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annual report | 2010

Table of contents

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    annual report | 2010

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    Our results are a testament to the strength of our valuable brands and, ultimately, the extraordinary work of our employees and creative partners.

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    Business model innovation is a hallmark of our company, and our scale advantage positions us to lead the digital evolution of our industries. Photo by Andrew Carpenean - US PRESSWIRE

  • Page 7
    ... A Message from the Chairman and CEO For Time Warner, 2010 was a watershed year that showcased our ability to deliver strong financial performance while entertaining and informing the world through our television networks, filmed entertainment and journalism. A few years ago, we embarked on a multi...

  • Page 8
    ... and publishing businesses. For instance, last year we launched digital tablet versions of Time Inc.'s major magazine titles, and we'll offer consumers a range of options, including digital-only subscriptions and dual print and digital subscriptions, as the tablet market takes off. Warner Bros. is...

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    ... campaign, Time Inc.'s efforts to reduce paper waste, Warner Bros.' leadership in reducing depictions of tobacco use in films, and our company-wide Ethical Sourcing Guidelines. These efforts, coupled with our support of public policies that promote freedom of expression, access to information and...

  • Page 12
    ... and CEO Warner Bros. Entertainment Inc. Barry M. Meyer Chairman and CEO Home Box Office, Inc. Bill Nelson Chairman and CEO Time Inc. Interim Management Committee Howard M. Averill Executive Vice President Maurice F. Edelson Executive Vice President John Huey Editor-in-Chief annual report | 2010

  • Page 13
    ... Statement of Equity ...Notes to Consolidated Financial Statements ...Management's Report on Internal Control Over Financial Reporting ...Reports of Independent Registered Public Accounting Firm ...Selected Financial Information ...Quarterly Financial Information ...Comparison of Cumulative Total...

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    (This page intentionally left blank) 2

  • Page 15
    ...sale of advertising. Home Box Office generates revenues principally from providing programming to cable, satellite and telephone company affiliates that have contracted to receive and distribute such programming to their customers who choose to subscribe to the Home Box Office Services ("Subscribers...

  • Page 16
    ... of 2010. CNN International has network feeds in five separate regions: Europe/Middle East/Africa, Asia Pacific, South Asia, Latin America and North America. HLN is distributed in Canada, the Caribbean, parts of Latin America and the Asia Pacific region. CNN en Español, a separate Spanish language...

  • Page 17
    ...in order to ensure continued access to such films. HBO is also defined by its award-winning original dramatic and comedy series, such as True Blood, Boardwalk Empire, Entourage, and Curb Your Enthusiasm, as well as movies, mini-series, boxing matches and sports news programs, comedy specials, family...

  • Page 18
    ...-Blood Prince, The Hangover, Sherlock Holmes, The Blind Side and Invictus. Warner Bros. released one film in January 2011, and currently plans to release 22 additional original motion pictures for distribution throughout the year, including Harry Potter and the Deathly Hollows: Part 2, Green Lantern...

  • Page 19
    ... media in the U.S. and internationally. Warner Bros. International Television Distribution Inc. is forming an international group of local television production companies in major territories with a focus on non-scripted programs and formats that can be sold internationally and adapted for sale...

  • Page 20
    ...or has editorial responsibility for over 45 magazine websites that collectively had average monthly unique visitors of over 50 million in the U.S., the U.K., Mexico and other countries during the fourth quarter of 2010, according to comScore Media Metrix. Time Inc. also publishes magazine content on...

  • Page 21
    ... its vast archive, and Time for Kids, a weekly current events newsmagazine for children ages five to 13; (ii) Fortune, a magazine published 18 times per year that reports on worldwide economic and business developments and compiles the annual Fortune 500 list of the largest U.S. corporations; (iii...

  • Page 22
    ... mail and online solicitation, subscription sales agents, marketing agreements with other companies and insert cards in Time Inc. magazines and other publications. Subscribers to the print version of People magazine may also download the digital version of People through Apple's iTunes App Store...

  • Page 23
    ... issues of People, Sports Illustrated, Time and Fortune are also sold through Apple's iTunes App Store for download on the iPad. Available Information and Website The Company's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to such reports...

  • Page 24
    ... changes in competitors' product and service offerings may require the Company to make additional research and development expenditures or offer products or services in a digital format without charge or at a lower price than offered in other formats. New technology or business initiatives supported...

  • Page 25
    ... fees, syndication results, affiliate fees and the distribution potential of its premium pay television services. For the Publishing segment, a decrease in magazine circulation or the number of unique visitors for its websites can lead to lower advertising demand and rates. The Company's businesses...

  • Page 26
    ... in 2010, there continues to be a risk that the print advertising market will not continue to improve, or it may take several years for any further improvement to occur. Declines in consumer spending due to weak economic conditions could also indirectly impact the Company's advertising revenues...

  • Page 27
    ... production or the release dates of the Company's feature films, television programming and magazines. The Company could also incur higher costs from such actions, new collective bargaining agreements or if collective bargaining agreements are renewed on less favorable terms. In addition, union or...

  • Page 28
    ... and certain areas of marketing activity are also subject to specific federal statutes and rules. In addition, the rules of the Audit Bureau of Circulations govern the Publishing segment's U.S. magazine subscription activities. The Company's digital properties and activities are subject to a variety...

  • Page 29
    ... cable system operators, satellite distribution services, telephone companies and other customers (known as affiliates) for the distribution of its networks and services, and there can be no assurance that these affiliate agreements will be renewed in the future on terms that are acceptable to the...

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    ... services, the number of subscribers to such services could decline. A decrease in the number of subscribers to the Networks segment's networks and services could result in a decrease in affiliate fees and advertising revenues. RISKS RELATING TO TIME WARNER'S FILMED ENTERTAINMENT BUSINESSES Sales...

  • Page 31
    ...could face increased costs and business disruption resulting from instability in the U.S. wholesaler distribution channel. The Publishing segment operates a national distribution business that relies on wholesalers to distribute its magazines to newsstands and other retail outlets. A small number of...

  • Page 32
    ... FINANCIAL CONDITION INTRODUCTION Management's discussion and analysis of results of operations and financial condition ("MD&A") is a supplement to the accompanying consolidated financial statements and provides additional information on Time Warner Inc.'s ("Time Warner" or the "Company") businesses...

  • Page 33
    ... customers who choose to subscribe to the HBO or Cinemax services. An additional source of revenues for Home Box Office is the sale and licensing of its original programming, including True Blood, Entourage and The Pacific. The Company's Networks segment has been pursuing international expansion...

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    ...sales through electronic delivery (particularly video-on-demand), which have higher gross margins than standard definition DVDs. Publishing. Time Warner's Publishing segment consists principally of magazine publishing and related websites as well as marketing services and direct-marketing businesses...

  • Page 35
    ... in "Financial Condition and Liquidity - Outstanding Debt and Other Financing Arrangements," in 2010, the Company entered into a series of transactions to capitalize on the historically low interest rate environment and extend the average maturity of its public debt. Specifically, Time Warner issued...

  • Page 36
    ... statements. Common Stock Repurchase Program On January 25, 2011, Time Warner's Board of Directors authorized up to $5.0 billion of share repurchases beginning January 1, 2011. See "Financial Condition and Liquidity" for more information. Retirement Plan Amendments In March 2010, the Company...

  • Page 37
    TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) amortized based on the ratio of current period advertising revenue to total estimated advertising revenue over the term of the agreement. Any costs recognized and payable by Turner ...

  • Page 38
    TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) Asset Impairments During the year ended December 31, 2010, the Company recorded noncash impairments of $9 million at the Filmed Entertainment segment related to the termination of a ...

  • Page 39
    ... of Time Warner equity awards held by TWC employees. In addition, the Company incurred pretax direct transaction costs, primarily legal and professional fees, related to the separation of TWC of $6 million for the year ended December 31, 2009 and $11 million for the year ended December 31, 2008. The...

  • Page 40
    TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) Revenues. The components of revenues are as follows (millions): Years Ended December 31, 2010 2009 % Change Subscription ...Advertising...Content ...Other ...Total revenues ... $ 9,...

  • Page 41
    TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) Other Income (Loss), Net. Other income (loss), net detail is shown in the table below (millions): Years Ended December 31, 2010 2009 Investment gains (losses), net...Amounts related ...

  • Page 42
    ... AND FINANCIAL CONDITION - (Continued) Business Segment Results Networks. Revenues and Operating Income of the Networks segment for the years ended December 31, 2010 and 2009 are as follows (millions): Years Ended December 31, 2010 2009 % Change Revenues: Subscription ...Advertising ...Content...

  • Page 43
    ... NCAA Tournament Games programming. Filmed Entertainment. Revenues and Operating Income of the Filmed Entertainment segment for the years ended December 31, 2010 and 2009 are as follows (millions): Years Ended December 31, 2010 2009 % Change Revenues: Subscription ...Advertising ...Content ...Other...

  • Page 44
    ... Two and a Half Men, The New Adventures of Old Christine and The Closer, increased revenues from new series and revenues from Shed Media, which was acquired in October 2010. Television product revenues from home video and electronic delivery were essentially flat due to the timing and mix of product...

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    TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) higher number of international releases. Film costs increased to $5.194 billion in 2010 from $4.789 billion in 2009. Included in film costs are net theatrical film valuation ...

  • Page 46
    ...for the magazine and digital businesses include manufacturing costs (paper, printing and distribution) and editorial-related costs, which together decreased 4% to $1.190 billion in 2010 from $1.241 billion in 2009, primarily due to lower paper costs associated with a decline in paper prices and cost...

  • Page 47
    TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) Revenues. The components of revenues are as follows (millions): Years Ended December 31, 2009 2008 % Change Subscription ...Advertising...Content ...Other ...Total revenues ... $ 8,...

  • Page 48
    ...an international VAT matter. Other Income (Loss), Net. Other income (loss), net detail is shown in the table below (millions): Years Ended December 31, 2009 2008 Investment losses, net ...Amounts related to the separation of TWC ...Costs related to the separation of AOL ...Income (loss) from equity...

  • Page 49
    ... Income of the Networks segment for the years ended December 31, 2009 and 2008 are as follows (millions): Years Ended December 31, 2009 2008 % Change Revenues: Subscription ...Advertising ...Content ...Other ...Total revenues ...Costs of revenues(a) ...Selling, general and administrative(a) ...Loss...

  • Page 50
    ... business, and a $3 million loss on the sale of GameTap. In addition, the 2009 results included restructuring costs of $8 million at Home Box Office primarily related to severance, and the 2008 results included a $3 million reversal of 2007 restructuring charges related to senior management changes...

  • Page 51
    ... 2008. The decrease in television product revenues from Home video and electronic delivery primarily resulted from the reduced quantity and performance of new releases and lower catalog sales, driven in part by the negative impact of the current economic environment. Other content revenues in 2009...

  • Page 52
    ... costs mainly resulting from the operational reorganization of the New Line business in 2008 and Warner Bros.' restructuring activities in 2009, discussed below, as well as a $133 million decrease in distribution expenses primarily associated with the declines in Home video and electronic delivery...

  • Page 53
    ... at the non-magazine businesses declined as a result of lower revenues. Selling, general and administrative expenses decreased due to cost savings initiatives, a decrease at IPC due primarily to the effect of foreign exchange rates, lower marketing expenses, the effect of the sale of Southern Living...

  • Page 54
    ...stock repurchase program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including price and business and market conditions. From January 1, 2010 through December 31, 2010, the Company...

  • Page 55
    ... fluctuations based on the timing of cash transactions related to production schedules, the acquisition of programming, collection of accounts receivable and similar items. In 2011, the Company anticipates that cash used by working capital will increase over 2010 primarily due to higher investments...

  • Page 56
    ... Operations Details of cash provided (used) by investing activities from continuing operations are as follows (millions): Year Ended December 31, 2010 2009 2008 Investments in available-for-sale securities ...$ Investments and acquisitions, net of cash acquired: HBO Asia, HBO South Asia and...

  • Page 57
    ...repurchases of common stock made in connection with the Company's common stock repurchase program. Cash Flows from Discontinued Operations Details of cash provided (used) by discontinued operations are as follows (millions): Years Ended December 31, 2010 2009 2008 Cash provided (used) by operations...

  • Page 58
    ... new program, the Company terminated its prior commercial paper program. 2010 Debt Transactions On March 3, 2010, Time Warner filed a shelf registration statement with the Securities and Exchange Commission that allows it to offer and sell from time to time debt securities, preferred stock, common...

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    TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) series of transactions to capitalize on the historically low interest rate environment and extend the maturities of its public debt. On March 11, 2010, Time Warner issued $2.0 billion...

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    ... totaled $2.4 billion, as the specific timing of any cash payments relating to this obligation cannot be projected with reasonable certainty. The references to Note 8 and Note 16 refer to the notes to the accompanying consolidated financial statements. The following is a description of the Company...

  • Page 61
    ... 31, 2010 (millions): Purchase Obligations Total (a) 2011 2012-2013 2014-2015 Thereafter Network programming obligations ...Creative talent and employment agreements(b) ...Obligations to use certain printing facilities for the production of magazines ...Advertising, marketing and sponsorship...

  • Page 62
    ... customer credit risk, refer to Note 1, "Description of Business, Basis of Presentation and Summary of Significant Accounting Polices," to the accompanying consolidated financial statements. MARKET RISK MANAGEMENT Market risk is the potential gain/loss arising from changes in market rates and prices...

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    ... INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) Interest Rate Risk Time Warner has issued fixed-rate debt that, at December 31, 2010, had an outstanding balance of $16.276 billion and an estimated fair value of $18.545 billion. Based on Time...

  • Page 64
    ..., which requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management considers an accounting policy to be critical if it is important to the Company's financial condition and results of...

  • Page 65
    ...-looking statements made by the Company in this report speak only as of the date on which they are made. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forwardlooking statements, whether as a result of new information, subsequent events or...

  • Page 66
    ... issued and 1.099 billion and 1.157 billion shares outstanding ...Paid-in-capital ...Treasury stock, at cost (542 million and 477 million shares) ...Accumulated other comprehensive loss, net ...Accumulated deficit ...Total Time Warner Inc. shareholders' equity ...Noncontrolling interests ...Total...

  • Page 67
    TIME WARNER INC. CONSOLIDATED STATEMENT OF OPERATIONS Years Ended December 31, (millions, except per share amounts) 2010 2009 2008 Revenues: Subscription ...Advertising ...Content ...Other ...Total revenues ...Costs of revenues ...Selling, general...Per share information attributable to Time Warner ...

  • Page 68
    ... available-for-sale securities ...Proceeds from the Special Dividend paid by Time Warner Cable Inc. Other investment proceeds ...FINANCING ACTIVITIES Borrowings ...Debt repayments ...Proceeds from exercise of stock options Excess tax benefit on stock options ...Principal payments on capital leases...

  • Page 69
    ...CONSOLIDATED STATEMENT OF EQUITY (millions) Time Warner Shareholders' Retained Earnings Paid-In Treasury (Accumulated Deficit) Capital Stock Common Stock Total Noncontrolling Interests Total Equity BALANCE AT DECEMBER 31, 2007 ...Net loss ...Foreign currency translation adjustments ...Change in...

  • Page 70
    ...' equity as a component of accumulated other comprehensive income, net. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates, judgments and assumptions that affect the amounts reported...

  • Page 71
    ... and digital strategy in the territories served and to capitalize on the growing multi-channel television market in such territories. The Company provides programming as well as certain services, including distribution, licensing, technological and administrative support, to HBO Asia, HBO South Asia...

  • Page 72
    ...primarily include home entertainment product at the Filmed Entertainment and Networks segments and magazines and direct marketing sales at the Publishing segment. In estimating the reserve for pricing rebates, management considers the terms of the Company's agreements with its customers that contain...

  • Page 73
    ... of its customers and adjusts credit limits based on payment histories, current credit ratings and other factors. Investments Investments in companies in which Time Warner has significant influence, but less than a controlling voting interest, are accounted for using the equity method. Significant...

  • Page 74
    ... 2009 Estimated Useful Lives Land(a) ...Buildings ...Capitalized software costs ...Furniture, fixtures and other equipment ... ...$ ... 499 2,610 1,597 3,337 8,043 (4,169) 3,874 $ 476 2,512 1,445 3,221 7,654 (3,732) 7 to 30 years 3 to 7 years 3 to 10 years Less accumulated depreciation ...Total...

  • Page 75
    ... to sell the security in the near term and the fair value is below the Company's cost basis). For investments accounted for using the cost or equity method of accounting, the Company evaluates information (e.g., budgets, business plans, financial statements, etc.) in addition to quoted market prices...

  • Page 76
    ... growth rates used in the DCF analysis ranged from 2.5%-3.5%. To illustrate the magnitude of a potential impairment relative to future changes in estimated fair values, had the fair values of each of the Company's reporting units been hypothetically lower by 10% as of December 31, 2010, the Time Inc...

  • Page 77
    ...the market price of Time Warner common stock at the date of grant. For more information, see Note 12. Revenues and Costs Networks The Networks segment recognizes Subscription revenues as programming services are provided to cable system operators, satellite distribution services, telephone companies...

  • Page 78
    ... sales for similar programming. For a premium pay television service that is not advertising-supported (e.g., HBO), each program's costs are amortized on a straight-line basis over its license period or estimated period of use, beginning with the month of initial exhibition. When the Company...

  • Page 79
    ... are revenues generated from single-copy sales of magazines through retail outlets such as newsstands, supermarkets, convenience stores and drugstores, which may or may not result in future subscription sales. Advertising revenues from websites are recognized as the services are performed. 67

  • Page 80
    ... to period affect the amount of film costs amortized in a given period and, therefore, could have an impact on the segment's financial results for that period. For example, prior to a film's release, the Company often will test market the film to the film's targeted demographic. If the film is not...

  • Page 81
    ...distribution services for an independent third-party company in the worldwide theatrical, home video, television and/or videogame sectors. The independent third-party company may retain final approval over the distribution, marketing, advertising and publicity for each film or videogame in all media...

  • Page 82
    ... is determined using the film forecast computation method. For the years ended December 31, 2010, 2009 and 2008, net participation costs of $508 million, $321 million and $584 million, respectively, were recorded in costs of revenues. Advertising Costs Time Warner expenses advertising costs as they...

  • Page 83
    ... against the cost of inventory capitalized. From time to time, the Company engages in transactions in which the tax consequences may be subject to uncertainty. Examples of such transactions include business acquisitions and dispositions, including dispositions designed to be tax free, issues related...

  • Page 84
    ... in a general entertainment network in India. The impairments noted above did not result in non-compliance with respect to any debt covenants. The following summary of changes in the Company's goodwill related to continuing operations during the years ended December 31, 2010 and 2009, by reportable...

  • Page 85
    ...not significantly impact the Company's consolidated financial results for the year ended December 31, 2010. HBO Asia, HBO South Asia and HBO LAG On January 2, 2008, Home Box Office purchased additional interests in HBO Asia and HBO South Asia and, on December 19, 2008, purchased additional interests...

  • Page 86
    ...CME is being accounted for under the cost method of accounting. Summary of Discontinued Operations AOL Separation from Time Warner On July 8, 2009, the Company repurchased Google Inc.'s ("Google") 5% interest in the AOL business for $283 million in cash, which amount included a payment in respect of...

  • Page 87
    ... ...Cost-method investments ...Total ... $ 883 600 313 $ 641 578 323 $ 1,796 $ 1,542 Equity-Method Investments At December 31, 2010, investments accounted for using the equity method primarily included the Company's investments in HBO LAG (80% owned), HBO Asia (80% owned), HBO South Asia...

  • Page 88
    ... a $16 million gain on the sale of the Company's investment in Adify Corporation and a $6 million gain on the sale of the Company's investment in BigBand Networks, Inc. Investment Writedowns For the years ended December 31, 2010, 2009 and 2008, the Company incurred writedowns to reduce the carrying...

  • Page 89
    TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) writedown of the Company's investment in Eidos (which was sold in 2009), and $2 million related to equity-method investments. The year ended December 31, 2008 also included $10 million of losses to reflect market fluctuations ...

  • Page 90
    ...not exceeding 10 years. Key inputs employed in the DCF methodology include estimates of a film's ultimate revenue and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on the weighted average cost of capital of the respective business (e.g., Warner Bros.) plus...

  • Page 91
    ...consist of (millions): December 31, 2010 December 31, 2009 Inventories: Programming costs, less amortization ...DVDs, books, paper and other merchandise ...Total inventories ...Less: current portion of inventory ...Total noncurrent inventories ...Film costs - Theatrical: Released, less amortization...

  • Page 92
    ... December 31, 2011. 8. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS Long-term debt consists of (millions)(a): Outstanding Debt December 31, December 31, 2010 2009 Fixed-rate public debt ...Other obligations ...Subtotal ...Debt due within one year ...Non-recourse debt ...Total long-term debt...

  • Page 93
    ... FINANCIAL STATEMENTS - (Continued) The revolving bank credit facilities, commercial paper program and public debt of the Company rank pari passu with the senior debt of the respective obligors thereon. The weighted-average interest rate on Time Warner's total debt was 6.52% December 31, 2010...

  • Page 94
    ... with the effectiveness of the CP Program, the Company terminated its prior commercial paper program. Proceeds from the CP Program may be used for general corporate purposes. Commercial paper issued by Time Warner is supported by, and the amount of commercial paper issued may not exceed, the unused...

  • Page 95
    TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Maturities of Public Debt The Company's public debt matures as follows (millions): 2011 2012 2013 2014 2015 Thereafter Debt...$ Covenants and Rating Triggers - 638 732 - 1,000 14,031 Each of the Company's New Credit ...

  • Page 96
    TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Future minimum capital lease payments at December 31, 2010 are as follows (millions): 2011 ...2012 ...2013 ...2014 ...2015 ...Thereafter ...$ ...14 13 14 12 10 32 95 (20) 75 (10) 65 Total ...Amount representing interest ......

  • Page 97
    TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Current and deferred income taxes (tax benefits) provided on income from continuing operations are as follows (millions): Years Ended December 31, 2010 2009 2008 Federal: ...Current ...Deferred ...Foreign: Current(a) ......

  • Page 98
    ... equal to the stock price on the date that a restricted stock unit (or performance share unit) vests or the excess of the stock price over the exercise price of an option upon exercise. As of December 31, 2010, the deferred tax asset recognized for equity-based compensation awards is substantially...

  • Page 99
    ... IRS is currently conducting an examination of the Company's U.S. income tax returns for the 2005 through 2007 period. The tax years that remain subject to examination by significant jurisdiction are as follows: U.S. federal ...California ...New York State ...New York City ...87 2002 2006 2000 2000...

  • Page 100
    ...stock repurchase program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including price and business and market conditions. From January 1, 2010 through December 31, 2010, the Company...

  • Page 101
    ...(4.27) (4.27) Diluted income per common share for the years ended December 31, 2010, 2009 and 2008 excludes approximately 127 million, 160 million and 151 million, respectively, common shares that may be issued under the Company's stock compensation plans because they do not have a dilutive effect...

  • Page 102
    ... effect of a market condition is reflected in the grant date fair value of the award, which is estimated using a Monte Carlo analysis to estimate the total return ranking of Time Warner among the S&P 500 Index companies over the performance period. In the case of PSUs granted in 2009 and 2010, the...

  • Page 103
    ... assumption used to value stock options at their grant date. 2010 Years Ended December 31, 2009 2008 Expected Expected Risk-free Expected volatility...29.5% term to exercise from grant date ...6.51 years rate ...2.9% dividend yield...3.1% 35.2% 6.11 years 2.5% 4.4% 28.7% 5.95 years 3.2% 1.7% 91

  • Page 104
    .... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes information about stock options outstanding as of December 31, 2010: WeightedAverage Exercise Price WeightedAverage Remaining Contractual Life (in years) Aggregate Intrinsic Value (thousands) Number of Options...

  • Page 105
    ... 31, 2008, the Company granted 0.4 million target PSUs at a weighted-average grant date fair value per PSU of $52.59. Equity-Based Compensation Expense Compensation expense recognized for equity-based compensation plans is as follows (millions): Years Ended December 31, 2010 2009 2008 Stock options...

  • Page 106
    ... activity for substantially all of Time Warner's domestic and international defined benefit pension plans is as follows: Defined Benefit Plans Benefit Obligation (millions) December 31, 2010 2009 Change in benefit obligation: Projected benefit obligation, beginning of year . Service cost...Interest...

  • Page 107
    ... in 2010, $38 million in 2009 and $35 million in 2008. Assumptions Weighted-average assumptions used to determine benefit obligations and net periodic benefit costs for the years ended December 31: Benefit Obligations 2010 2009 2008 Net Periodic Benefit Costs 2010 2009 2008 Discount rate ...Rate of...

  • Page 108
    ... of December 31, 2010 and December 31, 2009 (millions): Asset Category Level 1 December 31, 2010 Level 2 Level 3 Total Level 1 December 31, 2009 Level 2 Level 3 Total Cash and cash equivalents . . Insurance contracts ...Equity securities: Domestic equities ...International equities ...Fixed income...

  • Page 109
    ... to minimize funded status volatility. The changes are consistent with the Company's investment policy stated above and will be implemented as market conditions permit. Target asset allocations for international plans are reviewed periodically and as of December 31, 2010 are approximately 60...

  • Page 110
    ... terminations and other exit activities, including $11 million at the Filmed Entertainment segment, $39 million at the Publishing segment and $6 million at the Networks segment. 2009 Restructuring Activity For the year ended December 31, 2009, the Company incurred $198 million in restructuring costs...

  • Page 111
    TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) During the year ended December 31, 2010, the Company incurred $18 million at the Filmed Entertainment segment and $8 million at the Publishing segment related to 2009 restructuring initiatives as a result of changes in ...

  • Page 112
    ... of magazine publishing. Information as to the revenues, intersegment revenues, operating income (loss) and assets of Time Warner in each of its reportable segments is set forth below. Subscription Year Ended December 31, 2010 Advertising Content Other (millions) Total Revenues Networks ...Filmed...

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    TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Years Ended December 31, 2009 2008 (millions) 2010 Operating Income (Loss) Networks ...Filmed Entertainment ...Publishing ...Corporate ...Intersegment eliminations ... ...$ ... 4,224 1,107 515 (374) (44) 5,428 $ 3,470 1,...

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    ... FINANCIAL STATEMENTS - (Continued) Long-lived hard assets located outside the United States, which represent approximately 1% of total assets at December 31, 2010, are not material. Revenues in different geographical areas are as follows: 2010 Years Ended December 31, 2009 2008 (millions...

  • Page 115
    ... to incur an obligation to make any payments within that time period. In addition, amounts presented do not reflect the effects of any indemnification rights the Company might possess (millions). Nature of Contingent Commitments Total 2011 2012-2013 2014-2015 Thereafter Guarantees ...$ Letters of...

  • Page 116
    ...reorganization, on April 30, 2010, a Time Warner subsidiary (TW-SF LLC), as lender, entered into a 5-year $150 million multiple draw term facility with certain affiliates of the Partnerships, as borrowers, which can be used only to fund such affiliates' annual obligations to purchase certain limited...

  • Page 117
    ...2009, the court issued a decision in the first phase trial in favor of the defendants on the issue of whether the terms of various license agreements between DC Comics and Warner Bros. Entertainment Inc. were at fair market value or constituted "sweetheart deals." The parties are awaiting a new date...

  • Page 118
    ..."). This administrative proceeding relates to CNN America's December 2003 and January 2004 terminations of its contractual relationships with Team Video, under which Team Video had provided electronic newsgathering services in Washington, DC and New York, NY. The National Association of Broadcast...

  • Page 119
    ... Additional financial information with respect to cash (payments) and receipts is as follows (millions): 2010 Years Ended December 31, 2009 2008 Cash payments made for interest ...Interest income received ...Cash interest payments, net ...Cash payments made for income taxes ...Income tax refunds...

  • Page 120
    ...) - 34 33 Total other income (loss), net ...$ Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consist of (millions): $ 7 December 31, 2010 December 31, 2009 Accounts payable ...Accrued expenses ...Participations payable ...Programming costs payable ...Accrued...

  • Page 121
    ... inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline. Management conducted an evaluation of the effectiveness of the Company's system of internal control over financial reporting as of December 31, 2010 based on the framework...

  • Page 122
    ... and schedule are the responsibility of Time Warner's management. Our responsibility is to express an opinion on these financial statements, supplementary information and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight...

  • Page 123
    ..., 2010 and 2009, and the related consolidated statements of operations, cash flows and equity for each of the three years in the period ended December 31, 2010 of Time Warner and our report dated February 18, 2011 expressed an unqualified opinion thereon. Ernst & Young /s/ Ernst & Young New York, NY...

  • Page 124
    .... Capitalized terms are as defined and described in the consolidated financial statements or elsewhere herein. Certain reclassifications have been made to conform to the 2010 presentation. 2010 Years Ended December 31, 2008(b) 2007(b) 2009(a) (millions, except per share amounts) 2006 (b) Selected...

  • Page 125
    ...Common stock - low ...Cash dividends declared per share of common stock ...2009 Total revenues ...Operating income ...Net income ...Amounts attributable to Time Warner Inc. shareholders: Income from continuing operations ...Discontinued operations, net of tax ...Net income ...Per share information...

  • Page 126
    ... formerly known as Viacom Inc. into two publicly held companies, CBS Corporation and New Viacom. New Viacom is included in the Peer Group Index from January 3, 2006, the date on which New Viacom's Class B common stock began to trade publicly. CBS Corporation is included in the Peer Group Index for...

  • Page 127
    ...n D D D Time Warner Inc. S&P 500 Index Company Common Stock D Peer Group Index Peer Group Index Value at December 31, 2005 ...June 30, 2006 ...December 31, 2006 ...June 30, 2007 ...December 31, 2007 ...June 30, 2008 ...December 31, 2008 ...June 30, 2009 ...December 31, 2009 ...June 30, 2010...

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    .... Contact Information Corporate Headquarters Time Warner Inc. One Time Warner Center New York, NY 10019-8016 212-484-8000 Time Warner Corporate Website: www.timewarner.com Investor Relations Time Warner Inc. One Time Warner Center New York, NY 10019-8016 866-INFO-TWX e-mail: [email protected] Media...

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    annual report | 2010