Declines in revenue and operating income at Time Warner Inc.'s struggling AOL division crimped the media giant's results in the second quarter, despite strong gains in cable television and a solid performance at its movie studio.
Time Warner reported net income of $792 million, or 22 cents a share, for the second quarter ended June 30, down 26% from $1.07 billion, or 28 cents a share, in the same period last year. The bottom line was hurt by special charges of 2 cents a share compared with a one-time gain of 3 cents a share a year earlier.
Still, revenue for the conglomerate, which counts Warner Bros., HBO and Time magazine among its properties, increased 5.2% to $11.6 billion from $10.98 billion last year.
Media analyst Michael C. Nathanson of Bernstein Research said in a report that Time Warner "bucked the trend" of below-par second-quarter earnings from media companies in a difficult advertising environment.
Time Warner's cable networks -- including HBO, TBS and TNT -- led with revenue increasing 9% to $2.8 billion, while operating income jumped 18% to $749 million. Election coverage on CNN and high ratings for TNT shows such as "The Closer" and "Saving Grace" pushed up subscription and advertising revenue by 10% and 11%, respectively.
The filmed entertainment segment, which includes the Warner Bros. studio, reported revenue of $2.6 billion, up 14%. Operating income rose 16% to $94 million from $81 million, propelled by the hit summer releases "Sex and the City" and "Get Smart" as well as home-video launches of films such as "I Am Legend."
Although restructuring costs were incurred during the quarter and are anticipated in the third quarter as well, from New Line Cinema's consolidation into Warner Bros., Time Warner expects to save $140 million annually by combining the studios, Time Warner Chief Executive Jeffrey Bewkes told analysts. The units' integration will begin next year.
Bewkes noted the film division's positive outlook for the year, given the box-office dominance of "The Dark Knight" and the upcoming releases of the first computer-animated "Star Wars" film and the next "Harry Potter" installment.
"Dark Knight," which has produced record box-office revenue, was released July 18, and results will begin to appear in the third quarter ending Sept. 30.
"Some view the film business as unpredictable," Bewkes said in the conference call, noting Warner's success in developing film franchises such as the Batman series and mining its comic book and television assets. "That's not really been our experience at our company."
