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Supplementary Information - Condensed Consolidating Financial Statements
 9 Months Ended
Sep. 30, 2014
Condensed Financial Information of Parent Company Only 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 securities issued under certain of the Company's 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

 

The Company's financial information has been recast to reflect the financial condition and results of operations of the Company's former Time Inc. segment as discontinued operations for all periods presented. Amounts presented in the Consolidating Balance Sheet at December 31, 2013 related to discontinued operations of the Parent Company and the Guarantor Subsidiaries principally relate to the impact of the Time Separation on the Parent Company's and the Guarantor Subsidiaries' deferred income taxes.

 

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 outstanding debt and the relevant intercompany amounts at the respective subsidiary.

 

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 (provision) benefit 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 determined based on the temporary differences between the book and tax basis 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 Company, Guarantor Subsidiaries and Non-Guarantor Subsidiaries operated independently.

 

 

Consolidating Balance Sheet
September 30, 2014
(Unaudited; millions)

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
ASSETS               
Current assets               
Cash and equivalents $ 2,127 $ 214 $ 869 $ - $ 3,210
Receivables, net   64   1,056   5,890   (5)   7,005
Inventories   -   468   1,308   -   1,776
Deferred income taxes   181   58   (44)   (14)   181
Prepaid expenses and other current assets   116   112   493   -   721
Current assets of discontinued operations   -   -   -   -   -
Total current assets   2,488   1,908   8,516   (19)   12,893
Noncurrent inventories and theatrical film and television                
production costs   -   1,813   5,035   (69)   6,779
Investments in amounts due to and from consolidated               
subsidiaries   44,102   10,746   12,550   (67,398)   -
Investments, including available-for-sale securities   114   421   1,801   -   2,336
Property, plant and equipment, net   76   389   2,213   -   2,678
Intangible assets subject to amortization, net   -   -   1,225   -   1,225
Intangible assets not subject to amortization   -   2,007   5,027   -   7,034
Goodwill   -   9,880   17,707   -   27,587
Other assets   380   169   2,014   -   2,563
Noncurrent assets of discontinued operations   -   -   -   -   -
Total assets $ 47,160 $ 27,333 $ 56,088 $ (67,486) $ 63,095
                
LIABILITIES AND EQUITY               
Current liabilities               
Accounts payable and accrued liabilities $ 811 $ 955 $ 5,483 $ (197) $ 7,052
Deferred revenue   -   33   481   (10)   504
Debt due within one year   1,147   9   12   -   1,168
Current liabilities of discontinued operations   -   -   -   -   -
Total current liabilities   1,958   997   5,976   (207)   8,724
Long-term debt   17,107   4,007   275   -   21,389
Due to (from) affiliates   (721)   -   721   -   -
Deferred income taxes   1,797   2,242   1,478   (3,720)   1,797
Deferred revenue   -   21   352   (24)   349
Other noncurrent liabilities   1,789   1,655   3,213   (1,051)   5,606
Noncurrent liabilities of discontinued operations   -   -   -   -   -
Equity               
Due to (from) Time Warner Inc. and subsidiaries   -   (42,392)   7,260   35,132   -
Other shareholders’ equity   25,230   60,803   36,813   (97,616)   25,230
Total Time Warner Inc. shareholders’ equity   25,230   18,411   44,073   (62,484)   25,230
Noncontrolling interests   -   -   -   -   -
Total equity   25,230   18,411   44,073   (62,484)   25,230
Total liabilities and equity $ 47,160 $ 27,333 $ 56,088 $ (67,486) $ 63,095

Consolidating Balance Sheet
December 31, 2013
(Unaudited; recast; millions)

 

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
ASSETS               
Current assets               
Cash and equivalents $ 1,039 $ 148 $ 629 $ - $ 1,816
Receivables, net   73   901   6,341   (10)   7,305
Inventories   -   383   1,265   -   1,648
Deferred income taxes   369   50   (52)   2   369
Prepaid expenses and other current assets   103   84   372   -   559
Current assets of discontinued operations   79   78   832   (155)   834
Total current assets   1,663   1,644   9,387   (163)   12,531
Noncurrent inventories and theatrical film and television                
production costs   -   1,726   5,371   (81)   7,016
Investments in amounts due to and from consolidated                
subsidiaries   48,549   21,248   12,288   (82,085)   -
Investments, including available-for-sale securities   130   460   1,419   -   2,009
Property, plant and equipment, net   373   377   2,541   -   3,291
Intangible assets subject to amortization, net   -   -   1,338   -   1,338
Intangible assets not subject to amortization   -   2,007   5,036   -   7,043
Goodwill   -   9,879   17,522   -   27,401
Other assets   322   194   1,942   -   2,458
Noncurrent assets of discontinued operations   -   -   4,912   -   4,912
Total assets $ 51,037 $ 37,535 $ 61,756 $ (82,329) $ 67,999
                
LIABILITIES AND EQUITY               
Current liabilities               
Accounts payable and accrued liabilities $ 618 $ 770 $ 5,425 $ (59) $ 6,754
Deferred revenue   -   28   524   (10)   542
Debt due within one year   48   9   9   -   66
Current liabilities of discontinued operations   1   -   1,026   (1)   1,026
Total current liabilities   667   807   6,984   (70)   8,388
Long-term debt   16,046   4,001   14   -   20,061
Due to (from) affiliates   (900)   -   900   -   -
Deferred income taxes   2,287   2,666   2,016   (4,682)   2,287
Deferred revenue   -   36   348   (33)   351
Other noncurrent liabilities   2,657   1,939   3,352   (1,624)   6,324
Noncurrent liabilities of discontinued operations   376   411   713   (816)   684
Equity               
Due to (from) Time Warner Inc. and subsidiaries   -   (33,497)   6,155   27,342   -
Other shareholders’ equity   29,904   61,172   41,274   (102,446)   29,904
Total Time Warner Inc. shareholders’ equity   29,904   27,675   47,429   (75,104)   29,904
Noncontrolling interests   -   -   -   -   -
Total equity   29,904   27,675   47,429   (75,104)   29,904
Total liabilities and equity $ 51,037 $ 37,535 $ 61,756 $ (82,329) $ 67,999

Consolidating Statement of Operations
For The Three Months Ended September 30, 2014
(Unaudited; millions)

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
                
Revenues $ - $ 1,634 $ 4,818 $ (209) $ 6,243
Costs of revenues   -   (891)   (2,976)   186   (3,681)
Selling, general and administrative   (97)   (256)   (895)   22   (1,226)
Amortization of intangible assets   -   -   (52)   -   (52)
Restructuring and severance costs    (12)   (136)   (155)   -   (303)
Asset impairments    (1)   -   (4)   -   (5)
Gain (loss) on operating assets, net   -   (5)   -   -   (5)
Operating income   (110)   346   736   (1)   971
Equity in pretax income (loss) of consolidated subsidiaries   890   695   363   (1,948)   -
Interest expense, net   (248)   (78)   16   3   (307)
Other loss, net   (3)   (4)   (128)   -   (135)
Income from continuing operations before               
income taxes   529   959   987   (1,946)   529
Income tax (provision) benefit   437   (144)   (196)   340   437
Income from continuing operations   966   815   791   (1,606)   966
Discontinued operations, net of tax   1   (1)   -   1   1
Net income   967   814   791   (1,605)   967
Less Net loss attributable to noncontrolling interests   -   -   -   -   -
Net income attributable to Time Warner Inc.               
shareholders $ 967 $ 814 $ 791 $ (1,605) $ 967
                
Comprehensive income   930   779   752   (1,531)   930
Less Comprehensive loss attributable to                
noncontrolling interests   -   -   -   -   -
Comprehensive income attributable to                
Time Warner Inc. shareholders $ 930 $ 779 $ 752 $ (1,531) $ 930

Consolidating Statement of Operations
For The Three Months Ended September 30, 2013
(Unaudited; recast; millions)

 

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
                
Revenues $ - $ 1,540 $ 4,608 $ (106) $ 6,042
Costs of revenues   -   (651)   (2,581)   74   (3,158)
Selling, general and administrative   (99)   (221)   (869)   32   (1,157)
Amortization of intangible assets   -   -   (50)   -   (50)
Restructuring and severance costs    -   (45)   (11)   -   (56)
Asset impairments    -   -   (5)   -   (5)
Gain (loss) on operating assets, net   -   -   113   -   113
Operating income   (99)   623   1,205   -   1,729
Equity in pretax income (loss) of consolidated subsidiaries   1,741   1,196   400   (3,337)   -
Interest expense, net   (221)   (78)   (4)   3   (300)
Other loss, net   (12)   (2)   (4)   (2)   (20)
Income from continuing operations before               
income taxes   1,409   1,739   1,597   (3,336)   1,409
Income tax (provision) benefit   (451)   (554)   (506)   1,060   (451)
Income from continuing operations   958   1,185   1,091   (2,276)   958
Discontinued operations, net of tax   225   228   227   (455)   225
Net income   1,183   1,413   1,318   (2,731)   1,183
Less Net loss attributable to noncontrolling interests   -   -   -   -   -
Net income attributable to Time Warner Inc.               
shareholders $ 1,183 $ 1,413 $ 1,318 $ (2,731) $ 1,183
                
Comprehensive income   1,211   1,429   1,312   (2,741)   1,211
Less Comprehensive loss attributable to                
noncontrolling interests   -   -   -   -   -
Comprehensive income attributable to                
Time Warner Inc. shareholders $ 1,211 $ 1,429 $ 1,312 $ (2,741) $ 1,211

Consolidating Statement of Operations
For The Nine Months Ended September 30, 2014
(Unaudited; millions)

 

 

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
                
Revenues $ - $ 5,146 $ 15,264 $ (576) $ 19,834
Costs of revenues   -   (2,503)   (9,464)   510   (11,457)
Selling, general and administrative   (336)   (735)   (2,707)   65   (3,713)
Amortization of intangible assets   -   -   (152)   -   (152)
Restructuring and severance costs    (16)   (156)   (174)   -   (346)
Asset impairments    (7)   -   (24)   -   (31)
Gain (loss) on operating assets, net   -   (5)   456   -   451
Operating income   (359)   1,747   3,199   (1)   4,586
Equity in pretax income (loss) of consolidated subsidiaries   4,651   2,747   1,360   (8,758)   -
Interest expense, net   (716)   (196)   37   7   (868)
Other loss, net   2   11   (152)   (1)   (140)
Income from continuing operations before income               
taxes   3,578   4,309   4,444   (8,753)   3,578
Income tax (provision) benefit   (404)   (1,261)   (1,158)   2,419   (404)
Income from continuing operations   3,174   3,048   3,286   (6,334)   3,174
Discontinued operations, net of tax   (65)   (42)   (63)   105   (65)
Net income   3,109   3,006   3,223   (6,229)   3,109
Less Net loss attributable to noncontrolling interests   -   -   -   -   -
Net income attributable to Time Warner Inc.               
shareholders $ 3,109 $ 3,006 $ 3,223 $ (6,229) $ 3,109
                
Comprehensive income   3,016   2,926   3,132   (6,058)   3,016
Less Comprehensive loss attributable to                
noncontrolling interests   -   -   -   -   -
Comprehensive income attributable to                
Time Warner Inc. shareholders $ 3,016 $ 2,926 $ 3,132 $ (6,058) $ 3,016

Consolidating Statement of Operations
For The Nine Months Ended September 30, 2013
(Unaudited; recast; millions)

 

 

             Time
  Parent Guarantor Non-Guarantor   Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
                
Revenues $ - $ 4,752 $ 14,502 $ (397) $ 18,857
Costs of revenues   -   (2,123)   (8,700)   315   (10,508)
Selling, general and administrative   (299)   (717)   (2,687)   77   (3,626)
Amortization of intangible assets   -   -   (151)   -   (151)
Restructuring and severance costs    (2)   (63)   (67)   -   (132)
Asset impairments    (7)   -   (28)   -   (35)
Gain (loss) on operating assets, net   8   -   122   -   130
Operating income   (300)   1,849   2,991   (5)   4,535
Equity in pretax income (loss) of consolidated subsidiaries   4,567   3,048   1,251   (8,866)   -
Interest expense, net   (662)   (247)   12   8   (889)
Other loss, net   (19)   (1)   (38)   (2)   (60)
Income from continuing operations before income               
taxes   3,586   4,649   4,216   (8,865)   3,586
Income tax (provision) benefit   (1,166)   (1,518)   (1,394)   2,912   (1,166)
Income from continuing operations   2,420   3,131   2,822   (5,953)   2,420
Discontinued operations, net of tax   288   288   288   (576)   288
Net income   2,708   3,419   3,110   (6,529)   2,708
Less Net loss attributable to noncontrolling interests    -   -   -   -   -
Net income attributable to Time Warner Inc.               
shareholders $ 2,708 $ 3,419 $ 3,110 $ (6,529) $ 2,708
                
Comprehensive income   2,624   3,363   3,055   (6,418)   2,624
Less Comprehensive loss attributable to                
noncontrolling interests   -   -   -   -   -
Comprehensive income attributable to                
Time Warner Inc. shareholders $ 2,624 $ 3,363 $ 3,055 $ (6,418) $ 2,624

Consolidating Statement of Cash Flows
For The Nine Months Ended September 30, 2014
(Unaudited; millions)

  Parent Guarantor Non-Guarantor   Time Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
OPERATIONS               
Net income $ 3,109 $ 3,006 $ 3,223 $ (6,229) $ 3,109
Less Discontinued operations, net of tax   65   42   63   (105)   65
Net income from continuing operations   3,174   3,048   3,286   (6,334)   3,174
Adjustments for noncash and nonoperating items:               
Depreciation and amortization   13   88   450   -   551
Amortization of film and television costs   -   1,969   3,998   (34)   5,933
Asset impairments   7   -   24   -   31
Gain on investments and other assets, net   (17)   2   (438)   -   (453)
Excess (deficiency) of distributions over equity in pretax               
income of consolidated subsidiaries, net of cash               
distributions   (4,651)   (2,747)   (1,360)   8,758   -
Equity in losses of investee companies, net               
of cash distributions   2   (7)   141   -   136
Equity-based compensation   63   52   59   -   174
Deferred income taxes   (315)   (398)   (456)   854   (315)
Changes in operating assets and liabilities, net of acquisitions   (417)   (639)   (2,298)   (3,203)   (6,557)
Intercompany   -   2,355   (2,355)   -   -
Cash provided by operations from continuing operations   (2,141)   3,723   1,051   41   2,674
INVESTING ACTIVITIES               
Investments in available-for-sale securities   (5)   -   (25)   -   (30)
Investments and acquisitions, net of cash acquired   (30)   (2)   (846)   -   (878)
Capital expenditures   (20)   (49)   (247)   -   (316)
Investment proceeds from available-for-sale securities   13   4   -   -   17
Proceeds from Time Inc. in the Time Separation   590   -   810   -   1,400
Proceeds from the sale of Time Warner Center   -   -   1,264   -   1,264
Advances to (from) parent and consolidated subsidiaries   5,036   4,808   -   (9,844)   -
Other investment proceeds   43   91   13   (22)   125
Cash provided (used) by investing activities from                
continuing operations   5,627   4,852   969   (9,866)   1,582
FINANCING ACTIVITIES               
Borrowings   2,118   -   288   -   2,406
Debt repayments   -   -   (21)   -   (21)
Proceeds from exercise of stock options   276   -   -   -   276
Excess tax benefit from equity instruments   138   -   -   -   138
Principal payments on capital leases   -   (7)   (1)   -   (8)
Repurchases of common stock   (4,481)   -   -   -   (4,481)
Dividends paid   (841)   -   -   -   (841)
Other financing activities   73   (44)   (155)   (21)   (147)
Change in due to/from parent and investment in segment   -   (8,476)   (1,370)   9,846   -
Cash used by financing activities from continuing                
operations   (2,717)   (8,527)   (1,259)   9,825   (2,678)
Cash provided (used) by continuing operations   769   48   761   -   1,578
Cash used by operations from discontinued               
operations   1   -   (11)   -   (10)
Cash used by investing activities from               
discontinued operations   318   18   (51)   (336)   (51)
Cash provided (used) by financing activities from               
discontinued operations   -   -   (372)   336   (36)
Effect of change in cash and equivalents of discontinued                
operations   -   -   (87)   -   (87)
Cash provided (used) by discontinued operations   319   18   (521)   -   (184)
                
INCREASE (DECREASE) IN CASH AND                
EQUIVALENTS   1,088   66   240   -   1,394
CASH AND EQUIVALENTS AT BEGINNING               
OF PERIOD   1,039   148   629   -   1,816
CASH AND EQUIVALENTS AT END OF PERIOD $ 2,127 $ 214 $ 869 $ - $ 3,210

Consolidating Statement of Cash Flows
For The Nine Months Ended September 30, 2013
(Unaudited; recast; millions)

  Parent Guarantor Non-Guarantor   Time Warner
  Company Subsidiaries Subsidiaries Eliminations Consolidated
                
OPERATIONS               
Net income $ 2,708 $ 3,419 $ 3,110 $ (6,529) $ 2,708
Less Discontinued operations, net of tax   (288)   (288)   (288)   576   (288)
Net income from continuing operations   2,420   3,131   2,822   (5,953)   2,420
Adjustments for noncash and nonoperating items:               
Depreciation and amortization   18   96   445   -   559
Amortization of film and television costs   -   1,725   3,500   (23)   5,202
Asset impairments   7   -   28   -   35
Gain on investments and other assets, net   (4)   1   (67)   -   (70)
Excess (deficiency) of distributions over equity in pretax               
income of consolidated subsidiaries, net of cash               
distributions   (4,566)   (3,048)   (1,251)   8,865   -
Equity in losses of investee companies, net                
of cash distributions   1   2   162   -   165
Equity-based compensation   60   49   80   -   189
Deferred income taxes   708   510   290   (800)   708
Changes in operating assets and liabilities, net of acquisitions   (399)   (2,683)   (1,475)   (2,083)   (6,640)
Intercompany   -   3,446   (3,446)   -   -
Cash provided by operations from continuing operations   (1,755)   3,229   1,088   6   2,568
INVESTING ACTIVITIES               
Investments in available-for-sale securities   (2)   -   (23)   -   (25)
Investments and acquisitions, net of cash acquired   (8)   (1)   (450)   -   (459)
Capital expenditures   (13)   (49)   (234)   -   (296)
Investment proceeds from available-for-sale securities   8   -   25   -   33
Advances to (from) parent and consolidated subsidiaries   2,939   459   -   (3,398)   -
Other investment proceeds   15   148   111   (107)   167
Cash provided (used) by investing activities from               
continuing operations   2,939   557   (571)   (3,505)   (580)
FINANCING ACTIVITIES               
Borrowings   -   -   24   -   24
Debt repayments   -   (732)   (24)   -   (756)
Proceeds from exercise of stock options   596   -   -   -   596
Excess tax benefit from equity instruments   154   -   -   -   154
Principal payments on capital leases   -   (6)   -   -   (6)
Repurchases of common stock   (2,603)   -   -   -   (2,603)
Dividends paid   (811)   -   -   -   (811)
Other financing activities   42   (12)   (236)   105   (101)
Change in due to/from parent and investment in segment   -   (3,162)   (232)   3,394   -
Cash used by financing activities from continuing                
operations   (2,622)   (3,912)   (468)   3,499   (3,503)
Cash provided (used) by continuing operations   (1,438)   (126)   49   -   (1,515)
Cash provided (used) by operations from discontinued               
operations   (1)   -   264   -   263
Cash used by investing activities from               
discontinued operations   142   104   (22)   (246)   (22)
Cash used by financing activities from               
discontinued operations   -   -   (246)   246   -
Effect of change in cash and equivalents of discontinued               
operations   -   -   18   -   18
Cash provided (used) by discontinued operations   141   104   14   -   259
INCREASE (DECREASE) IN CASH AND               
EQUIVALENTS   (1,297)   (22)   63   -   (1,256)
CASH AND EQUIVALENTS AT BEGINNING               
OF PERIOD   1,861   295   604   -   2,760
CASH AND EQUIVALENTS AT END OF PERIOD $ 564 $ 273 $ 667 $ - $ 1,504