Viacom Reports First Quarter Results and Provides Strategic Update
Quarterly Revenues Return to Growth, 5% Increase Driven by Domestic Affiliate Performance, Continued International Strength and Theatrical Revenue Gains
Operating Cash Flow Increased to
Company Presents New Strategic Plan, Including Focus on Six Priority Flagship Brands and Deeper Integration of Paramount Pictures
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Nickelodeon's "
"Viacom's first quarter results reflect improvement in our core businesses, with increases in revenues and operating cash flow, continued strong international performance, including initial contributions from the acquisition of Telefe, and a return to positive growth in affiliate revenues. We are already benefiting from changes made early in the second quarter and seeing green shoots in our strongest businesses, as well as those that are poised for a turnaround. As we implement our strategy across the company, we believe we can drive significant value for shareholders."
FISCAL YEAR 2017 RESULTS |
||||||||||||
(in millions, except per share amounts) |
Quarter Ended |
B/(W) | ||||||||||
2016 | 2015 |
2016 vs. |
||||||||||
GAAP |
||||||||||||
Revenues | $ | 3,324 | $ | 3,154 | 5 | % | ||||||
Operating income | 706 | 839 |
(16) |
|
||||||||
Net earnings attributable to |
396 | 449 |
(12) |
|
||||||||
Diluted EPS | 1.00 | 1.13 |
(12) |
|
||||||||
Net cash provided by/(used in) operating activities | 159 | (126 | ) | NM | ||||||||
Non-GAAP* |
||||||||||||
Adjusted operating income | $ | 748 | $ | 839 |
(11) |
% |
||||||
Adjusted net earnings attributable to |
413 | 470 |
(12) |
|
||||||||
Adjusted diluted EPS | 1.04 | 1.18 |
(12) |
|
||||||||
Operating free cash flow | 113 | (152 | ) | NM | ||||||||
NM - Not Meaningful | ||||||||||||
* Non-GAAP measures referenced in this release are detailed in the Supplemental Disclosures at the end of this release. |
||||||||||||
Revenues in the first fiscal quarter were
MEDIA NETWORKS
Media Networks revenues increased 1% to
Affiliate revenues improved 2% to
Advertising revenues declined 2% to
Ancillary Revenues increased 20%, to
Media Networks reported adjusted operating income of
Performance highlights:
- Nickelodeon extended its winning streak in all major kids' demos (#1 with kids 2-11 and kids 2-5 for six quarters), taking the #1 spot with ages 6-11, its best performance in this demo in five years. Nickelodeon's performance this quarter was buoyed by the launch of more than 140 new episodes of new and returning series and specials
-
MTV closed the quarter with a strong December, showing its first ratings growth since 2014 -
At
Comedy Central ,The Daily Show wrapped the year on a ratings high forTrevor Noah , driven by debate and election coverage. The show was #1 with millennial men for the 5th consecutive quarter and ranked #2 with all millennials for the first quarter - Affiliate revenues returned to positive growth with increases both domestically and in international markets
- Domestic advertising revenue performance improved 500 basis points versus Q4 2016
- International revenues increased 5%, with gains in advertising, affiliate and ancillary revenue
FILMED ENTERTAINMENT
Licensing revenues grew 3% to
Home entertainment revenues increased 2% to
Ancillary revenues increased 86% to
Performance highlights:
- Revenue growth extended across all business units: theatrical, home entertainment, licensing and ancillary
-
Unprecedented three-year strategic agreement closed with
Shanghai Film Group and Huahua Media to co-finance approximately twenty-five percent of the value of Paramount's slate of films for a three-year period, with an option for an additional year - Paramount Television continues its strong growth with 14 shows ordered to production and over 50 projects in development
-
Strong recognition for Paramount's films included 18 Academy Awards
nominations, three
Screen Actors Guild Awards and a Golden Globe
BALANCE SHEET AND LIQUIDITY
At
STRATEGIC UPDATE
Today
-
Put the full power of
Viacom behind six flagship brands:BET ,Comedy Central ,MTV , Nickelodeon,Nick Jr . andParamount - Revitalize and elevate approach to content and talent
- Deepen partnerships to drive traditional revenue
- Make big moves in the digital world and physical world
- Continue to optimize and energize the organization
Viacom's flagship brands will be the company's highest priorities and will benefit from significant and increased resource commitments. These six brands each have compelling, valuable and distinct brand propositions. They serve diverse, substantial audiences with largely-owned content, have global reach and distribution potential across linear, digital, film, and consumer products, events and experiences. Viacom's other brands - some of which hold strong positions in their categories and maintain diverse and loyal followings - will be realigned to reinforce the six flagship brands.
The company has also identified opportunities to bring the best of
Additionally, Spike will be rebranded in early 2018 as The
In order to drive the scale, market strength and financial flexibility
These strategic priorities will be discussed in greater depth on today's investor call.
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 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 |
|||||||||||||
(in millions, except per share amounts) | 2016 | 2015 | |||||||||||
Revenues | $ | 3,324 | $ | 3,154 | |||||||||
Expenses: | |||||||||||||
Operating | 1,819 | 1,593 | |||||||||||
Selling, general and administrative | 701 | 667 | |||||||||||
Depreciation and amortization | 56 | 55 | |||||||||||
Restructuring | 42 | — | |||||||||||
Total expenses | 2,618 | 2,315 | |||||||||||
Operating income | 706 | 839 | |||||||||||
Interest expense, net | (156 | ) | (155 | ) | |||||||||
Equity in net earnings of investee companies | 13 | 31 | |||||||||||
Other items, net | 3 | 2 | |||||||||||
Earnings before provision for income taxes | 566 | 717 | |||||||||||
Provision for income taxes | (158 | ) | (256 | ) | |||||||||
Net earnings ( |
408 | 461 | |||||||||||
Net earnings attributable to noncontrolling interests | (12 | ) | (12 | ) | |||||||||
Net earnings attributable to |
$ | 396 | $ | 449 | |||||||||
Basic earnings per share attributable to |
$ | 1.00 | $ | 1.13 | |||||||||
Diluted earnings per share attributable to |
$ | 1.00 | $ | 1.13 | |||||||||
Weighted average number of common shares outstanding: | |||||||||||||
Basic | 397.0 | 396.6 | |||||||||||
Diluted | 397.9 | 398.4 | |||||||||||
Dividends declared per share of Class A and Class B common stock | $ | 0.20 | $ | 0.40 | |||||||||
CONSOLIDATED BALANCE SHEETS (Unaudited) |
|||||||||||||
(in millions, except par value) |
2016 |
2016 |
|||||||||||
ASSETS | |||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 443 | $ | 379 | |||||||||
Receivables, net | 3,125 | 2,712 | |||||||||||
Inventory, net | 908 | 844 | |||||||||||
Prepaid and other assets | 513 | 587 | |||||||||||
Total current assets | 4,989 | 4,522 | |||||||||||
Property and equipment, net | 976 | 932 | |||||||||||
Inventory, net | 4,159 | 4,032 | |||||||||||
|
11,586 | 11,400 | |||||||||||
Intangibles, net | 344 | 315 | |||||||||||
Other assets | 1,258 | 1,307 | |||||||||||
Total assets | $ | 23,312 | $ | 22,508 | |||||||||
LIABILITIES AND EQUITY | |||||||||||||
Current liabilities: | |||||||||||||
Accounts payable | $ | 375 | $ | 453 | |||||||||
Accrued expenses | 754 | 773 | |||||||||||
Participants' share and residuals | 836 | 801 | |||||||||||
Program obligations | 728 | 692 | |||||||||||
Deferred revenue | 361 | 419 | |||||||||||
Current portion of debt | 517 | 17 | |||||||||||
Other liabilities | 634 | 517 | |||||||||||
Total current liabilities | 4,205 | 3,672 | |||||||||||
Noncurrent portion of debt | 11,783 | 11,896 | |||||||||||
Participants' share and residuals | 336 | 358 | |||||||||||
Program obligations | 509 | 311 | |||||||||||
Deferred tax liabilities, net | 377 | 381 | |||||||||||
Other liabilities | 1,393 | 1,349 | |||||||||||
Redeemable noncontrolling interest | 200 | 211 | |||||||||||
Commitments and contingencies | |||||||||||||
|
|||||||||||||
Class A common stock, par value |
— | — | |||||||||||
Class B common stock, par value |
— | — | |||||||||||
Additional paid-in capital | 10,136 | 10,139 | |||||||||||
|
(20,796 | ) | (20,798 | ) | |||||||||
Retained earnings | 15,945 | 15,628 | |||||||||||
Accumulated other comprehensive loss | (827 | ) | (692 | ) | |||||||||
Total |
4,458 | 4,277 | |||||||||||
Noncontrolling interests | 51 | 53 | |||||||||||
Total equity | 4,509 | 4,330 | |||||||||||
Total liabilities and equity | $ | 23,312 | $ | 22,508 | |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
||||||||||||
Quarter Ended |
||||||||||||
(in millions) | 2016 | 2015 | ||||||||||
OPERATING ACTIVITIES | ||||||||||||
Net earnings ( |
$ | 408 | $ | 461 | ||||||||
Reconciling items: | ||||||||||||
Depreciation and amortization | 56 | 55 | ||||||||||
Feature film and program amortization | 1,089 | 1,028 | ||||||||||
Equity-based compensation | 23 | 26 | ||||||||||
Equity in net earnings and distributions from investee companies | 13 | (29 | ) | |||||||||
Deferred income taxes | (63 | ) | 299 | |||||||||
Operating assets and liabilities, net of acquisitions: | ||||||||||||
Receivables | (323 | ) | (188 | ) | ||||||||
Production and programming | (1,020 | ) | (1,292 | ) | ||||||||
Accounts payable and other current liabilities | (45 | ) | (481 | ) | ||||||||
Other, net | 21 | (5 | ) | |||||||||
Net cash provided by/(used in) operating activities | 159 | (126 | ) | |||||||||
INVESTING ACTIVITIES | ||||||||||||
Acquisitions and investments, net | (343 | ) | (30 | ) | ||||||||
Capital expenditures | (52 | ) | (26 | ) | ||||||||
Proceeds received from grantor trusts | 46 | — | ||||||||||
Net cash flow used in investing activities | (349 | ) | (56 | ) | ||||||||
FINANCING ACTIVITIES | ||||||||||||
Borrowings | 1,285 | — | ||||||||||
Debt repayments | (900 | ) | — | |||||||||
Commercial paper | — | 290 | ||||||||||
Purchase of treasury stock | — | (100 | ) | |||||||||
Dividends paid | (79 | ) | (159 | ) | ||||||||
Exercise of stock options | — | 1 | ||||||||||
Other, net | (14 | ) | (22 | ) | ||||||||
Net cash flow provided by financing activities | 292 | 10 | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | (38 | ) | (7 | ) | ||||||||
Net change in cash and cash equivalents | 64 | (179 | ) | |||||||||
Cash and cash equivalents at beginning of period | 379 | 506 | ||||||||||
Cash and cash equivalents at end of period | $ | 443 | $ | 327 | ||||||||
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION |
The following tables reconcile our results for the quarter ended
(in millions, except per share amounts) | ||||||||||||||||||||||||||
Quarter Ended |
||||||||||||||||||||||||||
Operating |
Earnings Before |
Provision for |
Net Earnings |
Diluted EPS |
||||||||||||||||||||||
Reported results (GAAP) | $ | 706 | $ | 566 | $ | 158 | $ | 396 | $ | 1.00 | ||||||||||||||||
Factors Affecting Comparability: | ||||||||||||||||||||||||||
Restructuring (2) | 42 | 42 | 14 | 28 | 0.07 | |||||||||||||||||||||
Loss on extinguishment of debt (3) | — | 6 | 2 | 4 | 0.01 | |||||||||||||||||||||
Discrete tax benefit (4) | — | — | 15 | (15 | ) | (0.04 | ) | |||||||||||||||||||
Adjusted results (Non-GAAP) | $ | 748 | $ | 614 | $ | 189 | $ | 413 | $ | 1.04 | ||||||||||||||||
Quarter Ended |
||||||||||||||||||||||||||
Operating |
Earnings Before |
Provision for |
Net Earnings |
Diluted EPS | ||||||||||||||||||||||
Reported results (GAAP) | $ | 839 | $ | 717 | $ | 256 | $ | 449 | $ | 1.13 | ||||||||||||||||
Factors Affecting Comparability: | ||||||||||||||||||||||||||
Discrete tax expense (5) | — | — | (21 | ) | 21 | 0.05 | ||||||||||||||||||||
Adjusted results (Non-GAAP) | $ | 839 | $ | 717 | $ | 235 | $ | 470 | $ | 1.18 | ||||||||||||||||
(1) | The tax impact has been calculated by applying the tax rates applicable to the adjustments presented. | ||
(2) |
The pre-tax charge of |
||
(3) |
The pre-tax charge of |
||
(4) | The net discrete tax benefit was principally related to the reversal of a valuation allowance on net operating losses upon receipt of a favorable tax authority ruling. | ||
(5) | The net discrete tax expense was principally related to a reduction in qualified production activity tax benefits as a result of retroactively reenacted legislation. | ||
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION |
(continued) |
The following table includes a reconciliation of net cash provided by/(used in) operating activities (GAAP) to free cash flow and operating free cash flow (non-GAAP). We define free cash flow as net cash provided by/(used in) 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 this measure 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/(used in) operating
activities
to free cash flow and operating free cash flow (in millions) |
Quarter Ended |
Better/(Worse) | ||||||||||||||||
2016 | 2015 | $ | ||||||||||||||||
Net cash provided by/(used in) operating activities (GAAP) | $ | 159 | $ | (126 | ) | $ | 285 | |||||||||||
Capital expenditures | (52 | ) | (26 | ) | (26 | ) | ||||||||||||
Free cash flow (Non-GAAP) | 107 | (152 | ) | 259 | ||||||||||||||
Debt retirement premium | 6 | — | 6 | |||||||||||||||
Operating free cash flow (Non-GAAP) | $ | 113 | $ | (152 | ) | $ | 265 | |||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170209005502/en/
Press:
Vice President, Corporate Communications and
Corporate Affairs
jeremy.zweig@viacom.com
or
Investors:
Senior Vice President, Investor Relations
james.bombassei@viacom.com
or
Vice President, Investor Relations
kareem.chin@viacom.com
Source:
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