AOL Time Warner Inc. (AOL), the world's largest Internet and media company, on Wednesday posted a $54.2 billion net loss, the largest ever U.S. quarterly net loss, after taking a whopping charge for accounting changes.

The Internet and media giant, home to CNN, People magazine and television shows like The Sopranos, also reined in its 2002 cash flow growth forecast, citing the slow online advertising market.

The results, while hit hard by a slowdown in its AOL Internet unit, were encouraging to some who have been bracing for the worst. Salomon Smith Barney analyst Lanny Baker said the company's acknowledgment of sluggish conditions was a bit of a relief.

The company posted a first quarter net loss of $54.2 billion, or $12.25 a basic share, compared with a net loss of $1.37 billion, or 31 cents a share, a year earlier.

"It is certainly the biggest [loss] in the U.S. in recent memory," said Marc Gerstein at research firm Multex.

The first quarter included a previously announced $54 billion charge, the largest in corporate history, to write off goodwill in line with accounting changes to reflect the sharp decline in the value of its $106.2 billion purchase of Time Warner in 2000.

Shares of AOL Time Warner were trading at $19.95 in after hours trading on Instinet, up 3.4 percent, or 65 cents from Wednesday's close on the New York Stock Exchange. The shares had traded up 1 percent ahead of the results on the NYSE.

AOL Time Warner said EBITDA rose 3 percent to $2.05 billion in the first quarter. Revenue grew 4 percent to $9.8 billion with strength in its cable systems and film business, which had recent hits including Lord of the Rings, offset by weakness in its AOL Internet and music businesses.

"Overall they hit the numbers. But on the EBITDA line, they were a little below expectations on America Online, Time Warner Cable, and their television networks," said Kaufman Bros. analyst Paul Kim.

AOL Time Warner said in a statement that its cash earnings, excluding amortization of goodwill and charges, rose to 18 cents a share from 16 cents a share a year-earlier.

Year-ago results were reported on a pro forma basis to assume that the acquisitions of AOL Europe UK publishing company IPC and the adoption of new accounting standards on goodwill had occurred on Jan. 1, 2001.

Wall Street analysts, on average, had expected the company to post cash earnings of 14 cents a share and revenue of $9.44 billion, according to Thomson Financial/First Call.

The company said EBITDA at its AOL Internet unit fell nearly 15 percent to $433 million from $507 million a year-earlier.

Wall Street has been eager to see how the unit is performing amid concerns about a slowdown in subscriber growth as AOL tries to maintain its dial-up business while moving into the high-speed access arena — seen as the key to future growth.

Shares of AOL Time Warner have fallen 70 percent since the deal to buy Time Warner, reflecting the radical changes in the marketplace since the deal was agreed in January 2000. At that time investors had worried that Time Warner's "old media" businesses of music, film, publishing and television would drag down the growth of hypercharged AOL.

Now, AOL's slowing subscriber growth and sluggish advertising has caused many to question the benefits of the largest U.S. merger.

Outlook Hurt by Ad Climate

But Richard Parsons, who is slated to replace Chief Executive Gerald Levin next month, said on Wednesday improvements are seen ahead.

"We are not being Pollyana-ish here or suggesting that we see the sun peaking over the horizon," said Parsons. "But ... we do see the light at the end of the tunnel."

The company reiterated its projection that overall revenue would grow between 5 percent and 8 percent but cut its cash flow guidance due to softness at the Internet unit amid lower ad and commerce revenues.

The company said it now sees 2002 cash flow growth in a range of 5 percent to 9 percent, down from a prior range of 8 percent to 12 percent.

For the second quarter, AOL Time Warner said it expects revenue growth in the mid-single digits and cash flow to be flat when compared with the same period in 2001.

The bad news lies in its AOL Internet unit. Parsons said he expected 2002 advertising and commerce revenues of $1.8 billion to $2.2 billion from $2.7 billion a year-earlier. The online unit's EBITDA would likely fall to $1.8 billion to $2.2 billion from $2.3 billion a year-earlier.

AOL shares closed up 19 cents, or 1 percent, at $19.30 on the New York Stock Exchange ahead of the results.