Viacom Reports Second Quarter 2007 Results

Viacom Reports Second Quarter 2007 Results

Revenues increased 13% to $3.19 billion in the second quarter of 2007. Operating income in the second quarter rose 6% to $702 million, which includes the impact of approximately $11 million of Media Networks restructuring charges. Net earnings from continuing operations for the quarter increased 4% to $433 million, including $65 million in net after-tax income related to a $94 million after-tax gain on the sale of MTV Networks’ investment in Russia, partially offset by a $22 million after-tax impairment charge to write off its investment in Amp’d Mobile, which filed for bankruptcy, and after-tax Media Networks restructuring charges of $7 million. Diluted earnings per share from continuing operations for the quarter increased 9% to $0.63, including a net $0.09 benefit from the above noted items. Diluted earnings per share from continuing operations in the second quarter of 2006 were $0.58, including a $0.10 benefit related to the release of tax reserves principally due to audit settlements. Adjusted diluted earnings per share from continuing operations for the quarter, excluding the net non-operating gain on investments and restructuring charges, increased 13% to $0.54 compared to $0.48 in the second quarter of 2006, excluding the tax reserve releases. A table found at the end of this release reconciles adjusted diluted earnings per share to reported results.

Sumner M. Redstone, Executive Chairman of Viacom, said, “Viacom has delivered another strong quarter, driven by superior execution across the Company. No other company has the range of powerful brands and depth of compelling content to captivate audiences from nearly every demographic around the world. In May, our Board authorized a new $4 billion share buyback program, which further reflects our confidence in the strategic direction of the Company.”

“We continued to make significant strides this past quarter to better position Viacom for future growth, both domestically and abroad,” said Philippe P. Dauman, President and Chief Executive Officer of Viacom. “Our Media Networks made substantial investments in original programming for the television screen, while expanding our branded presence across digital platforms. We launched a number of new, narrowly targeted websites this past quarter, providing richer experiences for our highly engaged consumers. This helped drive an average of 85 million unique visitors per month to our branded sites globally, a 68% increase over second quarter of last year. As part of our international strategy, we announced the formation of a joint venture in India that will include television, film and digital media content across numerous brands in this rapidly growing market. We also sold our equity stake in MTV Networks’ Russian investment, but will maintain a prominent presence in that market through a licensing agreement. These moves are part of our effort to establish the optimal business structure in each market to increase the value and profitability of our international business.”

“Our Filmed Entertainment segment delivered an outstanding quarter of results with multiple box office hits, including Blades of Glory, Disturbia and the distribution of DreamWorks Animation’s Shrek the Third. We are very pleased with the success of Transformers, our summer tentpole released in early July, which is well positioned to become a new franchise property. We also just announced the completion of the sale of Famous Music, and intend to invest those proceeds into growing our businesses and buying back our stock.”

Second quarter 2007 revenues of $3.19 billion grew 13% from $2.82 billion in 2006. Media Networks revenues rose 10% to $1.92 billion, with net acquisitions contributing $40 million in incremental revenues. Worldwide advertising revenues increased 6% to $1.15 billion. Affiliate fees grew 15% to $577 million and ancillary revenues rose 16% to $198 million. Filmed Entertainment revenues were up 20% to $1.31 billion in the second quarter of 2007, reflecting a 35% increase in home entertainment revenues to $545 million and a 34% increase in theatrical revenues to $437 million, which were partially offset by a 12% decrease in television license fees. Growth in home entertainment revenues was due to a year-over-year increase in the number of titles released. The rise in theatrical revenues was primarily driven by the distribution of DreamWorks Animation’s theatrical release of Shrek the Third compared with its 2006 release of Over the Hedge. This growth was partially offset by lower box office results for other theatrical releases compared with 2006 releases, which included Mission: Impossible III, and a decline in pay television license fees, which was primarily due to the timing in availabilities of specific titles.