Viacom has also announced today in the same news release that the Board of Directors has approved a significant expansion of the Class B stock repurchase program to $20 billion, from $10 billion. Under this expansion, the Company anticipates continuing its ongoing quarterly pace of share repurchases. In addition, over the next several months the Company will augment its overall buyback pace with purchases of an additional $2.0 billion of shares under the $20 billion program.
Original Viacom Press Release:
Viacom Reports Double-Digit Revenue And Earnings Growth For Third Quarter 2013
- Revenues Up 14%; Adjusted Net Earnings Up 24%; Adjusted Diluted EPS Increased 33%
- Domestic Affiliate Revenues Up 28%; Domestic Advertising Revenues Rose 6%
- Company Doubles Stock Repurchase Program to $20 Billion
NEW YORK, Aug. 2, 2013 /PRNewswire-FirstCall/ --
Viacom Inc. (NASDAQ: VIAB, VIA) today reported financial results for the fiscal third quarter, which ended June 30, 2013. Revenues increased 14% to $3.69 billion, reflecting higher revenues in both the Media Networks and Filmed Entertainment segments. Operating income rose 20% to $1.09 billion, as higher Media Networks affiliate fees and advertising revenues more than offset the impact of increased Filmed Entertainment distribution costs for two tentpole releases in the quarter. Adjusted net earnings from continuing operations attributable to Viacom increased 24% to $635 million, and adjusted diluted earnings per share from continuing operations were up 33% to $1.29 per diluted share.
(Download Image - Viacom Logo. (PRNewsFoto/Viacom Inc.): http://photos.prnewswire.com/prnh/20110811/NY51392LOGO )
Viacom also announced today that the Board of Directors approved a significant expansion of the Class B stock repurchase program to $20 billion, from $10 billion. Under this expansion, the Company anticipates continuing its ongoing quarterly pace of share repurchases. In addition, over the next several months the Company will augment its overall buyback pace with purchases of an additional $2.0 billion of shares under the $20 billion program.
Sumner M. Redstone, Executive Chairman of Viacom, said, "Viacom's strong results in the quarter once again demonstrated the value of our world-leading brands, global reach and devoted audiences. With an improving economy, Viacom is poised for continued success."
Philippe Dauman, President and Chief Executive Officer of Viacom, said, "Viacom's aggressive investment in content, outstanding operational execution and fiscal discipline helped deliver a strong quarter with double-digit revenue and profit growth. Domestic advertising revenue gains continued to accelerate at our Media Networks, as new, original programming drives improving ratings momentum. Viacom is also expanding partnerships with traditional cable operators and new digital distributors to deliver solid affiliate revenue gains. In a crowded summer season, Paramount's tentpoles – Star Trek Into Darkness and World War Z – achieved critical and box office success, and the studio has a promising slate remaining through calendar 2013 and beyond.
"The significant expansion of Viacom's stock repurchase program highlights the confidence we have in our business and the value of Viacom's stock. We will continue to focus on maintaining a strong and flexible balance sheet, which supports robust investments in our brands and franchises as well as substantial capital return to shareholders."
Quarterly revenues increased 14% over the prior year, to $3.69 billion. Media Networks revenues rose 13% to $2.57 billion, driven by increases in affiliate fees and advertising revenues. Affiliate revenues grew 28% domestically and rose 26% worldwide, due to the benefit of digital distribution arrangements and rate increases. Excluding the impact of digital distribution arrangements, which are affected by the timing of available programming, the domestic affiliate revenue growth rate was in the high single digits. Domestic advertising revenues rose 6%, due in part to increased ratings, and worldwide advertising revenues rose 5%.
Filmed Entertainment revenues rose 15% to $1.16 billion. Worldwide theatrical revenues were $464 million, an increase of 64% from the prior year, reflecting substantial carryover revenues from releases in the March 2013 quarter, as well as stronger results from current quarter releases Star Trek Into Darkness, World War Z, and Pain and Gain, compared to titles released in the June 2012 quarter. Worldwide home entertainment revenues declined 10%, largely due to lower carryover revenues.
Quarterly operating income increased 20% to $1.09 billion in the quarter, reflecting higher overall revenues partially offset by increased operating expenses, primarily in the Filmed Entertainment segment.
Quarterly adjusted net earnings from continuing operations attributable to Viacom were $635 million, an increase of 24%, principally driven by the increase in operating income. Adjusted diluted earnings per share from continuing operations for the quarter were $1.29, a 33% improvement from the prior year's comparable quarter.
Stock Repurchase Program
For the quarter ended June 30, 2013, Viacom repurchased 10.5 million shares under its stock repurchase program, for an aggregate purchase price of $700 million. As of June 30, 2013, Viacom had 478 million shares of common stock outstanding. As of August 1, 2013, Viacom had $12.4 billion remaining in its $20 billion stock repurchase program.
Debt
At June 30, 2013, total debt outstanding, including capital lease obligations, was $8.91 billion, compared with $8.15 billion at September 30, 2012. The Company's cash balances were $1.14 billion at June 30, 2013, an increase from $848 million at September 30, 2012.
About Viacom
Viacom is home to the world's premier entertainment brands that connect with audiences through compelling content across television, motion picture, online and mobile platforms in over 160 countries and territories. With media networks reaching approximately 700 million global subscribers, Viacom's leading brands include MTV, VH1, CMT, Logo, BET, CENTRIC, Nickelodeon, Nick Jr., TeenNick, Nicktoons, Nick at Nite, COMEDY CENTRAL, TV Land, SPIKE, Tr3s, Paramount Channel and VIVA. Paramount Pictures, America's oldest film studio and creator of many of the most beloved motion pictures, continues today as a major global producer and distributor of filmed entertainment. Viacom operates a large portfolio of branded digital media experiences, including many of the world's most popular properties for entertainment, community and casual online gaming.
For more information about Viacom and its businesses, visit www.viacom.com. Viacom may also use social media channels to communicate with its investors and the public about the company, its brands and other matters, and those communications could be deemed to be material information. Investors and others are encouraged to review posts on Viacom's company blog (blog.viacom.com), Twitter feed (www.twitter.com/viacom) and Facebook page (http://www.facebook.com/viacom).
Cautionary Statement Concerning Forward-Looking Statements
This news release contains both historical and forward-looking statements. All statements that are not statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements reflect the Company's current expectations concerning future results, objectives, plans and goals, and involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause future results, performance or achievements to differ. These risks, uncertainties and other factors include, among others: the public acceptance of the Company's programs, motion pictures and other entertainment content on the various platforms on which they are distributed; technological developments and their effect in the Company's markets and on consumer behavior; competition for audiences and distribution; the impact of piracy; economic conditions generally, and in advertising and retail markets in particular; fluctuations in the Company's results due to the timing, mix and availability of the Company's motion pictures and other programming; changes in the Federal communications laws and regulations; other domestic and global economic, business, competitive and/or regulatory factors affecting the Company's businesses generally; and other factors described in the Company's news releases and filings with the Securities and Exchange Commission, including but not limited to its 2012 Annual Report on Form 10-K and reports on Form 10-Q and Form 8-K. The forward-looking statements included in this document are made only as of the date of this document, and the Company does not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. If applicable, reconciliations for any non-GAAP financial information contained in this news release are included in this news release or available on the Company's website at http://www.viacom.com .
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
The following tables reconcile our results for the quarter and nine months ended June 30, 2013 and 2012 to adjusted results that exclude the impact of certain items identified as affecting comparability ("Factors Affecting Comparability"), including the extinguishment of debt and discrete tax benefits. We use consolidated adjusted operating income, adjusted net earnings from continuing operations attributable to Viacom and adjusted diluted earnings per share ("EPS") from continuing operations, as applicable, among other measures, to evaluate our actual operating performance and for planning and forecasting of future periods. We believe that the adjusted results provide relevant and useful information for investors because they clarify our actual operating performance, make it easier to compare Viacom's results with those of other companies and allow investors to review performance in the same way as our management. Since these are not measures of performance calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"), they should not be considered in isolation of, or as a substitute for, operating income, net earnings from continuing operations attributable to Viacom and diluted EPS as indicators of operating performance, and they may not be comparable to similarly titled measures employed by other companies.
(1) Adjusted results for the quarter and nine months ended June 30, 2013 exclude $12 million and $24 million of discrete tax benefits, respectively. The benefits recognized principally reflect the release of tax reserves with respect to certain effectively settled tax positions. Adjusted results for the quarter and nine months ended June 30, 2012 exclude $11 million and $77 million of discrete tax benefits, respectively. The benefits recognized in the quarter principally reflect the release of tax reserves with respect to certain effectively settled tax positions. The benefits recognized earlier in fiscal 2012 related to certain operating and capital loss carryforwards.
(2) Adjusted results for the nine months ended June 30, 2012 exclude a pre-tax debt extinguishment loss of $21 million on the redemption of all $750 million of our outstanding 6.850% Senior Notes due 2055. The tax impact has been calculated using the rate applicable to this adjustment.
SOURCE Viacom Inc.
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Also, from Associated Press, via ABC News:
Viacom 3Q Net Income Rises 20 PctAlso, from Reuters UK:
Viacom Inc. said Friday that its fiscal third-quarter net income rose 20 percent, as it reaped more in fees for its cable TV channels and advertising revenue got a boost from improved ratings at key networks.
The New York company, which owns Nickelodeon, MTV, Comedy Central and Paramount Pictures, posted an adjusted profit that fell a penny short of Wall Street expectations, but its revenue came in higher than expected.
Executives said they expected a continued resurgence in ratings — especially at the company's Nickelodeon children's network — and announced the doubling of its current stock buyback program to $20 billion.
The company added that it plans to buy back $2 billion in shares under the expanded program over the next several months. Viacom shares, which have gained 50 percent this year, hit an all-time high of $80.93 Friday and closed up 6.5 percent at $79.17.
In a conference call with investors, Viacom President and CEO Philippe Dauman said the company continues to see ratings improvement at its TV networks, especially Nickelodeon, which has struggled recently.
"Nickelodeon is clearly on the way back with new live action and animated hits that fuelled robust ratings," Dauman said.
Dauman also pointed to Viacom's recently struck distribution deal with Amazon.com and the box office success of the Paramount Pictures films "Star Trek Into Darkness," ''World War Z."
Sterne Agee analyst Vasily Karasyov called the results "Very encouraging" and backed his "Buy" rating for the stock. He noted that the company posted its highest U.S. advertising growth rate since the fourth quarter of fiscal 2011, which will make short-term investors happy, while the increased stock buyback program will please value-oriented investors.
But Moody's Investors Service was less enthusiastic about the increased stock buyback and cut Viacom's senior unsecured ratings to "Baa2" from "Baa1." It noted that the move will increase the company's debt.
For the quarter ended June 3, Viacom earned $643 million, or $1.31 per share. That's up from $534 million, or $1.01 per share, in the same quarter of 2012.
Excluding discontinued operations and one-time items, Viacom earned an adjusted $1.29 per share for the latest quarter. Analysts polled by FactSet expected $1.30 per share.
Revenue increased 14 percent to $3.69 billion from $3.24 billion. That topped analysts' expectations for $3.57 billion.
Viacom said revenue at its media networks business increased 13 percent to $2.57 billion, boosted by a 26 percent jump in global affiliate revenue that stemmed from both digital distribution agreements and rate increases.
In early June, the company struck a licensing agreement with Amazon.com Inc., giving it exclusive online rights to key Viacom programming, including episodes of Nickelodeon's "Dora the Explorer," after Viacom couldn't come to terms on a larger, omnibus deal with Netflix Inc.
Excluding digital distribution agreements, which are affected by the timing of available programing, domestic affiliate revenue rose in the "high-single digits," Viacom said.
Domestic advertising revenue increased 6 percent, helped by higher ratings, while worldwide advertising revenue rose 5 percent.
Dauman noted that Nickelodeon posted an 11 percent jump in ratings for its core demographic, while also getting a boost from the addition of some shows aimed at preschoolers that previously aired on its Nick Jr. network.
For the current quarter, Dauman said the company expects to see continued sequential improvement in advertising revenue growth.
Revenue at the company's filmed entertainment business, increased 15 percent to $1.16 billion, as global theatrical revenue jumped 64 percent to $464 million, helped by the releases of the movies "Star Trek Into Darkness," ''World War Z" and "Pain and Gain," along with continued strong ticket sales of other movies released in the second quarter.
But operating income at the business dropped 63 percent to $17 million, pulled down by higher film distribution costs.
Viacom doubles buyback plan, posts 14 percent revenue jumpAlso, below is Viacom's Q3 2013 Results Earnings Call Transcript, in which Viacom Management discusses the company's Q3 2013 Results, from Seeking Alpha:
(Reuters) - Viacom Inc reported a 14 percent rise in third-quarter revenue on Friday as the media company posted strong advertising and affiliate fees for its television shows and doubled its share repurchase program.
Shares of Viacom jumped 6.3 percent to $79.05 (51.76 pounds).
The company, which owns cable networks MTV, Comedy Central and movie studio Paramount Pictures, expanded its share buyback program to $20 billion from $10 billion.
"The stock is up on the buyback, and their domestic ad growth was very strong," said Brett Harriss, an analyst with Gabelli & Co. "It seems like some of the ratings issues have been addressed, specifically at Nickelodeon."
Ratings at some of its channels, including the children-oriented Nickelodeon, have improved because of new programming. Nickelodeon ratings were up 6 percent in the second quarter, according to Bernstein Research.
Ad revenue in the United States rose 6 percent, compared with a 2 percent gain in the previous quarter.
"The best piece of news in the report was advertising," Bernstein Research analyst Todd Juenger wrote in a note to investors.
Over the past several quarters, Viacom's stable of networks had suffered from poor ratings, which in turn affected advertising. TV ads rates are closely aligned with ratings - the more people who watch a show like SpongeBob SquarePants, the more money the network can get for a commercial.
Affiliate revenues, or the money that Viacom receives to license its TV programs in deals like its agreement with Amazon.com Inc, jumped 28 percent in the United States.
Revenue rose 15 percent at its Paramount Pictures unit to $1.16 billion on strong summer box office films "World War Z" and "Star Trek Into the Darkness."
Operating income from filmed entertainment fell 63 percent to $17 million because of expenses related to marketing and development.
QUESTIONED ABOUT GOING PRIVATE
Viacom Chief Executive Philippe Dauman cited improved operations and a stronger U.S. economy as reasons for doubling the buyback.
One analyst on the call questioned whether Viacom would consider going private, given the size of the buyback.
"I focus on the here and now," Dauman answered. "We believe our stock is a great value."
Viacom is controlled by media mogul Sumner Redstone, who serves as chairman of the company and its sister CBS Corp, through National Amusements.
Total revenue was $3.69 billion, compared with analysts' expectations of $3.58 billion, according to Thomson Reuters I/B/E/S. It recorded revenue of $3.24 billion a year ago.
Adjusted for special items including tax benefits, net income rose 24 percent to $635 million, or $1.29 per share, compared with the same quarter a year ago. Analysts expected $1.30 per share.
Viacom Management Discusses Q3 2013 Results - Earnings Call TranscriptYou can read Viacom's Q3 2013 Results Earnings Call Transcript in full here on the official Seeking Alpha website.
[...]
Philippe P. Dauman - Chief Executive Officer, President and Not Independent Director
Thank you very much, [...]. And good morning, everyone. Thank you for joining us today to discuss the third quarter of our fiscal year.
The June quarter was a strong one for Viacom. The results we announced this morning attest to that. And as I will discuss in a moment, the significance of our performance goes beyond financial results. We saw great creative and operational success throughout the quarter and positive signs that our momentum will continue.
Thanks to our sustained investment in original content, we continued to see sequential ratings improvement at a number of our key networks. Nickelodeon is clearly on the way back, with new live-action and animated hits that fueled robust ratings. We completed our upfront negotiations early and very successfully, achieving significant volume increases in a difficult market. We also struck a distribution deal with Amazon in which we received great value for our content and gained a strong promotional platform for our consumer products. And Paramount Pictures launched 2 commercially successful and critically lauded tentpoles with Star Trek Into Darkness and World War Z.
Tom and Wade will go into greater detail in a moment, but let me briefly recap Viacom's financial performance for the quarter. Revenues increased 14% to $3.69 billion and operating income grew 20% to $1.09 billion. Adjusted net earnings from continuing operations attributable to Viacom increased 24% to $635 million. Adjusted diluted earnings per share from continuing operations were up 33% to $1.29.
We increased our quarterly dividend to $0.30 per share from $0.275 per share, effective with the dividend paid July 1. We also repurchased $700 million of stock in the quarter, under what was our $10 billion share repurchase program. We are today announcing an increase in the size of our buyback program from $10 billion to $20 billion.
Given our improving operational and ad sales performance, improving U.S. macroeconomic environment and the attractive interest rate environment, we are comfortable returning to our target leverage ratio prior to the recession. As a result, we are increasing our target ratio to the 2.75 to 3.0 range.
Viacom's stock is a very good value. Our share buyback remains very accretive. And we will continue to aggressively return capital to our shareholders. Accordingly, given the added balance sheet capacity from our new leverage target, we will augment our current buyback pace with the purchase of an additional $2 billion of our stock over the next several months. The pace of our open-market purchases, which are part of the $20 billion program, will be subject to regulatory limits on trading volume. After December 31, we anticipate that our buybacks will return to a pace comparable to our most recent quarters.
Moving on to our Media Networks. Revenue in the segment grew 13% to $2.57 billion, thanks to growth in both advertising and affiliate revenues. Domestic advertising revenue increased 6% on the strength of continued ratings improvement among our networks. For the September quarter, we expect to see continued sequential improvement in ad revenue growth.
For the adult upfront market, we secured mid-single-digit volume growth by moving early while also improving our mix of advertisers. We saw a great outcome on the kids side, too, where we maintained volume and increased our share in a market that was down overall.
Domestic affiliate revenue grew 28% in the quarter, thanks to the benefit of our digital distribution agreements and rate increases. Core domestic affiliate growth, which excludes digital distribution, increased in the high-single-digit range. We expect total domestic affiliate growth of 10% for the full fiscal year.
In June, we completed a landmark multiyear agreement with Amazon for distribution of a broad selection of library programming from across our brands. The deal not only reinforces the value of our content, it also validates our view that the digital distribution market remains strong and growing and will enhance the overall economic environment for must-have brands and programs. It is also noteworthy that our programming on Amazon Prime Instant Video will live in a network-branded environment, one that connects audiences with our many consumer products available through the world's leading online retailer.
We continue to mine digital distribution opportunities abroad as well, where we recently renewed our agreement with Netflix in Latin America. And as part of our broader Amazon agreement, we struck a deal with LoveFilm in the U.K. and Germany.
Our ratings resurgence is a big part of the story, so let me take a moment to touch on highlights at a few of our networks. At Nickelodeon, our sustained investment in new original content, driven by a reinvigorated programming and development team, led to significant ratings gains. Nickelodeon was up 11% in its core demo for the quarter. Nickelodeon also drove viewing among kids 2 to 5 in the quarter, as the network strategy to move preschool programming from Nick Jr. to Nick in key dayparts continued to pay off.
Several new Nick shows emerged as hits right out of the gate. The live-action comedy, Sam & Cat, from Nick's marquee hit maker, Dan Schneider, is performing very well in its debut season, as is the animated series Sanjay and Craig, which has the offbeat sensibility of many of the network's most iconic hits. Haunted Hathaways, another live-action series, premiered in the current quarter to more than 3 million viewers. These new hits are significant, not only for their big viewership, but also for their strategic timing. Each will be well established with audiences in advance of the holiday season, Nick's most critical quarter from an ad sale standpoint. We'll have new episodes of these new shows; new series, Rabbids and The Thundermans; and new seasons of Fairly Odd Parents, Teenage Mutant Ninja Turtles and Legend of Korra in the fourth quarter of the calendar year, as well as several preschool premieres and holiday specials.
July marked Nickelodeon's sixth straight month of year-over-year ratings growth. With ratings stable and growing, Nickelodeon is striving to raise the bar. We will continue to fuel the pipeline, investing in promising original content, new producers and new talent to increasingly diversify the programming mix. We are very optimistic that Nickelodeon's upward trajectory will continue.
We are optimistic that Nick at Nite will continue its recent growth streak as well. In the June quarter, Nick at Nite ratings were up 29% in its core demo. And nearly every show in the Nick at Nite lineup increased ratings over last year. Full House, in particular, has brought the network significant strength in prime that is carrying throughout the schedule.
MTV saw the successful return of several hits in the third quarter, including Awkward, Catfish and Teen Wolf, which is attracting series-high ratings in its third season. We increased the marketing push behind the new season, responding to ratings trends, which show that highly serialized shows can often capture significant new viewership in season 3.
MTV continues to build out a balanced schedule of hits in its critical 10 Spot time period. Most recently, we established a strong position on Thursday nights with Ridiculousness, which continues to build viewership and repeat well across dayparts. MTV also expanded the Guy Code franchise in the third quarter with the premiere of Girl Code, another cost-efficient series that strengthens our Tuesday night female programming block and repeats well.
MTV held its summer pilot screenings at the end of July, featuring a significantly higher volume of potential series, reflecting not only our stepped-up investment in more original content, but also the healthy output of our new development team. MTV is currently reviewing these pilots, and you will start to see some of those series on the network in early 2014.
CMT delivered a stellar performance in the third quarter. The network increased ratings by 29% in its core 18 to 49 demo, making it 1 of the 5 fastest-growing entertainment networks in cable for the quarter. This success is the culmination of our ongoing efforts to transform CMT's programming. The network completely revamped its development team, creating a tri-coastal group in Nashville, Los Angeles and New York with increased expertise in areas including brand development, field production and talent casting. The new team has doubled CMT's programming output while only incrementally increasing costs, with a focus on bold, highly repeatable shows that harken back to the network's country music core and echo its themes.
Dog and Beth: On the Hunt is a great example and has emerged in its first season as the network's top series. It's brought a lot of new viewers to CMT, helping lift ratings across the schedule. There's a lot of room to grow at CMT, and we see great things ahead.
At BET, the first-ever BET Experience in June was a creative and commercial success. The 3-day festival in Los Angeles attracted more than 100,000 visitors and featured many unique sponsorships that connected marketers with the BET audience in new ways. The event gave the BET Awards a big lift, airing the show to 7.8 million viewers, its second-highest viewership total ever. The BET Awards also provided a strong promotional platform for a new season of The Game; and TV movie Being Mary Jane, starring Gabrielle Union, which BET has picked up as an ongoing series. I'm happy to share that we will present the BET Experience again next year.
Our brands continue to drive the conversation on social platforms. The BET Awards generated nearly 10 million tweets, for example. In June, we entered an ad partnership with Twitter through its Amplify product that will launch during MTV's Video Music Awards, another social powerhouse, and roll out across our brands to further monetize our enormous Twitter footprint.
We are doing equally well in the branded app space. The Nickelodeon app has reached 3 million installs in less than 6 months, remarkably quick, and is seeing strong user engagement. The app was well received by our marketing partners at the kids upfront. The MTV app has already been downloaded more than 0.5 million times since its launch in mid-June and is attracting significant advertiser interest, not only in MTV's full-length programming but also for its MTV Other content studio, which struck a marketing partnership with Starcom.
COMEDY CENTRAL and VH1 will launch branded apps by year's end. And COMEDY CENTRAL's newly launched Stand-Up app has drawn significant downloads and user time spent. Speaking of COMEDY CENTRAL, I want to take this opportunity to congratulate the network for earning 18 Emmy nominations. It's a new record for comedy, which is always well represented at the Emmys.
Finally, Viacom International Media Networks continues to be flexible in its market-to-market approach across the world. We are moving to full ownership models for MTV in Brazil, Russia and Italy, acquiring full operational and editorial control of the brand in these key markets. We see solid long-term opportunities for an owned and operated MTV in these markets, bringing them closer into our centralized global structure to ensure that the network is programmed with the best possible mix of international and local content, resulting in the strongest possible representation of the iconic MTV brand.
Moving on to our Filmed Entertainment segment. Revenues increased 15% to $1.16 billion in the third quarter. Paramount Pictures launched 2 strong tentpoles in Star Trek Into Darkness and World War Z, which are on their way to nearly $1 billion combined at the worldwide box office. Operating results in this segment were negatively impacted by the timing of distribution costs associated with World War Z and Star Trek Into Darkness.
The next quarter will show significant profitability for Paramount, including from these 2 films. They will likely be moderately less than we anticipated, due to the crowded tentpole schedule this summer and the delay of certain film licensing deals into next fiscal year. For 2014 fiscal year, Paramount will bring several hit franchises back to the big screen with Anchorman 2, a new Paranormal Activity, Jackass Presents: Bad Grandpa, and Transformers 4; and launch high-potential new tentpoles with Jack Ryan and Ninja Turtles.
Next fiscal year, we'll also see several projects enter the pipeline at Paramount Television. Last week, we named Amy Powell as President of the new television studio, adding to her duties as Paramount's head of Digital and its Insurge Pictures unit. And this week, Paramount Animation made news on 2 upcoming projects for 2015: First, the release date for the SpongeBob SquarePants movie has been set for February 13, 2015. And in late May 2015, Paramount will bring another exciting animated feature to theaters with Monster Trucks, which will be directed by Chris Wedge, the Oscar-winning director of Ice Age and Epic.
In closing, it was a pivotal quarter for Viacom in which our consistent investment in great content ultimately fueled strong top and bottom line growth. In fiscal 2013, we are investing more than ever in new content, more than $3 billion for our networks in total. Our networks are bringing more and more original content to their screens, resulting in ratings momentum and healthy growth in our principal revenue stream. Paramount Pictures presented 2 successful summer tentpoles and looks to fiscal 2014 with a promising slate.
We remain steadfastly committed to delivering value and are very pleased to be returning even more capital to our shareholders.
Thank you. And with that, I'll turn it over to Wade.
Wade Davis - Chief Financial Officer and Executive Vice President of Strategy & Corporate Development
Thanks, Philippe. Before I take you through our operating results, I want to note that our earnings release and web presentation summarizing the results for our June quarter are available on our website.
Now, let's take a look at our segment results. At our Media Networks segment, revenues in the quarter were up 13% compared with the prior year, with domestic revenues up 15% and international revenues up 4%. Foreign exchange had a 2-percentage-point unfavorable impact on international revenues. The increase in revenues in the quarter was principally driven by increases in affiliate and advertising revenues. Page 10 of our web deck provides a breakdown of our Media Networks revenue performance.
Domestic advertising revenues were up 6% in the quarter, and international revenues were down 6%. The decrease in international advertising was largely driven by softness in Europe.
In terms of affiliate revenues, domestic revenues increased 28% in the quarter, while international revenues were up 16%. Excluding the impact from the timing of product available under digital distribution agreements, domestic affiliate revenues grew high single digits. Growth in international revenues was due to rate and subscriber increases, new channel launches, as well as growth in digital distribution revenue related to the timing of product availability.
Expenses increased 6% in the quarter. Within expenses, programming expense grew 5%, distribution and other expenses increased 47% and SG&A expense was up 2%. The increase in distribution and other expenses was largely driven by participation associated with a digital distribution deal. Excluding the impact from the deal, distribution and other expenses were up 5% in the quarter.
Media Networks adjusted operating income was up 24%, and the adjusted operating income margin was 45%, up approximately 390 basis points compared to the prior year. The margin increase was driven by top line growth of 13%, partially offset by 6% growth in expenses.
Moving to Filmed Entertainment. Revenues were up 15% in the quarter, principally driven to higher theatrical -- principally due to higher theatrical revenues. Page 12 of the web presentation provides a breakdown of Filmed Entertainment revenues.
Worldwide theatrical revenues increased 64%, primarily due to higher carryover revenues from the March quarter release of G.I. Joe: Retaliation, as well as higher revenues from the current quarter's releases including Star Trek Into Darkness and World War Z.
Worldwide home entertainment revenues declined 10%, reflecting lower revenues from carryover titles. Worldwide ancillary revenues increased 6%, primarily due to the sale to Disney of the distribution rights to the 4 Marvel films that we previously released theatrically.
Filmed Entertainment generated adjusted operating income of $17 million in the quarter, as compared to $46 million last year. The decline in operating income principally reflects distribution costs associated with the release of World War Z at the end of the quarter, partially offset by the benefit from the Marvel distribution rights sale.
Now touching on corporate. Expenses increased $11 million in the quarter. The increase relates to higher deferred compensation cost driven by the appreciation in our stock price. Excluding deferred compensation costs, corporate expenses were substantially flat in the quarter.
With that, I would like to turn the call over to Tom.
Thomas E. Dooley - Chief Operating Officer, Senior Executive Vice President and Director
Thanks, Wade, and good morning, everyone. I'm going to talk about our cash flow, our debt profile and the return of capital to our shareholders. And I'll also cover the seasonal factors impacting our September quarter.
For the quarter, we generated $728 million in operating free cash flow, compared to $197 million of operating free cash flow last year. Page 5 of the web deck provides components of the free cash flow.
The increase in operating free cash flow in the quarter was principally due to lower cash taxes and higher operating income, partially offset by higher working capital utilization. Cash taxes benefited from the retroactive reenactment of provisions allowing for accelerated deductions related to domestic film and TV production expense. The unfavorable working capital variance in the quarter was principally due to the timing of collections associated with product made available under a digital distribution deal.
Now turning to our debt. For the most part, it is fixed rate, with an average cost at quarter end of 4.6%. In terms of our short-term funding, to the extent we have incremental borrowings, we are funding this in the commercial paper marketplace at an annual rate of approximately 25 basis points. We had no variable rate borrowings outstanding at quarter end.
As for our leverage, we ended the quarter with $8.9 billion of debt and capital leases outstanding and $1.1 billion of cash and cash equivalents on the balance sheet. Our leverage ratio at the end of the quarter was 2.3x. At June 30, our $2.5 billion bank revolver was undrawn.
Our commitment to return capital to shareholders continued in the June quarter, as we returned a total of $834 million of capital back to our shareholders between our buyback and dividend programs. Philippe has already addressed our increased buyback authorization and our continued aggressive capital return going forward.
Now, let's turn to some of the seasonal factors impacting the remainder of the fiscal year. For fiscal 2013, we anticipate domestic affiliate revenue growth of 10%. Accordingly, in the September quarter, affiliate revenue growth will be in the high single digits. For the full year, we continue to expect high-single-digit growth rates for Media Networks programming expense. In terms of non-programming expense, we will continue to drive efficiencies throughout the organization in order to preserve and enhance our margins.
Moving on to taxes. Given the strong performance of our films overseas, we now forecast a book tax rate of 34% for 2013. As for cash taxes, due primarily to the retroactive reenactment of provisions related to film and TV product that I mentioned earlier, cash taxes will be significantly lower than book taxes for fiscal 2013. Accordingly, we see strong free cash flow growth for the year.
In summary, we are encouraged as we continue to make progress in improving our ratings and our ad sales performance. We are investing in original content, with a focus on improving those demos and dayparts that have the greatest impact on ad sales. We are also investing in our organization and our infrastructure in order to engage and monetize our audiences as they increasingly embrace consumption of our content on digital platforms. As we do this, we are gaining additional insight into our viewers, enabling us to provide unique opportunities and additional value for our advertising partners. With the increase in the size of our buyback program and our target leverage ratio, given the low capital intensity of our business and our focus on driving margins and free cash flow, Viacom continues to demonstrate a strong capital allocation discipline and a commitment to driving shareholder value.
With that, I'll turn it over to your questions.
Question-and-Answer Session
[...]
Operator
And next we'll go to Alexia Quadrani with JPMorgan.
Alexia S. Quadrani - JP Morgan Chase & Co, Research Division
You've got some very favorable sort of industry trends in the back half of the calendar year now through December with a pickup in kids-oriented films and then the 2 competing video game console launches. How should that -- I mean, should that impact have an incremental sort of boost to how we should think about advertising revenues for sort of the next sort of 5 months or so?
Philippe P. Dauman - Chief Executive Officer, President and Not Independent Director
Well, certainly, we do have a favorable environment generally and a favorable environment as it relates specifically to Nickelodeon ratings. As you recall, in last year's December quarter, we had -- we were having ratings issue, so we were unable to meet demand in that we didn't have enough inventory to meet the holiday season advertising demand. So as you point out, we have more inventory to sell, as our ratings have improved. And as you correctly pointed out, particularly in the games area, there are a lot of new consoles and big games interesting kids.
Alexia S. Quadrani - JP Morgan Chase & Co, Research Division
And then when you're looking at the ratings at MTV, could you give us some color? Is there a more meaningful pickup between the sort of the standard day ratings we typically see and either the C3 or maybe even the C7 kind of data that you may get that would potentially be a benefit if we do see a change now from sort of a C3 to a sort of C7 system down the road?
Philippe P. Dauman - Chief Executive Officer, President and Not Independent Director
Well, we certainly get -- I mean, right now, we monetize C3. We certainly see, across many of our networks, a lift when you go to C3. And we've been investing in our programming in our key networks, where there are revenues to be had. So our ratings performance has improved, and MTV included. If you look at the beginning of this fourth quarter, our ratings are up year-on-year across -- pretty much across-the-board, with the exception of Nick Jr., where we strategically moved some programming off, onto Nickelodeon.
Thomas E. Dooley - Chief Operating Officer, Senior Executive Vice President and Director
Alexia, we've also had good strength, very good growth in ratings in primetime demos across certain key monetizable networks, which really helps us drive advertising sales, as the value of ratings in those times period is critical for us.
Operator
Next we'll go to Rich Greenfield with BTIG.
Richard Greenfield - BTIG, LLC, Research Division
I'm wondering -- you made this big change in where you sell your digital rights in the U.S. And I think, Philippe, you took a lot of heat for selling to Netflix originally. There was a lot of skeptics saying that, that's why Nickelodeon ratings were down. And clearly, Nickelodeon's rebounding, regardless of your digital deal. But wondering, as you look at the early data that you're seeing from Amazon, what is the actual utilization of your content look like during the current few months of this contract versus what you were seeing? I mean, Amazon appears to have far fewer streaming users than Netflix. Do you look at that kind of exposure of your content being positive, negative for -- in terms of what happens to your ratings? Just, how do you think about that dynamic? Because you obviously made the choice to sell to Amazon versus Netflix.
Philippe P. Dauman - Chief Executive Officer, President and Not Independent Director
Well, yes, we were in discussions with all players in the digital distribution universe. And we ended up with Amazon in this particular case for the content that we licensed to them because of the great dynamics of the overall deal. And to your specific question, yes, Amazon Prime today has significantly less reach than Netflix. Obviously, our content will help drive their sub numbers up, which is why they were very interested in our content. And as I mentioned in my remarks, we also like the Amazon environment in that our brands are brought out more clearly in the Amazon Prime environment than they are in the Netflix environment. But we continue to do business with Netflix around the world and expect to do so in the future. We said previously that it's hard to measure the impact on ratings, but we did look at a number of our streams, and even if you assume that it was all cannibalistic, it had a -- it would have a very modest impact on ratings. So we never thought that was a major factor. But overall, the -- we're extremely satisfied with the Amazon deal, both for monetary and nonmonetary reasons.
Richard Greenfield - BTIG, LLC, Research Division
And you can still sell content to Netflix from Nickelodeon and your other networks. You just have certain exclusivities, but we could still expect a deal from you in the U.S. for some of the Dora content and other Nickelodeon titles?
Philippe P. Dauman - Chief Executive Officer, President and Not Independent Director
Well, we have -- we do have some degrees of exclusivity. We have a lot of content available to license to all distributors concerned.
Thomas E. Dooley - Chief Operating Officer, Senior Executive Vice President and Director
Of course, as you know with your kids, kids are going to consume -- certain kids are going to consume content on tablets. And you have -- if you want your content to have a shot at being consumed, you have to have it on a tablet. So we're aggressively putting our content up on tablets through distribution partnerships and also using now the Nick app, which has been phenomenally successful, because we want kids to be able to consume our content wherever they want to consume it.
