SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 10, 1998
TIME WARNER INC.
(Exact name of registrant as specified in its charter)
Delaware 1-12259 13-3527249
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation File Number) Identification No.)
or organization)
75 Rockefeller Plaza, New York, NY 10019
(Address of principal executive offices) (zip code)
(212) 484-8000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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Item 5.
On February 10, 1998, Time Warner Inc. announced its
results of operations for the quarter and the year ended December
31, 1997 as set forth below.
TIME WARNER INC.
CONSOLIDATED STATEMENT OF OPERATIONS
BY BUSINESS SEGMENT
(In millions, except per share amounts)
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
1997 1996 1997 1996
Revenues:
Publishing $1,286 $1,166 $ 4,290 $ 4,117
Music 1,056 1,190 3,691 3,949
Cable Networks - TBS 808 680 2,900 680
Filmed Entertainment - TBS 434 455 1,531 455
Cable 257 232 997 909
Intersegment elimination (5) (23) (115) (46)
------- ------ ------- -------
Total revenues $3,836 $3,700 $13,294 $10,064
======= ====== ======= =======
Business segment operating income before
depreciation and amortization:
Publishing $ 228 $ 200 $ 608 $ 535
Music 174 290 550 744
Cable Networks - TBS 188 162 660 162
Filmed Entertainment - TBS 99 32 207 32
Cable 141 124 553 476
Intersegment elimination (2) 5 (13) 5
------ ------ ------- ------
828 813 2,565 1,954
Depreciation and amortization (359) (311) (1,294) (988)
------ ------ ------- -------
Business segment operating income 469 502 1,271 966
Equity in pretax income of Entertainment
Group, substantially all TWE 164 20 686 290
Interest and other, net (140) (320) (1,044) (1,174)
Corporate expenses (21) (26) (81) (78)
------- ------ ------- -------
Income before income taxes 472 176 832 4
Income tax provision (225) (117) (531) (160)
------- ------- ------- -------
Income (loss) before
extraordinary item 247 59 301 (156)
Extraordinary loss on retirement of debt,
net of income tax benefits of $21 million,
$- million, $37 million and
$22 million, respectively (31) - (55) (35)
------- ------ -------- --------
Net income (loss) 216 59 246 (191)
Preferred dividend requirements (81) (77) (319) (257)
------- ------- -------- --------
Net income (loss) applicable to
common shares $ 135 $ (18) $ (73) $ (448)
======= ======= ======== ========
Basic income (loss) per common share:
Income (loss) before extraordinary
item $ 0.29 $(0.03) $ (0.03) $ (0.95)
====== ======= ======== ========
Net income (loss) $ 0.23 $(0.03) $ (0.13) $ (1.04)
====== ======= ======== ========
Average common shares 577.5 558.7 567.7 431.2
====== ======= ======== ========
Diluted income (loss) per common share:
Income (loss) before
extraordinary item $ 0.28 $(0.03) $(0.03) $ (0.95)
====== ======= ======= ========
Net income (loss) $ 0.22 $(0.03) $(0.13) $ (1.04)
====== ======= ======= ========
Average common shares 600.0 558.7 567.7 431.2
====== ======= ======= ========
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ENTERTAINMENT GROUP
COMBINED STATEMENT OF OPERATIONS
BY BUSINESS SEGMENT
(In millions; unaudited)
Three Months Ended Years Ended
December 31, December 31,
1997 1996 1997 1996
Revenues:
Filmed Entertainment -
Warner Bros. $ 1,642 $1,713 $ 5,472 $ 5,648
Broadcasting - The WB Network 52 31 136 87
Cable Networks - HBO 471 462 1,923 1,763
Cable 1,097 988 4,243 3,851
Intersegment elimination (124) (150) (446) (488)
------- ------- -------- --------
Total revenues $ 3,138 $3,044 $11,328 $10,861
======= ======= ======= ========
Business segment operating income before
depreciation and amortization:
Filmed Entertainment -
Warner Bros. $ 135 $ 123 $ 601 $ 546
Broadcasting - The WB Network (28) (35) (87) (98)
Cable Networks - HBO 107 91 413 350
Cable 616 402 1,920 1,536
------- ------- -------- --------
830 581 2,847 2,334
Depreciation and amortization (359) (336) (1,386) (1,244)
------- -------- -------- --------
Business segment operating income 471 245 1,461 1,090
Interest and other, net (200) (155) (357) (524)
Minority interest (77) (53) (305) (207)
Corporate services (18) (17) (72) (69)
------- ------- ------- -------
Income before income taxes 176 20 727 290
Income tax provision (21) (21) (85) (70)
------- ------- ------- -------
Income (loss) before extraordinary
item 155 (1) 642 220
Extraordinary loss on retirement
of debt (23) - (23) -
------- ------- ------- -------
Net income (loss) $132 $ (1) $ 619 $ 220
======= ======== ======= ========
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TIME WARNER INC. AND ENTERTAINMENT GROUP
NOTES TO STATEMENTS OF OPERATIONS
Note 1: Basis of Presentation
Time Warner classifies its business interests into four fundamental
areas: Entertainment, consisting principally of interests in recorded
music and music publishing, filmed entertainment, television production
and television broadcasting; Cable Networks, consisting principally of
interests in cable television programming; Publishing, consisting
principally of interests in magazine publishing, book publishing and direct
marketing; and Cable, consisting principally of interests in cable
television systems. A majority of Time Warner's interests in filmed
entertainment, television production, television broadcasting and
cable television systems, and a portion of its interests in cable
television programming are held through Time Warner Entertainment
Company, L.P. ("TWE"). Time Warner owns general and limited partnership
interests in TWE consisting of 74.49% of the pro rata priority capital
("Series A Capital") and residual equity capital ("Residual Capital"),
and 100% of the senior priority capital ("Senior Capital") and junior
priority capital ("Series B Capital"). The remaining 25.51% limited
partnership interests in the Series A Capital and Residual Capital of
TWE are held by a subsidiary of U S WEST, Inc. Time Warner does not
consolidate TWE and certain related companies (the "Entertainment Group")
for financial reporting purposes. No portion of TWE's net income for the
years ended December 31, 1997 and 1996 was allocated to the limited
partnership interests.
Note 2: TBS Transaction
On October 10, 1996, Time Warner acquired the remaining 80% interest in
Turner Broadcasting System, Inc. ("TBS") that it did not already own.
In connection therewith, Time Warner issued approximately 179.8 million
shares of common stock to the former shareholders of TBS capital stock and
approximately 14 million stock options to replace all outstanding TBS stock
options. Time Warner also assumed approximately $2.8 billion of
indebtedness. The acquisition cost of approximately $6.2 billion was
allocated to the net assets acquired in accordance with the purchase
method of accounting for business combinations.
Note 3: Gains on Disposition of Assets
In the fourth quarter of 1997, Time Warner redeemed certain mandatorily
redeemable preferred securities of a wholly owned subsidiary for all of
its interest in Hasbro, Inc. ("Hasbro"). In connection with this
redemption and the related disposal of its interest in Hasbro, Time
Warner recognized a $200 million pretax gain which has been included
in interest and other, net, in Time Warner's 1997 consolidated
statement of operations.
In 1997, in an effort to enhance its geographic clustering of cable
television properties, TWE sold or exchanged various cable television
systems. As a result of these transactions, TWE recognized net
gains of approximately $160 million in the fourth quarter of 1997, and
approximately $200 million for the year. Such amounts have been included
in the operating results of the Cable division in the Entertainment Group's
1997 combined statement of operations.
In the first quarter of 1997, TWE sold its 58% interest in E!
Entertainment Television, Inc. A pretax gain of approximately
$250 million relating to this sale has been included in interest and
other, net, in the Entertainment Group's 1997 combined statement of
operations.
Note 4: Income Taxes
The relationship between income before income taxes and income tax
expense of Time Warner is affected by the amortization of goodwill
and certain other financial statement expenses that are not deductible
for income tax purposes. Income tax expense of Time Warner includes all
income taxes related to its allocable share of partnership income
and its equity in the income tax expense of corporate subsidiaries of
the Entertainment Group.
Note 5: Income (Loss) per Common Share
Basic income (loss) per common share is based upon the net income
(loss) applicable to common shares after preferred dividend
requirements and upon the weighted average of common shares
outstanding during the period. Diluted income (loss) per common
share adjusts for the effect of convertible securities and stock options
only in the periods in which such effect would have been dilutive.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on February 19, 1998.
TIME WARNER INC.
By: /s/ John A. LaBarca
Name: John A. LaBarca
Title: Senior Vice President