##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549


FORM 10-Q

|      |  |                                                                                                                                          
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|[ x ] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934 for the quarterly period ended March 31, 2003, 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 number 001-12878

TIME WARNER ENTERTAINMENT COMPANY, L.P.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                   
|----------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 13-3666692
(I.R.S. Employer
Identification Number)

| |  |  |  | 
| |  |  |  | 

75 Rockefeller Plaza
New York, New York 10019
(212) 484-8000

(Address, including zip code, and telephone number, including
area code, of each registrants principal executive offices)

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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes
 [  ]  No [X]





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TABLE OF CONTENTS



|                                                                                      |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
|Item 4. Controls and Procedures                                                      
|CONSOLIDATED BALANCE SHEET                                                           
|CONSOLIDATED STATEMENT OF OPERATIONS                                                 
|CONSOLIDATED STATEMENT OF CASH FLOWS                                                 
|CONSOLIDATED STATEMENT OF PARTNERSHIP CAPITAL                                        
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                           
|SIGNATURES                                                                           
|CERTIFICATIONS                                                                       
|EXHIBIT INDEX                                                                        
|EX-99.1 SECTION 906 CERTIFICATION OF THE PEO/PFO                                     



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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY, L.P.

INDEX TO FORM 10-Q

|                              |                                                                                                  |  |  |      |  | 
|----------------------------- | ------------------------------------------------------------------------------------------------ |  |  | ---- |  | 
|                              |                                                                                                  |  |  | Page
|                              |                                                                                                  |  |  |     
|PART I. FINANCIAL INFORMATION |                                                                                                  |  |  |     
|                              | Managements discussion and analysis of results of operations
and financial condition            |  |  | 1    | 
|                              | Item
4.  Controls and Procedures                                                                 |  |  | 14   | 
|                              | Consolidated balance sheet at March 31, 2003 and
December 31, 2002                               |  |  | 15   | 
|                              | Consolidated statement of operations for the three
months ended March 31, 2003 and 2002          |  |  | 16   | 
|                              | Consolidated statement of cash flows for the three
months ended March 31, 2003 and 2002          |  |  | 17   | 
|                              | Consolidated statement of partnership capital for the three
months ended March 31, 2003 and 2002 |  |  | 18   | 
|                              | Notes to consolidated financial statements                                                       |  |  | 19   | 
|PART II. OTHER INFORMATION    |                                                                                                  |  |  |     
|                              | Item
1.  Legal Proceedings                                                                       |  |  | 35   | 
|                              | Item
6.  Exhibits and Reports on Form 8-K                                                        |  |  | 36   | 





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##### Table of Contents






TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

INTRODUCTION

Managements discussion and analysis of results of operations and
financial condition (MD&A) is provided as a supplement to the accompanying
consolidated financial statements and footnotes to help provide an
understanding of Time Warner Entertainment Company, L.P.s, (TWE or the
Company) financial condition, changes in financial condition and results of
operations. The MD&A is organized as follows:



| |  |  | Overview.This section provides a general description of TWEs
businesses, as well as recent developments that have occurred during
2003 or that the Company believes are important in understanding the
results of operations.                                                                                                                                                                                                                                                                     
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Financial statement presentation.This section provides a summary
of how the Companys operations are presented in the consolidated
financial statements.                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | Results of operations.This section provides an analysis of the
Companys results of operations for the three months ended March 31,
2003 relative to that of 2002.                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | Liquidity and capital resources.This section provides an analysis
of the Companys financial condition and cash flows as of and for the
three months ended March 31, 2003.                                                                                                                                                                                                                                                                                                                         
|
| |  |  | Market risk management and other.This section discusses how the
Company manages exposure to potential losses arising from adverse
changes in interest rates and changes in the market value of
investments.                                                                                                                                                                                                                                                                                        
|
| |  |  | Caution concerning forward-looking statements and risk factors.
This section provides a description of factors that could affect the
operations, business or financial results of the Company and how
certain forward-looking statements made by the Company in this report,
including throughout MD&A and in the consolidated financial statements,
are based on managements current expectations about future events and
are inherently susceptible to uncertainty and changes in circumstances.

OVERVIEW

Prior to
the restructuring discussed below, a majority of AOL Time Warner Inc.'s
(AOL Time Warner) interests in its filmed entertainment and cable segments, and a
portion of its interests in its networks segment, were held through
TWE. AOL Time Warner owned general and limited partnership interests
in TWE consisting of 72.36% of the pro rata priority capital and
residual equity capital, and 100% of the junior priority capital. The
remaining 27.64% limited partnership interests in TWE were held by
subsidiaries of Comcast Corp. (Comcast).

On
March 31, 2003, AOL Time Warner and Comcast completed the
restructuring of TWE (the TWE restructuring). As a result of
the TWE restructuring, AOL Time Warner acquired complete ownership of
TWEs content businesses, including Warner Bros., Home Box Office,
and TWEs interests in The WB Network, Comedy Partners
(Comedy Central) and the Courtroom Television Network
(Court TV) (collectively, the TWE Non-Cable
Businesses). Additionally, all of AOL Time Warners
interests in cable, including those that were wholly-owned and those
that were held through TWE are now controlled by a new subsidiary of
AOL Time Warner called Time Warner Cable Inc. (TWC). As
part of the TWE restructuring, AOL Time Warner received a 79%
economic interest in TWCs cable systems. TWE
is now a subsidiary of TWC.

In
exchange for its previous stake in TWE, Comcast: (i) received
AOL Time Warner preferred stock, which will be converted into $1.5
billion of AOL Time Warner common stock; (ii) received a 21.0%
economic interest in TWCs cable systems; and (iii) was
relieved of $2.1 billion of pre-existing debt at one of its
subsidiaries, which was incurred by TWC, as part of the restructuring.

Comcasts
21.0% economic interest in TWCs cable business is held through a 17.9% direct ownership interest in TWC
(representing a 10.7% voting interest) and a limited partnership
interest in TWE representing a 4.7% residual equity interest. AOL
Time Warners 79% economic interest in TWCs cable business
is held through an 82.1% ownership interest in TWC (representing an 89.3%
voting interest) and a partnership interest in TWE representing a 1%
residual equity interest. AOL Time Warner also holds a
$2.4 billion mandatorily redeemable preferred equity interest in TWE.

The
additional cable ownership interests acquired by AOL Time Warner in the TWE
restructuring, as well as Comcasts exchange of a portion of its
interest in TWE for a 17.9% interest in TWC, have been accounted for
as step acquisitions and are reflected in the accompanying balance
sheet as of March 31, 2003.

The
purchase consideration paid by AOL Time Warner in the TWE
restructuring was as follows (in millions):



|                                                                         |                              |        |       |       | 
|------------------------------------------------------------------------ | ---------------------------- | ------ | ----- | ----- | 
|Description                                                              |                              | Amount |      
|                                                                         |                              |        |      
|Debt incurred at TWC                                                     |                              | $      | 2,100 |      
|Issuance of AOLTW mandatorily convertible
    preferred stock to Comcast |                              |        | 1,500 |      
|Value of cable assets transferred to Comcast                             |                              |        | 1,000 |      
|Acquisition costs                                                        |                              |        | 44    |      
|                                                                         |                              |        |      
|                                                                         | Total purchase consideration |        | $     | 4,644 | 
|                                                                         |                              |        |      

Of the
$4.664 billion purchase consideration paid by AOL Time Warner, $880
million (i.e., $1.4 billion of the purchase consideration less $520
million which represents the book value of the net assets acquired) is
attributable to the incremental interest in the cable business
acquired. A
preliminary allocation of the purchase consideration has been
performed, and all the purchase consideration has been allocated to franchise
license intangible assets at TWE. In addition, the 17.9% interest in
TWC retained by Comcast was stepped up to fair value. At TWE, this
$2.362 billion adjustment is reflected as an increase in cable
franchise license intangibles and a corresponding increase to
contributed capital. The franchise license intangible assets will not
be amortized but will be tested for impairment on an annual basis. As
a result of AOL Time Warners acquisition of TWEs content
businesses (through Warner Communications Inc.), TWE has presented the TWE Non-Cable Businesses
as discontinued operations.

1



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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The
Companys operations primarily consist of selling video
programming and high speed data services to subscribers for a monthly
fee and related advertising services to a variety of local, regional
and national clients. Subscriber services are distributed through a
network of coaxial and fiber optic cables. As a result of the TWE
restructuring, TWE became a subsidiary of TWC, the second largest
operator of cable systems in the United States. TWC holds interests
in cable systems serving approximately 10.9 million basic cable
subscribers as of March 31, 2003 and December 31, 2002.
This total includes subscribers served by the systems owned directly
by TWEs continuing consolidated operations and
its directly held and managed unconsolidated cable joint ventures, as
well as subscribers served by systems outside of TWE that are
directly owned by TWC, however, managed by TWE.
As of March 31, 2003 and December 31, 2002, approximately
7.7 million basic subscribers were served by TWEs
directly owned continuing consolidated operations, which exclude TWEs
directly held and managed unconsolidated cable system joint ventures and the operations of TWC
which TWE manages, however, does not have an ownership interest. The financial
statements included in this report reflect the operations of
TWEs consolidated cable systems and its equity investments in
its cable system joint ventures, but exclude the results of
TWCs cable systems in which TWE does not have an ownership
interest.

Restructuring of
TWE  Advance/Newhouse Partnership

During 2002, TWE and the Advance/Newhouse Partnership (Advance/Newhouse)
restructured the TWE-Advance/Newhouse Partnership (TWE-A/N) resulting in
Advance/Newhouse assuming authority for day-to-day operations of certain
TWE-A/N cable systems (A/N Systems), subject to some exceptions. TWE will
continue to exercise various management functions with respect to these systems
including oversight of programming and certain engineering related services.
As a result, TWE deconsolidated the financial position and operating results of
the A/N Systems and has reflected the 2002 operating results as discontinued
operations.

FINANCIAL STATEMENT PRESENTATION

Revenue

The Companys revenues consist of video revenue, high-speed data revenue
and advertising revenue. Video revenue includes monthly fees for basic,
standard and digital services, together with related equipment rental charges,
such as set-top boxes, and charges for premium channels and subscription
video-on-demand services. Video revenue also includes installation, pay per
view and video-on-demand charges and franchise fees relating to video charges
collected on behalf of local franchise authorities. Several ancillary items
are also included within video revenue, such as commissions related to the sale
of merchandise by home shopping services and rental income earned on leasing of
antennae tower facilities. In each period presented, these ancillary items
constitute less than 2% of video revenue.

High-speed data revenue includes monthly subscriber fees from both
residential and commercial high-speed data subscribers, along with related
equipment rental charges, home networking fees, installation charges and, to
the extent collected, franchise fees relating to high-speed data services. As
a result of a March 2002 ruling of the Federal Communications Commission
(FCC), TWE stopped collecting all franchise fees on high-speed data services.
The Companys high-speed data revenue also includes fees received from the
unconsolidated cable system joint ventures and the A/N Systems.

Advertising revenue includes the fees charged to local, regional and
national advertising customers for advertising placed on the Companys video
and high-speed data media outlets. At the present time, substantially all of
the Companys advertising revenue is from its video outlets. TWE divides its
advertising revenue into three general categories: general third-party
advertising, program vendor advertising and related party advertising. General
third-party advertising represents local, regional and national advertising
spots sold to unaffiliated third parties who do not provide TWE with
programming. Program vendor advertising represents advertising spots sold to
unaffiliated third-party programming vendors to promote their channels,
including new channel launches. Related party advertising represents
advertising spots sold to other divisions of AOL Time Warner and its
affiliates, including AOL Time Warner affiliated programming vendors. Program
vendor and related party advertising can vary significantly from period to
period depending on the timing of channel launches and the marketing strategies
of the other AOL Time Warner affiliates.

2



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TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Costs and Expenses

Cost of revenues primarily includes video programming costs, including
fees paid to the programming vendors net of amounts received, high-speed data
costs and cable service related expenses including non-administrative employee
costs directly associated with maintenance or the delivery of products and
services to subscribers, franchise fees and other expenses. TWEs
programming agreements generally provide that the Company pays a monthly per
subscriber fee in respect of each programming service that it carries.

Selling, general and administrative costs include variable and
non-variable expenses not directly associated with maintenance or delivery of
products and services to subscribers, such as administrative salary costs,
advertising and marketing expenses, billings, repair and maintenance,
management fees paid to AOL Time Warner and other administrative overhead
costs, net of management fees received from unconsolidated cable system joint
ventures and TWC cable systems in which TWE does not have an
ownership interest.

EBITDA

The Company evaluates operating performance based on several factors,
including operating income (loss) before non-cash depreciation of tangible assets,
amortization of intangible assets and impairment write-downs related to
goodwill and intangible assets, or EBITDA. Management considers EBITDA
to be an important indicator of the operational strength and performance of the
business, including the ability to provide cash flows to service debt and fund
capital expenditures. In addition, EBITDA eliminates the uneven effect of
considerable amounts of non-cash depreciation of tangible assets and
amortization  or write-downs of certain finite lived intangible assets, including goodwill, that were recognized in business combinations accounted for by the
purchase method. However, EBITDA should be considered in addition to, not as a
substitute for, operating income (loss), net income (loss) and other measures
of financial performance reported in accordance with accounting
principles generally accepted in the United States and may not be comparable to
 similarly titled measures
used by other companies.

RESULTS OF OPERATIONS

Quarter ended March 31, 2003 compared to quarter ended March 31, 2002

Revenues.The Companys revenues increased to $1.547 billion in 2003,
compared to $1.414 billion in 2002. This increase was due to
higher rates (reflecting higher programming costs and an increase in programming choices
offered to subscribers) and increases in high-speed data, digital cable and
basic cable subscribers, partially offset by a decrease in advertising revenue.
Revenues by category were as follows (in millions):

|                |  |                              |        |                     |  |   |       |   |  |   |     |   |  |  |     |    |  | 
|--------------- |  | ---------------------------- | ------ | ------------------- |  | - | ----- | - |  | - | --- | - |  |  | --- | -- |  | 
|                |  | Three Months Ended March 31, |        | Increase (decrease)
|                |  |                              |        |                    
|                |  | 2003                         |        | 2002                |  | $ |       | % |  |  
|                |  |                              |        |                     |  |   |       |   |  |  
|Video           |  |                              | $1,181 |                     |  | $ | 1,085 |   |  | $ | 96  |   |  |  | 9   | %  |  | 
|High-speed data |  |                              | 280    |                     |  |   | 201   |   |  |   | 79  |   |  |  | 39  | %  |  | 
|Advertising     |  |                              | 86     |                     |  |   | 128   |   |  |   | (42 | ) |  |  | (33 | %) |  | 
|                |  |                              |        |                     |  |   |       |   |  |   |     |   |  |  |     |    |  | 
|Total Revenue   |  |                              | $1,547 |                     |  | $ | 1,414 |   |  | $ | 133 |   |  |  | 9   | %  |  | 
|                |  |                              |        |                     |  |   |       |   |  |   |     |   |  |  |     |    |  | 

Total video revenue increased by $96 million, or 9%, over 2002. This
growth was predominantly attributable to higher rates and, to a lesser extent,
an increase in digital and basic subscribers. Consolidated basic video
subscribers increased by 108,000 to 7.7 million at March 31, 2003, as compared
to 7.6 million at March 31, 2002. Consolidated digital video subscribers, who
are included in the Companys 7.7 million basic video subscribers, increased by
653,000, or 32%, to 2.7 million at March 31, 2003, as
compared to 2.0 million at
March 31, 2002.

High-speed data revenue increased by $79 million, or 39%, over 2002,
primarily due to growth in high-speed data subscribers. From March 31, 2002 to
March 31, 2003, total consolidated and managed residential high-speed
data subscribers increased by 964,000 to 2.0 million subscribers. During
the same period, consolidated and

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TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

managed commercial high-speed data accounts
increased by 40,000 accounts to 90,000 accounts at March 31, 2003. Residential
high-speed data penetration of consolidated and managed systems increased from
10% of eligible homes passed at March 31, 2002 to 15% of eligible homes passed
at March 31, 2003. TWE expects continued growth in high speed
data subscribers and revenue, but at a lower rate as penetration
increases.

Total
advertising revenues declined by $42 million, or 33%, compared to 2002
primarily due to a decline in related party and program vendor advertising. General third-party
advertising revenue increased by 15% from $71 million in 2002 to $82 million in
2003 due to an increase in advertising rates and an increase in advertising
inventory available for sale. Program vendor advertising decreased from $34
million in 2002 to $2 million in 2003 primarily due to fewer new channel
launches. Related party advertising revenue decreased from $23 million in 2002
to $2 million in 2003 primarily due to decreased advertising by America Online,
Inc., a wholly owned subsidiary of AOL Time Warner, (America
Online). Despite expected
increases in general third party advertising revenues, the Company expects
total advertising revenues to continue to decline substantially throughout 2003 due to a decrease
in related party and program vendor advertising.

Cost of revenues.Cost of revenues increased to $695 million in 2003,
compared to $637 million in 2002, primarily due to higher programming costs and
higher personnel costs associated with the deployment of new services,
partially offset by a decline in high-speed connectivity costs. The components
of cost of revenues were as follows (in millions):

|                  |       |   |                              |     |                     |   |     |     |   |   |     |    |  |  |     |    |  
|----------------- | ----- | - | ---------------------------- | --- | ------------------- | - | --- | --- | - | - | --- | -- |  |  | --- | -- | -
|                  |       |   | Three Months Ended March 31, |     | Increase (decrease)
|                  |       |   |                              |     |                    
|                  |       |   | 2003                         |     | 2002                |   | $   |     | %
|                  |       |   |                              |     |                     |   |     |     |  
|Video programming |       | $ | 340                          |     |                     | $ | 283 |     |   | $ | 57  |    |  |  | 20  | % 
|Employee          |       |   | 199                          |     |                     |   | 178 |     |   |   | 21  |    |  |  | 12  | % 
|High-speed data   |       |   | 35                           |     |                     |   | 59  |     |   |   | (24 | )  |  |  | (41 | %)
|Other             |       |   | 121                          |     |                     |   | 117 |     |   |   | 4   |    |  |  | 3   | % 
|                  |       |   |                              |     |                     |   |     |     |   |   |     |    |  |  |     |   
|                  | Total |   | $                            | 695 |                     |   | $   | 637 |   |   | $   | 58 |  |  |     | 9  | %
|                  |       |   |                              |     |                     |   |     |     |   |   |     |    |  |  |     |   

TWEs video programming costs increased by 20% in 2003. The majority of
this increase was attributable to two factors: first, sports programming cost
increases, which reflect launches of new sports services and contractual rate
increases for existing sports services; and second, the impact of having added
numerous non-sports services to many of the Companys lineups, including new services and expanded distribution of existing services.
Industry-wide programming cost increases (including for premium channels),
higher sales of premium services, the continuing migration of premium channels to the
standard tier and the launch of video-on-demand offerings also contributed to
these programming cost increases. Video programming costs have risen
in recent years and will continue to rise, although at a lower rate than during 2002,
primarily due to the expiration of introductory and promotional
periods under programming affiliation agreements, the need to obtain
additional quality programming for more extensive programming
packages, the migration of premium channels to the standard tier,
industry-wide programming cost increases (especially for sports
programming), and inflation  indexed or negotiated license fee
increases.

Employee costs rose in 2003 in part as a result of higher headcount
associated with customer care and new product initiatives. Merit-based salary
increases, cost-of-living increases and the increased cost of employee
benefits, including costs associated with group insurance and defined benefit
pension plans, also contributed to the increase in employee costs.

High-speed data costs, which are primarily associated with connectivity,
have decreased due to an industry wide decline in such connectivity costs.
Additionally, the Company incurred one-time contract termination costs in 2002
associated with its transition from third-party connectivity providers to
America Online.

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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Selling, general and administrative expenses.Selling, general and
administrative expenses increased to $272 million in 2003 from $246 million in
2002. This increase of $26 million, or 11%, over 2002 was primarily associated
with the roll-out of new products and services. The components of selling,
general and administrative expenses were as follows (in millions):

|               |       |   |                              |     |                     |   |     |     |   |   |    |    |  |  |    |    |  
|-------------- | ----- | - | ---------------------------- | --- | ------------------- | - | --- | --- | - | - | -- | -- |  |  | -- | -- | -
|               |       |   | Three Months Ended March 31, |     | Increase (decrease)
|               |       |   |                              |     |                    
|               |       |   | 2003                         |     | 2002                |   | $   |     | %
|               |       |   |                              |     |                     |   |     |     |  
|Employee       |       | $ | 138                          |     |                     | $ | 122 |     |   | $ | 16 |    |  |  | 13 | % 
|Administrative |       |   | 54                           |     |                     |   | 56  |     |   |   | (2 | )  |  |  | (4 | %)
|Advertising    |       |   | 48                           |     |                     |   | 39  |     |   |   | 9  |    |  |  | 23 | % 
|Other          |       |   | 32                           |     |                     |   | 29  |     |   |   | 3  |    |  |  | 10 | % 
|               |       |   |                              |     |                     |   |     |     |   |   |    |    |  |  |    |   
|               | Total |   | $                            | 272 |                     |   | $   | 246 |   |   | $  | 26 |  |  |    | 11 | %
|               |       |   |                              |     |                     |   |     |     |   |   |    |    |  |  |    |   

Employee costs increased due to an increase in headcount associated with
the roll-out of new services and increased subscriber transactions, partially
offset by headcount reductions in other areas of the business. Merit-based
salary increases, cost-of-living increases and the increased cost of employee
benefits, including costs associated with group insurance and pension benefits,
also contributed to the increase in employee costs. Advertising costs
increased in 2003 due to aggressive marketing of new products and services,
including the Now Anythings Possible marketing campaign, launched during the
fourth quarter of 2002, which focuses on heightened customer care and the
Companys broad range of products and services.

Reconciliation of Consolidated EBITDA to Operating Income and Net Income (Loss)

|                                                                                                  |  |                              |      |      |  |          |         |   |  |  |      |   
|------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---- | ---- |  | -------- | ------- | - |  |  | ---- | --
|                                                                                                  |  | Three Months Ended March 31, |      |      |  |         
|                                                                                                  |  |                              |      |      |  |         
|                                                                                                  |  | 2003                         |      | 2002 |  | % Change
|                                                                                                  |  |                              |      |      |  |         
|                                                                                                  |  | (in millions)                |      |      |  |         
|EBITDA                                                                                            |  | $                            | 580  |      |  | $        | 531     |   |  |  | 9    | % 
|Depreciation                                                                                      |  |                              | (282 | )    |  |          | (230    | ) |  |  | 23   | % 
|Amortization                                                                                      |  |                              | (2   | )    |  |          | (1      | ) |  |  | 100  | % 
|                                                                                                  |  |                              |      |      |  |          |         |   |  |  |      |   
|Operating income                                                                                  |  |                              | 296  |      |  |          | 300     |   |  |  | (1   | %)
|Interest expense, net                                                                             |  |                              | (77  | )    |  |          | (92     | ) |  |  | (16  | %)
|Income from equity investments, net                                                               |  |                              | 5    |      |  |          | 1       |   |  |  |     |   
|Minority
interest expense                                                                         |  |                              | (12  | )    |  |          | (7      | ) |  |  | 71   | % 
|                                                                                                  |  |                              |      |      |  |          |         |   |  |  |      |   
|Income before income taxes,
discontinued operations and
cumulative effect of an accounting change |  |                              | 212  |      |  |          | 202     |   |  |  | 5    | % 
|Income tax provision                                                                              |  |                              | (4   | )    |  |          | (2      | ) |  |  | 100  | % 
|                                                                                                  |  |                              |      |      |  |          |         |   |  |  |      |   
|Income before discontinued operations and
cumulative effect of an accounting change               |  |                              | 208  |      |  |          | 200     |   |  |  | 4    | % 
|Income from discontinued operations, net of tax                                                   |  |                              | 290  |      |  |          | 180     |   |  |  | 61   | % 
|Cumulative effect of accounting change                                                            |  |                              |     |      |  |          | (21,763 | ) |  |  | (100 | %)
|                                                                                                  |  |                              |      |      |  |          |         |   |  |  |      |   
|Net income (loss)                                                                                 |  | $                            | 498  |      |  | $        | (21,383 | ) |  |  |     |   
|                                                                                                  |  |                              |      |      |  |          |         |   |  |  |      |   

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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

EBITDA.EBITDA in 2003 increased 9% to $580 million from $531 million in
2002. EBITDA increased principally as a result of revenue gains, partially
offset by an increase in costs of revenues and selling, general, and
administrative expenses.

Depreciation.Depreciation increased to $282 million in 2003, from $230
million in 2002. This increase of $52 million, or 23%, compared to 2002 was
primarily due to a change in the nature of the Companys capital spending. A
majority of capital spending in recent years was related to cable system
upgrades, which were substantially completed in mid-2002. With the completion
of these upgrades, a greater portion of capital spending in recent years has
been dedicated to assets, such as customer premises equipment, with shorter
useful lives. Depreciation expense relating to these shorter-lived assets,
coupled with existing depreciation expense relating to the upgraded cable
systems, has resulted in increased overall depreciation expense.

Amortization expense.Amortization expense increased to $2 million from
$1 million in 2002 due to an increase in intangible assets associated with the
renewal of cable franchises.

Operating income.Operating income in 2003 decreased to $296 million from
$300 million in 2002 due to an increase in depreciation expense that was offset
in part by an increase in EBITDA.

Interest expense, net.Net interest expense decreased in 2003 to $77
million from $92 million in 2002. This decrease of $15 million, or 16%,
compared to 2002 was due to declining interest rates on variable rate debt,
coupled with lower overall debt levels.

Income from equity investments, net.The income from equity investments,
net increased to $5 million in 2003 compared to $1 million in 2002 due to an
increase in the earnings of the Companys unconsolidated joint ventures (i.e.,
Texas Cable Partners, L.P. and Kansas City Cable Partners, L.P.)

Minority interest expense.Minority interest expense, associated with
TWCs direct interest in TWE-A/N and Road Runner, was $12 million of expense in
2003, compared to $7 million of expense in 2002. This change primarily
reflects an increase in profitability in Road Runner in which TWC holds an
ownership interest.

Income tax provision.As a U.S. partnership, TWE is not subject to U.S.
federal income taxation. Income taxes of $4 million in 2003 and $2 million in
2002 have been provided for the operations of TWEs subsidiary corporations and
unincorporated business taxes.

Income before discontinued operations and cumulative effect of accounting
change. The net income from continuing operations before the cumulative effect
of an accounting change was $208 million in 2003 compared to $200 million in
2002. The 2003 results benefited from reduced interest expense and increased
income from equity investments, offset in part by decreased operating
income and increased minority interest expense.

Net income (loss).Net income was $498 million in 2003 compared to a net
loss of $21.383 billion in 2002. The 2002 net loss was due to the cumulative
effect of an accounting change of $21.763 billion. Excluding the cumulative
effect of an accounting change, 2002 net income would have been $380 million
compared to $498 million in 2003. This increase of $118 million over 2002 is
primarily due to an increase in income from discontinued content operations in 2003.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2003, TWE had $6.408 billion of total debt, including $2.4
billion of mandatorily redeemable preferred securities held by AOL Time Warner,
and $97 million of cash and cash equivalents, representing net debt of $6.311
billion, and partners capital of $23.137 billion. At December 31, 2002, TWE
had $6.952 billion of debt, and $840 million of cash and cash equivalents,
representing net debt of $6.112 billion and partners capital of $37.117
billion. As discussed in further detail below, management believes that the
Companys operating cash

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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

flow, cash and equivalents and borrowing capacity are sufficient to fund
capital and liquidity needs for the foreseeable future.

Cash Flows

Operating
activities. Operating cash flow from continuing operations increased 13% to $251 million for 2003 compared to $222 million for 2002 primarily driven by an increase in EBITDA, partially offset by an increase in working capital requirements.

Investing activities. The Company has invested
significant amounts of capital to upgrade the technological capability and reliability of its cable systems and to make selective investments in companies with operations within the cable industry. Cash used by investing activities of continuing operations decreased 5% to $358 million in 2003, compared to
$376 million in 2002 as a result of a slight decrease in capital
expenditures combined with a decreased level of investments and acquisitions. The Company spent
 $287 million and $297 million on capital expenditures from continuing operations in 2003 and 2002,
respectively. The majority of capital expenditures in 2003 and 2002 were dedicated to purchases of
customer premise equipment.

The Company anticipates a decrease in overall capital expenditures in full year 2003 from those in full year 2002. For the full year 2003,
 a smaller portion of capital expenditures will be dedicated to system upgrades
and rebuilds due to the substantial completion of the system upgrades in mid-2002. Management also
expects expenditures for customer premise equipment to decline over the next several years as the
Companys pace of adding high-speed data and digital subscribers
slows and the unit prices for set-top boxes, cable modems and DVRs decline.

Financing activities. Cash used by financing activities of continuing operations was $637 million for 2003
as compared to cash provided by financing activities from continuing operations of $169 million in 2002.
This increase in cash used by financing activities was driven by the repayment of debt as part of the TWE
restructuring, lower contributions, net from AOL Time Warner and
lower borrowings during the period.

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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Free Cash Flow

The Company evaluates operating performance based on free cash flow. Free
cash flow is defined as cash provided by operating activities less income
(loss) from discontinued operations, operating cash flows from discontinued
operations, capital expenditures, partnership distributions and principal
payments on capital leases. Management believes that free cash flow is useful
to investors in evaluating the Companys performance because it is a commonly
used financial analysis tool for measuring and comparing cable companies
liquidity, operating performance and leverage and due to the capital-intensive
nature of the cable business. Free cash flow should not be considered as an
alternative to net income (loss) as an indicator of performance or as an
alternative to net cash provided by operating activities as a measure of
liquidity, and may not be comparable to similarly titled measures used by other
companies. The Companys free cash flow decreased to $102 million outflow in
2003 from $75 million outflow in 2002 primarily due to increased partnership distributions and increased working capital
requirements, partially offset by an increase in EBITDA.





|                                             |                    |                                                                                             |      |                              |      |      |       |   |      |  
|-------------------------------------------- | ------------------ | ------------------------------------------------------------------------------------------- | ---- | ---------------------------- | ---- | ---- | ----- | - | ---- | -
|                                             |                    |                                                                                             |      | Three Months Ended March 31,
|                                             |                    |                                                                                             |      |                             
|                                             |                    |                                                                                             |      | 2003                         |      | 2002
|                                             |                    |                                                                                             |      |                              |      |     
|                                             |                    |                                                                                             |      | (in millions)               
|Cash provided by operations                  |                    | $                                                                                           | 622  |                              |      | $    | 1,304 |   |     
|                                             | Reconciling items: |                                                                                             |      |                              |     
|                                             |                    | Income from discontinued operations                                                         |      |                              | (290 | )    |       |   | (180 | )
|                                             |                    | Operating cash flow adjustments relating
to discontinued operations                         |      |                              | (81  | )    |       |   | (902 | )
|                                             |                    |                                                                                             |      |                              |      |      |       |   |     
|                                             |                    | Cash provided by continuing
operating activities                                            |      |                              | 251  |      |       |   | 222  |  
|                                             |                    | Capital expenditures from
continuing operations                                             |      |                              | (287 | )    |       |   | (297 | )
|                                             |                    | Partnership distributions and principal
payments on capital leases of
continuing operations |      |                              | (66  | )    |       |   |     |  
|                                             |                    |                                                                                             |      |                              |      |      |       |   |     
|Free
cash flow used by continuing operations |                    | $                                                                                           | (102 | )                            |      | $    | (75   | ) |     
|                                             |                    |                                                                                             |      |                              |      |      |       |   |     

Outstanding Debt and Mandatorily Redeemable Preferred Equity



| |   |  | As part of the TWE restructuring, the Companys capital structure was
restructured as follows:                                                                                               
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a portion of AOL Time Warners equity interest in TWE was
recapitalized into a $2.4 billion mandatorily redeemable preferred equity interest in TWE and a 1% residual equity interest in TWE;
|
| |  |  | all outstanding amounts borrowed
by TWE and its subsidiaries under a previously existing bank credit facility were extinguished;                                                             
|
| |  |  | the Company settled all previous amounts due to AOL Time Warner;                                                                                                                             
|
| |  |  | the Company borrowed $600 million under its new Senior Revolving
Bank Credit Facility described in more detail in Note 8 to the
unaudited consolidated financial statements; and             
|
| |  |  | ownership in the Company (based on
common stock residual interests) is now held indirectly by TWC (94.3%), AOL Time
Warner (1.0%) and Comcast (4.7%).                                        

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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION



| |  |  | Debt and mandatorily redeemable preferred equity, as of March 31, 2003,
includes the following components:
| |  |  | ----------------------------------------------------------------------------------------------------------

|                                                                            |  |                  |       |               |  |          |       |      |  |                 |            | 
|--------------------------------------------------------------------------- |  | ---------------- | ----- | ------------- |  | -------- | ----- | ---- |  | --------------- | ---------- | 
|                                                                            |  | Outstanding Debt |       |               |  |          |       |      |  |                
|Facility                                                                    |  | (millions)       |       | Interest Rate |  | Maturity
|                                                                            |  |                  |       |               |  |         
|TWE public debt (a)                                                         |  | $                | 3,390 |               |  |          | 7.50  | %(d) |  |                 | 2008- 2033 | 
|Senior Revolving Bank
Credit Facility (b)                                   |  |                  | 600   |               |  |          | 1.835 | %(e) |  | January 7, 2004
|Mandatorily redeemable preferred
equity (c)                                 |  |                  | 2,400 |               |  |          | 8.059 | %    |  | April 1, 2023  
|Capital leases and other (including $6
million of debt due within one
year) |  |                  | 18    |               |  |          |       |      |  |                 |            | 
|                                                                            |  |                  |       |               |  |          |       |      |  |                 |            | 
|Total debt and preferred
equity                                             |  | $                | 6,408 |               |  |          |       |      |  |                 |            | 
|                                                                            |  |                  |       |               |  |          |       |      |  |                 |            | 



---

|(a) |  | Includes an unamortized fair value adjustment of approximately $190
million as of March 31, 2003, recorded in connection with the AOL Time
Warner merger, which is being amortized as a reduction of interest
expense over the term of the debt.  
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | The Senior Revolving Bank Credit Facility has a total committed
availability of $1.5 billion and matures on January 7, 2004, with an
option to extend its maturity for one year.                                                                  
|   
|(c) |  | The preferred equity of TWE held by AOL Time Warner pays cash
distributions at an annual rate equal to 8.059% of its face value on a
quarterly basis. The preferred equity matures and is required to be
redeemed in cash by TWE on April 1, 2023.
|   
|(d) |  | Calculated as a weighted average
interest rate of the various public debt issuances outstanding.                                                                                                                                                  
|   
|(e) |  | Interest rate is determined by
reference to TWEs credit rating and is
currently LIBOR plus 62.5 basis points.                                                                                                                                    

Contractual Commitments

Firm
Commitments.In addition to the debt and mandatorily redeemable
preferred equity, TWE has commitments under
various firm contractual arrangements to make future payments for goods and
services. These firm commitments secure future rights to various assets and
services to be used in the normal course of operations. For example, TWE is
contractually committed to make some minimum lease payments for the use of
property under operating lease agreements. In accordance with current
accounting rules, the future rights and obligations pertaining to these
contracts are not reflected as assets or liabilities on the consolidated balance sheet.

TWE and Comcast are also parties to a funding agreement that requires the
parties to provide additional funding to Texas Cable Partners, L.P. on a
month-to-month basis in an amount projected to enable Texas Cable Partners,
L.P. to comply with all of the covenants in its senior credit agreement and to
pay all of its liabilities and obligations as they mature during that month.
The Companys funding obligations under the funding agreement totaled $70
million for the year ended December 31, 2002. This funding
agreement expires on January 15, 2004 for 2003 funding shortfalls. The Companys projected funding obligation under this
agreement is reflected in the table below under Expected joint venture
funding commitments. Approximately $69 million of the Companys total
projected funding commitment of $86 million was funded in the first
quarter of 2003.

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TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following table summarizes the material firm commitments of
the
Companys continuing operations at December 31, 2002 and the timing and effect
that these obligations are expected to have on the Companys liquidity and cash
flow in future periods. This table excludes repayments on long-term debt. TWE
expects to fund these firm commitments with operating cash flow generated in
the normal course of business.

|                                                |       |   |                  |       |      |   |               |       |          |   |       |       |  |   |       |       | 
|----------------------------------------------- | ----- | - | ---------------- | ----- | ---- | - | ------------- | ----- | -------- | - | ----- | ----- |  | - | ----- | ----- | 
|                                                |       |   | Firm Commitments
|                                                |       |   |                 
|                                                |       |   |                  |       |      |   | 2004-         |       | 2007 and |   |       |       | 
|                                                |       |   | 2003             |       | 2006 |   | thereafter    |       | Total   
|                                                |       |   |                  |       |      |   |               |       |         
|                                                |       |   |                  |       |      |   | (in millions) |       |          |   |      
|Programming payments

(a)                       |       | $ | 1,018            |       |      | $ | 3,622         |       |          | $ | 4,199 |       |  | $ | 8,839 |      
|Expected joint venture funding

commitments (b) |       |   | 86               |       |      |   |              |       |          |   |      |       |  |   | 86    |      
|Operating leases

(c)                           |       |   | 39               |       |      |   | 103           |       |          |   | 142   |       |  |   | 284   |      
|Data processing

payments                       |       |   | 27               |       |      |   | 49            |       |          |   | 56    |       |  |   | 132   |      
|High speed data

connectivity                   |       |   | 40               |       |      |   | 40            |       |          |   |      |       |  |   | 80    |      
|Other                                           |       |   | 9                |       |      |   | 3             |       |          |   | 2     |       |  |   | 14    |      
|                                                |       |   |                  |       |      |   |               |       |          |   |       |       |  |   |       |      
|                                                | Total |   | $                | 1,219 |      |   | $             | 3,817 |          |   | $     | 4,399 |  |   | $     | 9,435 | 
|                                                |       |   |                  |       |      |   |               |       |          |   |       |       |  |   |       |      



|(a) |  | The Company has purchase commitments with various programming vendors in
order to provide video services to subscribers. The amounts of the
commitments reflected above are based on the number of consolidated
subscribers at December 31, 2002 applied to the per subscriber contractual
rates contained in the contracts that were in effect as of December 31,
2002 and revised to include significant contracts signed in March 2003.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | The projected funding commitments relate to Texas Cable Partners, L.P.                                                                                                                                                                                                                                                                                                                                                                    
|   
|(c) |  | Operating lease obligations primarily relate to the minimum lease rental
obligations for real estate and operating equipment in various locations.                                                                                                                                                                                                                                                                                        

Contingent Commitments.The Company also has various

contractual
arrangements that requires it to make payments or provide funding if specified
circumstances occur, which is referred to as contingent commitments. TWE
does not expect that the contingent commitments summarized in the table below
will result in any amounts being paid in the foreseeable future. The following
table summarizes contingent commitments at December 31, 2002 of the Companys
continuing operations. The timing of amounts presented in the table represents
when the maximum contingent commitment will expire and does not mean that TWE
expects to incur an obligation to make any payments during that time frame.

|                                                   |  |                        |    |      |  |               |       |          |  |   |     |  |  |   |       | 
|-------------------------------------------------- |  | ---------------------- | -- | ---- |  | ------------- | ----- | -------- |  | - | --- |  |  | - | ----- | 
|                                                   |  | Contingent Commitments
|                                                   |  |                       
|                                                   |  |                        |    |      |  | 2004-         |       | 2007 and |  |   |     | 
|                                                   |  | 2003                   |    | 2006 |  | thereafter    |       | Total   
|                                                   |  |                        |    |      |  |               |       |         
|                                                   |  |                        |    |      |  | (in millions) |       |          |  |  
|Guarantee
of debt(a)                               |  | $                      |   |      |  | $             | 2,100 |          |  | $ |    |  |  | $ | 2,100 | 
|Letters
of credit and other contingent commitments |  |                        | 25 |      |  |               |      |          |  |   | 107 |  |  |   | 132   | 
|                                                   |  |                        |    |      |  |               |       |         
|Total                                              |  | $                      | 25 |      |  | $             | 2,100 |          |  | $ | 107 |  |  | $ | 2,232 | 
|                                                   |  |                        |    |      |  |               |       |         



|(a) |  | Debt guarantee originated with the
TWE restructuring on March 31, 2003.
|--- |  | -----------------------------------------------------------------------

Prior to the TWE
restructuring, TWE had various contingent commitments, including
guarantees, related to the TWE Non-Cable Businesses. In connection
with the TWE restructuring, some of these commitments were not
transferred with their applicable Non-Cable Business and they remain
contingent commitments of TWE. AOL Time Warner and Warner
Communications Inc. have agreed, on a joint and several basis, to
indemnify TWE from and against any and all of these contingent
liabilities, but TWE remains a party to these commitments. These
contingent commitments are not included in the table above.

The Company has an
interest in and manages two cable joint ventures, Kansas City Cable
Partners, L.P. (serving approximately 300,000 basic subscribers as of
March 31, 2003) and Texas Cable Partners, L.P. (serving
approximately 1.2 million basic subscribers as of March 31,
2003), both of which are 50%-owned by TWE and 50%-owned by Comcast.
Under the terms of the two joint venture agreements, either partner
may after August 31, 2003 with respect to Kansas City Cable
Partners, L.P. and after December 31, 2003 with respect to Texas
Cable Partners, L.P., initiate buy-sell procedures based on the
market value of the joint venture interests. The Company does not
have current plans to initiate the buy-sell procedure in either joint
venture. If a buy-sell procedure were initiated by Comcast with
respect to either joint venture, TWE would have a choice either to
buy Comcasts interests in the joint venture or to sell its
interests in the joint venture to Comcast. However, in such an event,
the Company would be under no obligation to purchase Comcasts
interests. Additionally, in 2005, under the terms of both joint
venture agreements, either partner may trigger the dissolution of the
joint ventures resulting in the distribution of the net assets of the
joint ventures to the partners. Any actions to be taken by the
Company under the buy-sell or dissolution procedures will be
evaluated in the context of the Companys strategy for its Cable
operations and AOL Time Warners overall debt reduction plans.
These buy-sell arrangements are not reflected in the above table of
contingent commitments.

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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

TWE is required, at least quarterly, to make tax distributions to its
partners in proportion to their residual interests in an aggregate amount
generally equivalent to a percentage of TWEs taxable income.

As discussed in further detail below in the Equity Risk section, TWE is
required to make cash distributions to AOL Time Warner when the Companys
employees exercise previously issued AOL Time Warner stock options.

As part of the
TWE restructuring, there was $2.1 billion of pre-existing debt of a
Comcast subsidiary incurred by TWC in the form of a one-year term
loan with an optional extension for an additional year. This loan is
guaranteed by TWE and is included in the above table of contingent
commitments.

For so long as
the indebtedness of TWC and/or its subsidiaries and affiliates
(including TWE) is, in AOL Time Warners reasonable judgement, attributable
to AOL Time Warner in evaluating its credit profile, TWC, its
subsidiaries and affiliates will not, without the consent of AOL Time
Warner, create, incur or guarantee any indebtedness, including
preferred equity and rental obligations, if TWCs ratio of
indebtedness plus six times its annual rental expense to EBITDA plus
rental expense, or EBITDAR, then exceeds or would exceed
3:1.

MARKET RISK MANAGEMENT AND OTHER

Market risk is the potential loss arising from adverse changes in market
rates and prices, such as interest rates and changes in the market value of
investments.

Interest Rate Risk

Variable rate debt.As of March 31, 2003, TWE had an outstanding balance
of approximately $600 million of variable-rate debt. Based on the variable
rate obligations outstanding at March 31, 2003, each 25 basis point increase or
decrease in the level of interest rates would, respectively, increase or
decrease the annual interest expense and related cash payments by approximately
$2 million. These potential increases or decreases are based on simplifying
assumptions, including a constant level of variable rate debt for all
maturities and an immediate, across-the-board increase or decrease in the level
of interest rates with no other subsequent changes for the remainder of the
period.

Fixed rate debt.As of March 31, 2003, TWE had an outstanding balance of
approximately $5.790 billion of fixed-rate debt and preferred equity. Based on
the fixed-rate debt obligations outstanding at March 31, 2003, each 25 basis
point increase or decrease in the level of interest rates would, respectively,
increase or decrease the fair value of the fixed-rate debt by
approximately $166
million. These potential increases or decreases are based on simplifying
assumptions, including a constant level and rate of fixed-rate debt and an
immediate, across-the-board increase or decrease in the level of interest rates
with no other subsequent changes for the remainder of the period.

Equity Risk

The Company is also exposed to market risk as it relates to changes in the
market value of investments. TWE invests in equity instruments of private
companies for operational and strategic business purposes. Its investments are
subject to significant fluctuations in fair market value due to volatility of
the industries in which the companies operate. As of March 31, 2003, TWE had
$1.571 billion of investments primarily accounted for using the equity method
of accounting.

Some of TWEs employees were previously issued options to purchase shares
of AOL Time Warner common stock. TWE has agreed that, upon the
exercise of any of these options to purchase AOL Time Warner common
stock, TWE will reimburse AOL Time Warner in an amount equal to the excess of
the closing price of a share of AOL Time Warner common stock on the date of the
exercise of the option over the aggregate exercise price paid upon
exercise for each share of AOL Time Warner common stock. At March
31, 2003, TWE had accrued approximately $1 million of stock option distributions payable to
AOL Time Warner. That amount, which is not payable until the underlying
options are exercised, will be adjusted in subsequent accounting periods based on changes in the
quoted market prices for AOL Time Warners common stock.

11



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TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Inflation

Although the fees paid under some programming agreements with programming
vendors are adjusted based on the consumer price index, the Company does not
believe that its operations are materially affected by inflation.

Seasonality

TWEs business is subject to some seasonal trends in subscribers. The
Companys basic subscriber count tends to decline in the summer and return to
previous levels in the fall. This seasonality is largely due to college students
and other individuals who disconnect their cable service in the summer months
and reconnect in the fall.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS AND RISK FACTORS

The SEC encourages companies to disclose forward-looking information so
that investors can better understand a companys future prospects and make
informed investment decisions. This document contains such forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, particularly statements anticipating future growth in revenues, EBITDA
and cash flow. Words such as anticipates, estimates, expects,
projects, intends, plans, believes and words and terms of similar
substance used in connection with any discussion of future operating or
financial performance identify such forward-looking statements. Those
forward-looking statements are based on managements present expectations about
future events. As with any projection or forecast, they are inherently
susceptible to uncertainty and changes in circumstances, and TWE is under no
obligation to (and expressly disclaims any such obligation to) update or alter
its forward-looking statements whether as a result of such changes, new
information, future events or otherwise.

The Company operates in a highly competitive and rapidly changing business
that is customer and technology-driven. The Companys business is affected by
government regulation, economic, strategic, political and social conditions,
customer responses to new and existing products and services and technological
developments. The Companys actual results could differ materially from
managements expectations because of changes in such factors. Other factors and
risks could adversely affect the operations, business or financial results of
the Company in the future and could also cause actual results to
differ materially from
those contained in the forward-looking statements, including those identified
in the Companys other filings with the SEC and the following:



| |  |  | more aggressive than expected
competition from new technologies and other
distributors of video programming and high-speed data services such
as satellite, terrestrial wireless and DSL;                                                                                                                                                             
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | greater than expected increases in programming or other
costs, including costs of its new products and services, or
difficulty in passing such costs to the Companys subscribers;                                                                                                                                                                    
|
| |  |  | the unexpected loss of popular programming or exclusive
arrangements between programming providers and the Companys
competitors with respect to popular programming;                                                                                                                                                                                 
|
| |  |  | increases in government regulation of video programming rates
or other terms of service, such as digital must-carry,
forced access or common carrier requirements;                                                                                                                                                                                
|
| |  |  | government regulation of other services, such as high-speed data and voice services;                                                                                                                                                                                                                                                                  
|
| |  |  | increased difficulty in obtaining franchise renewals;                                                                                                                                                                                                                                                                                                 
|
| |  |  | the failure of new equipment, such as digital set-top boxes
or digital video recorders, or services, such as digital cable,
high-speed data services, voice services or video-on-demand, to
appeal to enough subscribers or to be available at prices
subscribers are willing to pay, to function as expected and to be
delivered in a timely fashion;
|
| |  |  | changes in technology and failure to anticipate technological
developments or to choose technologies appropriately;                                                                                                                                                                                                                                   

12



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TIME WARNER ENTERTAINMENT COMPANY, L.P.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION



| |  |  | fluctuations in spending levels by customers and advertisers;                                                                                                                                                                                                                                                                                                        
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | unanticipated changes in the level of capital expenditures;                                                                                                                                                                                                                                                                                                          
|
| |  |  | inability to realize the value of recorded intangibles
resulting in possible future impairments of the Companys cable
franchise intangibles that would affect its operating results;                                                                                                                                                                                
|
| |  |  | unanticipated funding obligations relating to some of the
Companys significant cable system joint ventures; and                                                                                                                                                                                                                                                     
|
| |  |  | the Companys overall financial strategy, including growth in
operations, maintaining its financial ratios and strong balance
sheet could be adversely affected by increased interest rates,
failure to meet earnings expectations, significant acquisitions or
other transactions, economic slowdowns and changes in the Companys
plans, strategies and intentions.

13



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##### Table of Contents






Item 4. Controls and Procedures

Within the 90-day period prior to the filing of this report, TWE, under the
supervision and with the participation of its management, including the Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the design and operation of TWEs disclosure controls and procedures (as
defined in Rule 13a-14(c) under the Securities Exchange Act of 1934 (the
Exchange Act)). Based on that evaluation, the Chief Executive Officer and the
Chief Financial Officer concluded that TWEs disclosure controls and procedures
are effective in timely making known to them material information relating to
TWE and TWEs consolidated subsidiaries required to be disclosed in TWEs
reports filed or submitted under the Exchange Act. TWE has investments in
certain unconsolidated entities. As TWE does not control these
entities, its disclosure controls and procedures with respect to such entities
are necessarily substantially more limited than those it maintains with respect
to its consolidated subsidiaries. There have been no significant changes in
TWEs internal controls or in other factors that could significantly affect the
internal controls subsequent to the date TWE completed its evaluation.

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TIME WARNER ENTERTAINMENT COMPANY, L.P.
CONSOLIDATED BALANCE SHEET

|                                                          |  |   |             |   |              |   |         |   | 
|--------------------------------------------------------- |  | - | ----------- | - | ------------ | - | ------- | - | 
|                                                          |  |   | March 31,   |   | December 31,
|                                                          |  |   | 2003        |   | 2002        
|                                                          |  |   |             |   |             
|                                                          |  |   | (millions) 
|                                                          |  |   | (unaudited) |   |              |   |        
|ASSETS                                                    |  |   |             |   |              |   |         |  
|Current Assets                                            |  |   |             |   |              |   |         |  
|Cash and cash equivalents                                 |  | $ | 97          |   |              | $ | 840     |  
|Receivables, less allowances of $43 and $46, respectively |  |   | 333         |   |              |   | 395     |  
|Receivables from affiliated parties                       |  |   | 14          |   |              |   | 82      |  
|Current assets of discontinued operations                 |  |   |            |   |              |   | 4,789   |  
|Prepaid expenses and other current assets                 |  |   | 61          |   |              |   | 32      |  
|                                                          |  |   |             |   |              |   |         |  
|Total current assets                                      |  |   | 505         |   |              |   | 6,138   |  
|Investments                                               |  |   | 1,571       |   |              |   | 1,508   |  
|Property, plant and equipment, net                        |  |   | 6,593       |   |              |   | 6,618   |  
|Other intangible assets not subject to amortization       |  |   | 23,692      |   |              |   | 20,429  |  
|Other intangible assets subject to amortization           |  |   | 61          |   |              |   | 63      |  
|Noncurrent assets of discontinued operations              |  |   |            |   |              |   | 19,568  |  
|Other assets                                              |  |   | 110         |   |              |   | 78      |  
|                                                          |  |   |             |   |              |   |         |  
|Total assets                                              |  | $ | 32,532      |   |              | $ | 54,402  |  
|                                                          |  |   |             |   |              |   |         |  
|LIABILITIES AND PARTNERS CAPITAL                         |  |   |             |   |              |   |         |  
|Current liabilities                                       |  |   |             |   |              |   |         |  
|Accounts payable                                          |  | $ | 166         |   |              | $ | 505     |  
|Deferred revenue and subscriber related liabilities       |  |   | 72          |   |              |   | 65      |  
|Payables to affiliated parties                            |  |   | 110         |   |              |   | 128     |  
|Accrued programming expense                               |  |   | 266         |   |              |   | 243     |  
|Debt due within one year                                  |  |   | 6           |   |              |   | 8       |  
|Current liabilities of discontinued operations            |  |   |            |   |              |   | 5,285   |  
|Other current liabilities                                 |  |   | 606         |   |              |   | 630     |  
|                                                          |  |   |             |   |              |   |         |  
|Total current liabilities                                 |  |   | 1,226       |   |              |   | 6,864   |  
|Long-term debt                                            |  |   | 4,002       |   |              |   | 6,944   |  
|Mandatorily redeemable preferred securities               |  |   | 2,400       |   |              |   |        |  
|Deferred income tax obligations                           |  |   | 9           |   |              |   | 8       |  
|Noncurrent liabilities of discontinued operations         |  |   |            |   |              |   | 2,378   |  
|Other liabilities                                         |  |   | 268         |   |              |   | 248     |  
|                                                          |  |   |             |   |              |   |         |  
|Total liabilities                                         |  |   | 7,905       |   |              |   | 16,442  |  
|Minority interest                                         |  |   | 1,490       |   |              |   | 843     |  
|                                                          |  |   |             |   |              |   |         |  
|Partners capital                                         |  |   |             |   |              |   |         |  
|Contributed capital                                       |  |   | 39,306      |   |              |   | 59,936  |  
|Accumulated other comprehensive loss, net                 |  |   | (101        | ) |              |   | (166    | )
|Partners deficit                                         |  |   | (16,068     | ) |              |   | (22,653 | )
|                                                          |  |   |             |   |              |   |         |  
|Total partners capital                                   |  |   | 23,137      |   |              |   | 37,117  |  
|                                                          |  |   |             |   |              |   |         |  
|Total liabilities and partners capital                   |  | $ | 32,532      |   |              | $ | 54,402  |  
|                                                          |  |   |             |   |              |   |         |  



| |  | See accompanying notes.
| |  | -----------------------

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TIME WARNER ENTERTAINMENT COMPANY, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31,
(Unaudited)

|                                                                                                                          |                                                  |   |            |       |      |   |         |       | 
|------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | - | ---------- | ----- | ---- | - | ------- | ----- | 
|                                                                                                                          |                                                  |   | 2003       |       | 2002
|                                                                                                                          |                                                  |   |            |       |     
|                                                                                                                          |                                                  |   | (millions)
|Revenues:                                                                                                                 |                                                  |   |            |       |      |   |         |      
|                                                                                                                          | Video                                            |   | $          | 1,181 |      |   | $       | 1,085 | 
|                                                                                                                          | High-speed data                                  |   |            | 280   |      |   |         | 201   | 
|                                                                                                                          | Advertising                                      |   |            | 86    |      |   |         | 128   | 
|                                                                                                                          |                                                  |   |            |       |      |   |         |       | 
|Total revenues (a)                                                                                                        |                                                  |   | 1,547      |       |      |   | 1,414   |      
|Costs and expenses:                                                                                                       |                                                  |   |            |       |      |   |         |      
|                                                                                                                          | Cost of revenues (a)                             |   |            | 695   |      |   |         | 637   | 
|                                                                                                                          | Selling, general and administrative expenses (a) |   |            | 272   |      |   |         | 246   | 
|                                                                                                                          | Depreciation                                     |   |            | 282   |      |   |         | 230   | 
|                                                                                                                          | Amortization of intangible assets                |   |            | 2     |      |   |         | 1     | 
|                                                                                                                          |                                                  |   |            |       |      |   |         |       | 
|Total costs and expenses                                                                                                  |                                                  |   | 1,251      |       |      |   | 1,114   |      
|                                                                                                                          |                                                  |   |            |       |      |   |         |       | 
|Operating income                                                                                                          |                                                  |   | 296        |       |      |   | 300     |      
|Interest expense, net (a)                                                                                                 |                                                  |   | (77        | )     |      |   | (92     | )    
|Income from equity investments, net                                                                                       |                                                  |   | 5          |       |      |   | 1       |      
|Minority interest expense                                                                                                 |                                                  |   | (12        | )     |      |   | (7      | )    
|                                                                                                                          |                                                  |   |            |       |      |   |         |       | 
|Income before taxes, discontinued operations
and cumulative effect of accounting change                                   |                                                  |   | 212        |       |      |   | 202     |      
|Income tax provision                                                                                                      |                                                  |   | (4         | )     |      |   | (2      | )    
|                                                                                                                          |                                                  |   |            |       |      |   |         |       | 
|Income before discontinued operations
and cumulative effect of accounting change                                          |                                                  |   | 208        |       |      |   | 200     |      
|Income from discontinued operations
before cumulative effect of accounting change net of tax of $63 and $37, respectively |                                                  |   | 290        |       |      |   | 180     |      
|Cumulative effect of accounting change                                                                                    |                                                  |   |           |       |      |   | (21,763 | )    
|                                                                                                                          |                                                  |   |            |       |      |   |         |       | 
|Net income (loss)                                                                                                         |                                                  | $ | 498        |       |      | $ | (21,383 | )    
|                                                                                                                          |                                                  |   |            |       |      |   |         |       | 



|(a) |  | Includes the following income (expenses) resulting from transactions with
related companies:
|--- |  | --------------------------------------------------------------------------------------------

|                                             |  |   |      |   |  |   |      |  
|-------------------------------------------- |  | - | ---- | - |  | - | ---- | -
|Revenues                                     |  | $ | 47   |   |  | $ | 37   |  
|Cost of revenues                             |  |   | (124 | ) |  |   | (116 | )
|Selling, general and administrative expenses |  |   | 19   |   |  |   | 12   |  
|Interest expense, net                        |  |   | 3    |   |  |   | 2    |  



| |  | See accompanying notes.
| |  | -----------------------

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TIME WARNER ENTERTAINMENT COMPANY, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
(Unaudited)

|                                                                           |                                           |   |            |        |      |   |         |        |  
|-------------------------------------------------------------------------- | ----------------------------------------- | - | ---------- | ------ | ---- | - | ------- | ------ | -
|                                                                           |                                           |   | 2003       |        | 2002
|                                                                           |                                           |   |            |        |     
|                                                                           |                                           |   | (millions)
|OPERATIONS                                                                 |                                           |   |            |        |      |   |         |       
|Net income (loss) (a)                                                      |                                           | $ | 498        |        |      | $ | (21,383 | )     
|Adjustments for noncash and nonoperating items:                            |                                           |   |            |        |      |   |         |       
|                                                                           | Cumulative effect of accounting change(b) |   |            |       |      |   |         | 21,763 |  
|                                                                           | Depreciation and amortization             |   |            | 284    |      |   |         | 231    |  
|                                                                           | Equity in income of investees             |   |            | (5     | )    |   |         | (1     | )
|Changes in operating assets and liabilities                                |                                           |   | (236       | )      |      |   | (208    | )     
|Adjustments relating to discontinued operations                            |                                           |   | 81         |        |      |   | 902     |       
|                                                                           |                                           |   |            |        |      |   |         |       
|                                                                           | Cash provided by operations               |   |            | 622    |      |   |         | 1,304  |  
|                                                                           |                                           |   |            |        |      |   |         |        |  
|INVESTING ACTIVITIES                                                       |                                           |   |            |        |      |   |         |       
|Capital expenditures                                                       |                                           |   | (287       | )      |      |   | (297    | )     
|Investment and acquisitions                                                |                                           |   | (71        | )      |      |   | (79     | )     
|Cash used by investing activities of discontinued operations               |                                           |   | (157       | )      |      |   | (154    | )     
|                                                                           |                                           |   |            |        |      |   |         |       
|                                                                           |                                           |   |            |        |      |   |         |        |  
|                                                                           | Cash used by investing activities         |   |            | (515   | )    |   |         | (530   | )
|                                                                          
|FINANCING ACTIVITIES                                                       |                                           |   |            |        |      |   |         |       
|Borrowings                                                                 |                                           |   | 592        |        |      |   | 980     |       
|Debt repayments                                                            |                                           |   | (1,454     | )      |      |   | (1,380  | )     
|Cash contributions (distributions) from/to AOL Time Warner subsidiary, net |                                           |   | 225        |        |      |   | 569     |       
|Cash used by financing activities of discontinued operations               |                                           |   | (385       | )      |      |   | (767    | )     
|                                                                           |                                           |   |            |        |      |   |         |       
|                                                                           | Cash used by financing activities         |   |            | (1,022 | )    |   |         | (598   | )
|                                                                           |                                           |   |            |        |      |   |         |       
|(Decrease) increase in cash and cash equivalents                           |                                           |   | (915       | )      |      |   | 176     |       
|Cash and cash equivalents at the beginning of period(c)                    |                                           |   | 1,012      |        |      |   | 250     |       
|                                                                           |                                           |   |            |        |      |   |         |       
|Cash and cash equivalents at end of period                                 |                                           | $ | 97         |        |      | $ | 426     |       
|                                                                           |                                           |   |            |        |      |   |         |       



|(a) |  | Includes net income (loss) from discontinued operations of $290 million
in 2003 and $(4.816) billion in 2002.
|--- |  | -------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Includes cumulative effect of
accounting change for discontinued operations of $4.996 billion in
2002.       
|   
|(c) |  | Includes cash and cash equivalents from discontinued operations of $172
million at December 31, 2002.        
|   
|    |  | See accompanying notes.                                                                                      

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TIME WARNER ENTERTAINMENT COMPANY, L.P.
CONSOLIDATED STATEMENT OF PARTNERSHIP CAPITAL
(Unaudited)

|                                                                                                                                                           |  |                 |         |      |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | ---- |  | - | ------- | -
|                                                                                                                                                           |  | Three Months   
|                                                                                                                                                           |  | Ended March 31,
|                                                                                                                                                           |  |                
|                                                                                                                                                           |  | (in millions)  
|                                                                                                                                                           |  | 2003            |         | 2002
|                                                                                                                                                           |  |                 |         |     
|BALANCE AT BEGINNING OF PERIOD                                                                                                                             |  | $               | 37,117  |      |  | $ | 65,405  |  
|Reallocation
of TWE goodwill to the AOL segment of AOL
Time Warner upon adoption of FAS 142                                                                |  |                 |        |      |  |   | (6,857  | )
|                                                                                                                                                           |  |                 |         |      |  |   |         |  
|Balance at the beginning of period, adjusted to give effect to the
America Online-Time Warner merger and reallocation
of goodwill upon adoption of FAS 142 |  |                 | 37,117  |      |  |   | 58,548  |  
|Allocation of purchase price in connection with
TWE restructuring                                                                                          |  |                 | 3,242   |      |  |   |        |  
|Conversion
of Partners Capital to mandatorily redeemable preferred equity
in connection with the TWE restructuring                                        |  |                 | (2,400  | )    |  |   |        |  
|Net income (loss)                                                                                                                                          |  |                 | 498     |      |  |   | (21,383 | )
|Other
comprehensive income (loss)                                                                                                                          |  |                 | 4       |      |  |   | (19     | )
|                                                                                                                                                           |  |                 |         |      |  |   |         |  
|Comprehensive
income (loss)                                                                                                                                |  |                 | 502     |      |  |   | (21,402 | )
|Other                                                                                                                                                      |  |                 | (257    | )    |  |   | 76      |  
|Distribution
of Non-Cable-Businesses to a subsidiary of AOL Time Warner                                                                                    |  |                 | (15,067 | )    |  |   |        |  
|                                                                                                                                                           |  |                 |         |      |  |   |         |  
|BALANCE AT END OF PERIOD                                                                                                                                   |  | $               | 23,137  |      |  | $ | 37,222  |  
|                                                                                                                                                           |  |                 |         |      |  |   |         |  



| |  | See accompanying notes.
| |  | -----------------------

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TIME WARNER ENTERTAINMENT COMPANY,
L.P.




NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


(UNAUDITED)






|1. |  | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
|-- |  | -------------------------------------------------
|  
|   |  | Description of Business                          



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Prior to the restructuring discussed below, a majority of AOL Time Warners
interests in its filmed entertainment and cable segments, and a portion of its interests in its networks segment, were held through TWE.
AOL Time Warner owned general and limited partnership interests in TWE consisting of 72.36% of the pro rata priority capital and residual
equity capital, and 100% of the junior priority capital. The remaining 27.64% limited partnership interests in TWE were held by
subsidiaries of Comcast Corp. (Comcast).                                                                                                                                                                                                                                                                                          
|
| | On March 31, 2003, AOL Time Warner and Comcast completed the
restructuring of TWE (the TWE restructuring). As a result
of the TWE restructuring, AOL Time Warner acquired complete ownership
of TWEs content businesses, including Warner Bros., Home Box
Office, and TWEs interests in The WB Network, Comedy Partners
(Comedy Central) and the Courtroom Television Network
(Court TV) (collectively, the TWE Non-Cable
Businesses). Additionally, all of AOL Time Warners
interests in cable, including those that were wholly-owned and those
that were held through TWE are now controlled by a new subsidiary of
AOL Time Warner called Time Warner Cable Inc. (TWC). As
part of the TWE restructuring, AOL Time Warner received a 79%
economic interest in TWCs cable systems. TWE
is now a subsidiary of TWC.
|
| | In exchange for
its previous stake in TWE, Comcast: (i) received AOL Time Warner
preferred stock, which will be converted into $1.5 billion of
AOL Time Warner common stock; (ii) received a 21.0% economic
interest in TWCs cable systems; and (iii) was relieved of
$2.1 billion of pre-existing debt at one of its subsidiaries,
which was incurred by TWC, as part of the restructuring.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | Comcasts
21.0% economic interest in TWCs cable business is held
through a 17.9% direct ownership interest in TWC (representing a
10.7% voting interest) and a limited partnership interest in TWE
representing a 4.7% residual equity interest. AOL Time Warners
79% economic interest in TWCs cable business is held through an 82.1%
ownership interest in TWC (representing an 89.3% voting interest) and
a partnership interest in TWE representing a 1% residual equity
interest. AOL Time Warner also holds a $2.4 billion mandatorily
redeemable preferred
equity interest in TWE.                                                                                                                                                                                                                                      
|
| | The additional
cable ownership interests acquired by AOL Time Warner in the TWE restructuring,
as well as Comcasts exchange of a portion of its interest in
TWE for a 17.9% interest in TWC, have been accounted for as step
acquisitions and are reflected in the accompanying balance sheet as
of March 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | The purchase
consideration paid by AOL Time Warner in the TWE restructuring was as
follows (in millions):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|



|Description                                                                                   |  | Amount
|--------------------------------------------------------------------------------------------- |  | ------
|                                                                                              |  |       
|                                                                                              |  |       
|Debt incurred
at TWC                                                                          |  | $2,100
|Issuance of
AOLTW mandatorily convertible preferred stock to Comcast                          |  | 1,500 
|Value of cable
assets transferred to Comcast(a)                                               |  | 1,000 
|Acquisition
costs                                                                             |  | 44    
|                                                                                              |  |       
|Total
purchase consideration                                                                  |  | $4,644
|                                                                                              |  |       
|(a)   Based on our
analysis of discounted cash flow and comparison to comparable market
data.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Of the
$4.644 billion purchase consideration paid by AOL Time Warner,
$880 million (i.e., $1.4 billion of purchase consideration
less $520 million which represents the book value of the net
assets acquired) is attributable to the incremental interest in the
cable business acquired.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | A preliminary
allocation of the purchase consideration has been performed and all
of the purchase consideration has been allocated to franchise license intangible
assets at TWE. In addition, the 17.9% interest in TWC retained by
Comcast was stepped up to fair value. At TWE, this
$2.362 billion adjustment is reflected as an increase in cable
franchise license intangibles and a corresponding increase to
contributed capital. The franchise license intangible assets will not
be amortized but will be tested for impairment on an annual basis. As
a result of AOL Time Warners acquisition of TWEs content
businesses (through Warner Communications Inc.), TWE has presented the TWE Non-Cable Businesses
as discontinued operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | The
Companys operations primarily consist of selling video
programming and high speed data services to subscribers for a monthly
fee and related advertising services to a variety of local, regional
and national clients. Subscriber services are distributed through a
network of coaxial and fiber optic cables. As a result of the TWE
restructuring, TWE became a subsidiary of TWC, the second largest
operator of cable systems in the United States. TWC holds interests
in cable systems serving approximately 10.9 million basic cable
subscribers as of March 31, 2003 and December 31, 2002.
This total includes subscribers served by the systems owned directly
by TWEs continuing consolidated operations and
its directly held and managed unconsolidated cable joint ventures, as
well as subscribers served by systems outside of TWE that are
directly owned by TWC, however, managed by TWE. As of March 31, 2003
and December 31, 2002, approximately
7.7 million basic subscribers were served by TWEs directly
owned
continuing consolidated operations, which exclude TWEs directly
held and managed unconsolidated cable system joint ventures and the
operations of TWC which TWE manages, however, does not have an
ownership interest. The financial
statements included in this report reflect the operations of
TWEs consolidated cable systems and its equity investments in
its cable system joint ventures, but exclude the results of
TWCs cable systems in which TWE does not have an ownership
interest.



| |  | Basis of Presentation  
| |  | -----------------------
|
| |  | Discontinued Operations



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As part of the restructuring of TWE, AOL Time Warner acquired complete
ownership of the TWE Non-Cable Businesses. The TWE Non-Cable Businesses
have been reflected as discontinued operations for all periods presented.
Revenues from the discontinued operations of the TWE Non-Cable Businesses
totaled $2.780 billion and $2.352 billion for the three months ended March
31, 2003 and 2002, respectively. Net income (loss) from the discontinued
operations of the TWE Non-Cable Businesses, totaled $290 million and
$(4.815 billion) for the three months ended March 31, 2003 and 2002,
respectively.



| |                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During 2002, TWE and the Advance/Newhouse Partnership
(Advance/Newhouse) restructured the TWE-Advance/Newhouse Partnership
(TWE-A/N) resulting in Advance/Newhouse assuming authority for the
day-to-day operations of certain TWE-A/N cable systems (A/N
Systems), subject to some exceptions. As
a result, TWE deconsolidated

19



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TIME WARNER ENTERTAINMENT COMPANY,
L.P.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(UNAUDITED)






| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the financial position and operating results of these systems and has
reflected the 2002 operating results as discontinued operations. Revenues
and net loss from the discontinued operations of the A/N Systems totaled
$352 million and $1 million, respectively, for the three months ended
March 31, 2002.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In conjunction with the TWE-A/N restructuring, TWC effectively acquired
Advance/Newhouses ownership interest in Road Runner. As a result of this
acquisition and the concurrent termination of Advance/Newhouses minority
veto rights in Road Runner, TWE consolidated the financial position and
results of operations of Road Runner retroactive to the beginning of 2002.
Previously, the Company accounted for its investment in
Road Runner under the equity method of accounting as the minority
shareholder held certain veto rights that allowed it to participate in the
day-to-day operations of the Road Runner business.
|
| | The minority
interest recognized on TWEs balance sheet primarily represents
TWCs preferred and common ownership in TWE-AN and Road Runner.
In connection with the TWE restructuring, TWC contributed $662
million of cash to TWE-A/N. This contribution increased TWCs
preferred interest in TWE-A/N by $662 million to $976 million.                                                                                                                                                                                                                                                                                              



| |  | Interim Financial Statements
| |  | ----------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The accompanying consolidated financial statements are unaudited but,
in the opinion of management, contain all the adjustments (consisting of
those of a normal recurring nature) considered necessary to present fairly
the financial position and the results of operations and cash flows for the
periods presented in conformity with generally accepted accounting
principles applicable to interim periods. The accompanying unaudited
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements of TWE, included in its Annual
Report on Form 10-K for the year ended December 31, 2002, filed with the SEC
on March 28, 2003.



| |  | Basis of Consolidation
| |  | ----------------------



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The unaudited consolidated financial statements of TWE include 100% of
the assets, liabilities, revenues, expenses, income, loss and cash flows of
all companies in which TWE has a controlling voting interest. Intercompany transactions
between the consolidated companies have been eliminated.



|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- |  | ------------------------------------------
|  
|   |  | Cash and Cash Equivalents                 



| |                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cash and cash equivalents include money market funds, overnight
deposits and other investments that are readily convertible into cash and
have original maturities of three months or less. Cash equivalents are
carried at cost, which approximates fair value.



| |  | Accounting for Investments
| |  | --------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Investments in companies in which TWE has significant influence, but
less than a controlling voting interest, are accounted for using the equity
method. Significant influence is generally presumed to exist when TWE owns
between 20% and 50% of the investee. The effect of any changes in TWE
ownership interests resulting from the issuance of capital by consolidated
subsidiaries or unconsolidated cable television system joint ventures to
unaffiliated parties is included as an adjustment to partners capital.



| |  | Revenues and Costs
| |  | ------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys revenues are principally derived from video and high
speed data subscriber fees and advertising. Subscriber fees are recorded as
revenue in the period the service is provided and advertising revenues,
including advertising purchased by programmers, are recognized in the period
that the advertisements are exhibited. Video programming costs are recorded
as the services are provided. Launch fees received by the Company from
programming vendors are recognized as a reduction of expense over the life
of the related programming arrangement. Amounts received from programming
vendors representing the reimbursement of marketing costs are recognized as
a reduction of marketing expenses in the period such reimbursements are
received.

20



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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY,
L.P.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(UNAUDITED)






| |  | Gross Versus Net Revenue Recognition
| |  | ------------------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In the normal course of business, TWE may act as an intermediary or
agent with respect to payments received from third parties. For example,
TWE collects taxes on behalf of franchising authorities. The
accounting issue encountered in these arrangements is whether TWE should report revenue
based on the gross amount billed to the ultimate customer or on the net
amount received from the customer after payments to franchising
authorities. The Company has determined that these amounts should be
reported on a gross basis.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Determining whether revenue should be reported gross or net is based on
an assessment of whether TWE is acting as the principal in a transaction
or acting as an agent in the transaction. To the extent TWE acts as a
principal in a transaction, TWE reports as revenue the payments received on
a gross basis. To the extent TWE acts as an agent in a transaction, TWE
reports as revenue the payments received less commissions and other payments
to third parties on a net basis. The determination of whether TWE serves as
principal or agent in a transaction is judgmental in nature and based on an
evaluation of the terms of each arrangement. In determining whether TWE
serves as principal or agent in these arrangements TWE follows the guidance
in Emerging Issues Task Force (EITF) 99-19, Reporting Revenue Gross as a
Principal versus Net as an Agent.



| |  | Multiple-Element Arrangements
| |  | -----------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In the normal course of business, TWE may enter into multiple-element
transactions where it is simultaneously both a customer and a vendor with
the same counter-party (multiple element transactions). For example, when
negotiating the terms of programming purchase contracts from cable networks,
TWE may simultaneously negotiate for the sale of
advertising to the same cable network. These arrangements may be documented in
one contract or may be documented in separate contracts. Whether it is in
one contract or multiple contracts, these arrangements are considered to
have been negotiated simultaneously for accounting purposes. In accounting
for these types of arrangements the Company considered the guidance in the following authoritative literature:



| |  |  | APB Opinion No. 29, Accounting for Nonmonetary Transactions;                                                            
| | - |  | --------------------------------------------------------------------------------------------------------------------------
|
| |  |  | EITF 01-09, Accounting for Consideration Given by a Vendor to a Customer;                                               
|
| |  |  | EITF 00-21, Revenue Arrangements with Multiple Deliverables; and                                                        
|
| |  |  | "Staff Accounting Bulletin No. 101: Revenue Recognition in
Financial Statements - Frequently asked Questions and Answers.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Additionally, in November 2002, the EITF reached a consensus on EITF
02-16, Accounting for Consideration Received from a Vendor by a Customer.
The guidance in EITF 02-16 is consistent with TWEs historical accounting.
Specifically, EITF 02-16 presumes that cash consideration received from a
vendor, such as a cable network programmer, is a reduction of the price to
use the vendors products or services and therefore a reduction in cable
programming cost. However, this presumption is overcome when the cash
consideration represents a payment for assets or services, such as
advertising, delivered to the vendor, in which case the cash consideration
should be characterized as revenue when recognized in a customers income
statement. EITF 02-16 also provides that cash consideration paid by a
vendor that exceeds the estimated fair value of the benefits, such as
advertising received by the vendor, should be characterized in the
customers income statement as a reduction of cost of sales or programming
expense.



| |                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | With respect to programming and vendor advertising arrangements being
negotiated simultaneously with the same cable network, TWE assesses whether
each element of the arrangements was at fair value. The factors that the
Company considers in determining the individual fair values of the
programming and advertising vary from arrangement to arrangement and
include:



| |  |  | existence of a most-favored-nation clause or comparable
assurances as to fair market value with respect to programming;
| | - |  | -------------------------------------------------------------------------------------------------------------------------
|
| |  |  | comparison to fees under a prior contract;                                                                               

21



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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY,
L.P.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(UNAUDITED)






| |  |  | comparison to fees paid for similar networks;                                      
| | - |  | -----------------------------------------------------------------------------------
|
| |  |  | comparison to advertising rates
paid by other advertisers on the Companys systems.



| |  | Advertising
| |  | -----------



| |                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Advertising costs are expensed upon the first exhibition of related
advertisements. Advertising expense, net of reimbursements from
programmers, was approximately $48 million and $39 million for the three
months ended March 31, 2003 and 2002, respectively.



| |  | Accounting for Goodwill and Other Intangible Assets
| |  | ---------------------------------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 141, Business Combinations and Statement No. 142 Goodwill
and Other Intangible Assets (FAS 142). These standards change the
accounting for business combinations by, among other things, prohibiting the
prospective use of pooling-of-interests accounting. In addition, FAS 142
requires that, effective January 1, 2002, goodwill, including the goodwill
included in the carrying value of investments accounted for using the equity
method of accounting, and certain other intangible assets deemed to have an
indefinite useful life, ceased being amortized. The new rules also require
that goodwill and certain intangible assets be assessed for impairment using
fair value measurement techniques. See Note 5 for further discussion of the
adoption of FAS 142.



| |  | Property, Plant and Equipment
| |  | -----------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Property, plant and equipment are stated at cost. The Company incurs
expenditures associated with the construction and maintenance of its cable
systems. Costs associated with the construction of the cable transmission
and distribution facilities and new cable service installations are
capitalized. TWE capitalizes expenditures for tangible fixed assets having
a useful life of greater than one year. Capitalized costs typically include
direct material, direct labor, overhead and interest. Sales and marketing
costs, as well as the costs of repairing or maintaining existing fixed
assets, are expensed as incurred. Types of capitalized expenditures include
plant upgrades, drops (i.e., customer installations), converters and cable
modems. With respect to customer premise equipment, including converters
and cable modems, TWE capitalizes direct installation charges only upon the
initial deployment of such assets. All costs incurred in subsequent
disconnects and reconnects are expensed as incurred. Depreciation on these
assets is provided generally using the straight-line method over their
estimated useful life. Property, plant and equipment consists of:

|                               |       |   |            |       |              |   |              |       |  |            |  |  | 
|------------------------------ | ----- | - | ---------- | ----- | ------------ | - | ------------ | ----- |  | ---------- |  |  | 
|                               |       |   | March 31,  |       | December 31, |   | Estimated   
|                               |       |   | 2003       |       | 2002         |   | Useful Lives
|                               |       |   |            |       |              |   |             
|                               |       |   | (millions) |       |              |   |             
|Land
and buildings(a)          |       | $ | 386        |       |              | $ | 381          |       |  | 5-20 years
|Distribution systems           |       |   | 7,339      |       |              |   | 7,172        |       |  | 3-16 years
|Vehicles and other equipment   |       |   | 565        |       |              |   | 549          |       |  | 3-10 years
|Construction in progress       |       |   | 528        |       |              |   | 523          |       |  |            |  | 
|                               |       |   |            |       |              |   |              |       |  |            |  | 
|                               |       |   | 8,818      |       |              |   | 8,625        |       |  |            |  | 
|Less: Accumulated depreciation |       |   | (2,225     | )     |              |   | (2,007       | )     |  |            |  | 
|                               |       |   |            |       |              |   |              |       |  |            |  | 
|                               | Total |   | $          | 6,593 |              |   | $            | 6,618 |  |            |  |  | 
|                               |       |   |            |       |              |   |              |       |  |            |  | 



|(a) |  | Land is not depreciated.
|--- |  | ------------------------



| |  | Computer Software
| |  | -----------------



| |                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | TWE capitalizes certain costs incurred for the development of internal
use software. These costs, which include the costs associated with coding,
software configuration, upgrades and enhancements are included in property,
plant and equipment in the accompanying consolidated balance sheet. Such
costs are depreciated on a straight-line basis over 3 to 5 years.

22



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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY,
L.P.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(UNAUDITED)






| |  | Valuation of Long-Lived Assets
| |  | ------------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company periodically reviews the carrying value of its long-lived
assets, including property, plant and equipment, whenever events or changes
in circumstances indicate that the carrying value may not be recoverable.
To the extent the estimated future cash inflows attributable to the asset,
less estimated future cash outflows, are less than the carrying amount, an
impairment loss is recognized to the extent that the carrying value of such
asset is greater than its fair value.



| |  | Cable Franchises
| |  | ----------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cable franchises include the value attributed to agreements with local
authorities that allow access to homes and businesses in cable services
areas acquired in connection with a business combination. Following the
adoption of FAS 142 in the first quarter of 2002, cable franchises
capitalized in purchase business combinations are no longer amortized but
are now subject to an annual review for impairment. Other costs incurred to
negotiate and renew cable franchise agreements are generally capitalized
and amortized over the term of such franchise agreements.



| |  | Stock Options
| |  | -------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | TWE employees participate in various AOL Time Warner stock option
plans. In accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related
interpretations, compensation cost for stock options granted to employees is
recognized in income based on the excess, if any, of the quoted market price
of the stock at the grant date of the award over the amount an employee must
pay to acquire the stock. Generally, the exercise price for stock options
granted to employees equals or exceeds the fair market value of AOL Time
Warner common stock at the date of grant, thereby resulting in no
recognition of compensation expense by the Company. For awards that
generate compensation expense as defined under APB 25, the Company
calculates the amount of compensation expense and recognizes the expense
over the vesting period of the award.



| |                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Had compensation cost for AOL Time Warners stock option plans been
determined based on the fair value method set forth in FASB Statement No.
123, Accounting for Stock-Based Compensation (FAS 123), the Companys
net income would have been as follows:

|                               |                                                                                                                 |   |                              |     |      |   |         |     |  
|------------------------------ | --------------------------------------------------------------------------------------------------------------- | - | ---------------------------- | --- | ---- | - | ------- | --- | -
|                               |                                                                                                                 |   | Three Months Ended March 31,
|                               |                                                                                                                 |   |                             
|                               |                                                                                                                 |   | 2003                         |     | 2002
|                               |                                                                                                                 |   |                              |     |     
|                               |                                                                                                                 |   | (millions)                  
|Net
income (loss) as reported: |                                                                                                                 | $ | 498                          |     |      | $ | (21,383 | )  
|                               | Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards |   |                              | (62 | )    |   |         | (88 | )
|                               |                                                                                                                 |   |                              |     |      |   |         |    
|Pro
forma net income (loss)    |                                                                                                                 | $ | 436                          |     |      | $ | (21,471 | )   |  
|                               |                                                                                                                 |   |                              |     |      |   |         |    



| |  | Segments
| |  | --------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | FASB Statement No. 131, Disclosure about Segments of an Enterprise
and Related Information, requires public companies to disclose certain
information about their reportable operating segments. Operating segments
are defined as components of an enterprise for which separate financial
information is available and is evaluated on a regular basis by the chief
operating decision maker in deciding how to allocate resources to an
individual segment and in assessing performance of the segment. Since the
Companys continuing operations provide a variety of services over the same
means of delivery, management has determined the Company has only one
reportable segment.

23



---



##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY,
L.P.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(UNAUDITED)






| |  | Use of Estimates
| |  | ----------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The preparation of the accompanying unaudited consolidated financial
statements requires management to make estimates and assumptions that
affect the amounts reported in the unaudited consolidated financial
statements and footnotes thereto. Actual results could differ from those
estimates. Estimates are used when accounting for certain items such as
allowances for doubtful accounts, investments, depreciation and
amortization, asset impairment, non-monetary transactions and
contingencies. Allocation methodologies used to prepare the accompanying
unaudited consolidated financial statements are based on estimates and have
been described in the notes, where appropriate.



|3. |  | NEW ACCOUNTING STANDARDS
|-- |  | ------------------------
|  
|   |  | Stock-Based Compensation



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In December 2002, the FASB issued Statement No. 148, Accounting for
Stock-Based Compensation, Transition and Disclosure (FAS 148). FAS 148
provides alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee compensation.
FAS 148 also requires that disclosures of the pro forma effect of using the
fair value method of accounting for stock-based employee compensation be
displayed more prominently and in a tabular format. Additionally, FAS 148
requires disclosure of the pro forma effect in interim financial statements.
The transition and annual disclosure requirements of FAS 148 are effective
for fiscal years ended after December 15, 2002. The interim disclosure
requirements of FAS 148 are effective for interim periods beginning after
December 15, 2002. The adoption of the provisions of
FAS 148 did not have an impact on the Companys consolidated financial statements.
However, the Company has modified its disclosures as required.



| |  | Exit and Disposal Activities
| |  | ----------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (FAS 146). FAS 146 nullifies
the accounting for restructuring costs provided in EITF Issue No. 94-3
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). FAS 146 requires that a liability associated with an exit
or disposal activity be recognized and measured at fair value only when
incurred. In addition, one-time termination benefits should be recognized
over the period employees will render service, if the service period is
beyond a minimum retention period. FAS 146 is effective for exit or
disposal activities initiated after December 31, 2002. The application of
the provisions of FAS 146 did not have a material impact on the Companys
consolidated financial statements.



| |  | Multiple-Element Arrangements
| |  | -----------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In November 2002, the EITF reached a consensus on EITF No. 00-21,
Revenue Arrangements with Multiple Deliverables. EITF 00-21 provides
guidance on how to account for arrangements that involve the delivery or
performance of multiple products, services and/or rights to use assets. The
provisions of EITF 00-21 will apply to revenue arrangements entered into in
fiscal periods beginning after June 15, 2003. Also, as previously
discussed, in November 2002 the EITF reached a consensus on EITF 02-16,
Accounting for Consideration Received from a Vendor by a Customer. EITF
02-16 provides guidance on how a customer is to account for arrangements
where consideration is both paid to and received from a vendor. The
provisions of EITF 02-16 will apply to arrangements entered into after
December 31, 2002. The Company believes that its current accounting is
consistent with the provisions of both EITF 00-21 and EITF 02-16 and
therefore does not expect that the application of the provisions of EITF
00-21 and EITF 02-16 will have a material impact on the Companys
consolidated financial statements.



| |  | Guarantees
| |  | ----------



| |                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In November 2002, the FASB issued FASB Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45
requires that a liability be recorded on the guarantors balance sheet upon
issuance of a

24



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##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY,
L.P.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(UNAUDITED)






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | guarantee. In addition, FIN 45 requires disclosures about the
guarantees that an entity has issued, including a reconciliation of changes
in the entitys product warranty liabilities. The initial recognition and
initial measurement provisions of FIN 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002, irrespective
of the guarantors fiscal year-end. The disclosure requirements of FIN 45
are effective for financial statements of interim or annual periods ending
after December 15, 2002. The application of the provisions of FIN 45 did
not have a material impact on the Companys consolidated financial
statements.



|4. |  | AOL TIME WARNER MERGER AND RESTRUCTURING COSTS                   
|-- |  | -----------------------------------------------------------------
|  
|   |  | AOL Time Warner Merger Costs Capitalized as a Cost of Acquisition



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In connection
with the AOL Time Warner merger, TWE reviewed its
operations and implemented several plans to restructure its operations (the
Restructuring Plans). As part of these Restructuring Plans, TWE recorded
a restructuring liability of approximately $84 million during 2001. This
restructuring liability included costs to exit and consolidate certain
activities of TWE, as well as costs to terminate employees across various
TWE business units. Such liabilities were recognized as part of the AOL
Time Warner Merger which was recorded as a purchase business combination and
were included in the allocation of the cost to acquire Time Warner
Inc.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Of the total 2001 restructuring costs, $46 million related to work
force reduction and represented employee termination benefits and relocation
costs. Employee termination costs occurred across the TWE business units
and ranged from senior executives to line personnel. The number of
employees initially identified to be involuntarily terminated or relocated
approximated 1,200. Not all employees who were originally identified were
terminated as of December 31, 2002. Therefore a non-cash reduction to the
employee termination accrual of $13 million and a corresponding reduction in
goodwill was reflected in the fourth quarter of 2002. Since certain
employees can defer receipt of termination benefits for up to five years,
cash payments will continue after such employees have been terminated. The
remaining termination liability totaled $13 million as of March 31, 2003.
Approximately $3 million of this amount is included in other current
liabilities with the remainder included in other non-current
liabilities. The 2001 restructuring charge also included approximately $38
million of lease and contract termination costs. The remaining liability
for such exit costs was $2 million as of March 31, 2003 and is included in
other current liabilities.

25



---



##### Table of Contents



TIME WARNER ENTERTAINMENT COMPANY,
L.P.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued) (UNAUDITED)
   Selected information relating to the restructuring plans is as follows (in millions): Employee
    
    OtherTerminations
    
    Exit Costs
    
    TotalInitial accruals
    
    $
    46
    
    
    $
    38
    
    
    $
    84Cash paid - 2001
    
    
    (3
    )
    
    
    (15
    )
    
    
    (18
    )Liability as of December 31, 2001
    
    
    43
    
    
    
    23
    
    
    
    66Cash paid - 2002
    
    
    (15
    )
    
    
    (21
    )
    
    
    (36
    )Non-cash
reductions - 2002(a)
    
    
    (13
    )
    
    
    
    
    
    
    (13
    )Liability as of December 31, 2002
    
    
    15
    
    
    
    2
    
    
    
    17Cash paid - 2003
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Liability as of March 31, 2003
    
    $
    13
    
    
    $
    2
    
    
    $
    15  (a)
    Non-cash reductions represent adjustments to the
restructuring accrual and a corresponding reduction in goodwill,
as actual costs related to employee terminations and other exit
costs were less than originally estimated.  Restructuring Costs  During the
fourth quarter of 2002, the Company incurred and
accrued other restructuring costs of $13 million, which are included in
selling, general and administrative expense, related to the termination of approximately 210 employees across various TWE cable business
units. As of December 31, 2002, TWE had terminated all affected employees. Because certain affected employees can defer receipt of
termination benefits for up to five years, cash payments will continue after
such employees have been terminated. The remaining liability for
terminations in connection with the 2002 restructuring is approximately $4
million as of March 31, 2003, of which approximately $3 million is included
in other current liabilities. 26    Table of Contents  TIME WARNER ENTERTAINMENT COMPANY,
L.P. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 (UNAUDITED)
   5.
    
    GOODWILL AND OTHER INTANGIBLE ASSETS  As discussed in Note 2, in January 2002, TWE adopted FAS 142, which
requires companies to cease amortizing goodwill and certain intangible
assets with an indefinite useful life. Instead, FAS 142 requires that
goodwill and intangible assets deemed to have an indefinite useful life be
reviewed for impairment upon adoption of FAS 142 (January 1, 2002) and
annually thereafter.  Upon the adoption of FAS 142 in the first quarter of 2002, the
Companys continuing operations completed its initial impairment review and
recorded a non-cash charge of approximately $16.767 billion to reduce the
carrying value of goodwill arising from the AOL Time Warner Merger.
Such a charge is non-operational in nature and is reflected as a cumulative effect
of an accounting change associated with continuing operations in the
accompanying unaudited consolidated statement of operations. The impairment
charge was estimated using a combination of a discounted cash flow
methodology and review of market comparisons and recent transactions.  Prior to performing the review for impairment, FAS 142 required that
goodwill deemed to be related to an entity as a whole be assigned to all of
AOL Time Warners reporting units, including the reporting units of America
Online. This differs from the previous accounting rules where goodwill was
assigned only to the businesses of the company acquired. As a result,
approximately $6.857 billion of goodwill generated in the AOL Time Warner
Merger was reallocated from TWE to other segments of AOL Time Warner.  During the
fourth quarter of 2002, the Company performed its annual impairment review for goodwill and other intangible
assets with respect to its continuing operations and recorded an additional non-cash charge of approximately
$2.355 billion, which was recorded as a component of operating
loss. The impairment
charge was estimated using a combination of a discounted cash flow
methodology and review of market comparisons and recent transactions.  The impairment charges were non-cash in nature and did not affect the
Companys liquidity or, when combined with the impairment of goodwill of
other AOL Time Warner segments, result in non-compliance with any of AOL
Time Warners debt covenants.  In conjunction with the TWE restructuring, the purchase accounting
adjustments associated with AOL Time Warners 6% increased ownership
interest in the cable systems of TWE and Comcasts exchange of a portion of
its interest in TWE for an interest in TWC have been pushed down to TWEs
books. This pushdown resulted in an increase in TWEs cable franchises of
$3.242 billion as of March 31, 2003. 27    Table of Contents  TIME WARNER ENTERTAINMENT COMPANY,
L.P.NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued) (UNAUDITED)
   As of March 31, 2003 and December 31, 2002, the Companys other
intangible assets and related accumulated amortization included the
following (in millions): March 31, 2003
    
    December 31, 2002Accumulated
    
    
    
    
    
    
    
    
    
    AccumulatedGross
    
    Amortization
    
    Net
    
    Gross
    
    Amortization
    
    NetIntangible assets subject to amortizationRenewal of cable franchises
    
    $
    75
    
    
    $
    (58
    )
    
    $
    17
    
    
    $
    73
    
    
    $
    (57
    )
    
    $
    16Other intangible assets
    
    
    66
    
    
    
    (22
    )
    
    
    44
    
    
    
    68
    
    
    
    (21
    )
    
    
    47Subtotal
    
    $
    141
    
    
    $
    (80
    )
    
    $
    61
    
    
    $
    141
    
    
    $
    (78
    )
    
    $
    63Intangible assets not subject to amortizationCable franchises
    
    $
    24,948
    
    
    $
    (1,256
    )
    
    $
    23,692
    
    
    $
    21,685
    
    
    $
    (1,256
    )
    
    $
    20,429Total
    
    $
    25,089
    
    
    $
    (1,336
    )
    
    $
    23,753
    
    
    $
    21,826
    
    
    $
    (1,334
    )
    
    $
    20,492  The Company recorded amortization expense of $2 million for the three
months ended March 31, 2003. Based on the current amount of intangible
assets subject to amortization, the estimated amortization expense for each
of the succeeding five years is $8 million. As acquisitions and
dispositions occur in the future and as purchase price allocations are
finalized, these amounts may vary.  The Company recorded the following intangible assets in the three
months ended March 31, 2003: Amortization(in millions)
    
    PeriodRenewal of cable franchises
    
    $
    2
    
    
    10 to 15 yearsCable franchises, net(a)
    
    
    3,263
    
    
    IndefiniteTotal
    
    $
    3,265  (a)  Approximately $3.242 billion of the increase is associated with
the TWE restructuring.  6.
    
    PARTNERS CAPITAL  TWE is required to make distributions to reimburse the partners for
income taxes at statutory rates based on their allocable share of taxable
income and to reimburse AOL Time Warner for stock options granted to
employees of TWE based on the amount by which the market price of AOL Time
Warner common stock exceeds the option exercise price on the exercise date.
TWE accrues a stock option distribution and a corresponding liability with
respect to unexercised options when the market price of AOL Time Warner
common stock increases during the accounting period, and reverses
previously accrued stock option distributions and the corresponding
liability when the market price of AOL Time Warner common stock
declines. The stock option liability for the continuing operations of
TWE was approximately $1 million and $3 million as of
March 31, 2003 and December 31, 2002, respectively.
Additionally, $257 million was distributed to AOL Time Warner
for income taxes in the quarter ended March 31, 2003, of which
$66 million was related to the Companys continuing operations.
No tax distributions were made to the partners in the quarter ended
March 31, 2002.  7.
    
    INVESTMENTS AND JOINT VENTURES  The Company had
investments of $1.571 billion and $1.508 billion as of
March 31, 2003 and December 31, 2002, respectively. These investments are
comprised almost entirely of equity method investees. 28    Table of Contents  TIME WARNER ENTERTAINMENT COMPANY,
L.P. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 (UNAUDITED)
   At March 31, 2003 and December 31, 2002, investments accounted for
using the equity method primarily included: Texas Cable Partners, L.P. (50%
owned, approximately 1.2 million subscribers) and Kansas City Cable
Partners, L.P. (50% owned, approximately 300,000 subscribers).  During 2002, the value of these investments experienced a decline in
value and during the fourth quarter of 2002, the Companys management
determined that the decline in value was other-than-temporary and recorded
an impairment charge of $363 million. This charge was not recognized on the
statement of operations of the equity investees. The impairment charge of
$363 million was estimated using a combination of a discounted cash flow
methodology and review of market comparisons and recent transactions.  8.
    
    DEBT AND MANDATORILY REDEEMABLE PREFERRED EQUITY  A summary of
TWEs debt and mandatorily redeemable preferred equity as of March 31, 2003 and
December 31, 2002 is summarized below: Outstanding BorrowingsMarch 31,
    
    December 31,2003
    
    2002(millions)Debt due within one year
    
    $
    6
    
    
    $
    8Long-term debt:Amounts due to
AOL Time Warner
    
    
    
    
    
    
    2,084TWE Public Debt (a)
    
    
    3,390
    
    
    
    3,394Senior Revolving Bank Credit Facility
    
    
    6002002 Credit Agreement
    
    
    
    
    
    
    1,167Capital leases and other
    
    
    12
    
    
    
    299Total long-term debt
    
    
    4,002
    
    
    
    6,944Mandatorily Redeemable Preferred
Equity (8.059%)
    
    
    2,400
    
    
    
    Total debt and preferred equity
    
    $
    6,408
    
    
    $
    6,952  (a)
    Includes an unamortized debt premium of $190 million and $194
million as of March 31, 2003 and December 31, 2002, respectively.  In conjunction
with the TWE restructuring, a $4.0 billion 364-day revolving
bank credit facility that was entered into in 2002 (2002 Credit
Agreement) along with AOL Time Warner and certain of its
subsidiaries was
bifurcated into two separate amended and restated credit agreements. The
two facilities evidence the separate direct obligations of AOL Time Warner,
with aggregate commitments of $2.5 billion, and TWE, with aggregate
commitments of $1.5 billion. TWEs $1.5 billion facility, hereafter
referred to as the Senior Revolving Bank Credit Facility, matures on
January 7, 2004, with an option to extend the maturity for up to one year.
TWE-AN is not a borrower under the Senior Revolving Bank Credit Facility.
If TWC becomes a public registrant, TWC will become a
joint and several borrower under the Senior Revolving Bank Credit Facility.  Borrowings under the Senior Revolving Bank Credit Facility bear
interest at rates generally determined by reference to the credit rating of
TWE until TWC becomes a public registrant and a joint and several
borrower, thereafter such rate will be determined by reference to TWCs credit
rating. The borrowings currently bear interest at
the rate of LIBOR plus 0.525%. In addition, TWE is required to pay a
facility fee of 0.10% per annum on the aggregate commitments under the
Senior Revolving Bank Credit Facility and a usage fee of
0.0625% per annum on the outstanding balance of loans under this facility at
all times that the aggregate 29    Table of Contents  TIME WARNER ENTERTAINMENT COMPANY,
L.P. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 (UNAUDITED)
   of the outstanding balances are
less than or equal to $990 million, and 0.125% at all times that the aggregate of the outstanding
balances exceeds $990 million.  Borrowings under the Senior Revolving Bank Credit Facility may be used
for general corporate purposes, and unused capacity may be used in support
of commercial paper borrowings. This facility provides for same-day
funding and multi-currency capability. This facility contains, among other
covenants, financial covenants providing for a maximum ratio of consolidated
total debt (excluding amounts owing to preferred equity interests and net of
cash balances in excess of $25 million) to consolidated EBITDA of 5:1, and a minimum ratio of consolidated EBITDA to
consolidated cash interest expense of 2:1. The facility does not
contain any credit ratings-based defaults or covenants, nor any
ongoing covenants or representations specifically relating to a
material adverse change in the Companys financial condition or
results of operations.  TWE is no longer a co-borrower with AOL Time Warner or any of AOL Time
Warners other business segments under any credit facility.  In connection with the TWE restructuring, all amounts due to AOL Time
Warner and all outstanding TWE-A/N debt was extinguished, and $600 million of indebtedness was incurred under the new Senior Revolving
Bank Credit Facility.  Additionally, the Company issued $2.4 billion in mandatorily redeemable
preferred equity to a subsidiary of AOL Time Warner in conjunction with the
TWE restructuring. The issuance was a non-cash transaction. The preferred
equity bears an annual interest rate of 8.059% payable in cash quarterly.
The preferred equity matures and is required to be redeemed by TWE in cash
on April 1, 2023.  During 1992 and 1993, TWE issued debt publicly in a number of
offerings. The maturities of these outstanding issuances ranged from 10 to
40 years and the interest rates range from 7.25% to 10.15%.
Each of Warner Communications Inc. (a subsidiary of AOL Time Warner) and
American Television and Communications Corporation (a subsidiary of
AOL Time Warner) (the
Guarantors) has guaranteed a
pro rata portion of TWEs public and bank debt and accrued interest at
March 31, 2003, based on the relative fair value of the net
assets that each Guarantor (or its predecessor) contributed to
TWE prior to the TWE restructuring. Such indebtedness is recourse to each Guarantor only to
the extent of its guarantee. The indenture pursuant to which
TWEs public notes and debentures have been issued (the
Indenture) requires the majority consent of the holders
of the notes and debentures to terminate the Guarantor
Guarantees. There are generally no restrictions on the ability of the
Guarantors to transfer material assets, other than its interests in
TWE or TWC, to parties that are not Guarantors.  For so long as
the indebtedness of TWC and/or its subsidiaries and affiliates
(including TWE) is, in AOL Time Warners judgment, attributable
to AOL Time Warner in evaluating its credit profile, TWC, its
subsidiaries and affiliates will not, without the consent of AOL Time
Warner, create, incur or guarantee any indebtedness, including
preferred equity and rental obligations, if TWCs ratio of
indebtedness plus six times its annual rental expense to EBITDA plus
rental expense, or EBITDAR, then exceeds or would exceed
3:1.  9.
    
    COMMITMENTS AND CONTINGENCIES  Firm Commitments  In addition to
the debt and preferred equity, TWE has commitments under various firm
contractual arrangements to make future payments for goods and services.
These firm commitments secure future rights to various assets and services
to be used in the normal course of operations. For example, TWE is
contractually committed to make some minimum lease payments for the use of
property under operating lease agreements. In accordance with current
accounting rules, the future rights and obligations pertaining to these
contracts are not reflected as assets or liabilities on the consolidated balance sheet.  TWE and Comcast are also parties to a funding agreement that requires
the parties to provide additional funding to Texas Cable Partners, L.P. on a
month-to-month basis in an amount projected to enable Texas Cable Partners,
L.P. to comply with all of the covenants in its senior credit agreement and
to pay all of its liabilities and obligations as they mature during that
month. The Companys funding obligations under the funding agreement
totaled $70 million for the year ended December 31, 2002.
This funding agreement expires on January 15, 2004 for 2003
funding shortfalls. The Companys projected
funding obligation under this agreement is reflected in the table below
under Expected joint venture funding commitments.
Approximately $69 million of the Companys total projected
2003 funding commitment of $86 million was funded in the first
quarter of 2003. 30    Table of Contents  TIME WARNER ENTERTAINMENT COMPANY,
L.P. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 (UNAUDITED)
   The following table summarizes the material firm commitments of the
Companys continuing operations at December 31, 2002 and the timing and
effect that these obligations are expected to have on the Companys
liquidity and cash flow in future periods. This table excludes repayments
on long-term debt. TWE expects to fund these firm commitments with
operating cash flow generated in the normal course of business. Firm Commitments2004-
    
    2007 and2003
    
    2006
    
    thereafter
    
    Total(in millions)Programming payments (a)
    
    $
    1,018
    
    
    $
    3,622
    
    
    $
    4,199
    
    
    $
    8,839Expected joint venture funding commitments(b)
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    86Operating leases(c)
    
    
    39
    
    
    
    103
    
    
    
    142
    
    
    
    284Data processing payments
    
    
    27
    
    
    
    49
    
    
    
    56
    
    
    
    132High speed data connectivity
    
    
    40
    
    
    
    40
    
    
    
    
    
    
    
    80Other
    
    
    9
    
    
    
    3
    
    
    
    2
    
    
    
    14Total
    
    $
    1,219
    
    
    $
    3,817
    
    
    $
    4,399
    
    
    $
    9,435  (a)
    The Company has purchase commitments with various programming vendors
in order to provide video services to subscribers. The amounts of the
commitments reflected above are based on the number of consolidated
subscribers at December 31, 2002 applied to the per subscriber
contractual rates contained in the contracts that were in effect as of
December 31, 2002 and revised to include significant contracts signed in
March 2003.(b)
    The projected funding commitments relate to Texas Cable Partners,
L.P.(c)
    Operating lease obligations primarily relate to the minimum lease
rental obligations for real estate and operating equipment in various
locations.Contingent Commitments  The Company also has various contractual arrangements that requires it
to make payments or provide funding if specified circumstances occur, which
is referred to as contingent commitments. TWE does not expect that the
contingent commitments summarized in the table below will result in any
amounts being paid in the foreseeable future. The following table
summarizes contingent commitments of the Companys continuing operations at
December 31, 2002. The timing of amounts presented in the table represents
when the maximum contingent commitment will expire and does not mean that
TWE expects to incur an obligation to make any payments during that time
frame. Contingent Commitments2004-
    
    2007 and2003
    
    2006
    
    thereafter
    
    Total(in millions)Guarantee
of debt(a)
    
    $
    
    
    
    $
    2,100
    
    
    $
    
    
    
    $
    2,100Letters of credit and other
contingent commitments
    
    
    25
    
    
    
    
    
    
    
    107
    
    
    
    132Total
    
    $
    25
    
    
    $
    2,100
    
    
    $
    107
    
    
    $
    2,232 (a)   Debt guarantee originated with the TWE
restructuring on March 31, 2003.  Prior to the TWE
restructuring, TWE had various contingent commitments, including
guarantees, related to the TWE Non-Cable Businesses. In connection
with the TWE restructuring, some of these commitments were not
transferred with their applicable Non-Cable Business and they remain
contingent commitments of TWE. AOL Time Warner and Warner
Communications Inc. have agreed, on a joint and several basis, to
indemnify TWE from and against any and all of these contingent
liabilities, but TWE remains a party to these commitments. These
contingent commitments are not included in the table above.  TWE does not provide any guarantees related to third-party debt of its
unconsolidated cable television system joint ventures.As of
December 31, 2002, Texas Cable Partners L.P. and Kansas City
Cable Partners L.P. had third-party debt outstanding of approximately
$1.227 billion and $399 million, respectively. 31    Table of Contents  TIME WARNER ENTERTAINMENT COMPANY,
L.P. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 (UNAUDITED)
   Other  The Company has
an interest in and manages two cable joint ventures, Kansas City
Cable Partners, L.P. (serving approximately 300,000 basic subscribers
as of March 31, 2003) and Texas Cable Partners, L.P. (serving
approximately 1.2 million basic subscribers as of March 31,
2003), both of which are 50%-owned by TWE and 50%-owned by Comcast.
Under the terms of the two joint venture agreements, either partner
may after August 31, 2003 with respect to Kansas City Cable
Partners, L.P. and after December 31, 2003 with respect to Texas
Cable Partners, L.P., initiate buy-sell procedures based on the
market value of the joint venture interests. The Company does not
have current plans to initiate the buy-sell procedure in either joint
venture. If a buy-sell procedure were initiated by Comcast with
respect to either joint venture, TWE would have a choice either to
buy Comcasts interests in the joint venture or to sell its
interests in the joint venture to Comcast. However, in such an event,
the Company would be under no obligation to purchase Comcasts
interests. Additionally, in 2005, under the terms of both joint
venture agreements, either partner may trigger the dissolution of the
joint ventures resulting in the distribution of the net assets of the
joint ventures to the partners. Any actions to be taken by the
Company under the buy-sell or dissolution procedures will be
evaluated in the context of the Company's strategy for its Cable
operations and AOL Time Warners overall debt reduction plans.
These buy-sell arrangements are not reflected in the above table of
contingent commitments.  At any time following the second anniversary of the closing of the TWE
restructuring, (i.e., March 31, 2005). Comcast has the right to require TWC to purchase all or a
portion of Comcasts limited partnership interest in TWE at an appraised
fair market value, subject to a right of first refusal in favor of AOL Time
Warner. Additionally, Comcast also has the right, at any time following the
second anniversary of the closing of the TWE restructuring, to sell all or a
portion of its interest in TWE to a third party in a bona fide transaction,
subject to a right of first refusal, first, in favor of AOL Time Warner and,
second, in favor of TWC. If TWC and AOL Time Warner do not collectively
elect to purchase all of Comcasts offered partnership interest, Comcast may
proceed with the sale of the offered partnership interest to that third
party on terms no more favorable than those offered to TWC and AOL Time
Warner, if that third party agrees to be bound by the same terms and
conditions applicable to Comcast as a limited partner in TWE. The purchase
price payable by TWC or AOL Time Warner as consideration for the Comcasts
partnership interest may be cash; common stock, if the common stock of the
purchaser is then publicly traded, or a combination of both.  TWE is required, at least quarterly, to make tax distributions to its
partners in proportion to their residual interests in an aggregate amount
generally equivalent to a percentage of TWEs taxable income. TWE is also
required to make cash distributions to AOL Time Warner when the Companys
employees exercise previously issued AOL Time Warner stock options.  As part of the TWE restructuring, there was $2.1 billion of
pre-existing debt of a Comcast subsidiary incurred by TWC in the form of a
one-year term loan with an optional extension for an additional year. This
loan is guaranteed by TWE and is included in the above table of
contingent commitments.  Legal Proceedings  In accordance with a March 2002 ruling by the Federal Communications
Commission (FCC) that the definition of cable service does not include
cable-modem service, the Company stopped collecting and paying all franchise fees related
to revenue derived from cable-modem service. Several local franchising
authorities have threatened lawsuits and have asked the FCC to determine
whether the Companys decision to stop payments is within its rights. In
addition, the city of Rochester, New York, along with a number of other
franchising authorities in the Rochester area, filed suit against the
Company on September 27, 2002 in the Supreme Court for the State of New York
in Monroe County, alleging that the Companys failure to pay franchise fees
with respect to revenue derived from cable-modem service constituted a
breach of relevant franchise agreements, and seeking more than $1 million in
damages. The Company removed the suit to the United States District Court
for the Western District of New York on October 15, 2002, and filed a motion
to dismiss on November 18, 2002. The Company intends to defend against this
lawsuit vigorously. On April 28, 2003, the District Court for
the Western District of New York remanded the case to the New York State
Supreme Court and denied the motion to dismiss as moot. Due to its preliminary status, management is unable to
predict the outcome of the case or reasonably estimate a range of possible
loss.  On February 4, 2003, plaintiffs in Hark Chan and Data Innovation LLC v.
Time Warner Entertainment Company, L.P. et al.filed a patent infringement
complaint in the United States District Court for the Western District of
Texas. The plaintiffs have named as defendants, among others, TWE, TWE-A/N,
Texas Cable Partners, L.P. and Road Runner. The plaintiffs allege that the
defendants high-speed data and video-on-demand services infringe various
patents held by the plaintiffs. The complaint does not allege any willful
infringement. The plaintiffs seek injunctive relief and monetary damages.
The Company intends to defend 32    Table of Contents  TIME WARNER ENTERTAINMENT COMPANY,
L.P. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 (UNAUDITED)
   against this lawsuit vigorously. Due to its preliminary status,
management is unable to predict the outcome of the case or reasonably
estimate a range of possible loss.  As of
May 12, 2003, three putative class action lawsuits have been
filed alleging violations of ERISA in the U.S. District Court for the
Southern District of New York on behalf of current and former
participants in the AOL Time Warner Savings Plan, the AOL Time Warner
Thrift Plan and/or the Time Warner Cable Savings Plan (the
Plans), which may include employees of TWE. Collectively,
these lawsuits name as defendants AOL Time Warner, certain current
and former directors and officers of AOL Time Warner and members of
the Administrative Committees of the Plans. One of these cases also
names TWE as a defendant. The lawsuits allege that AOL Time Warner
and other defendants breached certain fiduciary duties to Plan
participants by, inter alia, continuing to offer AOL Time
Warner stock as an investment under the Plans, and by failing to
disclose, among other things, that AOL Time Warner was experiencing
declining advertising revenues and that AOL Time Warner was
inappropriately inflating advertising revenues through various
transactions. The complaints seek unspecified damages and unspecified
equitable relief. The ERISA actions have been consolidated with other
AOL Time Warner-related shareholder lawsuits and derivative actions
under the caption In re AOL Time Warner Inc. Securities and
ERISA Litigation in the Southern District of New
York. AOL Time Warner intends to defend against these lawsuits
vigorously. The Company is unable to predict the outcome of these
cases or reasonably estimate a range of possible loss.As part of the TWE restructuring, AOL Time Warner has indemnified the
cable businesses of TWE from and against any and all liabilities relating
to, arising out of or resulting from specified litigation matters brought
against the TWE Non-Cable Businesses, including the Six Flagslitigation
described below. Although AOL Time Warner has agreed to indemnify the
cable businesses of TWE against such liabilities, TWE remains a named party
in certain litigation matters.  On June 24, 1997, plaintiffs in Six Flags Over Georgia LLC et al. v.
Time Warner Entertainment Company, L.P. et al.filed an amended complaint in
the Superior Court of Gwinnett County, Georgia, claiming that, inter alia,
defendants, which include TWE, violated their fiduciary duties in operating
the Six Flags Over Georgia theme park. On December 18, 1998, following a
trial, a jury returned a verdict in favor of plaintiffs. The total awarded
to plaintiffs was approximately $454 million in compensatory and punitive
damages. The case was appealed to the Georgia Court of Appeals, which
affirmed the trial courts judgment, and denied reconsideration. The Supreme
Court of Georgia denied certiorari on January 18, 2001. On February 28,
2001, the compensatory damages portion of the award plus accrued interest
was paid to plaintiffs. On March 1, 2001, the United States Supreme Court
granted a stay as to payment of the punitive damages part of the jurys
original award, pending the resolution of a petition for certiorari to be
filed by TWE, which was filed on June 15, 2001. On October 1, 2001, the
United States Supreme Court granted certiorari, vacated the opinion of the
Georgia Court of Appeals and remanded the case for further consideration as
to punitive damages. On March 29, 2002, the Georgia Court of Appeals
affirmed and reinstated its earlier decision regarding the punitive damage
award. On April 18, 2002, TWE filed a petition for certiorari to the Georgia
Supreme Court seeking review of the decision of the Georgia Court of
Appeals, which was denied on September 16, 2002. The Georgia Supreme Court
subsequently denied TWEs motion for reconsideration of its September 16th
ruling. TWE filed a petition for writ of certiorari to the United States
Supreme Court, which was denied on April 21, 2003. The punitive damages
portion of the award plus accrued interest totalling
$391 million has been paid by WCI, and the litigation
has been concluded.  On April 8,
2002, three former employees of certain subsidiaries of AOL Time
Warner filed Henry Spann et al. v. AOL Time Warner Inc. et al., a
purported class action, in the U.S. District Court for the Central
District of California. Plaintiffs have named as defendants, among
others, AOL Time Warner, TWE, WEA Corp., WEA Manufacturing Inc.,
Warner Bros. Records, Atlantic Recording Corporation, various pension
plans sponsored by the companies and the administrative committees of
those plans. Plaintiffs allege that defendants miscalculated the
proper amount of pension benefits owed to them and other class
members as required under the plans in violation of ERISA. The
lawsuit has been transferred to the U.S. District Court for the
Southern District of New York. Due to the preliminary status of this
matter, TWE is unable to predict the outcome of this suit.  The costs and other effects of pending or future litigation,
governmental investigations, legal and administrative cases and proceedings
(whether civil or criminal), settlements, judgments and investigations,
claims and changes in those matters (including those matters described
above) could have a material adverse effect on the Companys business,
financial condition and operating results. 10.
    ADDITIONAL FINANCIAL INFORMATION   Other Cash Flow Information  Additional financial information with respect to cash (payments) and receipts are as follows: Three Months Ended March 31,2003
    
    2002(millions)Cash payments made for interest
    
    $
    118
    
    
    $
    124Interest income received
    
    
    (2
    )
    
    
    Cash interest expense, net
    
    $
    116
    
    
    $
    124Cash payments made for income taxes
    
    $
    1
    
    
    $
    1 33    Table of Contents  TIME WARNER ENTERTAINMENT COMPANY,
L.P. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 (UNAUDITED)
   Video Programming and High Speed Data Expenses  Video programming and high speed data expenses included within cost of revenues consist of: Three Months Ended March 31,2003
    
    2002(millions)Video
    
    $
    340
    
    
    $
    283High speed data services
    
    
    35
    
    
    
    59$
    375
    
    
    $
    342  Other Current LiabilitiesOther current liabilities consist of: March 31,
    
    December 31,2003
    
    2002(millions)Accrued compensation
    
    $
    61
    
    
    $
    83Accrued franchise fees
    
    
    75
    
    
    
    86Accrued interest
    
    
    53
    
    
    
    92Accrued insurance
    
    
    57
    
    
    
    46Accrued sales and other taxes
    
    
    60
    
    
    
    65Accrued marketing support
    
    
    71
    
    
    
    52Other accrued expenses
    
    
    229
    
    
    
    206Total
    
    $
    606
    
    
    $
    630 34    Table of Contents  Part II. Other Information Item 1. Legal Proceedings In accordance with a March 2002 ruling by the Federal Communications
Commission (FCC) that the definition of cable service does not include
cable-modem service, the Company stopped paying all franchise fees related to
revenue derived from cable-modem service. Several local franchising
authorities have threatened lawsuits and have asked the FCC to determine
whether the Companys decision to stop payments is within its rights. In
addition, the city of Rochester, New York, along with a number of other
franchising authorities in the Rochester area, filed suit against the Company
on September 27, 2002 in the Supreme Court for the State of New York in Monroe
County, alleging that the Companys failure to pay franchise fees with respect
to revenue derived from cable-modem service constituted a breach of relevant
franchise agreements, and seeking more than $1 million in damages. The Company
removed the suit to the United States District Court for the Western District
of New York on October 15, 2002, and filed a motion to dismiss on November 18,
2002. On April 28, 2003, the District Court for the Western
District of New York remanded the case to the New York State Supreme
Court and denied the motion to dismiss as moot. The Company intends to defend against this lawsuit vigorously. Due to
its preliminary status, management is unable to predict the outcome of the case
or reasonably estimate a range of possible loss. On February 4, 2003, plaintiffs in Hark Chan and Data Innovation LLC v.
Time Warner Entertainment Company, L.P. et al.filed a patent infringement
complaint in the United States District Court for the Western District of
Texas. The plaintiffs have named as defendants, among others, TWE, TWE-A/N,
Texas Cable Partners, L.P. and Road Runner. The plaintiffs allege that the
defendants high-speed data and video-on-demand services infringe various
patents held by the plaintiffs. The complaint does not allege any willful
infringement. The plaintiffs seek injunctive relief and monetary damages. The
Company intends to defend against this lawsuit vigorously. Due to its
preliminary status, management is unable to predict the outcome of the case or
reasonably estimate a range of possible loss. As of
May 12, 2003, three putative class action lawsuits have been
filed alleging violations of ERISA in the U.S. District Court for the
Southern District of New York on behalf of current and former
participants in the AOL Time Warner Savings Plan, the AOL Time Warner
Thrift Plan and/or the Time Warner Cable Savings Plan (the
Plans), which may include employees of TWE. Collectively,
these lawsuits name as defendants AOL Time Warner, certain current
and former directors and officers of AOL Time Warner and members of
the Administrative Committees of the Plans. One of these cases also
names TWE as a defendant. The lawsuits allege that AOL Time Warner
and other defendants breached certain fiduciary duties to Plan
participants by, inter alia, continuing to offer AOL Time
Warner stock as an investment under the Plans, and by failing to
disclose, among other things, that AOL Time Warner was experiencing
declining advertising revenues and that AOL Time Warner was
inappropriately inflating advertising revenues through various
transactions. The complaints seek unspecified damages and unspecified
equitable relief. The ERISA actions have been consolidated with other
AOL Time Warner-related shareholder lawsuits and derivative actions
under the caption In re AOL Time Warner Inc. Securities and
ERISA Litigation in the Southern District of New
York. AOL Time Warner intends to defend against these lawsuits
vigorously. The Company is unable to predict the outcome of these
cases or reasonably estimate a range of possible loss. As part of the TWE restructuring, AOL Time Warner has indemnified the
cable businesses of TWE from and against any and all liabilities relating to,
arising out of or resulting from specified litigation matters brought against
the TWE Non-Cable Businesses including the Six Flagslitigation described
below. Although AOL Time Warner has agreed to indemnify the cable businesses
of TWE against such liabilities, TWE remains a named party in certain
litigation matters. Reference is made to Six Flags Over Georgia et al. v. Time Warner
Entertainment Company, L.P. et al.described on page 29 of TWEs Annual Report
on Form 10-K for the year ended December 31, 2002. TWEs petition for writ of
certiorari to the United States Supreme Court filed on December 23, 2002 was
denied on April 21, 2003. The punitive damages portion of the award plus
accrued interest totalling $391 million has been paid by WCI, and the litigation has been concluded. The costs and other effects of pending or future litigation, governmental
investigations, legal and administrative cases and proceedings (whether civil
or criminal), settlements, judgments and investigations, claims and changes in
those matters (including those matters described above) could have a material
adverse effect on the Companys business, financial condition and operating
results. 35    Table of Contents  Item 6. Exhibits and Reports on Form 8-K. (a)     Exhibits. The exhibits listed on the accompanying Exhibit Index are filed or
incorporated by reference as a part of this report and such Exhibit Index is
incorporated herein by reference. (b)     Reports
on Form 8-K.  TWE filed the following reports on Form 8-K. Item #
    
    Description
    
    Date(i)
    
    
    5
    
    
    Reporting the
closing of the Time Warner Entertainment -
Advance/Newhouse Partnership restructuring.
    
    December 31, 2002(ii)
    
    
    2,7
    
    
    Reporting (i) the closing of the TWE restructuring and
related transactions (Item 2) and (ii) unaudited
pro forma financial information reflecting the disposition
by TWE of its content assets and liabilities (Item 7).
    
    March 28, 2003 36    Table of Contents  TIME WARNER ENTERTAINMENT COMPANY, L.P. 
 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. TIME WARNER ENTERTAINMENT COMPANY, L.P.By
    

/s/ Wayne H. PaceName:
Title:
    

Wayne H. Pace
Executive Vice President and
Chief Financial OfficerDated: May 15, 2003 37    Table of Contents  
 CERTIFICATIONS I, Richard D. Parsons, certify that: 1.          I have reviewed this quarterly report on Form 10-Q of Time Warner
Entertainment Company, L.P.; 2.          Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; 3.          Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report; 4.          The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:  a.   designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;b.   evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); andc.   presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date; 5.          The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):  a.   all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; andb.   any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and 6.          The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses. By:

    
    /s/
Richard D. ParsonsName:
Title:
    
    Richard D.
Parsons
Chief Executive Officer
Time Warner Entertainment Company, L.P.Date: May 15, 2003 38    Table of Contents  I, Wayne H. Pace, certify that: 1.          I have reviewed this quarterly report on Form 10-Q of Time Warner
Entertainment Company, L.P.; 2.          Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; 3.          Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report; 4.          The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:  a.   designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;b.   evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and  c.   presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date; 5.          The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):  a.   all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; andb.   any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and 6.          The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses. By:
    
    /s/
    
    Wayne H. PaceName:
Title:
    
    Wayne H. Pace
Chief Financial Officer
Time Warner Entertainment
Company, L.P.Date: May 15, 2003 39    Table of Contents  
 EXHIBIT INDEX Pursuant to Item 601 of Regulation S-K
 Exhibit No.
    
    Description of Exhibit99.1
    
    Certification of Principal Executive Officer and Principal Financial
Officer of TWE pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
with respect to TWEs Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003. 40