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Time Warner Announces $317 Million Loss Due to Warner Acquisition

February 12, 1990

NEW YORK (AP) _ Time Warner Inc. announced Monday it lost $317 million in the fourth quarter and $987 million for all of 1989 because of costs related to its $14 billion acquisition of Warner Communications Inc.

Despite the loss, which was expected, securities analysts said they were satisfied with the results because Time Warner’s cash flow - which is crucial for paying off its $10.6 billion in debt - was strong.

Time Warner, formerly Time Inc., completed its acquisition of Warner Communications on Jan. 10 after having acquired more than half of Warner’s shares in a tender offer last July.

The results announced Monday were reported as though Time had acquired Warner on Jan. 1, 1988, and therefore included results from all of Warner’s divisions.

Time Warner’s fourth-quarter loss amounted to $5.52 per share and compared with a loss of $320 million, or $5.61 a share, in the same period of 1988.

However, Time Warner’s operating income, which does not reflect interest, taxes, costs associated with the Warner acquisition and other expenses, totaled $412 million, up from $351 million a year earlier.

The company’s fourth-quarter combined revenue rose to $3.09 billion from $2.5 billion a year earlier.

Time Warner said its quarterly results reflected a $175 million loss before taxes on the sale of its Scott, Foresman and Co. book publisher.

They also included a $63 million gain before taxes on the sale of Time Warner’s stock in Columbia Pictures Entertainment Inc.

The company said all its divisions performed well during the quarter.

Time-Warner’s magazine division, which includes Time, Sports Illustrated and People magazines, had operating income of $108 million in the fourth quarter, up 13 percent from 1988. Advertising revenue was up 8.7 percent while circulation revenue increased 4.7 percent.

Time Warner said its magazine revenue more than offset start-up costs for its Entertainment Weekly, which it launched Monday.

The company’s filmed entertainment division, which includes Warner Brothers Studios, had operating income of $80 million, compared with a loss of $20 million in fourth quarter 1988.

Time Warner said it continued to profit from the success of the motion picture ″Batman,″ which was in videocassette release domestically and theatrical distribution overseas during the quarter.

The company’s recorded music and publishing division, which includes Warner Records, had operating income of $141 million, up 11 percent from a year earlier.

Operating income at the company’s cable television division was up 58 percent to $180 million. Time Warner said the results partly reflected the addition of a Florida cable system acquired from Centel Corp.

Time Warner’s programming division, which includes Home Box Office and Cinemax, had operating income of $37 million, compared with a loss of $1 million a year earlier.

The company’s book division had a loss of $134 million, reflecting the Scott Foresman sale, compared with operating income of $35 million in fourth- quarter 1988.

John Reidy, an analyst with Drexel Burnham Lambert Inc., said Time Warner had a ″solid quarter.″ Judging by the performance of the company’s various divisions, cash flow for 1989 was in line with expectations, he said.

Analysts are more concerned with Time Warner’s ability to pay its debts and shrugged off the company’s losses. ″They’re meaningless,″ said Pavlos Alexandrakis at Argus Research Corp.

Alexandrakis also said Time Warner’s cash flow would be enough to service its debt load.

For the year, Time Warner said it lost $987 million, or $17.29 per share, compared with a loss of $1.14 billion, or $19.84 a share, in 1988.

Full-year revenue totaled $10.78 billion, up from $9.1 billion.

The results for all of 1989 also include the costs of the Warner acquisition. Operating income for the year totaled $1.92 billion, up from $1.33 billion in 1988.

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