MGM/UA Posts $26.9-Million Net Loss

MGM/UA Entertainment Co., which is in the throes of renegotiating the price of its sale to Turner Broadcasting System, reported Tuesday that it suffered a $26.9-million net loss in its first fiscal quarter ended Nov. 30.

A joint MGM-Turner filing with the Securities and Exchange Commission last month had said that the Culver City-based studio would report a “substantial” loss for the first quarter. MGM/UA had a $1.7-million net profit in the same quarter a year ago but finished fiscal 1985 engulfed in a $115.8-million net loss.

Representatives of Atlanta-based Turner Broadcasting reportedly were still in meetings Tuesday with MGM/UA officials and MGM/UA’s majority shareholder, Kirk Kerkorian. Spokesmen for both sides said they had no information on the talks.

MGM/UA Chairman Frank Rothman, commenting on the studio’s loss, said: “First-quarter results were adversely affected by expenses connected with the proposed merger. . . . Further contributing to the net loss were increased interest expense associated primarily with the reacquisition of the publicly held shares of MGM/UA Home Entertainment Group and the amortization of film costs of theatrical films released during the quarter.”

Rothman and other studio representatives were not available Tuesday to comment further.

In the prepared news release, Rothman said that “the opening of the Christmas blockbuster ‘Rocky IV’ occurred at the end of the quarter and would thus positively impact subsequent consolidated quarters.”

However, according to the SEC filings last month, one of the agreed-upon points in the Turner deal was that all proceeds of the film, a United Artists release, would go with other property to the new UA to be purchased for $480 million by Kerkorian simultaneously with the closing of the MGM/UA sale to Turner. Therefore, MGM under Turner would receive nothing from the big hit, which thus far has brought in about $110 million at the box office.

The breakdown on MGM/UA’s first quarter showed that operating revenue dropped to $163.3 million from $170.9 million a year earlier, while operating expenses rose to $162.3 million from $155.4 million.