Time Warner Inc. (TWX)

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Time Warner Inc. (TWX)

Q3 2009 Earnings Call

November 4, 2009 10:30 am ET

Executives

Doug Shapiro – Senior Vice President, Investor Relations

Jeffrey L. Bewkes – Chief Executive Officer

John K. Martin – Chief Financial Officer

Analysts

Spencer Wang – Credit Suisse

Benjamin Swinburne – Morgan Stanley

Michael Nathanson – Sanford Bernstein

Jessica Reif-Cohen – Band of America Merrill Lynch

Richard Greenfield – Pali Research

Michael Morris – UBS

Douglas Mitchelson – Deutsche Bank Securities

Anthony Diclemente – Barclays Capital

Presentation

Operator

Welcome to the Time Warner Third Quarter 2009 Earnings Call. (Operator instructions.) I will now turn the call over to Doug Shapiro, Senior Vice President of Investor Relations.

Doug Shapiro

This morning we issued two press releases, one detailing our results for the quarter, the other updating our 2009 business outlook. Before we begin, there are two items I need to talk about. Results refer to certain non-GAAP financial measures. Reconciliations of these historical non-GAAP measures to the most direct and comparable GAAP measures are included in our earnings release and trending schedules.

These schedules are available at our Website at timewarner.com/investors. Reconciliations of our expected future financial performance are also included in the business outlook release available on site. Second, today's announcement includes certain forward-looking statements, which are based on management's current expectations.

Actual results may differ materially from those expressed or implied through these statements due to various factors. These factors are discussed in detail in Time Warner's SEC filings. Time Warner is under no obligation and, in fact expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. With that, I will turn it over to Jeff.

Jeffrey L. Bewkes

As you read this morning, we have good news for you today. We are executing very well in spite of the tough environment. We're raising our guidance and we're on track to complete the AOL spin this year. We're making a lot of progress toward our longer term strategic priorities. So I'm increasingly confident that we are well positioned to deliver steady, attractive stockholder returns in 2010 and beyond that. Our third quarter results were better than expected.

In spite of the advertising climate and difficult comparisons in film and networks versus last year's high performance, adjusted OIBDA for our content groups held flat in the quarter and is now about 2% year-to-date. This strong performance was broad-based, coming from HBO, Turner and Warner Brothers.

As you saw this morning in our business outlook these results gave us the confidence to raise our full-year outlook for 2009. We now expect adjusted earnings per share of at least $2.05. This even includes as much as $100 million or about $0.05 per share in new restructuring charges at Time Inc. that we announced today. I'll tell you more about that in a minute.

For the first time we've also provided an outlook for just our Content Group, adjusted earnings per share of at least $1.75. That's up around 25% on a reported basis versus last year and it's at least a mid-single digits increase, if you take out a big legal reserve we had at the end of last year.

We provided guidance this way because we are confident that we will complete the AOL spin this year. This separation is an important milestone for both companies. It will enable both AOL and Time Warner to focus even more on our core business moving each of us toward our ultimate goal of improving our return on capital.

Looking forward, we'll stay focused on increasing returns in two ways, growing our profits and allocating our capital for the best risk-adjusted returns. To boost profit growth, we're focused on the key operating priorities that I talked about before.

First, continue to leverage our scale, our brands to deliver high-quality content consistently; second, to keep improving efficiency of our operations; third, expand internationally, and, fourth, continue to drive the development of business models to capitalize on changes in consumer usage and technology.

We're making progress on each of these objectives every quarter. Let me start with our great content. I've talked before about our firm belief that hits are growing in value, even as consumption keeps [inaudible]. I've also told you that we think it is possible to institutionalize success in a hit driven business. We do that by capitalizing on a virtual cycle of scale, distribution, brands and creative and managerial talent.

One of the best examples is Warner Brothers who's consistency and return profile may not be fully appreciated may not be fully appreciated. Warner is having another fantastic year. It is currently ranked number one at the box office. Harry Potter and the Half-Blood Prince and the Hangover are two of the four highest grossing films domestically in 2009.

Even recent releases like Where the Wild Things Are, Final Destination and The Informant have all exceeded expectations and we're very excited about upcoming films, particularly Sherlock Holmes and Clint Eastwood's In Vegas coming out before the end of the year.

Now although we're releasing fewer movies this year, we're on track to match or exceed last year's domestic box office gross of almost $1.9 trillion. Our TV production business has also had a great year with 12 new shows ordered by the networks and 14 returning shows. That makes us the leading provider of broadcast TV programming this season.

Two and a Half Men and Big Bang Theory are now in the top two comedies on the networks' schedules and in light of the scarcity of comedies they are two of the most valuable shows on television. These results aren't just grid-lock. This year will mark the eighth time in the last nine years that our studios have led the domestic box office.

Read the rest of this transcript for free on seekingalpha.com