Time Warner Inc. (NYSE:TWX) today reported financial results for its
first quarter ended March 31, 2015.
Chairman and Chief Executive Officer Jeff Bewkes said: “We got off to a
very strong start in 2015, with Revenues up 5%, and Adjusted Operating
Income growing 12% to a quarterly record of $1.8 billion. This led to a
23% increase in Adjusted EPS and puts us on track to achieve our goals
for the year. We accomplished a lot in the quarter, led by Turner, which
had its best quarter ever, with audience growth across a number of its
networks. The NCAA Men’s Basketball Tournament was a huge multiplatform
success, with its highest average television viewership in over two
decades helping make TBS the #1 ad-supported cable network in primetime
among adults 18-49 in the quarter. And March Madness Live served more
than 80 million live video streams and grew its usage by almost 20% over
last year’s tournament. Warner Bros. led the domestic box office for the
quarter on the strength of American Sniper, which brought in well
over $500 million globally. Warner Bros. also continued to lead the
industry in television production, including the #1 comedy and
unscripted series among adults 18-49 on television this season. HBO once
again grew domestic subscribers in the quarter while continuing to gain
acclaim for groundbreaking programming such as the recent documentaries Going
Clear: Scientology and the Prison of Belief and The Jinx: The
Life and Deaths of Robert Durst. The return of Game of Thrones
reached a new premiere high, while also providing the backdrop
for the highly-anticipated launch of HBO NOW, our standalone streaming
version of HBO – which is off to a great start. Reflecting our strong
commitment to provide direct returns to shareholders, we returned more
than $1.4 billion in dividends and share repurchases year-to-date.”
Company Results
Revenues increased 5% to $7.1 billion due to growth across all
divisions. Adjusted Operating Income grew 12% to $1.8 billion due to
growth at Turner, offset in part by declines at Warner Bros. and Home
Box Office. Operating Income decreased 13% to $1.8 billion primarily due
to a $441 million gain in the prior year quarter in connection with the
sale and leaseback of the Company’s space in Time Warner Center.
Adjusted Operating Income and Operating Income margins were both 25% in
the first quarter of 2015 compared to 24% and 30%, respectively, in the
prior year quarter.
The Company posted Adjusted Diluted Income per Common Share from
Continuing Operations (“Adjusted EPS”) of $1.19, up 23% from $0.97 for
the year-ago quarter. Diluted Income per Common Share from Continuing
Operations was $1.10 compared to $1.50 in the prior year quarter.
For the first three months of 2015, Cash Provided by Operations from
Continuing Operations reached $1.0 billion and Free Cash Flow totaled
$1.0 billion. As of March 31, 2015, Net Debt was $20.2 billion, up from
$19.9 billion at the end of 2014, due to share repurchases, dividends
and investments and acquisitions, partially offset by the generation of
Free Cash Flow.
Refer to “Use of Non-GAAP Financial Measures” in this release for a
discussion of the non-GAAP financial measures used in this release and
the reconciliations of the non-GAAP financial measures to the most
directly comparable GAAP financial measures.
Stock Repurchase Program Update
From January 1, 2015 through April 24, 2015, the Company repurchased
approximately 14 million shares of common stock for approximately $1.1
billion. At April 24, 2015, approximately $3.4 billion remained
available for repurchases under the Company’s stock repurchase program.
Segment Performance
The schedule below reflects Time Warner’s financial performance for
the three months ended March 31, by line of business (millions).
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Three Months Ended March 31,
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2015
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2014
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Revenues:
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Turner
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$
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2,710
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$
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2,593
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Home Box Office
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1,398
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1,339
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Warner Bros.
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3,199
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3,066
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Intersegment eliminations
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(180)
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(195)
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Total Revenues
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$
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7,127
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$
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6,803
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Adjusted Operating Income (Loss) (a):
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Turner
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$
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1,128
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$
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895
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Home Box Office
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458
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464
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Warner Bros.
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330
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380
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Corporate
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(102)
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(119)
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Intersegment eliminations
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–
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6
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Total Adjusted Operating Income
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$
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1,814
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$
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1,626
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Operating Income (Loss) (a):
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Turner
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$
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1,108
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$
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900
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Home Box Office
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458
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464
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Warner Bros.
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324
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369
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Corporate (b)
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(104)
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309
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Intersegment eliminations
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–
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6
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Total Operating Income
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$
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1,786
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$
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2,048
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Depreciation and Amortization:
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Turner
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$
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52
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$
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58
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Home Box Office
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25
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25
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Warner Bros.
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89
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93
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Corporate
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4
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7
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Intersegment eliminations
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–
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–
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Total Depreciation and Amortization
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$
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170
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$
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183
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(a)
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Adjusted Operating Income (Loss) and Operating Income (Loss) for the
three months ended March 31, 2015 and 2014 included restructuring
and severance costs of (millions):
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Three Months Ended March 31,
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2015
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2014
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Turner
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$
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(8)
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$
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(12)
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Home Box Office
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(1)
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(8)
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Warner Bros.
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(3)
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(2)
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Corporate
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-
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(4)
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Total Restructuring and Severance Costs
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$
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(12)
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$
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(26)
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(b)
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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 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 2015. Unless otherwise noted,
the dollar amounts in parentheses represent year-over-year changes.
TURNER
Revenues rose 5% ($117 million) to $2.7 billion, benefiting from
growth of 4% ($42 million) in Advertising revenues, 3% ($38 million) in
Subscription revenues and 25% ($37 million) in Content and other
revenues. Advertising revenues benefited from growth at Turner’s
domestic businesses mainly due to the 2015 NCAA Division I Men’s
Basketball Championship tournament (the “NCAA Tournament”) and growth at
Turner’s news businesses. Subscription revenues grew due to higher
domestic rates partially offset by lower domestic subscribers. Both
international advertising and international subscription revenue growth
were more than offset by the impact of foreign exchange rates. The
increase in Content and other revenues was due to higher subscription
video-on-demand revenues.
Adjusted Operating Income increased 26% ($233 million) to $1.1
billion, primarily due to higher revenues and lower expenses, including
lower marketing, programming and general and administrative costs,
largely as a result of operational efficiency initiatives and timing.
Programming costs declined 3% due primarily to timing and lower
syndicated programming expenses as a result of the abandonment of
certain programming in 2014.
Operating Income increased 23% ($208 million) to $1.1 billion.
The current year quarter included a $17 million foreign currency charge
related to the remeasurement of Turner’s net monetary assets denominated
in Venezuelan currency. The prior year quarter included a $13 million
gain related to the sale of a digital news asset.
The NCAA Tournament across TBS, TNT, truTV and CBS averaged 11.3 million
total viewers, up 8% from last year, and was the most-watched NCAA
Tournament in 22 years. The NCAA Tournament National Semifinal between
Kentucky and Wisconsin - airing across TBS, TNT and truTV - averaged
22.6 million total viewers to deliver the most-watched basketball game
ever on cable television and the most watched program in Turner’s
history. In addition, NCAA March Madness Live delivered a 17% increase
in live video streams compared to last year. During the first quarter of
2015, TBS ranked as the #1 ad-supported cable network in primetime among
total viewers, adults 18-49 and adults 25-54. Adult Swim ranked #1 in
total day on ad-supported cable among adults 18-34 and 18-49. CNN and
HLN grew their total day ratings among adults 25-54 by 20% and 33%,
respectively, in the first quarter.
HOME BOX OFFICE
Revenues grew 4% ($59 million) to $1.4 billion, reflecting
increases of 4% ($49 million) in Subscription revenues and 5% ($10
million) in Content and other revenues. Subscription revenues increased
primarily due to higher domestic rates, partially offset by the transfer
to Turner of the operation of HBO’s basic cable network in India. The
increase in Content and other revenues reflected higher home
entertainment revenues and higher international licensing revenues.
Adjusted Operating Income declined 1% ($6 million) to $458
million, as higher revenues were more than offset by higher programming,
distribution and marketing costs. Programming costs grew 9%, primarily
due to increased expenses for original programming. Distribution costs
increased primarily due to higher participation expenses. The increase
in marketing costs was primarily related to the launch of HBO NOW.
Operating Income decreased 1% ($6 million) to $458 million.
Through the first two weeks, the fifth season premiere of Game of
Thrones totaled 18.1 million gross viewers, over 1 million more
viewers than the prior season’s first episode after the same period of
time. In April 2015, Home Box Office launched HBO NOW, its stand-alone
streaming service, in the U.S. In February, HBO’s Citizenfour and Crisis
Hotline: Veterans Press 1 received Academy Awards for Documentary
Feature and Documentary Short Subject, respectively.
WARNER BROS.
Revenues increased 4% ($133 million) to $3.2 billion, reflecting
higher television licensing revenues primarily due to the subscription
video-on-demand sale of Friends and higher revenues from
videogames. Revenues also benefited from growth in theatrical
revenues led by the strong performance of American Sniper. The
increase was partially offset by the effect of foreign currency exchange
rates.
Adjusted Operating Income declined 13% ($50 million) to $330
million, as higher revenues were more than offset by higher film and
advertising costs due to the mix of theatrical releases and videogame
product.
Operating Income decreased 12% ($45 million) to $324 million.
Through April 27, American Sniper grossed over $540 million at
the worldwide box office. On April 9, Warner Bros., its TT Games
business and The LEGO Group announced LEGO Dimensions, a
videogame experience that combines physical LEGO brick building toys
based on multiple franchises, including Warner Bros.’ DC Comics, The
Lord of the Rings and The LEGO Movie, with interactive
console gameplay.
CONSOLIDATED NET INCOME AND PER SHARE RESULTS
First-Quarter Results
Adjusted EPS was $1.19 for the three months ended March 31, 2015,
compared to $0.97 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, 2015, the Company had Income from
Continuing Operations of $933 million, or $1.10 per
diluted common share. This compares to Income from Continuing Operations
attributable to Time Warner common shareholders in the first quarter of
2014 of $1.4 billion, or $1.50 per diluted common
share.
For the first quarters of 2015 and 2014, the Company had Net Income of
$970 million and $1.3 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; amounts related to
securities litigation and government investigations; and the foreign
currency losses during the three months ended December 31, 2014 and
March 31, 2015, related to the translation of net monetary assets
denominated in Venezuelan currency resulting from the Company’s change
to the SICAD 2 exchange rate beginning December 31, 2014 and the Simadi
exchange rate during the quarter ended March 31, 2015, respectively.
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; the foreign currency losses during the three months
ended December 31, 2014 and March 31, 2015 related to the translation of
net monetary assets denominated in Venezuelan currency resulting from
the Company’s change to the SICAD 2 exchange rate beginning December 31,
2014 and the Simadi exchange rate during the quarter ended March 31,
2015, respectively; 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 2015 full-year
business outlook.
The Company’s conference call can be heard live at 10:30 am ET on
Wednesday, April 29, 2015. 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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March 31,
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December 31,
|
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2015
|
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|
2014
|
|
|
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|
|
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ASSETS
|
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|
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Current assets
|
|
|
|
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Cash and equivalents
|
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$
|
2,260
|
|
$
|
2,618
|
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Receivables, less allowances of $854 and $1,152
|
|
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7,645
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|
|
7,720
|
|
Inventories
|
|
|
1,532
|
|
|
1,700
|
|
Deferred income taxes
|
|
|
184
|
|
|
184
|
|
Prepaid expenses and other current assets
|
|
|
874
|
|
|
958
|
|
Total current assets
|
|
|
12,495
|
|
|
13,180
|
|
|
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|
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Noncurrent inventories and theatrical film and television production
costs
|
|
|
6,735
|
|
|
6,841
|
|
Investments, including available-for-sale securities
|
|
|
2,270
|
|
|
2,326
|
|
Property, plant and equipment, net
|
|
|
2,580
|
|
|
2,655
|
|
Intangible assets subject to amortization, net
|
|
|
1,080
|
|
|
1,141
|
|
Intangible assets not subject to amortization
|
|
|
7,030
|
|
|
7,032
|
|
Goodwill
|
|
|
27,557
|
|
|
27,565
|
|
Other assets
|
|
|
2,448
|
|
|
2,519
|
|
Total assets
|
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$
|
62,195
|
|
$
|
63,259
|
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LIABILITIES AND EQUITY
|
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Current liabilities
|
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|
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|
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Accounts payable and accrued liabilities
|
|
$
|
7,062
|
|
$
|
7,507
|
|
Deferred revenue
|
|
|
530
|
|
|
579
|
|
Debt due within one year
|
|
|
1,299
|
|
|
1,118
|
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Total current liabilities
|
|
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8,891
|
|
|
9,204
|
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Long-term debt
|
|
|
21,172
|
|
|
21,376
|
|
Deferred income taxes
|
|
|
2,124
|
|
|
2,204
|
|
Deferred revenue
|
|
|
307
|
|
|
315
|
|
Other noncurrent liabilities
|
|
|
5,503
|
|
|
5,684
|
|
|
|
|
|
|
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Equity
|
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|
|
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Common stock, $0.01 par value, 1.652 billion and 1.652 billion shares
|
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|
|
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issued and 826 million and 832 million shares outstanding
|
|
|
17
|
|
|
17
|
|
Additional paid-in capital
|
|
|
148,819
|
|
|
149,282
|
|
Treasury stock, at cost (826 million and 820 million shares)
|
|
|
(43,087)
|
|
|
(42,445)
|
|
Accumulated other comprehensive loss, net
|
|
|
(1,307)
|
|
|
(1,164)
|
|
Accumulated deficit
|
|
|
(80,244)
|
|
|
(81,214)
|
|
Total equity
|
|
|
24,198
|
|
|
24,476
|
|
Total liabilities and equity
|
|
$
|
62,195
|
|
$
|
63,259
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC.
|
|
CONSOLIDATED STATEMENT OF OPERATIONS
|
|
Three Months Ended March 31,
|
|
(Unaudited; millions, except per share amounts)
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
7,127
|
|
$
|
6,803
|
|
Costs of revenues
|
|
|
(4,088)
|
|
|
(3,851)
|
|
Selling, general and administrative
|
|
|
(1,189)
|
|
|
(1,270)
|
|
Amortization of intangible assets
|
|
|
(48)
|
|
|
(50)
|
|
Restructuring and severance costs
|
|
|
(12)
|
|
|
(26)
|
|
Asset impairments
|
|
|
(1)
|
|
|
(12)
|
|
Gain (loss) on operating assets, net
|
|
|
(3)
|
|
|
454
|
|
Operating income
|
|
|
1,786
|
|
|
2,048
|
|
Interest expense, net
|
|
|
(294)
|
|
|
(265)
|
|
Other loss, net
|
|
|
(117)
|
|
|
(11)
|
|
Income from continuing operations before income taxes
|
|
|
1,375
|
|
|
1,772
|
|
Income tax provision
|
|
|
(442)
|
|
|
(407)
|
|
Income from continuing operations
|
|
|
933
|
|
|
1,365
|
|
Discontinued operations, net of tax
|
|
|
37
|
|
|
(73)
|
|
Net income
|
|
$
|
970
|
|
$
|
1,292
|
|
|
|
|
|
|
|
|
|
Per share information:
|
|
|
|
|
|
|
|
Basic income per common share from continuing operations
|
|
$
|
1.12
|
|
$
|
1.53
|
|
Discontinued operations
|
|
|
0.05
|
|
|
(0.08)
|
|
Basic net income per common share
|
|
$
|
1.17
|
|
$
|
1.45
|
|
Average basic common shares outstanding
|
|
|
829.4
|
|
|
891.0
|
|
|
|
|
|
|
|
|
|
Diluted income per common share from continuing operations
|
|
$
|
1.10
|
|
$
|
1.50
|
|
Discontinued operations
|
|
|
0.05
|
|
|
(0.08)
|
|
Diluted net income per common share
|
|
$
|
1.15
|
|
$
|
1.42
|
|
Average diluted common shares outstanding
|
|
|
845.9
|
|
|
910.6
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share of common stock
|
|
$
|
0.3500
|
|
$
|
0.3175
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC.
|
|
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
Three Months Ended March 31,
|
|
(Unaudited; millions)
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
OPERATIONS
|
|
|
|
|
|
|
|
Net income
|
|
$
|
970
|
|
$
|
1,292
|
|
Less Discontinued operations, net of tax
|
|
|
(37)
|
|
|
73
|
|
Net income from continuing operations
|
|
|
933
|
|
|
1,365
|
|
Adjustments for noncash and nonoperating items:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
170
|
|
|
183
|
|
Amortization of film and television costs
|
|
|
2,034
|
|
|
1,957
|
|
Asset impairments
|
|
|
1
|
|
|
12
|
|
(Gain) loss on investments and other assets, net
|
|
|
3
|
|
|
(448)
|
|
Equity in losses of investee companies, net of cash distributions
|
|
|
64
|
|
|
19
|
|
Equity-based compensation
|
|
|
90
|
|
|
89
|
|
Deferred income taxes
|
|
|
(96)
|
|
|
(244)
|
|
Changes in operating assets and liabilities, net of acquisitions
|
|
|
(2,190)
|
|
|
(1,200)
|
|
Cash provided by operations from continuing operations
|
|
|
1,009
|
|
|
1,733
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Investments in available-for-sale securities
|
|
|
(29)
|
|
|
(23)
|
|
Investments and acquisitions, net of cash acquired
|
|
|
(96)
|
|
|
(106)
|
|
Capital expenditures
|
|
|
(57)
|
|
|
(92)
|
|
Proceeds from the sale of Time Warner Center
|
|
|
-
|
|
|
1,264
|
|
Other investment proceeds
|
|
|
5
|
|
|
44
|
|
Cash provided (used) by investing activities from continuing
operations
|
|
|
(177)
|
|
|
1,087
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Borrowings
|
|
|
6
|
|
|
129
|
|
Debt repayments
|
|
|
(11)
|
|
|
(5)
|
|
Proceeds from exercise of stock options
|
|
|
67
|
|
|
116
|
|
Excess tax benefit from equity instruments
|
|
|
83
|
|
|
64
|
|
Principal payments on capital leases
|
|
|
(2)
|
|
|
(3)
|
|
Repurchases of common stock
|
|
|
(890)
|
|
|
(991)
|
|
Dividends paid
|
|
|
(294)
|
|
|
(287)
|
|
Other financing activities
|
|
|
(152)
|
|
|
(111)
|
|
Cash used by financing activities from continuing operations
|
|
|
(1,193)
|
|
|
(1,088)
|
|
Cash provided (used) by continuing operations
|
|
|
(361)
|
|
|
1,732
|
|
|
|
|
|
|
|
|
|
Cash provided (used) by operations from discontinued operations
|
|
|
3
|
|
|
(29)
|
|
Cash used by investing activities from discontinued operations
|
|
|
-
|
|
|
(19)
|
|
Effect of change in cash and equivalents of discontinued operations
|
|
|
-
|
|
|
(5)
|
|
Cash provided (used) by discontinued operations
|
|
|
3
|
|
|
(53)
|
|
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
|
|
|
(358)
|
|
|
1,679
|
|
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
2,618
|
|
|
1,816
|
|
CASH AND EQUIVALENTS AT END OF PERIOD
|
|
$
|
2,260
|
|
$
|
3,495
|
|
|
|
|
|
|
|
|
|
|
|
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, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
Asset Impairments
|
|
Gain (Loss) on Operating Assets, Net
|
|
Venezuelan Foreign Currency Loss
|
|
Other
|
|
Operating Income (Loss)
|
|
Turner
|
|
$
|
1,128
|
|
$
|
-
|
|
$
|
(3)
|
|
$
|
(17)
|
|
$
|
-
|
|
$
|
1,108
|
|
Home Box Office
|
|
|
458
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
458
|
|
Warner Bros.
|
|
|
330
|
|
|
-
|
|
|
-
|
|
|
(5)
|
|
|
(1)
|
|
|
324
|
|
Corporate
|
|
|
(102)
|
|
|
(1)
|
|
|
-
|
|
|
-
|
|
|
(1)
|
|
|
(104)
|
|
Intersegment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
eliminations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Time Warner
|
|
$
|
1,814
|
|
$
|
(1)
|
|
$
|
(3)
|
|
$
|
(22)
|
|
$
|
(2)
|
|
$
|
1,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin(a)
|
|
|
25.5%
|
|
|
-
|
|
|
(0.1%)
|
|
|
(0.3%)
|
|
|
-
|
|
|
25.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
Asset Impairments
|
|
Gain (Loss) on Operating Assets, Net
|
|
Venezuelan Foreign Currency Loss
|
|
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
|
|
$
|
1,626
|
|
$
|
(12)
|
|
$
|
454
|
|
$
|
-
|
|
$
|
(20)
|
|
$
|
2,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin(a)
|
|
|
23.9%
|
|
|
(0.2%)
|
|
|
6.7%
|
|
|
-
|
|
|
(0.3%)
|
|
|
30.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairments
|
|
$
|
(1)
|
|
$
|
(12)
|
|
Gain (loss) on operating assets, net
|
|
|
(3)
|
|
|
454
|
|
Venezuelan foreign currency loss
|
|
|
(22)
|
|
|
-
|
|
Other
|
|
|
(2)
|
|
|
(20)
|
|
Impact on Operating Income
|
|
|
(28)
|
|
|
422
|
|
|
|
|
|
|
|
|
|
Investment losses, net
|
|
|
(59)
|
|
|
(5)
|
|
Amounts related to the separation of Time Warner Cable Inc.
|
|
|
(4)
|
|
|
(1)
|
|
Amounts related to the disposition of Warner Music Group
|
|
|
-
|
|
|
(1)
|
|
Amounts related to the separation of Time Inc.
|
|
|
(2)
|
|
|
-
|
|
Items affecting comparability relating to equity method investments
|
|
|
(2)
|
|
|
-
|
|
Pretax impact
|
|
|
(95)
|
|
|
415
|
|
Income tax impact of above items
|
|
|
18
|
|
|
65
|
|
Impact of items affecting comparability on income from continuing
operations
|
|
$
|
(77)
|
|
$
|
480
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
933
|
|
$
|
1,365
|
|
Less Impact of items affecting comparability on income from
continuing
|
|
|
|
|
|
|
|
operations
|
|
|
(77)
|
|
|
480
|
|
Adjusted income from continuing operations
|
|
$
|
1,010
|
|
$
|
885
|
|
|
|
|
|
|
|
|
|
Per share information:
|
|
|
|
|
|
|
|
Diluted net income per common share
|
|
$
|
1.10
|
|
$
|
1.50
|
|
Less Impact of items affecting comparability on diluted net income
|
|
|
|
|
|
|
|
per common share
|
|
|
(0.09)
|
|
|
0.53
|
|
Adjusted EPS
|
|
$
|
1.19
|
|
$
|
0.97
|
|
Average diluted common shares outstanding
|
|
|
845.9
|
|
|
910.6
|
Asset Impairments
During the three months ended March 31, 2015, the Company recognized a
miscellaneous asset impairment of $1 million at Corporate. During the
three months ended March 31, 2014, the Company recognized asset
impairments of $1 million at the Turner segment related to miscellaneous
assets and $5 million and $6 million at the Warner Bros. segment and
Corporate, respectively, related to certain internally developed
software.
Gain (Loss) on Operating Assets, Net
For the three months ended March 31, 2015, the Company recognized a $3
million loss at the Turner segment related to the remeasurement of its
previously held investment in Esporte Interativo (“EI”), a Brazilian
television network that airs sports programming, upon the Turner
segment’s acquisition of a controlling interest in EI. 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
space in Time Warner Center.
Venezuelan Foreign Currency Loss
For the three months ended March 31, 2015, the Company recognized a
pretax foreign exchange loss of $22 million, consisting of $17 million
at the Turner segment and $5 million at the Warner Bros. segment,
related to a change in the foreign currency exchange rate used by the
Company for remeasuring its Venezuelan net monetary assets from the
SICAD 2 rate to the Simadi rate.
Other
Other reflects external costs related to mergers, acquisitions or
dispositions of $2 million and $20 million for the three months ended
March 31, 2015 and 2014, respectively. External costs related to
mergers, acquisitions or dispositions for the three months ended
March 31, 2015 consisted of $1 million at the Warner Bros. segment and
$1 million at Corporate. 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 acquisition of the operations outside the U.S.
of Eyeworks Group and $7 million at Corporate related to the legal and
structural separation of Time Inc. from the Company (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 Losses, Net
For the three months ended March 31, 2015, the Company recognized $59
million of investment losses, net consisting of $56 million of fair
value adjustments relating to warrants to purchase common stock of
Central European Media Enterprises Ltd. held by the Company and $3
million of miscellaneous investment losses. For the three months ended
March 31, 2014, the Company recognized $5 million of investment losses,
net.
Amounts Related to the Separation of Time Warner Cable Inc.
For the three months ended March 31, 2015, the Company recognized $4
million of other loss related to changes in the value of a Time Warner
Cable Inc. (“TWC”) tax indemnification receivable, which has been
reflected in Other loss, net in the accompanying Consolidated Statement
of Operations. For the three months ended March 31, 2014, the Company
recognized $1 million of other expense related to the expiration,
exercise and net change in the estimated fair value of Time Warner
equity awards held by TWC employees, which has 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 months ended March 31, 2014, the Company recognized a loss
of $1 million, primarily related to a tax indemnification obligation
associated with the disposition of Warner Music Group (“WMG”) in 2004.
This amount has been reflected in Other loss, net in the accompanying
Consolidated Statement of Operations.
Amounts Related to the Separation of Time Inc.
For the three months ended March 31, 2015, the Company recognized $2
million of other loss reflecting pension and other retirement benefits
related to employees and former employees of Time Inc.
Items Affecting Comparability Relating to Equity Method Investments
For the three months ended March 31, 2015, the Company recognized $2
million of losses as its share of discontinued operations recorded by an
equity method investee.
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 Free Cash Flow to Cash Provided by Operations
from Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
Cash provided by operations
|
|
$
|
1,009
|
|
$
|
1,733
|
|
Add external costs related to mergers, acquisitions, investments or
dispositions
|
|
|
|
|
|
|
|
and contingent consideration payments
|
|
|
4
|
|
|
15
|
|
Add excess tax benefits from equity instruments
|
|
|
83
|
|
|
64
|
|
Less capital expenditures
|
|
|
(57)
|
|
|
(92)
|
|
Less principal payments on capital leases
|
|
|
(2)
|
|
|
(3)
|
|
Free Cash Flow
|
|
$
|
1,037
|
|
$
|
1,717
|
|
|
|
|
|
|
|
|
|
|
|
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 television, feature film, home video and videogame production and
distribution.
Note 2. INTERSEGMENT TRANSACTIONS
Revenues recognized by Time Warner’s segments on intersegment
transactions are as follows (millions):
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
Intersegment Revenues
|
|
|
|
|
|
|
|
Turner
|
|
$
|
24
|
|
$
|
20
|
|
Home Box Office
|
|
|
7
|
|
|
9
|
|
Warner Bros.
|
|
|
149
|
|
|
166
|
|
Total intersegment revenues
|
|
$
|
180
|
|
$
|
195
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
Home video and electronic delivery of theatrical
|
|
|
|
|
|
|
|
product revenues
|
|
$
|
369
|
|
$
|
382
|
|
Home video and electronic delivery of television
|
|
|
|
|
|
|
|
product revenues
|
|
|
106
|
|
|
114
|
Note 4. DISCONTINUED OPERATIONS, NET OF TAX
Discontinued operations, net of tax for the three months ended March 31,
2015 was income of $37 million primarily related to the final resolution
of a tax indemnification obligation associated with the disposition of
WMG. Discontinued operations, net of tax for the three months ended
March 31, 2014 was a loss of $73 million primarily related to the Time
Separation.
Copyright Business Wire 2015