MGM Posts $16-Million Loss for Third Quarter

Despite stronger revenue boosted by the summer box-office hit “Legally Blonde” and the video and DVD sales of “Hannibal,” Metro-Goldwyn-Mayer on Monday reported a third-quarter loss of $16 million.

The Santa Monica-based studio attributed the loss to new accounting rules that took effect in January. The new standards require studios to immediately record marketing expenses rather than spread the costs over the life of a film.

Without the new rules, MGM would have posted a $28.2-million profit for the quarter--a record for the 77-year-old studio, the company said. Third-quarter revenue climbed 26% to $393.3 million.

“On an apples-to-apples comparison, this was the best quarter in our company’s history and we feel pretty good about that,” said Chris McGurk, MGM’s chief operating officer.

Earnings before interest, taxes, depreciation and amortization, a common yardstick used to measure a media company’s financial performance called EBITDA, would have shown a 23% increase to $53.4 million.

However, the new rules squeezed MGM’s third-quarter EBITDA to $9.2 million.

The net loss, which translates into 7 cents per share, compares with a net income of $27.1 million, or 13 cents per share, for the third quarter of last year.

MGM’s increased revenue was driven by two low-budget movies and demand for the DVD and video release in August of the Anthony Hopkins’ thriller “Hannibal.”

The Reese Witherspoon comedy, “Legally Blonde,” cost MGM $19 million and is closing in on $95 million in domestic box-office receipts. MGM also scored on its $2.5-million investment in “Jeepers Creepers,” a $10-million movie released by its United Artists division, which has raked in $35 million since its Aug. 31 opening.

“‘Legally Blonde’ will be one of MGM’s most profitable films ever,” McGurk said. The studio is already working on a sequel and has a deal with Walt Disney Co.’s ABC network for a TV series.

However, McGurk says MGM’s release of the Bruce Willis-Billy Bob Thorton movie “Bandits” suffered in the wake of attack-related news events. MGM had expected “Bandits” to debut in first place with nearly $20 million at the box office. Instead, “Bandits,” opened Oct. 12 in second place with $13.5 million.

The company anticipates its fourth-quarter earnings to range from 1 cent to 3 cents a share.