NEW YORK (CNNMoney.com) -- In its first financial report without Aol in a decade, Time Warner Inc. raised its dividend as it reported quarterly sales and profit Wednesday that rose from a year earlier and beat Wall Street's forecasts.
The media conglomerate's strong quarter was led by robust revenue and earnings from the television and film divisions -- the company's two strongest units. Cost-cutting, including roughly 500 job cuts, at Time Warner's publishing division, Time Inc., bolstered profit in that unit even as sales decreased.
"We began 2009 with an ambitious agenda and we achieved what we set out to do," said CEO Jeff Bewkes on a conference call with investors. "Time Warner is in a better position than ever ... and industry trends are going our way."
For the full year, Time Warner said it expects earnings per share to grow in the "mid-teens" after posting adjusted earnings per share of $1.83 for 2009. The company's 2010 forecast roughly matches what analysts expect: a 16% rise to $2.12 per share in 2010, according to a survey by Thomson Reuters.
The recession had cut sharply into Time Warner's media subscriptions and advertising sales, but the company signaled that the worst was likely over by forecasting improved profits, reporting better-than-expected financial results for the quarter and by raising its dividend.
Time Warner raised its dividend by 13.3%, or 2.5 cents, to 21.25 cents per share per quarter. For the year, Time Warner will issue dividends worth 85 cents per share, up from 75 cents.
The outlook for the media company has improved after completing two spinoffs of non-core units during the year and restructuring Time Inc. In early December, Time Warner let go of the revenue-draining Aol (AOL) unit, and in March spun off its cable service provider Time Warner Cable (TWC).
The 2001 AOL-Time Warner merger is widely considered to be the worst in history, but it was ultimately Bewkes' focus on a "new content-focused Time Warner" that brought the short-lived marriage to an end.
The New York-based parent company of CNNMoney.com and Fortune said its net income rose to $627 million, or 53 cents per share, in the quarter ended Dec. 31, compared with a $16 billion loss in the year-earlier quarter.
Excluding a charge of 2 cents per share, Time Warner said it earned 55 cents per share. Analysts polled by Thomson Reuters, who typically exclude one-time items from their estimates, forecasted earnings of 52 cents per share.
The company said adjusted operating income before depreciation and amortization (OIBDA), a commonly used profit metric for media companies, rose 35% to $1.5 billion, matching analysts' expectations.
Time Warner's sales rose 2% to $7.3 billion, topping analysts' forecasts of $7.2 billion.
Sales were mostly boosted by the company's filmed entertainment segment, which includes film studio Warner Bros. Revenue rose 7% in the division, led by strong box office sales of "Sherlock Holmes" and best picture Oscar nominee "The Blind Side." DVD sales of "Harry Potter and the Half-Blood Prince" and "The Hangover" also bolstered overall revenue.
Time Warner's television networks, which include CNN and other Turner programming, also performed well in the quarter. Sales grew 4% on an 11% rise in cable subscriptions, which more than offset a 4% drop in advertising sales.
The biggest decline in sales came from the Time Inc. unit, in which revenue fell 13%. Ad sales fell 12% at the company's publishing arm, and subscriptions were down 6% in the quarter.
But last quarter's restructuring of Time Inc. helped grow profits and adjusted OIBDA in the quarter. It was the first time the publishing unit's earnings and adjusted OIBDA rose on a year-over-year basis since the first quarter of 2008.
Kyle Bass is the founder and chief investment officer of Hayman Capital Management. More
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