B.O. muscle, growth in music sales and cable subs, and a healthier ad market pumped Time Warner Inc.’s fourth-quarter cash flow to a record $ 760 million, up almost 3% from a year ago as fourth-quarter revenues rose 8% to $ 4.1 billion.
Those results helped catapult the media titan to a banner year as cash flow jumped 8% to $ 2.83 billion on a 7% rise in revenues to $ 14.5 billion for the year. The company posted an annual net loss, however, of $ 221 million after a one-time charge of $ 70 million due to a new income tax law and a $ 57 million extraordinary loss for debt retirement. The net loss applicable to common shares shrank to $ 339 million from $ 542 million the prior year.
Time Warner made $ 7 million in net income ($ 4 million applicable to common shares) or 1 cents per share — slightly above estimates — after 1992’s comparable fourth-quarter loss of $ 93 million in net income or 25 cents per share.
“Whether or not you like (TWI chairman) Gerald Levin, it was really brilliant the way they timed and executed the refinancing of their gigantic existing debt, ” said Prudential Securities managingdirector Michael Burns.
“By reducing the significant interest costs, the company has positively impacted their cash flows. … It is fair to say that although (all TWI divisions) are not firing on all eight cylinders in their business, they truly are positioned as one of the few really diversified entertainment conglomerates.”
Telco US West holds a 25.7% residual interest in Time Warner Entertainment, which includes Filmed Entertainment, Programming-HBO and Time Warner Cable. Analysts, who met with Time Warner Monday, said it may admit more partners into the TWE partnership, but not on the magnitude of the US West stake. Time Warner also repeated that Seagram Co., its largest investor, has still not asked for board representation.
Warner Bros. also enjoyed a record quarter, but the inclusion of the Six Flags Theme Parks in the filmed entertainment group helped drive down cash flow 5% to $ 96 million. Time Warner became the sole owner of Six Flags in September 1993.
But fueled by “The Fugitive,” filmed entertainment cash flow in ’93 rose almost 6%, to $ 549 million. WB was No. 1 at the domestic B.O., and worldwide homevideo sales and international syndie revenues hit a new high.
HBO cash flow surged 9% last quarter to a record $ 61 million. The network earned a record operating $ 230 million for 1993, 7% higher than a year ago. Time Warner Sports and its half-ownership of Comedy Central were bright spots, although HBO Video revenues slipped. HBO and Cinemax subscriptions rose 1 million to 24.7 million.
The Warner Music Group turned in record quarterly cash flow of $ 215 million, a 10% advance over 1992, due to rising U.S. and Pacific Rim sales and music publishing gains. Sales so far this quarter have been sluggish but the company is forecasting an upturn with the release of new product later in the year.
Time Warner Cable’s quarterly cash flow dropped 5% to $ 242 million, due to federal rate reregulation implemented last September, although a 3% increase in subscribers and growing pay-per-view and ad revenues helped the unit post record annual cash flow of $ 1.04 billion, a gain of nearly 6.5% over the prior year.
Several analysts, however, see cable rate reregulation and increasing competition in the music and film industriesas likely to put increasing pressure on the company in the future.
Publishing sub Time Inc.’s cash flow chalked up an 11% increase to $ 146 million last quarter and a 13% rise to $ 372 million for the year. It attributed the growth to record circulation revenues, growth in book publishing and cost-cutting strategies. The company also cited the runaway success of bestseller “The Bridges of Madison County.”
David L. Smith, entertainment VP for Frank Magid & Associates, agreed that TWI’s diversification and smash results for film and music speak volumes about the future direction of entertainment.
“I think the numbers say a lot about how all these long-term strategies everywhere for trying to control the outlets and the software are affecting the business. When it really works, look where it worked: on the software side. Cable didn’t participate in the profit.”
Time Warner shares closed down 1/8 at 39 3/4 amid lighter than normal trading activity.