Time Warner Inc. Reports Third-Quarter 2012 Results

  Time Warner Inc. Reports Third-Quarter 2012 Results

Third-Quarter Highlights

  *Company posted Revenues of $6.8 billion and Adjusted Operating Income of
    $1.6 billion
  *Networks Adjusted Operating Income grew double digits, to its highest
    quarter ever
  *Adjusted EPS rose 9% to $0.86
  *Company repurchased 59  million shares for $2.3 billion year-to-date
    through November  2, 2012

Business Wire

NEW YORK -- November 07, 2012

Time Warner Inc. (NYSE:TWX) today reported financial results for its third
quarter ended September 30, 2012.

Chairman and Chief Executive Officer Jeff Bewkes said: “With one quarter left
to go in 2012, we’re on track for another very strong year. The highlight this
quarter was the strength of our Networks businesses, which delivered double
digit Adjusted Operating Income growth. This performance illustrates that our
investments in content and technology are continuing to pay off. We’re
experiencing good momentum across most of Turner’s networks. TBS, for
instance, was up 35% in primetime for adults 18-49 this quarter and is now the
#1 network on cable this year for adults 18-34. At HBO, the unmatched volume
of its quality original programming was underscored by the 23 Primetime Emmy
awards HBO received this year—more than any other network for the eleventh
consecutive year. With compelling content, technological innovations like HBO
GO and support from our affiliates, the subscriber trends at HBO today are the
best they’ve been in years.”

Mr. Bewkes continued: “Our studio faced difficult comparisons in the third
quarter, but Warner Bros. Television is having a terrific broadcast season
with a successful mix of new and returning shows. For Warner Bros.’ theatrical
business, the story this quarter was The Dark Knight Rises, which has brought
in over $1 billion at the global box office, surpassing The Dark Knight. And
the studio is off to a great start to the fourth quarter with the critical and
audience acclaim for Argo, which we’ll follow with the highly-anticipated
release next month of the first installment of The Hobbit. Overall, I’m very
confident about how we’re positioned heading into next year and beyond.
Reflecting that confidence and our continued commitment to improving
shareholder returns, through November 2 we’ve purchased approximately $2.3
billion of our stock this year.”

Company Results

In the third quarter of 2012, Revenues decreased 3%  to $6.8 billion as growth
at the Networks segment was  more than offset by declines at the Film and TV
Entertainment and Publishing segments. Adjusted Operating Income declined 1%
to $1.6 billion in the quarter as growth at the Networks and Publishing
segments was more than offset by a decline at the Film and TV Entertainment
segment. Operating Income also fell 1% to $1.6 billion. Adjusted Operating
Income and Operating Income margins were both 23% in the third quarter of
2012, unchanged from the prior year quarter.

In the third quarter, the Company posted Adjusted Diluted Net Income per
Common Share (“Adjusted EPS”) of $0.86  versus $0.79 for the year-ago quarter.
Diluted Income per Common Share was $0.86  for the three months ended
September 30, 2012 compared to $0.78 in the prior year quarter.

For the first nine months of 2012, Cash Provided by Operations from Continuing
Operations reached $2.3 billion, and Free Cash Flow totaled $2.0 billion. As
of September 30, 2012, Net Debt was $16.7  billion, up from $16.0 billion at
the end of 2011, due to share repurchases and dividends, partially offset by
the generation of Free Cash Flow.

Refer to “Use of Non-GAAP Financial Measures” in this release for a discussion
of the non-GAAP financial measures used in this release and the
reconciliations of the non-GAAP financial measures to the most directly
comparable GAAP financial measures.

Stock Repurchase Program Update

From January 1, 2012 through November 2, 2012, the Company repurchased
approximately 59  million shares of common stock for approximately $2.3
billion. These amounts reflect the purchase of approximately 20 million shares
of common stock for approximately $869 million since the amounts reported in
the Company’s second quarter earnings release issued on August 1, 2012. As of
November 2, 2012, approximately $2.1 billion remained under the Company’s
stock repurchase authorization.

Segment Performance

Presentation of Financial Information

The schedule below reflects Time Warner’s financial performance for the three
and nine months ended September 30 by line of business (millions).

                                                               
                      Three Months Ended Sept.    Nine Months Ended Sept.
                        30,                         30,
                       2012            2011        2012            2011
Revenues:                              
Networks              $ 3,339        $  3,208       $  10,539       $ 10,155
Film and TV             2,897           3,297          8,295          8,748
Entertainment^(a)
Publishing              838             889            2,469          2,633
Intersegment            (232   )        (326   )       (738    )      (755   )
eliminations
Total Revenues        $ 6,842       $  7,068      $  20,565      $ 20,781 
                                        
Adjusted Operating
Income (Loss) ^
(b):
Networks              $ 1,223        $  1,093       $  3,545        $ 3,287
Film and TV             330             528            682            846
Entertainment^(a)
Publishing              126             124            262            356
Corporate               (85    )        (78    )       (263    )      (253   )
Intersegment            (12    )        (62    )       (80     )      (77    )
eliminations
Total Adjusted        $ 1,582       $  1,605      $  4,146       $ 4,159  
Operating Income
                                        
Operating Income
(Loss) ^ (b):
Networks^(c)          $ 1,224        $  1,092       $  3,341        $ 3,278
Film and TV             328             524            676            836
Entertainment^(a)
Publishing              127             124            220            356
Corporate               (86    )        (82    )       (266    )      (261   )
Intersegment            (12    )        (62    )       (80     )      (77    )
eliminations
Total Operating       $ 1,581       $  1,596      $  3,891       $ 4,132  
Income
                                        
Depreciation and
Amortization:
Networks              $ 91           $  90          $  265          $ 275
Film and TV             92              95             276            285
Entertainment^(a)
Publishing              31              36             96             108
Corporate              8             7             21            21     
Total Depreciation    $ 222         $  228        $  658         $ 689    
and Amortization
                                                                             

      Effective for the first quarter of 2012, Time Warner changed the name of
      its Filmed Entertainment reportable segment to Film and TV
(a)  Entertainment. This change did not affect the composition of the
      segment; accordingly, all prior period financial information related to
      this reportable segment was unaffected.
      Adjusted Operating Income (Loss) and Operating Income (Loss) for the
(b)   three and nine months ended September 30, 2012 and 2011 included
      restructuring and severance costs of (millions):
      

                     Three Months Ended Sept. 30,  Nine Months Ended Sept.
                                                      30,
                       2012             2011         2012         2011

  Networks             $   (18   )       $  (16  )    $  (40  )     $  (34  )
  Film and TV              (11   )          (11  )       (19  )        (33  )
  Entertainment
  Publishing               (6    )          (3   )       (24  )        (15  )
  Corporate            -                -             (1   )       (2   )

  Total
  Restructuring and    $   (35   )       $  (30  )    $  (84  )     $  (84  )
  Severance Costs
                                                                            

      Operating Income for the nine months ended September 30, 2012 included
(c)  $199 million in charges related to the shutdown of Turner’s general
      entertainment network, Imagine, in India and TNT television operations
      in Turkey.
      

Presented below is a discussion of the performance of Time Warner’s segments
for the third quarter of 2012. Unless otherwise noted, the dollar amounts in
parentheses represent year-over-year changes.

NETWORKS (Turner Broadcasting and HBO)

Revenues rose 4% ($131 million) to $3.3 billion, benefitting from growth of 7%
($137 million) in Subscription revenues, which was partially offset by a
decline of 1% ($9 million) in Advertising revenues. The increase in
Subscription revenues resulted mainly from higher domestic rates and, to a
lesser extent, an increase in domestic subscribers at HBO and international
growth. Advertising revenues benefitted from growth at Turner’s domestic
entertainment networks, due principally to higher pricing, offset in part by
the timing of certain sports events. Domestic growth was more than offset by
decreases at Turner’s international networks, which were due primarily to the
negative effect of foreign currency exchange rates and the shutdown of
Turner’s general entertainment network, Imagine, in India and TNT television
operations in Turkey, which occurred in the first half of 2012.

Adjusted Operating Income increased 12% ($130 million) to $1.2 billion due to
higher revenues. Programming expenses were essentially flat compared to the
prior year’s quarter as the benefits from the shutdown of Imagine and TNT
television operations in Turkey and the timing of sports events were offset by
higher costs at HBO due to the timing of original programming. Operating
Income also increased 12% ($132 million) to $1.2 billion.

TNT series The Closer, Rizzoli & Isles, and Major Crimes ranked as cable’s top
three original primetime series in the third quarter among total viewers. At
TBS, total primetime viewers were up 45% over last year’s quarter. Cartoon
Network and Adult Swim were the #1 ad-supported cable networks in total day
delivery among boys 6-11 and adults 18-34, respectively.  In October, Turner
entered into an agreement to extend its relationship with Major League
Baseball through 2021, providing Turner with television rights and expanded
digital rights to both postseason and regular season games.

In September, HBOreceived 23 Primetime Emmy Awards, the most of any network
for the eleventh consecutive year,with Game of Thrones receiving six awards,
Game Change receiving five awards and Boardwalk Empire receiving four awards.
During the quarter, HBO announced that, together with Parsifal International,
it plans to launch HBO Nordic, a multi-platform premium television service, in
Sweden, Norway, Finland and Denmark.

FILM AND TV ENTERTAINMENT (Warner Bros.)

Revenues decreased 12% ($400 million) to $2.9 billion, due mainly to difficult
comparisons to the year ago period. The prior year’s quarter included revenues
from the theatrical release of Harry Potter and the Deathly Hallows: Part 2
and television license fees from the off-network availabilities of The Big
Bang Theory and Friends. This decline was offset in part by the global
theatrical performance of The Dark Knight Rises and an increase in
subscription video-on-demand revenue.

Adjusted Operating Income declined 38% ($198 million) to $330 million, due
mainly to lower revenues, offset partially by lower print and advertising
costs due to fewer theatrical releases in the quarter. Operating Income
decreased 37% ($196 million) to $328 million.

For the first ten months of 2012, Warner Bros. achieved the number two spot in
domestic box office share with $1.4 billion, led by the releases of The Dark
Knight Rises, Magic Mike and Journey 2: The Mysterious Island. The Dark Knight
Rises has surpassed $1 billion at the global box office during its theatrical
run, exceeding its predecessor The Dark Knight. Warner Bros. is the leading
supplier of programming to the broadcast networks, with 25 primetime series
announced for the 2012–2013 season. Including cable, animated and first-run
syndicated series, Warner Bros. is producing nearly 60 programs.

PUBLISHING (Time Inc.)

Revenues declined 6% ($51 million) to $838 million, reflecting decreases of 6%
($19 million) in Subscription revenues, 5% ($25 million) in Advertising
revenues and 18% ($17 million) in Other revenues. The decrease in Subscription
revenues was due primarily to lower domestic and international newsstand
sales. Advertising revenues decreased due to lower magazine advertising
demand, partly offset by revenues from SI.com and Golf.com, the management of
which was transferred from Turner to Time Inc. during the second quarter of
2012. The transfer of SI.com and Golf.com benefitted Advertising revenues and
negatively impacted Other revenues by similar amounts.

Adjusted Operating Income increased 2% ($2 million) to $126 million as a
decrease in expenses due to lower production costs and cost savings
initiatives offset the decline in revenues. Operating Income also increased 2%
($3 million) to $127 million.

During the first nine months of 2012, Time Inc. maintained its leading share
of overall domestic magazine advertising with 21.5% (Publishers Information
Bureau data). In October, Advertising Age named In Style and FORTUNE to its
A-List, which recognizes magazine brands that have demonstrated excellence
within the industry over the past year.

CONSOLIDATED NET INCOME AND PER SHARE RESULTS

Adjusted EPS was $0.86  for the three months ended September 30, 2012,
compared to $0.79 in last year’s third quarter. The increase in Adjusted EPS
reflects fewer shares outstanding.

For the three months ended September 30, 2012, the Company reported Net Income
attributable to Time Warner Inc. shareholders of  $838  million, or $0.86  per
diluted common share. This compares to Net Income attributable to Time Warner
Inc. shareholders in 2011’s third quarter of  $822  million, or $0.78  per
diluted common share.

For the third quarter of 2012 and 2011, the Company reported Net Income of 
$838  million and $822  million, respectively.

USE OF NON-GAAP FINANCIAL MEASURES

The Company utilizes Adjusted Operating Income (Loss) and Adjusted Operating
Income margin, among other measures, to evaluate the performance of its
businesses. Adjusted Operating Income (Loss) is Operating Income (Loss)
excluding the impact of noncash impairments of goodwill, intangible and fixed
assets; gains and losses on operating assets; gains and losses recognized in
connection with pension plan curtailments, settlements or termination
benefits; external costs related to mergers, acquisitions or dispositions, as
well as contingent consideration related to such transactions, to the extent
such costs are expensed; and amounts related to securities litigation and
government investigations. Adjusted Operating Income margin is defined as
Adjusted Operating Income divided by Revenues. These measures are considered
important indicators of the operational strength of the Company’s businesses.

Adjusted Net Income attributable to Time Warner Inc. common shareholders is
Net Income attributable to Time Warner Inc. common shareholders excluding
noncash impairments of goodwill, intangible and fixed assets and investments;
gains and losses on operating assets, liabilities and investments; gains and
losses recognized in connection with pension plan curtailments, settlements or
termination benefits; external costs related to mergers, acquisitions,
investments or dispositions, as well as contingent consideration related to
such transactions, to the extent such costs are expensed; amounts related to
securities litigation and government investigations; and amounts attributable
to businesses classified as discontinued operations, as well as the impact of
taxes and noncontrolling interests on the above items. Similarly, Adjusted EPS
is Diluted Net Income per Common Share attributable to Time Warner Inc. common
shareholders excluding the above items.

Adjusted Net Income attributable to Time Warner Inc. common shareholders and
Adjusted EPS are considered important indicators of the operational strength
of the Company’s businesses as these measures eliminate amounts that do not
reflect the fundamental performance of the Company’s businesses. The Company
utilizes Adjusted EPS, among other measures, to evaluate the performance of
its businesses both on an absolute basis and relative to its peers and the
broader market. Many investors also use an adjusted EPS measure as a common
basis for comparing the performance of different companies. Some limitations
of Adjusted Operating Income (Loss), Adjusted Operating Income margin,
Adjusted Net Income attributable to Time Warner Inc. common shareholders and
Adjusted EPS are that they do not reflect certain charges that affect the
operating results of the Company’s businesses and they involve judgment as to
whether items affect fundamental operating performance.

For periods ending on or after July 1, 2012, Free Cash Flow is defined as Cash
Provided by Operations from Continuing Operations plus payments related to
securities litigation and government investigations (net of any insurance
recoveries), external costs related to mergers, acquisitions, investments or
dispositions, to the extent such costs are expensed, contingent consideration
payments made in connection with acquisitions, and excess tax benefits from
the exercise of stock options, less capital expenditures, principal payments
on capital leases and partnership distributions, if any. For periods ending
prior to that date, Free Cash Flow is defined as Cash Provided by Operations
from Continuing Operations plus payments related to securities litigation and
government investigations (net of any insurance recoveries), external costs
related to mergers, acquisitions, investments or dispositions, to the extent
such costs are expensed, and excess tax benefits from the exercise of stock
options, less capital expenditures, principal payments on capital leases and
partnership distributions, if any. A change to the definition of Free Cash
Flow for periods prior to July 1, 2012 to adjust for contingent consideration
payments made in connection with acquisitions would have had no impact on the
reported Free Cash Flow for such periods. The Company uses Free Cash Flow to
evaluate its businesses and this measure is considered an important indicator
of the Company’s liquidity, including its ability to reduce net debt, make
strategic investments, pay dividends to common shareholders and repurchase
stock. A limitation of this measure, however, is that it does not reflect
payments made in connection with securities litigation and government
investigations, which reduce liquidity.

A general limitation of these measures is that they are not prepared in
accordance with U.S. generally accepted accounting principles and may not be
comparable to similarly titled measures of other companies due to differences
in methods of calculation and excluded items. Adjusted Operating Income
(Loss), Adjusted Net Income attributable to Time Warner Inc. common
shareholders, Adjusted EPS and Free Cash Flow should be considered in addition
to, not as a substitute for, the Company’s Operating Income (Loss), Net Income
attributable to Time Warner Inc. common shareholders, Diluted Net Income
(Loss) per Common Share and various cash flow measures (e.g., Cash Provided by
Operations from Continuing Operations), as well as other measures of financial
performance and liquidity reported in accordance with U.S. generally accepted
accounting principles.

ABOUT TIME WARNER INC.

Time Warner Inc., a global leader in media and entertainment with businesses
in television networks, film and TV entertainment and publishing, uses its
industry-leading operating scale and brands to create, package and deliver
high-quality content worldwide through multiple distribution outlets.

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’s current expectations or beliefs, and are subject to
uncertainty and changes in circumstances. Actual results may vary materially
from those expressed or implied by the statements herein due to changes in
economic, business, competitive, technological, strategic and/or regulatory
factors and other factors affecting the operation of Time Warner’s businesses.
More detailed information about these factors may be found in filings by Time
Warner with the Securities and Exchange Commission, including its most recent
Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. Time
Warner is under no obligation to, 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.

INFORMATION ON BUSINESS OUTLOOK RELEASE & CONFERENCE CALL

Time Warner Inc. issued a separate release today regarding its 2012 full-year
business outlook.

The Company’s conference call can be heard live at 10:30 am ET on Wednesday,
November 7, 2012. To listen to the call, visit www.timewarner.com/investors.

TIME WARNER INC.
CONSOLIDATED BALANCE SHEET
(Unaudited; millions, except share amounts)
                                                               
                                                  September 30,   December 31,
                                                  2012            2011
                                                                  
ASSETS
Current assets
Cash and equivalents                              $  3,188        $  3,476
Receivables, less allowances of $1,355 and           6,199           6,922
$1,957
Inventories                                          2,091           1,890
Deferred income taxes                                620             663
Prepaid expenses and other current assets           596           481     
Total current assets                                 12,694          13,432
                                                                     
Noncurrent inventories and theatrical film and       6,847           6,594
television production costs
Investments, including available-for-sale            2,029           1,820
securities
Property, plant and equipment, net                   3,906           3,963
Intangible assets subject to amortization, net       2,012           2,232
Intangible assets not subject to amortization        7,805           7,805
Goodwill                                             30,190          30,029
Other assets                                        2,002         1,926   
Total assets                                      $  67,485      $  67,801  
                                                                     
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities          $  7,075        $  7,815
Deferred revenue                                     1,050           1,084
Debt due within one year                            754           23      
Total current liabilities                            8,879           8,922
                                                                     
Long-term debt                                       19,122          19,501
Deferred income taxes                                2,553           2,541
Deferred revenue                                     521             549
Other noncurrent liabilities                         6,391           6,334
                                                                     
Equity
Common stock, $0.01 par value, 1.652 billion
and 1.652 billion shares
issued and 950 million and 974 million shares        17              17
outstanding
Paid-in-capital                                      154,918         156,114
Treasury stock, at cost (702 million and 678         (34,276  )      (33,651 )
million shares)
Accumulated other comprehensive loss, net            (820     )      (852    )
Accumulated deficit                                 (89,820  )     (91,671 )
Total Time Warner Inc. shareholders’ equity          30,019          29,957
Noncontrolling interests                            -             (3      )
Total equity                                        30,019        29,954  
Total liabilities and equity                      $  67,485      $  67,801  
                                                                             

TIME WARNER INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited; millions, except per share amounts)
                                                  
                          Three Months Ended         Nine Months Ended
                          9/30/12     9/30/11       9/30/12      9/30/11
                                                                   
Revenues                  $ 6,842      $ 7,068       $ 20,565      $ 20,781
Costs of revenues           (3,657 )     (3,808  )     (11,498 )     (11,579 )
Selling, general and        (1,511 )     (1,563  )     (4,692  )     (4,775  )
administrative
Amortization of             (57    )     (68     )     (178    )     (202    )
intangible assets
Restructuring and           (35    )     (30     )     (84     )     (84     )
severance costs
Asset impairments           (3     )     (4      )     (182    )     (15     )
Gain (loss) on             2          1           (40     )    6       
operating assets
Operating income            1,581        1,596         3,891         4,132
Interest expense, net       (318   )     (310    )     (946    )     (898    )
Other loss, net            (7     )    (33     )    (54     )    (49     )
                                                                     
Income before income        1,256        1,253         2,891         3,185
taxes
Income tax provision       (418   )    (431    )    (1,043  )    (1,075  )
Net income                  838          822           1,848         2,110
Less Net loss
attributable to
noncontrolling             -          -           3           3       
interests
Net income attributable
to Time Warner Inc.
shareholders              $ 838       $ 822        $ 1,851      $ 2,113   
                                                                     
Per share information
attributable to
Time Warner Inc. common
shareholders:
Basic net income per      $ 0.88      $ 0.79       $ 1.92       $ 1.97    
common share
Average basic common       950.4      1,036.4     958.5       1,064.2 
shares outstanding
                                                                     
Diluted net income per    $ 0.86      $ 0.78       $ 1.89       $ 1.95    
common share
Average diluted common     973.9      1,053.3     979.4       1,082.4 
shares outstanding
                                                                     
Cash dividends declared
per share of common
stock                     $ 0.2600    $ 0.2350     $ 0.7800     $ 0.7050  
                                                                             

TIME WARNER INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

Nine Months Ended September 30,

(Unaudited; millions)
                                                                  
                                                         2012        2011
                                                                     
OPERATIONS
Net income                                               $ 1,848     $ 2,110
Adjustments for noncash and nonoperating items:
Depreciation and amortization                              658         689
Amortization of film and television costs                  5,375       5,120
Asset impairments                                          182         15
Loss on investments and other assets, net                  71          4
Equity in losses of investee companies, net of cash        54          76
distributions
Equity-based compensation                                  187         185
Deferred income taxes                                      40          106
Changes in operating assets and liabilities, net of       (6,118)    (6,159)
acquisitions
Cash provided by operations from continuing operations     2,297       2,146
Cash used by operations from discontinued operations      (8)        (1)
Cash provided by operations                               2,289      2,145
                                                                       
INVESTING ACTIVITIES
Investments in available-for-sale securities               (29)        (3)
Investments and acquisitions, net of cash acquired         (572)       (326)
Capital expenditures                                       (426)       (511)
Investment proceeds from available-for-sale securities     1           8
Other investment proceeds                                 80         48
Cash used by investing activities                         (946)      (784)
                                                                       
FINANCING ACTIVITIES
Borrowings                                                 1,032       2,029
Debt repayments                                            (678)       (60)
Proceeds from exercise of stock options                    801         174
Excess tax benefit on stock options                        58          19
Principal payments on capital leases                       (9)         (9)
Repurchases of common stock                                (1,996)     (3,083)
Dividends paid                                             (762)       (761)
Other financing activities                                (77)       (88)
Cash used by financing activities                         (1,631)    (1,779)
                                                                       
DECREASE IN CASH AND EQUIVALENTS                           (288)       (418)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD               3,476      3,663
CASH AND EQUIVALENTS AT END OF PERIOD                    $ 3,188     $ 3,245
                                                                       

TIME WARNER INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Unaudited; dollars in millions)

Reconciliations of
Adjusted Operating Income (Loss) to Operating Income (Loss) and
Adjusted Operating Income Margin to Operating Income Margin
                                                                
  Three Months Ended September 30, 2012
                             
                    Adjusted                  Gain                   Operating
                    Operating   Asset         (Loss) on   Other      Income
                    Income      Impairments   Operating              (Loss)
                    (Loss)                    Assets
  Networks          $  1,223    $    (1)      $    -      $ 2        $  1,224
  Film and TV          330           (2)           1        (1)         328
  Entertainment
  Publishing           126           -             1        -           127
  Corporate            (85)          -             -        (1)         (86)
  Intersegment        (12)         -            -       -          (12)
  eliminations
  Total             $  1,582    $    (3)      $    2      $ -        $  1,581
                                                                        
  Margin^(a)           23.1%         -             -        -           23.1%
                                                                        
  Three Months Ended September 30,
  2011
                                                                        
                    Adjusted                  Gain                   Operating
                    Operating   Asset         (Loss) on   Other      Income
                    Income      Impairments   Operating              (Loss)
                    (Loss)                    Assets
  Networks          $  1,093    $    -        $    -      $ (1)      $  1,092
  Film and TV          528           (4)           1        (1)         524
  Entertainment
  Publishing           124           -             -        -           124
  Corporate            (78)          -             -        (4)         (82)
  Intersegment        (62)         -            -       -          (62)
  eliminations
  Total             $  1,605    $    (4)      $    1      $ (6)      $  1,596
                                                                        
  Margin^(a)           22.7%         -             -        (0.1%)      22.6%
                                                                        
  Please see below for additional information on items affecting
  comparability.
                                                                        

                                                                    
     Nine Months Ended September 30, 2012
                                           
                     Adjusted                  Gain                    Operating
                     Operating   Asset         (Loss) on   Other       Income
                     Income      Impairments   Operating               (Loss)
                     (Loss)                    Assets
     Networks        $ 3,545     $  (180  )    $ -         $ (24  )    $ 3,341
     Film and TV       682          (2    )      1           (5   )      676
     Entertainment
     Publishing        262          -            (41  )      (1   )      220
     Corporate         (263  )      -            -           (3   )      (266  )
     Intersegment     (80   )     -          -         -         (80   )
     eliminations
     Total           $ 4,146    $  (182  )    $ (40  )    $ (33  )    $ 3,891 
                                                                         
     Margin^(a)        20.2  %      (0.9  %)     (0.2 %)     (0.2 %)     18.9  %
                                                                         
     Nine Months Ended September 30, 2011
                                                                         
                     Adjusted                  Gain                    Operating
                     Operating   Asset         (Loss) on   Other       Income
                     Income      Impairments   Operating               (Loss)
                     (Loss)                    Assets
     Networks        $ 3,287     $  -          $ (2   )    $ (7   )    $ 3,278
     Film and TV       846          (15   )      8           (3   )      836
     Entertainment
     Publishing        356          -            -           -           356
     Corporate         (253  )      -            -           (8   )      (261  )
     Intersegment     (77   )     -          -         -         (77   )
     eliminations
     Total           $ 4,159    $  (15   )    $ 6        $ (18  )    $ 4,132 
                                                                         
     Margin^(a)        20.0  %      (0.1  %)     0.1  %      (0.1 %)     19.9  %
     
     Please see below for additional information on items affecting
     comparability.
                                                                         
                                                                         
     Adjusted Operating Income Margin is defined as Adjusted Operating Income
^(a) divided by Revenues. Operating Income Margin is defined as Operating Income
     divided by Revenues.
     

TIME WARNER INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Unaudited; millions, except per share amounts)

Reconciliations of
Adjusted Net Income attributable to Time Warner Inc. common shareholders to
Net Income attributable to Time Warner Inc. common shareholders and
Adjusted EPS to Diluted Net Income per Common Share
                                                       
                                    Three Months Ended    Nine Months Ended
                                    9/30/12  9/30/11     9/30/12   9/30/11
                                                                     
Asset impairments                   $ (3)     $ (4)       $ (182)    $ (15)
Gain (loss) on operating assets       2         1           (40)       6
Other                                -        (6)        (33)      (18)
Impact on Operating Income            (1)       (9)         (255)      (27)
                                                                       
Investment gains (losses), net        (5)       2           (29)       (1)
Amounts related to the separation
of Time
Warner Cable Inc.                     6         (15)        6          (10)
Amounts related to the
disposition of the
Warner Music Group                   1        -          (5)       -
Pretax impact                         1         (22)        (283)      (38)
Income tax impact of above items     (1)      8          59        22
Impact of items affecting
comparability on net
income attributable to Time
Warner Inc.
shareholders                        $ -       $ (14)      $ (224)    $ (16)
                                                                       
Amounts attributable to Time
Warner Inc.
shareholders:
Net income                          $ 838     $ 822       $ 1,851    $ 2,113
Less Impact of items affecting
comparability
on net income                        -        (14)       (224)     (16)
Adjusted net income                 $ 838     $ 836       $ 2,075    $ 2,129
                                                                       
Per share information
attributable to Time
Warner Inc. common shareholders:
Diluted net income per common       $ 0.86    $ 0.78      $ 1.89     $ 1.95
share
Less Impact of items affecting
comparability on
diluted net income per common        -        (0.01)     (0.23)    (0.02)
share
Adjusted EPS                        $ 0.86    $ 0.79      $ 2.12     $ 1.97
Average diluted common shares        973.9    1,053.3    979.4     1,082.4
outstanding
                                                                       

Asset Impairments

During the three and nine months ended September 30, 2012, the Company
recognized a $1 million reversal and $178 million of charges, respectively, at
the Networks segment in connection with the shutdown of Turner’s general
entertainment network, Imagine, in India and TNT television operations in
Turkey (the “Imagine and TNT Turkey Shutdowns”) primarily related to certain
receivables, including value added tax receivables, inventories and long-lived
assets, including Goodwill. For both the three and nine months ended September
30, 2012, the Company also recognized $4 million of other miscellaneous
noncash asset impairments consisting of $2 million at the Networks segment and
$2 million at the Film and TV Entertainment segment.

During the three and nine months ended September 30, 2011, the Company
recorded $1 million and $12 million, respectively, of noncash impairments of
capitalized software costs at the Film and TV Entertainment segment as well as
$3 million of other miscellaneous noncash asset impairments at the Film and TV
Entertainment segment for both the three and nine months ended September 30,
2011.

Gain (Loss) on Operating Assets

For the three and nine months ended September 30, 2012, the Company recognized
$1 million of income and a $41 million loss, respectively, at the Publishing
segment in connection with the sale in the first quarter of 2012 of Time
Inc.’s school fundraising business, QSP. For both the three and nine months
ended September 30, 2012, the Company also recorded noncash income of $1
million at the Film and TV Entertainment segment related to a fair value
adjustment on certain contingent consideration arrangements.

For the three and nine months ended September 30, 2011, the Company recognized
miscellaneous gains on operating assets of $1 million and $6 million,
respectively.

Other

Other reflects legal and other professional fees related to the defense of
securities litigation matters for former employees totaling $1 million and $3
million for the three and nine months ended September 30, 2012, respectively,
and $2 million and $6 million for the three and nine months ended September
30, 2011, respectively.

Other also reflects external costs related to mergers, acquisitions or
dispositions, which included income of $1 million and charges of $30 million
for the three and nine months ended September 30, 2012, respectively, as
compared to charges of $4 million and $12 million for the three and nine
months ended September 30, 2011, respectively. The external costs related to
mergers, acquisitions or dispositions for the three and nine months ended
September 30, 2012 included a reversal of $5 million and charges of $21
million, respectively, related to the Imagine and TNT Turkey Shutdowns.

Amounts related to securities litigation and government investigations and
external costs related to mergers, acquisitions or dispositions are included
in Selling, general and administrative expenses in the accompanying
Consolidated Statement of Operations.

Investment Gains (Losses), Net

For the three and nine months ended September 30, 2012, the Company recognized
$5 million and $29 million, respectively, of net miscellaneous investment
losses, including, for the nine months ended September 30, 2012, a $16 million
loss on an investment in a network in Turkey recognized as part of the Imagine
and TNT Turkey Shutdowns.

For the three and nine months ended September 30, 2011, the Company recognized
$2 million of net miscellaneous investment gains and $1 million of net
miscellaneous investment losses, respectively. Investment losses, net are
included in Other loss, net in the accompanying Consolidated Statement of
Operations.

Amounts Related to the Separation of Time Warner Cable Inc.

For both the three and nine months ended September 30, 2012, the Company
recognized other income of $6 million, and for the three and nine months ended
September 30, 2011, recognized other loss of $10 million and $5 million,
respectively, related to the expiration, exercise and net change in the
estimated fair value of Time Warner equity awards held by Time Warner Cable
Inc. (“TWC”) employees, which has been reflected in Other loss, net in the
accompanying Consolidated Statement of Operations. For both the three and nine
months ended September 30, 2011, the Company also recognized $5 million of
other loss related to changes in the value of a TWC tax indemnification
receivable, which has also been reflected in Other loss, net in the
accompanying Consolidated Statement of Operations.

Amounts Related to the Disposition of the Warner Music Group

For the three and nine months ended September 30, 2012, the Company recognized
$1 million of income and $5 million of losses, respectively, related to the
disposition of the Warner Music Group in 2004, which for the nine months ended
September 30, 2012 related primarily to a tax indemnification obligation.
These amounts have been reflected in Other loss, net in the accompanying
Consolidated Statement of Operations.

Income Tax Impact

The income tax impact reflects the estimated tax provision or tax benefit
associated with each item affecting comparability. Such estimated tax
provision or tax benefit can vary based on certain factors, including the
taxability or deductibility of the items and foreign tax on certain items.

TIME WARNER INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Unaudited; millions)

Reconciliation of Cash Provided by Operations from Continuing Operations to
Free Cash Flow
                                                                 
                                        Three Months Ended   Nine Months Ended
                                        9/30/12    9/30/11   9/30/12   9/30/11
                                                                       
  Cash provided by operations from
  continuing
  operations                            $  1,538   $ 1,278   $ 2,297   $ 2,146
  Add payments related to securities
  litigation and
  government investigations                1         2         3         6
  Add external costs related to
  mergers,
  acquisitions, investments or
  dispositions
  and contingent consideration             18        4         28        12
  payments
  Add excess tax benefits on stock         20        2         58        19
  options
  Less capital expenditures                (143)     (174)     (426)     (511)
  Less principal payments on capital      (3)      (4)      (9)      (9)
  leases
  Free Cash Flow                        $  1,431   $ 1,108   $ 1,951   $ 1,663
                                                                         

                               TIME WARNER INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. DESCRIPTION OF BUSINESS

Time Warner Inc. (“Time Warner”) is a leading media and entertainment company,
whose businesses include television networks, film and TV entertainment and
publishing. Time Warner classifies its operations into three reportable
segments: Networks: consisting principally of cable television networks,
premium pay and basic tier television services and digital media properties;
Film and TV Entertainment: consisting principally of feature film, television,
home video and videogame production and distribution; and Publishing:
consisting principally of magazine publishing and related websites as well as
book publishing, marketing services and other marketing businesses.

Note 2. INTERSEGMENT TRANSACTIONS

Revenues recognized by Time Warner’s segments on intersegment transactions are
as follows (millions):

                              Three Months Ended  Nine Months Ended
                                9/30/12   9/30/11   9/30/12  9/30/11
                                                               
  Intersegment Revenues
  Networks                      $   15     $  17     $  70     $  60
  Film and TV Entertainment         214       296       648       658
  Publishing                       3        13       20       37
  Total intersegment revenues   $   232    $  326    $  738    $  755
                                                                  

Note 3. FILM AND TV ENTERTAINMENT HOME VIDEO AND ELECTRONIC DELIVERY REVENUES

Home video and electronic delivery of theatrical and television product
revenues are as follows (millions):

                                      Three Months Ended  Nine Months Ended
                                        9/30/12   9/30/11   9/30/12  9/30/11
                                                                       
  Home video and electronic delivery
  of theatrical
  product revenues                      $   374    $  421    $ 1,322   $ 1,670
  Home video and electronic delivery
  of television
  product revenues                          291       161      617       419
                                                                         

Contact:

Time Warner Inc.
Corporate Communications
Keith Cocozza (212) 484-7482
or
Investor Relations
Doug Shapiro (212) 484-8926
Michael Kopelman (212) 484-8920