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)

 

months ended September 30, 2017 was primarily due to higher domestic licensing revenues related to library series, partially offset by lower initial telecast revenues.

Videogames revenues increased for the three months ended September 30, 2017 primarily due to higher carryover revenues from prior period releases. Videogames revenues decreased for the nine months ended September 30, 2017 primarily due to lower carryover revenues of $73 million from prior period releases, partially offset by higher revenues of $59 million from releases during the first nine months of 2017 compared to the first nine months of 2016. In addition, other revenues for the three and nine months ended September 30, 2017 increased $42 million and $83 million, respectively, primarily related to higher revenues from digital initiatives.

The components of Costs of revenues for the Warner Bros. segment are as follows (millions):

 

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

Film and television
production costs

   $ 1,656       $ 1,650       —%   $ 4,809       $ 4,430       9%

Print and advertising
costs

     468         549       (15)%     1,465         1,410       4%

Other costs, including
merchandise and
related costs

     219         248       (12)%     589         679       (13)%
  

 

 

    

 

 

      

 

 

    

 

 

    

Costs of revenues (a)

   $ 2,343       $ 2,447       (4)%   $ 6,863       $ 6,519       5%
  

 

 

    

 

 

      

 

 

    

 

 

    

 

(a)

Costs of revenues excludes depreciation.

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 $0 for both the three months ended September 30, 2017 and 2016 and $11 million and $1 million for the nine months ended September 30, 2017 and 2016, respectively. Videogame valuation adjustments were $0 for both the three months ended September 30, 2017 and 2016 and $5 million and $4 million for the nine months ended September 30, 2017 and 2016, respectively. The increase in film and television production costs for the nine months ended September 30, 2017 was primarily a result of higher costs for theatrical and television product. The decrease in print and advertising costs for the three months ended September 30, 2017 was primarily due to theatrical product, reflecting the type and number of releases, and, for the nine months ended September 30, 2017, the increase in print and advertising costs was primarily due to the type of videogame releases. Other costs, including merchandise and related costs decreased for the three and nine months ended September 30, 2017 primarily due to lower distribution-related costs of sales for videogames and home entertainment product.

Selling, general and administrative expenses increased for the three and nine months ended September 30, 2017 primarily due to costs related to the AT&T merger of $29 million and $78 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 nine months ended September 30, 2017 and 2016, which affected the comparability of the Warner Bros. segment’s results.

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

 

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