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AOL Time Warner Reports Record Q2 Gains as Overall Revenues Fall Short

18 Jul, 2001 By: Hive News

AOL Time Warner Inc. today reported results for itssecond quarter ended June 30, 2001, posting records in total revenues, EBITDA and cash earnings per common share, according to a company statement.

Total revenues rose 3% to $9.2 billion, up from $8.9 billion, on a pro forma basis, in last year's corresponding quarter, led by a 10% increase in subscription revenues to $4.1 billion. Content and other revenues declined 4% to $2.9 billion. Advertising andcommerce revenues grew 1% to $2.3 billion, with America Online and Time Warner Cable posting strong increases of 26% and 19% respectively.

Publishing and Networks posted results in line withadvertising market conditions.

EBITDA increased 20% to $2.5 billion; cash EPS climbed 28% to $0.32; and Free Cash Flow climbed 55% to $519 million, excluding merger-related costs. These compare to pro forma EBITDA of $2.1 billion, cash EPS of $0.25 and Free Cash Flow of $334 million inlast year's corresponding quarter. The EBITDA margin expanded to 28% from 24%.

AOL Time Warner's total subscriptions grew to more than 135 million, an increase of 17.9 million over the past year. The flagship AOL service added 1.3 million new members worldwide - a June quarter record - for a total of 30.1 million members at June 30. Time Warner Cable increased digital cable subscribers by 182% over the prior year to 2.5 million and Road Runner cable modemsubscribers by 146% to 1.4 million.

C.e.o. Jerry Levin said in a statement: "We couldn't be more proud of what we accomplished this quarter. We achieved outstanding bottom-line results, dramatic improvement in profit margins and a huge increase in Free Cash Flow. Our record results are further proof that we are delivering on the promise of the AOL Time Warner merger."

Levin added: "In just six months, we've made great progress integrating the company. We plan to continue this focus throughout theyear, driving efficiencies and taking advantage of cross-company synergies. Our subscription businesses are continuing to show robustgrowth and, as planned, we are looking forward to a strong second half for Film and Music. We've just begun to tap our enormous potential."

The company's reported net loss for the second quarter was $734 million, or $0.17 per share. On the same basis in the year-ago quarter, the company's pro forma net loss was $924 million, or $0.22per share.

For the six-month period ending June 30, 2001, total revenues grew 6% to $18.3 billion, EBITDA grew 20% to $4.7 billion and Free CashFlow grew 162% to $1.2 billion, excluding merger-related costs and one-time events, compared to pro forma total revenues of $17.2billion, EBITDA of $3.9 billion and Free Cash Flow of $446 million in the first half of 2000.

So far this year, the company has repurchased 30.2 million shares of its common stock at a cost of $1.4 billion. To improve its financial flexibility, during the quarter the company put in place a $5 billion commercial paper program and successfully issued anaggregate of $4 billion of debt securities, using the proceeds to pay down short-term bank debt and for other general corporate purposes.

The company is accelerating the integration of its business units across a number of areas, including movie promotion. AOL counts among its successful promotions Warner Bros. feature films Cats & Dogs, Swordfish and A.I., all of which opened at No. 1 in the domestic box office.AOL has heavily promoted the upcoming Harry Potter and the Sorcerer's Stone, exclusively premiering the film's trailers.

In digital cable/interactive TV, AOL Time Warner businesses are working together to promote value-added digital cable and interactive TV services. In the second quarter, Time Warner Cable and HBObegan a trial for subscription video-on-demand in Columbia, SC. Thetrial resulted in "overwhelming" consumer demand, according to the company, and more tests on other systems are scheduled in the coming months.

For the quarter, Filmed Entertainment revenues rose 5% to $1.9 billion, reflecting a stronger slate of new movies and an improvedhome video market driven by DVD sales. Filmed Entertainment's EBITDAgrew 17% to $250 million despite higher marketing and distribution expenses for an expanded film release schedule, including the latequarter releases of Swordfish and A.I., and the third quarter release of Cats & Dogs.

Warner Home Video increased its DVD sales to over 26 million units in the quarter, up 65% from last year's second quarter, while New LineCinema announced a partnership with Burger King for its December debutof the epic adventure trilogy The Lord of the Rings - New Line's biggest-ever promotional alliance - and an agreement with JVC.

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