NEW YORK — Viacom reported sharply higher earnings at Paramount and MTV Networks, but continuing woes at the company’s Blockbuster and interactive units led to a steep fourth-quarter loss.
Although cash flow rose 10% in 1996’s final quarter and revenues rose a healthy 22%, the company was dragged down by a $98 million writeoff relating to store closings at Blockbuster Music and a $245 million charge for Virgin Interactive Entertainment, which the company intends to sell and is now reclassified as a discontinued operation.
With those anticipated black marks included, Viacom reported a net loss of $227 million for the quarter, compared with a $4.5 million profit in 1995, on revenues of $3.4 billion, up 22%. Cash flow, however, was up 10% in the quarter to $478 million, buoyed by strong performances in the TV and film sectors, and the company managed to eke out $57 million in earnings from continuing operations, ahead of analysts’ expectations of a loss.
Virgin, Viacom’s spun-off cable systems and its radio group, whose $1.1 billion sale is now pending, have been excluded from those results. The rest of the businesses, however, are “pretty solid, and they’re doing a little better than expected,” said John Tinker, a Montgomery Securities analyst, who said the unanticipated improvement came from Par. “The company is still saying the Blockbuster turnaround won’t be until the second half, and that remains a concern, but (otherwise) they’re really managing their businesses.”
“They’re moving in the right direction, but it’s taking a long time, and there’s nothing really compelling about the upcoming quarter,” said Harold Vogel, a Cowen & Co. analyst.
Viacom’s shares rose 62-1/2¢ to $36.50 on the earnings news.
For the fourth quarter, cash flow was $478 million on revenues of $3.4 billion, while full-year cash flow was flat at $2.1 billion on revenues of $12.1 billion, an 11% gain. Full-year net income was $1.2 billion, up from $222 million in 1995.
In a conference call Tuesday, Viacom execs told analysts that 77% of the films on Paramount’s 1997 slate are co-financed with other partners, which minimizes risk but also the upside of potential hits. Execs were bullish over prospects for “Private Parts” and “The Saint,” both set for release this month, and said they remained focused on reducing debt. But first-quarter 1997 comparisons will be weaker due to a windfall from a Kirch Group output deal signed last year.
For last year’s fourth quarter, Par’s film and domestic firstrun syndication businesses nearly doubled cash flow to $81 million on revenues of $1.1 billion, up 34%, while full-year cash flow fell 5% to $455 million on revenues of $3.5 billion, a 3% gain. “Mission: Impossible,” “The First Wives Club” and “Star Trek: First Contact” were top performers.
And the networks and broadcasting segment — including basic and pay-cable channels and TV stations — continued to perform strongly, with cash flow up 40% in the quarter to $253 million and revenues up 23% to $703 million. For the year, segment cash flow rose 20% to $755 million on revenues of $2.4 billion, up 18%. MTV Networks exceeded those gains, fueled by the surging Nickelodeon, but offset by startup costs for Nick at Nite’s TV Land and M2 channels, and international expansion.