Time Warner Inc. Reports Third Quarter 2005 Results; Board of Directors Increases Stock Repurchase Program to $12.5 Billion

Chairman and Chief Executive Officer Dick Parsons said: "Our solidthird-quarter results and expanded stock repurchase program highlightthe fundamental operating strength of our businesses and their growingmomentum. In short, our Company is strong and getting stronger. OurBoard of Directors and management are confident that we're on theright course to build sustainable long-term value, optimize ourcapital allocation and leverage, and deliver a highly competitivereturn for all of our shareholders.

"This quarter's performance, led by double-digit profit growth atour Cable and Networks businesses, with significant contributions fromAOL and Time Inc., keeps us firmly on track to achieve our full-yearfinancial objectives. Especially impressive were Time Warner Cable'sresults, driven by strong subscriber trends across its high-speeddata, Digital Phone and digital video product lines. In the fourthquarter, we'll continue to extend the competitive advantages of ourcable company and our other businesses to fuel growth in 2006 andbeyond."

In announcing the expanded stock repurchase program, Mr. Parsonssaid: "In keeping with our commitment to deliver greater value toshareholders, our Board of Directors and management reviewed ourexisting stock repurchase program and decided to increase it to atotal of $12.5 billion. With our strong balance sheet,industry-leading free cash flow and solid earnings, we can expand ourstock buyback while still having the resources to invest meaningfullyin future growth as well as to pay our regular quarterly cashdividend."

Company Results

In the quarter, Revenues rose 6% over the same period in 2004 to$10.5 billion, led by growth at the Cable, Networks, FilmedEntertainment and Publishing segments.

Adjusted Operating Income before Depreciation and Amortizationclimbed 9% to $2.6 billion, reflecting strong double-digit increasesat the Networks and Cable segments as well as gains at the AOL andPublishing segments. This growth was offset partly by a decline at theFilmed Entertainment segment due to difficult prior-year comparisons.Operating Income rose 60% to $1.8 billion, due primarily to theabsence of the prior-year's charge to establish legal reserves of $500million related to the government investigations.

For the first nine months, Cash Provided by Operations was $5.6billion, and Free Cash Flow totaled $3.3 billion (reflecting a 42%conversion rate of Adjusted Operating Income before Depreciation andAmortization).

As of September 30, Net Debt totaled $12.4 billion, down $3.8billion from $16.2 billion at the end of 2004.

For the three months ended September 30, 2005, the Companyreported Net Income of $897 million, or $0.19 per diluted commonshare. This compares to Net Income in 2004 of $499 million, or $0.11per diluted common share.

Diluted Income per Common Share before discontinued operations andcumulative effect of accounting change was $0.19 for the three monthsended September 30, compared to $0.10 in last year's third quarter.The current and prior-year amounts included certain items affectingcomparability that are described in detail in the accompanyingConsolidated Reported Net Income and Per Share Results section. Suchitems did not meaningfully affect the current-year's diluted commonshare results and decreased the prior-year results by $0.05 perdiluted common share.

Stock Repurchase Program Increased to $12.5 Billion

The Board of Directors has authorized a $7.5 billion increase inthe stock repurchase program to a total of $12.5 billion over the next21 months, in keeping with the two-year schedule for the originalstock repurchase program announced August 3, 2005.

Purchases for the stock repurchase program may be made from timeto time on the open market and in privately negotiated transactions.Size and timing of these purchases will be based on factors includingprice as well as business and market conditions.

As of October 31, 2005, the Company has repurchased approximately45 million shares of common stock for approximately $809 million,since announcing the program on August 3, 2005.

Performance of Segments

The schedules below reflect Time Warner's performance for thethree and nine months ended September 30, by line of business (inmillions):
Three and Nine Months Ended September 30:

Three Months Ended Nine Months Ended
September 30, September 30,
Revenues: 2005 2004 2005 2004
---- ---- ---- ----
AOL $2,041 $2,141 $6,271 $6,509
Cable 2,395 2,121 6,998 6,280
Filmed Entertainment 2,650 2,503 8,300 8,581
Networks 2,398 2,188 7,172 6,761
Publishing 1,377 1,337 4,119 3,927
Intersegment Eliminations (323) (355) (1,095) (1,078)
-------- -------- -------- --------

Total Revenues $10,538 $9,935 $31,765 $30,980
======= ======= ======= =======

Adjusted Operating Income before Depreciation and Amortization (a):

AOL (b) $481 $450 $1,571 $1,436
Cable 945 824 2,667 2,391
Filmed Entertainment 253 361 882 1,190
Networks (c) 766 635 2,188 2,038
Publishing (d) 288 264 803 783
Corporate (e) (113) (115) (319) (391)
Intersegment Eliminations (19) (27) (26) (4)
-------- -------- -------- --------

Total Adjusted Operating
Income before Depreciation
and Amortization (a) $2,601 $2,392 $7,766 $7,443
====== ====== ====== ======

Operating Income:
AOL (b) $302 $261 $994 $814
Cable 512 438 1,433 1,267
Filmed Entertainment 171 282 636 956
Networks (c) 699 574 1,997 1,859
Publishing (d) 232 203 636 593
Corporate (e) (126) (123) (351) (423)
Legal reserves (f) - (500) (3,000) (500)
Intersegment Eliminations (19) (27) (26) (4)
-------- -------- -------- --------

Total Operating Income $1,771 $1,108 $2,319 $4,562
====== ====== ====== ======

(a) Adjusted Operating Income before Depreciation and Amortization
excludes the impact of noncash impairments of goodwill, intangible
and fixed assets, as well as gains and losses on asset sales,
legal reserves related to the government investigations and legal
reserves related to securities litigation. Refer to the
reconciliations of Adjusted Operating Income before Depreciation
and Amortization to Operating Income before Depreciation and
Amortization on pages 12 and 13. Operating Income includes these
items in their respective periods.

(b) For the nine months ended September 30, 2005, Adjusted Operating
Income before Depreciation and Amortization excludes a noncash
goodwill impairment charge of $24 million related to America
Online Latin America, Inc., a $5 million gain related to the sale
of a building and a $5 million gain related to the 2004 sale of
Netscape Security Solutions; for the three and nine months ended
September 30, 2004, Adjusted Operating Income before Depreciation
and Amortization excluded a $13 million gain on the sale of AOL
Japan; for the nine months ended September 30, 2004, it excluded a
noncash impairment charge of $10 million related to the sale of a
building. Operating Income includes these amounts in their
respective periods.

(c) For the nine months ended September 30, 2004, Adjusted Operating
Income before Depreciation and Amortization excluded a loss of
approximately $7 million related to the sale of the winter sports
teams. Operating Income included this amount in the period.

(d) For the nine months ended September 30, 2005, Adjusted Operating
Income before Depreciation and Amortization excludes an $8 million
gain related to the collection of a loan made in conjunction with
the Company's 2003 sale of Time Life Inc., which was previously
fully reserved due to concerns about recoverability; for the nine
months ended September 30, 2004, it excluded an $8 million gain
related to the sale of a building. Operating Income includes these
items in their respective periods.

(e) For the nine months ended September 30, 2004, Adjusted Operating
Income before Depreciation and Amortization included $53 million
of costs associated with the relocation from the Company's former
corporate headquarters, which included a $14 million reversal in
the third quarter of 2004; for the three and nine months ended
September 30, 2005, certain costs of approximately $2 million and
$5 million, respectively, were reversed, as updated estimates
indicated they would no longer be incurred. Operating Income
includes these items in their respective periods.

(f) Amounts represent charges related to the Company's securities
litigation matters and government investigations. For segment
reporting purposes in the Company's financial statements, amounts
are reflected in the results of the Corporate segment. For the
nine months ended September 30, 2005, amount includes $3.0 billion
in charges for legal reserves established in connection with the
Company's securities litigation. For the three and nine months
ended September 30, 2004, amounts include $500 million in legal
reserves related to the government investigations.

Presented below is a discussion of Time Warner's segments for thethird quarter of 2005. Unless otherwise noted, the Dollar amounts inparentheses represent year-over-year changes.

AOL (America Online)

Revenues declined 5% ($100 million) to $2.0 billion, reflecting a28% increase ($71 million) in Advertising revenues, which was morethan offset by a 10% decrease ($175 million) in Subscription revenues.Advertising revenues benefited from growth in paid search ($31million) and Advertising.com ($31 million), which was acquired August2, 2004. The decrease in Subscription revenues was due primarily to adecline in domestic AOL brand subscribers.

Adjusted Operating Income before Depreciation and Amortizationclimbed 7% ($31 million) to $481 million, as lower network ($93million) and marketing costs and higher Advertising revenues more thanoffset the decrease in domestic Subscription revenues.

Operating Income rose 16% ($41 million) to $302 million,benefiting from the increase in Adjusted Operating Income beforeDepreciation and Amortization and lower depreciation expense ($22million), offset in part by the absence of the prior-year's gainrelated to the sale of AOL Japan.

Subscriber Update

As of September 30, the AOL service totaled 20.1 million U.S.members, a decline of 678,000 from the prior quarter and 2.6 millionfrom the year-ago quarter. In Europe, the AOL service had 6.1 millionmembers, a decrease of 98,000 from the previous quarter and a declineof 170,000 from last year's quarter.

CABLE (Time Warner Cable)

Revenues rose 13% ($274 million) to $2.4 billion, driven by a 13%climb ($269 million) in Subscription revenues and a 4% increase inAdvertising revenues. Subscription revenues benefited from a 24%increase ($106 million) in high-speed data revenues, significantgrowth in Digital Phone revenues ($76 million), 16% growth ($27million) in enhanced digital video service revenues and higher basiccable rates. Average monthly revenue per basic cable subscriber rose13% to $86, marking the seventh consecutive quarter of double-digit,year-over-year growth.

Operating Income before Depreciation and Amortization grew 15%($121 million) to $945 million, reflecting higher revenues, offsetpartially by an increase in video programming costs of 9% ($44million) and higher general operating expenses. The quarter's resultsincluded a $10 million benefit (reflected in programming costs)related to the resolution of terms with a programming vendor, as wellas an $11 million reduction in accrued expense associated with changesin estimates.

Operating Income climbed 17% ($74 million) to $512 million, drivenby the increase in Operating Income before Depreciation andAmortization, offset partly by higher depreciation expense ($48million).

Subscriber Update

As of September 30, Time Warner Cable managed 10.9 million basicvideo cable subscribers, which included nearly 1.6 million subscribersin unconsolidated joint ventures. Total basic video cable subscribersgrew 18,000 during the quarter. Digital video subscribers rose 149,000over the previous quarter for a total of 5.2 million. This growthrepresents the largest third-quarter increase since 2002. Digitalpenetration of basic video cable subscribers reached 48% at the end ofthe quarter. Digital Video Recorder subscribers climbed 134,000 in thequarter to 1.3 million subscribers, representing 24% of digital videocustomers.

Residential high-speed data subscribers increased by 234,000during the quarter for a total of 4.6 million, representing 24% ofservice-ready homes passed. This is the largest third-quarter netincrease since 2002 and marks the third consecutive quarter in whichnet residential high-speed data subscribers increased by over 200,000.Digital Phone subscribers grew by 240,000 in the quarter for a totalof 854,000, representing 5% of eligible homes passed.

FILMED ENTERTAINMENT (Warner Bros. Entertainment & New LineCinema)

Revenues rose 6% ($147 million) to $2.7 billion, led by the strongdomestic theatrical performance of Warner Bros.' Charlie and theChocolate Factory and Batman Begins as well as New Line's WeddingCrashers. Also contributing to the increase were higher televisionrevenues from home video and international sources. This growth wasoffset partially by the difficult comparison to the prior-yearquarter's international theatrical revenues.

Operating Income before Depreciation and Amortization declined 30%($108 million), reflecting difficult comparisons to the prior-yearquarter's higher-margin international theatrical contributions fromWarner Bros.' Harry Potter and the Prisoner of Azkaban and Troy aswell as increased marketing and distribution expenses this quarter.Also driving the decrease were difficult comparisons to last year'shigh-margin contributions from the broadcast network run andsyndication of the final season of The Drew Carey Show as well as thetelevision syndication of the final season of Friends. This declinewas offset in part by lower theatrical valuation adjustments.

Operating Income decreased 39% ($111 million) to $171 million, dueto the decline in Operating Income before Depreciation andAmortization as well as slightly higher depreciation expense.

Highlights

Time Warner's studios ranked #1 in domestic theatrical box officefor the year through October 2, capturing a 21.9% share, with threefilms each generating more than $200 million in domestic box officereceipts to date - Wedding Crashers ($208 million), Charlie and theChocolate Factory ($206 million) and Batman Begins ($205 million).

For 2005 through September 24, Warner Home Video garnered anindustry-leading 19.1% share of home video sales and rentals in theU.S. and ranked #1 in DVD sales. Notable domestic home video releasesin the quarter included Warner Bros.' Million Dollar Baby andConstantine, as well as New Line's Monster-in-Law.

NETWORKS (Turner Broadcasting, HBO & The WB Network)

Revenues grew 10% ($210 million) to $2.4 billion, reflectinghigher Content, Subscription and Advertising revenues. Contentrevenues climbed 38% ($83 million), driven by HBO's broadcastsyndication sales of Sex and the City and higher international salesof HBO original programming. Subscription revenues rose 5% ($69million), resulting mainly from higher rates at Turner and HBO and, toa lesser extent, an increase in subscribers at Turner. Advertisingrevenues were up 8% ($54 million), led by 12% growth at the Turnernetworks.

Operating Income before Depreciation and Amortization climbed 21%($131 million) to $766 million. Growth in Subscription and Advertisingrevenues, as well as contributions from HBO's broadcast syndicationsales of Sex and the City, were offset partially by an increase inoriginal programming expenses at Turner and higher overall generaloperating expenses.

Operating Income grew 22% ($125 million) to $699 million,reflecting the increase in Operating Income before Depreciation andAmortization, offset partly by higher depreciation expense.

Highlights

Among advertising-supported cable networks, TNT finished thequarter #1 in prime-time delivery of its key audiences - including newrecords for Persons 2+ and Households - and ranked #1 in total-daydelivery among Adults 25-54, another new record. TNT has had 21consecutive quarters of year-over-year growth in total-day deliveryamong Adults 18-49. Cartoon Network ranked #1 in prime-time deliveryof Kids 2-11. Adult Swim ranked #1 in total-day delivery among Adults18-34, setting a new record among ad-supported cable networks. CNN'sSeptember news coverage of Hurricane Katrina attracted more than 100million viewers nationwide.

HBO won 27 Primetime Emmy Awards, the most of any network. TheLife and Death of Peter Sellers captured nine awards - more than anyother television show - while Deadwood and Warm Springs each garneredfive Emmys. Cartoon Network won seven Emmy Awards for its animatedseries, including Star Wars: Clone Wars, Foster's Home for ImaginaryFriends, The Powerpuff Girls and Samurai Jack.

PUBLISHING (Time Inc.)

Revenues rose 3% ($40 million) to $1.4 billion, benefiting fromgrowth in Content revenue ($13 million), led by Time Warner BookGroup, and higher Other revenue ($7 million). Additionally, the growthreflects increases in Subscription revenues ($13 million) andAdvertising revenues ($7 million) which were due primarily to theacquisition of Essence and recent magazine launches. Also contributingto Advertising revenue growth was a gain at Real Simple, which wasmore than offset by lower Advertising revenues from core magazines,driven mostly by declines at certain titles including SportsIllustrated and Time.

Operating Income before Depreciation and Amortization increased 9%($24 million) to $288 million, benefiting from growth at Synapse, RealSimple and Time Warner Book Group, as well as contributions fromEssence, offset partially by lower results at certain core magazinesand higher start-up losses.

Operating Income climbed 14% ($29 million) to $232 million, led byhigher Operating Income before Depreciation and Amortization as wellas lower amortization expense, offset partly by increased depreciationexpense.

Highlights

Based on Publishers Information Bureau (PIB) data, Time Inc.'s2005 industry-leading share of overall domestic advertising throughSeptember 30 was 23.1%.

People was recently named Advertising Age's 2005 Magazine of theYear, with Real Simple ranked second.

Time Warner Book Group added 10 titles to the New York Timesbestseller list this quarter. James Patterson's Lifeguard, JoelOsteen's Your Best Life Now and Elizabeth Kostova's The Historian allranked #1 during the quarter.

Consolidated Reported Net Income and Per Share Results

For the three months ended September 30, 2005, the Companyreported Net Income of $897 million, or $0.19 per diluted commonshare. This compares to Net Income in 2004 of $499 million, or $0.11per diluted common share.

For the three months ended September 30, 2005, the Companyreported Income before Discontinued Operations and Cumulative Effectof Accounting Change of $897 million, or $0.19 per diluted commonshare. This compares to Income before Discontinued Operations andCumulative Effect of Accounting Change in 2004 of $494 million, or$0.10 per diluted common share.

Certain pre-tax items in the current-year quarter affectedcomparability, including a $13 million writedown on the investment inNTV, an $8 million gain on the sale of an investment in Columbia Houseand $15 million in other net investment gains. Certain items in theprior-year quarter affected comparability, including $500 million inlegal reserves related to the government investigations, a pre-taxgain of $13 million related to the sale of AOL Japan and $296 millionin pre-tax net investment gains, which includes $188 million and $113million related to the sales of investments in Google and VIVA,respectively.

In aggregate, these items had the net effect of increasing thecurrent-year's Income before Discontinued Operations and CumulativeEffect of Accounting Change by $9 million (net of taxes), or nomeaningful effect on earnings per diluted common share, and decreasingthe prior-year's Income before Discontinued Operations and CumulativeEffect of Accounting Change by $223 million (net of taxes), or $0.05per diluted common share. Excluding such items, the increases inIncome before Discontinued Operations and Cumulative Effect ofAccounting Change and Diluted Income per Common Share beforeDiscontinued Operations and Cumulative Effect of Accounting Changewere driven primarily by higher Operating Income and lower netinterest expense.

Use of Operating Income before Depreciation and Amortization,Adjusted Operating Income before Depreciation and Amortization andFree Cash Flow

The Company utilizes Operating Income before Depreciation andAmortization, among other measures, to evaluate the performance of itsbusinesses. The Company also evaluates the performance of itsbusinesses using Operating Income before Depreciation and Amortizationexcluding the impact of noncash impairments of goodwill, intangibleand fixed assets, as well as gains and losses on asset sales, legalreserves related to the government investigations, and legal reservesrelated to securities litigation (referred to herein as AdjustedOperating Income before Depreciation and Amortization). Both OperatingIncome before Depreciation and Amortization and Adjusted OperatingIncome before Depreciation and Amortization are considered importantindicators of the operational strength of the Company's businesses.Operating Income before Depreciation and Amortization eliminates theuneven effect across all business segments of considerable amounts ofnoncash depreciation of tangible assets and amortization of certainintangible assets that were recognized in business combinations. Alimitation of this measure, however, is that it does not reflect theperiodic costs of certain capitalized tangible and intangible assetsused in generating revenues in the Company's businesses. Moreover,Adjusted Operating Income before Depreciation and Amortization doesnot reflect the diminution in value of goodwill and intangible assetsor gains and losses on asset sales. Management evaluates the costs ofsuch tangible and intangible assets, the impact of relatedimpairments, as well as asset sales through other financial measures,such as capital expenditures, investment spending and return oncapital.

Free Cash Flow is Cash Provided by Operations (as defined by U.S.generally accepted accounting principles) plus payments related tosecurities litigation, less cash provided by discontinued operations,capital expenditures and product development costs, principal paymentson capital leases, and partnership distributions, if any. Free CashFlow is considered to be an important indicator of the Company'sliquidity, including its ability to reduce net debt, make strategicinvestments, pay dividends to common shareholders and repurchasestock. A limitation of this measure, however, is that it does notreflect securities litigation payments, which reduce liquidity.

Operating Income before Depreciation and Amortization, AdjustedOperating Income before Depreciation and Amortization and Free CashFlow should be considered in addition to, not as a substitute for, theCompany's Operating Income, Net Income and various cash flow measures(e.g., Cash Provided by Operations), as well as other measures offinancial performance and liquidity reported in accordance with U.S.generally accepted accounting principles.

About Time Warner Inc.

Time Warner Inc. is a leading media and entertainment company,whose businesses include interactive services, cable systems, filmedentertainment, television networks and publishing.

Information on Business Outlook Release and Earnings ConferenceCall

Time Warner Inc. issued a separate release today regarding its2005 full-year business outlook.

The Company's earnings conference call can be heard live at 8:30am ET on Wednesday, November 2, 2005. To listen to the call, visitwww.timewarner.com/investors or AOL Keyword: IR.

Caution Concerning Forward-Looking Statements

This document includes certain forward-looking statements withinthe meaning of the Private Securities Litigation Reform Act of 1995.These statements are based on management's current expectations orbeliefs, and are subject to uncertainty and changes in circumstances.Actual results may vary materially from those expressed or implied bythe statements herein due to changes in economic, business,competitive, technological and/or regulatory factors, and otherfactors affecting the operation of the businesses of Time Warner Inc.More detailed information about these factors may be found in filingsby Time Warner with the Securities and Exchange Commission, includingits most recent Annual Report on Form 10-K and Quarterly Report onForm 10-Q. Time Warner is under no obligation to, and expresslydisclaims any such obligation to, update or alter its forward-lookingstatements, whether as a result of new information, future events, orotherwise.
TIME WARNER INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)


September 30, December 31,
2005 2004
------------- ------------
(millions, except
ASSETS per share amounts)
Current assets
Cash and equivalents $ 7,959 $ 6,139
Restricted cash 150 150
Receivables, less allowances of $1.867
and $2.109 billion 5,260 5,512
Inventories 1,720 1,737
Prepaid expenses and other current
assets 1,108 920
--------- ----------
Total current assets 16,197 14,458

Noncurrent inventories and film costs 4,973 4,415
Investments, including
available-for-sale securities 3,538 4,703
Property, plant and equipment, net 13,345 13,094
Intangible assets subject to
amortization, net 3,576 3,892
Intangible assets not subject to
amortization 39,701 39,656
Goodwill 40,268 39,667
Other assets 3,004 3,273
--------- ----------

Total assets $ 124,602 $ 123,158
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,273 $ 1,339
Participations payable 2,078 2,580
Royalties and programming costs payable 1,148 1,018
Deferred revenue 1,559 1,653
Debt due within one year 1,646 1,672
Other current liabilities 8,236 6,468
Current liabilities of discontinued
operations 43 50
--------- ----------
Total current liabilities 15,983 14,780

Long-term debt 18,739 20,703
Deferred income taxes 14,604 14,943
Deferred revenue 706 749
Mandatorily convertible preferred stock - 1,500
Other liabilities 5,488 4,160
Noncurrent liabilities of discontinued
operations 7 38
Minority interests 5,689 5,514

Shareholders' equity
Series LMCN-V common stock, $0.01 par
value, 87.2 and 105.7 million shares
outstanding 1 1
Time Warner common stock, $0.01 par
value, 4.590 and 4.483 billion shares
outstanding 46 45
Paid-in-capital 157,569 156,252
Accumulated other comprehensive income,
net 99 106
Accumulated deficit (94,329) (95,633)
--------- ----------
Total shareholders' equity 63,386 60,771
--------- ----------
Total liabilities and shareholders'
equity $ 124,602 $ 123,158
========= ==========

Note: Certain reclassifications have been made to the prior year's
financial information to conform to the September 30, 2005
presentation.



TIME WARNER INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2005 2004 2005 2004
---- ---- ---- ----
(millions, except per share amounts)
Revenues:
Subscription $5,535 $5,368 $16,645 $16,168
Advertising 1,776 1,646 5,443 4,939
Content 2,938 2,648 8,837 9,002
Other 289 273 840 871
------ ------ ------- -------
Total revenues 10,538 9,935 31,765 30,980
Costs of revenues (6,054) (5,646) (18,303) (17,959)
Selling, general and
administrative (2,564) (2,538) (7,663) (7,498)
Amortization of intangible
assets (144) (156) (446) (467)
Legal reserves related to
securities litigation and
government investigations - (500) (3,000) (500)
Merger-related and
restructuring costs (5) - (28) 2
Asset impairments - - (24) (10)
Gains on disposal of
assets, net - 13 18 14
------ ------ ------- -------

Operating income 1,771 1,108 2,319 4,562
Interest expense, net (282) (372) (952) (1,159)
Other income, net 9 304 1,109 368
Minority interest expense,
net (71) (54) (202) (172)
------ ------ ------- -------
Income before income taxes,
discontinued operations and
cumulative effect of
accounting change 1,427 986 2,274 3,599
Income tax provision (530) (492) (735) (1,511)
------ ------ ------- -------
Income before discontinued
operations and cumulative
effect of accounting change 897 494 1,539 2,088
Discontinued operations, net
of tax - 5 - 115
------ ------ ------- -------
Income before cumulative
effect of accounting change 897 499 1,539 2,203
Cumulative effect of
accounting change, net of
tax - - - 34
------ ------ ------- -------
Net income $ 897 $ 499 $ 1,539 $ 2,237
====== ====== ======= =======
Basic income per common
share before discontinued
operations and cumulative
effect of accounting change $ 0.19 $ 0.11 $ 0.33 $ 0.46
Discontinued operations - - - 0.02
Cumulative effect of
accounting change - - - 0.01
------ ------ ------- -------
Basic net income per common
share $ 0.19 $ 0.11 $ 0.33 $ 0.49
====== ====== ======= =======
Diluted income per common
share before discontinued
operations and cumulative
effect of accounting change $ 0.19 $ 0.10 $ 0.33 $ 0.44
Discontinued operations - 0.01 - 0.03
Cumulative effect of
accounting change - - - 0.01
------ ------ ------- -------
Diluted net income per
common share $ 0.19 $ 0.11 $ 0.33 $ 0.48
====== ====== ======= =======
Average basic common shares 4,683.4 4,573.3 4,652.4 4,561.4
======= ======= ======= =======
Average diluted common
shares 4,723.6 4,713.1 4,722.7 4,708.2
======= ======= ======= =======

Note: Certain reclassifications have been made to the prior year's
financial information to conform to the September 30, 2005
presentation.



TIME WARNER INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended September 30,
(Unaudited)


2005 2004
---- ----
(millions)

OPERATIONS
Net income(a) $ 1,539 $ 2,237
Adjustments for noncash and nonoperating items:
Cumulative effect of accounting change,
net of tax - (34)
Depreciation and amortization 2,441 2,385
Amortization of film costs 2,060 2,209
Asset impairments 24 10
Gain on investments and other assets, net (1,081) (364)
Equity in (income) losses of investee
companies, net of cash distributions (23) 3
Legal reserves related to securities litigation
and government investigations 3,000 500
Changes in operating assets and liabilities,
net of acquisitions(b) (2,355) (1,573)
Adjustments relating to discontinued operations (8) 15
------- -------
Cash provided by operations(c) 5,597 5,388
------- -------

INVESTING ACTIVITIES
Investments and acquisitions, net of cash
acquired (491) (759)
Capital expenditures and product development
costs (2,259) (2,021)
Investment proceeds from available-for-sale
securities 991 239
Other investment proceeds 414 2,805
------- -------
Cash provided (used) by investing activities (1,345) 264
------- -------

FINANCING ACTIVITIES
Borrowings 1,142 1,273
Debt repayments (3,043) (3,222)
Proceeds from exercise of stock options 275 272
Principal payments on capital leases (94) (148)
Repurchases of common stock (485) -
Dividends paid (235) -
Other 8 15
------- -------
Cash used by financing activities (2,432) (1,810)
------- -------
INCREASE IN CASH AND EQUIVALENTS 1,820 3,842

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 6,139 3,040
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ 7,959 $ 6,882
======= =======


(a) Includes net income from discontinued operations of $115 million
for the nine months ended September 30, 2004.

(b) 2005 includes a $300 million payment related to the government
investigations.

(c) 2005 includes an approximate $36 million use of cash related to
changing the fiscal year end of certain international operations
from November 30 to December 31.

Note: Certain reclassifications have been made to the prior year's
financial information to conform to the September 30, 2005
presentation.



TIME WARNER INC.
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND
AMORTIZATION TO OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
(millions, unaudited)

Three Months Ended September 30, 2005
Legal Reserves
Related To
Adjusted Securities
Operating Income/(Loss) Litigation &
Before Depreciation Asset Government
And Amortization Impairments Investigations
---------------- ----------- --------------
AOL $ 481 $ - $ -
Cable 945 - -
Filmed
Entertainment 253 - -
Networks 766 - -
Publishing 288 - -
Corporate (113) - -
Intersegment
elimination (19) - -
------- ------- -------
Total $ 2,601 $ - $ -
======= ======= =======


Gains/(Losses) Operating Income/(Loss)
From Before Depreciation
Asset Disposals And Amortization
--------------- -----------------------
AOL $ - $ 481
Cable - 945
Filmed Entertainment - 253
Networks - 766
Publishing - 288
Corporate - (113)
Intersegment elimination - (19)
-------- ----------
Total $ - $ 2,601
======== ==========



Three Months Ended September 30, 2004
Legal Reserves
Related To
Adjusted Securities
Operating Income/(Loss) Litigation &
Before Depreciation Asset Government
And Amortization Impairments Investigations
---------------- ----------- --------------
AOL(a) $ 450 $ - $ -
Cable 824 - -
Filmed
Entertainment 361 - -
Networks 635 - -
Publishing 264 - -
Corporate(b) (115) - (500)
Intersegment
elimination (27) - -
------- ------- -------
Total $ 2,392 $ - $ (500)
======= ======= =======



Gains/(Losses) Operating Income/(Loss)
From Before Depreciation
Asset Disposals And Amortization
--------------- -----------------------
AOL(a) $ 13 $ 463
Cable - 824
Filmed Entertainment - 361
Networks - 635
Publishing - 264
Corporate(b) - (615)
Intersegment elimination - (27)
-------- ----------
Total $ 13 $ 1,905
======== ==========



(a) For the three months ended September 30, 2004, Operating Income
before Depreciation and Amortization includes a gain of $13
million related to the sale of AOL Japan.

(b) For the three months ended September 30, 2004, Operating Income
before Depreciation and Amortization includes $500 million in
legal reserves related to the government investigations.



TIME WARNER INC.
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND
AMORTIZATION TO OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
(millions, unaudited)

Nine Months Ended September 30, 2005
Legal Reserves
Related To
Adjusted Securities
Operating Income/(Loss) Litigation &
Before Depreciation Asset Government
And Amortization Impairments Investigations
---------------- ----------- --------------
AOL(a) $ 1,571 $ (24) $ -
Cable 2,667 - -
Filmed
Entertainment 882 - -
Networks 2,188 - -
Publishing(b) 803 - -
Corporate(c) (319) - (3,000)
Intersegment
elimination (26) - -
------- ------- -------
Total $ 7,766 $ (24) $(3,000)
======= ======= =======


Gains/(Losses) Operating Income/(Loss)
From Before Depreciation
Asset Disposals And Amortization
--------------- -----------------------
AOL(a) $ 10 $ 1,557
Cable - 2,667
Filmed Entertainment - 882
Networks - 2,188
Publishing(b) 8 811
Corporate(c) - (3,319)
Intersegment elimination - (26)
-------- ----------
Total $ 18 $ 4,760
======== ==========



Nine Months Ended September 30, 2004
Legal Reserves
Related To
Adjusted Securities
Operating Income/(Loss) Litigation &
Before Depreciation Asset Government
And Amortization Impairments Investigations
---------------- ----------- --------------
AOL(a) $ 1,436 $ (10) $ -
Cable 2,391 - -
Filmed
Entertainment 1,190 - -
Networks(d) 2,038 - -
Publishing(b) 783 - -
Corporate(c) (391) - (500)
Intersegment
elimination (4) - -
------- ------- -------
Total $ 7,443 $ (10) $ (500)
======= ======= =======



Gains/(Losses) Operating Income/(Loss)
From Before Depreciation
Asset Disposals And Amortization
--------------- -----------------------
AOL(a) $ 13 $ 1,439
Cable - 2,391
Filmed Entertainment - 1,190
Networks(d) (7) 2,031
Publishing(b) 8 791
Corporate(c) - (891)
Intersegment elimination - (4)
-------- ----------
Total $ 14 $ 6,947
======== ==========


(a) For the nine months ended September 30, 2005, Operating Income
before Depreciation and Amortization includes a $24 million
noncash impairment charge related to goodwill associated with
America Online Latin America, Inc. ("AOLA"), an approximate $5
million gain related to the sale of a building and a $5 million
gain from the resolution of a previously contingent gain related
to the 2004 sale of Netscape Security Solutions. For the nine
months ended September 30, 2004, Operating Income before
Depreciation and Amortization includes a $10 million impairment
charge related to a building that was held for sale and a gain of
$13 million related to the sale of AOL Japan.

(b) For the nine months ended September 30, 2005, Operating Income
before Depreciation and Amortization includes an $8 million gain
related to the collection of a loan made in conjunction with the
Company's 2003 sale of Time Life Inc. ("Time Life"), which was
previously fully reserved due to concerns about recoverability.
For the nine months ended September 30, 2004, Operating Income
before Depreciation and Amortization includes an $8 million gain
related to the sale of a building.

(c) For the nine months ended September 30, 2005, Operating Income
(Loss) before Depreciation and Amortization includes $3 billion in
legal reserves related to securities litigation. For the nine
months ended September 30, 2004, Operating Income before
Depreciation and Amortization includes $500 million in legal
reserves related to the government investigations.

(d) For the nine months ended September 30, 2004, Operating Income
before Depreciation and Amortization includes an approximate $7
million loss related to the sale of the winter sports teams.



TIME WARNER INC.
RECONCILIATION OF OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION TO OPERATING INCOME
(millions, unaudited)

Three Months Ended September 30, 2005

Operating
Income/(Loss)
Before
Depreciation Operating
And Amortization Depreciation Amortization Income/(Loss)
---------------- ------------ ------------ -------------
AOL $ 481 $ (136) $ (43) $ 302
Cable 945 (415) (18) 512
Filmed
Entertainment 253 (29) (53) 171
Networks 766 (61) (6) 699
Publishing 288 (32) (24) 232
Corporate (113) (13) - (126)
Intersegment
elimination (19) - - (19)
------- ------- ------- -------
Total $ 2,601 $ (686) $ (144) $ 1,771
======= ======= ======= =======

Three Months Ended September 30, 2004

Operating
Income/(Loss)
Before
Depreciation Operating
And Amortization Depreciation Amortization Income/(Loss)
---------------- ------------ ------------ -------------
AOL(a) $ 463 $ (158) $ (44) $ 261
Cable 824 (367) (19) 438
Filmed
Entertainment 361 (26) (53) 282
Networks 635 (55) (6) 574
Publishing 264 (27) (34) 203
Corporate(b) (615) (8) - (623)
Intersegment
elimination (27) - - (27)
------- ------- ------- -------
Total $ 1,905 $ (641) $ (156) $ 1,108
======= ======= ======= =======


(a) For the three months ended September 30, 2004, Operating Income
before Depreciation and Amortization and Operating Income include
a gain of $13 million related to the sale of AOL Japan.

(b) For the three months ended September 30, 2004, Operating Income
before Depreciation and Amortization and Operating Income include
$500 million in legal reserves related to the government
investigations.



TIME WARNER INC.
RECONCILIATION OF OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION TO OPERATING INCOME
(millions, unaudited)

Nine Months Ended September 30, 2005

Operating
Income/(Loss)
Before
Depreciation Operating
And Amortization Depreciation Amortization Income/(Loss)
---------------- ------------ ------------ -------------
AOL(a) $ 1,557 $ (426) $ (137) $ 994
Cable 2,667 (1,177) (57) 1,433
Filmed
Entertainment 882 (89) (157) 636
Networks 2,188 (173) (18) 1,997
Publishing(b) 811 (98) (77) 636
Corporate(c) (3,319) (32) - (3,351)
Intersegment
elimination (26) - - (26)
------- ------- ------- -------
Total $ 4,760 $(1,995) $ (446) $ 2,319
======= ======= ======= =======


Nine Months Ended September 30, 2004

Operating
Income/(Loss)
Before
Depreciation Operating
And Amortization Depreciation Amortization Income/(Loss)
---------------- ------------ ------------ -------------
AOL(a) $ 1,439 $ (498) $ (127) $ 814
Cable 2,391 (1,068) (56) 1,267
Filmed
Entertainment 1,190 (75) (159) 956
Networks(d) 2,031 (155) (17) 1,859
Publishing(b) 791 (90) (108) 593
Corporate(c) (891) (32) - (923)
Intersegment
elimination (4) - - (4)
------- ------- ------- -------
Total $ 6,947 $(1,918) $ (467) $ 4,562
======= ======= ======= =======

(a) For the nine months ended September 30, 2005, Operating Income
before Depreciation and Amortization and Operating Income include
a $24 million noncash impairment charge related to goodwill
associated with AOLA, an approximate $5 million gain related to
the sale of a building and a $5 million gain from the resolution
of a previously contingent gain related to the 2004 sale of
Netscape Security Solutions. For the nine months ended September
30, 2004, Operating Income before Depreciation and Amortization
and Operating Income include a $10 million impairment charge
related to a building that was held for sale and a gain of $13
million related to the sale of AOL Japan.

(b) For the nine months ended September 30, 2005, Operating Income
before Depreciation and Amortization and Operating Income include
an $8 million gain related to the collection of a loan made in
conjunction with the Company's 2003 sale of Time Life, which
was previously fully reserved due to concerns about
recoverability. For the nine months ended September 30, 2004,
Operating Income before Depreciation and Amortization and
Operating Income include an $8 million gain related to the sale of
a building.

(c) For the nine months ended September 30, 2005, Operating Income
(Loss) before Depreciation and Amortization and Operating Income
(Loss) include $3 billion in legal reserves related to securities
litigation. For the nine months ended September 30, 2004,
Operating Income before Depreciation and Amortization and
Operating Income include $500 million in legal reserves related to
the government investigations.

(d) For the nine months ended September 30, 2004, Operating Income
before Depreciation and Amortization and Operating Income include
an approximate $7 million loss related to the sale of the winter
sports teams.



TIME WARNER INC.
RECONCILIATION OF CASH PROVIDED BY OPERATIONS TO FREE CASH FLOW
(millions, unaudited)


Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2005 2004 2005 2004
---- ---- ---- ----
Cash provided by operations $ 2,134 $ 2,082 $ 5,597 $ 5,388
Less discontinued operations:
Net loss - (5) - (115)
Other changes (3) (5) 8 (15)
----- ------ ----- ------

Cash provided by continuing
operations 2,131 2,072 5,605 5,258
Capital expenditures and
product development costs (811) (680) (2,259) (2,021)
Principal payments on capital
leases (27) (46) (94) (148)
----- ------ ----- ------

Free Cash Flow(a) $ 1,293 $ 1,346 $ 3,252 $ 3,089
===== ===== ===== ======


(a) Free Cash Flow is cash provided by operations (as defined by U.S.
generally accepted accounting principles) plus payments related to
securities litigation, less cash provided by discontinued
operations, capital expenditures and product development costs,
principal payments on capital leases, and partnership
distributions, if any.