Strong results from Paramount Communications' television operations failed to offset a weak showing at the box office, resulting in a sharp decline in earnings for the first quarter.
With the performance already expected by investors, the stock gained 50 cents to close at a new high of $ 50.25.
Net earnings for the quarter ended Jan. 31, 1993, were just $ 900,000, or 1 cents per share, compared with $ 18.4 million (16 cents) in the first three months of fiscal 1992. Revenues dropped to $ 943.7 million from $ 1.1 billion in the year-earlier period.
Paramount said that the weak performance of its film releases in the first quarter of fiscal 1993 -- which included "Jennifer Eight" and the Steve Martin starrer "Leap of Faith"-- resulted in lower operating income from entertainment despite substantially higher contributions from television programming operations.
The anemic earnings performance did not come as a shock to Wall Street; in early January, Paramount announced that comparisons with its strong fiscal 1992 first-half motion picture results -- which included "The Addams Family" and "Star Trek VI: The Undiscovered Country"-- would be unfavorable.
At a briefing for analysts, Paramount said operating income from filmed entertainment in the quarter was down an estimated $ 50 million from the year earlier period.
"The total gross box office by all their pictures during the first quarter was equal to that which was experienced in the first weekend of 'The Addams Family,' " or $ 24,203,754, noted Paine Webber entertainment analyst Chris Dixon , who has a buy rating on the stock.
But if film was weak, television was strong. Operating income from firstrun syndication was up an estimated $ 38 million, a 60% gain over the year-earlier period. Those results do not include Paramount's hugely successful new offerings , "Star Trek: Deep Space Nine" and "The Untouchables."
Paramount said its television operations benefited primarily from the licensing of "Wings" to USA Network (jointly owned by Paramount and MCA), increased contributions from "Star Trek: The Next Generation" and "Entertainment Tonight" in firstrun, and higher syndication sales of the original "Star Trek" series and "Happy Days."
USA Network recorded lower operating income in the first quarter because of start-up costs associated with the launch of the Sci-Fi Channel in September of '92.
Homevideo declined as domestic sales of "Patriot Games" and "Boomerang" did not match the strong performance in the year-earlier period of "Ghost" in foreign markets and "The Naked Gun 2 1/2: The Smell of Fear" in domestic markets.
Paramount said that the entertainment results in the first quarter also reflected lower operating income from its television broadcast stations and theatrical exhibition operations, as well as declines at Madison Square Garden. Theme parks, which were acquired in the fourth quarter of fiscal 1992, also registered a modest loss for the period.
The company told analysts that total earnings from the entertainment sector were $ 52.6 million, compared to $ 73.2 million the year before.
Paramount said thatseasonal losses in publishing (about $ 30 million), in line with expectations, were about equal to the corresponding period last year.
Looking forward, Paramount anticipates earning momentum in the second half of fiscal 1993, led by a resurgence in entertainment and educational and consumer publishing. A slate of big-budget films -- including "Indecent Proposal"; "Sliver" starring Sharon Stone; "The Firm" starring Tom Cruise; "Coneheads"; "Addams Family Values"; and "Wayne's World II"-- should revive box office fortunes.
On the television front, Paramount is looking to a lineup that includes 20 1/ 2 hours of firstrun syndication programming led by "Star Trek: The Next Generation,""Star Trek: Deep Space Nine" and "Entertainment Tonight."
Theme parks, which begin operations for the season in the second quarter, are also expected to be positive.
Indeed, Dixon believes the company has substantial growth potential.
The past quarter "is the worst-case scenario," he said. "It shows what Paramount's typical earnings capability can be without any movies at all; close to $ 200 million on an annualized basis. What people tend to forget about Paramount, particularly those on the entertainment side, is that it's much more than a movie company."
Despite what appears to be a brightening outlook, Par's annual meeting -- being held today in Indianapolis (sight of some of its publishing operations) -- could prove contentious.
The State of Wisconsin Investment Board, one of Paramount's institutional investors, has publicly objected to chairman Martin Davis' $ 3.6 million 1992 compensation package (which included a $ 2.7 million bonus). They say such a hefty bonus is unwarranted in a year when the company's performance lagged behind that of its peers and the market in general.
Connecticut State Treasurer Joseph M. Suggs Jr., who oversees that state fund's 200,300 Paramount shares, yesterday said he is joining Wisconsin in voting against re-election.
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