Third-Quarter Highlights
-
Revenues increased 5% to $6.6 billion
-
Company posted Adjusted Operating Income of $1.8 billion and
Adjusted EPS of $1.25
-
Free Cash Flow totaled $2.9 billion in the first nine months of 2015
-
Company repurchased 41 million shares for $3.3 billion year-to-date
through October 30, 2015
Time Warner Inc. (NYSE:TWX) today reported financial results for its
third quarter ended September 30, 2015.
Chairman and Chief Executive Officer Jeff Bewkes said: “We had another
very good quarter, with Revenues up 5% and strong growth in Adjusted
Operating Income, which totaled $1.8 billion. Our revenue growth was led
by Warner Bros. and Home Box Office, and illustrated how our investments
in great content have been paying off in our traditional television
businesses, as well as in newer areas such as videogames. In September,
HBO received a record 43 Primetime Emmy Awards, the most of any network
for the 14th consecutive year. That included 12 awards for Game
of Thrones, setting a record for a series in a single year.”
Mr. Bewkes continued: “Warner Bros. solidified its position as the
leading producer of broadcast series on television with the debuts of Blindspot
and Supergirl - the two most-watched new shows among adults 18-49
this broadcast season. Supergirl represents one of the eight
shows on television this season based on IP from DC Entertainment, which
is also a driver behind the record year Warner Bros. is having in
videogames. Through the first three quarters of 2015, Warner Bros. was
the top videogames publisher in the U.S. At Turner, buoyed by our
coverage of the Major League Baseball playoffs, TBS is the #1
ad-supported cable network in primetime among adults 18-49 year-to-date.
Cartoon Network continued to gain share, ending the third quarter as the
#1 ad-supported cable network in total day among kids 6-11. Adult Swim
also stood out as ad-supported cable’s #1 total day network among adults
18-34 for the 30th consecutive quarter. And CNN continued to
grow its primetime ratings across all key demographics in the quarter.
Further demonstrating our continuing commitment to shareholder returns,
so far this year we’ve returned $4.2 billion to our shareholders through
share repurchases and dividends.”
Company Results
Revenues increased 5% to $6.6 billion due to growth at Warner Bros. and
Home Box Office, partially offset by higher intercompany eliminations
and a decline at Turner. Adjusted Operating Income grew 85% to $1.8
billion due to growth across all operating divisions, reflecting the
absence of programming charges incurred in 2014 at Turner and lower
restructuring and severance charges across all segments, partially
offset by higher intercompany eliminations. Revenues and Adjusted
Operating Income included the unfavorable impact of foreign exchange
rates of $290 million and $160 million, respectively, in the quarter.
Operating Income increased 89% to $1.8 billion.
The Company posted Adjusted Diluted Income per Common Share from
Continuing Operations (“Adjusted EPS”) of $1.25 versus
$1.22 for the prior year quarter. Excluding a net tax benefit of $639
million, programming charges at Turner and restructuring and severance
charges in the prior year quarter, Adjusted EPS would have been $0.97 in
the prior year quarter. Diluted Income per Common Share from Continuing
Operations was $1.26 compared to $1.11 in the prior year quarter.
For the first nine months of 2015, Cash Provided by Operations from
Continuing Operations reached $3.0 billion and Free Cash Flow totaled
$2.9 billion. As of September 30, 2015, Net Debt was $21.2 billion, up
from $19.8 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 October 30, 2015, the Company repurchased
approximately 41 million shares of common stock for approximately $3.3
billion. These amounts reflect the purchase of approximately 16 million
shares of common stock for approximately $1.2 billion since the amounts
reported in the Company's second quarter earnings release on August 5,
2015. At October 30, 2015, approximately $1.2 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 and nine months ended September 30, by line of business (millions).
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner
|
|
|
$
|
2,398
|
|
|
|
$
|
2,446
|
|
|
|
$
|
7,935
|
|
|
|
$
|
7,789
|
|
Home Box Office
|
|
|
1,367
|
|
|
|
1,304
|
|
|
|
4,203
|
|
|
|
4,060
|
|
Warner Bros.
|
|
|
3,190
|
|
|
|
2,775
|
|
|
|
9,687
|
|
|
|
8,711
|
|
Intersegment eliminations
|
|
|
(391
|
)
|
|
|
(282
|
)
|
|
|
(786
|
)
|
|
|
(726
|
)
|
Total Revenues
|
|
|
$
|
6,564
|
|
|
|
$
|
6,243
|
|
|
|
$
|
21,039
|
|
|
|
$
|
19,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss) (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner (b)
|
|
|
$
|
1,071
|
|
|
|
$
|
350
|
|
|
|
$
|
3,329
|
|
|
|
$
|
2,185
|
|
Home Box Office
|
|
|
519
|
|
|
|
380
|
|
|
|
1,485
|
|
|
|
1,396
|
|
Warner Bros.
|
|
|
388
|
|
|
|
241
|
|
|
|
1,062
|
|
|
|
857
|
|
Corporate
|
|
|
(58
|
)
|
|
|
(114
|
)
|
|
|
(249
|
)
|
|
|
(336
|
)
|
Intersegment eliminations (b)
|
|
|
(78
|
)
|
|
|
136
|
|
|
|
(109
|
)
|
|
|
135
|
|
Total Adjusted Operating Income
|
|
|
$
|
1,842
|
|
|
|
$
|
993
|
|
|
|
$
|
5,518
|
|
|
|
$
|
4,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner (b)
|
|
|
$
|
1,072
|
|
|
|
$
|
337
|
|
|
|
$
|
3,310
|
|
|
|
$
|
2,166
|
|
Home Box Office
|
|
|
519
|
|
|
|
380
|
|
|
|
1,485
|
|
|
|
1,392
|
|
Warner Bros.
|
|
|
385
|
|
|
|
237
|
|
|
|
1,050
|
|
|
|
840
|
|
Corporate (c)
|
|
|
(64
|
)
|
|
|
(119
|
)
|
|
|
(257
|
)
|
|
|
53
|
|
Intersegment eliminations (b)
|
|
|
(78
|
)
|
|
|
136
|
|
|
|
(109
|
)
|
|
|
135
|
|
Total Operating Income
|
|
|
$
|
1,834
|
|
|
|
$
|
971
|
|
|
|
$
|
5,479
|
|
|
|
$
|
4,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner
|
|
|
$
|
51
|
|
|
|
$
|
55
|
|
|
|
$
|
155
|
|
|
|
$
|
169
|
|
Home Box Office
|
|
|
22
|
|
|
|
22
|
|
|
|
68
|
|
|
|
69
|
|
Warner Bros.
|
|
|
88
|
|
|
|
100
|
|
|
|
262
|
|
|
|
293
|
|
Corporate
|
|
|
6
|
|
|
|
6
|
|
|
|
16
|
|
|
|
20
|
|
Intersegment eliminations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total Depreciation and Amortization
|
|
|
$
|
167
|
|
|
|
$
|
183
|
|
|
|
$
|
501
|
|
|
|
$
|
551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Adjusted Operating Income (Loss) and Operating Income (Loss) for the
three and nine months ended September 30, 2015 and 2014 included
restructuring and severance costs of (millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
Turner
|
|
|
$
|
(5
|
)
|
|
|
$
|
(199
|
)
|
|
|
$
|
(23
|
)
|
|
|
$
|
(223
|
)
|
|
|
|
|
Home Box Office
|
|
|
—
|
|
|
|
(48
|
)
|
|
|
(5
|
)
|
|
|
(57
|
)
|
|
|
|
|
Warner Bros.
|
|
|
(1
|
)
|
|
|
(45
|
)
|
|
|
(3
|
)
|
|
|
(50
|
)
|
|
|
|
|
Corporate
|
|
|
(3
|
)
|
|
|
(11
|
)
|
|
|
—
|
|
|
|
(16
|
)
|
|
|
|
|
Total Restructuring and Severance Costs
|
|
|
$
|
(9
|
)
|
|
|
$
|
(303
|
)
|
|
|
$
|
(31
|
)
|
|
|
$
|
(346
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
|
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 was a net charge to Time Warner of $343
million.
|
|
|
|
(c)
|
|
Operating Income (Loss) for the nine months ended September 30, 2014
included a $441 million gain in connection with the sale and
leaseback of the Company’s space in Time Warner Center.
|
Presented below is a discussion of the performance of Time Warner’s
segments for the third quarter of 2015. Unless otherwise noted, the
dollar amounts in parentheses represent year-over-year changes.
TURNER
Revenues decreased 2% ($48 million) to $2.4 billion, due to
declines of 15% ($18 million) in Content and other revenues, 1% ($17
million) in Subscription revenues and 1% ($13 million) in Advertising
revenues. Content and other revenues decreased due to lower subscription
video-on-demand revenues. The decline in Subscription revenues was due
to the impact of foreign exchange rates and a decline in domestic
subscribers, partially offset by higher domestic rates and local
currency growth at Turner’s international networks. Advertising revenues
decreased due to the impact of foreign exchange rates and the absence of
NASCAR programming, partially offset by local currency growth at
Turner’s international networks. Domestic advertising was flat in the
quarter.
Adjusted Operating Income increased 206% ($721 million) to $1.1
billion, as the decline in revenues was more than offset by lower
expenses, including decreased programming costs and lower restructuring
and severance costs. Programming costs decreased 45% primarily due to
the absence of the prior year quarter’s $482 million of charges related
to Turner’s decision to no longer air certain programming. Excluding
these charges in the prior year, programming costs decreased in the
high-single digits mainly due to the absence of NASCAR programming.
Operating Income increased 218% ($735 million) to $1.1 billion.
TNT’s NBA Opening Night doubleheader averaged 2.9 million total viewers,
up 24% over last year, and generated double-digit growth across all key
demographics. TBS’ Major League Baseball postseason coverage averaged
6.3 million total viewers, up close to 50% compared to last year, and
was the network’s most watched postseason ever. For the 30th
consecutive quarter, Adult Swim was ad-supported cable’s #1 total day
network among adults 18-34, and it was #1 among adults 18-49 in the
third quarter. CNN’s recent coverage of the Republican presidential
debate garnered over 23 million average viewers - making it CNN’s most
watched program ever - and the Democratic presidential debate reached
over 15 million average viewers - making it the most watched Democratic
debate ever on cable. CNN continued to grow primetime ratings across all
key demographics, up 39% and 35% for adults 18-49 and 25-54,
respectively, in the third quarter. Cartoon Network was once again the
only top 3 kids network to grow ratings in the quarter, and ranked as
the #1 ad-supported cable network in total day ratings among kids 6-11.
HOME BOX OFFICE
Revenues increased 5% ($63 million) to $1.4 billion, due to
increases of 4% ($44 million) in Subscription revenues and 13% ($19
million) in Content and other revenues. Subscription revenues grew
primarily due to higher domestic rates, partially offset by lower
international revenues, which included the impact of the
transfer to Turner of the operation of HBO’s basic cable network in
India. The increase in Content and other revenues primarily reflected
higher domestic licensing revenues.
Adjusted Operating Income increased 37% ($139 million) to $519
million, reflecting higher revenues and lower expenses. The decrease in
expenses was mainly due to lower restructuring and severance costs as
well as decreased distribution and programming costs, partially offset
by higher marketing and technology costs. Programming costs decreased 6%
primarily reflecting lower acquired theatrical programming costs. The
higher marketing and technology costs related to HBO NOW, HBO’s
stand-alone streaming service.
Operating Income increased 37% ($139 million) to $519 million.
In September, HBO received a record 43 Primetime Emmy Awards, the most
of any network for the 14th consecutive year, with Game
of Thrones receiving 12 awards, a record for a series in one year,
and Olive Kitteridge receiving eight awards, the second-most of
any program. HBO recently added Roku as a distributor for HBO NOW and
added support for streaming HBO NOW to Google’s Chromecast and Amazon’s
FireTV. In October, HBO Latin America Group announced plans to launch a
new streaming version of HBO GO for broadband-only subscribers in Latin
America and the Caribbean.
WARNER BROS.
Revenues increased 15% ($415 million) to $3.2 billion, reflecting
higher videogames and television licensing revenues, partially offset by
the impact of foreign exchange rates, the absence of revenues from a
patent license and settlement agreement in the prior year quarter and
lower theatrical revenues. The increase in videogames revenues was
primarily due to the releases of LEGO Dimensions and Mad Max,
as well as carryover revenues from several titles, including Mortal
Kombat X and Batman: Arkham Knight. Television licensing
revenues benefited from the initial cable and off-network availability
of 2 Broke Girls and the initial cable availability and
subscription video-on-demand licensing of Person of Interest.
Adjusted Operating Income increased 61% ($147 million) to $388
million, due to the increase in revenues, lower theatrical and
videogames valuation adjustments and decreased restructuring and
severance costs, partially offset by higher print and advertising costs.
Operating Income increased 62% ($148 million) to $385 million.
Season-to-date among adults 18-49: Blindspot and Supergirl
ranked as the top two new series, The Voice ranked as the #1
non-scripted series and The Big Bang Theory ranked as the #1
comedy and #2 series overall in primetime on broadcast television. For
the first nine months of the year, Warner Bros. ranked as the top U.S.
videogame publisher, and Mortal Kombat X was the #1 videogame.
CONSOLIDATED NET INCOME AND PER SHARE RESULTS
Third-Quarter Results
Adjusted EPS was $1.25 for the three months ended
September 30, 2015, compared to $1.22 in last year’s third quarter. The
increase in Adjusted EPS primarily reflects higher Adjusted Operating
Income and fewer shares outstanding, offset in part by higher taxes as a
result of the $639 million net tax benefit in the third quarter of 2014
mainly related to the reversal of certain tax reserves in connection
with an audit settlement.
For the three months ended September 30, 2015, the Company had Income
from Continuing Operations of $1.0 billion, or $1.26 per
diluted common share. This compares to Income from Continuing Operations
attributable to Time Warner common shareholders in the third quarter of
2014 of $966 million, or $1.11 per diluted common share.
For the third quarters of 2015 and 2014, the Company had Net Income of
$1.0 billion and $967 million, 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, November 4, 2015. To listen to the call, visit www.timewarner.com/investors.
|
TIME WARNER INC. CONSOLIDATED BALANCE SHEET (Unaudited;
millions, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
September 30, 2015
|
|
|
December 31, 2014
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and equivalents
|
|
|
$
|
1,774
|
|
|
|
$
|
2,618
|
|
Receivables, less allowances of $854 and $1,152
|
|
|
7,322
|
|
|
|
7,720
|
|
Inventories
|
|
|
1,973
|
|
|
|
1,700
|
|
Deferred income taxes
|
|
|
184
|
|
|
|
184
|
|
Prepaid expenses and other current assets
|
|
|
886
|
|
|
|
958
|
|
Total current assets
|
|
|
12,139
|
|
|
|
13,180
|
|
Noncurrent inventories and theatrical film and television production
costs
|
|
|
7,294
|
|
|
|
6,841
|
|
Investments, including available-for-sale securities
|
|
|
2,154
|
|
|
|
2,326
|
|
Property, plant and equipment, net
|
|
|
2,569
|
|
|
|
2,655
|
|
Intangible assets subject to amortization, net
|
|
|
1,001
|
|
|
|
1,141
|
|
Intangible assets not subject to amortization
|
|
|
7,027
|
|
|
|
7,032
|
|
Goodwill
|
|
|
27,702
|
|
|
|
27,565
|
|
Other assets
|
|
|
2,788
|
|
|
|
2,406
|
|
Total assets
|
|
|
$
|
62,674
|
|
|
|
$
|
63,146
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
$
|
7,597
|
|
|
|
$
|
7,507
|
|
Deferred revenue
|
|
|
607
|
|
|
|
579
|
|
Debt due within one year
|
|
|
199
|
|
|
|
1,118
|
|
Total current liabilities
|
|
|
8,403
|
|
|
|
9,204
|
|
Long-term debt
|
|
|
22,728
|
|
|
|
21,263
|
|
Deferred income taxes
|
|
|
2,006
|
|
|
|
2,204
|
|
Deferred revenue
|
|
|
293
|
|
|
|
315
|
|
Other noncurrent liabilities
|
|
|
5,567
|
|
|
|
5,684
|
|
Redeemable noncontrolling interest
|
|
|
29
|
|
|
|
—
|
|
Equity
|
|
|
|
|
|
|
Common stock, $0.01 par value, 1.652 billion and 1.652 billion
shares issued and
|
|
|
|
|
|
|
|
|
803 million and 832 million shares outstanding
|
|
|
17
|
|
|
|
17
|
|
Additional paid-in capital
|
|
|
148,309
|
|
|
|
149,282
|
|
Treasury stock, at cost (849 million and 820 million shares)
|
|
|
(45,048
|
)
|
|
|
(42,445
|
)
|
Accumulated other comprehensive loss, net
|
|
|
(1,392
|
)
|
|
|
(1,164
|
)
|
Accumulated deficit
|
|
|
(78,238
|
)
|
|
|
(81,214
|
)
|
Total equity
|
|
|
23,648
|
|
|
|
24,476
|
|
Total liabilities and equity
|
|
|
$
|
62,674
|
|
|
|
$
|
63,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC. CONSOLIDATED STATEMENT OF
OPERATIONS (Unaudited; millions, except per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
Revenues
|
|
|
$
|
6,564
|
|
|
|
$
|
6,243
|
|
|
|
$
|
21,039
|
|
|
|
$
|
19,834
|
|
Costs of revenues
|
|
|
(3,526
|
)
|
|
|
(3,681
|
)
|
|
|
(11,802
|
)
|
|
|
(11,457
|
)
|
Selling, general and administrative
|
|
|
(1,143
|
)
|
|
|
(1,226
|
)
|
|
|
(3,580
|
)
|
|
|
(3,713
|
)
|
Amortization of intangible assets
|
|
|
(47
|
)
|
|
|
(52
|
)
|
|
|
(138
|
)
|
|
|
(152
|
)
|
Restructuring and severance costs
|
|
|
(9
|
)
|
|
|
(303
|
)
|
|
|
(31
|
)
|
|
|
(346
|
)
|
Asset impairments
|
|
|
(7
|
)
|
|
|
(5
|
)
|
|
|
(8
|
)
|
|
|
(31
|
)
|
Gain (loss) on operating assets, net
|
|
|
2
|
|
|
|
(5
|
)
|
|
|
(1
|
)
|
|
|
451
|
|
Operating income
|
|
|
1,834
|
|
|
|
971
|
|
|
|
5,479
|
|
|
|
4,586
|
|
Interest expense, net
|
|
|
(294
|
)
|
|
|
(307
|
)
|
|
|
(874
|
)
|
|
|
(868
|
)
|
Other loss, net
|
|
|
(54
|
)
|
|
|
(135
|
)
|
|
|
(296
|
)
|
|
|
(140
|
)
|
Income from continuing operations before income taxes
|
|
|
1,486
|
|
|
|
529
|
|
|
|
4,309
|
|
|
|
3,578
|
|
Income tax benefit (provision)
|
|
|
(452
|
)
|
|
|
437
|
|
|
|
(1,371
|
)
|
|
|
(404
|
)
|
Income from continuing operations
|
|
|
1,034
|
|
|
|
966
|
|
|
|
2,938
|
|
|
|
3,174
|
|
Discontinued operations, net of tax
|
|
|
—
|
|
|
|
1
|
|
|
|
37
|
|
|
|
(65
|
)
|
Net income
|
|
|
1,034
|
|
|
|
967
|
|
|
|
2,975
|
|
|
|
3,109
|
|
Less Net loss attributable to noncontrolling interests
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
Net income attributable to Time Warner Inc. shareholders
|
|
|
$
|
1,035
|
|
|
|
$
|
967
|
|
|
|
$
|
2,976
|
|
|
|
$
|
3,109
|
|
Amounts attributable to Time Warner Inc. shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
$
|
1,035
|
|
|
|
$
|
966
|
|
|
|
$
|
2,939
|
|
|
|
$
|
3,174
|
|
Discontinued operations, net of tax
|
|
|
—
|
|
|
|
1
|
|
|
|
37
|
|
|
|
(65
|
)
|
Net income
|
|
|
$
|
1,035
|
|
|
|
$
|
967
|
|
|
|
$
|
2,976
|
|
|
|
$
|
3,109
|
|
Per share information attributable to Time Warner Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share from continuing operations
|
|
|
$
|
1.27
|
|
|
|
$
|
1.13
|
|
|
|
$
|
3.57
|
|
|
|
$
|
3.63
|
|
Discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
0.05
|
|
|
|
(0.08
|
)
|
Basic net income per common share
|
|
|
$
|
1.27
|
|
|
|
$
|
1.13
|
|
|
|
$
|
3.62
|
|
|
|
$
|
3.55
|
|
Average basic common shares outstanding
|
|
|
810.2
|
|
|
|
850.9
|
|
|
|
820.4
|
|
|
|
872.2
|
|
Diluted income per common share from continuing operations
|
|
|
$
|
1.26
|
|
|
|
$
|
1.11
|
|
|
|
$
|
3.52
|
|
|
|
$
|
3.56
|
|
Discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
0.04
|
|
|
|
(0.07
|
)
|
Diluted net income per common share
|
|
|
$
|
1.26
|
|
|
|
$
|
1.11
|
|
|
|
$
|
3.56
|
|
|
|
$
|
3.49
|
|
Average diluted common shares outstanding
|
|
|
824.1
|
|
|
|
870.2
|
|
|
|
835.5
|
|
|
|
891.6
|
|
Cash dividends declared per share of common stock
|
|
|
$
|
0.3500
|
|
|
|
$
|
0.3175
|
|
|
|
$
|
1.0500
|
|
|
|
$
|
0.9525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC. CONSOLIDATED STATEMENT OF CASH
FLOWS Nine Months Ended September 30, (Unaudited;
millions)
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
OPERATIONS
|
|
|
|
|
|
|
Net income
|
|
|
$
|
2,975
|
|
|
|
$
|
3,109
|
|
Less Discontinued operations, net of tax
|
|
|
(37
|
)
|
|
|
65
|
|
Net income from continuing operations
|
|
|
2,938
|
|
|
|
3,174
|
|
Adjustments for noncash and nonoperating items:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
501
|
|
|
|
551
|
|
Amortization of film and television costs
|
|
|
5,739
|
|
|
|
5,933
|
|
Asset impairments
|
|
|
8
|
|
|
|
31
|
|
Gain on investments and other assets, net
|
|
|
(39
|
)
|
|
|
(453
|
)
|
Equity in losses of investee companies, net of cash distributions
|
|
|
160
|
|
|
|
136
|
|
Equity-based compensation
|
|
|
154
|
|
|
|
174
|
|
Deferred income taxes
|
|
|
(176
|
)
|
|
|
(315
|
)
|
Changes in operating assets and liabilities, net of acquisitions
|
|
|
(6,284
|
)
|
|
|
(6,557
|
)
|
Cash provided by operations from continuing operations
|
|
|
3,001
|
|
|
|
2,674
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Investments in available-for-sale securities
|
|
|
(41
|
)
|
|
|
(30
|
)
|
Investments and acquisitions, net of cash acquired
|
|
|
(344
|
)
|
|
|
(878
|
)
|
Capital expenditures
|
|
|
(250
|
)
|
|
|
(316
|
)
|
Investment proceeds from available-for-sale securities
|
|
|
1
|
|
|
|
17
|
|
Proceeds from Time Inc. in the Time Separation
|
|
|
—
|
|
|
|
1,400
|
|
Proceeds from the sale of Time Warner Center
|
|
|
—
|
|
|
|
1,264
|
|
Other investment proceeds
|
|
|
133
|
|
|
|
125
|
|
Cash provided (used) by investing activities from continuing
operations
|
|
|
(501
|
)
|
|
|
1,582
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Borrowings
|
|
|
2,877
|
|
|
|
2,406
|
|
Debt repayments
|
|
|
(2,341
|
)
|
|
|
(21
|
)
|
Proceeds from exercise of stock options
|
|
|
148
|
|
|
|
276
|
|
Excess tax benefit from equity instruments
|
|
|
141
|
|
|
|
138
|
|
Principal payments on capital leases
|
|
|
(8
|
)
|
|
|
(8
|
)
|
Repurchases of common stock
|
|
|
(3,030
|
)
|
|
|
(4,481
|
)
|
Dividends paid
|
|
|
(869
|
)
|
|
|
(841
|
)
|
Other financing activities
|
|
|
(258
|
)
|
|
|
(147
|
)
|
Cash used by financing activities from continuing operations
|
|
|
(3,340
|
)
|
|
|
(2,678
|
)
|
Cash provided (used) by continuing operations
|
|
|
(840
|
)
|
|
|
1,578
|
|
Cash used by operations from discontinued operations
|
|
|
(4
|
)
|
|
|
(10
|
)
|
Cash used by investing activities from discontinued operations
|
|
|
—
|
|
|
|
(51
|
)
|
Cash used by financing activities from discontinued operations
|
|
|
—
|
|
|
|
(36
|
)
|
Effect of change in cash and equivalents of discontinued operations
|
|
|
—
|
|
|
|
(87
|
)
|
Cash used by discontinued operations
|
|
|
(4
|
)
|
|
|
(184
|
)
|
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
|
|
|
(844
|
)
|
|
|
1,394
|
|
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
2,618
|
|
|
|
1,816
|
|
CASH AND EQUIVALENTS AT END OF PERIOD
|
|
|
$
|
1,774
|
|
|
|
$
|
3,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
|
Asset
Impairments
|
|
|
Gain (Loss) on Operating Assets, Net
|
|
|
Venezuelan Foreign Currency Loss
|
|
|
Other
|
|
|
Operating Income (Loss)
|
Turner
|
|
|
$
|
1,071
|
|
|
|
$
|
(1
|
)
|
|
|
$
|
2
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
1,072
|
|
Home Box Office
|
|
|
519
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
519
|
|
Warner Bros.
|
|
|
388
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
385
|
|
Corporate
|
|
|
(58
|
)
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(64
|
)
|
Intersegment eliminations
|
|
|
(78
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(78
|
)
|
Time Warner
|
|
|
$
|
1,842
|
|
|
|
$
|
(7
|
)
|
|
|
$
|
2
|
|
|
|
$
|
—
|
|
|
|
$
|
(3
|
)
|
|
|
$
|
1,834
|
|
Margin(a)
|
|
|
28.1
|
%
|
|
|
(0.1
|
)%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
(0.1
|
)%
|
|
|
27.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
|
Asset Impairments
|
|
|
Gain (Loss) on Operating Assets, Net
|
|
|
Venezuelan Foreign Currency Loss
|
|
|
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
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
|
Asset Impariments
|
|
|
Gain (Loss) on Operating Assets, Net
|
|
|
Venezuelan Foreign Currency Loss
|
|
|
Other
|
|
|
Operating Income (Loss)
|
Turner
|
|
|
$
|
3,329
|
|
|
|
$
|
(1
|
)
|
|
|
$
|
—
|
|
|
|
$
|
(17
|
)
|
|
$(1
|
)
|
|
|
$
|
3,310
|
|
Home Box Office
|
|
|
1,485
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,485
|
|
Warner Bros.
|
|
|
1,062
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
1,050
|
|
Corporate
|
|
|
(249
|
)
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(257
|
)
|
Intersegment eliminations
|
|
|
(109
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(109
|
)
|
Time Warner
|
|
|
$
|
5,518
|
|
|
|
$
|
(8
|
)
|
|
|
$
|
(1
|
)
|
|
|
$
|
(22
|
)
|
|
|
$
|
(8
|
)
|
|
|
$
|
5,479
|
|
Margin(a)
|
|
|
26.2
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
(0.1
|
)%
|
|
|
(0.1
|
)%
|
|
|
26.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
|
Asset
Impairments
|
|
|
Gain (Loss) on Operating Assets, Net
|
|
|
Venezuelan Foreign Currency Loss
|
|
|
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
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. shareholders
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
Asset impairments
|
|
|
$
|
(7
|
)
|
|
|
$
|
(5
|
)
|
|
|
$
|
(8
|
)
|
|
|
$
|
(31
|
)
|
Gain (loss) on operating assets, net
|
|
|
2
|
|
|
|
(5
|
)
|
|
|
(1
|
)
|
|
|
451
|
|
Venezuelan foreign currency loss
|
|
|
—
|
|
|
|
—
|
|
|
|
(22
|
)
|
|
|
—
|
|
Other
|
|
|
(3
|
)
|
|
|
(12
|
)
|
|
|
(8
|
)
|
|
|
(71
|
)
|
Impact on Operating Income
|
|
|
(8
|
)
|
|
|
(22
|
)
|
|
|
(39
|
)
|
|
|
349
|
|
Investment gains (losses), net
|
|
|
15
|
|
|
|
(78
|
)
|
|
|
(70
|
)
|
|
|
(57
|
)
|
Amounts related to the separation of Time Warner Cable Inc.
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
(1
|
)
|
Amounts related to the disposition of Warner Music Group
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
Amounts related to the separation of Time Inc.
|
|
|
(2
|
)
|
|
|
2
|
|
|
|
(7
|
)
|
|
|
2
|
|
Premiums paid and costs incurred on debt redemption
|
|
|
(21
|
)
|
|
|
—
|
|
|
|
(72
|
)
|
|
|
—
|
|
Items affecting comparability relating to equity method investments
|
|
|
17
|
|
|
|
(5
|
)
|
|
|
(4
|
)
|
|
|
(25
|
)
|
Pretax impact
|
|
|
(3
|
)
|
|
|
(102
|
)
|
|
|
(200
|
)
|
|
|
268
|
|
Income tax impact of above items
|
|
|
9
|
|
|
|
7
|
|
|
|
55
|
|
|
|
84
|
|
Impact of items affecting comparability on income from continuing
operations
|
|
|
$
|
6
|
|
|
|
$
|
(95
|
)
|
|
|
$
|
(145
|
)
|
|
|
$
|
352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Time Warner Inc. shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
$
|
1,035
|
|
|
|
$
|
966
|
|
|
|
$
|
2,939
|
|
|
|
$
|
3,174
|
|
Less Impact of items affecting comparability on income from
continuing operations
|
|
|
6
|
|
|
|
(95
|
)
|
|
|
(145
|
)
|
|
|
352
|
|
Adjusted income from continuing operations
|
|
|
$
|
1,029
|
|
|
|
$
|
1,061
|
|
|
|
$
|
3,084
|
|
|
|
$
|
2,822
|
|
Per share information attributable to Time Warner Inc. common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share from continuing operations
|
|
|
$
|
1.26
|
|
|
|
$
|
1.11
|
|
|
|
$
|
3.52
|
|
|
|
$
|
3.56
|
|
Less Impact of items affecting comparability on diluted net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income per common share from continuing operations
|
|
|
0.01
|
|
|
|
(0.11
|
)
|
|
|
(0.17
|
)
|
|
|
0.39
|
|
Adjusted EPS
|
|
|
$
|
1.25
|
|
|
|
$
|
1.22
|
|
|
|
$
|
3.69
|
|
|
|
$
|
3.17
|
|
Average diluted common shares outstanding
|
|
|
824.1
|
|
|
|
870.2
|
|
|
|
835.5
|
|
|
|
891.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Impairments
During the three and nine months ended September 30, 2015, the Company
recognized asset impairments of $7 million and $8 million, respectively,
which consisted of $5 million and $6 million, respectively, at Corporate
primarily related to certain internally developed software, and $1
million for both the three and nine months ended September 30, 2015 at
both the Turner and Warner Bros. segments relating to miscellaneous
assets.
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.
Gain (Loss) on Operating Assets, Net
For the three and nine months ended September 30, 2015, the Company
recognized a $2 million gain on operating assets at the Turner segment
reflecting a $3 million gain upon its acquisition of the controlling
interest of iStreamPlanet Co., LLC and a $1 million loss on the sale of
a business. For the nine months ended September 30, 2015, the Company
also recognized $2 million of net losses at the Turner segment related
to the remeasurement of certain previously held investments upon the
Turner segment’s acquisition of controlling interests in those
investments as well as a $1 million loss at the Warner Bros. segment.
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.
Venezuelan Foreign Currency Loss
For the nine months ended September 30, 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. The Venezuelan foreign currency loss is
included in Selling, general and administrative expenses in the
accompanying Consolidated Statement of Operations.
Other
Other reflects external costs related to mergers, acquisitions or
dispositions of $3 million and $8 million for the three and nine months
ended September 30, 2015, respectively, and $12 million and $71 million
for the three and nine months ended September 30, 2014, respectively.
External costs related to mergers, acquisitions or dispositions for the
three and nine months ended September 30, 2015 consisted of $0 and $1
million, respectively, at the Turner segment, $2 million and $5 million,
respectively, at the Warner Bros. segment and $1 million and $2 million,
respectively, at Corporate. 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 the international operations of Eyeworks Group and $4
million and $45 million, respectively, 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 Gains (Losses), Net
For the three and nine months ended September 30, 2015, the Company
recognized $15 million of net investment gains and $70 million of net
investment losses consisting of $5 million and $110 million,
respectively, of losses related to fair value adjustments on warrants to
purchase common stock of Central European Media Enterprises Ltd. (“CME”)
held by the Company and $20 million and $40 million, respectively, of
net miscellaneous investment gains.
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
warrants to purchase CME common stock held by the Company 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.
Amounts Related to the Separation of Time Warner Cable Inc.
For the three and nine months ended September 30, 2015, the Company
recognized $4 million of other loss related to payments made to Time
Warner Cable Inc. (“TWC”) in accordance with a tax sharing agreement
with TWC and for the nine months ended September 30, 2015, the Company
also recognized $4 million of other loss related to changes in the value
of a TWC tax indemnification receivable. The Company recognized other
expense of $1 million for the nine months ended September 30, 2014
related to the expiration, exercise and net change in the estimated fair
value of Time Warner equity awards held by TWC employees. The amounts
related to the separation of Time Warner Cable Inc. have 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 September 30, 2014, the Company recognized
other income 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 Time Separation
For the three and nine months ended September 30, 2015, the Company
recognized $2 million and $7 million, respectively, of other loss
primarily reflecting pension and other retirement benefits related to
employees and former employees of Time Inc. 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.
Premiums Paid and Costs Incurred on Debt Redemption
For the three and nine months ended September 30, 2015, the Company
recognized $21 million of premiums paid and costs incurred principally
on the redemption of $313 million aggregate principal amount of its
5.875% Notes due 2016 (the “2016 Notes”). For the nine months ended
September 30, 2015, the Company also recognized $51 million of premiums
paid and costs incurred on the purchase of $687 million aggregate
principal amount of its 2016 Notes through a tender offer. The premiums
paid and costs incurred on debt redemption were recorded in Other loss,
net in the accompanying Consolidated Statement of Operations.
Items Affecting Comparability Relating to Equity Method Investments
For the three and nine months ended September 30, 2015, the Company
recognized a $3 million asset impairment recorded by an equity method
investee for both periods and $2 million of income and $1 million of
losses, respectively, from discontinued operations recorded by an equity
method investee. In addition, for the three months ended September 30,
2015, the Company recognized an $18 million reversal of an accrual
related to government investigations recorded by an equity method
investee. For the three and nine months ended September 30, 2014, the
Company recognized $4 million of expenses related to a government
investigation of an equity method investee and $1 million and $9
million, respectively, of losses related to discontinued operations
recorded by an equity method investee. In addition, for the nine months
ended September 30, 2014, the Company recognized a $12 million loss on
the extinguishment of debt recorded by an equity method investee. These
amounts have been reflected in Other loss, net in the 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 Free Cash Flow to Cash Provided by Operations
from Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
Cash provided by operations from continuing operations
|
|
|
$
|
1,201
|
|
|
$
|
617
|
|
|
|
$
|
3,001
|
|
|
$
|
2,674
|
|
Add external costs related to mergers, acquisitions,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investments or dispositions and contingent consideration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
payments
|
|
|
1
|
|
|
28
|
|
|
|
9
|
|
|
60
|
|
Add excess tax benefits from equity instruments
|
|
|
21
|
|
|
43
|
|
|
|
141
|
|
|
138
|
|
Less capital expenditures
|
|
|
(96
|
)
|
|
(110
|
)
|
|
|
(250
|
)
|
|
(316
|
)
|
Less principal payments on capital leases
|
|
|
(3
|
)
|
|
(3
|
)
|
|
|
(8
|
)
|
|
(8
|
)
|
Free Cash Flow
|
|
|
$
|
1,124
|
|
|
$
|
575
|
|
|
|
$
|
2,893
|
|
|
$
|
2,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
Intersegment Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner
|
|
|
$
|
23
|
|
|
|
$
|
19
|
|
|
|
$
|
81
|
|
|
|
$
|
76
|
Home Box Office
|
|
|
4
|
|
|
|
8
|
|
|
|
22
|
|
|
|
27
|
Warner Bros.
|
|
|
364
|
|
|
|
255
|
|
|
|
683
|
|
|
|
623
|
Total intersegment revenues
|
|
|
$
|
391
|
|
|
|
$
|
282
|
|
|
|
$
|
786
|
|
|
|
$
|
726
|
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 September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
Home video and electronic delivery of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
theatrical product revenues
|
|
|
$
|
355
|
|
|
$
|
390
|
|
|
|
$
|
1,185
|
|
|
$
|
1,335
|
Home video and electronic delivery of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
television product revenues
|
|
|
143
|
|
|
144
|
|
|
|
341
|
|
|
368
|
Note 4. DISCONTINUED OPERATIONS, NET OF TAX
Discontinued operations, net of tax for the nine months ended
September 30, 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
and nine months ended September 30, 2014 was income of $1 million and a
loss of $65 million, respectively, primarily related to the Time
Separation.
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Copyright Business Wire 2015