Time Warner Inc. Reports Third-Quarter 2012 Results

Income Tax Impact

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

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

TIME WARNER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. DESCRIPTION OF BUSINESS

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

Note 2. INTERSEGMENT TRANSACTIONS

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

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

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

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

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

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