Time Warner Earnings Down 27%

Time Warner Inc. said Wednesday that its second-quarter profit dropped 27% to $777 million from an unusually fat profit a year earlier, when it recorded significant one-time gains.

Separately, Time Warner disclosed another cloud over its America Online unit in the form of an internal review of accounting issues at AOL Europe. The disclosure came as investigations by the Securities and Exchange Commission and Justice Department continue into accounting issues at the Internet giant.

The company said it might have to restate results.

The $777 million in earnings came to 17 cents a share, down from $1.06 billion, or 23 cents, a year earlier. Analysts had expected 15 cents a share for the latest quarter, according to Thomson First Call.

Overall, Wall Street greeted the media conglomerate’s results favorably even though net income was down.

That’s because the company’s results were better than they were a year earlier when one-time events are factored out.

Time Warner’s results a year earlier included a $750-million settlement with Microsoft Corp. over a browser issue and proceeds from its $1.2-billion sale to Viacom Inc. of its half-interest in the Comedy Central channel.

Excluding nonrecurring items, the company earned $533 million, or 11 cents a share, a year earlier.

The media giant’s revenue rose 10% to $10.89 billion from $9.92 billion.

“The upside was broad-based across virtually all divisions,” according to a report by analysts at J.P. Morgan Securities.

Analysts also were pleased that Time Warner modestly boosted forecasts for its upcoming results.

They also welcomed the earnings magic generated by the Warner Bros. film “Harry Potter and the Prisoner of Azkaban” and by DVD sales from New Line Cinema’s Oscar-winning “The Lord of the Rings: Return of the King.” Revenue for the film unit jumped 12% to $3.1 billion, with operating profit rising 9% to $417 million.

Revenue from Time Warner cable channels, which include HBO and CNN, jumped 10% to $2.3 billion thanks to higher ad rates, more subscriber revenue and DVD sales of HBO shows. Profit was up 84% to $661 million.

At Time Warner Cable, profit rose 9% to $817 million with sales increasing 10% to $2.1 billion. Operating profit before gains and charges at Time Warner’s publishing unit increased 55% to $355 million on a 4% sales increase to $1.47 billion.

In a conference call, Time Warner Chief Executive Richard Parsons did not tip his hand on the likelihood of potential acquisitions by the company. Two companies Time Warner is known to be interested in are Hollywood studio Metro-Goldwyn-Mayer Inc. and cable company Adelphia Communications Corp.

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Bloomberg News was used in compiling this report.