TOPICS > Nation

AOL Time Warner Posts Record $99 Billion Annual Loss

BY Admin  January 30, 2003 at 3:15 PM EST

The write-downs, or non-cash charges, were required by new accounting rules on goodwill assets.

In a separate announcement, Vice Chairman Ted Turner announced he will resign in May.

During a conference call Wednesday, AOL Time Warner officials surprised shareholders by announcing a larger-than-expected fourth quarter loss of $45.5 billion, primarily due to a $35 billion write-down of its AOL division and another $10 billion charge for its cable division. The write-downs, or non-cash charges, were required by new accounting rules on goodwill assets.

AOL Time Warner Chief Executive Richard Parsons said during the call that the mark-down would not affect the company’s ongoing operations.

The loss comes on the heels of a $54 billion charge taken in the first quarter, bringing to total an annual loss of $98.7 billion, the largest ever recorded by a U.S. company.

Parsons attributed the disappointing financial results to the new accounting rules, the overall weakness of the advertising industry, and the depreciating value of America Online and its Internet and cable businesses. Parsons underscored the “impressive” performance of AOL Time Warner’s traditional and entertainment businesses, specifically referring to the Turner cable networks and its movie division, New Line Cinemas.

While Parsons conceded that AOL scored poor financial marks, he optimistically reminded shareholders that America Online’s subscriber pool increased this year to 26 million, three times higher than any other Internet Service Provider.

News of Turner’s resignation also came Wednesday. Turner, the founder of CNN and Turner Broadcasting, told AOL Chief Executive Richard Parsons on Tuesday that he had been contemplating this decision “for a while” and determined that now was the best time for him to step down.

Turner, who owns 3.4 percent of the company and is its largest individual shareholder, has not indicated if he plans to remain on the board of directors or sell off his AOL Time Warner stock.

In his resignation letter, Turner said he planned to spend more time on his philanthropic work.

“As you know, I have devoted much of my life to philanthropic interests and, more recently, to several socially responsible business efforts,” Turner said. “Over the last five years, it has become even clearer to me how much personal satisfaction I derive from these activities. Therefore, I would like to now devote even more time, effort and resources to them.”

The 64-year-old vice chairman said the company “has been a significant part of my life for over fifty years,” suggesting that he has been involved in the company business since the age of 14. Company officials have not responded to inquiries regarding that statement.

Turner joins a list of executives who have announced their decisions to leave the struggling media giant. America Online founder and chairman Steve Case announced earlier this month that he plans to leave his post after this May’s annual shareholders meeting.

Since AOL Time Warner’s shares began its post-merger plummet — from $71 just after the January 2000 merger to an $8.70 low this past July — Turner has been critical of AOL Time Warner’s management, particularly that of CNN. In the last year alone, AOL’s shares have tumbled 49 percent.

Wall Street reacted to Wednesday’s news with a sudden sell-off of AOL Time Warner shares during late Wednesday and early Thursday trading.

Parsons also briefly mentioned during Wednesday’s conference call that the Department of Justice and Securities and Exchange Commission investigations into America Online’s advertising and commerce units’ accounting methods were “still ongoing.”

While officials did not provide further information on Wednesday, AOL Time Warner’s 2001 annual report said the company’s chief financial officer, Wayne Pace, is continuing its internal review of AOL’s advertising and commerce transactions. The company also acknowledged that “the financial results for each of the quarters ended September 30, 2000 through June 30, 2002″ would be restated.

The $99 billion write-down did not reflect any financial revisions in connection with the internal review, company spokesperson Tricia Primrose said.