Time Magazine 2009 Annual Report Download - page 55

Other revenues decreased due primarily to decreases at Synapse, Southern Living At Home and Oxmoor
House, partially offset by the impact of the acquisition of QSP.
Costs of revenues decreased 4% in 2008 and, as a percentage of revenues, were 39% in 2008 and 38% in 2007.
Costs of revenues for the magazine publishing business include manufacturing costs (paper, printing and
distribution) and editorial-related costs, which together decreased 3% to $1.627 billion in 2008 from
$1.670 billion in 2007, primarily due to cost savings initiatives and the impacts of the 2007 magazine closures
and the 2007 magazine sales. Paper costs savings realized primarily as a result of lower volumes were partially
offset by higher paper prices. The decrease in costs of revenues at the magazine publishing business, as well as a
decrease in costs at the non-magazine businesses associated with lower volumes, were offset by increased costs
associated with investments in certain digital properties, including incremental editorial-related costs, as well as
operating costs associated with the acquisition of QSP.
Selling, general and administrative expenses decreased primarily due to cost savings initiatives, the impacts of
the 2007 magazine closures and 2007 magazine sales and a decrease in promotion-related spending at the non-
magazine businesses, partially offset by costs associated with investments in digital properties and costs associated
with the acquisition of QSP, as well as an increase of $35 million in bad debt reserves.
As previously noted under “Significant Transactions and Other Items Affecting Comparability,” the 2008
results included a $7.139 billion noncash impairment to reduce the carrying value of goodwill and identifiable
intangible assets, a $30 million noncash asset impairment related to the sub-lease with a tenant that filed for
bankruptcy in September 2008, a $21 million noncash impairment of Southern Living At Home and a $5 million
noncash impairment related to certain other asset write-offs. The 2007 results included a $6 million gain on the 2007
magazine sales. In addition, the 2008 results included restructuring costs of $176 million primarily consisting of
$119 million of severance and other costs associated with a significant reorganization of the Publishing segment’s
operations and $57 million related to the sub-lease with a tenant that filed for bankruptcy in September 2008. The
2007 results included restructuring costs of $67 million, primarily consisting of severance associated with efforts to
streamline operations and costs related to the shutdown of LIFE magazine in the first quarter of 2007.
As discussed above, Operating Loss before Depreciation and Amortization in 2008 was negatively impacted by
$7.195 billion of asset impairments. Excluding the asset impairments, Operating Income before Depreciation and
Amortization decreased primarily due to a decline in revenues, partially offset by decreases in selling, general and
administrative expenses and costs of revenues. Also excluding the asset impairments, Operating Income decreased
due primarily to the decline in Operating Income before Depreciation and Amortization discussed above, and, an
increase in depreciation expense due primarily to the completion of construction on IPC’s new U.K. headquarters
during the second quarter of 2007.
Corporate. Operating Loss before Depreciation and Amortization and Operating Loss of the Corporate
segment for the years ended December 31, 2008 and 2007 are as follows (millions):
2008 2007 % Change
Years Ended December 31,
(recast)
Selling, general and administrative
(a)
......................... $ (324) $ (543) (40%)
Restructuring costs ...................................... (12) (10) 20%
Operating Loss before Depreciation and Amortization ............ (336) (553) (39%)
Depreciation ........................................... (44) (44) —
Operating Loss ......................................... $ (380) $ (597) (36%)
(a)
Selling, general and administrative expenses exclude depreciation.
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TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)