Time Warner Inc. (NYSE:TWX) today reported financial results for its
first quarter ended March 31, 2014.
Chairman and Chief Executive Officer Jeff Bewkes said: “We are off to a
very strong start in 2014, with results that demonstrate both the
returns we can achieve on our investments in great storytelling and the
growth potential of our businesses. Excluding Time Inc., which we expect
to spin off as an independent publicly-traded company this quarter, we
grew first quarter Revenues by 10%, Adjusted Operating Income by 12%,
and Adjusted EPS by 26%. In the first quarter, Warner Bros. picked up
where it left off after a record-breaking year in 2013, with The LEGO
Movie launching yet another franchise for us and leading all
releases at the domestic box office. Combined with its promising slate
of movies for the rest of the year and strong lineup of TV shows to be
unveiled at the upfronts, Warner Bros. is positioned to have another
excellent year in 2014. Home Box Office continues to be red hot, led by
the debut of True Detective, the most-watched freshman series in
HBO’s history. And the Season 4 premiere of Game of Thrones on
April 6 drew HBO’s largest audience since The Sopranos finale.
Turner also made history by bringing the NCAA Men’s Basketball Final
Four to cable for the first time ever. The success of the NCAA
Tournament also helped TBS maintain its position as ad-supported cable’s
#1 network in primetime among adults 18-34 and 18-49. It also showcased
the importance and vibrancy of our TV Everywhere initiatives, with a
more than 40% increase in streams for our March Madness Live service
over last year. Another standout at Turner was Adult Swim, which again
finished the quarter as the #1 ad-supported cable network in total day
for Adults 18-34. And CNN reaffirmed that it is the place the world goes
for authoritative coverage during major news events, with delivery in
its key demographic up over 50% in March. Further demonstrating our
commitment to shareholder returns, during the quarter we returned almost
$1.3 billion to our shareholders in the form of share buybacks and
dividends.”
Company Results Including Time Inc.
Revenues increased 9% to $7.5 billion in the first quarter of 2014.
Adjusted Operating Income grew 7% to $1.5 billion. Operating Income
increased 37% to $1.9 billion. Adjusted Operating Income and Operating
Income margins were 20% and 26% in the first quarter of 2014,
respectively, compared to 21% and 20% in the prior year quarter,
respectively.
The Company posted Adjusted Diluted Income per Common Share from
Continuing Operations (“Adjusted EPS”) of $0.91, up 20% from $0.76 for
the year-ago quarter. Diluted Income per Common Share from Continuing
Operations was $1.42 compared to $0.79 in the prior year quarter.
For the first three months of 2014, Cash Provided by Operations from
Continuing Operations reached $1.7 billion and Free Cash Flow totaled
$1.7 billion. As of March 31, 2014, Net Debt was $16.7 billion, down
from $18.3 billion at the end of 2013, due to the generation of Free
Cash Flow and proceeds from the sale of the Company’s office space in
Time Warner Center, offset in part by cash used for share repurchases
and dividends.
Company Results Excluding Time Inc.
Revenues increased 10% to $6.8 billion in the first quarter of 2014 due
to growth at Warner Bros., Turner and Home Box Office. Adjusted
Operating Income grew 12% to $1.6 billion also due to increases at
Warner Bros., Turner and Home Box Office. Operating Income increased 44%
to $2.0 billion. Adjusted Operating Income and Operating Income margins
were 24% and 30% in the first quarter of 2014, respectively, compared to
23% and 23% in the prior year quarter, respectively.
In the first quarter, the Company posted Adjusted EPS excluding Time
Inc. of $0.97 versus $0.77 for the year-ago quarter. Diluted
Income per Common Share from Continuing Operations was $1.50 for the
three months ended March 31, 2014 compared to $0.80 for last year’s
first quarter.
For the first three months of 2014, Cash Provided by Operations from
Continuing Operations excluding Time Inc. reached $1.7 billion and Free
Cash Flow excluding Time Inc. totaled $1.7 billion.
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
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.
From January 1, 2014 through April 25, 2014, the Company repurchased
approximately 20 million shares of common stock for approximately $1.3
billion.
Segment Performance
The schedule below reflects Time Warner’s financial performance for the
three months ended March 31, by line of business (millions).
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2014
|
|
2013
|
Revenues:
|
|
|
|
|
|
|
|
|
Turner
|
|
|
|
$
|
2,593
|
|
$
|
2,470
|
Home Box Office
|
|
|
|
|
1,339
|
|
|
1,228
|
Warner Bros.
|
|
|
|
|
3,066
|
|
|
2,681
|
Intersegment eliminations
|
|
|
|
|
(195)
|
|
|
(172)
|
Total excluding Time Inc.
|
|
|
|
|
6,803
|
|
|
6,207
|
Time Inc.
|
|
|
|
|
745
|
|
|
737
|
Intersegment eliminations
|
|
|
|
|
(3)
|
|
|
(5)
|
Total Revenues
|
|
|
|
$
|
7,545
|
|
$
|
6,939
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss) (a):
|
|
|
|
|
|
|
|
|
Turner
|
|
|
|
$
|
895
|
|
$
|
871
|
Home Box Office
|
|
|
|
|
464
|
|
|
417
|
Warner Bros.
|
|
|
|
|
380
|
|
|
265
|
Corporate
|
|
|
|
|
(119)
|
|
|
(116)
|
Intersegment eliminations
|
|
|
|
|
6
|
|
|
12
|
Total excluding Time Inc.
|
|
|
|
|
1,626
|
|
|
1,449
|
Time Inc.
|
|
|
|
|
(94)
|
|
|
(9)
|
Intersegment eliminations
|
|
|
|
|
4
|
|
|
–
|
Total Adjusted Operating Income
|
|
|
|
$
|
1,536
|
|
$
|
1,440
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) (a):
|
|
|
|
|
|
|
|
|
Turner
|
|
|
|
$
|
900
|
|
$
|
851
|
Home Box Office
|
|
|
|
|
464
|
|
|
417
|
Warner Bros.
|
|
|
|
|
369
|
|
|
263
|
Corporate (b)
|
|
|
|
|
309
|
|
|
(124)
|
Intersegment eliminations
|
|
|
|
|
6
|
|
|
12
|
Total excluding Time Inc.
|
|
|
|
|
2,048
|
|
|
1,419
|
Time Inc.
|
|
|
|
|
(120)
|
|
|
(9)
|
Intersegment eliminations
|
|
|
|
|
4
|
|
|
–
|
Total Operating Income
|
|
|
|
$
|
1,932
|
|
$
|
1,410
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
Turner
|
|
|
|
$
|
58
|
|
$
|
63
|
Home Box Office
|
|
|
|
|
25
|
|
|
22
|
Warner Bros.
|
|
|
|
|
93
|
|
|
93
|
Corporate
|
|
|
|
|
7
|
|
|
7
|
Total excluding Time Inc.
|
|
|
|
|
183
|
|
|
185
|
Time Inc.
|
|
|
|
|
43
|
|
|
32
|
Total Depreciation and Amortization
|
|
|
|
$
|
226
|
|
$
|
217
|
(a)
|
|
Adjusted Operating Income (Loss) and Operating Income (Loss) for the
three months ended March 31, 2014 and 2013 included restructuring
and severance costs of (millions):
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2014
|
|
2013
|
Turner
|
|
|
|
$
|
(12)
|
|
$
|
(14)
|
Home Box Office
|
|
|
|
|
(8)
|
|
|
(8)
|
Warner Bros.
|
|
|
|
|
(2)
|
|
|
(3)
|
Corporate
|
|
|
|
|
(4)
|
|
|
(2)
|
Total excluding Time Inc.
|
|
|
|
|
(26)
|
|
|
(27)
|
Time Inc.
|
|
|
|
|
(115)
|
|
|
(53)
|
Intersegment eliminations
|
|
|
|
|
4
|
|
|
-
|
Total Restructuring and Severance Costs
|
|
|
|
$
|
(137)
|
|
$
|
(80)
|
(b)
|
|
Operating Income (Loss) for the three months ended March 31, 2014
included a $441 million gain in connection with the sale and
leaseback of the Company’s office space in Time Warner Center.
|
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|
Presented below is a discussion of the performance of Time Warner’s
segments for the first quarter of 2014. Unless otherwise noted,
the dollar amounts in parentheses represent year-over-year changes.
TURNER
Revenues rose 5% ($123 million) to $2.6 billion, benefiting from
growth of 7% ($85 million) in Subscription revenues and 5% ($51 million)
in Advertising revenues, partially offset by a decline of 15% ($17
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 benefited from growth at Turner’s domestic
and international networks offset in part by the negative effect of
foreign currency exchange rates. The increase in domestic networks was
mainly due to the 2014 NCAA Division I Men’s Basketball Championship
tournament (the “NCAA Tournament”), including the airing of additional
games, and higher pricing, partially offset by lower audience delivery.
Content revenues declined due to the timing of subscription video on
demand availabilities.
Adjusted Operating Income increased 3% ($24 million) to $895
million, reflecting higher revenues, partly offset by higher expenses,
including programming costs. Programming costs grew 9%, primarily
reflecting higher costs associated with the NCAA Tournament and an
increase in original programming costs.
Operating Income increased 6% ($49 million) to $900 million. The
current year quarter included a $13 million gain related to the sale of
Zite, Inc., a news content aggregation and recommendation platform. The
prior year quarter included $20 million of charges related to Turner’s
international operations.
The NCAA Tournament delivered the four most-viewed college basketball
games ever on a cable television network. In addition, March Madness
Live delivered a 42% increase in live video streams, and cross platform
unique users grew 12% compared to last year. During the first quarter of
2014, TBS ranked as ad-supported cable’s #1 primetime network among
adults 18-34, 18-49 and 25-54 and claimed three of the top 10
ad-supported cable original comedy series. The Big Bang Theory on
TBS remained the #1 comedy on ad-supported cable among total viewers and
adults 18-49 for the ninth consecutive quarter. The first quarter was
Adult Swim’s second most-watched first quarter in its history for adults
18-34 and 18-49, and it ranked #1 in total day on ad-supported cable
among key adult and male demographics. In April 2014, Anthony
Bourdain: Parts Unknown on CNN and The Story of Film: An Odyssey
on TCM both received George Foster Peabody Awards.
HOME BOX OFFICE
Revenues grew 9% ($111 million) to $1.3 billion, reflecting
increases of 8% ($85 million) in Subscription revenues and 13% ($24
million) in Content revenues. Subscription revenues increased mainly
from higher domestic rates and the consolidation of HBO Asia and HBO
South Asia (collectively, “HBO Asia”) and HBO Nordic. The increase in
Content revenues was primarily due to higher home video revenues, which
benefited from sales of Game of Thrones: The Complete Third Season.
Adjusted Operating Income rose 11% ($47 million) to $464 million,
reflecting higher revenues, partly offset by higher programming and
distribution costs. Programming costs grew 8% mainly due to the
consolidation of HBO Asia and HBO Nordic. Distribution costs increased
primarily due to the costs associated with increased home video revenues.
Operating Income increased 11% ($47 million) to $464 million.
The fourth season premiere of Game of Thrones reached a gross
audience of over 17 million viewers, well above last season’s average of
14.4 million viewers, making it HBO’s most watched program since The
Sopranos finale in 2007. True Detective averaged a gross
audience of 11.9 million viewers per episode across all platforms and
delivered the largest audience for an HBO original series in its first
season. In April 2014, HBO Documentary Films’ Life According to Sam,
Mea Maxima Culpa: Silence in the House of God and Six by
Sondheim each received a George Foster Peabody Award.
WARNER BROS.
Revenues increased 14% ($385 million) to $3.1 billion, mainly due
to a stronger theatrical slate, led by The LEGO Movie and 300:
Rise of an Empire. Revenues also benefited from an increase in
videogames revenues, growth in initial telecast revenues and higher
international television licensing revenues. The increase was partially
offset by lower physical home video revenues due to the timing of key
releases.
Adjusted Operating Income rose 43% ($115 million) to $380
million, primarily due to higher revenues, partially offset by higher
associated film costs and higher theatrical valuation adjustments.
Operating Income increased 40% ($106 million) to $369 million.
Through April 27, The LEGO Movie and 300: Rise of an Empire
grossed approximately $450 million and $330 million, respectively, at
the worldwide box office. In March, Warner Bros.’ films received 10
Academy Awards, including seven for Gravity, the most of any
studio.
TIME INC.
Revenues increased 1% ($8 million) to $745 million as a result of
the acquisition of Time Inc. Affluent Media Group (formerly American
Express Publishing Corporation) (“AMG”) in the fourth quarter of 2013
and the benefit from certain weekly titles having one additional issue.
The increase reflects growth of 5% ($12 million) in Subscription
revenues, partially offset by a decrease of 11% ($8 million) in Other
revenues due to lower revenues from Synapse. Advertising revenues were
flat in the quarter as the inclusion of AMG’s revenues was offset by
declines in non-AMG domestic magazine advertising. Excluding the impact
of acquiring AMG, Revenues would have decreased 5%, Subscription
revenues would have been flat and Advertising and Other revenues would
have decreased 7% and 16%, respectively.
Adjusted Operating Loss of $94 million represented a
decline of $85 million compared to the year-ago quarter’s Adjusted
Operating Loss of $9 million, mainly resulting from higher restructuring
and severance charges and declines at certain non-AMG titles. The
current year quarter included $115 million of restructuring and
severance charges compared to $53 million in the prior year quarter.
Operating Loss of $120 million represented a decline of $111
million compared to the year-ago quarter’s Operating Loss of $9 million.
The current year quarter included $26 million of fixed asset impairments
primarily related to a building held for sale.
During the quarter, Time Inc. maintained its leading share of overall
domestic magazine advertising with 25.6%, up from 24.5% in the first
quarter of 2013 (Publishers Information Bureau data). The share
information for the first quarter of 2013 reflects the inclusion of AMG
and a title published on behalf of American Express Company.
CONSOLIDATED NET INCOME AND PER SHARE RESULTS
Company Results Including Time Inc.
Adjusted EPS was $0.91 for the three months ended March 31, 2014,
compared to $0.76 in last year’s first quarter. The increase in Adjusted
EPS primarily reflects higher Adjusted Operating Income and fewer shares
outstanding.
For the three months ended March 31, 2014, the Company reported Income
from Continuing Operations attributable to Time Warner common
shareholders of $1.3 billion, or $1.42 per diluted common
share. This compares to Income from Continuing Operations attributable
to Time Warner common shareholders in the first quarter of 2013 of $754
million, or $0.79 per diluted common share.
For the first quarter of 2014 and 2013, the Company reported Net Income
of $1.3 billion and $754 million, respectively.
Company Results Excluding Time Inc.
Adjusted EPS was $0.97 for the three months ended March 31, 2014,
compared to $0.77 in last year’s first quarter. The increase in Adjusted
EPS primarily reflects higher Adjusted Operating Income and fewer shares
outstanding.
For the three months ended March 31, 2014, the Company excluding Time
Inc. had Income from Continuing Operations attributable to Time Warner
common shareholders of $1.4 billion, or $1.50 per diluted
common share. This compares to Income from Continuing Operations
attributable to Time Warner common shareholders in the first quarter of
2013 of $764 million, or $0.80 per diluted common
share.
For the first quarter of 2014 and 2013, the Company excluding Time Inc.
had Net Income of $1.4 billion and $764 million,
respectively.
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. 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 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.
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. 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.
In light of the pending legal and structural separation of Time Inc.
from Time Warner (the “Time Separation”), the Company uses the non-GAAP
financial measures described above, but further excluding Time Inc. to
evaluate the non-publishing businesses. An additional limitation of the
measures that exclude the impact of Time Inc. is that they do not
reflect the operating results of all the Company’s businesses. The
Company expects to complete the Time Separation during the second
quarter of 2014.
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 Income from Continuing Operations
attributable to Time Warner Inc. common shareholders, Adjusted EPS, Free
Cash Flow and each of these non-GAAP financial measures excluding Time
Inc. 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, April 30, 2014. To listen to the call, visit www.timewarner.com/investors.
TIME WARNER INC.
CONSOLIDATED BALANCE SHEET
(Unaudited; millions, except share amounts)
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
|
$
|
3,546
|
|
|
$
|
1,862
|
|
Receivables, less allowances of $1,324 and $1,666
|
|
|
|
7,371
|
|
|
|
7,868
|
|
Inventories
|
|
|
|
1,879
|
|
|
|
2,028
|
|
Deferred income taxes
|
|
|
|
512
|
|
|
|
447
|
|
Prepaid expenses and other current assets
|
|
|
|
686
|
|
|
|
639
|
|
Total current assets
|
|
|
|
13,994
|
|
|
|
12,844
|
|
|
|
|
|
|
|
|
|
Noncurrent inventories and theatrical film and television production
costs
|
|
|
|
6,347
|
|
|
|
6,699
|
|
Investments, including available-for-sale securities
|
|
|
|
2,117
|
|
|
|
2,024
|
|
Property, plant and equipment, net
|
|
|
|
3,219
|
|
|
|
3,825
|
|
Intangible assets subject to amortization, net
|
|
|
|
2,437
|
|
|
|
1,920
|
|
Intangible assets not subject to amortization
|
|
|
|
7,041
|
|
|
|
7,629
|
|
Goodwill
|
|
|
|
30,568
|
|
|
|
30,563
|
|
Other assets
|
|
|
|
2,476
|
|
|
|
2,490
|
|
Total assets
|
|
|
$
|
68,199
|
|
|
$
|
67,994
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
$
|
7,262
|
|
|
$
|
7,322
|
|
Deferred revenue
|
|
|
|
951
|
|
|
|
995
|
|
Debt due within one year
|
|
|
|
65
|
|
|
|
66
|
|
Total current liabilities
|
|
|
|
8,278
|
|
|
|
8,383
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
20,226
|
|
|
|
20,099
|
|
Deferred income taxes
|
|
|
|
2,461
|
|
|
|
2,642
|
|
Deferred revenue
|
|
|
|
458
|
|
|
|
482
|
|
Other noncurrent liabilities
|
|
|
|
6,732
|
|
|
|
6,484
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 1.652 billion and 1.652 billion shares
|
|
|
|
|
|
|
|
issued and 886 million and 895 million shares outstanding
|
|
|
|
17
|
|
|
|
17
|
|
Paid-in capital
|
|
|
|
152,988
|
|
|
|
153,410
|
|
Treasury stock, at cost (766 million and 757 million shares)
|
|
|
|
(38,337
|
)
|
|
|
(37,630
|
)
|
Accumulated other comprehensive loss, net
|
|
|
|
(875
|
)
|
|
|
(852
|
)
|
Accumulated deficit
|
|
|
|
(83,749
|
)
|
|
|
(85,041
|
)
|
Total Time Warner Inc. shareholders’ equity
|
|
|
|
30,044
|
|
|
|
29,904
|
|
Noncontrolling interests
|
|
|
|
-
|
|
|
|
-
|
|
Total equity
|
|
|
|
30,044
|
|
|
|
29,904
|
|
Total liabilities and equity
|
|
|
$
|
68,199
|
|
|
$
|
67,994
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31,
(Unaudited; millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
7,545
|
|
|
$
|
6,939
|
|
Costs of revenues
|
|
|
|
(4,160
|
)
|
|
|
(3,750
|
)
|
Selling, general and administrative
|
|
|
|
(1,663
|
)
|
|
|
(1,620
|
)
|
Amortization of intangible assets
|
|
|
|
(69
|
)
|
|
|
(60
|
)
|
Restructuring and severance costs
|
|
|
|
(137
|
)
|
|
|
(80
|
)
|
Asset impairments
|
|
|
|
(38
|
)
|
|
|
(27
|
)
|
Gain on operating assets, net
|
|
|
|
454
|
|
|
|
8
|
|
Operating income
|
|
|
|
1,932
|
|
|
|
1,410
|
|
Interest expense, net
|
|
|
|
(266
|
)
|
|
|
(290
|
)
|
Other income (loss), net
|
|
|
|
(6
|
)
|
|
|
16
|
|
Income before income taxes
|
|
|
|
1,660
|
|
|
|
1,136
|
|
Income tax provision
|
|
|
|
(368
|
)
|
|
|
(382
|
)
|
Net income
|
|
|
|
1,292
|
|
|
|
754
|
|
Less Net loss attributable to noncontrolling interests
|
|
|
|
-
|
|
|
|
-
|
|
Net income attributable to Time Warner Inc. shareholders
|
|
|
$
|
1,292
|
|
|
$
|
754
|
|
|
|
|
|
|
|
|
|
Per share information attributable to Time Warner Inc. common
shareholders:
|
|
|
|
|
|
|
|
Basic net income per common share
|
|
|
$
|
1.45
|
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
Average basic common shares outstanding
|
|
|
|
891.0
|
|
|
|
932.8
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share
|
|
|
$
|
1.42
|
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
Average diluted common shares outstanding
|
|
|
|
910.6
|
|
|
|
956.4
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share of common stock
|
|
|
$
|
0.3175
|
|
|
$
|
0.2875
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
(Unaudited; millions)
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
OPERATIONS
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
1,292
|
|
|
$
|
754
|
|
Adjustments for noncash and nonoperating items:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
226
|
|
|
|
217
|
|
Amortization of film and television costs
|
|
|
|
1,957
|
|
|
|
1,792
|
|
Asset impairments
|
|
|
|
38
|
|
|
|
27
|
|
Gain on investments and other assets, net
|
|
|
|
(448
|
)
|
|
|
(69
|
)
|
Equity in losses of investee companies, net of cash distributions
|
|
|
|
21
|
|
|
|
77
|
|
Equity-based compensation
|
|
|
|
91
|
|
|
|
106
|
|
Deferred income taxes
|
|
|
|
(253
|
)
|
|
|
400
|
|
Changes in operating assets and liabilities, net of acquisitions
|
|
|
|
(1,220
|
)
|
|
|
(2,575
|
)
|
Cash provided by operations
|
|
|
|
1,704
|
|
|
|
729
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Investments in available-for-sale securities
|
|
|
|
(23
|
)
|
|
|
(15
|
)
|
Investments and acquisitions, net of cash acquired
|
|
|
|
(118
|
)
|
|
|
(62
|
)
|
Capital expenditures
|
|
|
|
(99
|
)
|
|
|
(85
|
)
|
Investment proceeds from available-for-sale securities
|
|
|
|
-
|
|
|
|
33
|
|
Other investment proceeds
|
|
|
|
1,308
|
|
|
|
120
|
|
Cash provided (used) by investing activities
|
|
|
|
1,068
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Borrowings
|
|
|
|
129
|
|
|
|
6
|
|
Debt repayments
|
|
|
|
(5
|
)
|
|
|
(438
|
)
|
Proceeds from exercise of stock options
|
|
|
|
116
|
|
|
|
339
|
|
Excess tax benefit from equity instruments
|
|
|
|
64
|
|
|
|
84
|
|
Principal payments on capital leases
|
|
|
|
(3
|
)
|
|
|
(2
|
)
|
Repurchases of common stock
|
|
|
|
(991
|
)
|
|
|
(672
|
)
|
Dividends paid
|
|
|
|
(287
|
)
|
|
|
(273
|
)
|
Other financing activities
|
|
|
|
(111
|
)
|
|
|
(112
|
)
|
Cash used by financing activities
|
|
|
|
(1,088
|
)
|
|
|
(1,068
|
)
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
|
|
|
|
1,684
|
|
|
|
(348
|
)
|
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
|
1,862
|
|
|
|
2,841
|
|
CASH AND EQUIVALENTS AT END OF PERIOD
|
|
|
$
|
3,546
|
|
|
$
|
2,493
|
|
|
|
|
|
|
|
|
|
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 March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Operating
Income (Loss)
|
|
Asset
Impairments
|
|
Gain (Loss) on
Operating Assets,
Net
|
|
Other
|
|
Operating
Income (Loss)
|
Turner
|
|
|
$
|
895
|
|
|
$
|
(1
|
)
|
|
$
|
13
|
|
|
$
|
(7
|
)
|
|
$
|
900
|
|
Home Box Office
|
|
|
|
464
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
464
|
|
Warner Bros.
|
|
|
|
380
|
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
369
|
|
Corporate
|
|
|
|
(119
|
)
|
|
|
(6
|
)
|
|
|
441
|
|
|
|
(7
|
)
|
|
|
309
|
|
Intersegment eliminations
|
|
|
|
6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
Time Warner excluding Time Inc.
|
|
|
|
1,626
|
|
|
|
(12
|
)
|
|
|
454
|
|
|
|
(20
|
)
|
|
|
2,048
|
|
Time Inc.
|
|
|
|
(94
|
)
|
|
|
(26
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(120
|
)
|
Intersegment eliminations
|
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
Time Warner
|
|
|
$
|
1,536
|
|
|
$
|
(38
|
)
|
|
$
|
454
|
|
|
$
|
(20
|
)
|
|
$
|
1,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin - Time Warner(a)
|
|
|
|
20.4
|
%
|
|
|
(0.5
|
%)
|
|
|
6.0
|
%
|
|
|
(0.3
|
%)
|
|
|
25.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin - Time Warner excluding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Inc.(a)
|
|
|
|
23.9
|
%
|
|
|
(0.2
|
%)
|
|
|
6.7
|
%
|
|
|
(0.3
|
%)
|
|
|
30.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Operating
Income (Loss)
|
|
Asset
Impairments
|
|
Gain (Loss) on
Operating Assets,
Net
|
|
Other
|
|
Operating
Income (Loss)
|
Turner
|
|
|
$
|
871
|
|
|
$
|
(18
|
)
|
|
$
|
-
|
|
|
$
|
(2
|
)
|
|
$
|
851
|
|
Home Box Office
|
|
|
|
417
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
417
|
|
Warner Bros.
|
|
|
|
265
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
263
|
|
Corporate
|
|
|
|
(116
|
)
|
|
|
(7
|
)
|
|
|
8
|
|
|
|
(9
|
)
|
|
|
(124
|
)
|
Intersegment eliminations
|
|
|
|
12
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12
|
|
Time Warner excluding Time Inc.
|
|
|
|
1,449
|
|
|
|
(27
|
)
|
|
|
8
|
|
|
|
(11
|
)
|
|
|
1,419
|
|
Time Inc.
|
|
|
|
(9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9
|
)
|
Time Warner
|
|
|
$
|
1,440
|
|
|
$
|
(27
|
)
|
|
$
|
8
|
|
|
$
|
(11
|
)
|
|
$
|
1,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin - Time Warner(a)
|
|
|
|
20.8
|
%
|
|
|
(0.4
|
%)
|
|
|
0.1
|
%
|
|
|
(0.2
|
%)
|
|
|
20.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin - Time Warner excluding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Inc.(a)
|
|
|
|
23.3
|
%
|
|
|
(0.4
|
%)
|
|
|
0.2
|
%
|
|
|
(0.2
|
%)
|
|
|
22.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Please see below for additional information on items affecting
comparability.
|
|
|
_____________________
|
|
(a)
|
|
Adjusted Operating Income margin is defined as Adjusted Operating
Income divided by Revenues. Operating Income margin is defined as
Operating Income divided by Revenues. Adjusted Operating Income
excluding Time Inc. margin is defined as Adjusted Operating Income
excluding Time Inc. divided by Revenues excluding Time Inc.
Operating Income excluding Time Inc. margin is defined as
Operating Income excluding Time Inc. divided by Revenues excluding
Time Inc.
|
|
|
|
|
|
TIME WARNER INC. RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURES (Unaudited; millions, except per
share amounts)
Reconciliations of Adjusted Net Income attributable
to Time Warner Inc. common shareholders to Net Income
attributable to Time Warner Inc. common shareholders and Adjusted
EPS to Diluted Net Income per Common Share attributable to Time
Warner Inc. common shareholders –Time Warner excluding
Time Inc., Time Inc. only, and Time Warner Inc.
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2014
|
|
|
|
Time Warner
|
|
|
|
|
|
|
|
|
|
excluding
|
|
|
|
|
|
Total
|
|
|
|
Time Inc.
|
|
Time Inc.
|
|
Eliminations
|
|
Time Warner
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairments
|
|
|
$
|
(12
|
)
|
|
$
|
(26
|
)
|
|
$
|
-
|
|
$
|
(38
|
)
|
Gain on operating assets, net
|
|
|
|
454
|
|
|
|
-
|
|
|
|
-
|
|
|
454
|
|
Other
|
|
|
|
(20
|
)
|
|
|
-
|
|
|
|
-
|
|
|
(20
|
)
|
Impact on Operating Income
|
|
|
|
422
|
|
|
|
(26
|
)
|
|
|
-
|
|
|
396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment gains (losses), net
|
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
(5
|
)
|
Amounts related to the separation of Time
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Cable Inc.
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
(1
|
)
|
Amounts related to the disposition of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Music Group
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
(1
|
)
|
Pretax impact
|
|
|
|
415
|
|
|
|
(26
|
)
|
|
|
-
|
|
|
389
|
|
Income tax impact of above items
|
|
|
|
65
|
|
|
|
9
|
|
|
|
-
|
|
|
74
|
|
Impact of items affecting comparability on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net income attributable to Time Warner Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
|
|
|
$
|
480
|
|
|
$
|
(17
|
)
|
|
$
|
-
|
|
$
|
463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Time Warner Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
1,365
|
|
|
$
|
(76
|
)
|
|
$
|
3
|
|
$
|
1,292
|
|
Less Impact of items affecting comparability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on net income
|
|
|
|
480
|
|
|
|
(17
|
)
|
|
|
-
|
|
|
463
|
|
Adjusted net income
|
|
|
$
|
885
|
|
|
$
|
(59
|
)
|
|
$
|
3
|
|
$
|
829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share information attributable to Time
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share
|
|
|
$
|
1.50
|
|
|
$
|
(0.08
|
)
|
|
$
|
-
|
|
$
|
1.42
|
|
Less Impact of items affecting comparability on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted net income per common share
|
|
|
|
0.53
|
|
|
|
(0.02
|
)
|
|
|
-
|
|
|
0.51
|
|
Adjusted EPS
|
|
|
$
|
0.97
|
|
|
$
|
(0.06
|
)
|
|
$
|
-
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average diluted common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
910.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2013
|
|
|
|
Time Warner
|
|
|
|
|
|
|
|
|
|
excluding
|
|
|
|
|
|
Total
|
|
|
|
Time Inc.
|
|
Time Inc.
|
|
Eliminations
|
|
Time Warner
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairments
|
|
|
$
|
(27
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
$
|
(27
|
)
|
Gain on operating assets, net
|
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
8
|
|
Other
|
|
|
|
(11
|
)
|
|
|
-
|
|
|
|
-
|
|
|
(11
|
)
|
Impact on Operating Income
|
|
|
|
(30
|
)
|
|
|
-
|
|
|
|
-
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment gains (losses), net
|
|
|
|
71
|
|
|
|
-
|
|
|
|
-
|
|
|
71
|
|
Amounts related to the separation of Time
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Cable Inc.
|
|
|
|
5
|
|
|
|
-
|
|
|
|
-
|
|
|
5
|
|
Amounts related to the disposition of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Music Group
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
(1
|
)
|
Pretax impact
|
|
|
|
45
|
|
|
|
-
|
|
|
|
-
|
|
|
45
|
|
Income tax impact of above items
|
|
|
|
(22
|
)
|
|
|
-
|
|
|
|
-
|
|
|
(22
|
)
|
Impact of items affecting comparability on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net income attributable to Time Warner Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
|
|
|
$
|
23
|
|
|
$
|
-
|
|
|
$
|
-
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Time Warner Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
764
|
|
|
$
|
(10
|
)
|
|
$
|
-
|
|
$
|
754
|
|
Less Impact of items affecting comparability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on net income
|
|
|
|
23
|
|
|
|
-
|
|
|
|
-
|
|
|
23
|
|
Adjusted net income
|
|
|
$
|
741
|
|
|
$
|
(10
|
)
|
|
$
|
-
|
|
$
|
731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share information attributable to Time
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share
|
|
|
$
|
0.80
|
|
|
$
|
(0.01
|
)
|
|
$
|
-
|
|
$
|
0.79
|
|
Less Impact of items affecting comparability on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted net income per common share
|
|
|
|
0.03
|
|
|
|
-
|
|
|
|
-
|
|
|
0.03
|
|
Adjusted EPS
|
|
|
$
|
0.77
|
|
|
$
|
(0.01
|
)
|
|
$
|
-
|
|
$
|
0.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average diluted common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
956.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Impairments
During the three months ended March 31, 2014, the Company recognized
asset impairments of $1 million at the Turner segment related to
miscellaneous assets, $5 million at the Warner Bros. segment related to
certain internally developed software, $26 million at the Time Inc.
segment primarily in connection with a building held for sale and $6
million at Corporate related to certain internally developed software.
During the three months ended March 31, 2013, the Company recognized
asset impairments of $18 million at the Turner segment consisting of $12
million related to certain of Turner’s international intangible assets
and $6 million related to programming assets resulting from Turner’s
decision in the first quarter of 2013 to shut down certain of its
entertainment networks in Spain, $2 million at the Warner Bros. segment
related to miscellaneous assets and $7 million at Corporate related to
certain internally developed software.
Gain on Operating Assets, Net
For the three months ended March 31, 2014, the Company recognized a $13
million gain at the Turner segment related to the sale of Zite, Inc., a
news content aggregation and recommendation platform, and a $441 million
gain at Corporate in connection with the sale and leaseback of the
Company’s office space in Time Warner Center.
For the three months ended March 31, 2013, the Company recognized an $8
million gain at Corporate on the disposal of certain corporate assets.
Other
Other reflects external costs related to mergers, acquisitions or
dispositions of $20 million and $11 million for the three months ended
March 31, 2014 and 2013, respectively. External costs related to
mergers, acquisitions or dispositions for the three months ended March
31, 2014 consisted of $7 million at the Turner segment primarily related
to exit costs in connection with the shutdown of CNN Latino, a
Spanish-language news broadcast programming block, $6 million at the
Warner Bros. segment primarily related to the agreement with Eyeworks
Group, a television production and distribution company, to acquire its
operations outside the U.S. and $7 million at Corporate related to the
Time Separation and for the three months ended March 31, 2013 consisted
of $2 million at the Turner segment related to the shutdown of certain
entertainment networks in Spain and $9 million at Corporate related to
the Time Separation.
External costs related to mergers, acquisitions or dispositions are
included in Selling, general and administrative expenses in the
accompanying Consolidated Statement of Operations.
Investment Gains (Losses), Net
For the three months ended March 31, 2014, the Company recognized $5
million of net investment losses.
For the three months ended March 31, 2013, the Company recognized $71
million of net 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
$6 million of net miscellaneous investment gains.
Amounts Related to the Separation of Time Warner Cable Inc.
For the three months ended March 31, 2014 and 2013, the Company
recognized $1 million of other expense and $5 million of other income,
respectively, related to the expiration, exercise and net change in the
estimated fair value of Time Warner equity awards held by Time Warner
Cable Inc. employees, which has been reflected in Other income (loss),
net in the accompanying Consolidated Statement of Operations.
Amounts Related to the Disposition of Warner Music Group
For both the three months ended March 31, 2014 and 2013, the Company
recognized losses of $1 million primarily related to a tax
indemnification obligation associated with the disposition of Warner
Music Group in 2004. These amounts have been reflected in Other income
(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.
TIME WARNER INC. RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURES (Unaudited; millions)
Reconciliation of Cash Provided by Operations to Free Cash Flow
- Time Warner excluding Time Inc. and Time Warner Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2014
|
|
|
|
Time Warner
|
|
|
|
|
|
|
|
excluding
|
|
|
|
Total
|
|
|
|
Time Inc.
|
|
Time Inc.
|
|
Time Warner
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operations
|
|
|
$
|
1,733
|
|
|
$
|
(29
|
)
|
|
$
|
1,704
|
|
Add external costs related to mergers, acquisitions, investments
|
|
|
|
|
|
|
|
|
|
|
or dispositions and contingent consideration payments
|
|
|
|
15
|
|
|
|
-
|
|
|
|
15
|
|
Add excess tax benefits from equity instruments
|
|
|
|
64
|
|
|
|
-
|
|
|
|
64
|
|
Less capital expenditures
|
|
|
|
(92
|
)
|
|
|
(7
|
)
|
|
|
(99
|
)
|
Less principal payments on capital leases
|
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(3
|
)
|
Free Cash Flow
|
|
|
$
|
1,717
|
|
|
$
|
(36
|
)
|
|
$
|
1,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2013
|
|
|
|
Time Warner
|
|
|
|
|
|
|
|
excluding
|
|
|
|
Total
|
|
|
|
Time Inc.
|
|
Time Inc.
|
|
Time Warner
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operations
|
|
|
$
|
747
|
|
|
$
|
(18
|
)
|
|
$
|
729
|
|
Add external costs related to mergers, acquisitions, investments
|
|
|
|
|
|
|
|
|
|
|
or dispositions and contingent consideration payments
|
|
|
|
209
|
|
|
|
-
|
|
|
|
209
|
|
Add excess tax benefits from equity instruments
|
|
|
|
84
|
|
|
|
-
|
|
|
|
84
|
|
Less capital expenditures
|
|
|
|
(79
|
)
|
|
|
(6
|
)
|
|
|
(85
|
)
|
Less principal payments on capital leases
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
Free Cash Flow
|
|
|
$
|
959
|
|
|
$
|
(24
|
)
|
|
$
|
935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. 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. Time Warner
expects to complete the separation during the second quarter of 2014.
Note 2. INTERSEGMENT TRANSACTIONS
Revenues recognized by Time Warner’s segments on intersegment
transactions are as follows (millions):
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Intersegment Revenues
|
|
|
|
|
|
|
|
|
Turner
|
|
|
|
$
|
21
|
|
$
|
24
|
Home Box Office
|
|
|
|
|
9
|
|
|
1
|
Warner Bros.
|
|
|
|
|
166
|
|
|
148
|
Time Inc.
|
|
|
|
|
2
|
|
|
4
|
Total intersegment revenues
|
|
|
|
$
|
198
|
|
$
|
177
|
|
|
|
|
|
|
|
|
|
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 March 31,
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Home video and electronic delivery of theatrical
|
|
|
|
|
|
|
|
|
product revenues
|
|
|
|
$
|
382
|
|
$
|
456
|
Home video and electronic delivery of television
|
|
|
|
|
|
|
|
|
product revenues
|
|
|
|
|
114
|
|
|
149
|
Copyright Business Wire 2014