SEC Filings

10-Q
TIME WARNER INC. filed this Form 10-Q on 10/26/2017
Entire Document
 


Table of Contents

TIME WARNER INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

 

Operating Income.  Operating Income increased to $2.245 billion for the three months ended September 30, 2017 from $2.014 billion for the three months ended September 30, 2016. Excluding the items noted under “Transactions and Other Items Affecting Comparability” totaling $94 million and $56 million of expense for the three months ended September 30, 2017 and 2016, respectively, Operating Income increased $269 million, primarily reflecting increases at the Warner Bros., Turner and Home Box Office segments. Operating Income increased to $6.013 billion for the nine months ended September 30, 2017 from $5.856 billion for the nine months ended September 30, 2016. Excluding the items noted under “Transactions and Other Items Affecting Comparability” totaling $234 million of expense and $14 million of income for the nine months ended September 30, 2017 and 2016, respectively, Operating Income increased $405 million, primarily reflecting increases at the Warner Bros. and Home Box Office segments, partially offset by a decrease at the Turner segment.

Interest Expense, Net.  Interest expense, net detail is shown in the table below (millions):

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2017      2016      2017      2016  

Interest expense

   $                 (305)      $                 (350)      $                 (919)      $                 (1,045)  

Interest income

     51         52         157         171   
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest expense, net

   $ (254)      $ (298)      $ (762)      $ (874)  
  

 

 

    

 

 

    

 

 

    

 

 

 

The decrease in interest expense for the three and nine months ended September 30, 2017 was primarily due to lower average interest rates and lower average debt balances. The decrease in interest income for the nine months ended September 30, 2017 was primarily driven by the financing transactions with CME that were completed in the second quarter of 2016.

Other Income (Loss), Net.  Other income (loss), net detail is shown in the table below (millions):

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2017      2016      2017      2016  

Investment gains, net

   $                    —       $                     57       $                   255       $                        93   

Amounts related to the separation or disposition of former Time Warner segments

     (4)        (8)        (10)        (17)  

Loss from equity method investees

     (65)        (59)        (160)        (261)  

Other

     (1)        (17)        (8)        (13)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income (loss), net

   $ (70)      $ (27)      $ 77       $ (198)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment gains, net and amounts related to the separation or disposition of former Time Warner segments are discussed under “Transactions and Other Items Affecting Comparability.” The decrease in loss from equity method investees for the nine months ended September 30, 2017 was primarily due to the recognition during the nine months ended September 30, 2016 of the Company’s share of losses from CME related to the 2016 CME financing transactions.

Income Tax Provision.  Income tax provision increased to $550 million and $1.472 billion for the three and nine months ended September 30, 2017, respectively, from $217 million and $1.187 billion for the three and nine months ended September 30, 2016, respectively. The Company’s effective tax rate was 29% and 28% for the three and nine months ended September 30, 2017, respectively, compared to 13% and 25% for the three and nine months ended September 30, 2016, respectively. The increases in the effective tax rate for the three and nine months ended September 30, 2017 were primarily due to a change in the Company’s tax method of accounting for film and television cost amortization that was approved by the Internal Revenue Service during the third quarter of 2016, partially offset by the impact of the Company’s adoption of the new share-based compensation accounting guidance relating to excess tax benefits recognized with respect to share-based awards and the expected utilization of certain tax attribute carryovers in 2017.

Income from Continuing Operations.  Income from continuing operations was $1.371 billion and $1.472 billion for the three months ended September 30, 2017 and 2016, respectively. Excluding the items noted under “Transactions and Other Items Affecting Comparability” totaling $67 million of expense and $29 million of income for the three months ended September 30, 2017 and 2016, respectively, Income from continuing operations decreased $5 million, primarily due to higher income tax expense, partially offset

 

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