AOL Awash in Red as Turner Rides Off

"2003 will be a reset year," CEO Dick Parsons said in a conference call Wednesday afternoon.

The company also said it would seek to cut debt to $20 billion from more than $25 billion now.

In other news, AOL said investigations of its business and accounting practices being conducted by the Securities and Exchange Commission and the Justice Department are ongoing and that there's nothing new to report on those fronts.

Ahead of the report, AOL rose 30 cents to close at $13.96. In after-hours trading, AOL's shares fell $1.32 to $12.64.

Disappointment

Given AOL Time Warner's full-year 2003 forecast for revenue growth "in the mid-single digits," the company envisions revenue of roughly $43.1 billion, or 5% over the company's 2002 revenue of $41.07 million. That $43.1 billion forecast nearly matches the $43.2 billion expected by analysts surveyed by Thomson Financial/First Call.

But the company's forecast of 2003 EBITDA to be "essentially flat" compared to 2002 falls short of Wall Street's expectations. Analysts surveyed by TheStreet.com had expected growth in a range from 3% to 7%.

AOL Time Warner attributed the disappointing 2003 outlook to four factors. Cable EBITDA percentage growth is expected to be in the range of high single digits to low double digits -- a slower pace than in the recent past -- because of less advertising revenue from programmers launching new channels and less AOL Time Warner intracompany business.

Pension expenses, says AOL, will grow $100 million over 2002 levels, because of market declines and more conservative assumptions. The music business will likely decline. And, as the company has already disclosed, EBITDA at the America Online unit is likely to decline 15% to 25%.

The company says its forecasts assume "a continued and modest improvement in advertising."

AOL Time Warner says its most recent writedown won't put the company in violation of its debt covenants.

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