Time Warner Reports Steady 2nd-Quarter Profit

Time Warner Inc., the world’s largest media company, said second-quarter profit was unchanged as magazine and television advertising sales growth propelled cash flow.

Time Warner, which is waiting for regulatory approval to be acquired by America Online Inc., said profit from operations was 11 cents a share, the same as a year ago. Net income fell 87%, to $75 million, because of charges, gains and higher interest expense. The company was expected to earn 8 cents, according to First Call/Thomson Financial.

Cash flow from operations rose 12% because of higher ad revenue at magazines such as People and at cable-television channels including TNT. The music group rebounded after three straight quarters of declining cash flow on album releases by groups including Kid Rock.

Time Warner’s improvement in music is “almost irrelevant because the music industry is in such turmoil” about the effects of the Internet, said Harold Vogel, a media analyst and chief executive of Vogel Capital Management.

Time Warner’s revenue in the quarter rose about 8%, to $7.1 billion. Cash flow rose to $1.4 billion from $1.2 billion, excluding one-time items.

The company defines cash flow as earnings before interest, taxes and amortization (EBITA). Analysts use cash flow to measure the performance of indebted companies such as Time Warner because it focuses on the underlying businesses and excludes interest expenses and noncash charges such as amortization.

The combined Time Warner-AOL expects to generate growth in cash earnings per share of up to 30% a year, Time Warner Chairman and Chief Executive Gerald Levin told analysts on a conference call. Levin also reiterated that the combined company will have cash flow of $11 billion in 2001 and revenue of more than $40 billion. Revenue will grow 12% to 15% a year, he said.

Time Warner’s Cable Networks division, which includes channels such as CNN, TBS and Home Box Office, reported record EBITA of $422 million for the second quarter, an increase of 15% over a year earlier. Higher subscription and advertising revenues drove the growth and offset lower results at World Championship Wrestling.

Time Warner Cable posted EBITA of $462 million for the latest quarter, up 13% from a year earlier. The growth was driven by revenue increases from basic cable, pay-per-view, advertising and the deployment of high-margin digital and high-speed Internet services.

Time Inc., the company’s publishing arm, reported EBITA of $226 million for the second quarter, up 14% from the previous year. Driving the gains was double-digit advertising revenue growth, led by strong performances of Fortune, Time, People, Teen People and In Style magazines.

The Filmed Entertainment unit posted EBITA of $199 million, a 3% increase from last year. The company cited strong double-digit EBITA gains at Warner Bros., partially offset by weaker results at the New Line movie studio, which faced tough year-to-year comparisons after last year’s blockbuster “Austin Powers: The Spy Who Shagged Me.”

EBITA for the music segment grew to $109 million in the second quarter, an increase of 11%.

The WB Television Network posted a narrower loss of $21 million for the latest quarter, compared with last year’s $30 million.

AOL plans to release its quarterly results Thursday.

Time Warner shares fell $1.81 on the New York Stock Exchange, to $87.38 a share.

*

Bridge News was used in compiling this report.