SCHEDULE 14A INFORMATION
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the Securities Exchange Act of 1934
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TIME WARNER INC.
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On February 7, 2006, Time Warner Inc. issued the following communications in
connection with a presentation on February 7, 2006 by Carl Icahn, participants
in his group and Lazard Ltd.:
1. Press release issued February 7, 2006 (Exhibit 1);
2. Letter to stockholders dated February 7, 2006 (Exhibit 2); and
3. Memorandum to employees dated February 7, 2006 (Exhibit 3)
Copies of these Time Warner communications are filed herewith as Exhibits 1, 2
and 3, as indicated.
IMPORTANT INFORMATION
Time Warner Inc. ("Time Warner") plans to file with the Securities and Exchange
Commission (the "SEC") and mail to its stockholders a Proxy Statement in
connection with its 2006 Annual Meeting, and advises its security holders to
read the Proxy Statement relating to the 2006 Annual Meeting when it becomes
available, because it will contain important information. Security holders may
obtain a free copy of the Proxy Statement and other documents (when available)
that Time Warner files with the SEC at the SEC's Web site at www.sec.gov. The
Proxy Statement and these other documents may also be obtained free from Time
Warner by directing a request to Time Warner Inc., ATTN: Investor Relations, One
Time Warner Center, New York, NY 10019-8016, or to D.F. King & Co., Inc. by
toll-free telephone at 1-800-431-9643, by e-mail at TimeWarnerInfo@dfking.com,
or by mail at 48 Wall Street, New York, NY 10005.
CERTAIN INFORMATION REGARDING PARTICIPANTS
Time Warner, its directors and named executive officers may be deemed to be
participants in the solicitation of Time Warner's security holders in connection
with its 2006 Annual Meeting. Security holders may obtain information regarding
the names, affiliations and interests of such individuals in Time Warner's
Annual Report on Form 10-K for the year ended December 31, 2004 and its proxy
statement dated April 4, 2005, each of which is filed with the SEC.
To the extent holdings of Time Warner securities have changed since the amounts
printed in the proxy statement, dated April 4, 2005, such changes have been
reflected on Statements of Change in Ownership on Form 4 filed with the SEC,
except in regard to the following changes, which will be reported on Annual
Statements of Changes in Ownership on Form 5: Mr. Turner, who made gifts in 2005
of an aggregate 3,263,296 shares of common stock, and Mr. Barksdale, who in 2005
inherited 236,892 shares of common stock. Such changes in ownership were not
required to be reported earlier and will be reported on Annual Statements of
Changes in Ownership on Form 5, to be filed with the SEC no later than February
14, 2006.
EXHIBIT 1
TIME WARNER ON ICAHN/LAZARD PROPOSAL:
"WE ARE ON THE RIGHT PATH. THE COMPANY IS DELIVERING."
NEW YORK, February 7, 2006 - Time Warner Inc. (NYSE: TWX) issued the following
statement in response to a proposal issued today by Carl Icahn and Lazard Ltd.:
"Our board and management regularly review all of the strategic options for
managing this company to create the greatest value for our shareholders. We are
on the right path. The company is delivering. Nevertheless, we will study the
Icahn/Lazard proposal carefully and thoroughly, as is consistent with our
existing practice and with our fiduciary duty to shareholders. We will have more
to say on the specifics of the proposal in due course."
Time Warner also issued today the below letter to its shareholders reviewing the
company's progress in building value and stating its intention to communicate
with shareholders regarding the Icahn/Lazard proposal.
Further information on Time Warner's ongoing initiatives to build value for its
shareholders is available on a special section of the company's Web site at
http://www.timewarner.com/buildingvalue.
About Time Warner Inc.
Time Warner Inc. is a leading media and entertainment company, whose businesses
include interactive services, cable systems, filmed entertainment, television
networks and publishing.
Important Information
Time Warner Inc. ("Time Warner") plans to file with the Securities and Exchange
Commission (the "SEC") and mail to its stockholders a Proxy Statement in
connection with its 2006 Annual Meeting, and advises its security holders to
read the Proxy Statement relating to the 2006 Annual Meeting when it becomes
available, because it will contain important information. Security holders may
obtain a free copy of the Proxy Statement and other documents (when available)
that Time Warner files with the SEC at the SEC's Web site at www.sec.gov. The
Proxy Statement and these other documents may also be obtained free from Time
Warner by directing a request to Time Warner Inc., ATTN: Investor Relations, One
Time Warner Center, New York, NY 10019-8016, or to D.F. King & Co., Inc. by
toll-free telephone at 1-800-431-9643, by e-mail at TimeWarnerInfo@dfking.com,
or by mail at 48 Wall Street, New York, NY 10005.
Certain Information Regarding Participants
Time Warner, its directors and named executive officers may be deemed to be
participants in the solicitation of Time Warner's security holders in connection
with its 2006 Annual Meeting. Security holders may obtain information regarding
the names, affiliations and interests of such individuals in Time Warner's
Annual Report on Form 10-K for the year ended December 31, 2004 and its proxy
statement dated April 4, 2005, each of which is filed with the SEC.
To the extent holdings of Time Warner securities have changed since the amounts
printed in the proxy statement, dated April 4, 2005, such changes have been
reflected on Statements of Change in Ownership on Form 4 filed with the SEC,
except in regard to the following changes, which will be reported on Annual
Statements of Changes in Ownership on Form 5: Mr. Turner, who made gifts in 2005
of an aggregate 3,263,296 shares of common stock, and Mr. Barksdale, who in 2005
inherited 236,892 shares of common stock. Such changes in ownership were not
required to be reported earlier and will be reported on Annual Statements of
Changes in Ownership on Form 5, to be filed with the SEC no later than February
14, 2006.
Letter to Shareholders
[GRAPHIC OMITTED]
One Time Warner Center o New York, NY 10019-8016
February 7, 2006
Dear Fellow Shareholders,
Time Warner's Board of Directors and senior management are committed to moving
your company forward with one clear priority: delivering value for you, our
shareholders. We took yet another step last week in delivering on our commitment
with the strong financial and operational results we reported for the fourth
quarter and full year 2005.
You may have recently heard something about Carl Icahn, who is leading a handful
of hedge funds, and his proposal to break up Time Warner. You also may know that
Mr. Icahn is paying an investment banking firm, Lazard Ltd., led by Bruce
Wasserstein, and a one-time media company executive, Frank Biondi, to promote
his proposal for your company.
As we would do with respect to any shareholder, we will study the Icahn/Lazard
proposal carefully and thoroughly, and then report back to you our findings,
conclusions and recommendations. But rest assured that, during this process, we
will continue to be focused on running the company and delivering the best
possible results for you - just as we did during 2005.
2005: A Year of Very Solid Performance
We delivered a very solid financial performance in 2005, led by double-digit
earnings growth at Time Warner Cable and our networks businesses. The
across-the-board strength in our businesses enabled us to meet all of our
full-year objectives.
Our businesses also made significant operational progress in 2005 to extend
their industry leadership and lay the groundwork for future growth. For example:
o Time Warner Cable set the industry standard with its record-breaking
subscriber growth across every one of its product lines - ending 2005 with
over 1 million subscribers for its Digital Phone service, its newest
product offering.
o Time Warner was once again the leading producer of filmed entertainment in
the world. Led by Warner Bros., our studios topped the industry in domestic
and international box office, domestic home video sales and television
programming.
o The Turner entertainment networks TNT and TBS each once again ranked #1 in
their respective key audiences among advertising-supported cable networks.
o HBO remained the preeminent premium television network with the best
original television programming in the world.
o Time Inc. continued to lead all magazine publishers in readership and
advertising share in the U.S.
o And AOL improved its competitiveness by launching AOL.com and expanding its
strategic alliance with Google.
2006: Continuing to Grow
As a result of our confidence in our management teams, business operations and
their competitive positions, the 2006 outlook for our businesses calls for us to
continue to grow our earnings, while keeping our balance sheet strong and costs
in tight control. Among our initiatives for the company in the coming year are:
First, we will continue to advance the leading competitive positions of all of
our businesses in an increasingly digital landscape.
Each of our businesses is a leader today because it has continually anticipated
change and adapted accordingly. With convergence in the media business finally
underway, we are ready for it. In 2006, I expect all of our media businesses to
allocate more resources and focus toward making our great content and brands
even more relevant in a digital environment. With effective execution, we will
turn what may seem like challenges to some into real opportunities for us.
Second, we will enhance AOL's competitive profile and take even greater
advantage of continuing strong trends toward online media.
During the past three years, AOL stabilized its finances and operations. And now
we are working to create value at AOL through both its subscription and
advertising business initiatives. AOL's recently announced broadband deals are
significant steps in moving the AOL broadband subscription business forward. And
AOL's enhanced Google relationship will both drive more traffic to AOL's online
properties and increase the capabilities of AOL's advertising sales force.
Third, we will stay focused on completing the acquisition and integration of the
new cable systems from Adelphia and Comcast - enhancing Time Warner Cable's
prospects for value creation.
As I mentioned above, we had outstanding operating results at Time Warner Cable
in 2005. The subscriber trends continue to be very powerful - reinforcing our
confidence in the strategy behind our pending Adelphia and Comcast transactions,
which we expect to close during the second quarter of this year.
Our cable business is exceptionally well-positioned over the next three to five
years, and we have every expectation that it will be a far more resilient
business than the investment community seems to expect, given current trading
valuations. Going forward, we will invest in this business to capitalize fully
on technological and consumer trends that we believe are constantly improving
the cable industry's competitive position and increasing its value.
Finally, we will drive incremental returns to shareholders through the efficient
allocation of our capital.
Last summer, we announced a $5 billion share repurchase program. Then, in early
November, we increased our share repurchase program to $12.5 billion - one of
the largest buybacks ever. To date, in total, we have purchased approximately $3
billion worth of our stock.
Given the current price of Time Warner stock, we have decided to repurchase our
stock even more aggressively. At current price levels, we expect to roughly
double the pace of our repurchases over the next three months. We see our stock
at these prices as a very attractive investment for our capital; however, we
will maintain our previously stated comfort level of leverage of around 3x debt
to earnings.
The Right Plan for Shareholders
Our 2005 strategy delivered excellent results, with one glaring exception - our
current stock price. As you know, media companies, in general, as well as the
cable industry, have traded down over the past year, largely because of
questions about their future growth prospects.
I can't speak for the entire industry, but I can tell you that, from Time
Warner's perspective, we are very confident about the health of our Company over
the short and longer terms. We have a strong management team - as demonstrated
by its track record over the past three years. We have a unique combination of
assets, which provides us with competitive advantages in an evolving landscape.
Over time, we think the benefits of this structure will be reflected in the
market value of our shares.
Our Board of Directors and senior management are confident that we're on the
right course to provide a highly attractive return, while building enduring
value for all of our shareholders. We believe that - by continuing to manage and
grow our businesses as effectively as any of our competitors, and by allocating
our capital prudently with a view to maximizing returns to shareholders - we
will be rewarded in the marketplace.
As always, we will keep you informed of our progress. For more information and
updates, please go to the new "Building Value" area on our Web site:
http://www.timewarner.com/buildingvalue.
Sincerely,
/s/ Richard D. Parsons
Richard D. Parsons
Chairman of the Board
and Chief Executive Officer
IMPORTANT INFORMATION
Time Warner Inc. ("Time Warner") plans to file with the Securities and Exchange
Commission (the "SEC") and mail to its stockholders a Proxy Statement in
connection with its 2006 Annual Meeting, and advises its security holders to
read the Proxy Statement relating to the 2006 Annual Meeting when it becomes
available, because it will contain important information. Security holders may
obtain a free copy of the Proxy Statement and other documents (when available)
that Time Warner files with the SEC at the SEC's Web site at www.sec.gov. The
Proxy Statement and these other documents may also be obtained free from Time
Warner by directing a request to Time Warner Inc., ATTN: Investor Relations, One
Time Warner Center, New York, NY 10019-8016, or to D.F. King & Co., Inc. by
toll-free telephone at 1-800-431-9643, by e-mail at TimeWarnerInfo@dfking.com,
or by mail at 48 Wall Street, New York, NY 10005.
CERTAIN INFORMATION REGARDING PARTICIPANTS
Time Warner, its directors and named executive officers may be deemed to be
participants in the solicitation of Time Warner's security holders in connection
with its 2006 Annual Meeting. Security holders may obtain information regarding
the names, affiliations and interests of such individuals in Time Warner's
Annual Report on Form 10-K for the year ended December 31, 2004 and its proxy
statement dated April 4, 2005, each of which is filed with the SEC.
To the extent holdings of Time Warner securities have changed since the amounts
printed in the proxy statement, dated April 4, 2005, such changes have been
reflected on Statements of Change in Ownership on Form 4 filed with the SEC,
except in regard to the following changes, which will be reported on Annual
Statements of Changes in Ownership on Form 5: Mr. Turner, who made gifts in 2005
of an aggregate 3,263,296 shares of common stock, and Mr. Barksdale, who in 2005
inherited 236,892 shares of common stock. Such changes in ownership were not
required to be reported earlier and will be reported on Annual Statements of
Changes in Ownership on Form 5, to be filed with the SEC no later than February
14, 2006.
# # #
Contacts:
Edward Adler (212) 484-6630
Susan Duffy (212) 484-6686
EXHIBIT 2
[GRAPHIC OMITTED]
One Time Warner Center o New York, NY 10019-8016
February 7, 2006
Dear Fellow Shareholders,
Time Warner's Board of Directors and senior management are committed to moving
your company forward with one clear priority: delivering value for you, our
shareholders. We took yet another step last week in delivering on our commitment
with the strong financial and operational results we reported for the fourth
quarter and full year 2005.
You may have recently heard something about Carl Icahn, who is leading a handful
of hedge funds, and his proposal to break up Time Warner. You also may know that
Mr. Icahn is paying an investment banking firm, Lazard Ltd., led by Bruce
Wasserstein, and a one-time media company executive, Frank Biondi, to promote
his proposal for your company.
As we would do with respect to any shareholder, we will study the Icahn/Lazard
proposal carefully and thoroughly, and then report back to you our findings,
conclusions and recommendations. But rest assured that, during this process, we
will continue to be focused on running the company and delivering the best
possible results for you - just as we did during 2005.
2005: A Year of Very Solid Performance
We delivered a very solid financial performance in 2005, led by double-digit
earnings growth at Time Warner Cable and our networks businesses. The
across-the-board strength in our businesses enabled us to meet all of our
full-year objectives.
Our businesses also made significant operational progress in 2005 to extend
their industry leadership and lay the groundwork for future growth. For example:
o Time Warner Cable set the industry standard with its record-breaking
subscriber growth across every one of its product lines - ending 2005 with
over 1 million subscribers for its Digital Phone service, its newest
product offering.
o Time Warner was once again the leading producer of filmed entertainment in
the world. Led by Warner Bros., our studios topped the industry in domestic
and international box office, domestic home video sales and television
programming.
o The Turner entertainment networks TNT and TBS each once again ranked #1 in
their respective key audiences among advertising-supported cable networks.
o HBO remained the preeminent premium television network with the best
original television programming in the world.
o Time Inc. continued to lead all magazine publishers in readership and
advertising share in the U.S.
o And AOL improved its competitiveness by launching AOL.com and expanding its
strategic alliance with Google.
2006: Continuing to Grow
As a result of our confidence in our management teams, business operations and
their competitive positions, the 2006 outlook for our businesses calls for us to
continue to grow our earnings, while keeping our balance sheet strong and costs
in tight control. Among our initiatives for the company in the coming year are:
First, we will continue to advance the leading competitive positions of all of
our businesses in an increasingly digital landscape.
Each of our businesses is a leader today because it has continually anticipated
change and adapted accordingly. With convergence in the media business finally
underway, we are ready for it. In 2006, I expect all of our media businesses to
allocate more resources and focus toward making our great content and brands
even more relevant in a digital environment. With effective execution, we will
turn what may seem like challenges to some into real opportunities for us.
Second, we will enhance AOL's competitive profile and take even greater
advantage of continuing strong trends toward online media.
During the past three years, AOL stabilized its finances and operations. And now
we are working to create value at AOL through both its subscription and
advertising business initiatives. AOL's recently announced broadband deals are
significant steps in moving the AOL broadband subscription business forward. And
AOL's enhanced Google relationship will both drive more traffic to AOL's online
properties and increase the capabilities of AOL's advertising sales force.
Third, we will stay focused on completing the acquisition and integration of the
new cable systems from Adelphia and Comcast - enhancing Time Warner Cable's
prospects for value creation.
As I mentioned above, we had outstanding operating results at Time Warner Cable
in 2005. The subscriber trends continue to be very powerful - reinforcing our
confidence in the strategy behind our pending Adelphia and Comcast transactions,
which we expect to close during the second quarter of this year.
Our cable business is exceptionally well-positioned over the next three to five
years, and we have every expectation that it will be a far more resilient
business than the investment community seems to expect, given current trading
valuations. Going forward, we will invest in this business to capitalize fully
on technological and consumer trends that we believe are constantly improving
the cable industry's competitive position and increasing its value.
Finally, we will drive incremental returns to shareholders through the efficient
allocation of our capital.
Last summer, we announced a $5 billion share repurchase program. Then, in early
November, we increased our share repurchase program to $12.5 billion - one of
the largest buybacks ever. To date, in total, we have purchased approximately $3
billion worth of our stock.
Given the current price of Time Warner stock, we have decided to repurchase our
stock even more aggressively. At current price levels, we expect to roughly
double the pace of our repurchases over the next three months. We see our stock
at these prices as a very attractive investment for our capital; however, we
will maintain our previously stated comfort level of leverage of around 3x debt
to earnings.
The Right Plan for Shareholders
Our 2005 strategy delivered excellent results, with one glaring exception - our
current stock price. As you know, media companies, in general, as well as the
cable industry, have traded down over the past year, largely because of
questions about their future growth prospects.
I can't speak for the entire industry, but I can tell you that, from Time
Warner's perspective, we are very confident about the health of our Company over
the short and longer terms. We have a strong management team - as demonstrated
by its track record over the past three years. We have a unique combination of
assets, which provides us with competitive advantages in an evolving landscape.
Over time, we think the benefits of this structure will be reflected in the
market value of our shares.
Our Board of Directors and senior management are confident that we're on the
right course to provide a highly attractive return, while building enduring
value for all of our shareholders. We believe that - by continuing to manage and
grow our businesses as effectively as any of our competitors, and by allocating
our capital prudently with a view to maximizing returns to shareholders - we
will be rewarded in the marketplace.
As always, we will keep you informed of our progress. For more information and
updates, please go to the new "Building Value" area on our Web site:
http://www.timewarner.com/buildingvalue.
Sincerely,
/s/ Richard D. Parsons
Richard D. Parsons
Chairman of the Board
and Chief Executive Officer
IMPORTANT INFORMATION
Time Warner Inc. ("Time Warner") plans to file with the Securities and Exchange
Commission (the "SEC") and mail to its stockholders a Proxy Statement in
connection with its 2006 Annual Meeting, and advises its security holders to
read the Proxy Statement relating to the 2006 Annual Meeting when it becomes
available, because it will contain important information. Security holders may
obtain a free copy of the Proxy Statement and other documents (when available)
that Time Warner files with the SEC at the SEC's Web site at www.sec.gov. The
Proxy Statement and these other documents may also be obtained free from Time
Warner by directing a request to Time Warner Inc., ATTN: Investor Relations, One
Time Warner Center, New York, NY 10019-8016, or to D.F. King & Co., Inc. by
toll-free telephone at 1-800-431-9643, by e-mail at TimeWarnerInfo@dfking.com,
or by mail at 48 Wall Street, New York, NY 10005.
CERTAIN INFORMATION REGARDING PARTICIPANTS
Time Warner, its directors and named executive officers may be deemed to be
participants in the solicitation of Time Warner's security holders in connection
with its 2006 Annual Meeting. Security holders may obtain information regarding
the names, affiliations and interests of such individuals in Time Warner's
Annual Report on Form 10-K for the year ended December 31, 2004 and its proxy
statement dated April 4, 2005, each of which is filed with the SEC.
To the extent holdings of Time Warner securities have changed since the amounts
printed in the proxy statement, dated April 4, 2005, such changes have been
reflected on Statements of Change in Ownership on Form 4 filed with the SEC,
except in regard to the following changes, which will be reported on Annual
Statements of Changes in Ownership on Form 5: Mr. Turner, who made gifts in 2005
of an aggregate 3,263,296 shares of common stock, and Mr. Barksdale, who in 2005
inherited 236,892 shares of common stock. Such changes in ownership were not
required to be reported earlier and will be reported on Annual Statements of
Changes in Ownership on Form 5, to be filed with the SEC no later than February
14, 2006.
# # #
EXHIBIT 3
To: Time Warner Colleagues
From: Dick Parsons
Date: February 7, 2006
Re: Icahn/Lazard Proposal
As you may know, this afternoon Carl Icahn and Lazard Ltd., led by Bruce
Wasserstein, announced a proposal regarding Time Warner. You may be seeing more
about this in the press over the coming days, so let me give you some background
to put it in perspective.
Over the past three years, our Board of Directors and senior management, along
with our outside financial advisers, have regularly reviewed a wide range of
strategic alternatives for our company. As a result of those efforts, we have
been pursuing a strategy that is designed to create the greatest value for our
shareholders.
Under that strategy, we have reshaped our collection of businesses to focus on
those where we have industry-leading positions, promising growth opportunities
and attractive returns. This has meant expanding in some areas and divesting
ourselves of other businesses.
We have also managed our businesses better than anyone else in our industries -
whether measured by financial performance or the quality of the products and
services we provide. Our businesses have delivered solid financial performance
as well as received innumerable accolades. In addition, we have taken advantage
of the relationships among our various businesses to pioneer new offerings, and
we are focusing even more of our efforts to sustain our industry leadership in
an increasingly digital world.
Finally, we have focused on allocating our capital in a disciplined way to
deliver value for our shareholders. We have not only invested in our businesses,
but also returned value directly to our shareholders through the dividend and
$12.5 billion share repurchase programs we announced last year.
We are on the right track. The company is delivering. Nevertheless, consistent
with both our fiduciary duty and our company's practice of reviewing a wide
array of strategic alternatives, we will study the recent Icahn/Lazard proposal
carefully and thoroughly. We'll have more to say about its specifics in due
course.
Of course, I'll keep you fully informed. In the meantime, the best thing that
all of us can do is to stay focused on our jobs. Thanks again for your support
and hard work.
Dick Parsons
P.S. For more information, please read the letter below that we are sending to
our shareholders. In addition, we have set up a section at our company's Web
site - www.timewarner.com/buildingvalue - to cover our continuing efforts to
build value for our shareholders.
# # #
February 7, 2006
Dear Fellow Shareholders,
Time Warner's Board of Directors and senior management are committed to moving
your company forward with one clear priority: delivering value for you, our
shareholders. We took yet another step last week in delivering on our commitment
with the strong financial and operational results we reported for the fourth
quarter and full year 2005.
You may have recently heard something about Carl Icahn, who is leading a handful
of hedge funds, and his proposal to break up Time Warner. You also may know that
Mr. Icahn is paying an investment banking firm, Lazard Ltd., led by Bruce
Wasserstein, and a one-time media company executive, Frank Biondi, to promote
his proposal for your company.
As we would do with respect to any shareholder, we will study the Icahn/Lazard
proposal carefully and thoroughly, and then report back to you our findings,
conclusions and recommendations. But rest assured that, during this process, we
will continue to be focused on running the company and delivering the best
possible results for you - just as we did during 2005.
2005: A Year of Very Solid Performance
We delivered a very solid financial performance in 2005, led by double-digit
earnings growth at Time Warner Cable and our networks businesses. The
across-the-board strength in our businesses enabled us to meet all of our
full-year objectives.
Our businesses also made significant operational progress in 2005 to extend
their industry leadership and lay the groundwork for future growth. For example:
o Time Warner Cable set the industry standard with its record-breaking
subscriber growth across every one of its product lines - ending 2005 with
over 1 million subscribers for its Digital Phone service, its newest
product offering.
o Time Warner was once again the leading producer of filmed entertainment in
the world. Led by Warner Bros., our studios topped the industry in domestic
and international box office, domestic home video sales and television
programming.
o The Turner entertainment networks TNT and TBS each once again ranked #1 in
their respective key audiences among advertising-supported cable networks.
o HBO remained the preeminent premium television network with the best
original television programming in the world.
o Time Inc. continued to lead all magazine publishers in readership and
advertising share in the U.S.
o And AOL improved its competitiveness by launching AOL.com and expanding its
strategic alliance with Google.
2006: Continuing to Grow
As a result of our confidence in our management teams, business operations and
their competitive positions, the 2006 outlook for our businesses calls for us to
continue to grow our earnings, while keeping our balance sheet strong and costs
in tight control. Among our initiatives for the company in the coming year are:
First, we will continue to advance the leading competitive positions of all of
our businesses in an increasingly digital landscape.
Each of our businesses is a leader today because it has continually anticipated
change and adapted accordingly. With convergence in the media business finally
underway, we are ready for it. In 2006, I expect all of our media businesses to
allocate more resources and focus toward making our great content and brands
even more relevant in a digital environment. With effective execution, we will
turn what may seem like challenges to some into real opportunities for us.
Second, we will enhance AOL's competitive profile and take even greater
advantage of continuing strong trends toward online media.
During the past three years, AOL stabilized its finances and operations. And now
we are working to create value at AOL through both its subscription and
advertising business initiatives. AOL's recently announced broadband deals are
significant steps in moving the AOL broadband subscription business forward. And
AOL's enhanced Google relationship will both drive more traffic to AOL's online
properties and increase the capabilities of AOL's advertising sales force.
Third, we will stay focused on completing the acquisition and integration of the
new cable systems from Adelphia and Comcast - enhancing Time Warner Cable's
prospects for value creation.
As I mentioned above, we had outstanding operating results at Time Warner Cable
in 2005. The subscriber trends continue to be very powerful - reinforcing our
confidence in the strategy behind our pending Adelphia and Comcast transactions,
which we expect to close during the second quarter of this year.
Our cable business is exceptionally well-positioned over the next three to five
years, and we have every expectation that it will be a far more resilient
business than the investment community seems to expect, given current trading
valuations. Going forward, we will invest in this business to capitalize fully
on technological and consumer trends that we believe are constantly improving
the cable industry's competitive position and increasing its value.
Finally, we will drive incremental returns to shareholders through the efficient
allocation of our capital.
Last summer, we announced a $5 billion share repurchase program. Then, in early
November, we increased our share repurchase program to $12.5 billion - one of
the largest buybacks ever. To date, in total, we have purchased approximately $3
billion worth of our stock.
Given the current price of Time Warner stock, we have decided to repurchase our
stock even more aggressively. At current price levels, we expect to roughly
double the pace of our repurchases over the next three months. We see our stock
at these prices as a very attractive investment for our capital; however, we
will maintain our previously stated comfort level of leverage of around 3x debt
to earnings.
The Right Plan for Shareholders
Our 2005 strategy delivered excellent results, with one glaring exception - our
current stock price. As you know, media companies, in general, as well as the
cable industry, have traded down over the past year, largely because of
questions about their future growth prospects.
I can't speak for the entire industry, but I can tell you that, from Time
Warner's perspective, we are very confident about the health of our Company over
the short and longer terms. We have a strong management team - as demonstrated
by its track record over the past three years. We have a unique combination of
assets, which provides us with competitive advantages in an evolving landscape.
Over time, we think the benefits of this structure will be reflected in the
market value of our shares.
Our Board of Directors and senior management are confident that we're on the
right course to provide a highly attractive return, while building enduring
value for all of our shareholders. We believe that - by continuing to manage and
grow our businesses as effectively as any of our competitors, and by allocating
our capital prudently with a view to maximizing returns to shareholders - we
will be rewarded in the marketplace.
As always, we will keep you informed of our progress. For more information and
updates, please go to the new "Building Value" area on our Web site:
http://www.timewarner.com/buildingvalue.
Sincerely,
Richard D. Parsons
Chairman of the Board
and Chief Executive Officer
IMPORTANT INFORMATION
Time Warner Inc. ("Time Warner") plans to file with the Securities and Exchange
Commission (the "SEC") and mail to its stockholders a Proxy Statement in
connection with its 2006 Annual Meeting, and advises its security holders to
read the Proxy Statement relating to the 2006 Annual Meeting when it becomes
available, because it will contain important information. Security holders may
obtain a free copy of the Proxy Statement and other documents (when available)
that Time Warner files with the SEC at the SEC's Web site at www.sec.gov. The
Proxy Statement and these other documents may also be obtained free from Time
Warner by directing a request to Time Warner Inc., ATTN: Investor Relations, One
Time Warner Center, New York, NY 10019-8016, or to D.F. King & Co., Inc. by
toll-free telephone at 1-800-431-9643, by e-mail at TimeWarnerInfo@dfking.com,
or by mail at 48 Wall Street, New York, NY 10005.
CERTAIN INFORMATION REGARDING PARTICIPANTS
Time Warner, its directors and named executive officers may be deemed to be
participants in the solicitation of Time Warner's security holders in connection
with its 2006 Annual Meeting. Security holders may obtain information regarding
the names, affiliations and interests of such individuals in Time Warner's
Annual Report on Form 10-K for the year ended December 31, 2004 and its proxy
statement dated April 4, 2005, each of which is filed with the SEC.
To the extent holdings of Time Warner securities have changed since the amounts
printed in the proxy statement, dated April 4, 2005, such changes have been
reflected on Statements of Change in Ownership on Form 4 filed with the SEC,
except in regard to the following changes, which will be reported on Annual
Statements of Changes in Ownership on Form 5: Mr. Turner, who made gifts in 2005
of an aggregate 3,263,296 shares of common stock, and Mr. Barksdale, who in 2005
inherited 236,892 shares of common stock. Such changes in ownership were not
required to be reported earlier and will be reported on Annual Statements of
Changes in Ownership on Form 5, to be filed with the SEC no later than February
14, 2006.