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Blockbusters boost Viacom
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February 26, 1998: 2:50 p.m. ET
Video rental unit helps stem operating loss at media giant; "Titanic" lifts stock price
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NEW YORK (CNNfn) - Surprising sales gains at its Blockbuster Video chain boosted Viacom Inc. to a smaller-than-expected fourth quarter operating loss last year, and executives of the entertainment giant hailed a "new vitality" for 1998.
The New York City-based company, whose Paramount Pictures unit co-produced the blockbuster film "Titanic," announced an operating loss of 29 cents a share. That was five cents less than the consensus analyst estimate, as compiled by First Call.
The loss excluded a one-time gain of $1.17 billion from the sale of its USA Networks and several TV stations. After months of haggling, Viacom sold its 50 percent stake in USA to co-owner and rival MCA Inc. last fall.
Including that gain, Viacom reported a net profit of $596 million, or $1.65 a share, for the quarter.
Cash flow at the company, as measured by EBITDA (as measured by earnings before interest, taxes, depreciation and amortization) totaled by $510 million, up from $478 million in the year-ago period.
Revenues grew to $3.61 billion from $3.41 billion in the fourth quarter of 1996.
"Viacom's fourth-quarter performance is indicative of a new vitality at the company and the major strides we have made in 1997," said Sumner Redstone, Viacom's chairman and chief executive.
Shares of Viacom (VIA.B) were up 1-5/16 at 45-9/16 in early afternoon trading on the New York Stock Exchange.
A 2 percent increase in same-store sales and a 7 percent gain in sales, to $1.02 billion, at the ailing Blockbuster video rental chain helped stem the flow of red ink at Viacom in the quarter.
Revenues from "Titanic," which Paramount co-produced with Twentieth Century Fox, began to flow in only late in the quarter. The film, which premiered on Dec. 19, has already become the top-grossing Hollywood movie of all time, with more than $919 million in global ticket sales.
Jessica Reif, an analyst with Merrill Lynch, said the bulk of the impact from "Titanic" should appear in the first quarter of 1998. Viacom has a 40 percent share in the film.
For that reason, any income from the film was "negligible" in the fourth quarter, said media analyst Ed Hatch of UBS Securities.
The smaller-than-expected operating loss also stemmed from strength at Viacom's broadcasting unit, which includes the cable networks MTV, Nickelodeon and Showtime. The unit saw revenues grow 19 percent to $834 million and cash flow increase by 14 percent.
Last month, Viacom unveiled plans to sell most of its Simon & Schuster publishing unit to reduce debt load. Analysts say the unit could fetch up to $4.5 billion. 
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Viacom
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