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VIACOM REPORTS RECORD SECOND QUARTER 2001 RESULTS …
Tags: amortization, assets, balance sheet, cable networks, capital expenditures, depreciation, diluted share, earnings, ebitda growth, free cash flow, merger, nyse, quarter ended june, record revenues, s cable, second quarter ended june, segments, stock, viacom, viacom inc,Pages: 9
Language: english
Created: Thu Jul 26 00:03:49 2001
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VIACOM REPORTS RECORD SECOND QUARTER 2001 RESULTS
· EBITDA Increases Fourfold to $1.36 Billion from $273 Million
· Pro Forma EBITDA Up 12% on Record Revenues of $5.71 Billion
· Pro Forma Free Cash Flow Climbs 33% to $936 Million
New York, New York, July 26, 2001 Reflecting strong double -digit EBITDA growth, Viacom Inc.
(NYSE: VIA and VIA.B) today reported record results for the second quarter ended June 30, 2001.
The Company also posted a 33% increase in pro forma free cash flow to $936 million. Free cash flow is
an important measure of performance because it reflects the resources available to the Company after
interest, taxes and capital expenditures that can be used to invest in the business, acquire additional
assets, strengthen the balance sheet and repurchase stock.
Viacom's second quarter 2001 results were led by double -digit EBITDA gains in the Company's Cable
Networks, Television and Entertainment segments. Viacom's reported revenues rose 18% to $5.72
billion from $4.85 billion in the same quarter last year, and reported EBITDA (earnings before interest,
taxes, depreciation and amortization) increased to $1.36 billion, up from $273 million, including merger-
related charges of $698 million, in the second quarter of 2000. Reported free cash flow for the second
quarter of 2001 was up 534% from the same quarter last year and after-tax cash flow climbed 211%
over the same quarter last year.
On a pro forma basis, second quarter 2001 EBITDA rose 12% to $1.36 billion on revenues of $5.71 billion,
compared with EBITDA of $1.21 billion and revenues of $5.67 billion for the second quarter of 2000. Pro
forma free cash flow per share for the second quarter of 2001 climbed 33% to $.52 per diluted share, or
$936 million, versus pro forma free cash flow of $.39 per diluted share, or $706 million, in the second
quarter last year. Pro forma after-tax cash flow for the second quarter of 2001 increased 15% to $1.04
billion, or $.58 per diluted share, compared with pro forma after-tax cash flow of $904 million, or $.50 per
diluted share, for the same quarter last year.
2
"Viacom delivered double -digit EBITDA growth in the second quarter despite a difficult economic
environment, once again demonstrating our ability to outperform the industry," said Sumner M. Redstone,
Chairman and Chief Executive Officer of Viacom. "Even more significant and indicative of the strength of
our assets, we also generated more than $1.5 billion in free cash flow in the first half of 2001. This
achievement highlights our exceptional long-term growth potential and our exceptional capability to pursue
growth both internally and externally and to create enormous value for stockholders."
Mel Karmazin, President and Chief Operating Officer of Viacom, said, "Viacom's second quarter results
exceeded expectations in a very difficult operating environment and we continued to outperform the
competition and pick up market share in every major segment. These results confirm our belief that Viacom's
EBITDA growth rate will improve rapidly and significantly compared with current results as the economy
strengthens. Overcoming the significant challenges created by the economic slowdown, our Cable Networks
reported 25% pro forma EBITDA growth, including double -digit increases at MTV Networks, BET and
Showtime. Our content businesses, which account for 50% of our annual revenues, also excelled in the
quarter. CBS, which posted significant sales gains, won the May Sweeps and captured Thursday night; our
entertainment operations, including Paramount, which leads the industry in motion picture market share,
delivered double-digit EBITDA growth; and Blockbuster posted higher EBITDA and raised its share to nearly
40% of the home video rental market. Infinity also made significant EBITDA contributions and maintained its
40%-plus margins in the second quarter of 2001.
"In the first half of 2001, Viacom generated more free cash flow than any media company in the world," Mr.
Karmazin added. "This is a significant advantage in any environment that, along with our leadership positions
and unyielding operational discipline, positions us to deliver consistent returns for stockholders."
Cable Networks reported EBITDA increased 36% to $389 million from $286 million and pro forma EBITDA
of $390 million increased 25% from $312 million in the second quarter of 2000. Television reported and pro
forma EBITDA of $361 million rose 119% and 16%, respectively, from $165 million and $311 million in the
same quarter last year. The Entertainment segment reported EBITDA increased 15% to $132 million
compared with $114 million in the second quarter of 2000. Blockbuster's reported EBITDA rose 5% to $118
million from $113 million in the second quarter of 2000. Infinity also made major EBITDA contributions in the
quarter, despite challenges created by the steep fall-off of advertising in the technology sector which
contributed to an unusually robust advertising market last year.
3
Viacom reported net earnings of $17 million, or $.01 per share, for the second quarter of 2001. This compares
with a net loss of $496 million, or a loss of $.41 per share, in the second quarter of 2000. The second quarter
of 2000 reflects merger-related charges of $698 million (after-tax $505 million).
Business Outlook
Viacom's second quarter and year-to-date results exceeded expectations. The Company believes that it is
well positioned to continue to outperform the industry for the rest of 2001 and over the long term. For the
second half of 2001, the Company believes it can achieve EBITDA growth generally in line with the
growth rate achieved in the first half of the year assuming the continuation of the current economic
climate.
Segment Results (Second Quarter 2001 versus Second Quarter 2000)
The table below presents second quarter 2001 and 2000 Revenues and EBITDA on a reported and pro forma
basis.
Second Quarter
(dollars in millions) Reported Pro Forma
2001 2000 B/(W)% 2001 2000 B/(W)%
Revenues:
Cable Networks $ 1,062.0 $ 961.2 10% $1,057.6 $ 993.2 6%
Television 1,626.4 1,225.7 33 1,626.4 1,649.5 (1)
Infinity 985.4 672.6 47 984.9 1,030.7 (4)
Entertainment 772.8 748.7 3 772.8 748.7 3
Video 1,226.0 1,214.4 1 1,226.0 1,214.4 1
Publishing 149.4 133.2 12 149.4 133.2 12
Intercompany eliminations (105.1) (104.9) -- (105.1) (96.6) (9)
Total Revenues $5,716.9 $ 4,850.9 18% $ 5,712.0 $ 5,673.1 1%
EBITDA:
Cable Networks $ 388.7 $ 286.2 36% $ 389.6 $ 312.2 25%
Television 360.8 164.5 119 360.8 310.8 16
Infinity 436.4 324.1 35 436.3 460.8 (5)
Entertainment 132.0 114.4 15 132.0 114.4 15
Video 118.4 113.2 5 118.4 113.2 5
Publishing 9.2 8.5 8 9.2 8.5 8
Segment Total 1,445.5 1,010.9 43 1,446.3 1,319.9 10
Corporate expenses/eliminations (65.5) (719.5) 91 (65.5) (75.3) 13
Residual costs of discontinued operations (18.3) (18.6) 2 (18.3) (30.4) 40
operations
Total EBITDA $ 1,361.7 $ 272.8 399% $ 1,362.5 $ 1,214.2 12%
4
Cable Networks (MTV Networks (MTVN) including MTV, VH1, Nickelodeon, Nick at Nite, TV Land,
TNN: The National Network and CMT; BET; and Showtime Networks Inc.)
Cable Networks pro forma EBITDA increased 25% to $390 million on pro forma revenues of $1.06 billion, an
increase of 6%. Higher pro forma revenues and EBITDA principally reflect double -digit increases in cable
affiliate fees and DBS revenues and increased efficiencies. For the 17th consecutive quarter, MTV was the
No. 1 cable network for the core 12-24 year old audience. MTV was also the No. 1 cable network for the
18-24 year old audience as well as the broader 12-34 year old audience. In the second quarter, TNN's
primetime household ratings grew 52%--the largest increase among all cable networks in primetime versus
the comparable prior year's quarter. The first annual BET Awards premiered in June and was the most-
watched entertainment special in BET's 21-year history with a 4.26 rating. Showtime subscriptions increased
21% over the prior year by approximately 5.0 million to 29.2 million subscriptions at June 30, 2001. Pro forma
results assume the acquisition of the CBS Cable Networks, TNN and CMT, the acquisition of BET, and
dispositions had occurred on January 1, 2000.
Television (CBS and UPN Television Networks and Stations; Television Production and
Syndication)
Television's pro forma EBITDA of $361 million increased 16% while pro forma revenues decreased 1% to
$1.63 billion. Television's EBITDA growth was led by the CBS Network, which delivered double -digit
revenue growth in primetime principally due to increased pricing. Strong second quarter programming on the
CBS Network included the winning combination of Survivor: The Australian Outback and CSI: Crime
Scene Investigation on Thursday nights and its successful Monday night lineup. The CBS Network won the
primetime May Sweep, finishing first in household ratings and second among adults age 25-54. The Network
posted double -digit ratings increases among adults 2554 and adults 1849. CBS Network's strong primetime
revenue growth was partially offset by the timing of the National Semifinals of the NCAA Men's Basketball
Tournament which took place in the second quarter last year but in the first quarter this year. Television's
results also benefited from higher revenues for continuing network shows and first-run syndication, including
Paramount Television Group's Frasier, Judge Judy, Judge Joe Brown and Moesha and also included
revenues from new series including Ed and That's Life. The revenue increases in television production and
syndication were more than offset by lower advertising sales for the television stations which faced difficult
comparisons with last year's exceptionally strong advertising environment.
5
Pro forma results assume that the CBS merger and the acquisition of the remaining 50% interest of UPN had
occurred on January 1, 2000. Pro forma results for second quarter 2000 are also adjusted to exclude certain
transactions with divested investments and losses of approximately $33 million for iWon.com, which was
previously a minority-owned, consolidated subsidiary. In 2001, iWon.com is accounted for as a deconsolidated
investment.
Infinity (Radio Stations, Outdoor Advertising Properties)
Infinity's pro forma EBITDA of $436 million decreased 5% on pro forma revenues of $985 million, a decrease
of 4%, reflecting difficult comparisons with the second quarter of 2000, which benefited from an exceptionally
strong advertising environment including very strong demand from the technology sector. In the second
quarter of 2001, Infinity continued to gain market share by outpacing the out-of-home market and was No. 1 in
radio revenue billings in seven of the top 10 markets.
Pro forma results assume the acquisition of Infinity as part of the CBS merger, and the subsequent acquisition
of the minority interest of Infinity, had occurred on January 1, 2000 and also assume the completion of all
acquisitions and related divestitures of radio and outdoor properties by Infinity had occurred at the beginning of
each period presented. Pro forma results for 2000 are also adjusted to exclude transactions with divested
investments.
Entertainment (Paramount Pictures, Famous Players, Famous Music Publishing and Paramount
Parks)
Entertainment's EBITDA of $132 million increased 15% on revenue increases of 3% to $773 million,
principally driven by higher Features, Theaters and Parks' revenues. Paramount's successful domestic
theatrical releases in the second quarter included Lara Croft: Tomb Raider, which has grossed $126 million
to date, and Along Came a Spider, which has grossed $74 million to date. Features' revenues were led by
higher home video revenues which included domestic contributions from What Women Want and Save the
Last Dance and continuing contributions from the successful foreign video release of Mission: Impossible 2.
For the first half of 2001, Paramount is No. 1 in US box office market share. Higher Theaters' revenues and
EBITDA benefited from slightly higher attendance and lower overhead. The Parks higher results reflect
modest attendance growth and higher per capita spending.
6
Video (Blockbuster)
Video's EBITDA increased 5% to $118 million on a revenue increase of 1% to $1.23 billion primarily driven
by the increase in the number of company-operated stores. Worldwide same store sales, including rental and
retail product, decreased 2.7%, reflecting weaker box office titles in video release versus the same quarter
last year which included The Sixth Sense, the top renting title in Blockbuster's history. Blockbuster's gross
profit margins improved in the quarter due to strong growth in DVD rental revenue, which resulted in fewer
purchases under VHS revenue sharing arrangements, which generally have lower gross profit margins, and
growth in other revenue, which generates a higher gross profit margin. Blockbuster's free cash flow doubled
to $75 million from the comparable prior year's quarter as a result of lower capital expenditures and continued
growth in the business. Blockbuster ended the second quarter of 2001 with 7,781 company-owned and
franchise stores, a net increase of 405 stores over the second quarter of 2000 of which 31 company-owned
stores were added in the second quarter 2001. Viacom owns approximately 82% of Blockbuster (NYSE:
BBI).
Publishing (Simon & Schuster)
Publishing's EBITDA increased 8% to $9 million on higher revenues of $149 million, an increase of 12%,
principally due to increased sales in the Trade, Pocket Books and Children's divisions. Publishing's best-
selling titles in the second quarter included John Adams by David McCullough, On the Street Where You
Live by Mary Higgins Clark and Temptation by Jude Deveraux.
Corporate Expenses/Eliminations
Pro forma corporate expenses, excluding intersegment profit eliminations, decreased 23% to $44 million,
principally due to effective cost containment measures. Included in the corporate expenses/eliminations of
$66 million for the second quarter of 2001 are intersegment profit eliminations of $22 million.
Six-Month Results
For the six months ended June 30, 2001, Viacom reported a 46% increase in revenues to $11.47 billion,
compared with $7.88 billion for the first half of 2000. Viacom reported EBITDA for the first six months of
2001 of $2.51 billion versus EBITDA of $742 million, including merger-related charges, in the same period last
year. Reported free cash flow for the six months ended June 30, 2001 was $1.52 billion, up from $365 million
for the comparable prior-year period. Reported after-tax cash flow for the first half of 2001 was $1.73 billion,
an increase of 163% over after-tax cash flow of $657 million for the same period last year, despite the impact
of significantly higher taxes paid in the first six months of 2001.
7
On a pro forma basis, revenues for the first six months of 2001 increased 4% to $11.45 billion compared with
revenues of $11.03 billion for the same period last year. Pro forma EBITDA for the first half of 2001
increased 13% to $2.52 billion, versus EBITDA of $2.22 billion for the same prior-year period. Pro forma free
cash flow for the six months ended June 30, 2001 was $1.59 billion, an increase of 25% from $1.28 billion for
the comparable prior-year period. Pro forma after-tax cash flow for the first half of 2001 was $1.80 billion, an
increase of 10% over after-tax cash flow of $1.63 billion for the same period last year. For the first half of
2001, Viacom reported net earnings of $9 million, or $.01 per share, compared with a net loss of $880 million,
or a loss of $.93 per share, in the same year-earlier period. Effective January 1, 2000, the Company adopted a
new accounting standard on motion picture accounting and recorded a non-cash pre-tax charge of $754 million,
or $452 million after-tax, reported as a cumulative effect of a change in accounting.
Six Months Ended June 30,
(dollars in millions) Reported Pro Forma
2001 2000 B/(W)% 2001 2000 B/(W)%
Revenues:
Cable Networks $ 2,044.4 $ 1,732.3 18% $ 2,030.6 $ 1,897.4 7%
Television 3,657.2 1,753.8 109 3,657.2 3,503.4 4
Infinity 1,821.0 672.6 171 1,819.8 1,899.5 (4)
Entertainment 1,368.0 1,271.3 8 1,368.0 1,271.3 8
Video 2,533.9 2,425.5 4 2,533.9 2,425.5 4
Publishing 271.3 246.0 10 271.3 246.0 10
Intercompany eliminations (226.7) (224.8) (1) (226.7) (217.6) (4)
Total Revenues $ 11,469.1 $ 7,876.7 46% $ 11,454.1 $ 11,025.5 4%
EBITDA:
Cable Networks $ 748.1 $ 521.7 43% $ 759.7 $ 621.0 22%
Television 675.5 281.8 140 675.5 601.3 12
Infinity 759.5 324.1 134 758.1 796.9 (5)
Entertainment 195.8 169.1 16 195.8 169.1 16
Video 278.9 263.5 6 278.9 263.5 6
Publishing 11.4 6.8 68 11.4 6.8 68
Segment Total 2,669.2 1,567.0 70 2,679.4 2,458.6 9
Corporate expenses/eliminations (116.8) (806.0) 86 (116.8) (174.9) 33
Residual costs of discontinued
operations (41.8) (18.6) (125) (41.8) (61.9) 32
Total EBITDA $ 2,510.6 $ 742.4 238% $ 2,520.8 $ 2,221.8 13%
Other Matters
During the first half of 2001, the Company repurchased approximately 8.5 million shares of the
Company's Class B common stock for approximately $432 million under its stock repurchase programs
of which $207 million was spent in the second quarter.
8
Viacom is the No. 1 platform in the world for advertisers, with preeminent positions in broadcast and
cable television, radio, outdoor advertising, and online. With programming that appeals to audiences in
every demographic category across virtually all media, the company is a leader in the creation,
promotion, and distribution of entertainment, news, sports, and music. Viacom's well-known brands
include CBS, MTV, Nickelodeon, VH1, BET, Paramount Pictures, Infinity, UPN, TNN: The National
Network, CMT, Showtime, Blockbuster and Simon & Schuster. More information about Viacom and its
businesses is available at http://www.viacom.com.
Cautionary Statement Concerning Forward-looking Statements
This document contains both historical and forward-looking statements. All statements, including Business
Outlook, other than statements of historical fact are, or may be deemed to be, forward-looking statements within
the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934.
These forward-looking statements are not based on historical facts, but rather reflect the Company's current
expectations concerning future results and events. Similarly, statements that describe our objectives, plans or
goals are or may be forward-looking statements. These forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements
of the Company to be different from any future results, performance and achievements expressed or implied by
these statements. The following important factors, among others, could affect future results, causing these results
to differ materially from those expressed in our forward-looking statements: advertising market conditions;
changes in the public acceptance of the Company's programming; changes in technology and its effect on
competition in the Company's markets; changes in the Federal Communications Laws and Regulations and the
outcome of related court cases; and other economic, business, competitive and/or regulatory factors affecting the
Company's businesses generally. The forward-looking statements included in this document are made only as of
the date of this document and under section 27A of the Securities Act and section 21E of the Exchange Act, we
do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or
circumstances.
Contacts:
Press: Investors:
Carl D. Folta Martin Shea
Senior Vice President, Corporate Relations Senior Vice President, Investor Relations
(212) 258-6352 (212) 258-6515
Susan Duffy James Bombassei
Vice President, Corporate Relations Vice President, Investor Relations
(212) 258-6347 (212) 258-6377
9
VIACOM INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited; all amounts, except per share amounts, are in millions)
Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
Revenues $ 5,716.9 $ 4,850.9 $11,469.1 $ 7,876.7
Operating income (loss) $ 585.8 $ (278.2) $ 989.5 $ (37.8)
Other income (expense):
Interest expense, net (255.2) (179.5) (500.7) (292.5)
Other items, net 2.0 (16.7) (7.8) (15.0)
Earnings (loss) before income taxes 332.6 (474.4) 481.0 (345.3)
Benefit (provision) for income taxes (314.7) 12.1 (438.2) (46.0)
Equity in loss of affiliated companies, net of tax (7.1) (21.3) (34.2) (27.4)
Minority interest, net of tax 5.9 (12.0) 0.8 (8.9)
Net earnings (loss) before cumulative effect of change
in accounting principle 16.7 (495.6) 9.4 (427.6)
Cumulative effect of change in accounting principle,
net of tax -- -- -- (452.3)
Net earnings (loss) $ 16.7 $ (495.6) $ 9.4 $ (879.9)
Earnings (loss) per common share:
Basic:
Net earnings (loss) before cumulative effect of change in .
$ 0.01 $ (0.41) $ 0.01 $ (0.45)
Net earnings (loss) $ 0.01 $ (0.41) $ 0.01 $ (0.93)
Diluted:
Net earnings (loss) before cumulative effect of change in
accounting principle $ 0.01 $ (0.41) $ 0.01 $ (0.45)
Net earnings (loss) $ 0.01 $ (0.41) $ 0.01 $ (0.93)
Weighted average number of common shares:
Basic 1,768.6 1,207.6 1,698.9 951.2
Diluted 1,800.2 1,207.6 1,730.6 951.2