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 FLOWSYear 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 ofAdjusted Operating Income
(Loss) to Operating Income (Loss) andAdjusted Operating
Income Margin to Operating Income Margin
Three Months Ended December 31,
2015
AdjustedOperatingIncome
(Loss)
AssetImpairments
Gain (Loss)
onOperatingAssets, Net
VenezuelanForeignCurrency
Loss
Other
OperatingIncome (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
AdjustedOperatingIncome
(Loss)
AssetImpairments
Gain (Loss)
onOperatingAssets, Net
VenezuelanForeignCurrency
Loss
Other
OperatingIncome (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
AdjustedOperatingIncome
(Loss)
AssetImpairments
Gain (Loss)
onOperatingAssets, Net
VenezuelanForeignCurrency
Loss
Other
OperatingIncome (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
AdjustedOperatingIncome
(Loss)
AssetImpairments
Gain (Loss)
onOperatingAssets, Net
VenezuelanForeignCurrency
Loss
Other
OperatingIncome (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 ofAdjusted EPS to
Diluted Income per Common Share from Continuing
Operationsattributable 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160210005688/en/
Corporate CommunicationsKeith Cocozza
212-484-7482orInvestor RelationsMichael Kopelman
212-484-8920Michael Senno 212-484-8950
Time Warner (NYSE:TWX)
Historical Stock Chart
From Mar 2024 to Apr 2024
Time Warner (NYSE:TWX)
Historical Stock Chart
From Apr 2023 to Apr 2024