-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MTDpauSgHUwL+f7LiiDgAtcBgRybDbxl4pe+82RMHT1Wn/Pjrtdiuoni2Evjbp5K wW9yWda89xPFKp0KwyBXKw== /in/edgar/work/0000893657-00-000016/0000893657-00-000016.txt : 20001114 0000893657-00-000016.hdr.sgml : 20001114 ACCESSION NUMBER: 0000893657-00-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIME WARNER ENTERTAINMENT CO L P CENTRAL INDEX KEY: 0000893657 STANDARD INDUSTRIAL CLASSIFICATION: [7812 ] IRS NUMBER: 133666692 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12878 FILM NUMBER: 761712 BUSINESS ADDRESS: STREET 1: 75 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124848000 MAIL ADDRESS: STREET 1: 75 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN TELEVISION & COMMUNICATIONS CORP CENTRAL INDEX KEY: 0000005910 STANDARD INDUSTRIAL CLASSIFICATION: [4841 ] IRS NUMBER: 132922502 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-04049 FILM NUMBER: 761713 BUSINESS ADDRESS: STREET 1: 75 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2033280600 MAIL ADDRESS: STREET 1: 75 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARNER COMMUNICATIONS INC CENTRAL INDEX KEY: 0000104650 STANDARD INDUSTRIAL CLASSIFICATION: [3652 ] IRS NUMBER: 132696809 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-53742-14 FILM NUMBER: 761714 BUSINESS ADDRESS: STREET 1: 75 ROCKEFELLER PLZ STREET 2: C/O TIME WARNER ENTERTAINMENT CO L P CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124848000 MAIL ADDRESS: STREET 1: 75 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10019 10-Q 1 0001.txt TIME WARNER ENTERTAIMENT 3RD QUARTER 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 for the quarterly period ended September 30, 2000, or [ ] 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 001-12878 _________ TIME WARNER ENTERTAINMENT COMPANY, L.P. (Exact name of registrant as specified in its charter) Delaware 13-3666692 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) American Television and Communications Corporation Delaware 13-2922502 Warner Communications Inc. Delaware 13-2696809 (Exact name of registrant (State or other (I.R.S. Employer as specified in its charter) jurisdiction of Identification Number) incorporation or organization) 75 Rockefeller Plaza New York, New York 10019 (212) 484-8000 (Address, including zip code, and telephone number, including area code, of each registrant's principal executive offices) 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 TIME WARNER ENTERTAINMENT COMPANY L.P. AND TWE GENERAL PARTNERS INDEX TO FORM 10-Q Page --------------- TWE General TWE Partners --- -------- PART I. FINANCIAL INFORMATION Management's discussion and analysis of results of operations and financial condition............................................................ 1 22 Consolidated balance sheets at September 30, 2000 and December 31, 1999........ 10 26 Consolidated statements of operations for the three months and nine months ended September 30, 2000 and 1999.............................................. 11 27 Consolidated statements of cash flows for the nine months ended September 30, 2000 and 1999.................................................................. 12 29 Consolidated statements of partnership capital and shareholders' equity for the nine months ended September 30, 2000 and 1999................................. 13 30 Notes to consolidated financial statements...................................... 14 31 PART II. OTHER INFORMATION...................................................... 38
TIME WARNER ENTERTAINMENT COMPANY, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Description of Business Time Warner Entertainment Company, L.P. ("TWE" or the "Company") classifies its business interests into four fundamental areas: Cable Networks, consisting principally of interests in cable television programming; Filmed Entertainment, consisting principally of interests in filmed entertainment, television production and television broadcasting; Cable, consisting principally of interests in cable television systems; and Digital Media, consisting principally of interests in Internet-related and digital media businesses. TWE also manages the cable properties owned by Time Warner Inc. ("Time Warner") and the combined cable television operations are conducted under the name of Time Warner Cable. Use of EBITA TWE evaluates operating performance based on several factors, including its primary financial measure of business segment operating income before noncash amortization of intangible assets ("EBITA"). Consistent with management's financial focus on controlling capital spending, EBITA measures operating performance after charges for depreciation. In addition, EBITA eliminates the uneven effect across all business segments of considerable amounts of noncash amortization of intangible assets recognized in business combinations accounted for by the purchase method. These business combinations include Time Warner's $14 billion acquisition of Warner Communications Inc. in 1989 and $1.3 billion acquisition of the minority interest in American Television and Communications Corporation in 1992, which created over $10 billion of intangible assets that generally are being amortized over a twenty to forty year period. The exclusion of noncash amortization charges also is consistent with management's belief that TWE's intangible assets, such as cable television franchises, film and television libraries and the goodwill associated with its brands, generally are increasing in value and importance to TWE's business objective of creating, extending and distributing recognizable brands and copyrights throughout the world. As such, the following comparative discussion of the results of operations of TWE includes, among other factors, an analysis of changes in business segment EBITA. However, EBITA should be considered in addition to, not as a substitute for, operating income, net income and other measures of financial performance reported in accordance with generally accepted accounting principles. Transactions Affecting Comparability of Results of Operations As more fully described herein, the comparability of TWE's operating results has been affected by certain significant transactions and nonrecurring items in each period. For 2000, the significant, nonrecurring items included (i) a net pretax, investment-related gain of approximately $65 million recognized in the third quarter, principally relating to additional proceeds received in the third quarter of 2000 in connection with the 1999 sale of an interest in CanalSatellite, a satellite television platform servicing France and Monaco, (ii) net pretax losses of approximately $8 million recognized in the second quarter relating to the sale or exchange of various cable television systems and investments, (iii) a $50 million pretax charge recognized in the second quarter related to the Six Flags Entertainment Corporation ("Six Flags") litigation, (iv) a pretax gain of $10 million recognized in the first quarter relating to the partial recognition of a deferred gain on the 1998 sale of Six Flags and (v) a noncash charge of $524 million in the first quarter reflecting the cumulative effect of an accounting change in connection with the adoption of a new film accounting standard. For 1999, the significant, nonrecurring items included (i) net pretax gains of approximately $358 million recognized in the third quarter and approximately $1.118 billion recognized in the first nine months relating to the sale 1 TIME WARNER ENTERTAINMENT COMPANY, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) or exchange of various cable television systems and investments, (ii) a pretax gain of $10 million recognized in each of the first three quarters relating to the partial recognition of a deferred gain on the 1998 sale of Six Flags and (iii) an approximate $215 million pretax gain recognized in the first quarter in connection with the early termination and settlement of a long-term, home video distribution agreement. In order to meaningfully assess underlying operating trends, management believes that the results of operations for each period should be analyzed after excluding the effects of significant nonrecurring items. As such, the following discussion and analysis focuses on amounts and trends adjusted to exclude the impact of these unusual items. However, unusual items may occur in any period. Accordingly, investors and other financial statement users individually should consider the types of events and transactions for which adjustments have been made. RESULTS OF OPERATIONS EBITA and operating income are as follows: Three Months Ended September 30, Nine Months Ended September 30, -------------------------------- ------------------------------------- Operating Operating EBITA Income EBITA Income ----------- -------------- ------------- ---------------- Income 2000 1999 2000 1999 2000 1999 2000 1999 ---- ---- ---- ----- ---- ---- ---- ---- (millions) Filmed Entertainment-Warner Bros.(a)........ $215 $180 $185 $150 $ 482 $658 $391 $567 Broadcasting-The WB Network................. (15) (24) (17) (25) (67) (95) (71) (98) Cable Networks-HBO.......................... 154 138 154 138 448 394 448 394 Cable(b).................................... 404 699 293 600 1,182 2,135 853 1,863 Digital Media............................... (15) - (15) - (45) - (45) - ---- ----- ----- ---- ----- ----- ---- ------ Total....................................... $743 $993 $600 $863 $2,000 $3,092 $1,576 $2,726 ==== ==== ==== ==== ====== ====== ====== ====== - ----------- (a) Includes a net pretax, investment-related gain of approximately $65 million recognized in the third quarter of 2000, a pre- tax charge of $24 million recognized in the second quarter of 2000 in connection with the Six Flags litigation, a pretax gain of $10 million related to the partial recognition of a deferred gain in connection with the 1998 sale of Six Flags recog- nized in the first quarter of 2000 and in each of the first three quarters of 1999 and a pretax gain of approximately $215 million recognized in the first quarter of 1999 relating to the early termination and settlement of a long-term, home video distribution agreement. (b) Includes net pretax gains related to the sale or exchange of certain cable television systems and investments of approximately $358 million recognized in the third quarter of 1999. Similarly, nine-month results include net pretax losses of $8 million in 2000 and net pretax gains of $1.118 billion in 1999.
Three Months Ended September 30, 2000 Compared to the Three Months Ended September 30, 1999 Consolidated Results TWE had revenues of $3.494 billion and net income of $248 million for the three months ended September 30, 2000, compared to revenues of $3.474 billion and net income of $561 million for the three months ended September 30, 1999. As previously described, the comparability of TWE's operating results for 2000 and 1999 has been affected by certain significant, nonrecurring items recognized in each period. These nonrecurring items aggregated to a net pretax income of approximately $65 million in 2000, compared to approximately $368 million of net pretax income in 1999. 2 TIME WARNER ENTERTAINMENT COMPANY, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) TWE's net income decreased to $248 million in 2000, compared to $561 million in 1999. However, excluding the effect of the nonrecurring items referred to earlier, net income decreased by $27 million to $183 million in 2000 from $210 million in 1999. As discussed more fully below, this decrease principally resulted from higher interest expense principally due to higher market interest rates on variable-rate debt and higher losses from certain investments accounted for under the equity method, offset in part by an overall increase in TWE's business segment operating income. As a U.S. partnership, TWE is not subject to U.S. federal and state income taxation. Income and withholding taxes of $57 million and $39 million for the three months ended September 30, 2000 and 1999, respectively, have been provided for the operations of TWE's domestic and foreign subsidiary corporations. Business Segment Results Filmed Entertainment-Warner Bros. Revenues decreased to $1.686 billion in 2000, compared to $1.862 billion in 1999. EBITA increased to $215 million in 2000 from $180 million in 1999. Operating income similarly increased to $185 million in 2000 from $150 million in 1999 due to the one-time items. Revenues decreased primarily due to the 1999 initial off-network availability of the popular television series The Drew Carey Show. Revenues from theatrical operations were essentially flat, as the combination of higher worldwide DVD sales and domestic theatrical revenues offset lower international theatrical revenues, principally relating to last year's highly successful release of The Matrix. The operating results in both periods were affected by certain one-time items. The 2000 results include a net pretax, investment-related gain of $65 million. The 1999 results include a pretax gain of $10 million relating to the partial recognition of a deferred gain on the 1998 sale of Six Flags. Excluding the impact of these items, EBITA and operating income decreased as a result of the decline in revenues, offset in part by lower film and television costs. Broadcasting-The WB Network. Revenues increased to $99 million in 2000, compared to $84 million in 1999. EBITA improved to a loss of $15 million in 2000 from a loss of $24 million in 1999. Operating losses decreased to $17 million in 2000 from $25 million in 1999. Revenues increased principally as a result of one additional night of prime-time programming in comparison to the prior year and advertising rate increases, offset in part by lower prime-time television ratings. Prime-time television ratings were negatively affected by lower household delivery associated with the WGN Superstation discontinuing its carriage of The WB Network's programming beginning in the fall of 1999. The EBITA and operating loss improvements were principally due to the revenue gains and lower promotion costs, which more than offset higher programming costs associated with the expanded programming schedule. Cable Networks-HBO. Revenues increased to $559 million in 2000, compared to $540 million in 1999. EBITA and operating income increased to $154 million in 2000 from $138 million in 1999. Revenues benefited primarily from an increase in subscriptions. EBITA and operating income were higher principally due to the revenue gains, increased cost savings and higher income from Comedy Central, a 50%-owned equity investee. Cable. Revenues increased to $1.288 billion in 2000, compared to $1.124 billion in 1999. EBITA, including the negative effect on operating trends of one-time gains recognized in 1999, decreased to $404 million in 2000 from $699 million in 1999. Operating income similarly decreased to $293 million in 2000 from $600 million in 1999 due to one-time gains. Revenues increased due to growth in basic cable subscribers, increases in basic cable rates, increases in advertising revenues and increases from the deployment of digital cable and high-speed online services. The 1999 operating results of the Cable segment were affected by net pretax gains of approximately $358 million relating to the 3 TIME WARNER ENTERTAINMENT COMPANY, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) sale or exchange of various cable television systems and investments. Excluding the effect of these items, EBITA and operating income increased principally as a result of the revenue gains and pension-related cost savings, offset in part by higher programming costs and higher depreciation related to capital spending. Digital Media. The Digital Media segment had $15 million of operating losses on $2 million of revenues in 2000 principally due to start-up costs associated with TWE's digital media businesses. TWE's digital media businesses include Entertaindom, an advertiser-supported entertainment destination site, and other entertainment-related websites. Due to the start-up nature of most of these businesses, losses are expected to continue in 2000. Interest and Other, Net. Interest and other, net, increased to $214 million of expense in 2000, compared to $185 million of expense in 1999. Interest expense increased to $165 million in 2000, compared to $138 million in 1999 as a result of higher market interest rates on variable-rate debt. Other expense, net, increased to $49 million in 2000, compared to $47 million in 1999, primarily because of higher losses from certain investments accounted for under the equity method of accounting. Minority Interest. Minority interest expense increased to $62 million in 2000, compared to $60 million in 1999. Minority interest expense was affected by the allocation of a portion of the net pretax gains in 1999 relating to the sale or exchange of various cable television systems and investments owned by the TWE-Advance/Newhouse Partnership ("TWE-A/N") to the minority owners of that partnership. Excluding the effect of the 1999 gains, minority interest expense increased principally due to a lower allocation of losses in 2000 to a minority partner in The WB Network. Nine Months Ended September 30, 2000 Compared to the Nine Months Ended September 30, 1999 Consolidated Results TWE had revenues of $10.118 billion, income of $617 million before the cumulative effect of an accounting change and net income of $93 million for the nine months ended September 30, 2000, compared to revenues of $9.468 billion and net income of $1.640 billion for the nine months ended September 30, 1999. As previously described, the comparability of TWE's operating results for 2000 and 1999 has been affected by certain significant, nonrecurring items recognized in each period. These items aggregated approximately $17 million of net pretax income in 2000, compared to approximately $1.363 billion of net pretax income in 1999. In addition, net income in 2000 was reduced by a charge of $524 million relating to the cumulative effect of an accounting change. TWE had net income of $93 million in 2000, compared to net income of $1.640 billion in 1999. However, excluding the significant effect of the nonrecurring items referred to earlier, net income increased by $148 million to $600 million in 2000 from $452 million in 1999. As discussed more fully below, this increase principally resulted from an overall increase in TWE's business segment operating income and lower losses from certain investments accounted for under the equity method, offset in part by higher interest expense principally due to higher market interest rates on variable-rate debt and higher losses associated with TWE's asset securitization program. Business Segment Results Filmed Entertainment-Warner Bros. Revenues increased to $4.705 billion in 2000, compared to $4.688 billion in 1999. EBITA, including the effect on operating trends of one-time items recognized in each period, decreased to $482 4 TIME WARNER ENTERTAINMENT COMPANY, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) million in 2000 from $658 million in 1999. Operating income similarly decreased to $391 million in 2000 from $567 million in 1999 due to the one-time items. Revenues benefited from increases in the distribution of both theatrical and television product, offset in part by lower revenues from consumer product operations. Warner Bros.'s revenues from the distribution of theatrical product increased principally due to higher worldwide DVD sales, offset in part by lower revenues from worldwide theatrical operations, principally relating to last year's highly successful release of The Matrix. Warner Bros.'s revenues from the distribution of television product increased principally due to higher aggregate revenues from basic cable, broadcast network and international syndicated television exhibition, offset in part by lower revenues from domestic syndicated television exhibition relating to the 1999 initial off-network availability of the popular television series The Drew Carey Show. The operating results in both periods were affected by certain one-time items. The 2000 results include a net pretax, investment-related gain of $65 million, a pretax charge of $24 million relating to the Six Flags litigation and a $10 million pretax gain relating to the partial recognition of a deferred gain on the 1998 sale of Six Flags. The 1999 results include pretax gains of $30 million relating to the partial recognition of a deferred gain on the 1998 sale of Six Flags and a $215 million net pretax gain recognized in connection with the early termination and settlement of a long-term, home video distribution agreement. Excluding the impact of these items, EBITA and operating income increased principally as a result of the revenue gains and lower film costs, offset in part by lower results from domestic television syndication operations. Broadcasting-The WB Network. Revenues increased to $310 million in 2000, compared to $246 million in 1999. EBITA improved to a loss of $67 million in 2000 from a loss of $95 million in 1999. Operating losses decreased to $71 million in 2000 from $98 million in 1999. Revenues increased principally as a result of one additional night of prime-time programming in comparison to the prior year and advertising rate increases, offset in part by lower prime- time television ratings. Prime-time television ratings were negatively affected by lower household delivery associated with the WGN Superstation discontinuing its carriage of The WB Network's programming beginning in the fall of 1999. The EBITA and operating loss improvements were principally due to the revenue gains, which more than offset higher programming costs associated with the expanded programming schedule. Cable Networks-HBO. Revenues increased to $1.683 billion in 2000, compared to $1.612 billion in 1999. EBITA and operating income increased to $448 million in 2000 from $394 million in 1999. Revenues benefited primarily from an increase in subscriptions. The increase in EBITA and operating income was principally due to the revenue gains, increased cost savings and higher income from Comedy Central, a 50%-owned equity investee. Cable. Revenues increased to $3.799 billion in 2000, compared to $3.312 billion in 1999. EBITA, including the negative effect on operating trends of one-time items recognized in each period, decreased to $1.182 billion in 2000 from $2.135 billion in 1999. Operating income similarly decreased to $853 million in 2000 from $1.863 billion in 1999 due to the one-time items. Revenues increased due to growth in basic cable subscribers, increases in basic cable rates, increases in advertising revenues and increases from the deployment of digital cable and high-speed online services. The operating results of the Cable segment were affected by net pretax losses of approximately $8 million in 2000 and net pretax gains of approximately $1.118 billion in 1999 relating to the sale or exchange of various cable television systems and investments. Excluding the effect of these items, EBITA and operating income increased principally as a result of the revenue gains and pension-related cost savings, offset in part by higher programming costs and higher depreciation related to capital spending. 5 TIME WARNER ENTERTAINMENT COMPANY, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Digital Media. The Digital Media segment had $45 million of operating losses on $5 million of revenues in 2000 principally due to start-up costs associated with TWE's digital media businesses. TWE's digital media businesses include Entertaindom, an advertiser-supported entertainment destination site, and other entertainment-related websites. Due to the start-up nature of most of these businesses, losses are expected to continue in 2000. Interest and Other, Net. Interest and other, net, increased to $640 million of expense in 2000, compared to $572 million of expense in 1999. Interest expense increased to $478 million in 2000, compared to $411 million in 1999 as a result of higher market interest rates on variable-rate debt and $26 million of additional interest expense recorded in 2000 in connection with the Six Flags litigation. Other expense, net, increased to $162 million in 2000, compared to $161 million in 1999. This marginal increase principally related to higher losses associated with TWE's asset securitization program, offset primarily by lower losses from certain investments accounted for under the equity method. Minority Interest. Minority interest expense decreased to $145 million in 2000, compared to $366 million in 1999. The decrease in minority interest expense was principally due to the allocation of a portion of the higher net pretax gains in 1999 relating to the sale or exchange of various cable television systems and investments owned by TWE-A/N to the minority owners of that partnership. Excluding the significant effect of the 1999 gains, minority interest expense decreased principally due to a higher allocation of losses in 2000 to a minority partner in The WB Network. FINANCIAL CONDITION AND LIQUIDITY September 30, 2000 Financial Condition At September 30, 2000, TWE had $6.5 billion of debt, $262 million of cash and equivalents (net debt of $6.2 billion) and $6.4 billion of partners' capital. This compares to $6.7 billion of debt, $517 million of cash and equivalents (net debt of $6.2 billion) and $7.1 billion of partners' capital at December 31, 1999. Cash Flows During the first nine months of 2000, TWE's cash provided by operations amounted to $2.172 billion and reflected $2.000 billion of business segment EBITA, $666 million of noncash depreciation expense and $221 million of proceeds from TWE's asset securitization program, less $417 million of interest payments, $81 million of income taxes, $56 million of corporate expenses and $161 million related to an aggregate increase in working capital requirements, other balance sheet accounts and noncash items. Cash provided by operations of $2.205 billion in the first nine months of 1999 reflected $3.092 billion of business segment EBITA, $632 million of noncash depreciation expense and $20 million of proceeds from TWE's asset securitization program, less $394 million of interest payments, $84 million of income taxes, $54 million of corporate expenses and $1.007 billion related to an aggregate increase in working capital requirements, other balance sheet accounts and noncash items. Cash used by investing activities was $1.500 billion in the first nine months of 2000, compared to $540 million in the first nine months of 1999, principally as a result of a decrease in cash proceeds from the sale of investments, higher capital expenditures and the absence in 2000 of the 1999 collection of TWE's $400 million loan to Time Warner. Capital expenditures increased to $1.436 billion in the first nine months of 2000, compared to $1.009 billion in the first nine months of 1999, reflecting higher spending on variable capital to facilitate a more aggressive roll-out of Time Warner Cable's popular digital cable and high-speed online services. 6 TIME WARNER ENTERTAINMENT COMPANY, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) Cash used by financing activities was $927 million in the first nine months of 2000, compared to $1.517 billion in the first nine months of 1999. The use of cash in 2000 principally resulted from the payment of $684 million of capital distributions to Time Warner and $168 million of debt reduction. The use of cash in 1999 principally resulted from the redemption of preferred stock of a subsidiary at an aggregate cost of $217 million, the payment of $1.116 billion of capital distributions to Time Warner and $39 million of debt reduction. Management believes that TWE's operating cash flow, cash and equivalents and additional borrowing capacity are sufficient to fund its capital and liquidity needs for the foreseeable future. Cable Capital Spending Time Warner Cable has been engaged in a plan to upgrade the technological capability and reliability of its cable television systems and develop new services, which it believes will position the business for sustained, long-term growth. Capital spending by TWE's Cable segment amounted to $1.351 billion in the nine months ended September 30, 2000, compared to $910 million in the nine months ended September 30, 1999. Cable capital spending for the fourth quarter of 2000 is budgeted to be approximately $425 million, reflecting higher spending on variable capital to facilitate a more aggressive roll-out of Time Warner Cable's popular digital cable and high-speed online services. Capital spending is expected to continue to be funded by cable operating cash flow. Warner Bros. Backlog Warner Bros.'s backlog represents the amount of future revenue not yet recorded from cash contracts for the licensing of theatrical and television product for pay cable, basic cable, network and syndicated television exhibition. Warner Bros.'s backlog amounted to $2.737 billion at September 30, 2000, compared to $3.033 billion at December 31, 1999 (including amounts relating to licensing of film product to TWE's cable television networks of $254 million and to Time Warner's cable television networks of $612 million at September 30, 2000 and $365 million to TWE's cable television networks and $599 million to Time Warner's cable television networks at December 31, 1999). Because backlog generally relates to contracts for the licensing of theatrical and television product which have already been produced, the recognition of revenue for such completed product is principally only dependent upon the commencement of the availability period for telecast under the terms of the related licensing agreement. Cash licensing fees are collected periodically over the term of the related licensing agreements or on an accelerated basis using a $500 million securitization facility. The portion of backlog for which cash has not already been received has significant off-balance sheet asset value as a source of future funding. As of September 30, 2000, including cash received under the securitization facility and other advanced payments, approximately $625 million of cash licensing fees had been collected against the backlog. The backlog excludes advertising barter contracts, which are also expected to result in the future realization of revenues and cash through the sale of advertising spots received under such contracts. Caution Concerning Forward-Looking Statements The Securities and Exchange Commission (the "SEC") encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. This document, together with management's public commentary related thereto, contains such "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, particularly statements 7 TIME WARNER ENTERTAINMENT COMPANY, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) anticipating future growth in revenues, EBITA and cash flow. Words such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes" and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify such forward-looking statements. Those forward-looking statements are management's present expectations or beliefs about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances, and TWE is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of such changes, new information, future events or otherwise. TWE operates in highly competitive, consumer driven and rapidly changing media and entertainment businesses that are dependent on government regulation and economic, political and social conditions in the countries in which they operate, consumer demand for their products and services, technological developments and (particularly in view of technological changes) protection of their intellectual property rights. TWE's actual results could differ materially from management's expectations because of changes in such factors. Some of the other factors that also could cause actual results to differ from those contained in the forward-looking statements include those identified in TWE's other filings with the SEC and: . For TWE's cable business, more aggressive than expected competition from new technologies and other types of video programming distributors, including DBS and DSL; increases in government regulation of basic cable or equipment rates or other terms of service (such as "digital must-carry," open access or common carrier requirements); increased difficulty in obtaining franchise renewals; the failure of new equipment (such as digital set-top boxes) or services (such as digital cable, high-speed online services, telephony over cable or video on demand) to appeal to enough consumers or to be available at reasonable prices to function as expected and to be delivered in a timely fashion; and greater than expected increases in programming or other costs. . For TWE's cable programming and television businesses, greater than expected programming or production costs; public and cable operator resistance to price increases (and the negative impact on premium programmers of increases in basic cable rates); increased regulation of distribution agreements; the sensitivity of advertising to economic cyclicality; and greater than expected fragmentation of consumer viewership due to an increased number of programming services or the increased popularity of alternatives to television. . For TWE's film and television businesses, their ability to continue to attract and select desirable talent and scripts at manageable costs; general increases in production costs; fragmentation of consumer leisure and entertainment time (and its possible negative effects on the broadcast and cable networks, which are significant customers of these businesses); continued popularity of merchandising; and the uncertain impact of technological developments such as DVD and the Internet. . For TWE's digital media businesses, their ability to locate and invest in profitable businesses, to develop products and services that are attractive, accessible and commercially viable in terms of content, technology and cost; their ability to manage costs and generate revenues; aggressive competition from existing and developing technologies and products; the resolution of issues concerning commercial activities via the Internet, including security, reliability, cost, ease of use and access; and the possibility of increased government regulation of new media services. 8 TIME WARNER ENTERTAINMENT COMPANY, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION-(Continued) In addition, TWE's overall financial strategy, including growth in operations, maintaining its financial ratios and strengthened balance sheet, could be adversely affected by increased interest rates, failure to meet earnings expectations, significant acquisitions or other transactions, consequences of the euro conversion and changes in TWE's plans, strategies and intentions. 9 TIME WARNER ENTERTAINMENT COMPANY, L.P. CONSOLIDATED BALANCE SHEET (Unaudited) September 30, December 31, 2000 1999 ------------- ------------ (millions) ASSETS Current assets Cash and equivalents...................................................... $ 262 $ 517 Receivables, including $1.138 and $1.354 billion due from Time Warner, less allowances of $602 and $668 million................................ 2,912 3,328 Inventories................................................................ 630 639 Prepaid expenses........................................................... 200 246 ------- ------ Total current assets....................................................... 4,004 4,730 Noncurrent inventories and film costs...................................... 2,526 2,855 Investments................................................................ 728 774 Property, plant and equipment.............................................. 7,259 6,488 Cable television franchises................................................ 5,322 5,464 Goodwill................................................................... 3,709 3,731 Other assets............................................................... 781 801 -------- ------- Total assets............................................................... $24,329 $24,843 ======= ======= LIABILITIES AND PARTNERS' CAPITAL Current liabilities Accounts payable........................................................... $ 1,858 $ 1,791 Participations payable..................................................... 1,072 1,258 Programming costs payable.................................................. 518 459 Debt due within one year................................................... 6 6 Other current liabilities, including $1.106 billion and $893 million due to Time Warner............................................................... 2,628 2,209 ------ ----- Total current liabilities.................................................. 6,082 5,723 Long-term debt............................................................. 6,487 6,655 Other long-term liabilities, including $1.368 and $1.292 billion due to Time Warner............................................................... 3,473 3,501 Minority interests......................................................... 1,846 1,815 Partners' capital Contributed capital........................................................ 7,349 7,338 Partnership deficit........................................................ (908) (189) ------- ------- Total partners' capital.................................................... 6,441 7,149 ------- ------- Total liabilities and partners' capital.................................... $24,329 $24,843 ======= ======= See accompanying notes.
10 TIME WARNER ENTERTAINMENT COMPANY, L.P. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) Revenues(a).............................................................. $ 3,494 $ 3,474 $ 10,118 $ 9,468 ------- ------- ------- ------- Cost of revenues(a)(b)................................................... (2,094) (2,246) (6,096) (5,943) Selling, general and administrative(a)(b)................................ (657) (593) (2,014) (1,766) Amortization of goodwill and other intangible assets..................... (143) (130) (424) (366) Gain (loss) on sale or exchange of cable systems and investments(a)...... - 358 (8) 1,118 Gain on early termination of video distribution agreement................ - - - 215 ------- ------ ------- ------ Business segment operating income........................................ 600 863 1,576 2,726 Interest and other, net(a)............................................... (214) (185) (640) (572) Corporate services(a).................................................... (19) (18) (56) (54) Minority interest........................................................ (62) (60) (145) (366) ------- ------ ------ ------ Income before income taxes and cumulative effect of accounting change................................................................ 305 600 735 1,734 Income taxes............................................................. (57) (39) (118) (94) ------- ------ ------ ------ Income before cumulative effect of accounting change..................... 248 561 617 1,640 Cumulative effect of accounting change................................... - - (524) - ------- ------- ------ ------ Net income............................................................... $ 248 $ 561 $ 93 $ 1,640 ======= ======= ======== ======= - --------------- (a) Includes the following income (expenses) resulting from transactions with the partners of TWE and other related companies: Revenues........................................................... $224 $150 $443 $422 Cost of revenues................................................... (111) (62) (258) (198) Selling, general and administrative................................ (6) (7) (53) (23) Gain on sale or exchange of cable systems and investments - 308 - 308 Interest and other, net............................................ 11 (8) 20 20 Corporate services................................................. (19) (18) (56) (54) (b) Includes depreciation expense of:.................................... $229 $226 $666 $632 ===== ==== ==== ==== See accompanying notes.
11 TIME WARNER ENTERTAINMENT COMPANY, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Nine Months Ended September 30, ------------------- 2000 1999 ---- ---- (millions) OPERATIONS Net income............................................................... $ 93 $1,640 Adjustments for noncash and nonoperating items: Cumulative effect of accounting change................................ 524 - Depreciation and amortization......................................... 1,090 998 Amortization of film costs............................................ 1,160 1,397 (Gain) loss on sale or exchange of cable systems and investments...... 8 (1,118) Equity in losses of investee companies after distributions............ 164 157 Changes in operating assets and liabilities.............................. (867) (869) ----- ------ Cash provided by operations.............................................. 2,172 2,205 ------ ------ INVESTING ACTIVITIES Investments and acquisitions............................................. (275) (273) Capital expenditures..................................................... (1,436) (1,009) Investment proceeds...................................................... 211 342 Collection of loan to Time Warner........................................ - 400 ----- ------- Cash used by investing activities........................................ (1,500) (540) ------ ------- FINANCING ACTIVITIES Borrowings............................................................... 1,250 1,854 Debt repayments.......................................................... (1,418) (1,893) Redemption of preferred stock of subsidiary.............................. - (217) Capital distributions.................................................... (684) (1,116) Other.................................................................... (75) (145) ------ ------ Cash used by financing activities........................................ (927) (1,517) ------ ------ INCREASE (DECREASE) IN CASH AND EQUIVALENTS.............................. (255) 148 CASH AND EQUIVALENTS AT BEGINNING OF PERIOD.............................. 517 87 ------ ------ CASH AND EQUIVALENTS AT END OF PERIOD.................................... $ 262 $ 235 ======= =======
See accompanying notes. 12 TIME WARNER ENTERTAINMENT COMPANY, L.P. CONSOLIDATED STATEMENT OF PARTNERSHIP CAPITAL (Unaudited) Nine Months Ended September 30, ------------------- 2000 1999 ---- ---- (millions) BALANCE AT BEGINNING OF PERIOD........................................... $7,149 $5,107 Net income................................................................. 93 1,640 Other comprehensive income (loss).......................................... (57) 6 ------ -------- Comprehensive income(a).................................................... 36 1,646 Distributions.............................................................. (760) (383) Allocation of income to Time Warner General Partners' Senior Capital....... - (24) Other...................................................................... 16 (4) ------ ------- BALANCE AT END OF PERIOD................................................... $6,441 $6,342 ====== ====== - ------------------- (a) Comprehensive income was $237 million for the three months ended September 30, 2000 and $520 million for the three months ended September 30, 1999.
See accompanying notes. 13 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Time Warner Entertainment Company, L.P., a Delaware limited partnership ("TWE"), classifies its business interests into four fundamental areas: Cable Networks, consisting principally of interests in cable television programming; Filmed Entertainment, consisting principally of interests in filmed entertainment, television production and television broadcasting; Cable, consisting principally of interests in cable television systems; and Digital Media, consisting principally of interests in Internet-related and digital media businesses. Each of the business interests within Cable Networks, Filmed Entertainment, Cable and Digital Media is important to TWE's objective of increasing partner value through the creation, extension and distribution of recognizable brands and copyrights throughout the world. Such brands and copyrights include (1) HBO and Cinemax, the leading pay-television services, (2) the unique and extensive film, television and animation libraries of Warner Bros. and trademarks such as the Looney Tunes characters and Batman, (3) The WB Network, a national broadcasting network launched in 1995 as an extension of the Warner Bros. brand and as an additional distribution outlet for Warner Bros.'s collection of children's cartoons and television programming, (4) Time Warner Cable, the second largest operator of cable television systems in the U.S. and (5) Internet websites, such as Entertaindom.com. Financial information for TWE's various business segments is presented herein as an indication of financial performance (Note 5). Except for start-up losses incurred in connection with The WB Network and Digital Media, TWE's principal business segments generate significant operating income and cash flow from operations. The cash flow from operations generated by such business segments is considerably greater than their operating income due to significant amounts of noncash amortization of intangible assets recognized principally in Time Warner Inc.'s ("Time Warner") $14 billion acquisition of Warner Communications Inc. ("WCI") in 1989 and $1.3 billion acquisition of the minority interest in American Television and Communications Corporation ("ATC") in 1992, a portion of which was allocated to TWE upon the capitalization of the partnership. Noncash amortization of intangible assets recorded by TWE's business segments amounted to $143 million for the three months ended September 30, 2000 and $130 million for the three months ended September 30, 1999. On a year-to-date basis, noncash amortization of intangible assets recorded by TWE's business segments amounted to $424 million in 2000 and $366 million in 1999. Certain of Time Warner's wholly owned subsidiaries collectively own 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 ("Series B Capital"). The remaining 25.51% limited partnership interests in the Series A Capital and Residual Capital of TWE are held by a subsidiary of AT&T Corp. Certain of Time Warner's subsidiaries are the general partners of TWE ("Time Warner General Partners"). 14 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Unaudited) Basis of Presentation Interim Financial Statements The accompanying consolidated financial statements are unaudited but, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the financial position and the results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles applicable to interim periods. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements of TWE included in its Annual Report on Form 10-K for the year ended December 31, 1999 (the "1999 Form 10-K"). Cumulative Effect of Change in Film Accounting Principle In June 2000, TWE adopted Statement of Position 00-2, "Accounting by Producers and Distributors of Films" ("SOP 00-2"). SOP 00-2 established new film accounting standards, including changes in revenue recognition and accounting for advertising, development and overhead costs. Specifically, SOP 00-2 requires advertising costs for theatrical and television product to be expensed as incurred. This compares to TWE's previous policy of first capitalizing and then expensing advertising costs for theatrical product over the related revenue streams. In addition, SOP 00-2 requires development costs for abandoned projects and certain indirect overhead costs to be charged directly to expense, instead of those costs being capitalized to film costs, which was required under the previous accounting model. SOP 00-2 also requires all film costs to be classified in the balance sheet as noncurrent assets. Provisions of SOP 00-2 in other areas, such as revenue recognition, generally are consistent with TWE's existing accounting policies. TWE has adopted the provisions of SOP 00-2 retroactively to the beginning of 2000. As a result, TWE's net income for the nine months ended September 30, 2000 includes a one-time, noncash charge of $524 million, primarily to reduce the carrying value of its film inventory. This charge has been reflected as a cumulative effect of an accounting change in the accompanying consolidated statement of operations. Reclassifications Certain reclassifications have been made to the prior year's financial statements to conform to the 2000 presentation. 2. SIGNIFICANT TRANSACTIONS America Online-Time Warner Merger In January 2000, Time Warner and America Online, Inc. ("America Online") announced that they had entered into an agreement to merge (the "Merger") by forming a new holding company named AOL Time Warner Inc. ("AOL Time Warner"). As a result of the Merger, the former shareholders of America Online will have an approximate 55% interest in AOL Time Warner and the former shareholders of Time Warner will have an approximate 45% interest in the combined entity, expressed on a fully diluted basis. The Merger is expected to be accounted for by AOL Time Warner as an acquisition of Time Warner under the purchase method of accounting for business combinations. 15 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Unaudited) The Merger was approved by the shareholders of America Online and Time Warner on June 23, 2000. In addition, the European Union Commission approved the Merger on October 11, 2000. The Merger is expected to close in the fall of 2000 and is subject to customary closing conditions, including all necessary U.S. government regulatory approvals. There can be no assurance that such approvals will be obtained. Six Flags In 1998, TWE sold its remaining 49% interest in Six Flags Entertainment Corporation ("Six Flags") to Premier Parks Inc. ("Premier," now known as Six Flags Inc.), a regional theme park operator, for approximately $475 million. TWE initially deferred a $400 million gain on the transaction principally as a result of uncertainties surrounding its realization. Those uncertainties related to litigation and TWE's guarantees of Premier's long-term obligations to make minimum payments to the limited partners of the Six Flags Over Texas and Six Flags Over Georgia theme parks (the "Co-Venture Guarantees"). TWE management periodically had evaluated its reasonably possible risk of loss relating to the Six Flags litigation and Co-Venture Guarantees. Based on the improving financial performance of Premier and the Six Flags Over Texas and Six Flags Over Georgia theme parks, management believed that its aggregate financial exposure had declined steadily. Accordingly, TWE periodically recognized a portion of the deferred gain as its realization became more fully assured. For each quarter of 1999 and in the first quarter of 2000, a $10 million pretax gain was recognized. These amounts have been included in business segment operating income in the accompanying consolidated statement of operations. In December 1998, a jury returned an adverse verdict in the Six Flags litigation in the amount of $454 million. TWE and its former 51% partner in Six Flags are financially responsible for this judgment. TWE appealed the verdict, but, in July 2000, an appellate court unexpectedly affirmed the jury's verdict. As a result, TWE revised its estimate of its financial exposure and recorded a one-time, pretax charge of $50 million in the second quarter of 2000 to cover its additional financial exposure in excess of established reserves. These reserves consisted of the unrecognized portion of the deferred gain and accrued interest. The $50 million charge is classified in two components in TWE's accompanying consolidated statement of operations: $26 million of the charge, representing an accrual for additional interest, is included in interest and other, net, and the remaining $24 million is included in business segment operating income. Filmed Entertainment Investment-Related Gains During the third quarter of 2000, Warner Bros. recognized a net pretax, investment-related gain of approximately $65 million, principally relating to additional proceeds received in the third quarter of 2000 in connection with the 1999 sale of an interest in CanalSatellite, a satellite television platform servicing France and Monaco. This gain is included in business segment operating income in the accompanying consolidated statement of operations. Gains (Losses) on Sale or Exchange of Cable Television Systems and Investments In 2000 and 1999, largely in an ongoing effort to enhance their geographic clustering of cable television properties, TWE sold or exchanged various cable television systems and investments. In connection with these transactions, TWE's cable segment recognized net pretax losses of approximately $8 million for the nine months ended September 30, 2000. In 1999, net pretax gains were approximately $358 million in the third quarter and $1.118 billion 16 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Unaudited) for the year-to-date period. Such amounts have been included in business segment operating income in the accompanying consolidated statement of operations. 1999 Gain on Termination of Video Distribution Agreement In March 1999, Warner Bros. and Metro-Goldwyn-Mayer, Inc. ("MGM") terminated a long-term distribution agreement under which Warner Bros. had exclusive worldwide distribution rights for MGM/United Artists home video product. In connection with the early termination and settlement of this distribution agreement, Warner Bros. recognized a net pretax gain of approximately $215 million, which has been included in business segment operating income in the accompanying consolidated statement of operations. 3. INVENTORIES AND FILM COSTS Inventories and film costs consist of: September 30, December 31, 2000 1999 ------------ ------------ (millions) Programming costs, less amortization.................................... $ 806 $ 854 Film costs-Theatrical: Released, less amortization.......................................... 762 924 Completed and not released........................................... 78 68 In production........................................................ 361 468 Development and pre-production....................................... 34 59 Film costs-Television: Released, less amortization.......................................... 105 363 Completed and not released........................................... 194 9 In production........................................................ 78 8 Development and pre-production....................................... 6 5 Film costs-Library, less amortization................................... 469 508 Merchandise............................................................. 263 228 ----- ------ Total inventories and film costs........................................ 3,156 3,494 Less current portion of inventory....................................... 630 639 ------- ------ Total noncurrent inventories and film costs............................. $2,526 $2,855 ====== ======
Approximately $798 million of released and completed and not released film costs are expected to be amortized during the next twelve months. 4. PARTNERS' CAPITAL TWE is required to make distributions to reimburse the partners for income taxes at statutory rates based on their allocable share of taxable income, and to reimburse Time Warner for stock options granted to employees of TWE based on the amount by which the market price of Time Warner Inc. common stock exceeds the option exercise price on the exercise date or, with respect to options granted prior to the TWE capitalization on June 30, 1992, the greater of the exercise price or the $13.88 market price of Time Warner Inc. common stock at the time of the TWE capitalization. TWE accrues a stock option distribution and a corresponding liability with respect to unexercised options when the 17 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Unaudited) market price of Time Warner Inc. common stock increases during the accounting period, and reverses previously accrued stock option distributions and the corresponding liability when the market price of Time Warner Inc. common stock declines. During the nine months ended September 30, 2000, TWE accrued $471 million of tax-related distributions and $289 million of stock option distributions, based on closing prices of Time Warner Inc. common stock of $78.33 at September 30, 2000 and $72.31 at December 31, 1999. During the nine months ended September 30, 1999, TWE accrued $316 million of tax-related distributions and $67 million of stock option distributions as a result of an increase at that time in the market price of Time Warner Inc. common stock. During the nine months ended September 30, 2000, TWE paid distributions to the Time Warner General Partners in the amount of $684 million, consisting of $471 million of tax-related distributions and $213 million of stock option related distributions. During the nine months ended September 30, 1999, TWE paid distributions to the Time Warner General Partners in the amount of $489 million, consisting of $316 million of tax-related distributions and $173 million of stock option related distributions. In July 1999, TWE borrowed $627 million under its bank credit agreement and paid a distribution to the Time Warner General Partners to redeem the remaining portion of their senior priority capital interests, including a priority capital return of $173 million. Time Warner used a portion of the proceeds received from this distribution to repay all $400 million of outstanding borrowings under its credit agreement with TWE. 5. SEGMENT INFORMATION TWE classifies its business interests into four fundamental areas: Cable Networks, consisting principally of interests in cable television programming; Filmed Entertainment, consisting principally of interests in filmed entertainment, television production and television broadcasting; Cable, consisting principally of interests in cable television systems; and Digital Media, consisting principally of interests in Internet-related and digital media businesses. TWE's Digital Media segment commenced operations in the fourth quarter of 1999. Information as to the operations of TWE in different business segments is set forth below based on the nature of the products and services offered. TWE evaluates performance based on several factors, including its primary financial measure of business segment operating income before noncash amortization of intangible assets ("EBITA"). The accounting policies of the business segments are the same as those described in the summary of significant accounting policies under Note 1 in TWE's 1999 Form 10-K. Intersegment sales are accounted for at fair value as if the sales were to third parties. 18 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Unaudited) Three Months Nine Months Ended September 30, Ended September 30, ------------------- -------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) Revenues Filmed Entertainment-Warner Bros............................................. $1,686 $1,862 $ 4,705 $4,688 Broadcasting-The WB Network.................................................. 99 84 310 246 Cable Networks-HBO........................................................... 559 540 1,683 1,612 Cable........................................................................ 1,288 1,124 3,799 3,312 Digital Media................................................................ 2 - 5 - Intersegment elimination..................................................... (140) (136) (384) (390) ------ ------- ----- ------ Total........................................................................ $3,494 $3,474 $10,118 $9,468 ====== ====== ======= ====== Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) EBITA(a) Filmed Entertainment-Warner Bros.(b)......................................... $215 $180 $482 $658 Broadcasting-The WB Network.................................................. (15) (24) (67) (95) Cable Networks-HBO........................................................... 154 138 448 394 Cable(c)..................................................................... 404 699 1,182 2,135 Digital Media................................................................ (15) - (45) - ----- ------ ------ ----- Total........................................................................ $743 $993 $2,000 $3,092 ==== ==== ====== ====== - --------------- (a) EBITA represents business segment operating income before noncash amortization of intangible assets. After deducting amortization of intangible assets, TWE's business segment operating income for the third quarter was $600 million in 2000 and $863 million in 1999. TWE's business segment operating income for the first nine months of the year was $1.576 billion in 2000 and $2.726 billion in 1999. (b) Includes a net pretax, investment-related gain of approximately $65 million recognized in the third quarter of 2000, a pretax charge of $24 million recognized in the second quarter of 2000 in connection with the Six Flags litigation, a pretax gain of $10 million relating to the partial recognition of a deferred gain in connection with the 1998 sale of Six Flags recognized in the first quarter of 2000 and in each of the first three quarters of 1999 and a pretax gain of approximately $215 million recognized in the first quarter of 1999 relating to the early termination and settlement of a long-term, home video distribution agreement. (c) Includes net pretax gains relating to the sale or exchange of certain cable television systems of approximately $358 million in the third quarter of 1999. Similarly, nine-month results include net pretax losses of $8 million in 2000 and net pretax gains of $1.118 billion in 1999.
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) Depreciation of Property, Plant and Equipment Filmed Entertainment-Warner Bros............................................. $ 18 $ 44 $ 61 $109 Broadcasting-The WB Network.................................................. - - 1 1 Cable Networks-HBO........................................................... 8 7 23 20 Cable........................................................................ 203 175 580 502 Digital Media................................................................ - - 1 - ----- ------ ----- ----- Total........................................................................ $229 $226 $666 $632 ==== ==== ==== ====
19 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Unaudited) Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) Amortization of Intangible Assets (a) Filmed Entertainment-Warner Bros............................................. $ 30 $ 30 $ 91 $ 91 Broadcasting-The WB Network.................................................. 2 1 4 3 Cable Networks-HBO........................................................... - - - - Cable........................................................................ 111 99 329 272 Digital Media................................................................ - - - - ---- ---- ---- ---- Total........................................................................ $143 $130 $424 $366 ==== ==== ==== ==== (a) Includes amortization relating to all business combinations accounted for by the purchase method, including Time Warner's $14 billion acquisition of WCI in 1989 and $1.3 billion acquisition of the minority interest in ATC in 1992.
6. COMMITMENTS AND CONTINGENCIES TWE is subject to a civil action brought by a former cable television competitor in New York City alleging violations of the antitrust laws. The case is presently scheduled for trial in February 2001. Although management believes these allegations are without merit, an adverse jury verdict could result in a material loss to TWE. Due to the vague nature of both plaintiffs' claims and their assertions of damages, a range of loss is not determinable at this time. TWE is subject to certain litigation relating to Six Flags. In December 1998, a jury returned an adverse verdict in the Six Flags matter in the amount of $454 million. TWE and its former 51% partner in Six Flags are financially responsible for this judgment. As described in Note 2, TWE appealed the verdict, but, in July 2000, an appellate court unexpectedly affirmed the jury's verdict. As a result, TWE revised its estimate of its financial exposure and recorded a one-time, pretax charge of $50 million in the second quarter of 2000 to cover its additional financial exposure in excess of established reserves. TWE is subject to numerous other legal proceedings. In management's opinion and considering established reserves, the resolution of these matters will not have a material effect, individually and in the aggregate, on TWE's consolidated financial statements. 7. ADDITIONAL FINANCIAL INFORMATION Cash Flows Additional financial information with respect to cash flows is as follows: Nine Months Ended September 30, ------------------- 2000 1999 ---- ---- (millions) Cash payments made for interest.................................... $417 $394 Cash payments made for income taxes, net........................... 81 84 Noncash capital distributions...................................... 289 67
20 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Unaudited) Interest and Other, Net Interest and other, net, consists of: Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) Interest expense................................ $(165) $(138) $(478) $(411) Other investment-related activity, principally net losses on corporate-related equity investees.......... (41) (35) (102) (122) Corporate finance-related activity, including losses on asset securitization programs.................. (10) (8) (53) (26) Miscellaneous................................... 2 (4) (7) (13) ------ ------ ------ ----- Total interest and other, net................... $(214) $(185) $(640) $(572) ===== ====== ====== =====
21 TWE GENERAL PARTNERS MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION On June 30, 1992, thirteen direct or indirect subsidiaries of Time Warner Companies, Inc. ("TW Companies") contributed the assets and liabilities or the rights to the cash flows of substantially all of TW Companies's Filmed Entertainment-Warner Bros., Cable Networks-HBO and Cable businesses to Time Warner Entertainment Company, L.P., a Delaware limited partnership ("TWE"), for general partnership interests, and each general partner guaranteed a pro rata portion of substantially all of TWE's debt and accrued interest based on the relative fair value of the net assets each contributed to TWE (the "General Partner Guarantees"). Since then, eleven of the thirteen original general partners have been merged or dissolved into the other two. Warner Communications Inc. ("WCI") and American Television and Communications Corporation ("ATC") are the two remaining general partners of TWE (collectively, the "General Partners"). They have succeeded to the general partnership interests and have assumed the General Partner Guarantees of the eleven former general partners. Set forth below is a discussion of the results of operations and financial condition of WCI, the only General Partner with independent business operations. WCI conducts substantially all of TW Companies's Music operations, which include copyrighted music from many of the world's leading recording artists that is produced and distributed by a family of established record labels such as Warner Bros. Records, Atlantic Records, Elektra Entertainment and Warner Music International. The financial position and results of operations of ATC are principally derived from its investments in TWE, TW Companies, Turner Broadcasting System, Inc. and Time Warner Telecom Inc. ("Time Warner Telecom"), and its revolving credit agreement with TW Companies. Capitalized terms are as defined and described in the accompanying consolidated financial statements, or elsewhere herein. Use of EBITA WCI evaluates operating performance based on several factors, including its primary financial measure of operating income before noncash amortization of intangible assets ("EBITA"). Consistent with management's financial focus on controlling capital spending, EBITA measures operating performance after charges for depreciation. The exclusion of noncash amortization charges is consistent with management's belief that WCI's intangible assets, such as music catalogues and copyrights and the goodwill associated with its brands, generally are increasing in value and importance to WCI's business objective of creating, extending and distributing recognizable brands and copyrights throughout the world. As such, the following comparative discussion of the results of operations of WCI includes, among other factors, an analysis of changes in business segment EBITA. However, EBITA should be considered in addition to, not as a substitute for, operating income, net income and other measures of financial performance reported in accordance with generally accepted accounting principles. RESULTS OF OPERATIONS WCI's operating results for 1999 reflect a change in the way management evaluates its investment in the Columbia House Company Partnerships ("Columbia House"), an equity investee. Effective on January 1, 2000, management reclassified WCI's share of the operating results of Columbia House from business segment operating income to interest and other, net, in the accompanying consolidated statement of operations. This reclassification resulted primarily from the planned restructuring of Columbia House's traditional direct-marketing business and an increasing dependency on the sale of video product. 22 TWE GENERAL PARTNERS MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) Three Months Ended September 30, 2000 Compared to the Three Months Ended September 30, 1999 WCI had revenues of $938 million and net income of $96 million in 2000, compared to revenues of $852 million and net income of $193 million in 1999. EBITA increased to $87 million in 2000 from $79 million in 1999 after giving effect to the Columbia House reclassification described earlier. Operating income increased to $27 million in 2000 from $19 million in 1999 after giving effect to the Columbia House reclassification. Revenues increased primarily due to higher domestic and international recorded music sales and higher revenues from DVD manufacturing operations. Revenues benefited principally from higher compact disc sales of a broad range of popular releases, including the latest releases from Madonna, The Corrs and Eric Clapton with B.B. King. EBITA and operating income increased principally as a result of the revenue gains, offset in part by higher marketing and artist royalty costs. WCI's equity in the pretax income of TWE was $181 million in 2000, compared to $356 million in 1999. TWE's pretax income decreased in 2000 as compared to 1999 principally because of the effect of certain significant nonrecurring items recognized in each period, as described more fully in Note 3 to the accompanying consolidated financial statements. These nonrecurring items aggregated approximately $65 million of net pretax income in 2000, compared to approximately $368 million of net pretax income in 1999. Excluding the significant effect of these nonrecurring items, TWE's pretax income decreased principally as a result of higher interest expense principally due to higher market interest rates on variable-rate debt and higher losses from certain investments accounted for under the equity method of accounting, offset in part by an overall increase in TWE's business segment operating income. WCI's interest and other, net, was $35 million of expense in 2000, compared to $14 million of income in 1999. Interest expense was $3 million in 2000, compared to $2 million in 1999. There was other expense, net, of $32 million in 2000, compared to other income, net, of $16 million in 1999. Other expense, net, increased principally due to merger-related costs relating to Time Warner's recently terminated merger agreement with EMI Group plc ("EMI") and higher losses from certain investments accounted for under the equity method of accounting. The relationship between income before income taxes and income tax expense for the General Partners is principally affected by the amortization of goodwill and certain other financial statement expenses that are not deductible for income tax purposes. Income tax expense for each of the General Partners includes all income taxes related to its allocable share of partnership income and its equity in the income tax expense of corporate subsidiaries of TWE. Nine Months Ended September 30, 2000 Compared to the Nine Months Ended September 30, 1999 WCI had revenues of $2.811 billion, income of $136 million before the cumulative effect of an accounting change and net loss of $66 million in 2000, compared to revenues of $2.616 billion and net income of $664 million in 1999. EBITA increased to $276 million in 2000 from $266 million in 1999 after giving effect to the Columbia House reclassification described earlier. Operating income increased to $95 million in 2000 from $79 million in 1999 after giving effect to the Columbia House reclassification. Revenues increased primarily due to higher domestic and international recorded music sales and higher revenues from DVD manufacturing operations. Revenues benefited principally from higher compact disc sales of a broad range of popular releases, including the latest releases from the Red Hot Chili Peppers, The Corrs, Eric Clapton with B.B. King, and matchbox twenty. EBITA and operating income increased principally as a result of the revenue gains, offset in part by higher marketing and artist royalty costs. WCI's equity in the pretax income of TWE was $436 million in 2000, compared to $1.028 billion in 1999. TWE's pretax income decreased in 2000 as compared to 1999 because of the effect of certain significant nonrecurring 23 TWE GENERAL PARTNERS MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) items recognized in each period, as described more fully in Note 3 to the accompanying consolidated financial statements. These nonrecurring items aggregated approximately $17 million of net pretax income in 2000, compared to approximately $1.363 billion of pretax income in 1999. Excluding the significant effect of these nonrecurring items, TWE's pretax income increased principally as a result of an overall increase in TWE's business segment operating income and lower losses from certain investments accounted for under the equity method of accounting, offset in part by higher interest expense principally due to higher market interest rates on variable-rate debt and higher losses associated with TWE's asset securitization program. Interest and other, net, was $205 million of expense in 2000, compared to $98 million of income in 1999. Interest expense was $9 million in 2000, compared to $7 million in 1999. There was other expense, net, of $196 million in 2000, compared to other income, net, of $105 million in 1999. Other expense, net, increased principally because of an approximate $115 million noncash pretax charge in 2000 to reduce the carrying value of WCI's investment in Columbia House, higher losses from certain investments accounted for under the equity method of accounting, merger-related costs relating to Time Warner's recently terminated merger agreement with EMI and the absence in 2000 of an approximate $53 million pretax gain in 1999 in connection with the initial public offering of a 20% interest in Time Warner Telecom, a leading fiber facilities-based provider of integrated communications services and solutions. The relationship between income before income taxes and income tax expense for the General Partners is principally affected by the amortization of goodwill and certain other financial statement expenses that are not deductible for income tax purposes. Income tax expense for each of the General Partners includes all income taxes related to its allocable share of partnership income and its equity in the income tax expense of corporate subsidiaries of TWE. FINANCIAL CONDITION AND LIQUIDITY September 30, 2000 Financial Condition WCI had $8.4 billion of equity at September 30, 2000, compared to $8.7 billion of equity at December 31, 1999. Cash and equivalents decreased to $98 million at September 30, 2000, compared to $107 million at December 31, 1999. WCI had no long-term debt due to TW Companies under its revolving credit agreement at the end of either period. ATC had $1.9 billion of equity at September 30, 2000, compared to $2.1 billion of equity at December 31, 1999. Senior Capital Distributions In July 1999, TWE paid a $627 million distribution to the General Partners to redeem the remaining portion of their senior priority capital interests, including a priority capital return of $173 million. Of the $627 million distribution, WCI and ATC received $372 million and $255 million, respectively. Cash Flows During the first nine months of 2000, WCI's cash provided by operations amounted to $271 million and reflected $276 million of EBITA, $62 million of noncash depreciation expense, $405 million of distributions from TWE, less $37 million of proceeds repaid under WCI's asset securitization program, $10 million of interest payments, $12 24 TWE GENERAL PARTNERS MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) million of income taxes ($68 million of which was paid to TW Companies under a tax sharing agreement) and $413 million related to an aggregate increase in working capital requirements, other balance sheet accounts and noncash items. In the first nine months of 1999, WCI's cash provided by operations of $119 million reflected $266 million of EBITA, $54 million of noncash depreciation expense, $392 million of distributions from TWE (excluding $269 million representing the return of a portion of the General Partners' Senior Capital interests that has been classified as a source of cash from investing activities), $90 million of proceeds received under WCI's asset securitization program, less $8 million of interest payments, $550 million of income taxes ($445 million of which was paid to TW Companies under a tax sharing agreement), and $125 million related to an aggregate increase in working capital requirements, other balance sheet accounts and noncash items. Cash used by investing activities was $132 million in the first nine months of 2000, compared to cash provided by investing activities of $156 million in 1999, principally as a result of the absence in 2000 of proceeds received from the distribution of TWE Senior Capital in 1999. Cash used by financing activities was $148 million in the first nine months of 2000, compared to $292 million in the first nine months of 1999, principally as a result of increased advances to TW Companies and decreased dividend payments. The assets and cash flows of TWE are restricted by certain borrowing and partnership agreements and are unavailable to the General Partners except through the payment of certain fees, reimbursements, cash distributions and loans, which are subject to limitations. Under its bank credit agreement, TWE is permitted to incur additional indebtedness to make distributions and other cash payments to the General Partners subject to its individual compliance with the cash flow coverage and leverage ratio covenants contained therein. Management believes that WCI's operating cash flow, cash and equivalents and additional borrowing capacity under its revolving credit agreement with TW Companies are sufficient to fund its capital and liquidity needs for the foreseeable future without distributions from TWE above those permitted by existing agreements. Although ATC has no independent operations, it is expected that additional tax-related and other distributions from TWE, as well as availability under ATC's revolving credit agreement with TW Companies, will continue to be sufficient to satisfy ATC's obligations with respect to its tax sharing agreement with TW Companies for the foreseeable future. 25 TWE GENERAL PARTNERS CONSOLIDATED BALANCE SHEETS (Unaudited) WCI ATC ------------------------ ---------------------------- September 30, December 31, September 30, December 31, 2000 1999 2000 1999 ------------- ----------- ------------- ------------ (millions) ASSETS Current assets Cash and equivalents................................ $ 98 $ 107 $ - $ - Receivables, less allowances of $262 and $290 million 1,191 1,528 - - Inventories......................................... 176 155 - - Prepaid expenses.................................... 867 727 - - -------- ------- ------ ------- Total current assets................................ 2,332 2,517 - - Investments in and amounts due to and from TWE...... 2,444 2,476 1,929 2,170 Investments in TW Companies......................... 103 103 60 60 Other investments................................... 1,325 1,497 456 449 Music catalogues, contracts and copyrights.......... 710 779 - - Goodwill............................................ 3,505 3,612 - - Other assets, primarily property, plant and equipment 530 497 - - -------- ------- ------ ------ Total assets........................................ $10,949 $11,481 $2,445 $2,679 ======= ======= ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts and royalties payable...................... $ 1,018 $ 1,115 $ - $ - Other current liabilities........................... 432 534 - - ------- ------ ------- ----- Total current liabilities........................... 1,450 1,649 - - Long-term liabilities, including $811, $766, $574 and $542 million due to TW Companies................. 1,057 1,095 574 542 Shareholders' equity Common stock........................................ 1 1 1 1 Preferred stock of WCI, $.01 par value, 90,000 shares outstanding, $90 million liquidation preference.. - - - - Paid-in capital..................................... 9,932 9,926 2,341 2,338 Retained earnings (accumulated deficit)............. (146) 833 88 172 ------- ------- --------- ------ 9,787 10,760 2,430 2,511 Due from TW Companies, net.......................... (759) (1,437) (223) (38) Reciprocal interest in TW Companies stock........... (586) (586) (336) (336) ------- ------ ------ ------ Total shareholders' equity.......................... 8,442 8,737 1,871 2,137 ------- ------ ------ ------ Total liabilities and shareholders' equity.......... $10,949 $11,481 $2,445 $2,679 ======= ======= ====== ====== See accompanying notes.
26 TWE GENERAL PARTNERS CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended September 30, (Unaudited) WCI ATC -------------- ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) Revenues(a)............................................ $ 938 $852 $ - $ - ---- ---- ------ ----- Cost of revenues(a)(b)................................. (551) (403) - - Selling, general and administrative(a)(b).............. (300) (370) - - Amortization of goodwill and other intangibles......... (60) (60) - - ----- ----- ------ ----- Business segment operating income...................... 27 19 - - Equity in pretax income of TWE(a)...................... 181 356 124 244 Interest and other, net(a)............................. (35) 14 8 8 ----- ----- ----- ----- Income before income taxes............................. 173 389 132 252 Income taxes(a)........................................ (77) (196) (50) (113) ----- ---- ----- ----- Net income............................................. $ 96 $193 $ 82 $139 ===== ==== ===== ==== - ------------------ (a) Includes the following income (expenses) resulting from transactions with Time Warner, TW Companies, TWE or equity investees of the General Partners: Revenues....................................... $ 46 $42 $ - $ - Cost of revenues............................... (3) (3) - - Selling, general and administrative............ (7) (12) - - Equity in pretax income of TWE................. (14) (17) - - Interest and other, net........................ (1) 33 - - Income taxes................................... (31) (161) (27) (97) (b) Includes depreciation expense of:................. $ 21 $ 19 $ - $ - ===== ====== ===== =====
See accompanying notes. 27 TWE GENERAL PARTNERS CONSOLIDATED STATEMENTS OF OPERATIONS Nine Months Ended September 30, (Unaudited) WCI ATC ------------------ ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) Revenues(a)............................................ $2,811 $2,616 $ - $ - ------ ------ ------- ----- Cost of revenues(a)(b)................................. (1,487) (1,314) - - Selling, general and administrative(a)(b).............. (1,048) (1,036) - - Amortization of goodwill and other intangibles......... (181) (187) - - ------ ------ ------- ----- Business segment operating income...................... 95 79 - - Equity in pretax income of TWE(a)...................... 436 1,028 299 706 Interest and other, net(a)(c).......................... (205) 98 29 56 ------ ------ ------- ----- Income before income taxes and cumulative effect of accounting change............................................ 326 1,205 328 762 Income taxes(a)........................................ (190) (541) (143) (318) ------ ------ ------- ----- Income before cumulative effect of accounting change... 136 664 185 444 Cumulative effect of accounting change, net of $135 million income tax benefit for WCI and $91 million income tax benefit for ATC........................................... (202) - (136) - ------ ------ ------- ----- Net income (loss)...................................... $ (66) $ 664 $ 49 $ 444 ====== ====== ======= ===== - ------------------ (a) Includes the following income (expenses) resulting from transactions with Time Warner, TW Companies, TWE or equity investees of the General Partners: Revenues....................................... $ 189 $ 155 $ - $ - Cost of revenues............................... (8) (9) - - Selling, general and administrative............ (12) (22) - - Equity in pretax income of TWE................. (72) (42) - - Interest and other, net........................ 1 92 - - Income taxes................................... (68) (445) (95) (280) (b) Includes depreciation expense of:................. $ 62 $ 54 $ - $ - ===== ===== ====== ======= (c) Includes an approximate $53 million pretax gain recognized by WCI and $36 million recognized by ATC in the second quarter of 1999 in connection with the initial public offering of a 20% interest in Time Warner Telecom Inc.
See accompanying notes. 28 TWE GENERAL PARTNERS CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, (Unaudited) WCI ATC ---------------- --------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) OPERATIONS Net income (loss)...................................... $ (66) $664 $ 49 $444 Adjustments for noncash and nonoperating items: Cumulative effect of accounting change............. 202 - 136 - Depreciation and amortization...................... 243 241 - - Excess (deficiency) of distributions over equity in pretax income of TWE.................................... (31) (636) (20) (436) Equity in losses (income) of other investee companies after distributions.................................... 59 14 (13) (4) Changes in operating assets and liabilities............ (136) (164) 120 (18) ----- ---- ----- ---- Cash provided (used) by operations..................... 271 119 272 (14) ----- ---- ----- ---- INVESTING ACTIVITIES Investments and acquisitions........................... (21) (37) - - Capital expenditures................................... (111) (101) - - Investment proceeds.................................... - 25 - - Proceeds received from distribution of TWE Senior Capital - 269 - 185 ---- ---- ----- ---- Cash provided (used) by investing activities........... (132) 156 - 185 ---- ---- ----- ---- FINANCING ACTIVITIES Dividends.............................................. (131) (479) (87) (326) Decrease (increase) in amounts due from TW Companies, net (17) 187 (185) 155 ---- ---- ----- ---- Cash used by financing activities...................... (148) (292) (272) (171) ---- ---- ----- ---- DECREASE IN CASH AND EQUIVALENTS....................... (9) (17) - - CASH AND EQUIVALENTS AT BEGINNING OF PERIOD............ 107 160 - - ---- ---- ----- ---- CASH AND EQUIVALENTS AT END OF PERIOD.................. $ 98 $143 $ - $ - ==== ==== ====== ======
See accompanying notes. 29 TWE GENERAL PARTNERS CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Nine Months Ended September 30, (Unaudited) WCI ATC --------------- ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) BALANCE AT BEGINNING OF PERIOD................................................$8,737 $7,701 $2,137 $1,482 Net income (loss)............................................................. (66) 664 49 444 Other comprehensive loss...................................................... (42) (35) (17) - ------ ------- -------- ------ Comprehensive income (loss)(a)................................................ (108) 629 32 444 Increase in stock option distribution liability to TW Companies(b)............................................................ (171) (40) (118) (27) Dividends..................................................................... (700) (377) - (255) Transfers to TW Companies, net................................................ 678 187 (185) 155 Other......................................................................... 6 1 5 (2) ------ ------- ------- ----- BALANCE AT END OF PERIOD......................................................$8,442 $8,101 $1,871 $1,797 ====== ====== ====== ====== - ------------------ (a) Comprehensive income for WCI was $79 million for the three months ended September 30, 2000 and $164 million for the three months ended September 30, 1999. Comprehensive income for ATC was $80 million for the three months ended September 30, 2000 and $130 million for the three months ended September 30, 1999. (b) The General Partners record distributions to TW Companies and a corresponding receivable from TWE as a result of the stock option related distribution provisions of the TWE partnership agreement. Stock option distributions of $171 million for WCI and $118 million for ATC were accrued in the first nine months of 2000. For the first nine months of 1999, stock option distributions accrued were $40 million for WCI and $27 million for ATC. These amounts were accrued because of an increase in the market price of Time Warner common stock (Note 3).
See accompanying notes. 30 TWE GENERAL PARTNERS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of Business On June 30, 1992, thirteen direct or indirect subsidiaries of Time Warner Companies, Inc. ("TW Companies") contributed the assets and liabilities or the rights to the cash flows of substantially all of TW Companies's Filmed Entertainment-Warner Bros., Cable Networks-HBO and Cable businesses to Time Warner Entertainment Company, L.P., a Delaware limited partnership ("TWE"), for general partnership interests, and each general partner guaranteed a pro rata portion of substantially all of TWE's debt and accrued interest based on the relative fair value of the net assets each contributed to TWE (the "General Partner Guarantees," see Note 5). Since then, eleven of the thirteen original general partners have been merged or dissolved into the other two. Warner Communications Inc. ("WCI") and American Television and Communications Corporation ("ATC") are the two remaining general partners of TWE. They have succeeded to the general partnership interests and have assumed the General Partner Guarantees of the eleven former general partners. WCI, ATC and, where appropriate, the former general partners are referred to herein as the "General Partners." WCI conducts substantially all of TW Companies's Music operations, which include copyrighted music from many of the world's leading recording artists that is produced and distributed by a family of established record labels such as Warner Bros. Records, Atlantic Records, Elektra Entertainment and Warner Music International. ATC does not conduct operations independent of its ownership interests in TWE and certain other investments. Basis of Presentation Interim Financial Statements The accompanying consolidated financial statements are unaudited but, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the financial position and the results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles applicable to interim periods. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the General Partners included in TWE's Annual Report on Form 10-K for the year ended December 31, 1999 (the "1999 Form 10-K"). Cumulative Effect of Change in Film Accounting Principle In June 2000, Time Warner Inc. ("Time Warner") and TWE adopted Statement of Position 00-2, "Accounting by Producers and Distributors of Films" ("SOP 00-2"). SOP 00-2 established new film accounting standards, including changes in revenue recognition and accounting for advertising, development and overhead costs. Specifically, SOP 00-2 requires advertising costs for theatrical and television product to be expensed as incurred. This compares to Time Warner's and TWE's previous policy of first capitalizing and then expensing advertising costs for theatrical product over the related revenue streams. In addition, SOP 00-2 requires development costs for abandoned projects and certain indirect overhead costs to be charged directly to expense, instead of those costs being capitalized to film costs, which was required under the previous accounting model. SOP 00-2 also requires all film costs to be classified in the balance 31 TWE GENERAL PARTNERS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Unaudited) sheet as noncurrent assets. Provisions of SOP 00-2 in other areas, such as revenue recognition, generally are consistent with Time Warner's and TWE's existing accounting policies. Time Warner and TWE have adopted the provisions of SOP 00-2 retroactively to the beginning of 2000. Because WCI and ATC have investments in TWE and other Time Warner consolidated subsidiaries, which are accounted for under the equity method, net income for the nine months ended September 30, 2000 includes a one-time, noncash, after-tax charge of $202 million for WCI and $136 million for ATC. These charges have been reflected as a cumulative effect of an accounting change in the accompanying consolidated statement of operations. Reclassifications Certain reclassifications have been made to the prior year's financial information to conform to the 2000 presentation, including a reclassification of WCI's operating results for 1999 to reflect a change in how management classifies WCI's share of the operating results of the Columbia House Company Partnerships ("Columbia House"), an equity investee. Effective on January 1, 2000, management reclassified WCI's share of the operating results of Columbia House from business segment operating income to interest and other, net. This reclassification resulted primarily from the planned restructuring of Columbia House's traditional direct-marketing business and an increasing dependency on the sale of video product. 2. SIGNIFICANT TRANSACTIONS America Online-Time Warner Merger In January 2000, Time Warner and America Online, Inc. ("America Online") announced that they had entered into an agreement to merge (the "Merger") by forming a new holding company named AOL Time Warner Inc. ("AOL Time Warner"). As a result of the Merger, the former shareholders of America Online will have an approximate 55% interest in AOL Time Warner and the former shareholders of Time Warner will have an approximate 45% interest in the combined entity, expressed on a fully diluted basis. The Merger is expected to be accounted for by AOL Time Warner as an acquisition of Time Warner under the purchase method of accounting for business combinations. The Merger was approved by the shareholders of America Online and Time Warner on June 23, 2000. In addition, the European Union Commission approved the Merger on October 11, 2000. The Merger is expected to close in the fall of 2000 and is subject to customary closing conditions, including all necessary U.S. government regulatory approvals. There can be no assurance that such approvals will be obtained. Warner-EMI Music Merger In January 2000, Time Warner and EMI Group plc ("EMI") announced they had entered into an agreement to combine their global music operations into two 50-50 joint ventures, to be referred to collectively as Warner EMI Music. On October 5, 2000, Time Warner and EMI terminated the merger agreement and withdrew their application seeking approval of the transaction from the European Union Commission. Time Warner and EMI intend to continue discussions with each other, the European Union Commission and other regulatory authorities in order to attempt to agree to a combination which is acceptable to all parties. There can be no assurance that these parties will be able to reach an agreement. 32 TWE GENERAL PARTNERS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Unaudited) In connection with the proposed merger, WCI has been incurring one-time, merger-related costs, which are permitted to be capitalized in accordance with generally accepted accounting principles. In the third quarter of 2000,because the merger agreement was terminated, WCI expensed all of its previously capitalized merger-related costs. These costs have been classified in interest and other, net, in the accompanying consolidated statement of operations. Columbia House Investment Write-Down In July 1999, Time Warner announced an agreement with Sony Corporation of America ("Sony") to merge their jointly owned music and video club operations of Columbia House with CDNOW, Inc. ("CDNOW"), a music and video e-commerce company. While awaiting the receipt of regulatory approvals, the March 13, 2000 termination date in the merger agreement was reached, and the parties terminated the agreement. Accordingly, the merger will not occur. In March 2000, WCI recorded a $115 million noncash pretax charge to reduce the carrying value of its investment in Columbia House to an estimate of its fair value. The charge has been included in interest and other, net, in the accompanying consolidated statement of operations. 3. TWE The General Partners' investment in and amounts due to and from TWE at September 30, 2000 and December 31, 1999 consists of the following: September 30, 2000 WCI ATC - ------------------ --- --- (millions) Investment in TWE.......................................................... $1,947 $1,372 Stock option related distributions due from TWE............................ 811 557 Other net liabilities due to TWE, principally related to home video distribution (314) - ------ ------ Total...................................................................... $2,444 $1,929 ====== ====== December 31, 1999 WCI ATC - ----------------- ---- --- (millions) Investment in TWE.......................................................... $2,342 $1,644 Stock option related distributions due from TWE............................ 766 526 Other net liabilities due to TWE, principally related to home video distribution (632) - ------ ------ Total...................................................................... $2,476 $2,170 ====== ======
Partnership Structure and Allocation of Income TWE is a Delaware limited partnership that was capitalized in 1992 to own and operate substantially all of the Filmed Entertainment-Warner Bros., Cable Networks-HBO and Cable businesses previously owned by the General Partners. The General Partners in the aggregate hold, directly or indirectly, 63.27% of the pro rata priority capital and residual equity capital of TWE and 100% of the junior priority capital of TWE. TW Companies holds 11.22% of the pro rata priority capital and residual equity capital limited partnership interests. The remaining 25.51% limited partnership interests in the pro rata priority capital and residual equity capital of TWE are held by a subsidiary of AT&T Corp. The TWE partnership agreement provides for special allocations of income, loss and distributions of partnership capital, including priority distributions in the event of liquidation. No portion of TWE's net income or losses has been allocated to the limited partnership interests. 33 TWE GENERAL PARTNERS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Unaudited) Summarized Financial Information of TWE Set forth below is summarized financial information of TWE. Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) Operating Statement Information Revenues............................................... $3,494 $3,474 $10,118 $9,468 Depreciation and amortization.......................... (372) (356) (1,090) (998) Business segment operating income(a)................... 600 863 1,576 2,726 Interest and other, net(b)............................. (214) (185) (640) (572) Minority interest...................................... (62) (60) (145) (366) Income before income taxes and cumulative effect of accounting change............................................. 305 600 735 1,734 Cumulative effect of accounting change................. - - (524) - Net income............................................. 248 561 93 1,640 - ------------------ (a) Includes a net pretax, investment-related gain of approximately $65 million recognized in the third quarter of 2000, a pretax charge of $24 million recognized in the second quarter of 2000 in connection with the Six Flags litigation, a pretax gain of $10 million relating to the partial recognition of a deferred gain in connection with the 1998 sale of Six Flags recognized in the first quarter of 2000 and in each of the first three quarters of 1999 and a pretax gain of approximately $215 million recognized in the first quarter of 1999 relating to the early termination and settlement of a long-term, home video distribution agreement. In addition, includes net pretax gains relating to the sale or exchange of certain cable television systems of approximately $358 million in the third quarter of 1999. Similarly, nine-month results include net pretax losses of $8 million in 2000 and net pretax gains of $1.118 billion in 1999. (b) Includes $26 million of additional interest expense recognized in the second quarter of 2000 in connection with the Six Flags litigation.
Nine Months Ended September 30, ------------------- 2000 1999 ---- ---- (millions) Cash Flow Information Cash provided by operations................................................ $2,172 $2,205 Investments and acquisitions............................................... (275) (273) Capital expenditures....................................................... (1,436) (1,009) Investment proceeds........................................................ 211 342 Collection of loan to Time Warner.......................................... - 400 Borrowings................................................................. 1,250 1,854 Debt repayments............................................................ (1,418) (1,893) Redemption of preferred stock of subsidiary................................ - (217) Capital distributions...................................................... (684) (1,116) Other...................................................................... (75) (145) Increase (decrease) in cash and equivalents................................ (255) 148
September 30, December 31, 2000 1999 ------------ ------------ (millions) Balance Sheet Information Cash and equivalents....................................................... $ 262 $ 517 Total current assets....................................................... 4,004 4,730 Total assets............................................................... 24,329 24,843 Total current liabilities.................................................. 6,082 5,723 Long-term debt ............................................................ 6,487 6,655 Minority interests......................................................... 1,846 1,815 Partners' capital.......................................................... 6,441 7,149
34 TWE GENERAL PARTNERS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Unaudited) Capital Distributions The assets and cash flows of TWE are restricted by the TWE partnership and credit agreements and are unavailable for use by the partners except through the payment of certain fees, reimbursements, cash distributions and loans, which are subject to limitations. At September 30, 2000 and December 31, 1999, the General Partners had recorded $1.368 billion and $1.292 billion, respectively, of stock option related distributions due from TWE, based on closing prices of Time Warner common stock of $78.33 and $72.31, respectively. The General Partners are paid when the options are exercised. The General Partners also receive tax-related distributions from TWE on a current basis. During the nine months ended September 30, 2000, the General Partners received distributions from TWE in the amount of $684 million, consisting of $471 million of tax-related distributions and $213 million of stock option related distributions. During the nine months ended September 30, 1999, the General Partners received distributions from TWE in the amount of $1.116 billion, consisting of $627 million of Senior Capital distributions (representing the return of $454 million of contributed capital and the distribution of a $173 million priority capital return), $316 million of tax-related distributions and $173 million of stock option related distributions. Of such aggregate distributions in 2000 and 1999, WCI received $405 million and $661 million, respectively, and ATC received $279 million and $455 million, respectively. Significant Items and Transactions The comparability of TWE's summarized financial information has been affected by a number of significant items and transactions occurring in all periods. These transactions are summarized below. For a more comprehensive description of these transactions, see Note 2 to the accompanying TWE consolidated financial statements. For 2000, the significant, nonrecurring items included (i) a net pretax, investment-related gain of approximately $65 million recognized in the third quarter, principally relating to additional proceeds received in the third quarter of 2000 in connection with the 1999 sale of an interest in CanalSatellite, a satellite television platform servicing France and Monaco, (ii) net pretax losses of approximately $8 million recognized in the second quarter relating to the sale or exchange of various cable television systems and investments, (iii) a $50 million pretax charge recognized in the second quarter related to the Six Flags Entertainment Corporation ("Six Flags") litigation, (iv) a pretax gain of $10 million recognized in the first quarter relating to the partial recognition of a deferred gain on the 1998 sale of Six Flags and (v) a noncash charge of $524 million in the first quarter reflecting the cumulative effect of an accounting change in connection with the adoption of a new film accounting standard. For 1999, the significant, nonrecurring items included (i) net pretax gains of approximately $358 million recognized in the third quarter and approximately $1.118 billion recognized in the first nine months relating to the sale or exchange of various cable television systems and investments, (ii) a pretax gain of $10 million recognized in each of the first three quarters relating to the partial recognition of a deferred gain on the 1998 sale of Six Flags and (iii) an approximate $215 million pretax gain recognized in the first quarter in connection with the early termination and settlement of a long-term, home video distribution agreement. 4. GAIN ON TIME WARNER TELECOM'S INITIAL PUBLIC OFFERING In May 1999, Time Warner Telecom Inc. ("Time Warner Telecom"), a leading fiber facilities-based provider of integrated communications services and solutions, completed an initial public offering of 20% of its common stock (the "Time Warner Telecom IPO"). In connection with the Time Warner Telecom IPO and certain related transactions, WCI's ownership interest in Time Warner Telecom was diluted from 28% to 22% and ATC's ownership interest in Time 35 TWE GENERAL PARTNERS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Unaudited) Warner Telecom was diluted from 19% to 15%. As a result, WCI and ATC recognized pretax gains of approximately $53 million and $36 million, respectively. These gains have been included in interest and other, net, in the accompanying consolidated statements of operations for the three and nine months ended September 30, 1999. 5. GENERAL PARTNER GUARANTEES Each General Partner has guaranteed a pro rata portion of approximately $5.2 billion of TWE's debt and accrued interest at September 30, 2000, based on the relative fair value of the net assets each General Partner (or its predecessor) contributed to TWE. Such indebtedness is recourse to each General Partner only to the extent of its guarantee. There are no restrictions on the ability of the General Partner guarantors to transfer assets, other than TWE assets, to parties that are not guarantors. The portion of TWE debt and accrued interest at September 30, 2000 that was guaranteed by each General Partner is set forth below (dollars in millions): Total Guaranteed by Each General Partner -------------------- General Partner % Amount - --------------- ------- ------ WCI ................................................... 59.27 $3,054 ATC ................................................... 40.73 2,099 ------ ------ Total.................................................. 100.00 $5,153 ====== ====== 6. COMMITMENTS AND CONTINGENCIES WCI is subject to various class action lawsuits as well as actions that have been brought by various state attorneys general alleging collusive and other illegal pricing practices by the major record companies in their capacity as distributors of compact discs. Although management believes these cases are without merit, adverse jury verdicts could result in a material loss to WCI. Due to the lack of specificity to plaintiffs' claims, a range of loss is not determinable at this time. TWE is subject to a civil action brought by a former cable television competitor in New York City alleging violations of the antitrust laws. The case is presently scheduled for trial in February 2001. Although management believes these allegations are without merit, an adverse jury verdict could result in a material loss to TWE. Due to the vague nature of both plaintiffs' claims and their assertions of damages, a range of loss is not determinable at this time. TWE is subject to certain litigation relating to Six Flags. In December 1998, a jury returned an adverse verdict in the Six Flags matter in the amount of $454 million. TWE and its former 51% partner in Six Flags are financially responsible for this judgment. As described in Note 2 to the accompanying TWE consolidated financial statements, TWE appealed the verdict, but, in July 2000, an appellate court unexpectedly affirmed the jury's verdict. As a result, TWE revised its estimate of its financial exposure and recorded a one-time, pretax charge of $50 million in the second quarter of 2000 to cover its additional financial exposure in excess of established reserves. The General Partners and TWE are also subject to numerous other legal proceedings. In management's opinion and considering established reserves, the resolution of these matters will not have a material effect, individually and in the aggregate, on the General Partners' financial statements. 36 TWE GENERAL PARTNERS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Unaudited) 7. ADDITIONAL FINANCIAL INFORMATION Additional financial information with respect to cash flows is as follows: Nine Months Ended September 30, ------------------------------- 2000 1999 ------------- ------------ WCI ATC WCI ATC --- --- --- --- (millions) Cash payments made for interest..................... $ 10 $ - $ 8 $ - Cash payments made for income taxes, net............ 12 95 550 280 Tax-related distributions received from TWE......... 279 192 187 129 Noncash capital distributions, net.................. 171 118 40 27
Noncash financing activities in 2000 included the settlement of WCI's note receivable from TW Companies through a WCI dividend in the amount of $695 million to TW Companies. 37 Part II. Other Information Item 1. Legal Proceedings Reference is made to Six Flags Over Georgia LLC et al. v. Time Warner Entertainment Company, L.P. et al., described on page I-24 of TWE's Annual Report on Form 10-K for the year ended December 31, 1999 (the "1999 Form 10-K") and page 39 of TWE's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (the "June 30, 2000 Form 10-Q"). On August 16, 2000, defendants filed a petition for certiorari with the Supreme Court of Georgia seeking review of the decision of the Georgia Court of Appeals that had affirmed the trial court's judgment. The Court is expected to act on the petition by the end of the year. Reference is made to the Consent Order signed by Warner Music Group and the other major record companies with the Federal Trade Commission ("FTC") with respect to the FTC's investigation of minimum advertised price programs, described on pages I-20 and I-24 of TWE's 1999 Form 10-K and page 39 of the June 30, 2000 Form 10-Q. On September 6, 2000, the FTC gave its final approval of the Consent Order. Reference is made to Digital Distribution Inc. d/b/a Compact Disc Warehouse v. CEMA Distribution et al., and the related suits, described on page I-24 of TWE's 1999 Form 10-K and page 39 of the June 30, 2000 Form 10-Q. On September 22, 2000, the United States District Court of Appeals for the Ninth Circuit denied the plaintiffs' application for review of the district court's denial of the motion for class certification. On October 23, 2000, defendants filed a motion for summary judgment. Trial in this matter is now scheduled for early next year. Reference is made to the actions pending in various Federal district courts alleging claims of price fixing in the recorded music industry, described on page 39 of the June 30, 2000 Form 10-Q under Bauman v. EMI Music Distribution et al. The Federal actions have been consolidated for pretrial proceedings and transferred for such purpose to the United States District Court for the District of Maine. A number of similar cases are pending in various state courts around the country, although the cases are generally at a very preliminary stage of the proceedings. Reference is made to State of Florida et al. v. BMG Music et al., described on page 39 of the June 30, 2000 Form 10-Q. The attorneys general of 12 additional states, along with Puerto Rico, the U.S. Virgin Islands and the Northern Mariana Islands, have since joined the lawsuit. This action has been consolidated in the United States District Court for the District of Maine with the Federal actions described in the preceding paragraph. Reference is made to Chambers et al. v. Time Warner Inc. et al., described on page 39 of the June 30, 2000 Form 10-Q. On August 28, 2000, the Court orally granted Time Warner's motion to dismiss. Reference is made to Bartholdi Cable Company, Inc. v. Time Warner Inc. et al., described on page I-25 of TWE's 1999 Form 10-K. Trial has been set to commence February 5, 2001. Reference is made to Parker et al. v. Time Warner Entertainment et al., described on page I-25 of TWE's 1999 Form 10-K. On October 2, 2000, the Magistrate Judge issued a recommendation to grant the defendants' motion to deny class certification as to the claims for money damages. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. -------- The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as a part of this report and such Exhibit Index is incorporated herein by reference. (b) Reports on Form 8-K. ------------------- No Current Report on Form 8-K was filed by TWE during the quarter ended September 30, 2000. 38 TIME WARNER ENTERTAINMENT COMPANY, L.P. AND TWE GENERAL PARTNERS SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TIME WARNER ENTERTAINMENT COMPANY, L.P. By: Warner Communications Inc., as General Partner By: /s/ Joseph A. Ripp ------------------------------------------ Name: Joseph A. Ripp Title: Executive Vice President and Chief Financial Officer AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION WARNER COMMUNICATIONS INC. By: /s/ Joseph A. Ripp ----------------------------------------- Name: Joseph A. Ripp Title: Executive Vice President and Chief Financial Officer Dated: November 10, 2000 39 EXHIBIT INDEX Pursuant to Item 601 of Regulations S-K Exhibit No. Description of Exhibit 27 Financial Data Schedule. EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 TIME WARNER ENTERTAINMENT COMPANY, L.P. FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the financial statements of Time Warner Entertainment Company, L.P. for the nine months ended September 30, 2000 and is qualified in its entirety by reference to such financial statements. 0000893657 TIME WARNER ENTERTAINMENT COMPANY L.P. 1,000,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 262 0 3,514 602 3,156 4,004 11,845 4,586 24,329 6,082 6,487 0 0 0 6,441 24,329 10,118 10,118 6,484 6,484 0 0 478 735 118 617 0 0 524 93 0 0
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