Time Warner Inc. (NYSE:TWX) today reported financial results for its
third quarter ended September 30, 2014.
Chairman and Chief Executive Officer Jeff Bewkes said: “We had another
good quarter, featuring solid revenue growth as well as strong growth in
Adjusted EPS. As we discussed at our Investor Event last month, we’ve
refocused the Company over the past few years to aggressively pursue the
huge global opportunities we see in video content. And once again, we
are seeing the benefits of our increased investments in great content
and storytelling. In the quarter, both Turner and HBO had double-digit
increases in subscription revenues, reflecting the growing strength and
appeal of their programming. HBO received 19 Primetime Emmy Awards, the
most of any network for the 13th straight year, including
five Emmys for newcomer True Detective. At Turner, TNT ranked as
ad-supported cable’s #1 primetime network for the second consecutive
quarter, TBS was the #2 ad-supported cable network in primetime among
adults 18-49 and 25-54, and Adult Swim again shined as ad-supported
cable’s #1 total day network among its key adult demos. Turner’s
extension last month of its longstanding relationship with the NBA
through the 2024-25 season is another great example of investing in
distinctive programming that will serve us well for years to come. This
fall, Warner Bros. is once again the number one producer for broadcast
television, including a strong slate of new shows. Season-to-date, Gotham
ranked as broadcast’s #2 new show among adults 18-49, while The Flash
had the most-watched telecast ever on The CW. These shows are among five
series featuring DC characters that will air this season. DC is also a
key component of the ambitious film slate that Warner Bros. recently
unveiled. Further demonstrating our continuing commitment to shareholder
returns, so far this year we’ve returned over $5.7 billion to our
shareholders in the form of share repurchases and dividends.”
Company Results1
Revenues increased 3% to $6.2 billion in the third quarter of 2014 due
to growth across all segments, partially offset by intercompany
eliminations. Adjusted Operating Income decreased 38% to $993 million
primarily due to charges at Turner related to its decision to no longer
air certain programming and restructuring and severance charges across
all segments. Operating Income decreased 44% to $971 million.
In the third quarter, the Company posted Adjusted Diluted Income per
Common Share from Continuing Operations (“Adjusted EPS”) of $1.22 versus
$0.91 for the year-ago quarter. Adjusted EPS included a net tax benefit
of $639 million primarily related to the reversal of certain tax
reserves resulting from an audit settlement. Excluding the tax matters,
programming charges at Turner and restructuring and severance charges,
Adjusted EPS would have been $0.97. Diluted Income per Common Share from
Continuing Operations was $1.11 for the three months ended September 30,
2014 compared to $1.02 for last year’s third quarter.
For the first nine months of 2014, Cash Provided by Operations from
Continuing Operations reached $2.7 billion and Free Cash Flow totaled
$2.5 billion. As of September 30, 2014, Net Debt was $19.3 billion, up
from $18.3 billion at the end of 2013, due to share repurchases,
investments and acquisitions and dividends, offset in part by the
generation of Free Cash Flow, cash received from Time Inc. in connection
with the spin-off and proceeds from the sale of the Company’s space in
Time Warner Center.
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.
1 On June 6, 2014, the Company completed the legal and
structural separation of Time Inc. from the Company. Accordingly, the
Company has recast its financial information to present the financial
condition and results of operations of its former Time Inc. segment as
discontinued operations for all periods presented.
Stock Repurchase Program Update
From January 1, 2014 through October 31, 2014, the Company repurchased
approximately 69 million shares of common stock for approximately $4.9
billion. These amounts reflect the purchase of 17 million shares of
common stock for $1.3 billion since the amounts reported in the
Company’s second quarter earnings release on August 6, 2014.
In June 2014, the Company’s Board of Directors authorized an additional
$5 billion of share repurchases. At October 31, 2014, $5.1 billion
remained available for repurchases.
Segment Performance
The schedule below reflects Time Warner’s financial performance for the
three and nine months ended September 30, by line of business (millions).
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Three Months Ended Sept. 30,
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Nine Months Ended Sept. 30,
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2014
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2013
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2014
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2013
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Revenues:
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(recast)
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(a)
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(recast)
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(a)
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Turner
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$
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2,446
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$
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2,338
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$
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7,789
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$
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7,435
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Home Box Office
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1,304
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1,186
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4,060
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3,630
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Warner Bros.
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2,775
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2,694
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8,711
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8,316
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Intersegment eliminations
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(282)
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(176)
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(726)
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(524)
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Total Revenues
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$
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6,243
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$
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6,042
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$
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19,834
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$
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18,857
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Adjusted Operating Income (Loss) (b):
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Turner (c)
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$
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350
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$
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971
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$
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2,185
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$
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2,657
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Home Box Office
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380
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397
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1,396
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1,264
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Warner Bros.
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241
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302
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857
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751
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Corporate
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(114)
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(99)
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(336)
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(293)
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Intersegment eliminations (c)
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136
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18
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135
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47
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Total Adjusted Operating Income
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$
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993
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$
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1,589
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$
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4,237
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$
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4,426
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Operating Income (Loss) (b):
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Turner (c)
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$
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337
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$
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967
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$
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2,166
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$
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2,633
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Home Box Office
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380
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502
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1,392
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1,378
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Warner Bros.
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237
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307
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840
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751
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Corporate (d)
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(119)
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(65)
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53
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(274)
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Intersegment eliminations (c)
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136
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18
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|
|
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135
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|
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47
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Total Operating Income
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$
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971
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$
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1,729
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$
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4,586
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$
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4,535
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Depreciation and Amortization:
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Turner
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$
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55
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$
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63
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$
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169
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$
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189
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Home Box Office
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22
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26
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69
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71
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Warner Bros.
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100
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91
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293
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278
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Corporate
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6
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6
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20
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21
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Total Depreciation and Amortization
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$
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183
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$
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186
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$
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551
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$
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559
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(a)
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The 2013 financial information has been recast so the basis of
presentation is consistent with that of the 2014 financial
information. Refer to Note 1, “Description of Business and Basis of
Presentation.”
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(b)
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Adjusted Operating Income (Loss) and Operating Income (Loss) for the
three and nine months ended September 30, 2014 and 2013 included
restructuring and severance costs of (millions):
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2014
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2013
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2014
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2013
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(recast)
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(a)
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(recast)
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(a)
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Turner
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$
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(199)
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$
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(30)
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$
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(223)
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$
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(64)
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Home Box Office
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(48)
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(24)
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(57)
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(36)
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Warner Bros.
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(45)
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(2)
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(50)
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(33)
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Corporate
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(11)
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-
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(16)
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1
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Total Restructuring and Severance Costs
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$
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(303)
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$
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(56)
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$
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(346)
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$
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(132)
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(c)
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Adjusted Operating Income (Loss) and Operating Income (Loss) for the
three and nine months ended September 30, 2014 included $482 million
of programming charges at Turner. These charges were partially
offset by $139 million of intercompany eliminations primarily
related to intercompany profits on programming Turner licensed from
Warner Bros. The result is a net charge to Time Warner of $343
million.
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(d)
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Operating Income (Loss) for the nine months ended September 30, 2014
included a $441 million gain in connection with the sale of the
Company’s space in Time Warner Center.
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Presented below is a discussion of the performance of Time Warner’s
segments for the third quarter of 2014. Unless otherwise noted,
the dollar amounts in parentheses represent year-over-year changes.
TURNER
Revenues rose 5% ($108 million) to $2.4 billion, mainly due to
growth of 10% ($117 million) in Subscription revenues and 17% ($12
million) in Content revenues, offset in part by a decline of 2% ($18
million) in Advertising revenues. The increase in Subscription revenues
was primarily due to higher domestic rates and international growth.
Advertising revenues decreased due to declines at Turner’s international
networks. Advertising revenues at Turner’s domestic networks were
essentially flat.
Adjusted Operating Income declined 64% ($621 million) to $350
million, as higher revenues were more than offset by higher programming
costs and increased restructuring and severance costs. Programming costs
grew 84% due to the current year quarter’s $482 million of charges
related to Turner’s decision to no longer air certain programming.
Excluding these charges, programming costs increased in the low double
digits due to higher costs associated with increased volume of original
programming and the first year of Turner’s new agreement with Major
League Baseball. The current year quarter included $199 million of
restructuring and severance costs compared to $30 million in the prior
year quarter. Excluding the programming and restructuring and severance
charges, Adjusted Operating Income would have been $1.0 billion.
Operating Income decreased 65% ($630 million) to $337 million.
TNT ranked as ad-supported cable’s #1 primetime network among total
viewers in the third quarter. TNT series Rizzoli & Isles, Major
Crimes and The Last Ship ranked as three of the top five
original series on ad-supported cable in the third quarter. TBS was the
#2 ad-supported cable network in primetime among adults 18-49 and 25-54,
and The Big Bang Theory remained the #1 comedy on ad-supported
cable among total viewers and adults 18-49 for the 11th
consecutive quarter. Adult Swim was ad-supported cable’s #1 total day
network among adults 18-24, 18-34 and 18-49. In October, Turner entered
into an agreement to extend its relationship with the National
Basketball Association through 2025. The new agreement expands Turner’s
television rights, provides enhanced digital rights for Bleacher Report
and maintains Turner’s long-standing management of the league’s digital
properties and NBA TV.
HOME BOX OFFICE
Revenues grew 10% ($118 million) to $1.3 billion, reflecting
increases of 10% ($106 million) in Subscription revenues and 7% ($10
million) in Content revenues. The increase in Subscription revenues
resulted from higher domestic rates and subscribers as well as the
consolidation of HBO Asia and HBO South Asia (collectively, “HBO Asia”).
The growth in Content revenues was primarily due to increased home video
revenues.
Adjusted Operating Income decreased 4% ($17 million) to $380
million, as higher revenues were more than offset by increased expenses
due to higher programming and distribution costs as well as increased
restructuring and severance costs. Programming costs grew 16% due to
increased expenses for original and acquired programming as well as the
consolidation of HBO Asia. Distribution costs increased primarily due to
higher participation expenses. The current year quarter included $48
million of restructuring and severance costs compared to $24 million in
the prior year quarter. Excluding the restructuring and severance
charges, Adjusted Operating Income would have been $428 million.
Operating Income declined 24% ($122 million) to $380 million. The
prior year quarter included a $105 million gain related to Home Box
Office’s acquisition of its former partner’s interests in HBO Asia in
September 2013.
In August, HBO received 19 Primetime Emmy Awards, the most of any
network for the thirteenth consecutive year, with True Detective
receiving five awards. The Leftovers, HBO’s first series with
Warner Bros., had a successful freshman season with 7.2 million average
viewers.
WARNER BROS.
Revenues increased 3% ($81 million) to $2.8 billion, mainly due
to growth in subscription video-on-demand revenues for television
product, higher licensing of theatrical product, growth in television
production, including from the acquisition of Eyeworks Group’s
operations outside the U.S., and revenues from a patent license and
settlement agreement. These increases were partly offset by softer
performance of current year quarter theatrical releases compared to the
prior year’s slate, which included Pacific Rim, The Conjuring
and We’re the Millers, and lower domestic off-network television
license fees.
Adjusted Operating Income decreased 20% ($61 million) to $241
million, as higher revenues were more than offset by increased
restructuring and severance costs, higher film costs for television
product and a value added tax accrual. The current year quarter included
$45 million of restructuring and severance costs compared to $2 million
in the prior year quarter. Excluding the restructuring and severance
charges, Adjusted Operating Income would have been $286 million.
Operating Income declined 23% ($70 million) to $237 million.
Through November 2, Annabelle grossed over $230 million at the
worldwide box office. Season-to-date, Gotham ranked as
broadcast’s #2 new drama series among adults 18-49. The premiere of The
Flash had a total of 6.8 million total viewers in final live +7
ratings, making it The CW network’s most-watched telecast ever.
CONSOLIDATED NET INCOME AND PER SHARE RESULTS
Company Results
Adjusted EPS was $1.22 for the three months ended September 30,
2014, compared to $0.91 in last year’s third quarter. The increase in
Adjusted EPS primarily reflects lower taxes as a result of a net tax
benefit of $639 million primarily related to the reversal of certain tax
reserves in the third quarter of 2014 and fewer shares outstanding,
offset in part by lower Adjusted Operating Income.
For the three months ended September 30, 2014, the Company had Income
from Continuing Operations attributable to Time Warner common
shareholders of $966 million, or $1.11 per diluted common
share. This compares to Income from Continuing Operations attributable
to Time Warner common shareholders in the third quarter of 2013 of $958
million, or $1.02 per diluted common share.
For the third quarter of 2014 and 2013, the Company had Net Income of $967
million and $1.2 billion, respectively.
USE OF NON-GAAP FINANCIAL MEASURES
The Company utilizes Adjusted Operating Income (Loss), Adjusted
Operating Income margin and Adjusted EPS, among other measures, to
evaluate the performance of its businesses. These measures are
considered important indicators of the operational strength of the
Company’s businesses. Some limitations of Adjusted Operating Income
(Loss), Adjusted Operating Income margin 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.
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.
Adjusted EPS is Diluted Income per Common Share from Continuing
Operations attributable to Time Warner Inc. common shareholders with the
following items excluded from Income from Continuing Operations
attributable to Time Warner Inc. common shareholders: 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 and the Company’s share of
the above items with respect to equity method investments. Adjusted EPS
is considered an important indicator of the operational strength of the
Company’s businesses as this measure eliminates 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.
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.
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 EPS and Free Cash Flow should be
considered in addition to, not as a substitute for, the Company’s
Operating Income (Loss), 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 and film and TV entertainment, uses
its industry-leading operating scale and brands to create, package and
deliver high-quality content worldwide on a multi-platform basis.
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, November 5, 2014. To listen to the call, visit www.timewarner.com/investors.
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TIME WARNER INC.
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CONSOLIDATED BALANCE SHEET
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(Unaudited; millions, except share amounts)
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|
|
September 30,
|
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December 31,
|
|
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2014
|
|
2013
|
|
|
|
|
|
(recast)
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ASSETS
|
|
|
|
|
|
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Current assets
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
3,210
|
|
|
$
|
1,816
|
|
Receivables, less allowances of $940 and $1,383
|
|
|
7,005
|
|
|
|
7,305
|
|
Inventories
|
|
|
1,776
|
|
|
|
1,648
|
|
Deferred income taxes
|
|
|
181
|
|
|
|
369
|
|
Prepaid expenses and other current assets
|
|
|
721
|
|
|
|
559
|
|
Current assets of discontinued operations
|
|
|
-
|
|
|
|
834
|
|
Total current assets
|
|
|
12,893
|
|
|
|
12,531
|
|
|
|
|
|
|
|
|
Noncurrent inventories and theatrical film and television production
costs
|
|
|
6,779
|
|
|
|
7,016
|
|
Investments, including available-for-sale securities
|
|
|
2,336
|
|
|
|
2,009
|
|
Property, plant and equipment, net
|
|
|
2,678
|
|
|
|
3,291
|
|
Intangible assets subject to amortization, net
|
|
|
1,225
|
|
|
|
1,338
|
|
Intangible assets not subject to amortization
|
|
|
7,034
|
|
|
|
7,043
|
|
Goodwill
|
|
|
27,587
|
|
|
|
27,401
|
|
Other assets
|
|
|
2,563
|
|
|
|
2,458
|
|
Noncurrent assets of discontinued operations
|
|
|
-
|
|
|
|
4,912
|
|
Total assets
|
|
$
|
63,095
|
|
|
$
|
67,999
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
7,052
|
|
|
$
|
6,754
|
|
Deferred revenue
|
|
|
504
|
|
|
|
542
|
|
Debt due within one year
|
|
|
1,168
|
|
|
|
66
|
|
Current liabilities of discontinued operations
|
|
|
-
|
|
|
|
1,026
|
|
Total current liabilities
|
|
|
8,724
|
|
|
|
8,388
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
21,389
|
|
|
|
20,061
|
|
Deferred income taxes
|
|
|
1,797
|
|
|
|
2,287
|
|
Deferred revenue
|
|
|
349
|
|
|
|
351
|
|
Other noncurrent liabilities
|
|
|
5,606
|
|
|
|
6,324
|
|
Noncurrent liabilities of discontinued operations
|
|
|
-
|
|
|
|
684
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Common stock, $0.01 par value, 1.652 billion and 1.652 billion shares
|
|
|
|
|
|
|
issued and 842 million and 895 million shares outstanding
|
|
|
17
|
|
|
|
17
|
|
Additional paid-in capital
|
|
|
149,549
|
|
|
|
153,410
|
|
Treasury stock, at cost (810 million and 757 million shares)
|
|
|
(41,563
|
)
|
|
|
(37,630
|
)
|
Accumulated other comprehensive loss, net
|
|
|
(841
|
)
|
|
|
(852
|
)
|
Accumulated deficit
|
|
|
(81,932
|
)
|
|
|
(85,041
|
)
|
Total Time Warner Inc. shareholders’ equity
|
|
|
25,230
|
|
|
|
29,904
|
|
Noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
Total equity
|
|
|
25,230
|
|
|
|
29,904
|
|
Total liabilities and equity
|
|
$
|
63,095
|
|
|
$
|
67,999
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC.
|
CONSOLIDATED STATEMENT OF OPERATIONS
|
(Unaudited; millions, except per share amounts)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
9/30/14
|
|
9/30/13
|
|
9/30/14
|
|
9/30/13
|
|
|
|
|
|
(recast)
|
|
|
|
|
(recast)
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
6,243
|
|
|
$
|
6,042
|
|
|
$
|
19,834
|
|
|
$
|
18,857
|
|
Costs of revenues
|
|
|
(3,681
|
)
|
|
|
(3,158
|
)
|
|
|
(11,457
|
)
|
|
|
(10,508
|
)
|
Selling, general and administrative
|
|
|
(1,226
|
)
|
|
|
(1,157
|
)
|
|
|
(3,713
|
)
|
|
|
(3,626
|
)
|
Amortization of intangible assets
|
|
|
(52
|
)
|
|
|
(50
|
)
|
|
|
(152
|
)
|
|
|
(151
|
)
|
Restructuring and severance costs
|
|
|
(303
|
)
|
|
|
(56
|
)
|
|
|
(346
|
)
|
|
|
(132
|
)
|
Asset impairments
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(31
|
)
|
|
|
(35
|
)
|
Gain (loss) on operating assets, net
|
|
|
(5
|
)
|
|
|
113
|
|
|
|
451
|
|
|
|
130
|
|
Operating income
|
|
|
971
|
|
|
|
1,729
|
|
|
|
4,586
|
|
|
|
4,535
|
|
Interest expense, net
|
|
|
(307
|
)
|
|
|
(300
|
)
|
|
|
(868
|
)
|
|
|
(889
|
)
|
Other loss, net
|
|
|
(135
|
)
|
|
|
(20
|
)
|
|
|
(140
|
)
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before
|
|
|
|
|
|
|
|
|
|
|
|
|
income taxes
|
|
|
529
|
|
|
|
1,409
|
|
|
|
3,578
|
|
|
|
3,586
|
|
Income tax (provision) benefit
|
|
|
437
|
|
|
|
(451
|
)
|
|
|
(404
|
)
|
|
|
(1,166
|
)
|
Income from continuing operations
|
|
|
966
|
|
|
|
958
|
|
|
|
3,174
|
|
|
|
2,420
|
|
Discontinued operations, net of tax
|
|
|
1
|
|
|
|
225
|
|
|
|
(65
|
)
|
|
|
288
|
|
Net income
|
|
|
967
|
|
|
|
1,183
|
|
|
|
3,109
|
|
|
|
2,708
|
|
Less Net loss attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net income attributable to Time Warner Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
|
|
$
|
967
|
|
|
$
|
1,183
|
|
|
$
|
3,109
|
|
|
$
|
2,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share information attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Warner Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share from
|
|
|
|
|
|
|
|
|
|
|
|
|
continuing operations
|
|
$
|
1.13
|
|
|
$
|
1.04
|
|
|
$
|
3.63
|
|
|
$
|
2.60
|
|
Discontinued operations
|
|
|
-
|
|
|
|
0.25
|
|
|
|
(0.08
|
)
|
|
|
0.31
|
|
Basic net income per common share
|
|
$
|
1.13
|
|
|
$
|
1.29
|
|
|
$
|
3.55
|
|
|
$
|
2.91
|
|
Average basic common shares outstanding
|
|
|
850.9
|
|
|
|
916.8
|
|
|
|
872.2
|
|
|
|
926.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share from
|
|
|
|
|
|
|
|
|
|
|
|
|
continuing operations
|
|
$
|
1.11
|
|
|
$
|
1.02
|
|
|
$
|
3.56
|
|
|
$
|
2.55
|
|
Discontinued operations
|
|
|
-
|
|
|
|
0.24
|
|
|
|
(0.07
|
)
|
|
|
0.30
|
|
Diluted net income per common share
|
|
$
|
1.11
|
|
|
$
|
1.26
|
|
|
$
|
3.49
|
|
|
$
|
2.85
|
|
Average diluted common shares outstanding
|
|
|
870.2
|
|
|
|
938.8
|
|
|
|
891.6
|
|
|
|
948.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share of
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock
|
|
$
|
0.3175
|
|
|
$
|
0.2875
|
|
|
$
|
0.9525
|
|
|
$
|
0.8625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC.
|
CONSOLIDATED STATEMENT OF CASH FLOWS
|
Nine Months Ended September 30,
|
(Unaudited; millions)
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
(recast)
|
OPERATIONS
|
|
|
|
|
|
|
Net income
|
|
$
|
3,109
|
|
|
$
|
2,708
|
|
Less Discontinued operations, net of tax
|
|
|
65
|
|
|
|
(288
|
)
|
Net income from continuing operations
|
|
|
3,174
|
|
|
|
2,420
|
|
Adjustments for noncash and nonoperating items:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
551
|
|
|
|
559
|
|
Amortization of film and television costs
|
|
|
5,933
|
|
|
|
5,202
|
|
Asset impairments
|
|
|
31
|
|
|
|
35
|
|
Gain on investments and other assets, net
|
|
|
(453
|
)
|
|
|
(70
|
)
|
Equity in losses of investee companies, net of cash distributions
|
|
|
136
|
|
|
|
165
|
|
Equity-based compensation
|
|
|
174
|
|
|
|
189
|
|
Deferred income taxes
|
|
|
(315
|
)
|
|
|
708
|
|
Changes in operating assets and liabilities, net of acquisitions
|
|
|
(6,557
|
)
|
|
|
(6,640
|
)
|
Cash provided by operations from continuing operations
|
|
|
2,674
|
|
|
|
2,568
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Investments in available-for-sale securities
|
|
|
(30
|
)
|
|
|
(25
|
)
|
Investments and acquisitions, net of cash acquired
|
|
|
(878
|
)
|
|
|
(459
|
)
|
Capital expenditures
|
|
|
(316
|
)
|
|
|
(296
|
)
|
Investment proceeds from available-for-sale securities
|
|
|
17
|
|
|
|
33
|
|
Proceeds from Time Inc. in the Time Separation
|
|
|
1,400
|
|
|
|
-
|
|
Proceeds from the sale of Time Warner Center
|
|
|
1,264
|
|
|
|
-
|
|
Other investment proceeds
|
|
|
125
|
|
|
|
167
|
|
Cash provided (used) by investing activities from continuing
operations
|
|
|
1,582
|
|
|
|
(580
|
)
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Borrowings
|
|
|
2,406
|
|
|
|
24
|
|
Debt repayments
|
|
|
(21
|
)
|
|
|
(756
|
)
|
Proceeds from exercise of stock options
|
|
|
276
|
|
|
|
596
|
|
Excess tax benefit from equity instruments
|
|
|
138
|
|
|
|
154
|
|
Principal payments on capital leases
|
|
|
(8
|
)
|
|
|
(6
|
)
|
Repurchases of common stock
|
|
|
(4,481
|
)
|
|
|
(2,603
|
)
|
Dividends paid
|
|
|
(841
|
)
|
|
|
(811
|
)
|
Other financing activities
|
|
|
(147
|
)
|
|
|
(101
|
)
|
Cash used by financing activities from continuing operations
|
|
|
(2,678
|
)
|
|
|
(3,503
|
)
|
Cash provided (used) by continuing operations
|
|
|
1,578
|
|
|
|
(1,515
|
)
|
|
|
|
|
|
|
|
Cash provided (used) by operations from discontinued operations
|
|
|
(10
|
)
|
|
|
263
|
|
Cash used by investing activities from discontinued operations
|
|
|
(51
|
)
|
|
|
(22
|
)
|
Cash used by financing activities from discontinued operations
|
|
|
(36
|
)
|
|
|
-
|
|
Effect of change in cash and equivalents of discontinued operations
|
|
|
(87
|
)
|
|
|
18
|
|
Cash provided (used) by discontinued operations
|
|
|
(184
|
)
|
|
|
259
|
|
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
|
|
|
1,394
|
|
|
|
(1,256
|
)
|
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
1,816
|
|
|
|
2,760
|
|
CASH AND EQUIVALENTS AT END OF PERIOD
|
|
$
|
3,210
|
|
|
$
|
1,504
|
|
|
|
|
|
|
|
|
|
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 September 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
Asset Impairments
|
|
Gain (Loss) on Operating Assets, Net
|
|
Other
|
|
Operating Income (Loss)
|
Turner
|
|
$
|
350
|
|
|
$
|
(4
|
)
|
|
$
|
(5
|
)
|
|
$
|
(4
|
)
|
|
$
|
337
|
|
Home Box Office
|
|
|
380
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
380
|
|
Warner Bros.
|
|
|
241
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
237
|
|
Corporate
|
|
|
(114
|
)
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
(119
|
)
|
Intersegment eliminations
|
|
|
136
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
136
|
|
Time Warner
|
|
$
|
993
|
|
|
$
|
(5
|
)
|
|
$
|
(5
|
)
|
|
$
|
(12
|
)
|
|
$
|
971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin(a)
|
|
|
15.9
|
%
|
|
|
(0.1
|
%)
|
|
|
(0.1
|
%)
|
|
|
(0.1
|
%)
|
|
|
15.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2013 (recast)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
Asset Impairments
|
|
Gain (Loss) on Operating Assets, Net
|
|
Other
|
|
Operating Income (Loss)
|
Turner
|
|
$
|
971
|
|
|
$
|
(5
|
)
|
|
$
|
2
|
|
|
$
|
(1
|
)
|
|
$
|
967
|
|
Home Box Office
|
|
|
397
|
|
|
|
-
|
|
|
|
105
|
|
|
|
-
|
|
|
|
502
|
|
Warner Bros.
|
|
|
302
|
|
|
|
-
|
|
|
|
6
|
|
|
|
(1
|
)
|
|
|
307
|
|
Corporate
|
|
|
(99
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
34
|
|
|
|
(65
|
)
|
Intersegment eliminations
|
|
|
18
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18
|
|
Time Warner
|
|
$
|
1,589
|
|
|
$
|
(5
|
)
|
|
$
|
113
|
|
|
$
|
32
|
|
|
$
|
1,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin(a)
|
|
|
26.3
|
%
|
|
|
(0.1
|
%)
|
|
|
1.9
|
%
|
|
|
0.5
|
%
|
|
|
28.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
Nine Months Ended September 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
Asset Impairments
|
|
Gain (Loss) on Operating Assets, Net
|
|
Other
|
|
Operating Income (Loss)
|
Turner
|
|
$
|
2,185
|
|
|
$
|
(15
|
)
|
|
$
|
10
|
|
|
$
|
(14
|
)
|
|
$
|
2,166
|
|
Home Box Office
|
|
|
1,396
|
|
|
|
(4
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,392
|
|
Warner Bros.
|
|
|
857
|
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
(12
|
)
|
|
|
840
|
|
Corporate
|
|
|
(336
|
)
|
|
|
(7
|
)
|
|
|
441
|
|
|
|
(45
|
)
|
|
|
53
|
|
Intersegment eliminations
|
|
|
135
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135
|
|
Time Warner
|
|
$
|
4,237
|
|
|
$
|
(31
|
)
|
|
$
|
451
|
|
|
$
|
(71
|
)
|
|
$
|
4,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin(a)
|
|
|
21.4
|
%
|
|
|
(0.2
|
%)
|
|
|
2.3
|
%
|
|
|
(0.4
|
%)
|
|
|
23.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2013 (recast)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
Asset Impairments
|
|
Gain (Loss) on Operating Assets, Net
|
|
Other
|
|
Operating Income (Loss)
|
Turner
|
|
$
|
2,657
|
|
|
$
|
(23
|
)
|
|
$
|
2
|
|
|
$
|
(3
|
)
|
|
$
|
2,633
|
|
Home Box Office
|
|
|
1,264
|
|
|
|
-
|
|
|
|
114
|
|
|
|
-
|
|
|
|
1,378
|
|
Warner Bros.
|
|
|
751
|
|
|
|
(5
|
)
|
|
|
6
|
|
|
|
(1
|
)
|
|
|
751
|
|
Corporate
|
|
|
(293
|
)
|
|
|
(7
|
)
|
|
|
8
|
|
|
|
18
|
|
|
|
(274
|
)
|
Intersegment eliminations
|
|
|
47
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
47
|
|
Time Warner
|
|
$
|
4,426
|
|
|
$
|
(35
|
)
|
|
$
|
130
|
|
|
$
|
14
|
|
|
$
|
4,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin(a)
|
|
|
23.5
|
%
|
|
|
(0.2
|
%)
|
|
|
0.7
|
%
|
|
|
-
|
|
|
|
24.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
TIME WARNER INC.
|
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
|
(Unaudited; millions, except per share amounts)
|
|
Reconciliation of
|
Adjusted EPS to Diluted Income per Common Share from Continuing
Operations attributable to Time Warner
|
Inc. common shareholders
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
9/30/14
|
|
9/30/13
|
|
9/30/14
|
|
9/30/13
|
|
|
|
|
|
(recast)
|
|
|
|
|
(recast)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairments
|
|
$
|
(5
|
)
|
|
$
|
(5
|
)
|
|
$
|
(31
|
)
|
|
$
|
(35
|
)
|
Gain (loss) on operating assets, net
|
|
|
(5
|
)
|
|
|
113
|
|
|
|
451
|
|
|
|
130
|
|
Other
|
|
|
(12
|
)
|
|
|
32
|
|
|
|
(71
|
)
|
|
|
14
|
|
Impact on Operating Income
|
|
|
(22
|
)
|
|
|
140
|
|
|
|
349
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment gains (losses), net
|
|
|
(78
|
)
|
|
|
12
|
|
|
|
(57
|
)
|
|
|
67
|
|
Amounts related to the separation of Time
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Cable Inc.
|
|
|
-
|
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
9
|
|
Amounts related to the disposition of
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Music Group
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Amounts related to the separation of Time Inc.
|
|
|
2
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
Items affecting comparability relating to
|
|
|
|
|
|
|
|
|
|
|
|
|
equity method investments
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
(25
|
)
|
|
|
(12
|
)
|
Pretax impact
|
|
|
(102
|
)
|
|
|
155
|
|
|
|
268
|
|
|
|
173
|
|
Income tax impact of above items
|
|
|
7
|
|
|
|
(52
|
)
|
|
|
84
|
|
|
|
(69
|
)
|
Impact of items affecting comparability on
|
|
|
|
|
|
|
|
|
|
|
|
|
income from continuing operations attributable
|
|
|
|
|
|
|
|
|
|
|
|
|
to Time Warner Inc. shareholders
|
|
$
|
(95
|
)
|
|
$
|
103
|
|
|
$
|
352
|
|
|
$
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Time Warner Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
966
|
|
|
$
|
958
|
|
|
$
|
3,174
|
|
|
$
|
2,420
|
|
Less Impact of items affecting comparability
|
|
|
|
|
|
|
|
|
|
|
|
|
on net income
|
|
|
(95
|
)
|
|
|
103
|
|
|
|
352
|
|
|
|
104
|
|
Adjusted income from continuing operations
|
|
$
|
1,061
|
|
|
$
|
855
|
|
|
$
|
2,822
|
|
|
$
|
2,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share information attributable to Time
|
|
|
|
|
|
|
|
|
|
|
|
|
Warner Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share from
|
|
|
|
|
|
|
|
|
|
|
|
|
continuing operations
|
|
$
|
1.11
|
|
|
$
|
1.02
|
|
|
$
|
3.56
|
|
|
$
|
2.55
|
|
Less Impact of items affecting comparability on
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted net income per common share
|
|
|
(0.11
|
)
|
|
|
0.11
|
|
|
|
0.39
|
|
|
|
0.11
|
|
Adjusted EPS
|
|
$
|
1.22
|
|
|
$
|
0.91
|
|
|
$
|
3.17
|
|
|
$
|
2.44
|
|
Average diluted common shares outstanding
|
|
|
870.2
|
|
|
|
938.8
|
|
|
|
891.6
|
|
|
|
948.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Impairments
During the three months ended September 30, 2014, the Company recognized
asset impairments of $5 million, consisting of $4 million at the Turner
segment related to miscellaneous assets and $1 million at Corporate
related to certain internally developed software. For the nine months
ended September 30, 2014, the Company recognized asset impairments of
$15 million at the Turner segment related to miscellaneous assets, $4
million at the Home Box Office segment related to the noncash impairment
of an international tradename and $5 million and $7 million at the
Warner Bros. segment and Corporate, respectively, related to certain
internally developed software.
During the three months ended September 30, 2013, the Company recognized
an international intangible asset impairment of $5 million at the Turner
segment. During the nine months ended September 30, 2013, the Company
recognized asset impairments of $35 million, consisting of $17 million
related to certain of Turner’s international intangible assets, $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, $5 million at the Warner Bros. segment related to
miscellaneous assets and $7 million at Corporate related to certain
internally developed software.
Gain (Loss) on Operating Assets, Net
For the three and nine months ended September 30, 2014, the Company
recognized a $5 million loss on operating assets at the Turner segment
related to the shutdown of a business. For the nine months ended
September 30, 2014, the Company also recognized $15 million of gains at
the Turner segment, reflecting a $2 million gain primarily related to
the sale of a building in South America and a $13 million gain 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 space in Time Warner Center.
For the three and nine months ended September 30, 2013, the Company
recognized a $105 million gain at the Home Box Office segment upon Home
Box Office’s acquisition of its former partner’s interests in HBO Asia
and HBO South Asia, a $2 million gain at the Turner segment on the sale
of a building and a $6 million gain at the Warner Bros. segment on
miscellaneous operating assets. For the nine months ended September 30,
2013, the Company also recognized a $9 million gain at the Home Box
Office segment upon Home Box Office’s acquisition of its former
partner’s interest in HBO Nordic and 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 $12 million and $71 million for the three and nine
months ended September 30, 2014, respectively, and $6 million and $24
million for the three and nine months ended September 30, 2013,
respectively. External costs related to mergers, acquisitions or
dispositions for the three and nine months ended September 30, 2014
consisted of $4 million and $14 million, respectively, at the Turner
segment primarily related to exit costs in connection with the shutdown
of CNN Latino, $4 million and $12 million, respectively, at the Warner
Bros. segment primarily related to the acquisition of Eyeworks Group’s
operations outside the U.S. and $4 million and $45 million,
respectively, at Corporate primarily related to the legal and structural
separation of Time Inc. from Time Warner (the “Time Separation”).
External costs related to mergers, acquisitions or dispositions for the
three and nine months ended September 30, 2013 primarily reflected
higher costs at Corporate of $4 million and $20 million, respectively,
primarily related to the Time Separation. Other also includes a gain of
$38 million for the three and nine months ended September 30, 2013 at
Corporate related to the curtailment of certain post-retirement benefits
(the “Curtailment”).
External costs related to mergers, acquisitions or dispositions and the
gain related to the Curtailment are included in Selling, general and
administrative expenses in the accompanying Consolidated Statement of
Operations.
Investment Gains (Losses), Net
For the three and nine months ended September 30, 2014, the Company
recognized $78 million and $57 million, respectively, of net
miscellaneous investment losses, consisting of $58 million and $59
million, respectively, of losses related to fair value adjustments on
Central European Media Enterprises Ltd. warrants and $20 million of net
miscellaneous investment losses for the three months ended September 30,
2014 and $2 million of net miscellaneous investment gains for the nine
months ended September 30, 2014. For the three months ended September
30, 2013, the Company recognized a $12 million gain associated with a
fair value adjustment on an option to acquire securities that was
terminated during the third quarter of 2013. For the nine months ended
September 30, 2013, the Company 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
$2 million of net miscellaneous investment gains.
Amounts Related to the Separation of Time Warner Cable Inc.
The Company recognized other expense of $1 million for the nine months
ended September 30, 2014 and other income of $4 million and $10 million
for the three and nine months ended September 30, 2013, 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.
(“TWC”) employees, which has been reflected in Other loss, net in the
accompanying Consolidated Statement of Operations. For the three and
nine months ended September 30, 2013, the Company also recognized $1
million of other loss related to changes in the value of a TWC tax
indemnification receivable, which has also been reflected in Other loss,
net in the accompanying Consolidated Statement of Operations.
Amounts Related to the Disposition of Warner Music Group
For the three and nine months ended September 30, 2014, the Company
recognized other income of $1 million and $0, respectively, primarily
related to a tax indemnification obligation associated with the
disposition of Warner Music Group in 2004. These amounts have been
reflected in Other loss, net in the accompanying Consolidated Statement
of Operations.
Amounts Related to the Time Separation
For the three and nine months ended September 30, 2014, the Company
recognized $2 million of other income related to the expiration,
exercise and net change in the estimated fair value of Time Warner
equity awards held by certain Time Inc. employees.
Items Affecting Comparability Relating to Equity Method Investments
For the three and nine months ended September 30, 2014, the Company
recognized $4 million as its share of costs related to a government
investigation of an equity method investee and $1 million and $9
million, respectively, as its share of discontinued operations recorded
by an equity method investee. In addition, for the nine months ended
September 30, 2014, the Company recognized $12 million as its share of a
loss on the extinguishment of debt recorded by an equity method
investee. For the nine months ended September 30, 2013, the Company
recognized $12 million as its share of a loss on the extinguishment of
debt recorded by an 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.
|
TIME WARNER INC.
|
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
|
(Unaudited; millions)
|
|
Reconciliation of Cash Provided by Operations from Continuing
Operations to Free Cash Flow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
9/30/14
|
|
9/30/13
|
|
9/30/14
|
|
9/30/13
|
|
|
|
|
|
(recast)
|
|
|
|
|
(recast)
|
Cash provided by operations from continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
$
|
617
|
|
|
$
|
1,043
|
|
|
$
|
2,674
|
|
|
$
|
2,568
|
|
Add external costs related to mergers,
|
|
|
|
|
|
|
|
|
|
|
|
|
acquisitions, investments or dispositions
|
|
|
|
|
|
|
|
|
|
|
|
|
and contingent consideration payments
|
|
|
28
|
|
|
|
6
|
|
|
|
60
|
|
|
|
222
|
|
Add excess tax benefits from equity instruments
|
|
|
43
|
|
|
|
24
|
|
|
|
138
|
|
|
|
154
|
|
Less capital expenditures
|
|
|
(110
|
)
|
|
|
(124
|
)
|
|
|
(316
|
)
|
|
|
(296
|
)
|
Less principal payments on capital leases
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(8
|
)
|
|
|
(6
|
)
|
Free Cash Flow
|
|
$
|
575
|
|
|
$
|
947
|
|
|
$
|
2,548
|
|
|
$
|
2,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
Note 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Time Warner Inc. (“Time Warner” or the “Company”) is a leading media and
entertainment company, whose businesses include television networks and
film and TV entertainment. Time Warner classifies its operations into
three 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; and Warner Bros.: consisting principally
of feature film, television, home video and videogame production and
distribution.
On June 6, 2014, the Company completed the legal and structural
separation of the Company’s Time Inc. segment from the Company (the
“Time Separation”). With the completion of the Time Separation, the
Company disposed of the Time Inc. segment in its entirety and ceased to
consolidate its assets, liabilities and results of operations in the
Company’s consolidated financial statements. Accordingly, the Company
has recast its financial information to present the financial condition
and results of operations of its former Time Inc. segment as
discontinued operations in the Company’s consolidated financial
statements for all periods presented.
In connection with the Time Separation, the Company received
$1.4 billion from Time Inc., consisting of proceeds relating to Time
Inc.’s acquisition of the IPC publishing business in the U.K. from a
wholly-owned subsidiary of Time Warner and a special dividend.
Note 2. INTERSEGMENT TRANSACTIONS
Revenues recognized by Time Warner’s segments on intersegment
transactions are as follows (millions):
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
9/30/14
|
|
9/30/13
|
|
9/30/14
|
|
9/30/13
|
|
|
|
|
|
(recast)
|
|
|
|
|
(recast)
|
Intersegment Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner
|
|
$
|
19
|
|
$
|
19
|
|
$
|
76
|
|
$
|
65
|
Home Box Office
|
|
|
8
|
|
|
1
|
|
|
27
|
|
|
5
|
Warner Bros.
|
|
|
255
|
|
|
156
|
|
|
623
|
|
|
454
|
Total intersegment revenues
|
|
$
|
282
|
|
$
|
176
|
|
$
|
726
|
|
$
|
524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Nine Months Ended
|
|
|
9/30/14
|
|
9/30/13
|
|
9/30/14
|
|
9/30/13
|
|
|
|
|
|
|
|
|
|
|
|
Home video and electronic delivery of theatrical
|
|
|
|
|
|
|
|
|
|
|
|
|
product revenues
|
|
$
|
390
|
|
$
|
371
|
|
$
|
1,335
|
|
$
|
1,271
|
Home video and electronic delivery of television
|
|
|
|
|
|
|
|
|
|
|
|
|
product revenues
|
|
|
144
|
|
|
162
|
|
|
368
|
|
|
458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copyright Business Wire 2014