Powered by a sharp turnaround at the once-ailing Blockbuster Video and across-the-board surges in its major business segments, Viacom Inc.'s fourth-quarter financial results released Thursday handily beat Wall Street expectations.
The results concluded an exceptionally strong year for Chairman Sumner Redstone, who called it "a great day" in disclosing the results to a meeting of analysts and reporters at Viacom's new Nickelodeon Films building in Burbank.
In addition to Blockbuster's turnaround, Viacom's quarterly results--a 24% increase in cash flow to $502 million, a 36% increase in operating income to $296 million and a 15% jump in revenue to $3.3 billion--were powered by strong results from Paramount Pictures as well as the MTV, Nickelodeon and VH-1 cable networks.
Moreover, Redstone predicted Viacom will soon become one of the few entertainment companies to regularly post substantial net income numbers.
Because of high debt levels, many entertainment companies--Walt Disney Co., being the major exception--usually post losses when all costs are deducted and prefer to stress such measures as cash flow and operating income. In the fourth quarter, Viacom posted $90 million in profit from continuing operations.
Separately, Redstone disclosed that Viacom's stock will split 2 for 1 in March, reflecting a threefold increase in its price over the last 16 months. Redstone noted that the stock not long ago was trading at $26 a share, and recently has been trading in the $80s. Some analysts are predicting it could eventually hit $120.
Viacom's Class B stock--the most widely held of its shares--added 13 cents Thursday to close at $86.75 on the American Stock Exchange, near a 52-week high.
Redstone also announced that Viacom's stock will move to trading on the New York Stock Exchange from the Amex in April.
Viacom said it expects an initial public offering of Blockbuster stock in the second quarter. The move is expected to be a first step toward a full divestiture by Viacom of the chain.
Viacom, which two years ago was mired in debt and struggling to turn Blockbuster around, has since shaved its interest costs by selling such assets as a substantial chunk of the Simon & Schuster publishing company. The company in the quarter had a $74.7-million charge related to the early payment of debt.
At Blockbuster, new management has successfully moved to a program in which the video chain shares the revenue of its rentals with Hollywood studios.
