Blockbuster Woes Drag Down Viacom Earnings

Viacom Inc. said this week that its third-quarter earnings dropped 70 percent as weakness at the Blockbuster video chain offset strong performances from MTV, Paramount studios and the media conglomerate’s other businesses.

Viacom earned $434.3 million, or $1.19 a share, in the July-September quarter, down from $1.41 billion, or $3.82 a share, in the same period last year. Revenue rose 12 percent to $3.65 billion from $3.27 billion.

The earnings include a gain of $416 million in the recent quarter from selling its radio station business and a gain of $1.3 billion last year from spinning off its cable systems operations.

Excluding those businesses, earnings from continuing operations dropped 83 percent to $18.4 million from $108.6 million, matching analysts’ expectations, according to Zacks Investment Research.

Not including interest costs, taxes and other items not related to day-to-day operations, Viacom’s earnings were down only 4 percent to $667.8 million from $693.8 million. That measure, known as EBITDA, is considered a key gauge of performance for debt-laden companies such as Viacom.

Viacom’s Class B shares were up 62 cents to close at $30.06 on the American Stock Exchange.

Operating earnings from Viacom’s video and theme parks unit dropped 75 percent on reduced value of Blockbuster’s videotape inventory and costs to refocus the chain on video rentals rather than broader retail sales. Pay-per-view and satellite television have helped take customers away from Blockbuster.

Those results offset a 22-percent rise in operating earnings from networks and broadcasting, led by MTV, and a 29-percent jump from Viacom’s entertainment group, which included strong box-office results from the films “Face/Off” and “In & Out” and syndication revenues from the TV show “Frasier.”

Operating earnings from publishing, which includes Simon & Schuster, climbed 1 percent.

During the quarter, Viacom sold its half of USA Networks to partner Seagram Co. for $1.7 billion. That deal and the sale of its 10 radio stations to Chancellor Media Corp. for $1.1 billion will help Viacom reduce its debt 20 percent to $8 billion by year’s end.

For the first nine months of the year, Viacom earned $220.6 million, or 50 cents a share, on revenue of $9.60 billion. A year earlier, it earned $1.48 billion, or $3.85 a share, on revenue of $8.67 billion.

Some of the stocks that moved substantially or traded heavily Friday on the New York Stock Exchange and Nasdaq Stock Market.

NYSE

R.J. Nabisco, up 1-1/8 at 31-11/16.

Philip Morris, up 7/8 at 39-5/8.

Loews, up 11/16 at 111-11/16.

A jury decided that the R.J. Reynolds Tobacco Co. was not liable for the cancer of a former smoker who had accused it of failing to warn the public about the dangers of cigarettes. Other tobacco stocks rose on the news.

Genesis Health, down 2-13/16 at 24-1/2.

Two investment firms, BT Alex, Brown and Wheat First, downgraded Genesis Health. Analysts said the Philadelphia-based health care provider was vulnerable to sensitivity in health stocks.

NASDAQ

Boston Chicken, down 1-1/2 at 8-15/16.

Merrill Lynch and Goldman Sachs downgraded the Golden, Colo.-based company after it said it may restructure itself into a chain of company-owned restaurants.

Midcom Communications, down 5-1/8 at 1-17/16.

The Southfield, Mich.-based company said it expects to post third- and fourth-quarter revenues below its previous expectations.

Braun’s Fashions, down 3-15/16 at 8-1/8.

The Minneapolis-based company said it doesn’t expect to meet Wall Street analysts’ expectations for the third quarter and fiscal year.