MGM Studios saw revenues for parent company MGM Holdings Inc. drop 9 percent in the third quarter, but adjusted income rose thanks to a one-time tax benefit generated by a change in accounting methods, the company said Thursday.
Revenues fell to $212.3 million from last year’s third quarter figure of $233.4 million and income before taxes dropped from $47 million last year to 40.9 million in the quarter ended Sept. 30. Lower-than-expected home entertainment returns from “The Hobbit: Battle of the Five Armies” were primarily responsible for the drop.
But adjusted income swung to $124.5 million from $24.5 million in last year’s third quarter, thanks to $83.1 million in tax gains associated with a shift in the way film and TV costs are amortized. In 2014, MGM was wrestling with an $18 million federal tax charge in the third quarter. Operating income fell to $37 million from $45.7 million.
Still, operating results were ahead of expectations keeping the company on track to achieve its anticipated growth in profitability for 2015 despite the impact of increased foreign currency headwinds.
MGM film releases “Hot Pursuit” and “Poltergeist” were soft at the box office and didn’t do much on DVD, either. Consequently, home entertainment sales slid to $31 million, a 38 percent drop from last year when a “Robocop” reboot was ringing up sales.
TV licensing rose $1.9 million to $152.5 million, driven by the delivery of the second season of “Fargo” to FX and foreign VOD and pay TV returns on “The Hobbit” finale.
Theatrical revenues fell 12.3 percent to $5.7 million with the dog film “Max” its only third-quarter release. It has taken in $42 million since June, when it was released via Warner Bros.
The film unit’s line on the ledger should improve significantly in the fourth quarter, which will reflect profits from the 24th James Bond movie “Spectre,” which has already grossed over $300 million worldwide through Sony distribution. “Creed,” a spinoff from the “Rocky” series starring Michael B. Jordan, is tracking well and comes out Nov. 25 via Warner Bros.
Also included in the final quarter results will be returns from the studio’s recent sale of the online rights to the James Bond films to Chinese internet provider Tencent.
Privately held MGM has been making its financial results public since it emerged from bankruptcy in 2010.