viacom 20081103%20Q308%20Web%20Deck
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This document summarizes Viacom's financial results for the third quarter of 2008. Revenues increased 4% year-over-year to $3.4 billion. Operating income decreased 15% to $689 million due to an 11% increase in expenses. Adjusted net earnings decreased 22% to $339 million, while adjusted diluted EPS decreased 15% to $0.55. Free cash flow was $564 million for the quarter compared to a significant decrease year-to-date. Total debt was $8.95 billion as of September 30, 2008, while cash on hand was $525 million.
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viacom 20081103%20Q308%20Web%20Deck
- 1. 3rd QUARTER 2008 RESULTS November 3, 2008
- 2. Cautionary Statement Concerning Forward-Looking Statements This presentation contains both historical and forward-looking statements. All statements, including Business Outlook, which are not statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements reflect the Company’s 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 actual results, performance or achievements to differ. These risks, uncertainties and other factors include, among others: advertising market conditions; the public acceptance of and ratings for the Company’s feature films, programs, digital services, games and other content, as well as related advertisements; competition for advertising dollars; technological developments and their effect in the Company’s markets and on consumer behavior; fluctuations in the Company’s results due to the timing, mix and availability of the Company’s programming, films and other content; changes in the Federal communications laws and regulations; the impact of piracy; the impact of increased scale in parties involved in the distribution and aggregation of the Company’s products and program services to consumers and advertisers; the impact of union activity; other domestic and global economic, business, competitive and/or regulatory factors affecting the Company’s businesses generally, including the current downturn in global economic conditions and possible domestic recession; and other factors described in the Company’s news releases and filings with the Securities and Exchange Commission, including but not limited to the Company’s 2007 Annual Report on Form 10-K and reports on Form 10-Q and Form 8-K. The forward-looking statements included in this presentation are made only as of the date of this presentation, and the Company does not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. Reconciliations for any non-GAAP financial information contained in this presentation are included in this presentation or found on the Company’s website at www.viacom.com. This presentation is a supplement to, and should be read in conjunction with, Viacom’s earnings release for the third quarter ended September 30, 2008. Page 1
- 3. Reported Results ($ In Millions, except per share amounts) 3rd Quarter Year-to-Date 2008 B/(W) 2007 2008 B/(W) 2007 Revenues $ 3,408 4% $10,382 13% Expenses (2,599) (11%) (7,983) (16%) Equity Compensation (28) (27%) (70) (9%) D&A (92) 11% (281) 5% Operating Income 689 (15%) 2,048 5% Net Earnings, 385 (14%) 1,061 (2%) Continuing Operations Diluted EPS, 0.62 (7%) 1.68 6% Continuing Operations Weighted Average 619.3 7% 630.1 8% Diluted Shares Page 2
- 4. Adjusted Results ($ In Millions, except per share amounts) 3rd Quarter Year-to-Date 2008 B/(W) 2007 2008 B/(W) 2007 Revenues $ 3,408 4% $10,382 13% (12%) (2) (2) Adjusted Expenses (2,599) (7,983) (18%) Equity Compensation (28) (27%) (70) (9%) D&A (92) 11% (281) 5% (2) (2) Adjusted Operating Income 689 (16%) 2,048 1% Adjusted Net Earnings, 339 (1) (22%) (2) (1) (2) 1,027 (1%) Continuing Operations Adjusted Diluted EPS, (1) (2) (1) (2) 0.55 (15%) 1.63 7% Continuing Operations Weighted Average 619.3 7% 630.1 8% Diluted Shares See Page 4 for footnotes. Page 3
- 5. Footnotes 1. 2008 adjusted results for the three months ended September 30, 2008 exclude discrete tax benefits of $46 million ($0.07 per share). The discrete tax benefits were principally the result of effectively settled audits. 2008 adjusted results for the nine months ended September 30, 2008 exclude a $12 million pre-tax non-cash investment impairment ($12 million after-tax, $0.02 per share) and discrete tax benefits of $46 million ($0.07 per share). 2. 2007 adjusted results for the three months ended September 30, 2007 exclude $3 million of pre-tax expenses related to Media Networks restructuring charges, principally severance, affecting MTV Networks domestic and international operations ($2 million after-tax, $0.00 per share) and net discrete tax benefits of $15 million ($0.02 per share). 2007 adjusted results for the nine months ended September 30, 2007 exclude $70 million of pre-tax expenses related to Media Networks restructuring charges, principally severance, affecting MTV Networks domestic and international operations ($44 million after-tax, $0.06 per share); $151 million pre-tax gain on the sale of equity investment ($94 million after-tax, $0.14 per share); $36 million non-cash pre-tax investment impairment ($22 million after-tax, $0.03 per share); and net discrete tax benefits of $15 million ($0.02 per share). See pages 16 - 21 for a reconciliation to GAAP results. Page 4
- 6. Free Cash Flow ($ In Millions) 3rd Quarter Year-to-Date 2008 B/(W) 2007 2008 B/(W) 2007 Operating Income $ 689 (15%) $ 2,048 5% Depreciation & Amortization 92 (11%) 281 (5%) Capital Expenditures (53) 21% (235) (59%) Cash Interest (36) 12% (286) (3%) Cash Taxes (1) (205) 20% (644) (52%) Working Capital & Other 77 n/m (779) (93%) $ 564 n/m $ 385 (62%) Operating Free Cash Flow (2) - n/m - n/m Cash Taxes on Disposition (3) $ 564 n/m $ 385 (60%) Free Cash Flow 1) Excludes taxes paid with respect to the dispositions of assets in 2007. 2) Cash taxes paid with respect to the gain recognized in 2Q’07 on the sale of the Company’s non-controlling investment in MTV Russia. It is important to note that the net cash proceeds from asset sales is not included in Free Cash Flow. 3) See Page 22 for the definition and reconciliation of free cash flow and operating free cash flow to net cash flow from operations. Note: n/m – not meaningful Page 5
- 7. Debt & Cash ($ In Millions) September 30, 2008 Commercial Paper / Bank Debt $ 1,520 Floating Rate Senior Notes due 2009 750 Total Floating Rate Debt 2,270 5.75% Senior Notes due 2011 1,495 6.25% Senior Notes due 2016 1,495 6.125% Senior Notes due 2017 497 6.875% Senior Debentures due 2036 1,734 6.75% Senior Debentures due 2037 248 6.85% Senior Notes due 2055 750 Note Payable 147 Capital Leases and Other 316 Total Fixed Rate Debt 6,682 Total Debt $ 8,952 Cash & Cash Equivalents $525 Page 6
- 8. Share Repurchase Program (In Millions) Nine Months Ended YTD through 3Q 2008 9/30/2008 10/31/2008 Cost of Repurchase $215 $1,075 $1,124 Shares Repurchased 7.6 30.2 32.7 Quarter End Shares Outstanding 615.3 Remaining program availability as of 10/31/08 is $1.4 billion Page 7
- 10. Media Networks – Revenues by Type ($ In Millions) 3rd Quarter Year-to-Date 2008 B/(W) 2007 2008 B/(W) 2007 Advertising $ 1,155 (2%) $ 3,376 2% Affiliate 660 12% 1,953 12% Ancillary 313 36% 952 56% Total $ 2,128 6% $ 6,281 11% Page 9
- 11. Media Networks – Financial Results ($ In Millions) 3rd Quarter Year-to-Date 2008 B/(W) 2007 2008 B/(W) 2007 Revenues $ 2,128 6% $ 6,281 11% Expenses (1,294) (16%) (3,845) (20%) Equity Compensation (13) (18%) (28) (4%) D&A (60) 17% (188) 12% Operating Income, Before 761 (5%) 2,220 1% Restructuring Charges Restructuring Charges (1) - n/m - n/m $ 761 (4%) $ 2,220 4% Operating Income 1) 2007 results include $3 million and $70 million, respectively, of expenses related to Media Networks restructuring charges, principally severance, affecting MTV Networks domestic and international operations for the quarter and nine months ended September 30, 2007. Note: n/m – not meaningful Page 10
- 12. Filmed Entertainment – Revenues by Type ($ In Millions) 3rd Quarter Year-to-Date 2008 B/(W) 2007 2008 B/(W) 2007 Theatrical $ 312 (36%) $ 1,364 14% Home Entertainment 593 30% 1,704 21% TV License Fees 342 16% 982 10% Ancillary 62 (3%) 176 22% Total $ 1,309 - $ 4,226 16% Page 11
- 13. Filmed Entertainment – Theatrical Releases 3Q 2008 3Q 2007 American Teen Transformers Tropic Thunder An Arctic Tale Ghost Town Hot Rod The Duchess Stardust Eagle Eye Into The Wild Page 12
- 14. Filmed Entertainment – Financial Results ($ In Millions) 3rd Quarter Year-to-Date 2008 B/(W) 2007 2008 B/(W) 2007 Revenues $ 1,309 0% $ 4,226 16% Expenses (1,297) (8%) (4,134) (16%) Equity Compensation (4) (33%) (10) (43%) D&A (27) - (78) (8%) Operating Income $ (19) n/m $ 4 n/m Note: n/m – not meaningful Page 13
- 15. Business Outlook For the full year 2008, Viacom expects to deliver mid-single to low double-digit growth in adjusted diluted earnings per share from continuing operations. This outlook is based on adjusted earnings and reflects growth from 2007 adjusted diluted earnings per share from continuing operations of $2.36. See the Supplemental Disclosures for a description of adjusted results and tables detailing those adjustments that impact the current and prior year. Page 14
- 17. Supplemental Disclosures – Non-GAAP Financial Information Non-GAAP measures, including free cash flow, operating free cash flow and adjusted results that exclude non-operating investment gains and losses, discrete taxes, impairment charges and restructuring charges, where applicable, are relevant and useful information for investors because they allow investors to view performance in a manner similar to the method used by the Company's management, help improve their ability to understand the Company's operating performance and make it easier to compare the Company's results with other companies. These measures are not calculated in accordance with GAAP. They should not be considered in isolation of, or as a substitute for, net cash flow from operations, operating income, net earnings from continuing operations and diluted EPS from continuing operations as indicators of operating performance. Such non-GAAP measures, as calculated by the Company, may not be comparable to similarly titled measures employed by other companies. Page 16
- 18. Supplemental Disclosures – Non-GAAP Financial Information ($ In Millions, Except Per Share Amounts) Quarter Ended September 30, 2008 Pre-tax Net Earnings Diluted EPS Earnings from from Operating from Continuing Continuing Income Continuing (1) (2) Operations Operations Operations Reported Results $ 689 $ 511 $ 385 $ 0.62 Adjustments: (6) - - (46) (0.07) Discrete Tax Benefits Adjusted Results $ 689 $ 511 $ 339 $ 0.55 See Page 21 for footnotes. Page 17
- 19. Supplemental Disclosures – Non-GAAP Financial Information ($ In Millions, Except Per Share Amounts) Nine Months Ended September 30, 2008 Pre-tax Net Earnings Diluted EPS Earnings from from Operating from Continuing Continuing Income Continuing Operations(1) Operations(2) Operations Reported Results $ 2,048 $ 1,599 $ 1,061 $ 1.68 Adjustments: Impairment of - 12 12 0.02 (5) Investment (6) - - (46) (0.07) Discrete Tax Benefits Adjusted Results $ 2,048 $ 1,611 $ 1,027 $ 1.63 See Page 21 for footnotes. Page 18
- 20. Supplemental Disclosures – Non-GAAP Financial Information ($ In Millions, Except Per Share Amounts) Quarter ended September 30, 2007 Pre-tax Net Earnings Diluted EPS Operating Earnings from from from Continuing Continuing Income Continuing Operations(1) (2) Operations Operations Reported Results $ 815 $ 692 $ 450 $ 0.67 Adjustments: Media Networks 3 3 2 - (3) Restructuring Activities (6) - - (15) (0.02) Discrete Tax Benefits Adjusted Results $ 818 $ 695 $ 437 $ 0.65 See Page 21 for footnotes. Page 19
- 21. Supplemental Disclosures – Non-GAAP Financial Information ($ In Millions, Except Per Share Amounts) Nine Months Ended September 30, 2007 Pre-tax Net Earnings Diluted EPS Operating Earnings from from from Continuing Continuing Income Continuing Operations(1) (2) Operations Operations Reported Results $ 1,958 $ 1,729 $ 1,085 $ 1.59 Adjustments: Media Networks 70 70 44 0.06 (3) Restructuring Activities Gain on Sale of Equity - (151) (94) (0.14) (4) Investment (5) - 36 22 0.03 Impairment of Investment (6) - - (15) (0.02) Discrete Tax Benefits Adjusted Results $ 2,028 $ 1,684 $ 1,042 $ 1.52 See Page 21 for footnotes. Page 20
- 22. Footnotes – Pages 17 - 20 1. Pre-tax earnings represent earnings from continuing operations before provision for income taxes and minority interest. 2. The tax impact of adjustments has been calculated where appropriate using the applicable rates in effect for the period presented. 3. 2007 adjusted results exclude $3 million and $70 million, respectively, of expenses related to Media Networks restructuring charges, principally severance, affecting MTV Networks domestic and international operations for the quarter and nine months ended September 30, 2007. 4. In 2007, the Company sold its non-controlling investment in MTV Russia for $191 million and recognized a pre-tax gain of $151 million. 5. 2008 and 2007 adjusted results exclude $12 million and $36 million, respectively, of pre-tax non-cash investment impairment charges for the nine months ended September 30, 2008 and 2007. 6. 2008 and 2007 adjusted results exclude $46 million and $15 million, respectively, of net discrete tax benefits for the quarter and nine months ended September 30, 2008 and 2007. The discrete tax benefits were principally the result of effectively settled audits. Page 21
- 23. Supplemental Disclosures – Non-GAAP Financial Information ($ In Millions) 3rd Quarter Year-to-Date 2008 2007 2008 2007 Cash Provided By (Used In) Operations $ 617 $ 298 $ 620 $1,103 (53) (67) (235) (148) Capital Expenditures Free Cash Flow (1) $ 564 $ 231 $ 385 $ 955 Cash Taxes on Disposition (2) - 48 - 48 Operating Free Cash Flow (3) $ 564 $ 279 $ 385 $1,003 1. The Company defines free cash flow as cash provided by (used in) operations minus capital expenditures. Free cash flow is a non-GAAP measure. Management believes free cash flow provides investors with an important perspective on the Company’s liquidity, including ability to service debt, make strategic acquisitions and investments, and repurchase stock. 2. Cash taxes paid with respect to the gain recognized in 2Q’07 on the sale of the Company’s non-controlling investment in MTV Russia. It is important to note that the net cash proceeds from asset sales is not included in Free Cash Flow. 3. The Company defines operating free cash flow as cash provided by (used in) operations minus capital expenditures plus cash taxes on dispositions. Operating free cash flow is a non-GAAP measure. Management believes operating free cash flow provides investors with an important perspective on the Company’s liquidity from ongoing activities. Page 22