Video: Time Warner breathes a sigh of relief

updated 1/31/2007 8:25:22 PM ET 2007-02-01T01:25:22

Time Warner Inc.’s profit jumped 34 percent in the fourth quarter, boosted by the sale of Internet access businesses in Europe, a tax benefit and a deal that added new subscribers to its cable TV unit.

The world’s largest media company, which owns Warner Bros., the magazine publisher Time Inc. and the second-largest cable TV operator in the country, said Wednesday it earned $1.75 billion, or 44 cents per share, for the three months ending in December, up from $1.3 billion, or 28 cents a share, in the same period a year ago.

Revenues rose 8 percent to $12.5 billion from $11.5 billion.

The results included a gain of $769 million from the sale of AOL’s Internet access businesses in the U.K. and France, a restructuring charge at AOL of $179 million, and about $900 million in tax benefits.

Excluding those gains and other one-time effects, operating income before depreciation and amortization rose 13 percent to $3 billion from $2.7 billion in the same period a year ago on higher profits from cable TV systems and cable TV networks such as HBO and TBS.

The company also recorded an expense of $615 million related to securities litigation.

Without one-time items or discontinued operations, the company posted profits of 22 cents per share in the most recent period, in line with the estimates of analysts polled by Thomson Financial, versus 23 cents per share in the year-ago period.

Its shares fell 17 cents to close at $21.87 on the New York Stock Exchange. They have traded in a 52-week range of $15.70 to $23.15.

Time Warner’s cable unit in July of last year acquired a number of cable subscribers from Adelphia Communications Corp. in a three-way deal with Comcast Corp., the top cable company in the country. Following the deal, Time Warner had about 13.4 million cable subscribers.

Revenues at the company’s AOL unit fell 8 percent and adjusted profits fell 10 percent as it continues to revamp its business model away from selling Internet access and toward selling online advertising.

AOL’s advertising revenues grew 49 percent in the quarter, which was above the 42 percent growth that Merrill Lynch analysts Jessica Reif Cohen had been expecting. In a note to investors, Cohen called the AOL results “encouraging.”

AOL began offering many of its services for free in hopes of attracting more traffic online. The Internet service provider lost another 2 million U.S. Internet access customers in the quarter, leaving it with 13.2 million as of the end of the year.

Time Warner also said it expects full-year earnings for 2007 to be $1 per share, assuming it completes its $20 billion stock buyback program in the first half of the year. Analysts polled by Thomson Financial had been expecting $1.01.

For the full year, Time Warner earned $6.55 billion, or $1.55 per share, up from $2.67 billion, or 57 cents per share, a year earlier, as revenues rose 4 percent to $44.2 billion from $42.4 billion.

Both periods included significant one-time effects, including gains from asset sales and expenses related to settling shareholder lawsuits and government investigations, a legacy of the fallout from the company’s agreement to be bought by AOL in 2000.

Excluding special items and in both periods as well as discontinued operations, full-year earnings came to 81 cents per share versus 73 cents per share in the prior year.

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