MGM IN BONDAGE AGENT 007, LIBRARY SALES LIFT STUDIO'S PROFITS FOR 2002.

Byline: Greg Hernandez Staff Writer

SANTA MONICA - Metro-Goldwyn-Mayer Inc., powered by the strong box office for the James Bond film ``Die Another Day,'' strong DVD sales from its expansive film library and some one-time gains, reported on Wednesday a 50 percent increase in 2002 fourth-quarter net income.

But subtracting the one-time gains of $32.5 million from the sale of MGM's equity interest in the Bravo television network and $13.2 million from a legal settlement with a vendor, earnings dropped to 6 cents per share, slightly below the consensus Street estimate of 7 cents.

MGM reported fourth-quarter net income of $58.7 million, or 24 cents per share, up from a year earlier when net income was $39.1 million, or 16 cents per share. Revenues on the quarter increased approximately 65 percent to $620.9 million from $375.5 million in the fourth quarter of 2001.

The company expects revenue in 2003 to increase by as much as 5 percent to more than $1.7 billion, with earnings per share expect in the range of 28 cents to 38 cents.

``In terms of operating cash flow, the results were in line for 2002 and for 2003, they did not come out and say anything that should be viewed as negative,'' said Robert G. Routh, a senior analyst with Arnhold and S. Bleichroeder. ``They are managing the company in a financially prudent manner. In the distant past, this was not always the case.''

``Die Another Day'' helped boost MGM's overall film slate for 2002 to profitability despite three expensive failures - ``Hart's War,'' ``Windtalkers'' and ``Rollerball'' - earlier in the year. The Bond film has grossed nearly $160 million domestically and $382 million worldwide, by far the best numbers for any Bond film.

The company has reverted back to a lower-risk strategy of investing about $20 million in any nonsequel theatrical release, which paid off in the second half of 2002 with the hit film ``Barbershop'' and in 2001 with ``Legally Blonde.''

`` 'Die Another Day' capped a remarkable turnaround for our theatrical division in 2002 following the missteps made in the first half of the year,'' said Chris McGurk, MGM's vice chairman and chief operating officer.

McGurk said such films as ``Crocodile Hunter: Collision Course,'' ``Barbershop,'' ``Bowling for Columbine'' and ``Igby Goes Down'' were profitable, while ``Nicolas Nickleby'' and ``Evelyn'' did not meet financial targets.''

MGM will release 18 films this year, 10 of which will be under the MGM label while the others will be released by its specialty arm, United Artists. Among the 2003 releases are sequels to past hits: ``Legally Blonde 2: Red, White and Blonde,'' ``Barbershop 2'' and ``Jeepers Creepers 2.''

``They are on the right track,'' Routh said. ``The cost of their films has gone down, and they have three sequels in 2003.''

MGM executives said that, from 2003 to 2006, they expect to generate approximately $900 million in cash revenue should their films perform at a certain level of profitability. Even if the films merely studio expects to generate $600 million in cash flow during the period.

``Our confidence in achieving an even higher return going forward is based on the fact that our film development strategy has fully evolved from a financial, creative and organizational standpoint,'' said McGurk.

With its expansive library of films and the growing popularity of the DVD format, home video continued to be a bright spot on the company's balance sheet. Past Bond films re-released on DVD had strong sales, which was attributed to the success of ``Die Another Day,'' which itself will be released on home video in June.

Worldwide, MGM's DVD units increased by 112 percent during the quarter compared with the year before. For all of 2003, DVD shipments increased by 80 million units. In addition, combined worldwide DVD and the 100-million unit level in 2003. The DVD market share for 2002 was 17 percent, second only to Warner Bros.

Shares of MGM's stock fell 18 cents Wednesday to close at $9.85 on the New York Stock Exchange.

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(1 -- 2 -- color) Pierce Brosnan as James Bond battles bad guys on a Hovercraft, above, and a possible double agent, Halle Berry, left, in MGM's only certified blockbuster of 2002, ``Die Another Day.''