Time Warner’s third-quarter earnings were hurt by charges for programming and severance pay as revenues rose.
Net income was $967 million, or $1.11 a share, compared to $1.2 billion, or $1.26, a year ago.
Revenues increased 3% to $6.2 billion.
The company said that income from continuing operations was $966 million, or $1.11 per share, compared to $958 million, or $1.02 a share.
Excluding a $639 million tax benefit, programming charges at Turner Broadcasting, and restructuring and severance charges, adjusted earnings per share would have been 97 cents.
Analysts expected earnings per share of 94 cents for the quarter.
The company also increased its guidance for all of 2014, saying it expects adjusted diluted income per share from continuing operations growth to be in the high teens. In August, the company said it expected growth in the low teens.
Since the company rebuffed an $85 billion buyout offer by Rupert Murdoch’s 21st Century Fox, the company has been outlining plans to boost earnings. It has announced staff cuts at its Turner Broadcasting, Warner Bros. and HBO units. It also announced initiatives to increase revenue including a domestic stand-alone over-the-top offering of HBO coming next year and a more aggressive approach to the kids TV business.
As part of its cost cutting, Time Warner said it would be taking second half charges of more than $400 million each for severance pay associated with the layoffs and for programming that its networks would no longer be running, including The Mentalist, Wipeout and some Tyler Perry series.
Many of the plans were spelled out at Time Warner’s Oct. 15 investor day, which was a big hit with analysts. “This was by far one of the best investor events we have ever attended,” gushed Marci Ryvicker of Wells Fargo, who was forecasting 93 cents in third quarter earnings per share.
At Turner Broadcasting, adjusted operating income declined 64% to $350 million. Programming costs rose 84% because of the decision to stop airing certain programming. Excluding those charges, programming costs increased in the low double digit range because of more original programming and higher costs for Major League Baseball. Operating income was also affected by a $199 million charge for restructuring and severance. Without the charges for programming and severance, adjusted operating income would have been $1 billion.
Turner’s revenues rose 5%. Subscription revenue was up 10% and content revenues were up 17%. Advertising revenues were down 2%, with revenue at the domestic cable networks largely flat, the company said.
Adjusted operating income dropped 4% to $380 million at HBO because of higher programming and distribution costs, plus costs for restructuring and severance. Programming costs were up16%. Excluding $48 million in restructuring and severance costs (compared to $24 million a year ago), adjusted operating income would have been $428 million.
HBO revenues rose 10% to $1.3 billion. Subscription revenues were up 10%, with domestic rates up and growth in the number of subscribers.
“We had another good quarter, featuring solid revenue growth as well as strong growth in adjusted [earnings per share]. As we discussed at our Investor Event last month, we’ve refocused the Company over the past few years to aggressively pursue the huge global opportunities we see in video content,” CEO Jeff Bewkes said in a statement. “And once again, we are seeing the benefits of our increased investments in great content and storytelling.”
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