- The Washington Times - Thursday, April 19, 2001

NEW YORK (AP) Internet and media giant AOL Time Warner Inc. posted a net loss of $1.37 billion on investment write-downs and other costs in its first quarter as a combined company, but revenues and cash earnings rose.

The company reaffirmed its aggressive growth targets for the year despite the sluggish economy.

The net loss of 31 cents a share compared with a net loss of $1.46 billion, or 34 cents, a year ago, when the company recorded an accounting charge of $443 million to comply with rules governing the carrying value of film inventories. The year-ago results were calculated as if the companies were combined a year ago.

Excluding a pretax charge of $620 million in the company's investment portfolio, $1.78 billion in amortization and one-time effects, the company's cash earnings rose 20 percent to $2.15 billion, compared with $1.8 billion in the comparable quarter a year ago.

Cash earnings per share rose to 23 cents, beating Wall Street estimates by 3 cents a share, according to Thomson Financial/First Call. A year ago, the company's cash earnings were 19 cents a share.

Revenues rose 9 percent to $9.08 billion, compared with $8.32 billion. Gerald Levin, the company's CEO, said in an interview the company was still on track to meet its goals of $40 billion in revenues this year and $11 billion in cash flow.

An economic slowdown has been pounding the earnings of companies that rely heavily on advertising, but Mr. Levin said the broadness of AOL Time Warner's revenue base, which includes several forms of subscription revenues such as cable TV and AOL's Internet service, would help the company ride out the downturn.

"I think we're off to an excellent start," Mr. Levin said. "I feel comfortable with our results because of the range of assets and our ability to ride above a lot of the marketplace activity."

In the months since its merger closed on Jan. 11, AOL Time Warner has cut more than 2,000 jobs and made several changes in its organizational lineup, most recently combining the WB broadcast network with Turner Broadcasting. It also overhauled the CNN cable network, which has been slipping badly in ratings.

But Mr. Levin said the company was also focusing on building its revenues as a way to meet its financial targets, which analysts have described as very aggressive given the poor economic climate. "We're making our targets by a variety of ways, not just from cost efficiencies," Mr. Levin said.

Touching on a topic of widespread speculation, Mr. Levin also said there would be no change in CNN founder Ted Turner's status at the company. Mr. Turner, who holds a vice chairman's title, has been widely quoted recently as saying he had been "fired" by top management as his operational duties were scaled down.

"Ted is an important factor for us," Mr. Levin said. "He's important to the company and he's important to me personally."

Most of AOL Time Warner's divisions had higher revenues and cash earnings, with the exception of its film and music studios. AOL, which is now a division of the combined company, posted a 17 percent gain in revenues to $2.1 billion as its worldwide subscription base recently passed 29 million.

Revenues from cable TV, another business that many see as resilient to economic slowdowns, rose 12 percent over the same period a year ago to $1.6 billion; revenues from networks, which include CNN, HBO, TBS and TNT, rose 6 percent.

The Warner Bros. music business, which often fluctuates from quarter to quarter, suffered a 6 percent decline in revenues. The company attributed two-thirds of the decline to currency fluctuations.

Results from movies and television were mixed, as revenues rose 17 percent to $2.2 billion while cash earnings slumped 39 percent to $113 million, which the company attributed to the timing of new releases and marketing costs.

Publishing, which includes Time Inc.'s massive magazine stable of People, Time, Fortune, InStyle and Sports Illustrated, had a 3 percent increase in revenues. Analysts have been expecting this business segment, which is more sensitive to advertising spending, to face difficulties this year from an advertising slowdown.

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