UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORTPursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): May 10, 2017
TIME INC.(Exact Name of Registrant as Specified in its Charter)
Delaware 001-36218 13-3486363(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File No.) Identification No.)
225 Liberty StreetNew York, NY 10281
(Address of Principal Executive Offices, including zip code)
(212) 522-1212(Registrant's telephone number, including area code)
Not Applicable(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (seeGeneral Instruction A.2 below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the ExchangeAct. ¨
Item 2.02. Results of Operations and Financial Condition.On May 10, 2017 , Time Inc. (the “Company”) issued a press release relating to, among other things, its financial results for the quarter and year ended March 31, 2017 . A copy ofthis press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
On May 10, 2017 , the Company also made available on its website at www.timeinc.com presentation materials that it intends to use in connection with its conference call that isscheduled to begin at 8:30 a.m. E.D.T., Thursday, May 10, 2017 regarding its quarter ended March 31, 2017 financial results (the "Presentation Deck"). A copy of the PresentationDeck is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
The information contained in this Item 2.02 as well as in Item 7.01 and Exhibit 99.1 and Exhibit 99.2 shall not be deemed "filed" for purposes of Section 18 of the SecuritiesExchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.
Item 7.01. Regulation FD Disclosure.See Item 2.02 above regarding the Presentation Deck.
Item 9.01. Financial Statements and Exhibits.
Exhibit Description99.1 Press Release issued by Time Inc. on May 10, 201799.2 Presentation Deck issued by Time Inc. on May 10, 2017
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto dulyauthorized.
TIME INC.(Registrant) By: /s/ Susana D'Emic
Susana D'Emic Executive Vice President and Chief Financial Officer
Date: May 10, 2017
EXHIBIT INDEX
Exhibit Description99.1 Press Release issued by Time Inc. on May 10, 201799.2 Presentation Deck issued by Time Inc. on May 10, 2017
Exhibit 99.1
TIME INC. REPORTS FIRST QUARTER 2017 RESULTS
Q1 Digital Advertising Revenues Grew 32% Year-Over-Year
Q1 Print Advertising Revenues Declined 21% due to Secular Industry Trends, Media Speculation about Company’s Ownership and Impact of Advertising Sales ForceReorganization
Time Inc. Board of Directors Revises Capital Allocation Strategy to Enhance Financial Flexibility; Reduces Regular Quarterly Cash Dividend to $0.04 Per Share; Plansto Reduce Leverage Ratio toward Lower End of 2.0x-2.5x Target Range of Net Debt to Adjusted OIBDA
Performance Improvement Initiatives Reduced First Quarter Costs by 7% Year-Over-Year; Company Hires Advisor to Assist with Aggressive Cost Re-Engineering forMeaningful Margin Expansion
Growth Initiatives Driving Strong Gains in Native and Branded Content Advertising Revenues and Video Revenues; Company Achieved Record One Billion MonthlyVideo Views in April
NEW YORK, May 10, 2017 - Time Inc. (NYSE:TIME) reported financial results for its first quarter ended March 31, 2017 .
Time Inc. President and CEO Rich Battista said, "In the first quarter of 2017, we made important progress on our strategic plan despite continuing challenges with print advertisingrevenues. We are taking strategic actions and focusing on key initiatives to put the Company on the right course for the future. We are creating a more vibrant and valuableplatform for our advertisers and consumers, further enhancing financial flexibility, aggressively reducing our cost base, rationalizing our portfolio and continuing to invest intransformational growth initiatives. Importantly, our Board of Directors’ April 28 announcement affirming our strategic plan has removed a major distraction for our people andadvertisers. While we have a lot of work to do, Time Inc. is very well positioned to emerge as a winner in the rapidly changing consumer and media marketplace."
Results Summary In millions (except per share amounts) Three Months Ended
March 31, 2017 2016 GAAP Measures Revenues $ 636 $ 690 Operating income (loss) (26) (3) Net income (loss) attributable to Time Inc. (28) (10) Diluted EPS (0.29) (0.10) Cash provided by (used in) operations 15 (52) Non-GAAP Measures Adjusted OIBDA $ 23 $ 43 Adjusted Net income (loss) (18) (11) Adjusted Diluted EPS (0.18) (0.11) Free cash flow (6) (87)
The Company’s Adjusted OIBDA , Adjusted Net income (loss) , Adjusted Diluted EPS and Free cash flow are non-GAAP financial measures. See “Use of Non-GAAP FinancialMeasures” below and the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in Schedules I through IV attached hereto.
FIRST QUARTER RESULTS
Revenues decreased $54 million or 8% in the first quarter of 2017 from the year-earlier quarter to $636 million , primarily reflecting declines in Print and other advertisingrevenues and Circulation revenues, partially offset by growth in Digital advertising revenues, primarily driven by acquisitions. The stronger U.S. dollar relative to the British poundhad a $10 million adverse impact on Revenues for the quarter ended March 31, 2017 . Excluding the impact of U.S. dollar/British pound exchange rate changes, Revenues wouldhave decreased 6% , including the benefit of acquisitions.
Advertising Revenues decreased $29 million or 8% in the first quarter of 2017 from the year-earlier quarter to $331 million reflecting a decrease in Print and other advertisingrevenues, primarily due to fewer advertising pages sold as a result of the continuing secular trend of advertisers shifting advertising spending from print to other media, loweraverage price per page of advertising sold and fewer issues served to customers, primarily due to a change in frequency. In addition, our print advertising revenues were negativelyimpacted by the public speculation about the ownership of the Company and the disruption from the reorganization of our advertising sales force. Although the secular printdeclines are expected to continue, there is encouraging sequential improvement in print advertising in June and in our early booking trends for the third quarter of 2017. Partiallyoffsetting the decrease in our Print and other advertising revenues was a 32% increase in our Digital advertising revenues primarily resulting from the Viant acquisition and growthin Digital advertising revenues relating to programmatic sales, native and branded content advertising, and video. The stronger U.S. dollar relative to the British pound had a $3million adverse impact on Advertising revenues for the quarter ended March 31, 2017 . Excluding the impact of U.S. dollar/British pound exchange rate changes, Advertisingrevenues would have decreased 7% .
Circulation Revenues decreased $33 million or 14% in the first quarter of 2017 from the year-earlier quarter to $205 million as a result of fewer issues served to customers,primarily due to a change in frequency, and the continued shift in consumer preferences from print to digital media. The stronger U.S. dollar relative to the British pound had a $6million adverse impact on Circulation revenues for the quarter ended March 31, 2017 . Excluding the impact of U.S. dollar/British pound exchange rate changes, Circulationrevenues would have decreased 11% .
Other Revenues, which include marketing and support services provided to third parties, book publishing, events and licensing, increased $8 million or 9% in the first quarter of2017 from the year-earlier quarter to $100 million , primarily driven by an increase in revenues from content and photo syndication and book publishing, particularly related tobookazines. The stronger U.S. dollar relative to the British pound had a $1 million adverse impact on Other revenues for the quarter ended March 31, 2017 . Excluding the impactof U.S. dollar/British pound exchange rate changes, Other revenues would have increased 10% .
Revenues Summary In millions Three Months Ended
March 31, 2017 2016 % Change Print and other advertising $ 212 $ 270 (21)% Digital advertising 119 90 32 % Advertising revenues 331 360 (8)%
Subscription 140 161 (13)% Newsstand 56 68 (18)% Other circulation 9 9 — % Circulation revenues 205 238 (14)%
Other revenues 100 92 9 % Revenues $ 636 $ 690 (8)%
Costs of Revenues and Selling, General and Administrative Expenses decreased $46 million or 7% in the first quarter of 2017 from the year-earlier quarter to $615 million .The decrease in Costs of revenues and Selling, general and administrative expenses was driven by the benefits realized from previously announced cost savings initiatives, lowerprinting, production and distribution costs driven by lower paper volume and prices and the removal of the exigent USPS surcharge effective April 10, 2016, that was originallyimposed in December 2013, and lower circulation promotional expenses. Additionally, included in Selling, general and administrative expenses were $2 million and $14 million ofOther costs related to mergers, acquisitions, investments and dispositions for the quarters ended March 31, 2017 and 2016, respectively. These costs have been excluded from ourAdjusted OIBDA calculation. The stronger U.S. dollar relative to the British pound had a $10 million favorable impact on Costs of revenues and Selling, general and administrativeexpenses for the quarter ended March 31, 2017 . Excluding the impact of U.S. dollar/British pound exchange rate changes, Costs of revenues and Selling, general andadministrative expenses would have decreased 5% .
Restructuring and Severance Costs increased $15 million in the first quarter of 2017 from the year-earlier quarter to $16 million .
Operating Income (Loss) was a loss of $26 million and $3 million for the quarters ended March 31, 2017 and 2016 , respectively. The increase in Operating loss was primarilydriven by declines in Print and other advertising revenues and Circulation revenues and higher Restructuring and severance costs , partially offset by the benefits of lower Costs ofrevenues and Selling, general and administrative expenses .
Adjusted OIBDA decreased $20 million in the first quarter of 2017 from the year-earlier quarter to $23 million , primarily due to higher Operating loss.
Cash Provided By (Used In) Operations increased $67 million in the first quarter of 2017 from the year-earlier quarter to $15 million , primarily due to the benefits of completingbuyouts of the leases of our former corporate headquarters and another leased property for $95 million in the first quarter of 2016 and higher collections of Receivables in the firstquarter of 2017. These benefits were partially offset by lower domestic net income tax refunds received in the first quarter of 2017.
Free Cash Flow was an outflow of $6 million in the first quarter of 2017 versus an outflow of $87 million for the year-earlier quarter, primarily reflecting improvements in Cashprovided by (used in) operations as well as lower Capital expenditures .
On May 10, 2017 , our Board of Directors declared a dividend of $0.04 per common share to stockholders of record as of the close of business on May 31, 2017 , payable on June15, 2017 .
Capital Allocation Update
Following a comprehensive review of Time Inc.’s capital allocation, capital structure and operating plan, the Time Inc. Board of Directors today announced a revision to theCompany’s capital allocation approach. The objective is to provide us with strategic and financial flexibility in order to better focus on investing in growth and at the same timemaintaining a strong balance sheet. Beginning this quarter, our quarterly cash dividend has been reduced to $0.04 per share. This change is intended to enable us to de-lever thebalance sheet, and move toward the low end of our target leverage range of 2.0x to 2.5x net debt to Adjusted OIBDA.
As of March 31, 2017, the Company had a cash position of $281 million in Cash and cash equivalents and Short-term investments and an undrawn revolving credit facility of $497million.
Updating Guidance Practices
Time Inc. is a company undergoing rapid transformation. For this reason, it is important to focus on longer-term targets and performance. Given this longer-term perspective, thevariability of our advertising revenues, and the potential impacts from portfolio rationalization, the Company is modifying its financial guidance approach similar to many othercompanies in the media sector. Beginning with this earnings release, the Company no longer intends to provide quarterly pacing or an annual revenue outlook. We will continue tooffer quarterly insights and key metrics as appropriate. We will also provide our annual outlook for Adjusted OIBDA. The content of our quarterly insights and key metrics mayvary quarter-to-quarter depending on what we consider to be relevant at the time.
CONFERENCE CALL WEBCAST
The Company’s conference call can be heard live at 8:30 am E.T. on Wednesday, May 10, 2017 .To access a live audio webcast of the conference call, visit the Events and Presentations section of invest.timeinc.com.The earnings press release and management presentation will be available on our website at invest.timeinc.com.
CONTACTS: Investor Relations Jaison Blair (212) 522-5952 Tanya Levy-Odom (212) 522-9225
USE OF NON-GAAP FINANCIAL MEASURES
Time Inc. utilizes Operating income (loss) excluding Depreciation and Amortization of intangible assets ("OIBDA"), Adjusted OIBDA , Adjusted Net income (loss) , AdjustedDiluted EPS and Free cash flow , among other measures, to evaluate the performance of its business and its liquidity. We believe that the presentation of these measures helpsinvestors to analyze underlying trends in our business and to evaluate the performance of our business both on an absolute basis and relative to our peers and the broader market.We believe that these measures provide useful information to both management and investors by excluding certain items that may not be indicative of our core operating results andoperational strength of our business and help investors evaluate our liquidity and our ability to service our debt.
Some limitations of OIBDA, Adjusted OIBDA , Adjusted Net income (loss) , Adjusted Diluted EPS and Free cash flow are that they do not reflect certain charges that affect theoperating results of the Company's business and they involve judgment as to whether items affect fundamental operating performance.
A general limitation of these measures is that they are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and may not be comparable tosimilarly titled measures of other companies due to differences in methods of calculation and excluded items. OIBDA, Adjusted OIBDA , Adjusted Net income (loss) , AdjustedDiluted EPS and Free cash flow should be considered in addition to, not as a substitute for, the Company's Operating income (loss) , Net income (loss) attributable to Time Inc. ,Diluted net income (loss) per common share and various cash flow measures (e.g., Cash provided by (used in) operations ), as well as other measures of financial performance andliquidity reported in accordance with GAAP.
In addition, this earnings release includes comparisons that exclude the impacts of foreign currency exchange rate changes. These comparisons, which are non-GAAP measures, arecalculated by assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute ourconstant currency results, we multiply or divide, as appropriate, our current year U.S. dollar results by the current year average foreign exchange rates and then multiply or divide,as appropriate, those amounts by the prior year average foreign exchange rates. We believe this provides useful supplemental information regarding our results of operations,consistent with how we evaluate our own performance.
ABOUT TIME INC.
Time Inc. (NYSE: TIME) is a leading multi-platform media company that engages over 170 million consumers globally every month through its portfolio of premium news andlifestyle brands across a diverse set of interest areas. The Company’s influential brands include People, Time, Fortune, Sports Illustrated, InStyle, Real Simple, Southern Living,Entertainment Weekly, Food & Wine, Travel + Leisure and Essence, as well as approximately 60 diverse brands in the United Kingdom. Time Inc. offers marketers a differentiatedproposition in the media marketplace by combining our distinctive content, large-scale audiences and proprietary data and people-based targeting capabilities. Time Inc. extends thepower of its brands through other media and platforms including video and television, licensing, live events and paid products and services. With approximately 30 million paidsubscribers, Time Inc. is one of the largest direct marketers in the U.S. media industry. The Company has recently extended its assets into related areas through variousacquisitions, including Viant, an advertising technology firm with a people-based marketing platform, Adelphic, a mobile-first self-service programmatic ad buying platform, andBizrate Insights, a consumer insights company. Time Inc. is also home to celebrated events, such as the Time 100, Fortune Most Powerful Women, People’s Sexiest Man Alive,Sports Illustrated’s Sportsperson of the Year, the Essence Festival and the Food & Wine Classic in Aspen.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’scurrent expectations or beliefs, and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statementsherein due to changes in economic, business, competitive, technological, strategic and/or regulatory factors and other factors affecting the operation of Time Inc.’s businesses.More detailed information about these factors may be found in filings by Time Inc. with the Securities and Exchange Commission, including its most recent Annual Report onForm 10-K and subsequent Quarterly Reports on Form 10-Q. Time Inc. is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-lookingstatements, whether as a result of new information, future events, or otherwise.
TIME INC.CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except share amounts)
March 31,
2017 December 31,
2016ASSETS Current assets Cash and cash equivalents $ 241 $ 296Short-term investments 40 40Receivables, less allowances of $183 and $203 at March 31, 2017 and December 31, 2016, respectively 427 543Inventories, net of reserves 30 31Prepaid expenses and other current assets 132 110Total current assets 870 1,020 Property, plant and equipment, net 311 304Intangible assets, net 835 846Goodwill 2,086 2,069Other assets 69 66
Total assets $ 4,171 $ 4,305
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued liabilities $ 513 $ 598Deferred revenue 420 403Current portion of long-term debt 7 7Total current liabilities 940 1,008
Long-term debt 1,232 1,233Deferred tax liabilities 195 210Deferred revenue 81 86Other noncurrent liabilities 323 328 Redeemable noncontrolling interests 1 — Stockholders' equity Common stock, $0.01 par value, 400 million shares authorized; 99.34 million and 98.95 million shares issued and outstanding atMarch 31, 2017 and December 31, 2016, respectively 1 1
Preferred stock, $0.01 par value, 40 million shares authorized; none issued — —Additional paid-in-capital 12,531 12,548Accumulated deficit (10,760) (10,732)Accumulated other comprehensive loss, net (373) (377)Total Time Inc. stockholders' equity 1,399 1,440Equity attributable to noncontrolling interests — —Total stockholders' equity 1,399 1,440
Total liabilities and stockholders' equity $ 4,171 $ 4,305
TIME INC.CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
Three Months Ended
March 31, 2017 2016Revenues Advertising Print and other advertising $ 212 $ 270Digital advertising 119 90
Total advertising revenues 331 360Circulation Subscription 140 161Newsstand 56 68Other circulation 9 9
Total circulation revenues 205 238Other 100 92
Total revenues 636 690Costs of revenues Production costs 135 159Editorial costs 83 92Other 65 45
Total costs of revenues 283 296Selling, general and administrative expenses 332 365Amortization of intangible assets 20 21Depreciation 13 13Restructuring and severance costs 16 1(Gain) loss on operating assets, net (2) (3)Operating income (loss) (26) (3)Bargain purchase (gain) — (5)Interest expense, net 17 17Other (income) expense, net 2 6Income (loss) before income taxes (45) (21)Income tax provision (benefit) (17) (11)
Net income (loss) (28) (10)Less: Net income (loss) attributable to noncontrolling interests — —
Net income (loss) attributable to Time Inc. $ (28) $ (10)
Per share information attributable to Time Inc. common stockholders: Basic net income (loss) per common share $ (0.29) $ (0.10)Weighted average basic common shares outstanding 99.65 102.59Diluted net income (loss) per common share $ (0.29) $ (0.10)Weighted average diluted common shares outstanding 99.65 102.59Cash dividends declared per share of common stock $ 0.04 $ 0.19
TIME INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Three Months Ended
March 31, 2017 2016Cash provided by (used in) operations $ 15 $ (52)Cash provided by (used in) investing activities (44) (139)Cash provided by (used in) financing activities (27) (117)Effect of exchange rate changes on Cash and cash equivalents 1 (3)INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (55) (311)CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 296 651
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 241 $ 340
Schedule I
TIME INC.RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OIBDA
(Unaudited; in millions)
Three Months Ended
March 31, 2017 2016Operating income (loss) $ (26) $ (3)Depreciation 13 13Amortization of intangible assets 20 21OIBDA (1) 7 31Restructuring and severance costs 16 1(Gain) loss on operating assets, net (2) (2) (3)Other costs (3) 2 14
Adjusted OIBDA (4) $ 23 $ 43______________(1) OIBDA is defined as Operating income (loss) excluding Depreciation and Amortization of intangible assets .
(2) (Gain) loss on operating assets, net primarily reflects the recognition of the deferred gain from the sale-leaseback of the Blue Fin Building that was completed in the fourth quarter of 2015.
(3) Other costs related to mergers, acquisitions, investments and dispositions during the periods presented are included within Selling, general and administrative expenses within theStatements of Operations.
(4) Adjusted OIBDA is defined as OIBDA adjusted for impairments of Goodwill, intangible assets, fixed assets and investments; Restructuring and severance costs; (Gain) loss on operatingassets, net; Pension settlements/curtailments; and Other costs related to mergers, acquisitions, investments and dispositions.
Schedule II
TIME INC.RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)
(Unaudited; in millions)
Three Months Ended
March 31, 2017 Three Months Ended
March 31, 2016 Gross Impact Tax Impact Net Impact Gross Impact Tax Impact Net ImpactNet income (loss) attributable to Time Inc. $ (45) $ 17 $ (28) $ (21) $ 11 $ (10)Restructuring and severance costs 16 (6) 10 1 — 1(Gain) loss on operating assets, net (1) (2) — (2) (3) — (3)Bargain purchase (gain) (2) — — — (5) — (5)(Gain) loss on extinguishment of debt (3) — — — (4) 1 (3)Other costs (4) 2 — 2 14 (5) 9Adjusted Net income (loss) (5) $ (29) $ 11 $ (18) $ (18) $ 7 $ (11)
________________________
(1) (Gain) loss on operating assets, net primarily reflects the recognition of the deferred gain from the sale-leaseback of the Blue Fin Building that was completed in the fourth quarter of 2015.
(2) Bargain purchase (gain) relates to the acquisition of certain assets of Viant in the first quarter of 2016.
(3) (Gain) loss on extinguishment of debt in connection with repurchases of our Senior Notes is included within Other (income) expense, net within the Statements of Operations.
(4) Other costs related to mergers, acquisitions, investments and dispositions during the periods presented are included within Selling, general and administrative expenses within theStatements of Operations.
(5) Adjusted Net income (loss) is defined as Net income (loss) attributable to Time Inc. adjusted for impairments of Goodwill, intangible assets, fixed assets and investments; Restructuringand severance costs; Gain (loss) on operating and/or non-operating assets; Pension settlements/curtailments; Bargain purchase (gain); (Gain) loss on extinguishment of debt; and Othercosts related to mergers, acquisitions, investments and dispositions; as well as the impact of income taxes on the above items.
Schedule III
TIME INC.RECONCILIATION OF DILUTED EPS TO ADJUSTED DILUTED EPS
(Unaudited; all per share amounts are net of tax)
Three Months Ended
March 31, 2017 2016Diluted net income (loss) per common share $ (0.29) $ (0.10)Restructuring and severance costs 0.10 0.01(Gain) loss on operating assets, net (1) (0.02) (0.03)Bargain purchase (gain) (2) — (0.05)(Gain) loss on extinguishment of debt (3) — (0.03)Other costs (4) 0.03 0.09
Adjusted Diluted EPS (5)(6) $ (0.18) $ (0.11)
______________(1) (Gain) loss on operating assets, net primarily reflects the recognition of the deferred gain from the sale-leaseback of the Blue Fin Building that was completed in the fourth quarter of 2015.
(2) Bargain purchase (gain) relates to the acquisition of certain assets of Viant in the first quarter of 2016.
(3) (Gain) loss on extinguishment of debt in connection with repurchases of our Senior Notes is included within Other (income) expense, net within the Statements of Operations.
(4) Other costs related to mergers, acquisitions, investments and dispositions during the periods presented are included within Selling, general and administrative expenses within theStatements of Operations.
(5) Adjusted Diluted EPS is defined as Diluted EPS adjusted for impairments of Goodwill, intangible assets, fixed assets and investments; Restructuring and severance costs; Gain (loss) onoperating and/or non-operating assets; Pension settlements/curtailments; Bargain purchase (gain); (Gain) loss on extinguishment of debt; and Other costs related to mergers, acquisitions,investments and dispositions; as well as the impact of income taxes on the above items.
(6) For periods in which we were in net loss and adjusted net loss positions, we used the diluted shares from Diluted net income (loss) per common share in the calculation of Adjusted DilutedEPS, without giving effect to the impact of participating securities.
Schedule IV
TIME INC.RECONCILIATION OF CASH PROVIDED BY (USED IN) OPERATIONS TO FREE CASH FLOW
(Unaudited; in millions)
Three Months Ended
March 31, 2017 2016Cash provided by (used in) operations $ 15 $ (52) Less: Capital expenditures (21) (35)
Free cash flow (1) $ (6) $ (87)
______________(1) Free cash flow is defined as Cash provided by (used in) operations , less Capital expenditures . Capital expenditures for the three months ended March 31, 2017 reflect lower capital
spending due to the completion of the construction of our corporate headquarters in 2016.
Management Presentation MAY 10, 2017 1Q 2017
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995; particularly statements regarding future financial and operating results of Time Inc. (the “Company”) and its business. These statements are based on management’s current expectations or beliefs, and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied in this presentation due to changes in economic, business, competitive, technological, strategic, regulatory and/or other factors. More detailed information about these factors may be found in the Company’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. The Company is under no obligation, and expressly disclaims any such obligation, to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Non-GAAP financial measures such as Operating income (loss) excluding Depreciation and Amortization of intangible assets (“OIBDA”)", Adjusted OIBDA, Adjusted Diluted Earnings Per Share (EPS) and Free cash flow, as included in this presentation, are supplemental measures that are not calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Definitions of these measures and reconciliations to the most directly-comparable U.S. GAAP measures are included at the end of this presentation deck. Our non-GAAP financial measures have limitations as analytical and comparative tools and you should consider OIBDA, Adjusted OIBDA, Adjusted Diluted EPS and Free cash flow in addition to, and not as a substitute for, the Company’s Operating income (loss), Net income (loss) attributable to Time Inc., Diluted EPS and various cash flow measures (e.g., Cash provided by (used in) operations), as well as other measures of financial performance and liquidity reported in accordance with U.S. GAAP. Note: Throughout the presentation, certain numbers may not sum to the total due to rounding. All trademarks and service marks referenced herein are owned by the respective trademark or service mark owners. ©2017 Time Inc. Published 2017. 2 Caution Concerning Forward-Looking Statements and Non-GAAPFinancial Measures
Total revenues declined 8% year-over-year including approx. 200 bps related to FX . Print advertising revenues declined 21% year-over-year. Digital advertising revenues increased 32% year-over-year representing approx. 36% of total advertising revenues. Circulation Revenues declined 14% year-over-year including approx. 300 bps related to FX. Other Revenues increased 9% year-over-year driven by digital syndication and bookazines including approx. 100 bps of adverse impact from FX. Costs of Revenues and Selling, General and Administrative expenses decreased 7% year-over-year, including approx. 200 bps related to FX. Operating Loss of $26 million versus Operating Loss of $3 million in the prior year. Adjusted OIBDA of $23 million versus $43 million in the prior year. Quarter-end cash, cash equivalents and short-term investments of $281 million or $2.83 per share. 1Q17 Financial Highlights 3
$270 $212 $90 $119 2015 2016 Digital Advertising Print and Other Advertising 1Q17 Advertising Revenues Total advertising revenues down 8% Print and other advertising revenues down 21% Digital advertising revenues up 32% - Includes the benefit of acquisitions $360 $331 4 HIGHLIGHTS 1Q 6 1Q 7 $MM Revenues Revenues
$161 $140 $68 $56 $9 $9 Other Circulation Revenues Newsstand Revenues Subscription Revenues Subscription revenues down 13% Newsstand revenues down 18% $MM $238 $205 1Q17 Circulation Revenues HIGHLIGHTS 1Q16 1Q17 5
1Q17 Other Revenues Other revenues up 9% $92 $100 HIGHLIGHTS 1Q16 1Q17 $MM 6
$365 $332 $296 $283 Costs of Revenues (COR) Selling, General & Administrative Expenses (SG&A) 1Q17 Costs of Revenues and SG&A Expenses COR and SG&A combined down 7% - Includes costs related to FX - Includes transaction-related expenses which are excluded from our Adjusted OIBDA calculation: 1Q16 1Q17 Transaction-related $14 $2 $615 $661 HIGHLIGHTS 1Q16 1Q17 $MM 7
1 2 1Q17 Adjusted OIBDA $43 $23 1Q17 Operating loss of $26 million vs. Operating loss of $3 million in the prior year 1Q17 Adjusted OIBDA of $23 million vs. $43 million in the prior year 1Q17 Diluted Net Loss Per Share of $(0.29) vs. ($0.10) in the prior year 1Q17 Adjusted Diluted EPS of ($0.18) vs. ($0.11) in the prior year HIGHLIGHTS 1Q16 1Q17 $MM 8
1Q17 Cash Update HIGHLIGHTS 1Q17 ending cash, cash equivalents and short-term investments of $281 million Cash provided by operations of $15 million Quarterly dividend of $0.19 per share, or $19 million, paid on 3/15/17 As of 3/31/17, net leverage ratio of 2.47x - Target net leverage ratio 2.0x to 2.5x 9 CHANGES IN CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Beginning Cash Balance 12/31/16 $336 Free Cash Flow Acquisitions/Divestitures, net Dividends paid Other (6) (23) (19) (7) Ending Cash Balance 3/31/17 $281
Q&A
Appendix
12 (1) OIBDA is defined as Operating income (loss) excluding Depreciation and Amortization of intangible assets. (2) (Gain) loss on operating assets, net primarily reflects the recognition of the deferred gain from the sale-leaseback of the Blue Fin Building that was completed in the fourth quarter of 2015. (3) Other costs related to mergers, acquisitions, investments and dispositions during the periods presented are included within Selling, general and administrative expenses within the Statements of Operations. (4) Adjusted OIBDA is defined as OIBDA adjusted for impairments of Goodwill, intangible assets, fixed assets and investments; Restructuring and severance costs; (Gain) loss on operating assets, net; Pension settlements/curtailments; and Other costs related to mergers, acquisitions, investments and dispositions. TIME INC. RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OIBDA (Unaudited; in millions) Schedule I Three Months Ended March 31, 2017 2016 Operating income (loss) $ (26 ) $ (3 ) Depreciation 13 13 Amortization of intangible assets 20 21 OIBDA(1) 7 31 Restructuring and severance costs 16 1 (Gain) loss on operating assets, net(2) (2 ) (3 ) Other costs(3) 2 14 Adjusted OIBDA(4) $ 23 $ 43
13 TIME INC. RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (Unaudited; in millions) Schedule II (1) (Gain) loss on operating assets, net primarily reflects the recognition of the deferred gain from the sale-leaseback of the Blue Fin Building that was completed in the fourth quarter of 2015. (2) Bargain purchase (gain) relates to the acquisition of certain assets of Viant in the first quarter of 2016. (3) (Gain) loss on extinguishment of debt in connection with repurchases of our Senior Notes is included within Other (income) expense, net within the Statements of Operations. (4) Other costs related to mergers, acquisitions, investments and dispositions during the periods presented are included within Selling, general and administrative expenses within the Statements of Operations. (5) Adjusted Net income (loss) is defined as Net income (loss) attributable to Time Inc. adjusted for impairments of Goodwill, intangible assets, fixed assets and investments; Restructuring and severance costs; Gain (loss) on operating and/or non-operating assets; Pension settlements/curtailments; Bargain purchase (gain); (Gain) loss on extinguishment of debt; and Other costs related to mergers, acquisitions, investments and dispositions; as well as the impact of income taxes on the above items. Three Months Ended March 31, 2017 Three Months Ended March 31, 2016 Gross Impact Tax Impact Net Impact Gross Impact Tax Impact Net Impact Net income (loss) attributable to Time Inc. $ (45 ) $ 17 $ (28 ) $ (21 ) $ 11 $ (10 ) Restructuring and severance costs 16 (6 ) 10 1 — 1 (Gain) loss on operating assets, net(1) (2 ) — (2 ) (3 ) — (3 ) Bargain purchase (gain)(2) — — — (5 ) — (5 ) (Gain) loss on extinguishment of debt(3) — — — (4 ) 1 (3 ) Other costs(4) 2 — 2 14 (5 ) 9 Adjusted Net income (loss)(5) $ (29 ) $ 11 $ (18 ) $ (18 ) $ 7 $ (11 )
Schedule III TIME INC. RECONCILIATION OF DILUTED EPS TO ADJUSTED DILUTED EPS (Unaudited; all per share amounts are net of tax) (1) (Gain) loss on operating assets, net primarily reflects the recognition of the deferred gain from the sale-leaseback of the Blue Fin Building that was completed in the fourth quarter of 2015. (2) Bargain purchase (gain) relates to the acquisition of certain assets of Viant in the first quarter of 2016. (3) (Gain) loss on extinguishment of debt in connection with repurchases of our Senior Notes is included within Other (income) expense, net within the Statements of Operations. (4) Other costs related to mergers, acquisitions, investments and dispositions during the periods presented are included within Selling, general and administrative expenses within the Statements of Operations. (5) Adjusted Diluted EPS is defined as Diluted EPS adjusted for impairments of Goodwill, intangible assets, fixed assets and investments; Restructuring and severance costs; Gain (loss) on operating and/or non-operating assets; Pension settlements/curtailments; Bargain purchase (gain); (Gain) loss on extinguishment of debt; and Other costs related to mergers, acquisitions, investments and dispositions; as well as the impact of income taxes on the above items. (6) For periods in which we were in a net loss position, we have used the expected diluted shares in the calculation of Adjusted Diluted EPS as if we were in a net income position, without giving effect to the impact of participating securities. 14 Three Months Ended March 31, 2017 2016 Diluted net income (loss) per common share $ (0.29 ) $ (0.10 ) Restructuring and severance costs 0.10 0.01 (Gain) loss on operating assets, net(1) (0.02 ) (0.03 ) Bargain purchase (gain)(2) — (0.05 ) (Gain) loss on extinguishment of debt(3) — (0.03 ) Other costs(4) 0.03 0.09 Adjusted Diluted EPS(5)(6) $ (0.18 ) $ (0.11 )
15 TIME INC. RECONCILIATION OF CASH PROVIDED BY (USED IN) OPERATIONS TO FREE CASH FLOW (Unaudited; in millions) Schedule IV (1) Free cash flow is defined as Cash provided by (used in) operations, less Capital expenditures. Capital expenditures for the three months ended March 31, 2017 reflect lower capital spending due to the completion of the construction of our corporate headquarters in 2016. Three Months Ended March 31, 2017 2016 Cash provided by (used in) operations $ 15 $ (52 ) Less: Capital expenditures (21 ) (35 ) Free cash flow(1) $ (6 ) $ (87 )
16 Schedule V TIME INC. RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OIBDA - 2017 OUTLOOK (Unaudited; in millions) (1) The Full Year 2016 results averaged a USD to GBP exchange rate of 1.3. The Full Year 2017 Outlook assumes USD to GBP exchange rate of 1.25. (2) OIBDA is defined as Operating income (loss) excluding Depreciation and Amortization of intangible assets. (3) Adjusted OIBDA is defined as OIBDA adjusted for impairments of Goodwill, intangibles, fixed assets and investments; Restructuring and severance costs; (Gain) loss on operating assets, net; Pension settlements/curtailments; and Other costs related to mergers, acquisitions, investments and dispositions. 2016 Actual(1) Full Year 2017 Outlook Range(1) Operating income (loss) $ 2 255 to 269 Depreciation 54 60 Amortization of intangible assets 83 75 OIBDA(2) $ 139 390 to 404 Asset impairments, Restructuring and severance costs, (Gains) losses on operating assets, net; and Other costs related to mergers, acquisitions, investments and dispositions 275 10 Adjusted OIBDA(3) $ 414 400 to 414
Management Presentation MAY 10, 2017 1Q 2017