Time Warner Delivers in Double Digits

4/16/2000 8:00 PM Eastern

Time Warner Inc. came blasting out of the gate in the first quarter-an historically slow time for cable-with revenue growth of 8 percent and earnings before interest, taxes and amortization growth of 13 percent for the period.

The company's cable networks and cable systems posted the biggest gains, with revenue at the networks rising 16 percent and cable systems revenue up 10 percent.

Cable networks also reported 18 percent EBITA (cash-flow) growth in the period, and EBITA was up 20 percent at the Turner Broadcasting System Inc. networks alone. For the cable systems, EBITA growth was 13 percent in the quarter.

The cable systems' growth was fueled by dramatic increases in digital subscribers-to 613,000 in the period, up 40 percent compared to year-end-and high-speed Internet customers. Time Warner finished the quarter with 447,000 high-speed data customers, up 35 percent sequentially.

Cable-subscriber growth was a healthy 1.8 percent and penetration rates for high-speed Internet services averaged 4.7 percent of homes passed.

In a meeting with analysts, Time Warner chairman Gerald Levin said that although the company had been slow to roll out digital cable and high-speed Internet, the wait is beginning to pay off.

"We were late to put digital boxes in, and only now do we have high-speed up and running," Levin said. "For a fair amount of time we were waiting, but we wanted to build in the capability of VOD [video-on-demand]. It was a methodical game plan here."

VOD is being rolled out in Time Warner's Hawaii system; other rollouts are scheduled for Tampa, Fla., and Austin, Texas, in the second quarter. Once those systems are on line, VOD will be available in about 1 million Time Warner homes.

Regarding Time Warner's pending merger with America Online Inc., Levin said he wants the new company to be "bold," and added that the new AOL Time Warner is poised to take advantage of new markets and business opportunities.

Executives from both companies have worked hard to address integration issues, Levin said. A four-man team consisting of Time Warner president Richard Parsons, Time Warner Digital Media chairman Richard Bressler, AOL president Robert Pitt-man and AOL vice chairman Richard Novack have been charged with that task, as well as with developing a "strategy and operating game plan."

"We've been using these months to put the right plans in place," Levin said. "We want to be bold. We're beginning to set the tone for the new company."

With new services being rolled out and the combined strength of the AOL Time Warner balance sheet once the merger is completed, Levin said he's not necessarily looking for other cable systems to acquire. But he also didn't rule that out.

"There are certain geographic areas that would make obvious sense, whether through additional acquisition, trades or realigning inventory," Levin said. "But I'm not unhappy with a cable footprint that passes 20 percent of the homes [in the U.S.]."

Time Warner by the Numbers
(In millions, except per-share amounts)

1Q '00 1Q '99

Total Revenue



Cable Networks



Cable Systems



Total Cash Flow



Cable Networks



Cable Systems



Net Income (Loss)



Net Income (Loss) Per Share



Source: company reports

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