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Turner Nets Lead Way at Time Warner

Time Warner Inc.'s cable networks continued their
strong performance in the first quarter, leading to an overall 2.5 percent cash-flow rise
that worked out to a 7 percent gain after accounting for various cable-system deals.

Time Warner and Time Warner Entertainment, the partnership
with U S West Inc., reported $852 million in cash flow in the quarter and $6 billion in
revenue, up from $831 million and $5.6 billion, respectively, in the same period a year

Time Warner had a net loss of $62 million in the quarter,
or 25 cents per share of stock, versus net income of $35 million a year ago, when the
company had a one-time gain from the sale of its stake in E! Entertainment Television.

"I think it was strong across the board," Media
Group Research analyst Mark Riely said. "Clearly, they're delivering."

The Turner Broadcasting System Inc. cable networks led the
way, with a 34 percent rise in cash flow, to $153 million, from $114 million in the same
period a year ago. Part of that came from subscriber revenue at TBS Superstation, which
was converted to a basic-cable network from a superstation in January, and much of it came
from "significant" ad-revenue gains at Turner Network Television, Cable News
Network and Cartoon Network.

Home Box Office reported a 20 percent cash-flow increase,
to $109 million from $91 million.

Time Warner's cable systems also performed well,
delivering a combined $381 million in cash flow, compared with $364 million a year ago, or
a 17 percent increase after adjusting for system buys and sales.

Sanford Bernstein & Co. analyst Tom Wolzien said Time
Warner chairman Gerald Levin, who met with analysts and some reporters last Wednesday,
emphasized his plan to continue to deliver cash-flow-percentage gains in the mid- to
high-teens over the next five years. Levin predicted that the company's biggest soft
spot, Time Warner Music, should show an overall gain this year. In the first quarter, the
music division's cash flow fell to $93 million from $118 million a year ago.

Time Warner has also pared down its debt, and its
debt-to-cash flow ratio was down to 3.2-to-1 Dec. 31, from a high of 6-to-1 in 1992. Last
week, credit-rating agency Fitch IBCA said it upgraded Time Warner's senior unsecured
debt to "BBB" from "BBB-minus." The agency cited "the combination
of consistently strong growth in cash flow; asset sales; and declining debt and leverage
levels that have resulted in a substantially stronger credit profile and enhanced
financial flexibility."

Levin talked about maintaining a solid BBB rating, which
would allow the company to maintain current leverage ratios and to use some available cash
that might otherwise have paid down debt to buy back more stock, Riely said.

As for other operating units, the Time Inc. publishing
division posted $85 million in cash flow, up 12 percent, and the WB Network lost $38
million, versus a $20 million loss a year ago. WB's revenue was up, but the loss rose
mostly because of a one-time gain last year, when The Tribune Co. exercised an option to
raise its stake to 22.25 percent.

The Warner Bros. studio's cash flow was up 13 percent,
to $119 million, boosted by strong gains from its television shows. The TBS film division
lost $15 million, versus posting $6 million in cash flow the year before, as weak films by
Castle Rock offset New Line Studio hit The Wedding Singer. Lost in Space,
another New Line film, has started off well.