CBS Corporation Reports First Quarter 2010 Results

Last Updated on Thursday, 06 May 2010 02:09 Thursday, 06 May 2010 02:09

CBS Corporation (NYSE: CBS.A and CBS) today reported results for the first quarter ended March 31, 2010.

"I could not be more pleased with how CBS performed in the first quarter of this year, and I'm confident that Leslie and his management team will build on this success as the economy continues to recover," said Sumner Redstone, Executive Chairman, CBS Corporation. "We've focused on strengthening our already solid financial position, building new efficiencies throughout the Company, and investing in our top-quality content businesses – and I look forward to all that we will do to build on these accomplishments this year and beyond."

"We got off to a tremendous start in 2010, as our businesses across the Company capitalized on the improving operating environment," said Leslie Moonves, President and Chief Executive Officer, CBS Corporation. "Network television is enjoying a robust scatter market, and with CBS in first place, we will be able to monetize what promises to be a very active Upfront. Our strength in primetime also establishes CBS as a leading beneficiary of the dual-revenue-stream broadcast model that continues to emerge, rewarding us not only with strong advertising revenues, but also a growing share of the retransmission consent fees that have now become a fact of the business. In addition, we're building our other recurring revenue streams, including syndication and premium cable – a business that continues to achieve new financial and creative highs. Meanwhile, the economic recovery has also been a boon to our expanding Interactive platform, and our local TV and radio operations, which are in the midst of a dramatic upswing. Ad sales and pacing for these businesses have been up sharply so far this year, and we expect political advertising to heat up as the November elections approach. As importantly, with our lower cost structure throughout the Company, the revenue growth we're seeing is translating to higher margins. Going forward, we'll maintain our focus on expenses, and add to the recent steps we've taken to strengthen our balance sheet and deliver value to shareholders. As always, we will keep creating and distributing the absolute best content out there. That remains the best strategy for success both today and well into the future."

First Quarter 2010 Results

Revenues of $3.53 billion for the first quarter of 2010 increased 12% from $3.16 billion for the same quarter last year, led by 19% growth at Local Broadcasting, 15% growth at Entertainment, which included the 2010 telecast of Super Bowl XLIV on the CBS Television Network, and 8% growth at Cable Networks.

Adjusted operating income before depreciation and amortization ("OIBDA") was $351.3 million for the first quarter of 2010, up 40% versus $250.6 million for the same prior-year period, primarily reflecting significant margin expansion at Local Broadcasting driven by the aforementioned revenue growth and a strong performance at Cable Networks. Adjusted operating income for the first quarter of 2010 increased 94% to $210.5 million from $108.3 million for the same quarter last year.

Adjusted net earnings for the first quarter of 2010 were $34.3 million versus a net loss of $36.0 million for the same quarter last year and adjusted diluted earnings per share were $.05 in 2010 compared to a loss of $.05 per diluted share in 2009.

Adjusted results for the first quarter of 2010 exclude restructuring charges of $57.1 million associated with the elimination of positions and contract terminations, and $25.9 million of discrete tax items. Adjusted results for the first quarter of 2009 exclude an $18.8 million charge to income tax expense for the reduction of deferred tax assets associated with stock-based compensation. Reconciliations of all non-GAAP measures to reported results are included at the end of this earnings release.

Reported operating income for the first quarter of 2010 increased 43% to $153.4 million from $107.5 million for the same quarter last year. The Company reported a net loss of $26.2 million, or a loss of $.04 per diluted share for the first quarter of 2010 versus a net loss of $55.3 million, or a loss of $.08 per diluted share, for the same quarter last year.

Free cash flow of $659.8 million for the first quarter of 2010 more than tripled from the prior-year first quarter amount of $204.3 million principally reflecting higher advertising sales and lower payments for interest, taxes and capital expenditures.

During the first quarter of 2010, the Company reduced the amounts outstanding under its revolving accounts receivable securitization program from $400.0 million to zero and terminated the program. Also during the first quarter, the Company called for the redemption of $414.6 million of its 7.70% senior notes due July 30, 2010, which settled on April 30, 2010. Additionally, in April 2010 the Company issued $500.0 million of 5.75% senior notes due 2020 and used the net proceeds from this offering to repurchase, through a tender offer, $400.0 million of its 6.625% senior notes due 2011, $42.6 million of its 8.625% debentures due 2012 and $57.4 million of its 5.625% senior notes due 2012. Throughout the first quarter, the Company also repurchased $19.5 million of CBS Corporation's debt on the open market at a discount.

Consolidated and Segment Results

The tables below present the Company's revenues by segment and type and its adjusted OIBDA and adjusted operating income (loss) by segment for the three months ended March 31, 2010 and 2009 (dollars in millions).

Entertainment (CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Films and CBS Interactive)

Entertainment revenues for the first quarter of 2010 increased 15% to $2.08 billion from $1.82 billion for the same prior-year period primarily reflecting 25% higher Network advertising revenues, driven by the 2010 telecast of Super Bowl XLIV on the CBS Television Network and the strong advertising scatter market, and 19% growth in CBS Interactive display advertising revenues in an improved advertising marketplace. Television license fees for the first quarter of 2010 remained relatively flat as compared with the same period last year, as higher international syndication sales and network license fees for new series were offset by lower domestic syndication sales.

Entertainment adjusted OIBDA decreased 4% to $144.8 million from $151.1 million reflecting growth in lower margin revenues from the Super Bowl telecast as well as the timing of costs related to television and film programming that will benefit future periods. Adjusted OIBDA for the first quarter of 2010 excludes $10.3 million of restructuring charges.

Cable Networks (Showtime Networks, Smithsonian Networks and CBS College Sports Network)

Cable Networks revenues for the first quarter of 2010 increased 8% to $368.0 million from $340.6 million for the same prior-year period due to rate increases and subscription growth at both Showtime Networks and CBS College Sports Network. Showtime Networks (which includes Showtime, The Movie Channel and Flix) subscriptions totaled 62.7 million as of March 31, 2010, up by 2.0 million, or 3%, from the same time last year. Smithsonian Networks subscriptions totaled 5.1 million, up by 2.4 million, or 89%. CBS College Sports Network subscriptions of 35.7 million were up by 6.5 million, or 22%.

Cable Networks OIBDA for the first quarter of 2010 increased 21% to $100.9 million with revenue growth partially offset by higher advertising costs associated with the timing of series premieres.

Publishing (Simon & Schuster)

Publishing revenues for the first quarter of 2010 decreased 6% to $151.7 million from $161.7 million for the same prior-year period reflecting the continued soft retail market, partially offset by significantly higher digital sales of Publishing content such as ebooks, audio downloads and stand-alone applications, which increased by $8.4 million, to $12.0 million. Best-selling titles in the first quarter of 2010 included Courage and Consequence by Karl Rove, House Rules by Jodi Picoult and Little Bee by Chris Cleave.

Publishing adjusted OIBDA for the first quarter of 2010 was $3.6 million versus $.1 million for the same quarter last year – the result of strong cost containment measures that more than offset the decline in revenues. Adjusted OIBDA for the first quarter of 2010 excludes $1.5 million of restructuring charges.

Local Broadcasting (CBS Television Stations and CBS Radio)

Local Broadcasting revenues for the first quarter of 2010 increased 19% to $605.5 million from $510.4 million for the same prior-year period. CBS Television Stations revenues increased 29% to $323.7 million from $250.9 million due to the improved advertising marketplace and higher political advertising sales. CBS Radio revenues increased 9% to $282.7 million from $259.7 million for the same prior-year period, and revenues from the ten largest radio markets increased 15%.

Local Broadcasting adjusted OIBDA for the first quarter of 2010 increased 148% to $134.0 million from $54.1 million primarily due to the revenue growth. Adjusted OIBDA margins for the first quarter of 2010 doubled, to 22% from 11% for the same quarter last year, the result of both the revenue growth and a lower fixed cost structure due to recent expense reduction measures. Adjusted OIBDA for the first quarter of 2010 excludes $25.2 million of restructuring charges.

Outdoor (CBS Outdoor)

Outdoor revenues for the first quarter of 2010 increased 3% to $392.2 million from $379.9 million for the same prior-year period, benefiting from the favorable impact of foreign exchange rate changes. In constant dollars, Outdoor revenues were down 1% from the first quarter of 2009. Americas revenues (comprising North and South America) for the first quarter of 2010 increased 1% (down 2% in constant dollars) to $248.8 million from $246.5 million for the same prior-year period. Europe revenues increased 7% (1% in constant dollars) to $143.4 million for the first quarter of 2010 from $133.4 million for the same quarter last year.

Outdoor adjusted OIBDA for the first quarter of 2010 increased 24% to $32.2 million from $25.9 million for the same prior-year period reflecting lower transit and billboard lease and maintenance costs principally due to cost-savings initiatives. Adjusted OIBDA excludes restructuring charges of $20.1 million for the first quarter of 2010 and $.8 million for the same prior-year period.