Time Warner Earnings Surge as All Units Jell

Time Warner Inc. continued its two-year string of unexpectedly strong earnings news, easily beating Wall Street’s second-quarter profit expectations with increases that ran across nearly all lines of its businesses.

Time Warner’s stellar performers included its publishing division, with strong ad sales for such magazines as In Style and Sports Illustrated, and its cable networks unit, home of such channels as The Cartoon Network, TBS, TNT and Cable News Network. Strong results also continued for its cable systems operations, and its Home Box Office channel.

Even film, which until recently had been soft, turned in a strong performance. Time Warner’s New Line Cinema unit benefited from the hit film “Austin Powers: The Spy Who Shagged Me,� while Warner Bros. posted an increase thanks in part to the hit film “The Matrix.� Music, which was the company’s weakest link a year ago, posted increases thanks to albums from such singers as Cher and Missy Elliott.

“They continue to hit on all cylinders. It’s a rare time in the corporation’s history that things are really clicking and benefiting from 10 years of investment,� said Jill Krutick, an analyst with Salomon Smith Barney.

The media giant said its net income climbed to $593 million, or 43 cents a share, on revenue of $3.57 billion. That compares to $101 million, or 2 cents a share, a year earlier on revenue of $3.67 billion.

Second-quarter results were inflated by $771 million in gains, compared to $70 million a year earlier, stemming from the sale or exchange of some cable TV systems and investments. Without those gains, Time Warner said, its earnings in the quarter still would have been 12 cents a share, double the consensus estimate of Wall Street’s analysts.

Time Warner shares rose $1.56 to $77.31 on the New York Stock Exchange. The stock is nearly at its 52-week high and is more than double its 52-week low.

The combined earnings before interest, taxes, depreciation and amortization, or cash flow, for Time Warner and its Time Warner Entertainment Co. partnership was up 74% to $2.02 billion. Without the cable systems gains, it rose 11%.

Time Warner until recently had no net income to report because high interest payments on its big debt load drained bottom-line profits. As a result, analysts and the company use cash flow as a gauge on how well Time Warner and its units are doing.

Plagued for years by its huge debt load and management upheaval, Time Warner began to jell in 1997 with the comeback of its cable operations. The company has since been churning out solid earnings results. Since early 1997, Time Warner’s stock has nearly tripled in price.

“Quarter after quarte--they’ve been doing this for two years now,� said Barry Hyman, market strategist with New York money manager Ehrenkrantz King Nussbaum Inc.

Cash flow in its publishing unit rose 11% to $196 million in the quarter, while results in its HBO uni--which also includes the Cinemax and Comedy Central network--climbed 16% to $131 million.

In music, cash flow rose 5% to $101 million, while filmed entertainment’s cash flow climbed 8% to $132 million.

Time Warner’s cable results, boosted by the one-time gain, was $1.18 billion, compared to $448 million a year earlier. Factoring out those deals, the company’s cable unit would still have posted an increase in cash flow of 11%.

Time Warner’s WB network posted wider losses of $30 million in the quarter, compared to $22 million, which the company attributed to higher start-up costs for the WB station group.

In a statement, Chief Executive Gerald M. Levin said that the company’s performance “keeps us on track for another record year.� He added that critical to the company’s growth going forward is its digital strategy to take advantage of new technologies that will affect the delivery of entertainment.