SEC Filings

10-Q
TIME WARNER INC. filed this Form 10-Q on 08/02/2017
Entire Document
 


Table of Contents

TIME WARNER INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

 

Included in film and television production costs are production costs related to videogames, as well as theatrical film and videogame valuation adjustments resulting primarily from revisions to estimates of ultimate revenue and/or costs for certain theatrical films and videogames. Theatrical film valuation adjustments were $1 million and $0 for the three months ended June 30, 2017 and 2016, respectively, and $11 million and $1 million for the six months ended June 30, 2017 and 2016, respectively. Videogame valuation adjustments were $0 for both the three months ended June 30, 2017 and 2016 and $5 million and $4 million for the six months ended June 30, 2017 and 2016, respectively. The increase in film and television production costs for the three and six months ended June 30, 2017 was primarily a result of higher revenues for theatrical product and, for the six months ended June 30, 2017, television product. The increase in print and advertising costs for the three and six months ended June 30, 2017 was primarily due to theatrical product, reflecting the type and number of releases, and, for the three months ended June 30, 2017, the type and number of videogame releases. Other costs, including merchandise and related costs decreased for the six months ended June 30, 2017 primarily due to lower distribution-related costs of sales primarily as a result of lower revenues for videogames.

Selling, general and administrative expenses increased for the three and six months ended June 30, 2017 primarily due to costs related to the AT&T merger of $27 million and $49 million, respectively, and higher costs related to digital initiatives.

Refer to “Transactions and Other Items Affecting Comparability” for a discussion of Gain on operating assets, Asset impairments, costs related to the AT&T merger and external costs related to mergers, acquisitions and dispositions for the three and six months ended June 30, 2017 and 2016, which affected the comparability of the Warner Bros. segment’s results.

The decrease in Operating Income for the three and six months ended June 30, 2017 was due to higher Costs of revenues and Selling, general and administrative expenses and lower Gains on operating assets, partially offset by higher Revenues.

Corporate.  Corporate’s Operating Loss for the three and six months ended June 30, 2017 and 2016 was as follows (millions):

 

     Three Months Ended June 30,   Six Months Ended June 30,
     2017   2016        % Change        2017   2016        % Change     

Selling, general and
administrative (a)

   $ (121   $ (86   41%   $ (229   $ (219   5%

Asset impairments

           (2   NM           (4   NM

Restructuring and
severance costs

           (1   NM     1           NM

Depreciation

     (7     (6   17%     (14     (12   17%
  

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

Operating Loss

   $             (128   $               (95   35%   $             (242   $             (235   3%
  

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 

(a)

Selling, general and administrative expenses exclude depreciation.

Refer to “Transactions and Other Items Affecting Comparability” for a discussion of Asset impairments, costs related to the AT&T merger and external costs related to mergers, acquisitions and dispositions for the three and six months ended June 30, 2017 and 2016, which affected the comparability of Corporate’s results.

For the three and six months ended June 30, 2017, Operating loss increased primarily due to costs related to the AT&T merger of $30 million and $56 million, respectively, and, for the six months ended June 30, 2017, was partially offset by lower equity-based compensation expense and lower costs of $10 million primarily related to technology initiatives.

FINANCIAL CONDITION AND LIQUIDITY

Management believes that cash generated by or available to the Company should be sufficient to fund its capital and liquidity needs for the foreseeable future, including scheduled debt repayments and quarterly dividend payments. Time Warner’s sources of cash include Cash provided by operations, Cash and equivalents on hand, available borrowing capacity under its committed credit facilities and commercial paper program and access to capital markets. Time Warner’s unused committed capacity at June 30, 2017 was $6.723 billion, which included $1.705 billion of Cash and equivalents.

 

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