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Time Inc. Spinoff Delayed Until Early Next Year

Publishing Revenue Slips While TV Grows

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Time Warner said Tuesday that it won't complete its plan to separate Time Inc. division into an independent company this year as anticipated, prolonging a period of uncertainty at the publishing division just a little bit longer.

Jeff Bewkes
Jeff Bewkes

Executives now intend to complete the spinoff early next year, Time Warner CEO Jeff Bewkes said during a conference call with analysts to discuss the company's second quarter results, to ensure the best position for Time Inc. as it starts life on its own. Mr. Bewkes also said he didn't want to rush Joe Ripp, who was named Time Inc.'s latest CEO last month and doesn't officially start until September.

Time Warner reported second-quarter profit that topped analysts' estimates, boosted by higher advertising revenue at its cable networks, which include TNT, HBO and CNN.

Excluding some items, earnings were 83 cents a share in the period, surpassing the 76 cents that analysts predicted on average, according to data compiled by Bloomberg. Network advertising sales rose 11%, helped by the National Basketball Association playoffs on TNT and the college basketball tournament, the company said.

Net income increased to $771 million from $413 million a year earlier. Revenue advanced 10% to $7.4 billion, topping the $7.1 billion estimate.

TV thriving
Mr. Bewkes has focused Time Warner's growth strategy on its TV business, which accounts for more than 70% of operating income.

"Our networks businesses, Turner and HBO, continued to shine, reflecting the success of our increased investments in distinctive programming that is resonating with audiences, advertisers and affiliates," Mr. Bewkes said in a statement. "TNT and TBS finished the second quarter as the No. 1 and No. 3 ad-supported cable networks in prime time for adults 18 to 49."

Original shows such as "Falling Skies," "Major Crimes" and "Dallas" helped increase ratings at its cable networks, Mr. Bewkes said.

The Warner Bros. division's sales gained 13% to $2.94 billion, lifted by movies such as "Man of Steel" and "The Great Gatsby."

Revenue at Time Inc. fell 3% to $833 million. Ad revenue dropped 5% and subscription revenue declined 7%, the company said. The declines were partially offset by a 23% boost in "other revenues."

The publishing division boosted operating income 28% to $124 million, due mainly to the restructuring actions it took earlier this year, which included laying off about 500 employees. The cost-controls won't be sufficient to offset declines in the last half of 2014, the company said.

Mr. Bewkes said in March that he would spin off Time Inc. -- the company's worst-performing division -- to focus on the more valuable TV and film divisions. That mirrors plans by other media companies. News Corp. split in two at the end of June to form separate newspaper and entertainment businesses, and Tribune Co. announced last month it would spin off its newspapers, which include the Los Angeles Times, while keeping its TV stations.

In July, Mr. Bewkes named Chief Financial Officer John Martin to lead its Turner Broadcasting unit, replacing Phil Kent. Bewkes is moving his lieutenants into key posts as the company evaluates possible successors in anticipation of the end of his employment agreement in 2017, when he'll be 65.

In January, Mr. Bewkes named Kevin Tsujihara to lead the company's Warner Bros. film and TV studio, ending a two-year contest among a number of Warner executives to succeed Barry Meyer.

A few months earlier, Mr. Bewkes hired Jeffrey Zucker to lead the ailing CNN after then-President Jim Walton said he would step down, and in September, he named Richard Plepler head of HBO. CNN ratings increased last quarter, Time Warner said today.

~ Bloomberg News and Ad Age staff ~

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