Big-time bonuses

Writedowns loom but TW exec pay rises

NEW YORK –Time Warner execs made some serious cash last year, according to the company’s latest proxy statement, even as the conglom anticipated hefty charges on the film side due to new accounting rules as well as a significant writedown at its struggling Columbia House online music retailer.

Chairman-CEO Gerald Levin pulled in a base salary of $1 million plus a $9 million bonus in 1999. The base was unchanged from the year before, while the bonus was bumped up from $7.8 million. Levin’s compensation package also included 437,500 stock options (down from 1.4 million in 1998) worth about $10.4 million.

As of Dec. 31, Levin’s tenure at the entertainment conglom had sent his way accumulated exercisable stock options valued at a whopping $353 million. Another $25 million in options will vest once Time Warner cements its planned merger with America Online. That deal is expected to close this fall.

During 1999, Levin exercised options on 70,000 shares, realizing $3.1 million.

Vice chairman Ted Turner had a nice year too. His base salary was also unchanged at $700,000, with the bonus ratcheted up to $6.9 million from $6 million. His 375,000 option grant was down from 600,000 the year before. At the end of 1999, he held exercisable options worth $148 million.

As for other top execs, Time Warner prexy Richard Parsons’ base salary rose to $750,000 from $600,000 and his bonus jumped to $4.75 million from $3.3 million.

Richard Bressler, Time Warner exec VP, earned $600,000, up from $450,000, and his bonus moved to $2 million from $1.5 million.

$400 mil charge

The proxy, filed with the SEC Thursday along with the company’s annual report, said Time Warner expects to record a non-cash charge of $400 million-$425 million to reduce the carrying value of its film inventory. That’s if certain film industry accounting changes are adopted, as expected, starting in January 2001.

The new rules say that advertising costs for theatrical and TV product must be expensed as incurred, instead of over time. Also, development costs for abandoned projects and certain indirect overhead costs would have to be charged directly to expense instead of being capitalized to film costs.

Another set of accounting changes in the works would alter the way the filmed entertainment industry classifies revenues, particularly relating to distribution arrangements for third-party and co-financed joint venture projects. Time Warner said it expects that both annual costs and revenues in film will be reduced by an equal amount in the $1.5 billion-$2 billion range.

Other filmed entertainment companies are likely to record similar charges.

Meanwhile, there’s a small soft spot in Time Warner’s music universe and it’s called Columbia House. The financially challenged company, half owned by Sony Corp., isn’t a particularly big part of Time Warner’s biz, but has become a rather big headache as plans to merge it with publicly traded CDNow were scrapped earlier this month.

Col House writedown

Time Warners’ annual report warned that it will have to take an unspecified but “significant” charge to write down the carrying value of its stake in Columbia House, an online retailer of CDs, audiocassettes and videos.

The charge will likely stem from various alternatives now being considered for the company, including online initiatives or joint ventures. But there may not be many alternatives around and some analysts predict an outright sale of the unit at a bargain basement price.

As for the bigger picture in music, Warner Music’s much-applauded combination with the U.K.’s EMI Group is expected to close by the end of the year.

Time Warner filings also noted that if its Road Runner unit doesn’t sell shares to the public by the end of next year, partners Microsoft and Compaq Computer may sell back their 10% stakes in the high-speed Internet provider.

Time Warner shares fell $7.44 to close at $90.63 as weakness in tech stocks pulled AOL lower. Time Warner has been trading in lockstep with AOL ever since the two giants announced their merger plans in January.

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