CBS CBS Corp

By Austen Hufford 

Viacom Inc. on Friday said profits for the current quarter could fall more than 25% short of expectations because of the disappointing performance of the latest "Teenage Mutant Ninja Turtles" movie and a delayed video-on-demand agreement, caused in part by the company's recent management dispute.

The reduced outlook comes as Viacom separately said Friday that it would pay the legal expenses of Chief Executive Philippe Dauman and board member George Abrams in a lawsuit filed against the trust controlling most of its shares, as the public battle with media mogul Sumner Redstone continues.

Viacom, which owns Paramount Pictures and cable channels like MTV and Comedy Central, said it now expects per-share earnings between $1 and $1.05 for the quarter ending June 30, well below the average analyst estimate of $1.38, according to Thomson Reuters.

Viacom also expects domestic ad sales to be about 4% lower in the quarter for a year before.

The latest "Teenage Mutant Ninja Turtles" movie underperformed domestically, Viacom said. The movie garnered an estimated $35.3 million in its debut in the U.S. and Canada, while the first movie opened to $65.6 million.

Viacom said it had expected to sign a "significant" video-on-demand agreement in the quarter, but the "public governance controversy" affected the timing and made coming to an agreement not possible in the quarter. Further details about the pact weren't immediately available.

Viacom's Class B shares, down 33% over the past year before Friday, fell 1.4% to $44.42 in 4 p.m. ET trading in New York.

Last month, Mr. Redstone removed Messrs. Dauman and Abrams from the board of National Amusements Inc., the holding company through which Mr. Redstone controls Viacom, and the seven-member trust that will oversee his controlling stakes in Viacom and CBS Corp. when he dies or is incapacitated.

Messrs. Dauman and Abrams filed suit last month in a Massachusetts court to challenge their dismissals, arguing that Viacom Vice Chairman Shari Redstone, daughter of Sumner Redstone, is engineering the changes by taking advantage of her father, and that Mr. Redstone doesn't have the mental competency to carry out the changes.

Friday, Viacom said it agreed to cover the costs of the lawsuit against National Amusements, including attorney's fees, witness fees and public relations costs. Under the agreements, Messrs. Dauman and Abrams would have to repay Viacom if either is found to have acted in breach of his fiduciary duties or in a manner not in the best interest of Viacom.

National Amusements responded by criticizing the company for using corporate resources to mount a campaign against its controlling shareholder, Mr. Redstone, especially after announcing a profit shortfall.

"The need for strong, independent oversight of Viacom could not be more apparent," National Amusements said in a prepared statement.

Viacom said the agreements were approved by a committee of independent members of the board. On Thursday, National Amusements Inc. said it was seeking to oust five Viacom independent directors, including Mr. Dauman and Mr. Abrams. Frederic V. Salerno, Viacom's lead independent director, immediately filed suit in Delaware to invalidate the dismissals.

The next phase of the fight will present corporate-governance questions that legal experts say are rarely considered in the upper echelons of American business -- with a board and its controlling shareholder effectively in a legal war.

The suit from Messrs. Dauman and Abrams describes Mr. Redstone as suffering from a worsening brain disorder and being unable to write, read, walk or "coherently communicate."

The mogul's doctor put out a statement saying Mr. Redstone was alert and in no distress during a recent examination, and that he knows what he's doing. In recent days, Mr. Redstone has met with top CBS and Paramount Pictures executives, though they came to his car and details of the meetings weren't available.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

June 17, 2016 17:03 ET (21:03 GMT)

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