Time Magazine 2014 Annual Report Download - page 49

TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)
For the year ended December 31, 2014, Costs of revenues increased primarily due to programming charges of
$526 million related to Turner’s decision following its strategic evaluation of its programming to no longer air certain
programming. Excluding these charges, programming costs increased primarily due to higher originals and sports
programming costs reflecting higher costs related to both the National Collegiate Athletic Association Division I Men’s
Basketball Championship tournament (the “NCAA Tournament”) and the first year of a new agreement with Major League
Baseball.
Refer to “Transactions and Other Items Affecting Comparability” for a discussion of Asset impairments, Gain (loss) on
operating assets, Venezuelan foreign currency loss and external costs related to mergers, acquisitions and dispositions for the
year ended December 31, 2014 and 2013, which affected the comparability of the Turner segment’s results.
The results for the year ended December 31, 2014 included $249 million of Restructuring and severance costs primarily
related to headcount reductions in connection with restructuring activities designed to position the Company for the current
operating environment and reallocate resources to the Company’s growth initiatives. The results for the year ended
December 31, 2013 included $93 million of Restructuring and severance costs primarily related to employee severance
actions.
The decrease in Operating Income for the year ended December 31, 2014 was primarily due to higher Costs of revenues,
higher Restructuring and severance costs and the Venezuela foreign currency loss, partially offset by higher Revenues.
2013 vs. 2012
The increase in Subscription revenues for the year ended December 31, 2013 was primarily due to an increase in domestic
subscription revenues of $197 million driven primarily by higher domestic rates as well as an increase in international
subscription revenues of $39 million reflecting subscriber growth and the unfavorable impact of foreign exchange rates of
approximately $50 million.
The increase in Advertising revenues for the year ended December 31, 2013 reflected domestic growth of $219 million
driven by an increase at Turner’s domestic entertainment networks due to higher pricing and demand, which included higher
demand for sports programming, primarily the NBA and the NCAA Tournament, partially offset by a decline at Turner’s
domestic news networks primarily due to an unfavorable comparison to the 2012 U.S. presidential election.
Content and other revenues were flat primarily due to the absence of revenues from Turner’s TNT television operations in
Turkey, which were shut down in the second quarter of 2012, offset by higher revenues from availabilities to SVOD services.
The increase in Costs of revenues for the year ended December 31, 2013 was primarily due to higher originals and sports
programming costs, mainly due to higher costs for original series, as well as higher costs for acquired films and syndicated
series. Programming costs for the year ended December 31, 2013 included $73 million of impairments related to certain
programs, primarily syndicated series, that management has concluded will no longer be aired.
For the year ended December 31, 2013, Selling, general and administrative expenses were essentially flat mainly due to
the absence of $18 million of exit and other costs related to the Imagine and TNT Turkey Shutdowns, partially offset by
higher marketing expenses.
Refer to “Transactions and Other Items Affecting Comparability” for a discussion of Asset impairments, Gain (loss) on
operating assets and external costs related to mergers, acquisitions and dispositions for the years ended December 31, 2013
and 2012, which affected the comparability of the Turner segment’s results.
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