Viacom (VIAB) beats consensus with adjusted EPS of $0.42; reports $18B write-down of impaired assets and $1.1B loss on discontinued Blockbuster (BBI) operations

| About: Viacom Inc. (VIA)

Viacom (NASDAQ:VIAB) reported results on February 24, 2005 for
the fourth quarter and year end 2004.  Below are some highlights.

Results 4Q04 vs. 4Q03:

  • Adjusted EPS (ex. write-off): $0.42 vs. $0.33; consensus was $0.38
  • GAAP EPS: ($10.99) vs. ($0.22)
  • EPS from continuing operations: ($10.21) vs. $0.33
  • Revenue: $6.3B vs. $5.9B (+6%); consensus was $6.24B
  • Operating income before D&A (excluding one-time charges): $1.5B vs. $1.3B (+10%)
  • Tax rate: 34.4% (39.1% excl. certain benefits) vs. 40%
  • Free cash flow: $605M vs. $563M (+7%)

Segment Breakdown 4Q04 vs. 4Q03:

Cable Networks:
Revenue: $1.9B vs. $1.7B (+9%)
OIBDA: $761M vs. $686M (+11%)
OIBDA margin: 40% vs. 41% (-100 bps)

Revenue: $2.2B vs. $2.1B (+5%)
OIBDA: $334M vs. $280M (+19%)
OIBDA margin: 15% vs. 13% (+200 bps)

Revenue: $550M vs. $551M (flat)
OIBDA: $238M vs. $259M (-8%)
OIBDA margin: 43% vs. 47% (-400 bps)

Revenue: $514M vs. $473M (+9%)
OIBDA: $137M vs. $115M (+19%)
OIBDA margin: 27% vs. 24% (+300 bps)

Revenue: $1.2B vs. $1.3B (-9%)
OIBDA: $90M vs. $101M (-11%)
OIBDA margin: 8% vs. 8% (flat)

1Q05 Guidance:

  • Revenues: mid-single digit growth
  • Operating income: mid-single digit growth
  • EPS: high-single digit growth

Quick comments:

  • Annual impairment test resulted in $18B write-off ($10.43/share) in Radio and Outdoor assets
  • Blockbuster (BBI) split-off: completed on 10/13/04; reflected in loss from discontinued operations of $1.1B
  • Share repurchase: repurchased 68.4M shares for $2.5B during 2004; during 1Q05 (through 2/22/05) repurchased 25M shares for $945M
  • Cable networks: ad revenues: +21%; affiliate growth +8%
  • Television: ad revenues: +11%; Super Bowl and political ads contributed 3% of revenues
  • Radio: ad growth in top-20 markets: +1%
  • Outdoor: North America: +4%; Europe: +14% (thanks for FX benefit)
  • Entertainment: faced a tough comps versus 4Q03 when the Indiana Jones DVD box set was released; parks revenues +9% due to higher attendance and lower spending per visitor
  • Launching LOGO channel for gay, lesbian and trans-gender community in June
  • Promising movie releases for 2005 include: Sahara, The Longest Yard and War of the Worlds
  • Plan to take an aggressive approach to home entertainment; hired Brad Grey, who starts next week; signed 3-movie deal at Sundance
  • In the early stages of auctioning Canada's Famous Players theater chain
  • View Paramount Parks as a non-core asset; have received unsolicited interest for it



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