Time Warner Reports Higher Second-Quarter Profit

NEW YORK - Time Warner early on Wednesday reported higher second-quarter earnings that exceeded Wall Street estimates amid continued growth at its TV networks unit. Before the market open, the entertainment conglomerate, led by chairman and CEO Jeff Bewkes, posted a quarterly profit of $637 million, compared with $560 million in the year-ago period. TW's revenue rose 10 percent to $7.0 billion, the highest growth rate since the third quarter of 2007. Advertising revenue increased 8 percent, including an 11 percent gain at the Turner cable networks. Based on its results, the conglomerate said it now expects at least low teen growth in its adjusted earnings per share for the full year 2011, compared to its previous target of a low teen gain. Networks unit revenue rose 9 percent in the second quarter, and adjusted operating profit rose 5 percent. Positive factors here in the latest quarter were revenue from the NCAA men's basketball tournament, growth at Turner's international entertainment networks and higher sales of HBO's original programming, including True Blood and Game of Thrones. But the division also cited higher programming costs due to higher expenses for originals and the cost of the NCAA tournament. Film unit revenue jumped 13 percent, but adjusted operating profit declined 6 percent. As expected, the theatrical success of The Hangover Part II and the home entertainment release of Harry Potter and the Deathly Hallows: Part 1 boosted film unit results as did stronger video game revenue. Explaining the lower profitability, the company cited "increased pre-release print and advertising expenses, higher theatrical film valuation adjustments and increased overhead costs related in part to recent acquisitions, as well as higher restructuring and severance costs." The film valuation adjustments were a reference to Green Lantern, which was released in June, but underperformed expectations in theaters. As a result, TW had to accelerate the expense recognition time frame assumption to better match the film's revenue performance, which analysts now believe will contribute less in terms of longer-term financials. Email: Georg.Szalai@thr.com Twitter: @georgszalai Related Topics Time Warner Jeff Bewkes