Time Warner Inc. Reports Second-Quarter 2016 Results
Second-Quarter Highlights
- Revenues of $7.0 billion
- Operating Income and Adjusted Operating Income each totaled $1.8 billion
- EPS of $1.20 and Adjusted EPS of $1.29
- Repurchased 23 million shares for $1.6 billion year-to-date through July 29, 2016
Time Warner Inc. (NYSE:TWX) today reported financial results for its second quarter ended June 30, 2016.
Chairman and Chief Executive Officer Jeff Bewkes said: “We had a strong first half of 2016, which puts us ahead of our original
goals for the year. Our performance reflects the creative excellence resulting from investments we’ve been making in the very best
content. At the same time, we’re capitalizing on new distribution opportunities to take advantage of the growing demand for
high-quality video content around the world. As an example of our creative excellence, Time Warner received 148 Primetime Emmy
nominations - more than any other company - with HBO’s 94 again setting the pace for the industry. In the second quarter, TNT and
TBS finished as the two highest rated ad-supported cable networks in primetime among adults 18-49, and Warner Bros. once again came
out of the upfront as the leading supplier to broadcast television. Warner Bros. also gained momentum in film with recent
successes, such as Central Intelligence and The Conjuring 2, and anticipation is running high for Suicide
Squad, which debuts this week.”
Mr. Bewkes continued: “Today, we also announced our 10% investment in Hulu LLC and that Turner has separately signed an
affiliate agreement for its full suite of networks to be carried on Hulu’s live-streaming service slated for launch early next
year. These are just the latest examples of our commitment to supporting innovative digital services that allow consumers to access
high-quality content however they want it across a variety of platforms. We’re confident the multiple investments we’re making in
these types of services position the Company to benefit from growing global demand for the strongest network brands and very best
video content.”
Company Results
Revenues decreased 5% to $7.0 billion due to a decline at Warner Bros., partially offset by growth at Turner and Home Box Office
and lower intersegment eliminations. Revenues included the unfavorable impact of foreign exchange rates of approximately $60
million in the quarter. Operating Income decreased 1% to $1.8 billion due to decreases at Warner Bros. and Home Box Office,
partially offset by a swing in intersegment eliminations. Adjusted Operating Income declined 5% to $1.8 billion.
The Company posted Diluted Income per Common Share from Continuing Operations (“EPS”) of $1.20 compared to $1.16 for the prior
year quarter. Adjusted Diluted Income per Common Share from Continuing Operations (“Adjusted EPS”) was $1.29 versus $1.25 for the
prior year quarter.
For the first six months of 2016, Cash Provided by Operations from Continuing Operations reached $2.0 billion and Free Cash Flow
totaled $1.9 billion.
Refer to “Use of Non-GAAP Financial Measures” in this release for a discussion of the non-GAAP financial measures used in this
release and the reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
Stock Repurchase Program Update
From January 1, 2016 through July 29, 2016, the Company repurchased approximately 23 million shares of common stock
for approximately $1.6 billion. These amounts reflect the purchase of approximately 9 million shares of common stock for
approximately $700 million since the amounts reported in the Company’s first quarter earnings release on May 4, 2016. At July 29,
2016, approximately $3.4 billion remained available for repurchases under the Company’s stock repurchase program.
Segment Performance
The schedule below reflects Time Warner’s financial performance for the three and six months ended June 30, by line of business
(millions).
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2016 |
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2015 |
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2016 |
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|
2015 |
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Revenues: |
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|
|
|
|
|
|
|
|
|
|
|
|
Turner |
|
|
|
|
$ |
|
|
3,010 |
|
|
|
$ |
|
|
2,827 |
|
|
|
|
$ |
|
|
|
5,916 |
|
|
|
$ |
|
|
|
5,537 |
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|
Home Box Office |
|
|
|
|
1,467 |
|
|
|
1,438 |
|
|
|
|
2,973 |
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|
2,836 |
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Warner Bros. |
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|
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2,658 |
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3,298 |
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5,767 |
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6,497 |
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Intersegment eliminations |
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|
(183 |
) |
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|
(215 |
) |
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|
|
(396 |
) |
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(395 |
) |
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Total Revenues |
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$ |
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|
6,952 |
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$ |
|
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7,348 |
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|
$ |
|
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|
14,260 |
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|
|
$ |
|
|
|
14,475 |
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|
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Operating Income (Loss) (a): |
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|
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Turner |
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|
|
|
$ |
|
|
1,130 |
|
|
|
$ |
|
|
1,130 |
|
|
|
|
$ |
|
|
|
2,369 |
|
|
|
$ |
|
|
|
2,238 |
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|
|
Home Box Office |
|
|
|
|
481 |
|
|
|
508 |
|
|
|
|
958 |
|
|
|
966 |
|
|
|
Warner Bros. |
|
|
|
|
308 |
|
|
|
341 |
|
|
|
|
732 |
|
|
|
665 |
|
|
|
Corporate |
|
|
|
|
(95 |
) |
|
|
(89 |
) |
|
|
|
(235 |
) |
|
|
(193 |
) |
|
|
Intersegment eliminations |
|
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|
|
22 |
|
|
|
(31 |
) |
|
|
|
18 |
|
|
|
(31 |
) |
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Total Operating Income |
|
|
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$ |
|
|
1,846 |
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|
|
$ |
|
|
1,859 |
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|
|
|
$ |
|
|
|
3,842 |
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|
|
$ |
|
|
|
3,645 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Adjusted Operating Income (Loss) (a): |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner |
|
|
|
|
$ |
|
|
1,133 |
|
|
|
$ |
|
|
1,130 |
|
|
|
|
$ |
|
|
|
2,372 |
|
|
|
$ |
|
|
|
2,258 |
|
|
|
Home Box Office |
|
|
|
|
481 |
|
|
|
508 |
|
|
|
|
967 |
|
|
|
966 |
|
|
|
Warner Bros. |
|
|
|
|
217 |
|
|
|
344 |
|
|
|
|
643 |
|
|
|
674 |
|
|
|
Corporate |
|
|
|
|
(93 |
) |
|
|
(89 |
) |
|
|
|
(228 |
) |
|
|
(191 |
) |
|
|
Intersegment eliminations |
|
|
|
|
22 |
|
|
|
(31 |
) |
|
|
|
18 |
|
|
|
(31 |
) |
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|
Total Adjusted Operating Income |
|
|
|
|
$ |
|
|
1,760 |
|
|
|
$ |
|
|
1,862 |
|
|
|
|
$ |
|
|
|
3,772 |
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|
|
$ |
|
|
|
3,676 |
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|
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Depreciation and Amortization: |
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Turner |
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|
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$ |
|
|
53 |
|
|
|
$ |
|
|
52 |
|
|
|
|
$ |
|
|
|
104 |
|
|
|
$ |
|
|
|
104 |
|
|
|
Home Box Office |
|
|
|
|
23 |
|
|
|
21 |
|
|
|
|
45 |
|
|
|
46 |
|
|
|
Warner Bros. |
|
|
|
|
87 |
|
|
|
85 |
|
|
|
|
175 |
|
|
|
174 |
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|
|
Corporate |
|
|
|
|
6 |
|
|
|
6 |
|
|
|
|
12 |
|
|
|
10 |
|
|
|
Total Depreciation and Amortization |
|
|
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|
$ |
|
|
169 |
|
|
|
$ |
|
|
164 |
|
|
|
|
$ |
|
|
|
336 |
|
|
|
$ |
|
|
|
334 |
|
|
|
(a) |
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Operating Income (Loss) and Adjusted Operating Income (Loss) for the three and six
months ended June 30, 2016 and 2015 included restructuring and severance costs of (millions): |
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2016 |
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2015 |
|
|
|
2016 |
|
|
2015 |
|
|
Turner |
|
|
$ |
|
|
(6 |
) |
|
|
$ |
|
|
(10 |
) |
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$ |
|
|
|
(7 |
) |
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$ |
|
|
|
(18 |
) |
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Home Box Office |
|
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(37 |
) |
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(4 |
) |
|
|
|
(41 |
) |
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|
(5 |
) |
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|
Warner Bros. |
|
|
(4 |
) |
|
|
1 |
|
|
|
|
(5 |
) |
|
|
(2 |
) |
|
|
Corporate |
|
|
(1 |
) |
|
|
3 |
|
|
|
|
— |
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|
|
3 |
|
|
|
Total Restructuring and Severance Costs |
|
|
$ |
|
|
(48 |
) |
|
|
$ |
|
|
(10 |
) |
|
|
|
$ |
|
|
|
(53 |
) |
|
|
$ |
|
|
|
(22 |
) |
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Presented below is a discussion of the performance of Time Warner’s segments for the second quarter of 2016. Unless otherwise
noted, the dollar amounts in parentheses represent year-over-year changes.
TURNER
Revenues increased 6% ($183 million) to $3.0 billion, due to increases of 11% ($142 million) in Subscription revenues and
6% ($73 million) in Advertising revenues, partially offset by a decline of 15% ($32 million) in Content and other revenues.
Subscription revenues increased due to higher domestic rates and local currency growth at Turner’s international networks,
partially offset by the impact of lower domestic subscribers and foreign exchange rates. Advertising revenues benefited from
domestic growth, primarily due to Turner’s news business and the 2016 NCAA Division I Men’s Basketball National Championship, and
local currency growth at Turner’s international networks, partially offset by the impact of foreign exchange rates. The decline in
Content and other revenues was due to lower domestic licensing revenues.
Operating Income and Adjusted Operating Income were both flat at $1.1 billion, as the growth in revenues was
offset by higher expenses, including increased programming and marketing costs. Programming costs grew 11% primarily due to higher
sports and original programming costs at Turner’s domestic entertainment networks. The increase in marketing costs was associated
with new original series related to the TBS and TNT rebrands.
In July, Turner received 22 Primetime Emmy nominations and CNN received 15 News & Documentary Emmy Awards nominations, a
record for the network. During the second quarter of 2016: Turner had 3 of the top 5 ad-supported cable networks in primetime among
adults 18-49 with TNT, TBS and Adult Swim ranking #1, #2 and #5, respectively; Adult Swim was the #1 ad-supported cable network in
total day among adults 18-34; and CNN was the #1 news network among adults 18-49 in primetime for the third consecutive quarter.
Year-to-date, TBS’ Wrecked and The Detour are the top 2 new comedies on ad-supported cable among adults 18-49.
Game 7 of the NBA Western Conference Finals on TNT was the most-viewed NBA telecast of all time on cable and TNT’s most watched
program ever with an average of nearly 16 million total viewers.
HOME BOX OFFICE
Revenues increased 2% ($29 million) to $1.5 billion, due to an increase of 6% ($72 million) in Subscription revenues
partially offset by a decline of 17% ($43 million) in Content and other revenues. Subscription revenues increased due to higher
domestic rates and subscribers and international growth. The decrease in Content and other revenues was due to lower domestic
licensing revenues, partially offset by higher international licensing revenues.
Operating Income and Adjusted Operating Income both decreased 5% ($27 million) to $481 million, as the growth in
revenues was more than offset by higher expenses, including increased programming and restructuring and severance costs.
Programming costs increased 6% primarily reflecting higher programming charges and expenses for original series, partially offset
by a reduction in amortization resulting from a longer estimated utilization period for original programming.
The most recent seasons of Game of Thrones, Silicon Valley and Veep all grew viewership double digits due
to growth on HBO’s digital platforms, and Game of Thrones averaged over 25 million viewers, a record for an HBO original
series. In July, HBO and Cinemax received a combined 98 Primetime Emmy nominations. HBO received 94 nominations, the most for any
network for the 16th year in a row. HBO’s nominations included Outstanding Comedy Series for Silicon Valley and
Veep, Outstanding Drama Series for Game of Thrones and Outstanding Television Movie for All the Way and
Confirmation.
WARNER BROS.
Revenues decreased 19% ($640 million) to $2.7 billion, primarily due to lower videogames, home entertainment and
television licensing revenues. Videogames revenues declined as the prior year quarter included the releases of Batman: Arkham
Knight and Mortal Kombat X. Home entertainment revenues declined due to fewer theatrical home video releases in the
current year quarter, including the comparison to the release of American Sniper in the prior year quarter, and lower
carryover revenues. Television licensing revenues declined as the prior year quarter benefited from the second-cycle syndication of
The Big Bang Theory and the subscription video-on-demand licensing of Seinfeld.
Operating Income decreased 10% ($33 million) to $308 million, due to the decline in revenues, partially offset by lower
associated costs of revenues due to the number and mix of film and videogames releases, a $90 million gain on the April 2016 sale
of Flixster and lower film valuation adjustments.
Adjusted Operating Income decreased 37% ($127 million) to $217 million. Adjusted Operating Income for the current year
quarter excludes the gain on the sale of Flixster.
In July, Warner Bros. received 32 Primetime Emmy nominations across 13 series. Heading into the 2016-2017 television season,
Warner Bros. is once again the #1 producer of shows for the broadcast networks, a position it has held for 13 of the last 14
seasons. Warner Bros. will have 31 series on broadcast networks, 22 of which are returning series, the most in Warner Bros.’
history. In total, Warner Bros. will produce 65 series for the upcoming season across all networks and services.
CONSOLIDATED NET INCOME AND PER SHARE RESULTS
Second-Quarter Results
For the three months ended June 30, 2016, the Company had Income from Continuing Operations attributable to Time Warner
Inc. shareholders of $952 million and EPS of $1.20. This compares to Income from Continuing Operations attributable to Time Warner
Inc. shareholders for the second quarter of 2015 of $971 million and EPS of $1.16. The increase in EPS primarily reflects fewer
shares outstanding.
Adjusted EPS was $1.29 for the three months ended June 30, 2016, compared to $1.25 for last year’s second quarter. The
increase in Adjusted EPS primarily reflects fewer shares outstanding and a lower effective tax rate.
For the second quarters of 2016 and 2015, the Company had Net Income attributable to Time Warner Inc. shareholders of $952
million and $971 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 (including restructuring and severance costs associated with 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 March 31, 2015, related to the
translation of net monetary assets denominated in Venezuelan currency resulting from the Company’s change to the Simadi exchange
rate during the quarter ended March 31, 2015. 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 (including extinguishments of debt) and investments, in each case including
associated costs of the transaction; 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 (including restructuring
and severance costs associated with 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 March 31, 2015 related to the translation of net monetary assets denominated in Venezuelan currency
resulting from the Company’s change to the Simadi exchange rate during the quarter ended March 31, 2015; 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 (including restructuring and severance costs associated with 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 the performance and liquidity of its businesses and considers Free Cash Flow when making decisions
regarding strategic investments, dividends and share repurchases. The Company believes Free Cash Flow provides useful information
to investors because it is 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 8:30 am ET on Wednesday, August 3, 2016. To listen to the call,
visit www.timewarner.com/investors.
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TIME WARNER INC. |
|
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CONSOLIDATED BALANCE SHEET |
|
|
(Unaudited; millions, except share amounts) |
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
December 31,
2015
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
Cash and equivalents |
|
|
|
|
$ |
|
|
|
|
2,496 |
|
|
|
$ |
|
|
|
2,155 |
|
|
|
Receivables, less allowances of $751 and $1,055 |
|
|
|
|
7,813 |
|
|
|
7,411 |
|
|
|
Inventories |
|
|
|
|
1,669 |
|
|
|
1,753 |
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
984 |
|
|
|
1,194 |
|
|
|
Total current assets |
|
|
|
|
12,962 |
|
|
|
12,513 |
|
|
|
Noncurrent inventories and theatrical film and television production costs |
|
|
|
|
7,589 |
|
|
|
7,600 |
|
|
|
Investments, including available-for-sale securities |
|
|
|
|
2,592 |
|
|
|
2,617 |
|
|
|
Property, plant and equipment, net |
|
|
|
|
2,516 |
|
|
|
2,596 |
|
|
|
Intangible assets subject to amortization, net |
|
|
|
|
856 |
|
|
|
949 |
|
|
|
Intangible assets not subject to amortization |
|
|
|
|
7,030 |
|
|
|
7,029 |
|
|
|
Goodwill |
|
|
|
|
27,701 |
|
|
|
27,689 |
|
|
|
Other assets |
|
|
|
|
2,881 |
|
|
|
2,855 |
|
|
|
Total assets |
|
|
|
|
$ |
|
|
|
|
64,127 |
|
|
|
$ |
|
|
|
63,848 |
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
|
|
$ |
|
|
|
|
6,403 |
|
|
|
$ |
|
|
|
7,188 |
|
|
|
Deferred revenue |
|
|
|
|
519 |
|
|
|
616 |
|
|
|
Debt due within one year |
|
|
|
|
50 |
|
|
|
198 |
|
|
|
Total current liabilities |
|
|
|
|
6,972 |
|
|
|
8,002 |
|
|
|
Long-term debt |
|
|
|
|
24,418 |
|
|
|
23,594 |
|
|
|
Deferred income taxes |
|
|
|
|
2,665 |
|
|
|
2,454 |
|
|
|
Deferred revenue |
|
|
|
|
400 |
|
|
|
352 |
|
|
|
Other noncurrent liabilities |
|
|
|
|
5,754 |
|
|
|
5,798 |
|
|
|
Redeemable noncontrolling interest |
|
|
|
|
29 |
|
|
|
29 |
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 1.652 billion and 1.652 billion shares issued and
780 million and 795 million shares outstanding
|
|
|
|
|
17 |
|
|
|
17 |
|
|
|
Additional paid-in capital |
|
|
|
|
147,311 |
|
|
|
148,041 |
|
|
|
Treasury stock, at cost (872 million and 857 million shares) |
|
|
|
|
(46,778 |
) |
|
|
(45,612 |
) |
|
|
Accumulated other comprehensive loss, net |
|
|
|
|
(1,447 |
) |
|
|
(1,446 |
) |
|
|
Accumulated deficit |
|
|
|
|
(75,215 |
) |
|
|
(77,381 |
) |
|
|
Total Time Warner Inc. shareholders’ equity |
|
|
|
|
23,888 |
|
|
|
23,619 |
|
|
|
Noncontrolling interest |
|
|
|
|
1 |
|
|
|
— |
|
|
|
Total equity |
|
|
|
|
23,889 |
|
|
|
23,619 |
|
|
|
Total liabilities and equity |
|
|
|
|
$ |
|
|
|
|
64,127 |
|
|
|
$ |
|
|
|
63,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC. |
|
|
CONSOLIDATED STATEMENT OF OPERATIONS |
|
|
(Unaudited; millions, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
|
|
Revenues |
|
|
|
|
$ |
|
|
6,952 |
|
|
|
$ |
|
|
7,348 |
|
|
|
|
$ |
|
|
14,260 |
|
|
|
$ |
|
|
14,475 |
|
|
|
Costs of revenues |
|
|
|
|
(3,840 |
) |
|
|
(4,188 |
) |
|
|
|
(7,845 |
) |
|
|
(8,276 |
) |
|
|
Selling, general and administrative |
|
|
|
|
(1,258 |
) |
|
|
(1,248 |
) |
|
|
|
(2,509 |
) |
|
|
(2,437 |
) |
|
|
Amortization of intangible assets |
|
|
|
|
(47 |
) |
|
|
(43 |
) |
|
|
|
(95 |
) |
|
|
(91 |
) |
|
|
Restructuring and severance costs |
|
|
|
|
(48 |
) |
|
|
(10 |
) |
|
|
|
(53 |
) |
|
|
(22 |
) |
|
|
Asset impairments |
|
|
|
|
(2 |
) |
|
|
— |
|
|
|
|
(5 |
) |
|
|
(1 |
) |
|
|
Gain (loss) on operating assets, net |
|
|
|
|
89 |
|
|
|
— |
|
|
|
|
89 |
|
|
|
(3 |
) |
|
|
Operating income |
|
|
|
|
1,846 |
|
|
|
1,859 |
|
|
|
|
3,842 |
|
|
|
3,645 |
|
|
|
Interest expense, net |
|
|
|
|
(292 |
) |
|
|
(286 |
) |
|
|
|
(576 |
) |
|
|
(580 |
) |
|
|
Other loss, net |
|
|
|
|
(131 |
) |
|
|
(125 |
) |
|
|
|
(171 |
) |
|
|
(242 |
) |
|
|
Income from continuing operations before income taxes |
|
|
|
|
1,423 |
|
|
|
1,448 |
|
|
|
|
3,095 |
|
|
|
2,823 |
|
|
|
Income tax provision |
|
|
|
|
(472 |
) |
|
|
(477 |
) |
|
|
|
(970 |
) |
|
|
(919 |
) |
|
|
Income from continuing operations |
|
|
|
|
951 |
|
|
|
971 |
|
|
|
|
2,125 |
|
|
|
1,904 |
|
|
|
Discontinued operations, net of tax |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
40 |
|
|
|
37 |
|
|
|
Net income |
|
|
|
|
951 |
|
|
|
971 |
|
|
|
|
2,165 |
|
|
|
1,941 |
|
|
|
Less Net loss attributable to noncontrolling interests |
|
|
|
|
1 |
|
|
|
— |
|
|
|
|
1 |
|
|
|
— |
|
|
|
Net income attributable to Time Warner Inc. shareholders |
|
|
|
|
$ |
|
|
952 |
|
|
|
$ |
|
|
971 |
|
|
|
|
$ |
|
|
2,166 |
|
|
|
$ |
|
|
1,941 |
|
|
|
Amounts attributable to Time Warner Inc. shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
|
|
$ |
|
|
952 |
|
|
|
$ |
|
|
971 |
|
|
|
|
$ |
|
|
2,126 |
|
|
|
$ |
|
|
1,904 |
|
|
|
Discontinued operations, net of tax |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
40 |
|
|
|
37 |
|
|
|
Net income |
|
|
|
|
$ |
|
|
952 |
|
|
|
$ |
|
|
971 |
|
|
|
|
$ |
|
|
2,166 |
|
|
|
$ |
|
|
1,941 |
|
|
|
Per share information attributable to Time Warner Inc.
commons shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share from continuing operations |
|
|
|
|
$ |
|
|
1.21 |
|
|
|
$ |
|
|
1.18 |
|
|
|
|
$ |
|
|
2.69 |
|
|
|
$ |
|
|
2.30 |
|
|
|
Discontinued operations |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
0.05 |
|
|
|
0.05 |
|
|
|
Basic net income per common share |
|
|
|
|
$ |
|
|
1.21 |
|
|
|
$ |
|
|
1.18 |
|
|
|
|
$ |
|
|
2.74 |
|
|
|
$ |
|
|
2.35 |
|
|
|
Average basic common shares outstanding |
|
|
|
|
784.5 |
|
|
|
821.6 |
|
|
|
|
787.6 |
|
|
|
825.5 |
|
|
|
Diluted income per common share from continuing operations |
|
|
|
|
$ |
|
|
1.20 |
|
|
|
$ |
|
|
1.16 |
|
|
|
|
$ |
|
|
2.66 |
|
|
|
$ |
|
|
2.26 |
|
|
|
Discontinued operations |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
0.05 |
|
|
|
0.05 |
|
|
|
Diluted net income per common share |
|
|
|
|
$ |
|
|
1.20 |
|
|
|
$ |
|
|
1.16 |
|
|
|
|
$ |
|
|
2.71 |
|
|
|
$ |
|
|
2.31 |
|
|
|
Average diluted common shares outstanding |
|
|
|
|
795.4 |
|
|
|
836.3 |
|
|
|
|
798.8 |
|
|
|
841.1 |
|
|
|
Cash dividends declared per share of common stock |
|
|
|
|
$ |
|
|
0.4025 |
|
|
|
$ |
|
|
0.3500 |
|
|
|
|
$ |
|
|
0.8050 |
|
|
|
$ |
|
|
0.7000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIME WARNER INC. |
|
|
CONSOLIDATED STATEMENT OF CASH FLOWS |
|
|
Six Months Ended June 30, |
|
|
(Unaudited; millions) |
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
$ |
|
|
|
2,165 |
|
|
|
|
$ |
|
|
|
1,941 |
|
|
|
Less Discontinued operations, net of tax |
|
|
|
|
(40 |
) |
|
|
|
(37 |
) |
|
|
Net income from continuing operations |
|
|
|
|
2,125 |
|
|
|
|
1,904 |
|
|
|
Adjustments for noncash and nonoperating items: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
336 |
|
|
|
|
334 |
|
|
|
Amortization of film and television costs |
|
|
|
|
4,158 |
|
|
|
|
4,087 |
|
|
|
Asset impairments |
|
|
|
|
5 |
|
|
|
|
1 |
|
|
|
(Gain) loss on investments and other assets, net |
|
|
|
|
(30 |
) |
|
|
|
85 |
|
|
|
Equity in losses of investee companies, net of cash distributions |
|
|
|
|
223 |
|
|
|
|
116 |
|
|
|
Equity-based compensation |
|
|
|
|
156 |
|
|
|
|
135 |
|
|
|
Deferred income taxes |
|
|
|
|
249 |
|
|
|
|
(80 |
) |
|
|
Changes in operating assets and liabilities, net of acquisitions |
|
|
|
|
(5,249 |
) |
|
|
|
(4,782 |
) |
|
|
Cash provided by operations from continuing operations |
|
|
|
|
1,973 |
|
|
|
|
1,800 |
|
|
|
Cash used by operations from discontinued operations |
|
|
|
|
(7 |
) |
|
|
|
— |
|
|
|
Cash provided by operations |
|
|
|
|
1,966 |
|
|
|
|
1,800 |
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Investments in available-for-sale securities |
|
|
|
|
(7 |
) |
|
|
|
(32 |
) |
|
|
Investments and acquisitions, net of cash acquired |
|
|
|
|
(286 |
) |
|
|
|
(152 |
) |
|
|
Capital expenditures |
|
|
|
|
(162 |
) |
|
|
|
(154 |
) |
|
|
Investment proceeds from available-for-sale securities |
|
|
|
|
1 |
|
|
|
|
— |
|
|
|
Other investment proceeds |
|
|
|
|
240 |
|
|
|
|
109 |
|
|
|
Cash used by investing activities |
|
|
|
|
(214 |
) |
|
|
|
(229 |
) |
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
|
|
942 |
|
|
|
|
2,106 |
|
|
|
Debt repayments |
|
|
|
|
(304 |
) |
|
|
|
(804 |
) |
|
|
Proceeds from exercise of stock options |
|
|
|
|
81 |
|
|
|
|
121 |
|
|
|
Excess tax benefit from equity instruments |
|
|
|
|
40 |
|
|
|
|
120 |
|
|
|
Principal payments on capital leases |
|
|
|
|
(7 |
) |
|
|
|
(5 |
) |
|
|
Repurchases of common stock |
|
|
|
|
(1,407 |
) |
|
|
|
(1,804 |
) |
|
|
Dividends paid |
|
|
|
|
(640 |
) |
|
|
|
(584 |
) |
|
|
Other financing activities |
|
|
|
|
(116 |
) |
|
|
|
(217 |
) |
|
|
Cash used by financing activities |
|
|
|
|
(1,411 |
) |
|
|
|
(1,067 |
) |
|
|
INCREASE IN CASH AND EQUIVALENTS |
|
|
|
|
341 |
|
|
|
|
504 |
|
|
|
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD |
|
|
|
|
2,155 |
|
|
|
|
2,618 |
|
|
|
CASH AND EQUIVALENTS AT END OF PERIOD |
|
|
|
|
$ |
|
|
|
2,496 |
|
|
|
|
$ |
|
|
|
3,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 over-the-top (“OTT”) services
domestically and premium pay, basic tier television and OTT 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 June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
|
|
Intersegment Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turner |
|
|
|
|
|
|
|
$ |
|
|
34 |
|
|
|
$ |
|
|
34 |
|
|
|
|
$ |
|
|
54 |
|
|
|
$ |
|
|
|
58 |
|
|
Home Box Office |
|
|
|
|
|
|
|
2 |
|
|
|
11 |
|
|
|
|
5 |
|
|
|
18 |
|
|
Warner Bros. |
|
|
|
|
|
|
|
147 |
|
|
|
170 |
|
|
|
|
337 |
|
|
|
319 |
|
|
Total intersegment revenues |
|
|
|
|
|
|
|
$ |
|
|
183 |
|
|
|
$ |
|
|
215 |
|
|
|
|
$ |
|
|
396 |
|
|
|
$ |
|
|
|
395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
2016 |
|
2015 |
|
|
|
2016 |
|
2015 |
Home video and electronic delivery of
theatrical product revenues
|
|
|
$ |
|
|
221 |
|
|
$ |
|
|
461 |
|
|
|
|
$ |
|
|
542 |
|
|
$ |
|
|
830 |
Home video and electronic delivery of
television product revenues
|
|
|
85 |
|
|
92 |
|
|
|
|
179 |
|
|
198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4. SUMMARY OF DISCONTINUED OPERATIONS
For the six months ended June 30, 2016, Discontinued operations, net of tax was income of $40 million
($0.05 of diluted income from discontinued operations per common share) related to additional tax benefits associated with certain
foreign tax attributes of the Warner Music Group (“WMG”), which the Company disposed of in 2004. For the six months ended
June 30, 2015, Discontinued operations, net of tax was income of $37 million ($0.05 of diluted income from discontinued
operations per common share), primarily related to the final resolution of a tax indemnification obligation associated with the
disposition of WMG.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 June 30, 2016(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Operating
Income (Loss)
|
|
|
|
Asset
Impairments
|
|
|
|
Gain (Loss) on
Operating
Assets, Net
|
|
|
|
Venezuelan
Foreign
Currency Loss
|
|
|
|
|
Other
|
|
|
|
Operating
Income (Loss)
|
|
|
|
Turner |
|
|
|
|
$ |
|
1,133 |
|
|
|
|
$
|
|
|
|
— |
|
|
|
|
|
$ |
|
(2 |
) |
|
|
|
$
|
|
—
|
|
|
|
|
|
$
|
|
|
|
(1 |
) |
|
|
|
$
|
|
|
1,130
|
|
|
|
|
Home Box Office |
|
|
|
|
481 |
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
481 |
|
|
|
|
Warner Bros. |
|
|
|
|
217 |
|
|
|
|
|
|
|
— |
|
|
|
|
|
91 |
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
308 |
|
|
|
|
Corporate |
|
|
|
|
(93 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
— |
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
(95 |
)
|
|
|
|
Intersegment eliminations |
|
|
|
|
22 |
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
22 |
|
|
|
|
Time Warner |
|
|
|
|
$ |
|
1,760 |
|
|
|
|
$
|
|
|
|
(2 |
) |
|
|
|
|
$ |
|
89 |
|
|
|
|
$
|
|
—
|
|
|
|
|
|
$
|
|
|
|
(1 |
) |
|
|
|
$
|
|
|
1,846 |
|
|
|
|
Margin(b) |
|
|
|
|
25.3 |
% |
|
|
|
|
|
|
— |
%
|
|
|
|
|
1.3 |
% |
|
|
|
|
|
—
|
%
|
|
|
|
|
|
|
|
— |
% |
|
|
|
|
|
26.6 |
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2015(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Operating
Income (Loss)
|
|
|
|
Asset
Impairments
|
|
|
Gain (Loss) on
Operating
Assets, Net
|
|
|
|
Venezuelan
Foreign
Currency Loss
|
|
|
|
|
Other
|
|
|
|
|
Operating
Income (Loss)
|
|
|
|
Turner |
|
|
|
|
$ |
|
1,130 |
|
|
|
|
|
$
|
|
|
— |
|
|
|
|
$ |
|
1 |
|
|
|
|
$
|
|
—
|
|
|
|
|
|
$ |
|
|
|
(1 |
) |
|
|
|
|
$
|
|
1,130 |
|
|
|
|
Home Box Office |
|
|
|
|
508 |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
508 |
|
|
|
|
Warner Bros. |
|
|
|
|
344 |
|
|
|
|
|
— |
|
|
|
|
(1 |
) |
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
(2
|
) |
|
|
|
|
341 |
|
|
|
|
Corporate |
|
|
|
|
(89 |
) |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(89 |
) |
|
|
|
Intersegment eliminations |
|
|
|
|
(31 |
) |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(31 |
) |
|
|
|
Time Warner |
|
|
|
|
$ |
|
1,862 |
|
|
|
|
|
$ |
|
|
— |
|
|
|
|
$ |
|
— |
|
|
|
|
$
|
|
—
|
|
|
|
|
|
$ |
|
|
|
(3 |
)
|
|
|
|
|
$
|
|
1,859 |
|
|
|
|
Margin(b) |
|
|
|
|
25.3 |
% |
|
|
|
|
— |
% |
|
|
|
— |
% |
|
|
|
|
|
—
|
%
|
|
|
|
|
|
|
|
—
|
%
|
|
|
|
|
25.3 |
% |
|
|
|
Please see below for additional information on items affecting comparability.
____________________
|
(a) Descriptions of the adjustments presented in the table follow the reconciliations of
Adjusted EPS to Diluted Income per Common Share from Continuing Operations.
|
(b) Adjusted Operating Income margin is defined as Adjusted Operating Income divided by
Revenues. Operating Income margin is defined as Operating Income divided by Revenues.
|
|
|
Six Months Ended June 30, 2016(a)
|
|
|
|
|
|
|
Adjusted
Operating
Income (Loss)
|
|
|
|
Asset
Impairments
|
|
|
|
Gain (Loss) on
Operating
Assets, Net
|
|
|
Venezuelan
Foreign
Currency Loss
|
|
|
|
Other
|
|
|
|
Operating
Income (Loss)
|
|
|
Turner |
|
|
|
|
$
|
|
|
|
2,372 |
|
|
|
|
|
$
|
|
|
— |
|
|
|
|
|
$
|
|
(2
|
)
|
|
|
|
$
|
|
|
— |
|
|
|
|
$
|
|
|
|
|
|
(1 |
) |
|
|
|
$
|
|
|
2,369 |
|
|
|
Home Box Office |
|
|
|
|
|
|
|
967 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
(9 |
) |
|
|
|
|
|
958 |
|
|
|
Warner Bros. |
|
|
|
|
|
|
|
643 |
|
|
|
|
|
|
(1 |
)
|
|
|
|
|
|
91 |
|
|
|
|
|
|
— |
|
|
|
|
|
(1 |
) |
|
|
|
|
|
732 |
|
|
|
Corporate |
|
|
|
|
|
|
|
(228 |
)
|
|
|
|
|
|
(4 |
)
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
(3 |
) |
|
|
|
|
|
(235 |
) |
|
|
|
Intersegment eliminations |
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
18 |
|
|
|
Time Warner |
|
|
|
|
$
|
|
|
|
3,772 |
|
|
|
|
|
$
|
|
|
(5 |
)
|
|
|
|
|
$
|
|
89 |
|
|
|
|
$
|
|
|
— |
|
|
|
|
$
|
|
|
|
|
|
(14 |
) |
|
|
|
$
|
|
|
3,842 |
|
|
|
Margin(b) |
|
|
|
|
|
|
|
26.5 |
%
|
|
|
|
|
|
— |
%
|
|
|
|
|
|
0.6 |
%
|
|
|
|
|
|
— |
%
|
|
|
|
|
(0.2 |
)% |
|
|
|
|
|
26.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2015(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Operating
Income (Loss)
|
|
|
|
Asset
Impairments
|
|
|
|
Gain (Loss) on
Operating
Assets, Net
|
|
|
Venezuelan
Foreign
Currency Loss
|
|
|
|
Other
|
|
|
|
Operating
Income (Loss)
|
|
|
Turner |
|
|
|
|
$ |
|
|
2,258 |
|
|
|
|
$ |
— |
|
|
|
|
$ |
(2 |
) |
|
|
|
$ |
|
(17 |
) |
|
|
|
$ |
(1 |
) |
|
|
|
$
|
|
2,238 |
|
|
|
Home Box Office |
|
|
|
|
966 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
966 |
|
|
|
Warner Bros. |
|
|
|
|
674 |
|
|
|
|
— |
|
|
|
|
(1 |
) |
|
|
|
(5 |
) |
|
|
|
(3 |
) |
|
|
|
665 |
|
|
|
Corporate |
|
|
|
|
(191 |
) |
|
|
|
(1 |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(1 |
) |
|
|
|
(193 |
) |
|
|
Intersegment eliminations |
|
|
|
|
(31 |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(31 |
) |
|
|
Time Warner |
|
|
|
|
$ |
|
|
3,676 |
|
|
|
|
$ |
(1 |
) |
|
|
|
$
|
(3 |
) |
|
|
|
$ |
|
(22 |
) |
|
|
|
$ |
(5 |
) |
|
|
|
$
|
|
3,645 |
|
|
|
Margin(b) |
|
|
|
|
25.4 |
% |
|
|
|
— |
% |
|
|
|
— |
% |
|
|
|
(0.2 |
)%
|
|
|
|
— |
%
|
|
|
|
25.2 |
% |
|
|
Please see below for additional information on items affecting comparability.
______________________
|
(a) Descriptions of the adjustments presented in the table follow the reconciliations of
Adjusted EPS to Diluted Income per Common Share from Continuing Operations.
|
(b) 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 June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
2016
|
|
|
2015
|
|
|
Asset impairments |
|
|
|
|
$ |
|
|
(2 |
) |
|
|
$ |
|
|
— |
|
|
|
|
$ |
|
|
(5 |
) |
|
|
$ |
|
|
(1 |
) |
|
|
Gain (loss) on operating assets, net |
|
|
|
|
89 |
|
|
|
— |
|
|
|
|
89 |
|
|
|
(3 |
) |
|
|
Venezuelan foreign currency loss |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
(22 |
) |
|
|
Other |
|
|
|
|
(1 |
) |
|
|
(3 |
) |
|
|
|
(14 |
) |
|
|
(5 |
) |
|
|
Impact on Operating Income |
|
|
|
|
86 |
|
|
|
(3 |
) |
|
|
|
70 |
|
|
|
(31 |
) |
|
|
Investment gains (losses), net |
|
|
|
|
47 |
|
|
|
(26 |
) |
|
|
|
36 |
|
|
|
(85 |
) |
|
|
Amounts related to the separation of Time Warner Cable Inc. |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
(4 |
) |
|
|
Amounts related to the disposition of Warner Music Group |
|
|
|
|
(1 |
) |
|
|
— |
|
|
|
|
(1 |
) |
|
|
— |
|
|
|
Amounts related to the separation of Time Inc. |
|
|
|
|
(4 |
) |
|
|
(3 |
) |
|
|
|
(8 |
) |
|
|
(5 |
) |
|
|
Premiums paid and costs incurred on debt redemption |
|
|
|
|
— |
|
|
|
(51 |
) |
|
|
|
— |
|
|
|
(51 |
) |
|
|
Items affecting comparability relating to equity method investments |
|
|
|
|
(149 |
) |
|
|
(19 |
) |
|
|
|
(140 |
) |
|
|
(21 |
) |
|
|
Pretax impact |
|
|
|
|
(21 |
) |
|
|
(102 |
) |
|
|
|
(43 |
) |
|
|
(197 |
) |
|
|
Income tax impact of above items |
|
|
|
|
(57 |
) |
|
|
28 |
|
|
|
|
(53 |
) |
|
|
46 |
|
|
|
Impact of items affecting comparability on income from continuing
operations |
|
|
|
|
$ |
|
|
(78 |
) |
|
|
$ |
|
|
(74 |
) |
|
|
|
$ |
|
|
(96 |
) |
|
|
$ |
|
|
(151 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Time Warner Inc. shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
|
|
$ |
|
|
952 |
|
|
|
$ |
|
|
971 |
|
|
|
|
$ |
|
|
2,126 |
|
|
|
$ |
|
|
1,904 |
|
|
|
Less Impact of items affecting comparability on income
from continuing operations
|
|
|
|
|
(78 |
) |
|
|
(74 |
) |
|
|
|
(96 |
) |
|
|
(151 |
) |
|
|
Adjusted income from continuing operations |
|
|
|
|
$ |
|
|
1,030 |
|
|
|
$ |
|
|
1,045 |
|
|
|
|
$ |
|
|
2,222 |
|
|
|
$ |
|
|
2,055 |
|
|
|
Per share information attributable to Time Warner Inc. common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share from continuing operations |
|
|
|
|
$ |
|
|
1.20 |
|
|
|
$ |
|
|
1.16 |
|
|
|
|
$ |
|
|
2.66 |
|
|
|
$ |
|
|
2.26 |
|
|
|
Less Impact of items affecting comparability on diluted
income per common share from continuing operations
|
|
|
|
|
(0.09 |
) |
|
|
(0.09 |
) |
|
|
|
(0.12 |
) |
|
|
(0.18 |
) |
|
|
Adjusted EPS |
|
|
|
|
$ |
|
|
1.29 |
|
|
|
$ |
|
|
1.25 |
|
|
|
|
$ |
|
|
2.78 |
|
|
|
$ |
|
|
2.44 |
|
|
|
Average diluted common shares outstanding |
|
|
|
|
795.4 |
|
|
|
836.3 |
|
|
|
|
798.8 |
|
|
|
841.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Impairments
During the three months ended June 30, 2016, the Company recognized miscellaneous asset impairments of $2 million at
Corporate. During the six months ended June 30, 2016, the Company recognized miscellaneous asset impairments of $5 million,
consisting of $4 million at Corporate and $1 million at the Warner Bros. segment. During the six months ended June 30, 2015,
the Company recognized a miscellaneous asset impairment of $1 million at Corporate.
Gain (Loss) on Operating Assets, Net
For the three and six months ended June 30, 2016, the Company recognized $89 million of net gains principally at the Warner
Bros. segment related to the gain on the sale of Flixster’s net assets to Fandango Media, LLC, a subsidary of NBCUniversal Media
LLC, in April 2016.
Venezuelan Foreign Currency Loss
For the six months ended June 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
For the three and six months ended June 30, 2016, Other includes external costs related to mergers, acquisitions or
dispositions of $1 million and $5 million, respectively, consisting of $1 million at the Turner segment and, for the six months
ended June 30, 2016, $3 million at Corporate and $1 million at the Warner Bros. segment. For the six months ended June 30,
2016, Other also includes $9 million of expenses at the Home Box Office segment related to Home Box Office’s withdrawal from a
multiemployer benefit plan. For the three and six months ended June 30, 2015, Other reflects external costs related to mergers,
acquisitions or dispositions of $3 million and $5 million, respectively, consisting of $1 million for both periods at the Turner
segment, $2 million and $3 million, respectively, at the Warner Bros. segment and $1 million for the six months ended June 30,
2015 at Corporate. External costs related to mergers, acquisitions or dispositions and the accrued pension withdrawal expenses are
included in Selling, general and administrative expenses in the accompanying Consolidated Statement of Operations.
Investment Gains (Losses), Net
For the three and six months ended June 30, 2016, the Company recognized $47 million and $36 million, respectively, of
investment gains, net, consisting of a $95 million gain in connection with financing transactions of Central European Media
Enterprises Ltd. (“CME”), $43 million and $62 million, respectively, of fair value losses relating to warrants to purchase common
stock of CME held by the Company, and $5 million of miscellaneous investment losses and $3 million of miscellaneous investment
gains, respectively. For the three and six months ended June 30, 2015, the Company recognized $26 million and $85 million,
respectively, of investment losses, net consisting of $49 million and $105 million, respectively, of losses related to fair value
adjustments on warrants to purchase common stock of CME held by the Company, and $23 million and $20 million, respectively, of
miscellaneous investment gains. Investment losses, net are included in Other loss, net in the accompanying Consolidated Statement
of Operations.
Amounts Related to the Separation of Time Warner Cable Inc.
For the six months ended June 30, 2015, the Company recognized $4 million of losses related to changes in the value of a
Time Warner Cable Inc. tax indemnification receivable, which has been reflected in Other loss, net in the accompanying Consolidated
Statement of Operations.
Amounts Related to the Separation of Time Inc.
The Company recognized expenses of $4 million and $8 million for the three and six months ended June 30, 2016,
respectively, and $3 million and $5 million for the three and six months ended June 30, 2015, respectively, primarily
reflecting pension and other retirement benefits related to employees and former employees of Time Inc. These amounts have been
reflected in Other loss, net in the accompanying Consolidated Statement of Operations.
Premiums Paid and Costs Incurred on Debt Redemption
For the three and six months ended June 30, 2015, the Company recognized $51 million of premiums paid and costs incurred on
the purchase of $687 million aggregate principal amount of its 5.875% Notes due 2016 through a tender offer, which was recorded in
Other loss, net in the accompanying Consolidated Statement of Operations.
Items Affecting Comparability Relating to Equity Method Investments
For the three and six months ended June 30, 2016, the Company recognized $150 million of losses primarily related to the
2016 CME financing transactions and $1 million and $10 million of income, respectively, primarily related to net investment gains
recorded by equity method investees. For the three and six months ended June 30, 2015, the Company recognized $19 million of
expenses primarily related to government investigations recorded by an equity method investee. For the six months ended
June 30, 2015, the Company also recognized $2 million of losses related to discontinued operations recorded by an equity
method investee. These amounts have been reflected in Other loss, net in the accompanying Consolidated Statement of Operations.
Income Tax Impact
The income tax impact reflects the estimated tax provision or tax benefit associated with each item affecting comparability
using the effective tax rate for the item. The estimated tax provision or tax benefit can vary based on certain factors, including
the taxability or deductibility of the item and the applicable tax jurisdiction for the item.
|
|
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 June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
|
Cash provided by operations from continuing operations |
|
|
|
|
$ |
|
|
1,216 |
|
|
|
$ |
|
|
791 |
|
|
|
|
$ |
|
|
1,973 |
|
|
|
$ |
|
|
|
1,800 |
|
|
Add external costs related to mergers, acquisitions,
investments or dispositions and contingent consideration
payments
|
|
|
|
|
2 |
|
|
|
4 |
|
|
|
|
10 |
|
|
|
8 |
|
|
Add excess tax benefits from equity instruments |
|
|
|
|
13 |
|
|
|
37 |
|
|
|
|
40 |
|
|
|
120 |
|
|
Less capital expenditures |
|
|
|
|
(87 |
) |
|
|
(97 |
) |
|
|
|
(162 |
) |
|
|
(154 |
) |
|
Less principal payments on capital leases |
|
|
|
|
(4 |
) |
|
|
(3 |
) |
|
|
|
(7 |
) |
|
|
(5 |
) |
|
Free Cash Flow |
|
|
|
|
$ |
|
|
1,140 |
|
|
|
$ |
|
|
732 |
|
|
|
|
$ |
|
|
1,854 |
|
|
|
$ |
|
|
|
1,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Corporate Communications
Keith Cocozza (212) 484-7482
or
Investor Relations
Michael Kopelman (212) 484-8920
Jessica Holscott (212) 484-6720
Michael Senno (212) 484-8950
View source version on businesswire.com: http://www.businesswire.com/news/home/20160803005779/en/