Loss in on the House

Music retailer's weakness costs TW

NEW YORK — Despite record profits in most of its divisions, Time Warner posted an overall loss for the first quarter, due mainly to a write-down for financially troubled music retailer Columbia House.

Company reported a net loss of $96 million for the three months ended March 31, compared with a net profit of $138 million for the year-ago quarter.

Total revenues for the three months were up 7.5% to $6.55 billion from $6.09 billion in 1999.

The company took a $220 million charge to write down its investment in Columbia House. The direct-sales company, half-owned by Sony, is going through a major restructuring as it is eclipsed by online retailers like Amazon.com. In March, a planned merger between Columbia House and Internet music retailer CDNow was called off.

“Management has concluded that the decline in Columbia House’s business is going to continue through the near term,” Time Warner said in a statement.

Bright side

On the bright side, Time Warner reported record operating profits for its cable networks, publishing, filmed entertainment and cable divisions. Time Warner uses the cash-flow measure called EBITA — earnings before interest, taxes and amortization of intangible assets — to report operating profit.

“I’m pleased with our record operating results and a strong EBITA growth rate of 13% for first quarter 2000, which puts us on track for another record-breaking year,” Time Warner chairman and CEO Gerald Levin said. “We remain focused on delivering impressive quarterly results, coupled with realizing all the opportunities presented by our pending merger with AOL.”

AOL optimism

In presenting their earnings, Levin and TW president Richard D. Parsons also continued to laud the value of the new marriage to America Online. The companies announced their merger Jan. 10.

“One of the things that is impressive to me is the optimism,” Parsons said. “They remind me of my kids. They still believe anything is possible. They still believe they want to change the world.”

Levin called AOL “a company of deals,” saying, “AOL has all of these relationships that are not recorded in their statements.”

Unit by unit

The filmed entertainment unit turned in record operating profit of $194 million, powered by theatrical hits such as “The Green Mile” and “The Whole Nine Yards” and DVD sales from “The Matrix,” “Eyes Wide Shut” and “Pokemon.”

Cable networks were helped by increased subscription revenues at HBO and Cinemax and good ratings at Turner Network Television and TBS Superstation.

Income slid for Time Warner Music due to slower sales of recorded music. The digital media division and the WB Network posted losses of $31 million and $30 million respectively.

(Paula Bernstein contributed to this report.)

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