The company, which also posted a $1.1 billion first-quarter loss Thursday morning -- primarily owing to a $1.5 billion writedown from implementation of new accounting rules -- struck a contrast to fellow media conglomerate
AOL Time Warner
lowered 2002 estimates Wednesday night and announced its own housecleaning writedown 36 times larger than Viacom's.
As part of the company's continuing effort to quash stories about tension between Chairman Sumner Redstone and President and Chief Operating Officer Mel Karmazin, Redstone opened the call with high praise for Karmazin and his management team.
On Thursday morning, Viacom's widely held class B shares rose 21 cents to trade at $50.40. While AOL Time Warner has been lurking among its 52-week low in recent days, Viacom remains closer to the top of its 52-week range of $28.25 to $59.50.
A Cut Above?
The $1.5 billion writedown in the first quarter ended March 31 stems from a goodwill writedown at the majority-owned video chain
, which Viacom acquired in 1994. On its conference call with analysts, Viacom cited the relatively small size of the writedown -- AOL Time Warner's, by comparison, amounted to $54 billion -- as an indication of why Viacom, in Redstone's words, is "a cut above."
Excluding the writedown, Viacom earned $367 million, or 21 cents a share, in the latest quarter, reversing a year-ago loss of $7 million, or less than a penny a share. Revenue in the first quarter of 2002 slipped to $5.67 billion from $5.75 billion a year earlier, while earnings before interest, taxes, depreciation and amortization -- a common media industry yardstick -- dropped to $1.09 billion from $1.15 billion a year ago.
The company said free cash flow rose to $380 million from $348 million a year earlier, led by strong results in its cable networks, video and entertainment segments.
The Ad Game
As part of the company's insistence that business is improving across all its businesses, Karmazin pointed to several signs that the advertising market was improving in different media. For starters, he said, the lead times for advertising purchases were lengthening and returning to normalcy. Advertisers are no longer buying ad time on a Thursday to run the following Monday, said Karmazin: "It's still late and it's still short, but it's a whole lot better than it was in the fourth quarter of '01," he said.
In Viacom's television and cable operations, Karmazin said, scatter market ad pricing was up from the upfront season and improved over last year's prices. Outdoor advertising inventory was "firming up," he said. Radio lead time and ad prices were rising, he said, and various Viacom cable and TV networks appeared to pick up market share in the first quarter.
The company reiterated its predictions of "double-digit" EBITDA growth for 2002.
In a show of support for Karmazin, controlling shareholder Redstone said on the call, "I want to recognize Viacom's incomparable management team led by Mel, which continues to do such an outstanding job." Redstone called Viacom's financial performance an illustration for investors "it is management that separates the real winners from the losers."