Seagram seesaw

Entertainment 'solid'; liquor division down

NEW YORK — A strong entertainment performance was not enough to offset a liquor division made wobbly by the Asian economy as the Seagram Co.’s adjusted net income fell 94% last quarter to $3 million.

The income adjustment included a final contribution from soon-to-be-sold Tropicana but omitted gains from the sale of Time Warner stock.

The inclusion of Time Warner stock sales in both the quarter ended June 30 and the year-earlier one boosted Seagram’s reported net income to $324 million and $148 million, respectively.

Total revenue, meanwhile, fell 15% to $2.2 billion, reflecting not only a weak economy in the Asia Pacific but also currency exchange losses.

Harold Vogel, the entertainment analyst at SG Cowen Securities, called Seagram’s entertainment results, consisting of Universal Studios’ music, recreation and filmed entertainment operations, “reasonably solid.”

Officials restrained

Vogel also sensed that Seagram officials “restrained their enthusiasm” while commenting on those results Wednesday during an analyst call.

Prompting the restraint is the so-called “quiet period” preceding Universal’s planned acquisition of music powerhouse PolyGram, which, pending regulatory approval, is expected to be completed in early November.

Seagram’s overall cash flow — or earnings before interest, taxes, depreciation and amortization — dropped 11% from continuing operations to $248 million.

Those results belie an uneven performance between business segments, however. Universal Studios’ cash flow actually advanced 19% to $125 million, paced by a 30% gain in music and a 35% gain in recreation.

Wine and spirits sag

In contrast, cash flow for Seagram’s spirits and wine group dropped 29% to $123 million. The company noted that liquor sales in the Asia Pacific region deteriorated 50% during the quarter.

The cash flow results are the first to render Seagram more of an entertainment company than the spirits and wine enterprise of its origins.

Adjusted earnings, slight as they were, nonetheless beat analyst expectations, which had formed a consensus around $3 million in red ink rather than adjusted profits.

Seagram’s stock responded by climbing 11% Wednesday to close at $34.69.

On other matters, Vogel said Seagram declined comment to analysts about the pending sale of Polygram’s film division but described its $3.3 billion sale of Tropicana to PepsiCo as being “on track.”

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