Updated from 7:46 a.m.
shares rose Tuesday as the company rolled out a long-awaited plan to shed its
Viacom posted strong fourth-quarter revenue, but bottom-line results were hobbled by a $1.3 billion charge at Blockbuster, which Viacom plans to spin off. That move ended weeks of speculation about the future of the problematic video retailer, fed occasionally by Viacom executives' vague comments about Blockbuster's fate.
The spinoff of Blockbuster, of which Viacom now owns 81%, is slated to happen by mid-2004, Viacom said. The announcement indicates Viacom has been unable to find a satisfactory buyer for the property.
The move "will allow each company to focus exclusively on its core businesses," Viacom CEO Sumner Redstone said in a statement. "Blockbuster can maximize its growth opportunities and Viacom can focus on the many opportunities we see ahead."
Speaking to analysts on a conference call Tuesday morning, Viacom President Mel Karmazin promised that each of the company's advertising-supported businesses would be up in the first quarter of 2004, bouncing back from weak year-over-year performances in TV and radio.
On the bottom line, Viacom reported earnings, excluding the Blockbuster charge, of $630 million, or 36 cents per diluted share. That matches the Thomson First Call consensus and is down from the 37 cents reported a year earlier.
On the basis of generally accepted accounting principles, Viacom reported a loss for the quarter of $385.4 million, or 22 cents per share, compared to a year-ago profit of $652.4 million, or 37 cents per share.
For the fourth quarter ended Dec. 31, Viacom reported revenue of $7.52 billion, up 11% from the $6.78 billion reported one year earlier. The consensus of analysts surveyed by Thomson First Call was for $7.1 billion in revenue, and none of the 21 analysts polled appeared to forecast higher than $7.3 billion.
Operating income before depreciation and amortization -- the cash flow measure formerly known as EBITDA -- amounted to $1.51 billion in the quarter, excluding the noncash Blockbuster charge, which stemmed from a reduction in Blockbuster's goodwill and other long-lived assets. That OIBDA figure, which matched the fourth-quarter 2002 number, was nearly even with analysts' expectations.
Overall, Viacom's fourth-quarter results reflect large growth at its cable TV properties, including MTV Networks, and higher revenue from Paramount's theatrical features and DVD releases.
Those trends offset relatively weak ad sales in television and radio, along with a 6.8% decline in same-store sales at Blockbuster.
At Viacom's Cable Networks division, revenue grew 24% to $1.7 billion in the fourth quarter, driven by 28% growth in ad revenue and 14% growth in affiliate fees. Operating income grew 19% to $635 million. Partially offsetting the operating income growth was the inclusion of $90 million in expenses for Comedy Central, of which Viacom acquired full control last year.
TV revenue fell 1% to $2.1 billion, and operating income fell 23% to $241 million. Higher ad revenue at the CBS and the UPN networks were more than offset by the absence of political advertising at the company's owned-and-operated stations, as well as lower revenue from cable sales. Television station ad sales will be up double-digits in the first quarter, accompanied by operating margin improvement, Karmazin said on the call. Strong network ratings, he said, particularly at 10:00 pm, are helping to boost ratings for local newscasts.
Local TV stations reaped 19% more Super Bowl ad revenue than they did in 2001, Karmazin said.
Radio revenue fell 3% to $551 million, and operating income fell 10% to $252 million, reflecting lower ad revenue.
While declining to specify, as the company has in previous quarters, the pace of advertising sales at the company's radio stations, Karmazin said he expected that every one of the company's 10 largest markets would report higher sales in the first quarter. Operating profit for radio in the first quarter will be higher as well, said Karmazin.
Radio's weak performance had been a sore point for Viacom throughout last year; in contrast to the expected first quarter 2004 performance, Karmazin pointed out that several of the company's top-ten markets reported revenue declines in the first quarter of 2003.
Nine of Viacom's 40 radio markets reported lower ad revenue in 2003 than in 2002, but Karmazin said that six of those nine would be up in 2004. "We have targeted those situations," he said. "We have taken action to turn around those situations."
Entertainment revenue grew 41% to $1.3 billion, boosted by DVD sales and higher Theaters revenue from movies such as
School of Rock
. Operating income grew 15% to $66 million.
Blockbuster's revenue grew 2% to $1.6 billion, while operating income, excluding the charges, grew 23% to $104 million.
Based on 2003 results excluding the charge, Viacom reiterated its growth targets for 2004. The company says revenue will grow in the range of 5% to 7%, operating income will be up 12% to 14%, and earnings per share will rise in the range of 13% to 15%.
Shares in Viacom rose 52 cents to $40.50 on Tuesday. The company's stock has ranged between $33 and $50 in the past year.