Alliance Atlantis Communications' film distribution business jumped 66% in the third quarter ended Dec. 31, 2001, with revenues up $25m (C$40.2m) to $62.6m (C$100.7m) from $37.6m (C$60.5m) in the prior year's period, boosted by the strong performance of Lord Of The Rings:, increased video and DVD demand and sales to broadcasters in both Canada and the UK.

In all the company recorded a 37% rise in net earnings for its third quarter, to $13.5m (C$21.7m) from $9.8m (C$15.8m) in the same period last year

Lord Of The Rings is the third-highest grossing film ever at the Canadian box office - after Titanic and Star Wars: the Phantom Menace - and the most successful in the company's history, having earned $25m (C$48m) after 10 weeks.

AAC expects a further boost next quarter thanks to the 39 Academy Award nominations bestowed on films for which it holds Canadian distribution rights, including titles such as In The Bedroom and The Shipping News. The company has also signed a non-exclusive video-on-demand pact with Canada's largest cable TV operator Rogers Cable. Meanwhile, its wholly-owned UK distribution arm Momentum Pictures is now the eighth largest distributor in the UK.

On the TV front, AAC is in preliminary discussions with US network CBS for a spin-off series of its successful TV drama series CSI: Crime Scene Investigation. But it plans to continue the overall reduction of production activity.

The company will benefit from the January 2002 consolidation of its TV and film production operations which saw the elimination of 80 full-time positions. The company expects an operating cost savings of at least $4.4m (C$7m) on an annualised basis from the cuts against a one-time $2.5m (C$4m) loss from severance payments.

The company also reported a one-time non-cash charge of $157.9m (C$253.9m) as a result of its adoption of mandatory US accounting standards which require production and distribution entities to expense P&A costs immediately.

Previously, studios would amortise P&A costs over several years. But that figure includes $43.5m (C$70m) which the company can put against future income tax payments.