Time Warner Film, TV Units Report Record Full-Year Profits

Time Warner chairman and CEO Jeff Bewkes

UPDATED: The entertainment conglomerate, led by CEO Jeff Bewkes, posted lower fourth-quarter earnings, but they exceeded Wall Street expectations.

Time Warner on Wednesday reported lower fourth-quarter earnings, but they exceeded Wall Street expectations.

The company's film unit posted full-year adjusted operating profit figures that set a company record. Time Warner also reported full-year operating profit records for its Turner and HBO units.

The entertainment conglomerate, led by CEO Jeff Bewkes, posted fourth-quarter earnings of $983 million, compared with $1.11 billion in the year-ago period. Quarterly revenue came in at a company-record $8.6 billion, up 5 percent.

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Time Warner raised its quarterly dividend by 10 percent to $1.27 per share on an annualized basis. The company also said it expects its 2014 full-year adjusted earnings per share to grow in the low-double-digit percentage range when excluding the Time Inc. magazine unit, which it is in the process of spinning off.

Time Warner on Tuesday also reported fourth-quarter asset impairments of $105 million, consisting of $24 million at Turner, most of which related to a building, $2 million at Warner Bros. and $79 million at Time Inc. "primarily related to certain trade names."

Full-year revenue increased 4 percent to $29.8 billion as earnings rose from $2.93 billion to $3.69 billion. Adjusted operating profit rose 8 percent to $6.6 billion as growth at Turner, HBO and Warner Bros. offset a decline at Time Inc.

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Warner Bros. posted fourth-quarter adjusted operating profit of $576 million, up 4 percent and one of the highest quarterly figures ever for the company, on a revenue gain of 7 percent.

Key film releases boosting the unit's performance in the fourth quarter included Gravity and The Hobbit: The Desolation of Smaug. A new Batman video game also boosted the quarterly profit at the film unit.

Full-year studio revenue increased 2 percent to $12.3 billion, mainly due to stronger theatrical and video games slates, as well as growth in electronic sell-through, partially offset by declines in TV licensing revenues "due to fewer theatrical availabilities and the comparison to last year's initial off-network availability of The Mentalist" and lower physical home video revenue.

Full-year Warner Bros. adjusted operating income jumped 7 percent to $1.3 billion due to the higher revenue, partially offset by higher print and advertising expenses due to an increased number of theatrical releases and increased restructuring and severance expenses.

"We had another very successful year in 2013, with Turner, Home Box Office and Warner Bros. all posting record profits while also investing for future growth," said Bewkes. "HBO remains in a league of its own, once again receiving the most Primetime Emmy Awards of any network, while tying for the most Golden Globe Awards and recording its biggest gain in domestic subscribers in 17 years. Warner Bros. delivered its best year on record by any measure. Theatrically, it led both the domestic and international box office, and its films received an industry-leading 21 Academy Award nominations, including best picture nominations for Gravity and Her."

Bewkes said the company remains on track to spin off Time Inc. into an independent publicly traded company during the second quarter.

Turner fourth-quarter revenue climbed 3 percent, but adjusted operating profit fell 3 percent amid increased expenses, especially a 12 percent programming cost increase primarily due to higher programming impairments and increased investments in original shows, including at the news networks.

Full-year Turner revenue rose 5 percent to $10.0 billion as subscription and advertising revenue each climbed 5 percent, but content revenue dropped 2 percent. The ad growth was partially offset by declines at Turner’s news networks mainly due to tough comparisons to the 2012 U.S. presidential election year. Turner's 2013 adjusted operating income increased 6 percent to $3.5 billion, driven by higher revenue, partly offset by higher programming costs and increased restructuring and severance expenses.

HBO fourth-quarter revenue rose 6 percent, with adjusted operating income down 4 percent due to higher expenses including a 12 percent increase in programming costs. It marked the first time that Time Warner reported separate results for Turner and HBO.

Full-year adjusted operating income rose 8 percent to $1.7 billion amid higher revenue, partly offset by increased expenses, including higher marketing and restructuring and severance expenses. Full-year revenue increased 4 percent to $4.9 billion with subscription revenue up 6 percent, but content revenue down 3 percent.

Email: Georg.Szalai@THR.com
Twitter: @georgszalai