SEC Filings

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


Table of Contents

TIME WARNER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 

6.

INVENTORIES AND THEATRICAL FILM AND TELEVISION PRODUCTION COSTS

Inventories and theatrical film and television production costs consist of (millions):

 

                                                                 
     September 30,
2017
     December 31,
2016
 

Inventories:

     

Programming costs, less amortization (a)

   $ 3,756       $ 3,625   

Other inventory, primarily DVDs and Blu-ray Discs

     217         184   
  

 

 

    

 

 

 

Total inventories

     3,973         3,809   

Less: current portion of inventory

     (2,198)        (2,062)  
  

 

 

    

 

 

 

Total noncurrent inventories

     1,775         1,747   
  

 

 

    

 

 

 
     

Theatrical film production costs: (b)

     

Released, less amortization

     678         818   

Completed and not released

     461         460   

In production

     1,384         1,286   

Development and pre-production

     142         133   
     

Television production costs: (b)

     

Released, less amortization

     1,849         1,618   

Completed and not released

     900         841   

In production

     1,164         995   

Development and pre-production

     14         18   
  

 

 

    

 

 

 

Total theatrical film and television production costs

     6,592         6,169   
  

 

 

    

 

 

 

Total noncurrent inventories and theatrical film and television production costs

   $ 8,367       $ 7,916   
  

 

 

    

 

 

 

 

(a)

Includes the costs of certain programming rights, primarily sports, for which payments have been made prior to the related rights being received.

(b)

Does not include $418 million and $518 million of acquired film library intangible assets as of September 30, 2017 and December 31, 2016, respectively, which are included in Intangible assets subject to amortization, net in the Consolidated Balance Sheet.

 

7.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Time Warner uses derivative instruments, primarily forward contracts, to manage the risk associated with the volatility of future cash flows denominated in foreign currencies and changes in fair value resulting from changes in foreign currency exchange rates. The principal currencies being hedged include the British Pound, Euro, Australian Dollar and Canadian Dollar. Time Warner uses foreign exchange contracts that generally have maturities of three to 18 months to hedge various foreign exchange exposures, including the following: (i) variability in foreign-currency-denominated cash flows, such as the hedges of unremitted or forecasted royalty and license fees owed to Time Warner’s domestic companies for the sale or anticipated sale of U.S. copyrighted products abroad or cash flows for certain film production costs denominated in a foreign currency (i.e., cash flow hedges), and (ii) currency risk associated with foreign-currency-denominated operating assets and liabilities (i.e., fair value hedges).

The Company also enters into derivative contracts that economically hedge certain of its foreign currency risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. These economic hedges are used primarily to offset the change in certain foreign-currency-denominated intercompany debt due to changes in the underlying foreign exchange rates.

The translation of revenues and expenses denominated in the functional currency of a foreign subsidiary may result in fluctuations in the U.S. Dollar-equivalent value of such revenues and expenses as compared to prior periods. Such transactions are not eligible for qualifying hedge accounting treatment, and the Company does not economically hedge this exposure.

 

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