Time Warner posts strong earnings
Media giant Time Warner reports better-than-expected operating results for the first quarter, riding the strength of its cable networks and gains at its film studio.
The world's No. 1 media company had net income of $138 million, or 10 cents a share, compared to a loss of $62 million, or 12 cents, for the year-ago quarter. A consensus of analysts surveyed by First Call expected the company to post a loss of 4 cents per share. Time Warner broke even on a per-share basis, after the payment of preferred dividends.
"We are off to a great start for 1999 and are on track for what I anticipate will be another record-breaking year," Time Warner chief executive Gerald Levin said in a prepared statement.
The company's revenue jumped 2.4 percent to $6.2 billion from $6.05 billion while operating cash flow, or earnings before interest, taxes, and amortization (EBITA), according to the company, climbed 47 percent to $1.3 billion from $852 million. Cash flow is a key measure of the performance of indebted companies because it excludes the interest payments.
"Our company's first-quarter growth was exceptionally strong through a healthy combination of 7 percent pro forma revenue growth and ongoing cost management," said Levin. "I am very pleased with our 24 percent pro forma growth, based on the double-digit growth of all of our businesses."
Revenue rose 7 percent and cash flow increased 24 percent in the first quarter when adjusted for certain cable-related transactions in 1998 and a pretax gain of about $215 million, or 10 cents a share, for the early termination of a video distribution agreement. The company didn't break out the transactions.
"Their businesses are flourishing and being managed for maximum profit production," said Fred Moran, an analyst at ING Baring Furman Selz.
During the first quarter, Time Warner Cable posted a record combined EBITA of $403 million compared to $381 million a year ago. The cable division's posted double-digit growth which reflects an increase in basic cable, advertising, and pay-per-view revenues. At the end of the first quarter, Time Warner Cable served approximately 12.9 million subscribers and passed approximately 21 million homes, which is more than 20 percent of total U.S. television households.
Time Warner owns Warner Bros. in a partnership with MediaOne Group, which has a 25.5 percent interest. Most of Time Warner's cable systems are also held in that partnership, called Time Warner Entertainment.
The comparability of the cable division's operating results for Time Warner and the Entertainment Group has been affected by several transactions in 1998, including the transfer of Time Warner Cable's direct broadcast satellite operations to Primestar, a separate holding company and the formation of the Road Runner joint venture to operate and expand Time Warner Cable's and MediaOne's existing high-speed online businesses.
Time Warner consists of four businesses: cable networks, publishing, entertainment, and cable.
The company's stock inched higher in early trading, rising nearly one percent or 0.75 to 77.75. The issue has traded as high as 78.38 and as low as 36.59 during the past 52 weeks.
Bloomberg contributed to this report.