Cap Cities Says ABC Unit Had Operating Loss : But Parent Firm’s Overall Net Income Increased Sharply in 4th Quarter

Capital Cities/ABC Inc. said Wednesday that its ABC television network suffered a substantial operating loss in 1986 due to weak advertising demand and disappointing ratings for its programs.

Capital Cities did not specify the amount of the network’s loss, which excludes the positive effect of an accounting change. But analyst Peter Appert of Cyrus J. Lawrence Inc. suggested that it was about $50 million.

Overall, the company said net income for the fourth quarter rose to $80.3 million from $39.8 million a year earlier. Revenue quadrupled to $1.19 billion in the three months ended Dec. 28.

The 1985 results do not include contributions from American Broadcasting, which was acquired in early January.

For the year, Capital Cities/ABC said its operating income rose 28% to $181.9 million from $142.2 million in 1985.

An extraordinary gain of $265.7 million, mainly reflecting Capital Cities’ sale of three television stations, five radio stations and its cable television systems, resulted in net income of $447.7 million for the year. That compared to a profit of $142.2 million in 1985.

Despite the loss by the TV network, operating income from the broadcasting group rose more than four times for the quarter to $185 million and more than tripled for the year to $519 million.

The group includes the ABC television network, seven radio networks, eight television stations, 19 radio stations and cable television programming, including the company’s 80% interest in the ESPN cable network.

Last year was a uniformly difficult one for all the networks amid a depressed advertising environment. But, in the ratings race, ABC fell further into a distant third place behind leader NBC and CBS.

Capital Cities, which acquired ABC in January, 1986, has responded to the financial squeeze at the network by instituting staff layoffs and other cost-cutting measures.

The broadcast group, however, was profitable as the company’s local television stations, radio networks and ESPN cable television channel posted earnings ahead of expectations.