Spokesman Says No Assets Targeted for Sale : Time Inc.’s Earnings Up 12% in Quarter

Time Inc. on Wednesday reported a 12% increase in its second-quarter net income, boosted by a hefty dividend from its stake in Turner Broadcasting System. The company did not disclose its costs associated with its pending acquisition of Warner Communications Inc., noting that the costs would be capitalized, or treated as a long-term investment.

The corporation’s second-quarter revenue rose nearly 11%, while costs and expenses rose almost 10%, compared to the same period a year ago. Time noted that its annual Turner dividend was recorded during the third quarter in 1988.

In another action, Time released its legal response to a lawsuit on appeal to the Delaware Supreme Court, where Paramount Communications Inc. is making a last-ditch effort to stop Time’s acquisition of Warner. Paramount launched a hostile bid for Time in early June but was never able to force the company’s board into negotiations. Last week, the Delaware Chancery Court ruled that Time’s board had acted within its legal scope to press ahead with a plan to combine with Warner.

Separately, a banking source said Time and Warner have not targeted specific assets for sale to help defray Time’s $14-billion cost of acquiring Warner, although he added that a sale of $1 billion to $3 billion in assets over the next few years would not be surprising.

The banker spoke in response to a Wall Street Journal article that said Time has identified $1.3 billion in assets that could be sold along with 25% of its cable-TV systems to help pay for its $70-per-share acquisition of Warner.

Time spokesman Louis J. Slovinsky declined to respond to any specific points in the Journal story, other than to say: “It sounds like . . . these (are) various scenarios that have been put together to demonstrate (Time’s) credit-worthiness to the banks. . . . All of the stuff is theoretical, and some of it is dead wrong.”

But another Time executive said vehemently that Time has not suggested--in documents or personal meetings with bankers--that it is considering a sale of 25% of its cable holdings.

Warner spokesman Geoffrey W. Holmes said he could readily identify $1.3 billion in assets that do not produce earnings or cash flow, such as Warner’s investments in Turner Broadcasting System, Hasbro Inc. and Cinamerica theaters, but “by no means have they been marked for sale.”

Indeed, Holmes said, Warner has just exercised warrants in Hasbro, the toy manufacturer, which would increase its stake to about 10 million shares, or 18.5% of the company. Warner, as an insider, can’t sell shares for at least six months under federal securities rules, Holmes noted.

And Warner General Counsel Martin Payson, who is slated to become a vice chairman of the combined company, said: “We’re very confident we can handle the debt and we have no intention of selling any of the core businesses.”

Citing documents prepared by unidentified bankers, the Journal said Time management projects a 4.85% annual revenue growth through 1997 at Home Box Office, the cable programming subsidiary, while Time projects 11.67% average growth between 1990 and 1997 in revenue from its cable-TV systems. Magazine revenue is projected to grow 8.79% during the same seven-year period, while book revenue will grow 4.85%, the newspaper said.

“It’s stuff that shouldn’t be out there,” said the banker, who declined to comment on the accuracy of the data because he and other bankers pledged confidentiality. He noted, however, that at least 40 banks had access to Time’s projections. “The timing (of the disclosure) is not good,” the banker said, because Time and Paramount are still battling in court, with oral arguments scheduled Monday in Delaware Supreme Court.

For the three months ended June 30, Time’s operating income rose 14% to $197 million, before the inclusion of interest expense or the $12-million pretax annual dividend from Turner Broadcasting System. Net income rose $10 million to $94 million.