New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
CBS qr2q 02
1. VIACOM REPORTS RECORD SECOND QUARTER 2002 RESULTS;
REITERATES FULL-YEAR GUIDANCE
Company Sees Upswing in Advertising
Free Cash Flow of $1.03 Billion, Up 22% and EBITDA of $1.42 Billion,
•
Up 4%, on 2% Higher Revenues of $5.85 Billion
Reported Diluted Earnings Per Share Rose to $.31 versus $.01
•
($.29 Per Share Assuming Adoption of SFAS No. 142 in 2001)
Operating Income Increased 5% to $1.18 Billion, Led by Growth of 9%
•
in Cable Networks, 7% in Television and 21% in Video Segment
(Assuming Adoption of SFAS No. 142 in 2001)
New York, New York, July 25, 2002 -- Viacom Inc. (NYSE: VIA and VIA.B) today reported
record results for the second quarter ended June 30, 2002.
Viacom revenues rose to $5.85 billion and operating income increased to $1.18 billion compared
with revenues of $5.72 billion and operating income of $586 million in the same quarter last
year, led by higher results in its Cable Networks, Television and Video segments.
Viacom reported net earnings of $547 million, or $.31 per diluted share, for the second quarter of
2002 compared with net earnings of $17 million, or $.01 per diluted share, for the second quarter
of 2001. Assuming the adoption of SFAS No. 142 “Goodwill and Other Intangible Assets” had
occurred in 2001, Viacom’s operating income would have been $1.13 billion and net earnings would
have been $524 million, or $.29 per diluted share, for the second quarter of 2001.
Free cash flow for the second quarter of 2002 increased 22% to $1.03 billion from $847 million in
the second quarter of 2001. Free cash flow reflects the Company’s EBITDA less cash interest,
taxes paid, working capital requirements and capital expenditures. The Company considers free
cash flow to be a critical 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
2. 2
assets, strengthen the balance sheet and repurchase stock. The Company’s EBITDA (earnings before
interest, taxes, depreciation and amortization) in the second quarter increased 4% to $1.42 billion from
$1.36 billion in the second quarter of 2001.
Viacom’s second quarter 2002 performance was led by higher results in its Cable Networks, Television and
Video segments with each of these segments contributing a 4% increase in revenues. For comparability,
segment operating income for 2001 discussed below assumes the adoption of SFAS No. 142 had occurred
at the beginning of 2001. Cable Networks operating income rose 9% to $372 million from $340 million
in the same quarter last year while Television segment operating income increased 7% to $349 million
from $326 million. Video segment delivered an operating income increase of 21% to $72 million from
$59 million. Cable Networks EBITDA of $422 million increased 9% from $389 million, Television
segment EBITDA increased 7% to $385 million from $361 million, and Video segment EBITDA grew by
9% to $129 million from $118 million.
“Viacom turned in an outstanding performance in the second quarter of 2002, particularly in light of the
continuing challenges of a slow recovery in the overall economic environment,” said Sumner M.
Redstone, Chairman and Chief Executive Officer of Viacom. “Viacom generated more than $1 billion in
free cash flow in the quarter, a significant achievement that illustrates our management discipline,
superior assets and our unique ability to consistently grow our Company and create real value for
shareholders. In fact, by every operational measure_revenues, operating income, net earnings and
EBITDA, Viacom delivered record second quarter results and is on track to achieve our full-year targets.”
Mel Karmazin, President and Chief Operating Officer of Viacom, said, “Viacom’s second quarter results
point out the unique value of our mix of businesses and the strength of our position in those businesses.
Our Cable Networks, Television and Video segments delivered top line growth and strong bottom line
growth. Underlying this performance is an upswing in our advertising-supported businesses. Upfront sales
at CBS, UPN, our Cable Networks and our syndication businesses were exceptionally strong, which bodes
well for advertising during the rest of 2002 and in 2003. Significant ratings momentum and programming
successes at CBS, UPN, MTV, Nickelodeon, TNN and BET, as well as at our radio and television
operations are also contributing to Viacom’s performance. Radio reported higher revenues in the second
quarter, its first year-over-year revenue growth since the fourth quarter of 2000. In the current quarter,
Radio pacings are up high single-digits, our television stations are pacing up double-digits versus the same
prior-year quarter, and Outdoor pacings continue to show improvement.”
3. 3
Business Outlook
Based on the continuing improvement in the advertising market, the Company believes it will achieve
double-digit growth in earnings per share, operating income and EBITDA for the full year 2002.
Additionally, the Company expects that escalating growth in the third quarter will build into the fourth
quarter.
Segment Results (Second Quarter 2002 versus Second Quarter 2001)
The tables below present Viacom’s reported second quarter 2002 and 2001 revenues and operating
income, and 2001 operating income adjusted for SFAS No. 142. The following segment discussion of
operating income for the quarter is presented using comparisons to 2001 operating income, adjusted
for SFAS No. 142 which was adopted in the first quarter of 2002. Goodwill is no longer amortized but
will be tested for impairment at least annually and therefore, the Company’s amortization expense is
now significantly lower, $26 million in the second quarter of 2002 as compared with $566 million in
the second quarter last year.
Second Quarter
(dollars in millions) Better/
2002 2001 (Worse)%
Revenues:
Cable Networks $1,105.0 $ 1,062.0 4%
Television 1,699.0 1,626.4 4
Infinity 989.2 985.4 _
Entertainment 920.6 922.2 _
Video 1,271.0 1,226.0 4
Intercompany eliminations (135.3) (105.1) (29)
Total Revenues $5,849.5 $ 5,716.9 2%
Second Quarter
(dollars in millions) Better/ 2001 Adjusted Better/
2002 2001 (Worse)% for SFAS 142 (Worse)%
Operating Income:
Cable Networks $ 371.9 $ 278.9 33% $ 340.1 9%
Television 349.0 163.0 114 326.0 7
Infinity 350.4 122.1 187 379.0 (8)
Entertainment 109.1 94.3 16 110.4 (1)
Video 72.0 16.2 N/M 59.3 21
Segment Total 1,252.4 674.5 86 1,214.8 3
Corporate expenses/eliminations (52.6) (70.4) 25 (70.4) 25
Residual costs (22.0) (18.3) (20) (18.3) (20)
Total Operating Income $1,177.8 $ 585.8 101% $1,126.1 5%
N/M – Not meaningful
4. 4
The table below sets forth EBITDA for the three months ended June 30, 2002 and 2001. The Company
believes that EBITDA is one appropriate measure of evaluating the operating performance of its
segments. However, EBITDA should be considered in addition to, not as a substitute for or superior to,
operating income, net earnings, cash flows, and other measures of financial performance.
Second Quarter
(dollars in millions) Better/
2002 2001 (Worse)%
EBITDA:
Cable Networks $ 422.4 $ 388.7 9%
Television 384.6 360.8 7
Infinity 409.2 436.4 (6)
Entertainment 140.2 141.2 (1)
Video 128.9 118.4 9
Segment Total 1,485.3 1,445.5 3
Corporate expenses/eliminations (46.8) (65.5) 29
Residual costs (22.0) (18.3) (20)
Total EBITDA $1,416.5 $1,361.7 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 revenues of $1.11 billion increased 4% from $1.06 billion, operating income of
$372 million increased 9% from $340 million and EBITDA of $422 million increased 9% from
$389 million for the second quarter of 2001. These results were led by growth in advertising
revenues and affiliate fees. Higher advertising revenues, including strong revenue growth at
Nickelodeon, TNN, TV Land, BET and MTV, reflect improvements in the advertising market. The
revenue increases were partially offset by revenue declines at VH1 as a result of lower ratings. The
2002 second quarter ranked as the highest-rated quarter in MTV’s history for the 18- to 34-year old
audience with contributions from new and existing hits including The Osbournes, The 2002 MTV
Movie Awards and Real World XI. Nickelodeon finished the second quarter as the No. 1 basic cable
network in total-day ratings for the 27th consecutive quarter, and achieved its most-watched second
quarter ever among households and total viewers on a 24-hour basis. SpongeBob SquarePants reigns
as television’s top-rated kids’ show. In the second quarter, TNN’s ratings in the key 18- to 49-year-
old audience increased by 50% from the prior year, marking the eighth straight quarter of ratings
growth. BET delivered double-digit EBITDA growth with higher advertising sales driven by increased
pricing and higher affiliate fee revenue. For the second quarter, BET scored its highest ratings ever
in core adults 18-34 driven by hit shows 106th and Park and The 2n d Annual BET Awards. Showtime
subscriptions increased by approximately 2.8 million, or 10%, over the prior year to 32.0 million
subscriptions at June 30, 2002.
5. 5
Television (CBS and UPN Television Networks and Stations; Television Production and Syndication)
Television’s revenues of $1.7 billion increased 4% from $1.63 billion, operating income increased 7%
to $349 million and EBITDA of $385 million increased 7% from $361 million for the second quarter
of 2001. Television’s results were led by advertising revenue growth at CBS and UPN Networks and
stations, including double-digit revenue growth in primetime at CBS and UPN Networks. Based on its
strong line-up of regularly scheduled hit series, CBS Network finished the 2001-2002 season a solid
second among adults 18-49, its best competitive finish in nine years. CBS aired 10 of the top 20 most-
watched regular series, including CSI: Crime Scene Investigation, the No. 1 drama on television,
Survivor, the No. 1 reality series on television, Everybody Loves Raymond, the No. 2 comedy and 60
Minutes, the No. 1 newsmagazine. CBS Network had record-breaking upfront advertising revenues of
approximately $1.9 billion in primetime for the 2002-2003 season versus $1.3 billion for the 2001-
2002 season, having achieved the highest rate increases of all major networks. UPN delivered its best
performance in 5 years during the 2001-2002 season among adults 18-49 and total viewers, spurred by
such hits as Buffy: The Vampire Slayer and the new Star Trek series Enterprise. UPN was the fastest-
growing broadcast network among persons 12-34, adults 18-34 and adults 18-49 and the second-year
comedy, Girlfriends, was the season’s fastest-growing comedy on any broadcast network. Paramount
Television Group contributed higher operating results for the quarter with higher first run syndication
revenues for Judge Judy and Judge Joe Brown and a change in product mix.
Infinity (Radio Stations, Outdoor Advertising Properties)
Infinity reported slightly higher revenues of $989 million versus revenues of $985 million while
operating income of $350 million decreased 8% from $379 million and EBITDA of $409 million
decreased 6% from $436 million for the second quarter of 2001. Infinity’s revenues reflect a 3%
increase in Radio revenues led by double-digit increases in the New York market which benefited from
the addition of the Yankees season broadcast on WCBS-AM, and higher revenues from distribution
agreements with Westwood One radio network, an affiliate of the Company. Viacom Outdoor
revenues decreased 3% versus the prior-year quarter. Infinity’s expenses were higher for the quarter as
they included incremental expenses associated with acquired sports rights and higher guarantee
payments on new transit contracts.
6. 6
Entertainment (Paramount Pictures, Famous Players, Famous Music Publishing, Paramount
Parks and Simon & Schuster)
Entertainment’s revenues of $921 million decreased slightly from $922 million in the prior-year
period while both operating income of $109 million and EBITDA of $140 million each decreased
1% versus operating income of $110 million and EBITDA of $141 million. Entertainment’s
operating results were lower than the prior year’s quarter principally as a result of higher Theatres
and Publishing revenues which were more than offset by lower Features and Parks revenues.
Features revenues included contributions from Paramount’s domestic theatrical release of The Sum
of All Fears, Changing Lanes and Clockstoppers and home video contributions from Vanilla Sky
and Domestic Disturbance. Higher Theaters revenues, operating income and EBITDA were driven
by higher average admission and concession prices. Simon & Schuster’s increased revenues
principally reflect increased sales in the Adult Publishing Group and Children’s Division. Simon &
Schuster’s top-selling titles in the second quarter included Daddy’s Little Girl by Mary Higgins
Clark and The Summerhouse by Jude Deveraux.
Effective January 1, 2002, the Company operates Simon & Schuster under the Entertainment
segment and now presents this business as part of this segment. Prior period segment information
has been reclassified to conform to the new presentation.
Video (Blockbuster)
Video revenues increased 4% to $1.27 billion from $1.23 billion, operating income increased 21%
to $72 million from $59 million and EBITDA increased 9% to $129 million from $118 million.
Video’s higher operating income and EBITDA were driven by growth in higher margin DVD rental
revenues as a percentage of total rental revenues. Worldwide same store sales, which includes both
rental and retail product, increased 3.9% primarily due to strong double-digit growth in previously
rented products and retail products. These positive comparisons were partially offset by a decline
of 2% domestic and 1% international rental revenues, which were impacted by the increased
availability of titles for sale at retail outlets. Gross margin of 59.3% for the second quarter
decreased slightly from 60.3% from the prior year quarter, primarily due to the decrease in
revenues from DIRECTV and higher contributions from the lower margin retail business.
Blockbuster ended the second quarter of 2002 with 8,138 company-owned and franchise stores, a
net increase of 357 stores over the second quarter of 2001 of which 50 company-owned stores
were added in the second quarter of 2002.
7. 7
In April 2002, the Company began acquiring shares of Blockbuster’s Class A common stock in order to
maintain an ownership position of no less than 80% for tax consolidation purposes. Viacom currently
owns approximately 81% of Blockbuster (NYSE: BBI).
Corporate Expenses/Eliminations
Corporate expenses, including depreciation, decreased 13% to $43 million for the second quarter of
2002 versus the prior-year period, principally due to effective cost containment measures.
Intersegment eliminations of $10 million for the quarter principally reflect the profit elimination of
the sale of feature films to cable and broadcast networks.
Residual Costs
Residual costs primarily include pension and postretirement benefit costs for benefit plans retained
by the Company for previously divested businesses. Residual costs increased 20% to $22 million for
the second quarter of 2002 versus the prior-year period primarily due to a reduction in amortized
actuarial gains for benefit plans of divested businesses.
Six-Month Results
For the six months ended June 30, 2002, Viacom reported revenues of $11.52 billion were slightly
higher than revenues of $11.47 billion for the first half of 2001. Operating income increased 106%
to $2.04 billion from $990 million in 2001, principally due to the adoption of SFAS No. 142 in the
first quarter of 2002. Viacom’s EBITDA for the first six months of 2002 of $2.51 billion was
comparable with the same period last year. Free cash flow for the six months ended June 30, 2002
was $1.41 billion, versus $1.19 billion for the comparable prior-year period. For the first half of
2002, Viacom reported earnings before cumulative effect of a change in accounting principle of
$914 million, or $.51 per diluted share, compared with net earnings of $9 million, or $.01 per share
in the same year-earlier period. The Company’s adoption of SFAS No. 142 resulted in a non-cash
charge of $1.5 billion recorded during the first quarter as a cumulative effect of a change in
accounting principle. Assuming the adoption of SFAS No. 142 had occurred at the beginning of
2001, operating income would have been $2.04 billion and net earnings before cumulative effect of
change in accounting principle would have been $878 million or $.51 per diluted share for the first
half of 2001.
8. 8
Six Months Ended June
30,
(dollars in millions) Better/
2002 2001 (Worse)%
Revenues:
Cable Networks $ 2,136.2 $ 2,044.4 4%
Television 3,556.8 3,657.2 (3)
Infinity 1,788.1 1,821.0 (2)
Entertainment 1,685.8 1,639.3 3
Video 2,597.0 2,533.9 2
Intercompany eliminations (242.2) (226.7) (7)
Total Revenues $11,521.7 $ 11,469.1 -%
Six Months Ended June 30,
(dollars in millions) Better/ 2001 Adjusted Better/
2002 2001 (Worse)% for SFAS 142 (Worse)%
Operating Income:
Cable Networks $ 728.0 $ 531.8 37% $ 646.0 13%
Television 567.5 281.7 101 607.2 (7)
Infinity 565.7 158.0 258 645.3 (12)
Entertainment 147.4 116.1 27 148.3 (1)
Video 191.4 70.0 173 156.8 22
Segment Total 2,200.0 1,157.6 90 2,203.6 -
Corporate expenses/eliminations (112.7) (126.3) 11 (126.3) 11
Residual costs (44.0) (41.8) (5) (41.8) (5)
Total Operating Income $ 2,043.3 $ 989.5 106% $2,035.5 -%
Six Months Ended June 30,
(dollars in millions) Better/
2002 2001 (Worse)%
EBITDA:
Cable Networks $ 825.7 $ 748.1 10%
Television 636.8 675.5 (6)
Infinity 683.2 759.5 (10)
Entertainment 206.7 207.2 -
Video 304.2 278.9 9
Segment Total 2,656.6 2,669.2 -
Corporate expenses/eliminations (101.2) (116.8) 13
Residual costs (44.0) (41.8) (5)
Total EBITDA $ 2,511.4 $ 2,510.6 -%
Other Matters
On May 15, 2002, the Company announced that it completed the acquisition of the assets of KCAL-TV
for $650 million. The acquisition gives Viacom two owned-and-operated stations in Los Angeles which
brings to eight the number of major markets in which Viacom owns two television broadcast stations.
9. 9
During the first six months of 2002, the Company repurchased approximately 11.1 million shares of its
Class B Common Stock for approximately $493 million under its stock repurchase program of which
$197 million was spent in the second quarter. From July 1 through July 19, the Company repurchased an
additional 2.7 million shares for approximately $103 million.
Viacom is a leading global media company, 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, Viacom Outdoor, Infinity, UPN, TNN: The National
Network, CMT: Country Music Television, Showtime, Blockbuster, and Simon & Schuster. More
information about Viacom and its businesses is available at www.viacom.com.
Cautionary Statement Concerning Forward-looking Statements
This news release 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 generally; 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; other domestic and global economic,
business, competitive and/or regulatory factors affecting the Company’s businesses generally; and other factors
described in the Company’s previous news releases and filings made under the securities laws. 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
10. 10
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,
2002 2001 2002 2001
Revenues $5,849.5 $5,716.9 $11,521.7 $11,469.1
Operating income $1,177.8 $ 585.8 $ 2,043.3 $ 989.5
Other income (expense):
Interest expense, net (218.4) (255.2) (423.6) (500.7)
Other items, net (27.3) 2.0 (18.3) (7.8)
Earnings before income taxes 932.1 332.6 1,601.4 481.0
Provision for income taxes (374.2) (314.7) (648.6) (438.2)
Equity in loss of affiliated companies, net of tax (3.7) (7.1) (17.8) (34.2)
Minority interest, net of tax (7.7) 5.9 (21.1) .8
Net earnings before cumulative effect of change
in accounting principle 546.5 9.4
16.7 913.9
Cumulative effect of change in accounting principle,
net of minority interest and tax — — (1,480.9) —
Net earnings (loss) $ 546.5 $ 16.7 $ (567.0) $ 9.4
Earnings (loss) per common share:
Basic:
Net earnings before cumulative effect of change
in accounting principle $ .31 $ .01 $ .52 $ .01
Net earnings (loss) $ .31 $ .01 $ (.32) $ .01
Diluted:
Net earnings before cumulative effect of change
in accounting principle $ .31 $ .01 $ .51 $ .01
Net earnings (loss) $ .31 $ .01 $ (.32) $ .01
Weighted average number of common shares:
Basic 1,756.1 1,768.6 1,754.8 1,698.9
Diluted 1,781.7 1,800.2 1,780.2 1,730.6