CBS Corporation Reports Record Results in the Second Quarter of 2012

NEW YORK, Aug. 2, 2012 /PRNewswire/ -- CBS Corporation (NYSE: CBS.A and CBS) today reported results for the second quarter ended June 30, 2012, including operating income before depreciation and amortization ("OIBDA"), operating income, and diluted earnings per share that were all-time records for CBS Corporation since it became a stand-alone Company in 2006.

"CBS's content continues to fuel the success of this great company," said Sumner Redstone, Executive Chairman, CBS Corporation. "In a world where great programming commands premium pricing, we continue to hit on all cylinders. I am extremely pleased with our terrific second-quarter results, and I am confident that Leslie and his management team will build on our momentum in the quarters and years to come."

"Our record second quarter results reflect CBS's underlying strength and the ongoing evolution of our business to encompass multiple sources of growing and recurring high-margin revenue," said Leslie Moonves, President and Chief Executive Officer, CBS Corporation. "The good news is, there's so much more to come, and there are several important events just ahead. The U.S. presidential election will be a major factor in our second half results, and the London Olympics will give a considerable lift to our Outdoor business. And as we head into 2013, we will benefit from the Super Bowl, CBS's success in the upfront marketplace, as well as from a number of hit shows that will be sold into syndication. Plus, we are containing our costs and reducing our interest expense, and as a sign of the confidence we have in our future, we recently announced a significant increase in the amount of capital we are returning to our shareholders both through our ongoing dividend and accelerated share buyback program. For all of these reasons, we're confident 2012 will be a record year, and we will produce exceptional results in 2013 and beyond as well."

Second Quarter 2012 Results

In the second quarter of 2012, the Company set new quarterly records in the following key metrics:

• OIBDA of $901 million
• Operating income of $769 million
• Diluted earnings per share of $.65

Two significant factors in the second quarter of 2011 – the Company's initial multiyear digital streaming agreement (under which dozens of the Company's library titles were first made available for streaming) and the semifinals of the NCAA Division I Men's Basketball Championship (which aired during the first quarter in 2012) – had an impact on the revenue comparison. Second quarter 2012 revenues came in at $3.48 billion compared with $3.59 billion for the same quarter a year ago. Some of the impact was offset by growth in high-margin affiliate and subscription fee revenues, while underlying advertising revenues for the second quarter of 2012 reflected a steady marketplace.

In addition, the OIBDA margin improved two percentage points, to a record 26%, and the operating income margin expanded two percentage points, to 22%, in the second quarter of 2012. Those increases, as well as the Company's record performance in the three key metrics mentioned above, reflect a higher profit margin on 2012 television licensing revenues as well as the growth in high-margin affiliate and subscription fees.

Net earnings were $427 million for the second quarter of 2012, up 8%. The Company's earnings per share rose 12%, which was driven by the operating income growth and lower weighted average shares outstanding as a result of the Company's share repurchase program.

Reconciliations of 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 $558 million for the second quarter of 2012, compared with $646 million for the second quarter a year ago. For the first half of 2012, free cash flow was $1.17 billion compared with $1.50 billion for the first half of 2011, reflecting higher investment in content (primarily television programming) and higher income tax payments. The Company generated cash flow from operating activities of $1.26 billion for the six months ended June 30, 2012, versus $1.59 billion for the comparable prior-year period.

During the second quarter of 2012, the Company issued $400 million of 1.95% senior notes due 2017 and $500 million of 4.85% senior notes due 2042. The Company used the net proceeds to repay its $152 million of 8.625% debentures at maturity on August 1, 2012. Also, the net proceeds were used in July to redeem the Company's $338 million of 5.625% senior notes due August 2012 and its $400 million of 8.20% senior notes due 2014. In connection with these redemptions, the Company will record a pretax loss on early extinguishment of debt of approximately $57 million during the third quarter. These actions, along with the debt activity during the first quarter of 2012, are expected to result in annualized interest expense savings of approximately $53 million.  

Also during the quarter, the Company repurchased 9.4 million shares of CBS Corp. Class B Common Stock for $301 million, at an average cost of approximately $32 per share. Since the inception of the program, through June 30, 2012, the Company has repurchased 60.6 million shares for $1.59 billion, at an average cost of approximately $26 per share.

Consolidated and Segment Results (dollars in millions)
The tables below present the Company's revenues by segment and type as well as its OIBDA before impairment charges and operating income (loss) by segment for the three and six months ended June 30, 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 of $1.71 billion for the second quarter of 2012 decreased 7% from $1.84 billion in the same prior-year period. Last year's second quarter benefited from the initial licensing of the Company's programming for digital streaming, the third-cycle domestic syndication sale of Frasier, and the semifinals of the NCAA Division I Men's Basketball Championship, which aired during the first quarter of 2012 versus the second quarter of 2011. Some of the impact was offset by growth in high-margin retransmission revenues and higher international syndication revenues in the second quarter of 2012.

Entertainment OIBDA for the second quarter of 2012 decreased 3% to $426 million from $440 million as the impact of the initial licensing of the Company's programming for digital streaming in 2011 was partially offset by higher profits from syndication.

Cable Networks (Showtime Networks, CBS Sports Network, and Smithsonian Networks)
Cable Networks revenues for the second quarter of 2012 increased 8% to $446 million from $413 million for the same prior-year period. The results were driven by higher affiliate revenues, which reflect increases in rates and subscriptions at Showtime Networks (which includes Showtime, The Movie Channel, and Flix), CBS Sports Network, and Smithsonian Networks, as well as higher licensing revenues from the digital streaming of Showtime original series.

Cable Networks OIBDA for the second quarter of 2012 grew 8% to $190 million from $176 million for the same prior-year period, primarily reflecting the revenue growth, partially offset by expense increases associated with the timing of theatrical programming costs and advertising expenses for series premieres.

Publishing (Simon & Schuster)
Publishing revenues for the second quarter of 2012 increased 3% to $189 million from $183 million for the same prior-year period reflecting continued growth in digital book sales, partially offset by lower print book sales. Digital sales increased 44% from the same prior-year period and represented approximately 21% of total Publishing revenues. Best-selling titles in the second quarter included The Wind Through the Keyhole by Stephen King and Cowards by Glenn Beck.

Publishing OIBDA for the second quarter of 2012 decreased $10 million to $9 million from the same prior-year period, as a charge related to a legal matter more than offset the revenue increase.

Local Broadcasting (CBS Television Stations and CBS Radio)
Local Broadcasting revenues for the second quarter of 2012 increased 2% to $704 million from $691 million for the same prior-year period. CBS Television Stations revenues rose 6%, reflecting increased spending by automotive manufacturers, higher political advertising, and higher retransmission revenues, which were partially offset by lower advertising spending by the retail and financial services industries. CBS Radio revenues decreased 2% as growth in automotive advertising was offset by a decline in spending by retail and financial services advertisers.

Local Broadcasting OIBDA for the second quarter of 2012 increased 8% to $248 million from $230 million, primarily driven by the revenue growth and lower programming and production costs.

Outdoor (CBS Outdoor)
Outdoor revenues for the second quarter of 2012 decreased 2% to $481 million from $490 million for the same prior-year period, driven by the unfavorable impact of foreign exchange rate changes. In constant dollars, revenues increased 1% from the second quarter of 2011. Revenues for the Americas (which includes North America and South America) increased 2% in constant dollars for the second quarter of 2012, principally driven by growth in the U.S. billboards and displays businesses, partially offset by the impact from the nonrenewal of the Toronto transit contract. Revenues for Europe increased 1% in constant dollars, primarily reflecting higher advertising sales associated with the 2012 Summer Olympics in London. Some of this increase was offset by weakness in the European economy and the nonrenewal of certain contracts.

Outdoor OIBDA for the second quarter of 2012 increased 8% to $93 million from $86 million for the same prior-year period, driven by the revenue growth in constant dollars.

Corporate
Corporate expenses before depreciation for the second quarter of 2012 decreased $5 million to $52 million from the same prior-year period, principally reflecting lower stock-based compensation expense.

Residual Costs
Residual costs include pension and postretirement benefits costs for plans retained by the Company for previously divested businesses. Residual costs for the second quarter of 2012 decreased $6 million to $12 million from the same quarter last year, primarily because of the benefit from the prefunding of pension plans during 2011.

About CBS Corporation
CBS Corporation (NYSE: CBS.A and CBS) is a mass media company that creates and distributes industry-leading content across a variety of platforms to audiences around the world. The Company has businesses with origins that date back to the dawn of the broadcasting age as well as new ventures that operate on the leading edge of media. CBS owns the most-watched television network in the U.S. and one of the world's largest libraries of entertainment content, making its brand – "the Eye" – one of the most recognized in business. The Company's operations span virtually every field of media and entertainment, including cable, publishing, radio, local TV, film, outdoor advertising, and interactive and socially responsible media. CBS's businesses include CBS Television Network, The CW (a joint venture between CBS Corporation and Warner Bros. Entertainment), Showtime Networks, CBS Sports Network, Smithsonian Networks, Simon & Schuster, CBS Television Stations, CBS Radio, CBS Outdoor, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Interactive, CBS Consumer Products, CBS Home Entertainment, CBS Films and CBS EcoMedia. For more information, go 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.

(a)      Margin is defined as OIBDA or operating income, as applicable, divided by revenues.

SOURCE CBS Corporation