Time Warner Beats Profit Estimates, Increases Buyback Plans

Time Warner Inc. (TWX), the media company that owns HBO and the Warner Bros. film studio, surpassed fourth-quarter profit estimates and made the biggest increase to its stock-buyback fund in seven years.

Excluding some items, earnings were $1.17 a share, the New York-based company said today in a statement. Analysts predicted $1.15 on average, according to data compiled by Bloomberg. Fourth-quarter revenue jumped 5 percent to $8.6 billion, also topping analysts’ estimates.

Pay-TV providers such as Verizon Communications Inc. and Comcast Corp. are paying more to carry Time Warner’s programming, whether it’s “Girls” on HBO or professional basketball games on TNT. Subscription revenue at Turner, which includes TNT and CNN, climbed 6 percent; HBO’s gained 8 percent.

Chief Executive Officer Jeffrey Bewkes has focused Time Warner’s growth strategy on its cable content, which accounts for more than 70 percent of the company’s operating income. He spun off AOL Inc. and Time Warner Cable Inc. soon after becoming CEO in 2008, and he plans to do the same with magazine publisher Time Inc., the company’s worst-performing division, by the end of June. Talks to merge the unit with Meredith Corp., owner of women’s titles such as Ladies’ Home Journal, broke down last year.

Photographer: Ron Antonelli/Bloomberg

Pedestrians pass in front of the Time Warner Center building at Columbus Circle in New York. Close

Pedestrians pass in front of the Time Warner Center building at Columbus Circle in New York.

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Photographer: Ron Antonelli/Bloomberg

Pedestrians pass in front of the Time Warner Center building at Columbus Circle in New York.

It was “another very successful year for the company,” Bewkes said on a conference call with analysts following the report. “This was the result of a strategy that has served us very well, not just last year, but for the past five years.”

Stock Buybacks

The company added $5 billion to its stock repurchase fund, the most since 2007, after budgeting $4 billion a year for buybacks since 2011. The company repurchased $3.9 billion in shares in the 13 months through Jan. 31, it said. Time Warner also increased its dividend today by 10 percent to $1.27 a year.

Shares of Time Warner rose 1.9 percent to $63.58 at 12 p.m. in New York. Through yesterday, the stock had climbed 24 percent in the past year.

Adjusted earnings will expand at a rate in the “low double digits” this year from $3.51 in 2013, a figure that excludes Time Inc., Time Warner said. The company also forecast about $150 million in restructuring costs for the first half of this year, related to job cuts that started yesterday at Time Inc.

Sales at Warner Bros. rose 7 percent to $4 billion as “Gravity” and “The Hobbit: The Desolation of Smaug” boosted box-office receipts.

CNN Slump

CNN had a difficult quarter in the U.S., losing ad sales at a rate in the “middle teens,” according to Chief Financial Officer Howard Averill. In 2012, CNN had benefited from much higher political spending for the U.S. presidential race. As a result, Turner’s total ad sales increased just 1 percent from a year earlier.

The company raised $1 billion in a bond offering in December and sold its Manhattan headquarters for $1.3 billion earlier this year. Toward the end of 2018, the company plans to move into the Hudson Yards, an office complex under development on Manhattan’s West Side that will reduce the amount of space it uses.

In July, Time Warner named Joseph Ripp as CEO of Time Inc. as the magazine unit prepares for its spinoff. Time Inc. will start off with $1.3 billion in debt, or about two-and-a-half to three times its annual operating income, the company said. Bloomberg News had reported in November that the amount would be about $1.2 billion.

Splitting Up

Bewkes’s move to drop the shrinking magazine business, focusing on TV and film, mirrors plans by other media companies. News Corp. split in two at the end of June, forming separate newspaper and entertainment businesses, and Tribune Co. announced last year it would spin off its newspapers, including the Los Angeles Times, while keeping its TV stations.

John Martin, Time Warner’s former chief financial officer, started as CEO of Turner Broadcasting at the beginning of this year. The appointment was part of Bewkes’s plan to move his lieutenants into key posts as the company evaluates possible successors at the end of his employment agreement in 2017, when he’ll be 65.

Last year, Bewkes named Kevin Tsujihara to lead Warner Bros. and Richard Plepler to head up HBO. In 2012, he had hired Jeffrey Zucker to lead the ailing CNN.

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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