Time Warner Inc. (TWX)

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Time Warner Inc (TWX)

Q4 2009 Earnings Call

February 03, 2010 10:30 am ET

Executives

Doug Shapiro - SVP, IR

Jeff Bewkes - Chairman & CEO

John Martin - EVP & CFO

Analysts

Spencer Wang - Credit Suisse

Michael Morris - UBS

Ben Swinburne - Morgan Stanley

Rich Greenfield - Pali Capital

Michael Nathanson - Bernstein Research

Tuna Amobi - Standard & Poor's Equity Group

Doug Mitchelson - Deutsche Bank

Alan Gould - Soleil Securities

Presentation

Operator

Hello and welcome to the Time Warner's Fourth Quarter and full year 2009 earnings call. At this time all participants are in a listen-only mode. (Operator Instructions). Today's conference call is being recorded. If you have any objections you may disconnect at this time.

I will now turn the call over to Doug Shapiro, Senior Vice President of Investor Relations. Sir, you may begin.

Doug Shapiro

Thanks a lot and welcome to Time Warner's 2009 fourth quarter and full year earnings conference call.

Before we begin, there are several items I need to cover. First, we refer to certain non-GAAP financial measures. Schedules setting out reconciliations of the historical non-GAAP financial measures to the most directly comparable GAAP measures are included in our earnings release, and trending schedules. These reconciliations are available on our website at timewarner.com/investors. The reconciliations of our expected future financial performance are also included our website.

Second, today's announcement includes certain forward-looking statements which are based on management's current expectations. Actual results may vary materially from those expressed or implied by these statements due to various factors. These factors are discussed in detail in Time Warner's SEC filings, including its most recent annual report on Form 10-K and further reports on Form 10-Q. 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.

Lastly, just please keep in mind that the company has presented the operating results for Time Warner Cable and AOL as discontinued operations for all periods presented.

With that let me turn the call over to Jeff.

Jeff Bewkes

Thanks, Doug. Good morning everyone and thanks for joining us. We began 2009 with an ambitious agenda and we achieved what we set out to do. So as a result, Time Warner is better positioned today than ever. We've got strong operational and financial momentum and there is increasing evidence that industry trends are going our way.

And now I think we are structured to run our businesses more aggressively than ever. We delivered very strong adjusted earnings per share growth last year despite the worst recession in most of our lives. Our Networks and Film businesses posted record profits driven largely by the strength of our content and that performance underscores two things that we have discussed before.

Demand is growing with the kind of high quality contents that we make as consumers enjoy more choices, it also shows how our unique combination of scale, brands and talent enables us to institutionalize success in hit-driven businesses.

In 2009, we approved the efficiency and productivity of businesses by reallocating resources. We substantially raised our investment in programming and production, and that's critical to drive our revenue and extend our competitive position, and we still increase margins by significantly reducing overhead expense.

While we're doing that, we strengthened our balance sheet last year as well while doubling our return of capital to shareholders. Free cash flow totaled almost $3 billion and we returned over $2 billion of that or more than 70% to our shareholders through dividends and share repurchases.

We also spun off Time Warner Cable and AOL, and that allowed us to focus all our energy in resources on what we do best, making and distributing the most compelling branded content on traditional and emerging platforms and monetizing it better than anyone else. In 2010 and beyond, we will build on this foundation.

As you saw in this morning's outlook release, we expect to grow our adjusted EPS mid-teens in 2010. We will do that by executing even more aggressively on the four operational priorities that I've discussed with you before. The first is leveraging our scale and brands to create the highest quality content and monetize it better than anyone else.

Second, make our operations more efficient by allocating resources to the best and most productive use. Third, we're going to keep expanding internationally. And fourth, we're developing new business models that capitalize on changes in consumer usage and technology well at the same time ensuring when possible that they are additive and not cannibalistic, we are going to talk more about that.

In practice this means that we will again spend more on programming and production in 2010. We will invest more in new digital initiatives and extend our brands internationally and we will do that while keeping our overall expenses relatively flat.

And I'd like to expand on what that means at each of our four divisions. So I'll start with Turner. We made considerable investments in original programming last year to make sure that our networks become even more attractive for our viewers our advertisers and our affiliates. We had a lot of successes. Last year TNT's original drama [screwed] ratings in the same times last five, over 50% over the prior year. And three of its new original series ranked in cables top 5.

Just to pick one of them TBS debuted the well past Tonight Show to double digit gain in its time slot and in its first few weeks it out delivered most other late night talk shows in the valuable 18 to 34 demo.

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