Viacom's (NYSE:VIA) fourth quarter was slammed by restructuring charges, and the impact of the weak economy — slower consumer spending, lower advertising and fewer DVD sales. Viacom isn't exposed to the ad markets that are hurting the most — local and broadcast—but it's still feeling the pinch of the recession. Including $454 million in restructuring charges, net income was down 69 percent.
Excluding those one-time items, earnings from continuing operations came in a penny below analyst expectations at 76 cents per share, down 8 cents from the year-ago quarter on flat revenue of $4.24 billion.
Viacom's crown jewel, its media networks division, which includes MTV and Nickelodeon, reported a 1.1 percent rise in revenue, but the divisions earnings dropped 44 percent. This reflects weakness in the ad markets, but also the pullback in consumer spending. The networks division includes Viacom's "Rock Band" video game, and consumers just didn't spend as much as expected on new games. The good news for this division is that the cable networks have signed new distribution deals with cable and satellite TV companies and secured a fee increase from Time Warner Cable. The bad news is that ratings at MTV and other big networks have been struggling with ratings declines, but Dauman insists that new programs on MTV and the other channels are turning those trends around.
The movie division reported a 1.6 percent drop in revenue and an 81 percent fall in profits. Ouch. While its hit movies like Iron Man continued to perform on DVD, smaller films and library titles really disappointed at retailers.
At the beginning of yesterday morning's earnings call Viacom Chairman Sumner Redstone tackled the looming question of National Amusements’ debt load. Redstone's privately held National Amusements has loans that are tied to the value of his media holdings, CBS (NYSE:CBS) and Viacom, which forced Redstone to sell $233 million of the two companies' stock. This morning Redstone reassured investors that he's close to refinancing the $1.6 billion in debt ahead of the March deadline, and that he has no plans to sell more Viacom or CBS Stock.
Redstone was optimistic about the company's future, saying "Viacom will weather this storm and emerge even stronger than ever before." But the reality of CEO Philippe Dauman's outlook was grim. Dauman says the company doesn't see "macroeconomic improvement on the horizon just yet," and that visibility into the ad market is "still very limited."