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Time Warner Inc. Reports Third-Quarter 2015 Results Third-Quarter Highlights

The following excerpt is from the company's SEC filing.

Revenues increased 5% to $6.6 billion

Company posted Adjusted Operating Income of $1.8 billion and Adjusted EPS of $1.25

Free Cash Flow totaled $2.9 billion in the first nine months of 2015

Company repurchased 41 million shares for $3.3 billion year-to-date through October 30, 2015

NEW YORK, November 4, 2015

Time Warner Inc. (NYSE:TWX) today reported financial results for its third quarter ended September 30, 2015.

Chairman and Chief Executive Officer Jeff Bewkes said: We had another very good quarter, with Revenues up 5% and strong growth in Adjusted Operating Inco me, which totaled $1.8 billion. Our revenue growth was led by Warner Bros. and Home Box Office, and illustrated how our investments in great content have been paying off in our traditional television businesses, as well as in newer areas such as videogames. In September, HBO received a record 43 Primetime Emmy Awards, the most of any network for the 14

consecutive year. That included 12 awards for

Game of Thrones,

setting a record for a series in a single year.

Mr. Bewkes continued: Warner Bros. solidified its position as the leading producer of broadcast series on television with the debuts of

Blindspot

Supergirl

- the two most-watched new shows among adults 18-49 this broadcast season.

represents one of the eight shows on television this season based on IP from DC Entertainment, which is also a driver behind the record year Warner Bros. is having in videogames. Through the first three quarters of 2015, Warner Bros. was the top videogames publisher in the U.S. At Turner, buoyed by our coverage of the Major League Baseball playoffs, TBS is the #1 ad-supported cable network in primetime among adults 18-49 year-to-date. Cartoon Network continued to gain share, ending the third quarter as the #1 ad-supported cable network in total day among kids 6-11. Adult Swim also stood out as ad-supported cables #1 total day network among adults 18-34 for the 30

consecutive quarter. And CNN continued to grow its primetime ratings across all key demographics in the quarter. Further demonstrating our continuing commitment to shareholder returns, so far this year weve returned $4.2 billion to our shareholders through share repurchases and dividends.

Company Results

Revenues increased 5% to $6.6 billion due to growth at Warner Bros. and Home Box Office, partially offset by higher intercompany eliminations and a decline at Turner. Adjusted Operating Income grew 85% to $1.8 billion due to growth across all operating divisions, reflecting the absence of programming charges incurred in 2014 at Turner and lower restructuring and severance charges across all segments, partially offset by higher intercompany eliminations

Revenues and Adjusted Operating Income included the unfavorable impact of foreign exchange rates of $290 million and $160 million, respectively, in the quarter. Operating Income increased 89% to $1.8 billion.

The Company posted Adjusted Diluted Income per Common Share from Continuing Operations (Adjusted EPS) of $1.25 versus $1.22 for the prior year quarter. Excluding a net tax benefit of $639 million,

programming charges at Turner and restructuring and severance charges in the prior year quarter, Adjusted EPS would have been $0.97 in the prior year quarter. Diluted Income per Common Share from Continuing Operations was $1.26 compared to $1.11 in the prior year quarter.

For the first nine months of 2015, Cash Provided by Operations from Continuing Operations reached $3.0 billion and Free Cash Flow totaled $2.9 billion. As of September 30, 2015, Net Debt was $21.2 billion, up from $19.8 billion at the end of 2014, due to share repurchases, dividends and investments and acquisitions, partially offset by the generation of Free Cash Flow.

Refer to Use of Non-GAAP Financial Measures in this release for a discussion of the non-GAAP financial measures used in this release and the reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

Stock Repurchase Program Update

From January 1, 2015 through October 30, 2015, the Company repurchased approximately 41 million shares of common stock for approximately $3.3 billion. These amounts reflect the purchase of approximately 16 million shares of common stock for approximately $1.2 billion since the amounts reported in the Companys second quarter earnings release on August 5, 2015. At October 30, 2015, approximately $1.2 billion remained available for repurchases under the Companys stock repurchase program.

Segment Performance

The schedule below reflects Time Warners financial performance for the three and nine months ended September 30, by line of business (millions).

Three Months Ended

Nine Months Ended

Revenues:

2,398

2,446

7,935

$ 7,789

1,367

1,304

4,203

4,060

3,190

2,775

9,687

8,711

Intersegment eliminations

Total Revenues

6,564

6,243

21,039

$ 19,834

Adjusted Operating Income (Loss)

1,071

3,329

$ 2,185

1,485

1,396

1,062

Corporate

Intersegment eliminations

Total Adjusted Operating Income

1,842

5,518

$ 4,237

1,072

3,310

$ 2,166

1,392

1,050

Corporate

Total Operating Income

1,834

5,479

$ 4,586

Depreciation and Amortization:

$ 169

Total Depreciation and Amortization

$ 551

(a) Adjusted Operating Income (Loss) and Operating Income (Loss) for the three and nine months ended September 30, 2015 and 2014 included restructuring and severance costs of (millions):

Three Months Ended September 30,

Nine Months Ended September 30,

$ (223)

Total Restructuring and Severance Costs

$ (346)

(b) Adjusted Operating Income (Loss) and Operating Income (Loss) for the three and nine months ended September 30, 2014 included $482 million of programming charges at Turner. These charges were partially offset by $139 million of intercompany eliminations primarily related to intercompany profits on programming Turner licensed from Warner Bros. The result was a net charge to Time Warner of $343 million.

(c) Operating Income (Loss) for the nine months ended September 30, 2014 included a $441 million gain in connection with the sale and leaseback of the Companys space in Time Warner Center.

Presented below is a discussion of the performance of Time Warners segments for the third quarter of 2015. Unless otherwise noted, the dollar amounts in parentheses represent year-over-year changes.

TURNER

decreased 2% ($48 million) to $2.4 billion, due to declines of 15% ($18 million) in Content and other revenues, 1% ($17 million) in Subscription revenues and 1% ($13 million) in Advertising revenues. Content and other revenues decreased due to lower subscription video-on-demand revenues. The decline in Subscription revenues was due to the impact of foreign exchange rates and a decline in domestic subscribers, partially offset by higher domestic rates and local currency growth at Turners international networks. Advertising revenues decreased due to the impact of foreign exchange rates and the absence of NASCAR programming, partially offset by local currency growth at Turners international networks. Domestic advertising was flat in the quarter.

Adjusted Operating Income

increased 206% ($721 million) to $1.1 billion, as the decline in revenues was more than offset by lower expenses, including decreased programming costs and lower restructuring and severance costs. Programming costs decreased 45% primarily due to the absence of the prior year quarters $482 million of charges related to Turners decision to no longer air certain programming. Excluding these charges in the prior year, programming costs decreased in the high-single digits mainly due to the absence of NASCAR programming.

increased 218% ($735 million) to $1.1 billion.

TNTs NBA Opening Night doubleheader averaged 2.9 million total viewers, up 24% over last year, and generated double-digit growth across all key demographics. TBS Major League Baseball postseason coverage averaged 6.3 million total viewers, up close to 50% compared to last year, and was the networks most watched postseason ever. For the 30

consecutive quarter, Adult Swim was ad-supported cables #1 total day network among adults 18-34, and it was #1 among adults 18-49 in the third quarter. CNNs recent coverage of the Republican presidential debate garnered over 23 million average viewers - making it CNNs most watched program ever - and the Democratic presidential debate reached over 15 million average viewers - making it the most watched Democratic debate ever on cable. CNN continued to grow primetime ratings across all key demographics, up 39% and 35% for adults 18-49 and 25-54, respectively, in the third quarter. Cartoon Network was once again the only top 3 kids network to grow ratings in the quarter, and ranked as the #1 ad-supported cable network in total day ratings among kids 6-11.

HOME BOX OFFICE

increased 5% ($63 million) to $1.4 billion, due to increases of 4% ($44 million) in Subscription revenues and 13% ($19 million) in Content and other revenues. Subscription revenues grew primarily due to higher domestic rates, partially offset by lower international revenues, which included the impact of the transfer to Turner of the operation of HBOs basic cable network in India. The increase in Content and other revenues primarily reflected higher domestic licensing revenues.

increased 37% ($139 million) to $519 million, reflecting higher revenues and lower expenses. The decrease in expenses was mainly due to lower restructuring and severance costs as well as decreased distribution and programming costs, partially offset by higher marketing and technology costs. Programming costs decreased 6% primarily reflecting lower acquired theatrical programming costs. The higher marketing and technology costs related to HBO NOW, HBOs stand-alone streaming service.

increased 37% ($139 million) to $519 million.

In September, HBO received a record 43 Primetime Emmy Awards, the most of any network for the 14

consecutive year, with

Game of Thrones

receiving 12 awards, a record for a series in one year, and

Kitteridge

receiving eight awards, the second-most of any program. HBO recently added Roku as a distributor for HBO NOW and added support for streaming HBO NOW to Googles Chromecast and Amazons FireTV. In October, HBO Latin America Group announced plans to launch a new streaming version of HBO GO for broadband-only subscribers in Latin America and the Caribbean.

WARNER BROS.

increased 15% ($415 million) to $3.2 billion, reflecting higher videogames and television licensing revenues, partially offset by the impact of foreign exchange rates, the absence of revenues from a patent license and settlement agreement in the prior year quarter and lower theatrical revenues. The increase in videogames revenues was primarily due to the releases of

LEGO Dimensions

Mad Max

, as well as carryover revenues from several titles, including

Mortal Kombat X

Batman: Arkham Knight

. Television licensing revenues benefited from the initial cable and off-network availability of

2 Broke Girls

and the initial cable availability and subscription video-on-demand licensing of

Person of Interest

increased 61% ($147 million) to $388 million, due to the increase in revenues, lower theatrical and videogames valuation adjustments and decreased restructuring and severance costs, partially offset by higher print and advertising...


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