'Great first year' for CBS Corp.

Posts $335 mil profit; sets buyback, 10% dividend

CBS Corp. swung to a better-than-expected fourth-quarter profit, boosted its quarterly dividend 10% on Tuesday and unveiled a much-anticipated $1.5 billion stock-buyback program as president and CEO Leslie Moonves and chairman Sumner Redstone lauded the firm's successful first year as an independent company.

Wall Street observers gave the financial update mixed reviews, with some lauding the company's performance and shareholder initiatives, while others wondered about its 2007 growth momentum.

Moonves signaled Tuesday that CBS Corp. could look to quietly start negotiations with more cable operators, including such biggies as Comcast Corp. and Time Warner Cable, about new carriage deals and first-time retransmission rights payments well ahead of contract expirations in 2009 and beyond.

"There is a new paradigm in the marketplace," he said when asked about his optimism that CBS Corp. also will get such payments from larger distribution firms.

On the conference call, Redstone said it was a "terrific" quarter and year for the company. "What a success the new CBS Corp. has become in its very first year," he said. "I'm really enthusiastic about the future."

Redstone also expressed his "unequivocal confidence" in Moonves and his team.

Moonves also looked back on "a great first year," highlighting that the financial performance surpassed key management targets for 2006.

He said CBS Corp. expects to be able to grow its revenue in the low-single-digit percentage range longer-term, its operating income in the mid-single digits and earnings per share in the high single digits.

CFO Fred Reynolds said that underlying financials will see nice gains this year, but on a reported basis, revenue and operating income will be about flat compared with 2006 because of numerous factors, including $40 million-$50 million in additional stock-based compensation expense, a weaker off-network syndication pipeline and the loss of contributions from radio or TV stations it has sold or is in the process of selling.

Moonves told analysts that CBS Corp. has no plans to sell its Simon & Schuster book unit or "bring in-house and combine with our radio operations" radio programmer Westwood One.

He signaled that there could be further smaller deals, saying his team is focused on running its core businesses effectively and "reshaping our (asset) portfolio into better-margin, higher-growth businesses." For example, Moonves wouldn't rule out further TV station sales, saying the firm will consider that when approached with the right price.

Management also said that the stock-buyback program, set to reduce the company's outstanding shares by 6%, could be a one-time affair, with Moonves saying "a healthy dividend is the best way to return" money to shareholders. CBS Corp. said its board has approved a 10% quarterly dividend increase to 22 cents per share, the fourth hike in about 14 months.

CBS Corp. posted a fourth-quarter profit of $335 million, compared with a year-ago loss of $9.14 billion, which included a huge write-down. Revenue rose 2% to $3.9 billion, driven by a 10% gain in the firm's outdoor unit, a 7% publishing division improvement and a 3% TV unit increase, partly offset by an 8% radio decline.

Full-year 2006 revenue edged up 1% to $14.3 billion with increases of 2% in TV, 6% in publishing and 8% in the outdoor unit, partially offset by a 7% radio decrease.

TV unit revenue rose to $2.6 billion in the fourth quarter thanks to the second-cycle cable sale of "Star Trek: Voyager," subscriber growth at Showtime and "slightly" higher advertising revenue thanks to political ad gains.

TV operating income before depreciation and amortization before impairment charges rose 20% to $531.5 million.

Moonves said he is "very excited" about this year's broadcast upfront selling season, touted the CBS network for being No. 1 in all major demographics even before the Super Bowl broadcast and suggested that "2008 political (advertising) could creep into 2007" thanks to earlier primaries.

Radio revenue fell to $498.2 million in the latest quarter, with the company citing recent programming changes and "challenges in the radio advertising marketplace." OIBDA fell 2% to $211.3 million as revenue declines were partially offset by lower programming costs.

Moonves said he is "not satisfied" with the radio performance, and his team is "aggressively" looking at ways to make the radio experience "more personalized and community focused."

"In somewhat of a role reversal from recent quarters, TV and radio both came in better at the (operating cash flow) level, while outdoor (operating cash flow) growth was actually disappointing," Merrill Lynch analyst Jessica Reif Cohen said about CBS Corp.'s fourth quarter.

Moonves also vowed to bring his company's content to more new digital platforms if the price is right, signaling that a TV content deal with Internet giant Google Inc. might have failed because of pricing and release timing issues.