AOL Time Warner reported a small third-quarter profit Wednesday despite weak business at its America Online division, but said it would restate its financial results for a two-year period because of accounting practices at the troubled unit.
Wall Street took the news well, though, reassured by the company's strong performance in its other divisions and the company's statement that it anticipates no further adjustments of financial results. The stock surged more than 6 percent in extended trading.
"Management has gone a long way toward clearing the air regarding accounting issues," said Christopher Dixon, an analyst at UBS PaineWebber. ``Hopefully, this will allow investors to focus on strong fundamentals taking place across the operations excluding AOL.''
For the three months ending Sept. 30, the media conglomerate earned US$57 million, or US$0.01 per share, compared with a loss of US$997 million, or US$0.22 per share, in the same period a year ago. The results were in line with the expectations of analysts surveyed by Thomson First Call.
Revenues for the third quarter totaled US$9.98 billion, compared to US$9.07 billion during Q3 last year.
AOL Time Warner said that it will restate financial results for the third quarter of 2000 through the second quarter of this year -- a move expected to reduce revenues by US$190 million and earnings before taxes, interest, depreciation and amortization, or EBITDA, by US$97 million -- because of its previously announced internal review of certain advertising and commerce transactions at its America Online division.
The adjustments, which will primarily affect the America Online division, are expected to be filed with the Securities and Exchange Commission in the fourth quarter.
"Although our internal review is ongoing, we do not expect this internal review will result in any further adjustments," said AOL Time Warner's chief executive officer Richard Parsons.
The company's shares rose US$0.87 to US$14.40 in extended trading following the release of the third-quarter figures, adding to a US$0.03 advance during the regular session.
Also Wednesday, AOL Time Warner said it plans a Dec. 3 meeting with analysts to give Wall Street more details about America Online's future business plan.
The America Online division has been struggling for months now, weighed down by declining advertising revenues and a government investigation into its accounting practices. AOL had previously said it may have inappropriately accounted for approximately US$49 million in transactions at the online unit.
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