Time Warner beats forecasts, raises dividend

Sees strong film year after record; no MGM comment

NEW YORK -- Time Warner on Wednesday said it swung to a fourth-quarter profit that exceeded Wall Street forecasts on better film and TV unit results.

A film unit profit record for the full year and latest signs that the advertising market is indeed in recovery mode earned cheers from Wall Street analysts.

The entertainment giant also raised its quarterly dividend 13.3% to 21.25 cents per share and said its board has expanded a stock buyback authority from $1 billion to $3 billion.

However, some analysts said they had hoped for more aggressive growth guidance for 2010.

On TW's earnings conference call, chairman and CEO Jeff Bewkes declined to comment on the MGM auction, but reiterated that TW doesn't need to do any deals. Any transaction would be opportunistic, disciplined and provide financial returns, he said. Tuesday night News Corp. chairman and CEO Rupert Murdoch had said his company was unlikely to walk away with MGM.

Bewkes also vowed to spend more on programming and production this year as TW looks to show the long-term growth and profit power of its now content-centric businesses.

TW on Wednesday posted a profit of $627 million, compared with a loss of $16 billion in the year-ago period driven by big impairment charges.

Revenue at the conglomerate rose 2% to $7.3 billion, a return to growth after a slump that started in mid-2008, as seen by many others in the sectors, and that investors have hoped would come to an end. TW CFO John Martin on Wednesday's call also predicted revenue gains for the full year 2010.

Fourth-quarter adjusted operating income before depreciation and amortization rose 35% to $1.5 billion driven by growth at its film and TV divisions.

For the full year 2009, TW cited record film and TV profits. For the year, revenue declined 3% to $25.8 billion with adjusted OIBDA up 9% to $5.7 billion.

The company reported AOL and Time Warner Cable, which it spun off in December and March, respectively, as discontinued operations.

It took a $104 million charge in the latest quarter to the realizable value of "Without a Trace," a program licensed by its Turner TV networks unit from Warner Bros. It said it is trying to re-license the program to a third party.

For 2010, the conglomerate forecast growth in adjusted profit per share from continuing operations in the mid-teen percentage range over the $1.83 reported for 2009.

In the fourth quarter, TV unit OIBDA rose 29% on a 4% revenue gain. Film OIBDA jumped 41% as revenue rose 7% thanks to film releases such as "The Blind Side" and "Sherlock Holmes," as well as DVD releases such as "The Hangover" and the sixth installment of "Harry Potter." Collins Stewart analyst Thomas Eagan called the film performance "the standout" of the earnings report.

Full 2009 film results saw adjusted OIBDA up 21% despite a 3% revenue decline.

Here are more highlights from the TW earnings conference call:
* CEO Bewkes said TW will outline a more expansive strategy in the coming weeks or months for how DC Comics will be integrated more closely into the firm's tentpole film lineup.

* After record profits in its film unit it 2009, Warner Bros. will bring "very strong profits" again this year, Bewkes said without committing to the goal of another record. While the weak DVD market is expected to be somewhat of a drag, more DVD releases, growth in Blu-ray and electronic sell-through, as well as the film slate and a strong outlook for the TV production business will all benefit the unit. Plus, CFO Martin mentioned that the company will continue to take "a hard line on costs."

* Bewkes said that NBC's return to programming the 10pm time slot after the Jay Leno experiment and a push by broadcasters for retransmission payments from distributors should all play into the hands of Warner's TV production business.

* The Turner entertainment networks will grow advertising revenue in 2010, "even without a major rebound in ratings trends," on which his team is working on, Bewkes said.
CFO Martin said that a 4% fourth-quarter TV unit ad decline was driven by tough comparisons on the news side due to the presidential election in the year-ago period. But first-quarter scatter market ad prices are "very much above the upfront."

* Asked about continuing reports of softness in premium network subscriptions, Bewkes said HBO is doing well. In 2009, HBO saw net subscriber growth driven by telecom giants. Some cable operators underperformed, but should feel encouraged to drive premium this year, he said. "You have heard more chatter on premium softness" than actual softness has been seen, and if there is sluggishness, it is felt by competitors, Bewkes concluded.

* Asked about film release windows, Bewkes said TW's day-and-date cable VOD release strategy last year helped solidify the firm's top rank in the VOD and DVD markets. Offering consumers more choices, while making sure more profitable windows come before less profitable ones is key for TW. While the CEO didn't give specifics, he said TW and DVD rental kiosk operator Redbox are discussing possible arrangements while their litigation continues.

* TW's gaming business is now bringing in more than $500 million in annual revenue and "healthy margins," Martin said.