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Time Warner Q2 profit rises to $850 mn

MUMBAI: US media conglomerate Time Warner has reported financial results for its second quarter ended 30 June 2014. Profit rose to $850 million while revenues grew by three per cent to $6.8 billion due to HBO and Turner.

Adjusted operating income increased by 17 per cent to $1.6 billion again due to HBO and Turner. Adjusted EPS rose by 29 per cent to $0.98

Free Cash flow increased by 16 per cent to $2 billion in the first half of 2014.

Revenues at HBO grew by 17 per cent ($201 million) to $1.4 billion, reflecting increases of 10 per cent ($101 million) in subscription revenues and 56 per cent ($98 million) in content revenues. Subscription revenues increased mainly from higher domestic rates and the consolidation of HBO Asia and HBO South Asia (collectively, HBO Asia) and HBO Nordic. The increase in content revenues was primarily due to the licensing of select original programming to Amazon Prime Instant Video.

Adjusted operating income at HBO rose by 23 per cent ($102 million) to $552 million, reflecting higher revenues, partially offset by increased expenses due to higher programming costs as well as the comparison against the prior year’s quarter, which benefited from a $31 million adjustment to a receivable allowance. Programming costs grew by 11 per cent due to increased original programming expenses as well as the consolidation of HBO Asia and HBO Nordic.

Operating income increased by 19 per cent ($89 million) to $548 million. The prior year quarter included a gain as a result of HBO’s acquisition of its former partner’s interest in HBO Nordic. HBO received 99 Primetime Emmy nominations in July, the most for any network for the 14th year in a row and more than double the nominations of the closest competitor for the second consecutive year.

Time Warner chairman, CEO Jeff Bewkes said, “We had another strong quarter, reflecting the strength of our businesses and our potential for continued growth as we deliver on our strategic plan to be the world’s leading video content company. Adjusted Operating Income increased 17 per cent while Adjusted EPS rose 29 per cent, and over the first half of the year we generated $2 billion of Free Cash Flow, up 16 per cent year- over-year. We achieved these results in a milestone quarter during which we spun off Time Inc. as an independent, publicly-traded company, further unlocking value for our shareholders and giving Time Warner even more operational focus. Our commitment to invest in great storytelling was evident across the Company. With hits like ‘Game of Thrones’, ‘True Detective’ and ‘Silicon Valley’, HBO once again led the industry with 99 Primetime Emmy nominations, more than double its nearest competitor for the second straight year and the most nominations for the fourteenth year in a row.

“At Turner, TNT debuted the two most-watched new series on ad-supported cable this year with ‘The Last Ship’ and ‘Murder in the First’ and ranked as ad-supported cable’s #1 primetime network among total viewers and adults 18-34, 18-49 and 25- 54 in the second quarter. Turner’s other networks also continued to lead the industry, and in the second quarter TBS finished as the #3 ad-supported cable network in primetime among adults 18-49 and Adult Swim ended as ad-supported cable’s #1 network in total day among adults 18-34 and 18-49. Heading into the 2014-2015 television season, Warner Bros. is the #1 producer of shows for broadcast networks for the 11th time in the past 12 seasons. Starting this fall, Warner Bros. will have 31 shows on broadcast networks, including at least two primetime series on each network, and 60 shows across broadcast and cable.

“And in film, Warner Bros. benefited in the quarter from the home video releases of the second Hobbit installment and ‘The Lego Movie’, which, in addition to being one of the year’s biggest box office hits, has also become a franchise property for the studio. Further demonstrating our commitment to shareholder returns, so far this year we’ve returned over $4 billion to our shareholders in the form of share buybacks and dividends, and our board in June approved an additional $5 billion of share repurchases.”

Adjusted operating income grew by 17 per cent to $1.6 billion due to increases at Turner, Home Box Office and Warner Bros. Operating income increased by 13 per cent to $1.6 billion. Adjusted operating income and operating income margins were 24 per cent and 23 per cent in the second quarter of 2014, respectively, compared to 21 per cent for each in the prior year quarter.

Turner: Revenues rose by five per cent ($123 million) to $2.8 billion, mainly due to growth of eight per cent ($99 million) in subscription revenues and one per cent ($13 million) in advertising revenues.

The increase in subscription revenues was primarily due to higher domestic rates and international growth, partially offset by the negative effect of foreign currency exchange rates. Advertising revenues increased due to growth at Turner’s domestic and international networks, partially offset by the negative effect of foreign currency exchange rates. Domestic advertising revenues benefited from the airing of two 2014 NCAA Division I Men’s Basketball Championship tournament semifinal games and higher pricing, partially offset by lower audience delivery and demand.

Adjusted operating income increased by 15 per cent ($125 million) to $940 million due to higher revenues. Expenses were flat in the quarter as higher programming costs were offset by lower marketing expenses and the reversal of an accrued contingency. Programming costs grew by five per cent primarily due to higher costs related to the NCAA Tournament. Operating income increased by 14 per cent ($114 million) to $929 million.

TNT ranked as ad-supported cable’s number one primetime network among total viewers and adults 18-34, 18-49 and 25-54 in the second quarter and ‘The Last Ship’ and ‘Murder in the First’ are the two most-watched new series on ad-supported cable year-to-date. TBS was the #3 ad-supported cable network in primetime among adults 18-49 and 25-54, and The Big Bang Theory remained the #1 comedy on ad-supported cable among total viewers and adults 18-49 for the 10th consecutive quarter. Adult Swim was ad-supported cable’s #1 total day network among adults 18-24, 18-34 and 18-49, and it ranked #1 among adults 18-34 for the 25th consecutive quarter.

Warner Bros.: Revenues decreased by two per cent ($71 million) to $2.9 billion, mainly due to softer theatrical performance in the current year quarter compared to the prior year’s theatrical slate, which included ‘Man of Steel’, ‘The Hangover Part III’ and ‘The Great Gatsby’. The decline was partially offset by an increase in home entertainment revenues due to the timing of the release of ‘The Hobbit: The Desolation of Smaug’, the strong performance of ‘The Lego Movie’ and continued growth in electronic sell-through, as well as growth in license fees from television production.

Adjusted operating income increased by 28 per cent ($52 million) to $236 million as contributions from home entertainment and television, as well as lower restructuring costs and reversals of bad debt reserves, more than offset the impact of softer theatrical performances. Operating income grew by 29 per cent ($53 million) to $234 million.

Heading into the 2014-2015 television season, Warner Bros. Television Group is once again the #1 producer of shows for the broadcast networks, a position it has held for 11 of the past 12 seasons. Warner Bros. Television Group will have 31 shows on broadcast networks, including at least two primetime series on each network, and 60 shows across broadcast and cable. In June, Warner Bros. Television Group acquired Eyeworks Group’s operations outside of the U.S., increasing its international production capabilities.