TIME WARNER INC/
8-K, 1999-09-17
MOTION PICTURE & VIDEO TAPE PRODUCTION
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

        Date of Report (Date of earliest event reported): August 3, 1999

                                TIME WARNER INC.
             (Exact name of registrant as specified in its charter)

        Delaware                     1-12259                  13-3527249
    -----------------             --------------           ----------------
(State or other jurisdiction        (Commission             (I.R.S. Employer
     of incorporation)               File Number)          Identification No.)


                    75 Rockefeller Plaza, New York, NY 10019
               (Address of principal executive offices) (zip code)

                                 (212) 484-8000
            --------------------------------------------------------
              (Registrant's telephone number, including area code)

                                 Not Applicable
                     --------------------------------------
          (Former name or former address, if changed since last report)


<PAGE>


Item 5. Other Events

         Time  Warner  Inc.  ("Time  Warner" or the  "Company")  classifies  its
business  interests into four  fundamental  areas:  CABLE  NETWORKS,  consisting
principally of interests in cable television programming; PUBLISHING, consisting
principally  of interests in magazine  publishing,  book  publishing  and direct
marketing; ENTERTAINMENT,  consisting principally of interests in recorded music
and music publishing, filmed entertainment, television production and television
broadcasting; and CABLE, consisting principally of interests in cable television
systems.  A  majority  of  Time  Warner's  interests  in  filmed  entertainment,
television production, television broadcasting and cable television systems, and
a portion of its  interests in cable  television  programming,  are held through
Time Warner Entertainment Company, L.P. ("TWE").

         Time Warner  owns  general and  limited  partnership  interests  in TWE
consisting of 74.49% of the pro rata priority  capital  ("Series A Capital") and
residual equity capital  ("Residual  Capital"),  and 100% of the junior priority
capital.  The remaining  25.51%  limited  partnership  interests in the Series A
Capital and Residual  Capital of TWE are held by a subsidiary of MediaOne Group,
Inc.  ("MediaOne").  Since 1993, when MediaOne was admitted as a limited partner
of TWE, Time Warner has not consolidated TWE and certain related  companies (the
"Entertainment  Group")  for  financial  reporting  purposes  because of certain
rights held by MediaOne  that allowed it to  participate  in the  management  of
TWE's businesses.

         As previously reported in TWE's Current Report on Form 8-K dated August
3,  1999,  TWE  received  a notice  (the  "Termination  Notice")  from  MediaOne
concerning the  termination of MediaOne's  covenant not to compete with TWE. The
termination  of that  covenant is necessary  for MediaOne to complete its merger
with AT&T Corp. As a result of the  Termination  Notice and the operation of the
partnership agreement governing TWE, MediaOne's governance and management rights
over TWE have  terminated  immediately  and  irrevocably  to the fullest  extent
permitted  by  Section  5.5(f) of the TWE  partnership  agreement.  As a result,
MediaOne  no longer  has a vote on, or any right to  participate  in,  the Cable
Management  Committee  described on page I-34 of Time Warner's  Annual Report on
Form 10-K for the year ended December 31, 1998, as amended ("Time  Warner's Form
10-K") and its  representatives  serving on TWE's  Board of  Representatives  no
longer  have  the  right  to  vote  on any  matter  pertaining  to any of  TWE's
businesses.  MediaOne retains certain  protective  governance  rights on the TWE
Board of Representatives  pertaining to certain limited matters affecting TWE as
a whole.

         Because  of  this  significant  reduction  in  MediaOne's  rights,  for
accounting purposes, Time Warner will consolidate the Entertainment Group, which
substantially  consists of TWE,  retroactive  to the beginning of 1999. As such,
set forth herein are restated  consolidated  condensed  financial  statements of
Time Warner and restated  supplementary  financial  information of Time Warner's
business  segments as of and for the six months ended June 30, 1999, which gives
effect to the consolidation of the Entertainment Group,  effective as of January
1, 1999. In order to facilitate comparative analysis,  also set forth herein are
a pro forma  consolidated  condensed  statement of operations of Time Warner and
pro forma supplementary financial information of Time Warner's business segments
for the year ended  December 31, 1998 that each  similarly  gives effect to Time
Warner's consolidation of the Entertainment Group as of the beginning of 1998.

         The restated and pro forma consolidated  condensed financial statements
and supplementary  financial  information should be read in conjunction with the
historical  financial  statements  of Time Warner and TWE,  including  the notes
thereto,  which are contained in Time Warner's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999 and Time Warner's Form 10-K.


<PAGE>




                                TIME WARNER INC.
                  Restated Consolidated Condensed Balance Sheet
                                  June 30, 1999
                              (millions, unaudited)

<TABLE>
<CAPTION>

                                                                                      Intercompany
                                                           Time       Entertainment   Eliminations        Time
                                                          Warner          Group      and Consolidating   Warner
                                                        Historical(a)  Historical(a)   Adjustments(b)   Restated
                                                        -------------  -------------  ---------------   --------
ASSETS
Current Assets
<S>                                                       <C>            <C>           <C>             <C>
Cash and equivalents....................................  $   304        $   117       $     -         $    421
Receivables, net........................................    2,397          2,639          (821)           4,215
Inventories.............................................      923          1,247             -            2,170
Prepaid expenses........................................    1,279            220             -            1,499
                                                          -------        -------       -------         --------

Total current assets....................................    4,903          4,223          (821)           8,305

Noncurrent inventories..................................    1,838          2,114            (9)           3,943
Loan receivable from Time Warner........................        -            400          (400)               -
Investments in and amounts due to and from
   Entertainment Group..................................    6,252              -        (6,252)               -
Other investments.......................................      924            903           (19)           1,808
Property, plant and equipment, net......................    2,027          6,302             -            8,329
Music catalogues, contracts and copyrights..............      824              -             -              824
Cable television and sports franchises..................    2,662          4,527           295            7,484
Goodwill................................................   11,647          3,795            57           15,499
Other assets............................................      816            625             -            1,441
                                                          -------         ------       --------        --------

Total assets............................................  $31,893        $22,889       $(7,149)        $ 47,633
                                                          =======        =======       ========        ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities...............................  $ 4,136        $ 4,745       $  (716)        $  8,165
Long-term debt..........................................   10,765          6,535             -           17,300
Borrowings against future stock option proceeds.........    1,219              -             -            1,219
Deferred income taxes...................................    3,704              -             -            3,704
Unearned portion of paid subscriptions..................      755              -             -              755
Other long-term liabilities.............................    1,647          3,527        (1,451)           3,723
Minority interests......................................        -          1,744         1,356            3,100
Company-obligated mandatorily redeemable
   preferred securities of a subsidiary
   holding solely subordinated debentures
   of a subsidiary of the Company.......................      575              -             -              575
Time Warner General Partners' Senior Capital............        -            627          (627)               -
Shareholders' equity....................................    9,092          5,711        (5,711)           9,092
                                                          -------        -------       --------        --------

Total liabilities and shareholders' equity..............  $31,893        $22,889       $(7,149)        $ 47,633
                                                          =======        =======       ========        ========

See accompanying notes.

</TABLE>


<PAGE>


                                TIME WARNER INC.
             Restated Consolidated Condensed Statement of Operations
                     For the Six Months Ended June 30, 1999
                 (millions, except per share amounts; unaudited)

<TABLE>
<CAPTION>

                                                                                      Intercompany
                                                           Time       Entertainment   Eliminations         Time
                                                          Warner          Group      and Consolidating    Warner
                                                        Historical(a)  Historical(a)   Adjustments(b)    Restated
                                                        ------------   ------------    --------------    --------

<S>                                                        <C>            <C>           <C>             <C>
Revenues..............................................    $ 6,840         $5,994       $  (212)         $12,622

Cost of revenues(1)...................................     (3,696)        (3,904)          203           (7,397)
Selling, general and administrative(1)................     (2,365)        (1,202)            -           (3,567)
Gain on sale or exchange of
     cable systems and investments....................         11            760             -              771
Gain on early termination of video
     distribution agreement...........................          -            215             -              215
                                                          -------         ------       -------          -------

Business segment operating income.....................        790          1,863            (9)           2,644
Equity in pretax income of Entertainment Group........      1,135              -        (1,135)               -
Interest and other, net(2)............................       (513)          (392)            8             (897)
Minority interest.....................................          -           (301)            2             (299)
Corporate expenses....................................        (44)           (36)            -              (80)
                                                          -------         ------       -------          -------

Income before income taxes............................      1,368          1,134        (1,134)           1,368
Income tax provision..................................       (637)           (55)           55             (637)
                                                          -------         ------       -------          -------

Net income............................................        731          1,079        (1,079)             731
Preferred dividend requirements.......................        (36)             -             -              (36)
                                                          -------         ------       -------          -------

Net income applicable to common shares................    $   695         $1,079       $(1,079)         $   695
                                                          =======         ======       =======          =======

Net income per common share:
   Basic..............................................    $  0.56         $    -       $     -          $  0.56
                                                          =======         ======       =======          =======
   Diluted............................................    $  0.54         $    -       $     -          $  0.54
                                                          =======         ======       =======          =======

Average common shares:
   Basic..............................................    1,246.2              -             -          1,246.2
                                                          =======         ======       =======          =======
   Diluted............................................    1,401.6              -             -          1,401.6
                                                          =======         ======       =======          =======

- ---------------
(1)  Includes depreciation and amortization
     expense of:......................................    $   560         $  642       $    10          $ 1,212
                                                          =======         ======       =======          =======

(2)  Includes an approximate  $115 million
     pretax gain recognized by Time Warner
     in connection with the initial public
     offering of a 20% interest in Time
     Warner Telecom Inc.


See accompanying notes.

</TABLE>



<PAGE>


                                TIME WARNER INC.
            Pro Forma Consolidated Condensed Statement of Operations
                      For the Year Ended December 31, 1998
                 (millions, except per share amounts; unaudited)

<TABLE>
<CAPTION>

                                                                                      Intercompany
                                                           Time       Entertainment   Eliminations        Time
                                                          Warner          Group      and Consolidating   Warner
                                                        Historical(a)  Historical(a)   Adjustments(b)   Pro Forma
                                                        ------------   ------------    -------------    ---------

<S>                                                       <C>            <C>             <C>            <C>
Revenues..............................................    $14,582        $12,256       $  (594)         $26,244

Cost of revenues(1)...................................     (8,228)        (8,289)          506          (16,011)
Selling, general and administrative(1)................     (4,876)        (2,333)            -           (7,209)
Gain on sale or exchange of cable systems
   and investments....................................         18             90             -              108
                                                          -------        -------       -------          -------

Business segment operating income.....................      1,496          1,724           (88)           3,132
Equity in pretax income of Entertainment Group........        356              -          (356)               -
Interest and other, net(2)............................     (1,180)          (965)           23           (2,122)
Minority interest.....................................          -           (264)           (2)            (266)
Corporate expenses....................................        (86)           (72)            -             (158)
                                                          -------        -------       -------          -------

Income before income taxes............................        586            423          (423)             586
Income tax provision..................................       (418)           (92)           92             (418)
                                                          -------        -------       -------          -------

Net income............................................        168            331          (331)             168
Preferred dividend requirements(3)....................       (540)             -             -             (540)
                                                          -------        -------       -------          -------

Net income (loss) applicable to common shares.........    $  (372)       $   331       $  (331)         $ (372)
                                                          =======        =======       =======          =======

Net loss per common shares:
   Basic..............................................    $ (0.31)       $     -       $     -          $ (0.31)
                                                          =======        =======       =======          =======
   Diluted............................................    $ (0.31)       $     -       $     -          $ (0.31)
                                                          =======        =======       =======          =======

Average common shares:
   Basic..............................................    1,194.7              -             -          1,194.7
                                                          =======        =======       =======          =======
   Diluted............................................    1,194.7              -             -          1,194.7
                                                          =======        =======       =======          =======

- ---------------
(1)  Includes depreciation and amortization
     expense of:.....................................     $ 1,178        $ 1,436       $    21          $ 2,635
                                                          =======        =======       =======          =======

(2)  Includes a charge of approximately $210 million recognized
     by TWE principally to reduce the carrying value of an
     interest in Primestar, Inc.

(3) Preferred dividend requirements include a one-time effect of
    $234  million ($.19 loss per common  share) relating to the
    premium paid in connection  with Time Warner's  redemption of
    its Series M  exchangeable preferred stock.



See accompanying notes.

</TABLE>


<PAGE>


                                TIME WARNER INC.
                       NOTES TO THE RESTATED AND PRO FORMA
                   CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


(a)   Reflects the historical  financial  position and operating results of Time
      Warner and the Entertainment  Group, which substantially  consists of TWE,
      as of and for the six  months  ended  June 30,  1999  and the  year  ended
      December 31, 1998. Certain  reclassifications have been made to conform to
      the new, consolidated presentation.

(b)   Adjustments  reflect  the  elimination  of  all  significant  intercompany
      accounts and transactions  between Time Warner and the Entertainment Group
      and other  consolidating  adjustments  necessary to prepare a consolidated
      set of  financial  statements.  These  adjustments  primarily  include the
      elimination of (i) intercompany  revenues and expenses,  (ii) intercompany
      receivables and payables and (iii) the Entertainment  Group's  partnership
      capital and Time Warner's investment in the Entertainment Group.


<PAGE>


                                Time Warner Inc.
                       Supplementary Financial Information
                               By Business Segment
                                  (In millions)
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                THREE MONTHS ENDED                            SIX MONTHS ENDED     YEAR ENDED
                              ------------------------------------------------------------  --------------------  -----------
                                    MARCH 31,           JUNE 30,       SEPT 30, DECEMBER 31,      JUNE 30,        DECEMBER 31,
                              ------------------- ------------------- ---------- ---------  --------------------  -----------
                               Restated Pro Forma  Restated Pro Forma Pro Forma  Pro Forma  Restated   Pro Forma  Pro Forma
                               1999 (4)  1998 (4)  1999 (4)  1998 (4)  1998 (4)  1998 (4)   1999 (4)   1998 (4)   1998 (4)
                              --------- --------- --------- --------- ---------- ---------  --------  ----------  -----------
      Revenues
<S>                              <C>       <C>       <C>       <C>        <C>       <C>       <C>         <C>         <C>
      Cable Networks             $1,364    $1,240    $1,611    $1,415     $1,330    $1,392   $ 2,975     $ 2,655     $ 5,377

      Publishing                    974       948     1,153     1,136      1,076     1,336     2,127       2,084       4,496

      Music                         936       888       828       905        938     1,294     1,764       1,793       4,025

      Filmed Entertainment        1,697     1,684     1,783     1,834      2,272     2,188     3,480       3,518       7,978

      Broadcasting-
      The WB Network                 79        45        83        61         64        90       162         106         260

      Cable                       1,296     1,401     1,330     1,326      1,288     1,327     2,626       2,727       5,342

      Intersegment
      elimination                  (255)     (258)     (257)     (241)      (375)     (360)     (512)       (499)     (1,234)
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------

      Total                      $6,091    $5,948    $6,531    $6,436     $6,593    $7,267   $12,622     $12,384     $26,244
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------


      EBITA (1)

      Cable Networks             $  309    $  262    $  366    $  311     $  271    $  316   $   675     $   573     $ 1,160

      Publishing                     94        85       196       176        112       234       290         261         607

      Music                         102        93       101        96         99       205       203         189         493

      Filmed
      Entertainment (2)             375       104       203       160        233       198       578         264         695

      Broadcasting-
      The WB Network                (41)      (38)      (30)      (23)       (17)      (15)      (71)        (61)        (93)

      Cable (3)                     403       381     1,180       448        417       448     1,583         829       1,694

      Intercompany
      elimination                    12       (35)        1        (8)       (33)      (18)       13        (43)         (94)
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------

      Total                      $1,254    $  852    $2,017    $1,160     $1,082    $1,368   $ 3,271     $ 2,012     $ 4,462
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------


      Depreciation of Property, Plant
        and Equipment

      Cable Networks             $   31    $   27    $   32    $   30     $   31    $   28   $    63     $    57     $   116

      Publishing                     19        19        19        19         20        22        38          38          80

      Music                          17        19        18        19         16        18        35          38          72

      Filmed
      Entertainment                  30        42        38        39         49        42        68          81         172

      Broadcasting-
      The WB Network                  -         -         1         -          1         -         1           -           1

      Cable                         182       231       198       215        206       212       380         446         864
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------

      Total                      $  279    $  338    $  306    $  322     $  323    $  322   $   585     $   660     $ 1,305
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------


<PAGE>



                                                THREE MONTHS ENDED                            SIX MONTHS ENDED     YEAR ENDED
                              ------------------------------------------------------------  --------------------  -----------
                                    MARCH 31,           JUNE 30,       SEPT 30, DECEMBER 31,      JUNE 30,        DECEMBER 31,
                              ------------------- ------------------- ---------- ---------  --------------------  -----------
                               Restated Pro Forma  Restated Pro Forma Pro Forma  Pro Forma  Restated   Pro Forma  Pro Forma
                               1999 (4)  1998 (4)  1999 (4)  1998 (4)  1998 (4)  1998 (4)   1999 (4)   1998 (4)   1998 (4)
                              --------- --------- --------- --------- ---------- ---------  --------  ----------  -----------

      Amortization of Intangible
      Assets

      Cable Networks             $   50    $   50    $   51    $   50     $   50    $   50   $   101     $   100     $   200

      Publishing                     10         9        10         8         10        11        20          17          38

      Music                          67        68        70        71         69        72       137         139         280

      Filmed
      Entertainment                  50        54        50        54         58        50       100         108         216

      Broadcasting-
      The WB Network                  1         1         1         1          -         1         2           2           3

      Cable                         133       152       134       148        148       145       267         300         593
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------
      Total                      $  311    $  334    $  316    $  332     $  335    $  329   $   627     $   666     $ 1,330
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------


      --------------------------------
      (1) EBITA represents
          business segment
          operating income
          before noncash
          amortization of
          intangible assets,
          Time Warner's
          business segment
          operating income was:  $  943    $  518    $1,701    $  828     $  747    $1,039   $ 2,644     $ 1,346     $ 3,132
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------
                              ---------  --------  --------  --------   --------  --------  --------  ----------  ----------

      (2) Includes a net
          pretax gain of
          approximately $215
          million recognized
          in the first
          quarter of 1999 in
          connection with
          the early termination
          and settlement of a
          long-term home video
          distribution agreement.

      (3) Includes net pretax
          gains relating to the
          sale or exchange of
          certain cable television
          systems and investments
          of $771 million in
          the second quarter
          of 1999, $14 million
          in the first quarter of
          1998 and $70 million in
          the second quarter of 1998.

      (4) Restated and pro
          forma amounts reflect
          the consolidation of
          the Entertainment
          Group, substantially
          all TWE, retroactive
          to the beginning
          of each period.


</TABLE>


<PAGE>



                                    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,  in the City of New York, State of New
York, on September 16, 1999.


                                         TIME WARNER INC.



                                         By:   /s/  Joseph A. Ripp
                                         Name:    Joseph A. Ripp
                                         Title:   Executive Vice President
                                                  and Chief Financial Officer






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