Viacom Reports Third Quarter 2008 Results

Viacom Reports Third Quarter 2008 Results

-- Diluted EPS from Continuing Operations were $0.62; Adjusted Diluted EPS

NEW YORK, Nov. 3 /PRNewswire-FirstCall/ -- Viacom Inc. (NYSE:VIA) (NYSE: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.  

First Call Analyst:
FCMN Contact: james.bombassei@viacom.com

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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Profile: International Entertainment