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Time Warner Inc. Reports First-Quarter 2013 Results First-Quarter Highlights

NEW YORK, May 01, 2013 (BUSINESS WIRE) — –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

Time Warner Inc. TWX +0.86% 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% in the 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 Entertainment                                                   2,681                     2,784
        Intersegment eliminations                                                    (169)                    (165)
                                                                                    -----            --------------
        Total excluding Publishing                                                  6,207                     6,221
        Publishing                                                                    737                       773
        Intersegment eliminations                                                      (5)                     (15)
                                                                                    -----            --------------
        Total Revenues                                                            $ 6,939          $          6,979
                                                                                    =====            ==============
        Adjusted Operating Income (Loss) (a):
        Networks                                                                  $ 1,288          $          1,201
        Film and TV Entertainment                                                     265                       215
        Corporate                                                                    (116)                    (100)
        Intersegment eliminations                                                      12                        (4)
                                                                                    -----            --------------
        Total excluding Publishing                                                  1,449                     1,312
        Publishing                                                                     (9)                      39
                                                                                    -----            --------------
        Total Adjusted Operating Income                                           $ 1,440          $          1,351
                                                                                    =====            ==============
        Operating Income (Loss) (a):
        Networks                                                                  $ 1,268          $          1,143
        Film and TV Entertainment                                                     263                       214
        Corporate                                                                    (124)                    (102)
        Intersegment eliminations                                                      12                        (4)
                                                                                    -----            --------------
        Total excluding Publishing                                                  1,419                     1,251
        Publishing                                                                     (9)                      (4)
                                                                                    -----            --------------
        Total Operating Income                                                    $ 1,410          $          1,247
                                                                                    =====            ==============
        Depreciation and Amortization:
        Networks                                                                  $    85          $             87
        Film and TV Entertainment                                                      93                        90
        Corporate                                                                       7                         6
                                                                                    -----            --------------
        Total excluding Publishing                                                    185                       183
        Publishing                                                                     32                        32
                                                                                    -----            --------------
        Total Depreciation and Amortization                                       $   217          $            215
                                                                                    =====            ==============
        ______________
        (a)
                              Adjusted Operating Income (Loss) and Operating Income (Loss) for
                              the three 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 Entertainment                                (3)                      (6)
                              Corporate                                                (2)          -
                                                                                    -----            --------------
                                                                                      (27)                     (20)
                              Total excluding Publishing
                              Publishing                                              (53)                      (6)
                                                                                    -----            --------------
                                                                                  $   (80)        $            (26)
                              Total Restructuring and 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 10th 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 http://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 and $1,757                                  7,095               7,385
        Inventories                                                                        1,987               2,036
        Deferred income taxes                                                                459                 474
        Prepaid expenses and other current assets                                            590                 528
                                                                                         -------             -------
        Total current assets                                                              12,624              13,264
        Noncurrent inventories and theatrical film and television production               6,252               6,675
        costs
        Investments, including available-for-sale securities                               1,920               2,047
        Property, plant and equipment, net                                                 3,769               3,942
        Intangible assets subject to amortization, net                                     2,033               2,108
        Intangible assets not subject to amortization                                      7,642               7,642
        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 liabilities                                  $        6,922        $      8,039
        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 shares outstanding                           17                  17
        Paid-in-capital                                                                  154,065             154,577
        Treasury stock, at cost (719 million and 720 million shares)                     (35,099)           (35,077)
        Accumulated other comprehensive loss, net                                         (1,060)              (988)
        Accumulated deficit                                                              (87,932)           (88,652)
                                                                                         ------- ----        ------- ----
        Total Time Warner Inc. shareholders' equity            29,991              29,877
        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 noncontrolling interests                                 -                   2
                                                                                         -------             -------
        Net income attributable to Time Warner Inc. shareholders                  $          720        $        583
                                                                                  ====   =======        ==== =======
        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 outstanding                                          956.4               990.1
                                                                                         =======             =======
        Cash dividends declared per share of common stock                         $       0.2875        $     0.2600
                                                                                  ====   =======        ==== =======
                                                         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 costs                                       1,792               1,948
           Asset impairments                                                                  27                  52
           Loss on investments and other assets, net                                          19                  51
           Equity in losses of investee companies, net of cash distributions                  23                  15
           Equity-based compensation                                                         106                 101
           Deferred income taxes                                                             400                 (92)
        Changes in operating assets and liabilities, net of acquisitions                  (2,575)            (2,455)
                                                                                         ------- ----        ------- ----
        Cash provided by operations                                                          729                 416
                                                                                         -------             -------
        INVESTING ACTIVITIES
        Investments in available-for-sale securities                                         (15)               (17)
        Investments and acquisitions, net of cash acquired                                   (62)               (59)
        Capital expenditures                                                                 (85)              (133)
        Investment proceeds from available-for-sale securities                                33                   -
        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 instruments                                            84                  34
        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 PERIOD                                        2,841               3,476
                                                                                         -------             -------
        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         Asset       Gain (Loss) on       Other         Operating
                                                   Operating     Impairments   Operating Assets,                 Income (Loss)
                                                 Income (Loss)                        Net
                                               -------------    ----------    ---------------    ----------    -------------
             Networks                            $  1,288         $  (18)       $      -          $   (2)      $  1,268
             Film and TV Entertainment                265             (2)              -               -             263
             Corporate                               (116)           (7)              8              (9)          (124)
             Intersegment eliminations                 12              -                -               -              12
                                                    -----           ----            -----            ----           -----
             Time Warner excluding Publishing       1,449            (27)              8             (11)         1,419
             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         Asset       Gain (Loss) on       Other         Operating
                                                   Operating     Impairments   Operating Assets,                 Income (Loss)
                                                 Income (Loss)                        Net
                                               -------------    ----------    ---------------    ----------    -------------
             Networks                            $  1,201         $  (52)       $      -          $   (6)      $  1,143
             Film and TV Entertainment                215              -                -              (1)           214
             Corporate                               (100)            -                -              (2)          (102)
             Intersegment eliminations                 (4)            -                -               -              (4)
                                                    ----- ----      ----            -----            ----           ----- ----
             Time Warner excluding Publishing       1,312            (52)              -              (9)         1,251
             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.
             ___________________
        (a)  Adjusted Operating Income margin is defined as Adjusted Operating
             Income 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 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 Warner Cable Inc.                5              (1)
        Amounts related to the disposition of Warner Music Group                  (1)             -
                                                                               ----- -         -----
        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. shareholders                     $    (65)      $    (78)
                                                                         ===== ===== =   ===== ===== =
        Amounts attributable to Time Warner Inc. shareholders:
        Net income                                                          $    720        $    583
        Less Impact of items affecting comparability on net income               (65)           (78)
                                                                               ----- -         ----- -
        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 and government                   -              2
        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 Entertainment                                   148             140
               Publishing                                                    4              13
                                                                        ------          ------
               Total intersegment revenues                          $      174      $      180
                                                                 ====== ======   ====== ======
        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

SOURCE: Time Warner Inc.

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

Copyright Business Wire 2013

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