Time Warner Cable 2013 Annual Report Download - page 44

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TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)
websites (the “AEP Acquisition”). Time Inc. also entered into a multi-year agreement to publish Departures
magazine on behalf of American Express Company. In connection with the purchase, Time Inc. recognized a
pretax gain of $13 million in the fourth quarter of 2013 resulting from the settlement of the pre-existing
contractual arrangement with AEP pursuant to which Time Inc. previously provided management services to
AEP’s publishing business. The purchase price was not material to the Company’s financial condition or results
of operations, and the acquisition did not have a material impact on its financial results.
HBO Asia and HBO South Asia
In September 2013, Home Box Office purchased its partner’s interests in HBO Asia and HBO South Asia
(collectively, “HBO Asia”) for $37 million in cash, net of cash acquired. HBO Asia operates HBO- and
Cinemax-branded premium pay and basic tier television services serving over 15 countries in Asia, including
India. As a result of this acquisition, Home Box Office now owns 100% of HBO Asia and began consolidating its
results of operations and financial condition effective September 30, 2013. For the year ended December 31,
2013, Home Box Office recognized a $104 million gain upon the Company’s acquisition of the controlling
interests in HBO Asia. The consolidation of HBO Asia’s operating results did not have a material impact on the
Company’s consolidated financial results for the year ended December 31, 2013.
Time Inc. Separation from Time Warner
On March 6, 2013, Time Warner announced that its Board of Directors has authorized management to
proceed with plans for the Time Separation. The Time Separation is currently expected to be effected as a spin-
off of Time Inc., a wholly owned subsidiary of the Company. In the Time Separation, Time Warner will
distribute all of its Time Inc. common stock to Time Warner stockholders, and Time Inc. will become an
independent publicly-traded company. The Time Separation is contingent on the satisfaction of a number of
conditions, including the effectiveness of a registration statement on Form 10, which Time Inc. filed with the
Securities and Exchange Commission on November 22, 2013. Time Warner expects to complete the Time
Separation during the second quarter of 2014.
Central European Media Enterprises Ltd.
During the second quarter of 2013, Central European Media Enterprises Ltd. (“CME”) conducted a public
offering of shares of its Class A common stock in which the Company purchased approximately 28.5 million
shares for approximately $78 million in cash in order to maintain a 49.9% voting interest in CME’s Class A
common stock. In addition, on June 25, 2013, the Company purchased $200 million of CME’s newly-issued,
non-voting Series B convertible redeemable preferred shares. The Company incurred costs of $9 million in
connection with these transactions.
Prior to the second quarter of 2013, the Company accounted for its investment in CME under the cost
method of accounting because CME founder and Non-Executive Chairman, Ronald S. Lauder, controlled the
voting rights associated with the Company’s shares in CME pursuant to a voting agreement between the parties.
During the second quarter of 2013, the voting agreement ended and the Company assumed control of the voting
rights associated with its shares of Class A common stock and Series A convertible preferred stock (which is
convertible into shares of Class A common stock and votes with the Class A common stock on an as-converted
basis). As a result of the end of the voting agreement with Mr. Lauder, the Company began accounting for its
investment in the Class A common stock and Series A convertible preferred stock of CME under the equity
method of accounting. The Company accounts for its investment in the Series B convertible redeemable
preferred shares of CME under the cost method of accounting. In accordance with applicable accounting
guidance, the Company has recast its historical financial results to reflect the presentation of its investment in the
Class A common stock and Series A convertible preferred stock of CME under the equity method of accounting
for all prior periods from the date of the Company’s initial investment in CME in May 2009. See Note 4,
“Investments,” to the accompanying consolidated financial statements for more information.
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