Media and entertainment giant Time Warner said on Wednesday it plunged into the red after setting aside $3-billion to cover shareholder lawsuits stemming from its 2001 merger with America Online (AOL).
Time Warner posted a loss of $321-million in the second quarter to June, from a net profit of $777-million in the same period last year.
Of the legal reserves, $2,4-billion will go to a settlement for a class-action lawsuit filed by disgruntled holders of stock in both Time Warner and its AOL division, officials said.
Time Warner’s auditor Ernst and Young will pay an addition $100-million to settle its end of the charges, attorneys representing the class-action plaintiffs said.
The settlement, one of the biggest in US corporate history, comes after Time Warner agreed in March to pay $300-million to settle government charges that AOL fraudulently overstated ad revenues and numbers of internet subscribers from 2000 to 2002.
Time Warner said the remaining $600-million of its $3-billion legal reserve will go to settle pending securities litigation.
”By working to resolve these issues now, we’re aiming to avoid the costs, risks and distractions of protracted litigation,” company chief executive Dick Parsons said in a statement.
”Even after considering the reserve, our balance sheet remains strong,” he said.
Time Warner’s second-quarter loss equates to seven cents a share, with revenue down 1% to $10,7-billion on declines from both its film and AOL divisions.
Time Warner shares slumped 2,7%, or 47 cents, to $16,95 in pre-opening trade. — Sapa-AFP