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USA drains, pix pump Par results

Dragged back into the red last quarter by anticipated losses at its half-owned USA Network, Paramount Communications nevertheless reported a surprisingly robust performance from its film business.

Par posted a net loss of $ 36.6 million, or 31 cents per share, for the fiscal third quarter ended Jan. 31, in line with a company-issued warning Feb. 2. That compares with a loss of $ 66.8 million, or 56 cents, (after a one-time accounting charge of $ 66.9 million) in the same quarter last year.

Revenues rose 7% to $ 1.01 billion.

For the first nine months, Paramount posted net profits of $ 180.6 million ($ 1.50), up 20.4% from the year-ago period. Nine-month revenues rose 17% to $ 3.76 billion.

Par’s official report to the Securities & Exchange Commission showed revenues from its entertainment segment (everything except publishing) climbed 12% to $ 714.2 million in the third quarter and 26% to $ 2.37 billion for the nine-month period. But operating income for the segment dropped 74% and 11%, respectively.

Par didn’t disclose dollar numbers on its segments, but USA Network’s losses undoubtedly whacked operating income. The cable channel posted a $ 78 million charge in the third quarter, owing to poor ratings for “Major Dad” and other series programming as well as start-up costs for the Sci-Fi Channel.

If you “blacked out” the $ 78 million charge, said PaineWebber analyst Christopher Dixon, its Paramount Studios unit would have reported about $ 85 million of operating income vs. $ 51 million a year ago. Indeed, film did well: Strong overseas box office receipts from “Sliver” and “The Firm” triggered substantial gains in feature film and theatrical quarterly sales.

Feature film revenues — including video — gained 32% to $ 358 million last quarter and grew 13% to $ 941 million for the nine-month period. Theatrical revenues — feature revenues excluding video — soared 94% in the third quarter and rose 58% in the nine-month period.

Homevideo revenues added 69% and 4% for the three- and nine-month periods, led by domestic releases of “The Firm” and “Sliver” and persistently strong domestic and overseas performance by ” Indecent Proposal,””Patriot Games” and “Boomerang.”

Features generated third-quarter operating income but recorded a decline of 24% in nine-month operating income. Theatrical results dipped slightly due to write-downs for “Coneheads,””Searching for Bobby Fischer,””The Thing Called Love ,””Flesh and Bone,””Addams Family Values” and “Bopha!,” which were partially offset by “Indecent Proposal” and “The Firm,” according to the filing.

A weaker mix of new titles depressed pay-cable revenues 37% and 23%, respectively, in the three-and nine-month periods. Network and worldwide syndie feature sales fell 33% and 5% in the quarter and nine-month periods, because fewer titles were available.

TV programming revenues added 5% to $ 179 million for the quarter and grew 24 % to $ 631 million for the first nine months. The absence of funds from “Cheers” offset higher series licensing fees in the third quarter. Basic cable sales of “Wings” and syndie sales of library titles added a boost.

Revenues from firstrun product firmed 21% and 15% for the three- and nine-month periods on gains from “Star Trek: Deep Space Nine,””Leeza,””Star Trek: The Next Generation” and “Hard Copy,” which shored up lower revenues from “The Arsenio Hall Show.”

TV programming operating income dropped 78% and 42% in the three- and nine-month periods, pressured by a less-profitable mix of shows and higher new-programming costs.

The station and network group posted an operating loss for the third quarter and a nine-month 61% decline in operating income due to the USA Network loss.

Last September’s purchase of WKBD-TV (Detroit) and better ad sales spurred profits 37% higher to $ 56 million at Par stations last quarter and 24% higher to $ 153 million in the nine-month period (the only segment disclosing dollar amounts.)

Theatrical exhibition revenues fell 16% to $ 42 million and operating income weakened 60% last quarter, as occurred overall in the exhibition industry.

Madison Square Garden revenues rose 10% to $ 103 million last quarter, in line with estimates, and rose 14% to $ 224 million for the nine-month period. Paramount Parks revenues more than quadrupled to $ 302 million in the nine-month period.

Publishing revenues slipped 2% last quarter to $ 299 million and the segment’s quarterly operating loss deepened 46%.

Educational technology publishing revs strengthened 18% to $ 11 million in the quarter.

“The future of Viacom-Paramount-Blockbuster will focus on the ability to introduce new multimedia products,” said PaineWebber’s Dixon. “The fact that education technology (publishing) is up 34% for the first nine months underscores the important role technology will have in generating new sources of revenue for the combined company.”

Paramount’s interest and other investment expense rose 220% to $ 4.8 million for the quarter. For the nine-month period, Paramount paid interest and investment expense of $ 17.5 million after earning $ 8.8 million in the same year-ago period.

Paramount is in the process of merging with Viacom in a deal valued at about $ 9.8 billion.

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