Boosted by strong showings from its cable business and TV networks, Time Warner saw profits swell 76% last quarter to $1.13 billion.
The world’s largest media and entertainment conglom also emerged from its torturous early marriage to AOL, but compared to a year earlier, when pics such as “”The Lord of the Rings: The Return of the King,” “Elf” and “Texas Chainsaw Massacre” fed film coffers, adjusted income for fourth-quarter 2004 dropped 27% to $284 million on the film side, while revenues dropped 3% to $3.3 billion.
Proclaiming that 2004 was the year “the company settled down,” chair-CEO Dick Parsons said during an earnings call Friday that the company’s revenues for the final quarter of 2004 were $11.1 billion, up 1.9% on the year-earlier period, while revenues for the year rose 6% to $42.1 billion.
And in a clear sign of the conglom’s newfound ease, Parsons happily confirmed that Time Warner is confident enough to be on the acquisition hunt again — this time for bankrupt cabler Adelphia in a joint bid submitted by Time Warner Cable and Comcast. No such offer would be possible without Time Warner’s having largely resolved a federal probe of AOL accounting practices.
Also Friday, TW revealed in a regulatory filing that it profited handily from the sale of roughly 2.4 million pre-IPO Google shares, adding a pretax gain of $188 million to its cash coffers. This combined with the 2004 sale of Warner Music Group provided Time Warner with more than $3.2 billion in cash, helping it further reduce its debt to $16.2 billion, down from $22.7 billion at the beginning of last year.
Time Warner, through AOL, still owns 5 million Google shares, valued at just over $1 billion.
But the open-ended Adelphia question muted Wall Street’s reaction to TW’s latest financial snapshot, with shares falling 12¢ in trading Friday to close at $18.04. In general, earnings were in line with investor expectations.
According to Time Warner’s preferred financial measurement — adjusted operating income before depreciation and amortization — all divisions save filmed entertainment saw an uptick in the fourth quarter.
Analysts had expected such a year-to-year dip, noting that New Line Cinema and Warner Bros. would have been hard pressed to repeat their performance in the final quarter of 2003, when “LOTR: The Return of the King” and “Texas Chainsaw Massacre” were both released.
Analysts also said numbers for “Alexander” and “Catwoman” could have impacted the film division.
Time Warner Entertainment and Networks Group chair Jeff Bewkes instead emphasized the film division’s combined standing as the 2004 global box office leader. He noted that Warner Bros. Intl. became the first studio ever to pass the $2 billion box office mark overseas. For the year, the film division saw adjusted operating income grow 12% to $1.5 billion and revenues 8% to $11.9 billion.
“Once again, we stroked it out of the park,” Parsons said.
A continued performer on the film side was market leader Warner Home Video, which saw strong sales of movie and TV titles including “Harry Potter and the Prisoner of Azkaban,” “The Last Samurai,” “Return of the King” and “Seinfeld.”
TV on top
Bewkes said Warner Bros.’ television operation enjoyed its most profitable year on record in 2004, topping the competition in producing 25 primetime shows.
Key growth Time Warner television properties the WB, HBO and Turner Broadcasting — which includes CNN, Cartoon Network and entertainment cable nets TNT and TBS — saw adjusted income climb 10% to $663 million and revenues by 6% to $2.3 billion in the fourth quarter, boosted by increased subscribers and higher ad revenues. Ad revenues were flat at the ratings-troubled WB.
Bewkes insisted that HBO remains at the top of its game and predicted that the upcoming “Rome” series would mark another hit for the premium cable net. He didn’t go into the reasons why TNT lost out to A&E in landing basic cable rights to HBO’s “The Sopranos.” A&E paid a record $2.5 million-plus per episode.
Strong performer TW Cable recorded adjusted operating income of $887 million last quarter, up 11% over the final quarter of 2003. Revenues rose 10% to 2.2 billion. Operator said it signed up 124,000 digital cable customers, 153,000 digital video recorder customers and 197,000 Internet users.
At AOL, adjusted operating income rose 8% to $326 million last quarter, despite the loss of 464,000 customers from the previous quarter. As of Dec. 31, AOL had 22.2 million domestic subs, a loss of 2 million from a year earlier. Overseas, AOL picked up 9,000 customers from the previous quarter, bringing its total international subscriber base to 6.3 million. AOL’s revenues last quarter were up only 1% to $2.2 billion.
Publishing revs flat
Revenues were essentially flat at Time Warner’s publishing stable last quarter and for the year, although Time Inc. mags Real Simple, Time, In Style, Sports Illustrated, Fortune and Entertainment Weekly helped ad revenues spike 9%.
The Time Warner Book Group added 16 titles to the New York Times bestseller list last quarter; Jon Stewart’s “America (The Book): A Citizen’s Guide to Democracy” remained on the list from the previous quarter.
Adjusted income in the fourth quarter rose 8% to $401 million at Time Inc. and Warner Books.
Parsons said a top priority for 2005 is promoting further synergy among Time Warner’s divisions — hence last week’s announcement that TW Cable and AOL are teaming to add AOL features to the cabler’s high-speed Road Runner service.
As for the Adelphia bid, Parsons wouldn’t go into the details of the offer, saying the process is confidential.
Industry insiders are speculating that TW Cable has put up more money than Comcast, considering that TW Cable stands to gain Adelphia’s much-valued L.A. market. The Adelphia board, made up of various creditors, is expected to decide whether to accept a bid or emerge from bankruptcy intact by early spring.