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Viacom Reports 4Q Results

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Viacom today reported results for the full year and fourth quarter ended December 31, 2004.

For the full year 2004, Viacom revenues increased 8% to $22.5 billion from $20.8 billion in the prior year. Advertising revenues increased 11% led by growth of 21% in Cable Networks and 11% in Television. Viacom reported an operating loss of $13.0 billion versus operating income of $4.5 billion in the prior year. Full year 2004 net loss from continuing operations was $15.1 billion, or a loss of $8.78 per diluted share, compared with net earnings from continuing operations of $2.2 billion, or $1.27 per diluted share, for 2003.

In accordance with the SFAS No. 142, “Goodwill and other Intangible Assets,” the Company conducted its annual impairment test for all reporting units for the year ended December 31, 2004. The analysis resulted in a non- cash impairment charge of $18.0 billion, or $10.43 per diluted share, to reduce the carrying amount of Radio and Outdoor goodwill and intangibles to their respective estimated fair value. The Company’s combined goodwill and intangible asset balance after the impairment charge is approximately $49 billion. Full year 2004 results also included a second quarter severance charge of $56 million, or $.02 per diluted share, due to management changes, and the recognition of a tax benefit of $205 million, or $.12 per diluted share, principally from the resolution of income tax audits.

For the full year 2004, Viacom’s free cash flow climbed to $3.0 billion from $2.5 billion in 2003, an increase of 17%, principally reflecting higher earnings excluding the non-cash charge, partially offset by higher cash taxes. Free cash flow reflects the Company’s net cash flow from operating activities of $3.6 billion less capital expenditures of $415 million and operating cash flow from Blockbuster of $237 million.

Excluding the charges, Viacom’s full year 2004 operating income increased 14% to $5.1 billion primarily driven by increases at Cable Networks and Television, partially offset by declines in the Radio and Entertainment segments. Excluding the charges and the tax benefit, Viacom’s net earnings from continuing operations increased 19% to $2.7 billion for 2004 and diluted earnings per share increased 21% to $1.54.

For the fourth quarter, Viacom revenues increased 6% to $6.3 billion from $5.9 billion for the same period last year, led by double-digit increases in the Cable Networks segment. Fourth quarter 2004 operating loss was $16.7 billion compared with operating income of $1.1 billion. Viacom reported a fourth quarter net loss from continuing operations of $17.1 billion, or a loss of $10.21 per diluted share, compared with net earnings of $586 million, or $.33 per diluted share, in the same period last year.

Excluding the charges and the tax benefit, Viacom’s fourth quarter operating income increased 10% to $1.3 billion, net earnings from continuing operations increased 22% to $714 million and diluted earnings per share increased 27% to $.42.

Sumner M. Redstone, Chairman and Chief Executive Officer of Viacom, said, “Having adjusted the valuations of our radio and outdoor businesses to reflect emerging business trends and the competitive environment, we are now positioned to fully focus our efforts on the Company’s fast growing assets. We are poised to move rapidly to increase our investment and re-evaluate our portfolio in Radio and to focus on the higher return areas within Outdoor. These businesses have terrific potential and continue to generate some of the highest margins and free cash flow in the industry.

“Overall, Viacom’s underlying operational performance, including 11% advertising growth, reflects our ability to run our businesses to generate significant returns. Excluding the charges and the tax benefit, Viacom delivered 21% earnings per share growth and a 17% increase in free cash flow to $3.0 billion. In addition to reinvesting in our businesses for future growth, we were able to take advantage of this free cash flow growth to return capital to shareholders in the form of dividends and share repurchases. In fact, as a result of the Blockbuster split-off and the use of $2 billion of our $8 billion share buyback authorization, we acquired 96.4 million outstanding shares in 2004.”

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Viacom Reports 4Q Results
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