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|Time Warner Inc. Provides 2018 Full-Year Business Outlook|
The outlook for 2018 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
OPERATING DRIVERS FOR FULL-YEAR AND FIRST QUARTER OF 2018
The Company expects Turner’s 2018 full-year subscription revenues to increase in the mid-single digits compared to the prior year. For the full year, the Company expects growth in Turner’s programming costs and total expenses to moderate compared to 2017. The Company anticipates Turner’s Operating Income growth rate in 2018 will increase compared to the prior year.
Scatter pricing for advertising sales at Turner’s domestic entertainment
networks has increased high-single digits in the first quarter of 2018
to date compared to last year’s upfront. The Company anticipates
Turner’s total advertising revenues will increase in the high single- to
low double-digits in the first quarter of 2018 compared to the prior
year quarter, due in part to an approximately five percentage point
benefit the Company expects from airing the Final Four games of the
Home Box Office
The Company anticipates Home Box Office’s 2018 full-year subscription revenues to increase at a similar rate as in 2017. The Company expects content and other revenues to decline significantly in 2018 compared to the prior year due to the mix of home video releases and the comparison to international licensing deals completed in the prior year. In addition, the Company expects full-year 2018 total expense growth at Home Box Office to moderate compared to 2017. 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 at a healthy rate in 2018 compared to the prior year.
The Company expects Home Box Office’s subscription revenue growth in the first quarter of 2018 to increase at a rate similar to the expectation for the full year in 2018. The expected lower subscription revenue growth rate in the first quarter of 2018 compared to the fourth quarter of 2017 is primarily due to changes in the timing for recognizing certain revenue under new revenue recognition accounting guidance adopted in 2018. The Company expects Home Box Office’s content and other revenues to decline significantly in the first quarter compared to the prior year quarter. In addition, the Company anticipates year-over-year growth in total expenses to be higher in the first half of 2018 compared to the second half of 2018. The Company expects Home Box Office’s Operating Income to decline in the first quarter.
The Company expects Warner Bros.’ full-year Operating Income to increase in 2018 compared to the prior year reflecting higher games profits primarily related to carryover from the 2017 releases and growth in television licensing revenues of theatrical product due to the licensing of the Harry Potter franchise.
In the first quarter of 2018, the Company expects Warner Bros.’ Operating Income to decline by a double-digit percentage compared to the prior year quarter due to the comparison to the television licensing of a library series in last year’s first quarter and the mix and timing of film releases.
Based on the Company’s analysis of the impact of the U.S. tax reform legislation enacted at the end of 2017, the Company anticipates its 2018 full-year effective tax rate will be approximately 20%. This does not reflect the impact of any potential new provisions or other changes to the tax legislation that could occur during 2018.
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
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 2018 Adjusted Operating Income to its expected 2018 Operating Income, to the extent practicable, is included with this release. The reconciliation does not include the expected 2018 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 2018.
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
Information on Earnings Release
In a separate release issued today,
Time Warner Inc.