Growth in cable nets, video, TV stations also cited

NEW YORK — A firming ad market has boosted Viacom earnings, and its Sumner Redstone and Mel Karmazin are gloating over competitors’ accounting probes and strategic woes.

“Viacom is the model of stability and opportunity. In fact, the rationale of our merger is more compelling now than it was three years ago,” chairman-CEO Redstone said during a conference call with Wall Streeters.

“I wish you could look us in the eye and read our body language and see how confident we are,” added Karmazin, who joked that he was wearing a T-shirt that said, “We will not do anything stupid.”

Net income surged to $574 million from $17 million, with a stiff accounting charge in the prior quarter. Excluding that item, profit last year was $524 million. Viacom cited growth in cable nets, video and TV stations. Company recently hired veteran Dennis Swanson to revive the underperforming station group.

Revenue firmed slightly to $5.58 billion as ad sales picked up. Operating income nearly doubled to $1.2 billion, and free cash flow, which shows resources available after interest, taxes and capital spending, rose 22%.

Karmazin cited “exceptionally strong” upfront sales at CBS, UPN, cable nets and for syndicated fare. Infinity radio grew revenue by 3%, its first increase since the fourth quarter of 2000.

Even as investors push for increased transparency in financial reporting, Viacom is lumping more assets in its “entertainment” division, which now includes Paramount Pictures, Famous Players movie theaters, music publishing, theme parks and Simon & Schuster.

Pic, park revs down

Combined revenue was about flat at $921 million. Operating income was down slightly to $109 million. Viacom said higher theater and publishing sales were more than offset by lower revenue from pics and parks.

Features’ contribution included Par’s domestic theatrical release of “The Sum of All Fears,” “Changing Lanes” and “Clockstoppers” plus homevids “Vanilla Sky” and “Domestic Disturbance.”

Theaters benefited from higher admission and concession prices.

Chief financial officer Richard Bressler said the company has “taken care of any obligations with respect to Kirch as we leave the quarter.” Paramount was believed to have significant exposure to the bankrupt German media conglom. But Hollywood studios aren’t legally required to disclose the figure and don’t, which makes it hard to determine its impact on the studio’s earnings.

Cabler revs on rise

Cable networks saw revenue rise 4% to $1.1 billion. Operating income grew 9% to $372 million, with higher ad revenues at Nickelodeon, TNN, TV Land, BET and MTV¬†–¬†partly offset by falling revenue at VH1 as ratings declined. Execs said, however, that VH1′s fortunes were looking up.

Television revenue rose 4% to $1.7 billion. Operating income was up 7% to $349 million. The radio and outdoor advertising group Infinity reported revenue about flat at $989 million and operating income down 8% to $350 million.

Blockbuster Video reported Wednesday that revenue rose to $1.3 billion from $1.2 billion and operating income jumped 21% to $72 million.

Viacom repurchased 11 million shares for $493 million in the first six months of the year. Karmazin said the company is always trolling for acquisitions but won’t “overpay” and hasn’t found as many bargains as it might have expected given the current economic climate.

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