Viacom Net Income Drops Nearly 22%

However, its operating earnings exceed Wall Street's expectations.
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today reported that its earnings declined nearly 22% in the third quarter, although its operating earnings exceeded Wall Street's expectations.

For the quarter ended Sept. 30, the company posted net income of $96.7 million, or 14 cents a diluted share, on net revenues of $3.3 billion. In the year-earlier quarter, earnings were $123.4 million, or 17 cents a diluted share, on revenue of $3.2 billion.

But excluding one-time charges and unusual items, Viacom posted operating income of $160 million, or 23 cents a diluted share. Analysts surveyed by

First Call/Thomson Financial

expected the media conglomerate to earn 16 cents a share from continuing operations.

The company took large restructuring hits during the quarter, including $49 million for buying Aaron Spelling's TV operations. In addition, it recorded an extraordinary loss of $14.2 million, net of tax. Susan Duffy, vice president for corporate relations, said the $14.2 million represented early payment on debts and associated penalties.

Viacom's actively traded class B shares were down 7/16 to 40 11/16 in mid-afternoon trading.

The earnings were "overshadowed by the amazing quarter last year," when


hit video stores, Sumner Redstone, chairman and chief executive, said in a conference call with analysts.

The company also announced a merger with


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during the quarter, which still requires shareholder approval.

Revenues from rentals of movies outpaced new movies and TV shows. Video revenues were up 13% from the year-ago quarter to $1.1 billion at the company's 6,860


stores. Entertainment revenues from films like

Runaway Bride

and shows like

Sabrina: The Teenage Witch

dropped to $1.2 billion from last year's $1.3 billion.

Viacom's operating cash flow -- earnings before interest, taxes, depreciation and amortization -- fell to $166 million from $215 million.

Asked to comment on reports that the company might drop plans to spin off Blockbuster, Redstone said: "Blockbuster is not a sick child, it's a booming, thriving business."

Publishing revenues increased 4% thanks to titles like Frank McCourt's



The company made $6.6 million in revenues from its online operations, including




Web sites, double the results of a year earlier.

"It was really an amazing quarter in what is shaping up to be a truly outstanding year," Redstone said.



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, the beverage and entertainment company, reported a narrower loss than expected.

The company said it lost $124 million, or 29 cents a diluted share, on revenues of $3.6 billion in its first fiscal quarter. In the year-ago quarter, the company reported net income of $95 million, or 27 cents a diluted share. Analysts polled by First Call had expected the company to report a loss of 31 cents a share.

Seagram's shares were down 1/8 at 41 3/8 at mid-afternoon.