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

Business Wire, Nov 2, 2005

NEW YORK -- Time Warner Inc. (NYSE:TWX) today reported financial results for its third quarter ended September 30, 2005. The Company also announced that its Board of Directors has authorized a $7.5 billion increase in the stock repurchase program to a total of $12.5 billion over the next 21 months.

Chairman and Chief Executive Officer Dick Parsons said: "Our solid third-quarter results and expanded stock repurchase program highlight the fundamental operating strength of our businesses and their growing momentum. In short, our Company is strong and getting stronger. Our Board of Directors and management are confident that we're on the right course to build sustainable long-term value, optimize our capital allocation and leverage, and deliver a highly competitive return for all of our shareholders.

"This quarter's performance, led by double-digit profit growth at our Cable and Networks businesses, with significant contributions from AOL and Time Inc., keeps us firmly on track to achieve our full-year financial objectives. Especially impressive were Time Warner Cable's results, driven by strong subscriber trends across its high-speed data, Digital Phone and digital video product lines. In the fourth quarter, we'll continue to extend the competitive advantages of our cable company and our other businesses to fuel growth in 2006 and beyond."

In announcing the expanded stock repurchase program, Mr. Parsons said: "In keeping with our commitment to deliver greater value to shareholders, our Board of Directors and management reviewed our existing stock repurchase program and decided to increase it to a total of $12.5 billion. With our strong balance sheet, industry-leading free cash flow and solid earnings, we can expand our stock buyback while still having the resources to invest meaningfully in future growth as well as to pay our regular quarterly cash dividend."

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, Filmed Entertainment and Publishing segments.

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

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

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

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

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

Stock Repurchase Program Increased to $12.5 Billion

The Board of Directors has authorized a $7.5 billion increase in the stock repurchase program to a total of $12.5 billion over the next 21 months, in keeping with the two-year schedule for the original stock repurchase program announced August 3, 2005.

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

As of October 31, 2005, the Company has repurchased approximately 45 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 the three and nine months ended September 30, by line of business (in millions):

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.