CBS Corporation Reports Record First Quarter 2012 Results

NEW YORK, May 1, 2012 /PRNewswire/ -- CBS Corporation (NYSE: CBS.A and CBS) today reported results for the first quarter ended March 31, 2012.

"As great as these last few years have been, this quarter tops it all," said Sumner Redstone, Executive Chairman, CBS Corporation. "What's most exciting is that we are poised to benefit from all of the strategic actions we've taken – and continue to take – for a long, long time. We have the best content and the right management to ensure success, and as a result, I have never been more confident about our Company's future than I am today."

"The transformation of CBS's business model continues, and I am extremely pleased that we posted record results," said Leslie Moonves, President and Chief Executive Officer, CBS Corporation. "Our ability to capitalize on the fundamental shifts in our industry has led to the growth of significant new revenue streams and has also allowed us to increase our share of non-advertising revenue. At the same time, we continue to benefit from underlying advertising growth. Of course, the cornerstone of our ability to drive earnings will always come back to our success in creating premium content. In that regard, we greatly look forward to building on our leading position when we unveil our new primetime schedule in a couple of weeks. We will then sell that lineup into what we're confident will be a very healthy upfront marketplace, and begin anew the process of monetizing our programming through the burgeoning content value chain. So, with political dollars due to ramp up in the back half of 2012, and with the syndication programming pipeline we have established for 2013, we look forward to the future with great confidence."

First Quarter 2012 Results

Revenues of $3.92 billion for the first quarter of 2012 increased 12% from $3.51 billion for the same prior-year period. This increase was led by content licensing and distribution revenues, which were up 39%, driven by licensing agreements for digital streaming as well as international and domestic syndication sales. Advertising revenues increased 5%, reflecting growth in network primetime and sports advertising, including the timing of the semifinals of the NCAA Division I Men's Basketball Championship ("NCAA Tournament"), which aired during the first quarter of 2012 versus the second quarter of 2011. Affiliate and subscription fee revenues rose 7%, led by growth at Cable Networks and higher retransmission revenues.

Operating income before depreciation and amortization ("OIBDA") of $773 million increased 34% in the first quarter of 2012 from $576 million for the same prior-year period. OIBDA before impairment charges, which excludes a noncash impairment charge of $11 million relating to radio station divestitures, rose 36% to $784 million.

Operating income of $642 million for the first quarter of 2012 increased 47% from $437 million for the same prior-year period, and the operating income margin rose four percentage points, to 16%. The operating income growth and margin expansion were primarily driven by increases in high-margin revenue streams.

Net earnings were $363 million for the first quarter of 2012, or $.54 per diluted share, up from $202 million, or $.29 per diluted share, for last year's first quarter, reflecting the operating income growth as well as lower weighted average shares outstanding as a result of the Company's share repurchase program. Net earnings include a gain of $16 million, net of tax ($25 million before tax) on early extinguishment of debt. The impact of this item on net earnings was offset by a noncash impairment charge of $14 million, net of tax ($11 million before tax).

Reconciliations of all non-GAAP measures to reported results are included at the end of this earnings release.

Free Cash Flow, Balance Sheet and Liquidity

Free cash flow was $607 million for the first quarter of 2012, compared with $853 million for the first quarter a year ago. The free cash flow comparison was affected by the timing of programming payments. The Company generated cash flow from operating activities of $646 million for the three months ended March 31, 2012, versus $894 million for the comparable prior-year period.

During the first quarter of 2012, the Company issued $700 million of 3.375% senior notes due March 1, 2022, and used the net proceeds to redeem, at face value, its $700 million of 6.750% senior notes due March 27, 2056. The refinancing of this debt is expected to result in an annualized net interest expense savings of $22 million. As of March 31, 2012, the Company's cash balance was $794 million, debt outstanding was $5.92 billion, and there were no credit facility borrowings.

Also during the quarter, the Company repurchased 9.0 million shares of CBS Corp. Class B Common Stock for $269 million, at an average cost of approximately $30 per share. Since the inception of the share repurchase program in January of 2011, the Company has repurchased 51.2 million shares for $1.29 billion, at an average cost of approximately $25 per share, leaving $1.71 billion of authorization remaining at March 31, 2012.

Consolidated and Segment Results (dollars in millions)

The tables below present the Company's revenues by segment and type and its OIBDA before impairment charges and operating income (loss), by segment for the three months ended March 31, 2012, and 2011. Reconciliations of all non-GAAP measures to reported results are included at the end of this earnings release.

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 2012 increased 16% to $2.32 billion from $1.99 billion for the same prior-year period, principally driven by the licensing of television programming for digital streaming and syndication, higher advertising revenues, and increases in retransmission revenues. Advertising revenue grew 8%, with four of the percentage points from the timing of the semifinals of the NCAA Tournament.

Entertainment OIBDA for the first quarter of 2012 increased 53% to $411 million from $268 million for the same prior-year period, and the OIBDA margin improved five percentage points to 18%. These increases were primarily driven by growth in high-margin revenues.

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

Cable Networks revenues for the first quarter of 2012 increased 15% to $452 million from $393 million for the same prior-year period. The revenue growth was driven by higher licensing revenues from the digital streaming of Showtime original series as well as increases in rates and subscriptions at Showtime Networks and Smithsonian Networks.

Cable Networks OIBDA for the first quarter of 2012 increased 37% to $209 million from $153 million for the same prior-year period, reflecting revenue growth and lower costs from the timing of programming expenses.

Publishing (Simon & Schuster)

Publishing revenues for the first quarter of 2012 increased 14% to $176 million from $155 million for the same prior-year period, reflecting strong growth in the sales of more profitable digital content as well as higher print book sales. Sales of digital content increased 64% in the quarter and represented approximately 26% of Publishing's total revenues, the highest to date. Best selling titles in the first quarter included Kill Shot by Vince Flynn and Lone Wolf by Jodi Picoult. The first quarter of 2012 also benefited from the continued success of fourth quarter releases Steve Jobs by Walter Isaacson and 11/22/63 by Stephen King.

Publishing OIBDA for the first quarter of 2012 increased 43% to $10 million from $7 million for the same prior-year period. This increase was primarily driven by growth in digital and print book sales, which was partially offset by higher costs related to legal matters.

Local Broadcasting (CBS Television Stations and CBS Radio)

Local Broadcasting revenues of $622 million in the first quarter of 2012 remained flat compared with the same prior-year period. Increased spending by automotive manufacturers and retailers as well as higher retransmission revenues were offset by lower advertising spending from the utilities and service industries. For the first quarter of 2012, CBS Television Stations revenues increased 2% from the same quarter last year, while CBS Radio revenues decreased 2%.

Local Broadcasting OIBDA before impairment charges for the first quarter of 2012 increased 1% to $171 million from OIBDA of $169 million for the same prior-year period, primarily driven by the revenue growth. OIBDA before impairment charges excludes a first quarter 2012 impairment charge of $11 million related to radio station divestitures.

Outdoor (CBS Outdoor)

Outdoor revenues for the first quarter of 2012 increased 1% to $416 million from $413 million for the same prior-year period, driven by increased revenues in the Americas (comprised of North America and South America), partially offset by the unfavorable impact of foreign exchange rate changes. Revenues in the Americas increased 4% in constant dollars. Growth in the U.S. billboards and displays businesses was partially offset by the impact of the nonrenewal of the Toronto transit contract, which negatively affected the Americas revenue comparison by two percentage points. Revenues for Europe decreased 2% in constant dollars because of the nonrenewal of certain contracts as well as weakness in the European economy.

Outdoor OIBDA for the first quarter of 2012 increased 8% to $53 million from $49 million for the same prior-year period principally because of the higher revenues.

Corporate

Corporate expenses before depreciation expense were $58 million for the first quarter of 2012 compared with $52 million for the same quarter last year, reflecting increased compensation expenses primarily associated with the Company's higher stock price.

Residual Costs

Residual costs include pension and postretirement benefits costs for plans retained by the Company for previously divested businesses. Residual costs decreased $7 million to $12 million for the first quarter of 2012 from $19 million for the same quarter last year, primarily because of the benefit from the prefunding of pension plans during 2011.

About CBS Corporation

CBS Corporation is a mass media company with constituent parts that reach back to the beginnings of the broadcast industry, as well as newer businesses that operate on the leading edge of the media industry. The Company, through its many and varied operations, combines broad reach with well-positioned local businesses, all of which provide it with an extensive distribution network by which it serves audiences and advertisers in all 50 states and key international markets. It has operations in virtually every field of media and entertainment, including broadcast television (CBS and The CW – a joint venture between CBS Corporation and Warner Bros. Entertainment), cable television (Showtime Networks, Smithsonian Networks and CBS Sports Network), local television (CBS Television Stations), television production and syndication (CBS Television Studios, CBS Studios International and CBS Television Distribution), radio (CBS Radio), advertising on out-of-home media (CBS Outdoor), publishing (Simon & Schuster), interactive media (CBS Interactive), licensing and merchandising (CBS Consumer Products), video/DVD (CBS Home Entertainment), motion pictures (CBS Films), and sustainable media (EcoMedia).  For more information, log on to www.cbscorporation.com.

Cautionary Statement Concerning Forward-looking Statements

This news release contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. These forward-looking statements are not based on historical facts, but rather reflect the Company's current expectations concerning future results and events.  Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause the actual results, performance or achievements of the Company to be different from any future results, performance or achievements expressed or implied by these statements. These risks, uncertainties and other factors include, among others: advertising market conditions generally; changes in the public acceptance of the Company's programming; changes in technology and its effect on competition in the Company's markets; changes in the Federal Communications laws and regulations; the impact of piracy on the Company's products, the impact of the consolidation in the market for the Company's programming; other domestic and global economic, business, competitive and/or other regulatory factors affecting the Company's businesses generally; the impact of union activity, including possible strikes or work stoppages or the Company's inability to negotiate favorable terms for contract renewals; and other factors described in the Company's news releases and filings with the Securities and Exchange Commission including but not limited to the Company's most recent Form 10-K, Form 10-Qs and Form 8-Ks. The forward-looking statements included in this document are made only as of the date of this document, and under section 27A of the Securities Act and section 21E of the Exchange Act, we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.

SOURCE CBS Corporation

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