Time Magazine 2015 Annual Report Download - page 94

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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Gains and losses reclassified from Accumulated other comprehensive loss, net to Other loss, net in the Consolidated
Statement of Operations are determined based on the specific identification method.
Investment in Hudson Yards Development Project
During 2015, the Company finalized agreements relating to the construction and development of office and studio
space in the Hudson Yards development on the west side of Manhattan in order to move its Corporate headquarters and New
York City-based employees to the new space. The Company will fund its proportionate share of the costs for the construction
and development through HYNTH, a limited liability company that is controlled by the developer and managed by an
affiliate of the developer. As of December 31, 2015 and 2014, the Company’s investment in HYNTH, which is accounted for
under the equity method of accounting, was approximately $438 million and $102 million, respectively, and is included in
Investments, including available-for-sale securities in the Consolidated Balance Sheet. Based on construction cost estimates
and space projections as of December 31, 2015, the Company expects to invest an additional $1.7 billion, excluding interest,
in the Hudson Yards development project through 2019.
CME
As of December 31, 2015, the Company had an approximate 49.4% voting interest in CME’s common stock and an
approximate 75.7% economic interest in CME on a diluted basis.
As of December 31, 2015, the Company owned 61.4 million shares of CME’s Class A common stock and 1 share of
Series A convertible preferred stock, which is convertible into 11.2 million shares of CME’s Class A common stock and
votes with the Class A common stock on an as-converted basis. The Company accounts for its investment in CME’s Class A
common stock and Series A convertible preferred stock under the equity method of accounting.
As of December 31, 2015, the Company owned all of the outstanding shares of CME’s Series B convertible
redeemable preferred shares, which are non-voting and may be converted into 99.5 million shares of CME’s Class A
common stock at the Company’s option at any time after June 25, 2016. The Company accounts for its investment in CME’s
Series B convertible redeemable preferred shares under the cost method of accounting.
As of December 31, 2015, the Company owned 3.4 million of CME’s 15% senior secured notes due 2017 (the “Senior
Secured Notes”), each consisting of a $100 principal amount plus accrued interest. The Senior Secured Notes are accounted
for at their amortized cost and classified as held-to-maturity in the Consolidated Balance Sheet. At December 31, 2015, the
carrying value of the Senior Secured Notes was $268 million.
As of December 31, 2015, the Company held 101 million warrants each to purchase one share of CME Class A
common stock. The warrants have a four-year term that expires in May 2018 and an exercise price of $1.00 per share, do not
contain any voting rights and are not exercisable until May 2016. The warrants are subject to a limited right whereby the
Company can exercise any of its warrants earlier solely to own up to 49.9% of CME’s Class A common stock. The warrants
are carried at fair value in the Consolidated Balance Sheet. The initial fair value of the warrants was recognized as a discount
to the Senior Secured Notes and the term loan provided by the Company to CME (as described below) and a deferred gain
related to the revolving credit facility provided by the Company to CME (as described below). At December 31, 2015, the
carrying value of the warrants was $179 million.
As of December 31, 2015, the Company has guaranteed an aggregate amount of €486 million of CME’s obligations (as
described below). In connection with these guarantees, the Company recognized a liability at the inception of each respective
arrangement based on the estimated fair value of the guarantee. At December 31, 2015, the carrying value of liabilities
associated with such guarantees was $66 million.
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