FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
___ EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995

___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission File No. 1-8911

TURNER BROADCASTING SYSTEM, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Georgia 58-0950695
- ------------------------------- --------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

One CNN Center
Atlanta, Georgia 30303
- ------------------------------- --------------------------------------
(Address of principal (Zip Code)
executive offices)

(404) 827-1700
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

Yes X No
-------- --------

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

Outstanding at
Class September 30, 1995
- ------------------------------- -----------------------------------
[S] [C]
Class A Common Stock, par
value $0.0625 68,330,388
Class B Common Stock, par
value $0.0625 137,941,500

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TURNER BROADCASTING SYSTEM, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS)

SEPTEMBER 30, DECEMBER 31,
1995 1994
---------------- -----------------

ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 84,817 $ 52,895
Accounts receivable, less allowance of
$40,135 and $31,862
Unaffiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415,563 567,404
Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,393 103,432
Film costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507,653 446,355
Installment contracts receivable, less
allowance of $8,722 and $10,661 . . . . . . . . . . . . . . . . . . . 54,251 46,806
Prepaid expense and other current assets . . . . . . . . . . . . . . . . . 94,547 71,510
--------------- --------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 1,233,224 1,288,402

Film costs, less current portion . . . . . . . . . . . . . . . . . . . . . 1,868,290 1,893,069
Property and equipment, less accumulated
depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331,509 308,960
Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . 425,886 409,468
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,428 172,646
--------------- --------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,139,337 $ 4,072,545
=============== ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,390 $ 49,036
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292,824 249,813
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,457 108,122
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,343 61,376
Participants' share and royalties payable . . . . . . . . . . . . . . . . . 90,064 58,417
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,723 37,338
Film contracts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 64,899 40,252
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 1,487 1,345
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 90,456 40,702
--------------- --------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 743,643 646,401

Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . 2,336,223 2,517,748
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 394,744 385,731
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . 242,268 178,934
--------------- --------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 3,716,878 3,728,814

TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . 422,459 343,731
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . $ 4,139,337 $ 4,072,545
=============== ===============

See accompanying Notes to Consolidated Condensed Financial Statements.

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TURNER BROADCASTING SYSTEM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)

THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- --------------------------
1995 1994 1995 1994
-------------- -------------- -------------- -----------

Revenue
Unaffiliated . . . . . . . . . . . . . . . . . . . . . . $ 887,030 $625,527 $2,165,514 $1,674,270
Affiliated . . . . . . . . . . . . . . . . . . . . . . . 119,551 113,362 349,268 309,570
---------- -------- ---------- ----------
1,006,581 738,889 2,514,782 1,983,840
---------- -------- ---------- ----------

Cost of operations . . . . . . . . . . . . . . . . . . . . 648,787 466,756 1,533,507 1,266,844
Selling, general and administrative . . . . . . . . . . . . 231,837 166,947 634,877 498,393
Gain on sale of equity investment . . . . . . . . . . . . . - - - (21,746)
Costs of accounts receivable
securitization program . . . . . . . . . . . . . . . . 4,811 - 8,069 -
Depreciation of property and equipment and
amortization of goodwill and other
intangible assets . . . . . . . . . . . . . . . . . . 20,258 16,077 57,092 43,186
Interest expense, net of interest income . . . . . . . . . 43,348 52,425 140,632 157,801
Equity in (income) loss of unconsolidated
entities . . . . . . . . . . . . . . . . . . . . . . . . (6,185) 1,572 1,552 5,435
---------- -------- ---------- ----------
942,856 703,777 2,375,729 1,949,913
---------- -------- ---------- ----------

Income before provision for
income taxes . . . . . . . . . . . . . . . . . . 63,725 35,112 139,053 33,927

Provision for income taxes . . . . . . . . . . . . . . . . 23,969 14,729 55,607 14,249
---------- -------- ---------- ----------
Income before extraordinary item . . . . . . . . . 39,756 20,383 83,446 19,678
Extraordinary item . . . . . . . . . . . . . . . . - (24,996) - (24,996)
---------- -------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . $ 39,756 $ (4,613) $ 83,446 $ (5,318)
========== ======== ========== ==========

Earnings (loss) per common share and
common stock equivalent
Income before extraordinary item . . . . . . $ 0.14 $ 0.07 $ 0.29 $ 0.07
Extraordinary item . . . . . . . . . . . . . - (0.09) - (0.09)
---------- -------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . $ 0.14 $ (0.02) $ 0.29 $ (0.02)
========== ======== ========== ==========

Weighted average number of common shares
outstanding, including conversion of
common stock equivalents,
when applicable . . . . . . . . . . . . . . . . . . . 285,433 282,532 283,817 280,994

See accompanying Notes to Consolidated Condensed Financial Statements.

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TURNER BROADCASTING SYSTEM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)

NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
1995 1994
------------- ---------------

Cash provided by operations before changes
in film costs and liabilities, net . . . . . . . . . . . . . . . . . . . . . $ 196,384 $ 3,928
Changes in film costs and liabilities, net
Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . . . 65,817 65,008
Produced programming . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,403 (87,818)
Licensed program and distribution rights . . . . . . . . . . . . . . . . . (8,839) 8,744
--------- ---------
Net cash provided by (used for) operations . . . . . . . . . . . . . . . . . . . . 307,765 (10,138)
--------- ---------

Cash provided by (used for) investing activities
Sale of equity investment . . . . . . . . . . . . . . . . . . . . . . . . . - 107,978
Distributions from unconsolidated entities . . . . . . . . . . . . . . . . . 7,605 -
Acquisitions and advances to unconsolidated entities . . . . . . . . . . . . (7,051) (146,097)
Additions to property and equipment . . . . . . . . . . . . . . . . . . . . (72,617) (80,825)
--------- ---------
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . (72,063) (118,944)
--------- ---------

Cash provided by (used for) financing activities
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 609,610
Payments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (270,285) (576,346)
Payments of cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . (14,720) (9,802)
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . 6,225 1,166
--------- ---------
Net cash provided by (used for) financing activities . . . . . . . . . . . . . . (203,780) 24,628
--------- ---------

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . 31,922 (104,454)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 52,895 162,858
--------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 84,817 $ 58,404
========= =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES:

Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66,790 $ 28,359
Net interest paid, including interest
capitalized of $12,115 and $10,383 . . . . . . . . . . . . . . . . . . . . . 155,426 134,107
Dividends declared but unpaid . . . . . . . . . . . . . . . . . . . . . . . . . . - 4,901

On January 28, 1994, the Company completed the merger with New Line Cinema Corporation as follows:

Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . $ 695,400
Less: common stock issued or issuable . . . . . . . . . . . . . . . . . . . . . . 406,700
cash paid for debt and other acquisition costs. . . . . . . . . . . . . . . 139,600
---------
Liabilities assumed, including Convertible Debentures . . . . . . . . . . . . . . $ 149,100
=========

See accompanying Notes to Consolidated Condensed Financial Statements.

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TURNER BROADCASTING SYSTEM, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED

NOTE 1. PREPARATION OF INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The consolidated condensed financial statements included herein have
been prepared by Turner Broadcasting System, Inc. (the "Company") pursuant to
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the accompanying consolidated condensed financial
statements contain all adjustments, which are of a normal recurring nature,
necessary for a fair presentation of such financial statements. Although
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations,
management believes that the disclosures are adequate to make the information
presented not misleading. For further information, reference is made to the
consolidated financial statements and the notes thereto incorporated by
reference in the Company's Form 10-K for the year ended December 31, 1994.

Certain prior year amounts have been reclassified to conform to the
current year presentation.

NOTE 2. FILM COSTS

The following table sets forth the components of unamortized film
costs (in thousands):

September 30, December 31,
1995 1994
----------------- -----------------

Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . $1,038,513 $1,102,563
Produced programming
Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381,296 302,559
Completed and not released . . . . . . . . . . . . . . . . . . . . . 61,015 40,021
In process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397,300 405,255
Episodic television . . . . . . . . . . . . . . . . . . . . . . . . 85,885 107,543
Licensed program and distribution rights . . . . . . . . . . . . . . . 305,987 257,796
Prepaid licensed program rights . . . . . . . . . . . . . . . . . . . 105,947 123,687
---------- ----------
2,375,943 2,339,424
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . 507,653 446,355
---------- ----------
$1,868,290 $1,893,069
========== ==========

Episodic television includes serial television program costs. Prepaid
licensed program rights represent licensed program rights for which payments
have been made but the programming is not currently available for use. As
these programs become available for use they are reclassified to licensed
program rights.

On the basis of the Company's anticipated total gross revenue
estimates, over 86% of released and episodic television produced programming
costs at September 30, 1995 will be amortized within the three-year period
ending September 30, 1998.

Amortization of film costs included in Cost of operations is composed
of the following (in thousands):

Three months ended Nine months ended
September 30, September 30,
----------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ --------- -----------

Purchased program rights . . . . . . . . . . . . . . . $ 22,750 $ 22,226 $ 67,696 $ 66,565
Produced programming . . . . . . . . . . . . . . . . . 325,898 249,291 706,702 625,048
Licensed program and distribution
rights . . . . . . . . . . . . . . . . . . . . . . 25,852 19,100 76,372 58,281
Participants' share and royalties . . . . . . . . . . . 78,201 13,831 115,641 37,230
Non-cash amortization of certain
acquisition purchase adjustments . . . . . . . . . 13,013 674 16,305 2,432
-------- -------- -------- --------
$465,714 $305,122 $982,716 $789,556
======== ======== ======== ========

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NOTE 3. EARNINGS (LOSS) PER COMMON SHARE AND COMMON STOCK EQUIVALENT

Net income (loss) per common share and common stock equivalent is
computed by dividing net income (loss) applicable to common stock by the
weighted average number of outstanding shares of common stock and common stock
equivalents, when dilutive, during the applicable periods in 1995 and 1994.
Common stock equivalents are principally the incremental shares associated with
the Class C Convertible Preferred Stock (the "Class C Preferred Stock") and the
outstanding stock options. Fully-diluted income (loss) per share amounts are
similarly computed, but include the effect, when dilutive, of the Company's
other potentially dilutive securities. The Company's zero coupon subordinated
convertible notes and the convertible subordinated debentures of a wholly-owned
subsidiary are excluded from the fully-diluted calculations of net income
(loss) per common share for the three-month and nine-month periods ended
September 30, 1995, and 1994 due to their anti-dilutive effect. The difference
between the primary and fully-diluted earnings per share is not significant.

NOTE 4. LONG-TERM DEBT

Long-term debt is summarized as follows (in thousands):

SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------------- ---------------

Bank credit facilities . . . . . . . . . . . . . . . . . . . . $1,295,000 $1,490,000
8 3/8% Senior Notes . . . . . . . . . . . . . . . . . . . . . 297,426 297,381
7.4% Senior Notes . . . . . . . . . . . . . . . . . . . . . . 249,659 249,637
8.4% Senior Debentures . . . . . . . . . . . . . . . . . . . . 199,846 199,845
Zero coupon subordinated convertible notes . . . . . . . . . . 259,044 245,569
Convertible subordinated debentures of
a wholly-owned subsidiary . . . . . . . . . . . . . . . . . . 29,075 29,075
Obligations under capital leases . . . . . . . . . . . . . . . 6,308 6,200
Other long-term debt . . . . . . . . . . . . . . . . . . . . . 1,352 1,386
---------- ----------
2,337,710 2,519,093
Less current portion . . . . . . . . . . . . . . . . . . . . . 1,487 1,345
---------- ----------
$2,336,223 $2,517,748
========== ==========

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NOTE 5. STOCKHOLDERS' EQUITY

Stockholders' equity consists of the following components (in
thousands, except share data):

SEPTEMBER 30, DECEMBER 31,
1995 1994
--------------- ----------------

Class C Convertible Preferred Stock, par
value $0.125; authorized 12,600,000 shares;
issued and outstanding 12,396,976 shares . . . . . . . . . . $ 260,438 $ 260,438
Class A Common Stock, par value $0.0625;
authorized 75,000,000 shares; issued and
outstanding 68,330,388 shares . . . . . . . . . . . . . . . . 4,271 4,271
Class B Common Stock, par value $0.0625;
authorized 300,000,000 shares; issued and
outstanding 137,941,500 and 137,424,549
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,621 8,589
Capital in excess of par value . . . . . . . . . . . . . . . . 1,083,286 1,073,317
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (934,157) (1,002,884)
---------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . $ 422,459 $ 343,731
========== ===========

On March 1, 1995, June 1, 1995, and September 1, 1995 the Board of
Directors declared a cash dividend on the Company's outstanding shares of Class
A Common Stock and Class B Common Stock, payable at the rate of $0.0175 for
each share held on the record dates. In addition, holders of the Company's
outstanding Class C Preferred Stock were entitled to an equivalent cash
dividend of $0.105 for each share held on the record dates based on the number
of shares of Class B Common Stock which would be issued upon conversion of each
share of Class C Preferred Stock. Cash dividends of $4,902,000, $4,907,000,
and $4,911,000 were paid on March 30, 1995, June 30, 1995, and September 30,
1995, respectively, to shareholders of record at the close of business on March
15, 1995, June 15, 1995, and September 15, 1995, respectively.

The Company's ability to pay cash dividends to holders of shares of the
Class A and Class B Common Stock and the Class C Preferred Stock is subject to
certain covenants in the Company's outstanding debt instruments. Currently, the
most restrictive of such covenants limits the maximum aggregate amount of
dividends permitted to be paid annually to such holders to $30,000,000.

NOTE 6. ACQUISITION

The Company and New Line Cinema Corporation ("New Line"), a motion
picture production and distribution company, completed a merger of New Line
with a wholly-owned subsidiary of the Company on January 28, 1994 (the "New
Line Merger"). As a result of the New Line Merger, each share of New Line
Common Stock has been converted into the right to receive 0.96386 of a share of
the Company's Class B Common Stock. The valuations used by New Line and the
Company for purposes of arriving at the exchange ratio were $20 per share of
New Line Common Stock and $20.75 per share of the Company's Class B Common
Stock. The maximum number of shares of Class B Common Stock issuable pursuant
to the New Line Merger is approximately 21,300,000 shares, valued at
approximately $442,000,000. Cash will be distributed in lieu of any fractional
shares. At September 30, 1995, approximately 16,500,000 shares of the
Company's Class B Common Stock had been issued in connection with the New Line
Merger. The remaining shares are issuable upon the exercise of New Line stock
options and warrants and the conversion of the New Line convertible
subordinated debentures

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discussed below. Additionally, the Company assumed and incurred liabilities of
approximately $149,100,000 and paid debt and certain other acquisition costs of
approximately $140,000,000 in connection with the New Line Merger. Among the
liabilities assumed in the New Line Merger were $29,125,000 of New Line 6 1/2%
convertible subordinated debentures (the "Convertible Debentures"). The
Convertible Debentures are convertible at the option of the holders into an
aggregate of approximately 1,700,000 shares of Class B Common Stock.

The New Line Merger was accounted for by the purchase method of
accounting. Goodwill and other intangible assets in the amount of
approximately $330,000,000 were recognized in the transaction, and are being
amortized using a straight-line basis over periods not to exceed 40 years. The
pro forma effect of the New Line Merger for the nine months ended September 30,
1994 is not significant.

NOTE 7. ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM

In May 1995, the Company entered into an agreement with a financial
institution whereby the Company can sell on an ongoing basis up to $300,000,000
of an undivided percentage ownership interest in a designated pool of domestic
cable and advertising accounts receivable. The initial sale generated proceeds
of approximately $236,000,000 that were used to repay amounts outstanding under
the Company's unsecured revolving credit facilities. As collections reduce the
accounts receivable balance in the pool, the Company has continued to sell
participating interests in new receivables up to the maximum allowable under
the program. The sales of accounts receivable under this program have reduced
the accounts receivable balance in the consolidated condensed balance sheet and
the proceeds have been included as a source of cash provided by operations in
the consolidated condensed statement of cash flows. Under the terms of the
agreement, the difference between the cash proceeds and the undivided
percentage ownership interest sold in the designated pool of domestic cable and
advertising accounts receivable consists of receivables that have been
designated as reserves principally for any potential credit costs that may be
incurred under the program. However, these costs are not expected to exceed
the full amount of the allowance for doubtful accounts which has been retained
in the consolidated condensed balance sheet of the Company, as the Company
expects to experience substantially the same risk of credit loss as if the
receivables had not been sold. The ongoing costs of the program are largely
based on the purchaser's level of investment and cost of funds. The costs of
the program are anticipated to be less than those the Company would have
otherwise incurred under the Company's unsecured revolving credit facilities.
Under the agreement, which expires in May 1996, the Company performs collection
and administrative responsibilities related to the receivables sold as agent
for the purchaser.

As of September 30, 1995, the Company had sold an undivided interest
in this designated pool of domestic cable and advertising accounts receivable
that aggregated $300,000,000, generating net proceeds of $212,000,000. The
estimated total cost of the program for the sale of accounts receivable during
the three and nine months ended September 30, 1995, approximated $4,800,000 and
$8,100,000, respectively, and is reflected as a reduction of operating profit
in the consolidated condensed statements of operations.

NOTE 8. PROPOSED MERGER WITH TIME WARNER INC.

On September 22, 1995, the Board of Directors of the Company approved
the merger (the "Merger") of the Company with a wholly-owned subsidiary of Time
Warner Inc., a Delaware corporation ("Time Warner"). Thereafter, the Company,

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Time Warner and Time Warner Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Time Warner, executed an Agreement and Plan of
Merger, dated as of September 22, 1995 (the "Merger Agreement"). In the Merger,
each outstanding share of Class A Common Stock, par value $0.0625 per share, of
the Company and each share of Class B Common Stock, par value $0.0625 per
share, of the Company (other than shares held by Time Warner or in the treasury
of the Company and other than shares with respect to which dissenters' rights
are perfected) will be converted into 0.75 of a share of common stock, par
value $1.00 per share, of Time Warner ("Time Warner Common Stock"), and each
share of Class C Convertible Preferred Stock, par value $0.125 per share, of
the Company (other than shares held by Time Warner or in the treasury of the
Company and other than shares with respect to which dissenters' rights are
perfected) will be converted into 4.80 shares of Time Warner Common Stock. The
Company has agreed pursuant to the Merger Agreement not to solicit any other
takeover proposal and, subject to certain conditions, not to provide any
information to, or to negotiate with any other party. In addition, in the event
the Merger Agreement is terminated under certain circumstances and a definitive
agreement with respect to an alternative transaction is executed, or an
alternative transaction is consummated, at or within 18 months after such
termination, the Company would be obligated to pay to Time Warner a termination
fee of $175,000,000. The Merger Agreement also contemplates an alternative
structure, if the parties so agree, which would involve the merger of each of
the Company and Time Warner with separate subsidiaries of a newly-formed
holding company. If such holding company structure is implemented, each issued
and outstanding share of the Company's capital stock (other than shares held by
Time Warner or in the treasury of the Company and other than shares with
respect to which dissenters' rights are perfected) will be converted into the
right to receive common stock of such newly-formed holding company at the same
exchange ratios described above. At the present time, the Company expects that
the parties to the Merger Agreement will agree to the holding company
structure.

The Merger is subject to a number of closing conditions, including
regulatory approvals and the approval of the shareholders of the Company and
the stockholders of Time Warner. There can be no assurance that all of the
conditions to the consummation of the Merger will be satisfied or that, as a
condition to the grant of any approvals by government agencies, changes will
not be required to the terms of the Merger Agreement or the other agreements
entered into by the Company, Time Warner and Liberty Media Corporation ("LMC")
and its affiliates in connection with the Merger. As a result of the
arrangements among R.E. Turner, the Company, Time Warner and LMC and its
affiliates, holders of a sufficient number of shares of the Company's capital
stock of each class have agreed to vote in favor of the Merger to assure its
approval by the Company's shareholders, regardless of the vote of any other
shareholders of the Company. The LMC Agreement, however, provides that the
obligation of LMC and its affiliates to vote for the Merger is subject to
certain conditions, including there not having been amendments to the
agreements that would have certain effects on LMC.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

SOURCES AND USES OF CASH

Cash provided by operations after changes in film costs and associated
liabilities for the nine months ended September 30, 1995 aggregated $308
million, including cash interest payments, net of cash interest received, of
$155 million and a net change in film costs and liabilities of $111 million.
Also included in cash provided by operations was $212 million which represents
the current net proceeds from the accounts receivable securitization program
discussed below. Other primary uses of cash during the period included
repayments of amounts outstanding under the unsecured revolving credit
facilities of $270 million and additions to property and equipment of $73
million.

Included in the net change in film costs were $650 million utilized by
the Company for original entertainment and sports programming (including $285
million for theatrical film productions, excluding promotional and advertising
costs).

In May 1995, the Company entered into an agreement with a financial
institution whereby the Company can sell on an ongoing basis up to $300 million
of an undivided percentage ownership interest in a designated pool of domestic
cable and advertising accounts receivable. As of September 30, 1995, the
Company had sold an undivided interest in this designated pool of its domestic
cable and advertising accounts receivable that aggregated $300 million. The
initial proceeds from the sale, $236 million, were used to repay amounts
outstanding under the Company's unsecured revolving credit facilities. The
Company has recognized costs of $8 million in connection with this accounts
receivable securitization program. The ongoing costs of the program are
anticipated to be less than those the Company would have otherwise incurred
under the bank credit facilities. See Note 7 of Notes to Consolidated
Condensed Financial Statements.

See the Consolidated Condensed Statements of Cash Flows for additional
details regarding sources and uses of cash and Note 4 and Note 7 of Notes to
Consolidated Condensed Financial Statements for additional information about
the Company's indebtedness and the accounts receivable securitization program.

CREDIT FACILITIES AND FINANCING ACTIVITIES

The Company had approximately $2.3 billion of outstanding indebtedness at
September 30, 1995, of which $1.3 billion was outstanding under unsecured
revolving credit facilities with banks.

CAPITAL RESOURCES AND COMMITMENTS

During the next 12 months, the Company anticipates making cash
expenditures of approximately $280 million for sports programming, primarily
rights fees, approximately $1.3 billion for original entertainment programming
(excluding promotional and advertising costs) and approximately $150 million
for licensed programming. Also, during the next 12 months, the Company expects
to make total expenditures of approximately $125 million for additional or
replacement property and equipment. Of the anticipated programming and capital

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expenditures described above, firm commitments exist for approximately $625
million. Other capital resource commitments consist primarily of lease
obligations, some of which are contingent on revenues derived from usage.
Management expects to continue to lease satellite facilities, sports facilities
and office facilities not already owned by the Company.

Management expects to finance these commitments from working capital
provided by operations and financing arrangements with lessors, vendors and
film suppliers and additional borrowings.

PROPOSED MERGER WITH TIME WARNER INC.

On September 22, 1995, the Board of Directors of the Company approved
the Merger of the Company with Time Warner. Thereafter, the Company, Time
Warner and Time Warner Acquisition Corp., a Delaware corporation and a wholly-
owned subsidiary of Time Warner, executed the Merger Agreement. In the Merger,
each outstanding share of Class A Common Stock, par value $0.0625 per share, of
the Company and each share of Class B Common Stock, par value $0.0625 per
share, of the Company (other than shares held by Time Warner or in the treasury
of the Company and other than shares with respect to which dissenters' rights
are perfected) will be converted into 0.75 of a share of Time Warner Common
Stock, and each share of Class C Convertible Preferred stock, par value $0.125
per share, of the Company (other than shares held by Time Warner or in the
treasury of the Company and other than shares with respect to which dissenters'
rights are perfected) will be converted into 4.80 shares of Time Warner Common
Stock. The Company has agreed pursuant to the Merger Agreement not to solicit
any other takeover proposal and, subject to certain conditions, not to provide
any information to or to negotiate with any other party. In addition, in the
event the Merger Agreement is terminated under certain circumstances and a
definitive agreement with respect to an alternative transaction is executed, or
an alternative transaction is consummated, at or within 18 months after such
termination, the Company would be obligated to pay to Time Warner a termination
fee of $175 million. The Merger Agreement also contemplates an alternative
structure, if the parties so agree, which would involve the merger of each of
the Company and Time Warner with separate subsidiaries of a newly-formed
holding company. If such holding company structure is implemented, each issued
and outstanding share of the Company's capital stock (other than shares held by
Time Warner or in the treasury of the Company and other than shares with
respect to which dissenters' rights are perfected) will be converted into the
right to receive common stock of such newly-formed holding company at the same
exchange ratios described above. At the present time, the Company expects that
the parties to the Merger Agreement will agree to the holding company
structure.

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vote for the Merger is subject to certain conditions, including there not
having been amendments to the agreements that would have certain effects on
LMC.

RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1995 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1994

UNAUDITED UNAUDITED
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
(IN THOUSANDS)

Revenue
Entertainment
Networks $ 311,422 $283,124
Production & Distribution 476,893 280,203
Intrasegment revenue elimination (15,868) (21,456)
---------- --------
Total Entertainment 772,447 541,871
News 177,265 163,546
Other 67,752 37,750
Intersegment revenue elimination (10,883) (4,278)
---------- --------
$1,006,581 $738,889
========== ========

Operating profit (loss)
Entertainment
Networks $ 70,030 $ 51,065
Production & Distribution (11,284) 4,753
Intrasegment elimination 3,918 2,097
---------- --------
Total Entertainment 62,664 57,915
News 58,764 52,611
Other (15,729) (21,417)
Costs of accounts receivable
securitization program (4,811) -
Equity in income (loss) of
unconsolidated entities 6,185 (1,572)
---------- --------
$ 107,073 $ 87,537
========== ========

ENTERTAINMENT SEGMENT

Entertainment Segment revenue increased $230 million, or 43%, from
$542 million to $772 million. The majority of the increase was due to
syndication revenue, which increased $199 million, primarily due to the
domestic syndication of "Seinfeld." In the entertainment networks, advertising
revenue increased $40 million, or 32%, excluding any advertising revenue
related to the 1994 Goodwill Games, due to an increase in the amount charged
per thousand homes and higher viewership. The Entertainment Segment recognized
$33 million in total revenue in the third quarter of 1994 from the telecast of
the 1994 Goodwill Games. Subscription revenue increased $22 million, or 20%,
due to higher rates and an increase in subscribers.

Operating profit for the Entertainment Segment increased $5 million,
or 8%, from $58 million to $63 million. Operating profit for the entertainment
networks increased $20 million, or 33%, due to the revenue increases described
above. Operating results for the production and distribution companies
decreased $15 million. Losses from certain domestic theatrical releases in the
quarter and lower than expected results from films released internationally
exceeded the

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third quarter operating profit of $28 million realized from the off-network
syndication of the television series "Seinfeld." The impact of the 1994
Goodwill Games on operating profit for the Segment in the third quarter was not
significant, as $26 million in losses on the games were recorded in the second
quarter of 1994.

NEWS SEGMENT

News Segment revenue rose $14 million, or 8%, from $163 million to
$177 million, due to higher domestic and international subscription revenue as
a result of increased subscribers, and improved international advertising
revenues.

Revenue advances outpaced cost increases resulting in a $6 million, or
12%, improvement in operating profit, from $53 million to $59 million.

OTHER SEGMENT

Revenue for the segment increased $30 million, or 79%, from $38
million to $68 million, due primarily to the addition of 20 more Braves home
games played in the third quarter of 1995 in comparison to the strike-shortened
1994 season. Overall, operating losses for the segment decreased $6 million, or
27%, from $22 million to $16 million. Decreases in the Braves' operating
losses of $13 million were offset by increased general corporate costs in line
with overall Company growth.

EQUITY IN LOSS OF UNCONSOLIDATED ENTITIES/MISCELLANEOUS

Operating profit increased $8 million due primarily to the Atlanta
Hawks' allocation of franchise fees from the NBA's admission of two new teams
starting in the 1995/96 season.

By notice dated September 16, 1994, the Company called for redemption
on October 17, 1994, all of its outstanding 12% Senior Subordinated Debentures
(the "Subordinated Debentures") due 2001. The redemption of the Subordinated
Debentures resulted in an extraordinary after-tax charge of $25 million
representing the write-off of unamortized debt issue costs and premiums
associated with early redemption.

In May 1995, the Company sold an undivided percentage ownership
interest in a designated domestic cable and advertising accounts receivable
pool of approximately $300 million. The proceeds were used to repay amounts
outstanding under the Company's unsecured revolving credit facilities. The
Company recognized costs of $5 million in the third quarter in connection with
this securitization program. The ongoing costs of the securitization program
are anticipated to be less than those the Company would have otherwise incurred
under its unsecured revolving credit facilities.

Consolidated depreciation and amortization increased $4 million as a
result of increased levels of property and equipment required to support the
Company's growth.

As a result of the information discussed above, the Company reported
net income of $40 million in the third quarter of 1995 ($0.14 net income per
common share and common share equivalent). This compares to a net loss of $5
million in the third quarter of 1994 ($0.02 net loss per common share).

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RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1995 VS. NINE MONTHS
ENDED SEPTEMBER 30, 1994

UNAUDITED UNAUDITED
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
(IN THOUSANDS)

Revenue
Entertainment
Networks $ 863,673 $ 745,847
Production & Distribution 1,021,276 699,714
Intrasegment revenue elimination (60,083) (51,670)
---------- ----------
Total Entertainment 1,824,866 1,393,891
News 557,244 477,502
Other 156,227 130,860
Intersegment revenue elimination (23,555) (18,413)
---------- ----------
$2,514,782 $1,983,840
========== ==========

Operating profit (loss)
Entertainment
Networks $ 178,134 $ 84,722
Production & Distribution (23,874) (29,520)
Intrasegment elimination 548 10,851
---------- ----------
Total Entertainment 154,808 66,053
News 196,395 156,564
Other (61,897) (47,200)
Costs of accounts receivable
securitization program (8,069) -
Gain on sale of equity investment - 21,746
Equity in loss of
unconsolidated entities (1,552) (5,435)
---------- ----------
$ 279,685 $ 191,728
========== ==========

ENTERTAINMENT SEGMENT

Entertainment Segment revenue increased $431 million, or 31%, from $1.4
billion to $1.8 billion. Syndication revenue increased $210 million due
primarily to the domestic syndication of "Seinfeld." In addition, network
advertising revenue increased $87 million, or 20% excluding any advertising
revenue related to the 1994 Goodwill Games, due to an increase in the amount
charged per thousand homes and higher viewership. The Entertainment segment
recognized $33 million in revenue through the third quarter of 1994 from the
telecast of the 1994 Goodwill Games. Subscription revenue also increased,
rising $62 million, or 26%, to $303 million, due to higher rates and an
increase in subscribers. In addition to the increased syndication revenue, the
Company's production and distribution companies contributed increased revenue
related to home video distribution, which increased $59 million, or 24%, to
$302 million, and favorable box office results for theatrical film releases,
which increased $32 million, or 20%, to $192 million.

Operating profit for the Entertainment Segment increased $89 million
over the first nine months of 1994, from $66 million to $155 million, $33
million of which related to losses in 1994 associated with the Goodwill Games.
Additionally, increased operating profits from the entertainment networks,

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exclusive of the Goodwill Games, of $69 million were primarily due to reduced
sports programming costs as compared to the same period in the previous year
when the 1994 Winter Olympics were telecast, as well as the advertising and
subscription revenue advances mentioned above. After intrasegment
eliminations, operating results at the production and distribution companies
decreased $9 million due primarily to $28 million realized from the off-network
syndication of the television series "Seinfeld", which was offset by losses
from certain domestic theatrical releases and lower than expected results from
films released internationally.

NEWS SEGMENT

News Segment revenue rose $79 million, or 17%, from $478 million to
$557 million. The increase was due primarily to a $34 million, or 16%,
increase in domestic advertising revenue associated with higher viewership
levels, and a $17 million, or 10%, increase in domestic subscription revenue
due primarily to higher rates and an increase in subscribers. The remaining
increase in overall revenue was primarily generated by CNN International, where
revenue rose $21 million, or 28%, from $77 million to $98 million.

Revenue advances outpaced cost increases resulting in a $40 million, or
25%, improvement in operating profit, from $156 million to $196 million.

OTHER SEGMENT

Revenue for the segment increased $25 million, or 19%, from $131
million to $156 million. Revenues at World Championship Wrestling associated
primarily with pay-per-view events increased $10 million, or 49%. In addition,
revenues generated by the Atlanta Braves increased $11 million as a result of
increased broadcast rights revenue due to the effects of the strike in 1994.
Overall, operating losses for the segment increased $15 million, due primarily
to increases in general corporate costs in line with overall Company growth.

EQUITY IN LOSS OF UNCONSOLIDATED ENTITIES/OTHER CONSOLIDATED INFORMATION

Operating losses decreased $4 million due primarily to the Atlanta
Hawks' allocation of franchise fees from the NBA's admission of two new teams
starting in the 1995/96 season.

By notice dated September 16, 1994, the Company called for redemption
on October 17, 1994, all of its outstanding Subordinated Debentures. The
redemption of the Subordinated Debentures resulted in an extraordinary after-
tax charge of $25 million representing the write-off of unamortized debt issue
costs and premiums associated with early redemption.

In May 1995, the Company sold an undivided percentage ownership
interest in a designated domestic cable and advertising accounts receivable
pool of approximately $300 million. The proceeds were used to repay amounts
outstanding under the Company's unsecured revolving credit facilities. The
Company has recognized costs of $8 million in connection with this
securitization program. The ongoing costs of the securitization program are
anticipated to be less than those the Company would have otherwise incurred
under its unsecured revolving credit facilities.

In June 1994, the Company sold its equity interest in RHI Entertainment
for approximately $108 million in cash and recognized a pre-tax gain of
approximately $22 million.

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Consolidated depreciation and amortization increased approximately $14
million as a result of increased levels of property and equipment required to
support the Company's growth.

As a result of the information discussed above, the Company reported
net income of $83 million for the nine months ended September 30, 1995 ($0.29
net income per common share and common share equivalent). This compares to a
net loss of $5 million for the nine months ended September 30, 1994 ($0.02 net
loss per common share).

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Turner Broadcasting System, Inc. v. Federal Communications Commission and The
United States of America

As last updated in the Company's Form 10-K for the year ended December
31, 1994, on October 5, 1992, the Company filed a lawsuit in the United States
District Court for the District of Columbia challenging the provisions of the
Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Act") that would require cable television operators to devote up to one-third
of their channel capacity to the carriage of local broadcast stations and
provide certain channel positioning rights to local broadcast stations. The
Company's complaint alleges that these provisions violate the First Amendment
of the United States Constitution. Under a provision of the 1992 Act, the case
was heard by a three-judge court. On April 8, 1993, the Court upheld the
constitutionality of these provisions by a 2-1 vote. On June 27, 1994, the
United States Supreme Court vacated the District Court's ruling and remanded
the case for further proceedings. The Company is pursuing its claims. On July
17, 1995, the District Court heard oral arguments on cross-motions for summary
judgment.

Shareholder Litigation in Connection with Proposed Merger

Since August 30, 1995, seventeen complaints have been filed against
the Company, its directors and Time Warner, and in most cases,
Tele-Communications, Inc. ("TCI") in connection with the proposed Merger of the
Company with Time Warner. Sixteen of these complaints were filed in Superior
Court in Fulton County, Georgia. An additional complaint was filed in the Court
of Chancery in New Castle County in the State of Delaware on October 2, 1995;
an action on behalf of the same plaintiff was filed in Georgia on October 23,
1995. Of the complaints filed in Georgia, fourteen were filed prior to the
approval of the Merger on September 22, 1995 and two complaints were filed
after the proposed Merger was approved by the TBS and Time Warner Boards of
Directors. On September 27, 1995, an amended complaint was filed in one of the
pre-September 22nd complaints. On October 24, 1995, an amended complaint was
filed in another pre-September 22nd complaint which apparently would
consolidate thirteen of the sixteen complaints filed in Georgia.

These complaints, all purportedly brought on behalf of a class of the
Company's public shareholders, allege, among other things, that some or all of
the defendants have breached their fiduciary duties as directors and/or
shareholders. All of the complaints seek damages, most of the complaints also
seek, among other things, to enjoin consummation of the Merger, and many seek
an auction of the Company.

By letter dated October 20, 1995, certain of the plaintiffs in the
Georgia suits made a demand upon the Company to repudiate certain of the
transactions relating to the proposed Merger as corporate waste or, absent
repudiation, seek indemnification from any officers or directors who authorized
the challenged transactions. These plantiffs indicated that a shareholders'
derivative suit would be filed in less than 90 days, seeking injunctive relief.
These derivative claims have been asserted in the October 24, 1995 amended
complaint referred to

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above. The Board of Directors of the Company intends to establish a committee
of the Board to investigate such derivative claims.

The Company intends to vigorously defend each of these lawsuits.

ITEM 5. OTHER INFORMATION

REGULATION

On October 5, 1992, the 1992 Act became law. The Federal
Communications Commission (the "FCC" or the "Commission") is charged with
implementation of the 1992 Act.

RATE REGULATION

Section 623 of the Communications Act of 1934, as amended by the 1992
Act, establishes a two-tier rate structure applicable to systems not found to
be subject to "effective competition" as defined by the statute. Rates for a
required "basic service tier" are subject to regulation by practically every
community. Rates for cable programming services other than those carried on
the basic tier are subject to regulation if, upon complaint, the FCC finds that
such rates are "unreasonable." Programming offered by a cable operator on a
per-channel or per-program basis, however, is exempt from rate regulation.

On April 1, 1993, the FCC adopted implementing regulations for Section
623. The text of its Report and Order was released on May 3, 1993. The FCC
adopted a benchmark approach to rate regulation. Rates above the benchmark
would be presumed to be unreasonable. Once established, cable operators could
adjust their rates based on appropriate factors and could pass through certain
costs to customers, including increased programming costs.

On February 22, 1994, the Commission adopted further regulations.
Among other things, the additional regulations will govern the offering of bona
fide "a la carte" channels that are exempted from rate regulation. The
Commission also adopted a methodology for determining rates when channels are
added to or deleted from regulated tiers. These regulations may adversely
affect the Company's ability to sell its existing or new networks to cable
customers and/or may adversely affect the prices the Company may charge for its
services, although at this time the Company cannot predict their full effect on
its operations.

On April 5, 1993, the FCC also froze rates for cable services subject
to regulation under the 1992 Act for 120 days. On June 11, 1993, the FCC
deferred the implementation of rate regulation from June 21, 1993 until October
1, 1993, and extended the freeze on rates for cable services subject to
regulation from August 4, 1993 to November 15, 1993. On November 10, 1993, the
Commission further extended the freeze until February 15, 1994, and on February
8, 1994, extended the expiration date of the freeze until May 15, 1994. On
July 27, 1993, the FCC moved the effective date of rate regulation back to
September 1, 1993. Additionally, among other things, the FCC permitted cable
operators to structure rates and service offerings up until September 1, 1993,
without prior notice to subscribers.

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On June 5, 1995, the United States Court of Appeals for the District
of Columbia upheld the FCC's implementing regulations against challenge on
constitutional, statutory and administrative law grounds.

On July 16, 1993, the FCC issued a Notice of Proposed Rulemaking to
add the regulatory requirements to govern cost-of-service showings that cable
operators may submit under this provision to justify rates above the
benchmarks. On February 22, 1994, the Commission adopted interim rules to
govern the cost-of-service proceedings.

The FCC on November 10, 1994 reversed its policy regarding rate
regulation of packages of "a la carte" services. "A la carte" services that
are offered in a package will now be subject to rate regulation by the FCC. In
light of the uncertainty created by the various criteria that the FCC
previously applied to "a la carte" packages, the FCC, in those cases in which
it was not clear how the FCC's previous criteria should have been applied to
the package at issue, and where only a "small number" of channels were moved
from a previously regulated tier to the package, will allow cable operators to
treat existing packages as New Product Tiers ("NPTs") as discussed below.

The FCC, in addition to revising its rules governing "a la carte"
channels, also on November 10, 1994 revised its regulations governing the
manner in which cable operators may charge subscribers for new cable
programming services. The FCC instituted a three-year flat fee mark-up plan
for charges relating to new channels of cable programming services in addition
to the present formula for calculating the permissible rate for new services.
Commencing on January 1, 1995, operators may charge for new channels of cable
programming services added after May 14, 1994 at a mark-up of 20 cents per
channel over actual programming costs, but may not make adjustments to monthly
rates for these new services totaling more than $1.20, plus an additional 30
cents solely for programming license fees, per subscriber over the first two
years of the three-year period. Cable operators may charge an additional 20
cents in the third year only for channels added in that year. Cable operators
electing to use the 20 cents per channel adjustment may not take a 7.5% mark-up
on programming cost increases, which is permitted under the FCC's current rate
regulations. The FCC requested further comment on whether cable operators
should continue to receive the 7.5% mark-up on increases in license fees on
existing programming services.

Additionally, the FCC will permit cable operators to offer NPTs at
rates which they elect so long as, among other conditions, other service tiers
that are subject to rate regulation are priced in conformity with applicable
FCC regulations and cable operators do not remove programming services from
such existing tiers and offer them on the NPT.

The constitutionality of these provisions has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court upheld the
constitutionality of these provisions. An appeal of that decision is pending
in the U.S. Court of Appeals for the District of Columbia. The Company cannot
predict the ultimate outcome of the litigation.

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MUST CARRY AND RETRANSMISSION CONSENT

The 1992 Act contains provisions that would require cable television
operators to devote up to one-third of their channel capacity to the carriage
of local broadcast stations and provide certain channel position rights to
local broadcast stations. The 1992 Act also includes provisions governing
retransmission of broadcast signals by cable systems, whereby retransmission of
broadcast signals would require the broadcaster's consent and provides each
local broadcaster the right to make an election between must carry or
retransmission consent. The retransmission consent provisions of the 1992 Act
became effective on October 5, 1993.

On March 11, 1993, the FCC adopted a Report and Order implementing
these provisions. The provisions could affect the ability and willingness of
cable systems to carry cable programming services. The Company has filed
litigation challenging the provision as unconstitutional (see "Legal
Proceedings - Turner Broadcasting System, Inc. v. Federal Communications
Commission and The United States of America").

PROGRAM ACCESS

On April 1, 1993, the Commission issued regulations implementing a
provision that, among other things, makes it unlawful for a cable network, in
which a cable operator has an attributable interest, to engage in certain
"unfair methods of competition or unfair or deceptive acts or practices," the
purpose and effect of which is to hinder significantly, or prevent, any
multichannel video programming distributor from providing satellite cable
programming or satellite broadcast programming to cable subscribers or
consumers. The provisions contain an exemption for any contract that grants
exclusive distribution rights to a person with respect to satellite cable
programming or that was entered into on or before June 1, 1990. While the
Company cannot predict the regulations' full effect on its operations, such
regulations may affect the rates charged by the Company's cable programming
services to its customers and could affect the terms and conditions of
contracts between the Company and its customers.

The constitutionality of this provision has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court upheld this provision. An
appeal of that decision is pending in the United States Court of Appeals for
the District of Columbia Circuit. Appeals of the Commission's implementing
regulations have also been taken to the United States Court of Appeals for the
District of Columbia Circuit. The Company cannot predict the ultimate outcome
of the litigation.

REGULATION OF CARRIAGE AGREEMENTS

The 1992 Act contains a provision that requires the FCC to establish
regulations governing program carriage agreements and related practices between
cable operators and video programming vendors, including provisions to prevent
the cable operator from requiring a financial interest in a program service as
a condition of carriage and provisions designed to prohibit a cable operator
from coercing a video programming vendor to provide exclusive rights as a
condition of carriage. On October 22, 1993, the Commission issued regulations
implementing this provision. The Company cannot at this time predict the
effect of this provision on its operations.

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The constitutionality of this provision has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court upheld the
constitutionality of this provision. An appeal of that decision is pending in
the United States Court of Appeals for the District of Columbia Circuit. The
Company cannot predict the outcome of the litigation.

OWNERSHIP LIMITATIONS

Section 11 of the 1992 Act directed the Commission to prescribe rules
and regulations establishing limits on the number of cable subscribers a person
is authorized to reach through cable systems owned by such person and the
number of channels that can be occupied by video programmers in which a cable
operator has an attributable interest. The Commission must also consider the
necessity of imposing limitations on the degree to which multichannel video
programming distributors may engage in the creation or production of video
programming.

On December 28, 1992, the FCC issued a Notice of Proposed Rulemaking
and Notice of Inquiry with respect to these provisions. On October 22, 1993,
the FCC adopted a Second Report and Order that established a 40% limit on the
number of channels that may be occupied by programming services in which the
particular cable operator has an attributable interest. The Company is subject
to this provision. The FCC also established a national limit of 30% on the
number of homes passed that any one person can reach through cable systems
owned by such person, but stayed implementation of that provision pending
judicial review of its constitutionality. On April 5, 1995, the FCC denied the
petitions for reconsideration. The Company cannot at this time predict the
effect of this provision or these proposals on its operations.

The constitutionality of these provisions has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court found the national limit
on homes passed unconstitutional, but upheld the constitutionality of the
channel capacity limits. An appeal of that decision is currently pending in
the United States Court of Appeals for the District of Columbia Circuit.
Appeals of the Commission's implementing regulations have also been taken to
the United States Court of Appeals for the District of Columbia Circuit. The
Company cannot predict the ultimate outcome of the litigation.

SPORTS MIGRATION

The 1992 Act directed the FCC to submit an interim report by July 1,
1993, and a final report by July 1, 1994, to Congress on the migration of
sports programming from broadcast networks to cable networks and cable
pay-per-view. On June 30, 1994, the FCC issued its final report in which it
recommended that no action by Congress was necessary.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.37.1 Amendment to Employment Agreement, dated as of July 17, 1995, by
and between New Line Cinema Corporation and Robert Shaye, with
respect to the Employment Agreement, dated as of January 28, 1994.

11 Computation of Earnings per Common and Common Equivalent Share.

27 Financial Data Schedule (for SEC use only).

(b) Reports on Form 8-K

On October 5, 1995, the Company filed a Form 8-K announcing that on
September 22, 1995, the Board of Directors of the Company approved the merger
of the Company with a wholly-owned subsidiary of Time Warner Inc. and
thereafter, the Company, Time Warner Inc. and Time Warner Acquisition Corp., a
wholly-owned subsidiary of Time Warner Inc., executed an Agreement and Plan of
Merger, dated as of September 22, 1995.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

TURNER BROADCASTING SYSTEM, INC.

By: /s/ William S. Ghegan
------------------------------------
William S. Ghegan
Vice President, Controller and
Chief Accounting Officer

Date: November 14, 1995