U tows Seagram line

Studio's gains boost parent's sagging qtr.

By MARTIN PEERS

NEW YORK -- Video revenue from "The Lost World: Jurassic Park" and full ownership of USA Networks lifted Universal Studios' earnings 33% before interest, taxes, depreciation and amortization, to $199 million, in the second quarter ended Dec. 31, Universal's parent Seagram Co. Ltd. reported Wednesday.

Meanwhile, Seagram CEO Edgar Bronfman Jr. revealed Wednesday that a re-engineering program under way at Universal's film group over the past year has identified ways to cut $150 million out of the studio's overhead.

Bronfman revealed the figure during a conference call with Wall Street analysts and his comments were confirmed by a Seagram spokesman, who said the savings came from a new focus on use of "certain vendors" such as law firms and parcel delivery services and from purchasing.

The spokesman cautioned that annual cost savings would not reach $150 million because some money would have to be reinvested in new systems. Seagram declined to comment on what U's total overhead is now.

Meanwhile, the uptick at Universal was the only bright spot in the quarter for Seagram, which suffered a severe crunch in its Asian beverage businesses as a result of the Asian economic crisis. Largely as a result, Seagram Co.'s overall net income plummeted 83%, to $28 million in the quarter, on 5.5% lower revenue of $3.5 billion.

Seagram took a $60 million one-time charge against earnings in the quarter to cover the cost of writing down Asian liquor assets and severance payments, the company said. Additionally, beverage earnings before interest, taxes, depreciation and amortization (cash flow) fell 20%.

"The decline in our spirits business in Asia Pacific over the past several months has been difficult," Bronfman said. He predicted a "shortfall for fiscal 1998" based on current market conditions in Asia, but said the business would be "well positioned" to start growing again next year.

Seagram stock has been weak for the past few months, as investors reacted to the expected impact of the Asian troubles on the company. However, the stock jumped $1.12 Wednesday to close at $34.50.

Cowen & Co. analyst Harold Vogel said investors may have been heartened by the performance of the film group and pleased that the Asian charge wasn't any bigger.

U's filmed entertainment division increased cash flow 74%, to $113 million, on 7% higher revenue of $1.07 billion. A Seagram spokesman said ownership of the outstanding 50% of USA Networks, acquired Oct. 21 from Viacom Inc., added $29 million to the cash flow.

Even excluding this, cash flow grew 29%, which came mostly from video revenues on "The Lost World."

Film earnings will look significantly different next quarter because Seagram has agreed to sell USA to HSN Inc. and the deal may close as early as Feb. 12, the day after HSN shareholders vote on the transaction.

Universal's music division recorded 4% higher cash flow of $47 million on marginally lower revenue of $451 million.

Bronfman told analysts the music group's market share was down from a year ago, but a spokesman for Seagram said the music group had achieved the top spot briefly last year and it had not expected to maintain that position.

At the recreation group, including theme parks, cash flow dipped $1 million to $39 million on 8% lower revenue of $294 million.