MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

INTRODUCTION

Management’s discussion and analysis of results of operations and financial condition (“MD&A”) is a supplement to the accompanying consolidated financial statements and provides additional information on Time Warner Inc.’s (“Time Warner” or the “Company”) businesses, current developments, financial condition, cash flows and results of operations. MD&A is organized as follows:

OVERVIEW

Time Warner is a leading media and entertainment company whose major businesses encompass an array of the most respected and successful media brands. Among the Company’s brands are TNT, TBS, Adult Swim, Cartoon Network, CNN, HBO, Cinemax, Warner Bros. and New Line Cinema. During the nine months ended September 30, 2015, the Company generated Revenues of $21.039 billion (up 6% from $19.834 billion in 2014), Operating Income of $5.479 billion (up 19% from $4.586 billion in 2014), Income from continuing operations of $2.938 billion (down 7% from $3.174 billion in 2014), Net Income attributable to Time Warner Inc. shareholders of $2.976 billion (down 4% from $3.109 billion in 2014) and Cash provided by operations from continuing operations of $3.001 billion (up 12% from $2.674 billion in 2014). The Company’s results for the nine months ended September 30, 2014 were significantly impacted by the sale and leaseback of the Company’s space in Time Warner Center in January 2014 as well as the reversal of certain tax reserves in connection with an audit settlement, restructuring and severance costs and programming impairments.

Time Warner Businesses

Time Warner classifies its operations into three reportable segments: Turner, Home Box Office and Warner Bros. For additional information regarding Time Warner’s segments, refer to Note 13, “Segment Information,” to the accompanying consolidated financial statements.

Turner.   The Turner segment consists of businesses managed by Turner Broadcasting System, Inc. (“Turner”). During the nine months ended September 30, 2015, the Turner segment recorded Revenues of $7.935 billion (37% of the Company’s total Revenues) and Operating Income of $3.310 billion.

Turner operates domestic and international television networks and related properties that offer entertainment, sports, kids and news programming on television and digital platforms for consumers around the world. The Turner networks and related properties include TNT, TBS, Adult Swim, truTV, Turner Classic Movies, Turner Sports, Cartoon Network, Boomerang, CNN and HLN. The Turner networks generate revenues principally from providing programming to affiliates that have contracted to receive and distribute this programming to subscribers, from the sale of advertising and from licensing its original programming, including to subscription-video-on-demand (“SVOD”) services, and its brands and characters for consumer products. Turner’s programming is available to audiences for viewing live and on demand across television, mobile devices and other digital platforms through services provided by affiliates and on Turner’s digital properties. Turner also owns and operates various digital media businesses, including Bleacher Report ; the CNN digital properties, including CNN Go , CNN.com and CNNMoney.com ; and other digital properties

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associated with its networks, all of which generate revenues principally from the sale of advertising and sponsorships. In addition, Turner manages and operates sports league digital properties in conjunction with associated television rights, such as NBA Digital and NCAA.com , which also generate revenues primarily from the sale of advertising and sponsorships.

Home Box Office.   The Home Box Office segment consists of businesses managed by Home Box Office, Inc. (“Home Box Office”). During the nine months ended September 30, 2015, the Home Box Office segment recorded Revenues of $4.203 billion (20% of the Company’s total Revenues) and Operating Income of $1.485 billion.

Home Box Office operates the HBO and Cinemax multi-channel premium pay television services, with the HBO service ranking as the most widely distributed multi-channel premium pay television service. HBO- and Cinemax-branded premium pay and basic tier television services are distributed in over 60 countries in Latin America, Asia and Europe. In the U.S., Home Box Office generates revenues principally from providing programming to affiliates that have contracted to receive and distribute such programming to their customers who subscribe to the HBO or Cinemax services. HBO and Cinemax programming is available in the U.S. to subscribers of affiliates for viewing on its main HBO and Cinemax channels and its multiplex channels, through Home Box Office’s on demand services, HBO On Demand and Cinemax On Demand, and through Home Box Office’s streaming video-on-demand services, HBO GO and MAX GO. HBO GO and MAX GO are available on a variety of digital platforms, including mobile devices, gaming consoles and Internet connected streaming devices and televisions. Home Box Office’s agreements with its domestic affiliates are typically long-term arrangements that provide for annual service fee increases and marketing support. While fees to Home Box Office under affiliate agreements are generally based on the number of subscribers served by the affiliates, the relationship between subscriber totals and the amount of revenues earned depends on the specific terms of the applicable agreement, which may include basic and/or pay television subscriber thresholds, volume discounts and other performance-based discounts. Marketing and promotional activities intended to retain existing subscribers and acquire new subscribers may also impact revenue earned. In April 2015, Home Box Office launched HBO NOW, a stand-alone premium streaming service available to consumers in the U.S.

Home Box Office also derives subscription revenues from the distribution by international affiliates of country-specific HBO and Cinemax premium pay and basic tier television services to their local subscribers. HBO GO is available to HBO premium pay television subscribers in a number of countries outside the U.S.

Additional sources of revenues for Home Box Office are (i) the home entertainment sales of its original programming, including Game of Thrones , True Blood , Boardwalk Empire and True Detective , via electronic sell-through (“EST”) and on DVDs and Blu-ray Discs and (ii) the licensing of its original programming to SVOD services and international television networks.

Warner Bros.   The Warner Bros. segment consists of businesses managed by Warner Bros. Entertainment Inc. (“Warner Bros.”) that principally produce and distribute television shows, feature films and videogames. During the nine months ended September 30, 2015, the Warner Bros. segment recorded Revenues of $9.687 billion (43% of the Company’s total Revenues) and Operating Income of $1.050 billion.

Warner Bros. is a leader in television production and distribution. For the 2015/2016 season, Warner Bros. is producing over 60 original series in the U.S., including (i) at least two series for each of the five broadcast networks (including 2 Broke Girls , Arrow , The Bachelor , The Big Bang Theory , Blindspot , DC’s Legends of Tomorrow , The Flash , Gotham , Lucifer , The Middle , Mike & Molly , Mom , Rush Hour , Supergirl , Supernatural , Vampire Diaries and The Voice ), (ii) series for basic cable networks (including Major Crimes , Pretty Little Liars and Rizzoli & Isles ), (iii) series for premium pay television services (including The Leftovers , Shameless and Westworld ), (iv) series for SVOD services (including 11/22/63 , Fuller House and Longmire ), (v) series for first-run syndication (including The Ellen DeGeneres Show , Extra and TMZ ) and (vi) animated series for Cartoon Network, Adult Swim and Disney XD. Warner Bros. also licenses the rights to many of its U.S. original television series in international territories. Outside the U.S., Warner Bros. has a global network of production companies in 16 countries (located across Europe and South America and in Australia and New Zealand), which allows Warner Bros. to develop programming specifically tailored for the audiences in these territories. These local production companies also focus on developing non-scripted programs and formats that can be adapted and sold internationally and in the U.S. Television product revenues are generated principally from the licensing of programs to broadcast and cable television networks and premium pay television and SVOD services.

Warner Bros. is also a leader in the feature film industry and produces feature films under its Warner Bros. and New Line Cinema banners. The Warner Bros. segment’s theatrical product revenues are generated principally through rental fees from theatrical exhibition of feature films, including the following recently released films: Black Mass , Get Hard , The Intern , Mad Max: Fury Road , Magic Mike XXL, The Man from U.N.C.L.E, Pan , San Andreas and Vacation , and subsequently through licensing fees received from the distribution of films on premium pay television, television broadcast and cable networks and SVOD services.

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The segment also generates television and theatrical product revenues from the distribution of television and theatrical product in various digital formats (e.g., EST and video-on-demand) and on DVDs and Blu-ray Discs. In addition, the segment generates revenues through the development and distribution of videogames, including the following recently released videogames: Batman: Arkham Knight , Lego Dimensions and Mortal Kombat X . Warner Bros.’ television, film and videogame businesses benefit from a shared infrastructure, including shared production, distribution, marketing and administrative functions and resources.

The distribution and sale of physical discs is one of the largest contributors to the segment’s revenues and profits. For the past several years, sales of physical discs have declined as the home entertainment industry has been undergoing significant changes as it transitions from the physical distribution of film and television content via DVDs and Blu-ray Discs to the electronic delivery of such content. Several factors have contributed to this decline, including consumers shifting to SVOD services and discount rental kiosks, which generate significantly less revenue per transaction for the Company than physical disc sales; changing retailer initiatives and strategies (e.g., reduction of floor space devoted to physical discs); retail store closures; increasing competition for consumer discretionary time and spending; and piracy. The electronic delivery of film and television content is growing and becoming more important to the Warner Bros. segment, which has helped to offset some of the decline in sales of physical discs. During the first nine months of 2015, across the home entertainment industry, consumer spending on physical discs continued to decline and consumer spending on electronic delivery continued to increase.

Television Industry

The U.S. television industry is continuing to evolve, with changes in technology, rapid growth in new video services, and corresponding increase in overall video content consumption and shift in consumer viewing habits. Consumers are watching an increasing amount of programming on-demand and across a wide variety of services and devices, including smartphones, tablets, PCs and internet-connected televisions. During 2014 and 2015, the number of multi-channel video service subscribers in the U.S. declined slightly, and the Company expects further modest declines. To counteract this trend, some multi-channel video service providers (“MVPDs”) are putting greater emphasis on selling smaller bundles of cable networks, resulting in higher subscriber declines for most individual networks than for multi-channel video services in total.

At the same time, the penetration of broadband and internet-connected devices has grown and SVOD services such as Amazon Prime, Hulu and Netflix have continued to increase their number of subscribers. These SVOD services have been, and are expected to continue, making significant investments in acquired and original programming. In addition, ad-supported broadband video services such as through YouTube and Facebook have continued to gain in popularity. Some television networks have launched SVOD services that are available to consumers without a multi-channel video service subscription.

As a result of these changes, consumers have more options for obtaining video content, including lower-cost alternatives. At the same time, however, the combination of new competitors, changes in viewing habits and declines in MVPD subscribers has negatively affected overall television ratings and, as a result, television advertising revenues for the industry and certain of the Company’s networks. There also has been a corresponding shift of advertising dollars to non-traditional video outlets.

To address these changes, the Company’s strategy over the past few years has focused on strengthening its position within the traditional TV ecosystem, enhancing the value of traditional pay television subscriptions for consumers, and pursuing new opportunities outside the traditional ecosystem. As part of this strategy, the Company plans to continue increasing its investment in high-quality distinctive programming to enhance the value of its networks. The Company is also working to enhance the value to consumers of the traditional MVPD bundle and capitalize on the shift in consumption habits in a number of ways, including by expanding the amount of its content that is available on demand to MVPD subscribers and supporting the development of better user interfaces for on-demand multiplatform viewing. In addition, Turner has introduced new advertising products that provide greater data analytic tools and targeting capabilities to advertisers in order to more effectively compete with non-traditional outlets. The Company is also pursuing a number of initiatives to capitalize on the new opportunities presented by these changes, including launching and investing in SVOD services, as well as investing in short-form content production and digital-first news and entertainment networks.

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Recent Developments

Strategic Review

As part of its long-range planning process, the Company routinely reviews opportunities to streamline its operations and optimize resource allocation among its strategic priorities. In connection with that review, the Company will evaluate its future use of approximately $100 million of programming rights. Because the Company has not yet completed its review, it is not able to estimate the charges, if any, it will incur.

Central European Media Enterprises Ltd.

On September 30, 2015, Central European Media Enterprises Ltd. (“CME”) entered into a credit agreement (the “2015 Credit Agreement”) with third-party financial institutions for a €235 million senior unsecured term loan that will be funded in November 2015 and mature on November 1, 2019. Time Warner has guaranteed CME’s obligations under the 2015 Credit Agreement for a fee equal to 8.5% less the interest rate on the term loan, to be paid to Time Warner semi-annually in cash or in kind at CME’s option. CME will use the proceeds of the term loan to repay the $261 million aggregate principal amount of its 5.0% Senior Convertible Notes due 2015 (the “2015 Notes”) at maturity on November 15, 2015. As consideration for assisting CME in refinancing the 2015 Notes, Time Warner earned a commitment fee of $9 million, which will accrue interest at a rate of 8.5%. As of September 30, 2015, there were no amounts outstanding under the 2015 Credit Agreement. CME may enter into unsecured hedge arrangements to protect against changes in the interest rate on the term loan during its term. If so, Time Warner will guarantee CME’s obligations under such hedge arrangements.

iStreamPlanet

In August 2015, Turner acquired a majority ownership interest in iStreamPlanet Co., LLC (“iStreamPlanet”), a provider of streaming and cloud-based video and technology services, for $149 million, net of cash acquired. As a result of Turner’s acquisition of the additional interests in iStreamPlanet, Turner recorded a $3 million gain on a previously held investment accounted for under the cost method and began consolidating iStreamPlanet in the third quarter of 2015. In connection with the acquisition, $29 million of Redeemable noncontrolling interest was recorded in the accompanying Consolidated Balance Sheet.

June Debt Offering

On June 4, 2015, Time Warner issued $2.1 billion aggregate principal amount of debt securities under a shelf registration statement. The Company used a portion of the net proceeds from this offering to retire at maturity the $1.0 billion aggregate principal amount outstanding of its 3.15% Notes due July 15, 2015. See “Financial Condition and Liquidity  –  Outstanding Debt and Other Financing Arrangements” for further information.

Debt Tender Offer and Redemption

In June 2015, Time Warner purchased $687 million aggregate principal amount of the $1.0 billion aggregate principal amount outstanding of its 5.875% Notes due 2016 (the “2016 Notes”) through a tender offer. In August 2015, the Company redeemed the $313 million aggregate principal amount of the 2016 Notes that remained outstanding following the tender offer. The premiums paid and costs incurred in connection with this purchase and redemption were $20 million and $71 million for the three and nine months ended September 30, 2015, respectively, and were recorded in Other loss, net in the accompanying Consolidated Statement of Operations. See “Financial Condition and Liquidity – Outstanding Debt and Other Financing Arrangements” for further information.

July Debt Offering

On July 28, 2015, Time Warner issued €700 million aggregate principal amount of debt securities under a shelf registration statement. See “Financial Condition and Liquidity  –  Outstanding Debt and Other Financing Arrangements” for further information.

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Venezuela Currency

Certain of the Company’s divisions conduct business with third parties located in Venezuela and, as a result, the Company holds net monetary assets denominated in Venezuelan Bolivares Fuertes (“VEF”) that primarily consist of cash and accounts receivable. As of December 31, 2014, the Company used the SICAD 2 exchange rate to remeasure its VEF-denominated monetary assets. Because of Venezuelan government-imposed restrictions on the exchange of VEF into foreign currency in Venezuela, the Company has not been able to convert VEF earned in Venezuela into U.S. Dollars through the Venezuelan government’s foreign currency exchanges.

On February 10, 2015, Venezuelan government officials announced changes to Venezuela’s foreign currency exchange system. Those changes included the elimination of the SICAD 2 exchange due to the merger of the SICAD 1 and SICAD 2 exchanges into a single SICAD exchange as well as the creation of the Simadi exchange, which is a new free market foreign currency exchange. On their initial date of activity, the exchange rates published by the Central Bank of Venezuela were 12 VEF to each U.S. Dollar for the SICAD exchange and 170 VEF to each U.S. Dollar for the Simadi exchange. Given the restrictions associated with the official government rate and the SICAD exchange, starting on February 10, 2015, the Company began to use the Simadi exchange rate to remeasure its VEF-denominated transactions and balances and recognized a pretax foreign exchange loss of $22 million in the Consolidated Statement of Operations during the quarter ended March 31, 2015.

RESULTS OF OPERATIONS

Recent Accounting Guidance

See Note 1, “Description of Business and Basis of Presentation,” to the accompanying consolidated financial statements for a discussion of recent accounting guidance.

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In addition to the items affecting comparability described above, the Company incurred Restructuring and severance costs of $9 million and $31 million for the three and nine months ended September 30, 2015, respectively, and $303 million and $346 million for the three and nine months ended September 30, 2014, respectively. For the three months ended September 30, 2014, the Company also incurred $343 million of programming impairments, reflecting $482 million of programming impairments at the Turner segment, partially offset by $139 million of intercompany eliminations. For further discussion of Restructuring and severance costs and the programming impairments, see “Consolidated Results” and “Business Segment Results.”

Asset Impairments

During the three and nine months ended September 30, 2015, the Company recognized asset impairments of $7 million and $8 million, respectively, which consisted of $5 million and $6 million, respectively, at Corporate primarily related to certain internally developed software, and $1 million for both the three and nine months ended September 30, 2015 at both the Turner and Warner Bros. segments relating to miscellaneous assets.

During the three months ended September 30, 2014, the Company recognized asset impairments of $5 million, consisting of $4 million at the Turner segment related to miscellaneous assets and $1 million at Corporate related to certain internally developed software. For the nine months ended September 30, 2014, the Company recognized asset impairments of $15 million at the Turner segment related to miscellaneous assets, $4 million at the Home Box Office segment related to the noncash impairment of an international tradename and $5 million and $7 million at the Warner Bros. segment and Corporate, respectively, related to certain internally developed software.

Gain (Loss) on Operating Assets, Net

For the three and nine months ended September 30, 2015, the Company recognized a $2 million gain on operating assets at the Turner segment reflecting a $3 million gain upon its acquisition of the controlling interest of iStreamPlanet and a $1 million loss on the sale of a business. For the nine months ended September 30, 2015, the Company also recognized $2 million of net losses at the Turner segment related to the remeasurement of certain previously held investments upon the Turner segment’s acquisition of controlling interests in those investments as well as a $1 million loss at the Warner Bros. segment.

For the three and nine months ended September 30, 2014, the Company recognized a $5 million loss on operating assets at the Turner segment related to the shutdown of a business. For the nine months ended September 30, 2014, the Company also recognized $15 million of gains at the Turner segment, reflecting a $2 million gain primarily related to the sale of a building in South America and a $13 million gain related to the sale of Zite, Inc., a news content aggregation and recommendation platform, and a $441 million gain at Corporate in connection with the sale and leaseback of the Company’s space in Time Warner Center.

Venezuelan Foreign Currency Loss

For the nine months ended September 30, 2015, the Company recognized a pretax foreign exchange loss of $22 million, consisting of $17 million at the Turner segment and $5 million at the Warner Bros. segment, related to a change in the foreign currency exchange rate used by the Company for remeasuring its Venezuelan net monetary assets from the SICAD 2 rate to the Simadi rate. The Venezuelan foreign currency loss is included in Selling, general and administrative expenses in the accompanying Consolidated Statement of Operations. See “Recent Developments” for more information.

Other

Other reflects external costs related to mergers, acquisitions or dispositions of $3 million and $8 million for the three and nine months ended September 30, 2015, respectively, and $12 million and $71 million for the three and nine months ended September 30, 2014, respectively. External costs related to mergers, acquisitions or dispositions for the three and nine months ended September 30, 2015 consisted of $0 and $1 million, respectively, at the Turner segment, $2 million and $5 million, respectively, at the Warner Bros. segment and $1 million and $2 million, respectively, at Corporate. External costs related to mergers, acquisitions or dispositions for the three and nine months ended September 30, 2014 consisted of $4 million and $14 million, respectively, at the Turner segment primarily related to exit costs in connection with the shutdown of CNN Latino, $4 million and $12 million, respectively, at the Warner Bros. segment primarily related to the acquisition of the international operations of Eyeworks Group (“Eyeworks”) and $4 million and $45 million, respectively, at Corporate related to the legal and structural separation of Time Inc. from the Company (the “Time Separation”).

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

Investment Gains (Losses), Net

For the three and nine months ended September 30, 2015, the Company recognized $15 million of net investment gains and $70 million of net investment losses consisting of $5 million and $110 million, respectively, of losses related to fair value adjustments on warrants to purchase common stock of CME held by the Company and $20 million and $40 million, respectively, of net miscellaneous investment gains.

For the three and nine months ended September 30, 2014, the Company recognized $78 million and $57 million, respectively, of net miscellaneous investment losses, consisting of $58 million and $59 million, respectively, of losses related to fair value adjustments on warrants to purchase CME common stock held by the Company and $20 million of net miscellaneous investment losses for the three months ended September 30, 2014 and $2 million of net miscellaneous investment gains for the nine months ended September 30, 2014.

Amounts Related to the Separation of Time Warner Cable Inc.

For the three and nine months ended September 30, 2015, the Company recognized $4 million of other loss related to payments made to Time Warner Cable Inc. (“TWC”) in accordance with a tax sharing agreement with TWC and for the nine months ended September 30, 2015, the Company also recognized $4 million of other loss related to changes in the value of a TWC tax indemnification receivable. The Company recognized other expense of $1 million for the nine months ended September 30, 2014 related to the expiration, exercise and net change in the estimated fair value of Time Warner equity awards held by TWC employees. The amounts related to the separation of Time Warner Cable Inc. have 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 September 30, 2014, the Company recognized other income of $1 million primarily related to a tax indemnification obligation associated with the disposition of Warner Music Group (“WMG”) in 2004. This amount has been reflected in Other loss, net in the accompanying Consolidated Statement of Operations.

Amounts Related to the Time Separation

For the three and nine months ended September 30, 2015, the Company recognized $2 million and $7 million, respectively, of other loss primarily reflecting pension and other retirement benefits related to employees and former employees of Time Inc. For the three and nine months ended September 30, 2014, the Company recognized $2 million of other income related to the expiration, exercise and net change in the estimated fair value of Time Warner equity awards held by certain Time Inc. employees.

Premiums Paid and Costs Incurred on Debt Redemption

For the three and nine months ended September 30, 2015, the Company recognized $21 million of premiums paid and costs incurred principally on the redemption of $313 million aggregate principal amount of its 2016 Notes. For the nine months ended September 30, 2015, the Company also recognized $51 million of premiums paid and costs incurred on the purchase of $687 million aggregate principal amount of its 2016 Notes through a tender offer. The premiums paid and costs incurred on debt redemption were recorded in Other loss, net in the accompanying Consolidated Statement of Operations. See “Financial Condition and Liquidity – Outstanding Debt and Other Financing Arrangements” for further information.

Items Affecting Comparability Relating to Equity Method Investments

For the three and nine months ended September 30, 2015, the Company recognized a $3 million asset impairment recorded by an equity method investee for both periods and $2 million of income and $1 million of losses, respectively, from discontinued operations recorded by an equity method investee. In addition, for the three months ended September 30, 2015, the Company recognized an $18 million reversal of an accrual related to government investigations recorded by an equity method investee. For the three and nine months ended September 30, 2014, the Company recognized $4 million of expenses related to a government investigation of an equity method investee and $1 million and $9 million, respectively, of losses related to discontinued operations

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recorded by an equity method investee. In addition, for the nine months ended September 30, 2014, the Company recognized a $12 million loss on the extinguishment of debt recorded by an equity method investee. These amounts have been reflected in Other loss, net in the Consolidated Statement of Operations.

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.

For the three months ended September 30, 2015, Revenues at the Turner segment decreased driven by lower Content and other, Subscription and Advertising revenues. For the nine months ended September 30, 2015, Revenues at the Turner segment increased due to higher Content and other and Subscription revenues. Revenues at the Home Box Office segment increased for the three and nine months ended September 30, 2015 due to higher Subscription and Content and other revenues. For the three and nine months ended September 30, 2015, Revenues at the Warner Bros. segment increased driven by higher Television product and Videogames and other revenues, partially offset by lower Theatrical product revenues. The strengthening of the U.S. Dollar relative to foreign currencies to which the Company is exposed negatively impacted the Company’s Revenues by approximately $290 million and $790 million for the three and nine months ended September 30, 2015, respectively. Each of the revenue categories is discussed in greater detail by segment in “Business Segment Results.”

Costs of Revenues.   For the three and nine months ended September 30, 2015, Costs of revenues were $3.526 billion and $11.802 billion, respectively, as compared to $3.681 billion and $11.457 billion for the three and nine months ended September 30, 2014, respectively. The decrease in costs of revenues for the three months ended September 30, 2015 was primarily due to decreases at the Turner and Home Box Office segments, partially offset by an increase at the Warner Bros. segment. The increase in Costs of revenues for the nine months ended September 30, 2015 was due to higher Costs of revenues at the Warner Bros. and Home Box Office segments, partially offset by a decrease at the Turner segment. Included in Costs of revenues for the three and nine months ended September 30, 2014 was $343 million of programming impairments relating to programming that will no longer be aired subsequent to September 30, 2014, reflecting $482 million of programming impairments at the Turner segment, partially offset by $139 million of intercompany eliminations primarily related to intercompany profits on programming licensed by the Warner Bros. segment to the Turner segment. The segment variations are discussed in “Business Segment Results.”

Selling, General and Administrative Expenses.   For the three and nine months ended September 30, 2015, Selling, general and administrative expenses decreased 7% and 4%, respectively, to $1.143 billion and $3.580 billion, respectively, from $1.226 billion and $3.713 billion for the three and nine months ended September 30, 2014, respectively, primarily reflecting decreases at Corporate and the Turner segment, and for the three months ended September 30, 2015, the Warner Bros. segment. These decreases for the three and nine months ended September 30, 2015 were partially offset by an increase at the Home Box Office segment. For the nine months ended September 30, 2015, Selling, general and administrative expenses included a $22 million foreign currency charge related to a change in the foreign currency exchange rate used by the Company for remeasuring its Venezuelan net monetary assets from the SICAD 2 rate to the Simadi rate. The segment variations are discussed in “Business Segment Results.”

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Included in Costs of revenues and Selling, general and administrative expenses is depreciation expense of $120 million and $363 million for the three and nine months ended September 30, 2015, respectively, and $131 million and $399 million for the three and nine months ended September 30, 2014, respectively.

Amortization Expense.   Amortization expense was $47 million and $138 million for the three and nine months ended September 30, 2015, respectively, and $52 million and $152 million for the three and nine months ended September 30, 2014, respectively.

Restructuring and Severance Costs.   For the three and nine months ended September 30, 2015 and 2014, the Company incurred Restructuring and severance costs primarily related to employee terminations and other exit activities. Restructuring and severance costs are as follows (millions):

Operating Income.   Operating Income increased to $1.834 billion for the three months ended September 30, 2015 from $971 million for the three months ended September 30, 2014. Excluding the items noted under “Transactions and Other Items Affecting Comparability” totaling $8 million and $22 million of expense for the three months ended September 30, 2015 and 2014, respectively, Operating Income increased $849 million despite the unfavorable impact of foreign currency exchange rates of approximately $160 million, primarily reflecting increases at all of the segments and lower losses at Corporate. Operating Income for the three months ended September 30, 2014 included the $343 million of programming impairments described above.

Operating Income increased to $5.479 billion for the nine months ended September 30, 2015 from $4.586 billion for the nine months ended September 30, 2014. Excluding the items noted under “Transactions and Other Items Affecting Comparability” totaling $39 million of expense and $349 million of income for the nine months ended September 30, 2015 and 2014, respectively, Operating Income increased $1.281 billion despite the unfavorable impact of foreign currency exchange rates of approximately $370 million, reflecting increases at all of the segments and lower losses at Corporate. Operating Income for the nine months ended September 30, 2014 included the $343 million of programming impairments described above.

Interest Expense, Net.   For the three months ended September 30, 2015, Interest expense, net decreased to $294 million from $307 million for the three months ended September 30, 2014 reflecting higher interest income of $13 million as well as lower average interest rates, partially offset by higher average debt balances. The increase in interest income was mainly due to noncash interest income accretion related to the CME transactions completed in 2014.

For the nine months ended September 30, 2015, Interest expense, net increased to $874 million from $868 million for the nine months ended September 30, 2014 reflecting higher average debt balances, partially offset by higher interest income of $22 million as well as lower average interest rates. The increase in interest income was primarily related to noncash interest income accretion related to the CME transactions completed in 2014, partially offset by the recognition of interest income during the nine months ended September 30, 2014 on a note receivable that was collected in March 2014.

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Other Loss, Net.   Other loss, net detail is shown in the table below (millions):

Investment gains (losses), net, items affecting comparability relating to equity method investments, premiums paid and costs incurred on debt redemption and amounts related to the separation of TWC, the disposition of WMG and the Time Separation are discussed under “Transactions and Other Items Affecting Comparability.” The remaining change in Other loss, net for the three and nine months ended September 30, 2015 was primarily related to losses from equity method investees, which included the unfavorable impact of foreign exchange rates of approximately $15 million and $60 million for the three and nine months ended September 30, 2015, respectively.

Income Tax Benefit (Provision).   Income tax provision increased to $452 million and $1.371 billion for the three and nine months ended September 30, 2015, respectively, from an income tax benefit of $437 million and an income tax provision of $404 million for the three and nine months ended September 30, 2014, respectively. The Company’s effective tax rate was 30% and 32% for the three and nine months ended September 30, 2015 compared to (83)% and 11% for the three and nine months ended September 30, 2014, respectively. The increase in the effective tax rate for the three and nine months ended September 30, 2015 was primarily due to the recognition of a tax benefit attributable to the reversal of tax reserves in connection with a Federal tax settlement during the three months ended September 30, 2014.

Income from Continuing Operations.   Income from continuing operations was $1.034 billion and $966 million for the three months ended September 30, 2015 and 2014, respectively. Excluding the items noted under “Transactions and Other Items Affecting Comparability” totaling $6 million of income and $95 million of expense for the three months ended September 30, 2015 and 2014, respectively, Income from continuing operations decreased $33 million, primarily reflecting higher income taxes, partially offset by higher Operating Income. Basic and Diluted income from continuing operations per common share were $1.27 and $1.26, respectively, for the three months ended September 30, 2015 and were $1.13 and $1.11, respectively, for the three months ended September 30, 2014.

Income from continuing operations was $2.938 billion and $3.174 billion for the nine months ended September 30, 2015 and 2014, respectively. Excluding the items noted under “Transactions and Other Items Affecting Comparability” totaling $145 million of expense and $352 million of income for the nine months ended September 30, 2015 and 2014, respectively, Income from continuing operations increased $261 million, primarily reflecting higher Operating Income, partly offset by higher income taxes. Basic and Diluted income from continuing operations per common share were $3.57 and $3.52, respectively, for the nine months ended September 30, 2015 and were $3.63 and $3.56, respectively, for the nine months ended September 30, 2014.

Discontinued Operations, Net of Tax.   Discontinued operations, net of tax was income of $37 million for the nine months ended September 30, 2015, primarily related to the final resolution of a tax indemnification obligation associated with the disposition of WMG and income of $1 million and a loss of $65 million for the three and nine months ended September 30, 2014, respectively, primarily related to the Time Separation. For the nine months ended September 30, 2015, Basic and Diluted income from discontinued operations per common share were $0.05 and $0.04, respectively, as compared to a Basic and Diluted loss from discontinued operations per common share of $0.08 and $0.07, respectively, for the nine months ended September 30, 2014.

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Net Income Attributable to Time Warner Inc. Shareholders.   Net income attributable to Time Warner Inc. shareholders was $1.035 billion and $2.976 billion for the three and nine months ended September 30, 2015, respectively, and $967 million and $3.109 billion for the three and nine months ended September 30, 2014, respectively. Basic and Diluted net income per common share were $1.27 and $1.26, respectively, for the three months ended September 30, 2015 and were $1.13 and $1.11, respectively, for the three months ended September 30, 2014. Basic and Diluted net income per common share were $3.62 and $3.56, respectively, for the nine months ended September 30, 2015 and were $3.55 and $3.49, respectively, for the nine months ended September 30, 2014.

The changes in Subscription revenues for the three and nine months ended September 30, 2015 reflected lower international revenues and higher domestic revenues. International subscription revenues for the three and nine months ended September 30, 2015 declined $29 million and $55 million, respectively, reflecting the unfavorable impact of foreign exchange rates of approximately $50 million and $135 million, respectively, which was partially offset by higher contractual rates and subscriber growth largely in Latin America. Domestic subscription revenues for the three and nine months ended September 30, 2015 increased $12 million and $96 million, respectively, primarily due to higher contractual rates, partially offset by a decrease in subscribers.

The decrease in Advertising revenues for the three months ended September 30, 2015 was due to a $12 million decline in international revenues, reflecting the unfavorable impact of foreign exchange rates of approximately $30 million. Domestic advertising revenues for the three months ended September 30, 2015 were essentially flat as growth at Turner’s news businesses was offset by lower audience delivery at certain entertainment networks and the absence of Advertising revenues in 2015 associated with NASCAR television programming. The increase in Advertising revenues for the nine months ended September 30, 2015 reflected domestic growth of $49 million mainly driven by Turner’s news businesses and the 2015 National Collegiate Athletic Association Division I Men’s Basketball Championship tournament (the “NCAA Tournament”), partially offset by lower audience delivery at certain of its entertainment networks and the absence of Advertising revenues in 2015 associated with NASCAR television programming. The increase in Advertising revenues for the nine months ended September 30, 2015 was partially offset by lower international revenues of $32 million reflecting the unfavorable impact of foreign exchange rates of approximately $80 million.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

The changes in Content and other revenues for the three and nine months ended September 30, 2015 were primarily due to the timing of license fees from SVOD services.

The components of Costs of revenues for the Turner segment are as follows (millions):

For the three and nine months ended September 30, 2015, programming costs decreased primarily due to programming impairments of $482 million recognized in 2014 as a result of Turner’s strategic evaluation of its programming and decision to no longer air certain programming, the absence of programming costs in 2015 associated with NASCAR and the timing and mix of programming.

For the three months ended September 30, 2015, Selling, general and administrative expenses decreased primarily due to the lower compensation accruals in the current year period. The decrease in Selling, general and administrative expenses for the nine months ended September 30, 2015 was primarily due to lower marketing expenses of $60 million principally due to timing as well as operational efficiency initiatives, including the 2014 restructuring activities described below. The decrease in Selling, general and administrative expenses for the nine months ended September 30, 2015 was partially offset by the absence in the current period of the reversal in 2014 of a $20 million accrued contingency.

Refer to “Transactions and Other Items Affecting Comparability” for a discussion of Asset impairments, Gain (loss) on operating assets, Venezuelan foreign currency loss and external costs related to mergers, acquisitions and dispositions for the three and nine months ended September 30, 2015 and 2014, which affected the comparability of the Turner segment’s results.

The results for the three months ended September 30, 2014 included $199 million of Restructuring and severance costs primarily related to headcount reductions in connection with restructuring activities designed to position the Company for the current operating environment and reallocate resources to the Company’s growth initiatives.

The increase in Operating Income for the three and nine months ended September 30, 2015 was primarily due to lower Costs of revenues and lower Restructuring and severance costs and, for the nine months ended September 30, 2015, higher Revenues.

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Home Box Office.   Revenues and Operating Income of the Home Box Office segment for the three and nine months ended September 30, 2015 and 2014 are as follows (millions):

The increase in Subscription revenues for the three and nine months ended September 30, 2015 was driven by higher domestic subscription revenues of $53 million and $150 million, respectively, primarily due to higher contractual rates. International subscription revenues for the three and nine months ended September 30, 2015 decreased $9 million and $17 million, respectively, mainly due to the transfer to Turner of the operation and certain contracts of an HBO-branded basic tier television service in India and the unfavorable impact of foreign exchange rates of approximately $5 million and $10 million, respectively, partially offset by growth from international subscribers.

The increase in Content and other revenues for the three and nine months ended September 30, 2015 was primarily due to higher television licensing revenues of $30 million and $28 million, respectively, which included the impact of unfavorable foreign exchange rates of approximately $5 million and $10 million, respectively, and, for the nine months ended September 30, 2015, the remainder of the increase reflected higher pay-per-view revenues. The increase in Content and other revenues for the three and nine months ended September 30, 2015 was partially offset by lower home entertainment revenues of $13 million and $27 million, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

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The components of Costs of revenues for the Home Box Office segment are as follows (millions):

The decrease in programming costs for the three months ended September 30, 2015 was primarily due to lower costs for acquired films and syndicated series. The increase in programming costs for the nine months ended September 30, 2015 was primarily due to higher costs for original series, partially offset by lower costs for acquired films and syndicated series. The decrease in other direct operating costs for the three months ended September 30, 2015 was primarily related to lower participation expenses, partially offset by costs associated with HBO NOW. The increase in other direct operating costs for the nine months ended September 30, 2015 was mainly due to costs associated with HBO NOW.

For the three and nine months ended September 30, 2015, Selling, general and administrative expenses increased primarily due to higher marketing expenses related to the launch of HBO NOW.

Refer to “Transactions and Other Items Affecting Comparability” for a discussion of Asset impairments for the three and nine months ended September 30, 2015 and 2014, which affected the comparability of the Home Box Office segment’s results.

The results for the three months ended September 30, 2014 included $48 million of Restructuring and severance costs primarily related to headcount reductions in connection with restructuring activities designed to position the Company for the current operating environment and reallocate resources to the Company’s growth initiatives.

The increase in Operating Income for the three and nine months ended September 30, 2015 was primarily due to higher Revenues and lower Restructuring and severance costs, and for the three months ended September 30, 2015, lower Costs of Revenues. The increase in Operating Income for the three and nine months ended September 30, 2015 was partially offset by higher Selling, general and administrative expenses.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

Warner Bros.   Revenues and Operating Income of the Warner Bros. segment for the three and nine months ended September 30, 2015 and 2014 are as follows (millions):

Revenues primarily relate to theatrical product (which is content made available for initial exhibition in theaters) and television product (which is content made available for initial airing on television). The increase in Revenues for the three and nine months ended September 30, 2015 included the net unfavorable impact of foreign exchange rates of approximately $190 million and $530 million, respectively. The components of Revenues for the three and nine months ended September 30, 2015 and 2014 are as follows (millions):

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

Theatrical product revenues from film rentals decreased for the three months ended September 30, 2015, reflecting lower carryover revenues of $59 million from prior period releases, partially offset by higher revenues of $47 million from theatrical films released during the third quarter of 2015 compared to the third quarter of 2014. Theatrical product revenues from film rentals increased for the nine months ended September 30, 2015, reflecting higher carryover revenues of $180 million from prior period releases, partially offset by lower revenues of $142 million from theatrical films released during the first nine months of 2015 compared to the first nine months of 2014. The Company released seven and five theatrical films in the third quarters of 2015 and 2014, respectively, and eighteen and fourteen theatrical films in the first nine months of 2015 and 2014, respectively.

For the three and nine months ended September 30, 2015, theatrical product revenues from home video and electronic delivery decreased primarily due to lower revenues from prior period releases, including catalog titles. There were four and three home video and electronic delivery releases in the third quarters of 2015 and 2014, respectively, and fifteen and eleven home video and electronic delivery releases in the first nine months of 2015 and 2014, respectively.

The decrease in theatrical product revenues from television licensing for the three and nine months ended September 30, 2015 was primarily due to the timing and mix of availabilities.

The increase in theatrical product revenues from consumer products and other for the three and nine months ended September 30, 2015 was primarily due to higher licensing revenues.

Television product revenues from television licensing for the three and nine months ended September 30, 2015 increased primarily due to higher syndication revenues (including higher license fees from SVOD services), partially offset by lower initial telecast revenues.

The increase in television product revenues from consumer products and other for the three and nine months ended September 30, 2015 was primarily due to an increase in the production of television series on behalf of third parties and, for the three months ended September 30, 2015, higher intellectual property licensing.

Videogames and other revenues increased for the three and nine months ended September 30, 2015 primarily due to higher revenues from videogames released during the third quarter and first nine months of 2015 as compared to the similar periods of 2014, and for the three months ended September 30, 2015, higher revenues from prior period releases. The Company released two and three videogames during the third quarters of 2015 and 2014, respectively, and twelve and six videogames during the first nine months of 2015 and 2014, respectively. The increase in videogames and other revenues for the three and nine months ended September 30, 2015 was partially offset by $75 million of revenues recognized during the three and nine months ended September 30, 2014 related to a patent license and settlement agreement.

The components of Costs of revenues for the Warner Bros. segment are as follows (millions):

Included in film and television production costs are production costs related to videogames, as well as theatrical film and videogame valuation adjustments resulting primarily from revisions to estimates of ultimate revenue and/or costs for certain theatrical films and videogames. Theatrical film valuation adjustments were $0 and $74 million for the three and nine months ended September 30, 2015, respectively, and $14 million and $50 million for the three and nine months ended September 30, 2014, respectively. Videogame valuation adjustments for the three and nine months ended September 30, 2015 were $0 and $17 million,

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OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

respectively, and for the three and nine months ended September 30, 2014 were $27 million and $45 million, respectively. The increases in film and television production costs and print and advertising costs for the three and nine months ended September 30, 2015 were primarily due to the mix of product released. Other costs, including merchandise and related costs increased for the three and nine months ended September 30, 2015 primarily due to higher distribution costs associated with videogame sales.

Selling, general and administrative expenses decreased for the three months ended September 30, 2015 primarily due to the favorable impact of foreign exchange rates, partially offset by higher bad debt expense. Selling, general and administrative expenses were essentially flat for the nine months ended September 30, 2015 primarily due to the absence in the current period of a reversal in the second quarter of 2014 of certain bad debt reserves, offset by the favorable impact of foreign exchange rates.

Refer to “Transactions and Other Items Affecting Comparability” for a discussion of Asset impairments, Venezuelan foreign currency and external costs related to mergers, acquisitions and dispositions for the three and nine months ended September 30, 2015 and 2014, which affected the comparability of the Warner Bros. segment’s results.

The results for the three months ended September 30, 2014 included $45 million of Restructuring and severance costs primarily related to headcount reductions in connection with restructuring activities designed to position the Company for the current operating environment and reallocate resources to the Company’s growth initiatives.

The increase in Operating Income for the three and nine months ended September 30, 2015 was primarily due to higher Revenues and lower Restructuring and severance costs, partially offset by higher Costs of revenues.

Corporate.   Corporate’s Operating Income (Loss) for the three and nine months ended September 30, 2015 and 2014 was as follows (millions):

Refer to “Transactions and Other Items Affecting Comparability” for a discussion of Asset impairments, Gain on operating assets and external costs related to mergers, acquisitions and dispositions for the three and nine months ended September 30, 2015 and 2014, which affected the comparability of Corporate’s results.

The results for the three months ended September 30, 2014 included $11 million of Restructuring and severance costs primarily related to headcount reductions in connection with restructuring activities designed to position the Company for the current operating environment and reallocate resources to the Company’s growth initiatives.

Operating loss for the three months ended September 30, 2015 decreased primarily due to lower equity-based compensation expense of $32 million, which mainly reflected lower expenses for performance stock units due to a decrease in the Company’s stock price as well as lower costs related to enterprise efficiency initiatives. Excluding the $441 million Gain on operating assets during the nine months ended September 30, 2014, Operating loss for the nine months ended September 30, 2015 decreased primarily due to lower external costs related to mergers, acquisitions and dispositions of $43 million, lower equity-based compensation expense of $28 million, which mainly reflected lower expenses for performance stock units due to a decrease in the Company’s stock price, as well as lower costs related to enterprise efficiency initiatives.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

The enterprise efficiency initiatives involve the centralization of certain administrative functions to generate cost savings or other benefits for the Company. Selling, general and administrative expenses included costs related to enterprise efficiency initiatives of $3 million and $12 million for the three and nine months ended September 30, 2015, respectively, and $10 million and $34 million for the three and nine months ended September 30, 2014, respectively.

FINANCIAL CONDITION AND LIQUIDITY

Management believes that cash generated by or available to the Company should be sufficient to fund its capital and liquidity needs for the foreseeable future, including scheduled debt repayments, quarterly dividend payments and the purchase of common stock under the Company’s stock repurchase program. Time Warner’s sources of cash include Cash provided by operations, Cash and equivalents on hand, available borrowing capacity under its committed credit facilities and commercial paper program and access to capital markets. Time Warner’s unused committed capacity at September 30, 2015 was $6.796 billion, which included $1.774 billion of Cash and equivalents.

Current Financial Condition

At September 30, 2015, Time Warner had net debt of $21.153 billion ($22.927 billion of debt less $1.774 billion of Cash and equivalents) and $23.648 billion of Shareholders’ equity, compared to net debt of $19.763 billion ($22.381 billion of debt less $2.618 billion of Cash and equivalents) and $24.476 billion of Shareholders’ equity at December 31, 2014.

The following table shows the significant items contributing to the increase in net debt from December 31, 2014 to September 30, 2015 (millions):

On June 13, 2014, Time Warner’s Board of Directors authorized up to $5.0 billion of share repurchases in addition to the $5.0 billion it had previously authorized for share repurchases beginning January 1, 2014. Purchases under the stock repurchase program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including price and business and market conditions. From January 1, 2015 through October 30, 2015, the Company repurchased 41 million shares of common stock for $3.284 billion pursuant to trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

During the first quarter of 2015, the Company finalized agreements relating to the construction and development of office and studio space in the Hudson Yards development on the west side of Manhattan in order to move its Corporate headquarters and New York City-based employees to the new space. Based on current construction cost estimates and space projections, the Company expects to invest an additional $1.9 billion in the Hudson Yards development project through 2019.

Cash Flows

Cash and equivalents decreased by $844 million, including $4 million of Cash used by discontinued operations, for the nine months ended September 30, 2015. Cash and equivalents increased by $1.394 billion, including $184 million of Cash used by discontinued operations, for the nine months ended September 30, 2014. Components of these changes are discussed below in more detail.

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Cash provided by operations from continuing operations for the nine months ended September 30, 2015 increased primarily due to higher Operating Income and lower net income taxes paid, partially offset by higher cash used by working capital. Cash used by working capital increased primarily due to higher receivables due to the timing of collections and revenue growth, higher payments related to restructuring initiatives undertaken in 2014 and higher content investments.

The change in Cash provided (used) by investing activities from continuing operations for the nine months ended September 30, 2015 was primarily due to proceeds received in 2014 in connection with the Time Separation and from the sale of space in Time Warner Center, partially offset by a decrease in investment and acquisition spending. Included in Investments and acquisitions, net of cash acquired for the nine months ended September 30, 2015 and 2014 are payments of $72 million and $99 million, respectively, related to the Hudson Yards development project.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

Cash used by financing activities from continuing operations for the nine months ended September 30, 2015 increased primarily due to an increase in Debt repayments, a decrease in Proceeds from the exercise of stock options and an increase in cash used for Other financing activities, partially offset by a decrease in Repurchases of common stock and an increase in Borrowings. The increase in cash used for Other financing activities was primarily due to premiums paid and costs incurred in connection with the purchase of $687 million aggregate principal amount of the 2016 Notes through a tender offer and the redemption of $313 million aggregate principal amount of the 2016 Notes that remained outstanding following the tender offer. During the nine months ended September 30, 2015, the Company issued approximately 5 million shares of common stock and received $148 million in connection with the exercise of stock options. At September 30, 2015, all of the approximately 21 million exercisable stock options outstanding on such date had exercise prices below the closing price of the Company’s common stock on the New York Stock Exchange.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

Outstanding Debt and Other Financing Arrangements

Outstanding Debt and Committed Financial Capacity

At September 30, 2015, Time Warner had total committed capacity, defined as maximum available borrowings under various existing debt arrangements and cash and short-term investments, of $29.752 billion. Of this committed capacity, $6.796 billion was unused and $22.927 billion was outstanding as debt. At September 30, 2015, total committed capacity, outstanding letters of credit, outstanding debt and total unused committed capacity were as follows (millions):

June Debt Offering

On June 4, 2015, Time Warner issued $2.1 billion aggregate principal amount of debt securities under a shelf registration statement, consisting of $1.5 billion aggregate principal amount of 3.60% Notes due 2025 and $600 million aggregate principal amount of 4.85% Debentures due 2045 (the “June 2015 Debt Offering”). The securities issued in the June 2015 Debt Offering are guaranteed, on an unsecured basis, by Historic TW Inc. (“Historic TW”). In addition, Turner and Home Box Office guarantee, on an unsecured basis, Historic TW’s guarantee of the securities. The net proceeds to the Company from the June 2015 Debt Offering were $2.083 billion, after deducting underwriting discounts and offering expenses. The Company used a portion of the net proceeds from the June 2015 Debt Offering to retire at maturity the $1.0 billion aggregate principal amount outstanding of its 3.15% Notes due July 15, 2015. The remainder of the net proceeds will be used for general corporate purposes, including share repurchases.

Debt Tender Offer and Redemption

In June 2015, Time Warner purchased $687 million aggregate principal amount of the $1.0 billion aggregate principal amount outstanding of the 2016 Notes through a tender offer. In August 2015, the Company redeemed the $313 million aggregate principal amount of the 2016 Notes that remained outstanding following the tender offer. The premiums paid and costs incurred in connection with this purchase and redemption were $20 million and $71 million for the three and nine months ended September 30, 2015, respectively, and were recorded in Other loss, net in the accompanying Consolidated Statement of Operations.

July Debt Offering

On July 28, 2015, Time Warner issued €700 million aggregate principal amount of 1.95% Notes due 2023 under a shelf registration statement (the “July 2015 Debt Offering”). The notes issued in the July 2015 Debt Offering are guaranteed, on an unsecured basis, by Historic TW. In addition, Turner and Home Box Office guarantee, on an unsecured basis, Historic TW’s guarantee of the notes. The net proceeds from the issuance of the notes will be used for general corporate purposes. In addition, the Company has designated these notes as a hedge of the variability in the Company’s Euro-denominated net investments. See Note 6, “Derivative Instruments and Hedging Activities,” to the accompanying consolidated financial statements for more information.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

Programming Licensing Backlog

Programming licensing backlog represents the amount of future revenues not yet recorded from cash contracts for the worldwide licensing of theatrical and television product for premium cable, basic cable, network and syndicated television and SVOD exhibition. Backlog was $6.7 billion and $6.5 billion at September 30, 2015 and December 31, 2014, respectively. Included in the backlog amounts is licensing of theatrical and television product from the Warner Bros. segment to the Turner segment in the amount of $514 million and $700 million at September 30, 2015 and December 31, 2014, respectively. Also included in the backlog amounts is licensing of theatrical product from the Warner Bros. segment to the Home Box Office segment in the amount of $782 million and $788 million at September 30, 2015 and December 31, 2014, respectively.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often include words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance. Examples of forward-looking statements in this report include, but are not limited to, statements regarding (i) the Company’s expected investment in space in the Hudson Yards development and (ii) the possible incurrence of a charge in connection with the Company’s evaluation of its future use of programming rights.

The Company’s forward-looking statements are based on management’s current expectations and assumptions regarding the Company’s business and performance, the economy and other future conditions and forecasts of future events, circumstances and results. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. The Company’s actual results may vary materially from those expressed or implied in its forward-looking statements. Important factors that could cause the Company’s actual results to differ materially from those in its forward-looking statements include government regulation, economic, strategic, political and social conditions and the following factors:

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)

Any forward-looking statement made by the Company in this report speaks only as of the date on which it is made. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, subsequent events or otherwise.

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