Turner assets, HBO hot; music, pix weaker
The numbers, adjusted for the impact of last October's acquisition of Turner Broadcasting System, allowed Time Warner to highlight the rationale for doing the deal: Only HBO showed faster growth than the Turner cable networks in the quarter.
After depreciation, amortization, taxes and interest, Time Warner's bottom line showed a much smaller loss of $18 million compared with a loss of $76 million a year earlier.
"It's a real good performance," said Time Warner chairman Gerald Levin, adding that he expects the "same kind of growth rate" in 1997. Time Warner stock rose $1.87 to $41.50. "The numbers were good," said Cowen & Co. analyst Harold Vogel.
For the year, cash flow rose 7% to $4.5 billion on 8.2% higher revenue of $23.6 billion, while the net loss rose 6% to $627 million. The year's cash flow (which includes Turner's earnings as if it was owned for the full period) was hurt by $200 million in writeoffs from Turner earlier in the year, including on film losses previously disclosed.
In the fourth quarter Turner's cable networks, which include TNT, TBS, Cartoon Network and Cable News Network, produced 22% higher cash flow of $162 million, which Time Warner said was due to "significant gains in advertising and subscription revenues" at the entertainment networks --- despite a decline in CNN's cash flow caused by startup costs at CNNfn, CNN/SI and CNN en Espanol.
HBO, which like the Turner networks is now under the supervision of TW vice chairman Ted Turner, posted 24% growth in cash flow of $91 million, helped by an increase of 2.7 million subscribers through the year to a year-end total of 32.4 million (including Cinemax).
Warner Bros. and Warner Music had a much less spectacular quarter, with the studio posting just 1.6% higher cash flow of $123 million on 9.5% higher revenue of $1.7 billion, helped by consumer products revenue from "Space Jam," TW said. The studio had a big disappointment in the quarter with "Mars Attacks!," which likely hurt the earnings, analysts said.
And Warner Music's cash flow fell 1.7% to $290 million on 3% lower revenue of $1.2 billion. Levin, who met with reporters Tuesday to review the results, noted that there "clearly is an environmental issue in terms of the overstored retail side and some real problems with respect to the pricing of music."
Turner's film group, whose future is in transition, returned to the black with cash flow of $32 million compared with a loss of $3 million a year earlier. The increase was driven by the box office results of Turner Pictures' "Michael." For the year the TBS film group lost $108 million as a result of writeoffs from Castle Rock Entertainment, which is staying at Time Warner, and New Line, which is up for sale.
Time Warner's cable systems performed strongly, showing 15% higher cash flow of $526 million in the quarter, reflecting both higher revenues in basic cable, advertising and pay-per-view.
The company's startup WB Network lost $35 million in the quarter, up from $26 million a year earlier, while the full-year loss was $98 million compared with $66 million in 1995. Time Warner blamed the increased losses on the expanded rollout of the schedule: In September WB went to three nights a week and Kids WB also expanded.
Time Inc. also had a good quarter, showing 14% higher cash flow of $200 million. For the full year cash flow rose 12% to $535 million.
