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Supplementary Information - Condensed Consolidating Financial Statements
 6 Months Ended
Jun. 30, 2011
Supplementary Information - Condensed Consolidating Financial Statements Disclosure [Abstract]  
SUPPLEMENTARY INFORMATION - CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Overview

 

Set forth below are condensed consolidating financial statements presenting the financial position, results of operations and cash flows of (i) Time Warner Inc. (the “Parent Company”), (ii) Historic TW Inc. (in its own capacity and as successor by merger to Time Warner Companies, Inc.), Home Box Office, Inc., and Turner Broadcasting System, Inc., each a wholly owned subsidiary of the Parent Company (collectively, the “Guarantor Subsidiaries”), on a combined basis, (iii) the direct and indirect non-guarantor subsidiaries of the Parent Company (the “Non-Guarantor Subsidiaries”), on a combined basis and (iv) the eliminations necessary to arrive at the information for Time Warner Inc. on a consolidated basis. The Guarantor Subsidiaries, fully and unconditionally, jointly and severally, guarantee the securities issued under the indentures on an unsecured basis.

 

There are no legal or regulatory restrictions on the Parent Company's ability to obtain funds from any of its wholly owned subsidiaries through dividends, loans or advances.

 

Basis of Presentation

 

In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) the Parent Company's interests in the Guarantor Subsidiaries and (ii) the Guarantor Subsidiaries' interests in the Non-Guarantor Subsidiaries, where applicable, even though all such subsidiaries meet the requirements to be consolidated under U.S. generally accepted accounting principles. All intercompany balances and transactions between the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries have been eliminated, as shown in the column “Eliminations.”

 

The Parent Company's accounting bases in all subsidiaries, including goodwill and identified intangible assets, have been “pushed down” to the applicable subsidiaries. Corporate overhead expenses have been reflected as expenses of the Parent Company and have not been allocated to the Guarantor Subsidiaries or the Non-Guarantor Subsidiaries. Interest income (expense) is determined based on third-party debt and the relevant intercompany amounts within the respective legal entity.

 

All direct and indirect domestic subsidiaries are included in Time Warner Inc.'s consolidated U.S. tax return. In the condensed consolidating financial statements, tax expense has been allocated based on each such subsidiary's relative pretax income to the consolidated pretax income. With respect to the use of certain consolidated tax attributes (principally operating and capital loss carryforwards), such benefits have been allocated to the respective subsidiary that generated the taxable income permitting such use (i.e., pro-rata based on where the income was generated). For example, to the extent a Non-Guarantor Subsidiary generated a gain on the sale of a business for which the Parent Company utilized tax attributes to offset such gain, the tax attribute benefit would be allocated to that Non-Guarantor Subsidiary. Deferred taxes of the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries have been allocated based upon the temporary differences between the carrying amounts of the respective assets and liabilities of the applicable entities.

 

Certain transfers of cash between subsidiaries and their parent companies and intercompany dividends are reflected as cash flows from investing and financing activities in the accompanying condensed consolidating statements of cash flows. All other intercompany activity is reflected in cash flows from operations.

 

Management believes that the allocations and adjustments noted above are reasonable.  However, such allocations and adjustments may not be indicative of the actual amounts that would have been incurred had the Parent, Guarantor and Non-Guarantor entities operated independently.

 

 

Consolidating Balance Sheet
June 30, 2011
(Unaudited; millions)

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
ASSETS               
Current assets               
Cash and equivalents $ 2,587 $ 285 $ 648 $ - $ 3,520
Receivables, net   9   663   5,230   -   5,902
Inventories   -   456   1,443   -   1,899
Deferred income taxes   558   561   489   (1,050)   558
Prepaid expenses and other current assets   136   52   372   -   560
Total current assets   3,290   2,017   8,182   (1,050)   12,439
Noncurrent inventories and film costs   -   1,770   4,609   (94)   6,285
Investments in amounts due to and from consolidated               
subsidiaries   46,050   22,507   11,493   (80,050)   -
Investments, including available-for-sale securities   105   420   2,097   (624)   1,998
Property, plant and equipment, net   384   445   3,085   -   3,914
Intangible assets subject to amortization, net   -   -   2,388   -   2,388
Intangible assets not subject to amortization   -   2,007   5,827   -   7,834
Goodwill   -   9,879   20,201   -   30,080
Other assets   278   166   1,246   -   1,690
Total assets $ 50,107 $ 39,211 $ 59,128 $ (81,818) $ 66,628
                
LIABILITIES AND EQUITY               
Current liabilities               
Accounts payable and accrued liabilities $ 587 $ 776 $ 5,323 $ (61) $ 6,625
Deferred revenue   -   13   870   (9)   874
Debt due within one year   -   11   18   -   29
Total current liabilities   587   800   6,211   (70)   7,528
Long-term debt   13,739   4,738   35   -   18,512
Due (to) from affiliates   (908)   -   908   -   -
Deferred income taxes   2,502   3,359   2,975   (6,334)   2,502
Deferred revenue   -   -   353   (61)   292
Other noncurrent liabilities   2,471   2,023   3,471   (1,884)   6,081
Equity               
Due (to) from Time Warner and subsidiaries   -   (22,297)   (1,247)   23,544   -
Other shareholders’ equity   31,716   50,588   46,425   (97,013)   31,716
Total Time Warner Inc. shareholders’ equity   31,716   28,291   45,178   (73,469)   31,716
Noncontrolling interests   -   -   (3)   -   (3)
Total equity   31,716   28,291   45,175   (73,469)   31,713
Total liabilities and equity $ 50,107 $ 39,211 $ 59,128 $ (81,818) $ 66,628

Consolidating Balance Sheet
December 31, 2010
(Unaudited; millions)

 

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
ASSETS               
Current assets               
Cash and equivalents $ 2,815 $ 256 $ 592 $ - $ 3,663
Receivables, net   26   639   5,748   -   6,413
Inventories   -   496   1,424   -   1,920
Deferred income taxes   581   583   507   (1,090)   581
Prepaid expenses and other current assets   126   80   355   -   561
Total current assets   3,548   2,054   8,626   (1,090)   13,138
Noncurrent inventories and film costs   -   1,643   4,443   (101)   5,985
Investments in amounts due to and from consolidated                
subsidiaries   44,677   21,709   11,381   (77,767)   -
Investments, including available-for-sale securities   101   383   1,903   (591)   1,796
Property, plant and equipment, net   346   448   3,080   -   3,874
Intangible assets subject to amortization, net   -   -   2,492   -   2,492
Intangible assets not subject to amortization   -   2,007   5,820   -   7,827
Goodwill   -   9,879   20,115   -   29,994
Other assets   228   142   1,048   -   1,418
Total assets $ 48,900 $ 38,265 $ 58,908 $ (79,549) $ 66,524
                
LIABILITIES AND EQUITY               
Current liabilities               
Accounts payable and accrued liabilities $ 676 $ 730 $ 6,401 $ (74) $ 7,733
Deferred revenue   -   19   882   (17)   884
Debt due within one year   -   9   17   -   26
Total current liabilities   676   758   7,300   (91)   8,643
Long-term debt   11,761   4,728   34   -   16,523
Due (to) from affiliates   (858)   -   858   -   -
Deferred income taxes   1,950   3,220   2,859   (6,079)   1,950
Deferred revenue   -   -   363   (67)   296
Other noncurrent liabilities   2,431   2,058   3,635   (1,957)   6,167
Equity               
Due (to) from Time Warner and subsidiaries   -   (21,172)   (680)   21,852   -
Other shareholders’ equity   32,940   48,673   44,534   (93,207)   32,940
Total Time Warner Inc. shareholders’ equity   32,940   27,501   43,854   (71,355)   32,940
Noncontrolling interests   -   -   5   -   5
Total equity   32,940   27,501   43,859   (71,355)   32,945
Total liabilities and equity $ 48,900 $ 38,265 $ 58,908 $ (79,549) $ 66,524

Consolidating Statement of Operations
For The Three Months Ended June 30, 2011
(Unaudited; millions)

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
                
Revenues $ - $ 1,416 $ 5,783 $ (169) $ 7,030
Costs of revenues   -   (694)   (3,493)   143   (4,044)
Selling, general and administrative   (78)   (245)   (1,322)   24   (1,621)
Amortization of intangible assets   -   -   (66)   -   (66)
Restructuring and severance costs    (1)   (1)   (22)   -   (24)
Asset impairments    -   -   (11)   -   (11)
Gain on operating assets   -   -   2   -   2
Operating income   (79)   476   871   (2)   1,266
Equity in pretax income (loss) of consolidated subsidiaries   1,239   859   329   (2,427)   -
Interest expense, net   (214)   (93)   (10)   3   (314)
Other loss, net   4   (2)   25   (29)   (2)
                
Income before income taxes   950   1,240   1,215   (2,455)   950
Income tax provision   (313)   (402)   (392)   794   (313)
Net income   637   838   823   (1,661)   637
Less Net loss attributable to                
noncontrolling interests   1   1   1   (2)   1
Net income attributable to Time Warner Inc.               
shareholders $ 638 $ 839 $ 824 $ (1,663) $ 638

Consolidating Statement of Operations
For The Three Months Ended June 30, 2010
(Unaudited; millions)

 

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
                
Revenues $ - $ 1,355 $ 5,174 $ (152) $ 6,377
Costs of revenues   -   (643)   (3,091)   135   (3,599)
Selling, general and administrative   (88)   (229)   (1,213)   18   (1,512)
Amortization of intangible assets   -   -   (66)   -   (66)
Restructuring and severance costs    -   -   (6)   -   (6)
Operating income   (88)   483   798   1   1,194
Equity in pretax income (loss) of consolidated subsidiaries   1,165   789   341   (2,295)   -
Interest expense, net   (188)   (105)   (11)   4   (300)
Other loss, net   (12)   (4)   30   (31)   (17)
                
Income before income taxes   877   1,163   1,158   (2,321)   877
Income tax provision   (317)   (404)   (403)   807   (317)
Net income   560   759   755   (1,514)   560
Less Net loss attributable to                
noncontrolling interests   2   2   2   (4)   2
Net income attributable to Time Warner Inc.               
shareholders $ 562 $ 761 $ 757 $ (1,518) $ 562

Consolidating Statement of Operations
For The Six Months Ended June 30, 2011
(Unaudited; millions)

 

 

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
                
Revenues $ - $ 2,964 $ 11,092 $ (343) $ 13,713
Costs of revenues   -   (1,476)   (6,584)   289   (7,771)
Selling, general and administrative   (166)   (480)   (2,615)   49   (3,212)
Amortization of intangible assets   -   -   (134)   -   (134)
Restructuring and severance costs    -   (4)   (50)   -   (54)
Asset impairments    -   -   (11)   -   (11)
Gain on operating assets   -   -   5   -   5
Operating income   (166)   1,004   1,703   (5)   2,536
Equity in pretax income (loss) of consolidated subsidiaries   2,482   1,670   725   (4,877)   -
Interest expense, net   (401)   (185)   (7)   5   (588)
Other loss, net   17   (6)   25   (52)   (16)
                
Income before income taxes   1,932   2,483   2,446   (4,929)   1,932
Income tax provision   (644)   (819)   (806)   1,625   (644)
Net income   1,288   1,664   1,640   (3,304)   1,288
Less Net loss attributable to noncontrolling interests   3   3   3   (6)   3
Net income attributable to Time Warner Inc.               
shareholders $ 1,291 $ 1,667 $ 1,643 $ (3,310) $ 1,291

Consolidating Statement of Operations
For The Six Months Ended June 30, 2010
(Unaudited; millions)

 

 

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
                
Revenues $ - $ 2,697 $ 10,196 $ (194) $ 12,699
Costs of revenues   -   (1,242)   (5,880)   170   (6,952)
Selling, general and administrative   (194)   (453)   (2,375)   22   (3,000)
Amortization of intangible assets   -   -   (134)   -   (134)
Restructuring and severance costs    -   -   (15)   -   (15)
Gain on operating assets   -   59   -   -   59
Operating income   (194)   1,061   1,792   (2)   2,657
Equity in pretax income (loss) of consolidated subsidiaries   2,624   1,778   752   (5,154)   -
Interest expense, net   (368)   (213)   (19)   4   (596)
Other loss, net   (71)   (4)   64   (59)   (70)
                
Income before income taxes   1,991   2,622   2,589   (5,211)   1,991
Income tax provision   (706)   (906)   (912)   1,818   (706)
Net income   1,285   1,716   1,677   (3,393)   1,285
Less Net loss attributable to noncontrolling interests   2   2   2   (4)   2
Net income attributable to Time Warner Inc.               
shareholders $ 1,287 $ 1,718 $ 1,679 $ (3,397) $ 1,287

Consolidating Statement of Cash Flows
For The Six Months Ended June 30, 2011
(Unaudited; millions)

  Parent Guarantor Non-Guarantor   Time Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
OPERATIONS               
Net income $ 1,288 $ 1,664 $ 1,640 $ (3,304) $ 1,288
Adjustments for noncash and nonoperating items:               
Depreciation and amortization   13   69   379   -   461
Amortization of film and television costs   -   1,174   2,655   3   3,832
Asset impairments   -   -   11   -   11
(Gain) loss on investments and other assets, net   (2)   1   6   -   5
Excess (deficiency) of distributions over equity in pretax               
income of consolidated subsidiaries, net of cash               
distributions   (2,482)   (1,670)   (725)   4,877   -
Equity in losses of investee companies, net               
of cash distributions   (2)   4   38   -   40
Equity-based compensation   24   34   89   -   147
Deferred income taxes   103   109   94   (203)   103
Changes in operating assets and liabilities, net of acquisitions   1   (503)   (3,153)   (1,364)   (5,019)
Intercompany   -   755   (755)   -   -
Cash provided by operations from continuing operations   (1,057)   1,637   279   9   868
INVESTING ACTIVITIES               
Investments in available-for-sale securities   (2)   -   (1)   -   (3)
Investments and acquisitions, net of cash acquired   (12)   6   (274)   -   (280)
Capital expenditures   (51)   (52)   (234)   -   (337)
Investment proceeds from available-for-sale securities   8   -   -   -   8
Advances to (from) parent and consolidated subsidiaries   1,197   (427)   -   (770)   -
Other investment proceeds   11   5   6   -   22
Cash used by investing activities from continuing operations   1,151   (468)   (503)   (770)   (590)
FINANCING ACTIVITIES               
Borrowings   1,977   -   46   -   2,023
Debt repayments   -   -   (45)   -   (45)
Proceeds from exercise of stock options   160   -   -   -   160
Excess tax benefit on stock options   17   -   -   -   17
Principal payments on capital leases   -   (5)   -   -   (5)
Repurchases of common stock   (1,976)   -   -   -   (1,976)
Dividends paid   (514)   -   -   -   (514)
Other financing activities   14   (10)   (82)   (3)   (81)
Change in due to/from parent and investment in segment   -   (1,125)   361   764   -
Cash used by financing activities from continuing                
operations   (322)   (1,140)   280   761   (421)
Cash used by continuing operations   (228)   29   56   -   (143)
                
Cash used by operations from discontinued operations   -   -   -   -   -
                
DECREASE IN CASH AND EQUIVALENTS   (228)   29   56   -   (143)
CASH AND EQUIVALENTS AT BEGINNING               
OF PERIOD   2,815   256   592   -   3,663
CASH AND EQUIVALENTS AT END OF PERIOD $ 2,587 $ 285 $ 648 $ - $ 3,520

Consolidating Statement of Cash Flows
For The Six Months Ended June 30, 2010
(Unaudited; millions)

  Parent Guarantor Non-Guarantor   Time Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
OPERATIONS               
Net income $ 1,285 $ 1,716 $ 1,677 $ (3,393) $ 1,285
Adjustments for noncash and nonoperating items:               
Depreciation and amortization   18   68   382   -   468
Amortization of film and television costs   -   960   2,148   3   3,111
(Gain) loss on investments and other assets, net   1   (2)   -   -   (1)
Excess (deficiency) of distributions over equity in pretax               
income of consolidated subsidiaries, net of cash               
distributions   (2,624)   (1,778)   (752)   5,154   -
Equity in losses of investee companies, net                
of cash distributions   (1)   13   10   -   22
Equity-based compensation   24   30   74   -   128
Deferred income taxes   (85)   (91)   (57)   148   (85)
Changes in operating assets and liabilities, net of acquisitions   105   (324)   (1,417)   (1,904)   (3,540)
Intercompany   -   731   (731)   -   -
Cash provided by operations from continuing operations   (1,277)   1,323   1,334   8   1,388
INVESTING ACTIVITIES               
Investments in available-for-sale securities   (5)   -   (1)   -   (6)
Investments and acquisitions, net of cash acquired   4   (281)   (259)   -   (536)
Capital expenditures   (2)   (38)   (166)   -   (206)
Advances to (from) parent and consolidated subsidiaries   701   (277)   -   (424)   -
Other investment proceeds   54   26   22   -   102
Cash used by investing activities from continuing operations   752   (570)   (404)   (424)   (646)
FINANCING ACTIVITIES               
Borrowings   2,143   -   61   -   2,204
Debt repayments   (1,000)   -   (908)   -   (1,908)
Proceeds from exercise of stock options   68   -   -   -   68
Excess tax benefit on stock options   4   -   -   -   4
Principal payments on capital leases   -   (6)   (2)   -   (8)
Repurchases of common stock   (1,016)   -   -   -   (1,016)
Dividends paid   (492)   -   -   -   (492)
Other financing activities   (65)   -   (1)   -   (66)
Change in due to/from parent and investment in segment   -   (555)   139   416   -
Cash used by financing activities from continuing               
operations   (358)   (561)   (711)   416   (1,214)
Cash used by continuing operations   (883)   192   219   -   (472)
                
Cash used by operations from discontinued operations   (23)   -   -   -   (23)
                
DECREASE IN CASH AND EQUIVALENTS   (906)   192   219   -   (495)
CASH AND EQUIVALENTS AT BEGINNING               
OF PERIOD   3,863   138   732   -   4,733
CASH AND EQUIVALENTS AT END OF PERIOD $ 2,957 $ 330 $ 951 $ - $ 4,238