NEW YORK — General Cinemas’ parent GC Cos. Inc. suffered an 18% drop in its fourth-quarter net profit to $3.7 million in the three months to Oct. 31, it said Wednesday, as operating losses increased due to higher corporate expenses.
GC’s operating loss, before interest and taxes, doubled to $5.1 million after corporate expenses rose from $1.1 million to $4.2 million. Also contributing to the increased red ink was a drop in theater profit margins, as theater operating costs rose 6% on 2.7% higher revenue of $89 million.
“The financial performance of the exhibition business in 1996 and 1997 faced significant challenges on the operating line, primarily attributable to increased industry competitive activity,” said GC president Robert Smith.
GC chief financial officer Gail Edwards said the squeeze on margins was a result of tougher industry conditions, with admissions down through the year, and higher financing costs on GC’s new plexes. She said the increase in corporate expenses was due to one-time costs related to recent acquisitions.
GC partially offset the increase in costs with a one-time gain of $3.2 million on sale of theater assets. General Cinema made $10.3 million selling seven theaters in Oklahoma during the quarter, it said, but this was substantially wiped out by a $7.4 million accounting write-off relating to the age of the company’s circuit.
On the investment side of GC’s earnings, investment income was flat at $10.5 million. GC’s interest expense fell slightly to $137,000. GC stock rose 37¢ to $45.37.
The quarterly result concluded GC’s 1997 fiscal year, when the company’s net profit fell 15% to $14.7 million.