CBS Corp. Q2 financials soar

Management predicts further ad market improvements

NEW YORK - CBS Corp. reported much-improved second-quarter financials after the market close Tuesday on strong advertising and other revenue improvements that led profit to multiply.

Management in a conference call said it is seeing no signs of an ad market slowdown, with third-quarter scatter ad market prices for the CBS network running 30%-plus ahead of the upfront.

CBS shares rose in after-hours trading.

The company posted a better-than-expected quarterly profit of $150.1 million, well up from $15.4 million in the year-ago period. Adjusted profit of $175.2 million, which excludes one-time losses and charges, compared with $62.6 million in the year-ago period.

Operating income before depreciation and amortization rose 49% to $578.5 million.

Revenue jumped 11% to $3.3 billion -- the second consecutive quarter of clear revenue growth after the recession. It also marked only the second double-digit gain since its separation from Viacom at the end of 2005.

The revenue jump was driven by a 9% gain in advertising revenue, 12% subscription fee gains and a 19% jump in content licensing and distribution revenue.
Revenue rose 17% in the local broadcasting unit, 12% at the firm's cable networks and 10% in the entertainment unit.

Among key ad figures, CBS Corp. reported a 5% gain for the CBS network and a 31% for its TV stations due to an improved marketplace across key categories, including automotive and financial services, and higher political advertising sales. CBS Radio revenue climbed 6%.

"With top-line gains in all of our businesses, and a continued vigilance on cost containment, revenues are translating more efficiently into profits," said president and CEO Leslie Moonves. The very healthy ad sales pacing we're seeing today indicates that the recovery is continuing, and we expect a significant lift in political advertising around the November elections."

Executive chairman and controlling shareholder Sumner Redstone called the results "terrific."

On a conference call after the market close, Redstone, all focused on business, said he was "more than pleased" by the "super-excellent results." He also touted CBS's "momentous momentum."

Moonves predicted continued financial gains through the rest of 2010, 2011 and beyond, saying revenue trends, helped by retransmission consent fees like in a deal unveiled Monday with cable giant Comcast Corp., and continued cost controls will combine to produce further upward momentum.

Importantly, he said: "We do not foresee a slowdown" in local ad momentum.

Here some highlights from the earnings conference call:

-- Moonves said CBS sold 80% of its network ad inventory in this year's upfront ad market, compared with about 65% last year. He vowed his team would continue to grow network revenue and profitability.

-- Second-quarter scatter ad market prices were up in the mid-20% range over upfront levels, said CFO Joseph Ianniello. Scatter prices are, however, pacing up 30%-plus in the current third quarter. "Those advertisers who bought in the upfront I think will be very pleased," the CFO said.

-- Ad revenue is currently trending up in the mid-20% range at the firm's TV stations, while radio is up in he high single digits.

-- The CEO promised exciting announcements "shortly" about the CBS Films slate for 2011, saying the first release will likely be an acquired film followed by two own productions. Moonves said the firm remains focused on budget below $40 million, such as the $17 million budget for upcoming "Beastly."

-- Moonves highlighted the more than 5 million Showtime subscribers the company gained over the past year.

-- Asked about reverse compensation, Moonves reiterated that some CBS affiliate TV stations have started paying the company as it keeps attracting retrans fees.