Viacom Inc. (VIA)

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Viacom, Inc. (VIA)

Q3 2008 Earnings Call

November 3, 2008 4:30 pm ET


Jim Bombassei - Senior Vice President, Investor Relations

Sumner M. Redstone - Executive Chairman

Philippe P. Dauman - President & Chief Executive Officer

Thomas E. Dooley - Chief Financial Officer


Imran Khan – JP Morgan

Michael Nathanson - Sanford Bernstein

Spencer Wang - Credit Suisse

Benjamin Swinburne - Morgan Stanley

Alan Gould - Natixis Bleichroeder

John [Tinades]– Wachovia Securities

Doug Creutz - Cowen & Company

Mark Wienkes - Goldman Sachs

Jeffrey Logsdon - BMO Capital Markets



Good day everyone and welcome to the Viacom third quarter 2008 earnings release teleconference. Today’s call is being recorded. And at this time I would like to turn the call over to the Senior Vice President of Investor Relations, Mr. Jim Bombassei.

Jim Bombassei

Good afternoon everyone and thank you for taking the time to join us for our third quarter earnings call. Joining me for today’s discussion are Sumner Redstone, our Chairman; Philippe Dauman, our President and CEO; Thomas Dooley, our Chief Administrative Officer and CFO; and Jimmy Barge, our Controller and Head of Tax and Treasury.

Please note that in addition to our press release we have slides containing supplemental information available on our website. Before we begin let me refer you to page number one in the Web presentation and remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Reconciliations for non-GAAP financial information discussed on this call can be found in our earnings release or on our website.

And now I would like to turn the call over to Sumner.

Sumner M. Redstone

Good afternoon everyone and thank you for joining us. As we report our results today we do so in a time of great uncertainty. There are serious issues affecting the economy both in the United States and abroad. But, history suggests that the business of entertainment maintains positive attributes even in such difficult times. In fact, during past economic downturns, the media business has clearly outperformed the general economy. So let me assure you that Viacom, as a pure-play content company is not only well positioned but also extremely well prepared in these uncertain times.

Now, over the past two years Philippe and his team have really done an outstanding job of pursuing a smart and disciplined path. They have kept Viacom financially strong and firmly focused on the long term. They have continually cultivated the birth and growing set of branded assets and they have successfully balanced creative expansion with operational efficiency.

While no one could have foreseen the current situation, I assure you, there is no management team in the media business that has done a better job of positioning their company to weather the storm and, more important in a way, to seize the inevitable opportunities that will emerge as the economy recovers.

Now, please let me put on my National Amusements cap. Last week on the CBS teleconference call I provided an update on National Amusements’ negotiations with its lenders. For those who might not have heard that call, let me give you an accurate and realistic assessment of where we are in the process.

As has been widely reported, the talks relate to covenant agreements that were triggered by unforeseen and truly unprecedented market activity that caused a precipitous drop in the value of the overall market and in the market value, I would say, of CBS and Viacom shares.

Now National has a top team of professional advisors working with its banks and note holders to restructure the unsecured debt under the supervision of a committee of national directors who have no executive role at either CBS or Viacom. As part of its dialogue with lenders, National sold $233.0 million of CBS and Viacom non-voting shares. Now this was an extraordinary action, brought on by an unprecedented situation and let me assure you of one thing: National does not intend to sell one more share of stock in Viacom or CBS.

Also please note: National is more than just its stock holdings. Amongst its assets are a substantial and valuable theater operation, built for the most part on land which we own. Something I always insisted on, unlike most of our competitors, which means we have valuable real estate holdings throughout the country. And National includes more than 1,500 screens in the United States, in Latin America, in the United Kingdom, and Russia.

I have been advised that National talks with its lenders are very constructive. They are ongoing and I can assure you that a resolution is expected within a reasonable time frame. So I am optimistic not only about Viacom, the love of my life, of course, but also about National. In the meantime, as I said on Thursday, I know you will have questions. I ask that you hold your questions until I am in a position to comment further.

Now, Philippe, it’s your ball.

Philippe P. Dauman

As we sit here on the eve of Election Day, let me begin by saying the state of Viacom is strong. During the third quarter and beyond Viacom, like every company, had to adjust to the realities of a serious economic downturn. It was a general pull back in spending by marketers as they responded to lower consumer spending.

Throughout these uncertain times we have taken, and will continue to take, all appropriate steps to prepare for whatever challenges lie ahead. The prudent management of our balance sheet over the past two years has positioned us very well for both the short and long term. We also continue to generate significant free cash flow, which will accelerate in the fourth quarter. Most importantly, our business is centered on some of the most powerful entertainment brands in the world with leadership positions in growing markets.

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