Time Warner Posts Better Than Expected Q1 Profits

 

Time Warner Inc. said Wednesday that its first-quarter profit fell 14 percent as AOL and publishing results continued to crumble under the weight of deteriorating ad sales. Still, the media and entertainment conglomerate’s adjusted results were better than Wall Street expected.

The owner of Time magazine, Turner Broadcasting and HBO also maintained its full-year adjusted earnings forecast.

Time Warner earned $661 million, or 55 cents per share, for the period ended March 31, down from the year-earlier result of $771 million, or 64 cents per share.

Excluding investment losses and other items, earnings from continuing operations were 46 cents per share. That’s better than the 38 cents-per-share that analysts surveyed by Thomson Reuters predicted. Analysts’ estimates typically exclude one-time items.

Quarterly results reflect a 1-for-3 reverse stock split.

New York-based Time Warner, which spun off Time Warner Cable Inc. in March, said revenue dropped 7 percent to $6.95 billion from $7.47 billion. Aside from the pressures of its AOL and publishing units, the company said lower DVD sales at its filmed entertainment division also squeezed results.

Analysts expected revenue of $6.78 billion.

The publishing division’s revenue sagged 23 percent to $806 million mostly on a 30 percent decline in ad sales. Over at AOL, ad sales slipped 20 percent and subscription revenue fell 27 percent, which helped send total revenue down 23 percent to $867 million. The number of AOL subscribers continued to fall in the quarter, with free e-mail and other free services taking a bite out of membership.

Revenue for the filmed entertainment unit fell 7 percent to $2.6 billion with DVD sales declining on fewer home video releases, the stronger dollar, lower movie theater revenue and a drop in catalog sales.

At the networks division, which houses HBO and Turner Broadcasting, revenue rose 6 percent to $2.8 billion. Increased rates at the two cable outlets and the consolidation of HBO Latin American Group helped boost subscription revenue, but those results were somewhat offset by a 2 percent drop in ad sales.

While Time Warner Cable did not contribute to revenue results, it did help lower its former parent company’s debt load by a significant amount. Time Warner sliced its net debt to $10.4 billion from $20.7 billion at the end of 2008, primarily because Time Warner Cable’s spin-off resulted in a one-time dividend payout of $9.25 billion to Time Warner.

Separately, Time Warner Cable said Wednesday that its first-quarter profit fell 32 percent on restructuring and other costs related to its spin-off, despite a boost in sales.

The spin-off of Time Warner Cable is expected to help the former parent company concentrate on its strengths in content, especially if it can also shed all or part of AOL, acquired as part of AOL’s $106 billion purchase of Time Warner in 2001.

Chairman and Chief Executive Jeff Bewkes said in a statement that the company is “working to determine the right ownership structure for AOL.”

Last month, AOL tapped former Google Inc. executive Tim Armstrong to become its chief executive in the hopes he would be able to turn around the Internet division. Armstrong replaces Randy Falco and will also take over as chairman.

Time Warner still expects 2009 adjusted earnings to be about flat with a year ago, which comes out to $1.98 per share. The forecast accounts for the stock split as well as the Time Warner Cable spin-off.

Analysts forecast profit of $1.96 per share.

Time Warner shares advanced $1.09, or 5 percent, to $22.86 in morning trading.

4/29/2009 9:39 AM NEW YORK (AP)