AOL Time Warner Inc. (AOL) Chief Executive Richard Parsons said Wednesday that the Securities and Exchange Commission was looking into a series of transactions that boosted the company's revenues.

The world's largest media company also posted its first quarterly net profit since completing its megamerger, although strength in its cable and film businesses was offset by a slowdown in its America Online division.

Parsons, speaking during a conference call, defended the company's accounting, saying the allegations raised in a newspaper report were without merit.

Last week, the Washington Post said that AOL Time Warner boosted revenue figures through "unconventional" deals from 2000 to 2002. 

Parsons said that AOL Time Warner's auditor, Ernst & Young, signed off on the accounting at the time of the transactions and then again when the issue was brought up. Parsons said that AOL called the SEC prior to the Post articles appearing. 

"We are comfortable with the accounting practices and policies in place at our company. Our accounting is appropriate for the businesses in which we operate," Chief Financial Officer Wayne Pace told the conference call.

Shares of AOL Time Warner fell in after-hours trade to $10.70, on the Instinet system, after having closed down 1.3 percent at $11.40 in New York Stock Exchange trade.

AOL's second-quarter earnings excluding a range of costs and its revenues topped analysts' expectations. However, analysts raised concerns about subscriber growth at the America Online unit.

For the second quarter, the media giant posted a net profit of $394 million, or 9 cents a share, compared to a net loss of $734 million, or 17 cents a share, a year-earlier. Year-ago results included a $1.7 billion charge related to goodwill and amortization.

AOL Time Warner said that excluding a range of costs such as noncash amortization expenses, earnings were flat at 24 cents a share compared with a year-earlier.

Revenue rose 10 percent to $10.6 billion from a year earlier.

Wall Street analysts, on average, had expected the company, which is home to HBO, People magazine, The West Wing, and artists like Madonna, to post earnings before a range of items of 22 cents a share and revenue of $10.02 billion, according to Thomson First Call.

AOL Time Warner said its earnings before interest, taxes, depreciation and amortization, a common measure of cash flow, grew 2 percent to $2.5 billion from a year-earlier.

COMPANY REVISES 2002 GUIDANCE

The company, suffering from a 65 percent decline in its shares this year, said it expected its 2002 revenue growth to come in at the upper end of its 5 percent to 8 percent range but expects cash flow growth to come in near the lower end of its 5 percent to 9 percent expected range.

Last week the company, which reported the largest corporate net loss ever in the first quarter after taking a whopping charge to write-down the value of its assets, reshuffled its top management.

The shake-up put control in the hands of traditional media executives from Time Warner about 18 months after Internet pioneer AOL completed its $106.2 billion takeover of Time Warner -- a deal that was supposed to deliver growth by building on synergies between old and new media. The company's No. 2 executive, Robert Pittman, also resigned as part of the shake-up, just months after he was sent to revive AOL.

The company's online unit, struggling with a slowdown in advertising spending and subscriber growth, reported normalized earnings before interest, taxes, depreciation and amortization (EBITDA) of $473 million, down from $652 million a year-earlier. Revenue at the AOL unit fell to $2.27 billion, down from pro forma revenue of $2.33 billion a year-earlier.

The AOL service added 492,000 net new subscribers in the quarter, compared to analysts' expectations for up to 1 million net new subscribers. The company said the subscriber growth included 477,000 in the United States and 78,000 in Europe.

"Subscriber growth issues at AOL have worsened dramatically," said SoundView Technology analyst Jordan Rohan.

"We've got an issue there," Rohan said. "There's a lot of good to talk about, but the pace of the deterioration of the online subscriber growth is concerning."

Strength at the company's cable systems and its film unit, driven by the home video release of Harry Potter and the Sorcerer's Stone and film hits like Insomnia, helped offset some of the weakness from AOL.

AOL Time Warner stock has been hit by concerns about slowing advertising and subscriber growth at its online unit, recent management upheaval, and investors' concerns about companies with complex accounting.

The company has been struggling to regain investor credibility since abandoning aggressive growth targets last week that it had been touting for months.

The Associated Press and Reuters contributed to this report.