Time Magazine 2014 Annual Report Download - page 51

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TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)
The increase in Costs of revenues for the year ended December 31, 2014 reflected higher programming and other direct
operating costs. The increase in programming costs for the year ended December 31, 2014 was primarily due to higher
acquired films and syndicated series programming costs, which included the consolidations of both HBO Asia and HBO
Nordic, as well as higher originals and sports programming costs, reflecting higher costs for original series. The increase in
other direct operating costs for the year ended December 31, 2014 was mainly due to higher participation expenses and the
absence of a $31 million reduction to a receivable allowance recorded in 2013.
For the year ended December 31, 2014, Selling, general and administrative expenses increased due to higher expenses of
$36 million at HBO Asia and HBO Nordic primarily due to their consolidations in 2013.
Refer to “Transactions and Other Items Affecting Comparability” for a discussion of Asset impairments and Gain (loss)
on operating assets for the years ended December 31, 2014 and 2013, which affected the comparability of the Home Box
Office segment’s results.
The results for the year ended December 31, 2014 included $63 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 $39 million of Restructuring and severance costs primarily related to executive severance costs.
The decrease in Operating Income for the year ended December 31, 2014 was primarily due to higher Costs of revenues,
the impact of the $113 million gain on operating assets on the 2013 results and higher Selling, general and administrative
expenses, 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 $165 million driven primarily by higher rates. In addition, the 2013 consolidations of HBO Asia and
HBO Nordic contributed $48 million of Subscription revenues for the year ended December 31, 2013.
The decrease in Content and other revenues for the year ended December 31, 2013 was primarily due to lower home
entertainment revenues mainly as a result of lower library sales.
The decrease in Costs of revenues for the year ended December 31, 2013 was primarily due to lower other direct
operating costs mainly as a result of a reduction of a receivable allowance. Originals and sports programming costs for the
year ended December 31, 2013 were flat as lower programming impairments were offset by higher costs for originals and
sports programming. In addition, acquired films and syndicated series programming costs were essentially flat as costs
associated with the consolidations of HBO Asia and HBO Nordic were largely offset by lower costs for acquired films.
For the year ended December 31, 2013, Selling, general and administrative expenses increased mainly due to higher
domestic marketing expenses of $29 million, higher domestic employee-related costs of $17 million and $15 million of costs
associated with the consolidations of HBO Asia and HBO Nordic.
Refer to “Transactions and Other Items Affecting Comparability” for a discussion of Gain (loss) on operating assets for
the years ended December 31, 2013 and 2012, which affected the comparability of the Home Box Office segment’s results.
For the year ended December 31, 2013, Restructuring and severance costs increased due largely to higher executive
severance costs.
The increase in Operating Income for the year ended December 31, 2013 was primarily due to higher Revenues and Gains
on operating assets, partially offset by higher Selling, general and administrative expenses.
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