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Time Warner Quarter Charms the Cynics

Time Warner


impressed even the most

cynical with a much better-than-expected earnings report this morning, sending its stock to an all-time high in midday trading.

The home of Bugs Bunny reported earnings of $23 million, or 4 cents per share, on revenues of $6.53 billion for the three months ended June 30. That compared with analysts' expectations that Time Warner would lose 4 cents per share, and a loss for the year-earlier period of $49 million, or 9 cents per share.

More important, from investors' point of view, the company's EBITA soared some 17%, to $1.16 billion, handily beating analysts' expectations. (Time Warner executives encourage investors to value the company on EBITA, or earnings before interest, taxes and noncash amortization charges, rather than bottom-line earnings, which Time Warner doesn't usually have.) Time Warner Chairman Gerald Levin said the company EBITA's figure was a record and predicted "another record-breaking year."

Time Warner's biggest gains came from its cable systems, where EBITA rose almost 30%, from $347 million in 1997 to $448 million this year. Revenue increased slightly, but most of the gains came from higher EBITA margins, which reached an astonishing 34% of revenues during the quarter. Publishing and the company's cable networks,

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, also posted double-digit EBITA gains, and corporate and interest expenses dipped slightly.

Despite the gains, Time Warner's film and music businesses remain weak. Its

Warner Bros.

studio turned in EBITA of just $122 million on revenues of more than $1.3 billion, a cash flow margin of barely 9%. The company's overall EBITA-to-revenue margin was roughly double that. And the company's music division earned just $96 million in EBITA, down from $106 million last year, even though revenue increased slightly.

In midday trading, Time Warner was up 3 1/2 to 94 3/4, an all-time high, on volume of more than 1.3 million shares.