New York: Viacom Inc.has reported strong growth in operating income and profit on improving trends in the advertising market, continued strength of its affiliate revenues and lower film and distribution costs for the quarter ended June 30, 2010.
Consolidated revenues for the quarter were $3.30 billion, essentially flat with the prior year, as growth in affiliate, theatrical and advertising revenues offset lower home entertainment revenues. Adjusted operating income grew 28% to $794 million versus the prior year, reflecting 14% growth in Media Networks and a $77 million increase in the Filmed Entertainment segment. Viacom generated $418 million in adjusted net earnings from continuing operations attributable to Viacom, a 40% increase over the second quarter of 2009, and adjusted diluted earnings per share (EPS) of $0.68, up 39% year-over-year.
Sumner M. Redstone, Executive Chairman of Viacom, said, “Viacom’s strong bottom-line results reflect our focused strategy, our creative ingenuity and our disciplined financial approach. We are very pleased with our consistent progress and the solid results that Viacom continues to deliver for shareholders.”
Philippe Dauman, President and Chief Executive Officer of Viacom, said, “Viacom has significantly strengthened its financial position, driving free cash flow and continuing to expand our operating margins, culminating this quarter with the delivery of Viacom’s first quarterly cash dividend.
Importantly, this was achieved without sacrificing our investment in programming, which allows us to further build our brands, launch major new hits and create even stronger connections with our audiences. As a result, we are well positioned to capitalize on improving trends in the advertising market. We have strong slates of new and returning programming debuting in the coming months on MTV, Nickelodeon, BET, Spike, Comedy Central and other networks, which we continue to deliver to audiences on multiple screens and devices.
“At Paramount Pictures, our film slate strategy focused on franchise opportunities coupled with the studio’s continued bottom-line vigilance is generating strong results. Our tentpole releases, Marvel Studios’ Iron Man 2 and DreamWorks Animation’s Shrek Forever After, both rank among the top five films in domestic box office for the year.”
Quarterly revenues of $3.30 billion were on par with the $3.299 billion generated in 2009. Solid growth in affiliate and advertising revenues resulted in a 6% increase in Media Networks revenues. Domestic advertising revenues increased 4% as the strong scatter market more than offset the impact of a weaker 2009 upfront. Worldwide advertising revenues were also up 4%.
Worldwide affiliate revenues grew 11% in the quarter, primarily due to rate growth. Worldwide ancillary revenues were flat as growth in online content licensing fees and consumer products sales was offset by lower music video game royalties. Filmed Entertainment revenues were down 10% to $1.25 billion primarily due to lower home entertainment revenues, which declined 43% in the quarter. This decline reflects lower revenues from third party distribution arrangements as well as the release of three titles in the current quarter versus six titles in the comparable 2009 quarter.
Worldwide theatrical revenues grew 10% in the quarter reflecting the solid performance of Marvel Studios’ Iron Man 2 and DreamWorks Animation’s Shrek Forever After as well as the solid carryover revenues from the previous quarter’s major releases. Worldwide television license fees decreased 2% primarily due to lower international syndicated television revenues.
Quarterly adjusted operating income increased 28% to $794 million compared with $619 million in the second quarter of 2009. This growth was led by a $97 million, or 14%, increase in Media Networks operating income, which was driven by higher affiliate and advertising revenues as well as lower losses from Rock Band. This growth was partially offset by the Company’s continued investment in programming.
The Filmed Entertainment segment delivered a $69 million profit, which represents a $77 million improvement over the second quarter 2009 result, driven by lower costs due to fewer theatrical and home entertainment releases.
Quarterly adjusted net earnings from continuing operations attributable to Viacom increased $120 million, or 40%, to $418 million, principally due to higher operating income. Adjusted diluted earnings per share for the quarter were $0.68, a 39% increase over adjusted diluted EPS of $0.49 in the second quarter of 2009.
At June 30, 2010, total debt outstanding, including capital lease obligations, was $6.76 billion, compared with $6.77 billion at December 31, 2009. The Company’s cash balances increased to $677 million at June 30, 2010 compared with $298 million at December 31, 2009.