<PAGE>   1

                                   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, 1996

                                   OR

     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.

<TABLE>
<CAPTION>
                                                        Outstanding at
             Class                                    September 30, 1996
------------------------------------            ----------------------------
<S>                                                     <C>
Class A Common Stock, par
   value $0.0625                                         68,330,388
Class B Common Stock, par
   value $0.0625                                        140,446,115

</TABLE>
<PAGE>   2

                        PART I - FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

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


<TABLE>
<CAPTION>
                                                                                    SEPTEMBER 30,          DECEMBER 31,
                                                                                        1996                   1995
                                                                                  ----------------      -----------------
<S>                                                                                  <C>                <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . .          $     83,885       $        85,185
Accounts receivable, less allowance of
    $39,910 and $38,503
    Unaffiliated  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               512,162               464,923
    Affiliated  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               100,238                92,657
Film costs            . . . . . . . . . . . . . . . . . . . . . . . . . . .               766,511               567,031
Installment contracts receivable, less
    allowance of $6,083 and $7,633  . . . . . . . . . . . . . . . . . . . .                59,705                47,928
Prepaid expense and other current assets  . . . . . . . . . . . . . . . . .               212,243               135,597
                                                                                  ---------------       ---------------
      Total current assets  . . . . . . . . . . . . . . . . . . . . . . . .             1,734,744             1,393,321


Film costs, less current portion  . . . . . . . . . . . . . . . . . . . . .             2,082,719             1,936,565
Property and equipment, less accumulated
    depreciation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               385,845               358,528
Goodwill and other intangible assets  . . . . . . . . . . . . . . . . . . .               415,995               427,611
Other assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               262,244               279,375
                                                                                  ---------------       ---------------
      TOTAL ASSETS  . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $     4,881,547       $     4,395,400
                                                                                  ===============       ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $        99,999       $        64,704
Accrued expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               390,064               292,167
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               128,058                83,772
Income taxes payable  . . . . . . . . . . . . . . . . . . . . . . . . . . .                     -                63,693
Participants' share and royalties payable . . . . . . . . . . . . . . . . .               155,338               107,254
Interest payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                17,060                33,011
Film contracts payable  . . . . . . . . . . . . . . . . . . . . . . . . . .               121,750                69,802
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . .                 2,182                 1,543
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . .                86,971               123,693
                                                                                  ---------------       ---------------
      Total current liabilities   . . . . . . . . . . . . . . . . . . . . .             1,001,422               839,639

Long-term debt, less current portion  . . . . . . . . . . . . . . . . . . .             2,765,019             2,479,770
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .               517,538               421,685
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . .               146,027               216,627
                                                                                  ---------------       ---------------
         TOTAL LIABILITIES  . . . . . . . . . . . . . . . . . . . . . . . .             4,430,006             3,957,721

         TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . .               451,541               437,679
                                                                                  ---------------       ---------------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . .       $     4,881,547       $     4,395,400
                                                                                  ===============       ===============
</TABLE>

See accompanying Notes to Consolidated Condensed Financial Statements.

                                       2
<PAGE>   3

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


<TABLE>
<CAPTION>
                                                                          THREE MONTHS                      NINE MONTHS
                                                                             ENDED                             ENDED
                                                                         SEPTEMBER 30,                     SEPTEMBER 30,
                                                                -------------------------------  -------------------------------
                                                                     1996             1995             1996           1995
                                                                --------------   --------------  ---------------  --------------
<S>                                                             <C>              <C>             <C>              <C>
Revenue
    Unaffiliated  . . . . . . . . . . . . . . . . . . . . .     $      929,333   $      887,030  $     2,360,448  $   2,165,514
    Affiliated  . . . . . . . . . . . . . . . . . . . . . .            156,141          119,551          400,245        349,268
                                                                --------------   --------------  ---------------  -------------
                                                                     1,085,474        1,006,581        2,760,693      2,514,782
                                                                --------------   --------------  ---------------  -------------

Cost of operations  . . . . . . . . . . . . . . . . . . . .            806,146          654,546        1,857,777      1,551,944
Selling, general and administrative . . . . . . . . . . . .            251,256          226,078          725,427        616,440
Equity in (income) loss
     of unconsolidated entities   . . . . . . . . . . . . .              1,711           (6,185)           6,160          1,552
Costs of accounts receivable
    securitization program  . . . . . . . . . . . . . . . .              2,040            4,811           10,843          8,069
Time Warner merger costs  . . . . . . . . . . . . . . . . .              1,967                -            8,680              -
Depreciation of property and equipment and
    amortization of intangible assets   . . . . . . . . . .             24,855           20,258           70,343         57,092
Interest expense, net of interest income  . . . . . . . . .             42,232           43,348          123,415        140,632
                                                                --------------   --------------  ---------------  -------------
                                                                     1,130,207          942,856        2,802,645      2,375,729
                                                                --------------   --------------  ---------------  -------------

    Income (loss) before provision
     (benefit) for income taxes   . . . . . . . . . . . . .           (44,733)           63,725          (41,952)       139,053

Provision (benefit) for income taxes  . . . . . . . . . . .           (23,112)           23,969          (21,794)        55,607
                                                                -------------    --------------  ---------------   ------------
    Net income (loss)   . . . . . . . . . . . . . . . . . .     $     (21,621)   $       39,756  $       (20,158)  $     83,446
                                                                =============    ==============  ===============   ============

Earnings (loss) per common share and
    common stock equivalent
       Net income (loss). . . . . . . . . . . . . . . . . .     $       (0.10)   $         0.14  $         (0.10)  $       0.29
                                                                =============    ==============  ===============   ============

Weighted average number of common shares
    outstanding, including conversion of
    common stock equivalents,
    when applicable   . . . . . . . . . . . . . . . . . . .           208,727           285,433         208,001         283,817

</TABLE>


See accompanying Notes to Consolidated Condensed Financial Statements.

                                       3
<PAGE>   4



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

<TABLE>
<CAPTION>
                                                                                               NINE MONTHS ENDED
                                                                                                 SEPTEMBER 30,
                                                                                       ----------------------------------
                                                                                            1996               1995
                                                                                       -------------      ---------------
<S>                                                                                    <C>                 <C>
Cash provided by operations before changes
   in film costs and liabilities, net   . . . . . . . . . . . . . . . . . . . . .      $     12,637        $    196,384
    Changes in film costs and liabilities, net
      Purchased program rights  . . . . . . . . . . . . . . . . . . . . . . . . .            58,990              65,817
      Produced programming  . . . . . . . . . . . . . . . . . . . . . . . . . . .          (241,886)             54,403
      Licensed program and distribution rights  . . . . . . . . . . . . . . . . .           (20,185)             (8,839)
                                                                                          ---------        ------------
Net cash provided by (used for) operations  . . . . . . . . . . . . . . . . . . .          (190,444)            307,765
                                                                                          ---------        ------------

Cash provided by (used for) investing activities
    Distributions from unconsolidated entities  . . . . . . . . . . . . . . . . .             3,205               7,605
    Acquisitions and advances to unconsolidated entities  . . . . . . . . . . . .            (2,902)             (7,051)
    Additions to property and equipment   . . . . . . . . . . . . . . . . . . . .          (102,910)            (72,617)
                                                                                       ------------         -----------
Net cash used for investing activities  . . . . . . . . . . . . . . . . . . . . .          (102,607)            (72,063)
                                                                                       ------------         -----------

Cash provided by (used for) financing activities
    Borrowings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           301,068              75,000
    Payments of debt  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              (649)           (270,285)
    Payments of cash dividends  . . . . . . . . . . . . . . . . . . . . . . . . .           (14,847)            (14,720)
    Proceeds from exercise of stock options   . . . . . . . . . . . . . . . . . .             6,179               6,225
                                                                                       ------------        ------------
Net cash provided by (used for) financing activities  . . . . . . . . . . . . . .           291,751            (203,780)
                                                                                       ------------        ------------

Net increase (decrease) in cash and cash equivalents  . . . . . . . . . . . . . .            (1,300)             31,922
Cash and cash equivalents at beginning of period  . . . . . . . . . . . . . . . .            85,185              52,895
                                                                                       ------------        ------------
Cash and cash equivalents at end of period  . . . . . . . . . . . . . . . . . . .      $     83,885        $     84,817
                                                                                       ============        ============

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

Cash paid for income taxes  . . . . . . . . . . . . . . . . . . . . . . . . . . .      $     26,194        $     66,790
Net interest paid, including interest
    capitalized of $15,541 and $12,115  . . . . . . . . . . . . . . . . . . . . .           146,051             155,426
Conversion of convertible subordinated debentures
    originally issued by a wholly-owned subsidiary  . . . . . . . . . . . . . . .            29,075                   -

</TABLE>



See accompanying Notes to Consolidated Condensed Financial Statements.

                                       4
<PAGE>   5

                        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, 1995.

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


NOTE 2.        MERGER WITH TIME WARNER INC.

         On October 10, 1996, the mergers (the "Mergers") contemplated by the
Amended and Restated Agreement and Plan of Merger dated September 22, 1995, as
amended as of August 8, 1996, among the Company, Time Warner Inc. ("Old Time
Warner"), TW Inc. ("New Time Warner"), Time Warner Acquisition Corp. and TW
Acquisition Corp. (the "Merger Agreement"), were approved by the shareholders
of the Company and the stockholders of Old Time Warner.  Also, on October 10,
1996, the Company, Old Time Warner and Liberty Media Corporation ("LMC") closed
the transactions contemplated by the Merger Agreement and the Second Amended
and Restated LMC Agreement dated as of September 22, 1995, among Old Time
Warner, New Time Warner, LMC and certain subsidiaries of LMC.  Pursuant to the
Merger Agreement, (i) each outstanding share of Class A and Class B Common
Stock, par value $.0625 per share, of the Company, other than shares held
directly or indirectly by Old Time Warner or New Time Warner or in the treasury
of the Company, was converted into the right to receive 0.75 of a share of
common stock, par value of $.01 per share, of New Time Warner ("TW Common
Stock"), (ii) each outstanding share of Class C Preferred Stock, par value
$.125 per share, of the Company, other than shares held directly or indirectly
by Old Time Warner or New Time Warner or in the treasury of the Company, was
converted into the right to receive 4.80 shares of TW Common Stock, (iii) each
outstanding share of common stock, par value $1.00 per share, of Old Time
Warner, other than shares held directly or indirectly by Old Time Warner, was
converted into one share of TW Common Stock, and (iv) each outstanding share of
each series of preferred stock, par value $1.00 per share, of Old Time Warner,
other than shares held directly or indirectly by Old Time Warner, was converted
into one share of a substantially identical series of preferred stock, par
value $.10 per share, of New Time Warner.  As a result of the Mergers, New Time
Warner, which has been renamed Time Warner Inc., owns, directly and indirectly,
the entire equity interest in each of the Company and Old Time Warner, which
has been renamed Time Warner Companies Inc.

         Concurrently with the closing of the Mergers on October 10, 1996, the
Company sold to LMC Southeast Sports, Inc. all of the outstanding capital stock
of Turner Sports Programming, Inc. ("TSPI") which owns a 44% interest in
SportSouth Network, Ltd.  The purchase price for the stock of TSPI was
approximately $65,000,000, as determined in accordance with a formula set forth
in the stock purchase agreement for such transaction, which purchase price may
be subject to a post-closing adjustment.

         The Mergers are not reflected in the accompanying consolidated
condensed financial statements of the Company.  As a result of the Mergers and
the application of the purchase method of accounting for business combinations
by New Time Warner, such historical consolidated condensed financial statements
may be adjusted in the fourth quarter of 1996.  The valuations and other
studies which will provide the basis for such adjustments have not been
completed.

                                       5
<PAGE>   6

NOTE 3.        FILM COSTS

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

<TABLE>
<CAPTION>
                                                                                  SEPTEMBER 30,           DECEMBER 31,
                                                                                      1996                    1995
                                                                                -------------------    ------------------
    <S>                                                                         <C>                    <C>
    Purchased program rights  . . . . . . . . . . . . . . . . . . . . . . .     $         961,336       $    1,017,761
    Produced programming
      Released  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               511,000              397,639
      Completed and not released  . . . . . . . . . . . . . . . . . . . . .               143,688               73,706
      In process  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               667,271              504,997
      Episodic television   . . . . . . . . . . . . . . . . . . . . . . . .               112,142              101,430
    Licensed program and distribution rights  . . . . . . . . . . . . . . .               346,039              302,370
    Prepaid licensed program rights   . . . . . . . . . . . . . . . . . . .               107,754              105,693
                                                                                -----------------      ---------------
                                                                                        2,849,230            2,503,596
    Less current portion  . . . . . . . . . . . . . . . . . . . . . . . . .               766,511              567,031
                                                                                -----------------      ---------------
                                                                                $       2,082,719      $     1,936,565
                                                                                =================      ===============
</TABLE>

         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 88% of released and episodic television produced programming
costs at September 30, 1996 will be amortized within the three-year period
ending September 30, 1999.

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

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                      SEPTEMBER 30,                  SEPTEMBER 30,
                                                            ------------------------------  -----------------------------
                                                                 1996             1995            1996           1995
                                                            -------------    -------------  ---------------- -----------
<S>                                                         <C>              <C>            <C>              <C>
Purchased program rights  . . . . . . . . . . . . . . .     $     22,132     $     22,750   $        65,936  $    67,696
Produced programming  . . . . . . . . . . . . . . . .            444,467          325,898           960,566      706,702
Licensed program and distribution
    rights  . . . . . . . . . . . . . . . . . . . . . .           32,532           25,852            95,417       76,372
Participants' share and royalties . . . . . . . . . . .           41,850           78,201            87,413      115,641
Non-cash amortization of certain
    acquisition purchase adjustments  . . . . . . . . .            1,406           13,013             4,748       16,305
                                                            ------------     ------------   ---------------  -----------
                                                            $    542,387     $    465,714   $     1,214,080  $   982,716
                                                            ============     ============   ===============  ===========
</TABLE>


NOTE 4.  EARNINGS 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 1996 and 1995.
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. In 1996, no common stock equivalents are included in
the calculation of primary earnings per share, due to their anti-dilutive
effect. 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 originally issued by 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, 1996 and 1995 due to their anti-dilutive effect.  The difference
between primary and fully-diluted earnings per share is not significant.


                                       6
<PAGE>   7

NOTE 5.  LONG-TERM DEBT
      Long-term debt is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                        SEPTEMBER 30,             DECEMBER 31,
                                                                            1996                      1995
                                                                     ----------------          ----------------
 <S>                                                                 <C>                       <C>
 Bank credit facilities . . . . . . . . . . . . . . . . . . . .      $      1,735,000          $      1,435,000
 8 3/8% Senior Notes  . . . . . . . . . . . . . . . . . . . . .               297,491                   297,442
 7.4% Senior Notes  . . . . . . . . . . . . . . . . . . . . . .               249,689                   249,666
 8.4% Senior Debentures . . . . . . . . . . . . . . . . . . . .               199,847                   199,846
 Zero coupon subordinated convertible notes . . . . . . . . . .               278,165                   263,694
 Convertible subordinated debentures
   originally issued by a wholly-owned
   subsidiary . . . . . . . . . . . . . . . . . . . . . . . . .                     -                    29,075
 Obligations under capital leases . . . . . . . . . . . . . . .                 5,707                     5,254
 Other long-term debt . . . . . . . . . . . . . . . . . . . . .                 1,302                     1,336
                                                                     ----------------          ----------------
                                                                            2,767,201                 2,481,313
 Less current portion . . . . . . . . . . . . . . . . . . . . .                 2,182                     1,543
                                                                     ----------------          ----------------
                                                                     $      2,765,019          $      2,479,770
                                                                     ================          ================
</TABLE>

        On January 4, 1996, the Company called for redemption on February 5,
1996 all of the convertible subordinated debentures originally issued by a
wholly-owned subsidiary and subsequently assumed by the Company.  All of the
debentures outstanding, which aggregated approximately $29,000,000, were
converted into the Company's Class B Common Stock at $17.51 per share or 57.11
shares of Class B Common Stock for each $1,000 face amount of debentures.  The
conversion resulted in the issuance of approximately 1.7 million shares of
Class B Common Stock.

        In connection with the consummation of the Mergers under the Merger
Agreement, New Time Warner guaranteed all of the obligations of the Company
under the indentures for the Company's 8 3/8% Senior Notes due 2013, 7.4% Senior
Notes due 2004 and 8.4% Senior Debentures due 2024 and the Company's zero
coupon subordinated convertible notes due 2007.

NOTE 6.  STOCKHOLDERS' EQUITY

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

<TABLE>
<CAPTION>
                                                                            SEPTEMBER 30,         DECEMBER 31,
                                                                                1996                  1995
                                                                        ----------------     -----------------
<S>                                                                     <C>                     <C>
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 140,446,115 and 137,982,831
  shares  . . . . . . . . . . . . . . . . . . . . . . . . . . .                   8,778                   8,624
Capital in excess of par value  . . . . . . . . . . . . . . . .               1,132,895               1,084,181
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . .                (954,841)               (919,835)
                                                                        ---------------         ---------------
    Total stockholders' equity  . . . . . . . . . . . . . . . .         $       451,541         $       437,679
                                                                        ===============         ===============
</TABLE>

        On February 16, 1996, May 31, 1996 and September 3, 1996, 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 date. In addition, holders of the Company's
outstanding Class C Preferred Stock were entitled to an equivalent cash
dividend of $0.1050 for each share held on the record date based on the number
of shares of Class B Common Stock which would be issued


                                       7
<PAGE>   8

upon conversion of each share of Class C Preferred Stock.  Cash dividends of
$4,944,000, $4,949,000 and $4,954,000 were paid on March 29, 1996, June 28,
1996 and September 30, 1996, respectively, to shareholders of record at the
close of business on March 15, 1996, June 14, 1996 and September 16, 1996,
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.

         In connection with its acquisition of New Line Cinema Corporation
("New Line Cinema") in January 1994, the Company assumed warrants (the
"Warrants") originally issued by New Line Cinema which were exercisable for
250,000 shares of New Line Cinema common stock.  Upon the assumption of the
Warrants by the Company, the Warrants became exercisable for an aggregate of
240,965 shares of the Company's Class B Common Stock at an exercise price of
$14.39 per share.  On July 17, 1996, all of the Warrants were exercised for an
aggregate exercise price of $3,467,000 and the Company issued an aggregate of
240,965 shares of Class B Common Stock to the holders of the Warrants.

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 proceeds 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.  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 was scheduled to expire in May 1996 but was renewed in April
1996 for another one-year term, the Company performs collection and
administrative responsibilities related to the receivables sold as agent for
the purchaser.

         As of September 30, 1996, the Company had sold an undivided interest
in this designated pool of domestic cable and advertising accounts receivable
that aggregated $277,000,000, generating net proceeds of $221,000,000.  The
estimated total cost of the program for the sale of accounts receivable during
the three-month and nine-month periods ended September 30, 1996, approximated
$2,000,000 and $10,800,000, respectively, and is reflected as a reduction of
operating profit in the consolidated condensed statements of operations.


                                       8
<PAGE>   9

NOTE 8.         INCOME TAXES

         The 1991 and 1992 consolidated federal income tax returns of the
Company have been examined by the Internal Revenue Service (the "IRS").  As a
result of the examination, the IRS has issued a deficiency notice for
additional taxes.  The IRS is prohibited from collecting the disputed tax until
the taxpayer has had an opportunity to seek a redetermination of the asserted
deficiency in court.  On June 25, 1996, the Company filed a petition in U.S.
Tax Court contesting the notice as it believes the items in dispute have been
properly reported in its tax returns.  The Company does not anticipate a quick
resolution of this matter and the ultimate result cannot be predicted at this
time.  However, in the opinion of management, any additional tax liability
resulting from this matter would not have a material adverse impact on the
consolidated financial position or operating results of the Company.

NOTE 9.         SUBSEQUENT EVENTS

         As of June 30, 1996, the Company owned a 33.1% limited partnership
interest in n-tv, a 24-hour German language news channel.  On October 29, 1996,
an unaffiliated third-party acquired a 25% limited partnership interest in
n-tv.  This transaction had the effect of reducing the Company's ownership
interest in n-tv to approximately 25.5%, effective July 2, 1996.  This
transaction did not have a material impact on the consolidated financial
position or operating results of the Company.


                                       9
<PAGE>   10

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


LIQUIDITY AND CAPITAL RESOURCES

SOURCES AND USES OF CASH

         Cash used for operations after changes in film costs and associated
liabilities for the nine months ended September 30, 1996 aggregated $190
million, including a net change in film costs and associated liabilities of
$203 million, and cash interest payments, net of cash interest received, of
$146 million.  Other primary uses of cash during the period included additions
to property and equipment of $103 million.  The primary source of cash for the
period was borrowings under the unsecured revolving credit facilities of $300
million.

         Included in the net change in film costs were $1.0 billion utilized by
the Company for original entertainment and sports programming (including $649
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.  The agreement was renewed in April
1996 for another one-year term.  As of September 30, 1996, the Company had sold
an undivided interest in this designated pool of its domestic cable and
advertising accounts receivable that aggregated $277 million.  The original
proceeds were used in 1995 to repay amounts outstanding under the Company's
unsecured revolving credit facilities.  During 1996, the Company has recognized
costs of approximately $11 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 5 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 $2.8 billion of outstanding indebtedness at
September 30, 1996, of which $1.7 billion was outstanding under unsecured
revolving credit facilities with banks.

        On January 4, 1996, the Company called for redemption on February 5,
1996 all of the convertible subordinated debentures originally issued by a
wholly-owned subsidiary and subsequently assumed by the Company.  All of the
debentures outstanding, which aggregated approximately $29 million, were
converted into the Company's Class B Common Stock at $17.51 per share or 57.11
shares of Class B Common Stock for each $1,000 face amount of debentures.  The
conversion resulted in the issuance of approximately 1.7 million shares of
Class B Common Stock.

        In connection with the consummation of the Mergers under the Merger
Agreement, New Time Warner guaranteed all of the obligations of the Company
under the indentures for the Company's 8 3/8% Senior Notes due 2013, 7.4%
Senior Notes due 2004 and 8.4% Senior Debentures due 2024 and the Company's
zero coupon subordinated convertible notes due 2007.


                                       10
<PAGE>   11

CAPITAL RESOURCES AND COMMITMENTS

During the next 12 months, the Company anticipates making cash expenditures 
at the entertainment networks of approximately $295 million for sports
programming, primarily rights fees, approximately $175 million for original
entertainment programming and approximately $115 million for licensed
programming.  In the entertainment production and distribution companies, such
anticipated cash expenditures are continuing to be evaluated in connection with
the Mergers.  Also, during the next 12 months, the Company as a whole expects
to make total expenditures of approximately $135 million for additional or
replacement property and equipment.  Firm commitments of approximately $445
million exist for programming and capital expenditures during the next 12
months, excluding those in production and distribution companies.  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 from operations and financing
arrangements with lessors, vendors and additional borrowings.

Merger with Time Warner Inc.

         On October 10, 1996, the mergers (the "Mergers") contemplated by the
Amended and Restated Agreement and plan of Merger dated September 22, 1995, as
amended as of August 8, 1996, among the Company, Time Warner Inc. ("Old Time
Warner"), TW Inc. ("New Time Warner"), Time Warner Acquisition Corp. and TW
Acquisition Corp. (the "Merger Agreement"), were approved by the shareholders
of the company and the stockholders of Old Time Warner.  Also, on October 10,
1996, the Company, Old Time Warner and Liberty Media Corporation ("LMC") closed
the transactions contemplated by the Merger Agreement and the Second Amended
and Restated LMC Agreement dated as of September 22, 1995, among Old Time
Warner, New Time Warner, LMC and certain subsidiaries of LMC.  Pursuant to the
Merger Agreement, (i) each outstanding share of Class A and Class B Common
Stock, par value $.0625 per share, of the Company, other than shares held
directly or indirectly by Old Time Warner or New Time Warner or in the treasury
of the Company, was converted into the right to receive 0.75 of a share of
common stock, par value $.01 per share, of New Time Warner ("TW Common Stock"),
(ii) each outstanding share of Class C Preferred Stock, par value $.125 per
share, of the Company, other than shares held directly or indirectly by Old
Time Warner or New Time Warner or in the treasury of the Company, was converted
into the right to receive 4.80 shares of TW Common Stock, (iii) each
outstanding share of common stock, par value $1.00 per share, of Old Time
Warner, other than shares held directly or indirectly by Old Time Warner, was
converted into one share of TW Common Stock, and (iv) each outstanding share of
each series of preferred stock, par value $1.00 per share, of Old Time Warner,
other than shares held directly or indirectly by Old Time Warner, was converted
into one share of a substantially identical series of preferred stock, par
value $.10 per share, of New Time Warner.  As a result of the Mergers, New Time
Warner, which has been renamed Time Warner Inc., owns, directly and indirectly,
the entire equity interest in each of the Company and Old Time Warner, which
has been renamed Time Warner Companies Inc.

         Concurrently with the closing of the Mergers on October 10, 1996, the
company sold to LMC Southeast Sports, Inc. all of the outstanding capital stock
of Turner Sports Programming, Inc. ("TSPI") which owns a 44% interest in
SportSouth Network, Ltd.  The purchase price for the stock of TSPI was
approximately $65 million as determined in accordance with a formula set forth
in the stock purchase agreement for such transaction, which purchase price may
be subject to a post-closing adjustment.

         The Mergers are not reflected in the accompanying consolidated
condensed financial statements of the Company.  As a result of the Mergers and
the application of the purchase method of accounting for business combinations
by New Time Warner, such historical consolidated condensed financial statements
may be adjusted in the fourth quarter of 1996.  The valuations and other
studies which will provide the basis for such adjustments have not been
completed.

                                       11
<PAGE>   12


RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1996 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1995


<TABLE>
<CAPTION>
                                                             UNAUDITED                     UNAUDITED
                                                         THREE MONTHS ENDED           THREE MONTHS ENDED
                                                         SEPTEMBER 30, 1996           SEPTEMBER 30, 1995
                                                         ------------------           ------------------
                                                                         (IN THOUSANDS)
<S>                                                         <C>                          <C>
Revenue
  Entertainment
   Networks                                                 $      366,805               $       312,361
   Production & Distribution                                       455,958                       482,033
   Intrasegment revenue elimination                                (16,902)                      (16,858)
                                                            --------------               ---------------
  Total Entertainment                                              805,861                       777,536
  News                                                             210,199                       176,325
  Other                                                             82,504                        64,829
  Intersegment revenue elimination                                 (13,090)                      (12,109)
                                                            --------------               ---------------
                                                            $    1,085,474               $     1,006,581
                                                            ==============               ===============

Operating profit (loss)
  Entertainment
   Networks                                                 $       70,353               $        70,604
   Production & Distribution                                      (113,631)                      (11,888)
   Intrasegment elimination                                          5,051                         3,918
                                                            --------------               ---------------
  Total Entertainment                                              (38,227)                       62,634
  News                                                              55,662                        58,341
  Other                                                            (14,218)                      (15,276)
  Equity in income (loss) of
       unconsolidated entities                                      (1,711)                        6,185
  Costs of accounts receivable
       securitization program                                       (2,040)                       (4,811)
  Time Warner merger costs                                          (1,967)                           -
                                                            --------------               ---------------
                                                            $       (2,501)              $       107,073
                                                            ==============               ===============
</TABLE>


ENTERTAINMENT SEGMENT

         Entertainment Segment revenue increased $28 million, or 4%, from $778
million to $806 million.  In the entertainment networks, subscription revenue
increased $29 million, or 21%, from $134 million to $163 million, as a result
of higher rates as well as an increase in cable and home satellite viewers,
primarily at TNT. Advertising revenue for the entertainment networks
increased $23 million, or 14%, from $166 million to $189 million, primarily due
to a strong overall advertising market for TBS Superstation, TNT, and the
Cartoon Network. In the production and distribution companies, home video
revenue increased $55 million, or 59%, from $95 million to $150 million,
primarily due to an increase in domestic sales of existing library product.
Theatrical film revenues increased $27 million, from $72 million to $99
million, due to the timing and number of releases in the third quarter of 1996
in comparison to 1995.  Television syndication revenue decreased $104 million,
from $264 million to $160 million, due to the impact of the 1995 initial
off-network syndication of Seinfeld, offset by additional off-network
syndication of the program in 1996 and an increase in New Line Cinema
Corporation ("New Line") and other Castle Rock Entertainment ("Castle Rock")
product available in the television syndication markets.

                                       12
<PAGE>   13

         Operating profit for the Entertainment Segment decreased $101 million,
from an operating profit of $63 million to an operating loss of $38 million.
Operating profit for the entertainment networks increased $1 million, from $82
million to $83 million after the effect of intrasegment eliminations, due
primarily to the revenue increases described above, offset by increased costs
related to sports and entertainment programming. Operating losses from the
production and distribution companies increased $103 million, substantially due
to disappointing results for domestic and international theatrical releases,
which resulted in write-offs of approximately $109 million.

NEWS SEGMENT

         News Segment revenue rose $34 million, or 19%, from $176 million to
$210 million.  Advertising revenue increased $22 million, or 27%, due to
increased viewership during the 1996 U.S. political conventions and
presidential campaign, as well as increased international advertising revenue
at CNN International.  Subscription revenue increased $8 million, or 11%, from
$75 million to $83 million, due to an increase in both cable and home satellite
viewers at CNN and CNN International.

         Operating profit for the News Segment decreased $2 million, or 5%,
from $58 million to $56 million as revenue increases were offset by increased
newsgathering costs including costs associated with political coverage as well
as CNNfn and CNN-SI start-up costs.

OTHER SEGMENT

         Revenue for the Other Segment increased $18 million, or 27%, from $65
million to $83 million. Revenue at World Championship Wrestling ("WCW")
increased $9 million primarily due to increased syndication and pay-per-view
revenues.  Revenue at the Omni Arena and Hotel in Atlanta increased $9 million
due to increased usage during the 1996 Olympic Games.  Overall, revenue
increases outpaced increased costs including those associated with corporate
infrastructure spending, resulting in a $1 million decrease in operating losses
for the quarter.

EQUITY IN LOSS OF UNCONSOLIDATED ENTITIES/MISCELLANEOUS

         The Company's share of operating losses from unconsolidated entities
increased by $8 million primarily due to the inclusion in 1995 of the Atlanta
Hawks' allocation of $9 million in franchise fees from the NBA's admission of
two new teams starting in the 1995-96 season.

         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 original proceeds were used to repay
amounts outstanding under the Company's unsecured revolving credit facilities.
The Company recognized costs of approximately $2 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.

         The Company incurred approximately $2 million of expenses related to
the transactions contemplated by the Merger Agreement.

         Consolidated interest expense decreased $1 million, from $43 million
to $42 million, due to an increase in interest income associated with long-term


                                       13
<PAGE>   14

receivables and lower interest rates related to the Company's revolving credit
facilities.

         As a result of the information discussed above, the Company reported a
net loss of $22 million in the third quarter of 1996 ($0.10 net loss per common
share). This compares to net income of $40 million in the third quarter of 1995
($0.14 net income per common share and common share equivalent).

RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1996 VS. NINE MONTHS
ENDED SEPTEMBER 30, 1995


<TABLE>
<CAPTION>
                                                             UNAUDITED                     UNAUDITED
                                                         NINE MONTHS ENDED             NINE MONTHS ENDED
                                                         SEPTEMBER 30, 1996           SEPTEMBER 30, 1995
                                                         ------------------           -------------------
                                                                         (IN THOUSANDS)
<S>                                                         <C>                          <C>
Revenue
  Entertainment
   Networks                                                 $    1,040,151               $       865,883
   Production & Distribution                                     1,035,865                     1,035,234
   Intrasegment revenue elimination                                (87,784)                      (63,085)
                                                            --------------               ---------------
  Total Entertainment                                            1,988,232                     1,838,032
  News                                                             617,324                       555,032
  Other                                                            191,119                       148,791
  Intersegment revenue elimination                                 (35,982)                      (27,073)
                                                            --------------               ---------------
                                                            $    2,760,693               $     2,514,782
                                                            ==============               ===============

Operating profit (loss)
  Entertainment
   Networks                                                 $      206,478               $       179,366
   Production & Distribution                                      (203,214)                      (24,796)
   Intrasegment elimination                                        (17,352)                          548
                                                            --------------               ---------------
  Total Entertainment                                              (14,088)                      155,118
  News                                                             182,231                       195,204
  Other                                                            (60,997)                      (61,016)
  Equity in loss of
       unconsolidated entities                                      (6,160)                       (1,552)
  Costs of accounts receivable
       securitization program                                      (10,843)                       (8,069)
  Time Warner merger costs                                          (8,680)                           -
                                                            --------------               ---------------
                                                            $       81,463               $       279,685
                                                            ==============               ===============
</TABLE>


ENTERTAINMENT SEGMENT

        Entertainment Segment revenue increased $150 million, or 8%, from $1.84
billion to $1.99 billion.  In the entertainment networks, advertising revenue
increased $101 million, or 19%, from $526 million to $627 million, due to a
strong overall advertising market for TNT and TBS Superstation.  Subscription
revenue for the entertainment networks increased $67 million, or 22%, from $305
million to $372 million, as a result of higher rates as well as an increase in
both cable and home satellite viewers, primarily at TNT.  In the production and
distribution companies, home video revenue increased $55 million, or 19%, from
$293 million to $348 million, primarily due to an increase in domestic sales of
existing library product.  Television syndication revenue decreased $76
million, or 19%, from $399 million to $323 million, due to the impact of the
1995 initial

                                       14
<PAGE>   15

off-network syndication of Seinfeld, offset by additional off-network
syndication of the program in 1996 and an overall increase in New Line and
other Castle Rock product available in the television syndication markets.

        Operating profit for the Entertainment Segment decreased $169 million,
from an operating profit of $155 million to an operating loss of $14 million.
Operating profit for the entertainment networks increased $38 million, or 18%,
from $209 million to $247 million after the effect of intrasegment
eliminations,  primarily due to the revenue increases described above partially
offset by increased costs related to sports and entertainment programming.
Operating losses from the production and distribution companies increased $207
million from $54 million to $261 million.  The increase was substantially due
to disappointing results from domestic and international theatrical releases,
which resulted in write-offs of approximately $200 million.

NEWS SEGMENT

        News Segment revenue increased $62 million, or 11%, from $555 million
to $617 million. Advertising revenue increased $31 million, or 11%, from $274
million to $305 million, primarily due to the continued expansion of CNN
International, as well as from increased viewership during the 1996 U.S.
political conventions and presidential campaign. Subscription revenue increased
$23 million, or 10%, from $221 million to $244 million, due to an increase in
both cable and home satellite viewers at CNN and CNN International.

        Operating profit for the News Segment decreased $13 million, or 7%,
from $195 million to $182 million, as revenue increases were offset by
increased newsgathering costs associated with political coverage as well as
CNNfn and CNN-SI start-up costs.

OTHER SEGMENT

        Revenue for the Other Segment increased $42 million, or 28%, from $149
million to $191 million.  Atlanta Braves revenue increased $16 million
primarily due to an increase in the number of games played in 1996 compared to
the strike-shortened 1995 season.  Revenue at WCW increased $18 million,
primarily due to increased syndication and pay-per-view revenues.  Revenue at
the Omni Arena and Hotel in Atlanta increased $10 million due to increased
usage during the 1996 Olympic Games.  Overall, revenue increases were offset by
increased costs, primarily related to general corporate infrastructure
spending, resulting in no significant change in operating losses.

EQUITY IN LOSS OF UNCONSOLIDATED ENTITIES/MISCELLANEOUS

        The Company's share of operating losses from unconsolidated entities
increased $5 million, due primarily to the inclusion in 1995 of the Atlanta
Hawks' allocation of $9 million in franchise fees from the NBA's admission of
two new teams starting in the 1995-96 season, offset by increased earnings from
SportSouth Network, Ltd. and improved operations at n-tv, a 24-hour German news
network.

         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 original proceeds were used to repay
amounts outstanding under the Company's unsecured revolving credit facilities.
The Company recognized costs of approximately $11 million for the nine month
period

                                       15
<PAGE>   16

ended September 30, 1996 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.

         The Company incurred approximately $9 million of expenses related to
the Transaction contemplated by the Merger Agreement.

        Consolidated interest expense decreased $18 million, from $141 million
to $123 million, primarily due to lower interest rates associated with the
Company's revolving credit facilities as well as increased interest income
associated with long-term receivables.

        As a result of the information discussed above, the Company reported a
net loss of $20 million for the nine months ended September 30, 1996 ($0.10 net
loss per common share).  This compares to net income of $83 million for the
nine months ended September 30, 1995 ($0.29 net income per common share and
common share equivalent).


                                       16
<PAGE>   17

PART II - OTHER INFORMATION



ITEM 1.  LEGAL PROCEEDINGS

Turner Broadcasting System, Inc., et al. v. Federal Communications Commission,
et al.

         On October 5, 1992, the Company filed suit in the United States
District Court for the District of Columbia (the "District Court") challenging
the provisions of the Cable Television Consumer Protection and Competition Act
of 1992 (the "1992 Act") that require cable television systems to devote up to
one-third or more of their channel capacity to the carriage of local television
stations and provide certain channel positioning rights to such stations.  The
provisions also grant television stations the right to require prior consent to
the retransmission by a cable operator of the station's broadcast signal.  The
Company's complaint alleges that these provisions infringe upon the free speech
rights of cable program networks and cable operators in violation of the First
Amendment of the United States Constitution.  Under a provision in the 1992
Act, the case was heard by a three-judge panel of the District Court.  On April
8, 1993, the District Court upheld the constitutionality of the provisions by a
2-1 vote. On June 17, 1994, the United States Supreme Court vacated the
District Court's ruling and remanded the case for further proceedings. On
December 12, 1995, the District Court, on remand, again upheld the
constitutionality of the provisions by a 2-1 vote.  On December 21, 1995, the
Company appealed the District Court's ruling to the United States Supreme
Court.  On February 20, 1996, the Supreme Court noted probable jurisdiction to
hear the Company's appeal and heard oral argument on October 7, 1996.  The
Company cannot predict the outcome of the litigation at this time.  The Company
is pursuing its claims.

Shareholder Litigation in Connection with Proposed Merger

         Seventeen actions were originally filed against the Company, Time
Warner, certain officers and directors of the Company, Time Warner or Time
Warner Entertainment Company, L.P., and other defendants, purportedly on behalf
of a class of the Company's shareholders, in connection with the merger
transaction involving the Company and Time Warner (the "Mergers").  Sixteen of
the seventeen complaints were filed in Superior Court, Fulton County, Georgia;
the other, which was filed in the Court of Chancery of the State of Delaware in
and for New Castle County, was subsequently dismissed voluntarily without
prejudice by the plaintiff.  Of the complaints filed in Georgia, fourteen were
filed prior to the approval of the Mergers on September 22, 1995 by the Boards
of Directors of Time Warner and the Company (Shigala v. Turner Broadcasting
Sys., Inc., et al., Case No. E-41502; Schrank v. R.E. Turner, et al., Case No.
E-41501; Lewis, et al. v. Turner Broadcasting Sys., Inc., et al., Case No.
E-41500; Silverstein and Silverstein v. Turner Broadcasting Sys., Inc., et al.,
Case No. E-41526; Strauss v. Turner Broadcasting Sys., Inc., et al., Case No.
E-41538; Hoffman v.  Ted Turner, et al., Case No. E-41544; Barry v. Turner
Broadcasting Sys., Inc., et al., Case No. E-41545; Mersel and Mersel v. R.E.
Turner, et al., Case No. E-41554; Friedland and Friedland v. Turner
Broadcasting Sys., Inc., et al., Case No. E-41562; Schwarzchild v. Turner
Broadcasting Sys., Inc., et al., Case No. E-41586; Turner and Hanson v. Turner
Broadcasting Sys., Inc., et al., Case No. E-041637; H. Mark Solomon v. Turner
Broadcasting Sys., et al., Case No. E-41685; Shores v. Turner Broadcasting
Sys., Inc., et al., Case No. E-41749; and Krim and Davidson v. Turner
Broadcasting Sys., Inc., et al., Case No. E-41779).  Two of

                                       17
<PAGE>   18

the complaints filed in Georgia were filed after the Mergers were approved
(Altman v. Turner Broadcasting Sys., Inc., et al., Case No. E-43205; and Joyce
v. Tele-Communications, Inc., et al., Case No. E-43321).  The plaintiff in
Altman filed a voluntary dismissal of that action without prejudice on November
10, 1995.

         On November 13, 1995, Judge Elizabeth Long, to whom all remaining
actions had been assigned, consolidated all actions except the Joyce action.
On December 20, 1995, the defendants filed answers in response to the Second
Amended Complaint (the "Second Amended Complaint") previously filed in Lewis on
November 1, 1995.

         On January 19, 1996, the defendants in these actions filed a Motion
for Judgment on the Pleadings on all claims asserted in the Second Amended
Complaint on the grounds that, under Georgia law, the valid grant of
dissenters' rights to the Company's shareholders with respect to the merger
involving the Company (the "TBS Merger") prohibits plaintiffs from maintaining
the claims asserted in the Second Amended Complaint.  On January 31, 1996, the
Court consolidated the Joyce action with the other consolidated actions, and
ordered plaintiffs to file a consolidated amended complaint.  Additionally, the
Court stayed discovery in these consolidated actions until the Court rules on
the Defendants' Motion for Judgment on the Pleadings.

         On February 29, 1996, plaintiffs filed their Third Amended
Consolidated Supplemental and Derivative Class Action Complaint (the "Third
Amended Complaint").  The Third Amended Complaint, which includes a derivative
claim, alleged, among other things, that the terms of the TBS Merger are unfair
to the Company's shareholders and that the defendants have breached or aided
and abetted the breach of fiduciary common law and statutory duties owed to the
Company's shareholders.  The Third Amended Complaint further alleged that the
defendants acted fraudulently in negotiating and approving the TBS Merger, that
the approval of the TBS Merger by the Company's Board of Directors  was
fraudulently obtained, and that the vote of the Company's Board of Directors
approving the TBS Merger did not comply with the Company's Restated Articles of
Incorporation and Bylaws or with Georgia law.  Among other relief demanded, the
Third Amended Complaint sought damages, an injunction against the consummation
of the TBS Merger and related transactions, and an auction of the Company.  On
April 1, 1996, defendants in this action filed motions for judgment on the
pleadings on all claims asserted in the Third Amended Complaint (the
"Defendants' Motions").  On June 17, 1996, the Court transformed the
Defendants' Motions into a motion for summary judgment with respect to two of
the plaintiff's claims, and denied the plaintiff's request for discovery on
those claims.  The Court has not yet ruled on the Defendants' Motions.

         On September 13, 1996, Plaintiffs filed a Motion for Preliminary
Injunction requesting that the Court enjoin the consummation of the TBS Merger.
In this motion, Plaintiffs contended that the TBS Merger should be enjoined
because the six members of the Board of Directors of the Company who voted in
favor of the TBS Merger were interested in the transaction under the Company's
Bylaws and thus precluded from voting on the transaction.  On September 19,
1996, Plaintiffs then filed a Motion for Leave to File a Fourth Amended
Complaint.  Plaintiffs' proposed Fourth Amended Complaint contains essentially
the same claims asserted in the Third Amended Complaint as well as additional
allegations that the purported grant of certain option and severance
arrangements to four of the Company's directors who voted in favor of the TBS
Merger rendered those directors interested in the transaction under the
Company's Bylaws.  After

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limited discovery on the issues implicated by Plaintiffs' Motion for
Preliminary Injunction, the Court held a hearing on Plaintiffs' Motion on
October 2, 1996.  On October 3, 1996, the Court entered an Order denying
Plaintiffs' Motion for Preliminary Injunction.

         The Company intends to defend vigorously these actions.

         By letter dated October 20, 1995, plaintiffs in certain of the Georgia
actions described above made a demand upon the Company to repudiate the
agreement for the sale of the stock of Turner Sports Programming, Inc. which
owns a 44% interest in SportSouth Network, Ltd. and the fee authorized to be
paid by the Company to one of its advisors in connection with the Mergers as
corporate waste or, absent repudiation, to seek indemnification from any
officers or directors of the Company who authorized the challenged matters.
These plaintiffs indicated that a shareholders' derivative suit seeking
injunctive relief would be filed in less than 90 days, which claims were
asserted four days later in the first amended complaint filed in Lewis and
later asserted in the Second Amended Complaint, the Third Amended Complaint and
the proposed Fourth Amended Complaint.  The Company's Board of Directors has
established a committee of directors to investigate such claims.


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ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

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 September 6, 1996, the Company filed a Current Report on Form 8-K
which described (i) the previously reported transactions contemplated by the
Amended and Restated Agreement and Plan of Merger, dated as of September 22,
1995, among the Company, Time Warner, TW Inc., Time Warner Acquisition Corp.
and TW Acquisition Corp. (the "Merger Agreement") as further amended by
Amendment No. 1, dated August 8, 1996, to the Merger Agreement and (ii) the
Agreement Containing Consent Order (including the Related Interim Agreement)
executed by the Company, Time Warner, Tele-Communications, Inc. and Liberty
Media Corporation and submitted to the Federal Trade Commission.


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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, 1996


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