Viacom Inc. today issued the following update on its operations and business outlook for the full year 2001 in light of the extraordinary events surrounding the attacks on the United States last week.
Sumner M. Redstone, Chairman and CEO of Viacom, said, “We want to thank and commend all Viacom employees, particularly our dedicated news staffs, for their extraordinary efforts during this very difficult period. Joining the rest of our nation, Viacom is back at work and focused on continuing to grow our businesses for the benefit of the American economy and our shareholders. We want to take the opportunity to communicate directly with our shareholders and update them on the outlook for 2001 as we currently see it. We also intend to continue to highlight the strength of our company by employing a portion of our free cash flow to buy Viacom stock under our previously authorized share purchase program.”
Mel Karmazin, Viacom’s President and COO, said, “The tragic events of the past week underscore the exceptional and unique value of our assets, particularly our television and radio broadcast businesses, which continue to play a central role in our society. Viacom remains fundamentally strong and we continue to believe that the Company is well positioned for the remainder of 2001 and over the long term.
“As a result of the attacks, we incurred a considerable increase in costs at CBS News, our local television station news operations, especially in New York, and at our major market all-news and talk radio stations. We also experienced a significant loss of revenue from our broadcast networks, cable networks, and radio and TV stations, stemming from the around-the-clock news coverage. Additionally, we lost revenue from the cancellation of the Latin Grammys, the cancellation of last week’s NFL games, the rescheduling of the Emmy Awards, as well as the delay of the new fall season. We anticipate some benefit from the availability of business interruption and other insurance, which have the potential to offset a portion of our losses.
“We are having ongoing and extensive discussions with advertisers and ad agencies about their view of the advertising marketplace for the remainder of 2001 and beyond. Many of our advertisers have expressed uncertainty about their plans and are currently assessing various creative strategies to respond to the marketing challenges. Some advertisers believe their current campaigns are inappropriate for today’s business environment and consumer sentiment and are working to revise their messages. Most companies we spoke with believe they will return to normal advertising levels but are uncertain about the timing. There also are concerns about additional disruptions that could occur following a U.S. response to the attacks.
“We continue to work closely with our advertisers to meet these challenges and help them return to the market and reach their customers as soon as possible.
“These factors will have an obvious impact on the financial performance of Viacom for the remainder of 2001, particularly the approximately 50% of our revenues derived from the high-margin advertising business. We continue to believe that Viacom’s EBITDA from operations in 2001 will be the highest in the Company’s history. However, because of the impact of unforeseen recent events, we now anticipate that full-year 2001 EBITDA will be slightly higher than the comparable results last year, versus our previous guidance of double-digit growth.
“Looking ahead, we remain confident that Viacom’s exceptional brands, strong leadership position and ability to generate the highest levels of free cash flow in our industry will enable us to outperform in any environment and grow our market share.”