The debt offering takes advantage of the market’s low interest rates, and will help fuel Viacom’s recently announced plan to double its stock repurchase effort to $20B — including $3B to take place in 2013. The decision to raise overall debt led Moody’s Investors Service to lower Viacom’s senior unsecured rating to Baa2 from Baa1. The buy-back “appears to be a one-time effort to smooth over the anemic growth by returning more capital to win the favor of shareholders,” Moody’s said. The plan has worked so far: Viacom shares are up 10.2% following the repurchase announcement. As for the debt, Viacom says that it will consist of three offerings with $500M in senior notes paying 2.5% due in 2018, $1.25B in senior notes at 4.25% due 2023, and $1.25B in senior notes at 5.85% due 2043. Citigroup Global Markets; J.P. Morgan Securities; Merrill Lynch, Pierce, Fenner & Smith; and RBS Securities are the joint book-running managers.
Hats off to Susquehanna Financial Group’s Vasily Karasyov for having the wit today to describe Viacom’s creaky financial performance in the last three months of 2011 as “A Quarter Of Paranormal Activity.” But from the look of the inconsistent reactions to this morning’s news, one might wonder whether the mysterious forces from Paramount’s horror film franchise also were stirring on Wall Street. Investor views seemed to gyrate through the day as Viacom shares initially fell 4.5% from yesterday’s close, then leaped to a 2.1% gain before closing at $46.69, down 0.6%. Analysts also were all over the lot about the company’s prospects this year. Karasyov lowered his ad growth forecast for the current quarter to 1% from 4% after Viacom reported that fiscal 1Q sales fell 3% — mostly due to the ongoing ratings problems at Nickelodeon. Credit Suisse’s Spencer Wang lowered his earnings per share estimate for this year by 2% to $4.28. But Janney Capital Markets’ Tony Wible was impressed by Viacom’s share repurchases and projections of rising pay TV fees, and raised his 2012 EPS forecast 1.2% to $4.16. Wells Fargo’s Marci Ryvicker held fast to her $4.27 prediction. Calling herself “not only surprised by the decline (in advertising) but disappointed,” she adds that “profitability has held up” putting Viacom “on track to hit its 20% target margin next fiscal year.”
This looks like a smart move considering how low interest rates are now. Just before making this announcement, Viacom said that it’s also redeeming $750M in senior notes that pay 6.85%.
NEW YORK, Dec. 7, 2011 — Viacom Inc. (NASDAQ: VIA, VIAB) today announced that it has agreed to sell $400 million in aggregate principal amount of 2.500% senior notes due 2016 (the “2016 Senior Notes”) at a price equal to 99.366% of the principal amount thereof and $600 million in aggregate principal amount of 3.875% senior notes due 2021 (the “2021 Senior Notes” and, together with the 2016 Senior Notes, the “Senior Notes”) at a price equal to 98.361% of the principal amount thereof. The sale of the Senior Notes is expected to close on December 12, 2011. Viacom intends to use the net proceeds from the offering for the repayment of outstanding indebtedness and, to the extent that any proceeds remain, for general corporate purposes, including, but not limited to, the repurchase of shares under its share repurchase program. Viacom’s senior unsecured debt is currently rated BBB+ by Standard & Poor’s and Fitch, and rated Baa1 by Moody’s Investors Service.
UPDATE: Viacom Says Nielsen Snafu Led To Decline In Nickelodeon Toy Ads; Forecasts Strong 2012 Despite Economic “Headwinds”
UPDATE, 8:50 AM: Listen up Occupy Wall Streeters: Viacom CEO Philippe Dauman told analysts that the company is doing better than ever financially – yet is still cutting jobs. It reported a $130M restructuring charge in the fiscal 4Q — $77M coming from the Media Networks and $53M from Filmed Entertainment. That will mostly go toward severance payments over the next year. Viacom expects to benefit from $140M in annual savings, improving profit margins even if the economy weakens, COO Tom Dooley says. Company SEC filings indicate that the Viacom cut 320 positions over the last year, ending with 10,580 full and part time employees in September. Most of the cuts took place overseas. Dauman says that in late October the company announced that it will hire 100 people for accounting, finance and corporate support at cable channel CMT’s headquarters in Tennessee, which means Viacom is “able to bring jobs onshore.”
Dauman cited two problems that worry some investors: He cited economic “headwinds” hurting ad sales — although he quickly added that Viacom can make up for any problems with additional revenues from rising fees that cable and satellite companies pay. Also, he said that Nickelodeon lost ad sales, especially from toy companies, beginning in September when Nielsen ‘inexplicably” reported unusually weak ratings. Although Dauman offered few details, Morgan Stanley’s Benjamin Swinburne says he believes live-only ratings in Nick’s key demos fell 9% in September and 15% in …
UPDATE, 6:55 AM: CEO Philippe Dauman says that Paramount is starting to make business plans for 2013 and 2014 and “can accommodate having Dreamworks [Animation] titles in or out” after their distribution deal expires next year. He told analysts, in a conference call, that the companies have “a strong relationship” and that he’s ready to discuss a new deal whenever Dreamworks Animation CEO Jeffrey Katzenberg is ready. But he added that Paramount’s “development pipeline is strong” and will include more animated films following the success of its first effort, Rango.
Dauman also says that the company plans “a very significant increase” over the next year or 2 in the amount of original shows it will run on cable channel Spike. He added that he expects “significant year-over-year gains” in upfront ad sales across Viacom’s networks.
PREVIOUS, 5:11 AM: Helped by a strengthening ad market, TV hits including MTV’s Jersey Shore, and a Paramount Pictures slate that included Rango, Viacom far exceeded Wall Street analysts’ forecasts for its financial performance in the quarter that ended in March. The entertainment giant reported net earnings of $376 million, up 47% vs. the same period last year, on revenues of $3.3 billion, up 20%. That translated into 72 cents in earnings per share. The consensus forecast among analysts put earnings of 61 cents with revenues of $3 billion.
“This was an outstanding quarter, reflecting our continued operating momentum,” Viacom CEO Philippe Dauman said in a prepared statement.
Viacom has been very good to Philippe Dauman. A company proxy statement filed on Friday with the Securities and Exchange Commission revealed that the CEO amassed $84.5 million in stock, salary and other benefits during Viacom’s fiscal year, which ended on Sept. 30. Included in the giant sum is a one-time stock award – $31.7 million – which is dependent on financial goals over the next five years and was part of his new agreement signed in April. The company’s three top executives – Dauman, chairman Sumner Redstone and COO Thomas Dooley – were paid $165 million in stock and other compensation. Dooley received a total of $64.7 million, while Redstone got $15 million. The amounts received were, according the proxy statement, based on performance; Viacom’s stock price rose 22% during the compensation period.
The amount was certainly a huge raise for Dauman, who received $34 million in 2009 – and it will be interesting to see how all media moguls fare as their compensation is reported for a much-improved (financially-speaking) 2010. In 2009, the top media mogul paydays included Les Moonves ($43 million), Comcast’s Brian Roberts ($25 million), News Corp’s Rupert Murdoch ($18 million), Disney’s Bob Iger ($21 million) and Time Warner’s Jeff Bewkes ($19.4 million)
NEW YORK, Jan. 13, 2011 — Viacom Inc. today announced that its Board of Directors has declared a quarterly cash dividend of $0.15 per share on its Class A and Class B common stock. The dividend will be payable on April 1, 2011 to stockholders of record at the close of business on February 28th.
A revived ad market boosted the media networks division, but the movie unit faltered. The result was a 3rd quarter net revenue of $3.33 billion, a 5% increase compared to $3.17 billion same quarter last year and in line with Wall Street expectations. But profit-wise, Viacom’s net income fell to $189 million from $463 million same quarter last year due to several one-time charges and dropping profits at the Harmonix gaming unit, which the company announced it will be selling. Harmonix is responsible for the Rock Band video game series. MTV Networks bought Harmonix in 2006 for $175 million. Of the film division, Philippe Dauman decided to focus on the future, saying, “Our motion picture business continues on its trajectory of controlling overhead expenses as it pursues a film strategy focused on franchises and brands. The studio is off to a great start in fiscal 2011 with the box office success of Jackass 3D and Paranormal Activity 2.” And Sumner Redstone said, “We continue to benefit from the improving economy and look forward to even brighter days ahead.”