Ad Revenue Helps Drive Time Warner’s Better-Than-Expected Results

Time Warner Inc. on Wednesday reported better-than-expected earnings for the first quarter, with help from higher advertising sales at its cable television networks and magazines.

The world’s largest media company, which is being bought by Dulles, Va.-based America Online Inc., said it had profit from operations of 5 cents a share, compared with break-even results in the year-ago period. The latest results exclude a pretax charge of $220 million related to an investment in the Columbia House music club and other one-time items.

Time Warner was expected to earn 2 cents a share before one-time items, the average estimate of analysts polled by First Call/Thomson Financial. Revenue rose 7.5% to $6.54 billion, and cash flow rose 13% to $1.17 billion, excluding one-time items and $30 million in losses from new media.

Advertising, which accounts for about 20% of Time Warner’s revenue, drove the growth, especially at the cable networks and publishing businesses, both of which had record cash flow. The film group also set a record because of higher home video sales and movies such as the “The Green Mile.” Music was the weak link as sales fell in the U.S., the biggest music market.

Cash flow, which Time Warner defines as earnings before interest, taxes, depreciation and amortization, is used by analysts to measure the performance of indebted companies. Time Warner had about $18.1 billion of debt at the end of last year.

This is one of the last quarters that New York-based Time Warner will report earnings separately.

Time Warner Chairman Gerald Levin told analysts that the America Online transaction, valued at about $156 billion, is on track to be completed later this year. He also reiterated that the company expects to meet its goal of 13% to 15% cash-flow growth this year.

Cash flow rose at four of Time Warner’s six divisions, with the strongest increases coming at its filmed entertainment and cable network businesses.

The music division, which is being combined with EMI Group’s music business, continued to be a drag on the company’s results. Cash flow at Warner Music declined 10% to $80 million, hurt by the release of fewer top-selling albums.

On the New York Stock Exchange, Time Warner shares fell $5.75 to close at $90, and America Online shares fell $3 to $62.50.