Annual Report Project

Annual Report Project

Introduction

The purpose of this report is to expand the boundaries of our knowledge by exploring some relevant facts and figures relating to Oprah Winfrey & Harpo's Magazine & Own Television Network. The purpose of a corporate annual report is to communicate to stockholders and other interested parties its financial statements. The annual report is a summary of the corporation's operations over the previous 12 month time period and states the corporation's plans for the future.

Analysis of the report

Main sections of the annual report

The annual report of Oprah Winfrey Network includes the following sections:

Auditor's report

Financial statements

Notes to the financial statements: Details about potential problems with the numbers or how the numbers were derived

Management's discussion and analysis: The higher-ups' breakdown of the financial results and other factors that impact the company's operations.

Key factors of financial performance

Oprah Winfrey Network reported strong first-quarter results with better-than-expected sales growth and profitability as it is generating additional cash flow for noncurrent content, which shows off the value of owning content outright. Oprah Winfrey Network is one of the firms reaping the rewards of Netflix overpaying for mostly stale or low-value content. We're increasing our fair value estimate to $32 per share from $25 based partially on the recent results but also a better long-term profitability outlook. The shares remain slightly overvalued as we think the market is pricing in a continuation of the strong ad market growth from the past two years, which we believe is a bit too optimistic. This stock trades in a more cyclical manner than its media peers (it dipped below $20 as recently as October) (Wahlen, 2011).

Sales of $3.9 billion were 12% higher, with both the entertainment and cable network segments fueling the better-than-expected growth. Entertainment segment revenue growth was 16%; Oprah Winfrey network advertising growth was up 4% on a comparable basis and local TV station sales improved 2%. We estimate that roughly half of the 16% segment growth was from online streaming deals and new syndication agreements. These strong results reaffirm our long-standing thesis that quality content gets paid for, and despite changes in the distribution of content, the best economics eventually flow to content owners. We view Oprah Winfrey television and magazine businesses (about 30% of EBITDA) as mature cash-generating businesses, with television outpacing magazine over the next five years. On the TV side, competition for local advertising is intense. In most markets, there are ...