Time Warner Inc. Reports First-Quarter 2013 Results

  Time Warner Inc. Reports First-Quarter 2013 Results

First-Quarter Highlights

  *Company posted Revenues of $6.9 billion
  *Adjusted Operating Income grew 7% to $1.4 billion
  *Adjusted EPS rose 22% to $0.82
  *Company repurchased 16 million shares for $868 million year-to-date
    through April 26, 2013

Business Wire

NEW YORK -- May 01, 2013

Time Warner Inc. (NYSE:TWX) today reported financial results for its first
quarter ended March 31, 2013.

Chairman and Chief Executive Officer Jeff Bewkes said: “We’re off to a strong
start in 2013, making us even more confident in our full-year outlook. Our
Adjusted Operating Income in the first quarter increased 7% to $1.4 billion,
up 10% excluding Publishing, and Adjusted EPS climbed 22%. These results
reflect the ongoing strength of our content, particularly in television. At
Turner, the NCAA Division I Men’s Basketball tournament was the most watched
March Madness in almost two decades. And we’re seeing good momentum across
most of Turner’s networks, including TBS, which was the #1 ad-supported cable
network in primetime across adults 18-34 and 18-49 during the quarter. At
Warner Bros., we have had another very strong TV season, including having four
of the top six comedies on TV and both of the breakout new dramas of this
season, Revolution and The Following. And HBO continues to go from strength to
strength, powered by hits like Game of Thrones, which is on track this season
to become the most-watched series on HBO since The Sopranos.”

Mr. Bewkes continued: “This quarter we also announced our plans to spin off
Time Inc. into an independent publicly-traded company, which we expect to
complete by the end of the year. As we said when we announced the spin-off in
March, we believe this is the best structure for both Time Inc. and Time
Warner, and expect this step will create additional value for our
stockholders. Underscoring our commitment to stockholder returns, so far this
year we’ve repurchased almost $870 million of our stock and paid out over $270
million in dividends.”

Company Results

Revenues of $6.9 billion were essentially flat compared to the year-ago
quarter, as growth at the Networks segment was  offset by declines at the Film
and TV Entertainment and Publishing segments. Adjusted Operating Income grew
7% to $1.4 billion due to increases at the Networks and Film and TV
Entertainment segments, offset in part by declines at the Publishing segment.
Adjusted Operating Income margins were 21% and 19% in the first quarter of
2013 and 2012, respectively. Operating Income increased 13% to $1.4 billion,
while Operating Income margin was 20% compared to 18% inthe prior year
quarter.

In the first quarter, the Company posted Adjusted Diluted Net Income per
Common Share (“Adjusted EPS”) of $0.82  versus $0.67 for the year-ago quarter.
Diluted Income per Common Share was $0.75  for the three months ended March
31, 2013 compared to $0.59 for last year’s first quarter.

Excluding Publishing, Revenues were flat, Adjusted Operating Income rose 10%
and Operating Income grew 13%.

For the first three months of 2013, Cash Provided by Operations reached $729
million and Free Cash Flow totaled $935 million. As of March 31, 2013, Net
Debt was $16.9 billion, down from $17.0 billion at the end of 2012, due to the
generation of Free Cash Flow and proceeds from the exercise of stock options,
offset in part by cash used for share repurchases and dividends.

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

In January 2013, the Company’s Board of Directors authorized a total of $4
billion in share repurchases beginning January 1, 2013, which replaced the
amount remaining under the prior authorization.

From January 1, 2013 through April 26, 2013, the Company repurchased
approximately 16 million shares of common stock for approximately $868
million.

Segment Performance

Presentation of Financial Information

The schedule below reflects Time Warner’s financial performance for the three
months ended March 31, by line of business (millions).

                            Three Months Ended March31,
                                         2013           2012        
Revenues:
Networks                                 $  3,695        $  3,602
Film and TV                                 2,681           2,784
Entertainment
Intersegment                                (169   )        (165   )
eliminations
Total excluding                             6,207           6,221
Publishing
Publishing                                  737             773
Intersegment                                (5     )        (15    )
eliminations
Total Revenues                           $  6,939        $  6,979
                                                                            
Adjusted Operating
Income (Loss) ^(a):
Networks                                 $  1,288        $  1,201
Film and TV                                 265             215
Entertainment
Corporate                                   (116   )        (100   )
Intersegment                                12              (4     )
eliminations
Total excluding                             1,449           1,312
Publishing
Publishing                                  (9     )        39
Total Adjusted                           $  1,440        $  1,351
Operating Income
                                                                            
Operating Income
(Loss) ^(a):
Networks                                 $  1,268        $  1,143
Film and TV                                 263             214
Entertainment
Corporate                                   (124   )        (102   )
Intersegment                                12              (4     )
eliminations
Total excluding                             1,419           1,251
Publishing
Publishing                                  (9     )        (4     )
Total Operating Income                   $  1,410        $  1,247
                                                                            
Depreciation and
Amortization:
Networks                                 $  85           $  87
Film and TV                                 93              90
Entertainment
Corporate                                   7               6
Total excluding                             185             183
Publishing
Publishing                                  32              32
Total Depreciation and                   $  217          $  215
Amortization
______________
                                                                            
    Adjusted Operating Income (Loss) and Operating Income (Loss) for the three
(a) months ended March 31, 2013 and 2012 included restructuring and severance
    costs of (millions):
                                                                            
                              Three Months Ended March31,
                                            2013            2012
    Networks                             $  (22    )     $  (14    )
    Film and TV                             (3     )        (6     )
    Entertainment
    Corporate                               (2     )        –
                                                                            
    Total excluding                         (27    )        (20    )
    Publishing
    Publishing                              (53    )        (6     )
    Total
    Restructuring and                    $  (80    )     $  (26    )
    Severance Costs

Presented below is a discussion of the performance of Time Warner’s segments
for the first quarter of 2013. Unless otherwise noted, the dollar amounts in
parentheses represent year-over-year changes.

NETWORKS (Turner Broadcasting and HBO)

Revenues increased  3% ($93 million) to $3.7 billion, benefiting from growth
of 5% ($115 million) in Subscription revenues, partly offset by declines of 1%
($12 million) in Advertising revenues and 4% ($11 million) in Content
revenues. The increase in Subscription revenues resulted primarily from higher
domestic rates and international growth. Advertising revenues benefited from
growth at Turner’s domestic entertainment networks due principally to higher
pricing, offset in part by the timing of the 2013 NCAA Division I Men’s
Basketball National Championship tournament (the “NCAA Tournament”).
Advertising revenue growth at Turner’s domestic entertainment networks was
more than offset by declines at its news networks, due to lower demand, and
the shutdown of Turner’s general entertainment network, Imagine, in India and
TNT television operations in Turkey in the first half of 2012.

Adjusted Operating Income grew 7% ($87 million) to $1.3 billion due primarily
to higher revenues. Programming costs were essentially flat compared to the
prior year quarter as higher costs for originals were offset by the timing of
the NCAA Tournament, lower programming write-downs and cost reductions due to
the shutdown of Imagine and the TNT television operations in Turkey.

Operating Income increased 11% ($125 million) to $1.3 billion. The current
year quarter included $20 million of charges related to  Turner’s
international operations. The prior year quarter included a $58 million charge
related to Turner’s decision to shut down Imagine.

The NCAA Tournament across TBS, TNT, truTV and CBS averaged 10.7 million total
viewers, up 11% from last year, and was the most-watched NCAA Tournament in 19
years. During the first quarter of 2013, TBS ranked #1 among ad-supported
cable networks with adults 18-34 and adults 18-49 in primetime. The Big Bang
Theory on TBS ranked as ad-supported cable’s top comedy series of the quarter
in total day delivery among all key adult demographics. Adult Swim was
ad-supported cable’s #1 network for key adult and male viewers in total day
delivery, and the first quarter was the most-watched quarter in its history.
In March 2013, Southland on TNT and Coverage Inside Syria & Homs 2012 on CNN 
both received 2013 George Foster Peabody Awards.

For the first two episodes of its third season, HBO’s Game of Thrones is
averaging a gross audience of 13.4 million viewers per episode, putting it on
pace to become HBO’s second most popular series ever. HBO earned five George
Foster Peabody Awards in March 2013, including awards for Girls and Game
Change.

FILM AND TV ENTERTAINMENT (Warner Bros.)

Revenues decreased 4% ($103 million) to $2.7 billion, reflecting mainly lower
theatrical performance and a decline in television licensing revenues
resulting primarily from fewer significant international syndication
availabilities. The declines were offset in part by higher home video revenues
from the strong performance of The Hobbit: An Unexpected Journey and Argo and
revenues from the Warner Bros. Studio Tour London – The Making of Harry
Potter, which opened in March 2012.

Adjusted Operating Income rose 23% ($50 million) to $265 million, as
contributions from The Hobbit: An Unexpected Journey and  lower print and
advertising costs more than offset the decline in revenues.

Operating Income grew 23% ($49 million) to $263 million.

The Hobbit: An Unexpected Journey surpassed $1 billion at the global box
office, making it the fourth biggest film in Warner Bros.’ history. The Ellen
DeGeneres Show, which is in its 10^th season, has  been renewed by stations
covering 97% of the U.S. through the 2015-2016 season. Season-to-date, Warner
Bros. Television’s Revolution and The Following rank as the top two new series
on primetime broadcast television among adults 18-49.

PUBLISHING (Time Inc.)

Revenues declined 5%  ($36 million)  to $737 million, reflecting declines of
11% ($31 million) in Subscription revenues and 10% ($8 million) in Other
revenues, partly offset by an increase of 2% ($6 million) in Advertising
revenues. The decrease in Subscription revenues was a result of lower
subscription and newsstand sales, partially due to certain weekly titles
having fewer issues than the prior year quarter. Advertising revenues
increased due to revenues from SI.com and Golf.com, the management of which
was transferred from Turner to Time Inc. during the second quarter of 2012,
partly offset by lower magazine advertising revenues. The transfer of SI.com
and Golf.com benefited Advertising revenues and negatively impacted Other
revenues.

Adjusted Operating Loss of $9 million  represented a decline of $48 million
compared to the year-ago quarter’s Adjusted Operating Income of $39 million,
resulting from higher restructuring and severance charges and lower revenues,
partly offset by cost savings. The current year quarter included $53 million
of restructuring and severance charges compared to $6 million in the prior
year quarter.

Operating Loss of $9 million represented a decline of $5 million compared to
the year-ago quarter’s Operating Loss of $4 million. The prior year quarter
also included a $42 million loss related to the sale of the school fundraising
business, QSP.

During the quarter, Time Inc. increased its leading share of overall domestic
magazine advertising to 23.0% (Publishers Information Bureau data), its
highest share in over two decades. In April 2013, Time Inc. received ten
nominations for the 2013 National Magazine Awards, including Magazine of the
Year for TIME and General Excellence, Print for Fortune.

CONSOLIDATED NET INCOME AND PER SHARE RESULTS

Adjusted EPS was $0.82  for the three months ended March 31, 2013, compared to
$0.67 in last year’s first quarter. The increase in Adjusted EPS primarily
reflected higher Adjusted Operating Income and fewer shares outstanding.

For the three months ended March 31, 2013, the Company reported Net Income
attributable to Time Warner Inc. shareholders of  $720  million, or $0.75  per
diluted common share. This compares to Net Income attributable to Time Warner
Inc. shareholders in the first quarter of 2012 of  $583  million, or $0.59 
per diluted common share.

For the first quarter of 2013 and 2012, the Company reported Net Income of 
$720  million and  $581  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. In light of the pending legal and structural separation of the
Company’s Publishing segment from Time Warner, the Company also uses Adjusted
Operating Income (Loss) excluding Publishing to further evaluate the
non-publishing 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 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 equity instruments, 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 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 equity
instruments, 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 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 Operating Income (Loss) excluding Publishing, 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 per Common Share and various cash
flow measures (e.g., Cash Provided by 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 2013 full-year
business outlook.

The Company’s conference call can be heard live at 10:30 am ET on Wednesday,
May 1, 2013. To listen to the call, visit www.timewarner.com/investors.

                                                            
                                                                  
TIME WARNER INC.
CONSOLIDATED BALANCE SHEET
(Unaudited; millions, except share amounts)
                                                                  
                                              March 31,           December 31,
                                              2013                2012
                                                                  
ASSETS
Current assets
Cash and equivalents                          $   2,493         $  2,841
Receivables, less allowances of $1,428              7,095            7,385
and $1,757
Inventories                                         1,987            2,036
Deferred income taxes                               459              474
Prepaid expenses and other current               590            528     
assets
Total current assets                                12,624           13,264
                                                                  
Noncurrent inventories and theatrical               6,252            6,675
film and television production costs
Investments, including                              1,920            2,047
available-for-sale securities
Property, plant and equipment, net                  3,769            3,942
Intangible assets subject to                        2,033            2,108
amortization, net
Intangible assets not subject to                    7,642            7,642
amortization
Goodwill                                            30,409           30,446
Other assets                                     2,298          2,045   
Total assets                                  $   66,947       $  68,169  
                                                                  
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued                  $     6,922         $  8,039
liabilities
Deferred revenue                                    932              1,011
Debt due within one year                         316            749     
Total current liabilities                           8,170            9,799
                                                                  
Long-term debt                                      19,125           19,122
Deferred income taxes                               2,500            2,127
Deferred revenue                                    518              523
Other noncurrent liabilities                        6,642            6,720
                                                                  
Equity
Common stock, $0.01 par value, 1.652
billion and 1.652 billion shares
issued and 933 million and 932 million              17               17
shares outstanding
Paid-in-capital                                     154,065          154,577
Treasury stock, at cost (719 million                (35,099 )        (35,077 )
and 720 million shares)
Accumulated other comprehensive loss,               (1,060  )        (988    )
net
Accumulated deficit                              (87,932 )       (88,652 )
Total Time Warner Inc. shareholders’                29,991           29,877
equity
Noncontrolling interests                         1              1       
Total equity                                     29,992         29,878  
Total liabilities and equity                  $   66,947       $  68,169  
                                                                  

TIME WARNER INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31,
(Unaudited; millions, except per share amounts)
                                                                  
                                              2013                2012
                                                                  
Revenues                                      $     6,939         $  6,979
Costs of revenues                                   (3,750  )        (3,976  )
Selling, general and administrative                 (1,620  )        (1,575  )
Amortization of intangible assets                   (60     )        (61     )
Restructuring and severance costs                   (80     )        (26     )
Asset impairments                                   (27     )        (52     )
Gain (loss) on operating assets, net             8              (42     )
Operating income                                    1,410            1,247
Interest expense, net                               (290    )        (320    )
Other loss, net                                  (18     )       -       
Income before income taxes                          1,102            927
Income tax provision                             (382    )       (346    )
Net income                                          720              581
Less Net loss attributable to                    -              2       
noncontrolling interests
Net income attributable to Time Warner        $   720          $  583     
Inc. shareholders
                                                                  
Per share information attributable to Time Warner Inc. common shareholders:
Basic net income per common share             $   0.77         $  0.60    
                                                                  
Average basic common shares outstanding          932.8          968.3   
                                                                  
Diluted net income per common share           $   0.75         $  0.59    
                                                                  
Average diluted common shares                    956.4          990.1   
outstanding
                                                                  
Cash dividends declared per share of          $   0.2875       $  0.2600  
common stock
                                                                  
                                                                  
TIME WARNER INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
(Unaudited; millions)
                                                                  
                                              2013                2012
                                                                  
OPERATIONS
Net income                                    $     720           $  581
Adjustments for noncash and
nonoperating items:
Depreciation and amortization                       217              215
Amortization of film and television                 1,792            1,948
costs
Asset impairments                                   27               52
Loss on investments and other assets,               19               51
net
Equity in losses of investee companies,             23               15
net of cash distributions
Equity-based compensation                           106              101
Deferred income taxes                               400              (92     )
Changes in operating assets and                  (2,575  )       (2,455  )
liabilities, net of acquisitions
Cash provided by operations                      729            416     
                                                                  
INVESTING ACTIVITIES
Investments in available-for-sale                   (15     )        (17     )
securities
Investments and acquisitions, net of                (62     )        (59     )
cash acquired
Capital expenditures                                (85     )        (133    )
Investment proceeds from                            33               -
available-for-sale securities
Other investment proceeds                        120            22      
Cash used by investing activities                (9      )       (187    )
                                                                  
FINANCING ACTIVITIES
Borrowings                                          6                11
Debt repayments                                     (438    )        (13     )
Proceeds from exercise of stock options             339              185
Excess tax benefit from equity                      84               34
instruments
Principal payments on capital leases                (2      )        (3      )
Repurchases of common stock                         (672    )        (725    )
Dividends paid                                      (273    )        (257    )
Other financing activities                       (112    )       (60     )
Cash used by financing activities                (1,068  )       (828    )
                                                                  
DECREASE IN CASH AND EQUIVALENTS                    (348    )        (599    )
CASH AND EQUIVALENTS AT BEGINNING OF             2,841          3,476   
PERIOD
CASH AND EQUIVALENTS AT END OF PERIOD         $   2,493        $  2,877   

                                                                          
                                                                                 
       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 March 31, 2013
                                      
                             Adjusted                  Gain
                             Operating   Asset         (Loss) on               Operating
                             Income      Impairments   Operating   Other       Income
                             (Loss)                    Assets,                 (Loss)
                                                       Net
       Networks              $ 1,288     $  (18   )    $ -         $ (2   )    $ 1,268
       Film and TV             265          (2    )      -           -           263
       Entertainment
       Corporate               (116  )      (7    )      8           (9   )      (124  )
       Intersegment           12         -          -         -         12    
       eliminations
       Time Warner
       excluding               1,449        (27   )      8           (11  )      1,419
       Publishing
       Publishing             (9    )     -          -         -         (9    )
       Time Warner           $ 1,440    $  (27   )    $ 8        $ (11  )    $ 1,410 
                                                                                 
       Margin^(a)              20.8  %      (0.4  %)     0.1  %      (0.2 %)     20.3  %
                                                                                 
                                                                                 
       Three Months Ended March 31, 2012
                                                                                 
                             Adjusted                  Gain
                             Operating   Asset         (Loss) on               Operating
                             Income      Impairments   Operating   Other       Income
                             (Loss)                    Assets,                 (Loss)
                                                       Net
       Networks              $ 1,201     $  (52   )    $ -         $ (6   )    $ 1,143
       Film and TV             215          -            -           (1   )      214
       Entertainment
       Corporate               (100  )      -            -           (2   )      (102  )
       Intersegment           (4    )     -          -         -         (4    )
       eliminations
       Time Warner
       excluding               1,312        (52   )      -           (9   )      1,251
       Publishing
       Publishing             39         -          (42  )     (1   )     (4    )
       Time Warner           $ 1,351    $  (52   )    $ (42  )    $ (10  )    $ 1,247 
                                                                                 
       Margin^(a)              19.4  %      (0.7  %)     (0.6 %)     (0.2 %)     17.9  %
                                                                                 
       Please see below for additional information on items affecting comparability.
                                                                                 
       ___________________
                                                                                 
       Adjusted Operating Income margin is defined as Adjusted Operating Income divided
^(a)   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 March31,
                                                  2013             2012
                                                                     
                                                                       
Asset impairments                                 $  (27    )        $ (52   )
Gain (loss) on operating assets, net                 8                 (42   )
Other                                               (11    )         (10   )
Impact on Operating Income                           (30    )          (104  )
                                                                       
Investment losses, net                               (17    )          (9    )
Amounts related to the separation of Time            5                 (1    )
Warner Cable Inc.
Amounts related to the disposition of               (1     )         -     
Warner Music Group
Pretax impact                                        (43    )          (114  )
Income tax impact of above items                    (22    )         36    
Impact of items affecting comparability on
net income
attributable to Time Warner Inc.                  $  (65    )        $ (78   )
shareholders
                                                                       
Amounts attributable to Time Warner Inc.
shareholders:
Net income                                        $  720             $ 583
Less Impact of items affecting                      (65    )         (78   )
comparability on net income
Adjusted net income                               $  785            $ 661   
                                                                       
Per share information attributable to Time
Warner Inc. common shareholders:
Diluted net income per common share               $  0.75            $ 0.59
Less Impact of items affecting
comparability on
diluted net income per common share                 (0.07  )         (0.08 )
Adjusted EPS                                      $  0.82           $ 0.67  
Average diluted common shares outstanding           956.4           990.1 

Asset Impairments

During the three months ended March 31, 2013, the Company recognized asset
impairments of $18 million at the Networks segment consisting of $12 million
related to certain Turner international intangible assets and $6 million
related to programming assets resulting from Turner’s decision in the first
quarter of 2013 to shut down certain of its entertainment networks in Spain,
$2 million at the Film and TV Entertainment segment related to miscellaneous
assets and $7 million at the Corporate segment related to internally developed
software.

During the three months ended March 31, 2012, the Company recognized $52
million of charges at the Networks segment primarily related to certain
receivables, programming assets and long-lived assets in connection with
Turner’s decision in the first quarter 2012 to shut down its general
entertainment network, Imagine, in India.

Gain (Loss) on Operating Assets, Net

For the three months ended March 31, 2013, the Company recognized an $8
million gain at the Corporate segment on the disposal of certain corporate
assets.

For the three months ended March 31, 2012, the Company recognized a $42
million loss at the Publishing segment in connection with the sale in the
first quarter of 2012 of Time Inc.’s school fundraising business, QSP.

Other

Other reflects external costs related to mergers, acquisitions or dispositions
of $11 million and $8 million for the three months ended March 31, 2013 and
2012, respectively. External costs related to mergers, acquisitions or
dispositions for the three months ended March 31, 2013 consisted of $9 million
related to the separation of Time Inc. from Time Warner and $2 million related
to the shutdown of certain of Turner’s entertainment networks in Spain and for
the three months ended March 31, 2012 included $6 million related to the
shutdown of Imagine.

Other also reflects legal and other professional fees related to the defense
of securities litigation matters for former employees totaling $0 and $2
million for the three months ended March 31, 2013 and 2012, respectively.

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

Investment Losses, Net

For the three months ended March 31, 2013, the Company recognized $17 million
of net investment losses, consisting of an $88 million impairment of the
Company’s investment in Central European Media Enterprises Ltd., a $65 million
gain on the sale of the Company’s investment in a theater venture in Japan,
which included a $10 million gain related to a foreign currency contract, and
$6 million of net miscellaneous investment gains.

For the three months ended March 31, 2012, the Company recognized $9 million
of miscellaneous investment losses.

Amounts Related to the Separation of Time Warner Cable Inc.

For the three months ended March 31, 2013 and 2012, the Company recognized
other income of $5 million and other loss of $1 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. employees, which has been
reflected in Other loss, net in the accompanying Consolidated Statement of
Operations.

Amounts Related to the Disposition of Warner Music Group

For the three months ended March 31, 2013, the Company recognized $1 million
of losses associated with the disposition of Warner Music Group in 2004.

Income Tax Impact

The income tax impact reflects the estimated tax provision or tax benefit
associated with each item affecting comparability. The 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 to Free Cash Flow
                                                                      
                                                  Three Months Ended March31,
                                                  2013             2012
                                                                   
Cash provided by operations                       $   729          $  416
Add payments related to securities litigation         -               2
and government investigations
Add external costs related to mergers,
acquisitions, investments or dispositions
and contingent consideration payments                 209             2
Add excess tax benefits from equity instruments       84              34
Less capital expenditures                             (85   )         (133  )
Less principal payments on capital leases            (2    )        (3    )
Free Cash Flow                                    $   935         $  318   



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 and marketing businesses.


Note 2. INTERSEGMENT TRANSACTIONS

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

                                  Three Months Ended March31,
                                    2013                     2012
                                                              
      Intersegment Revenues
      Networks                      $     22                 $    27     
      Film and TV                         148                      140
      Entertainment
      Publishing                         4                      13     
      Total intersegment            $     174                $    180    
      revenues
                                    
                                    
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 March31,
                                    2013                      2012
                                                              
      Home video and
      electronic delivery of
      theatrical
      product revenues              $     477                 $    467
      Home video and
      electronic delivery of
      television
      product revenues                    205                      189

Contact:

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