Time Warner Inc. (NYSE:TWX) today reported financial results for its
fourth quarter and full year ended December 31, 2013.
Chairman and Chief Executive Officer Jeff Bewkes said: “We had another
very successful year in 2013, with Turner, Home Box Office and Warner
Bros. all posting record profits while also investing for future growth.
We grew Adjusted Operating Income by 8% and Adjusted EPS by 16% — our
fifth consecutive year of double-digit Adjusted EPS growth. Among
Turner’s highlights, TBS ranked as ad-supported cable’s #1 network in
primetime among adults 18-49 and TNT was the #2 network in total day
among adults 25-54. Adult Swim had the most-watched year in its history
and ranked #1 on ad-supported cable among adults 18-34 in total day for
the ninth year in a row. HBO remains in a league of its own, once again
receiving the most Primetime Emmy Awards of any network, while tying for
the most Golden Globe Awards and recording its biggest gain in domestic
subscribers in 17 years. Warner Bros. delivered its best year on record
by any measure. Theatrically, it led both the domestic and international
box office, and its films received an industry-leading 21 Academy Award
nominations — including Best Picture nominations for Gravity and Her.
In television, Warner Bros. has over 60 programs airing on broadcast
and cable during the 2013-2014 television season, including, among
adults 18-49, the #1 comedy in The Big Bang Theory, the #1
unscripted show in The Voice and the #3 drama in The Following.”
Mr. Bewkes continued: “We also remain on track for the separation of
Time Inc. into an independent publicly-traded company during the second
quarter of 2014. And our plans to consolidate our New York City area
operations into a single new location reflect our unrelenting focus on
increased efficiency and collaboration. Demonstrating our commitment to
stockholder returns, in 2013, we returned nearly $5 billion to our
stockholders in the form of share buybacks and dividends. Furthering
this commitment, our Board of Directors has authorized a new $5 billion
share repurchase program and a double-digit increase in our dividend for
the fifth consecutive year.”
Full-Year Company Results
Full-year revenues increased 4% from 2012 to $29.8 billion and Adjusted
Operating Income rose 8% from 2012 to $6.6 billion as growth at Turner,
Home Box Office and Warner Bros. and a decrease in intercompany
eliminations more than offset a decline at Time Inc. Operating Income
increased 12% from 2012 to $6.6 billion. Adjusted Operating Income and
Operating Income margins were 22% in 2013 compared to 21% in 2012.
The Company posted 2013 Adjusted Diluted Income per Common Share from
Continuing Operations (“Adjusted EPS”) of $3.77, up 16% from $3.242
in the prior year. Diluted Income per Common Share from Continuing
Operations was $3.77 compared to $3.002 in 2012.
On March 6, 2013, Time Warner announced that its Board of Directors has
authorized management to proceed with plans for the complete legal and
structural separation of Time Inc. from Time Warner. In 2013, excluding
Time Inc., Revenues increased 4%, Adjusted Operating Income grew 9% and
Operating Income rose 14%.
In 2013, Cash Provided by Operations from Continuing Operations reached
$3.7 billion and Free Cash Flow totaled $3.5 billion. As of December 31,
2013, Net Debt was $18.3 billion, up from $17.0 billion at the end of
2012, due to share repurchases and dividends, partially offset by the
generation of Free Cash Flow and proceeds from the exercise of stock
options.
Fourth-Quarter Company Results
Revenues increased 5% to $8.6 billion in the fourth quarter of 2013 due
to growth at Warner Bros., Turner and Home Box Office. Adjusted
Operating Income decreased 2% to $1.9 billion due to declines at Turner,
Time Inc. and Home Box Office, partially offset by an increase at Warner
Bros. Operating Income decreased 9% to $1.8 billion. Adjusted Operating
Income and Operating Income margins were 23% and 22% in the fourth
quarter of 2013, respectively, compared to 24% and 25% in the prior year
quarter, respectively.
The Company posted Adjusted EPS of $1.17, up 1% from $1.162 for
the year-ago quarter. Diluted Income per Common Share from Continuing
Operations was $1.06 compared to $1.152 in the prior year
quarter.
In the fourth quarter of 2013, excluding Time Inc., Revenues increased
6%, Adjusted Operating Income fell 1% and Operating Income decreased 5%.
Refer to “Use of Non-GAAP Financial Measures” in this release for a
discussion of the non-GAAP financial measures used in this release and
the reconciliations of the non-GAAP financial measures to the most
directly comparable GAAP financial measures.
Stock Repurchase Program Update
From January 1, 2013 through January 31, 2014, the Company repurchased
approximately 64 million shares of common stock for approximately $3.9
billion. These amounts reflect the purchase of approximately 14
million shares of common stock for approximately $927 million since the
amounts reported in the Company’s third quarter earnings release issued
on November 6, 2013.
In January 2014, the Company’s Board of Directors authorized a total of
$5 billion in share repurchases beginning January 1, 2014, which
replaced the amount remaining under the prior authorization.
Regular Quarterly Dividend
On February 4, 2014, the Company’s Board of Directors increased the
Company’s regular quarterly dividend by 10% to $0.3175 per share.
Segment Performance
Presentation of Financial Information
The schedule below reflects Time Warner’s financial performance for the
three months and year ended December 31, by line of business (millions).
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Three Months Ended Dec. 31,
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Year Ended Dec. 31,
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2013
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2012
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2013
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2012
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Revenues:
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Turner
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$
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2,548
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$
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2,475
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$
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9,983
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$
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9,527
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Home Box Office
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1,260
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1,191
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4,890
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4,686
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Warner Bros.
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3,996
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3,723
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12,312
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12,018
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Intersegment eliminations
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(200)
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(187)
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(724)
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(906)
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Total excluding Time Inc.
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7,604
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7,202
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26,461
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25,325
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Time Inc.
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966
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967
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3,354
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3,436
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Intersegment eliminations
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(5)
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(5)
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(20)
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(32)
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Total Revenues
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$
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8,565
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$
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8,164
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$
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29,795
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$
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28,729
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Adjusted Operating Income (Loss) (a):
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Turner
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$
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879
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$
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906
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$
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3,536
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$
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3,334
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Home Box Office
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414
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430
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1,678
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1,547
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Warner Bros.
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576
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555
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1,327
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1,237
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Corporate
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(114)
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(95)
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(407)
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(358)
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Intersegment eliminations
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14
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(17)
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61
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(97)
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Total excluding Time Inc.
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1,769
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1,779
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6,195
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5,663
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Time Inc.
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173
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201
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404
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463
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Total Adjusted Operating Income
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$
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1,942
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$
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1,980
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$
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6,599
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$
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6,126
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Operating Income (Loss) (a):
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Turner
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$
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853
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$
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948
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$
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3,486
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$
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3,172
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Home Box Office
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413
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430
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1,791
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1,547
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Warner Bros.
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573
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552
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1,324
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1,228
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Corporate
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(120)
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(86)
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(394)
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(352)
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Intersegment eliminations
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14
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(17)
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61
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(97)
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Total excluding Time Inc.
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1,733
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1,827
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6,268
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5,498
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Time Inc.
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107
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200
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337
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420
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Total Operating Income
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$
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1,840
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$
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2,027
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$
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6,605
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$
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5,918
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Depreciation and Amortization:
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Turner
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$
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63
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$
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67
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$
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252
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$
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263
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Home Box Office
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29
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23
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100
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92
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Warner Bros.
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101
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106
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379
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382
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Corporate
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7
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7
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28
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28
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Total excluding Time Inc.
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200
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203
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759
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765
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Time Inc.
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33
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31
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127
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127
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Total Depreciation and Amortization
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$
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233
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$
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234
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$
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886
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$
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892
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(a)
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Adjusted Operating Income (Loss) and Operating Income (Loss) for the
three months and year ended December 31, 2013 and 2012 included
restructuring and severance costs of (millions):
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Three Months Ended Dec. 31,
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Year Ended Dec. 31,
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2013
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2012
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2013
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2012
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Turner
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$
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(29)
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$
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(23)
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$
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(93)
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$
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(52)
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Home Box Office
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(3)
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(4)
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(39)
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(15)
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Warner Bros.
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(16)
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(4)
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(49)
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(23)
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Corporate
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(3)
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(1)
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(2)
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(2)
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Total excluding Time Inc.
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(51)
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(32)
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(183)
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(92)
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Time Inc.
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(5)
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(3)
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(63)
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(27)
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Total Restructuring and Severance Costs
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$
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(56)
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$
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(35)
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$
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(246)
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$
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(119)
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Presented below is a discussion of the performance of Time Warner’s
segments for the fourth quarter and full year of 2013. Unless
otherwise noted, the dollar amounts in parentheses represent
year-over-year changes.
TURNER
Full-Year Results
Revenues rose 5% ($456 million) to $10.0 billion, benefiting from
growth of 5% ($236 million) in Subscription revenues and 5% ($219
million) in Advertising revenues, partially offset by a decline of 2%
($6 million) in Content revenues. The increase in Subscription revenues
was primarily due to higher domestic rates and international growth,
partially offset by the negative effect of foreign currency exchange
rates. Advertising revenues primarily benefited from growth at Turner’s
domestic entertainment networks, principally due to higher pricing, as
well as increased demand for Turner’s sports programming. The growth in
Advertising revenues was partially offset by declines at Turner’s news
networks mainly due to the comparison to the 2012 U.S. presidential
election. The decline in Content revenues was primarily due to
the shutdown of TNT television operations in Turkey in the second
quarter of 2012.
Adjusted Operating Income increased 6% ($202 million) to $3.5
billion, reflecting higher revenues, partly offset by higher programming
costs and increased restructuring and severance expenses. Programming
costs grew 6%, primarily reflecting an increase in original programming,
including at Turner’s domestic news networks, and higher programming
impairments.
Operating Income increased 10% ($314 million) to $3.5 billion.
The prior year included $192 million in charges related to the shutdown
of Turner’s general entertainment network, Imagine, in India and its TNT
television operations in Turkey as well as a $34 million gain related to
the 2007 sale of the Atlanta Braves baseball franchise (the “Braves”).
TNT claimed four of the top fifteen ad-supported cable original series
of 2013, more than any other network. In 2013, TBS ranked as
ad-supported cable’s #1 primetime network among adults 18-34 and adults
18-49. 2013 was Adult Swim’s most-watched year in its history for adults
18-34 and adults 18-49 in total day, and it ranked #1 in total day on
ad-supported cable among adults 18-34 for the ninth year in a row. CNN
once again reached more viewers than any other cable news network in
2013 and reclaimed the #2 ranking in total day for cable news networks
among total viewers.
Fourth-Quarter Results
Revenues increased 3% ($73 million) to $2.5 billion, due to
increases of 6% ($69 million) in Subscription revenues and 1% ($6
million) in Advertising revenues. Similar to the full year results, the
increase in Subscription revenues mainly resulted from higher domestic
rates and international growth, partially offset by the negative effect
of foreign currency exchange rates. Advertising revenues benefited from
growth at Turner’s domestic entertainment networks, mainly due to
increased pricing and demand. That growth was partially offset by
declines at the domestic news networks, primarily due to the comparison
to the 2012 U.S. presidential election in the prior year quarter.
Adjusted Operating Income fell 3% ($27 million) to $879 million,
due to increased expenses, including higher programming costs and
marketing expenses. Programming costs grew 12% in the quarter primarily
due to higher programming impairments and increased investments in
original programming, including at Turner’s domestic news networks.
Operating Income decreased 10% ($95 million) to $853 million. The
fourth quarter of 2013 included an $18 million impairment related to a
building in South America. The prior year quarter included a $34 million
gain related to the 2007 sale of the Braves.
HOME BOX OFFICE
Full-Year Results
Revenues rose 4% ($204 million) to $4.9 billion, as Subscription
revenue growth of 6% ($221 million) was partially offset by a decline of
3% ($18 million) in Content revenues. The increase in Subscription
revenues resulted mainly from higher domestic rates and the
consolidation of HBO Asia and HBO South Asia (collectively, “HBO Asia”)
and HBO Nordic. Content revenues declined due to lower home video
revenues, primarily due to lower library sales.
Adjusted Operating Income increased 8% ($131 million) to $1.7
billion, reflecting higher revenues, partly offset by increased
expenses, including higher marketing and restructuring and severance
expenses. Programming costs grew 1% due to the consolidation of HBO Asia
and HBO Nordic and higher original programming expenses, partly offset
by lower programming impairments and lower expenses for acquired
theatrical product due to lower volume of titles.
Operating Income increased 16% ($244 million) to $1.8 billion and
included $113 million in gains related to HBO’s acquisitions of its
partners’ interests in HBO Asia and HBO Nordic.
In 2013, HBO received the most Primetime Emmy Awards of any network for
the twelfth consecutive year. At the 71st Annual Golden Globe
Awards, HBO won two awards, including Best TV Movie or Mini-Series for Behind
the Candelabra.
Fourth-Quarter Results
Revenues increased 6% ($69 million) to $1.3 billion, due to
Subscription revenue growth of 8% ($84 million), which was partially
offset by a decrease of 9% ($16 million) in Content revenues. The
increase in Subscription revenues resulted mainly from higher domestic
rates and the consolidation of HBO Asia and HBO Nordic. Content revenues
decreased largely due to lower home video revenues, partly offset by
higher international licensing revenues.
Adjusted Operating Income decreased 4% ($16 million) to $414
million, due to higher expenses, including a 12% increase in programming
costs. Programming costs grew due to higher original programming
expenses and the consolidation of HBO Asia and HBO Nordic, partly offset
by lower expenses for acquired theatrical product.
Operating Income decreased 4% ($17 million) to $413 million.
WARNER BROS.
Full-Year Results
Revenues increased 2% ($294 million) to $12.3 billion, mainly due
to stronger theatrical and videogames slates, as well as growth in
electronic sell-through. The increase was partially offset by declines
in television licensing revenues due to fewer theatrical availabilities
and the comparison to last year’s initial off-network availability of The
Mentalist, as well as lower physical home video revenues.
Adjusted Operating Income rose 7% ($90 million) to $1.3 billion,
mainly due to higher revenues, partially offset by higher print and
advertising expenses due to an increased number of theatrical releases,
as well as increased restructuring and severance expenses.
Operating Income increased 8% ($96 million) to $1.3 billion.
In 2013, Warner Bros. ranked #1 at the domestic and international box
offices, with its films grossing over $5 billion globally for the first
time ever, led by The Hobbit: The Desolation of Smaug, Gravity and
Man of Steel. It was also the 5th straight year that
Warner Bros.’ films grossed over $4 billion at the worldwide box office,
setting an industry record. In 2013, Warner Bros. remained #1
domestically in overall home entertainment. Warner Bros. has over 60
series airing on television for the 2013-2014 television season,
including 32 series on broadcast networks, the most of any studio. At
the 71st Annual Golden Globe Awards, Warner Bros. won awards
for Best Director – Motion Picture for Gravity and Best
Screenplay – Motion Picture for Her. For the 86th
Academy Awards, Warner Bros. received an industry-leading 21
nominations, including Best Picture nominations for Gravity and Her.
Fourth-Quarter Results
Revenues increased 7% ($273 million) to $4.0 billion, mainly due
to stronger theatrical and videogames slates. The fourth quarter of 2013
included the theatrical releases of Gravity and The Hobbit:
The Desolation of Smaug and the videogame release of Batman:
Arkham Origins. The growth was partially offset by a decline in home
video revenues and lower television licensing revenues from theatrical
product.
Adjusted Operating Income increased 4% ($21 million) to $576
million mainly due to the increase in revenues and lower theatrical
valuation adjustments, partially offset by increased television costs
due to product mix.
Operating Income increased 4% ($21 million) to $573 million.
TIME INC.
Full-Year Results
Revenues declined 2% ($82 million) to $3.4 billion, reflecting
decreases of 7% ($81 million) in Subscription revenues and 1% ($12
million) in Advertising revenues, partially offset by an increase of 5%
($16 million) in Other revenues. Subscription revenues declined due to
lower worldwide newsstand revenues and lower domestic subscription
revenues, partially offset by the acquisition of American Express
Publishing Corporation (“AEP”) in October 2013. Advertising revenues
decreased primarily due to declines in worldwide magazine advertising,
partially offset by the inclusion of AEP’s revenues.
Adjusted Operating Income decreased 13% ($59 million) to $404
million due to the decline in revenues and increased restructuring and
severance expenses.
Operating Income decreased 20% ($83 million) to $337 million. The
current year included $79 million of impairments primarily related to
certain tradenames. The prior year included a pre-tax loss of $36
million related to the sale of Time Inc.’s school fundraising business,
QSP.
In 2013, Time Inc. maintained its leading share of overall domestic
magazine advertising with 23.7%, up from 21.5% in 2012 (Publishers
Information Bureau data). The 2013 share reflects the inclusion of AEP
and a title managed on behalf of American Express Company for the full
year.
Fourth-Quarter Results
Revenues were essentially flat at $966 million due to a decrease
of 6% ($19 million) in Subscription revenues offset by increases of 2%
($13 million) in Advertising revenues and 6% ($5 million) in Other
revenues. Similar to the full year results, Subscription revenues
declined due to lower worldwide newsstand revenues and lower domestic
subscription revenues, partially offset by the inclusion of AEP.
Advertising revenues increased due to the acquisition of AEP, partially
offset by the impact of certain weekly titles having one fewer issue in
the fourth quarter of 2013. Excluding the impact of acquiring AEP,
Subscription, Advertising and Other revenues would have decreased 10%,
7% and 4%, respectively, and Total revenues would have declined 8%.
Adjusted Operating Income decreased 14% ($28 million) to $173
million, primarily due to revenue declines at certain non-AEP titles.
Operating Income decreased 47% ($93 million) to $107 million and
included $79 million of impairments primarily related to certain
tradenames.
CONSOLIDATED NET INCOME AND PER SHARE RESULTS
Full-Year Results
For the year ended December 31, 2013, Adjusted EPS was $3.77 compared to
$3.242 in 2012. The increase in Adjusted EPS primarily
reflects higher Adjusted Operating Income and fewer shares outstanding.
The Company reported Income from Continuing Operations attributable to
Time Warner common shareholders of $3.6 billion, or $3.77 per
diluted common share. This compares to Income from Continuing Operations
attributable to Time Warner common shareholders in 2012 of $2.9
billion2, or $3.002 per
diluted common share.
For the years ended December 31, 2013 and 2012, the Company reported Net
Income of $3.7 billion and $2.9 billion2, respectively.
Fourth-Quarter Results
Adjusted EPS was $1.17 for the three months ended December 31,
2013, compared to $1.162 in last year’s fourth quarter. The
increase in Adjusted EPS primarily reflects fewer shares outstanding.
For the three months ended December 31, 2013, the Company reported
Income from Continuing Operations attributable to Time Warner common
shareholders of $1.0 billion, or $1.06 per diluted common
share. This compares to Income from Continuing Operations attributable
to Time Warner common shareholders in the fourth quarter of 2012 of $1.1
billion2, or $1.152 per diluted
common share.
For the fourth quarter of 2013 and 2012, the Company reported Net Income
of $1.0 billion and $1.1 billion2,
respectively.
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1 In the fourth quarter of 2013, the Company separated
its former Networks reportable segment into two reportable segments:
Turner and Home Box Office. In addition, during the fourth quarter
of 2013, the Company changed the names of its Film and TV
Entertainment reportable segment to Warner Bros. and its Publishing
reportable segment to Time Inc. The new presentation had no impact
on the historical consolidated financial information previously
reported by the Company.
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2 The Company has recast its historical financial results
to reflect the presentation of its investment in Central European
Media Enterprises Ltd. (“CME”) under the equity method of accounting
for all prior periods from the date of the Company’s initial
investment in CME in May 2009.
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USE OF NON-GAAP FINANCIAL MEASURES
The Company utilizes Adjusted Operating Income (Loss) and Adjusted
Operating Income margin, among other measures, to evaluate the
performance of its businesses. In light of the pending legal and
structural separation of Time Inc. from Time Warner, the Company also
uses Adjusted Operating Income (Loss) excluding Time Inc. to further
evaluate the non-publishing businesses. Adjusted Operating Income (Loss)
is Operating Income (Loss) excluding the impact of noncash impairments
of goodwill, intangible and fixed assets; gains and losses on operating
assets (other than deferred gains on sale-leasebacks); gains and losses
recognized in connection with pension and other postretirement benefit
plan curtailments or settlements; external costs related to mergers,
acquisitions or dispositions, as well as contingent consideration
related to such transactions, to the extent such costs are expensed; and
amounts related to securities litigation and government investigations.
Adjusted Operating Income margin is defined as Adjusted Operating Income
divided by Revenues. These measures are considered important indicators
of the operational strength of the Company’s businesses.
Adjusted Income from Continuing Operations attributable to Time Warner
Inc. common shareholders is Income from Continuing Operations
attributable to Time Warner Inc. common shareholders excluding noncash
impairments of goodwill, intangible and fixed assets and investments;
gains and losses on operating assets (other than deferred gains on
sale-leasebacks), liabilities and investments; gains and losses
recognized in connection with pension and other postretirement benefit
plan curtailments or settlements; external costs related to mergers,
acquisitions, investments or dispositions, as well as contingent
consideration related to such transactions, to the extent such costs are
expensed; amounts related to securities litigation and government
investigations; and amounts attributable to businesses classified as
discontinued operations, as well as the impact of taxes and
noncontrolling interests on the above items. Similarly, Adjusted EPS is
Diluted Income per Common Share from Continuing Operations attributable
to Time Warner Inc. common shareholders excluding the above items.
Adjusted Income from Continuing Operations attributable to Time Warner
Inc. common shareholders and Adjusted EPS are considered important
indicators of the operational strength of the Company’s businesses as
these measures eliminate amounts that do not reflect the fundamental
performance of the Company’s businesses. The Company utilizes Adjusted
EPS, among other measures, to evaluate the performance of its businesses
both on an absolute basis and relative to its peers and the broader
market. Many investors also use an adjusted EPS measure as a common
basis for comparing the performance of different companies. Some
limitations of Adjusted Operating Income (Loss), Adjusted Operating
Income (Loss) excluding Time Inc., Adjusted Operating Income margin,
Adjusted Income from Continuing Operations attributable to Time Warner
Inc. common shareholders and Adjusted EPS are that they do not reflect
certain charges that affect the operating results of the Company’s
businesses and they involve judgment as to whether items affect
fundamental operating performance.
For periods ending on or after July 1, 2012, Free Cash Flow is defined
as Cash Provided by Operations from Continuing Operations plus payments
related to securities litigation and government investigations (net of
any insurance recoveries), external costs related to mergers,
acquisitions, investments or dispositions, to the extent such costs are
expensed, contingent consideration payments made in connection with
acquisitions, and excess tax benefits from equity instruments, less
capital expenditures, principal payments on capital leases and
partnership distributions, if any. For periods ending prior to that
date, Free Cash Flow is defined as Cash Provided by Operations from
Continuing Operations plus payments related to securities litigation and
government investigations (net of any insurance recoveries), external
costs related to mergers, acquisitions, investments or dispositions, to
the extent such costs are expensed, and excess tax benefits from equity
instruments, less capital expenditures, principal payments on capital
leases and partnership distributions, if any. A change to the definition
of Free Cash Flow for periods prior to July 1, 2012 to adjust for
contingent consideration payments made in connection with acquisitions
would have had no impact on the Free Cash Flow for such periods. The
Company uses Free Cash Flow to evaluate its businesses and this measure
is considered an important indicator of the Company’s liquidity,
including its ability to reduce net debt, make strategic investments,
pay dividends to common shareholders and repurchase stock.
A general limitation of these measures is that they are not prepared in
accordance with U.S. generally accepted accounting principles and may
not be comparable to similarly titled measures of other companies due to
differences in methods of calculation and excluded items. Adjusted
Operating Income (Loss), Adjusted Operating Income (Loss) excluding Time
Inc., Adjusted Income from Continuing Operations attributable to Time
Warner Inc. common shareholders, Adjusted EPS and Free Cash Flow should
be considered in addition to, not as a substitute for, the Company’s
Operating Income (Loss), Income from Continuing Operations attributable
to Time Warner Inc. common shareholders, Diluted Income per Common Share
from Continuing Operations and various cash flow measures (e.g., Cash
Provided by Operations from Continuing Operations), as well as other
measures of financial performance and liquidity reported in accordance
with U.S. generally accepted accounting principles.
ABOUT TIME WARNER INC.
Time Warner Inc., a global leader in media and entertainment with
businesses in television networks, film and TV entertainment and
publishing, uses its industry-leading operating scale and brands to
create, package and deliver high-quality content worldwide through
multiple distribution outlets.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements
are based on management’s current expectations or beliefs, and are
subject to uncertainty and changes in circumstances. Actual results may
vary materially from those expressed or implied by the statements herein
due to changes in economic, business, competitive, technological,
strategic and/or regulatory factors and other factors affecting the
operation of Time Warner’s businesses. More detailed information about
these factors may be found in filings by Time Warner with the Securities
and Exchange Commission, including its most recent Annual Report on Form
10-K and subsequent Quarterly Reports on Form 10-Q. Time Warner is under
no obligation to, and expressly disclaims any such obligation to, update
or alter its forward-looking statements, whether as a result of new
information, future events, or otherwise.
INFORMATION ON BUSINESS OUTLOOK RELEASE & CONFERENCE CALL
Time Warner Inc. issued a separate release today regarding its 2014
full-year business outlook.
The Company’s conference call can be heard live at 10:30 am ET on
Wednesday, February 5, 2014. To listen to the call, visit www.timewarner.com/investors.
|
|
|
TIME WARNER INC.
|
|
CONSOLIDATED BALANCE SHEET
|
|
(Unaudited; millions, except share amounts)
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
1,862
|
|
|
$
|
2,841
|
|
|
Receivables, less allowances of $1,666 and $1,757
|
|
|
7,868
|
|
|
|
7,385
|
|
|
Inventories
|
|
|
2,028
|
|
|
|
2,036
|
|
|
Deferred income taxes
|
|
|
447
|
|
|
|
474
|
|
|
Prepaid expenses and other current assets
|
|
|
639
|
|
|
|
528
|
|
|
Total current assets
|
|
|
12,844
|
|
|
|
13,264
|
|
|
|
|
|
|
|
|
|
|
Noncurrent inventories and theatrical film and television production
costs
|
|
|
6,699
|
|
|
|
6,675
|
|
|
Investments, including available-for-sale securities
|
|
|
2,024
|
|
|
|
1,966
|
|
|
Property, plant and equipment, net
|
|
|
3,825
|
|
|
|
3,942
|
|
|
Intangible assets subject to amortization, net
|
|
|
1,920
|
|
|
|
2,108
|
|
|
Intangible assets not subject to amortization
|
|
|
7,629
|
|
|
|
7,642
|
|
|
Goodwill
|
|
|
30,563
|
|
|
|
30,446
|
|
|
Other assets
|
|
|
2,490
|
|
|
|
2,046
|
|
|
Total assets
|
|
$
|
67,994
|
|
|
$
|
68,089
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
7,322
|
|
|
$
|
8,039
|
|
|
Deferred revenue
|
|
|
995
|
|
|
|
1,011
|
|
|
Debt due within one year
|
|
|
66
|
|
|
|
749
|
|
|
Total current liabilities
|
|
|
8,383
|
|
|
|
9,799
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
20,099
|
|
|
|
19,122
|
|
|
Deferred income taxes
|
|
|
2,642
|
|
|
|
2,127
|
|
|
Deferred revenue
|
|
|
482
|
|
|
|
523
|
|
|
Other noncurrent liabilities
|
|
|
6,484
|
|
|
|
6,721
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 1.652 billion and 1.652 billion shares
|
|
|
|
|
|
|
|
issued and 895 million and 932 million shares outstanding
|
|
|
17
|
|
|
|
17
|
|
|
Paid-in-capital
|
|
|
153,410
|
|
|
|
154,577
|
|
|
Treasury stock, at cost (757 million and 720 million shares)
|
|
|
(37,630
|
)
|
|
|
(35,077
|
)
|
|
Accumulated other comprehensive loss, net
|
|
|
(852
|
)
|
|
|
(989
|
)
|
|
Accumulated deficit
|
|
|
(85,041
|
)
|
|
|
(88,732
|
)
|
|
Total Time Warner Inc. shareholders’ equity
|
|
|
29,904
|
|
|
|
29,796
|
|
|
Noncontrolling interests
|
|
|
-
|
|
|
|
1
|
|
|
Total equity
|
|
|
29,904
|
|
|
|
29,797
|
|
|
Total liabilities and equity
|
|
$
|
67,994
|
|
|
$
|
68,089
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC.
|
|
CONSOLIDATED STATEMENT OF OPERATIONS
|
|
(Unaudited; millions, except per share amounts)
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
|
|
12/31/13
|
|
12/31/12
|
|
12/31/13
|
|
12/31/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
8,565
|
|
|
$
|
8,164
|
|
|
$
|
29,795
|
|
|
$
|
28,729
|
|
|
Costs of revenues
|
|
|
(4,776
|
)
|
|
|
(4,436
|
)
|
|
|
(16,230
|
)
|
|
|
(15,934
|
)
|
|
Selling, general and administrative
|
|
|
(1,730
|
)
|
|
|
(1,641
|
)
|
|
|
(6,465
|
)
|
|
|
(6,333
|
)
|
|
Amortization of intangible assets
|
|
|
(70
|
)
|
|
|
(70
|
)
|
|
|
(251
|
)
|
|
|
(248
|
)
|
|
Restructuring and severance costs
|
|
|
(56
|
)
|
|
|
(35
|
)
|
|
|
(246
|
)
|
|
|
(119
|
)
|
|
Asset impairments
|
|
|
(105
|
)
|
|
|
(4
|
)
|
|
|
(140
|
)
|
|
|
(186
|
)
|
|
Gain on operating assets, net
|
|
|
12
|
|
|
|
49
|
|
|
|
142
|
|
|
|
9
|
|
|
Operating income
|
|
|
1,840
|
|
|
|
2,027
|
|
|
|
6,605
|
|
|
|
5,918
|
|
|
Interest expense, net
|
|
|
(300
|
)
|
|
|
(307
|
)
|
|
|
(1,190
|
)
|
|
|
(1,253
|
)
|
|
Other loss, net
|
|
|
(49
|
)
|
|
|
(125
|
)
|
|
|
(112
|
)
|
|
|
(217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income taxes
|
|
|
1,491
|
|
|
|
1,595
|
|
|
|
5,303
|
|
|
|
4,448
|
|
|
Income tax provision
|
|
|
(508
|
)
|
|
|
(483
|
)
|
|
|
(1,749
|
)
|
|
|
(1,526
|
)
|
|
Income from continuing operations
|
|
|
983
|
|
|
|
1,112
|
|
|
|
3,554
|
|
|
|
2,922
|
|
|
Discontinued operations, net of tax
|
|
|
-
|
|
|
|
-
|
|
|
|
137
|
|
|
|
-
|
|
|
Net income
|
|
|
983
|
|
|
|
1,112
|
|
|
|
3,691
|
|
|
|
2,922
|
|
|
Less Net loss attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
Net income attributable to Time Warner Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
|
|
$
|
983
|
|
|
$
|
1,112
|
|
|
$
|
3,691
|
|
|
$
|
2,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share information attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Warner Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
continuing operations
|
|
$
|
1.09
|
|
|
$
|
1.18
|
|
|
$
|
3.85
|
|
|
$
|
3.05
|
|
|
Discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
0.14
|
|
|
|
-
|
|
|
Basic net income per common share
|
|
$
|
1.09
|
|
|
$
|
1.18
|
|
|
$
|
3.99
|
|
|
$
|
3.05
|
|
|
Average basic common shares outstanding
|
|
|
901.9
|
|
|
|
942.1
|
|
|
|
920.0
|
|
|
|
954.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
continuing operations
|
|
$
|
1.06
|
|
|
$
|
1.15
|
|
|
$
|
3.77
|
|
|
$
|
3.00
|
|
|
Discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
0.15
|
|
|
|
-
|
|
|
Diluted net income per common share
|
|
$
|
1.06
|
|
|
$
|
1.15
|
|
|
$
|
3.92
|
|
|
$
|
3.00
|
|
|
Average diluted common shares outstanding
|
|
|
924.3
|
|
|
|
966.9
|
|
|
|
942.6
|
|
|
|
976.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share of common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock
|
|
$
|
0.2875
|
|
|
$
|
0.2600
|
|
|
$
|
1.1500
|
|
|
$
|
1.0400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC.
|
|
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
Year Ended December 31,
|
|
(Unaudited; millions)
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
OPERATIONS
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,691
|
|
|
$
|
2,922
|
|
|
Less Discontinued operations, net of tax
|
|
|
(137
|
)
|
|
|
-
|
|
|
Net income from continuing operations
|
|
|
3,554
|
|
|
|
2,922
|
|
|
Adjustments for noncash and nonoperating items:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
886
|
|
|
|
892
|
|
|
Amortization of film and television costs
|
|
|
7,262
|
|
|
|
7,210
|
|
|
Asset impairments
|
|
|
140
|
|
|
|
186
|
|
|
(Gain) loss on investments and other assets, net
|
|
|
(65
|
)
|
|
|
26
|
|
|
Equity in losses of investee companies, net of cash distributions
|
|
|
218
|
|
|
|
225
|
|
|
Equity-based compensation
|
|
|
256
|
|
|
|
234
|
|
|
Deferred income taxes
|
|
|
759
|
|
|
|
(150
|
)
|
|
Changes in operating assets and liabilities, net of acquisitions
|
|
|
(9,294
|
)
|
|
|
(8,069
|
)
|
|
Cash provided by operations from continuing operations
|
|
|
3,716
|
|
|
|
3,476
|
|
|
Cash used by operations from discontinued operations
|
|
|
(2
|
)
|
|
|
(34
|
)
|
|
Cash provided by operations
|
|
|
3,714
|
|
|
|
3,442
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Investments in available-for-sale securities
|
|
|
(27
|
)
|
|
|
(37
|
)
|
|
Investments and acquisitions, net of cash acquired
|
|
|
(485
|
)
|
|
|
(668
|
)
|
|
Capital expenditures
|
|
|
(602
|
)
|
|
|
(643
|
)
|
|
Investment proceeds from available-for-sale securities
|
|
|
33
|
|
|
|
1
|
|
|
Other investment proceeds
|
|
|
171
|
|
|
|
101
|
|
|
Cash used by investing activities
|
|
|
(910
|
)
|
|
|
(1,246
|
)
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Borrowings
|
|
|
1,028
|
|
|
|
1,039
|
|
|
Debt repayments
|
|
|
(762
|
)
|
|
|
(686
|
)
|
|
Proceeds from exercise of stock options
|
|
|
674
|
|
|
|
1,107
|
|
|
Excess tax benefit from equity instruments
|
|
|
179
|
|
|
|
83
|
|
|
Principal payments on capital leases
|
|
|
(9
|
)
|
|
|
(11
|
)
|
|
Repurchases of common stock
|
|
|
(3,708
|
)
|
|
|
(3,272
|
)
|
|
Dividends paid
|
|
|
(1,074
|
)
|
|
|
(1,011
|
)
|
|
Other financing activities
|
|
|
(111
|
)
|
|
|
(80
|
)
|
|
Cash used by financing activities
|
|
|
(3,783
|
)
|
|
|
(2,831
|
)
|
|
|
|
|
|
|
|
|
|
DECREASE IN CASH AND EQUIVALENTS
|
|
|
(979
|
)
|
|
|
(635
|
)
|
|
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
2,841
|
|
|
|
3,476
|
|
|
CASH AND EQUIVALENTS AT END OF PERIOD
|
|
$
|
1,862
|
|
|
$
|
2,841
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC.
|
|
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
|
|
(Unaudited; dollars in millions)
|
|
|
|
Reconciliations of
|
|
Adjusted Operating Income (Loss) to Operating Income (Loss) and
|
|
Adjusted Operating Income Margin to Operating Income Margin
|
|
|
|
Three Months Ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Operating
Income (Loss)
|
|
Asset
Impairments
|
|
Gain (Loss) on
Operating Assets,
Net
|
|
Other
|
|
Operating
Income (Loss)
|
|
Turner
|
|
$
|
879
|
|
|
$
|
(24
|
)
|
|
$
|
-
|
|
|
$
|
(2
|
)
|
|
$
|
853
|
|
|
Home Box Office
|
|
|
414
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
413
|
|
|
Warner Bros.
|
|
|
576
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
573
|
|
|
Corporate
|
|
|
(114
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
(120
|
)
|
|
Intersegment eliminations
|
|
|
14
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14
|
|
|
Time Warner excluding Time Inc.
|
|
|
1,769
|
|
|
|
(26
|
)
|
|
|
(1
|
)
|
|
|
(9
|
)
|
|
|
1,733
|
|
|
Time Inc.
|
|
|
173
|
|
|
|
(79
|
)
|
|
|
13
|
|
|
|
-
|
|
|
|
107
|
|
|
Time Warner
|
|
$
|
1,942
|
|
|
$
|
(105
|
)
|
|
$
|
12
|
|
|
$
|
(9
|
)
|
|
$
|
1,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin(a)
|
|
|
22.7
|
%
|
|
|
(1.2
|
%)
|
|
|
0.1
|
%
|
|
|
(0.1
|
%)
|
|
|
21.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Operating
Income (Loss)
|
|
Asset
Impairments
|
|
Gain (Loss) on
Operating Assets,
Net
|
|
Other
|
|
Operating
Income (Loss)
|
|
Turner
|
|
$
|
906
|
|
|
$
|
4
|
|
|
$
|
34
|
|
|
$
|
4
|
|
|
$
|
948
|
|
|
Home Box Office
|
|
|
430
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
430
|
|
|
Warner Bros.
|
|
|
555
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
552
|
|
|
Corporate
|
|
|
(95
|
)
|
|
|
-
|
|
|
|
10
|
|
|
|
(1
|
)
|
|
|
(86
|
)
|
|
Intersegment eliminations
|
|
|
(17
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(17
|
)
|
|
Time Warner excluding Time Inc.
|
|
|
1,779
|
|
|
|
2
|
|
|
|
44
|
|
|
|
2
|
|
|
|
1,827
|
|
|
Time Inc.
|
|
|
201
|
|
|
|
(6
|
)
|
|
|
5
|
|
|
|
-
|
|
|
|
200
|
|
|
Time Warner
|
|
$
|
1,980
|
|
|
$
|
(4
|
)
|
|
$
|
49
|
|
|
$
|
2
|
|
|
$
|
2,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin(a)
|
|
|
24.3
|
%
|
|
|
(0.1
|
%)
|
|
|
0.6
|
%
|
|
|
-
|
|
|
|
24.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Please see below for additional information on items affecting
comparability.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Operating
Income (Loss)
|
|
Asset
Impairments
|
|
Gain (Loss) on
Operating Assets,
Net
|
|
Other
|
|
Operating
Income (Loss)
|
|
Turner
|
|
$
|
3,536
|
|
|
$
|
(47
|
)
|
|
$
|
2
|
|
|
$
|
(5
|
)
|
|
$
|
3,486
|
|
|
Home Box Office
|
|
|
1,678
|
|
|
|
-
|
|
|
|
113
|
|
|
|
-
|
|
|
|
1,791
|
|
|
Warner Bros.
|
|
|
1,327
|
|
|
|
(7
|
)
|
|
|
6
|
|
|
|
(2
|
)
|
|
|
1,324
|
|
|
Corporate
|
|
|
(407
|
)
|
|
|
(7
|
)
|
|
|
8
|
|
|
|
12
|
|
|
|
(394
|
)
|
|
Intersegment eliminations
|
|
|
61
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61
|
|
|
Time Warner excluding Time Inc.
|
|
|
6,195
|
|
|
|
(61
|
)
|
|
|
129
|
|
|
|
5
|
|
|
|
6,268
|
|
|
Time Inc.
|
|
|
404
|
|
|
|
(79
|
)
|
|
|
13
|
|
|
|
(1
|
)
|
|
|
337
|
|
|
Time Warner
|
|
$
|
6,599
|
|
|
$
|
(140
|
)
|
|
$
|
142
|
|
|
$
|
4
|
|
|
$
|
6,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin(a)
|
|
|
22.1
|
%
|
|
|
(0.5
|
%)
|
|
|
0.5
|
%
|
|
|
0.1
|
%
|
|
|
22.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Operating
Income (Loss)
|
|
Asset
Impairments
|
|
Gain (Loss) on
Operating Assets,
Net
|
|
Other
|
|
Operating
Income (Loss)
|
|
Turner
|
|
$
|
3,334
|
|
|
$
|
(176
|
)
|
|
$
|
34
|
|
|
$
|
(20
|
)
|
|
$
|
3,172
|
|
|
Home Box Office
|
|
|
1,547
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,547
|
|
|
Warner Bros.
|
|
|
1,237
|
|
|
|
(4
|
)
|
|
|
1
|
|
|
|
(6
|
)
|
|
|
1,228
|
|
|
Corporate
|
|
|
(358
|
)
|
|
|
-
|
|
|
|
10
|
|
|
|
(4
|
)
|
|
|
(352
|
)
|
|
Intersegment eliminations
|
|
|
(97
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(97
|
)
|
|
Time Warner excluding Time Inc.
|
|
|
5,663
|
|
|
|
(180
|
)
|
|
|
45
|
|
|
|
(30
|
)
|
|
|
5,498
|
|
|
Time Inc.
|
|
|
463
|
|
|
|
(6
|
)
|
|
|
(36
|
)
|
|
|
(1
|
)
|
|
|
420
|
|
|
Time Warner
|
|
$
|
6,126
|
|
|
$
|
(186
|
)
|
|
$
|
9
|
|
|
$
|
(31
|
)
|
|
$
|
5,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin(a)
|
|
|
21.3
|
%
|
|
|
(0.6
|
%)
|
|
|
-
|
|
|
|
(0.1
|
%)
|
|
|
20.6
|
%
|
|
|
|
Please see below for additional information on items affecting
comparability.
|
|
|
|
|
|
___________________
|
|
(a)
|
|
Adjusted Operating Income Margin is defined as Time Warner Adjusted
Operating Income divided by Revenues. Operating Income Margin is
defined as Operating Income divided by Revenues.
|
|
|
|
|
|
|
|
TIME WARNER INC.
|
|
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
|
|
(Unaudited; millions, except per share amounts)
|
|
|
|
Reconciliations of
|
|
Adjusted Income from Continuing Operations attributable to Time
Warner Inc. common shareholders to
|
|
Income from Continuing Operations attributable to Time Warner
Inc. common shareholders and
|
|
Adjusted EPS to Diluted Income per Common Share from Continuing
Operations attributable to Time Warner
|
|
Inc. common shareholders
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
|
|
12/31/13
|
|
12/31/12
|
|
12/31/13
|
|
12/31/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairments
|
|
$
|
(105
|
)
|
|
$
|
(4
|
)
|
|
$
|
(140
|
)
|
|
$
|
(186
|
)
|
|
Gain on operating assets, net
|
|
|
12
|
|
|
|
49
|
|
|
|
142
|
|
|
|
9
|
|
|
Other
|
|
|
(9
|
)
|
|
|
2
|
|
|
|
4
|
|
|
|
(31
|
)
|
|
Impact on Operating Income
|
|
|
(102
|
)
|
|
|
47
|
|
|
|
6
|
|
|
|
(208
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment gains (losses), net
|
|
|
(6
|
)
|
|
|
(1
|
)
|
|
|
61
|
|
|
|
(30
|
)
|
|
Amounts related to the separation of Time
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Cable Inc.
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
3
|
|
|
|
4
|
|
|
Amounts related to the disposition of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Music Group
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
(7
|
)
|
|
Items affecting comparability relating to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity method investments
|
|
|
(18
|
)
|
|
|
(94
|
)
|
|
|
(30
|
)
|
|
|
(94
|
)
|
|
Pretax impact
|
|
|
(133
|
)
|
|
|
(52
|
)
|
|
|
39
|
|
|
|
(335
|
)
|
|
Income tax impact of above items
|
|
|
35
|
|
|
|
41
|
|
|
|
(34
|
)
|
|
|
100
|
|
|
Impact of items affecting comparability on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income from continuing operations attributable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Time Warner Inc. shareholders
|
|
$
|
(98
|
)
|
|
$
|
(11
|
)
|
|
$
|
5
|
|
|
$
|
(235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Time Warner Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
983
|
|
|
$
|
1,112
|
|
|
$
|
3,554
|
|
|
$
|
2,925
|
|
|
Less Impact of items affecting comparability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on net income
|
|
|
(98
|
)
|
|
|
(11
|
)
|
|
|
5
|
|
|
|
(235
|
)
|
|
Adjusted income from continuing operations
|
|
$
|
1,081
|
|
|
$
|
1,123
|
|
|
$
|
3,549
|
|
|
$
|
3,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share information attributable to Time
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
continuing operations
|
|
$
|
1.06
|
|
|
$
|
1.15
|
|
|
$
|
3.77
|
|
|
$
|
3.00
|
|
|
Less Impact of items affecting comparability on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted net income per common share
|
|
|
(0.11
|
)
|
|
|
(0.01
|
)
|
|
|
-
|
|
|
|
(0.24
|
)
|
|
Adjusted EPS
|
|
$
|
1.17
|
|
|
$
|
1.16
|
|
|
$
|
3.77
|
|
|
$
|
3.24
|
|
|
Average diluted common shares outstanding
|
|
|
924.3
|
|
|
|
966.9
|
|
|
|
942.6
|
|
|
|
976.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Impairments
During the three months ended December 31, 2013, the Company recorded
$105 million of noncash impairments, consisting of $24 million at the
Turner segment, of which $18 million related to a building, $4 million
related to Turner’s decision in the fourth quarter of 2013 to shut down
an entertainment network in Belgium and $2 million related to certain
miscellaneous assets, $2 million at the Warner Bros. segment related to
miscellaneous assets and $79 million at the Time Inc. segment primarily
related to certain tradenames.
During the year ended December 31, 2013, the Company recorded noncash
impairments of $140 million, consisting of $47 million at the Turner
segment of which $18 million related to certain of Turner’s
international intangible assets, $18 million related to a building in
South America, $10 million related to programming assets resulting from
Turner’s decision to shut down certain of its entertainment networks in
Spain and Belgium and $1 million related to miscellaneous assets, $7
million at the Warner Bros. segment related to miscellaneous assets, $79
million at the Time Inc. segment primarily related to certain tradenames
and $7 million at the Corporate segment related to certain internally
developed software.
During the three months and year ended December 31, 2012, the Company
recognized a $4 million reversal and $174 million of charges,
respectively, at the Turner segment in connection with the shutdown of
Turner’s general entertainment network, Imagine, in India and TNT
television operations in Turkey (the “Imagine and TNT Turkey Shutdowns”)
primarily related to certain receivables, including value added tax
receivables, inventories and long-lived assets, including Goodwill.
During the three months ended December 31, 2012, the Company also
recognized $8 million of other miscellaneous noncash asset impairments
consisting of $2 million at the Warner Bros. segment and $6 million at
the Time Inc. segment. In addition, during the year ended December 31,
2012, the Company recognized $4 million of other miscellaneous noncash
asset impairments consisting of $2 million at the Turner segment and $2
million at the Warner Bros. segment.
Gain on Operating Assets, Net
For the three months and year ended December 31, 2013, the Company
recognized a $1 million reversal and $104 million of gains,
respectively, at the Home Box Office segment related to the Company’s
acquisition of the controlling interests in HBO Asia and HBO South Asia.
For the three months and year ended December 31, 2013, the Company also
recognized a gain of $13 million at the Time Inc. segment related to the
settlement of a pre-existing contractual arrangement with American
Express Publishing Corporation (“AEP”) in connection with Time Inc.’s
acquisition of AEP. In addition, for the year ended December 31, 2013,
the Company recognized net gains on operating assets of $25 million,
including a $2 million gain at the Turner segment on the sale of a
building, a $9 million gain at the Home Box Office segment upon the
Company’s acquisition of the controlling interest in HBO Nordic, a $6
million gain at the Warner Bros. segment on miscellaneous operating
assets and an $8 million gain at the Corporate segment on the disposal
of certain corporate assets.
During the three months and year ended December 31, 2012, the Company
recognized $5 million of income and a $36 million loss, respectively, at
the Time Inc. segment in connection with the sale in the first quarter
of 2012 of Time Inc.’s school fundraising business, QSP. During the
three months and year ended December 31, 2012, the Company also
recognized a $34 million gain at the Turner segment on the settlement of
an indemnification obligation related to the 2007 sale of the Atlanta
Braves baseball franchise and a $10 million gain at the Corporate
segment on the disposal of certain corporate assets. In addition, for
the year ended December 31, 2012, the Company recognized $1 million of
noncash income at the Warner Bros. segment associated with a fair value
adjustment on certain contingent consideration arrangements.
Other
For the three months and year ended December 31, 2013, Other reflects
external costs related to mergers, acquisitions or dispositions of $9
million and $34 million, respectively. External costs related to
mergers, acquisitions or dispositions for the three months and year
ended December 31, 2013 were primarily related to the pending separation
of Time Inc. from Time Warner. Other also includes a gain of $38 million
for the year ended December 31, 2013 related to the curtailment of
certain post-retirement benefits (the “Curtailment”).
For the three months and year ended December 31, 2012, Other reflects
external costs related to mergers, acquisitions or dispositions, which
included a reversal of $2 million and costs of $28 million,
respectively. The external costs related to mergers, acquisitions or
dispositions for the three months and year ended December 31, 2012
included a reversal of $3 million and charges of $18 million,
respectively, related to the Imagine and TNT Turkey Shutdowns. Other
also includes legal and other professional fees related to the defense
of securities litigation matters for former employees totaling $3
million for the year ended December 31, 2012.
External costs related to mergers, acquisitions or dispositions, the
gain related to the Curtailment and amounts related to securities
litigation and government investigations are included in Selling,
general and administrative expenses in the accompanying Consolidated
Statement of Operations.
Investment Gains (Losses), Net
For the three months and year ended December 31, 2013, the Company
recognized $6 million of miscellaneous investment losses, net. For the
year ended December 31, 2013, the Company also recognized $67 million of
net miscellaneous investment gains consisting of a $65 million gain on
the sale of the Company’s investment in a theater venture in Japan,
which included a $10 million gain related to a foreign currency contract
and a $2 million net noncash gain associated with an option to acquire
securities that was terminated during the third quarter of 2013.
For the three months and year ended December 31, 2012, the Company
recognized $5 million and $19 million, respectively, of miscellaneous
investment losses, net. The year ended December 31, 2012 also included a
$16 million loss on an investment in a network in Turkey recognized as
part of the Imagine and TNT Turkey Shutdowns. In addition, for the three
months and year ended December 31, 2012, the Company recognized noncash
income of $4 million and $5 million, respectively, associated with a
fair value adjustment on certain options to acquire securities.
Amounts Related to the Separation of Time Warner Cable Inc.
For the three months and year ended December 31, 2013, the Company
recognized losses of $6 million and $7 million, respectively, related to
changes in the value of a Time Warner Cable Inc. (“TWC”) tax
indemnification receivable, which has been reflected in Other loss, net
in the accompanying Consolidated Statement of Operations. For the year
ended December 31, 2013, the Company also recognized $10 million of
income related to the expiration, exercise and net change in the
estimated fair value of Time Warner equity awards held by TWC employees,
which has also been reflected in Other loss, net in the accompanying
Consolidated Statement of Operations.
For the three months and year ended December 31, 2012, the Company
recognized $3 million and $9 million, respectively, of income related to
the expiration, exercise and net change in the estimated fair value of
Time Warner equity awards held by TWC employees. In addition, for both
the three months and year ended December 31, 2012, the Company
recognized $5 million of losses related to changes in the value of a TWC
tax indemnification receivable.
Amounts Related to the Disposition of Warner Music Group
For the three months and year ended December 31, 2013, the Company
recognized $1 million of losses related to the disposition of Warner
Music Group (“WMG”) in 2004. For the three months and year ended
December 31, 2012, the Company recognized losses of $2 million and $7
million, respectively, associated with the disposition of WMG. These
losses are due primarily to a tax indemnification obligation and have
been reflected in Other loss, net in the accompanying Consolidated
Statement of Operations.
Items Affecting Comparability Relating to Equity Method Investments
For the three months ended December 31, 2013, the Company recognized $18
million as its share of noncash impairments recorded by an equity method
investee. In addition, for the year ended December 31, 2013, the Company
recognized $12 million as its share of a noncash loss on the
extinguishment of debt recorded by the equity method investee. For the
three months and year ended December 31, 2012, the Company recognized
$94 million as its share of noncash impairments recorded by the equity
method investee. These amounts have been reflected in Other loss, net in
the accompanying Consolidated Statement of Operations.
Income Tax Impact
The income tax impact reflects the estimated tax provision or tax
benefit associated with each item affecting comparability. The estimated
tax provision or tax benefit can vary based on certain factors,
including the taxability or deductibility of the items and foreign tax
on certain items. For the year ended December 31, 2012, the income tax
impact includes a $42 million benefit reflecting the reversal of a
valuation allowance related to the expected usage of capital loss
carryforwards in connection with the 2013 sale of the Company’s
investment in a theater venture in Japan.
|
|
|
TIME WARNER INC.
|
|
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
|
|
(Unaudited; millions)
|
|
|
|
Reconciliation of Cash Provided by Operations to Free Cash Flow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
|
|
12/31/13
|
|
12/31/12
|
|
12/31/13
|
|
12/31/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operations from continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
$
|
884
|
|
|
$
|
1,179
|
|
|
$
|
3,716
|
|
|
$
|
3,476
|
|
|
Add payments related to securities litigation and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
government investigations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
Add external costs related to mergers,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
acquisitions, investments or dispositions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and contingent consideration payments
|
|
|
9
|
|
|
|
5
|
|
|
|
232
|
|
|
|
33
|
|
|
Add excess tax benefits from equity instruments
|
|
|
25
|
|
|
|
25
|
|
|
|
179
|
|
|
|
83
|
|
|
Less capital expenditures
|
|
|
(287
|
)
|
|
|
(217
|
)
|
|
|
(602
|
)
|
|
|
(643
|
)
|
|
Less principal payments on capital leases
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(9
|
)
|
|
|
(11
|
)
|
|
Free Cash Flow
|
|
$
|
628
|
|
|
$
|
990
|
|
|
$
|
3,516
|
|
|
$
|
2,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
Note 1. DESCRIPTION OF BUSINESS
Time Warner Inc. (“Time Warner” or the “Company”) is a leading media and
entertainment company, whose businesses include television networks,
film and TV entertainment and publishing. Time Warner classifies its
operations into four reportable segments: Turner: consisting
principally of cable networks and digital media properties; Home Box
Office: consisting principally of premium pay television
services domestically and premium pay and basic tier television services
internationally; Warner Bros.: consisting principally of
feature film, television, home video and videogame production and
distribution; and Time Inc.: consisting principally of
magazine publishing and related websites and operations. In the fourth
quarter of 2013, the Company separated its former Networks reportable
segment into two reportable segments: Turner and Home Box Office. In
addition, during the fourth quarter of 2013, the Company changed the
names of its Film and TV Entertainment reportable segment to Warner
Bros. and its Publishing reportable segment to Time Inc. The new
presentation had no impact on the historical consolidated financial
information previously reported by the Company. On March 6, 2013, Time
Warner announced that its Board of Directors has authorized management
to proceed with plans for the complete legal and structural separation
of the Time Inc. segment from Time Warner.
Note 2. INTERSEGMENT TRANSACTIONS
Revenues recognized by Time Warner’s segments on intersegment
transactions are as follows (millions):
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
|
|
12/31/13
|
|
12/31/12
|
|
12/31/13
|
|
12/31/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner
|
|
$
|
24
|
|
$
|
26
|
|
$
|
95
|
|
$
|
91
|
|
Home Box Office
|
|
|
9
|
|
|
1
|
|
|
14
|
|
|
14
|
|
Warner Bros.
|
|
|
171
|
|
|
164
|
|
|
625
|
|
|
812
|
|
Time Inc.
|
|
|
1
|
|
|
1
|
|
|
10
|
|
|
21
|
|
Total intersegment revenues
|
|
$
|
205
|
|
$
|
192
|
|
$
|
744
|
|
$
|
938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 3. WARNER BROS. HOME VIDEO AND ELECTRONIC DELIVERY
REVENUES
Home video and electronic delivery of theatrical and television product
revenues are as follows (millions):
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
|
|
12/31/13
|
|
12/31/12
|
|
12/31/13
|
|
12/31/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home video and electronic delivery of theatrical
|
|
|
|
|
|
|
|
|
|
|
|
|
|
product revenues
|
|
$
|
885
|
|
$
|
985
|
|
$
|
2,244
|
|
$
|
2,320
|
|
Home video and electronic delivery of television
|
|
|
|
|
|
|
|
|
|
|
|
|
|
product revenues
|
|
|
378
|
|
|
358
|
|
|
984
|
|
|
1,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4. DISCONTINUED OPERATIONS, NET OF TAX
For the year ended December 31, 2013, Discontinued operations, net of
tax reflected a net tax benefit due to the recognition of additional
foreign tax credits attributable to the sale of WMG in 2004.
Note 5. SALE AND LEASEBACK OF TIME WARNER CENTER
On January 16, 2014, Time Warner sold the office space it owned in Time
Warner Center for approximately $1.3 billion. Time Warner also agreed to
lease office space in Time Warner Center from the buyer until early
2019. In connection with these transactions, the Company expects to
recognize a pretax gain of approximately $700 million to $800 million,
of which approximately $400 million to $500 million will be recognized
in the first quarter of 2014. The balance of the gain will be recognized
ratably over the lease period. Time Warner also expects to recognize a
tax benefit of approximately $50 million to $70 million related to the
sale.
Copyright Business Wire 2014