NEW YORK (Business Wire) -- Time Warner Inc. (NYSE:TWX) today updated its full-year 2004 business outlook.
The Company said it now expects its 2004 full-year growth rate in Operating Income before Depreciation and Amortization, excluding impairments of goodwill and intangible assets and gains and losses from asset disposals ("Adjusted Operating Income before Depreciation and Amortization"), to be in the low-double-digits to low-teens range, as compared to $8.7 billion in 2003. This expectation reflects anticipated revenue gains and margin expansion.
Time Warner also said it now expects the 2004 full-year growth rate in Adjusted Operating Income before Depreciation and Amortization at its America Online division to be in the low- to mid-teens range, off a base of $1.5 billion in 2003.
In addition, the Company reaffirmed that it expects 2004 full-year growth rates in Adjusted Operating Income before Depreciation and Amortization to be higher than the corresponding 2003 rates at each of its reporting segments, except for the Filmed Entertainment segment, which is anticipated to have difficult comparisons.
Lastly, Time Warner said it continues to expect to convert between 30% to 40% of its 2004 Adjusted Operating Income before Depreciation and Amortization into Free Cash Flow. The Company reaffirmed that it expects its America Online division to generate around $1 billion in Free Cash Flow in 2004.
The outlook above does not include the impact of any future merger and restructuring charges and sales and acquisitions of operating assets that may occur from time to time due to management decisions and changing business circumstances. The Company is currently unable to forecast precisely the timing and magnitude of any such events.
Use of Operating Income before Depreciation and Amortization, Adjusted Operating Income before Depreciation and Amortization and Use of Free Cash Flow
The Company utilizes Operating Income before Depreciation and Amortization, among other measures, to evaluate the performance of its businesses. The Company also evaluates the performance of its businesses using Operating Income before Depreciation and Amortization excluding the impact of non-cash impairments of goodwill, intangible and fixed assets, as well as gains and losses on asset sales (referred to herein as Adjusted Operating Income before Depreciation and Amortization). Both Operating Income before Depreciation and Amortization and Adjusted Operating Income before Depreciation and Amortization are considered important indicators of the operational strength of the Company's businesses. Operating Income before Depreciation and Amortization eliminates the uneven effect across all business segments of considerable amounts of non-cash depreciation of tangible assets and amortization of certain intangible assets that were recognized in business combinations. A limitation of this measure, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company's businesses. Moreover, Adjusted Operating Income before Depreciation and Amortization does not reflect the diminution in value of goodwill and intangible assets or gains and losses on asset sales. Management evaluates the costs of such tangible and intangible assets, the impact of related impairments, as well as asset sales through other financial measures, such as capital expenditures, investment spending and return on capital.
The Company also utilizes Free Cash Flow to evaluate the performance of its businesses. Free Cash Flow is Cash Provided by Operations (as defined by accounting principles generally accepted in the United States) less cash provided by discontinued operations, capital expenditures and product development costs, principal payments on capital leases, dividends paid and partnership distributions, if any. Free Cash Flow is considered to be an important indicator of the Company's ability to reduce debt and make strategic investments.
Operating Income before Depreciation and Amortization, Adjusted Operating Income before Depreciation and Amortization and Free Cash Flow should be considered in addition to, not as a substitute for, the Company's Operating Income, Net Income and various cash flow measures (e.g., Cash Provided by Operations), as well as other measures of financial performance reported in accordance with accounting principles generally accepted in the United States.
About Time Warner Inc.
Time Warner Inc. is a leading media and entertainment company, whose businesses include interactive services, cable systems, filmed entertainment, television networks and publishing.
In a separate release issued today, Time Warner Inc. reported financial results for its second quarter ended June 30, 2004.
The Company's earnings conference call can be heard live at 10 am ET on Wednesday, July 28, 2004. To listen to the call, visit www.timewarner.com/investors or AOL Keyword: IR.
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 or beliefs, and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive, technological and/or regulatory factors, sales of business assets, and the potential impact of future decisions by management that may result in merger and restructuring charges, as well as the potential impact of any future impairment charges to goodwill or other intangible assets. More detailed information about these factors may be found in filings by Time Warner Inc. with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and its most recent quarterly report on Form 10-Q. 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.
TIME WARNER INC.
RECONCILIATION OF GUIDANCE
($ in millions)
(Unaudited)
Year Ended Reconciliation
December 31, of 2004
2003 Guidance
-------------- --------------
Reconciliation of Operating Income
Before Depreciation and Amortization,
excluding impairments of goodwill,
intangible and fixed assets, as well
as gains and losses from asset
disposals to Operating Income:
Time Warner Inc.
----------------
Adjusted Operating Income Before
Depreciation and Amortization,
excluding impairments of goodwill,
intangible and fixed assets, as well
as gains and losses from asset
disposals $ 8,699 Low double
digit to low
teens growth
Depreciation and Amortization (3,140) Mid single to
high teens
growth
Impairment of goodwill, intangible and
fixed assets (318) No material
impairment
expected
Gains and losses from asset disposals 14 No material
-------------- gains/losses
expected
Operating Income $ 5,255 Increase in
============== absolute
dollar amount
AOL
---
Adjusted Operating Income Before
Depreciation and Amortization,
excluding impairments of goodwill,
intangible and fixed assets, as well
as gains and losses from asset
disposals $ 1,507 Low to mid
teens growth
Depreciation and Amortization (844) Down single
digit to high
teens growth
Impairment of goodwill, intangible and
fixed assets - No material
impairment
expected
Gains and losses from asset disposals - No material
-------------- gains/losses
expected
Operating Income $ 663 Increase in
============== absolute
dollar amount
Cable
-----
Adjusted Operating Income Before
Depreciation and Amortization,
excluding impairments of goodwill,
intangible and fixed assets, as well
as gains and losses from asset
disposals $ 2,992 Growth rate
exceeds 2003
growth rate
of 9%
Depreciation and Amortization (1,461) Mid to high
single digit
growth
Impairment of goodwill, intangible and
fixed assets - No material
impairment
expected
Gains and losses from asset disposals - No material
------------ gains/losses
expected
Operating Income $ 1,531 Increase in
============ absolute
dollar amount
Filmed Entertainment
--------------------
Adjusted Operating Income Before
Depreciation and Amortization,
excluding impairments of goodwill,
intangible and fixed assets, as well as
gains and losses from asset disposals $ 1,312 Growth rate
falls short
of the 2003
growth rate
of 19%
Depreciation and Amortization (292) Increase in
absolute
dollar amount
Impairment of goodwill, intangible and
fixed assets - No material
impairment
expected
Gains and losses from asset disposals 43 No material
------------ gains/losses
expected
Operating Income $ 1,063 Increase in
============ absolute
dollar amount
Networks
--------
Adjusted Operating Income Before
Depreciation and Amortization,
excluding impairments of goodwill,
intangible and fixed assets, as well as
gains and losses from asset disposals $ 2,246 Growth rate
exceeds 2003
growth rate
of 11%
Depreciation and Amortization (218) Increase in
absolute
dollar amount
Impairment of goodwill, intangible and
fixed assets (219) No material
impairment
expected
Gains and losses from asset disposals - No material
------------ gains/losses
expected
Operating Income $ 1,809 Increase in
============ absolute
dollar amount
Publishing
----------
Adjusted Operating Income Before
Depreciation and Amortization,
excluding impairments of goodwill,
intangible and fixed assets, as well as
gains and losses from asset disposals $ 1,083 Growth rate
improves over
2003 decline
of 6%
Depreciation and Amortization (291) Decrease in
absolute
dollar amount
Impairment of goodwill, intangible and
fixed assets (99) No material
impairment
expected
Gains and losses from asset disposals (29) No material
------------ gains/losses
expected
Operating Income $ 664 Increase in
============ absolute
dollar amount
Reconciliation of Free Cash Flow to
Cash Provided by Operations:
Time Warner Inc.
----------------
Free Cash Flow (1) $ 3,312 Free Cash Flow
conversion
between 30%
to 40% of
Adjusted
Operating
Income Before
Depreciation
and
Amortization,
excluding
impairments
of goodwill,
intangible and
fixed assets,
as well as
gains and
losses from
asset
disposals
Capital expenditures and product
development costs plus principal
payments on capital leases
(all from continuing operations) 2,939 Increase in
------------ absolute
dollar amount
Cash provided by continuing operations 6,251 Cash provided
by continuing
operations
exceeding 90%
of Operating
Income
Cash provided by discontinued
operations 350 Decrease in
------------ absolute
dollar amount
Cash Provided by Operations $ 6,601 Cash Provided
============ by Operations
exceeding 90%
of Operating
Income
AOL
---
Free Cash Flow $ 1,022 Around $1.0
billion
Capital expenditures and product
development costs plus principal
payments on capital leases 642 Down low
------------ double digit
to low double
digit growth
Cash Provided by Operations $ 1,664 Around $1.5
============ billion
Note:
-----
(1) Free Cash Flow is defined as Cash Provided by Operations (as
defined by accounting principles generally accepted in the United
States) less cash provided by discontinued operations, capital
expenditures and product development costs, principal payments on
capital leases, dividends paid and partnership distributions, if any.
Time Warner Inc.
Edward Adler, Corporate Communications
212-484-6630
Tricia Primrose Wallace, Corporate Communications
212-484-7450
Mia Carbonell, Corporate Communications
212-484-6684
John Martin, Investor Relations
212-484-6579
Jim Burtson, Investor Relations
212-484-8719
