Caution Concerning ForwardLooking Statements and NonGAAP Financial Measures
Today’s presentation includes forwardlooking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995; particularly statements regarding future financial and operating results of the Company and its businesses. 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, strategic and/or regulatory factors, and other factors affecting the operations of the businesses of Time Warner. More detailed information about these factors may be found in filings by Time Warner with the SEC, including its most recent Annual Report on Form 10K and Quarterly Reports on Form 10Q in the sections entitled “Caution Concerning ForwardLooking Statements” and “Risk Factors.” Time Warner is under no obligation to, and expressly disclaims any such obligation to, update or alter its forwardlooking statements, whether as a result of new information, future events or otherwise. Today’s presentation also includes information regarding the historical financial performance through September 30, 2009 of Time Warner and its reporting segments and its expectations regarding future performance, including historical financial performance as reflected in nonGAAP financial measures such as Operating Income before Depreciation and Amortization, Adjusted Operating Income before Depreciation and Amortization, Content Group Adjusted Operating Income before Depreciation and Amortization, Free Cash Flow, Adjusted EPS and Content Group Adjusted EPS. Please note that schedules setting out the reconciliation of these and other historical nonGAAP financial measures to operating income, cash provided by operations from continuing operations, diluted income per common share from continuing operations or other most directly comparable GAAP financial measures, as applicable, are included in the trending schedules posted on the Company’s Web site at www.timewarner.com/investors and, as applicable, also are included in the Company’s earnings release for the quarter ended September 30, 2009, which also can be accessed from the Company’s Web site. Reconciliations of the expected future financial performance of both Time Warner and the Content Group are included in a press release issued on November 4, 2009, which also can be accessed from the Company’s Web site, as well as in the trending schedules posted on the Company’s Web site.
Third Quarter 2009 Results
Chief Financial Officer
John K. Martin
November 4, 2009
Financial Highlights
Content Group Adjusted OIBDA declined 1% compared to Q308
Substantial Free Cash Flow through September 30
Continued commitment to shareholder returns
Raising fullyear financial outlook
Consolidated Income Statement Highlights
$ in millions, except per share amounts
Q309 Revenues Cost of revenues * Selling, general and administrative * Restructuring costs Adjusted Operating Income before D&A ** $7,135 $(3,924)
Q308 $7,579 $(4,103)
Growth
(6%)
(4%)
$(1,612)
$(39) $1,804
$(1,726)
$(20) $1,979
(7%)
95% (9%) (6%)
Margin %
Adjusted EPS ***
25%
$0.61
26%
$0.65
* ** ***
Cost of revenues and selling, general and administrative expenses include depreciation. Defined as Operating Income before D&A excluding the impact of noncash impairments of goodwill, intangible and fixed assets, as well as gains and losses on asset sales, and amounts related to securities litigation and government investigations. Defined as Diluted Income per Common Share from Continuing Operations attributable to Time Warner Inc. common shareholders excluding noncash impairments of goodwill, intangible and fixed assets and investments; gains and losses on sales of operating assets and investments; external costs related to mergers, acquisitions, investments or dispositions, as well as contingent consideration related to such transactions, to the extent such costs are expensed; and amounts related to securities litigation and government investigations, as well as the impact of taxes and noncontrolling interests on the above items.
Segment Highlights
Networks Highlights
$ in millions
Q309
Q308
Growth
Subscription Advertising Content Other Total Revenues
Adjusted Operating Income before D&A *
$1,885 768 197 24 $2,874
$1,096
$1,722 772 224 13 $2,731
$1,008
9% (1%) (12%) 85% 5%
9%
Margin %
38%
37%
*
Defined as Operating Income before D&A excluding the impact of noncash impairments of goodwill, intangible and fixed assets, as well as gains and losses on asset sales and amounts related to securities litigation and government investigations.
Filmed Entertainment Highlights
$ in millions
Subscription Advertising Content: Theatrical product Television product Other content Total Content Other Total Revenues Operating Income before D&A
Q309 $12 18 1,708 779 229 2,716 34 $2,780 $385
Q308 $10 20 1,777 776 244 2,797 54 $2,881 $381
Growth 20% (10%) (4%) 0% (6%) (3%) (37%) (4%) 1%
Margin %
14%
13%
Publishing Highlights
$ in millions
Q309
Subscription Advertising Content Other Total Revenues Adjusted Operating Income before D&A * $333 456 22 103 $914 $139
Q308
$382 585 16 135 $1,118 $241
Growth
(13%) (22%) 38% (24%) (18%) (42%)
Margin %
15%
22%
*
Defined as Operating Income before D&A excluding the impact of noncash impairments of goodwill, intangible and fixed assets, as well as gains and losses on asset sales and amounts related to securities litigation and government investigations.
AOL Highlights
$ in millions
Q309
Q308
Growth
Subscription Advertising AOL Media Third Party Network Total Advertising Other Total Revenues
Adjusted Operating Income before D&A *
$332
288 127 415 30 $777 $239
$470
363 144 507 35 $1,012 $398
(29%)
(21%) (12%) (18%) (14%) (23%) (40%)
Margin %
*
31%
39%
Defined as Operating Income before D&A excluding the impact of noncash impairments of goodwill, intangible and fixed assets, as well as gains and losses on asset sales and amounts related to securities litigation and government investigations.
Corporate Highlights
$ in millions
Q309 Adjusted Operating Income before D&A* $(69)
Q308 $(68)
Growth
1%
*
Defined as Operating Income before D&A excluding the impact of noncash impairments of goodwill, intangible and fixed assets, as well as gains and losses on asset sales and amounts related to securities litigation and government investigations.
2009 Business Outlook
2009 Outlook
***
Time Warner Adjusted EPS *
Content Group Adjusted EPS **
At least $2.05 compared to base of $1.98 in 2008 ****
At least $1.75 compared to base of $1.42 in 2008 ****
*
**
*** ****
Defined as Diluted Income per Common Share from Continuing Operations attributable to Time Warner Inc. common shareholders excluding noncash impairments of goodwill, intangible and fixed assets and investments; gains and losses on sales of operating assets and investments; external costs related to mergers, acquisitions, investments or dispositions, as well as contingent consideration related to such transactions, to the extent such costs are expensed; and amounts related to securities litigation and government investigations, as well as the impact of taxes and noncontrolling interests on the above items. Content Group Adjusted EPS is Diluted Income per Common Share from Continuing Operations attributable to Time Warner Inc. common shareholders excluding the results of the AOL segment; noncash impairments of goodwill, intangible and fixed assets and investments; gains and losses on sales of operating assets and investments; external costs related to mergers, acquisitions, investments or dispositions, as well as contingent consideration related to such transactions, to the extent such costs are expensed; and amounts related to securities litigation and government investigations, as well as the impact of taxes and noncontrolling interests on the above items. Does not include the impact of any future merger or unplanned restructuring charges, the impact from sales and acquisitions of operating assets and investments, or the impact of taxes on the above items, 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/or magnitude of any such amounts or events. These amounts exclude the results of Time Warner’s former Cable segment and reflect the Company’s 1for3 reverse stock split on March 27, 2009.
Free Cash Flow
$ in millions
YTD09 Adjusted Operating Income before D&A * $4,940 35 (673) (820) $3,482 (464) 13 $3,031
YTD08 $5,264 249 (823) (444) $4,246 (556) (15) $3,675
Working Capital/Other ** Cash Interest Expense, Net
Cash Taxes Cash Flow Provided by Operations from Continuing Ops. Capex & Product Development Other *** Free Cash Flow ****
Conversion % of Adjusted OIBDA
*
61%
70%
Defined as Operating Income before D&A excluding the impact of noncash impairments of goodwill, intangible and fixed assets, as well as gains and losses on asset sales, and amounts related to securities litigation and government investigations. ** Includes payments related to securities litigation and government investigations (net of any insurance recoveries). *** Includes principal payments on capital leases, excess tax benefits from the exercise of stock options, and payments related to securities litigation and government investigations (net of any insurance recoveries). **** Defined as Cash Provided by Operations from Continuing Operations plus payments related to securities litigation and government investigations (net of any insurance recoveries), external costs related to mergers, acquisitions, investments or dispositions and excess tax benefits from the exercise of stock options, less capital expenditures and product development costs, principal payments on capital leases, and partnership distributions, if any.
Capital Structure Update
$ in billions
Net Debt December 31, 2008 *
$20.7
Time Warner Cable Special Dividend
YTD09 Free Cash Flow ** Dividends Share Repurchase Program Other *** Net Debt September 30, 2009 *
(9.3)
(3.0) 0.7 0.7 0.6 $10.4
* **
Defined as total debt less cash and equivalents. Defined as Cash Provided by Operations from Continuing Operations plus payments related to securities litigation and government investigations (net of any insurance recoveries), external costs related to mergers, acquisitions, investments or dispositions, and excess tax benefits from the exercise of stock options, less capital expenditures and product development costs, principal payments on capital leases and partnership distributions, if any. *** Relates to investment and acquisition spending, net of cash acquired, proceeds from the sale of investments and fixed assets, stock option proceeds, net of taxes, capital lease obligations, cash flow from discontinued operations, and debt discount activity.
Third Quarter 2009 Results John K. Martin
Chief Financial Officer
November 4, 2009