Updated from April 28 Paced by "spectacular quarters" from its film and television operations, Time Warner ( TWX) posted stronger-than-expected first-quarter numbers and boosted 2004 guidance. Wednesday afternoon's solid report comes on the heels of positive comments from big media rivals such as Viacom ( VIAB) and Comcast ( CMCSA), both of which have impressed Wall Street over the last week with their improving financial outlooks. Time Warner shares rose 3% Thursday. "These results demonstrate the individual and collective strength of our businesses and put us comfortably on track to meet all of our 2004 financial targets," Time Warner CEO Dick Parsons said. Parsons also dismissed recent media reports about AOL's merger-and-acquisition plans as "rank speculation." For the quarter ended March 31, Time Warner reported net income of $961 million, or 20 cents a diluted share. This compares with the year-ago profit of $396 million, or 9 cents a share. Excluding an accounting change, latest-quarter earnings were 15 cents a share, up from a dime a year earlier. Revenue surged 9% from year-earlier levels to $10.1 billion. Wall Street analysts surveyed by Thomson First Call had forecast a 9-cent profit on revenue of $9.51 billion. The company raised its guidance for full-year operating income before depreciation and amortization, the cash-flow yardstick formerly known as EBITDA. OIBDA percentage growth, which the company had said previously would be in the range of high single digits to low double digits, will now be in the low double digits. Off of $8.8 billion in 2003 OIBDA, low-double digit growth of, say, 12% would translate to 2004 OIBDA of $9.86 billion. The Thomson First Call consensus going into today's call was for $9.69 billion. Time Warner's America Online service finished the first quarter with 24 million members in the U.S., losing 237,000 subscribers in the quarter. That is smaller than both the fourth-quarter 2003 loss of 399,000 subscribers and the year-ago loss of 289,000 subscribers.
AOL's European service gained 38,000 in the quarter, bringing its member base to 6.4 million. "I feel positive about the progress AOL is demonstrating," Don Logan, chairman of Time Warner's Media & Communications Group, said on a conference call with analysts. The company added 600,000 subscribers to broadband service plans in the quarter, he said, partly through offers such as an unlimited dial-up service plan with broadband features. Paid-search advertising revenue at AOL amounted to $74 million in the quarter, up 57% from one year earlier. Ad revenue, from both paid search and traditional advertising, will improve throughout the year, Logan said. "We're going to get our fair share of the advertising growth," he said. Revenue at Time Warner's cable TV systems came in within expectations at $2.04 billion, while OIBDA of $750 million appeared to be slightly lower than analysts' forecasts; expenses for the quarter included a $27 million reserve related to a legal claim. The operator added 193,000 residential broadband Internet customers in the quarter, bringing the total to 3.4 million subscribers. The company said the Securities and Exchange Commission and the Justice Department are continuing their investigations into the company's accounting and disclosure practices, including advertising sales practices at America Online. The company said that until accounting issues are resolved with the SEC, it's unlikely that the SEC will give the green light to any securities offerings, such as the potential initial public offering of Time Warner Cable. Parsons suggested Time Warner was unlikely to spin off AOL any time soon, saying that the business has a lot of upside but is undervalued in the market. On Wednesday, Time Warner shares slipped 34 cents to $16.48. In postclose action they rose 3%.