Time Warner to Separate from Cable Unit; 1Q Net Profit Off

Apr 30, 2008  •  Post A Comment

Time Warner expects to make a “complete structural separation” from Time Warner Cable, new Time Warner CEO Jeff Bewkes said Wednesday as the company announced lower first quarter earnings.
Time Warner Cable already has its own publicly traded stock, but is 84% owned by Time Warner.
“We’re working hard on an agreement with Time Warner Cable, which we expect to finalize soon,” Mr. Bewkes said in a statement. “At the same time, we’ll continue to pursue the rest of our aggressive agenda that we believe will deliver increasing value to our shareholders.”
“Although no details related to structure were provided, we continue to think that a separation makes sense,” said Bear Stearns analyst Spencer Wang in a research note Wednesday morning.
For the first quarter net profit fell 36% to $771 million, or 21 cents a share, from a year ago, when the company had big one-time gains from the sale of AOL’s German access business and the unwinding of a cable partnership with Comcast. Revenues rose 2% to $11.4 billion.
The earnings fell slightly short of Wall Street expectations.
Time Warner reaffirmed that it expects to grow its adjusted operating income before depreciation and amortization by 7% to 12% this year and that earnings per diluted share from continuing operations will be between $1.07 and $1.11. It raised its outlook for free cash flow because of lower interest rates and new tax laws.
Operating income at Time Warner’s networks group, which includes Turner Broadcasting and HBO, rose 2%. Programming costs increased at Turner, which is paying more to air National Basketball Association games and creating more original programming. HBO’s programming expenses were also up. Ad revenues at Turner were up 13%.
Revenues fell 23% at Time Warner’s troublesome AOL unit, as declining subscription revenue more than offset a 1% increase in ad revenues. Operating income was down 74% partly because of the sale of the German unit.
Operating income rose 10% at Time Warner Cable on an 8% increase in revenues.
(Editor: Jensen)


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