AOL Time Warner said today its quarterly profit nearly tripled on large one-time gains, and said US regulators informed it that some of its accounting on advertising deals was incorrect.
The Securities and Exchange Commission referred to two advertising deals with Germany's Bertelsmann in 2001, and raises the prospect of yet another earnings restatement at the world's largest media company.
AOL said its auditors contend the accounting was appropriate.
Excluding one-time gains from the sale of AOL's stake in the Comedy Central cable television channel and settlement of a long-running dispute with Microsoft, AOL's second-quarter earnings fell.
AOL Time Warner said second-quarter net profit rose to $1.1 billion, or 23 cents a share, from $396 million, or 9 cents a share, a year earlier. Revenue rose 6 per cent to $10.82 billion.
Results suffered largely from weakness at America Online, the Internet service provider unit, which lost more dial-up subscribers in the quarter than many analysts had expected.
But hit films, such as The Matrix Reloaded, strength at the cable TV business and cost-cutting at the struggling online division helped results top analysts' estimates.
Shares of AOL fell to $16.30 in pre-market trade on Instinet, down from a Tuesday close on the New York Stock Exchange of $16.85.
US subscribers to America Online fell to 25.3 million, down 1.2 million from a year earlier and down 846,000 from the first quarter. Many analysts were looking for a loss of about 500,000 subscribers.
For the entire company, AOL said it expects 2003 revenue to grow in the mid-single digits from $41 billion in 2002. It also forecast mid-single-digit growth in cash flow, compared with previous forecasts for low- to mid-single-digit growth.
AOL Time Warner shares - which have been dogged by federal inquiries into America Online and questions about growth, especially at the online unit - have risen about 30 percent this year.