AOL TW reveals more ‘inappropriate’ revenues
AOL Time Warner said in a statement late Wednesday it has learned within the past 10 days that three additional transactions involving its America Online unit — totaling $49 million over a period of six quarters — “may have been inappropriately recognized” as advertising and commerce revenues at the time.
The disclosure was made in the company’s 10-Q second-quarter 2002 financial results filing with the Securities and Exchange Commission this afternoon just as AOL Time Warner CEO Richard Parsons and Chief Financial Officer Wayne Pace were certifying the company’s reported results just ahead of the SEC’s deadline for large public companies.
The SEC and Department of Justice are conducting probes of AOL Time Warner’s accounting practices triggered by disclosure of $270 million in other such questionable America Online advertising and commerce revenues reported over 18 months. After completing its own internal review, the company said it “will determine whether its accounting for any transactions was not appropriate, and if so, what action, if any, is appropriate with respect to its reported financial results.”
Moody’s says ‘negative’ for AOL TW: Moody’s Investors Service has changed its outlook on AOL Time Warner and Time Warner Entertainment debt to “negative,” although it has maintained its Baa 1 rating, which it also has assigned to its new $10 billion bank facility. Moody’s cited the “negative incremental risk” for AOL Time Warner that will result with or without a TWE restructuring agreement with AT&T and Comcast Corp. Moody’s cites the company’s “significant shortfall in free cash flow” and free cash flow to debt ratios from original expectations, which likely will “halt cash or debt-financed acquisitions” and “share repurchasing activity for the near term.”
Parsons, Pace to certify in time for SEC: AOL Time Warner now says its CEO Richard Parsons and chief financial officer Wayne Pace will certify in writing their company’s reported financial information in time for a 5 p.m. (ET) deadline set by the Securities and Exchange Commission for public companies posting more than $1.2 billion in annual revenues. Speculation that company officials might not sign or would conditionally sign off on the numbers depressed AOL Time Warner stock earlier in the day. AOL Time Warner later Wednesday was expected to file a quarterly report with the SEC detailing the separation agreement with former COO officer Bob Pittman, who has agreed to retain 9 million in stock options through 2007, previously valued the company at $106 million but currently worthless. Mr. Pittman opted to bet on AOL Time Warner’s future than to accept a $2 million for 10 days of consulting work over two years that would have prevented him from accepting a fulltime position elsewhere.
Cablevision may buy News Corp. Rainbow Partnerships stake: News Corp. Chairman and CEO Rupert Murdoch told investors today that he is expecting Cablevision Systems to buyout News Corp.’s 40 percent stake in Rainbow Partnerships (which includes Madison Square Garden) by December for more than $1 billion, which is equivalent to an existing funding gap the cable operator already faces in January. Analysts said Cablevision may trade assets and stakes instead, including full ownership of shared regional sports networks.
News Corp. and its Fox Entertainment Group subsidiary reported double-digit growth in their revenues and operating income in the fiscal fourth quarter and fiscal 2002, and forecast 25 percent to 30 percent cash-flow growth at Fox in fiscal 2003 and high teens to low 20s percent operating income growth for News Corp., despite a gradually improving advertising market and a money-losing Fox Television network. Although it will be unable to match last year’s record $1.3 billion in free cash flow, it continues to aggressively reduce debt.
News Corp. posted a $1.74 billion fiscal fourth-quarter loss, reflecting the write-down value of its stake in Gemstar TV Guide International, on which it lost a total of $6 billion in fiscal 2002 on its 42 percent stake. News Corp. officials said that a potential baseball strike would be more of a scheduling disruption and programming inconvenience than a financial threat, since it can seek financial damages and would get reduction credits in future rights payments.
Vivendi lowered to junk status: Moody’s Investors Service lowered its ratings on Vivendi Universal to B1, or junk bond status, citing the company’s cash shortage and financial risk to its restructuring plans as the company announced a $12 billion loss for the first half of the year and the sale of $10 billion in assets including its Houghton Mifflin unit.
Standard & Poor’s earlier today also cut Vivendi’s debt ratings to junk status. Vivendi shares fell 25 percent to a new one-year low of $11.80 a share despite confirmation of a new $3 billion credit facility with seven banks to service payments on the company’s $18.6 billion debt. Vivendi confirmed it would sell its stake in EchoStar Communications, some of its Canal Plus-related assets and Italian digital TV platform Telepiu. It still could sell Universal Studios and Universal Music.
‘Monk’s’ repurposed run on ABC stirs interest: It wasn’t a grand slam, but ABC’s new secondary airing of “Monk,” which has its first-run on cable’s USA Network, had a respectable first broadcast outing in ABC’s 9 p.m.-to-10 p.m. (ET) Tuesday time slot, which was previously occupied by “NYPD Blue.” The acquisition of a broadcast window for “Monk,” co-produced by Disney-owned Touchstone Television, comes as a result of ABC exercising an option on a four-week secondary window after USA Network’s first telecasts on Friday evenings.
Last night on ABC, “Monk” turned in a third-ranked 2.6 rating/7 share average among adults 18 to 49, a 4 percent improvement over “NYPD Blue’s” summer average in the key demo (2.5/7), according to Nielsen Media Research fast national data. Among total viewers, “Monk’s” airing tallied 7.0 million viewers, which was a 9 percent spurt over “Blue’s” average summer headcount (6.5 million).
Against competing network programming, “Monk” was way outdistanced by Fox’s top-ranked summer hit “American Idol,” which posted a 6.0/17 score in adults 18 to 49 and 12.2 million viewers. But “Monk” gave NBC’s back-to-back repeats of “Frasier” (2.7/8) only a very slight 4 percent cushion. “Idol” also won the hour in households (7.2/12), followed by CBS’s repeat of “The Guardian” (5.6/9), “Frasier” (5.0/8) and “Monk” (4.5/8).
UPN elevates Levy: Kevin Levy has been promoted to UPN director of program planning and scheduling from manager of scheduling. Mr. Levy has been involved with scheduling UPN’s prime-time programming and also is the current executive on “WWE Smackdown!” He reports to Kelly Kahl, executive VP of program planning and scheduling at CBS.
Showtime pilot gets go ahead: Showtime has given a pilot green light to the tentatively titled “Out of Order,” about a Hollywood screenwriting couple whose marriage is in crisis.
The pilot for a potential 2003 series will star Eric Stoltz (“Killing Zoe”), Felicity Huffman (“Sports Night”), Kim Dickens (“Hollow Man”) and Justine Bateman (“Family Ties”).
William H. Macy (“Fargo”) and director/actor Peter Bogdanovich (“The Last Picture Show”) will guest star in the pilot.
Nichols leaving PBS: Laura Nichols, PBS’s senior vice president of corporate communications and public affairs, has resigned. Ms. Nichols will continue in the post until Sept. 5, after which she will work as a corporate communications consultant to PBS in conjunction with Karen Nussle, a director for BKSH & Associates.