updated 7/28/2004 12:17:35 PM ET 2004-07-28T16:17:35

Time Warner Inc. reported a 27 percent decline in net earnings for the second quarter Wednesday compared with the same period a year ago, when the company recorded large gains from the sale of Comedy Central and a settlement with Microsoft Corp. But profits still came in ahead of expectations.

(MSNBC is a Microsoft-NBC joint venture.)

The giant media conglomerate, whose operations include CNN, Warner Bros. and HBO, earned $777 million, or 17 cents a share, in the three months ending in June, versus $1.06 billion, or 23 cents a share, a year earlier.

Revenues rose a robust 10 percent to $10.89 billion from $9.92 billion, fattened by receipts from the latest “Harry Potter” movie, cable TV services and cable networks. The long-troubled America Online service continued to lose dialup customers, but revenues and profitability both increased thanks to higher advertising.

The results were well ahead of analysts’ expectations. Excluding a loss of two cents per share from its Warner Bros. music business, which was sold to an investor group in March, the company had earnings of 19 cents per share versus an estimate of 15 cents per share by analysts surveyed by Thomson First Call.

In the year-ago period, the company earned $533 million, or 11 cents per share, excluding the Comedy Central gain, the Microsoft settlement, accounting charges and other one-time items.

America Online lost another 668,000 U.S. subscribers in the quarter, leaving its total at 23.4 million, but advertising revenues grew 23 percent thanks largely to more revenues from paid search. AOL also had lower network expenses.

Revenues from movies and television rose 12 percent on the latest releases in the “Harry Potter” and “Lord of the Rings” movie series, plus home video releases of “The Matrix Revolutions,” “Mystic River” and other movies.

Cable networks also performed well. Revenues rose 10 percent in the division that includes HBO, CNN, TNT and other channels, which the company attributed to higher advertising rates and revenues, higher subscriber revenue as well as higher home video sales of HBO programs.

Revenues from the company’s publishing division rose 4 percent as advertising revenues improved at several of the magazines in the Time Inc. magazine division, including Time, Real Simple, Fortune and Sports Illustrated.

The company also said it had recently begun a review of the accounting of its consolidation and interest in AOL Europe prior to January 2002. The company’s accounting and disclosure practices are still being investigated by the Securities and Exchange Commission as well as the Justice Department.

Time Warner raised its estimate for full-year results, saying it now expected to post percentage gains in the low double-digits to low-teens range in operating income before depreciation and amortization. The company has previously forecast gains in the low double digits.

For the first six months of the year, Time Warner reported earnings of $1.74 billion, or 37 cents a share, against $1.46 billion, or 32 cents a share, in the comparable period a year ago. Six-month revenues rose 10 percent to $21.01 billion from $19.16 billion.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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