By Caroline Wilbert, The Atlanta Journal-Constitution Knight Ridder/Tribune Business News
Apr. 24--AOL Time Warner reported a profit in the first quarter, offering a glimmer of good news after a year of punishing losses.
The company, buoyed by strong results from its film and cable networks divisions, beat earnings estimates and reported lower-than-expected debt.
Still, the media conglomerate, which owns Atlanta-based Turner Broadcasting System, faces a range of challenges. They include a federal investigation into accounting practices, declining subscriber numbers at its America Online division and still-staggering debt levels.
The company earned $396 million, or 9 cents a share, for the quarter ended March 31, on revenue of $10 billion. The results easily surpassed the 4-cents-per-share expectations of Wall Street analysts, according to Thomson First Call.
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 $54 billion write-down related to its America Online business.
It went on to post a loss of $98.7 billion for 2002.
AOL's first-quarter earnings before interest, taxes, depreciation and amortization -- the measure of performance often used by media companies -- rose 14 percent to $2 billion.
'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 Richard Parsons said during a conference call.
'Across the board, the earnings report was very positive,' said Mark May, an analyst at Kaufman Brothers.
One of Parsons' most important challenges is reducing debt. The first-quarter results produced more cash than expected, enabling AOL to finish the quarter with a lower-than-expected net debt of $26.3 billion. Also, the company is making progress on sales of its assets.
The company has been trying to sell non-core assets, including the Atlanta sports teams, the Braves, Thrashers and Hawks.
This week it announced a deal to sell its 50 percent stake in Comedy Central to the network's joint owner, Viacom Inc., for $1.23 billion. AOL also confirmed in the conference calls it is exploring the sale of the manufacturing arm of its Warner Music Group, a deal that could raise $1 billion.
Locally, negotiations to sell the company's professional sports teams continue, with at least three potential buyers -- car dealership owner David McDavid, New York sports executive Dave Checketts and a group led by Ted Turner.
'There is not a tremendous amount of pressure to do anything immediately,' May said. However, the company will need to sell more assets within six to 12 months to meet debt-reduction targets, he said.
AOL Time Warner stock rose 69 cents to $14 per share.
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(c) 2003, The Atlanta Journal-Constitution. Distributed by Knight Ridder/Tribune Business News.
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