Company takes $45.5B charge for America Online
NEW YORK - AOL Time Warner Inc. capped a turbulent year Wednesdayby announcing it would take a $45.5 billion charge to reflect adecline in the value of the company, which continues to be draggeddown by America Online's poor performance.
At the same time, the company announced that Ted Turner wasstepping down as vice chairman of its board of directors, effectiveat the company's annual meeting in May.
Turner is not sure whether he will remain on the AOL Time Warnerboard or leave the company entirely, according to spokeswoman MauraDonlan. Turner was unreachable for comment.
In a letter to chief executive Richard Parsons, Turner wrote:'After much reflection, I have decided to resign from my executiveduties as vice chairman of AOL Time Warner.'
'I have not come to this decision lightly. As you know, thiscompany has been a significant part of my life for over 50 years. Ihave the deepest respect for you, the senior management and my fellowmembers of the board. With this team in place, I am optimistic thatthe company will be able to move forward and reach its truepotential.'
'I have devoted much of my life to philanthropic interest, andmore recently, to several socially responsible business efforts,'wrote Turner, 64. 'Over the last five years, it has become evenclearer to me how much personal satisfaction I derive from theseactivities. Therefore, I would like to now devote even more time,effort and resources to them.'
AOL Time Warner's fourth-quarter loss comes on top of a $54billion noncash charge posted in the first quarter, at the time thebiggest quarterly loss in U.S. business history. The total 2002 lossof nearly $100 billion is the largest annual loss in U.S. corporatehistory.
The AOL unit - which was garnering 1 million or more new onlinesubscribers every quarter in its heyday of the late 1990s - actuallylost 176,000 U.S. members during the company's fourth quarter. AOL'sworldwide membership fell for the first time in its history, from anestimated 35.3 million members at the end of September to 35.2million at the end of December.
But in a conference call with investors, Parsons struck a hopefulnote as he highlighted the 'stellar performances' of theconglomerate's other media units.
The company's television networks, for example, reported a cashflow increase of 46 percent in the fourth quarter. Growth was led byHBO, but even the lesser-known WB network delivered a record fourthquarter, resulting in its first full-year profit.
Even so, a slew of trouble spots - such as lucrative oldadvertising contracts that continue to expire - forced AOL TimeWarner to report a fourth-quarter net loss of $44.9 billion, or$10.04 a share. That compared to a loss of $1.8 billion, or 41 centsa share, a year ago.
The company said revenue in the quarter grew 8 percent to $11.4billion while earnings before interest, taxes, depreciation andamortization (EBITDA) - a key measure of cash flow - rose 16 percentto $2.8 billion from a year earlier. That was slightly better thanwhat many analysts had predicted.
AOL Time Warner stock, which rose 2.2 percent Wednesday to closeat $13.96 on the New York Stock Exchange, fell about 10 percent inextended trading after the earnings announcement.
The strong fourth-quarter performance of Time Warner divisions,which include CNN and HBO, offset a revenue decline of 6 percent anda cash-flow decline of 11 percent for the Internet unit.
The story was the same for the full-year results. Despite AOL'srevenue decline of 4 percent, the company as a whole saw revenueclimb 7 percent to $41.1 billion.
Parsons insisted that 2003 would be the year the company re-emerges with new momentum.
He predicted revenue growth in the mid-single digits and saidEBITDA would be flat to down in the low single digits.
Parsons said one of the company's main goals in 2003 is to pareits $26 billion debt load. He said the company's commitment to thatgoal was indicated by the company's sale of its entire 8.4 percentstake in satellite operator Hughes Electronics Corp., announced thisweek. He said the sale, which brought in $800 million, will help thecompany reduce debt to $20 billion by the end of this year.
Parsons said the company would make other cash-generating moves,but didn't specify what those moves might be. He didn't say, forexample, whether the company planned to sell its Atlanta sportsteams.
'We have made strengthening the balance sheet a priority,' Parsonssaid. 'There are a number of ways to do that. We have alternatives -looking at non-core assets, non-strategic assets - and we have beenexploring those.'
