Time Magazine 2014 Annual Report Download - page 91

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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Equity-Method Investments
At December 31, 2014, investments accounted for using the equity method included the Company’s investments in the
Class A common stock and Series A convertible preferred stock of CME, HBO LAG (88% owned) and certain other ventures
that are generally 20% to 50% owned.
HBO LAG is a VIE and, because voting control of this entity is shared equally with the other investor in HBO LAG, the
Company has determined that it is not the primary beneficiary of this VIE. As of December 31, 2014 and December 31,
2013, the Company’s aggregate investment in HBO LAG was $568 million and $580 million, respectively, and was recorded
in Investments, including available-for-sale securities, in the Consolidated Balance Sheet. The investment in HBO LAG is
intended to enable the Company to more broadly leverage its programming and digital strategy in the territories served and to
capitalize on growing multi-channel television opportunities in such territories. The Company provides programming as well
as certain services, including distribution, licensing and technological and administrative support, to HBO LAG. HBO LAG
is financed through cash flows from its operations, and the Company is not obligated to provide HBO LAG with any
additional financial support. In addition, the assets of HBO LAG are not available to settle the Company’s obligations.
Cost-Method Investments
The Company’s cost-method investments include its investment in the Series B convertible redeemable preferred shares
of CME as well as its investments in entities such as non-public start-up companies and investment funds. 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 year ended December 31, 2014, the Company recognized net gains of $36 million, primarily related to
miscellaneous investments sold during the year. For the year ended December 31, 2013, the Company recognized net gains
of $76 million, primarily related to a gain on the sale of the Company’s investment in a theater venture in Japan. For the year
ended December 31, 2012, the Company recognized net gains of $11 million related to the sale of various investments.
Investment Writedowns
For the years ended December 31, 2014, 2013 and 2012, the Company incurred writedowns to reduce the carrying value
of certain investments that experienced other-than-temporary impairments, as set forth below (millions):
December 31,
2014 2013 2012
Equity-method investments .................................. $ 21 $ 5 $ 25
Cost-method investments .................................... 8 5 14
Available-for-sale securities .................................. 6 7 7
Total .................................................... $ 35 $ 17 $ 46
The impairment of equity-method investments incurred during the year ended December 31, 2012 is primarily related to
the shutdown of TNT television operations in Turkey. For more information on this investment, see Note 3. While Time
Warner has recognized all declines that are believed to be other-than-temporary as of December 31, 2014, it is reasonably
possible that individual investments in the Company’s portfolio may experience other-than-temporary declines in value in
the future if the underlying investees experience poor operating results or the U.S. or certain foreign equity markets
experience declines in value.
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