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Time Warner Inc. Reaffirms 2017 Full-Year Business Outlook

NEW YORK--(BUSINESS WIRE)--Aug. 2, 2017-- Time Warner Inc. (NYSE:TWX) today reaffirmed its 2017 full-year business outlook. The Company continues to expect its 2017 full-year Adjusted Operating Income to increase in the high single-digits, based on current foreign exchange rates.

The outlook for 2017 Adjusted Operating Income does not include the impact of any future merger or unplanned restructuring and severance charges, the impact from future sales and acquisitions of operating assets or the impact of taxes on such items. These items may occur from time to time due to management decisions and changing business circumstances. The outlook also does not include the costs associated with the pending acquisition by AT&T Inc. (including retention, restructuring and severance costs associated with the transaction). The impact of such items would be included in Adjusted Operating Income (other than the costs associated with the AT&T transaction, gains and losses from operating assets and any related tax effect) and Operating Income, which is the most directly comparable GAAP measure to Adjusted Operating Income. The Company is currently unable to forecast precisely the timing and/or magnitude of any such events and their resulting impacts on Operating Income and Adjusted Operating Income.

OPERATING DRIVERS FOR SECOND HALF OF 2017

Turner

The Company expects Turner’s subscription revenue growth in the second half of 2017 to increase at a similar rate as in the first half of 2017. Scatter pricing for advertising sales at Turner’s domestic entertainment networks has increased double-digits in the third quarter to date compared to last year’s upfront. The Company anticipates Turner’s total advertising revenues will decline in the low single-digits in the third quarter of 2017 compared to the prior year quarter, primarily due to lower audience delivery at its domestic entertainment networks.

The Company anticipates Turner’s total expense growth in the second half of 2017 will moderate compared to the first half of 2017 and its Operating Income will increase both for the second half of 2017 and for the full year compared to the prior year periods.

Home Box Office

The Company anticipates Home Box Office’s subscription revenue growth rate will increase in the second half of 2017 relative to the second quarter of 2017 and its total revenues in the second half of 2017 will increase at a higher rate compared to the first half of the year.

In the second half of 2017, the Company expects Home Box Office’s programming costs to increase at an elevated rate compared to the prior year due to the timing of original programming. The Company anticipates Home Box Office’s revenue growth will more than offset expense growth and as a result expects its Operating Income to increase in the second half of the year compared to the prior year.

Warner Bros.

Based on the timing of this year’s theatrical release slate, notably the scheduled release of Justice League in the fourth quarter of 2017 compared to the release of Suicide Squad in the third quarter last year, and the scheduled videogame release of Middle-earth: Shadow of War in the fourth quarter of 2017, the Company expects Warner Bros.’ Operating Income growth in the second half of 2017 to be weighted to the fourth quarter.

Use of Adjusted Operating Income (Loss) Measure

Adjusted Operating Income (Loss) is defined as Operating Income (Loss) excluding the impact of noncash impairments of goodwill, intangible and fixed assets; gains and losses on operating assets (other than deferred gains on sale-leasebacks); gains and losses recognized in connection with pension and other postretirement benefit plan curtailments or settlements; costs related to the pending acquisition by AT&T Inc. (including retention, restructuring and severance costs associated with the transaction); external costs related to mergers, acquisitions or dispositions (including restructuring and severance costs associated with 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. The Company utilizes Adjusted Operating Income (Loss), among other measures, to evaluate the performance of its businesses. Some limitations of Adjusted Operating Income (Loss) are that it does not reflect certain charges that affect the operating results of the Company’s businesses and it involves judgment as to whether items affect fundamental operating performance. Also, a general limitation of Adjusted Operating Income (Loss) is that it is not prepared in accordance with U.S. generally accepted accounting principles and may not be comparable to similarly titled measures of other companies due to differences in methods of calculation and excluded items.

Adjusted Operating Income (Loss) should be considered in addition to, not as a substitute for, the Company’s Operating Income (Loss), as well as other measures of financial performance reported in accordance with U.S. generally accepted accounting principles.

A reconciliation of the Company’s expected 2017 Adjusted Operating Income to its expected 2017 Operating Income, to the extent practicable, is included with this release. The reconciliation does not include the expected 2017 Operating Income because the Company is unable to forecast the timing and/or magnitude of some items that are included in Operating Income but excluded from Adjusted Operating Income, but it is likely there will be additional amounts during the remainder of 2017.

About Time Warner Inc.

Time Warner Inc., a global leader in media and entertainment with businesses in television networks and film and TV entertainment, uses its industry-leading operating scale and brands to create, package and deliver high-quality content worldwide on a multi-platform basis.

Caution Concerning Forward-Looking Statements

This document contains 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, strategic and/or regulatory factors and other factors affecting the operation of Time Warner’s businesses, including the pending merger with AT&T Inc. More detailed information about these factors may be found in filings by Time Warner with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and subsequent Quarterly Reports 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.

Information on Earnings Release

In a separate release issued today, Time Warner Inc. reported the financial results for its second quarter ended June 30, 2017.

       

TIME WARNER INC.
RECONCILIATION OF GUIDANCE
(Millions, Unaudited)

 

Year Ended
December 31, 2016

   

Reconciliation of 2017 Guidance

 

Reconciliation of Adjusted Operating Income to Operating Income

 

Adjusted Operating Income

$

7,601

Growth expected to be in the high-single digit range.(1)

 

Asset impairments

(43

)

Unable to estimate beyond the ($2) million recognized for the period January 1, 2017 through June 30, 2017.(2)

 

Gains (losses) on operating assets, net

78

Unable to estimate beyond the $56 million recognized for the period January 1, 2017 through June 30, 2017.(2)

 

Costs related to the AT&T Merger

(42

)

Unable to estimate beyond the ($183) million recognized for the period January 1, 2017 through June 30, 2017 and the approximately ($145) million expected to be incurred for the period July 1, 2017 through December 31, 2017.(2)(3)

 

Other operating income items

 

(47

)

Unable to estimate beyond the ($11) million recognized for the period January 1, 2017 through June 30, 2017.(2)

 

Operating Income

$

7,547

 

Unable to estimate.(1)

 

(1) Based on current exchange rates.

(2) Because of the nature of the items, the Company is unable to estimate the amounts of any adjustments for the items excluded from Operating Income for the period after December 31, 2016, other than the item noted in (3) below, due to its inability to forecast if or when any such items will occur. Based on the occurrence of small amounts of these items for the year ended December 31, 2016, it is likely that additional amounts will occur during the year ended December 31, 2017.

(3) In connection with entering into the Agreement and Plan of Merger with AT&T Inc., the Company approved special retention restricted stock units ("Special Retention RSUs") and cash retention awards to be awarded to certain employees. The Company expects to recognize approximately ($145) million of expenses for the period July 1, 2017 through December 31, 2017 principally related to such Special Retention RSUs and cash retention awards.

Source: Time Warner Inc.

Time Warner Inc.
Corporate Communications
Keith Cocozza (212) 484-7482
or
Investor Relations
Jessica Holscott (212) 484-6720
Michael Senno (212) 484-8950