Time Inc. - FORM 8-K - EX-99.2 - EXHIBIT 99.2

Attached files

file	filename
8-K - 8-K - Time Inc.	a8k9302014earningsreleasea.htm
EX-99.1 - EXHIBIT 99.1 - Time Inc.	exhibit9913q14pr.htm

Exhibit 99.2

TIME INC.

2014 TRENDING SCHEDULES

BASIS OF PRESENTATION

Time Inc. utilizes Adjusted Operating Income Before Depreciation and Amortization (Adjusted OIBDA), among other measures, to evaluate the performance of its business. Adjusted OIBDA is defined as Operating Income less Depreciation and Amortization (OIBDA) and adjusted for noncash impairments of goodwill, intangibles, fixed asset and investments, restructuring and severance costs, gains and losses on operating assets, and other costs related to mergers, acquisitions, investments or dispositions.

Free Cash Flow is defined as Cash provided by (used in) operations less capital expenditures. The Company uses Free Cash Flow to evaluate its business and this measure is considered an important indicator of the Company's liquidity, including its ability to reduce net debt, make strategic investments, and pay dividends to common shareholders.

We believe that the presentation of OIBDA, Adjusted OIBDA, and Free Cash Flow helps investors analyze underlying trends in our business, evaluate the performance of our business both on an absolute basis and relative to our peers and the broader market, provides useful information to both management and investors by excluding certain items that may not be indicative of our core operating results and operational strength of our business and helps investors evaluate our ability to service our debt.

Some limitations of OIBDA, Adjusted OIBDA, and Free Cash Flow are that they do not reflect certain charges that affect the operating results of the Company’s business and they involve judgment as to whether items affect fundamental operating performance.

A general limitation of these measures is that they are not prepared in accordance with U.S. generally accepted accounting principles and may not be comparable to similarly titled measures of other companies due to differences in methods of calculation and excluded items. OIBDA, Adjusted OIBDA, and Free Cash Flow should be considered in addition to, not as a substitute for, the Company’s Operating income (loss), Income (loss) from continuing operations and various cash flow measures (e.g., Cash provided by (used in) operations), as well as other measures of financial performance and liquidity reported in accordance with U.S. generally accepted accounting principles.

The pro forma share information presented herein gives effect to the issuance of 108.94 million common shares of the Company in connection with the spin-off of the Company from Time Warner as if it had occurred at the beginning of each period presented through the date of the spin-off, June 6, 2014. In addition, certain prior period amounts have been adjusted to conform to the current period presentation.

TIME INC.

2014 TRENDING SCHEDULES

CONSOLIDATED AND COMBINED BALANCE SHEETS

(In millions, except share amounts; Unaudited)



	2012												2013												2014
	March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,
ASSETS
Current assets
Cash and cash equivalents	$	94		$	116		$	88		$	81		$	70		$	69		$	63		$	46		$	51		$	204		$	325
Receivables, less allowances	507			497			468			588			530			520			502			489			414			383			407
Inventories, net of reserves	94			89			94			83			98			99			71			56			63			62			59
Deferred tax assets	100			89			85			82			82			82			82			75			75			98			99
Prepaid expenses and other current assets	70			71			67			52			73			84			96			97			133			113			125
Assets held for sale	—			—			—			—			—			—			—			—			—			51			4
Total current assets	865			862			802			886			853			854			814			763			736			911			1,019
Property, plant and equipment, net	620			599			588			576			544			529			521			534			494			475			442
Intangible assets subject to amortization, net	501			491			483			638			627			617			608			582			1,150			1,130			1,108
Intangible assets not subject to amortization	800			799			799			637			636			636			637			586			—			—			—
Goodwill	3,142			3,134			3,145			3,150			3,123			3,123			3,132			3,162			3,174			3,163			3,143
Other assets	46			48			50			48			45			45			44			47			72			78			88
Total assets	$	5,974		$	5,933		$	5,867		$	5,935		$	5,828		$	5,804		$	5,756		$	5,674		$	5,626		$	5,757		$	5,800
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	425		$	472		$	462		$	531		$	454		$	495		$	514		$	534		$	499		$	564		$	596
Deferred revenue	535			510			494			485			509			486			463			449			468			437			438
Current portion of long-term debt	—			—			—			—			—			—			—			—			—			7			7
Liabilities held for sale	—			—			—			—			—			—			—			—			—			12			—
Total current liabilities	960			982			956			1,016			963			981			977			983			967			1,020			1,041
Long-term debt	34			35			35			36			36			37			37			38			38			1,370			1,369
Deferred tax liabilities	292			292			305			313			306			315			326			313			298			296			291
Deferred revenue	151			145			141			137			140			133			128			135			129			122			118
Other noncurrent liabilities	143			134			138			149			146			135			130			163			213			191			188
Commitments and contingencies
Shareholders' Equity
Common stock, $0.01 par value, 400 million shares authorized	—			—			—			—			—			—			—			—			—			1			1
Preferred stock, $0.01 par value, 40 million shares authorized; none issued	—			—			—			—			—			—			—			—			—			—			—
Additional paid-in-capital	—			—			—			—			—			—			—			—			—			12,654			12,669
Time Warner investment	4,523			4,498			4,430			4,429			4,431			4,392			4,332			4,158			4,079			—			—
Accumulated deficit	—			—			—			—			—			—			—			—			—			(9,819		)	(9,771		)
Accumulated other comprehensive loss, net	(129		)	(153		)	(138		)	(145		)	(194		)	(189		)	(174		)	(116		)	(98		)	(78		)	(106		)
Total shareholders' equity	4,394			4,345			4,292			4,284			4,237			4,203			4,158			4,042			3,981			2,758			2,793
Total liabilities and shareholders' equity	$	5,974		$	5,933		$	5,867		$	5,935		$	5,828		$	5,804		$	5,756		$	5,674		$	5,626		$	5,757		$	5,800

TIME INC.

2014 TRENDING SCHEDULES

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(In millions, except per share amounts; Unaudited)



	Year Ended			Three Months Ended											Year Ended		Three Months Ended										Year Ended			Three Months Ended
	12/31/2011			3/31/2012			6/30/2012		9/30/2012			12/31/2012			12/31/2012		3/31/2013			6/30/2013		9/30/2013		12/31/2013			12/31/2013			3/31/2014			6/30/2014			9/30/2014
Revenues
Advertising
Print and other advertising	$	1,684		$	332		$	411	$	371		$	449		$	1,563	$	322		$	382	$	368	$	455		$	1,527		$	318		$	387		$	363
Digital advertising	239			51			61		66			78			256		67			66		62		85			280			72			74			65
Total Advertising	1,923			383			472		437			527			1,819		389			448		430		540			1,807			390			461			428
Circulation
Subscription	754			179			180		179			210			748		166			174		176		205			721			180			171			174
Newsstand	498			107			108		115			117			447		88			95		105		101			389			86			83			98
Other circulation	19			3			4		3			5			15		4			4		4		7			19			4			4			7
Total Circulation	1,271			289			292		297			332			1,210		258			273		285		313			1,129			270			258			279
Other	483			101			94		104			108			407		90			112		103		113			418			85			101			114
Total revenues	3,677			773			858		838			967			3,436		737			833		818		966			3,354			745			820			821
Operating expenses
Costs of revenues
Production costs	847			184			202		192			217			795		171			182		182		211			746			175			191			180
Editorial costs	455			118			118		113			118			467		110			107		109		117			443			108			111			113
Other	78			16			17		30			19			82		19			30		31		53			133			23			26			29
Total Costs of revenues	1,380			318			337		335			354			1,344		300			319		322		381			1,322			306			328			322
Selling, general and administrative expenses	1,557			379			379		340			378			1,476		361			359		345		381			1,446			375			384			357
Amortization of intangible assets	42			9			9		9			9			36		10			10		10		12			42			19			20			19
Restructuring and severance costs	18			6			12		6			3			27		53			1		4		5			63			115			55			(6		)
Asset impairments	17			—			—		—			6			6		—			—		—		79			79			26			—			—
Goodwill impairment	—			—			—		—			—			—		—			—		—		—			—			—			26			—
Depreciation	100			23			24		22			22			91		22			20		22		21			85			24			28			25
(Gain) loss on operating assets	—			42			—		(1		)	(5		)	36		—			—		—		(13		)	(13		)	—			—			(2		)
Total operating expenses	3,114			777			761		711			767			3,016		746			709		703		866			3,024			865			841			715
Operating income (loss)	563			(4		)	97		127			200			420		(9		)	124		115		100			330			(120		)	(21		)	106
Interest expense, net	4			1			—		1			1			3		1			—		1		1			3			1			11			19
Other (income) expense, net	(6		)	2			1		—			—			3		—			3		—		(2		)	1			(5		)	1			3
Income (loss) before income taxes	565			(7		)	96		126			199			414		(10		)	121		114		101			326			(116		)	(33		)	84
Income tax provision (benefit)	197			4			34		42			71			151		(2		)	46		46		35			125			(42		)	(1		)	36
Net income (loss)	$	368		$	(11	)	$	62	$	84		$	128		$	263	$	(8	)	$	75	$	68	$	66		$	201		$	(74	)	$	(32	)	$	48
Basic net income (loss) per common share	$	3.38		$	(0.10	)	$	0.57	$	0.77		$	1.17		$	2.41	$	(0.07	)	$	0.69	$	0.62	$	0.61		$	1.85		$	(0.68	)	$	(0.30	)	$	0.44
Diluted net income (loss) per common share	$	3.38		$	(0.10	)	$	0.57	$	0.77		$	1.17		$	2.41	$	(0.07	)	$	0.69	$	0.62	$	0.61		$	1.85		$	(0.68	)	$	(0.30	)	$	0.44
Weighted average basic common shares outstanding⁽¹⁾	108.94			108.94			108.94		108.94			108.94			108.94		108.94			108.94		108.94		108.94			108.94			108.94			108.97			109.15
Weighted average diluted common shares outstanding⁽¹⁾	108.94			108.94			108.94		108.94			108.94			108.94		108.94			108.94		108.94		108.94			108.94			108.94			108.97			109.74

___________________


(1)	The pro forma share information presented herein gives effect to the issuance of 108.94 million common shares of the Company in connection with the spin-off of the Company from Time Warner as if it had occurred at the beginning of each period presented through the date of the spin-off, June 6, 2014.

TIME INC.

2014 TRENDING SCHEDULES

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(In millions; Unaudited)



	2011			2012												2013												2014
	Year Ended			Three Months Ended			Six Months Ended			Nine Months Ended			Year Ended			Three Months Ended			Six Months Ended			Nine Months Ended			Year Ended			Three Months Ended			Six Months Ended			Nine Months Ended
	December 31,			March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,
OPERATING ACTIVITIES
Net income (loss)	$	368		$	(11	)	$	51		$	135		$	263		$	(8	)	$	67		$	135		$	201		$	(74	)	$	(106	)	$	(58	)
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization	142			32			65			96			127			32			62			94			127			43			91			135
Amortization of deferred financing costs and discounts on indebtedness	—			—			—			—			—			—			—			—			—			—			—			1
Asset impairments	17			—			—			—			6			—			—			—			79			26			26			26
Goodwill impairment	—			—			—			—			—			—			—			—			—			—			26			26
Gain on sale of operating assets	—			—			—			—			—			—			—			—			—			—			—			(2		)
(Gains) losses on investments and other assets, net	1			42			42			41			36			—			—			—			—			1			—			—
(Gains) losses on equity method of investee companies, net of cash distributions	(6		)	1			2			2			4			1			2			3			2			2			2			4
Share-based compensation expense relating to equity classified awards	41			16			25			32			39			7			9			13			18			2			10			25
Deferred income taxes	18			2			5			17			32			(5		)	3			13			28			(11		)	(11		)	(17		)
Changes in operating assets and liabilities	(107		)	(13		)	2			9			(46		)	(28		)	(25		)	(11		)	(37		)	11			42			30
Cash provided by (used in) operations	474			69			192			332			461			(1		)	118			247			418			—			80			170
INVESTING ACTIVITIES
Investments and acquisitions, net of cash acquired	(2		)	(1		)	(6		)	(8		)	(8		)	(1		)	(2		)	(3		)	10			(12		)	(29		)	(29		)
Capital expenditures	(48		)	(6		)	(12		)	(20		)	(34		)	(6		)	(12		)	(19		)	(34		)	(7		)	(23		)	(30		)
Proceeds from sale of assets	4			15			15			16			16			—			—			—			1			—			—			41
Cash provided by (used in) investing activities	(46		)	8			(3		)	(12		)	(26		)	(7		)	(14		)	(22		)	(23		)	(19		)	(52		)	(18		)
FINANCING ACTIVITIES
Proceeds from the issuance of debt	—			—			—			—			—			—			—			—			—			—			1,377			1,377
Financing costs	—			—			—			—			—			—			—			—			—			—			(13		)	(13		)
Principal payments on Term Loan	—			—			—			—			—			—			—			—			—			—			—			(2		)
Excess tax benefits from share-based compensation arrangements	6			12			12			11			16			18			26			30			34			12			—			—
Transfer to Time Warner in connection with Spin-Off	—			—			—			—			—			—			—			—			—			—			(1,400		)	(1,400		)
Net transfers from (to) Time Warner	(411		)	(90		)	(180		)	(338		)	(465		)	(21		)	(142		)	(273		)	(464		)	12			166			166
Cash provided by (used in) financing activities	(405		)	(78		)	(168		)	(327		)	(449		)	(3		)	(116		)	(243		)	(430		)	24			130			128
Effect of exchange rate changes on Cash and cash equivalents	—			—			—			—			—			—			—			—			—			—			—			(1		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	23			(1		)	21			(7		)	(14		)	(11		)	(12		)	(18		)	(35		)	5			158			279
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	72			95			95			95			95			81			81			81			81			46			46			46
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	95		$	94		$	116		$	88		$	81		$	70		$	69		$	63		$	46		$	51		$	204		$	325

Free Cash Flow:
Cash provided by (used in) operations	$	474		$	69		$	192		$	332		$	461		$	(1	)	$	118		$	247		$	418		$	—		$	80		$	170
Less capital expenditures	(48		)	(6		)	(12		)	(20		)	(34		)	(6		)	(12		)	(19		)	(34		)	(7		)	(23		)	(30		)
Free Cash Flow⁽¹⁾	$	426		$	63		$	180		$	312		$	427		$	(7	)	$	106		$	228		$	384		$	(7	)	$	57		$	140

__________________


(1)	Free cash flow is defined as net cash flows provided by (used in) operations less capital expenditures.

TIME INC.

2014 TRENDING SCHEDULES

RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OIBDA

(In millions; Unaudited)



	Year Ended		Three Months Ended											Year Ended		Three Months Ended										Year Ended			Three Months Ended
	12/31/2011		3/31/2012			6/30/2012		9/30/2012			12/31/2012			12/31/2012		3/31/2013			6/30/2013		9/30/2013		12/31/2013			12/31/2013			3/31/2014			6/30/2014			9/30/2014
Operating income (loss)	$	563	$	(4	)	$	97	$	127		$	200		$	420	$	(9	)	$	124	$	115	$	100		$	330		$	(120	)	$	(21	)	$	106
Depreciation	100		23			24		22			22			91		22			20		22		21			85			24			28			25
Amortization	42		9			9		9			9			36		10			10		10		12			42			19			20			19
OIBDA⁽¹⁾	705		28			130		158			231			547		23			154		147		133			457			(77		)	27			150
Asset impairments	17		—			—		—			6			6		—			—		—		79			79			26			—			—
Goodwill impairment	—		—			—		—			—			—		—			—		—		—			—			—			26			—
Restructuring and severance costs	18		6			12		6			3			27		53			1		4		5			63			115			55			(6		)
(Gain) loss on operating assets	—		42			—		(1		)	(5		)	36		—			—		—		(13		)	(13		)	—			—			(2		)
Other costs⁽²⁾	—		1			—		—			—			1		—			—		1		—			1			—			5			2
Adjusted OIBDA⁽³⁾	$	740	$	77		$	142	$	163		$	235		$	617	$	76		$	155	$	152	$	204		$	587		$	64		$	113		$	144

___________________


(1)	OIBDA is defined as operating income (loss) less depreciation and amortization.


(2)	Other costs are primarily transaction costs related to acquisitions and dispositions during the periods presented.


(3)	Adjusted OIBDA is defined as OIBDA less Asset impairments, Goodwill impairment, Restructuring and severance costs, Gains or losses on operating assets and other costs related to acquisitions, dispositions and mergers.

Time Inc. - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - November 4, 2014

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