Time Warner Inc. (NYSE:TWX) on Wednesday reported financial results for its first quarter ended March 31, 2008.
Chief Executive Officer Jeff Bewkes said: “Our results this quarter, particularly the underlying operating strength at our Cable, Networks and Filmed Entertainment businesses, gave us the confidence to reaffirm our full-year business outlook. We’ve also made substantial progress on our key structural initiatives. We’ve decided that a complete structural separation of Time Warner Cable, under the right circumstances, is in the best interests of both companies’ shareholders. We’re working hard on an agreement with Time Warner Cable, which we expect to finalize soon. At the same time, we’ll continue to pursue the rest of our aggressive agenda that we believe will deliver increasing value to our shareholders.”
In the quarter, Revenues climbed 2% over the same period in 2007 to $11.4 billion, led by increases at the Cable, Networks and Filmed Entertainment segments.
Adjusted Operating Income before Depreciation and Amortization, which included $116 million in restructuring charges associated with the announced operational reorganization of the New Line Cinema business, declined 1% to $3.1 billion. Declines at the AOL and Filmed Entertainment segments were offset almost entirely by strong growth at the Cable, Networks and Publishing segments. Operating Income was down 23% to $1.9 billion, due largely to the absence of the significant gain on the sale of AOL’s Internet access business in Germany in the prior year quarter.
For the first three months, Cash Provided by Operations was $2.8 billion, and Free Cash Flow totaled $1.8 billion (representing a 58% conversion rate of Adjusted Operating Income before Depreciation and Amortization). As of March 31, 2008, Net Debt was $34.6 billion, down $1.0 billion from $35.6 billion at the end of 2007, due primarily to the generation of Free Cash Flow.
Diluted Income per Common Share from Continuing Operations was $0.21 for the three months ended March 31, 2008, compared to $0.30 in last year’s first quarter. The current and prior year amounts included certain items affecting comparability that are described in detail in the Consolidated Reported Net Income and Per Share Results section below. The net impact of such items was to decrease the current year quarter’s results by $0.01 per diluted common share and to increase the prior year quarter’s results by $0.08 per diluted common share.
In the presentation of financial information in this release, Adjusted Operating Income before Depreciation and Amortization excludes the impact of noncash impairments of goodwill, intangible and fixed assets, as well as gains and losses on asset sales and amounts related to securities litigation and government investigations. Operating Income includes these amounts in their respective periods. Refer to the reconciliations of Adjusted Operating Income (Loss) before Depreciation and Amortization to Operating Income (Loss) before Depreciation and Amortization and the reconciliations of Operating Income (Loss) before Depreciation and Amortization to Operating Income (Loss) in this release for details.
For the three months ended March 31, 2008, Adjusted Operating Income (Loss) before Depreciation and Amortization and Operating Income (Loss) included restructuring charges of $116 million related to the operational reorganization of the New Line Cinema business.
Presented below is a discussion of Time Warner’s segments for the first quarter of 2008. Unless otherwise noted, the dollar amounts in parentheses represent year-over-year changes.