Time Inc. - FORM 10-Q - May 10, 2017

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - Time Inc.	a1q2017exhibit322.htm
EX-32.1 - EXHIBIT 32.1 - Time Inc.	a1q2017exhibit321.htm
EX-31.2 - EXHIBIT 31.2 - Time Inc.	a1q2017exhibit312.htm
EX-31.1 - EXHIBIT 31.1 - Time Inc.	a1q2017exhibit311.htm
EX-10.2 - EXHIBIT 10.2 - Time Inc.	a1q2017exhibit102.htm
EX-10.1 - EXHIBIT 10.1 - Time Inc.	a1q2017exhibit101.htm
EX-4.1 - EXHIBIT 4.1 - Time Inc.	a1q2017exhibit41.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-36218

TIME INC.

(Exact Name of Registrant as Specified in its Charter)




Delaware		13-3486363
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)




225 Liberty Street, New York, N.Y.		10281
(Address of Principal Executive Offices)		(Zip Code)

(212) 522-1212

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

Description of Class Shares Outstanding as of

Common Stock — $0.01 par value May 5, 2017

99,458,481

TIME INC.

FORM 10-Q

TABLE OF CONTENTS



		Page
Part I	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016 (audited)	2
	Consolidated Statements of Operations for the Three Months Ended March 31, 2017 and 2016 (unaudited)	3
	Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2017 and 2016 (unaudited)	4
	Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2017 and 2016 (unaudited)	5
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016 (unaudited)	6
	Notes to the Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	39

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
	Signature	42

Part I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

TIME INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except share amounts)



	March 31, 2017			December 31, 2016
ASSETS
Current assets
Cash and cash equivalents	$	241		$	296
Short-term investments	40			40
Receivables, less allowances of $183 and $203 at March 31, 2017 and December 31, 2016, respectively	427			543
Inventories, net of reserves	30			31
Prepaid expenses and other current assets	132			110
Total current assets	870			1,020

Property, plant and equipment, net	311			304
Intangible assets, net	835			846
Goodwill	2,086			2,069
Other assets	69			66
Total assets	$	4,171		$	4,305

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	513		$	598
Deferred revenue	420			403
Current portion of long-term debt	7			7
Total current liabilities	940			1,008

Long-term debt	1,232			1,233
Deferred tax liabilities	195			210
Deferred revenue	81			86
Other noncurrent liabilities	323			328
Commitments and contingencies (Note 12)

Redeemable noncontrolling interests	1			—

Stockholders' equity
Common stock, $0.01 par value, 400 million shares authorized; 99.34 million and 98.95 million shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively	1			1
Preferred stock, $0.01 par value, 40 million shares authorized; none issued	—			—
Additional paid-in-capital	12,531			12,548
Accumulated deficit	(10,760		)	(10,732		)
Accumulated other comprehensive loss, net	(373		)	(377		)
Total Time Inc. stockholders' equity	1,399			1,440
Equity attributable to noncontrolling interests	—			—
Total stockholders' equity	1,399			1,440
Total liabilities and stockholders' equity	$	4,171		$	4,305

See accompanying notes.

TIME INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in millions, except per share amounts)



	Three Months Ended March 31,
	2017			2016
Revenues
Advertising	$	331		$	360
Circulation	205			238
Other	100			92
Total revenues	636			690
Costs of revenues	284			297
Selling, general and administrative expenses	344			377
Amortization of intangible assets	20			21
Restructuring and severance costs	16			1
(Gain) loss on operating assets, net	(2		)	(3		)
Operating income (loss)	(26		)	(3		)
Bargain purchase (gain)	—			(5		)
Interest expense, net	17			17
Other (income) expense, net	2			6
Income (loss) before income taxes	(45		)	(21		)
Income tax provision (benefit)	(17		)	(11		)
Net income (loss)	(28		)	(10		)
Less: Net income (loss) attributable to noncontrolling interests	—			—
Net income (loss) attributable to Time Inc.	$	(28	)	$	(10	)

Per share information attributable to Time Inc. common stockholders:
Basic net income (loss) per common share	$	(0.29	)	$	(0.10	)
Weighted average basic common shares outstanding	99.65			102.59
Diluted net income (loss) per common share	$	(0.29	)	$	(0.10	)
Weighted average diluted common shares outstanding	99.65			102.59
Cash dividends declared per share of common stock	$	0.04		$	0.19

See accompanying notes.

TIME INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; in millions)



	Three Months Ended March 31,
	2017			2016
Net income (loss)	$	(28	)	$	(10	)

Other comprehensive income (loss), net of tax

Foreign currency translation
Unrealized gains (losses) occurring during the period	9			(12		)

Benefit obligations
Unrealized gains (losses) occurring during the period	(6		)	5
Reclassification adjustment for (gains) losses realized in net income (loss)	1			1
Net benefit obligations	(5		)	6

Other comprehensive income (loss)	4			(6		)

Comprehensive income (loss)	(24		)	(16		)
Less: Comprehensive income (loss) attributable to noncontrolling interests	—			—
Comprehensive income (loss) attributable to Time Inc.	$	(24	)	$	(16	)

See accompanying notes.

TIME INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited; in millions)



	Three Months Ended March 31, 2017
	Common Stock		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss, Net			Total Stockholders' Equity
Balance as of December 31, 2016	$	1	$	12,548		$	(10,732	)	$	(377	)	$	1,440
Net income (loss)	—		—			(28		)	—			(28		)
Other comprehensive income (loss)	—		—			—			4			4
Dividends declared	—		(19		)	—			—			(19		)
Equity-based compensation, net of withholding taxes	—		2			—			—			2
Balance as of March 31, 2017	$	1	$	12,531		$	(10,760	)	$	(373	)	$	1,399



	Three Months Ended March 31, 2016
	Common Stock		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss, Net			Total Stockholders' Equity
Balance as of December 31, 2015	$	1	$	12,604		$	(10,570	)	$	(226	)	$	1,809
Net income (loss)	—		—			(10		)	—			(10		)
Other comprehensive income (loss)	—		—			—			(6		)	(6		)
Dividends declared	—		(20		)	—			—			(20		)
Purchase of common stock	—		—			(58		)	—			(58		)
Equity-based compensation, net of withholding taxes	—		5			—			—			5
Balance as of March 31, 2016	$	1	$	12,589		$	(10,638	)	$	(232	)	$	1,720

See accompanying notes.

TIME INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)



	Three Months Ended March 31,
	2017			2016
OPERATING ACTIVITIES
Net income (loss)	$	(28	)	$	(10	)
Adjustments to reconcile Net income (loss) to Cash provided by (used in) operations
Depreciation and amortization	33			34
Amortization of deferred financing costs and discounts on indebtedness	1			2
(Gain) loss on sale of operating assets	—			(1		)
(Gain) loss on repurchases of 5.75% Senior Notes	—			(4		)
Amortization of deferred gain on sale-leaseback	(2		)	(2		)
Bargain purchase (gain)	—			(5		)
(Income) loss on equity-method investments	1			10
Equity-based compensation expense	6			10
Deferred income taxes	(15		)	(7		)
Changes in operating assets and liabilities
Receivables	132			60
Inventories	1			—
Prepaid expenses and other assets	(24		)	20
Accounts payable and other liabilities	(93		)	(165		)
Other, net	3			6
Cash provided by (used in) operations	15			(52		)

INVESTING ACTIVITIES
Acquisitions, net of cash acquired	(21		)	(96		)
(Investments in) divestitures of cost and equity-method investments	(2		)	(9		)
Proceeds from dispositions	—			1
Purchases of short-term investments	(20		)	(20		)
Maturities of short-term investments	20			20
Capital expenditures	(21		)	(35		)
Cash provided by (used in) investing activities	(44		)	(139		)

FINANCING ACTIVITIES
Purchase of common stock	—			(58		)
Repurchase of 5.75% Senior Notes	—			(31		)
Principal payments on Term Loan	(2		)	(2		)
Withholding taxes paid on equity-based compensation	(4		)	(5		)
Dividends paid	(19		)	(20		)
Contingent/deferred consideration payments	(2		)	(1		)
Cash provided by (used in) financing activities	(27		)	(117		)
Effect of exchange rate changes on Cash and cash equivalents	1			(3		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(55		)	(311		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	296			651
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	241		$	340

See accompanying notes.

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Time Inc., together with its subsidiaries (collectively, the "Company," "we," "us" or "our"), is a leading multi-platform media company that engages over 170 million consumers globally every month through its portfolio of premium news and lifestyle brands across a diverse set of interest areas. The Company’s influential brands include People, Time, Fortune, Sports Illustrated, InStyle, Real Simple, Southern Living, Entertainment Weekly, Food & Wine, Travel + Leisure and Essence, as well as approximately 60 diverse brands in the United Kingdom. Time Inc. offers marketers a differentiated proposition in the media marketplace by combining our distinctive content, large-scale audiences and proprietary data and people-based targeting capabilities. Time Inc. extends the power of its brands through other media and platforms including video and television, licensing, live events and paid products and services. With approximately 30 million paid subscribers, Time Inc. is one of the largest direct marketers in the U.S. media industry. The Company has recently extended its assets into related areas through various acquisitions, including Viant, an advertising technology firm with a people-based marketing platform, Adelphic, a mobile-first self-service programmatic ad buying platform, and Bizrate Insights, a consumer insights company. Time Inc. is also home to celebrated events, such as the Time 100, Fortune Most Powerful Women, People’s Sexiest Man Alive, Sports Illustrated’s Sportsperson of the Year, the Essence Festival and the Food & Wine Classic in Aspen.

Basis of Presentation

The consolidated financial statements include the accounts of Time Inc. and all wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. We reflect the noncontrolling interest in net income (loss) of our majority-owned subsidiaries in the consolidated statements of operations in Net income (loss) attributable to noncontrolling interests and the equity in noncontrolling interest in majority owned subsidiaries in Equity attributable to noncontrolling interests included in Stockholders' equity on our consolidated balance sheets. The consolidated financial statements included herein (the “Financial Statements”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair presentation have been reflected in these Financial Statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The preparation of the Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the Financial Statements and accompanying disclosures. Actual results could differ from those estimates.

The financial position and operating results of our foreign operations are consolidated using the local currency as the functional currency. Local currency assets and liabilities are translated at the rates of exchange as of the balance sheet date, and local currency revenues and expenses are translated at average rates of exchange during the period. Translation gains or losses on assets and liabilities are included as a component of Accumulated other comprehensive loss, net.

The consolidated balance sheets are referred to as the “Balance Sheets” herein. The consolidated statements of operations are referred to as the “Statements of Operations” herein. The consolidated statements of comprehensive income (loss) are referred to as the "Statements of Comprehensive Income (Loss)" herein. The consolidated statements of stockholders' equity are referred to as the "Statements of Stockholders' Equity" herein. The consolidated statements of cash flows are referred to as the “Statements of Cash Flows” herein.

The accompanying Financial Statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the Securities and Exchange Commission (“SEC”) on February 27, 2017 (the “2016 Form 10-K”).

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Guidance

Accounting Guidance Adopted in 2017

In January 2017, guidance was issued which simplifies the test for goodwill impairment by eliminating Step 2, the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments in this guidance are effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. We early adopted this guidance on January 1, 2017. The adoption of this guidance did not have a material impact on our Financial Statements.

In March 2016, guidance was issued which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The updated guidance requires excess tax benefits and deficiencies from share-based payment awards to be recorded in income tax expense in the income statement. Under the previous guidance, excess tax benefits and deficiencies have been recognized in Additional paid-in capital in the Balance Sheets. In addition, the updated guidance modifies the classification of certain share-based payment activities within the Statements of Cash Flows and these changes are required to be applied retrospectively to all periods presented. The updated guidance may add volatility to the Company’s income tax expense in future periods depending upon, among other things, the level of tax expense and the price of our common stock at the date of vesting for share-based awards. We adopted this guidance on January 1, 2017 and it did not have a material impact on our Financial Statements.

In July 2015, guidance was issued that simplifies the measurement of inventory by requiring certain inventory to be subsequently measured at the lower of cost and net realizable value. We adopted this guidance on January 1, 2017. The adoption of this guidance did not have a material impact on our Financial Statements.

Accounting Guidance Not Yet Adopted

In March 2017, guidance was issued that will change how employers that sponsor defined benefit pension and/or other postretirement benefit plans present the net periodic benefit cost in the income statement. Employers will present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. Employers will present the other components of the net periodic benefit cost separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein. Upon adoption, our net periodic benefit cost (income), other than service costs, which has historically been included in Operating income (loss) in our Statements of Operations will be presented below Operating income (loss) in our Statements of Operations. The net periodic benefit cost (income) classified within Operating income (loss) was $19 million of income for the year ended December 31, 2016. We will adopt this guidance on a retrospective basis on January 1, 2018.

In January 2017, guidance was issued that changes the definition of a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set of assets is not deemed to be a business. If the threshold is not met, the entity then evaluates whether the set of assets meets the requirement to be deemed a business, which at a minimum, requires there to be an input and a substantive process that together significantly contribute to the ability to create outputs. This guidance will become effective on a prospective basis for us on January 1, 2018, and it is not expected to have a material impact on our Financial Statements and related disclosures.

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In February 2016, guidance was issued which requires that a lessee recognize lease assets and lease liabilities on its balance sheet and disclose key information about its leasing arrangements. We are currently evaluating the effect that this guidance will have on our Financial Statements and related disclosures. We will adopt this guidance on a modified retrospective basis on January 1, 2019.

In January 2016, guidance was issued which requires equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income. The amendments in this guidance are effective for fiscal years beginning after December 15, 2017 and for interim periods therein. We are currently evaluating the effect that this guidance will have on our Financial Statements and related disclosures.

In May 2014, guidance was issued that establishes a new revenue recognition framework in GAAP for all companies and industries. The core principle of the guidance is that an entity should recognize revenue from the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to receive for those goods or services. The guidance includes a five-step framework to determine the timing and amount of revenue to recognize related to contracts with customers. In addition, this guidance requires new or expanded disclosures related to the judgments made by companies when following this framework. We will adopt this guidance on January 1, 2018.

We are continuing to assess the potential impact of the guidance across our revenue streams. Upon adoption, we will recognize revenue from our contracts with customers as each performance obligation is satisfied, either at a point in time or over a period of time, based on when control transfers to our customers. We have determined that the performance obligations within our print advertising, subscription and newsstand contracts are satisfied on an issue's on sale date, which is expected to accelerate the timing of revenue recognition compared to our current policy of revenue recognition based on an issue’s cover date. The paper, printing and distribution costs of these revenues are expected to accelerate to match the timing of the revenue recognition. Digital advertising revenue will continue to be recognized as impressions are delivered.

We currently anticipate adopting this guidance using the full retrospective method, however, we have not yet selected a transition method and are currently evaluating the impact that the updated guidance will have on our Financial Statements and related disclosures. We expect to complete this evaluation by September 30, 2017.

2. ACQUISITIONS

During the three months ended March 31, 2017, we completed an acquisition for total cash consideration, net of cash acquired, of $21 million. The excess of the total consideration over the fair value of the net tangible and intangible assets acquired has been recorded as Goodwill, which represents future economic benefits expected to arise from other intangibles acquired that do not qualify for separate recognition. The Goodwill recorded of $13 million will be deductible for tax purposes.

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. INVESTMENTS

Our investments included within Short-term investments and Other assets on the accompanying Balance Sheets consist primarily of short-term investments, equity-method investments and cost-method investments. Our investments, by category, consisted of the following (in millions):



	March 31, 2017		December 31, 2016
Short-term investments^(a)	$	40	$	40
Equity-method investments^(b)	8		9
Cost-method investments^(c)	8		6
Total	$	56	$	55

_______________________


(a)	Our Short-term investments consist of term deposits with original maturities greater than three months and remaining maturities of less than one year. Our term deposits are carried at amortized cost on the accompanying Balance Sheets as held-to-maturity securities. Cost approximates fair value due to the short term nature of the term deposits.


(b)	Our Equity-method investments primarily consist of joint ventures. For the three months ended March 31, 2017, we recorded equity losses of $1 million. For the three months ended March 31, 2016, we recognized equity losses of $10 million primarily related to resuming applying the equity method after opting to provide additional funding.


(c)	During the three months ended March 31, 2017, we made a $2 million investment in a privately-held transaction marketing technology company. We use available qualitative and quantitative information to evaluate all Cost-method investments for impairment at least quarterly.

4. FAIR VALUE MEASUREMENTS

Fair value measurements are determined based on assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy distinguishes between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require us to use present value and other valuation techniques in the determination of fair value (Level 3).

The following table presents information about assets and liabilities required to be carried at fair value on a recurring basis as of March 31, 2017 and December 31, 2016, respectively (in millions):



	March 31, 2017										December 31, 2016
	Level 1		Level 2		Level 3			Total			Level 1		Level 2		Level 3			Total
Assets
Cash and cash equivalents - Money market funds	$	113	$	—	$	—		$	113		$	102	$	—	$	—		$	102
Liabilities
Contingent consideration^(a)	—		—		(2		)	(2		)	—		—		(2		)	(2		)
Other - liabilities^(b)	—		—		(11		)	(11		)	—		—		(12		)	(12		)
Total	$	113	$	—	$	(13	)	$	100		$	102	$	—	$	(14	)	$	88

_______________________

(a)

Contingent consideration, of which $1 million is included in Accounts payable and accrued liabilities and $1 million in Other noncurrent liabilities on the accompanying Balance Sheets at both March 31, 2017 and December 31, 2016, consists of earn-out liabilities in connection with acquisitions. Fair values were derived using a Monte Carlo simulation approach or a probability weighted present value of expected future payouts approach, which are considered Level 3 measurements. Adjustments to fair value of such obligations are included as a component of Selling, general and administrative expenses in the Statements of Operations. Such contingent considerations are primarily based on financial targets and other operational metrics.

(b)

Our other liabilities included within Other noncurrent liabilities on the accompanying Balance Sheets consist primarily of a put option liability related to an equity-method investment, the fair value of which was derived using a lattice model which is considered a Level 3 measurement. Adjustments to fair value of this obligation are included as a component of Other (income) expense, net in the Statements of Operations.

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the beginning and ending balance of our liabilities classified as Level 3 (in millions):



	2017			2016
Beginning Balance as of January 1	$	14		$	19
Issuances	—			2
Fair value adjustments	(1		)	—
Ending Balance as of March 31	$	13		$	21

Other Financial Instruments

Our other financial instruments, including our term loan (the "Term Loan") and our 5.75% senior notes (the "Senior Notes"), are not required to be carried on our Balance Sheets at fair value. The following table summarizes the fair value of each of our significant debt instruments based on quoted market prices for similar issues or on the current rates offered to us for instruments of the same remaining maturities (in millions):



	March 31, 2017				December 31, 2016
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Debt instruments
Term Loan	$	671	$	684	$	672	$	687
5.75% Senior Notes	568		599		568		597
	$	1,239	$	1,283	$	1,240	$	1,284

The fair value of the outstanding debt instruments presented above is based on pricing from observable market information in a non-active market. Therefore, these debt instruments are classified in Level 2 of the fair value hierarchy. Unrealized gains or losses on debt do not result in realization or expenditure of cash and generally are not recognized in the Financial Statements unless the debt is retired prior to its maturity.

The carrying value for the majority of our other financial instruments approximates fair value due to the short-term nature of the financial instruments. The fair value of financial instruments is generally determined by reference to the market value of the instrument as quoted on a national securities exchange or an over-the-counter market. In case a quoted market value is not available, fair value is based on an estimate using present value or other valuation techniques.

Non-Financial Instruments

The majority of our non-financial instruments, which include goodwill, intangible assets, inventories and property, plant and equipment, are not required to be carried at fair value on a recurring basis. However, if certain triggering events occur (or at least annually for Goodwill) a non-financial instrument is required to be evaluated for impairment. If we were to determine that the non-financial instrument was impaired, we would be required to write down the non-financial instrument to its fair value.

Fair value measurements are also used in nonrecurring valuations performed in connection with acquisition accounting. The nonrecurring valuations primarily include the valuation of tradenames, customer and advertiser relationships, technology and database intangible assets and property, plant and equipment. With the exception of certain inputs for our weighted average cost of capital and discount rate calculation that are derived from third-party information, the inputs used in our discounted cash flow analysis, such as forecasts of future cash flows, are based on assumptions. The valuation of customer and advertiser relationships is primarily based on an excess earnings methodology, which is a form of a discounted cash flow analysis. The excess earnings methodology requires us to estimate the specific cash flows expected from the relationships, considering such factors as estimated life of the relationships and the revenue expected to be generated over the life of such relationships. Tangible assets are typically valued using a replacement or reproduction cost approach, considering such factors as current prices of the same or similar equipment, the age of

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

the equipment and economic obsolescence. All of our nonrecurring valuations use significant unobservable inputs and, therefore, fall under Level 3 of the fair value hierarchy.

5. DEBT

Our debt obligations consisted of the following (in millions):



	March 31, 2017			December 31, 2016
5.75% Senior Notes	$	575		$	575
Senior Credit Facilities
Term Loan	680			682
Unamortized discount and deferred financing costs	(16		)	(17		)
Total debt obligations	1,239			1,240
Less: Current portion of long-term debt	7			7
Long-term debt	$	1,232		$	1,233

Senior Notes and Senior Credit Facilities

On April 29, 2014, we issued $700 million aggregate principal amount of Senior Notes due April 15, 2022 in a private offering. The Senior Notes are fully and unconditionally guaranteed by substantially all of our wholly-owned domestic subsidiaries and, under certain circumstances, may become guaranteed by other existing or future subsidiaries.

On April 24, 2014, we entered into senior secured credit facilities (the "Senior Credit Facilities") providing for a Term Loan in an aggregate principal amount of $700 million with a seven-year maturity and a $500 million revolving credit facility (the "Revolving Credit Facility") with a five-year maturity, of which up to $100 million is available for the issuance of letters of credit. The Revolving Credit Facility will be used for working capital and other general corporate purposes. The Revolving Credit Facility remained undrawn as of March 31, 2017 except for utilization for letters of credit in the face amount of $3 million.

The indenture governing the Senior Notes and the credit agreement governing the Senior Credit Facilities contain certain restrictive covenants. With respect to the Revolving Credit Facility only, we are required to maintain a consolidated secured net leverage ratio (as defined in the credit agreement governing the Senior Credit Facilities) not to exceed 2.75x to 1.00x, as tested at the end of each fiscal quarter. We were in compliance with all provisions of our debt agreements as of March 31, 2017.

In November 2015, our Board of Directors authorized discretionary principal debt repayments and/or repurchases of up to $200 million in the aggregate on our Term Loan and our Senior Notes. There were no repurchases of the aggregate principal amount of our Term Loan or Senior Notes during the three months ended March 31, 2017. During the three months ended March 31, 2016, we repurchased $35 million of the aggregate principal amount of our Senior Notes at a discount with accrued interest for a total of $31 million and recognized a pretax gain from extinguishment of $4 million. As of March 31, 2017, $75 million remains unused under the authorization.

6. INCOME TAXES

At the end of each interim period, we estimate the annual effective income tax rate and apply that rate to our ordinary year-to-date earnings. The income tax expense or benefit related to significant or unusual items that are separately reported, or reported net of their respective tax impact, are individually computed and recognized in the period in which they occur. The effect of changes in enacted tax laws, tax rates or tax status is recognized in the period in which such changes occur.

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The change in the effective income tax rate, which reflected our income tax benefit for the three months ended March 31, 2017, was primarily due to the prior year net increase in tax benefit attributed to the nontaxable Bargain purchase (gain) recorded in connection with the acquisition of Viant and certain equity losses recorded without tax benefit reflected in the three months ended March 31, 2016 and the effect of foreign operations.

7. STOCKHOLDERS' EQUITY AND NONCONTROLLING INTERESTS

In November 2015, our Board of Directors authorized share repurchases of our common stock of up to $300 million. There were no share repurchases of our common stock during the three months ended March 31, 2017. As of March 31, 2017, $123 million remains authorized for share repurchases.

Following a comprehensive review of Time Inc.’s capital allocation, capital structure and operating plan, on May 10, 2017, the Time Inc. Board of Directors declared a quarterly dividend of $0.04 per common share to stockholders of record as of the close of business on May 31, 2017, payable on June 15, 2017. On February 16, 2017, our Board of Directors declared a quarterly dividend of $0.19 per common share to stockholders of record as of the close of business on February 28, 2017. A total of $19 million was paid on March 15, 2017 with respect to the dividend declared on February 16, 2017.

Redeemable Noncontrolling Interests

Redeemable noncontrolling interests on our Balance Sheets relate to noncontrolling interests of certain consolidated entities whereby equity interests, in the form of common units, have been granted to key employees of these entities, subject to vesting and forfeiture provisions. In conjunction with the issuance of these common units, the Company entered into put and call arrangements whereby such employees have a right to put their shares to us and require us to buy their interests at their fair values, per the provisions of the operating agreements. The put and call arrangements are accounted for as equity instruments, as the employees are subject to the risks and rewards associated with share ownership for a reasonable period of time. We retain rights to call these interests over time, in each case subject to the satisfaction of certain conditions. The fair value of the common units is being recognized as equity-based compensation expense over the vesting period of 4 to 4.5 years from the date of grant.

Upon vesting, the portion of the redemption value associated with the completed service period was recorded to redeemable noncontrolling interests. As these common units are redeemable at the option of the holder and are not contingent upon an event not in control of the holder, redemption is determined to be probable. If the common units are not redeemed, the redemption value will be remeasured through Redeemable noncontrolling interest at each reporting date.

Net income or loss of the noncontrolling interest entity is attributed to the parent and the noncontrolling interest entity on the Statement of Operations in accordance with the terms of the operating agreements.

Comprehensive Income (Loss)

Comprehensive income (loss) is reported in the Statements of Comprehensive Income (Loss) and consists of Net income (loss) and other gains and losses affecting Stockholders' equity that, under GAAP, are excluded from Net income (loss). Such items consist primarily of foreign currency translation gains (losses) and changes in certain pension benefit plan obligations.

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following summary sets forth the activity within Other comprehensive income (loss) for the three months ended March 31, 2017 and 2016 (in millions):



	Three Months Ended March 31, 2017
	Pretax			Tax (Provision) Benefit		Net of Tax
Unrealized foreign currency translation gains (losses)	$	9		$	—	$	9
Unrealized gains (losses) on benefit obligations	(7		)	1		(6		)
Reclassification adjustment for (gains) losses on pension benefit obligations realized in Net income (loss) attributable to Time Inc.^(a)	1			—		1
Other comprehensive income (loss)	$	3		$	1	$	4



	Three Months Ended March 31, 2016
	Pretax			Tax (Provision) Benefit			Net of Tax
Unrealized foreign currency translation gains (losses)	$	(12	)	$	—		$	(12	)
Unrealized gains (losses) on benefit obligations	6			(1		)	5
Reclassification adjustment for (gains) losses on pension benefit obligations realized in Net income (loss) attributable to Time Inc.^(a)	1			—			1
Other comprehensive income (loss)	$	(5	)	$	(1	)	$	(6	)

__________________________


(a)	Included within Selling, general and administrative expenses on the accompanying Statements of Operations.

8. NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per common share is calculated by dividing Net income (loss) attributable to Time Inc. common stockholders by the Weighted average basic common shares outstanding. Diluted net income (loss) per common share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of common shares issuable under equity-based compensation plans in accordance with the treasury stock method, except where the inclusion of such common shares would have an anti-dilutive impact.

For the three months ended March 31, 2017 and 2016, basic and diluted net income (loss) per common share were as follows (in millions, except per share amounts):



	Three Months Ended March 31,
	2017			2016
Net income (loss) attributable to Time Inc. common stockholders	$	(28.49	)	$	(10.40	)

Weighted average number of common shares outstanding - basic	99.65			102.59
Dilutive effect of equity awards	—			—
Weighted average number of common shares outstanding - diluted	99.65			102.59

Net income (loss) per common share attributable to Time Inc. common stockholders:
Basic	$	(0.29	)	$	(0.10	)
Diluted	$	(0.29	)	$	(0.10	)

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The computation of Diluted net income (loss) per common share for the three months ended March 31, 2017 and 2016 excludes all equity awards. As both periods include net losses, the inclusion of any equity awards would be anti-dilutive. Such equity awards are as set forth below (in millions):



	Three Months Ended March 31,
	2017	2016
Anti-dilutive equity awards	10	8

9. EQUITY-BASED COMPENSATION

The Company grants stock options, restricted stock units (RSUs) and performance stock units (PSUs) under its 2016 Omnibus Incentive Compensation Plan.

During the three months ended March 31, 2017 and 2016, there were 1 million and 2 million RSUs granted, respectively, and approximately 1 million RSUs vested into common shares during each period presented. The weighted average grant date fair value of RSUs granted during the three months ended March 31, 2017 and 2016 was $17.50 and $11.51, respectively. There were also 2 million stock options granted at a weighted average grant date fair value of $2.33 per option during the three months ended March 31, 2016.

On February 13, 2017, the Company adopted a long-term incentive compensation plan ("2017 Performance Stock Unit Plan") pursuant to which PSUs were awarded under the 2016 Omnibus Incentive Compensation Plan. The 2017 Performance Stock Unit Plan is designed to incentivize and reward executive officers for effecting the successful transformation of our business, as measured by two performance-based vesting conditions, weighted 50% each. The number of units that will vest into common shares is determined based on the Company’s 2018 financial performance. Achievement of the financial performance and payouts are interpolated between 50% and 200% with the target performance established at a 100% payout.

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Each PSU represents the unfunded, unsecured right to receive one share of our common stock on the vesting date but carries no voting or dividend rights. The number of PSUs eligible to vest is determined by evaluation of the two performance-based vesting conditions on or before the second anniversary of the grant. Vesting occurs on a graded-vesting schedule, with 50% of the units vesting on the date the compensation committee of the Company certifies the vesting conditions and the remaining 50% vesting one year later. The expense related to these PSUs is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The fair value and compensation expense of each PSU is determined based on the closing sale price of Time Inc.’s common stock on the NYSE Composite Tape on the date of grant discounted to exclude the estimated dividend yield during the vesting period.

Compensation expense recognized for our equity-based awards for the three months ended March 31, 2017 and 2016 is as follows (in millions):



	Three Months Ended March 31,
	2017		2016
RSUs	$	3	$	7
Stock options	1		3
Outperformance Plan	1		—
Common units (Note 7)	1		—
Total expense included in Operating income (loss)	$	6	$	10
Income tax benefit recognized	$	1	$	2

10. BENEFIT PLANS

Defined Benefit Pension Plans

We participate in various funded and unfunded noncontributory defined benefit plans, including international plans in the United Kingdom, Germany and Benelux. Pension benefits under these plans are based on formulas that reflect the employees' years of service and compensation during their employment period. During both the three months ended March 31, 2017 and 2016, we contributed $4 million to our international pension plans.

Components of net periodic benefit cost (income) for the three months ended March 31, 2017 and 2016 were as follows (in millions):



	Three Months Ended March 31,
	2017			2016
Interest cost	$	5		$	6
Expected return on plan assets	(12		)	(12		)
Amortization of net loss	2			1
Net periodic benefit cost (income)	$	(5	)	$	(5	)

We are party to a deed of guarantee with the trustees of a defined benefit pension plan for certain of our current and former U.K. employees (which is closed to new participants). Under the deed of guarantee, we would be obligated to fund the pension plan’s “buyout deficit” (i.e., the amount that would be needed to purchase annuities to discharge the benefits under the plan) under certain circumstances. Specifically, we would be required to deposit the buyout deficit into escrow or provide a surety bond or other suitable credit support if we were to experience a drop in our long-term unsecured senior debt credit ratings to Caa1 or below from Moody's and to CCC+ or below from Standard & Poor's or if our debt in excess of $50 million were not to be paid when due or were to come due prior to its stated maturity as a result of a default. As of March 31, 2017, our long-term unsecured senior debt credit rating was B3 from Moody's and B from Standard & Poor's. If we had been required to fund the buyout deficit on March 31, 2017, the amount would

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

have been approximately £341 million. The amount of the buyout deficit changes daily and is determined by many factors, including changes in the fair value of plan assets and liabilities and interest rates.

Interest rate fluctuations and volatility of the debt and equity markets can have a significant impact on asset values and benefit obligations under our non-U.S. pension plans and future anticipated contributions. For example, a hypothetical 100 basis point increase in interest rates generally would decrease our benefit obligations under our non-U.S. pension plans by approximately $143 million.

11. RESTRUCTURING AND SEVERANCE COSTS

Our Restructuring and severance costs primarily relate to employee termination costs, ranging from senior executives to line personnel, and other exit costs, including lease terminations. Restructuring and severance costs for the three months ended March 31, 2017 and 2016 were $16 million and $1 million, respectively.

The following is a reconciliation between the beginning and ending Restructuring and severance liability balances (in millions):



	Employee Terminations			Other Exit Costs			Total
Remaining liability as of December 31, 2016	$	70		$	28		$	98
Net accruals	15			1			16
Cash paid	(26		)	(6		)	(32		)
Remaining liability as of March 31, 2017	$	59		$	23		$	82

The liability balance for employee terminations primarily relates to our realignment program announced in July 2016 to unify and centralize the editorial, advertising sales and brand development organizations. The liability balance for other exit costs primarily relates to the remaining rental obligations at the Time and Life Building and another leased property that were not included in the settlements negotiated in 2016.

As of March 31, 2017, of the remaining $82 million liability, $74 million was classified as a current liability in the Balance Sheets, with the remaining $8 million classified as a noncurrent liability. Amounts classified as noncurrent liabilities are expected to be paid through 2019 and primarily relate to severance costs. During the three months ended March 31, 2017, we reversed $2 million of restructuring charges primarily due to modifications to certain employee termination agreements. During the three months ended March 31, 2016, we reversed $4 million of restructuring charges primarily due to the settlement of the other lease obligation and of employee termination accruals due to modifications to certain employee termination agreements.

12. COMMITMENTS AND CONTINGENCIES

Commitments

We have commitments under certain firm contractual arrangements ("firm commitments") to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations. Our commitments not recorded on the Balance Sheets primarily consist of operating lease arrangements, talent commitments and purchase obligations for goods and services. Our other commitments primarily consist of debt and pension obligations. Our commitments have not significantly varied from those disclosed within our 2016 Form 10-K.

Legal Proceedings

In the ordinary course of business, we are defendants in or parties to various legal claims, actions and proceedings. These claims, actions and proceedings are at varying stages of investigation, arbitration or adjudication, and involve a variety of areas of law.

On March 10, 2009, Anderson News L.L.C. and Anderson Services L.L.C. (collectively, "Anderson News") filed an antitrust lawsuit in the U.S. District Court for the Southern District of New York (the “District Court”) against several magazine publishers, distributors and wholesalers, including Time Inc. and one of its subsidiaries, Time Inc. Retail (formerly Time/Warner Retail Sales & Marketing, Inc.) ("TIR"). Plaintiffs allege that defendants violated Section 1 of the Sherman Antitrust Act by engaging in an antitrust conspiracy against Anderson News, as well as other related state law claims. Specifically, plaintiffs allege that defendants conspired to reduce competition in the wholesale market

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for single-copy magazines by rejecting the magazine distribution surcharge proposed by Anderson News and another magazine wholesaler and refusing to distribute magazines to them. Plaintiffs are seeking (among other things) an unspecified award of treble monetary damages against defendants, jointly and severally. On August 2, 2010, the District Court granted defendants' motions to dismiss the complaint with prejudice and, on October 25, 2010, the District Court denied Anderson News' motion for reconsideration of that dismissal. On November 8, 2010, Anderson News appealed and, on April 3, 2012, the U.S. Court of Appeals for the Second Circuit (the “Circuit Court”) vacated the District Court's dismissal of the complaint and remanded the case to the District Court. On January 7, 2013, the U.S. Supreme Court denied defendants' petition for writ of certiorari to review the judgment of the Circuit Court vacating the District Court's dismissal of the complaint. In February 2014, Time Inc. and several other defendants amended their answers to assert antitrust counterclaims against plaintiffs. On December 19, 2014, the defendants filed a motion for summary judgment on Anderson News' claims and Anderson News filed a motion for summary judgment on the antitrust counterclaim. On August 20, 2015, the District Court granted the defendants’ motion for summary judgment on Anderson News’ claims and granted Anderson News’ motion for summary judgment on the defendants’ antitrust counterclaim. On August 25, 2015, Anderson News filed a notice with the Circuit Court appealing the District Court’s dismissal of Anderson News’ claims, and on September 14, 2015, the defendants filed a notice with the Circuit Court appealing the District Court’s dismissal of the defendants’ antitrust counterclaim. On December 8, 2015, Anderson News filed its appellate brief with the Circuit Court and on March 8, 2016, the defendants filed their appellate briefs with the Circuit Court. Anderson’s reply brief was filed on May 9, 2016 and the defendants’ sur-reply brief was filed on May 23, 2016. Oral argument on the appeal was held on December 2, 2016. We are awaiting the court's decision.

On November 14, 2011, TIR and several other magazine publishers and distributors filed a complaint in the U.S. Bankruptcy Court for the District of Delaware against Anderson Media Corporation, the parent company of Anderson News, and several Anderson News affiliates. Plaintiffs, acting on behalf of the Anderson News bankruptcy estate, seek to avoid and recover in excess of $70 million that they allege Anderson News transferred to the Anderson News-affiliated insider defendants in violation of the United States Bankruptcy Code and Delaware state law prior to the involuntary bankruptcy petition filed against Anderson News by certain of its creditors. On December 28, 2011, the defendants moved to dismiss the complaint. On June 5, 2012, the court denied defendants' motion. On November 6, 2013, the bankruptcy court lifted the automatic stay barring claims against the debtor, allowing Time Inc. and others to pursue an antitrust counterclaim against Anderson News in the antitrust action brought by Anderson News in the U.S. District Court for the Southern District of New York (described above).

On October 26, 2010, the Canadian Minister of National Revenue denied the claims by TIR for input tax credits in respect of goods and services tax that TIR had paid on magazines it imported into and had displayed at retail locations in Canada during the years 2006 to 2008, on the basis that TIR did not own those magazines and issued Notices of Reassessment in the amount of approximately C$52 million. On January 21, 2011, TIR filed an objection to the Notices of Reassessment with the Chief of Appeals of the Canada Revenue Agency ("CRA"), arguing that TIR claimed input tax credits only in respect of goods and services tax it actually paid and, regardless of whether its payment of the goods and services tax was appropriate or in error, it is entitled to a rebate for such payments. On September 13, 2013, TIR received Notices of Reassessment in the amount of C$26.9 million relating to the disallowance of input tax credits claimed by TIR for goods and services tax that TIR had paid on magazines it imported into and had displayed at retail locations in Canada during the years 2009 to 2010. On October 22, 2013, TIR filed an objection to the Notices of Reassessment received on September 13, 2013 with the Chief of Appeals of the CRA, asserting the same arguments made in the objection TIR filed on January 21, 2011. Beginning in 2015, the collections department of the CRA requested payment of both assessments plus accrued interest or the posting of sufficient security. In each instance, TIR responded by stating that collection should remain stayed pending resolution of the issues raised by TIR’s objection. On February 8, 2016, the Company filed an application for a remission order with the International Trade Policy Division of Finance Canada to seek relief from the assessments and the CRA’s collection efforts. On February 12, 2016, TIR filed a complaint with the Office of the Taxpayers’ Ombudsman about the CRA’s failure for more than five years to rule on TIR’s objections to the reassessments. TIR requested that the Ombudsman Office recommend to the CRA that the reassessments be vacated or the CRA support TIR’s application for a remission order. On March 2, 2016, the CRA proposed that the Tax Court of Canada resolve the issue of whether TIR or the publishers are entitled to the input tax credits. On March 9, 2016, TIR agreed to the proposal. On May 6, 2016, TIR filed a Notice of Appeal with the Tax Court of Canada of the assessments issued by the CRA and on July 25, 2016, the CRA filed a Reply to TIR's Notice of Appeal. On March 31, 2017, the Company and the CRA jointly proposed a timetable for the completion of certain pre-trial steps related

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

to this matter, which was approved by the Tax Court. In accordance with the timetable, on April 28, 2017, TIR filed an Amended Notice of Appeal of the assessments. Including interest accrued on both reassessments, the total reassessment by the CRA for the years 2006 to 2010 was C$91.1 million as of November 30, 2015.

On October 3, 2012, Susan Fox filed a class action complaint (the "Complaint") against Time Inc. in the United States District Court for the Eastern District of Michigan alleging violations of Michigan’s Video Rental Privacy Act (“VRPA”) as well as claims for breach of contract and unjust enrichment. The VRPA limits the ability of entities engaged in the business of selling, renting or lending retail books or other written materials from disclosing to third parties certain information about customers’ purchase, lease or rental of those materials. The Complaint alleges that Time Inc. violated the VRPA by renting to third parties lists of subscribers to various Time Inc. magazines. The Complaint sought injunctive relief and the greater of statutory damages of $5,000 per class member or actual damages. On December 3, 2012, Time Inc. moved to dismiss the Complaint on the grounds that it failed to state claims for relief and because the named plaintiff lacked standing because she suffered no injury from the alleged conduct. On August 6, 2013, the court granted, in part, and denied, in part, Time Inc.’s motion, dismissing the breach of contract claim but allowing the VRPA and unjust enrichment claims to proceed. On November 11, 2013, Rose Coulter-Owens replaced Susan Fox as the named plaintiff. On March 13, 2015, the plaintiff filed a motion seeking to certify a class consisting of all Michigan residents who between March 31, 2009 and November 15, 2013 purchased a subscription to Time, Fortune or Real Simple magazines through any website other than Time.com, Fortune.com and RealSimple.com. On July 27, 2015, the court granted plaintiff’s motion to certify the class, which we estimate to comprise approximately 40,000 consumers. On August 31, 2015, Time Inc. and the plaintiff moved for summary judgment and on October 1, 2015 both parties filed briefs in opposition to their adversaries’ motions. On February 16, 2016, the court granted Time Inc.'s motion for summary judgment and dismissed the case. On March 16, 2016, the plaintiff filed a notice with the Circuit Court appealing the District Court’s dismissal of plaintiff’s claims. On May 26, 2016, Time Inc. filed a motion to dismiss the appeal on the ground that plaintiff lacked standing to pursue her claims. On September 22, 2016, the Motions Part of the Circuit Court issued an order directing that Time Inc.'s motion to dismiss the appeal should be decided by the appellate panel that was assigned the plaintiff's appeal on the merits. On November 4, 2016, Plaintiff filed her appellate brief and on December 21, 2016, Time Inc. filed its opposition to Plaintiff's appeal and a cross-appeal to the District Court's order certifying the class. Plaintiff filed a reply and opposition to Time Inc.'s class certification appeal on February 6, 2017 and Time Inc. filed a sur-reply on February 20, 2017. Oral argument on the appeal was heard on April 26, 2017. We are awaiting the court's decision. On February 19, 2016, the same law firm representing Coulter-Owens filed another class action, entitled Perlin v. Time Inc., in the United States District Court for the Eastern District of Michigan alleging violations of the VRPA as well as a claim for unjust enrichment. This lawsuit was filed on behalf of Michigan residents who purchased subscriptions directly from Time Inc. On May 6, 2016 and May 31, 2016, Time Inc. moved to dismiss the Complaint. Perlin filed an opposition brief on June 27, 2016 and Time Inc. filed its reply brief on July 11, 2016. On February 15, 2017, the Court denied Time Inc.'s motion to dismiss and on March 1, 2017, Time Inc. answered the Complaint.

We intend to vigorously defend against or prosecute the matters described above.

We establish an accrued liability for specific matters, such as a legal claim, when we determine both that a loss is probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters.

For the matters disclosed above, we do not believe that any reasonably possible loss in excess of accrued liabilities would be material to the Financial Statements as a whole. In view of the inherent difficulty of predicting the outcome of litigation, claims and other matters, we often cannot predict what the eventual outcome of a pending matter will be, or what the timing or results of the ultimate resolution of a matter will be.

Income Tax Uncertainties

Our operations are subject to tax in various domestic and international jurisdictions and are regularly audited by federal, state and foreign tax authorities. We believe we have appropriately accrued for the expected outcome of all pending tax matters and do not currently anticipate that the ultimate resolution of pending tax matters will have a material adverse effect on our financial condition, future results of operations or liquidity. In connection with the Spin-

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Off, we entered into a Tax Matters Agreement with Time Warner that may require us to indemnify Time Warner for certain tax liabilities for periods prior to the Spin-Off.

13. ADDITIONAL FINANCIAL INFORMATION

Additional financial information with respect to certain balances included in the Financial Statements herein is as follows (in millions):



	March 31, 2017		December 31, 2016
Inventories, net of reserves:
Raw materials - paper	$	28	$	30
Finished goods	2		1
Total inventories, net of reserves	$	30	$	31



	March 31, 2017		December 31, 2016
Prepaid expenses and other current assets:
Prepaid production costs	$	22	$	20
Prepaid commissions	18		18
Postage deposit	18		12
Prepaid income taxes	7		6
Due from Time Warner	1		3
Other prepaid expenses and other current assets	66		51
Total prepaid expenses and other current assets	$	132	$	110



	March 31, 2017		December 31, 2016
Other assets:
Deferred tax assets	$	19	$	19
Notes receivable^(a)	10		10
Equity-method investments	8		9
Cost-method investments	8		6
Other noncurrent assets	24		22
Total other assets	$	69	$	66

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



	March 31, 2017		December 31, 2016
Accounts payable and accrued liabilities:
Accounts payable	$	210	$	232
Accrued compensation	74		126
Restructuring and severance	74		89
Rebates and allowances	42		43
Distribution expenses payable	28		28
Liability to Time Warner	25		24
Accrued other taxes	21		18
Accrued interest	15		7
Deferred gain^(b)	8		8
Barter liabilities	4		4
Contingent consideration	1		1
Other current liabilities	11		18
Total accounts payable and accrued liabilities	$	513	$	598



	March 31, 2017		December 31, 2016
Other noncurrent liabilities:
Deferred rent	$	120	$	112
Deferred gain^(b)	64		64
Noncurrent tax reserves and interest	39		38
Noncurrent pension and postretirement liabilities^(c)	34		44
Noncurrent deferred compensation	28		28
Put option liability	10		10
Restructuring and severance	8		9
Liability to Time Warner	1		1
Contingent consideration	1		1
Other noncurrent liabilities	18		21
Total other noncurrent liabilities	$	323	$	328



	Three Months Ended March 31,
	2017		2016
Other (income) expense, net:
(Income) loss on equity-method investments	$	1	$	10
Investment (gains) losses, net	1		—
(Gain) loss on extinguishment of debt	—		(4		)
Total other (income) expense, net	$	2	$	6

TIME INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



	Three Months Ended March 31,
	2017			2016
Cash Flows:
Cash payments made for income taxes	$	1		$	1
Income tax refund received	(2		)	(43		)
Cash tax (receipts) payments, net	$	(1	)	$	(42	)

Cash payments made for interest	$	8		$	8
Interest income received	(1		)	—
Cash interest (receipts) payments, net	$	7		$	8

__________________________

(a)

In 2016, we provided a £10 million loan ($2 million in Prepaid expenses and other current assets and $10 million in Other assets as of March 31, 2017) to a new printing vendor for our U.K. operations to assist in financing its purchase of the printing facilities of our former printing vendor. The loan was provided in order to maintain continuity in printing operations for our U.K. business. The interest rate on the loan is 8% per annum and has a term of five years with principal repayments of £0.3 million per quarter and £5 million at the end of the five year term.


(b)	The Deferred gain related to the sale-leaseback of the Blue Fin Building that was completed in the fourth quarter of 2015 will be recognized ratably over the lease term through 2025.


(c)	Refer to Note 10, "Benefit Plans."

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The consolidated financial statements are referred to as the "Financial Statements" herein. The consolidated balance sheets are referred to as the “Balance Sheets” herein. The consolidated statements of operations are referred to as the “Statements of Operations” herein. The consolidated statements of comprehensive income (loss) are referred to as the "Statements of Comprehensive Income (Loss)" herein. The consolidated statements of stockholders' equity are referred to as the "Statements of Stockholders' Equity" herein. The consolidated statements of cash flows are referred to as the “Statements of Cash Flows” herein.

The consolidated financial statements include the accounts of Time, Inc. and all wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. See Note 1, "Description of Business and Basis of Presentation" to our Financial Statements included in this quarterly report on Form 10-Q for additional information. This management's discussion and analysis ("MD&A") of our results of operations and financial condition is provided as a supplement to, and should be read in conjunction with, the Financial Statements to help provide an understanding of our financial condition, changes in financial condition, results of our operations and cash flows. The preparation of the Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the Financial Statements and accompanying disclosures. Actual results could differ from those estimates. There have been no material changes to our critical accounting policies and estimates described in our Annual Report on Form 10-K for the year ended December 31, 2016.

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our MD&A is organized as follows:

Business Overview. This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.

Consolidated Results of Operations. This section provides an analysis of our results of operations for the three months ended March 31, 2017 compared to the three months ended March 31, 2016. Our discussion is presented on a consolidated basis. We report as one reportable segment. In addition, a brief description is provided of significant transactions and events that impacted the comparability of the results being analyzed.

Liquidity and Capital Resources. This section provides a discussion of our financial condition as of March 31, 2017, as well as an analysis of our cash flows for the three months ended March 31, 2017 and 2016. The discussion of our financial condition and liquidity includes summaries of (i) our primary sources of liquidity and (ii) our contractual obligations that existed as of March 31, 2017 and December 31, 2016.

Caution Concerning Forward-Looking Statements. This section provides a description of the use of forward-looking information appearing in this report, including MD&A and the accompanying Financial Statements.

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS OVERVIEW

Business Description

We generate revenues primarily from the sale of advertising in our magazines across multiple platforms, including print, digital and video, from magazine subscriptions and newsstand sales, and from brand licensing and events. We operate as one reportable segment and the majority of our revenues are generated in the United States. During the three months ended March 31, 2017, we generated Revenues of $636 million (a decrease of $54 million from $690 million for the three months ended March 31, 2016); Operating loss of $26 million (an increase of $23 million in Operating loss from $3 million for the three months ended March 31, 2016); Net loss of $28 million (an increase of $18 million in Net loss from $10 million for the three months ended March 31, 2016); and Cash provided by operations of $15 million (an increase of $67 million from Cash used in operations of $52 million for the three months ended March 31, 2016).

Advertising, circulation, digital audience and traffic and the price of paper are the key variables whose fluctuations can have a material effect on our operating results and cash flow. We have to anticipate the level of revenues from advertising and circulation, digital advertising inventory, postal and paper prices in managing our businesses to maximize operating profit during expanding and contracting economic cycles.

We continue to experience declines in our Print and other advertising and Circulation revenues due to challenging conditions in the magazine publishing industry and due to the continuing shift in consumer preference from print media to digital media. In addition, growing consumer engagement with digital media on mobile devices and social platforms has started a secular shift in media consumption to content on desktop and mobile and has introduced significant new competition. The proliferation of new platforms available to advertisers, combined with continuing strong competition from print platforms, has affected both the amount of advertising we are able to sell as well as the rates advertisers are willing to pay. Our ability to compete successfully for advertising also depends on our ability to drive scale, engage digital audiences and prove the value of our advertising and the effectiveness of our print and digital platforms, including the value of advertising adjacent to high quality content, and on our ability to use our brands to continue to offer advertisers unique, multi-platform advertising programs and franchises. While the use of digital devices and applications as content distribution platforms has lowered the barriers to entry for competitors, it has also opened opportunities for us to grow digitally. We expect these trends to continue. Furthermore, our Advertising and Circulation revenues are sensitive to general economic conditions.

Additionally, as a result of the June 23, 2016 referendum by British voters to exit the European Union (“Brexit”), global markets and foreign currencies have been adversely impacted. In particular, the value of the British pound has sharply declined as compared to the U.S. dollar and other currencies. A weaker British pound compared to the U.S. dollar during a reporting period causes local currency results of our United Kingdom (“U.K.”) operations to be translated into fewer U.S. dollars. This volatility in foreign currencies is expected to continue as the U.K. negotiates and executes its exit from the European Union, which was initiated on March 29, 2017. A significantly weaker British pound compared to the U.S. dollar could have an adverse effect on the Company’s business, financial condition and results of operations.

Business Strategy

For several years, Time Inc. has been making the transition from print publisher to multi-platform media company. We have migrated away from a decentralized holding company model of siloed brands to integrated platforms built for scale. We now operate as a set of unified platforms across editorial, advertising, consumer marketing and technology that we believe will enable us to more effectively pursue our key growth drivers, as well as efficiencies.

Our platform strategy is aimed at leveraging the power of our world-class brands and content, large-scale and growing audiences, advertising capabilities, advanced proprietary data and people-based targeting and subscription marketing to drive monetization of our advertising, subscription and other revenues.

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overall, our strategic plan is comprised of the following key components:


•	Continue growing our digital audiences and revenues led by native and branded content solutions and video;


•	Innovate how we produce, market and distribute our print products, and re-engineer our operations in order to sustain this important source of cash flows;


•	Expand and diversify our sources of revenue by extending our powerful brands and content across a number of platforms and media including TV, OTT, events, licensing, new products and strategic partnerships;


•	Enhance the power of our proprietary data, people-based targeting and self-service programmatic capabilities;


•	Pursue selective rationalization of our brand portfolio, the potential sale of non-core assets, and joint venture opportunities.


•	Continued re-engineering of the cost structure with a goal of meaningful margin expansion over the course of our plan.

Key Developments in 2017

Acquisitions

Recent Accounting Guidance

See Note 1, "Description of Business and Basis of Presentation," to the accompanying Financial Statements for a discussion of recent accounting guidance.

Transactions and Other Items Affecting Comparability

As more fully described herein and in the related notes to the accompanying Financial Statements, the comparability of our results has been affected by the following during the three months ended March 31, 2017 and 2016 (in millions):



	Three Months Ended March 31,
	2017			2016
Restructuring and severance costs	$	16		$	1
Other costs	2			14
Impact on Operating income (loss)	18			15
Bargain purchase (gain)	—			(5		)
(Gain) loss on extinguishment of debt	—			(4		)
Income tax impact of above items	(6		)	(4		)
Impact on Net income (loss) attributable to Time Inc. from items affecting comparability	$	12		$	2

Restructuring and Severance Costs

For the three months ended March 31, 2017 and 2016, we incurred net Restructuring and severance costs of $16 million and $1 million, respectively, primarily related to headcount reductions.

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Other Costs

For the three months ended March 31, 2017 and 2016, Other costs related to mergers, acquisitions, investments and dispositions, included within Selling, general and administrative expenses on the accompanying Statements of Operations, were $2 million and $14 million, respectively. For the three months ended March 31, 2016, Other costs included a settlement loss of a pre-existing relationship incurred as part of an acquisition.

Bargain Purchase (Gain)

We did not recognize any Bargain purchase (gain) during the three months ended March 31, 2017. For the three months ended March 31, 2016, we recognized a Bargain purchase (gain) of $5 million related to the acquisition of Viant.

(Gain) Loss on Extinguishment of Debt

We did not repurchase any of our 5.75% senior notes (the "Senior Notes") during the three months ended March 31, 2017. For the three months ended March 31, 2016, we repurchased $35 million in aggregate principal value of our Senior Notes at a discount with accrued interest totaling $31 million and recognized a pretax gain on an extinguishment of $4 million. Gains and losses on extinguishment of debt are included in Other (income) expense, net on the accompanying Statements of Operations. As of March 31, 2017, $75 million remains unused under the authorization.

Other Items Affecting Comparability

In addition to the items described above, the following item affected comparability of results for the three months ended March 31, 2017 and 2016:


•	Equity Method Losses: We had suspended recognizing equity losses for certain equity method investments during 2015 as our investee losses were in excess of the investments' carrying amounts. During the three months ended March 31, 2016, we provided additional financial support to these equity-method investments and recognized $9 million in equity losses related to these fundings.

CONSOLIDATED RESULTS OF OPERATIONS

The following discussion provides an analysis of our results of operations and should be read in conjunction with the accompanying Statements of Operations.

Geographic Concentration of Revenues

A majority of our Revenues have been generated in the United States and, to a lesser extent, in the United Kingdom. For the three months ended March 31, 2017 and 2016, 88% and 86%, respectively, of our Revenues were generated in the United States and 10% and 11%, respectively, of our Revenues were generated in the United Kingdom. We expect the majority of our revenues will continue to be generated in the United States for the foreseeable future.

Seasonality

Our quarterly performance typically reflects moderate seasonal fluctuations. Advertising revenues from our magazines and digital platforms are typically higher in the fourth quarter of the year due to higher consumer spending activity and corresponding higher advertiser demand to reach our audiences during this period.

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations – three months ended March 31, 2017 versus the three months ended March 31, 2016

The table below provides a summary of our results of operations for three months ended March 31, 2017 and 2016 (in millions):



	Three Months Ended March 31,
	2017			2016			% Change
Revenues	$	636		$	690		(8	%)
Operating expenses	662			693			(4	%)
Operating income (loss)	(26		)	(3		)	NM
Bargain purchase (gain)	—			(5		)	(100	%)
Interest expense, net	17			17			—	%
Other (income) expense, net	2			6			(67	%)
Income tax provision (benefit)	(17		)	(11		)	55	%
Net income (loss)	$	(28	)	$	(10	)	NM

_______________________

NM - Not Meaningful

Revenues

The following table presents our Revenues, by type, for the three months ended March 31, 2017 and 2016 (in millions):



	Three Months Ended March 31,
	2017		2016		% Change
Revenues
Advertising
Print and other advertising	$	212	$	270	(21	%)
Digital advertising	119		90		32	%
Total advertising revenues	331		360		(8	%)
Circulation	205		238		(14	%)
Other	100		92		9	%
Total revenues	$	636	$	690	(8	%)

The following table presents our Revenues, by type, as a percentage of total revenues for three months ended March 31, 2017 and 2016:



	Three Months Ended March 31,
	2017		2016
Revenues
Advertising	52	%	52	%
Circulation	32	%	34	%
Other	16	%	14	%
Total revenues	100	%	100	%

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Advertising Revenues

For the three months ended March 31, 2017, Advertising revenues decreased 8% as compared to the three months ended March 31, 2016 reflecting a decrease in Print and other advertising revenues, primarily due to fewer advertising pages sold as a result of the continuing secular trend of advertisers shifting advertising spending from print to other media, lower average price per page of advertising sold and fewer issues served to customers, primarily due to a change in frequency. In addition, our print advertising revenues were negatively impacted by the public speculation about the ownership of the Company and the disruption from the reorganization of our advertising sales force. Although the secular print declines are expected to continue, there is encouraging sequential improvement in print advertising in June and in our early booking trends for the third quarter of 2017. Partially offsetting the decrease in our Print and other advertising revenues was a 32% increase in our Digital advertising revenues primarily resulting from the Viant acquisition and growth in Digital advertising revenues relating to programmatic sales, native and branded content advertising, and video. The stronger U.S. dollar relative to the British pound adversely impacted Advertising revenues for the three months ended March 31, 2017 by $3 million.

Circulation Revenues

The components of Circulation revenues for the three months ended March 31, 2017 and 2016 are as follows (in millions):



	Three Months Ended March 31,
	2017		2016		% Change
Circulation
Subscription	$	140	$	161	(13	%)
Newsstand	56		68		(18	%)
Other circulation	9		9		—	%
Total circulation revenues	$	205	$	238	(14	%)

For the three months ended March 31, 2017, Circulation revenues decreased 14% as compared to the three months ended March 31, 2016 due to fewer issues served to customers, primarily due to a change in frequency, and the continued shift in consumer preferences from print to digital media. The stronger U.S. dollar relative to the British pound adversely impacted Circulation revenues for the three months ended March 31, 2017 by $6 million. We expect the market conditions associated with our Circulation revenues to continue.

Other Revenues

Other revenues, which include marketing and support services provided to third parties, book publishing, events and licensing, increased 9% for the three months ended March 31, 2017 as compared to the three months ended March 31, 2016 to $100 million primarily due to an increase in revenues from content and photo syndication, and book publishing, particularly related to bookazines. The stronger U.S. dollar relative to the British pound adversely impacted Other revenues for the three months ended March 31, 2017 by $1 million.

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Operating Expenses

The components of Operating expenses for the three months ended March 31, 2017 and 2016 are as follows (in millions):



	Three Months Ended March 31,
	2017			2016			% Change
Operating expenses
Costs of revenues
Production costs	$	135		$	159		(15	%)
Editorial costs	83			92			(10	%)
Other	65			45			44	%
Total costs of revenues^(a)	283			296			(4	%)
Selling, general and administrative expenses^(a)	332			365			(9	%)
Amortization of intangible assets	20			21			(5	%)
Depreciation	13			13			—	%
Restructuring and severance costs	16			1			NM
(Gain) loss on operating assets, net	(2		)	(3		)	(33	%)
Operating expenses	$	662		$	693		(4	%)

_______________________


NM	- Not Meaningful


(a)	Costs of revenues and Selling, general and administrative expenses set forth above exclude depreciation.

Costs of Revenues

Costs of revenues consist of costs related to the production of magazines and books, editorial costs, as well as other costs. Production costs include paper, printing and distribution costs. A variety of factors affect paper prices and availability, including demand, capacity, raw material and energy costs and general economic conditions. Our current paper supply arrangements are based on an annual request-for-proposal process establishing a non-binding pricing framework for the year. Price and volume adjustments are negotiated from time to time under this pricing framework, typically on a quarterly basis. The bulk of our U.S. printing occurs under multi-year contracts with a single printer. The Board of Governors of the USPS reviews prices for mailing services annually and periodically adjusts postage rates for each class of mail, including periodicals. Although prices and price increases for various USPS products vary, overall average price increases generally are capped by law at the rate of inflation as measured by the Consumer Price Index. In April 2016, the USPS announced a 4.3% rate decrease for all classes of mail as a result of the removal of the exigent surcharge that was imposed in December 2013, effective April 10, 2016.

For the three months ended March 31, 2017, Costs of revenues decreased 4% as compared to the three months ended March 31, 2016. Production costs decreased 15% primarily due to lower paper volume and prices and the removal of the exigent USPS surcharge effective April 10, 2016, that was originally imposed in December 2013. Editorial costs decreased 10% primarily as a result of cost savings initiatives. Other costs of revenues increased 44% as compared to the three months ended March 31, 2016 primarily due to higher costs of digital operations, including higher volume and digital media acquisition costs. The stronger U.S. dollar relative to the British pound favorably impacted Costs of revenues for the three months ended March 31, 2017 by $5 million.

Selling, General and Administrative Expenses

For the three months ended March 31, 2017, Selling, general and administrative expenses ("SG&A") decreased 9% as compared to the three months ended March 31, 2016. SG&A decreased primarily due to cost savings initiatives and lower circulation promotional expenses. Included in SG&A for the three months ended March 31, 2017 and 2016 were $2 million and $14 million, respectively, of other costs related to mergers, acquisitions, investments and

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

dispositions. The stronger U.S. dollar relative to the British pound benefited SG&A by $5 million for the three months ended March 31, 2017.

Amortization of Intangible Assets

Amortization of intangible assets was $20 million and $21 million for the three months ended March 31, 2017 and 2016, respectively.

Depreciation

Depreciation expense was $13 million for both the three months ended March 31, 2017 and 2016.

Restructuring and Severance Costs

For the three months ended March 31, 2017 and 2016, we incurred Restructuring and severance costs of $16 million and $1 million, respectively, primarily related to headcount reductions.

(Gain) Loss on Operating Assets, Net

For the three months ended March 31, 2017 and 2016, gains on operating assets, net of $2 million and $3 million, respectively, primarily related to the recognition of the deferred gain from the sale-leaseback of the Blue Fin Building that was completed in the fourth quarter of 2015.

Operating Income (Loss)

Operating loss for the three months ended March 31, 2017 and 2016 were $26 million and $3 million, respectively. The increase in Operating loss was primarily driven by declines in Print and other advertising revenues and Circulation revenues and higher Restructuring and severance costs, partially offset by the benefit of lower operating expenses.

Bargain Purchase (Gain)

For the three months ended March 31, 2017 and 2016, the Bargain purchase (gain) was nil and $5 million, respectively, related to the acquisition of Viant.

Interest Expense, Net

Interest expense, net was $17 million for both the three months ended March 31, 2017 and 2016, respectively.

Other (Income) Expense, Net

Other (income) expense, net, was an expense of $2 million and $6 million for the three months ended March 31, 2017 and 2016, respectively. The decrease was the result of the recognition of $10 million of equity losses for the three months ended March 31, 2016 primarily related to investments where we resumed applying the equity method after opting to provide additional funding, partially offset by the gain on extinguishment of debt of $4 million. Other (income) expense, net, of $2 million for the three months ended March 31, 2017 related to equity and other investment-related losses.

Income Tax Provision (Benefit)

For the three months ended March 31, 2017 and 2016, our income tax benefit was $17 million and $11 million, respectively. Our effective income tax rate, reflecting our tax benefit, was 37% and 50% for the three months ended March 31, 2017 and 2016, respectively. The change in the effective income tax rate, which reflected our income tax benefit for the three months ended March 31, 2017, was primarily due to the prior year net increase in tax benefit attributed to the nontaxable bargain purchase gain recorded in connection with the acquisition of Viant and certain equity losses recorded without tax benefit reflected in the three months ended March 31, 2016 and the effect of foreign operations.

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net Income (Loss)

Net loss for the three months ended March 31, 2017 and 2016 was $28 million and $10 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Sources of cash primarily include cash flows from operations, amounts available under our revolving credit facility (the "Revolving Credit Facility") and access to capital markets. We have historically generated annual positive net cash flows from operating activities. Our access to additional borrowings under the Revolving Credit Facility is subject to the satisfaction of customary borrowing conditions, including the absence of any event or circumstance having a material adverse effect on our business. In addition, the obligation of the financial institutions under our Revolving Credit Facility are several and not joint, and, as a result, a funding default by one or more institutions does not need to be made up by the others. As a public company, we may have access to other sources of capital such as the public bond markets. However, our access to, and the availability of, financing on acceptable terms in the future will be affected by many factors, including (i) our financial condition, prospects and credit rating, (ii) the liquidity of the overall capital markets and (iii) the state of the economy. There can be no assurance that we will continue to have access to the capital markets on favorable terms or at all. As of March 31, 2017, total Cash and cash equivalents were $241 million, including $24 million held by foreign subsidiaries. As of March 31, 2017, we also held Short-term investments consisting of term deposits of $40 million with original maturities of greater than three months and remaining maturities of less than one year.

The principal uses of cash that affect our liquidity position include the following: operational expenditures including employee costs, paper purchases and capital expenditures; acquisitions; dividends and stock repurchases; debt repurchases and debt service costs, including interest and principal payments on our Senior Notes and senior credit facilities (the "Senior Credit Facilities"); investments; and income tax payments. Of the up to $300 million of stock repurchases and $200 million for debt repayments and/or repurchases authorized by our Board of Directors, $123 million and $75 million, respectively, remained unused as of March 31, 2017. We have been financing, and expect to finance in the future, repurchases under our 2015 share repurchase authorization and fund debt repayments and/or repurchases from working capital and/or cash balances.

As disclosed in Part 1, Item 1A. "Risk Factors" in our 2016 Form 10-K and Note 13 to our consolidated financial statements included therein, we are party to a deed of guarantee with the trustees of a defined benefit pension plan for certain of our current and former U.K. employees (which is closed to new participants). Under the deed of guarantee, we would be obligated to fund the pension plan’s “buyout deficit” (i.e., the amount that would be needed to purchase annuities to discharge the benefits under the plan) under certain circumstances. Specifically, we would be required to deposit the buyout deficit into escrow or provide a surety bond or other suitable credit support if we were to experience a drop in our long-term unsecured senior debt credit ratings to Caa1 or below from Moody's and to CCC+ or below from Standard & Poor's or if our debt in excess of $50 million were not to be paid when due or were to come due prior to its stated maturity as a result of a default. As of March 31, 2017, our long-term unsecured senior debt credit rating was B3 from Moody's and B from Standard & Poor's. If we had been required to fund the buyout deficit on March 31, 2017, the amount would have been approximately £341 million. The amount of the buyout deficit changes daily and is determined by many factors, including changes in the fair value of plan assets and liabilities and interest rates.

We have evaluated and expect to continue to evaluate possible acquisitions and dispositions of certain businesses and assets. Such transactions may be material and may involve cash, issuance of securities or assumption of indebtedness. In accordance with the provisions of our debt agreements, we may under certain circumstances be required to use the net cash proceeds of asset sales out of the ordinary course of business to prepay our debt unless we invest (or commit to invest) such proceeds in our business within 15 months of receipt.

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Following a comprehensive review of Time Inc.’s capital allocation, capital structure and operating plan, the Time Inc. Board of Directors has revised the Company’s capital allocation approach. The objective is to provide us with strategic and financial flexibility in order to better focus on investing in growth and at the same time maintaining a strong balance sheet. On May 10, 2017, our Board of Directors declared a reduced quarterly dividend of $0.04 per common share to stockholders of record as of the close of business on May 31, 2017, payable on June 15, 2017. On February 16, 2017, our Board of Directors declared a quarterly dividend of $0.19 per common share to stockholders of record as of the close of business on February 28, 2017. A total of $19 million was paid on March 15, 2017 with respect to the dividend declared on February 16, 2017. The declaration and amount of any actual dividend are in the sole discretion of our Board of Directors and are subject to numerous factors that ordinarily affect dividend policy, including the results of our operations and our financial position, as well as general economic and business conditions.

We believe that a combination of cash-on-hand, cash generated from operating activities and availability under our Revolving Credit Facility will provide sufficient liquidity to service the principal and interest payments on our indebtedness, along with our funding and investment requirements over the next twelve months and over the long-term.

As of March 31, 2017, the only utilization under the Revolving Credit Facility was letters of credit in the face amount of $3 million. Subject to the satisfaction of customary conditions, undrawn revolver commitments are available to be drawn for our general corporate purposes. We were in compliance with all of our debt covenants as of March 31, 2017.

Sources and Uses of Cash

Cash and cash equivalents decreased by $55 million for the three months ended March 31, 2017 as compared to the year ended December 31, 2016; and decreased by $311 million for the three months ended March 31, 2016 as compared to the year ended December 31, 2015. The components of these changes are discussed below.

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Operating Activities

Details of Cash provided by (used in) operations are as follows (in millions):



	Three Months Ended March 31,
	2017			2016
Net income (loss)	$	(28	)	$	(10	)
Adjustments to reconcile Net income (loss) to Cash provided by (used in) operations
Depreciation and amortization	33			34
Amortization of deferred financing costs and discounts on indebtedness	1			2
(Gain) loss on sale of operating assets	—			(1		)
(Gain) loss on repurchases of 5.75% Senior Notes	—			(4		)
Amortization of deferred gain on sale-leaseback	(2		)	(2		)
Bargain purchase (gain)	—			(5		)
(Income) loss on equity-method investments	1			10
Equity-based compensation expense	6			10
Deferred income taxes	(15		)	(7		)
All other net, including working capital changes^(a)	19			(79		)
Cash provided by (used in) operations	$	15		$	(52	)

___________________________


(a)	Includes domestic net income tax refunds received of $2 million and $41 million for the three months ended March 31, 2017 and 2016, respectively. Includes foreign net income taxes paid of $1 million and received of $1 million for the three months ended March 31, 2017 and 2016, respectively.

Cash provided by operations increased in the three months ended March 31, 2017 primarily due to the benefits of completing buyouts of the leases of our former corporate headquarters and another leased property for $95 million in the first quarter of 2016 and higher collections of Receivables in the first quarter of 2017. These benefits were partially offset by lower domestic net income tax refunds received in the first quarter of 2017.

Investing Activities

Details of Cash provided by (used in) investing activities are as follows (in millions):



	Three Months Ended March 31,
	2017			2016
Acquisitions, net of cash acquired	$	(21	)	$	(96	)
(Investments in) divestitures of cost and equity-method investments	(2		)	(9		)
Proceeds from dispositions	—			1
Purchases of short-term investments	(20		)	(20		)
Maturities of short-term investments	20			20
Capital expenditures	(21		)	(35		)
Cash provided by (used in) investing activities	$	(44	)	$	(139	)

Cash used in investing activities decreased in the three months ended March 31, 2017 primarily due to lower cash used for acquisitions, lower capital spending due to the completion of the construction of our corporate headquarters in 2016 and lower investments in cost and equity-method investments.

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financing Activities

Details of Cash provided by (used in) financing activities are as follows (in millions):



	Three Months Ended March 31,
	2017			2016
Purchase of common stock	$	—		$	(58	)
Repurchase of 5.75% Senior Notes	—			(31		)
Principal payments on Term Loan	(2		)	(2		)
Withholding taxes paid on equity-based compensation	(4		)	(5		)
Dividends paid	(19		)	(20		)
Contingent/deferred consideration payments	(2		)	(1		)
Cash provided by (used in) financing activities	$	(27	)	$	(117	)

Cash used in financing activities decreased as there were no repurchases made under our 2015 share and debt repurchase authorizations for the three months ended March 31, 2017.

Principal Debt Obligations

As of March 31, 2017, we had outstanding approximately $575 million of Senior Notes and approximately $680 million of a Term Loan under our Senior Credit Facilities. The Senior Notes mature in April 2022 and the Term Loan matures in April 2021. Our $500 million Revolving Credit Facility under the Senior Credit Facilities remained undrawn as of March 31, 2017, except for utilization for letters of credit in the face amount of $3 million.

The credit agreement governing the Senior Credit Facilities permits us to incur incremental senior secured term loan borrowings under the Senior Credit Facilities, subject to the satisfaction of certain conditions, in an aggregate principal amount not to exceed the sum of $500 million. The credit agreement governing the Senior Credit Facilities also allows us to incur additional incremental senior secured term loans in unlimited amounts (beyond the $500 million) so long as, on a pro forma basis at the time of incurrence, our consolidated secured net leverage ratio (as defined in the credit agreement governing the Senior Credit Facilities) does not exceed 2.50x to 1.00x. However, no lender is under any obligation to make any such incremental senior secured term loans to us.

We are permitted to prepay amounts outstanding under the Senior Credit Facilities at any time without premium or penalty. Under certain circumstances, the Term Loan may require us to prepay amounts outstanding thereunder with the net cash proceeds of asset sales out of the ordinary course of business and casualty events if we do not use (or commit to use) such proceeds within 15 months of receipt to invest in our business, including, among other things, by acquiring, maintaining or developing assets useful in our business or making acquisitions permitted under the Senior Credit Facilities. We are required to make quarterly repayments of the Term Loan equal to 0.25% of the aggregate original principal amount. All then-outstanding principal and interest under the Term Loan is due and payable on April 24, 2021. All then-outstanding principal and interest under the Revolving Credit Facility is due and payable, and all commitments thereunder will be terminated, on June 6, 2019.

On or after April 15, 2017, we may redeem the Senior Notes at a premium that will start at 4.313% and decrease over time to zero. In the event of a change of control (as defined in the indenture governing the Senior Notes), the holders of the Senior Notes may require us to purchase for cash all or a portion of their Senior Notes at a purchase price equal to 101% of the principal amount of such Senior Notes, plus accrued and unpaid interest. The Senior Notes mature in April 2022.

The indenture governing the Senior Notes and the credit agreement governing the Senior Credit Facilities limit, among other things, our ability and the ability of our subsidiaries to incur or guarantee additional indebtedness or sell preferred or mandatorily redeemable stock; to pay dividends on, make distributions in respect of, repurchase or redeem capital stock; to make investments or acquisitions; to sell, transfer or otherwise dispose of certain assets; to allow liens

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

to exist on our assets; to enter into sale/leaseback transactions; to consolidate, merge, sell or otherwise dispose of all or substantially all of our or our subsidiaries’ assets; or to enter into certain transactions with affiliates. These limitations restrict our current and future operations, particularly our ability to incur debt that we may need to fund initiatives in response to changes in our business, the industries in which we operate, the economy and governmental regulations. With respect to the Revolving Credit Facility only, we are required to maintain a consolidated secured net leverage ratio (as defined in the credit agreement governing the Senior Credit Facilities) not to exceed 2.75x to 1.00x, as tested at the end of each fiscal quarter. We were in compliance with all provisions of our debt agreements as of March 31, 2017.

The foregoing description of the Senior Notes and the Senior Credit Facilities is only an overview. We also refer you to the form of indenture for the Senior Notes and the credit agreement for the Senior Credit Facilities that have been filed as exhibits to our Registration Statement on Form 10 filed with the Securities and Exchange Commission in May 2014.

Contractual and Other Obligations

Contractual Obligations

In addition to the financing arrangements discussed above, we have obligations under certain contractual arrangements to make future payments for goods and services. These contractual obligations secure the future rights to various assets and services to be used in the normal course of operations. For example, we are contractually committed to make certain minimum lease payments for the use of property under operating lease agreements. In accordance with applicable accounting rules, the future rights and obligations pertaining to certain firm commitments, such as operating lease obligations and certain purchase obligations under contracts, are not reflected as assets or liabilities in the accompanying Balance Sheets. Our commitments have not significantly varied from those disclosed within our 2016 Form 10-K.

Contingencies

We are defendants in or parties to various legal claims, actions and proceedings. These claims, actions and proceedings are at varying stages of investigation, arbitration or adjudication, and involve a variety of areas of law. See Note 12, "Commitments and Contingencies," to the accompanying Financial Statements.

Income Tax Uncertainties

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often include words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes,” and words and terms of similar substance in connection with discussion of future operating or financial performance. Examples of forward-looking statements in this report include, but are not limited to, statements regarding the adequacy of our liquidity to meet our needs for the foreseeable future, our expectation that the market conditions that have adversely affected our subscription and advertising revenues will continue and the estimates of repurchases of our common stock and/or our debt in connection with our Board of Directors authorization.

Our forward-looking statements are based on our current expectations regarding our business and performance, the economy and other future conditions and forecasts of future events, circumstances and results. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Important factors that could cause our actual results to differ materially from those in our forward-looking statements include government regulations, economic, strategic, political and social conditions and the following factors:


•	changes in and the execution of our plans, initiatives and strategies;


•	recent and future changes in technology, including methods for the delivery of our content;


•	changes in consumer behavior, including changes in spending behavior and changes in when, where and how content is consumed;


•	our ability to develop or acquire technologies that enable us to serve changing consumer behaviors and support our evolving business needs;


•	competitive pressures;


•	our ability to deal effectively with economic slowdowns or other economic or market difficulties;


•	possible disruptions in our retail distribution channels due to challenging conditions in the highly-concentrated wholesale magazine distribution industry, the financial instability of certain wholesalers and a reduction of retail outlets as a result of weak economic or industry conditions;


•	increases in the price of paper or in postal rates and services or disruption of services from our suppliers including our printers;


•	changes in advertising market conditions or advertising expenditures due to, among other things, economic conditions, changes in consumer behavior, changes in advertising standards or the implementation of technologies that interfere with advertisements, pressure from public interest groups, changes in laws and regulations and other societal or political developments;


•	our ability to exploit and protect our intellectual property rights in and to our content and other products;


•	lower than expected valuations associated with our cash flows and revenues, which could impair our ability to realize the value of recorded intangible assets and Goodwill;


•	increased volatility or decreased liquidity in the capital markets, including any limitation on our ability to access the capital markets, refinance our outstanding indebtedness or obtain bank financing on acceptable terms;

TIME INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


•	impacts on our pension obligations due to changes in equity markets, our credit rating, interest rates, actuarial assumptions and regulatory actions;


•	the effect of any significant acquisitions, investments, dispositions and other similar transactions by us;


•	the adequacy of our risk management framework;


•	changes in GAAP or other applicable accounting policies;


•	the impact of terrorist acts, hostilities, natural disasters (including extreme weather) and pandemic viruses;

•

a disruption, breach (including misappropriation or accidental release of data) or failure of network and information systems or other technology on which our business relies (including the network and information systems or other technology of our vendors, partners and suppliers), or any delay in recovering from such, that occurs as a result of computer viruses, malware, hackers or similar causes, including possible loss of revenue due to cancellation of customers' credit cards on file for subscription auto-renewals resulting from credit card data breaches affecting us or third parties, and reputational harm that may result from any of these incidents;


•	changes in tax and other laws and regulations affecting our domestic or international operations, including the impact of Brexit;


•	changes in foreign exchange rates;


•	the outcome of litigation and other proceedings, including the matters described in the notes to our Financial Statements, as well as possible regulatory actions and civil claims involving privacy issues related to consumer data collection and use practices; and


•	the other risks and uncertainties detailed in Part I, Item 1A. "Risk Factors," in our 2016 Form 10-K.

Any forward-looking statement made by us in this report speaks only as of the date on which it is made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have exposure to different types of market risk including changes in foreign currency exchange rates and interest rate risk. We neither hold nor issue financial instruments for trading purposes.

The following sections provide quantitative and qualitative information on our exposure to foreign currency exchange rate risk and interest rate risk. We make use of sensitivity analyses that are inherently limited in estimating actual losses in fair value that can occur from changes in market conditions.

Foreign Currency Exchange Rate Risk

We conduct operations in three principal currencies: the U.S. dollar; the British pound sterling; and the Euro. These currencies primarily serve as the functional currency for our U.S., U.K. and European operations, respectively. Cash is managed centrally within each of these regions with net earnings reinvested locally and working capital requirements met from existing liquid funds. To the extent such funds are not sufficient to meet working capital requirements, funding in the appropriate local currencies is made available from intercompany capital and/or overdraft facilities. We generally do not hedge our investments in the net assets of our U.K. and European operations.

To manage foreign currency exchange rate risk, we may enter into foreign currency contracts from time to time with financial institutions to limit our exposure to fluctuations in foreign currency exchange rates. We do not enter into foreign currency contracts for speculative or trading purposes.

Because of fluctuations in currency exchange rates, we are subject to currency translation exposure on the results of our operations. Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities' statements of earnings and balance sheets from each functional currency to our reporting currency (the U.S. dollar) for consolidation purposes. We do not hedge translation risk because we typically reinvest cash flows

generated from our international operations locally. The currency exchange rates with the most significant impact on translation are the British pound sterling and, to a lesser extent, the Euro. As currency exchange rates fluctuate, translation of our Statements of Operations into U.S. dollars affects the comparability of revenues and operating expenses between years.

As a result of the June 23, 2016 referendum by British voters to exit the European Union (“Brexit”), global markets and foreign currencies have been volatile. In particular, the value of the British pound has sharply declined as compared to the U.S. dollar and other currencies. This volatility in foreign currencies is expected to continue as the U.K. negotiates and executes its exit from the European Union, which was initiated on March 29, 2017.

Interest Rate Risk

Based on the level of interest rates prevailing at March 31, 2017, the fair value of our fixed rate Senior Notes of $599 million was greater than their carrying value of $568 million by $31 million. The fair value of these financial instruments is estimated based on reference to quoted market prices for comparable securities and consideration of our risk profile. A hypothetical 100 basis point decrease in interest rates prevailing at March 31, 2017 would increase the estimated fair value of our fixed rate debt by approximately $26 million to approximately $625 million. A hypothetical 100 basis point increase in interest rates prevailing at March 31, 2017 would decrease the estimated fair value of our fixed rate debt by approximately $26 million to approximately $573 million.

Our Term Loan is subject to variable interest rates but includes a eurocurrency "floor" of 1%. A hypothetical 100 basis point increase in current interest rates would increase our annual interest expense by approximately $7 million. The Revolving Credit Facility is subject to variable interest rates but is assumed to be undrawn for purposes of this calculation. Our Revolving Credit Facility remained undrawn as of the date of filing of this quarterly report on Form 10-Q, except for $3 million in letters of credit issued thereunder.

The discount rate used to measure the benefit obligations for our non-U.S. pension plans is determined by using a spot-rate yield curve, derived from the yields available on high quality corporate bonds. Broad equity and bond indices are used in the determination of the expected long-term rate of return on our non-U.S. pension plan assets. Therefore, interest rate fluctuations and volatility of the debt and equity markets can have a significant impact on asset values of our non-U.S. pension plans and future anticipated contributions. For example, a hypothetical 100 basis point increase in interest rates generally would decrease our benefit obligations under our non-U.S. pension plans by approximately $143 million.

Credit Risk

Cash and cash equivalents are maintained with several financial institutions as well as invested in certain high quality money market mutual funds and term deposits. Insurance with respect to deposits held with banks is limited to an insignificant amount of such deposits. However, our bank deposits and money market fund investments generally may be redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear minimal credit risk.

There is also limited credit risk with respect to the term deposits in which we invest as these investments all have issuers, guarantors and/or other counterparties of reputable credit.

Our receivables did not represent significant concentrations of credit risk as of March 31, 2017 or December 31, 2016 due to the wide variety of customers, markets and geographic areas to which our products and services are sold.

We monitor our positions and the credit quality of the financial institutions which are counterparties to our financial instruments. We are exposed to credit loss in the event of nonperformance by the counterparties to the agreements. As of March 31, 2017 and December 31, 2016, we did not anticipate nonperformance by any of the counterparties.

Other Market Risk

We continue to be exposed to risks associated with paper used for printing. Paper is a basic commodity and its price is sensitive to the balance of supply and demand. Our expenses are affected by the cyclical increases and decreases in the price of paper. The cost of raw materials, of which paper expense is a major component, represents approximately 7% of our total annual operating expenses.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in reports filed and submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that information required to be disclosed by us is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

(b) Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the first quarter ended March 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 12, "Commitments and Contingencies," in the accompanying Financial Statements.

ITEM 1A. RISK FACTORS

There have been no material changes to our risk factors as previously disclosed in our 2016 Form 10-K as filed with the SEC on February 27, 2017.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS



Exhibit No.	Description

4.1	Tenth Supplemental Indenture, dated January 30, 2017, between Time Mailing Services LLC and Wells Fargo Bank, National Association, as trustee.*

10.1	Form of Restricted Stock Units Agreement for restricted stock units granted under the Time Inc. 2016 Omnibus Incentive Compensation Plan on or after February 13, 2017.*

10.2	Form of Performance Stock Units Agreement for performance stock units granted under the Time Inc. 2016 Omnibus Incentive Compensation Plan on or after February 13, 2017.*

10.3	Time Inc. Key Management Change in Control Severance Plan and Form of Participation Notice (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on February 3, 2017).

31.1	Principal Executive Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2	Principal Financial Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002.**

32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002.**

101.INS	XBRL Instance Document**

101.SCH	XBRL: Taxonomy Extension Schema Document**

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB	XBRL Taxonomy Extension Label Linkbase Document**

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document**

* Filed herewith.

**Furnished herewith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



TIME INC. (Registrant)

By:	/s/ Susana D'Emic
	Susana D'Emic
	Executive Vice President and Chief Financial Officer

Date: May 10, 2017

Time Inc. - FORM 10-Q - May 10, 2017

Attached files

Time Inc. Reports