Viacom Inc. (NYSE: VIA and VIA.B) has reported financial results for the first quarter ended March 31, 2008.
During the first quarter of 2008, revenues increased 15% to $3.12 billion with double-digit growth in both the Media Networks and Filmed Entertainment segments. Operating income also grew double digits versus a year ago, up 29% to $567 million. Excluding the impact of Media Networks restructuring charges in the first quarter 2007, adjusted operating income rose 14% in the first quarter of 2008. Net earnings rose 33% to $270 million with diluted earnings per share (EPS) of $0.42. On an adjusted basis, diluted EPS grew 29% to $0.44 in the first quarter of 2008. The adjusted results exclude a $0.02 per share reduction related to a non-cash impairment of a minority investment in the first quarter of 2008 and the Media Networks restructuring charges taken in the first quarter of 2007. Adjustments are detailed in the Supplemental Disclosures tables at the end of this release.
Sumner M. Redstone, Executive Chairman of Viacom, said, “Viacom entered 2008 at an aggressive pace, delivering strong results in the first quarter. We continue to unlock new value in our businesses as we create innovative ways for our audience to engage with our unparalleled entertainment brands. I am more confident than ever that we have the right strategies and the best management to deliver on our commitment to grow shareholder value over time.”
Philippe Dauman, President and Chief Executive Officer of Viacom, said, “Content creation is our central mission and our ongoing investments in programming are paying off as we see our television ratings continue to improve. Successful new programming across our networks during the first quarter included MTV’s Randy Jackson Presents: America’s Best Dance Crew, TV Land’s High School Reunion and BET’s Iron Ring among others, which joined new seasons of several proven audience favorites. Audiences are also responding to our digital content, which is moving beyond our own branded sites through smart distribution deals with leading online and mobile partners. Already this year, we took a significant step to advance our casual gaming strategy as Nickelodeon prepares to add approximately 1,600 new online games to its growing portfolio. Additionally, our Rock Band video game is continuing its successful tour and is emerging as a valuable long-term franchise. We expect to further that success with the upcoming release of Rock Band on the Wii home video game system and our launch in Europe.
“Our motion picture operations continue to make great progress. Paramount’s Cloverfield was a solid hit in the first quarter and we’re looking forward to a strong slate of releases during the remainder of the year, including today’s premiere of Iron Man. Additionally, we have announced an innovative new premium service that combines the significant creative fire power of Paramount, MGM and Lionsgate. We are reinventing the pay television window, taking control of our content and how it is being distributed and marketed – offering maximum flexibility for us and for our audiences.”
First Quarter 2008 revenues of $3.12 billion grew 15% from $2.72 billion in 2007. Media Networks revenues rose 16% to $2.02 billion, principally driven by strong sales of the music video game Rock Band. Worldwide ancillary revenues grew 72% in the first quarter. Worldwide advertising revenues were up 8% to $1.05 billion driven by Nickelodeon, COMEDY CENTRAL and TV Land. Affiliate revenues increased 13% on a worldwide basis. Filmed Entertainment revenues were up 12% to $1.15 billion in the quarter primarily due to a 22% increase in home entertainment revenues. Home entertainment growthreflects increased revenues from third-party distribution arrangements, including $29 million in revenue recognized in connection with the conclusion of an HD-DVD exclusivity arrangement. Television license fees rose 10% primarily due to an increase in international pay TV and international syndicated television license fees. Worldwide theatrical revenues decreased 7% to $247 million due to the lower box office performance of the films in theatrical release during the first quarter of 2008 versus the prior year quarter.
First Quarter 2008 operating income increased 29% to $567 million, versus $441 million in the first quarter of 2007. Media Networks operating income grew 15% to $694 million, including a 9 percentage point benefit related to prior year restructuring charges. This also reflects the impact of higher expenses in the current quarter, principally related to distribution costs for the Rock Band video game. The Filmed Entertainment segment narrowed its operating loss by 42% to $63 million, as higher revenues were partially offset by a 7% increase in expenses, largely related to feature film amortization. Corporate expenses increased $10 million, reflecting higher legal fees related to litigation and employee-related expenses.
First Quarter 2008 net earnings increased $67 million, or 33%, to $270 million, reflecting higher operating income. Diluted earnings per share for the quarter were $0.42, a 45% increase over EPS of $0.29 in the first quarter of 2007, which included a $0.05 per share reduction from restructuring charges. On an adjusted basis, diluted EPS were $0.44 in the first quarter of 2008, a 29% increase over the prior year’s adjusted results.
Viacom, consisting of BET Networks, MTV Networks and Paramount Pictures, is the world’s leading entertainment content company. It engages audiences on television, motion picture and digital platforms through many of the world’s best known entertainment brands, including MTV, VH1, CMT, Logo, Harmonix, Nickelodeon, Noggin, Nick at Nite, AddictingGames, Neopets, COMEDY CENTRAL, Spike TV, TV Land, AtomFilms, Gametrailers, BET, Paramount Pictures, DreamWorks Pictures and Paramount Vantage. Viacom’s global reach includes approximately 160 channels and 325 online properties in 160 countries and territories.