AOL Time posts biggest profit since 2001 merger

1Q net is $396 million, or 9 cents per share

April 24, 2003|By BLOOMBERG NEWS

NEW YORK - AOL Time Warner Inc., the world's largest media company, reported yesterday its largest quarterly profit since it was formed in 2001. Sales climbed 6.3 percent, aided by more subscribers at the HBO television network and higher DVD sales of Warner Bros. movies.

Net income in the first quarter was $396 million, or 9 cents a share. AOL Time Warner had a net loss of $54.2 billion a year earlier after costs to write down the value of acquired assets. Sales rose to $10 billion, the company said in a statement.

Sales at the TV and movie units, two of the company's biggest businesses, rose more than 10 percent, helping offset a 4 percent drop in revenue and accelerating subscriber defections at America Online. Chief Executive Officer Richard Parsons has said the unit will someday fuel profit.

"The numbers were a little bit better than expected," said Merrill Lynch analyst Jessica Reif Cohen, who has a "neutral" rating on the shares. "On the negative side, the subscriber losses were extremely high and that's clearly a worrisome trend."

The U.S. Securities and Exchange Commission may delay AOL Time Warner's planned initial public offering of its cable unit, Chief Financial Officer Wayne Pace said on a conference call with investors. Parsons said earlier yesterday that the company planned to sell the shares in the second half of this year, moving back the company's earlier projection of a June IPO.

Earnings excluding gains on investments and certain costs rose to 8 cents a share from break-even last year, excluding a $54.2 billion write-down. Analysts had forecast profit of 4 cents. Revenue was roughly in line with forecasts of $9.73 billion.

America Online sales will be little changed in 2003, with advertising sales falling as much as 45 percent, AOL Time Warner said yesterday, repeating an earlier forecast. The unit lost 289,000 subscribers last quarter after losing 180,000 in the preceding period.

Shares of AOL Time Warner rose 69 cents, or 5.2 percent, to $14 on the New York Stock Exchange yesterday. The shares are down more than 70 percent since America Online Inc., the world's largest Internet company, bought Time Warner Inc. for $124 billion in stock and assumed debt. Falling sales and profit at America Online, coupled with an expanding government probe, have hurt the shares even as most of the company's businesses expand, investors have said.

AOL Time Warner's first-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) rose 14 percent to $2 billion in the latest quarter, the company said.

The company said first-quarter net income included gains of about $109 million from the sale of some investments. The results also included $23 million of noncash investment costs and $24 million of merger and restructuring expenses.

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