AOL to Restate Revenue for Internet Unit

NEW YORK — AOL Time Warner said Wednesday that it plans to restate its financial results from September 2000 through June 2002, reducing its advertising and commerce revenues by $190 million over that two-year period.

The restatement stems from an internal review that uncovered questionable ad deals at the media giant’s America Online Internet division. The review is ongoing, but the company said it does not expect any further restatements as a result of it. AOL Time Warner also continues to cooperate with separate investigations being conducted by the Securities and Exchange Commission and the Department of Justice.

For America Online, the impact of the adjustments will be to decrease its advertising and commerce revenues by $168 million over the eight quarterly periods, with a corresponding reduction in Ebitda, or earnings before income taxes, depreciation and amortization, for that same time period of $97 million. The remaining $22 million represents a reduction in revenues from certain transactions related to the America Online division in which the advertising was delivered by other AOL Time Warner divisions.

The adjustments represent about one percent of the America Online division’s total revenues for that same two-year period, about 3.4 percent of its advertising and commerce revenues and 1.9 percent of its Ebitda. The largest impact of the adjustments is in the quarter ended Sept. 30, 2000, for which advertising and commerce revenues will be reduced by $66 million and Ebitda will be decreased by $30 million.

AOL Time Warner also reported its third-quarter earnings Wednesday. For the company’s America Online division, Ebitda declined 30 percent on revenues that fell seven percent. While revenues at America Online increased 15 percent as a result of membership growth in the U.S. and Europe, advertising and commerce revenues declined by 48 percent in the quarter. The company attributed the Internet unit’s poor ad performance to a reduction in the benefits from prior-period contract sales and continued softness in online advertising.

For the third quarter, AOL Time Warner’s overall revenues increased six percent over the same period in 2001 to $10 billion. The New York-based company said Ebitda totaled $2.2 billion, down one percent from 2001, due primarily to a decline at America Online.

AOL Time Warner stock [AOL] was trading on the New York Stock Exchange at $14.55 Thursday, up $1.02 or 7.54 percent. Its 52-week high is $39.21 and 52-week low is $8.70.