- The Washington Times - Thursday, May 8, 2003

NEW YORK (AP) — AOL Time Warner Inc. reported yesterday that it returned to profitability in the first quarter of 2003, following a year of punishing losses.The world’s largest media company earned $396 million, or 9 cents a share, for the quarter ending March 31 on revenue of $10 billion. The results surpassed the 4-cent-per-share expectations of Wall Street analysts, according to Thomson First Call.”We’re pleased we got off to such a strong start. It suggests to us we’ll have a good year,” AOL Time Warner Chief Executive Officer Richard Parsons said.In the first quarter last year, AOL lost $54.24 billion, or $12.25 a share, on revenue of $9.41 billion. The losses were due to a massive $54 billion write-down related to its America Online business.AOL Time Warner shares rose 69 cents, or 5.2 percent, to $14 on the New York Stock Exchange. The earnings turnaround reflected a 6.3 percent jump in revenue, along with corporate restructuring and debt-reduction efforts like the sale of a $109 million stake in GM Hughes, Mr. Parsons said.The conglomerate is “firmly on track” to meet its earnings goals for 2003, Mr. Parsons said.On Tuesday, AOL Time Warner announced its sale of a 50 percent stake in Comedy Central to Viacom for $1.23 billion. The company said some $2 billion in proceeds from the sales of GM Hughes and Comedy Central would be used to pay down its $26.3 billion debt.”We’ll be using all our free cash-flow for debt reduction,” said Chief Financial Officer Wayne Pace.Mr. Parsons had little to say about reports of Securities and Exchange Commission and Department of Justice investigations into AOL’s accounting treatment of advertising sales to European media conglomerates Bertelsmann and Vivendi Universal.”It remains one of my highest priorities to work with the regulatory agencies, the investigative agencies … so we can bring this matter to as expeditious a close as possible,” Mr. Parsons said.For the first quarter, AOL Time Warner reported charges of $23 million for investment write-downs and $24 million in merger costs, layoffs and other charges at America Online. Revenues at the online division slipped 4 percent to $2.20 billion, pulled down by declines in advertising, including the company’s quashing of unpopular pop-up ads.Media and communications group chairman Don Logan said AOL’s flagging ad sales would rebound in 2003 and the business’ earnings would stabilize and start growing.But AOL’s subscriber base slipped for the second quarter in a row, by 290,000 members. In the fourth quarter of 2002, AOL reported its first-ever drop in subscribers, when 170,000 U.S. users left the online service.America Online is still the world’s largest Internet service provider by far, with 26.2 million U.S. subscribers and about 35 million worldwide.The company’s cable division, which includes TV and broadband Internet access, reported a 9 percent boost in revenues over the year-ago period, to $1.84 billion, mainly due to an increase in subscriptions at higher rates.AOL Time Warner’s planned initial public offering of Time Warner’s cable assets, which was expected to take place in June, will likely be delayed until the second half of 2003, Mr. Pace said.Mr. Pace said the SEC could delay the IPO even further by demanding that its investigation into AOL Time Warner’s accounting issues be completed before it authorizes the IPO.Time Warner’s filmed entertainment division saw an 11 percent jump in revenue, to $2.36 billion, helped by sales of DVDs and home videos.The company’s networks division, which includes HBO and other cable properties, saw a 17 percent revenue increase, to $2.09 billion.Revenue at AOL Time Warner’s music division slipped 3 percent, to $914 million.The conglomerate is seeking to sell its music manufacturing business “for the right price,” said Jeff Bewkes, chairman of the entertainment and networks group.The company’s publishing division enjoyed a 7 percent gain in revenues, to $1.15 billion, boosted by a 21 percent leap in subscriptions.


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