UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 |
FORM 8-K |
CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Date of Report (Date of earliest event reported): August 9, 2018 |
VIACOM INC. | ||
(Exact name of registrant as specified in its charter) |
Delaware | 001-32686 | 20-3515052 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
1515 Broadway, New York, NY | 10036 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 258-6000 |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 2 – Financial Information | |||
Item 2.02 | Results of Operations and Financial Condition. | ||
On August 9, 2018, Viacom Inc. issued a press release announcing earnings for the quarter ended June 30, 2018. A copy of the press release is furnished herewith as Exhibit 99 and is incorporated by reference herein in its entirety. | |||
Section 9 – Financial Statements and Exhibits | |||
Item 9.01 | Financial Statements and Exhibits. | ||
(d) Exhibits. The following exhibit is furnished as part of this Report on Form 8-K: | |||
Exhibit No. | Description of Exhibit | ||
99 |
VIACOM INC. | |||
By: | /s/ Christa A. D’Alimonte | ||
Name: | Christa A. D’Alimonte | ||
Title: | Executive Vice President, General Counsel and Secretary |
Exhibit No. | Description of Exhibit | |
99 | Press release of Viacom Inc. dated August 9, 2018 announcing earnings for the quarter ended June 30, 2018. |
(in millions, except per share amounts) | Quarter Ended June 30, | B/(W) | Nine Months Ended June 30, | B/(W) | |||||||||||||||||
2018 | 2017 | 2018 vs. 2017 | 2018 | 2017 | 2018 vs. 2017 | ||||||||||||||||
GAAP | |||||||||||||||||||||
Revenues | $ | 3,237 | $ | 3,364 | (4 | )% | $ | 9,458 | $ | 9,944 | (5 | )% | |||||||||
Operating income | 752 | 746 | 1 | 1,925 | 1,784 | 8 | |||||||||||||||
Net earnings from continuing operations attributable to Viacom | 511 | 680 | (25 | ) | 1,302 | 1,197 | 9 | ||||||||||||||
Diluted EPS from continuing operations | 1.27 | 1.69 | (25 | ) | 3.23 | 2.99 | 8 | ||||||||||||||
Non-GAAP* | |||||||||||||||||||||
Adjusted operating income | $ | 767 | $ | 805 | (5 | )% | $ | 2,125 | $ | 2,165 | (2 | )% | |||||||||
Adjusted net earnings from continuing operations attributable to Viacom | 475 | 471 | 1 | 1,259 | 1,201 | 5 | |||||||||||||||
Adjusted diluted EPS from continuing operations | 1.18 | 1.17 | 1 | 3.12 | 3.00 | 4 | |||||||||||||||
• | Viacom flagship brands grew year-over-year audience share for the fifth consecutive quarter, and Viacom continues to hold the top share of basic U.S. cable viewing among key demos, including Adults 18-34, African Americans 18-49 and Kids 2-11, among others. |
• | MTV was the fastest growing network in primetime among the top 50 broadcast and cable channels in the Adults 18-34 demo for the quarter. It has increased year-over-year primetime ratings for four straight quarters -- its best streak in seven years -- and, collectively with VH1, held nine of the top 10 unscripted cable series this year. The second season premiere of Floribama Shore in July 2018 brought in nearly 1 million viewers, with ratings up double-digits from its series debut. |
• | BET posted its highest-rated third quarter since 2014 -- up 24% in C3 among Adults 18-49 -- culminating in the 2018 BET Awards, cable’s #1 awards show for the fourth straight year. |
• | Comedy Central produced its biggest year-over-year primetime ratings gain for a quarter since fiscal 2014. The network continued to broaden its audience base, growing year-over-year ratings among women 18-49 for seven consecutive months as of July 2018. |
• | The premiere week of Nickelodeon’s Double Dare averaged 1.4 million viewers, making it the most-watched series debut on kids’ TV so far in 2018. |
• | Paramount Network’s Yellowstone is the most watched scripted cable series of 2018 after The Walking Dead, with an average audience of approximately 4.4 million viewers in Live+3. |
• | VH1 has delivered 12 consecutive quarters of year-over-year share growth. Franchise favorite RuPaul’s Drag Race garnered 12 Emmy nominations in 2018 -- the most for any unscripted series on TV. |
• | Viacom Digital Studios continues to drive tremendous growth in digital consumption of its content, increasing quarterly total video views and watch-time 112% and 104% year-over-year, respectively. Since the third quarter of fiscal 2016, the company has tripled its total digital video streams across O&O and social platforms to 7.0 billion in the quarter. Additionally, Nick’s Noggin app has flourished on Amazon Prime Video Channels, with strong subscriber growth since its launch on the platform in May 2018. |
• | The company secured distribution of leading Viacom brands on the new AT&T Watch entertainment-only skinny bundle service. The partnership expands the broad representation of Viacom networks across the AT&T subscriber footprint through a new, differentiated platform that targets mobile users. |
• | Viacom’s Media Networks is quickly executing on the company’s studio production strategy to create and license content for digital and linear partners. Viacom International Studios launched in the quarter, uniting the extensive production capabilities of Telefe and majority-owned Brazilian comedy brand Porta dos Fundos with those of Viacom’s Latin American brands. VIS is already producing shows for Netflix, Amazon, Telemundo and Fox, among others. In the U.S., Nickelodeon delivered its first title under a multi-year agreement with Netflix to produce and license animated series Pinky Malinky. And MTV Studios, launched in June, will capitalize on one of the TV industry’s largest libraries of youth-focused and music-related IP in the world that -- up until now -- has been largely untapped. |
• | Accelerating the growth of Viacom’s live events business, Bellator formed a nine-figure, multi-year distribution partnership with global sports streaming service DAZN that positions the league to become an even more significant player in MMA. The sixth annual BET Experience attracted 165,000 attendees, and cable’s #1 comedy brand also continued to build success in live events, with more than 45,000 fans attending Comedy Central’s second annual Clusterfest in June 2018. |
• | Paramount Pictures has improved adjusted operating income in six consecutive quarters, and was profitable in the second and third quarters of fiscal 2018. |
• | A Quiet Place has grossed more than $188 million domestically to date, making it the second highest grossing horror film in the U.S. over the past decade. The film has so far earned more than $332 million at the worldwide box office at a production cost of approximately $20 million. |
• | Released in May 2018, Book Club has gone on to earn more than $68 million to date at the domestic box office -- more than six times its acquisition cost of $10 million. |
• | The fourth quarter release of Mission: Impossible - Fallout grossed nearly $330 million globally in its first two weekends -- the biggest opening ever for the franchise. The film has received universal acclaim, with critics hailing it as the best in the series. |
• | Looking ahead to the fall, Paramount Players and BET will release Tyler Perry’s Nobody’s Fool -- starring Tiffany Haddish and Tika Sumpter -- followed by the studio’s November 2018 release of World War II horror film Overlord, produced by J.J. Abrams. Including the recently announced live-action adaptation of the iconic Nickelodeon series Rugrats, Paramount Players has already slated at least five branded feature films with Viacom’s leading media networks. |
• | In all, Paramount’s fiscal 2019 slate will nearly double the number of worldwide theatrical releases compared to fiscal 2018. |
• | Paramount Television has continued to drive substantial growth in licensing revenues from hit series, including the second season of 13 Reasons Why. The Alienist, which Paramount produced for TNT, received six Emmy nominations, including Outstanding Limited Series. And Amazon ordered a second season of Tom Clancy’s Jack Ryan well before the series premieres in August 2018. Paramount TV is expected to double its production output in 2019, and currently has 19 series ordered or in production. |
Contacts | ||
Press: | Investors: | |
Jeremy Zweig Vice President, Corporate Communications and Corporate Affairs (212) 846-7503 jeremy.zweig@viacom.com Alex Rindler Senior Manager, Corporate Communications (212) 846-4337 alex.rindler@viacom.com | James Bombassei Senior Vice President, Investor Relations and Treasurer (212) 258-6377 james.bombassei@viacom.com Kareem Chin Vice President, Investor Relations (212) 846-6305 kareem.chin@viacom.com | |
VIACOM INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) | |||||||||||||||
Quarter Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
(in millions, except per share amounts) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Revenues | $ | 3,237 | $ | 3,364 | $ | 9,458 | $ | 9,944 | |||||||
Expenses: | |||||||||||||||
Operating | 1,681 | 1,788 | 4,925 | 5,551 | |||||||||||
Selling, general and administrative | 738 | 756 | 2,249 | 2,205 | |||||||||||
Depreciation and amortization | 51 | 53 | 159 | 167 | |||||||||||
Restructuring and related costs | 15 | 21 | 200 | 237 | |||||||||||
Total expenses | 2,485 | 2,618 | 7,533 | 8,160 | |||||||||||
Operating income | 752 | 746 | 1,925 | 1,784 | |||||||||||
Interest expense, net | (138 | ) | (155 | ) | (428 | ) | (469 | ) | |||||||
Equity in net earnings of investee companies | 2 | 47 | 5 | 78 | |||||||||||
Gain on sale of EPIX | — | 285 | — | 285 | |||||||||||
Other items, net | (9 | ) | (2 | ) | (15 | ) | (37 | ) | |||||||
Earnings from continuing operations before provision for income taxes | 607 | 921 | 1,487 | 1,641 | |||||||||||
Provision for income taxes | (93 | ) | (233 | ) | (158 | ) | (417 | ) | |||||||
Net earnings from continuing operations | 514 | 688 | 1,329 | 1,224 | |||||||||||
Discontinued operations, net of tax | 11 | 3 | 23 | 3 | |||||||||||
Net earnings (Viacom and noncontrolling interests) | 525 | 691 | 1,352 | 1,227 | |||||||||||
Net earnings attributable to noncontrolling interests | (3 | ) | (8 | ) | (27 | ) | (27 | ) | |||||||
Net earnings attributable to Viacom | $ | 522 | $ | 683 | $ | 1,325 | $ | 1,200 | |||||||
Amounts attributable to Viacom: | |||||||||||||||
Net earnings from continuing operations | $ | 511 | $ | 680 | $ | 1,302 | $ | 1,197 | |||||||
Discontinued operations, net of tax | 11 | 3 | 23 | 3 | |||||||||||
Net earnings attributable to Viacom | $ | 522 | $ | 683 | $ | 1,325 | $ | 1,200 | |||||||
Basic earnings per share attributable to Viacom: | |||||||||||||||
Continuing operations | $ | 1.27 | $ | 1.69 | $ | 3.23 | $ | 3.00 | |||||||
Discontinued operations | 0.03 | 0.01 | 0.06 | 0.01 | |||||||||||
Net earnings | $ | 1.30 | $ | 1.70 | $ | 3.29 | $ | 3.01 | |||||||
Diluted earnings per share attributable to Viacom: | |||||||||||||||
Continuing operations | $ | 1.27 | $ | 1.69 | $ | 3.23 | $ | 2.99 | |||||||
Discontinued operations | 0.02 | 0.01 | 0.06 | 0.01 | |||||||||||
Net earnings | $ | 1.29 | $ | 1.70 | $ | 3.29 | $ | 3.00 | |||||||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic | 402.8 | 402.0 | 402.6 | 399.1 | |||||||||||
Diluted | 403.3 | 402.6 | 402.9 | 400.0 | |||||||||||
Dividends declared per share of Class A and Class B common stock | $ | 0.20 | $ | 0.20 | $ | 0.60 | $ | 0.60 | |||||||
VIACOM INC. CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||||
(in millions, except par value) | June 30, 2018 | September 30, 2017 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 929 | $ | 1,389 | |||
Receivables, net | 3,149 | 2,970 | |||||
Inventory, net | 916 | 919 | |||||
Prepaid and other assets | 579 | 523 | |||||
Total current assets | 5,573 | 5,801 | |||||
Property and equipment, net | 875 | 978 | |||||
Inventory, net | 3,851 | 3,982 | |||||
Goodwill | 11,610 | 11,665 | |||||
Intangibles, net | 311 | 313 | |||||
Other assets | 941 | 959 | |||||
Total assets | $ | 23,161 | $ | 23,698 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 305 | $ | 431 | |||
Accrued expenses | 764 | 869 | |||||
Participants’ share and residuals | 774 | 825 | |||||
Program obligations | 654 | 712 | |||||
Deferred revenue | 317 | 463 | |||||
Current portion of debt | 23 | 19 | |||||
Other liabilities | 460 | 434 | |||||
Total current liabilities | 3,297 | 3,753 | |||||
Noncurrent portion of debt | 10,065 | 11,100 | |||||
Participants’ share and residuals | 414 | 384 | |||||
Program obligations | 465 | 477 | |||||
Deferred tax liabilities, net | 350 | 294 | |||||
Other liabilities | 1,254 | 1,323 | |||||
Redeemable noncontrolling interest | 245 | 248 | |||||
Commitments and contingencies | |||||||
Viacom stockholders’ equity: | |||||||
Class A common stock, par value $0.001, 375.0 authorized; 49.4 and 49.4 outstanding, respectively | — | — | |||||
Class B common stock, par value $0.001, 5,000.0 authorized; 353.7 and 353.0 outstanding, respectively | — | — | |||||
Additional paid-in capital | 10,132 | 10,119 | |||||
Treasury stock, 393.1 and 393.8 common shares held in treasury, respectively | (20,562 | ) | (20,590 | ) | |||
Retained earnings | 18,247 | 17,124 | |||||
Accumulated other comprehensive loss | (811 | ) | (618 | ) | |||
Total Viacom stockholders’ equity | 7,006 | 6,035 | |||||
Noncontrolling interests | 65 | 84 | |||||
Total equity | 7,071 | 6,119 | |||||
Total liabilities and equity | $ | 23,161 | $ | 23,698 | |||
Nine Months Ended June 30, | |||||||
(in millions) | 2018 | 2017 | |||||
OPERATING ACTIVITIES | |||||||
Net earnings (Viacom and noncontrolling interests) | $ | 1,352 | $ | 1,227 | |||
Discontinued operations, net of tax | (23 | ) | (3 | ) | |||
Net earnings from continuing operations | 1,329 | 1,224 | |||||
Reconciling items: | |||||||
Depreciation and amortization | 159 | 167 | |||||
Feature film and program amortization | 3,402 | 3,475 | |||||
Equity-based compensation | 45 | 52 | |||||
Equity in net earnings and distributions from investee companies | 2 | (11 | ) | ||||
Gain on sale of EPIX | — | (285 | ) | ||||
Deferred income taxes | 27 | (118 | ) | ||||
Operating assets and liabilities, net of acquisitions: | |||||||
Receivables | (211 | ) | (504 | ) | |||
Production and programming | (3,373 | ) | (3,252 | ) | |||
Accounts payable and other current liabilities | (384 | ) | (139 | ) | |||
Other, net | 1 | 45 | |||||
Net cash provided by operating activities | 997 | 654 | |||||
INVESTING ACTIVITIES | |||||||
Acquisitions and investments, net | (90 | ) | (358 | ) | |||
Capital expenditures | (102 | ) | (139 | ) | |||
Proceeds from asset sales | 57 | 108 | |||||
Proceeds from sale of EPIX | — | 593 | |||||
Proceeds from grantor trusts | 7 | 52 | |||||
Net cash provided by/(used in) investing activities | (128 | ) | 256 | ||||
FINANCING ACTIVITIES | |||||||
Borrowings | — | 2,569 | |||||
Debt repayments | (1,000 | ) | (3,300 | ) | |||
Dividends paid | (241 | ) | (239 | ) | |||
Exercise of stock options | 2 | 172 | |||||
Other, net | (70 | ) | (64 | ) | |||
Net cash used in financing activities | (1,309 | ) | (862 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (20 | ) | (2 | ) | |||
Net change in cash and cash equivalents | (460 | ) | 46 | ||||
Cash and cash equivalents at beginning of period | 1,389 | 379 | |||||
Cash and cash equivalents at end of period | $ | 929 | $ | 425 | |||
(in millions, except per share amounts) | |||||||||||||||||||
Quarter Ended June 30, 2018 | |||||||||||||||||||
Operating Income | Earnings from Continuing Operations Before Provision for Income Taxes | Provision for Income Taxes (1) | Net Earnings from Continuing Operations Attributable to Viacom | Diluted EPS from Continuing Operations | |||||||||||||||
Reported results (GAAP) | $ | 752 | $ | 607 | $ | 93 | $ | 511 | $ | 1.27 | |||||||||
Factors Affecting Comparability: | |||||||||||||||||||
Restructuring and related costs (2) | 15 | 15 | 4 | 11 | 0.03 | ||||||||||||||
Discrete tax benefit (3) | — | — | 47 | (47 | ) | (0.12 | ) | ||||||||||||
Adjusted results (Non-GAAP) | $ | 767 | $ | 622 | $ | 144 | $ | 475 | $ | 1.18 | |||||||||
(in millions, except per share amounts) | |||||||||||||||||||
Nine Months Ended June 30, 2018 | |||||||||||||||||||
Operating Income | Earnings from Continuing Operations Before Provision for Income Taxes | Provision for Income Taxes (1) | Net Earnings from Continuing Operations Attributable to Viacom | Diluted EPS from Continuing Operations | |||||||||||||||
Reported results (GAAP) | $ | 1,925 | $ | 1,487 | $ | 158 | $ | 1,302 | $ | 3.23 | |||||||||
Factors Affecting Comparability: | |||||||||||||||||||
Restructuring and related costs (2) | 200 | 200 | 48 | 152 | 0.38 | ||||||||||||||
Gain on extinguishment of debt (4) | — | (25 | ) | (6 | ) | (19 | ) | (0.05 | ) | ||||||||||
Gain on asset sale (5) | — | (16 | ) | — | (16 | ) | (0.04 | ) | |||||||||||
Investment impairments (6) | — | 46 | 10 | 36 | 0.09 | ||||||||||||||
Discrete tax benefit (3) | — | — | 196 | (196 | ) | (0.49 | ) | ||||||||||||
Adjusted results (Non-GAAP) | $ | 2,125 | $ | 1,692 | $ | 406 | $ | 1,259 | $ | 3.12 | |||||||||
(in millions, except per share amounts) | |||||||||||||||||||
Quarter Ended June 30, 2017 | |||||||||||||||||||
Operating Income | Earnings from Continuing Operations Before Provision for Income Taxes | Provision for Income Taxes (1) | Net Earnings from Continuing Operations Attributable to Viacom | Diluted EPS from Continuing Operations | |||||||||||||||
Reported results (GAAP) | $ | 746 | $ | 921 | $ | 233 | $ | 680 | $ | 1.69 | |||||||||
Factors Affecting Comparability: | |||||||||||||||||||
Restructuring and programming charges (7) | 59 | 59 | 21 | 38 | 0.09 | ||||||||||||||
Gain on extinguishment of debt (4) | — | (16 | ) | (5 | ) | (11 | ) | (0.03 | ) | ||||||||||
Gain on sale of EPIX (8) | — | (285 | ) | (96 | ) | (189 | ) | (0.47 | ) | ||||||||||
Investment impairment (6) | — | 10 | 4 | 6 | 0.01 | ||||||||||||||
Discrete tax benefit (3) | — | — | 53 | (53 | ) | (0.12 | ) | ||||||||||||
Adjusted results (Non-GAAP) | $ | 805 | $ | 689 | $ | 210 | $ | 471 | $ | 1.17 | |||||||||
(in millions, except per share amounts) | |||||||||||||||||||
Nine Months Ended June 30, 2017 | |||||||||||||||||||
Operating Income | Earnings from Continuing Operations Before Provision for Income Taxes | Provision for Income Taxes (1) | Net Earnings from Continuing Operations Attributable to Viacom | Diluted EPS from Continuing Operations | |||||||||||||||
Reported results (GAAP) | $ | 1,784 | $ | 1,641 | $ | 417 | $ | 1,197 | $ | 2.99 | |||||||||
Factors Affecting Comparability: | |||||||||||||||||||
Restructuring and programming charges (7) | 381 | 381 | 135 | 246 | 0.62 | ||||||||||||||
Loss on extinguishment of debt (4) | — | 20 | 7 | 13 | 0.03 | ||||||||||||||
Gain on sale of EPIX (8) | — | (285 | ) | (96 | ) | (189 | ) | (0.47 | ) | ||||||||||
Investment impairment (6) | — | 10 | 4 | 6 | 0.02 | ||||||||||||||
Discrete tax benefit (3) | — | — | 72 | (72 | ) | (0.19 | ) | ||||||||||||
Adjusted results (Non-GAAP) | $ | 2,165 | $ | 1,767 | $ | 539 | $ | 1,201 | $ | 3.00 | |||||||||
Reconciliation of net cash provided by operating activities to free cash flow and operating free cash flow (in millions) | Quarter Ended June 30, | Better/ (Worse) | Nine Months Ended June 30, | Better/ (Worse) | |||||||||||||||||||
2018 | 2017 | $ | 2018 | 2017 | $ | ||||||||||||||||||
Net cash provided by operating activities (GAAP) | $ | 698 | $ | 249 | $ | 449 | $ | 997 | $ | 654 | $ | 343 | |||||||||||
Capital expenditures | (38 | ) | (44 | ) | 6 | (102 | ) | (139 | ) | 37 | |||||||||||||
Free cash flow (Non-GAAP) | 660 | 205 | 455 | 895 | 515 | 380 | |||||||||||||||||
Debt retirement premium | — | — | — | — | 33 | (33 | ) | ||||||||||||||||
Operating free cash flow (Non-GAAP) | $ | 660 | $ | 205 | $ | 455 | $ | 895 | $ | 548 | $ | 347 | |||||||||||