Mixed Results in Time Warner’s Q4

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NEW YORK: Time Warner’s Q4 revenues decreased 6 percent to $7.1 billion due to a decline at Warner Bros., partially offset by increases at HBO and Turner.

Adjusted operating income declined 12 percent to $1.4 billion, with decreases across all operating divisions as well as a swing in intercompany eliminations. Revenues and adjusted operating income included the unfavorable impact of foreign exchange rates of approximately $270 million and $115 million, respectively, in the quarter. Operating income was essentially flat at $1.4 billion.

Turner’s quarterly revenues increased 2 percent to $2.7 billion, due to a 5 percent hike in advertising revenues. Subscription and content and other revenues were essentially flat in the quarter. Adjusted operating income decreased 15 percent to $781 million, as the increase in revenues was more than offset by higher programming expenses.

At HBO, revenues were up 6 percent to $1.4 billion, due to a 3 percent gain in subscription revenues and a 20 percent spike in content and other revenues. Adjusted operating income was essentially flat at $393 million, as the increase in revenues was offset by higher expenses. The increase in expenses was mainly due to higher programming costs as well as higher marketing and technology costs related to HBO NOW.

Warner Bros.’s Q4 revenues were down 13 percent to $3.3 billion, mainly due to lower theatrical revenues, as the prior-year quarter included the releases of The Hobbit: The Battle of the Five Armies, Interstellar and Annabelle, as well as the impact of foreign exchange rates. Adjusted operating income was down 5 percent to $373 million, due to the decline in revenues partially offset by lower restructuring and severance charges and theatrical valuation adjustments.

For the full year, Time Warner’s revenues and adjusted operating income increased 3 percent and 19 percent to $28.1 billion and $6.9 billion, respectively, due to growth across all operating divisions. Turner’s full-year revenues were up 2 percent to $10.6 billion and adjusted operating income increased 32 percent to $4.1 billion. HBO’s full-year revenues gained 4 percent to $5.4 billion and adjusted operating income rose 5 percent to $1.9 billion. Full-year revenues at Warner Bros. was up 4 percent to $13 billion and adjusted operating income increased 15 percent to $1.4 billion.

Jeff Bewkes, Time Warner’s chairman and CEO, said: “We had another very successful year in 2015, demonstrating once again Time Warner’s ability to deliver strong financial performance as well as creative and programming excellence. Revenues grew 3 percent and adjusted operating income was up 19 percent. All three of our operating divisions increased revenue and profits while also investing to capitalize on the shift to on-demand viewing and growing worldwide demand for the very best video content. Warner Bros. had its best year ever in video games, led by Mortal Kombat X and Batman: Arkham Knight, and remained the number one supplier of broadcast television programming, including the biggest new hit of the TV season in Blindspot. As we embark on what promises to be a very strong year for Warner Bros. theatrically, Mad Max: Fury Road and Creed received a combined 11 nominations for the 88th Academy Awards.”

Bewkes continued: “Home Box Office grew subscribers both on its linear networks and through HBO NOW, our new stand-alone streaming service. Once again, HBO distinguished itself with the combination of the biggest Hollywood hits and best original programming. In 2015, HBO received 43 Primetime Emmys, the most in a single year by any network in at least 25 years—led by a record 12 Emmys for Game of Thrones. Turner continued to prove its tremendous value to its audiences, distributors and advertisers with TBS, TNT and Adult Swim all ranking among ad-supported cable’s top 10 networks in prime time among adults 18 to 49 for the year. CNN was the fastest-growing top 40 cable network in its key demographic in the U.S. for the year, and Cartoon Network was the only top three kids’ network to grow ratings. Further demonstrating our commitment to shareholder returns, during 2015 we returned $4.8 billion to our shareholders through share repurchases and dividends, and this morning announced a 15 percent increase to our dividend and a new $5 billion share repurchase program.”