Viacom net income down 69% on job cut costs, restructuring

MUMBAI: Viacom Inc’s net income fell 69 per cent to $454 million in the fourth quarter mainly due to restructuring charges.

Revenues in the fourth quarter of 2008 were flat year-over-year at $4.24 billion. Operating income was down 51 per cent to $475 million, including the impact of $454 million in restructuring and other charges taken in the quarter.

The company’s net income was $173 million, or 28 cents a share, down from $559.5 million, or 86 cents, a year earlier. Excluding items, among them the restructuring charges and prior-year write-downs, earnings from continuing operations fell to 76 cents from 84 cents.

Filmed Entertainment revenues declined 2 per cent in the fourth quarter to $1.81 billion, principally the result of a six per cent decrease in home entertainment revenues to $1.02 billion. This decrease in home entertainment revenues, which was partially offset by increased revenues from third-party distribution agreements, reflects the impact of the industry-wide decline in the home entertainment market during the fourth quarter. Theatrical revenues grew 28 per cent to $350 million, primarily due to the strong performance of Madagascar 2: Escape to Africa. Television license fees were down 13 per cent to $351 million and ancillary revenues increased 9 per cent to $86 million.

Revenues for the full year 2008 grew nine per cent to $14.63 billion driven by growth in both the Filmed Entertainment and Media Networks segments. Operating income declined 14 per cent to $2.52 billion. Reported net earnings for the year were down 32 per cent to $1.25 billion, or diluted net earnings per share (EPS) of $2.

On December 4, 2008, Viacom announced restructuring plans to better align its organization and cost structure with changing economic conditions. In addition, following a strategic review of its operations, the company wrote down certain programming and other assets. These activities resulted in an aggregate of $454 million of restructuring and other charges in the fourth quarter of 2008. Excluding the impact of these charges and other items, adjusted diluted EPS from continuing operations were $2.38 versus $2.36 in 2007.

Viacom executive chairman Sumner M. Redstone said, "There is no doubt that global economic conditions are difficult right now. Having worked through turbulent times before, I know that it is in such times that companies with strong, resilient assets distinguish themselves. With enduring brands and a proven leadership team, Viacom is well prepared to manage through this environment and thrive over the long term."

Viacom president and CEO Philippe Dauman added, "Our fourth quarter results reflect the realities of a challenging economy. The broad marketplace conditions weighed on our advertising, home entertainment and consumer products businesses. That was offset, however, by solid growth in our affiliate and theatrical revenues, both up double digits. Ratings trends at several of our core networks are improving as new programming gains traction and we are looking forward to a promising motion picture slate anchored by three upcoming tentpoles, J.J. Abrams’ Star Trek, Transformers 2: Revenge of the Fallen and G.I. Joe."

"While our strategy remains firmly focused on building our brands for long-term success, we also have great confidence in our ability to execute successfully today. We acted early and decisively to prepare for the rapid decline in economic conditions. Without sacrificing the creation of great content, we aggressively managed our cost structure, which significantly boosted cash flow and further strengthened our balance sheet. The restructuring actions we took late last year will result in approximately $200 million in savings this year. While it is difficult to know how long these conditions will persist, our actions have positioned us very well to seize the opportunities that will arise as the economy recovers," Dauman said.