Settlement dings Time Warner earnings
By Reuters
http://news.com.com/Settlement+dings+Time+Warner+earnings/2100-1030_3-5816805.html
Story last modified Wed Aug 03 07:13:00 PDT 2005
Time Warner posted a quarterly loss on Wednesday, dragged down by a $2.4
billion settlement of a shareholder lawsuit that accused the company of
overstating its revenue from 1999 to 2002.
The world's largest media company also said it plans to buy back up to $5
billion in stock over the next two years.
Time Warner reported a quarterly net loss of $321 million, or 7 cents a
share, compared with a year-earlier net profit of $777 million, or 17 cents
a share.
Excluding a number of items, including a $3 billion reserve for the
settlement and other pending suits, the company said it posted a profit of
18 cents per share, falling just below Wall Street expectations for profit
of 19 cents per share.
Revenue fell 1 percent to $10.7 billion, missing analysts' expectations of
$11 billion, according to Reuters Estimates.
New York-based Time Warner agreed to pay $2.4 billion to shareholders who
accused the company of overstating its revenue by $1.7 billion between
January 1999 and August 2002.
The settlement, which will go to millions of shareholders who invested in
the company during that time, is the second-largest paid by a publicly
traded company, according to Heins Mills & Olsen, the law firm representing
the shareholders. Time Warner's auditor, Ernst & Young, agreed to pay $100
million as part of the settlement.
In March, the company said it would pay $300 million to settle charges with
the Securities and Exchange Commission, stemming from similar allegations.
Time Warner also agreed to pay $210 million as part of a deferred
prosecution agreement with the Justice Department to resolve criminal
charges of aiding and abetting securities fraud.
Time Warner restated its results from 2000 through 2003 to reduce online
advertising by a total of $679 million.
With the most recent settlement, Time Warner has paid more than $3.5
billion to resolve the accounting issues.
The company's movies division, where revenue dropped 15 percent, dragged on
overall earnings during a quarter that could not match the performance of
top movies franchises like last year's installment of "Lord of the Rings"
or another "Harry Potter."
But growth of digital phone customers and high-speed Internet subscribers
from its cable unit, which drove the division's revenue up 11 percent,
helped prop up results, underscoring Time Warner's commitment to expand the
business.
The cable division added 201,000 new high-speed data subscribers and
242,000 digital phone subscribers. It lost 5,000 basic video customers,
ending the quarter with 10.9 million customers.
Time Warner agreed to buy Adelphia Communications earlier this year in a
joint bid with Comcast valued at around $17.6 billion.
America Online, Time Warner's online division, lost 917,000 subscribers,
ending the quarter with 20.8 million U.S. members. Revenue for the unit
fell 4 percent, with subscriber losses overshadowing a 45 percent increase
in online advertising revenue.
================================
George Antunes, Political Science Dept
University of Houston; Houston, TX 77204
Voice: 713-743-3923 Fax: 713-743-3927
antunes at uh dot edu
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