AOL Time Warner to restate results, reduce revenue by $190M
By Thomas S. Mulligan
Los Angeles Times
NEW YORK — Acknowledging deeper problems at America Online than previously reported, AOL Time Warner Inc. yesterday said it would restate eight quarters of financial results and reduce its revenues by $190 million as part of an in-house review of its troubled Internet unit, which also is the focus of ongoing federal probes.
Meanwhile, strong earnings for movies, cable TV, broadcasting and publishing helped offset a sharp advertising slowdown at America Online, enabling AOL Time Warner to eke out a third-quarter profit of $57 million, or 1 cent per share, as compared with a loss of $997 million, or 22 cents per share, a year ago.
The world's largest media and entertainment firm said that its quarterly revenue rose 6 percent to $10 billion, from $9.1 billion a year ago. AOL Time Warner's EBITDA, or earnings before interest, taxes, depreciation and amortization — a common profit yardstick for media companies — fell to 19 cents a share from 24 cents a share a year earlier. Both matched the expectations of Wall Street analysts.
Despite the flat results, AOL Time Warner Chief Executive Richard D. Parsons stuck to an earlier projection that the company would finish the full year with 5 percent to 8 percent growth in revenues and about 5 percent growth in EBITDA.
AOL Time Warner announced the results for the quarter ended Sept. 30 after the close of the stock market yesterday.
During a conference call with financial analysts, Parsons said that the company's internal review turned up "several more" advertising deals at the American Online unit for which revenue had been improperly booked. In August the company revealed that three deals at the Internet unit involved $49 million in wrongly booked revenues. That same month Parsons acknowledged that the company was under investigation by the Securities and Exchange Commission and the Department of Justice.
In the latest quarter America Online's revenue dropped 7 percent to $2.22 billion, as ad sales fell 48 percent.
Reviving the Internet unit is the parent company's top operating priority, Parsons said, but he deferred any discussion of specifics to Dec. 3, when the company will hold "AOL Day" — a half-day conference to unveil a strategic plan that the division's executives have been working on for months.
The restatements announced yesterday will lower AOL Time Warner's previously reported revenues by $190 million for the two years from July 1, 2000, through June 30, 2002, or about 1 percent.
The biggest change will be for the quarter ended Sept. 30, 2000, with a drop in revenue of $66 million. The restatements also will reduce the company's EBITDA by $97 million.
The adjusted financial statements will be filed with the SEC by the end of the year.
Parsons did not identify any of the companies involved in the ad deals with AOL and declined to provide further details, citing the federal investigation.
