SEC Filings

10-Q
TIME WARNER INC. filed this Form 10-Q on 08/02/2017
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Table of Contents

TIME WARNER INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

 

Items Affecting Comparability Relating to Equity Method Investments

For the three and six months ended June 30, 2017, the Company recognized $1 million and $0, respectively, of gains primarily related to its share of net investment gains recorded by equity method investees. For the three and six months ended June 30, 2016, the Company recognized $150 million of losses primarily related to the 2016 financing transactions with CME and $1 million and $10 million of income, respectively, primarily related to net investment gains recorded by equity method investees. These amounts have been reflected in Other income (loss), net in the accompanying Consolidated Statement of Operations.

Income Tax Impact

The income tax impact reflects the estimated tax provision or tax benefit associated with each item affecting comparability using the effective tax rate for the item. The estimated tax provision or tax benefit can vary based on certain factors, including the taxability or deductibility of the item and the applicable tax jurisdiction for the item. For the six months ended June 30, 2017, the income tax impact includes a $69 million benefit primarily reflecting the reversal of a valuation allowance related to the use of capital loss carryforwards to offset the gains on the Turner segment’s sales of its interest in the joint venture that owns the Omni Atlanta hotel and its Atlanta broadcast television station.

Consolidated Results

The following discussion provides an analysis of the Company’s results of operations and should be read in conjunction with the accompanying Consolidated Statement of Operations.

Revenues.  The components of Revenues are as follows (millions):

 

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

Turner

   $ 3,102     $ 3,010     3%   $ 6,190     $ 5,916     5%

Home Box Office

     1,476       1,467     1%     3,044       2,973     2%

Warner Bros.

     2,988       2,658     12%     6,353       5,767     10%

Intersegment eliminations

     (236     (183   29%     (522     (396   32%
  

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

Total revenues

   $ 7,330     $ 6,952     5%   $ 15,065     $ 14,260     6%
  

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

For the three and six months ended June 30, 2017, Revenues at the Turner and Home Box Office segments increased primarily driven by higher Subscription revenues, and Revenues at the Warner Bros. segment increased primarily driven by higher Theatrical product revenues. Each of the revenue categories is discussed in greater detail by segment in “Business Segment Results.”

Costs of Revenues.  Costs of revenues were $4.205 billion and $8.538 billion for the three and six months ended June 30, 2017, respectively, and $3.840 billion and $7.845 billion for the three and six months ended June 30, 2016, respectively. The increase in Costs of revenues for the three and six months ended June 30, 2017 primarily reflected higher programming expenses at the Turner segment and higher film and television production costs at the Warner Bros. segment, partially offset by lower programming expenses at the Home Box Office segment. The segment variations are discussed in “Business Segment Results.”

Selling, General and Administrative Expenses.  For the three months ended June 30, 2017, Selling, general and administrative expenses increased 13% to $1.427 billion from $1.258 billion for the three months ended June 30, 2016. For the six months ended June 30, 2017, Selling, general and administrative expenses increased 8% to $2.702 billion from $2.509 billion for the six months ended June 30, 2016, primarily reflecting increases at the Turner and Warner Bros. segments. For the three and six months ended June 30, 2017, Selling, general and administrative expenses included $98 million and $178 million, respectively, of costs related to the AT&T merger. The segment variations are discussed in “Business Segment Results.”

Included in Costs of revenues and Selling, general and administrative expenses is depreciation expense of $123 million and $243 million for the three and six months ended June 30, 2017, respectively, and $122 million and $241 million for the three and six months ended June 30, 2016, respectively.

 

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