UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 10, 2016
TIME WARNER INC.
(Exact
Name of Registrant as Specified in its Charter)
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| Delaware |
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1-15062 |
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13-4099534 |
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(Commission File Number) |
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(IRS Employer |
| Incorporation) |
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Identification No.) |
One Time Warner Center, New York, New York 10019
(Address of Principal Executive Offices) (Zip Code)
212-484-8000
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
[ ] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under
the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
The following information is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.”
On February 10, 2016, Time Warner Inc. (“Time Warner”) issued a press release setting forth its financial results for its
fourth quarter and year ended December 31, 2015. A copy of Time Warner’s press release is attached as Exhibit 99.1 to this report. Time Warner does not intend for this Item 2.02 or Exhibit 99.1 to be deemed “filed” for
purposes of Section 18 of the Securities Exchange Act of 1934 or to be incorporated by reference into filings under the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits.
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| Exhibit |
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Description |
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| 99.1 |
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Press release issued February 10, 2016 by Time Warner Inc. and furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.” |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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| TIME WARNER INC. |
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| By: |
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/s/ Howard M. Averill |
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Name: Howard M. Averill
Title: Executive Vice President and
Chief Financial Officer |
Date: February 10, 2016
EXHIBIT INDEX
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| Exhibit |
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Description |
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| 99.1 |
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Press release issued February 10, 2016 by Time Warner Inc. and furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.” |
Exhibit 99.1
TIME WARNER INC. REPORTS FOURTH-QUARTER AND FULL-YEAR 2015 RESULTS
Full-Year Highlights
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Revenues increased 3% to $28.1 billion |
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Company posted Adjusted Operating Income of $6.9 billion |
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Adjusted EPS grew 14% to $4.75 |
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Free Cash Flow totaled $3.6 billion |
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Company repurchased 45 million shares for $3.6 billion |
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Board authorized a 15% increase in quarterly dividend for March 2016 and new $5 billion share repurchase program |
NEW YORK, February 10, 2016 – 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.
2
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 $0.4025 per share.
3
Segment Performance
The schedule below reflects Time Warner’s financial performance for the three months and year ended December 31, by line of business (millions).
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Three Months Ended December 31, |
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Year Ended December 31, |
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2015 |
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2014 |
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2015 |
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2014 |
| Revenues: |
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| Turner |
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$ |
2,661 |
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$ |
2,607 |
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$ |
10,596 |
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$ 10,396 |
| Home Box Office |
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1,412 |
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1,338 |
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5,615 |
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5,398 |
| Warner Bros. |
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3,305 |
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3,815 |
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12,992 |
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12,526 |
| Intersegment eliminations |
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(299) |
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(235) |
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(1,085) |
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(961) |
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| Total Revenues |
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$ |
7,079 |
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$ |
7,525 |
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$ |
28,118 |
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$ 27,359 |
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| Adjusted Operating Income (Loss) (a): |
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| Turner (b)(c) |
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$ |
781 |
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$ |
921 |
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$ |
4,110 |
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$ 3,106 |
| Home Box Office |
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393 |
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394 |
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1,878 |
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1,790 |
| Warner Bros. |
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373 |
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391 |
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1,435 |
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1,248 |
| Corporate |
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(102) |
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(124) |
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(351) |
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(460) |
| Intersegment eliminations (b)(c) |
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(40) |
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14 |
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(149) |
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149 |
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| Total Adjusted Operating Income |
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$ |
1,405 |
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$ |
1,596 |
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$ |
6,923 |
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$ 5,833 |
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| Operating Income (Loss) (a)(d)(e): |
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| Turner (b)(c) |
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$ |
777 |
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$ |
788 |
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$ |
4,087 |
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$ 2,954 |
| Home Box Office |
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393 |
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394 |
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1,878 |
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1,786 |
| Warner Bros. |
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366 |
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319 |
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1,416 |
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1,159 |
| Corporate (f) |
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(110) |
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(126) |
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(367) |
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(73) |
| Intersegment eliminations (b)(c) |
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(40) |
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14 |
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(149) |
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149 |
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| Total Operating Income |
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$ |
1,386 |
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$ |
1,389 |
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$ |
6,865 |
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$ 5,975 |
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| Depreciation and Amortization: |
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| Turner |
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$ |
54 |
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$ |
56 |
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$ |
209 |
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$ 225 |
| Home Box Office |
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27 |
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22 |
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95 |
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91 |
| Warner Bros. |
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94 |
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97 |
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356 |
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390 |
| Corporate |
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5 |
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7 |
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21 |
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27 |
| Intersegment eliminations |
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— |
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— |
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— |
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— |
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| Total Depreciation and Amortization |
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$ |
180 |
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$ |
182 |
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$ |
681 |
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$ 733 |
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(a) Adjusted Operating Income (Loss) and Operating Income (Loss) for the
following periods included restructuring and severance costs of (millions): |
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Three Months Ended December 31, |
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Year Ended December 31, |
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2015 |
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2014 |
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2015 |
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2014 |
| Turner |
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$ |
(35) |
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$ |
(26) |
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$ |
(58) |
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$ (249) |
| Home Box Office |
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5 |
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(6) |
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— |
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(63) |
| Warner Bros. |
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2 |
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(119) |
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(1) |
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(169) |
| Corporate |
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(1) |
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(15) |
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(1) |
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(31) |
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| Total Restructuring and Severance Costs |
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$ |
(29) |
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$ |
(166) |
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$ |
(60) |
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$ (512) |
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| (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. |
4
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.
5
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.
6
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.
7
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
8
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,
9
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.
|
|
|
| CONTACTS: |
|
|
| Corporate Communications |
|
Investor Relations |
| Keith Cocozza (212) 484-7482 |
|
Michael Kopelman (212) 484-8920 |
|
|
Michael Senno (212) 484-8950 |
10
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 |
|
|
|
|
|
|
|
11
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
TIME WARNER INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
(Unaudited; millions)
|
|
|
|
|
|
|
| |
|
2015 |
|
|
2014 |
| OPERATIONS |
|
|
|
|
|
|
| Net income |
|
$ |
3,832 |
|
|
$ 3,827 |
| Less Discontinued operations, net of tax |
|
|
(37) |
|
|
67 |
|
|
|
|
|
|
|
| Net income from continuing operations |
|
|
3,795 |
|
|
3,894 |
| Adjustments for noncash and nonoperating items: |
|
|
|
|
|
|
| Depreciation and amortization |
|
|
681 |
|
|
733 |
| Amortization of film and television costs |
|
|
8,030 |
|
|
8,040 |
| Asset impairments |
|
|
25 |
|
|
69 |
| Venezuelan foreign currency loss |
|
|
— |
|
|
173 |
| Gain on investments and other assets, net |
|
|
(32) |
|
|
(464) |
| Equity in losses of investee companies, net of cash distributions |
|
|
161 |
|
|
232 |
| Equity-based compensation |
|
|
182 |
|
|
219 |
| Deferred income taxes |
|
|
328 |
|
|
166 |
| Changes in operating assets and liabilities, net of acquisitions |
|
|
(9,319) |
|
|
(9,381) |
|
|
|
|
|
|
|
| Cash provided by operations from continuing operations |
|
|
3,851 |
|
|
3,681 |
|
|
|
|
|
|
|
| INVESTING ACTIVITIES |
|
|
|
|
|
|
| Investments in available-for-sale securities |
|
|
(41) |
|
|
(30) |
| Investments and acquisitions, net of cash acquired |
|
|
(672) |
|
|
(950) |
| Capital expenditures |
|
|
(423) |
|
|
(474) |
| Investment proceeds from available-for-sale securities |
|
|
2 |
|
|
25 |
| Proceeds from Time Inc. in the Time Separation |
|
|
— |
|
|
1,400 |
| Proceeds from the sale of Time Warner Center |
|
|
— |
|
|
1,264 |
| Other investment proceeds |
|
|
141 |
|
|
148 |
|
|
|
|
|
|
|
| Cash provided (used) by investing activities from continuing operations |
|
|
(993) |
|
|
1,383 |
|
|
|
|
|
|
|
| FINANCING ACTIVITIES |
|
|
|
|
|
|
| Borrowings |
|
|
3,768 |
|
|
2,409 |
| Debt repayments |
|
|
(2,344) |
|
|
(72) |
| Proceeds from exercise of stock options |
|
|
165 |
|
|
338 |
| Excess tax benefit from equity instruments |
|
|
151 |
|
|
179 |
| Principal payments on capital leases |
|
|
(11) |
|
|
(11) |
| Repurchases of common stock |
|
|
(3,632) |
|
|
(5,504) |
| Dividends paid |
|
|
(1,150) |
|
|
(1,109) |
| Other financing activities |
|
|
(260) |
|
|
(173) |
|
|
|
|
|
|
|
| Cash used by financing activities from continuing operations |
|
|
(3,313) |
|
|
(3,943) |
|
|
|
|
|
|
|
| Cash provided (used) by continuing operations |
|
|
(455) |
|
|
1,121 |
|
|
|
|
|
|
|
| Cash used by operations from discontinued operations |
|
|
(8) |
|
|
(16) |
| Cash used by investing activities from discontinued operations |
|
|
— |
|
|
(51) |
| Cash used by financing activities from discontinued operations |
|
|
— |
|
|
(36) |
| Effect of change in cash and equivalents of discontinued operations |
|
|
— |
|
|
(87) |
|
|
|
|
|
|
|
| Cash used by discontinued operations |
|
|
(8) |
|
|
(190) |
| Effect of Venezuelan exchange rate changes on cash and equivalents |
|
|
— |
|
|
(129) |
|
|
|
|
|
|
|
| INCREASE (DECREASE) IN CASH AND EQUIVALENTS |
|
|
(463) |
|
|
802 |
| CASH AND EQUIVALENTS AT BEGINNING OF PERIOD |
|
|
2,618 |
|
|
1,816 |
|
|
|
|
|
|
|
| CASH AND EQUIVALENTS AT END OF PERIOD |
|
$ |
2,155 |
|
|
$ 2,618 |
|
|
|
|
|
|
|
13
TIME WARNER INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Unaudited; dollars in millions)
Reconciliations of
Adjusted Operating Income (Loss) to Operating Income (Loss) and
Adjusted Operating Income Margin to Operating Income Margin
Three Months Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Adjusted
Operating
Income (Loss) |
|
|
Asset
Impairments |
|
|
Gain (Loss) on
Operating
Assets, Net |
|
|
Venezuelan
Foreign
Currency Loss |
|
|
Other |
|
|
Operating
Income (Loss) |
| Turner |
|
$ |
781 |
|
|
$ |
(2) |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(2) |
|
|
$ 777 |
| Home Box Office |
|
|
393 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
393 |
| Warner Bros. |
|
|
373 |
|
|
|
(6) |
|
|
|
— |
|
|
|
— |
|
|
|
(1) |
|
|
366 |
| Corporate |
|
|
(102) |
|
|
|
(9) |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
(110) |
| Intersegment eliminations |
|
|
(40) |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
(40) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Time Warner |
|
$ |
1,405 |
|
|
$ |
(17) |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(2) |
|
|
$ 1,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Margin(a) |
|
|
19.8% |
|
|
|
(0.2)% |
|
|
|
—% |
|
|
|
—% |
|
|
|
—% |
|
|
19.6% |
|
| Three Months Ended December 31, 2014 |
|
|
|
|
|
|
|
| |
|
Adjusted
Operating
Income (Loss) |
|
|
Asset
Impairments |
|
|
Gain (Loss) on
Operating
Assets, Net |
|
|
Venezuelan
Foreign
Currency Loss |
|
|
Other |
|
|
Operating
Income (Loss) |
| Turner |
|
$ |
921 |
|
|
$ |
(2) |
|
|
$ |
6 |
|
|
$ |
(137) |
|
|
$ |
— |
|
|
$ 788 |
| Home Box Office |
|
|
394 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
394 |
| Warner Bros. |
|
|
391 |
|
|
|
(36) |
|
|
|
7 |
|
|
|
(36) |
|
|
|
(7) |
|
|
319 |
| Corporate |
|
|
(124) |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2) |
|
|
(126) |
| Intersegment eliminations |
|
|
14 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Time Warner |
|
$ |
1,596 |
|
|
$ |
(38) |
|
|
$ |
13 |
|
|
$ |
(173) |
|
|
$ |
(9) |
|
|
$ 1,389 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Margin(a) |
|
|
21.2% |
|
|
|
(0.5)% |
|
|
|
0.2% |
|
|
|
(2.3)% |
|
|
|
(0.1)% |
|
|
18.5% |
Please see below for additional information on items affecting comparability.
| (a) |
Adjusted Operating Income margin is defined as Adjusted Operating Income divided by Revenues. Operating Income margin is defined as Operating Income divided by Revenues. |
14
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
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Adjusted
Operating
Income (Loss) |
|
|
Asset
Impairments |
|
|
Gain (Loss) on
Operating
Assets, Net |
|
|
Venezuelan
Foreign
Currency Loss |
|
|
Other |
|
|
Operating
Income (Loss) |
| Turner |
|
$ |
4,110 |
|
|
$ |
(3) |
|
|
$ |
— |
|
|
$ |
(17) |
|
|
$ |
(3) |
|
|
$ 4,087 |
| Home Box Office |
|
|
1,878 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
1,878 |
| Warner Bros. |
|
|
1,435 |
|
|
|
(7) |
|
|
|
(1) |
|
|
|
(5) |
|
|
|
(6) |
|
|
1,416 |
| Corporate |
|
|
(351) |
|
|
|
(15) |
|
|
|
— |
|
|
|
— |
|
|
|
(1) |
|
|
(367) |
| Intersegment eliminations |
|
|
(149) |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
(149) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Time Warner |
|
$ |
6,923 |
|
|
$ |
(25) |
|
|
$ |
(1) |
|
|
$ |
(22) |
|
|
$ |
(10) |
|
|
$ 6,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Margin(a) |
|
|
24.6% |
|
|
|
(0.1)% |
|
|
|
—% |
|
|
|
(0.1)% |
|
|
|
—% |
|
|
24.4% |
|
| Year Ended December 31, 2014 |
|
|
|
|
|
|
|
| |
|
Adjusted
Operating
Income (Loss) |
|
|
Asset
Impairments |
|
|
Gain (Loss) on
Operating
Assets, Net |
|
|
Venezuelan
Foreign
Currency Loss |
|
|
Other |
|
|
Operating
Income (Loss) |
| Turner |
|
$ |
3,106 |
|
|
$ |
(17) |
|
|
$ |
16 |
|
|
$ |
(137) |
|
|
$ |
(14) |
|
|
$ 2,954 |
| Home Box Office |
|
|
1,790 |
|
|
|
(4) |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
1,786 |
| Warner Bros. |
|
|
1,248 |
|
|
|
(41) |
|
|
|
7 |
|
|
|
(36) |
|
|
|
(19) |
|
|
1,159 |
| Corporate |
|
|
(460) |
|
|
|
(7) |
|
|
|
441 |
|
|
|
— |
|
|
|
(47) |
|
|
(73) |
| Intersegment eliminations |
|
|
149 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Time Warner |
|
$ |
5,833 |
|
|
$ |
(69) |
|
|
$ |
464 |
|
|
$ |
(173) |
|
|
$ |
(80) |
|
|
$ 5,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Margin(a) |
|
|
21.3% |
|
|
|
(0.3)% |
|
|
|
1.7% |
|
|
|
(0.6)% |
|
|
|
(0.3)% |
|
|
21.8% |
Please see below for additional information on items affecting comparability.
| (a) |
Adjusted Operating Income margin is defined as Adjusted Operating Income divided by Revenues. Operating Income margin is defined as Operating Income divided by Revenues. |
15
TIME WARNER INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Unaudited; millions, except per share amounts)
Reconciliation of
Adjusted EPS to Diluted Income per Common Share from Continuing Operations
attributable to Time Warner Inc. common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended December 31, |
|
|
Year Ended December 31, |
| |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
| Asset impairments |
|
$ |
(17) |
|
|
$ |
(38) |
|
|
$ |
(25) |
|
|
$ (69) |
| Gain (loss) on operating assets, net |
|
|
— |
|
|
|
13 |
|
|
|
(1) |
|
|
464 |
| Venezuelan foreign currency loss |
|
|
— |
|
|
|
(173) |
|
|
|
(22) |
|
|
(173) |
| Other |
|
|
(2) |
|
|
|
(9) |
|
|
|
(10) |
|
|
(80) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Impact on Operating Income |
|
|
(19) |
|
|
|
(207) |
|
|
|
(58) |
|
|
142 |
| Investment gains (losses), net |
|
|
39 |
|
|
|
87 |
|
|
|
(31) |
|
|
30 |
| Amounts related to the separation of Time Warner Cable Inc. |
|
|
— |
|
|
|
(10) |
|
|
|
(8) |
|
|
(11) |
| Amounts related to the disposition of Warner Music Group |
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
2 |
| Amounts related to the separation of Time Inc. |
|
|
(2) |
|
|
|
1 |
|
|
|
(9) |
|
|
3 |
| Premiums paid and costs incurred on debt redemption |
|
|
— |
|
|
|
— |
|
|
|
(72) |
|
|
— |
| Items affecting comparability relating to equity method investments |
|
|
(23) |
|
|
|
(72) |
|
|
|
(27) |
|
|
(97) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Pretax impact |
|
|
(5) |
|
|
|
(199) |
|
|
|
(205) |
|
|
69 |
| Income tax impact of above items |
|
|
2 |
|
|
|
81 |
|
|
|
57 |
|
|
165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Impact of items affecting comparability on income from continuing operations |
|
$ |
(3) |
|
|
$ |
(118) |
|
|
$ |
(148) |
|
|
$ 234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amounts attributable to Time Warner Inc. shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from continuing operations |
|
$ |
857 |
|
|
$ |
720 |
|
|
$ |
3,796 |
|
|
$ 3,894 |
| Less Impact of items affecting comparability on income from continuing operations |
|
|
(3) |
|
|
|
(118) |
|
|
|
(148) |
|
|
234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted income from continuing operations |
|
$ |
860 |
|
|
$ |
838 |
|
|
$ |
3,944 |
|
|
$ 3,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Per share information attributable to Time Warner Inc. common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted net income per common share from continuing operations |
|
$ |
1.06 |
|
|
$ |
0.84 |
|
|
$ |
4.58 |
|
|
$ 4.41 |
| Less Impact of items affecting comparability on diluted net income per common share from continuing operations |
|
|
— |
|
|
|
(0.14) |
|
|
|
(0.17) |
|
|
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EPS |
|
$ |
1.06 |
|
|
$ |
0.98 |
|
|
$ |
4.75 |
|
|
$ 4.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average diluted common shares outstanding |
|
|
811.7 |
|
|
|
855.7 |
|
|
|
829.5 |
|
|
882.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Impairments
During the three months ended December 31, 2015, the Company recognized asset impairments of $9 million at Corporate
primarily related to an asset held for disposal, $6 million at Warner Bros. primarily related to certain internally developed software and $2 million at the Turner segment related to miscellaneous assets. In addition, for the year ended
December 31, 2015, the Company recognized asset impairments of $6 million at Corporate primarily related to certain internally developed software and $1 million at both the Turner and Warner Bros. segments related to miscellaneous assets.
16
TIME WARNER INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Unaudited; millions, except per share amounts)
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.
17
TIME WARNER INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Unaudited; millions, except per share amounts)
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.
18
TIME WARNER INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Unaudited; millions, except per share amounts)
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.
19
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
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.
21
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