Profit trail

New York, Aug. 3 (Reuters): Time Warner Inc, the world’s largest media company, on Wednesday posted a quarterly loss, dragged down by a $2.4 billion settlement of a shareholder lawsuit that accused the company of overstating its revenue from 1999 to 2002.

The company also said it plans to buy back up to $5 billion in stock over the next two years.

Time Warner reported a quarterly net loss of $321 million, or 7 cents a share, compared with a year-earlier net profit of $777 million, or 17 cents.

Excluding a number of items, including a $3 billion reserve for the settlement and other pending suits, the company said it posted a profit of 18 cents per share, falling just below Wall Street expectations for profit of 19 cents per share.

Revenue fell 1 per cent to $10.7 billion, missing analysts’ expectations of $11 billion.

Its shares were down 1.7 per cent at $17.12 before the opening bell on Wednesday.

New York-based Time Warner agreed to pay $2.4 billion to shareholders who accused the company of overstating its revenue by $1.7 billion between January 1999 and August 2002.

The settlement, which will go to millions of shareholders who invested in the company during that time, is the second-largest paid by a publicly traded company, Heins Mills & Olsen, the law firm representing the shareholders said. Time Warner’s auditor, Ernst & Young, agreed to pay $100 million as part of the settlement.

In March, the company said it would pay $300 million to settle charges with the US Securities and Exchange Commission, stemming from similar allegations. Time Warner also agreed to pay $210 million as part of a deferred prosecution agreement with the US justice department to resolve criminal charges of aiding and abetting securities fraud.

Time Warner restated its results from 2000 through 2003 to reduce online advertising by a total of $679 million.

With the most recent settlement, Time Warner has paid more than $3.5 billion to resolve the accounting issues.

The firm’s movies division, where revenue dropped 15 per cent, dragged on overall earnings during a quarter that could not match the performance of top movies franchises like last year’s installment of “Lord of the Rings” or another “Harry Potter”.

But growth of digital phone customers and high-speed Internet subscribers from its cable unit, which drove the division’s revenue up 11 per cent, helped prop up results, underscoring Time Warner’s commitment to expand the business.

The cable division added 201,000 new high-speed data subscribers and 242,000 digital phone subscribers. It lost 5,000 basic video customers, ending the quarter with 10.9 million customers.

Time Warner agreed to buy Adelphia Communications Corp earlier this year in a joint bid with Comcast Corp.