Warner Media (TWX) DEFA14A Additional proxy soliciting materials

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant   x Filed by a Party other than the Registrant   ¨

Check the appropriate box:

¨ Preliminary Proxy Statement

¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

¨ Definitive Proxy Statement

x Definitive Additional Materials

¨ Soliciting Material Pursuant to § 240.14a-12

Time Warner Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x No fee required.

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

¨ Fee paid previously with preliminary materials.

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

Explanatory Note: As part of Time Warner Inc.’s regular, ongoing engagement with shareholders, Time Warner is planning to have a number of meetings with shareholders. The attached Proxy Statement Summary is intended to facilitate discussions at those meetings and presents information regarding Time Warner’s businesses, performance, executive compensation programs, and governance practices taken from Time Warner’s 2015 Proxy Statement.

2015 Proxy Statement Summary

May 2015

Overview 

Clear Strategy

Strong Governance

Practices

Use leading scale and brands to create the best content

Use technology to enhance consumer experience, drive usage and improve Company economics

Expand internationally in faster-growing territories

Focus on operating and capital efficiency

Compensation Program

Closely Aligned With

Performance

Substantial emphasis on variable performance-based compensation (93% of target compensation for

CEO)

Balanced mix of short-

and long-term performance measures that drive shareholder value

Challenging financial and strategic goals set at the beginning of each performance period

89.5% of votes cast at the 2014 Annual Meeting of Shareholders were in favor of named executive officer

compensation

Focused Business

Independent

Board

with

director

experience

in:

media,

technology,

consumer-facing

businesses;

creating

or managing large enterprises; and making complex strategic, financial and operational decisions

Policy on Board refreshment promotes good mix of Board tenure

Robust annual Board self-evaluation and ongoing director education

Long-standing

practice

of

ongoing

dialogue

with

shareholders;

engaged

with

shareholders

representing

almost 55% of shares in 2014

History of Strong

Financial Performance

Streamlined company and operations to focus on high quality branded video content

Completed

transition

in

senior

leadership,

with

new

CEOs

at

each

of

the

Company’s

three

operating

divisions and a new CFO

Adjusted

EPS

increased

18%,

the

6th

consecutive

year

of

at

least

high

teens

growth

Free Cash Flow of $3.5 billion in 2014, another year of strong growth

Total

Shareholder

Return

(“TSR”)

of

30%

(1-YR),162%

(3-YR)

and

244%

(5-YR)

at

or

near

the

top

of

Company’s entertainment and media peer group in each period

2

Our Operating Strategy: 2014 Highlights & Initiatives

Use technology to

enhance consumer

experience, drive

usage and improve

Company economics

Use leading

scale and

brands to create the

best content

Expand internationally

in faster-growing

territories

Turner Broadcasting System, Inc.

Expanded HBO GO to additional platforms, including Amazon Fire, PS3 and Xbox One

Launched CNNGo, connecting subscribers to CNN’s news and original programming live and on demand via a

variety of digital platforms

Bleacher Report ranked as the #2 digital sports destination in 2014, with approximately 40 million average

monthly domestic multi-platform unique users for the year

Announced HBO NOW, an over-the-top streaming service (launched in U.S. April 2015)

Acquired non-U.S. operations of Eyeworks Group; Warner Bros. now has local production companies in 16

international territories

Announced global kids initiative between Turner and Warner Bros.

3

Home Box Office, Inc.

Warner Bros. Entertainment Inc.

TBS, TNT & Adult Swim ranked among ad-supported cable’s top-10 networks in primetime among adults 18-49

Turner renewed long-term partnership with the NBA through the 2024-2025 season

Announced plans to double investment in original programming on TNT and TBS over next several years

HBO and Cinemax added a total of 2.8M domestic subscribers, the most in over 30 years

More Primetime Emmy awards than any other network for the 13th year in a row

Warner Bros. generated over $4 billion at the global box office for the 6th year in a row; announced expanded

slate of movies for 2016-2020

#1 producer of primetime series with over 60 series airing for the 2014-2015 television season

History of Strong Financial Performance*

Free Cash Flow ($B)

Return on Invested Capital

Adjusted Operating Income ($B)

Adjusted EPS

1-YR Growth:  18.2%

3-YR CAGR:   18.2%

4

*

On

June

6,

2014,

the

Company

completed

the

legal

and

structural

separation

of

Time

Inc.

from

the

Company

(the

“Time

Separation”).

Accordingly,

the

Company

has

recast

its

financial

information

to

present

the financial condition and results of operations of its former Time Inc. segment as discontinued operations for all periods presented.

See

Appendix

A

for

definitions

of

non-GAAP

financial

measures

and

reconciliations

to

the

most

directly

comparable

GAAP

financial

measures.

$4.3

$4.9

$5.3

$5.7

$6.2

$5.8

$0.9

2009

2010

2011

2012

2013

2014

Adjusted Operating Income

Q314/Q414 Programming charges at Turner and restructuring & severance charges

$1.69

$2.14

$2.51

$2.94

$3.51

$4.15

2009

2010

2011

2012

2013

2014

$2.6

$2.2

$2.2

$2.5

$3.1

$3.5

2009

2010

2011

2012

2013

2014

20%

21%

22%

2012

2013

2014

Commitment to Shareholder Value

5

Committed to providing direct returns to shareholders through repurchases and dividends ($B)

$26.3B

cumulative

returns

2009

–

2014

$2.1

$3.0

$5.6

$4.3

$4.8

1-YR

3-YR

5-YR

30%

14%

163%

75%

244%

105%

$6.6

$1.2

$2.0

$4.6

$3.3

$3.7

$5.5

$0.9

$1.0

$1.0

$1.0

$1.1

$1.1

2009

2010

2011

2012

2013

2014

Delivered 1-year, 3-year and 5-year TSR more than double the S&P 500’s TSR over the same time periods

Share Repurchases

Dividends

S&P 500

Time Warner

Compensation Mix that Links Pay to Performance

Chairman / CEO Pay*

Pay for Other NEOs*

93% Variable

80% Variable

6

* The percentages in the charts reflect the base salary, target annual bonus and target annual value of long-term incentive awards. The charts do not include health and welfare benefits, employer

matching contributions in retirement programs or personal benefits, which constitute less than 3% of each NEO’s 2014 direct target compensation.

Base

Salary

7%

Annual

Cash

Bonus

36%

PSUs &

Stock

Options

57%

Base

Salary

20%

Annual

Cash

Bonus

40%

PSUs &

Stock

Options

26%

RSUs

14%

Performance Metrics Align With Our Business Model

Incentive

Component

Time

Horizon

Performance

Measure

Performed

Delivered

2014 Outcome Linked to

Performance

Annual Cash

Bonus

1-year

Adj. Divisional Pre-Tax Income

(“ADPTI”)

70%

10% ADPTI growth in 2014

143% financial

performance rating

(maximum –

150%)

Free Cash Flow

$3.5B of Free Cash Flow

Individual progress on key long-

term strategic objectives

30%

Individual performance

achievements described on

pages 60-61 of the 2015

proxy statement

Individual performance

ratings ranged from

140% to 150%

(maximum –

150%)

PSUs with a

Performance

Period Ending in

2014

3-year

Cumulative Adj. EPS

Double-digit annual growth

193% Adj. EPS rating

TSR modifier at 120%

Payout capped at 200%

TSR relative to the S&P 500

171% TSR   at 91   percentile

Stock Options

4-year

vesting

period

TWX common stock price

2014 increase –

28%

3-year increase –

147%

5-year increase –

206%

Long-term stock price

performance determines

value realized

7

1

For

PSUs,

Company

and

S&P

500

TSR

is

calculated

using

the

average

closing

price

for

the

30

trading

days

ending

on

the

first

and

last

days

of

the

performance

period.

1

st

More Challenging Financial Goals in 2014

8

Financial goals set for 2014 bonuses were even more challenging than the 2013 goals

Higher growth required to achieve the same rating across entire range of outcomes 

1

2013 Goals adjusted to reflect Time Separation; see the 2015 proxy statement for additional information.

Adjusted Divisional Pre-Tax Income Growth

Required for 150% Growth Rating

Free Cash Flow ($B)

Required for 150% Growth Rating

9%

11%

2013

2014

$2.8

$3.4

2013

2014

1

1

Compensation Decisions in 2014 and Early 2015

Compensation Committee reviewed enterprise-wide incentive programs

Conducted to ensure incentive programs continue to meet the following key objectives:

o

Support long-term financial and strategic performance expectations

o

Appropriately reflect competitive peer practices

Compensation Program Review

Employment Agreement Renewals

Renewed

employment

agreements

with

all

NEOs

–

other

than

the

CEO

–

in

2014

and

early

2015

o

Secured benefit of executives’

continued service

o

Recognized their strong ongoing performance

o

Majority of compensation increase provided via long-term (equity) compensation to enhance shareholder

alignment

o

Continue to reflect best practices (e.g., no gross-ups)

9

o

Identified opportunities to increase alignment with shareholder interests and more effectively support

Company’s long-term goals via greater emphasis on equity compensation

Concluded

programs

are

generally

well-structured

and

aligned

with

peer

practices

Best Practices in Compensation Governance

Pay-for-Performance

Multiple Performance Metrics and Time

Horizons

Share Ownership and Retention

Requirements

Regular Engagement with Shareholders

Limited Personal Benefits

Policy Limiting Equity Dilution

Annual Compensation-Related Risk

Review

Clawback Policy

Independent Compensation Consultant

10

What We Do

What We Don’t Do

No Targeting Specific Percentiles

No Guaranteed Bonuses

No Excise Tax Gross-Ups

No Change in Control Agreements

No Tax Gross-Ups for Personal Benefits

No Repricing or Buyouts of Stock 

Options

No Hedging or Pledging by Executives

No Excessive Overhang

Limits on Pension Credits and 

Calculations

Strong Governance Practices

Board

Independence:

All

directors,

other

than

the

CEO,

are

independent

and

each

Board

committee

consists

solely

of

independent directors

Director

Qualifications:

Diverse

skills

and

broad,

relevant

experience;

annual

self-evaluation

process

and

robust

ongoing director education program

Board

Refreshment

Policy:

The

Board

believes

it

is

well-served

by

having

non-employee

directors

with

a

mix

of

tenures and expects that average tenure will generally not exceed 10 years; non-employee directors will not be eligible

for nomination for a term during which they will reach age 75

Board

Leadership

Policy

with

Lead

Independent

Director

Currently

in

Place:

Role

involves

significant

authority

and responsibilities, including authority over meeting agendas; Board Leadership Policy requires consideration of Board

leadership

at

least

annually,

with

disclosure

to

shareholders

on

factors

reviewed

(see

2015

report

posted

at

www.timewarner.com/leadership)

Strong Shareholder Rights in Place:

All directors elected annually; majority vote standard in uncontested director

elections; no supermajority vote provisions in charter or by-laws; right of shareholders holding 15% of shares to request

a special meeting

Long

History

of

Shareholder

Engagement:

Engaged

with

shareholders

representing

almost

55%

of

common

stock

in

2014

11

12

Highly Experienced and Diverse Board of Directors

Key Skills and Qualifications

Application of Key Skills and Qualifications

Leadership and Senior Management

Support development, implementation and oversight of execution of

business plans and strategies; ability to identify and develop leadership

qualities in others

Media, Communications or Technology

Business

Understanding of Company’s business, strategy and long-range plans;

insights regarding new technologies and business models

Finance, Investments, Banking or M&A

Understanding and evaluation of Company’s capital structure, financing /

investment activities and financial statements; provide relevant

perspectives and support for strategic decisions in an increasingly

complex business environment

Consumer-Focused Business

Insights regarding the marketing and distribution of content to consumers

worldwide

Legal, Regulatory and Government

Relations

Insight into working constructively with governments around the world and

addressing public policy matters

International Operations/Global Economic

Policy

Provide useful business and cultural perspectives regarding international

operations

The Board is comprised of directors who possess deep experience in all key areas

that are important to our business

13

First

major

U.S.-based

media

and

entertainment

company

to

publish

comprehensive

CSR

report

–

most

recent

report

available online (www.timewarner.com/citizenship)

Content creation and distribution guided by core values: journalistic integrity, freedom of expression, diversity of

viewpoints and responsible content

o

One of the first companies to adopt a policy regarding tobacco depictions in films

o

From

the

adoption

of

our

policy

in

2005

through

2014,

there

were

no

depictions

in

our

G-rated

films

and

a

95%

reduction of such depictions in our PG and PG-13-rated films

Commitment

to

conduct

business

in

an

environmentally

responsible

manner

while

reducing

environmental

footprint,

focusing

on

four

key

areas:

energy

and

greenhouse

gas

reduction;

green

production

of

feature

film

and

television;

waste reduction and recycling; green buildings

o

Reduced greenhouse gas emissions over the last several years

o

Report emissions and reductions annually

Existing practices and policies already address tobacco depictions in films and the reduction of greenhouse gas

emissions

Commitment to Social Responsibility

Time Warner has a clear commitment and robust disclosure on environmental and social matters

and

the

Board

recommends

a

vote

AGAINST

proposals

#5

and

#6

14

Written

Consent

is

Not

in

Shareholders’

Best

Interest

No Procedural Protections

o

The proposal does not require any information to be provided to shareholders prior to the consent becoming

effective, such as a description of the proposed action, the reasons for the proposed action and any potential

conflicts of interest of the shareholder(s) seeking the action

Meetings Better Protect Rights of All Shareholders

o

Shareholder meetings are a better method to present important matters for consideration by shareholders

Shareholders Have Rights and Protections that Reduce the Need for Written Consent Rights

o

Shareholders elect directors annually by majority vote in uncontested director elections, and any incumbent

director who does not receive a majority of the votes cast for his or her election is required to offer to resign from

the Board

o

Holders of 15% of the outstanding common stock may request a special meeting of shareholders

o

Shareholders may submit proposals for presentation at an annual meeting (including nominations of director

candidates)

o

Shareholders may communicate directly with any director (including the Lead Independent Director), any Board

committee or the full Board 

o

The

Board

consists

of

a

substantial

majority

of

independent

directors

–

all

directors

other

than

the

Company’s

CEO

The

Board

recommends

a

vote

AGAINST

proposal

#4

Appendix A: Non-GAAP Financial Measures

A-15

Non-GAAP

Financial

Measures

-

Definitions

A-16

“Adjusted Operating Income (Loss)”

is defined as Operating Income (Loss) excluding the impact of noncash impairments of goodwill, intangible

and fixed assets; gains and losses on operating assets (other than deferred gains on sale-leasebacks); gains and losses recognized in

connection with pension and other postretirement benefit plan curtailments or settlements; external costs related to mergers, acquisitions or

dispositions, as well as contingent consideration related to such transactions, to the extent such costs are expensed; amounts related to

securities litigation and government investigations; and the foreign currency loss during 2014, related to the translation of net monetary assets

denominated in Venezuelan currency resulting from the Company’s change to begin using the SICAD 2 exchange rate.

“Adjusted

Divisional

Pre-Tax

Income

is

defined

as

Adjusted

Operating

Income

plus

Income

(loss)

from

equity

method

investments.

“Adjusted EPS”

is defined as Diluted Income per Common Share from Continuing Operations attributable to Time Warner Inc. common

shareholders with the following items excluded from Income from Continuing Operations attributable to Time Warner Inc. common shareholders:

noncash

impairments

of

goodwill,

intangible

and

fixed

assets

and

investments;

gains

and

losses

on

operating

assets

(other

than

deferred

gains

on sale-leasebacks), liabilities and investments; gains and losses recognized in connection with pension and other postretirement benefit plan

curtailments

or

settlements;

external

costs

related

to

mergers,

acquisitions,

investments

or

dispositions,

as

well

as

contingent

consideration

related to such transactions, to the extent such costs are expensed; amounts related to securities litigation and government investigations; the

foreign

currency

loss

during

2014,

related

to

the

translation

of

net

monetary

assets

denominated

in

Venezuelan

currency

resulting

from

the

Company’s

change

to

begin

using

the

SICAD

2

exchange

rate;

and

amounts

attributable

to

businesses

classified

as

discontinued

operations;

as

well as the impact of taxes and noncontrolling interests on the above items and the Company’s share of the above items with respect to equity

method investments.

For

periods

ending

on

or

after

July

1,

2012,

“Free

Cash

Flow

is

defined

as

Cash

Provided

by

Operations

from

Continuing

Operations

plus

payments related to securities litigation and government investigations (net of any insurance recoveries), external costs related to mergers,

acquisitions, investments or dispositions, to the extent such costs are expensed, contingent consideration payments made in connection with

acquisitions, and excess tax benefits from equity instruments, less capital expenditures, principal payments on capital leases and partnership

distributions,

if

any.

For

periods

ending

prior

to

that

date,

“Free

Cash

Flow”

is

defined

as

Cash

Provided

by

Operations

from

Continuing

Operations plus payments related to securities litigation and government investigations (net of any insurance recoveries), external costs related to

mergers, acquisitions, investments or dispositions, to the extent such costs are expensed, and excess tax benefits from equity instruments, less

capital expenditures, principal payments on capital leases and partnership distributions, if any. A change to the definition of Free Cash Flow for

periods prior to July 1, 2012 to adjust for contingent consideration payments made in connection with acquisitions would have had no impact on

the reported Free Cash Flow for such periods.

On June 6, 2014, the Company completed the legal and structural separation of Time Inc. from the Company.  Accordingly, the 2009, 2010, 2011,

2012 and 2013 financial information presented in this Appendix has been recast to present the financial position and results of operations of the

Company’s former Time Inc. segment as discontinued operations.

”

”

Non-GAAP

Financial

Measures

-

Reconciliations

A-17

Reconciliation of Adjusted Operating Income to Operating Income

(In millions; Unaudited)

Reconciliation of Adjusted EPS to Diluted Income Per Common Share from Continuing Operations Attributable to Time Warner Inc.

Common Shareholders 

(Unaudited)

Year Ended December 31,

2014

2013

2012

2011

2010

2009

(recast)

(recast)

(recast)

(recast)

(recast)

Adjusted Operating Income

$

5,833

$

6,195

$

5,663

$

5,284

$

4,874

$

4,339

Asset impairments

(69)

(61)

(180)

(27)

(9)

(52)

Gain (loss) on operating assets, net

464

129

45

7

70

(33)

Venezuelan foreign currency loss

(1)

(173)

—

—

—

—

—

Other

(2)

(80)

5

(30)

(22)

(22)

(30)

Operating Income

$

5,975

$

6,268

$

5,498

$

5,242

$

4,913

$

4,224

Year Ended December 31,

2014

2013

2012

2011

2010

2009

(recast)

(recast)

(recast)

(recast)

(recast)

Diluted income per common share from continuing operations attributable

to Time Warner Inc. Common Shareholders

$

4.41

$

3.56

$

2.73

$

2.37

$

1.99

$

1.63

Less Impact of items affecting comparability on diluted income per

common share from continuing operations attributable to Time Warner

Inc. Common Shareholders

0.26

0.05

(0.21)

(0.14)

(0.15)

(0.06)

Adjusted EPS

$

4.15

$

3.51

$

2.94

$

2.51

$

2.14

$

1.69

(1)

Venezuelan foreign currency loss during the year ended December 31, 2014 related to the translation of net monetary assets denominated in Venezuelan currency resulting

from the Company’s change to begin using the SICAD 2 exchange rate.

(2)

For 2014, 2013 and 2012, the definition of Other includes gains and losses recognized in connection with pension and other postretirement benefit plan curtailments or

settlements; external costs related to mergers, acquisitions or dispositions; and amounts related to securities litigation and government investigations.  For 2011, the definition

of

Other

includes

external

costs

related

to

mergers,

acquisitions

or

dispositions;

and

amounts

related

to

securities

litigation

and

government

investigations.

There

were

no

pension

and

other

postretirement

benefit

plan

curtailments

or

settlements

in

2011.

For

2010

and

2009,

the

definition

of

Other

includes

only

amounts

related

to

securities

litigation

and government investigations.

Non-GAAP

Financial

Measures

-

Reconciliations

A-18

Reconciliation of Free Cash Flow to Cash Provided by Operations from Continuing Operations

(In millions; Unaudited)

Year Ended December 31,

2014

2013

2012

2011

2010

2009

(recast)

(recast)

(recast)

(recast)

(recast)

Cash provided by operations from continuing operations

$

3,681

$

3,258

$

2,987

$

2,939

$

2,778

$

3,033

Add payments related

to securities litigation and government investigations

—

—

3

8

22

30

Add

external

costs

related

to

mergers,

acquisitions,

investments

or

dispositions and contingent consideration payments

76

231

32

14

—

21

Add excess tax benefits from equity instruments

179

179

83

22

7

1

Less capital expenditures

(474)

(568)

(609)

(724)

(582)

(489)

Less principal payments on capital leases

(11)

(9)

(11)

(12)

(14)

(18)

Free Cash Flow

$

3,451

$

3,091

$

2,485

$

2,247

$

2,211

$

2,578

Non-GAAP

Financial

Measures

-

Reconciliations

A-19

Reconciliation of Return on Invested Capital (ROIC)

(In millions; Unaudited)

Reconciliation

of

Operating

Income

to

Net

Operating

Profit

After

Taxes

(“NOPAT”)

Year Ended December 31,

2014

2013

2012

(recast)

(recast)

Operating Income

$

5,975

$

6,268

$

5,498

Asset impairments

69

61

180

Gain on operating assets, net

(464

)

(129)

(45)

Venezuelan foreign currency loss

(1)

173

—

—

Other operating income items

80

(5)

30

Adjusted Operating Income

5,833

6,195

5,663

Add Amortization expense

202

209

212

Adjusted Operating Income before amortization expense

6,035

6,404

5,875

Less Income taxes

(2)

(1,267

)

(2,049

)

(1,998

)

Add equity loss, net of taxes

(153

)

(150

)

(180

)

Adjust for items affecting comparability relating to equity method investments

97

30

94

NOPAT

(3)

$

4,712

$

4,235

$

3,791

Non-GAAP

Financial

Measures

-

Reconciliations

A-20

Reconciliation of Total Assets to Capital Employed

Year Ended December 31,

2014

2013

2012

2011

(recast)

(recast)

(recast)

Total Assets

$

63,259

$

67,999

$

68,095

$

67,811

Less:

Deferred tax assets

(184)

(369)

(384)

(563)

Assets related to Discontinued Operations

—

(5,746)

(5,943)

(6,157)

Total current liabilities of continuing operations less debt due

within one year

(8,086)

(7,296)

(8,059)

(7,825)

Excess cash

(4)

(1,118)

(316)

(1,260)

(1,881)

Capital employed

53,871

54,272

52,449

51,385

Less Purchase Price Adjustments

(5)

(32,894)

(33,049)

(33,194)

(33,403)

Capital employed excluding PPA

$

20,977

$

21,223

$

19,255

$

17,982

Average Capital Employed

(6)

$

54,072

$

53,361

$

51,917

Average Capital Employed excluding PPA

(6)

$

21,100

$

20,239

$

18,619

ROIC

(7)

9%

8%

7%

ROIC excluding PPA

(7)

22%

21%

20%

2014

2013

2012

Actual

Adjustments

As

Adjusted

Actual

Adjustments

As

Adjusted

Actual

Adjustments

As

Adjusted

(recast)

(recast)

(recast)

(recast)

(recast)

(recast)

Income from continuing

operations before

income taxes

4,679

69

4,610

4,968

106

4,862

4,033

(292)

4,325

Income tax provision

(785)

165

(950)

(1,614)

(59)

(1,555)

(1,370)

86

(1,456)

Effective Tax rate

17%

-239%

21%

32%

56%

32%

34%

29%

34%

(1)

Venezuelan foreign currency loss during 2014 related to the translation of net monetary assets denominated in Venezuelan currency resulting from the Company’s change to

begin using the SICAD 2 exchange rate.

(2)

Calculated

using

the

Company’s

adjusted

effective

tax

rate

—

21%

for

2014,

32%

for

2013

and

34%

for

2012.

The

Company’s

adjusted

effective

tax

rate

reflects

the

impact

of

the

items

affecting

comparability

on

the

Company’s

Income

from

continuing

operations

as

set

forth

below.

Non-GAAP

Financial

Measures

-

Reconciliations

A-21

(3)

Net operating profit after taxes (“NOPAT”) represents the Adjusted Operating Income before amortization expense, net of tax at the Company’s adjusted effective tax rate

plus the equity income (loss), net of taxes from investments accounted for under the equity method adjusted for the Company’s share of items affecting comparability

relating to such equity method investments.

(4)

Excess cash represents the amount of cash in excess of $1.5 billion.

(5)

Purchase Price Adjustments (“PPA”) reflect the net outstanding goodwill and intangible assets recognized in connection with the merger of Time Warner Inc. (now known as

Historic TW Inc.) with America Online, Inc. (now known as Historic AOL LLC) in 2001 and the restructuring of Time Warner Entertainment Company, L.P. in 2003.

(6)

Average Capital Employed and Average Capital Employed excluding PPA are calculated using the respective amounts at December 31, 2014, 2013, 2012 and 2011 divided

by two.

Year Ended December 31,

2014

2013

2012

(recast)

(recast)

Items Affecting Comparability

Asset impairments

$

(69)

$

(61)

$

(180)

Gain on operating assets, net

464

129

45

Venezuelan

foreign

currency

loss

(a)

(173)

—

—

Other

operating

income

items

(b)

(80)

5

(30)

Gains (losses) on investments

30

61

(30)

Other

Amounts related to separation of Time Warner Cable Inc.

(11)

3

4

Amounts related to disposition of Warner Music Group

2

(1)

(7)

Amounts related to separation of Time Inc.

3

—

—

Items affecting comparability relating to equity method investments

(97)

(30)

(94)

Total other

(103)

(28)

(97)

Total of above items affecting comparability

69

106

(292)

Income

tax

impact

of

above

items

(c)

165

(59)

86

Impact of items affecting comparability on income from continuing operations

attributable to Time Warner Inc. shareholders

$

234

$

47

$

(206)

(a)

Venezuelan foreign currency loss during 2014 related to the translation of net monetary assets denominated in Venezuelan currency resulting from the

Company’s change to begin using the SICAD 2 exchange rate.

(b)

Other operating income items includes gains and losses recognized in connection with pension and other postretirement benefit plan curtailments or

settlements; external costs related to mergers, acquisitions or dispositions; and amounts related to securities litigation and government investigations.

(c)

For the year ended December 31, 2014, the gain on the sale and leaseback of Time Warner Center was offset by the utilization of tax attributes.

(7)

Return on Invested Capital (“ROIC”) is calculated as NOPAT divided by Average Capital Employed and ROIC excluding PPA is calculated as NOPAT divided by Average

Capital Employed excluding PPA.