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Time Warner tops forecast
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October 18, 2000: 2:16 p.m. ET
Media firm's 3Q profit exceeds estimates; publishing and cable units are cited
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NEW YORK (CNNfn) - Time Warner Inc. said Wednesday its third-quarter operating earnings grew 13 percent, beating Wall Street forecasts, boosted by strong earnings from its cable television networks and publishing unit, amid advertising growth.
The positive earnings likely contributed to a turnaround in the company's shares, which slumped early along with other media and blue chip stocks. Shares of Time Warner (TWX: Research, Estimates) climbed Tuesday afternoon to $67.21, up $1.65 from Tuesday's close. The stock still is down about 26 percent in the past two weeks.
 Time Warner, the No. 2 U.S. cable provider and media company, whose merger with America Online Inc. (AOL: Research, Estimates) is awaiting U.S. regulatory approval, said earnings before interest, taxes and amortization (EBITA), adjusted for special items, rose to $1.27 billion, or 7 cents a share, from $1.13 billion, also 7 cents share, in the year-earlier period.
Wall Street analysts had expected the New York-based company to post earnings before items of 4 cents a share, according to First Call/Thomson Financial, which tracks earnings performance.
Time Warner, whose entertainment segments include Warner Music, the WB Network, and both CNN and CNNfn.com, said on a reported basis, including items, third-quarter net income fell to $1.276 billion, or 6 cents per diluted share, from $1.611 billion, or 28 cents per share, a year ago. Total revenue grew to $6.873 billion from $6.723 billion.
Looking at the company's performance for the year, Levin said he expects the company to deliver EBITA growth of 12-to-13 percent in 2000.
Analysts' opinions about the results were mixed overall. They cited the positive performance of some units, such as publishing, and less impressive showing of others.
"In terms of cash flow (the quarter) was a good quarter, but in terms of revenues, it was a little lighter than what we were looking for," said A.G. Edwards & Sons analyst Mike Kupinski.
Strong segments lead positive results, but films lag
Revenue from its cable networks group, home to HBO, TBS and Cartoon Network, grew to $1.56 billion. Third-quarter EBITA for the division climbed 15 percent to $376 million from $328 million a year earlier.
 Revenue from its publishing group, which includes such magazines as People, Sports Illustrated, and Time, fell to $1.08 billion from adjusted year-ago results. But third-quarter EBITA for the group climbed 14 percent, to $151 million from $132 million, driven by ad gains at publications including Fortune and Time.
The company's Warner Music Group posted third-quarter EBITA of $87 million, up 10 percent from $79 million a year ago. Revenue in the segment grew 10 percent to $938 million, supported by artists such as Red Hot Chili Peppers, Yolanda Adams and Madonna.
The quarter's results also reflect solid growth at Warner Music International, particularly in Japan, and growth of DVD manufacturing profits, the company said.
Time Warner said third-quarter EBITA for its Filmed Entertainment unit was $206 million, down 6 percent from $218 million a year ago. The company boasted of impressive domestic theatrical and international television syndication results, but said the year-to-year comparison is difficult due to the strong 1999 third quarter, which included the initial off-network availability of popular television series "The Drew Carey Show."
EMI deal alive; AOL pact 'in the home stretch'
During a conference call with analysts, Time Warner president Richard Parsons said the company still is pursuing a partnership with EMI Group PLC, after nixing a planned marriage of their music units under intense scrutiny from European regulators.
"We continue to believe in the deal and we are working with them now," he said, adding that the companies have agreed to a period of exclusive negotiations that runs through January of 2001.
Commenting on the pending acquisition by AOL, Time Warner CEO Gerald Levin reiterated that he sees the pact closing later this year and, somewhat defiantly, shrugged off reports that U.S. regulators might reject the deal.
"While I know there are a lot of leaks and speculation, most of what I've read has been totally off base," Levin told analysts. "We are in the home stretch with U.S. regulators. We are highly confident of a successful conclusion."
Separately, the company addressed open access, one issue for which the merger has been scrutinized. Internet service provider RMI.NET Inc. (RMII: Research, Estimates) on Wednesday said it has struck a deal to provide high-speed Internet access over Time Warner's Time Warner Cable system.
Denver-based RMI.NET said it was among a handful of Internet companies Time Warner selected to test the provision of Internet service by providers other than itself.
Time Warner and Juno Online unveiled a similar pact in July. 
-- from staff and wire reports.
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