CBS keeps optimism amid weak economy

Redstone doesn't plan further stock sales

Things are not as bad as they may seem amid the credit crunch and  signs that the U.S. economy is close to a recession.

That was the message CBS Corp. CEO Leslie Moonves and chairman and controlling shareholder Sumner Redstone tried to send Thursday during a conference call after a third-quarter financial report that was as weak as expected.

In his first public comments on the issue, Redstone promised not to sell a single additional share of CBS or Viacom Inc., which he also controls, after recently doing so to address high debt held by his holding company National Amusements. "This was not something NA wanted to do, nor is it something that NA intends to do again," he said, adding that the company is "actively talking with our lenders" about possible new debt structures.

Pressed by analysts about whether he could completely rule out share sales even if there were further declines in stock prices, Redstone wouldn't comment.

Pali Research analyst Richard Greenfield said Redstone "may not have a choice (to sell more stock, even voting stock) going forward if debt renegotiations do not pan out in time."

CBS posted a 3% third-quarter revenue gain to $3.38 billion on higher syndication revenue, driven by the cable syndication sale of "CSI: NY" and the acquisition of CNET Networks.

However, the company reported an operating loss before depreciation and amortization of $13.48 billion, compared to a year-ago profit of $757.6 million. The loss was driven by a pretax noncash impairment charge of $14.12 billion taken because of current market conditions that have reduced the value of the firm's assets.

Adjusted for the charge and other items, OIBDA would have hit $665.2 million, down from $786.9 million in the year-ago period.

Moonves touted the relative strength of national TV advertising sales amid a tough economy and much-weakened local ad momentum and made clear that his firm has enough cash to continue a dividend that some have called into question amid the recent financial crisis.

"Our strong year-to-date free cash flow of $1.4 billion enables us to strategically invest in our businesses and is more than sufficient to pay our dividend," Moonves said.

The so-called scatter ad market is "obviously not booming as in years past," Moonves said. But he touted the CBS network's ratings leadership this season, saying this will allow it to be a "beneficiary" of ad spending in the coming weeks.

Moonves touted CBS' content strength in TV and online, saying great programming will remain a focus in a weak economy. However, he also promised Wall Street the company would take "a very disciplined approach to investment in capital projects."

In the core TV division, revenue rose 2% to $2.08 billion because of higher license fees, home entertainment and affiliate revenue partially offset by ad sales that decreased 14%. The company cited lower primetime ratings of summer programming competing with the Beijing Olympics, the primetime coverage of the presidential conventions and one debate that contained limited advertising, as well as ad softness particularly in local advertising.

Moonves on Thursday also touted the recently created CBS Interactive, which includes CNET, as an area for further growth. Breaking out the segment's results for the first time, CBS said revenue at the digital unit reached $140.7 million, up from $35.9 million in the year-ago period thanks mostly to the CNET acquisition.
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