Positive messages for TW shareholders

CEO predicts sustained growth in cash flow and earnings

NEW YORK -- Time Warner's annual shareholder meeting Thursday mixed financial messages and star power as the company tried to strike a balance between Wall Street and Hollywood.

TW may see flat earnings this year, but is committed to outperforming its major media peers this year and beyond, chairman and CEO Jeffrey Bewkes said in his opening remarks.

While companies face a "very difficult environment" around the world amid the recession, TW's businesses "are holding more than their own" against competitors, he said.

The planned AOL spin-off, announced just hours earlier, also played a role at Thursday's meeting.

AOL is "our toxic asset," famously outspoken shareholder Evelyn Y. Davis argued.
But the CEO replied: "AOL is not a toxic asset." Pointing to more than $1 billion in annual cash flows, he added: "It is profitable, solvent and will be growing."

In more financial promises, Bewkes also reaffirmed a commitment to boosting returns for TW shareholders via sustained growth in cash flow and earnings, as well as direct payouts in the form of dividend. Bewkes said the 3% current dividend yield at TW is strong already, but added his team plans to boost the dividend "over time."

The meeting took place in a more-intimate-than-usual conference room at the Time Warner Center, the company's headquarters in midtown Manhattan. More than 100 people were in attendance.

It was Bewkes' first meeting as chairman and, therefore, master of ceremonies.

Among the TW reps in attendance were Warner Bros. Entertainment chairman and CEO Barry Meyer, Turner Broadcasting System chairman and CEO Phil Kent, and AOL chairman and CEO Tim Armstrong.

Meyer said with new forms of distribution growing, while DVD sales are down, he hopes that the new platforms will at least balance out the DVD declines over time.

The decisions at the meeting included a 55% majority in favor of a shareholder proposal that will now allow holders of 10% of TW common stock to call special shareholder meetings outside the annual gathering.
However, a "say on pay" proposal that would have allowed shareholders a non-binding vote on the compensation levels of top executives just fell short with 45% approval.

Bewkes also used the gathering to renew his commitment to the importance of high-quality content for TW's success. He underlined it with a video showing industry favorites talking about why they love working with and for TW, including Randy Jackson, Ellen DeGeneres, Tyra Banks, Bill Maher, Steven Bochco, Anderson Cooper and George Lopez.

Other videos touting TW's content power featured "The Mentalist," the upcoming George Lopez late night TV show, a new Ray Romano show on TNT, the upcoming sixth installment of "Harry Potter" and HBO Films' upcoming "The Pacific" by Tom Hanks and Steven Spielberg.

But Bewkes also once again highlighted the need to run TW's businesses more efficiently.

He said 2008 cost cutting initiatives are saving 100s of millions of dollars, and the folding of New Line Cinema into Warner Bros. allowed for the reduction of 90% of New Line's overhead.

Among the other things that came up in the Q&A session of the meeting: the future of the Time Inc. magazine unit; a shareholder wish to add more women and members of minorities to TW's board; the effect of a likely General Motors bankruptcy; and discussions of the depiction of violence and the use of swear words in movies.

Bewkes said most pain from reduced auto ads has already hit media firms, and a GM bankruptcy wouldn't add much more woes.

Asked about the need for New York production tax credits, he said: "We are aware of and keep alert to" where there are production incentives, including abroad. But there "won't be a problem for New York" as some of TW's and other companies' shows are set here and it won't always make sense for people to shoot elsewhere.

Bewkes signaled an often-rumored sale of TW's magazine unit was not imminent.
"The most profitable" magazine group in the world has been going for decades and has
leading brands and "very high cash flow," he said. "We believe we can make...our magazine earnings and cash flow grow when this recession ends."

There were also several moments that drew chuckles.
For example, Davis lauded Bewkes for his good looks, saying he stood out from other industry leaders in that regard. Another female shareholder said a few minutes later that she wanted to publicly join Davis in lauding the CEO for being "handsome."

Davis also accidentally called Bewkes "Jerry" a couple of times - maybe lapsing back into the old days when Gerald "Jerry" Levin ran TW.

And towards the end of the meeting, a shareholder asked if questions would be possible in email or other digital form in the future given that younger generations are spending so much time online. Quipped Bewkes: "It's good to get them moving out of their chairs though."
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