Polygram net tumbles 85%
Plunge blamed on high overhead
The film division's operating loss of $49 million was more than double the loss posted in the year-earlier quarter, as sales inched ahead a meager 4%.
Polygram Filmed Entertainment attributed the weak results, announced Wednesday, to higher overhead for its distribution system and to increased provisions for non-performing films.
Polygram's music division also reported declines, as operating income dropped 40% to $82 million on relatively flat sales slightly in excess of $1 billion.
A weaker pop music release schedule was cited as the source of the music division's declines.
The two divisions combined to produce net income for the Polygram Group of $11 million, compared with $73 million in the year-earlier period, on flat sales of $2 billion.
The less-than-stellar performance was foretold a month ago when Seagram announced the $10.6 billion it had originally agreed to pay for Polygram had been cut to $10.26 billion.
In explaining the reduced price, which had been negotiated with 75% Polygram shareholder Philips Electronics, Seagram cited "lower than expected financial results of Polygram during the second quarter."
The statement was interpreted (Daily Variety, June 23) to mean Polygram's disastrous first quarter, which witnessed an 88% plunge in earnings, had spilled over to the next. And, indeed, it had.
About Polygram's second-quarter performance, CEO Jan Cook said: "As expected, Polygram's music performance in the first half of 1998 faced a difficult comparison with last year, when a number of international and local releases achieved very strong sales."
Cook didn't comment directly on the film division, which is on the block for an estimated $750 million once the agreed-to takeover is completed, but said Polygram was "pleased that the sale to Seagram has received approval from the U.S. regulatory authorities, and we hope that the remaining approvals will be granted as quickly as possible for the benefit of our artists and employees."
Upcoming music product for the second half of 1998 includes new albums from megarocker Bryan Adams, Swedish band the Cardigans and singer-songwriter Sheryl Crow.
In contrast to PFE's actual results, Polygram has been circulating among potential buyers briefing books that predict a tripling of the film division's cash flow between 1999 and 2002.
Upcoming scheduled PFE film titles include "Elizabeth," which is premiering at the Toronto Intl. Film Festival, "What Dreams May Come" with Robin Williams, Cuba Gooding Jr. and Annabella Sciorra, and "Hi-Lo Country," starring Woody Harrelson.
Polygram's shares closed unchanged Wednesday at $53.44.
