Viacom Reports Strong Third Quarter Results
Company Delivers Improved Financial Performance as Management Continues to Execute on Strategic Plan
Quarterly Revenues Rose 8%, with Continued Gains in
Year-to-Date Net Cash Provided by Operating Activities Increased to
"Among other recent successes, the Company entered into an unprecedented
distribution and data partnership with Altice USA, secured a significant
cross-platform talent agreement with award-winning writer, director and
actor
"Every day we are working hard to reinvent
FISCAL YEAR 2017 RESULTS
(in millions, except per share amounts) |
Quarter Ended |
B/(W) |
Nine Months Ended |
B/(W) | ||||||||||||||||||||
2017 | 2016 |
2017 vs. |
2017 | 2016 |
2017 vs. |
|||||||||||||||||||
GAAP |
||||||||||||||||||||||||
Revenues | $ | 3,364 | $ | 3,107 | 8 | % | $ | 9,944 | $ | 9,262 | 7 | % | ||||||||||||
Operating income | 746 | 769 | (3 | ) | 1,784 | 2,194 | (19 | ) | ||||||||||||||||
Net earnings from continuing operations attributable to |
680 | 432 | 57 | 1,197 | 1,184 | 1 | ||||||||||||||||||
Diluted EPS from continuing operations | 1.69 | 1.09 | 55 | 2.99 | 2.98 | — | ||||||||||||||||||
Non-GAAP* |
||||||||||||||||||||||||
Adjusted operating income | $ | 805 | $ | 769 | 5 | % | $ | 2,165 | $ | 2,194 | (1 | )% | ||||||||||||
Adjusted net earnings from continuing operations attributable to
|
471 | 419 | 12 | 1,201 | 1,192 | 1 | ||||||||||||||||||
Adjusted diluted EPS from continuing operations | 1.17 | 1.05 | 11 | 3.00 | 3.00 | — | ||||||||||||||||||
* Non-GAAP measures referenced in this release are detailed in the Supplemental Disclosures at the end of this release.
Revenues in the third fiscal quarter increased 8%, or
MEDIA NETWORKS
Media Networks revenues grew 2% to
Domestic affiliate revenues increased 4% to
Domestic advertising revenues declined 2% to
Ancillary revenues decreased 9% to
Adjusted operating income for Media Networks was substantially
flat at
Performance highlights:
-
The Company secured a groundbreaking partnership with Altice USA,
which ensures continued distribution of
Viacom's premiere networks in the Cablevision system, returnsViacom programming toSuddenlink customers, expands next-generation branded content offerings for viewers and leverages our industry-leading advertising products across multiple platforms and screens. -
Viacom entered a multi-year talent agreement withTyler Perry that encompasses television, film, short-form and digital video. The partnership will bring Perry's signature brand of storytelling toViacom's audiences. -
Sequential quarterly improvement in domestic ad sales revenues and
momentum from the
U.S. upfront indicate that the Company's flagship brand strategy and renewed commitment to partnerships are resonating. -
Under six months of new leadership,
MTV recorded year-over-year ratings growth in June for the first time since 2011, and claimed four of the top 30 cable series in the quarter, including a rebooted Fear Factor - the network's highest rated new series in the last two years. -
BET experienced its strongest June year-over-year ratings growth in four years, and July was the network's second consecutive month of year-over-year growth. -
Comedy Central's The Daily Show withTrevor Noah continued its ratings climb as cable's number-one daily late night talk show with millennials, recording its highest-rated and most-watched quarter ever. - Nickelodeon continued to dominate the ratings in its major demographics, with 9 of the top 10 shows for kids 2-11 and four of the top five shows for kids 2-5. It grew year-over-year ratings by 5% and has remained the number-one kids network for eight consecutive quarters.
-
Revenue weighted share for VIMN's portfolio of flagship brands
increased 6% internationally, while
Channel 5 outperformed the market and grew share for a sixth straight quarter. The successful integration of Telefe continued as the network maintained its strong market leadership inArgentina .
FILMED ENTERTAINMENT
Theatrical revenues increased 189% to
Licensing revenues rose 1% to
Home entertainment revenues increased 14% to
Ancillary revenues grew 61% to
Performance highlights:
-
In June,
Paramount announced the establishment of Paramount Players, a new production division that will develop, produce and market feature films in collaboration withViacom's flagship brands. AwesomenessTV founderBrian Robbins will lead the division as President. -
The studio recently named accomplished filmmaker and producer
Mireille Soria as President of Paramount Animation to oversee the group's operations and work withViacom's teams to guide the creative development and production of its animated feature slate. -
Transformers: The Last Knight opened to number one in the
U.S. and in 53 markets internationally, includingChina . -
Paramount TV continued to strengthen its portfolio, with 16 shows
ordered to production and over 50 projects in development. Remaining
fiscal 2017 releases include new seasons of Shooter,
Berlin Station and Nickelodeon'sSchool of Rock , which was recently nominated for a Primetime Emmy for Outstanding Children's Program.
BALANCE SHEET AND LIQUIDITY
In the quarter, the Company continued to implement its plan to
strengthen its balance sheet, reduce leverage and enhance liquidity,
redeeming over
The Company's cash balance was
About
For more information about
Cautionary Statement Concerning Forward-Looking Statements
This news release contains both historical and forward-looking
statements. All statements that are not statements of historical fact
are, or may be deemed to be, forward-looking statements. Forward-looking
statements reflect our 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 future results, performance or achievements to differ. These
risks, uncertainties and other factors include, among others: the effect
of recent changes in management and our board of directors; the ability
of our recently-announced strategic initiatives to achieve their
operating objectives; the public acceptance of our brands, programs,
motion pictures and other entertainment content on the various platforms
on which they are distributed; the impact of inadequate audience
measurement on our program ratings and advertising and affiliate
revenues; technological developments and their effect in our markets and
on consumer behavior; competition for content, audiences, advertising
and distribution; the impact of piracy; economic fluctuations in
advertising and retail markets, and economic conditions generally;
fluctuations in our results due to the timing, mix, number and
availability of our motion pictures and other programming; the potential
for loss of carriage or other reduction in the distribution of our
content; changes in the Federal communications or other laws and
regulations; evolving cybersecurity and similar risks; other domestic
and global economic, business, competitive and/or regulatory factors
affecting our businesses generally; and other factors described in our
news releases and filings with the
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) |
||||||||||||||||||
Quarter Ended |
Nine Months Ended |
|||||||||||||||||
(in millions, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||
Revenues | $ | 3,364 | $ | 3,107 | $ | 9,944 | $ | 9,262 | ||||||||||
Expenses: | ||||||||||||||||||
Operating | 1,788 | 1,575 | 5,551 | 4,822 | ||||||||||||||
Selling, general and administrative | 756 | 708 | 2,205 | 2,080 | ||||||||||||||
Depreciation and amortization | 53 | 55 | 167 | 166 | ||||||||||||||
Restructuring | 21 | — | 237 | — | ||||||||||||||
Total expenses | 2,618 | 2,338 | 8,160 | 7,068 | ||||||||||||||
Operating income | 746 | 769 | 1,784 | 2,194 | ||||||||||||||
Interest expense, net | (155 | ) | (156 | ) | (469 | ) | (466 | ) | ||||||||||
Equity in net earnings of investee companies | 47 | 19 | 78 | 85 | ||||||||||||||
Gain on sale of |
285 | — | 285 | — | ||||||||||||||
Gain/(loss) on extinguishment of debt | 16 | — | (20 | ) | — | |||||||||||||
Other items, net | (18 | ) | 3 | (17 | ) | (1 | ) | |||||||||||
Earnings from continuing operations before provision for income taxes | 921 | 635 | 1,641 | 1,812 | ||||||||||||||
Provision for income taxes | (233 | ) | (195 | ) | (417 | ) | (602 | ) | ||||||||||
Net earnings from continuing operations | 688 | 440 | 1,224 | 1,210 | ||||||||||||||
Discontinued operations, net of tax | 3 | — | 3 | — | ||||||||||||||
Net earnings ( |
691 | 440 | 1,227 | 1,210 | ||||||||||||||
Net earnings attributable to noncontrolling interests | (8 | ) | (8 | ) | (27 | ) | (26 | ) | ||||||||||
Net earnings attributable to |
$ | 683 | $ | 432 | $ | 1,200 | $ | 1,184 | ||||||||||
Amounts attributable to |
||||||||||||||||||
Net earnings from continuing operations | $ | 680 | $ | 432 | $ | 1,197 | $ | 1,184 | ||||||||||
Discontinued operations, net of tax | 3 | — | 3 | — | ||||||||||||||
Net earnings attributable to |
$ | 683 | $ | 432 | $ | 1,200 | $ | 1,184 | ||||||||||
Basic earnings per share attributable to |
||||||||||||||||||
Continuing operations | $ | 1.69 | $ | 1.09 | $ | 3.00 | $ | 2.99 | ||||||||||
Discontinued operations | 0.01 | — | 0.01 | — | ||||||||||||||
Net earnings | $ | 1.70 | $ | 1.09 | $ | 3.01 | $ | 2.99 | ||||||||||
Diluted earnings per share attributable to |
||||||||||||||||||
Continuing operations | $ | 1.69 | $ | 1.09 | $ | 2.99 | $ | 2.98 | ||||||||||
Discontinued operations | 0.01 | — | 0.01 | — | ||||||||||||||
Net earnings | $ | 1.70 | $ | 1.09 | $ | 3.00 | $ | 2.98 | ||||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||||
Basic | 402.0 | 396.5 | 399.1 | 396.4 | ||||||||||||||
Diluted | 402.6 | 398.0 | 400.0 | 397.9 | ||||||||||||||
Dividends declared per share of Class A and Class B common stock | $ | 0.20 | $ | 0.40 | $ | 0.60 | $ | 1.20 | ||||||||||
CONSOLIDATED BALANCE SHEETS (Unaudited) |
||||||||||
(in millions, except par value) |
2017 |
2016 |
||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 425 | $ | 379 | ||||||
Receivables, net | 3,302 | 2,712 | ||||||||
Inventory, net | 930 | 844 | ||||||||
Prepaid and other assets | 477 | 587 | ||||||||
Total current assets | 5,134 | 4,522 | ||||||||
Property and equipment, net | 955 | 932 | ||||||||
Inventory, net | 4,074 | 4,032 | ||||||||
|
11,648 | 11,400 | ||||||||
Intangibles, net | 325 | 315 | ||||||||
Other assets | 990 | 1,307 | ||||||||
Total assets | $ | 23,126 | $ | 22,508 | ||||||
LIABILITIES AND EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 325 | $ | 453 | ||||||
Accrued expenses | 878 | 773 | ||||||||
Participants' share and residuals | 848 | 801 | ||||||||
Program obligations | 746 | 692 | ||||||||
Deferred revenue | 406 | 419 | ||||||||
Current portion of debt | 70 | 17 | ||||||||
Other liabilities | 523 | 517 | ||||||||
Total current liabilities | 3,796 | 3,672 | ||||||||
Noncurrent portion of debt | 11,103 | 11,896 | ||||||||
Participants' share and residuals | 370 | 358 | ||||||||
Program obligations | 468 | 311 | ||||||||
Deferred tax liabilities, net | 337 | 381 | ||||||||
Other liabilities | 1,381 | 1,349 | ||||||||
Redeemable noncontrolling interest | 209 | 211 | ||||||||
Commitments and contingencies | ||||||||||
|
||||||||||
Class A common stock, par value |
— | — | ||||||||
Class B common stock, par value |
— | — | ||||||||
Additional paid-in capital | 10,108 | 10,139 | ||||||||
|
(20,591 | ) | (20,798 | ) | ||||||
Retained earnings | 16,589 | 15,628 | ||||||||
Accumulated other comprehensive loss | (697 | ) | (692 | ) | ||||||
Total |
5,409 | 4,277 | ||||||||
Noncontrolling interests | 53 | 53 | ||||||||
Total equity | 5,462 | 4,330 | ||||||||
Total liabilities and equity | $ | 23,126 | $ | 22,508 | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
||||||||||
Nine Months Ended |
||||||||||
(in millions) | 2017 | 2016 | ||||||||
OPERATING ACTIVITIES | ||||||||||
Net earnings ( |
$ | 1,227 | $ | 1,210 | ||||||
Discontinued operations, net of tax | (3 | ) | — | |||||||
Net earnings from continuing operations | 1,224 | 1,210 | ||||||||
Reconciling items: | ||||||||||
Depreciation and amortization | 167 | 166 | ||||||||
Feature film and program amortization | 3,475 | 3,253 | ||||||||
Equity-based compensation | 52 | 71 | ||||||||
Equity in net earnings and distributions from investee companies | (11 | ) | (81 | ) | ||||||
Gain on sale of |
(285 | ) | — | |||||||
Deferred income taxes | (118 | ) | 470 | |||||||
Operating assets and liabilities, net of acquisitions: | ||||||||||
Receivables | (504 | ) | (137 | ) | ||||||
Production and programming | (3,252 | ) | (3,915 | ) | ||||||
Accounts payable and other current liabilities | (139 | ) | (482 | ) | ||||||
Other, net | 44 | (155 | ) | |||||||
Net cash provided by operating activities | 653 | 400 | ||||||||
INVESTING ACTIVITIES | ||||||||||
Acquisitions and investments, net | (358 | ) | (59 | ) | ||||||
Capital expenditures | (139 | ) | (80 | ) | ||||||
Proceeds received from sale of |
593 | — | ||||||||
Proceeds received from grantor trusts | 52 | — | ||||||||
Sale of marketable securities | 108 | — | ||||||||
Net cash provided by/(used in) investing activities | 256 | (139 | ) | |||||||
FINANCING ACTIVITIES | ||||||||||
Borrowings | 2,569 | — | ||||||||
Debt repayments | (3,300 | ) | (368 | ) | ||||||
Commercial paper | — | 453 | ||||||||
Purchase of treasury stock | — | (100 | ) | |||||||
Dividends paid | (239 | ) | (476 | ) | ||||||
Excess tax benefits on equity-based compensation awards | 1 | — | ||||||||
Exercise of stock options | 172 | 10 | ||||||||
Other, net | (64 | ) | (64 | ) | ||||||
Net cash flow used in financing activities | (861 | ) | (545 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (2 | ) | (30 | ) | ||||||
Net change in cash and cash equivalents | 46 | (314 | ) | |||||||
Cash and cash equivalents at beginning of period | 379 | 506 | ||||||||
Cash and cash equivalents at end of period | $ | 425 | $ | 192 | ||||||
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
The following tables reconcile our results for the quarter and nine
months ended
(in millions, except per share amounts) | ||||||||||||||||||||||
Quarter Ended |
||||||||||||||||||||||
Operating |
Earnings from |
Provision for |
Net Earnings |
Diluted EPS |
||||||||||||||||||
Reported results (GAAP) | $ | 746 | $ | 921 | $ | 233 | $ | 680 | $ | 1.69 | ||||||||||||
Factors Affecting Comparability: | ||||||||||||||||||||||
Restructuring and programming charges (2) | 59 | 59 | 21 | 38 | 0.09 | |||||||||||||||||
Gain on extinguishment of debt (3) | — | (16 | ) | (5 | ) | (11 | ) | (0.03 | ) | |||||||||||||
Gain on sale of |
— | (285 | ) | (96 | ) | (189 | ) | (0.47 | ) | |||||||||||||
Investment impairment (5) | — | 10 | 4 | 6 | 0.01 | |||||||||||||||||
Discrete tax benefit (6) | — | — | 53 | (53 | ) | (0.12 | ) | |||||||||||||||
Adjusted results (Non-GAAP) | $ | 805 | $ | 689 | $ | 210 | $ | 471 | $ | 1.17 | ||||||||||||
Nine Months Ended |
||||||||||||||||||||||
Operating |
Earnings from |
Provision for |
Net Earnings |
Diluted EPS |
||||||||||||||||||
Reported results (GAAP) | $ | 1,784 | $ | 1,641 | $ | 417 | $ | 1,197 | $ | 2.99 | ||||||||||||
Factors Affecting Comparability: | ||||||||||||||||||||||
Restructuring and programming charges (2) | 381 | 381 | 135 | 246 | 0.62 | |||||||||||||||||
Loss on extinguishment of debt (3) | — | 20 | 7 | 13 | 0.03 | |||||||||||||||||
Gain on sale of |
— | (285 | ) | (96 | ) | (189 | ) | (0.47 | ) | |||||||||||||
Investment impairment (5) | — | 10 | 4 | 6 | 0.02 | |||||||||||||||||
Discrete tax benefit (6) | — | — | 72 | (72 | ) | (0.19 | ) | |||||||||||||||
Adjusted results (Non-GAAP) | $ | 2,165 | $ | 1,767 | $ | 539 | $ | 1,201 | $ | 3.00 | ||||||||||||
Quarter Ended |
||||||||||||||||||||||
Operating |
Earnings from |
Provision for |
Net Earnings |
Diluted EPS |
||||||||||||||||||
Reported results (GAAP) | $ | 769 | $ | 635 | $ | 195 | $ | 432 | $ | 1.09 | ||||||||||||
Factors Affecting Comparability: | ||||||||||||||||||||||
Discrete tax benefit (6) | — | — | 13 | (13 | ) | (0.04 | ) | |||||||||||||||
Adjusted results (Non-GAAP) | $ | 769 | $ | 635 | $ | 208 | $ | 419 | $ | 1.05 | ||||||||||||
Nine Months Ended |
||||||||||||||||||||||
Operating |
Earnings from |
Provision for |
Net Earnings |
Diluted EPS |
||||||||||||||||||
Reported results (GAAP) | $ | 2,194 | $ | 1,812 | $ | 602 | $ | 1,184 | $ | 2.98 | ||||||||||||
Factors Affecting Comparability: | ||||||||||||||||||||||
Discrete tax expense (7) | — | — | (8 | ) | 8 | 0.02 | ||||||||||||||||
Adjusted results (Non-GAAP) | $ | 2,194 | $ | 1,812 | $ | 594 | $ | 1,192 | $ | 3.00 | ||||||||||||
(1) The tax impact has been calculated by applying the tax rates applicable to the adjustments presented. |
(2) We recognized pre-tax restructuring and programming charges of
|
(3) We redeemed senior notes and debentures totaling |
(4) During the quarter ended |
(5) During the quarter ended |
(6) The net discrete tax benefit in the quarter ended |
(7) The net discrete tax expense in the nine months ended |
The following table includes a reconciliation of net cash provided by operating activities (GAAP) to free cash flow and operating free cash flow (non-GAAP). We define free cash flow as net cash provided by operating activities minus capital expenditures, plus excess tax benefits from equity-based compensation awards (actual tax deductions in excess of amounts previously recognized, which is included within financing activities in the statement of cash flows), as applicable. We define operating free cash flow as free cash flow, excluding the impact of the cash premium on the extinguishment of debt, as applicable. Free cash flow and operating free cash flow are non-GAAP measures. Management believes the use of these measures provides investors with an important perspective on, in the case of free cash flow, our liquidity, including our ability to service debt and make investments in our businesses, and, in the case of operating free cash flow, our liquidity from ongoing activities.
Reconciliation of net cash provided by operating activities
to free cash flow and operating free cash flow (in millions) |
Quarter Ended |
Better/
(Worse) |
Nine Months Ended |
Better/
(Worse) |
||||||||||||||||||||||
2017 | 2016 | $ | 2017 | 2016 | $ | |||||||||||||||||||||
Net cash provided by operating activities (GAAP) | $ | 248 | $ | 116 | $ | 132 | $ | 653 | $ | 400 | $ | 253 | ||||||||||||||
Capital expenditures | (44 | ) | (26 | ) | (18 | ) | (139 | ) | (80 | ) | (59 | ) | ||||||||||||||
Excess tax benefits | 1 | — | 1 | 1 | — | 1 | ||||||||||||||||||||
Free cash flow (Non-GAAP) | 205 | 90 | 115 | 515 | 320 | 195 | ||||||||||||||||||||
Debt retirement premium | — | — | — | 33 | — | 33 | ||||||||||||||||||||
Operating free cash flow (Non-GAAP) | $ | 205 | $ | 90 | $ | 115 | $ | 548 | $ | 320 | $ | 228 | ||||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170803006434/en/
Press:
Vice President, Corporate Communications and
Corporate
Affairs
jeremy.zweig@viacom.com
or
Senior Manager, Corporate Communications
alex.rindler@viacom.com
or
Investors:
Senior Vice President, Investor Relations
james.bombassei@viacom.com
or
Vice President, Investor Relations
kareem.chin@viacom.com
Source:
News Provided by Acquire Media