New York: Media company Time Warner Inc. said on Wednesday that it expects a fourth-quarter charge of $25 billion to write down the value of its cable, publishing and AOL assets, leading to a loss for the year.
New York-based Time Warner said its results, particularly for its AOL and publishing unit’s advertising operations, have been pressured by economic conditions that are more difficult than it initially anticipated.
Time Warner’s cable television arm Time Warner Cable Inc. will account for $15 billion of the charge, with the remaining $10 billion related to its publishing and AOL divisions, spokesman Edward Adler said, declining to give further specifics.
Because the charge was a noncash item that will not have adverse tax implications, Chief Financial Officer John Martin shrugged it off.
“It’s a noncash book writedown. We don’t see any adverse impacts to the business at all,” Martin said Wednesday in comments broadcast live on the Internet from an analysts conference in Phoenix. “It’s noncash and we move on.”
The charge will lead to an operating loss for the fourth quarter. Time Warner also anticipates a full-year loss, down from a prior outlook for a profit between $1.04 and $1.07 per share.
Analysts polled by Thomson Reuters predict 2008 earnings of $1.08 per share. Analysts’ estimates typically exclude one-time items.
Time Warner’s stock dropped 69 cents, or 6.3%, to close at $10.29. The shares have ranged from $7 to $16.90 over the past year.
Time Warner Inc. also said it anticipated a charge of about $280 million related to a December judgment against Turner Broadcasting System for the 2004 sale of the Atlanta Thrashers hockey and Atlanta Hawks basketball teams and a $50 million to $60 million charge for a lease restructuring for space at New York’s Time & Life Building held by Lehman Brothers Holdings Inc., which filed for bankruptcy protection in September.
Time Warner, which also owns the CNN cable network and the Warner Bros. film studio, said it feels there are “strong grounds” to have the verdict in the Turner Broadcasting case set aside by the trial court or overturned during an appeal.
The company also expects it will boost reserves by about $40 million for possible credit losses related to some customers that have declared bankruptcy. Those customers include Circuit City Stores Inc. and Woolworths in the U.K., among others, Adler said.
Time Warner Cable noted that its stock price tumbled during the second half of 2008, which indicates a “significant decrease in the value of its cable franchise rights.” The company’s stock is off 30% from its 52-week high of $31.56 set last May.
It also foresees an approximately $350 million impairment charge on its investment in wireless broadband provider Clearwire Corp. Intel Corp. also said Wednesday that it needs to absorb a charge for the deterioration of the value of Clearwire investment.
Aside from its cable business, Time Warner Inc.’s publishing unit has had to contend with a dismal advertising environment, while its AOL division continues to be a headache.
Meanwhile, AOL has unsuccessfully attempted to shift from its roots as an Internet access provider to an advertising-focused company. In November, AOL reported a 6 percent drop in third-quarter online ad revenue, while chief rivals like Google Inc. and Microsoft Corp. saw gains. Time Warner has been working to split AOL’s access and advertising businesses operationally, a move that would make it easier to sell off one or both. It has engaged in talks with Yahoo Inc., Microsoft and Earthlink Inc. about potential AOL acquisitions.