CBS' first-quarter loss narrows

Ad revenue rises further; Moonves eyes best upfront in years

NEW YORK -- CBS Corp. reported a lower first-quarter loss after the market close Wednesday amid advertising revenue improvements of 17% across the company, which gets about two thirds of its total revenue from ads.

CBS recorded a loss of $26.2 million, compared with last year's $55.3 million loss.
The company posted a quarterly adjusted profit of $34.3 million, which excludes one-time items, compared with a loss of $36 million in the year-ago period.

Revenue rose 12% to $3.53 billion - marking the firm's return to clear revenue growth after the recession and recent quarters of about unchanged revenue. It also marked the first double digit improvement since its separation from Viacom at the end of 2005. The revenue gain was driven by a 19% gain in the local broadcasting unit, where ad trends have improved sharply, 15% in the entertainment unit, which included the Super Bowl telecast on the CBS network that saw a 25% ad gain, and 8% at cable networks. Excluding the Super Bowl, CBS ad sales were still up in the high single digits.

"We got off to a tremendous start in 2010, as our businesses across the company capitalized on the improving operating environment," said president and CEO Leslie Moonves, who also highlighted that cost cuts over the last two years make revenue gains now even more pronounced. "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."
On a conference call, he predicted the upfront will be "the strongest one in years."

At the CBS network, first-quarter scatter ad prices were up 30%, and in the current quarter trends remain strong at 20%-plus, management said. Asked by an analyst if that means a softening of scatter trends, Moonves said the second quarter tends to be a tad weaker than the first and said he should focus more on scatter being up more than 25% for CBS since the start of the year when gauging the strength of trends.

The ad rebound is also benefiting the company's other businesses. "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," Moonves said. "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."

CBS TV stations revenue increased 29% to $323.7 million in the first quarter due to improved ad trends, and radio revenue climbed 9% to $282.7 million. In the current second quarter, they are pacing up more than 20% and in the high single digit percentage range, respectively, Moonves said.

The company also reported 19% growth in display ad revenue for its digital unit CBS Interactive and said the second quarter is pacing up 20%-plus.

CBS Corp. also touted subscription growth at CBS College Sports Network and Showtime Networks, with Moonves lauding the premium cable service as "a business that continues to achieve new financial and creative highs."

Adjusted profit for the first quarter excludes restructuring charges of $57.1 million and $25.9 million of discrete tax items. Adjusted results for the first quarter of 2009 excluded an $18.8 million charge.

Adjusted operating income before depreciation and amortization, a key metric that analysts look at for CBS Corp., rose 40% to $351.3 million driven mainly by the local broadcasting and cable networks units, while the entertainment segment was down 4%. For the decline, the company cited "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."

"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 executive chairman and controlling shareholder Sumner Redstone.

Here some further highlights from the earnings conference call:
* Asked about a potential combination or alliance of CBS News and CNN, Moonves said the company always looks at all ways to further improve its businesses. "We have been talking to CNN for years," and CNN's Anderson Cooper already appears on "60 Minutes," he said, adding such talks with CNN and others in the industry are likely to continue.

* Moonves said network retransmission fee revenue from distributors of CBS is now a reality. This year, it will make up more than $100 million, with "multiples" to come in the future, he said. He also mentioned a recent deal with Nexstar, an operator of CBS stations not owned by CBS Corp. that gives the latter higher contributions for he value of the network now that stations are getting retrans money. He predicted more such deals to come. Moonves also said CBS has had talks with some affiliate groups about jointly negotiating retrans fees with cable operators and other distributors.

* While CBS FIlms has been disappointing in the early going, Moonves once again predicted a better future. He lauded the "very respectable run" by "The Back-up Plan" and predicted "continuous improvement" of the relatively new film unit.

* Redstone, as always, opened the prepared remarks on the earnings call, but started with some delay after Moonves asked him to proceed. Redstone cited static on the phone line in saying he didn't know he was up yet.
He also lauded the ad boon now that the recession is over. "What a difference a year makes," Redstone said. "No company today is poised to benefit from the improving economy more than we are." He also once again lauded Moonves as "incomparable" and as "my very good friend."

* Asked about a potential increase in dividend payments, Moonves said CBS feels "really good" about its balance sheet and cash position now and asked Wall Street to stay tuned in the coming quarters as it always evaluates its use of cash. He also said he expects no significant acquisitions.
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