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"Our operating results reflected the continued collective strength of our traditional media and entertainment businesses, offset by the declining trend in advertising at America Online."
——Dick Parsons

AOL TIME WARNER MAKES A QUARTERLY COMEBACK

Q3 Results, While Mixed, Provide a Ray of Hope
Beleaguered media giant AOL Tim Warner joined the recent run of companies posting better than expected results when it released its third-quarter earnings report Thursday.

AOLTW made 19 cents a share in Q3 2002, versus 24 cents in the same period last year, but that 19 cents turned out to be one cent better than analysts’ expectations.

Q3 net income was $57 million, or 1 cent a share, compared to a net loss of $997 million, or 22 cents a share, during the same period last year, while Q3 revenue was up 6% to $10 billion. EBITDA fell 1% to $2.2 billion from Q3 2001.

The good news came from such traditional areas of strength as publishing (e.g., Time, People), cable (yo, The Sopranos) film (The Lord of the Rings: The Fellowship of the Ring) and, would you believe, music. Yes, kids, Warner Music Group gained ground in the quarter despite taking the expected hits in a generally depressed marketplace.

WMG's EBITDA posted a 10% increase in Q3 on revenue gains of 2%. The revenue growth was due in part to the acquisition of Christian label Word and a rise in DVD manufacturing volume, while the gain in EBITDA was attributed to lower returns, lower marketing and overhead, and lower bad-debt expenses. These gains were offset in part by higher costs in signing acts and making records.

The bad news emanated, not surprisingly, from AOL, which will restate results for the two-year period from June 2000-2002 after having initially overstated revenue by $190 million. The revised results will be released on the completion of an internal accounting review

"I'm pleased that our overall performance was right in line with expectations," said AOLTW CEO Richard Parsons. "Our operating results reflected the continued collective strength of our traditional media and entertainment businesses, offset by the declining trend in advertising at America Online. We also generated a substantial amount of free cash flow for the third quarter in a row this year. Importantly, this quarter's performance keeps us on track to deliver on our overall company full-year revenue and EBITDA goals. As we move forward, we will stay focused on growing our businesses, putting the right plan in place for America Online, and continuing our progress toward achieving our other top priorities."

AOLTW shares rose 91 cents to $14.42 in after-hours trading, as investors responded positively to the earnings report. The stock closed regular trading up 3 cents at $13.53.

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