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)

 

For the three and nine months ended September 30, 2017, Subscription revenues increased primarily reflecting higher domestic subscription revenues of $167 million and $506 million, respectively, due to higher contractual rates, partially offset by a decrease in subscribers.

For the three months ended September 30, 2017, the decrease in Advertising revenues reflected lower domestic revenues of $36 million, primarily driven by lower audience delivery at Turner’s entertainment networks, partially offset by increases at Turner’s news businesses. For the nine months ended September 30, 2017, the decrease in Advertising revenues reflected lower domestic revenues of $157 million primarily due to the comparison to the revenues associated with the NCAA Division I Men’s Basketball Championship Tournament (the “NCAA Tournament”) in the prior year period when Turner’s networks aired the championship and two Final Four games, as well as lower audience delivery at Turner’s entertainment networks, partially offset by increases at Turner’s news businesses.

The components of Costs of revenues for the Turner segment are as follows (millions):

 

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

Programming costs:

                

Originals and sports

   $ 555       $ 506       10%   $ 2,606       $ 2,277       14%

Acquired films and
syndicated series

     208         203       2%     628         593       6%
  

 

 

    

 

 

      

 

 

    

 

 

    

Total programming costs

     763         709       8%     3,234         2,870       13%

Other direct operating costs

     239         226       6%     696         635       10%
  

 

 

    

 

 

      

 

 

    

 

 

    

Costs of revenues (a)

   $   1,002       $      935       7%   $   3,930       $   3,505       12%
  

 

 

    

 

 

      

 

 

    

 

 

    

 

(a)

Costs of revenues exclude depreciation.

For the three months ended September 30, 2017, programming costs increased primarily due to higher costs for original series. For the nine months ended September 30, 2017, programming costs increased mainly due to higher costs for National Basketball Association programming, partially offset by lower costs for NCAA Tournament programming. The increase in other direct operating costs for the three and nine months ended September 30, 2017 primarily related to costs associated with digital content and technology initiatives.

For the three and nine months ended September 30, 2017, Selling, general and administrative expenses increased primarily due to $31 million and $80 million, respectively, of costs related to the AT&T merger as well as higher marketing expense of $44 million and $76 million, respectively.

Refer to “Transactions and Other Items Affecting Comparability” for a discussion of Gain (loss) on operating assets, costs related to the AT&T merger and external costs related to mergers, acquisitions and dispositions for the three and nine months ended September 30, 2017 and 2016, which affected the comparability of the Turner segment’s results.

Operating Income for the three months ended September 30, 2017 increased due to higher Revenues, higher Gain on operating assets and lower Asset impairments, partially offset by higher Costs of revenues and Selling, general and administrative expenses. Operating Income for the nine months ended September 30, 2017 decreased due to higher Costs of revenues and Selling, general and administrative expenses, partially offset by higher Revenues, higher Gain on operating assets and lower Asset impairments.

 

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