Cash flow, op profits up at Viacom

Stock rises after plans for a two-for-one split

By MARTIN PEERS

NEW YORK -- Increased profits from Paramount Pictures, MTV Networks and Blockbuster Video helped Viacom lift its fourth-quarter operating profits 36% to $296.3 million, it said Thursday.

And while Wall Street analysts had mixed reactions to the quarter, Viacom stock rose 12¢ to $86.75 after the company announced plans for a two-for-one stock split and a move of its stock market listing to the NYSE from the American Stock Exchange.

Both moves will make trading in Viacom stock easier, Wall Streeters said, as many investors dislike the Amex and individual investors are notorious for shying away from stocks priced above $100 -- the level to which Viacom chair Sumner Redstone predicted Viacom stock was heading.

Net profit fell to $36.3 million from $558 million a year earlier, reflecting the $1.2 billion one-time profit on sale of Viacom's 50% stake in USA Networks that inflated last year's numbers.

A better indicator of the business improvement was Viacom's cash flow (earnings before interest, taxes, depreciation and amortization), which rose 24% to $502.4 million on 15% higher revenue of $3.3 billion.

Wall Street analysts said the cash flow result was slightly ahead of most expectations, although opinions were not unanimous. While Schroders & Co. analyst David Londoner said the result was good, Lehman Bros. analyst Larry Petrella said the "numbers were a little bit below my expectation."

Entertainment surprises

The entertainment division (mainly Paramount Pictures) performed better than most expected, increasing cash flow 26% to $50 million on 13% higher revenue of $1.1 billion. The quarter brought the entertainment division's cash flow for the year to $497 million, up 36% on 12% higher revenue of $4.3 billion.

The quarter also confirmed a strong recovery in the Blockbuster Video chain. Viacom said its video and theme parks division increased cash flow 29% to $131 million on 21% higher revenue of $1.1 billion, mostly due to Blockbuster. Its sales rose 15%, adjusted for store openings.

Still, Blockbuster's cash flow was a little below expectations, reflecting higher than anticipated promotion costs. Blockbuster has boosted sales through revenue-sharing deals with the major Hollywood studios, but marketing costs have also risen.

As usual, MTV Networks delivered strong earnings growth. Networks and broadcasting, which includes both the TV station group and the cable nets, increased cash flow 17% to $336 million on 13% higher revenues of $943 million in the quarter.

Showtime and Simon & Schuster also fared well.

The quarterly result brought Viacom's cash flow for the year to $1.9 billion, excluding one-time Blockbuster charges, up 20% on 1997. Revenue rose 13% to $12 billion.