-- Diluted EPS from Continuing Operations were $0.62; Adjusted Diluted EPS
from Continuing Operations were $0.55
NEW YORK, Nov. 3 -- Viacom Inc. (NYSE: VIA and
VIA.B) today reported financial results for the third quarter ended September
30, 2008.
Third Quarter 2008 Results
(in millions, Quarter Ended Better/ Nine Months Ended Better/
except per share September 30, (Worse) September 30, (Worse)
amounts) 2008 2007 2008 2008 2007 2008
vs. vs.
2007 2007
Revenues $ 3,408 $ 3,271 4% $ 10,382 $ 9,175 13%
Operating income 689 815 (15)% 2,048 1,958 5%
Net earnings from
continuing
operations 385 450 (14)% 1,061 1,085 (2)%
Diluted EPS from
continuing
operations 0.62 0.67 (7)% 1.68 1.59 6%
Net earnings 401 641 (37)% 1,078 1,278 (16)%
Diluted EPS $ 0.65 $ 0.96 (32)% $ 1.71 $ 1.87 (9)%
Revenues grew 4% to $3.41 billion in the third quarter 2008 led by a 6%
increase in Media Networks revenues with Filmed Entertainment revenues
relatively flat versus the prior year's results. Operating income declined
15% in the quarter, primarily reflecting a $91 million decrease in the Filmed
Entertainment segment as it lapped the strong performance of Transformers in
the third quarter of 2007. Net earnings from continuing operations were $385
million with diluted earnings per share (EPS) of $0.62, a 7% decrease from the
prior year's results. Excluding $0.07 in discrete tax benefits, adjusted
diluted EPS from continuing operations were $0.55, a 15% decline from the
third quarter 2007 adjusted results. Adjustments are detailed in the
Supplemental Disclosures at the end of this release.
Sumner M. Redstone, Executive Chairman of Viacom, said, "Viacom remains
focused on running its business efficiently and continuing to invest wisely in
our brands. As we've seen in the past, we believe audiences the world over
will increasingly turn to the television, film and multimedia programming we
offer. This, in turn, creates opportunities for us to deepen our audience
connections."
Philippe Dauman, President and Chief Executive Officer of Viacom, said,
"The economic environment and ongoing uncertainty have posed new challenges
for the media industry, and Viacom has not been immune to the impact of these
forces. Over the past two years, however, we have been judiciously managing
our finances and operations. Thanks to these efforts, we believe that we will
be well positioned both in the near term and as the global economy regains its
footing over time. With a talented team, world-class brands, a strong balance
sheet and significant cash flow, we will continue to drive our strategy
forward.
"In the quarter, Viacom's multiple revenue streams provided solid top-line
growth for the company, with strong ancillary and affiliate revenue increases
moderating the impact of a softer domestic advertising market. Our popular
programming, such as The Daily Show with Jon Stewart, The Colbert Report,
SpongeBob SquarePants and The Hills, continues to connect with audiences and
set viewership records. In the coming months, we plan to launch several new
shows as well as novel multiplatform initiatives to recharge ratings at some
of our channels. We are also very excited by the great potential of our games
business, led by our rapidly expanding Rock Band franchise.
"Paramount Pictures has taken significant steps this year to achieve
ongoing overhead and operational savings in order to better compete in the
current marketplace. In addition to building a powerful and strategic
theatrical slate, it is also leading the industry with smart moves into the
digital space. We are looking forward to DreamWorks Animation's Madagascar:
Escape 2 Africa, which opens this week, and to Paramount's year-end release of
two widely anticipated films, The Curious Case of Benjamin Button and
Revolutionary Road."
Revenues
Revenues Quarter Ended Better/ Nine Months Ended Better/
September 30, (Worse) September 30, (Worse)
(in millions) 2008 2007 2008 2008 2007 2008
vs. vs.
2007 2007
Media Networks $ 2,128 $ 1,999 6% $ 6,281 $ 5,654 11%
Filmed Entertainment 1,309 1,305 - 4,226 3,640 16%
Eliminations (29) (33) NM (125) (119) NM
Total revenues $ 3,408 $ 3,271 4% $ 10,382 $ 9,175 13%
NM = Not Meaningful
Third Quarter 2008 revenues of $3.41 billion grew 4% from $3.27 billion in
2007. Media Networks revenues rose 6% to $2.13 billion led by a 36% increase
in ancillary revenues to $313 million. Ancillary revenue growth was driven by
continued strong sales of Rock Band, which more than offset a decline in
consumer products sales. Worldwide affiliate revenues were strong, up 12% to
$660 million, reflecting rate and subscriber increases across the Company's
core channels. Softness in the overall advertising market contributed to a 2%
decrease in worldwide advertising revenues to $1.16 billion in the quarter.
Domestic advertising revenues declined 3% due in part to ratings softness at
certain channels. Filmed Entertainment revenues increased $4 million over the
prior year's results to $1.31 billion. Growth in home entertainment revenues,
up 30% to $593 million, was driven by increased revenues from third-party
distribution agreements, including the DVD release of Marvel's Iron Man late
in the third quarter. Theatrical revenues were $312 million, a 36% decline
over the prior year's results, which included the strong performance of
Transformers. Television license fees rose 16% to $342 million, reflecting an
increase in and more favorable mix of available titles in the pay TV, network
and syndicated television markets.
Operating Income
Operating Income
(Loss) Quarter Ended Better/ Nine Months Ended Better/
September 30, (Worse) September 30, (Worse)
(in millions) 2008 2007 2008 2008 2007 2008
vs. vs.
2007 2007
Media Networks $ 761 $ 796 (4)% $ 2,220 $ 2,132 4%
Filmed Entertainment (19) 72 NM 4 (14) NM
Corporate (53) (53) - (176) (162) (9)%
Eliminations - - NM - 2 NM
Total operating
income $ 689 $ 815 (15)% $ 2,048 $ 1,958 5%
NM = Not Meaningful
Third Quarter 2008 operating income decreased 15% to $689 million versus
$815 million in the third quarter of 2007. Operating income for the Media
Networks segment declined 4%, reflecting the impact of lower advertising and
consumer products revenues as well as higher expenses primarily related to
programming. The Filmed Entertainment segment reported an operating loss of
$19 million in the third quarter compared with $72 million in operating income
last year. This result was driven by lower theatrical revenues as well as
higher feature film amortization.
Business Outlook
For the full year 2008, Viacom expects to deliver mid-single to low
double-digit growth in adjusted diluted earnings per share from continuing
operations. This outlook is based on adjusted earnings and reflects growth
from 2007 adjusted diluted earnings per share from continuing operations of
$2.36.
Stock Repurchase Program
For the quarter ended September 30, 2008, 7.6 million shares were
repurchased for an aggregate purchase price of $215 million. As of October
31, 2008, the Company has $1.4 billion remaining in its existing $4 billion
share repurchase program.
Debt
At September 30, 2008, total debt outstanding, including capital lease
obligations, was $8.95 billion, compared with $8.25 billion at December 31,
2007.
About Viacom
Viacom, consisting of BET Networks, MTV Networks and Paramount Pictures,
is the world's leading entertainment content company. It engages audiences on
television, motion picture and digital platforms through many of the world's
best known entertainment brands, including MTV, VH1, CMT, Logo, Rock Band,
Nickelodeon, Noggin, Nick at Nite, AddictingGames, Neopets, COMEDY CENTRAL,
Spike TV, TV Land, Atom, Gametrailers, BET, Paramount Pictures and Paramount
Vantage. Viacom's global reach includes approximately 160 channels and 400
online properties in 160 countries and territories.
For more information about Viacom and its businesses, visit
www.viacom.com.
Cautionary Statement Concerning Forward-Looking Statements
This news release contains both historical and forward-looking statements.
All statements, including Business Outlook, which are not statements of
historical fact are, or may be deemed to be, forward-looking statements.
Forward-looking statements reflect the Company's current expectations
concerning future results, objectives, plans and goals, and involve known and
unknown risks, uncertainties and other factors that are difficult to predict
and which may cause actual results, performance or achievements to differ.
These risks, uncertainties and other factors include, among others:
advertising market conditions; the public acceptance of and ratings for the
Company's feature films, programs, digital services, games and other content,
as well as related advertisements; competition for advertising dollars;
technological developments and their effect in the Company's markets and on
consumer behavior; fluctuations in the Company's results due to the timing,
mix and availability of the Company's programming, films and other content;
changes in the Federal communications laws and regulations; the impact of
piracy; the impact of increased scale in parties involved in the distribution
and aggregation of the Company's products and program services to consumers
and advertisers; the impact of union activity; other domestic and global
economic, business, competitive and/or regulatory factors affecting the
Company's businesses generally, including the current downturn in global
economic conditions and possible domestic recession; and other factors
described in the Company's news releases and filings with the Securities and
Exchange Commission, including but not limited to the Company's 2007 Annual
Report on Form 10-K and reports on Form 10-Q and Form 8-K. The forward-looking
statements included in this document are made only as of the date of this
document, and the Company does not have any obligation to publicly update any
forward-looking statements to reflect subsequent events or circumstances.
VIACOM INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Quarter Ended Nine Months Ended
(in millions, except September 30, September 30,
earnings per share amounts) 2008 2007 2008 2007
Revenues $3,408 $3,271 $10,382 $9,175
Expenses:
Operating 1,945 1,671 5,992 4,998
Selling, general and
administrative 682 682 2,061 1,922
Depreciation and
amortization 92 103 281 297
Total expenses 2,719 2,456 8,334 7,217
Operating income 689 815 2,048 1,958
Interest expense, net (123) (115) (363) (340)
Gain on sale of equity
investment - - - 151
Equity in (losses) earnings
of investee companies (32) (1) (48) 12
Other items, net (23) (7) (38) (52)
Earnings from continuing
operations before provision
for income taxes
and minority interest 511 692 1,599 1,729
Provision for income taxes (122) (237) (526) (631)
Minority interest, net of tax (4) (5) (12) (13)
Net earnings from continuing
operations 385 450 1,061 1,085
Discontinued operations, net
of tax 16 191 17 193
Net earnings $401 $641 $1,078 $1,278
Basic earnings per common share:
Earnings per share,
continuing operations $0.62 $0.67 $1.69 $1.59
Earnings per share,
discontinued operations $0.03 $0.29 $0.02 $0.28
Net earnings per share $0.65 $0.96 $1.71 $1.87
Diluted earnings per common share:
Earnings per share,
continuing operations $0.62 $0.67 $1.68 $1.59
Earnings per share,
discontinued operations $0.03 $0.29 $0.03 $0.28
Net earnings per share $0.65 $0.96 $1.71 $1.87
Weighted average number of
common shares outstanding:
Basic 618.9 667.1 629.2 682.0
Diluted 619.3 668.2 630.1 683.5
VIACOM INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2008 2007
(in millions, except par value)
ASSETS
Current assets:
Cash and cash equivalents $525 $920
Receivables, net (includes retained
interests in securitizations) 2,036 2,617
Inventory, net 1,002 727
Deferred tax assets, net 230 248
Prepaid and other assets 376 321
Total current assets 4,169 4,833
Property and equipment, net 1,217 1,196
Inventory, net 4,649 4,108
Goodwill 11,402 11,375
Intangibles, net 747 684
Other assets 631 708
Total assets $22,815 $22,904
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $376 $497
Accrued expenses 1,164 1,563
Participants' share and residuals 1,316 1,545
Program rights obligations 442 370
Deferred revenue 331 406
Financing obligations 133 187
Other liabilities 421 705
Total current liabilities 4,183 5,273
Financing obligations 8,819 8,059
Participants' share and residuals 356 285
Program rights obligations 696 533
Deferred tax liabilities, net 148 105
Other liabilities 1,420 1,501
Minority interests 43 37
Commitments and contingencies
Stockholders' equity:
Class A Common stock, par value $0.001,
375.0 authorized; 57.4 and 57.4
outstanding, respectively - -
Class B Common stock, par value $0.001,
5,000.0 authorized; 557.9 and 587.4
outstanding, respectively 1 1
Additional paid-in capital 8,155 8,079
Treasury stock (5,577) (4,502)
Retained earnings 4,485 3,407
Accumulated other comprehensive income 86 126
Total stockholders' equity 7,150 7,111
Total liabilities and stockholders'
equity $22,815 $22,904
VIACOM INC.
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
The following tables reconcile the Company's results for the quarter and
nine months ended September 30, 2008 and 2007, respectively, to adjusted
results that exclude the impact of impairments of minority investments, Media
Networks restructuring activities, a realized gain on the sale of the
Company's non-controlling investment in MTV Russia and net discrete tax
benefits. The Company uses adjusted operating income, adjusted net earnings
and adjusted diluted EPS among other things, to evaluate the Company's
operating performance in the absence of these items and for planning and
forecasting of future periods. The Company believes that the adjusted results
provide relevant and useful information for investors because it allows
investors to view performance in a manner similar to the method used by the
Company's management, improves their ability to understand the Company's
operating performance and makes it easier to compare the Company's results
with other companies. Since adjusted operating income, adjusted net earnings
and adjusted diluted EPS are not measures of performance calculated in
accordance with GAAP, they should not be considered in isolation of, or as a
substitute for operating income, net earnings and diluted EPS as indicators of
operating performance and they may not be comparable to similarly titled
measures employed by other companies.
(in millions, except Quarter Ended
per share amounts) September 30, 2008
Pre-tax Net Earnings Diluted
Earnings from from EPS from
Operating Continuing Continuing Continuing
Income Operations(1) Operations(2) Operations
Reported results $689 $511 $385 $0.62
Adjustments:
Discrete tax
benefits (6) - - (46) (0.07)
Adjusted results $689 $511 $339 $0.55
(in millions, except Nine Months Ended
per share amounts) September 30, 2008
Pre-tax Net Earnings Diluted
Earnings from from EPS from
Operating Continuing Continuing Continuing
Income Operations(1) Operations(2) Operations
Reported results $2,048 $1,599 $1,061 $1.68
Adjustments:
Impairment of
investment(5) - 12 12 0.02
Discrete tax
benefits (6) - - (46) (0.07)
Adjusted results $2,048 $1,611 $1,027 $1.63
(in millions, except Quarter Ended
per share amounts) September 30, 2007
Pre-tax Net Earnings Diluted
Earnings from from EPS from
Operating Continuing Continuing Continuing
Income Operations(1) Operations(2) Operations
Reported results $815 $692 $450 $0.67
Adjustments:
Media Networks
restructuring
activities(3) 3 3 2 -
Discrete tax
benefits (6) - - (15) (0.02)
Adjusted results $818 $695 $437 $0.65
(in millions, except Nine Months Ended
per share amounts) September 30, 2007
Pre-tax Net Earnings Diluted
Earnings from from EPS from
Operating Continuing Continuing Continuing
Income Operations(1) Operations(2) Operations
Reported results $1,958 $1,729 $1,085 $1.59
Adjustments:
Media Networks
restructuring
activities(3) 70 70 44 0.06
Gain on sale of
equity
investment(4) - (151) (94) (0.14)
Impairment of
investment(5) - 36 22 0.03
Discrete tax
benefits (6) - - (15) (0.02)
Adjusted results $2,028 $1,684 $1,042 $1.52
(1) Pre-tax earnings represent earnings from continuing operations before
provision for income taxes and minority interest.
(2) The tax impact of adjustments has been calculated where appropriate
using the applicable rates in effect for the period presented.
(3) 2007 adjusted results exclude $3 million and $70 million,
respectively, of expenses related to Media Networks restructuring
charges, principally severance, affecting MTV Networks domestic and
international operations for the quarter and nine months ended
September 30, 2007.
(4) In 2007, the Company sold its non-controlling investment in MTV
Russia for $191 million and recognized a pre-tax gain of $151 million.
(5) 2008 and 2007 adjusted results exclude $12 million and $36 million,
respectively, of pre-tax non-cash investment impairment charges for
the nine months ended September 30, 2008 and 2007.
(6) 2008 and 2007 adjusted results exclude $46 million and $15 million,
respectively, of net discrete tax benefits for the quarter and nine
months ended September 30, 2008 and 2007. The discrete tax benefits
were principally the result of effectively settled audits.
Business Outlook
The Company's business outlook is based on 2007 adjusted diluted earnings
per share from continuing operations of $2.36. The following table reconciles
the Company's results for the full year ended December 31, 2007 to the
adjusted results that exclude the impact of restructuring activities, the
realized gain on the sale of the Company's non-controlling interest in MTV
Russia, an impairment charge associated with the write-down of Amp'd Mobile
and net discrete tax benefits.
(in millions, except Year Ended
per share amounts) December 31, 2007
Pre-tax Net Earnings Diluted
Earnings from from EPS from
Operating Continuing Continuing Continuing
Income Operations(1) Operations(2) Operations
Reported results $2,936 $2,580 $1,630 $2.41
Adjustments:
Media Networks
restructuring
activities(3) 77 77 49 0.07
Gain on sale of
equity
investment(4) - (151) (95) (0.14)
Impairment of
investment(5) - 36 23 0.04
Discrete tax
benefits (6) - - (15) (0.02)
Adjusted results $3,013 $2,542 $1,592 $2.36
(1) Pre-tax earnings represent earnings from continuing operations
Before provision for income taxes and minority interest.
(2) The tax impact of adjustments has been calculated where appropriate
using the applicable rates in effect for the period presented.
(3) 2007 adjusted results exclude $77 million of expenses related to
Media Networks restructuring charges, principally severance,
affecting MTV Networks domestic and international operations.
(4) The Company sold its non-controlling investment in MTV Russia for
$191 million and recognized a pre-tax gain of $151 million.
(5) The Company recorded a pre-tax non-cash impairment charge of $36
million to write off its investment in Amp'd Mobile which filed for
bankruptcy.
(6) 2007 adjusted results exclude net discrete tax benefits of $15
million, which were principally the result of effectively settled
audits.
SOURCE Viacom
CONTACT: Press:
Carl Folta, Executive Vice President, Corporate
Communications
+1-212-258-6352
carl.folta@viacom.com
Kelly McAndrew, Vice
President, Corporate Communications
+1-212-846-7455
kelly.mcandrew@viacom.com
or
Investors:
James Bombassei, Senior Vice
President, Investor Relations
+1-212-258-6377
james.bombassei@viacom.com
Pamela Yi, Director, Investor Relations
+1-212-846-7581
pamela.yi@viacom.com
Web Site: http://www.viacom.com
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