May 7, 2015 Last Updated 11:50 pm

Cost reductions helps Time Inc. report lower losses in first quarter earnings report

Total revenue falls 9 percent, but reduced costs in production, editorial and G&A leads to a reduced loss of $9 million versus $74 million in the same quarter of 2014

Time Inc. reported first quarter earnings Thursday afternoon, reporting far smaller losses than the previous year, made possible by sharp reductions in costs. Time Inc., which includes such titles as People, Sports Illustrated, InStyle, Time, and Real Simple, beat estimates on net income and was in line on revenue.

The company saw revenue fall in both print advertising and subscription revenue, though digital advertising revenue rose 1 percent.

The company, who are moving into new office space in many markets, said it would sell its Blue Fin building in the UK.

Here is a portion of the earnings announcement:


First Quarter Highlights

  • Company posted Revenues of $680 million and Adjusted OIBDA of $51 million in the first quarter of 2015.
  • Adjusted OIBDA performance reflected strong digital advertising growth and significant benefits from efficiency efforts.
  • Cash and cash equivalents at March 31, 2015 were $458 million. On May 7, 2015, our Board of Directors declared a quarterly dividend of $0.19 per common share to stockholders of record as of the close of business on May 29, 2015, payable June 15, 2015.
  • We have listed for sale the Blue Fin building, our principal executive offices in the U.K.

NEW YORK, NY – May 7, 2015 — Time Inc. reported financial results for its first quarter ended March 31, 2015.

Time Inc. Chairman and CEO, Joe Ripp said, “Our results and financial performance reflect progress in the fundamental re-engineering of our business, and in re-positioning the company for its return to growth. At the center of that transformation are Time Inc.’s extraordinary portfolio of media brands, engaged audiences and powerful story-telling. These are allowing us to engage with the largest audiences in the company’s history. Each month, we are connecting with more than 120 million people in print, more than 120 million digitally and more than 145 million through social media. We remain confident in our plans to extend our powerful brands across platforms and into new revenue streams.”

Time-Q1-2015-1

The company’s Adjusted OIBDA, Adjusted Net (Loss) Income, Adjusted Diluted EPS and Free Cash Flow are non-GAAP financial measures. See “Use of Non-GAAP Financial Measures” below and the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in Schedules I through IV attached hereto.

FIRST QUARTER 2015 RESULTS

Revenues for the first quarter of 2015 decreased $65 million or 9% versus the prior year comparable quarter to $680 million. The stronger U.S. dollar relative to the British pound adversely impacted Revenues for the quarter ended March 31, 2015 by $9 million. The quarter ended March 31, 2014 included $19 million of revenues from subsequently-disposed businesses (specifically, our Mexico-based operations, Grupo Editorial Expansión (“GEX”), and our CNNMoney.com collaborative arrangement with Time Warner). Excluding the impacts of U.S. dollar/British pound exchange rate changes and the GEX and CNNMoney.com dispositions, Revenues would have decreased 5%.

Advertising Revenues decreased $37 million or 9% in the first quarter of 2015 from the prior year comparable quarter to $353 million. The stronger U.S. dollar relative to the British pound adversely impacted Advertising revenues by $3 million. The quarter ended March 31, 2014 included $16 million of Advertising revenues from GEX and CNNMoney.com. Excluding the impacts of U.S.dollar/British pound exchange rate changes and the GEX and CNNMoney.com dispositions, Advertising revenues would have decreased 5%.

Print and Other Advertising Revenues decreased $38 million or 12% in the first quarter of 2015 from the prior year comparable quarter to $280 million. The stronger U.S. dollar relative to the British pound adversely impacted Print and other advertising revenues by $3 million. The quarter ended March 31, 2014 included $5 million of Print and other advertising revenues from GEX. Excluding the impacts of U.S. dollar/British pound exchange rate changes and the GEX disposition, Print and other advertising revenues would have decreased 10%. The decrease was driven primarily by fewer advertising pages sold due to lower demand, and by lower average price per page of advertising sold due to the category mix of advertisers. Our domestic titles experienced advertising declines in the food and beauty categories, partially offset by strong sales in the pharmaceutical category.

Digital Advertising Revenues increased $1 million or 1% in the first quarter of 2015 from the prior year comparable quarter to $73 million. The quarter ended March 31, 2014 included $11 million of Digital advertising revenues from GEX and CNNMoney.com. Excluding the impact of the GEX and CNNMoney.com dispositions, Digital advertising revenues would have increased by 20%, reflecting strong growth in video and programmatic sales. Time Inc. served 106.8 million multiplatform unique visitors during March 2015 in the U.S., an increase of 30% since March 2014 (excluding CNNMoney.com).

Circulation Revenues, which comprise subscription, newsstand and other circulation revenues, decreased $20 million or 7% in the first quarter of 2015 from the prior year comparable quarter to $250 million. The stronger U.S. dollar relative to the British pound adversely impacted Circulation revenues by $5 million. The quarter ended March 31, 2014 included $1 million of Circulation revenues from GEX. Excluding the impacts of U.S. dollar/British pound exchange rate changes and the GEX disposition, Circulation revenues would have decreased 5%.

Subscription Revenues decreased $15 million or 8% in the first quarter of 2015 from the prior year comparable quarter to $165 million. The stronger U.S. dollar relative to the British pound adversely impacted Subscription revenues by $1 million. The quarter ended March 31, 2014 included $1 million of Subscription revenues from GEX. Excluding the impacts of U.S. dollar/British pound exchange rate changes and the GEX disposition, Subscription revenues would have decreased 7%, principally driven by lower demand for print subscriptions.

Newsstand Revenues decreased $9 million or 10% in the first quarter of 2015 from the prior year comparable quarter to $77 million. The stronger U.S. dollar relative to the British pound adversely impacted Newsstand revenues by $4 million. Excluding the impact of U.S. dollar/British pound exchange rate changes, Newsstand revenues would have decreased 6%, primarily driven by lower demand.

Other Revenues, which include marketing and support services provided to third parties, events, licensing and branded book publishing, decreased $8 million or 9% in the first quarter of 2015 from the prior year comparable quarter to $77 million. The stronger U.S. dollar relative to the British pound adversely impacted Other revenues by $1 million. The quarter ended March 31, 2014 included Other revenues of $2 million from GEX. Excluding the impacts of U.S. dollar/British pound exchange rate changes and the GEX disposition, Other revenues would have decreased 6%, primarily driven by lower revenues at our book publishing business.

Time-Q1-2015-2

Costs of Revenues, which consist of Production costs, Editorial costs and Other costs (including production overhead costs), decreased $35 million or 11% in the first quarter of 2015 from the prior year comparable quarter to $271 million. The stronger U.S. dollar relative to the British pound favorably impacted Costs of revenues for the quarter ended March 31, 2015 by $4 million. The quarter ended March 31, 2014 included $12 million of Costs of revenues from GEX and CNNMoney.com. Excluding the impacts of U.S. dollar/British pound exchange rate changes and the GEX and CNNMoney.com dispositions, Costs of revenues would have decreased 6%.

Production costs decreased $15 million or 9% from the prior year comparable quarter to $160 million. The stronger U.S. dollar relative to the British pound favorably impacted Production costs by $2 million. The quarter ended March 31, 2014 included $1 million of Production costs from GEX. Excluding the impacts of U.S. dollar/British pound exchange rate changes and the GEX disposition, Production costs would have decreased 7%, driven by lower volume of pages produced and favorable paper and printing prices.

Editorial costs decreased $19 million or 18% from the prior year comparable quarter to $89 million. The stronger U.S. dollar relative to the British pound favorably impacted Editorial costs by $2 million. The quarter ended March 31, 2014 included $7 million of Editorial costs from GEX and CNNMoney.com. Excluding the impacts of U.S dollar/British pound exchange rate changes and the GEX and CNNMoney.com dispositions, Editorial costs would have decreased 10%, driven by savings from previously announced cost savings initiatives, partially offset by digital investments.

Other costs of revenues decreased $1 million or 4% from the prior year comparable quarter to $22 million. The quarter ended March 31, 2014 included $4 million of Other costs from GEX and CNNMoney.com. Excluding the impact of the GEX and CNNMoney.com dispositions, Other costs would have increased 16% primarily driven by digital investments.

Selling, General and Administrative Expenses (“SG&A”) decreased $16 million or 4% in the first quarter of 2015 from the prior year comparable quarter to $359 million. The stronger U.S. dollar relative to the British pound favorably impacted SG&A by $4 million. The quarter ended March 31, 2014 included $12 million of SG&A from GEX and CNNMoney.com. Excluding the impacts of U.S. dollar/British pound exchange rate changes and the GEX and CNNMoney.com dispositions, SG&A would have remained flat. The benefits realized from previously announced cost-savings initiatives were offset by: an increase of $9 million in stock-based compensation costs due to the absence of equity grants to our employees in the quarter ended March 31, 2014; incremental non-cash rent expense of $4 million associated with the upcoming relocation of our corporate headquarters; incremental rent expense of $2 million related to our previously-announced sale-leaseback of properties in Birmingham, AL and Menlo Park, CA, a portion of which is associated with temporary space; and spending on investments and growth initiatives.

Restructuring and Severance Costs were $2 million and $115 million for the quarters ended March 31, 2015 and 2014, respectively. Restructuring and severance costs in the first quarter ended March 31, 2015 related to headcount reductions while Restructuring and severance costs in the first quarter ended March 31, 2014 related to headcount reductions and lease exit costs.

Operating Income of $5 million for the quarter ended March 31, 2015 represented an improvement of $125 million from an Operating loss of $120 million in the prior year comparable quarter, primarily driven by lower Restructuring and severance costs and Asset impairments. Operating income also reflected revenue reductions, partially offset by declines in Costs of revenues and SG&A.

Adjusted OIBDA of $51 million for the quarter ended March 31, 2015 represented a decrease of $13 million from the prior year comparable quarter, reflecting revenue reductions partially offset by declines in Costs of revenues and SG&A.

Net Loss was $9 million in the quarter ended March 31, 2015 compared to Net loss of $74 million in the prior year comparable quarter. Adjusted net loss was $7 million in the first quarter ended March 31, 2015 compared to Adjusted net income of $16 million in the prior year comparable quarter. Diluted EPS was a loss of $0.08 per share versus a loss of $0.68 per share in the prior year comparable quarter. Adjusted diluted EPS was a loss of $0.06 per common share versus Adjusted diluted EPS of $0.15 per share in the prior year comparable quarter.

Free Cash Flow was a use of cash of $24 million for the quarter ended March 31, 2015 versus the prior year comparable quarter use of cash of $7 million and primarily reflected a use of cash for working capital needs.

On March 13, 2015 we paid a dividend of $21 million or $0.19 per common share to stockholders of record as of the close of business on February 27, 2015.

On May 7, 2015, our Board of Directors declared a quarterly dividend of $0.19 per common share to stockholders of record as of the close of business on May 29, 2015, payable June 15, 2015.

LISTING OF BLUE FIN BUILDING FOR SALE

Today, we are announcing that we have listed for sale the Blue Fin building, our principal executive offices in the U.K. This approximately 500,000 square foot property is a marquee building in central London. We expect that Time Inc. UK, which currently occupies approximately 228,000 square feet in the building, will remain a tenant following any sale.

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