Full-Year Highlights
-
Revenues increased 3% to $28.1 billion
-
Company posted Adjusted Operating Income of $6.9 billion
-
Adjusted EPS grew 14% to $4.75
-
Free Cash Flow totaled $3.6 billion
-
Company repurchased 45 million shares for $3.6 billion
-
Board authorized a 15% increase in quarterly dividend for March
2016 and new $5 billion share repurchase program
Time Warner Inc. (NYSE:TWX) today reported financial results for its
fourth quarter and full year ended December 31, 2015.
Chairman and Chief Executive Officer Jeff Bewkes said: “We had another
very successful year in 2015, demonstrating once again Time Warner’s
ability to deliver strong financial performance as well as creative and
programming excellence. Revenues grew 3% and Adjusted Operating Income
was up 19%. All three of our operating divisions increased revenue and
profits while also investing to capitalize on the shift to on-demand
viewing and growing worldwide demand for the very best video content.
Warner Bros. had its best year ever in videogames, led by Mortal
Kombat X and Batman: Arkham Knight, and remained the number
one supplier of broadcast television programming, including the biggest
new hit of the TV season in Blindspot. As we embark on what
promises to be a very strong year for Warner Bros. theatrically, Mad
Max: Fury Road and Creed received a combined 11 nominations
for the 88th Academy Awards.
Mr. Bewkes continued: “Home Box Office grew subscribers both on its
linear networks and through HBO NOW, our new stand-alone streaming
service. Once again, HBO distinguished itself with the combination of
the biggest Hollywood hits and best original programming. In 2015, HBO
received 43 Primetime Emmys, the most in a single year by any network in
at least 25 years — led by a record 12 Emmys for Game of Thrones.
Turner continued to prove its tremendous value to its audiences,
distributors, and advertisers with TBS, TNT and Adult Swim all ranking
among ad-supported cable’s top 10 networks in primetime among adults
18-49 for the year. CNN was the fastest-growing top 40 cable network in
its key demographic in the U.S. for the year, and Cartoon Network was
the only top 3 kids network to grow ratings. Further demonstrating our
commitment to shareholder returns, during 2015 we returned $4.8 billion
to our shareholders through share repurchases and dividends, and this
morning announced a 15% increase to our dividend and a new $5 billion
share repurchase program.”
Full-Year Company Results
Full-year revenues and Adjusted Operating Income increased 3% and 19%
from 2014 to $28.1 billion and $6.9 billion, respectively,
due to growth across all operating divisions. The growth in Adjusted
Operating Income benefited from lower programming charges at Turner and
restructuring and severance charges across the Company, partially offset
by a swing in intersegment eliminations. Revenues and Adjusted Operating
Income included the unfavorable impact of foreign exchange rates of
approximately $1.1 billion and $480 million, respectively, in the year.
Operating Income increased 15% from 2014 to $6.9 billion.
The Company posted 2015 Adjusted Diluted Income per Common Share from
Continuing Operations (“Adjusted EPS”) of $4.75, up 14% from $4.15 in
the prior year. Adjusted EPS included the unfavorable impact of foreign
exchange rates of $0.50 in the current year. Diluted Income per Common
Share from Continuing Operations was $4.58 in 2015 compared to $4.41 in
2014.
In 2015, Cash Provided by Operations from Continuing Operations reached
$3.9 billion and Free Cash Flow totaled $3.6 billion. As of December 31,
2015, Net Debt was $21.6 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.
Fourth-Quarter Company Results
Revenues decreased 6% to $7.1 billion due to a decline at Warner Bros.,
partially offset by increases at Home Box Office and Turner. Adjusted
Operating Income declined 12% to $1.4 billion due to decreases at all
operating divisions as well as a swing in intercompany eliminations.
Revenues and Adjusted Operating Income included the unfavorable impact
of foreign exchange rates of approximately $270 million and $115
million, respectively, in the quarter. Operating Income was flat at $1.4
billion as the prior year quarter included a $173 million foreign
currency charge related to the remeasurement of net monetary assets
denominated in Venezuelan currency resulting from a change in the
foreign currency exchange rate used by the Company.
The Company posted Adjusted EPS of $1.06, up 8% versus
$0.98 for the prior year quarter. Adjusted EPS included the unfavorable
impact of foreign exchange rates of $0.12 in the current year quarter.
Diluted Income per Common Share from Continuing Operations was $1.06
compared to $0.84 in the prior year quarter.
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 February 5, 2016, the Company repurchased
approximately 52 million shares of common stock for approximately $4.1
billion. These amounts reflect the purchase of approximately 11 million
shares of common stock for approximately $787 million since the amounts
reported in the Company’s third quarter earnings release on November 4,
2015.
In January 2016, the Company’s Board of Directors authorized a total of
$5 billion in share repurchases beginning January 1, 2016,
including the amount remaining under the prior authorization.
Regular Quarterly Dividend
On February 9, 2016, the Company’s Board of Directors increased the
Company’s regular quarterly dividend by 15% to $0.4025 per share.
Segment Performance
The schedule below reflects Time Warner’s financial performance for the
three months and year ended December 31, by line of business (millions).
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues:
|
|
|
|
|
|
|
|
|
Turner
|
|
$
|
2,661
|
|
|
$
|
2,607
|
|
|
$
|
10,596
|
|
|
$
|
10,396
|
|
Home Box Office
|
|
1,412
|
|
|
1,338
|
|
|
5,615
|
|
|
5,398
|
|
Warner Bros.
|
|
3,305
|
|
|
3,815
|
|
|
12,992
|
|
|
12,526
|
|
Intersegment eliminations
|
|
(299
|
)
|
|
(235
|
)
|
|
(1,085
|
)
|
|
(961
|
)
|
Total Revenues
|
|
$
|
7,079
|
|
|
$
|
7,525
|
|
|
$
|
28,118
|
|
|
$
|
27,359
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss) (a):
|
|
|
|
|
|
|
|
|
Turner (b)(c)
|
|
$
|
781
|
|
|
$
|
921
|
|
|
$
|
4,110
|
|
|
$
|
3,106
|
|
Home Box Office
|
|
393
|
|
|
394
|
|
|
1,878
|
|
|
1,790
|
|
Warner Bros.
|
|
373
|
|
|
391
|
|
|
1,435
|
|
|
1,248
|
|
Corporate
|
|
(102
|
)
|
|
(124
|
)
|
|
(351
|
)
|
|
(460
|
)
|
Intersegment eliminations (b)(c)
|
|
(40
|
)
|
|
14
|
|
|
(149
|
)
|
|
149
|
|
Total Adjusted Operating Income
|
|
$
|
1,405
|
|
|
$
|
1,596
|
|
|
$
|
6,923
|
|
|
$
|
5,833
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) (a)(d)(e):
|
|
|
|
|
|
|
|
|
Turner (b)(c)
|
|
$
|
777
|
|
|
$
|
788
|
|
|
$
|
4,087
|
|
|
$
|
2,954
|
|
Home Box Office
|
|
393
|
|
|
394
|
|
|
1,878
|
|
|
1,786
|
|
Warner Bros.
|
|
366
|
|
|
319
|
|
|
1,416
|
|
|
1,159
|
|
Corporate (f)
|
|
(110
|
)
|
|
(126
|
)
|
|
(367
|
)
|
|
(73
|
)
|
Intersegment eliminations (b)(c)
|
|
(40
|
)
|
|
14
|
|
|
(149
|
)
|
|
149
|
|
Total Operating Income
|
|
$
|
1,386
|
|
|
$
|
1,389
|
|
|
$
|
6,865
|
|
|
$
|
5,975
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
Turner
|
|
$
|
54
|
|
|
$
|
56
|
|
|
$
|
209
|
|
|
$
|
225
|
|
Home Box Office
|
|
27
|
|
|
22
|
|
|
95
|
|
|
91
|
|
Warner Bros.
|
|
94
|
|
|
97
|
|
|
356
|
|
|
390
|
|
Corporate
|
|
5
|
|
|
7
|
|
|
21
|
|
|
27
|
|
Intersegment eliminations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Depreciation and Amortization
|
|
$
|
180
|
|
|
$
|
182
|
|
|
$
|
681
|
|
|
$
|
733
|
|
__________________________
(a)
|
|
Adjusted Operating Income (Loss) and Operating Income (Loss) for the
following periods included restructuring and severance costs of
(millions):
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Turner
|
|
$
|
(35
|
)
|
|
$
|
(26
|
)
|
|
$
|
(58
|
)
|
|
$
|
(249
|
)
|
Home Box Office
|
|
5
|
|
|
(6
|
)
|
|
—
|
|
|
(63
|
)
|
Warner Bros.
|
|
2
|
|
|
(119
|
)
|
|
(1
|
)
|
|
(169
|
)
|
Corporate
|
|
(1
|
)
|
|
(15
|
)
|
|
(1
|
)
|
|
(31
|
)
|
Total Restructuring and Severance Costs
|
|
$
|
(29
|
)
|
|
$
|
(166
|
)
|
|
$
|
(60
|
)
|
|
$
|
(512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
|
Adjusted Operating Income (Loss) and Operating Income (Loss) for the
three months and year ended December 31, 2015 included $131 million
of programming charges at Turner. The charges for the three months
and year ended December 31, 2015 were partially offset by $2 million
of intersegment eliminations primarily related to intersegment
profits on programming Warner Bros. licensed to Turner.
|
(c)
|
|
Adjusted Operating Income (Loss) and Operating Income (Loss) for the
three months and year ended December 31, 2014 included $44 million
and $526 million, respectively, of programming charges at Turner.
The charges for the three months and year ended December 31, 2014
were increased by $1 million and partially offset by $138 million,
respectively, of intersegment eliminations primarily related to
intersegment profits on programming Warner Bros. licensed to Turner.
|
(d)
|
|
Operating Income (Loss) for the year ended December 31, 2015
included the impact of a $22 million foreign currency charge related
to the remeasurement of the Company’s net monetary assets
denominated in Venezuelan currency resulting from a change in the
foreign currency exchange rate used by the Company from the SICAD 2
exchange rate to the Simadi rate.
|
(e)
|
|
Operating Income (Loss) for both the three months and year ended
December 31, 2014 included the impact of a $173 million foreign
currency charge related to the remeasurement of the Company’s net
monetary assets denominated in Venezuelan currency resulting from a
change in the foreign currency exchange rate used by the Company
from the official rate to the SICAD 2 exchange rate.
|
(f)
|
|
Operating Income (Loss) for the year ended December 31, 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 fourth quarter and full year of 2015. Unless otherwise
noted, the dollar amounts in parentheses represent year-over-year
changes.
TURNER
Full-Year Results
Revenues increased 2% ($200 million) to $10.6 billion, benefiting
from increases of 16% ($88 million) in Content and other revenues, 2%
($69 million) in Advertising revenues and 1% ($43 million) in
Subscription revenues. The increase in Content and other revenues was
due to higher subscription video-on-demand revenues, primarily from
licensing select Turner original programming to Hulu. Advertising
revenues benefited from domestic growth, primarily due to Turner’s news
business, and local currency growth at Turner’s international networks,
partially offset by the impact of foreign exchange rates. The increase
in Subscription revenues was due to higher domestic rates and local
currency growth at Turner’s international networks, partially offset by
the impact of foreign exchange rates and lower domestic subscribers.
Adjusted Operating Income increased 32% ($1.0 billion) to $4.1
billion primarily due to lower programming and restructuring and
severance expenses. Programming costs declined 11% due to a decrease in
programming charges ($395 million). Excluding the charges from both
years, programming costs declined in the low single digits primarily due
to lower syndicated programming expenses as a result of the abandonment
of certain programming in 2014 and the absence of NASCAR programming,
partially offset by higher costs associated with airing the MLB playoffs.
Operating Income increased 38% ($1.1 billion) to $4.1 billion.
The current and prior years included $17 million and $137 million,
respectively, of foreign currency charges related to the remeasurement
of Turner’s net monetary assets denominated in Venezuelan currency.
In 2015: TBS, TNT and Adult Swim ranked among ad-supported cable’s top
10 networks in primetime among adults 18-49, TBS was the #1 ad-supported
cable network in primetime among adults 25-54 and the #1 ad-supported
entertainment cable network in primetime among adults 18-49, CNN was the
fastest growing top 40 cable network in the U.S. among adults 25-54 and
CNN.com was the most viewed digital news source. Cartoon Network was the
only top 3 kids network to grow ratings in 2015, and in December 2015,
was the #1 cable network in VOD in the U.S., a position it has held for
21 straight months. Bleacher Report ranked as the #2 digital sports
destination averaging 37 million monthly unique visitors across its
desktop and mobile platforms in 2015.
Fourth-Quarter Results
Revenues increased 2% ($54 million) to $2.7 billion, due to an
increase of 5% ($52 million) in Advertising revenues. Subscription
and Content and other revenues were essentially flat in
the quarter. Advertising revenues increased due to domestic growth and
local currency growth at Turner’s international networks, partially
offset by the impact of foreign exchange rates. The increase in domestic
advertising revenues was due to growth at Turner’s news business and the
airing of the MLB playoffs, including additional games in the quarter.
Subscription revenues benefited from domestic growth and local currency
growth at Turner’s international networks, offset by the impact of
foreign exchange rates. Domestic subscription revenues increased due to
higher rates and the favorable comparison to the impact of a contract
dispute with a distributor in the prior year’s quarter, partially offset
by lower subscribers.
Adjusted Operating Income decreased 15% ($140 million) to
$781 million as the increase in revenues was more than offset by higher
programming expenses. Programming costs grew 22% primarily due to higher
programming charges ($87 million). Excluding the charges from both
periods, programming costs grew in the low teens mainly due to higher
costs associated with airing the MLB playoffs, including additional
games in the quarter, and the timing of original programming.
Operating Income declined 1% ($11 million) to $777 million as the
prior year quarter included the $137 million foreign currency charge.
HOME BOX OFFICE
Full-Year Results
Revenues increased 4% ($217 million) to $5.6 billion, due to
increases of 4% ($170 million) in Subscription revenues and 6% ($47
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 reflects
higher licensing revenues, partially offset by lower home entertainment
revenues.
Adjusted Operating Income rose 5% ($88 million) to $1.9 billion,
reflecting the higher revenues partially offset by increased expenses.
The growth in expenses was mainly due to higher marketing and technology
costs related to HBO NOW, HBO’s stand-alone streaming service, as well
as higher programming costs, partially offset by lower restructuring and
severance costs. Programming costs grew 3% reflecting higher original
programming expenses, including programming charges.
Operating Income increased 5% ($92 million) to $1.9 billion.
In 2015, HBO and Cinemax added a total of 2.7 million domestic
subscribers, including from HBO NOW. In 2015, 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. For the 88th
Academy Awards, HBO received 3 nominations for Documentary (Short
Subject).
Fourth-Quarter Results
Revenues increased 6% ($74 million) to $1.4 billion, due to
increases of 3% ($37 million) in Subscription revenues and 20% ($37
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 international licensing revenues, partially offset by lower home
entertainment revenues.
Adjusted Operating Income was essentially flat at $393 million as
the increase in revenues was offset by higher expenses. The increase in
expenses was mainly due to higher programming costs as well as higher
marketing and technology costs related to HBO NOW. Programming costs
increased 11% primarily due to programming charges.
Operating Income was essentially flat at $393 million.
WARNER BROS.
Full-Year Results
Revenues increased 4% ($466 million) to $13.0 billion, reflecting
higher videogames and television revenues, partially offset by lower
theatrical and home entertainment revenues as well as the impact of
foreign exchange rates. The increase in videogames revenues was mainly
due to the releases of Mortal Kombat X, LEGO Dimensions
and Batman: Arkham Knight. Television revenues increased
primarily due to higher licensing revenues, including from the domestic
availabilities of 2 Broke Girls, The Big Bang Theory, Person
of Interest, Friends and Seinfeld. Theatrical revenues
declined as the prior year included revenues from the final two
installments of The Hobbit trilogy as well as The LEGO Movie
and Godzilla.
Adjusted Operating Income increased 15% ($187 million) to $1.4
billion, reflecting higher revenues as well as lower restructuring and
severance charges and related cost-savings.
Operating Income increased 22% ($257 million) to $1.4 billion.
The prior year included a $36 million foreign currency charge related to
the remeasurement of Warner Bros.’ net monetary assets denominated in
Venezuelan currency and $41 million of asset impairments.
Warner Bros. has over 65 series airing on television for 2015-2016
television season, including 32 primetime series on broadcast networks,
the most of any studio for the 12th time in the past 13
seasons. Season-to-date among adults 18-49: Blindspot ranked as
the #1 new series, The Voice ranked as the #1 non-scripted series
and The Big Bang Theory ranked as the #1 comedy in primetime on
broadcast television. In 2015, Warner Bros. ranked as the #3 U.S.
videogame publisher producing two of the top ten titles and remained #1
domestically in overall home entertainment. For the 88th
Academy Awards, Warner Bros. received 11 nominations, including a Best
Picture nomination for Mad Max: Fury Road.
Fourth-Quarter Results
Revenues decreased 13% ($510 million) to $3.3 billion, mainly due
to lower theatrical revenues, as the prior year quarter included the
releases of The Hobbit: The Battle of the Five Armies, Interstellar
and Annabelle, as well as the impact of foreign exchange rates.
Adjusted Operating Income decreased 5% ($18 million) to $373
million, due to the decline in revenues partially offset by lower
restructuring and severance charges and theatrical valuation adjustments.
Operating Income increased 15% ($47 million) to $366 million. The
prior year quarter included the $36 million foreign currency charge and
$36 million of asset impairments.
CONSOLIDATED NET INCOME AND PER SHARE RESULTS
Full-Year Results
Adjusted EPS was $4.75 for the year ended December 31,
2015, compared to $4.15 in 2014. 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 a $639 million net tax
benefit in 2014, which was mainly related to the reversal of certain tax
reserves in connection with an audit settlement.
For the year ended December 31, 2015, the Company had Income from
Continuing Operations of $3.8 billion, or $4.58 per diluted common
share. This compares to Income from Continuing Operations attributable
to Time Warner common shareholders in 2014 of $3.9 billion, or $4.41 per
diluted common share.
For both 2015 and 2014, the Company had Net Income of $3.8 billion.
Fourth-Quarter Results
Adjusted EPS was $1.06 for the three months ended December 31, 2015,
compared to $0.98 in last year’s fourth quarter. The increase in
Adjusted EPS primarily reflects lower taxes and fewer shares outstanding.
For the three months ended December 31, 2015, the Company had Income
from Continuing Operations of $857 million, or $1.06 per
diluted common share. This compares to Income from Continuing Operations
attributable to Time Warner common shareholders in the fourth quarter of
2014 of $720 million, or $0.84 per diluted common share.
For the fourth quarters of 2015 and 2014, the Company had Net Income of
$857 million and $718 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 2016
full-year business outlook.
The Company’s conference call can be heard live at 10:30 am ET on
Wednesday, February 10, 2016. To listen to the call, visit www.timewarner.com/investors.
|
TIME WARNER INC. CONSOLIDATED BALANCE SHEET (Unaudited;
millions, except share amounts)
|
|
|
|
|
|
|
|
December 31, 2015
|
|
December 31, 2014
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
Cash and equivalents
|
|
$
|
2,155
|
|
|
$
|
2,618
|
|
Receivables, less allowances of $1,055 and $1,152
|
|
7,411
|
|
|
7,720
|
|
Inventories
|
|
1,753
|
|
|
1,700
|
|
Deferred income taxes
|
|
—
|
|
|
184
|
|
Prepaid expenses and other current assets
|
|
1,194
|
|
|
958
|
|
Total current assets
|
|
12,513
|
|
|
13,180
|
|
Noncurrent inventories and theatrical film and television production
costs
|
|
7,600
|
|
|
6,841
|
|
Investments, including available-for-sale securities
|
|
2,617
|
|
|
2,326
|
|
Property, plant and equipment, net
|
|
2,596
|
|
|
2,655
|
|
Intangible assets subject to amortization, net
|
|
949
|
|
|
1,141
|
|
Intangible assets not subject to amortization
|
|
7,029
|
|
|
7,032
|
|
Goodwill
|
|
27,689
|
|
|
27,565
|
|
Other assets
|
|
2,855
|
|
|
2,406
|
|
Total assets
|
|
$
|
63,848
|
|
|
$
|
63,146
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current liabilities
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
7,188
|
|
|
$
|
7,507
|
|
Deferred revenue
|
|
616
|
|
|
579
|
|
Debt due within one year
|
|
198
|
|
|
1,118
|
|
Total current liabilities
|
|
8,002
|
|
|
9,204
|
|
Long-term debt
|
|
23,594
|
|
|
21,263
|
|
Deferred income taxes
|
|
2,454
|
|
|
2,204
|
|
Deferred revenue
|
|
352
|
|
|
315
|
|
Other noncurrent liabilities
|
|
5,798
|
|
|
5,684
|
|
Redeemable noncontrolling interest
|
|
29
|
|
|
—
|
|
Equity
|
|
|
|
|
Common stock, $0.01 par value, 1.652 billion and 1.652 billion
shares issued and
|
|
|
|
|
|
|
795 million and 832 million shares outstanding
|
|
17
|
|
|
17
|
|
Additional paid-in capital
|
|
148,041
|
|
|
149,282
|
|
Treasury stock, at cost (857 million and 820 million shares)
|
|
(45,612
|
)
|
|
(42,445
|
)
|
Accumulated other comprehensive loss, net
|
|
(1,446
|
)
|
|
(1,164
|
)
|
Accumulated deficit
|
|
(77,381
|
)
|
|
(81,214
|
)
|
Total equity
|
|
23,619
|
|
|
24,476
|
|
Total liabilities and equity
|
|
$
|
63,848
|
|
|
$
|
63,146
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC. CONSOLIDATED STATEMENT OF
OPERATIONS (Unaudited; millions, except per share
amounts)
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues
|
|
$
|
7,079
|
|
|
$
|
7,525
|
|
|
$
|
28,118
|
|
|
$
|
27,359
|
|
Costs of revenues
|
|
(4,352
|
)
|
|
(4,418
|
)
|
|
(16,154
|
)
|
|
(15,875
|
)
|
Selling, general and administrative
|
|
(1,244
|
)
|
|
(1,477
|
)
|
|
(4,824
|
)
|
|
(5,190
|
)
|
Amortization of intangible assets
|
|
(51
|
)
|
|
(50
|
)
|
|
(189
|
)
|
|
(202
|
)
|
Restructuring and severance costs
|
|
(29
|
)
|
|
(166
|
)
|
|
(60
|
)
|
|
(512
|
)
|
Asset impairments
|
|
(17
|
)
|
|
(38
|
)
|
|
(25
|
)
|
|
(69
|
)
|
Gain (loss) on operating assets, net
|
|
—
|
|
|
13
|
|
|
(1
|
)
|
|
464
|
|
Operating income
|
|
1,386
|
|
|
1,389
|
|
|
6,865
|
|
|
5,975
|
|
Interest expense, net
|
|
(289
|
)
|
|
(301
|
)
|
|
(1,163
|
)
|
|
(1,169
|
)
|
Other income (loss), net
|
|
40
|
|
|
13
|
|
|
(256
|
)
|
|
(127
|
)
|
Income from continuing operations before income taxes
|
|
1,137
|
|
|
1,101
|
|
|
5,446
|
|
|
4,679
|
|
Income tax provision
|
|
(280
|
)
|
|
(381
|
)
|
|
(1,651
|
)
|
|
(785
|
)
|
Income from continuing operations
|
|
857
|
|
|
720
|
|
|
3,795
|
|
|
3,894
|
|
Discontinued operations, net of tax
|
|
—
|
|
|
(2
|
)
|
|
37
|
|
|
(67
|
)
|
Net income
|
|
857
|
|
|
718
|
|
|
3,832
|
|
|
3,827
|
|
Less Net loss attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Net income attributable to Time Warner Inc. shareholders
|
|
$
|
857
|
|
|
$
|
718
|
|
|
$
|
3,833
|
|
|
$
|
3,827
|
|
Amounts attributable to Time Warner Inc. shareholders:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
857
|
|
|
$
|
720
|
|
|
$
|
3,796
|
|
|
$
|
3,894
|
|
Discontinued operations, net of tax
|
|
—
|
|
|
(2
|
)
|
|
37
|
|
|
(67
|
)
|
Net income
|
|
$
|
857
|
|
|
$
|
718
|
|
|
$
|
3,833
|
|
|
$
|
3,827
|
|
Per share information attributable to Time Warner Inc.
|
|
|
|
|
|
|
|
|
common shareholders:
|
|
|
|
|
|
|
|
|
Basic income per common share from continuing operations
|
|
$
|
1.07
|
|
|
$
|
0.86
|
|
|
$
|
4.64
|
|
|
$
|
4.49
|
|
Discontinued operations
|
|
—
|
|
|
(0.01
|
)
|
|
0.05
|
|
|
(0.07
|
)
|
Basic net income per common share
|
|
$
|
1.07
|
|
|
$
|
0.85
|
|
|
$
|
4.69
|
|
|
$
|
4.42
|
|
Average basic common shares outstanding
|
|
798.3
|
|
|
836.7
|
|
|
814.9
|
|
|
863.3
|
|
Diluted income per common share from continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
$
|
1.06
|
|
|
$
|
0.84
|
|
|
$
|
4.58
|
|
|
$
|
4.41
|
|
Discontinued operations
|
|
—
|
|
|
—
|
|
|
0.04
|
|
|
(0.07
|
)
|
Diluted net income per common share
|
|
$
|
1.06
|
|
|
$
|
0.84
|
|
|
$
|
4.62
|
|
|
$
|
4.34
|
|
Average diluted common shares outstanding
|
|
811.7
|
|
|
855.7
|
|
|
829.5
|
|
|
882.6
|
|
Cash dividends declared per share of common stock
|
|
$
|
0.3500
|
|
|
$
|
0.3175
|
|
|
$
|
1.4000
|
|
|
$
|
1.2700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC. CONSOLIDATED STATEMENT OF CASH
FLOWS Year Ended December 31, (Unaudited;
millions)
|
|
|
|
|
|
|
|
2015
|
|
2014
|
OPERATIONS
|
|
|
|
|
Net income
|
|
$
|
3,832
|
|
|
$
|
3,827
|
|
Less Discontinued operations, net of tax
|
|
(37
|
)
|
|
67
|
|
Net income from continuing operations
|
|
3,795
|
|
|
3,894
|
|
Adjustments for noncash and nonoperating items:
|
|
|
|
|
Depreciation and amortization
|
|
681
|
|
|
733
|
|
Amortization of film and television costs
|
|
8,030
|
|
|
8,040
|
|
Asset impairments
|
|
25
|
|
|
69
|
|
Venezuelan foreign currency loss
|
|
—
|
|
|
173
|
|
Gain on investments and other assets, net
|
|
(32
|
)
|
|
(464
|
)
|
Equity in losses of investee companies, net of cash distributions
|
|
161
|
|
|
232
|
|
Equity-based compensation
|
|
182
|
|
|
219
|
|
Deferred income taxes
|
|
328
|
|
|
166
|
|
Changes in operating assets and liabilities, net of acquisitions
|
|
(9,319
|
)
|
|
(9,381
|
)
|
Cash provided by operations from continuing operations
|
|
3,851
|
|
|
3,681
|
|
INVESTING ACTIVITIES
|
|
|
|
|
Investments in available-for-sale securities
|
|
(41
|
)
|
|
(30
|
)
|
Investments and acquisitions, net of cash acquired
|
|
(672
|
)
|
|
(950
|
)
|
Capital expenditures
|
|
(423
|
)
|
|
(474
|
)
|
Investment proceeds from available-for-sale securities
|
|
2
|
|
|
25
|
|
Proceeds from Time Inc. in the Time Separation
|
|
—
|
|
|
1,400
|
|
Proceeds from the sale of Time Warner Center
|
|
—
|
|
|
1,264
|
|
Other investment proceeds
|
|
141
|
|
|
148
|
|
Cash provided (used) by investing activities from continuing
operations
|
|
(993
|
)
|
|
1,383
|
|
FINANCING ACTIVITIES
|
|
|
|
|
Borrowings
|
|
3,768
|
|
|
2,409
|
|
Debt repayments
|
|
(2,344
|
)
|
|
(72
|
)
|
Proceeds from exercise of stock options
|
|
165
|
|
|
338
|
|
Excess tax benefit from equity instruments
|
|
151
|
|
|
179
|
|
Principal payments on capital leases
|
|
(11
|
)
|
|
(11
|
)
|
Repurchases of common stock
|
|
(3,632
|
)
|
|
(5,504
|
)
|
Dividends paid
|
|
(1,150
|
)
|
|
(1,109
|
)
|
Other financing activities
|
|
(260
|
)
|
|
(173
|
)
|
Cash used by financing activities from continuing operations
|
|
(3,313
|
)
|
|
(3,943
|
)
|
Cash provided (used) by continuing operations
|
|
(455
|
)
|
|
1,121
|
|
Cash used by operations from discontinued operations
|
|
(8
|
)
|
|
(16
|
)
|
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
|
|
(8
|
)
|
|
(190
|
)
|
Effect of Venezuelan exchange rate changes on cash and equivalents
|
|
—
|
|
|
(129
|
)
|
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
|
|
(463
|
)
|
|
802
|
|
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
|
|
2,618
|
|
|
1,816
|
|
CASH AND EQUIVALENTS AT END OF PERIOD
|
|
$
|
2,155
|
|
|
$
|
2,618
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC. RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURES (Unaudited; dollars in millions) Reconciliations
of Adjusted Operating Income (Loss) to Operating
Income (Loss) and Adjusted Operating Income Margin to
Operating Income Margin
|
|
|
Three Months Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
Asset Impairments
|
|
Gain (Loss) on Operating Assets, Net
|
|
Venezuelan Foreign Currency Loss
|
|
Other
|
|
Operating Income (Loss)
|
Turner
|
|
$
|
781
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
777
|
|
Home Box Office
|
|
393
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
393
|
|
Warner Bros.
|
|
373
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
|
366
|
|
Corporate
|
|
(102
|
)
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
(110
|
)
|
Intersegment eliminations
|
|
(40
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(40
|
)
|
Time Warner
|
|
$
|
1,405
|
|
|
$
|
(17
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
1,386
|
|
Margin(a)
|
|
19.8
|
%
|
|
(0.2
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
19.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2014
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
Asset Impairments
|
|
Gain (Loss) on Operating Assets, Net
|
|
Venezuelan Foreign Currency Loss
|
|
Other
|
|
Operating Income (Loss)
|
Turner
|
|
$
|
921
|
|
|
$
|
(2
|
)
|
|
$
|
6
|
|
|
$
|
(137
|
)
|
|
$
|
—
|
|
|
$
|
788
|
|
Home Box Office
|
|
394
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
394
|
|
Warner Bros.
|
|
391
|
|
|
(36
|
)
|
|
7
|
|
|
(36
|
)
|
|
(7
|
)
|
|
319
|
|
Corporate
|
|
(124
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(126
|
)
|
Intersegment eliminations
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
Time Warner
|
|
$
|
1,596
|
|
|
$
|
(38
|
)
|
|
$
|
13
|
|
|
$
|
(173
|
)
|
|
$
|
(9
|
)
|
|
$
|
1,389
|
|
Margin(a)
|
|
21.2
|
%
|
|
(0.5
|
)%
|
|
0.2
|
%
|
|
(2.3
|
)%
|
|
(0.1
|
)%
|
|
18.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
Asset Impairments
|
|
Gain (Loss) on Operating Assets, Net
|
|
Venezuelan Foreign Currency Loss
|
|
Other
|
|
Operating Income (Loss)
|
Turner
|
|
$
|
4,110
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
(17
|
)
|
|
$
|
(3
|
)
|
|
$
|
4,087
|
|
Home Box Office
|
|
1,878
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,878
|
|
Warner Bros.
|
|
1,435
|
|
|
(7
|
)
|
|
(1
|
)
|
|
(5
|
)
|
|
(6
|
)
|
|
1,416
|
|
Corporate
|
|
(351
|
)
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(367
|
)
|
Intersegment eliminations
|
|
(149
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(149
|
)
|
Time Warner
|
|
$
|
6,923
|
|
|
$
|
(25
|
)
|
|
$
|
(1
|
)
|
|
$
|
(22
|
)
|
|
$
|
(10
|
)
|
|
$
|
6,865
|
|
Margin(a)
|
|
24.6
|
%
|
|
(0.1
|
)%
|
|
—
|
%
|
|
(0.1
|
)%
|
|
—
|
%
|
|
24.4
|
%
|
|
Year Ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss)
|
|
Asset Impairments
|
|
Gain (Loss) on Operating Assets, Net
|
|
Venezuelan Foreign Currency Loss
|
|
Other
|
|
Operating Income (Loss)
|
Turner
|
|
$
|
3,106
|
|
|
$
|
(17
|
)
|
|
$
|
16
|
|
|
$
|
(137
|
)
|
|
$
|
(14
|
)
|
|
$
|
2,954
|
|
Home Box Office
|
|
1,790
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,786
|
|
Warner Bros.
|
|
1,248
|
|
|
(41
|
)
|
|
7
|
|
|
(36
|
)
|
|
(19
|
)
|
|
1,159
|
|
Corporate
|
|
(460
|
)
|
|
(7
|
)
|
|
441
|
|
|
—
|
|
|
(47
|
)
|
|
(73
|
)
|
Intersegment eliminations
|
|
149
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
149
|
|
Time Warner
|
|
$
|
5,833
|
|
|
$
|
(69
|
)
|
|
$
|
464
|
|
|
$
|
(173
|
)
|
|
$
|
(80
|
)
|
|
$
|
5,975
|
|
Margin(a)
|
|
21.3
|
%
|
|
(0.3
|
)%
|
|
1.7
|
%
|
|
(0.6
|
)%
|
|
(0.3
|
)%
|
|
21.8
|
%
|
Please see below for additional information on items affecting
comparability.
__________________________
(a)
|
|
Adjusted Operating Income margin is defined as Adjusted Operating
Income divided by Revenues. Operating Income margin is defined as
Operating Income divided by Revenues.
|
|
TIME WARNER INC. RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURES (Unaudited; millions, except per
share amounts) Reconciliation of Adjusted
EPS to Diluted Income per Common Share from Continuing Operations attributable
to Time Warner Inc. common shareholders
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Asset impairments
|
|
$
|
(17
|
)
|
|
$
|
(38
|
)
|
|
$
|
(25
|
)
|
|
$
|
(69
|
)
|
Gain (loss) on operating assets, net
|
|
—
|
|
|
13
|
|
|
(1
|
)
|
|
464
|
|
Venezuelan foreign currency loss
|
|
—
|
|
|
(173
|
)
|
|
(22
|
)
|
|
(173
|
)
|
Other
|
|
(2
|
)
|
|
(9
|
)
|
|
(10
|
)
|
|
(80
|
)
|
Impact on Operating Income
|
|
(19
|
)
|
|
(207
|
)
|
|
(58
|
)
|
|
142
|
|
Investment gains (losses), net
|
|
39
|
|
|
87
|
|
|
(31
|
)
|
|
30
|
|
Amounts related to the separation of Time Warner Cable Inc.
|
|
—
|
|
|
(10
|
)
|
|
(8
|
)
|
|
(11
|
)
|
Amounts related to the disposition of Warner Music Group
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Amounts related to the separation of Time Inc.
|
|
(2
|
)
|
|
1
|
|
|
(9
|
)
|
|
3
|
|
Premiums paid and costs incurred on debt redemption
|
|
—
|
|
|
—
|
|
|
(72
|
)
|
|
—
|
|
Items affecting comparability relating to equity method
|
|
|
|
|
|
|
|
|
|
|
|
|
investments
|
|
(23
|
)
|
|
(72
|
)
|
|
(27
|
)
|
|
(97
|
)
|
Pretax impact
|
|
(5
|
)
|
|
(199
|
)
|
|
(205
|
)
|
|
69
|
|
Income tax impact of above items
|
|
2
|
|
|
81
|
|
|
57
|
|
|
165
|
|
Impact of items affecting comparability on income from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
continuing operations
|
|
$
|
(3
|
)
|
|
$
|
(118
|
)
|
|
$
|
(148
|
)
|
|
$
|
234
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Time Warner Inc. shareholders:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
857
|
|
|
$
|
720
|
|
|
$
|
3,796
|
|
|
$
|
3,894
|
|
Less Impact of items affecting comparability on income
|
|
|
|
|
|
|
|
|
|
|
|
|
from continuing operations
|
|
(3
|
)
|
|
(118
|
)
|
|
(148
|
)
|
|
234
|
|
Adjusted income from continuing operations
|
|
$
|
860
|
|
|
$
|
838
|
|
|
$
|
3,944
|
|
|
$
|
3,660
|
|
Per share information attributable to Time Warner Inc.
|
|
|
|
|
|
|
|
|
common shareholders:
|
|
|
|
|
|
|
|
|
Diluted net income per common share from continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
$
|
1.06
|
|
|
$
|
0.84
|
|
|
$
|
4.58
|
|
|
$
|
4.41
|
|
Less Impact of items affecting comparability on diluted net
|
|
|
|
|
|
|
|
|
|
|
|
|
income per common share from continuing operations
|
|
—
|
|
|
(0.14
|
)
|
|
(0.17
|
)
|
|
0.26
|
|
Adjusted EPS
|
|
$
|
1.06
|
|
|
$
|
0.98
|
|
|
$
|
4.75
|
|
|
$
|
4.15
|
|
Average diluted common shares outstanding
|
|
811.7
|
|
|
855.7
|
|
|
829.5
|
|
|
882.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Impairments
During the three months ended December 31, 2015, the Company recognized
asset impairments of $9 million at Corporate primarily related to an
asset held for disposal, $6 million at Warner Bros. primarily related to
certain internally developed software and $2 million at the Turner
segment related to miscellaneous assets. In addition, for the year ended
December 31, 2015, the Company recognized asset impairments of $6
million at Corporate primarily related to certain internally developed
software and $1 million at both the Turner and Warner Bros. segments
related to miscellaneous assets.
During the three months ended December 31, 2014, the Company recorded
asset impairments of $2 million at the Turner segment related to
miscellaneous assets and $36 million at the Warner Bros. segment,
including $12 million related to a tradename, and the remaining amount
primarily related to certain fixed assets. During the year ended
December 31, 2014, the Company recorded $69 million of asset impairments
consisting of $17 million at the Turner segment related to miscellaneous
assets; $4 million at the Home Box Office segment related to an
international tradename; $41 million at the Warner Bros. segment,
including $12 million related to a tradename, and the remaining amount
primarily related to various fixed assets and certain internally
developed software; and $7 million at Corporate related to certain
internally developed software.
Gain (Loss) on Operating Assets, Net
For the year ended December 31, 2015, the Company recognized losses on
operating assets of $1 million at the Warner Bros. segment.
For the three months and year ended December 31, 2014, the Company
recognized gains on operating assets of $6 million at the Turner segment
and $7 million at the Warner Bros. segment primarily related to the sale
of certain fixed assets. For the year ended December 31, 2014, the
Company recognized $16 million of net gains at the Turner segment,
reflecting a $13 million gain related to the sale of Zite, Inc., a news
content aggregation and recommendation platform, a $4 million gain
related to the sale of certain fixed assets, a $2 million gain primarily
related to the sale of a building in South America and a $3 million loss
related to the shutdown of a business; a $7 million gain at the Warner
Bros. segment primarily related to the sale of certain fixed assets; 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 year ended December 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.
For the year ended December 31, 2014, the Company recognized a pretax
foreign exchange loss of $173 million, consisting of $137 million at the
Turner segment and $36 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 official rate to
the SICAD 2 exchange rate.
The Venezuelan foreign currency losses are 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 $2 million and $10 million for the three months and year
ended December 31, 2015, respectively. External costs related to
mergers, acquisitions or dispositions for the three months and year
ended December 31, 2015 consisted of $2 million and $3 million,
respectively, at the Turner segment; $1 million and $6 million,
respectively, at the Warner Bros. segment; and a reversal of $1 million
and expenses of $1 million, respectively, at Corporate.
For the three months and year ended December 31, 2014, Other reflects
external costs related to mergers, acquisitions or dispositions of $9
million and $80 million, respectively, which consisted of $0 and $14
million, respectively, at the Turner segment primarily related to exit
costs in connection with the shutdown of CNN Latino; $7 million and $19
million, respectively, at the Warner Bros. segment primarily related to
the acquisition of Eyeworks Group’s operations outside the U.S.; and $2
million and $47 million, respectively, at Corporate primarily 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 months ended December 31, 2015, the Company recognized $39
million of net investment gains, consisting of $47 million of gains
related to fair value adjustments on warrants to purchase common stock
of Central European Media Enterprises Ltd. (the “CME Warrants”) held by
the Company and $8 million of net miscellaneous investment losses. For
the year ended December 31, 2015, the Company recognized $31 million of
net miscellaneous investment losses, consisting of $63 million of losses
related to fair value adjustments on the CME Warrants and $32 million of
net miscellaneous investment gains.
For the three months ended December 31, 2014, the Company recognized $87
million of net investment gains, consisting of $88 million of gains
related to fair value adjustments on the CME Warrants and $1 million of
net miscellaneous investment losses. For the year ended December 31,
2014, the Company recognized $30 million of net miscellaneous investment
gains, consisting of $29 million of gains related to fair value
adjustments on the CME Warrants and $1 million of net miscellaneous
investment gains.
Amounts Related to the Separation of Time Warner Cable Inc.
For the year ended December 31, 2015, the Company recognized a loss of
$4 million related to changes in the value of a Time Warner Cable Inc.
(“TWC”) tax indemnification receivable, which has been reflected in
Other income (loss), net in the accompanying Consolidated Statement of
Operations. For the year ended December 31, 2015, the Company also
recognized a loss of $4 million related to payments made to TWC in
accordance with a tax sharing arrangement with TWC.
The Company recognized a loss of $1 million for the year ended December
31, 2014 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 income (loss), net in the accompanying
Consolidated Statement of Operations. The Company also recognized a loss
of $10 million for both the three months and year ended December 31,
2014 related to changes in the value of a TWC tax indemnification
receivable, which has also been reflected in Other income (loss), net in
the accompanying Consolidated Statement of Operations.
Amounts Related to the Disposition of Warner Music Group
The Company recognized income of $2 million for both the three months
and year ended December 31, 2014 primarily related to a tax
indemnification obligation associated with the disposition of Warner
Music Group (“WMG”) in 2004. These amounts have been reflected in Other
income (loss), net in the accompanying Consolidated Statement of
Operations.
Amounts Related to the Time Separation
For the three months and year ended December 31, 2015, the Company
recognized losses of $2 million and $9 million, respectively, primarily
reflecting pension and other retirement benefits related to employees
and former employees of Time Inc. For the three months and year ended
December 31, 2014, the Company recognized income of $1 million and $3
million, respectively, related to the expiration, exercise and net
change in the estimated fair value of Time Warner equity awards held by
certain Time Inc. employees. These amounts have been reflected in Other
income (loss), net in the accompanying Consolidated Statement of
Operations.
Premiums Paid and Costs Incurred on Debt Redemption
For the year ended December 31, 2015, the Company recognized $72 million
of premiums paid and costs incurred principally to retire its 5.875%
Notes due 2016 through a tender offer and redemption. This amount has
been reflected in Other income (loss), net in the accompanying
Consolidated Statement of Operations.
Items Affecting Comparability Relating to Equity Method Investments
For the three months and year ended December 31, 2015, the Company
recognized $15 million and $18 million, respectively, related to asset
impairments recorded by an equity method investee and $7 million and $8
million, respectively, related to losses from discontinued operations
recorded by an equity method investee. In addition, for both the three
months and year ended December 31, 2015, the Company recognized $1
million related to expenses recorded by an equity method investee
related to government investigations.
For the three months and year ended December 31, 2014, the Company
recognized $61 million and $70 million, respectively, related to losses
from discontinued operations recognized by an equity method investee as
well as $15 million and $27 million, respectively, related to a loss on
the extinguishment of debt recognized by an equity method investee. In
addition, for the three months ended December 31, 2014, the Company
reversed $4 million related to expenses recorded earlier in 2014 by an
equity method investee related to a government investigation.
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 December 31,
|
|
Year Ended December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Cash provided by operations from continuing operations
|
|
$
|
850
|
|
|
$
|
1,007
|
|
|
$
|
3,851
|
|
|
$
|
3,681
|
|
Add external costs related to mergers, acquisitions,
|
|
|
|
|
|
|
|
|
|
|
|
|
investments or dispositions and contingent consideration
|
|
|
|
|
|
|
|
|
|
|
|
|
payments
|
|
5
|
|
|
16
|
|
|
14
|
|
|
76
|
|
Add excess tax benefits from equity instruments
|
|
10
|
|
|
41
|
|
|
151
|
|
|
179
|
|
Less capital expenditures
|
|
(173
|
)
|
|
(158
|
)
|
|
(423
|
)
|
|
(474
|
)
|
Less principal payments on capital leases
|
|
(3
|
)
|
|
(3
|
)
|
|
(11
|
)
|
|
(11
|
)
|
Free Cash Flow
|
|
$
|
689
|
|
|
$
|
903
|
|
|
$
|
3,582
|
|
|
$
|
3,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and streaming services
domestically and premium pay, basic tier television and streaming
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 December 31,
|
|
Year Ended December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Intersegment Revenues
|
|
|
|
|
|
|
|
|
Turner
|
|
$
|
24
|
|
|
$
|
25
|
|
|
$
|
105
|
|
|
$
|
101
|
Home Box Office
|
|
18
|
|
|
9
|
|
|
40
|
|
|
36
|
Warner Bros.
|
|
257
|
|
|
201
|
|
|
940
|
|
|
824
|
Total intersegment revenues
|
|
$
|
299
|
|
|
$
|
235
|
|
|
$
|
1,085
|
|
|
$
|
961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31,
|
|
Year Ended December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Home video and electronic delivery of theatrical product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revenues
|
|
$
|
532
|
|
|
$
|
578
|
|
|
$
|
1,717
|
|
|
$
|
1,913
|
Home video and electronic delivery of television product
|
|
|
|
|
|
|
|
|
|
|
|
revenues
|
|
188
|
|
|
216
|
|
|
529
|
|
|
584
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4. DISCONTINUED OPERATIONS, NET OF TAX
Discontinued operations, net of tax for the year ended December 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 and year ended
December 31, 2014 was losses of $2 million and $67 million,
respectively, primarily related to the Time Separation.
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