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SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Commission file number 001-12878

TIME WARNER ENTERTAINMENT COMPANY, L.P.

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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TIME WARNER ENTERTAINMENT COMPANY, L.P.

INDEX TO FORM 10-Q

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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):

     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.

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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.

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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):

     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):

     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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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):

     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)

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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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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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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.

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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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:

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.

(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 pr