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): April 12, 2000
TIME WARNER INC.
(Exact name of registrant as specified in its charter)
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Delaware 1-12259 13-3527249
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
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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)
<PAGE>
Item 5. Other Events
On April 12, 2000, Time Warner Inc. announced its results of operations
for the quarter ended March 31, 2000. A copy of the press release is attached
hereto as Exhibit 99 and is incorporated herein by reference.
Item 7(c). Exhibits
99 Press Release dated April 12, 2000 of Time Warner Inc.
announcing results of operations for the quarter ended
March 31, 2000.
<PAGE>
SIGNATURE
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.
TIME WARNER INC.
By: /s/ James W. Barge
------------------------------
Name: James W. Barge
Title: Vice President & Controller
Date: April 19, 2000
<PAGE>
Exhibit Index
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Exhibit No. Description
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99 Press release dated April 12, 2000 of Time Warner Inc.
announcing results of operations for the quarter ended
March 31, 2000.
For Immediate Release Exhibit 99
TIME WARNER BUSINESSES REPORT RECORD FIRST QUARTER
--Normalized EBITA Growth was 13% for First Quarter--
--Normalized Revenue Growth was 8% for First Quarter--
--Normalized EPS for First Quarter Improves to $.05--
--Cable Networks, Publishing, Filmed Entertainment and Cable
Post Record First Quarters--
NEW YORK, April 12, 2000--Time Warner Inc. (Time Warner, NYSE: TWX) reported
operating income before amortization of intangible assets (EBITA) of $1.171
billion on revenues of $6.549 billion for the first quarter of 2000. In the
first quarter of 1999, EBITA was $1.241 billion on revenues of $6.091 billion.
EBITA grew 13% for the first quarter when normalized for certain items described
below affecting the comparability of operating results. Revenue grew 8% for the
quarter on a normalized basis. Cable Networks, Publishing, Filmed Entertainment
and Cable all posted record operating results for the quarter.
Below are EBITA results for the first quarter on both an actual and normalized
basis (in millions):
First Quarter
-------------------------------------------------
Actual (1) Normalized (1)
---------- --------------
2000 1999 2000 1999
---- ---- ---- ----
Cable Networks $ 364 $ 309 $ 364 $ 309
Publishing 117 94 117 103
Music 80 89 80 89
Filmed Entertainment 194 375 194 160
Broadcasting--The WB Network (31) (41) (31) (41)
Cable 485 403 457 406
Intersegment Elimination (8) 12 (8) 12
------- ------- ------- -------
EBITA Before Digital Media 1,201 1,241 1,173 1,038
Digital Media (30) -- -- --
------- ------- ------- -------
TOTAL EBITA $ 1,171 $ 1,241 $ 1,173 $ 1,038
======= ======= ======= =======
(1) The comparability of the operating results for publishing, filmed
entertainment and cable has been affected by certain transactions and
nonrecurring items, as described more fully in the discussion of divisional
results. In order to enhance comparability, normalized results have been
presented that exclude the effects from such transactions and nonrecurring
items, as well as digital media activities. In addition, effective on
January 1, 2000, management reclassified Time Warner's share of the
operating results of Columbia House, a 50%-owned equity investee, from
its music division to interest and other, net. Accordingly, music operating
results for 1999 have been reclassified to conform to the 2000 presentation.
Commenting on the company's performance, Time Warner's Chairman and CEO Gerald
M. Levin said, "I am pleased with our record operating results and strong EBITA
growth rate of 13% for the first quarter of 2000, which puts us on an early
track for another record-breaking year. We remain focused on delivering
impressive quarterly results, coupled with realizing all the opportunities
presented by our pending merger with AOL. In the three months following our
agreement to merge with AOL, we have collaborated on dozens of commercial
relationships. This has set the tone for the creation of a vibrant and
fast-growing company, a world leader in content, communications and commerce."
For the first quarter, basic net income per common share, when normalized to
exclude the aggregate effect of the nonrecurring items(1), was $.05 in 2000,
compared to breakeven in 1999. On a reported basis, Time Warner had a
first-quarter net loss of $.08 per common share in 2000, compared to net income
of $.10 per common share during the same period in 1999.
CABLE NETWORKS
First-quarter EBITA for the Cable Networks division was a record $364 million,
up 18%, versus $309 million a year earlier. The Turner Cable Networks' 20% EBITA
growth resulted from 23% revenue growth led by strong gains in both subscription
and advertising revenues, partially offset by lower results at World
Championship Wrestling. HBO's 15% EBITA growth reflects increased subscription
revenues for HBO and Cinemax. TBS Superstation and Turner Network Television
(TNT) ended the first quarter with seven of the 10 highest-rated theatrical
motion pictures on basic cable. Cartoon Network posted its best-ever first
quarter in prime-time ratings and delivery among households, kids 2-11 and kids
6-11. HBO also won six George Foster Peabody Awards, including one for the hit
original series The Sopranos.
PUBLISHING
First-quarter EBITA for Time Inc. was a record of $117 million, up 14%, versus
$103 million on a normalized basis for the comparable 1999 period. The 1999
reported results of $94 million included losses from Time Inc.'s
Book-of-the-Month Club, which was deconsolidated in 2000 after being contributed
to a joint venture with Bertelsmann's Doubleday Direct book club business during
the quarter. The first quarter was Time Inc.'s 26th straight quarter of
year-over-year EBITA growth. Contributing to the results were double-digit
advertising revenue gains, led by Fortune, In Style and Entertainment Weekly.
Time Inc.'s results included a gain of approximately $30 million related to the
partial sale of its stake in Martha Stewart Living Omnimedia. This gain did not
affect operating trends as it was more than offset by the combination of startup
costs associated with the launch of several new magazines, severance costs
related to certain restructuring efforts, including Life magazine, and an
investment gain recognized in the comparative period in 1999. New magazine
launches in the quarter included Real Simple, Sports Illustrated For Women, In
Style Australia and Time Large Print Edition.
(1) The comparability of Time Warner's income (loss) per common share is
affected by certain significant and nonrecurring items recognized in each
period. For 2000, these items include $28 million of gains relating to the
sale or exchange of cable television systems and investments, a noncash
charge of $220 million that reduced the carrying value of Time Warner's
interest in Columbia House and one-time transaction costs of $46 million
relating to the America Online-Time Warner merger. For 1999, significant
and nonrecurring items include a $215 million net gain from the early
termination of a long-term video distribution agreement.
MUSIC
Warner Music Group posted first-quarter EBITA of $80 million, compared to $89
million in the first quarter of 1999. The results reflect a decline in domestic
recorded music partially offset by DVD manufacturing profits. Top sellers for
the quarter include Kid Rock, Red Hot Chili Peppers, AC/DC, The Corrs, Alanis
Morissette, Cher, Faith Hill, Tracy Chapman, Steely Dan, The Next Best Thing
soundtrack, Gerald Levert, Eric Clapton, Tim McGraw, Drama and Pantera. Warner
Music Group labels and artists won 20 Grammy Awards in February.
FILMED ENTERTAINMENT
First-quarter EBITA for Filmed Entertainment was an operating record of $194
million, up 21%, versus $160 million on a normalized basis for the comparable
1999 period. The 1999 reported results of $375 million included a net pretax
gain of approximately $215 million recognized in connection with the early
termination and settlement of a long-term video distribution agreement. The
current quarter's results benefited from improvements in Warner Bros.' home
video and television businesses and TBS's film library operations, partially
offset by lower results from Warner Bros.' consumer products operations.
First-quarter theatrical revenues benefited from the domestic box-office success
of Warner Bros.' The Green Mile ($136 million to date) and The Whole Nine Yards
($57 million to date). In home video, DVD revenues grew over 75% led by The
Matrix, Eyes Wide Shut and Pokemon.
BROADCASTING--THE WB NETWORK
The WB Television Network posted a loss of $31 million in the quarter, an
improvement of 24% over the loss of $41 million a year ago. The results reflect
higher broadcast revenues, as well as reduced start-up costs for The WB Network
100+ Station Group. On a season-to-date basis, the Kids' WB! weekend line-up
continues to be the number one network as compared to its broadcast and cable
competition.
CABLE
In the first quarter, Time Warner Cable posted record EBITA of $485 million, up
from $403 million a year ago. EBITA grew 13% when normalized for the effects of
certain transactions, including net pretax gains of $28 million recognized in
2000, relating to the sale or exchange of cable television systems and
investments. The cable division's strong double-digit growth reflects
significant increases in revenues from basic cable, deployment of digital and
high-speed Internet services and advertising. At the end of the quarter, Time
Warner Cable had approximately 613,000 digital video subscribers, representing
more than 40% growth compared to year-end 1999. Time Warner Cable also added
approximately 117,000 high-speed Internet customers during the quarter, up 35%
compared to year-end 1999, resulting in 447,000 total customers at the end of
the quarter. Time Warner Cable serves approximately 12.7 million subscribers,
and passes 20.7 million homes, which is over 20% of total U.S. television
households.
DIGITAL MEDIA
Time Warner Digital Media posted a loss of $30 million, reflecting start-up
activities associated with the company's digital media businesses.
Time Warner Inc. (NYSE: TWX, www.timewarner.com) is the world's leading media
company. Its businesses include cable networks, publishing, music, filmed
entertainment, cable and digital media.
####
Caution Concerning Forward-Looking Statements
This document includes certain "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements are
based on management's current expectations and are naturally subject to
uncertainty and changes in circumstances. Actual results may vary materially
from the expectations contained herein due to changes in economic, business,
competitive and/or regulatory factors and factors affecting the proposed
combination of Time Warner and America Online, Inc. More detailed information
about those factors is set forth in Time Warner's filings with the Securities
and Exchange Commission, including its most recent annual report on Form 10-K
and current reports on Form 8-K. Time Warner is under no obligation to (and
expressly disclaims any such obligation to) update or alter its forward-looking
statements whether as a result of new information, future events or otherwise.
To receive a copy of this press release through the Internet, access Time
Warner's corporate website located at http://www.timewarner.com
Attachments:
(1) Consolidated Statement of Operations
(2) Notes to Statement of Operations
Contact:
Edward Adler
(212) 484-6630
<PAGE>
TIME WARNER INC.
CONSOLIDATED STATEMENT OF OPERATIONS
BY BUSINESS SEGMENT
(In millions; unaudited)
Three Months Ended
March 31,
-------------------
2000 1999
---- ----
Revenues:
Cable Networks $1,586 $1,364
Publishing(1) 939 974
Music 917 936
Filmed Entertainment 1,880 1,697
Broadcasting - The WB Network 102 79
Cable 1,447 1,296
Intersegment elimination (324) (255)
----- -----
Revenues Before Digital Media 6,547 6,091
Digital Media 2 -
----- -----
Total revenues $6,549 $6,091
===== =====
Business segment operating income before
depreciation and amortization ("EBITDA"):
Cable Networks $ 397 $ 340
Publishing(1) 136 113
Music 100 106
Filmed Entertainment(1) 216 405
Broadcasting - The WB Network (31) (41)
Cable(1) 698 585
Intersegment elimination (8) 12
----- -----
EBITDA Before Digital Media 1,508 1,520
Digital Media (29) -
----- -----
Total EBITDA $1,479 $1,520
===== =====
Business segment operating income before
amortization ("EBITA"):
Cable Networks $ 364 $ 309
Publishing(1) 117 94
Music 80 89
Filmed Entertainment(1) 194 375
Broadcasting - The WB Network (31) (41)
Cable(1) 485 403
Intersegment elimination (8) 12
----- -----
EBITA Before Digital Media 1,201 1,241
Digital Media (30) -
----- -----
Total EBITA $1,171 $1,241
===== =====
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(1) The comparability of the operating results for publishing, filmed
entertainment and cable has been affected by certain transactions and
nonrecurring items. See accompanying notes.
<PAGE>
TIME WARNER INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
-------------------
2000 1999
---- ----
Revenues $6,549 $6,091
Costs and expenses (5,736) (5,371)
Gain on sale or exchange of cable
television systems and investments 28 -
Gain on early termination of video
distribution agreement - 215
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Business segment operating income 841 935
Interest and other, net (808) (506)
Corporate expenses (43) (40)
Minority interest (54) (85)
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Income (loss) before income taxes (64) 304
Income taxes (32) (166)
------ -------
Net income (loss) (96) 138
Preferred dividend requirements (5) (18)
------ ------
Net income (loss) applicable to common shares $ (101) $ 120
====== ======
Basic and diluted net income (loss) per common share $ (0.08) $ .10
====== ======
Average common shares 1,301.5 1,243.1
======= =======
See accompanying notes.
<PAGE>
TIME WARNER INC.
NOTES TO STATEMENTS OF OPERATIONS
Note 1: Basis of Presentation
Time Warner classifies its business interests into six fundamental areas: Cable
Networks, consisting principally of interests in cable television programming;
Publishing, consisting principally of interests in magazine publishing, book
publishing and direct marketing; Music, consisting principally of interests in
recorded music and music publishing; Filmed Entertainment, consisting
principally of interests in filmed entertainment, television production and
television broadcasting; Cable, consisting principally of interests in cable
television systems; and Digital Media, consisting principally of interests in
Internet-related and digital media businesses.
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 and digital media are held
through Time Warner Entertainment Company, L.P. ("TWE"). The 1999 operating
results reflect the consolidation of TWE and certain related companies (referred
to as the Entertainment Group), retroactive to the beginning of 1999.
Certain reclassifications have been made to the prior year's financial
information to conform to the 2000 presentation, including a reclassification of
the Music division's operating results for 1999 to reflect a change in how
management classifies Time Warner's share of the operating results of the
Columbia House Company Partnerships ("Columbia House"), a 50%-owned equity
investee. Effective on January 1, 2000, management reclassified Time Warner's
share of the operating results of Columbia House from its Music division to
interest and other, net. This reclassification resulted primarily from the
planned restructuring of Columbia House's traditional direct-marketing business
and an increasing dependency on the sale of video product.
Note 2: Book-of-the-Month Club Joint Venture
In the first quarter of 2000, Time Warner formed a jointly owned book club
venture with Bertelsmann AG ("Bertelsmann"). The venture combined the domestic
operations of Time Warner's Book-of-the-Month Club with the domestic book club
operations of Doubleday Direct, Inc. ("Doubleday"), a leading consumer book club
group owned by Bertelsmann. In connection with this transaction, Time Warner has
deconsolidated its domestic book club operations in 2000 and is accounting for
its interest in the joint venture under the equity method of accounting. Time
Warner's share of the operating results of the joint venture for the first
quarter of 2000 has been included in interest and other, net, in the
accompanying consolidated statement of operations. During the three months ended
March 31, 1999, the Publishing division's operating results included revenues of
$66 million, EBITA losses of $9 million and operating losses of $10 million
relating to Book-of-the-Month Club.
Note 3: 1999 Gain on Termination of MGM Video Distribution Agreement
In March 1999, Warner Bros. and Metro-Goldwyn-Mayer, Inc. ("MGM") terminated a
long-term distribution agreement under which Warner Bros. had exclusive
worldwide distribution rights for MGM/United Artists home video product. In
connection with the early termination and settlement of this distribution
agreement, Warner Bros. recognized a net pretax gain of approximately $215
million, which has been included in the 1999 operating results of Time Warner's
Filmed Entertainment division.
Note 4: Gains on the Sale or Exchange of Cable Television Systems
and Investments
In 2000, largely in an ongoing effort to enhance its geographic clustering of
cable television properties, Time Warner continued to sell or exchange various
cable television systems and investments. In connection with these transactions,
the operating results of Time Warner's Cable division include pretax gains of
approximately $28 million in the first quarter of 2000.
Note 5: Columbia House Investment Write-Down
In July 1999, Time Warner announced an agreement with Sony Corporation of
America ("Sony") to merge their jointly owned music and video club operations of
Columbia House with CDNOW, Inc. ("CDNOW"), a music and video e-commerce company.
Since that time, the parties had been pursuing the receipt of regulatory
approvals. While awaiting these approvals, the March 13th termination date in
the merger agreement was reached, and the parties terminated the agreement.
Accordingly, the merger will not occur.
Time Warner is continuing to evaluate strategic alternatives for Columbia
House's operations. Those alternatives are focused primarily on ways to improve
Columbia House's declining operating performance, including online initiatives,
joint ventures and other strategic actions. Management believes that such
strategies are important to achieve a turnaround in Columbia House's operating
performance and to position it for long-term growth in a highly competitive and
rapidly changing business environment.
With the termination of the CDNOW merger in March 2000, the risk associated with
the timely execution of these strategies and the transformation of Columbia
House's traditional business model to an online one has increased. As a result,
management has concluded that the decline in Columbia House's business is going
to continue through the near term. As such, Time Warner recorded a $220 million
noncash pretax charge during the first quarter of 2000 to reduce the carrying
value of its investment in Columbia House to an estimate of its fair value. The
charge has been included in interest and other, net, in the accompanying
consolidated statement of operations.
Note 6: 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.
Note 7: 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, stock
options and other potentially dilutive financial instruments only in the periods
in which such effect would have been dilutive.
Note 8: Comparability of Income (Loss) per Common Share
As described more fully above, income (loss) per common share has been affected
by certain significant, nonrecurring items recognized in 2000 and 1999. Those
items consist of (i) pretax gains of approximately $28 million in 2000 relating
to the sale or exchange of various cable television systems and investments,
(ii) a noncash pretax charge of approximately $220 million in 2000 relating to
the write-down of Time Warner's carrying value of its investment in Columbia
House, (iii) a net pretax gain of approximately $215 million in 1999 relating to
early termination and settlement of a long-term, home video distribution
agreement and (iv) one-time transaction costs of approximately $46 million in
2000 relating to the America Online-Time Warner merger. The aggregate net effect
of these items for the first quarter was to decrease basic and diluted net
income per common share by $.13 in 2000 and to increase basic and diluted net
income per common share by $.10 in 1999.
