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Stories. Shared.
Annual Report 2012

Table of contents

  • Page 1
    Stories. Shared. Annual Report 2012

  • Page 2

  • Page 3
    ... want to have the audience immersed in the films I make. I don't want people watching a film on screen - I want them to actually feel like they're going on this adventure into Middle-earth with me. Director Peter Jacpson on the set of The Hobbit: An Unexpected Journey in New Zealand with Martin...

  • Page 4
    ... that is both funny and meaningful 24 times a year is a ridiculously difficult thing to do. And yet, on shows like The Big Bang Theory, there's a tangible feeling of gratitude for the opportunity. Chucp Lorre (left), co-creator/executive producer of The Big Bang Theory, on the Warner Bros. lot with...

  • Page 5
    Our Person of the Year interview showed Obama. After all, he will never have to run for office again, never have to say the words 'I approved this message.' Ricp Stengel, Managing Editor, TIME, in the Oval Office on December 12, 2012. a more forceful 2012 Annual Report 3

  • Page 6
    4 Time Warner

  • Page 7
    ... to make sure everything is completely accurate, you're getting everything right, and you're getting it quick. You're really concentrating, it's really intense. CNN's Anderson Cooper on the set in New York with Wolf Blitzer on November 7, 2012. 2012 Annual Report 5

  • Page 8
    .... I don't think anybody's having more fun than we do. Charles Barpley (right), analyst on TNT's Emmy Award-winning Inside the NBA for the past 14 years, at the NBA All-Star Weekend in Orlando...

  • Page 9
    In this scene, I was the director, camera person and actor, and it was so much fun in that wonderful, magic-ofHollywood way. Angie Harmon, co-star of Rizzoli & Isles, on the set of the TNT hit. 2012 Annual Report 7

  • Page 10
    ... space in the middle of nowhere and there's a lot happening and equipment everywhere. But as the show goes on, I feel like some of these scenes have been written for me - I see myself.... Maisie Williams shoots her first scene of Game of Thrones Season 3 in the hills outside Belfast. 8 Time Warner

  • Page 11
    2012 Annual Report 9

  • Page 12
    .... Director Ben Afflecp, with Alan Arkin and a crew member, on the set of Academy Award-winning Argo on the Warner Bros. lot, Burbank, CA, in 2011. 10 Time Warner

  • Page 13
    ... of any cable network group. In 2012, truTV, Cartoon Network and Adult Swim also extended their leadership positions with the young audiences that are sought by advertisers. And CNN maintained its stature as the go-to place for breaking news, ending the year on a high note by 2012 Annual Report 11

  • Page 14
    ... making more than 1,000 hours of on-demand content and live streams of CNN, HLN and Cartoon Network available to more than 80 million subscribers at the end of 2012. And HBO GO is the gold standard of TV Everywhere products, offering subscribers more than 1,700 hours of HBO programming across a wide...

  • Page 15
    ... Time Warner's stature as the preferred home for talent and creativity - giving us great confidence in our future. On behalf of all of Time Warner's employees, I want to thank you, our stockholders, for the trust that you place in us. Jeff Bewpes Chairman and CEO April 3, 2013 2012 Annual Report...

  • Page 16
    ... Executive Vice President, Corporate Marketing and Communications Carol A. Melton Executive Vice President, Global Public Policy Olaf Olafsson Executive Vice President, International and Corporate Strategy Time Warner Senior Operating Executives Philip I. Kent Chairman and CEO, Turner Broadcasting...

  • Page 17
    ...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 Returns ... 3 15 24 53 54...

  • Page 18
    [THIS PAGE INTENTIONALLY LEFT BLANK] 2

  • Page 19
    ...its networks and live streaming from CNN, HLN and Cartoon Network. These offerings are made available to customers of affiliates who have chosen to subscribe to packages that include the applicable Turner network and who must authenticate their subscription in order to view the programming online or...

  • Page 20
    ...and Wedding Band. Syndicated series for the 2012-2013 season include The Big Bang Theory, Family Guy and The Office. TBS is also airing new episodes of Cougar Town for the 2012-2013 season and episodes from prior seasons through syndication. TBS is also the home of the late night talk show Conan. In...

  • Page 21
    ... featured on the CNN network or CNN.com. Live streaming from the network is also available to authenticated subscribers online and on mobile devices. In addition, CNN operates CNNMoney.com and related mobile websites and apps in partnership with Time Inc.'s Money and Fortune magazines and CNNMexico...

  • Page 22
    ...and kids programming. Chilevisión, a leading free-to-air television broadcaster in Chile that is owned and operated by Turner, airs local news and entertainment. In addition, Turner provides the advertising sales and network operations services for the WB Channel in Latin America. In Europe, Turner...

  • Page 23
    ... to grow its audience. For example, CWtv.com promotes The CW's programming and provides video clips, episode guides, photos, music, social networking features and station lists, as well as full episodes with advertising. The CW also has an app for iOS, tablet and Android mobile devices that allows...

  • Page 24
    .... In the U.S. and most major international markets, Warner Bros. has generally released all films simultaneously for sale on DVD, Blu-ray Disc (including, for new release titles, an UltraViolet digital copy), and via VOD and EST (e.g., download to own); however, in 2012, Warner Bros. began releasing...

  • Page 25
    ...Tom & Jerry Show, all of which are airing on Cartoon Network in the 2012-2013 season. WBAI also oversees the creative use of, and production of animated programming based on, classic animated characters from Warner Bros., including Looney Tunes, and from the Hanna-Barbera and DC Comics libraries. In...

  • Page 26
    ... of interactive entertainment, including videogames for console and handheld platforms, social networking games and mobile games. In addition, WBIE develops, publishes and operates massively multiplayer online games through Turbine Inc. ("Turbine"), a subsidiary of WBHE. In 2012, WBIE's significant...

  • Page 27
    ... the magazine, as well as special-edition books and magazines. In 2012, DC Entertainment published on average more than 100 printed comic books, graphic novels and specialty books a month and nearly 350 digital comic books and graphic novels per month. Publishing The Company's publishing business is...

  • Page 28
    ...Leisure and their related websites. IPC publishes approximately 55 magazines as well as numerous special issues. All of IPC's brands are available on Amazon's Kindle Fire and Barnes & Noble's Nook and on Apple Newsstand for purchase and download to a variety of digital devices. IPC is organized into...

  • Page 29
    ... programs that help schools and youth groups raise money through the sale of subscriptions to Time Inc.'s and other publishers' magazines, among other products. 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...

  • Page 30
    ... susceptible to uncertainty and changes in circumstances, and the Company is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Time Warner's actual results may...

  • Page 31
    ... the Internet, home video products, videogames, social networking, print media, live sports and other events and radio broadcasts, for consumers' leisure and entertainment time and discretionary spending. Technological developments, such as tablets and other mobile electronic devices, VOD, new video...

  • Page 32
    ... segment's premium pay television services, the Publishing segment's magazine circulation, and the number of unique visitors to the Company's websites. The underperformance of a feature film, particularly an "event" film (which typically has high production and marketing costs) or a feature film...

  • Page 33
    ... sales and rates are dependent on audience size, and advertisers' willingness to purchase advertising from the Company may be adversely affected by a decline in audience ratings or the number of unique visitors at the Networks segment's websites or a decline in circulation, magazine readership...

  • Page 34
    ... of tablet editions of magazines is shifting how consumers interact with magazines and how the audience for tablet editions of magazines is measured, which could negatively impact the Publishing segment's advertising revenues. The Company faces risks relating to doing business internationally that...

  • Page 35
    ... of business opportunities, which could result in costly redesign efforts, discontinuance of certain product and service offerings or other competitive harm. The Internet Corporation for Assigned Names and Numbers plans to expand the Internet and has accepted over 1,900 applications for new generic...

  • Page 36
    ...or loss of information maintained in the information systems and networks of the Company and its third party vendors, including personnel, customer and vendor confidential data. The Company could be exposed to significant costs if such risks were to materialize. In addition, such events could result...

  • Page 37
    ...further, or retail video service rates charged by affiliates continue to increase, subscribers may cancel their video service subscriptions, reduce the number of services they subscribe to or elect to subscribe to a lower-priced tier that may not include all of the segment's networks and premium pay...

  • Page 38
    ...by power outages, natural disasters (including extreme weather), terrorist attacks, failures or impairments of communications satellites or on-ground uplinks or downlinks used to transmit programming, or other similar events. RISKS RELATING TO TIME WARNER'S FILM AND TV ENTERTAINMENT BUSINESSES Sales...

  • Page 39
    ...segment has been experiencing declines in print advertising and newsstand sales at certain of its magazines as a result of market conditions in the magazine publishing industry as well as the current economic environment. The segment is pursuing a number of initiatives to help mitigate the impact of...

  • Page 40
    .... Such information is based on management's current expectations about future events, which are inherently susceptible to uncertainty and changes in circumstances. Refer to "Risk Factors" in this 2012 Annual Report to Stockholders for a discussion of the risk factors applicable to the Company...

  • Page 41
    ... electronic sell-through ("EST") and the licensing of original programming primarily to international television networks. HBO's original programming includes Game of Thrones, True Blood and Boardwalk Empire. During the year ended December 31, 2012, Turner shut down its general entertainment network...

  • Page 42
    ... tablet editions on multiple digital devices and platforms. The Publishing segment generates revenues primarily from the sale of advertising, magazine subscriptions and newsstand sales. The Publishing segment is experiencing declines in its print advertising and newsstand sales as a result of market...

  • Page 43
    ...now sells the advertising for these websites and no longer receives a license fee from Turner. These changes did not affect the Company's consolidated results of operations for the years ended December 31, 2012, 2011 and 2010. Recent Developments Common Stock Repurchase Program In January 2013, Time...

  • Page 44
    ...long-lived assets, including Goodwill. For the year ended December 31, 2012, the Company also recognized $12 million of other miscellaneous noncash asset impairments consisting of $2 million at the Networks segment, $4 million at the Film and TV Entertainment segment and $6 million at the Publishing...

  • Page 45
    ... in connection with the sale in the first quarter of 2012 of Time Inc.'s school fundraising business, QSP (the "QSP Business"), and a $10 million gain at the Corporate segment on the disposal of certain corporate assets. For the year ended December 31, 2011, the Company recognized net gains on...

  • Page 46
    ... Cable Inc. For the years ended December 31, 2012, 2011 and 2010, the Company recognized other income of $9 million, other income of $4 million and other loss of $6 million, respectively, related to the expiration, exercise and net change in the estimated fair value of Time Warner equity awards held...

  • Page 47
    ... 31, 2012 was primarily related to an increase at the Film and TV Entertainment segment, partially offset by a decline at the Publishing segment. For the year ended December 31, 2011, the increase in Subscription and Advertising revenues was primarily related to an increase at the Networks segment...

  • Page 48
    ... Year Ended December 31, 2012 2011 2010 Networks ...Film and TV Entertainment ...Publishing ...Corporate ...Total restructuring and severance costs ... $ 67 23 27 2 $ 52 41 18 2 $ 6 30 61 - $ 119 $ 113 $ 97 The total number of employees terminated across the segments in 2012, 2011 and 2010...

  • Page 49
    ... Networks segment for the years ended December 31, 2012, 2011 and 2010 are as follows (millions): Year Ended December 31, 2012 2011 2010 % Change 2012 vs. 2011 2011 vs. 2010 Revenues: Subscription ...Advertising ...Content ...Other ...Total revenues ...Costs of revenues(a) ...Selling, general and...

  • Page 50
    ...of Costs of revenues for the Networks segment are as follows (millions): Year Ended December 31, 2012 2011 2010 % Change 2012 vs. 2011 2011 vs. 2010 Programming costs: Originals and sports ...Acquired films and syndicated series ...Total programming costs ...Other direct operating costs ...Costs of...

  • Page 51
    ..., which included expenses associated with an HBO GO national marketing campaign, and higher international costs of $48 million, primarily associated with growth. In addition, for the year ended December 31, 2010, Selling, general and administrative expenses included a $58 million reserve reversal in...

  • Page 52
    ... Entertainment segment for the years ended December 31, 2012, 2011 and 2010 are as follows (millions): Year Ended December 31, 2012 2011 2010 % Change 2012 vs. 2011 2011 vs. 2010 Revenues: Subscription ...Advertising ...Content ...Other ...Total revenues ...Costs of revenues(a) ...Selling, general...

  • Page 53
    ... timing of network deliveries, partially offset by lower worldwide syndication revenues mainly as a result of the initial off-network availability of The Big Bang Theory in 2011. The increase in television product revenues from home video and electronic delivery for the year ended December 31, 2012...

  • Page 54
    ... films. For the years ended December 31, 2011 and 2010, theatrical film valuation adjustments were $74 million and $78 million, respectively. Other costs increased primarily due to higher merchandise costs mainly associated with the increase in videogame sales. The increase in Selling, general and...

  • Page 55
    ... for the years ended December 31, 2012, 2011 and 2010 are as follows (millions): Year Ended December 31, 2012 2011 2010 % Change 2012 vs. 2011 2011 vs. 2010 Revenues: Subscription ...Advertising ...Content ...Other ...Total revenues ...Costs of revenues(a) ...Selling, general and administrative...

  • Page 56
    ...) 2012 vs. 2011 For the year ended December 31, 2012, Subscription revenues decreased primarily due to lower newsstand sales, mainly as a result of market conditions in the magazine publishing industry as well as the current economic environment in the US and internationally. For the year ended...

  • Page 57
    ... functions to generate cost savings or other benefits for the Company. For the years ended December 31, 2012 and 2011, Selling, general and administrative expenses included $51 million and $21 million, respectively, of costs related to enterprise efficiency initiatives. 2011 vs. 2010 Operating Loss...

  • Page 58
    ...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, 2012 through December 31, 2012, the Company...

  • Page 59
    .... Investing Activities Details of Cash used by investing activities are as follows (millions): Year Ended December 31, 2012 2011 2010 Investments in available-for-sale securities ...Investments and acquisitions, net of cash acquired: CME ...Bleacher Report ...HBO LAG ...HBO Europe ...Chilevision...

  • Page 60
    ...2012, all of the approximately 39 million exercisable stock options outstanding on such date had exercise prices below the closing price of the Company's common stock on the New York Stock Exchange on that day. The decrease in Cash used by financing activities from continuing operations for the year...

  • Page 61
    ... discounts. At December 31, 2012, the principal amounts of the Company's public debt matures as follows: $732 million in 2013 (classified as current on...debt obligations totaling $17 million are due within the next twelve months. 2012 Debt Offering On June 13, 2012, Time Warner issued $1.0 billion ...

  • Page 62
    ...the $2 billion of public debt issued by Time Warner in 2006, which is not guaranteed by Home Box Office). See Note 8, "Long-Term Debt and Other Financing Arrangements," to the accompanying consolidated financial statements for additional information regarding the Company's outstanding debt and other...

  • Page 63
    ... and marketing payments to vendors and content providers, primarily at the Networks and Film and TV Entertainment segments; (2) obligations related to the Company's postretirement and unfunded defined benefit pension plans; (3) obligations to purchase information technology licenses and services...

  • Page 64
    ... based on its best estimate of the pricing that will be in effect at the time the obligation is incurred. Additionally, the Company has included only the obligations under the contracts as they existed at December 31, 2012, and has not assumed that the contracts will be renewed or replaced at...

  • Page 65
    ...customer credit risk, refer to Note 1, "Description of Business, Basis of Presentation and Summary of Significant Accounting Policies," to the accompanying consolidated financial statements. MARKET RISK MANAGEMENT Market risk is the potential gain/loss arising from changes in market rates and prices...

  • Page 66
    ... principally uses foreign exchange contracts that generally have maturities of three months to eighteen months and provide continuing coverage throughout the hedging period. At December 31, 2012 and 2011, Time Warner had contracts for the sale and the purchase of foreign currencies at fixed rates as...

  • Page 67
    ..., (ii) the Company's international expansion plans, (iii) the Company's anticipated contributions to certain international defined benefit plans in 2013, (iv) the Company's expectation that soft market conditions associated with the Publishing segment's magazine advertising and newsstand sales will...

  • Page 68
    ... by the Company in this 2012 Annual Report to Stockholders 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 forward-looking statements, whether as a result of new information, subsequent events or...

  • Page 69
    ... Current liabilities Accounts payable and accrued liabilities ...Deferred revenue ...Debt due within one year ...Total current liabilities ...Long-term debt ...Deferred income taxes ...Deferred revenue ...Other noncurrent liabilities ...Commitments and Contingencies (Note 16) Equity Common stock...

  • Page 70
    TIME WARNER INC. CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31, (millions, except share amounts) 2012 2011 2010 Revenues: Subscription ...Advertising ...Content ...Other ...Total revenues ...Costs of revenues ...Selling, general and administrative ...Amortization of intangible assets ...

  • Page 71
    ...Year Ended December 31, (millions) 2012 2011 2010 Net income ...Other comprehensive income, net of tax: Foreign currency translation: Unrealized gains (losses) occurring during the period ...Less Reclassification adjustment for losses realized in net income ...Change...attributable to Time Warner Inc....

  • Page 72
    ...Inventories and film costs ...Accounts payable and other liabilities ...Other changes ...Cash provided by operations from continuing operations ...Cash used by operations from discontinued operations ...Cash provided by operations ...INVESTING ACTIVITIES Investments in available-for-sale securities...

  • Page 73
    ...) $29,877 Amounts related primarily to stock options and restricted stock includes write-offs of deferred tax assets related to equity-based compensation. During the year ended December 31, 2012, the Company issued treasury stock to cover the exercise of stock options. See accompanying notes. 57

  • Page 74
    ... company, whose businesses include television networks, film and TV entertainment and publishing. Time Warner classifies its operations into three reportable segments: Networks: consisting principally of cable television networks, premium pay and basic tier television services and digital...

  • Page 75
    ...that will be returned, management analyzes vendor sales of the Company's product, historical return trends, current economic conditions, and changes in customer demand. Based on this information, management reserves a percentage of any product sales that provide the customer with the right of return...

  • Page 76
    ..., the Company performs analyses of risks on a customer-specific basis. At December 31, 2012 and 2011, total reserves for doubtful accounts were approximately $284 million and $280 million, respectively. Bad debt expense recognized during the years ended December 31, 2012, 2011 and 2010 totaled $55...

  • Page 77
    ... pay and basic tier television services and are accounted for using the equity method. See Note 4 for additional information. Derivative Instruments The Company uses derivative instruments principally to manage the risk associated with movements in foreign currency exchange rates and recognizes all...

  • Page 78
    ... 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 79
    ... business plans and, when applicable, various growth rates are assumed for years beyond the current business plan period. Discount rate assumptions are based on an assessment of market rates as well as the risk inherent in the future cash flows of the respective reporting units. In 2012, the Company...

  • Page 80
    ..., covering certain international employees. Pension benefits are based on formulas that reflect the participating employees' years of service and compensation. Time Warner uses a December 31 measurement date for its plans. The pension expense recognized by the Company is determined using certain...

  • Page 81
    ...The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the market price of Time Warner common stock at the date of grant. For more information, see Note 12. Revenues and Costs Networks Subscription revenues are recognized as programming services are...

  • Page 82
    ... the date the Company may bill the customers for these sales. Unbilled accounts receivable, which primarily relate to the distribution of television product at the Film and TV Entertainment and Networks segments, totaled $3.210 billion and $2.975 billion at December 31, 2012 and December 31, 2011...

  • Page 83
    ..." for more information. Publishing Magazine Subscription and Advertising revenues are recognized at the magazine cover date. The unearned portion of magazine subscriptions is deferred until the magazine cover date, at which time a proportionate share of the gross subscription price is included in...

  • Page 84
    ... refers to quoted market prices (where available), independent appraisals (where available), historical transactions or comparable cash transactions and the Company's best estimate of selling price. Other indicators of value include the existence of price protection in the form of "most-favored...

  • Page 85
    ... companies. From time to time, the Networks segment contracts with third parties, or in certain instances a related party such as a joint venture, to perform television or website advertising sales services. While terms of these agreements can vary, the Networks segment generally records advertising...

  • Page 86
    ...the years ended December 31, 2012 and 2011 were not significant. In accounting for this arrangement, the Company recorded Advertising revenues for the advertisements aired on Turner's networks and amortized Turner's share of the programming rights fee based on the ratio of current period advertising...

  • Page 87
    ... events or substantive changes in circumstances. For the year ended December 31, 2012, the Networks segment recognized impairments of both Goodwill and intangible assets related to the shutdown of Imagine (see Note 3 for additional information). Goodwill The performance of the Company's annual...

  • Page 88
    ... noncash impairments of intangible assets during the years ended December 31, 2012, 2011 and 2010 by reportable segment, as follows (millions): Year Ended December 31, 2012 2011 2010 Networks ...Film and TV Entertainment ...Publishing ...Time Warner ... $ 79 1 - $ 80 $ 5 1 13 $ - 9 11 $ 20 $ 19...

  • Page 89
    ... respective useful lives. Effective December 31, 2012, certain tradenames of the Publishing segment totaling approximately $164 million that were previously assigned indefinite lives have been assigned finite lives of 18 years and will begin to be amortized starting in January 2013. The Company...

  • Page 90
    ...in HBO Europe of $78 million was determined using the consideration paid in the 2010 purchase, which was primarily derived using a combination of market and income valuation techniques. Dispositions Imagine In 2012, Turner shut down its general entertainment network, Imagine, in India and recognized...

  • Page 91
    ... the school fundraising business, QSP, and recognized a $36 million loss in connection with the sale. 4. INVESTMENTS The Company's investments consist of equity-method investments, fair-value and other investments, including available-for-sale securities, and cost-method investments. Time Warner...

  • Page 92
    ... as its investment in CME. The Company uses available qualitative and quantitative information to evaluate all cost-method investments for impairment at least quarterly. Gain on Sale of Investments For the years ended December 31, 2012, 2011 and 2010, the Company recognized net gains of $11 million...

  • Page 93
    ... than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). The following table presents information about...

  • Page 94
    ... value of Time Warner's debt was considered a Level 2 measurement as it was based on observable market inputs such as current interest rates and, where available, actual sales transactions. Unrealized gains or losses on debt do not result in the realization or expenditure of cash and generally are...

  • Page 95
    ... consist of (millions): December 31, 2012 December 31, 2011 Inventories: Programming costs, less amortization ...DVDs, Blu-ray Discs, books, paper and other merchandise ...Total inventories ...Less: current portion of inventory ...Total noncurrent inventories ...Theatrical film production Released...

  • Page 96
    ... to videogames included within theatrical film costs. Amortization of such costs was $182 million, $163 million and $40 million for the years ended December 31, 2012, 2011 and 2010, respectively. 7. DERIVATIVE INSTRUMENTS Time Warner uses derivative instruments, principally forward contracts, to...

  • Page 97
    ... December 31, 2012 2011 Fixed-rate public debt ...Other obligations ...Subtotal ...Debt due within one year ...Total long-term debt ...(a) $ 19,620 251 19,871 (749) $ 19,122 $ 19,251 273 19,524 (23) $ 19,501 Represents principal amounts adjusted for premiums and discounts. The Company's unused...

  • Page 98
    ... 31, 2012 and 2011, the weighted average interest rate on the Company's outstanding fixed-rate public debt was 6.23% and 6.37%, respectively. At December 31, 2012, the Company's fixed-rate public debt had maturities ranging from 2013 to 2042. Debt Offering On June 13, 2012, Time Warner issued $500...

  • Page 99
    ..., 2012 are as follows (millions): 2013 ...2014 ...2015 ...2016 ...2017 ...Thereafter ...Total ...Amount representing interest ...Present value of minimum lease payments ...Current portion ...Total long-term portion ...Film Tax-Advantaged Arrangements The Company's film and TV entertainment business...

  • Page 100
    ...benefits) provided on Income from continuing operations are as follows (millions): Year Ended December 31, 2012 2011 2010 Federal: Current ...Deferred ...Foreign: Current(a) ...Deferred ...State and Local: Current ...Deferred ...Total ...(a) $ 1,195 (135) 358 4 123 (19) $ 1,526 $ 922 178 364 (52...

  • Page 101
    .... For accounting purposes, the Company records equity-based compensation expense and a related deferred tax asset for the future tax deductions it may receive. For income tax purposes, the Company receives a tax deduction equal to the stock price on the date that a restricted stock unit (or...

  • Page 102
    ... twelve-month period ended December 31, 2013; however, various events could cause the Company's current expectations to change in the future. The Company and its subsidiaries file income tax returns in the U.S. and various state and local and foreign jurisdictions. The Internal Revenue Service ("IRS...

  • Page 103
    ...of December 31, 2012. Purchases under the 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. Shares Authorized...

  • Page 104
    TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following summary sets forth the activity within Other comprehensive income (loss) (millions): Pretax Tax (provision) benefit Net of tax Year Ended December 31, 2010...December 31, 2012 December 31, 2011 Foreign currency ...

  • Page 105
    ...of the Company. Generally, stock options are granted with exercise prices equal to the fair market value on the date of grant, vest ratably over a four-year period, and expire ten years from the date of grant. Generally, RSUs vest between three to four years from the date of grant. Beginning in 2012...

  • Page 106
    ...-average assumptions used to value stock options at their grant date and the weighted-average grant date fair value per share: Year Ended December 31, 2012 2011 2010 Expected volatility ...31.2% 29.5% 29.5% Expected term to exercise from grant date ...6.50 years 6.31 years 6.51 years Risk-free rate...

  • Page 107
    TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes information about stock options exercised (millions): 2012 Year Ended December 31, 2011 2010 Total intrinsic value ...Cash received ...Tax benefits realized ...Restricted Stock Units and Target ...

  • Page 108
    ... all of Time Warner's domestic and international defined benefit pension plans is as follows: Defined Benefit Pension Plans Benefit Obligation (millions) December 31, 2012 2011 Change in benefit obligation: Projected benefit obligation, beginning of year ...Service cost ...Interest cost ...Plan...

  • Page 109
    ...51 $ 20 $ 22 Weighted-average assumptions used to determine benefit obligations and net periodic benefit costs for the years ended December 31: Benefit Obligations 2012 2011 2010 Net Periodic Benefit Costs 2012 2011 2010 Discount rate ...Rate of compensation increase ...Expected long-term return...

  • Page 110
    ... the plan's liability cash flows to rates derived from highquality corporate bonds available at the measurement date. In developing the expected long-term rate of return on plan assets, the Company considered long-term historical rates of return, the Company's plan asset allocations as well as...

  • Page 111
    ...both December 31, 2012 and December 31, 2011, the defined benefit pension plans' assets did not include any securities issued by Time Warner. Expected cash flows After considering the funded status of the Company's defined benefit pension plans, movements in the discount rate, investment performance...

  • Page 112
    ...benefits to active and retired participants, primarily at the Film and TV Entertainment segment. Total contributions made by the Company to these other multiemployer benefit plans for the years ended December 31, 2012, 2011 and 2010 were $167 million, $157 million and $165 million, respectively. 96

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    ...): Year Ended December 31, 2012 2011 2010 Networks ...Film and TV Entertainment ...Publishing ...Corporate ...Total restructuring and severance costs ... $ 67 23 27 2 $ 52 41 18 2 $ 6 30 61 - $ 119 $ 113 $ 97 Year Ended December 31, 2012 2011 2010 2012 activity ...2011 activity ...2010...

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    ...: consisting principally of magazine publishing and related websites as well as book publishing and marketing businesses. Effective for the first quarter of 2012, the Company changed the name of its Filmed Entertainment reportable segment to Film and TV Entertainment. This change did not affect the...

  • Page 115
    ...Capital expenditures of Time Warner in each of its reportable segments is set forth below (millions): Subscription Year Ended December 31, 2012 Advertising Content Other Total Revenues Networks ...Film and TV Entertainment ...Publishing ...Intersegment eliminations ...Total revenues ... $ 8,670 117...

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    ... $ 39,002 19,853 5,850 3,599 $ 68,304 $ 38,166 19,257 6,055 4,323 $ 67,801 Year Ended December 31, 2012 2011 2010 Capital Expenditures Networks ...Film and TV Entertainment ...Publishing ...Corporate ...Total capital expenditures ... $ 294 270 34 45 $ 643 $ 330 313 48 81 $ 772 $ 291 272 49 19...

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    ... to region based on location of customer. Revenue in the EuroZone countries comprise approximately 45%, 46% and 49% of Europe for the years ended 2012, 2011 and 2010, respectively. 16. COMMITMENTS AND CONTINGENCIES Commitments Time Warner has commitments under certain network programming, film...

  • Page 118
    ...expects 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 2013 2014-2015 2016-2017 Thereafter Guarantees ...Letters...

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    ... amounts is licensing of film product from the Film and TV Entertainment segment to the Networks segment in the amount of $1.2 billion and $1.4 billion at December 31, 2012 and 2011, respectively. Backlog excludes filmed entertainment advertising barter contracts, which are expected to result in the...

  • Page 120
    ..."). 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 121
    ...programmer defendants to sell and/or license programming on a "bundled" basis to the distributor defendants, who in turn purportedly offer that programming to subscribers in packaged tiers, rather than on a per channel (or "Ã la carte") basis. In an order dated October 15, 2009, the court dismissed...

  • Page 122
    ..., Other loss, net, Accounts payable and accrued liabilities and Other noncurrent liabilities is as follows (millions): Year Ended December 31, 2012 2011 2010 Cash Flows Cash payments made for interest ...Interest income received ...Cash interest payments, net ...Cash payments made for income taxes...

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    ... (Continued) December 31, 2012 December 31, 2011 Accounts Payable and Accrued Liabilities Accounts payable ...Accrued expenses ...Participations payable ...Programming costs payable ...Accrued compensation ...Accrued interest ...Accrued income taxes ...Total accounts payable and accrued liabilities...

  • Page 124
    ... 31, 2012, the Company's internal control over financial reporting is effective based on the specified criteria. The effectiveness of the Company's internal control over financial reporting has been audited by the Company's independent auditor, Ernst & Young LLP, a registered public accounting firm...

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    ... in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Time Warner's internal control over financial reporting as of December 31, 2012, based on criteria established in...

  • Page 126
    ... internal control over financial reporting as of December 31, 2012, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Time Warner as of December 31, 2012 and 2011...

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    ... to conform to the 2012 presentation. 2012 Year Ended December 31, 2011 2010 2009 (millions, except per share amounts) 2008(a) Selected Operating Statement Information: Total revenues ...Operating income (loss) ...Net income (loss) ...Amounts attributable to Time Warner Inc. shareholders: Income...

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    ... operations ...Common stock - high ...Common stock - low ...Cash dividends declared per share of common stock ...2011 Total revenues ...Operating income ...Net income ...Net income attributable to Time Warner Inc. shareholders: ...Per share information attributable to Time Warner Inc. common...

  • Page 129
    ... Group Index") by measuring the changes in common stock prices from December 31, 2007, plus reinvested dividends and distributions through 2012. The common stock of the following companies is included in the Peer Group Index: CBS Corporation (Class B), News Corporation (Class A), Viacom Inc. (Class...

  • Page 130
    ... and distributions on a monthly basis and quarterly market capitalization weighting. The Company's Common Stock performance has been adjusted to take into account the separation of Time Warner Cable Inc. and AOL Inc. from the Company in 2009. From 2008 through 2012, the Company paid a quarterly...

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    ..., M4 Level, North Tower, 100 CNN Center, Atlanta, GA. Number of Employees Approximately 34,000 worldwide at December 31, 2012. InDepenDent AuDitors Ernst & Young LLP Time Warner Inc. Contact Information Corporate Headquarters Time Warner Inc. One Time Warner Center New York, NY 10019-8016 212-484...

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