OREANDA-NEWS. Time Inc. (NYSE:TIME) reported financial results for its first quarter ended March 31, 2016.

Time Inc. Chairman and CEO Joe Ripp said, "Our first quarter results reflect progress toward achieving revenue growth in 2016. We are seeing double digit growth of Digital advertising and Other revenues driven by acquisitions and growth investments. We are making progress to transform Time Inc. into a multi-platform, multimedia enterprise and we are infusing digital culture into our day-to-day operations. Our acquisition of Viant is enhancing the breadth and depth of our first party data. It will enable us to deliver advertisers’ messages to specific audience segments across all their connected devices, and to measure the true sales impact. Also, today at our Newfront presentation, we will be announcing a slate of new video programming and services. With households abandoning the cable bundle, and social platforms providing new distribution opportunities, Time Inc. is positioning itself to be a major player in digital video."

 
Results Summary
In millions (except per share amounts)         Three Months Ended
March 31,
          2016     2015
GAAP Measures                
Revenues         $ 690       $ 680  
Operating income (loss)         (3 )     5  
Net income (loss)         (10 )     (9 )
Diluted EPS         (0.10 )     (0.08 )
Cash provided by (used in) operations         (52 )     (20 )
                 
Non-GAAP Measures                
Adjusted OIBDA         $ 43       $ 51  
Adjusted Net income (loss)         (11 )     (7 )
Adjusted Diluted EPS         (0.11 )     (0.06 )
Free Cash Flow         (87 )     (24 )
                     

The company’s Adjusted OIBDA, Adjusted Net Income, Adjusted Diluted EPS and Free Cash Flow are non-GAAP financial measures. See “Use of Non-GAAP Financial Measures” 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 increased $10 million or 1% in the first quarter of 2016 from the year-earlier quarter to $690 million primarily reflecting the benefit of acquisitions. In addition, declines in Print and other advertising revenues and in Circulation revenues were partially offset by growth in Digital advertising revenues. The stronger U.S. dollar relative to the British pound had a $4 million adverse impact on Revenues for the quarter ended March 31, 2016.

Advertising Revenues increased $7 million or 2% in the first quarter of 2016 from the year-earlier quarter to $360 million primarily reflecting the benefit of acquisitions, principally the Viant acquisition. In addition, the decrease in Print and other advertising revenues was partially offset by growth in Digital advertising revenue from video and programmatic sales.

Print and Other Advertising Revenues decreased $10 million or 4% in the first quarter of 2016 from the year-earlier quarter to $270 million. The decrease was driven principally by a decline in advertising pages sold, due to the continuing trend of advertisers shifting advertising spending from print to other media, and by lower average price per page of advertising sold, primarily due to the mix of advertisers. These were partially offset by the benefit of certain advertising revenues being recognized on a gross basis in 2016 that had been recognized on a net basis in 2015. Our domestic titles experienced advertising declines principally in the beauty, fashion/retail and media & movies categories, partially offset by strong sales in the food, travel and automotive categories.

Digital Advertising Revenues increased $17 million or 23% in the first quarter of 2016 from the year-earlier quarter to $90 million, primarily reflecting the benefit of the Viant acquisition, as well as growth in video and programmatic sales. Time Inc. served 120 million multiplatform unique visitors during March 2016 in the U.S., an increase of 12% since March 2015.

Circulation Revenues, which are comprised of subscription, newsstand and other circulation revenues, decreased $12 million or 5% in the first quarter of 2016 from the year-earlier quarter to $238 million. The stronger U.S. dollar relative to the British pound had a $3 million adverse impact on Circulation revenues.

Subscription Revenues decreased $4 million or 2% in the first quarter of 2016 from the year-earlier quarter to $161 million as a result of the continued shift in consumer preference from print to digital media.

Newsstand Revenues decreased $9 million or 12% in the first quarter of 2016 from the year-earlier quarter to $68 million. The stronger U.S. dollar relative to the British pound had a $2 million adverse impact on Newsstand revenues.

Other Revenues, which include marketing and support services provided to third parties, branded book publishing, events, and licensing, increased by $15 million or 19% in the first quarter of 2016 from the year-earlier quarter to $92 million principally driven by the benefit of acquisitions.

 
Revenues Summary
In millions         Three Months Ended
March 31,
          2016   2015
               
Print and other advertising         $ 270     $ 280
Digital advertising         90     73
Advertising revenues         360     353
               
Subscription         161     165
Newsstand         68     77
Other circulation         9     8
Circulation revenues         238     250
               
Other revenues         92     77
               
Revenues         $ 690     $ 680
                     

Costs of Revenues, which consist of Production costs, Editorial costs and Other costs, increased $25 million or 9% in the first quarter of 2016 from the year-earlier quarter to $296 million. The stronger U.S. dollar relative to the British pound had a $2 million favorable impact on Costs of revenues for the quarter ended March 31, 2016.

Production costs decreased $1 million or 1% from the year-earlier quarter to $159 million.

Editorial costs increased $3 million or 3% from the year-earlier quarter to $92 million, primarily driven by digital investments.

Other costs of revenues increased $23 million or 105% from the year-earlier quarter to $45 million principally driven by costs of operations of acquired businesses, as well as certain costs that were directly netted against Print and other advertising revenues in 2015 which are now included in Other costs of revenue in 2016.

Selling, General and Administrative Expenses ("SG&A") increased $6 million or 2% from the year-earlier quarter to $365 million. Included in SG&A for the quarters ended March 31, 2016 and 2015 were $14 million and $1 million, respectively, of costs related to mergers, acquisitions, investments and dispositions ("transaction costs") which have been excluded from our Adjusted OIBDA calculation. These transactions costs included payments made to certain vendors of Viant in order to continue receiving services from such vendors. The other components of SG&A decreased by $5 million, primarily driven by the benefits realized from previously announced cost savings initiatives, including in real estate, partially offset by increase in expenses related to growth initiatives and the costs of operations of acquired businesses. Additionally, the stronger U.S. dollar relative to the British pound also benefited SG&A by $2 million for the quarter ended March 31, 2016.

Depreciation decreased $11 million or 46% from the year-earlier quarter to $13 million, largely due to accelerated depreciation in 2015 of assets at our former headquarters at 1271 Avenue of the Americas in anticipation of relocating at the end of 2015, as well as less depreciation expense in 2016 due to the sale-leaseback of the Blue Fin Building in the fourth quarter of 2015.

Operating Income (Loss) was a loss of $3 million and income of $5 million for the quarters ended March 31, 2016 and 2015, respectively. The decrease in Operating income in the first quarter of 2016 versus the first quarter of 2015 was primarily driven by expenses associated with operations of acquired businesses, growth initiatives and transaction costs partially offset by higher revenues and the benefit of lower depreciation.

Adjusted OIBDA of $43 million for the quarter ended March 31, 2016 represented a decrease of $8 million from the year-earlier quarter of 2015 primarily due to lower Operating income.

Net Income (Loss) was a loss of $10 million for the quarter ended March 31, 2016 versus a loss of $9 million for the year-earlier quarter. Adjusted net loss was $11 million in the quarter ended March 31, 2016 compared to Adjusted net loss of $7 million for the year-earlier quarter. Diluted EPS was a loss of $0.10 per common share for the quarter ended March 31, 2016 versus a loss of $0.08 in the year-earlier quarter. Adjusted diluted EPS was a loss of $0.11 versus a loss of $0.06 in the year-earlier quarter.

Free Cash Flow was an outflow of $87 million for the quarter ended March 31, 2016 versus an outflow of $24 million for the year-earlier quarter, primarily reflecting the buyouts of leases for our former headquarters for $95 million, higher capital expenditures of $31 million principally associated with concluding our real estate relocations, partially offset by a tax refund, lower cash rent paid, and lower bonus payments.

On May 5, 2016, our Board of Directors declared a dividend of $0.19 per common share to stockholders of record as of the close of business on May 31, 2016, payable on June 15, 2016.

During the three months ended March 31, 2016, we repurchased $35 million of aggregate principal amount of our 5.75% Senior Notes at a discount and recognized a pretax gain of $4 million on the extinguishment of such notes. We also repurchased 4.05 million shares of our common stock at a weighted average price of $14.40 per share during the three months ended March 31, 2016. Such repurchases were made in accordance with our Board of Directors' authorizations in November 2015.

OUTLOOK

Our Outlook for 2016 is as follows:

         
$ in millions        
            2015 Actual  

Full Year 2016
Outlook Range(1)
Revenues – as reported         (5%)   1% to 5%
                     
Adjusted OIBDA         $440   $440 to $490
Investment spending, net         $(30)  

 

$(25)

  
                     
Capital expenditures         $166   $85 to $105
Real estate related(2)         $115  

 

$40

  
Core & growth         $51   $45 to $65
                     
(1) There is no change from our previously reported 2016 outlook range.
(2) 2015 Actual capital expenditures were offset by $46 million of tenant improvements allowances.
 

The company’s Adjusted OIBDA is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” below and the reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure in Schedule V attached hereto.

 

USE OF NON-GAAP FINANCIAL MEASURES

Time Inc. utilizes Adjusted Operating Income Before Depreciation and Amortization ("Adjusted OIBDA"), among other measures, to evaluate the performance of its business. Adjusted OIBDA is defined as Operating income (loss) excluding Depreciation and Amortization of intangible assets ("OIBDA") and adjusted for impairments of Goodwill, intangibles, fixed assets and investments; Restructuring and severance costs; gains and losses on operating assets; pension plan settlements and/or curtailments; and Other costs related to mergers, acquisitions, investments and dispositions.

Adjusted Net Income (Loss) is Net income (loss) adjusted for impairments of Goodwill, intangibles, fixed assets and investments; Restructuring and severance costs; gains and losses on operating and/or non-operating assets; pension plan settlements and/or curtailments; Bargain purchase gain; gains and losses on extinguishment of debt; Other costs related to mergers, acquisitions, investments and dispositions; as well as the impact of income taxes on the above items. Similarly, Adjusted Diluted EPS is Diluted net income (loss) per common share from continuing operations excluding the above items.

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

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

Some limitations of OIBDA, Adjusted OIBDA, Adjusted Net Income (Loss), Adjusted Diluted EPS and Free Cash Flow are that they do not reflect certain charges that affect the operating results of the company’s business and they involve judgment as to whether items affect fundamental operating performance.

A general limitation of these measures is that they are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and may not be comparable to similarly titled measures of other companies due to differences in methods of calculation and excluded items. OIBDA, Adjusted OIBDA, Adjusted Net Income (Loss), Adjusted Diluted 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), diluted net income (loss) per common share from continuing operations and various cash flow measures (e.g., cash provided by (used in) operations), as well as other measures of financial performance and liquidity reported in accordance with 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, are calculated 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 our constant 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 one of the world's leading media companies, with a monthly global print audience of over 120 million and worldwide digital properties that attract more than 150 million visitors each month, including over 60 websites. Our influential brands include People, Sports Illustrated, InStyle, Time, Real Simple, Southern Living, Entertainment Weekly, Travel + Leisure, Cooking Light, Fortune and Food & Wine, as well as more than 50 diverse titles in the United Kingdom, such as Decanter, Horse & Hound and Wallpaper*. Time Inc. is home to celebrated franchises and events, including the Fortune 500, Time 100, People’s Sexiest Man Alive, Sports Illustrated’s Sportsperson of the Year, the Food & Wine Classic in Aspen, the Essence Festival and the biennial Fortune Global Forum. Hundreds of thousands of people attend our live media events every year. We have been extending the power of our brands through various investments and acquisitions, including the formation of Sports Illustrated Play, a new business devoted to youth and amateur sports, and the acquisitions of INVNT, a company that specializes in live media, and Viant, an advertising technology firm with a specialized people-based marketing platform. We also provide content marketing, targeted local print and digital advertising programs, branded book publishing and marketing and support services, including subscription sales services for magazines and other products, retail distribution and marketing services and customer service and fulfillment services, for ourselves and third-party clients, including other magazine publishers.

               

TIME INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except share amounts)
               
          March 31,
2016		   December 31,
2015
ASSETS              
Current assets              
Cash and cash equivalents         $ 340     $ 651  
Short-term investments         60     60  

Receivables, less allowances of $206 and $248 at March 31, 2016 and December 31, 2015,
respectively

         470     484  
Inventories, net of reserves         34     35  
Prepaid expenses and other current assets         183     187  
Total current assets         1,087     1,417  
               
Property, plant and equipment, net         286     267  
Intangible assets, net         1,067     1,046  
Goodwill         2,025     2,038  
Other assets         122     116  
Total assets         $ 4,587     $ 4,884  
               
LIABILITIES AND STOCKHOLDERS' EQUITY              
Current liabilities              
Accounts payable and accrued liabilities         $ 518     $ 683  
Deferred revenue         438     436  
Current portion of long-term debt         7     7  
Total current liabilities         963     1,126  
               
Long-term debt         1,251     1,286  
Deferred tax liabilities         239     242  
Deferred revenue         91     89  
Other noncurrent liabilities         323     332  
               
Stockholders' Equity              

Common stock, $0.01 par value, 400 million shares authorized; 102.57 million and 106.03
million shares issued and outstanding at March 31, 2016 and December 31, 2015,
respectively

         1     1  
Preferred stock, $0.01 par value, 40 million shares authorized; none issued         —     —  
Additional paid-in-capital         12,589     12,604  
Accumulated deficit         (10,638 )   (10,570 )
Accumulated other comprehensive loss, net         (232 )   (226 )
Total stockholders' equity         1,720     1,809  
Total liabilities and stockholders' equity         $ 4,587     $ 4,884  
                       
           

TIME INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in millions, except per share amounts)
           
          Three Months Ended
March 31,
          2016   2015
Revenues              
Advertising              
Print and other advertising         $ 270     $ 280  
Digital advertising         90     73  
Total advertising         360     353  
Circulation              
Subscription         161     165  
Newsstand         68     77  
Other circulation         9     8  
Total circulation         238     250  
Other         92     77  
Total revenues         690     680  
Costs of revenues              
Production costs         159     160  
Editorial costs         92     89  
Other         45     22  
Total costs of revenues         296     271  
Selling, general and administrative expenses         365     359  
Amortization of intangible assets         21     19  
Depreciation         13     24  
Restructuring and severance costs         1     2  
(Gain) loss on operating assets, net         (3 )   —  
Operating income (loss)         (3 )   5  
Bargain purchase gain         (5 )   —  
Interest expense, net         17     19  
Other (income) expense, net         6     3  
Income (loss) before income taxes         (21 )   (17 )
Income tax provision (benefit)         (11 )   (8 )
Net income (loss)         $ (10 )   $ (9 )
               
Per share information attributable to Time Inc. common stockholders:              
Basic net income (loss) per common share         $ (0.10 )   $ (0.08 )
Weighted average basic common shares outstanding         102.59     109.53  
Diluted net income (loss) per common share         $ (0.10 )   $ (0.08 )
Weighted average diluted common shares outstanding         102.59     109.53  
Cash dividends declared per share of common stock         $ 0.19     $ 0.19  
                       
           

TIME INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)
           
          Three Months Ended
March 31,
          2016   2015
OPERATING ACTIVITIES              
Net income (loss)         $ (10 )   $ (9 )
Adjustments to reconcile net income (loss) to cash provided by (used in) operations              
Depreciation and amortization         34     43  
Amortization of deferred financing costs and discounts on indebtedness         2     1  
(Gain) loss on sale of operating assets         (1 )   —  
(Gain) loss on repurchases of 5.75% Senior Notes         (4 )   —  
Amortization of deferred gain on sale-leaseback         (2 )   —  
Bargain purchase gain         (5 )   —  
Settlement loss         3     —  
(Gain) loss on equity method of investee companies, net of cash distributions         10     3  
Equity-based compensation expense         10     13  
Deferred income taxes         (7 )   2  
Changes in operating assets and liabilities              
Receivables         60     76  
Inventories         —     5  
Prepaid expenses and other current assets         20     (31 )
Accounts payable and accrued liabilities         (165 )   (122 )
Other, net         3     (1 )
Cash provided by (used in) operations         (52 )   (20 )
               
INVESTING ACTIVITIES              
Acquisitions, net of cash acquired         (96 )   (13 )
(Investments in) divestitures of equity affiliates         (9 )   —  
Proceeds from dispositions         1     —  
Purchases of short-term investments         (20 )   —  
Maturities of short-term investments         20     —  
Capital expenditures         (35 )   (4 )
Cash provided by (used in) investing activities         (139 )   (17 )
               
FINANCING ACTIVITIES              
Purchase of common stock         (58 )   —  
Repurchase of 5.75% Senior Notes         (31 )   —  
Principal payments on Term Loan         (2 )   (2 )
Withholding taxes paid on equity-based compensation         (5 )   —  
Dividends paid         (20 )   (21 )
Contingent/deferred consideration payment         (1 )   —  
Cash provided by (used in) financing activities         (117 )   (23 )
Effect of exchange rate changes on Cash and cash equivalents         (3 )   (1 )
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         (311 )   (61 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD         651     519  
CASH AND CASH EQUIVALENTS, END OF PERIOD         $ 340     $ 458  
               
SUPPLEMENTAL INFORMATION              
Income Taxes Paid         $ (1 )   $ (4 )
Income Tax Refunds Received         $ 43     $ —  
Cash Paid for Interest         $ (8 )   $ (8 )
                       
         

Schedule I
           

TIME INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OIBDA

(Unaudited; in millions)
           
          Three Months Ended
March 31,
          2016   2015
Operating income (loss)         $ (3 )   $ 5
Depreciation         13     24
Amortization of intangible assets         21     19
OIBDA(1)         31     48
Restructuring and severance costs         1     2
(Gain) loss on operating assets, net(2)         (3 )   —
Other costs(3)         14     1
Adjusted OIBDA(4)         $ 43     $ 51
                     

______________

(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 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, intangibles, fixed assets and investments; Restructuring and severance costs; gains and losses on operating assets; pension plan settlements and/or curtailments; and Other costs related to mergers, acquisitions, investments and dispositions.
       
         

Schedule II
           

TIME INC.

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME

(Unaudited; in millions)
           
      Three Months Ended
March 31, 2016		   Three Months Ended
March 31, 2015
     

Gross
Impact

   Tax Impact   Net Impact  

Gross
Impact

   Tax Impact   Net Impact
Net income (loss)     $ (21 )   $ 11     $ (10 )   $ (17 )   $ 8     $ (9 )
Restructuring and severance costs     1     —     1     2     (1 )   1  
(Gain) loss on operating assets, net(1)     (3 )   —     (3 )   —     —     —  
Bargain purchase gain(2)     (5 )   —     (5 )   —     —     —  
(Gain) loss on extinguishment of debt(3)     (4 )   1     (3 )   —     —     —  
Other costs     14     (5 )   9     1     —     1  
Adjusted Net income (loss)(4)     $ (18 )   $ 7     $ (11 )   $ (14 )   $ 7     $ (7 )
                                                   

______________

(1)

    

(Gain) loss on operating assets, net primarily relates to the recognition of the deferred gain from the sale-leaseback of the Blue Fin Building 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 on extinguishment of debt in connection with repurchases of our Senior Notes are included within Other (income) expense, net on the Statements of Operations.

(4)

    

Adjusted Net income (loss) is defined as Net income (loss) adjusted for impairments of Goodwill, intangibles, fixed assets and investments; Restructuring and severance costs; gains and losses on operating and/or non-operating assets; pension plan settlements and/or curtailments; Bargain purchase gain; gains and losses 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.
       
         

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,
          2016   2015
Diluted EPS         $ (0.10 )   $ (0.08 )
Restructuring and severance costs         0.01     0.01  
(Gain) loss on operating assets, net(1)         (0.03 )   —  
Bargain purchase gain(2)         (0.05 )   —  
(Gain) loss on extinguishment of debt(3)         (0.03 )   —  
Other costs         0.09     0.01  
Adjusted Diluted EPS(4)(5)         $ (0.11 )   $ (0.06 )
                       

______________

(1)

    

(Gain) loss on operating assets, net primarily relates to the recognition of the deferred gain from the sale-leaseback of the Blue Fin Building 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 on extinguishment of debt in connection with repurchases of our Senior Notes are included within Other (income) expense, net on the Statements of Operations.

(4)

    

Adjusted Diluted EPS is defined as Diluted EPS adjusted for impairments of Goodwill, intangibles, fixed assets and investments; Restructuring and severance costs; gains and losses on operating and/or non-operating assets; pension plan settlements and/or curtailments; Bargain purchase gain; gains and losses 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.

(5)

    

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.
       
 

Schedule IV
   

TIME INC.

RECONCILIATION OF CASH PROVIDED BY (USED IN) OPERATIONS TO FREE CASH FLOW

(Unaudited; in millions)
   
  Three Months Ended
March 31,
  2016   2015
Cash provided by (used in) operations $ (52 )   $ (20 )
Less: Capital expenditures (35 )   (4 )
Free Cash Flow(1) $ (87 )   $ (24 )
               

______________

(1)

    

Free Cash Flow is defined as Cash provided by (used in) operations, less Capital expenditures. Capital expenditures in the three months ended March 31, 2016 are primarily associated with concluding our real estate relocations.
       
             

Schedule V
               

TIME INC.

RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OIBDA - 2016 OUTLOOK

(Unaudited; in millions)
               
              2016 Outlook
          2015 Actual   Low   High
Operating income (loss)         $ (823 )   $ 305     $ 340
Depreciation         92     60     70
Amortization of intangible assets         80     75     80
OIBDA(1)         $ (651 )   $ 440     $ 490

Asset impairments, Goodwill impairment, Restructuring and severance
costs, gains/losses on operating assets, pension plan settlements and/or
curtailments and Other costs related to mergers, acquisitions,
investments and dispositions

         1,091     —     —
Adjusted OIBDA(2)         $ 440     $ 440     $ 490
                             

______________

(1)

    

OIBDA is defined as Operating income (loss) excluding Depreciation and Amortization of intangible assets.

(2)

    

Adjusted OIBDA is defined as OIBDA adjusted for impairments of Goodwill, intangibles, fixed assets and investments; Restructuring and severance costs; gains and losses on operating assets; pension plan settlements and/or curtailments; and Other costs related to mergers, acquisitions, investments and dispositions.