NEW YORK, Aug. 6 /PRNewswire-FirstCall/ -- CBS Corporation (NYSE: CBS.A and CBS) today reported results for the second quarter ended June 30, 2009, with revenues of $3.01 billion, adjusted earnings per share of $.08 on a diluted basis and free cash flow of $351.7 million.
"Leslie and his management team continue to run CBS with a sure and steady hand," said Sumner Redstone, Executive Chairman, CBS Corporation. "We are focused on what matters most: maintaining financial flexibility and positioning the Company as one of the leading beneficiaries in an economic recovery. I am proud of the work our people do each day to achieve these goals, and confident in CBS's bright future."
"As we anticipated, early signs of a recovery took hold in the second quarter, and our revenue, profit and EPS trends were all better than in the first quarter," said Leslie Moonves, President and Chief Executive Officer, CBS Corporation. "We continue to believe that the back half of the year will be considerably stronger than the first. We are particularly encouraged by the strong performance of our many content businesses. Following a season where we were the only Network to grow in all key demos, CBS is again alone in adding viewers this summer, and well positioned to carry that momentum into the fall. We also have a strong slate of syndication titles in the pipeline for release between now and year-end. And we continue to see the benefits of the aggressive steps we have taken to reduce expenses throughout the Company. As the U.S. economy improves, we are confident we can deliver stronger financial results in both the near and longer term."
Second Quarter 2009 Results
Revenues for the second quarter of 2009 totaled $3.01 billion compared to $3.39 billion for the same quarter last year due to lower advertising sales, as the softness in the advertising marketplace continued during the second quarter. The decline in advertising sales was partially offset by the acquisition of CNET Networks ("CNET").
Operating income before depreciation and amortization ("OIBDA") for the second quarter of 2009 was $387.4 million compared with $760.4 million for last year's second quarter. Operating income was $242.2 million versus $637.0 million for the same quarter last year. In both cases, lower advertising sales were partially offset by lower expenses associated with cost-savings initiatives and the acquisition of CNET.
Adjusted net earnings for the second quarter of 2009 exclude two items. During the second quarter, the Company utilized the proceeds from new debt offerings to repurchase senior notes due 2010 resulting in a pre-tax loss on early extinguishment of debt of $30.5 million. In addition, the Company had a $23.3 million reduction of deferred tax assets associated with stock-based compensation. On an adjusted basis, excluding these two items, net earnings for the second quarter of 2009 were $57.4 million, or $.08 per diluted share, versus $330.1 million, or $.49 per diluted share, for the same quarter last year reflecting lower operating income. Adjusted results for the second quarter of 2008 exclude a pre-tax gain of $127.2 million on the sale of the Company's investment in Sundance Channel.
Reported net earnings were $15.4 million, or $.02 per diluted share, for the second quarter of 2009 versus net earnings of $408.4 million, or $.61 per diluted share, for the same quarter last year, reflecting lower operating income.
Free cash flow for the second quarter of 2009 was $351.7 million.
First Half 2009 Results
Revenues were $6.17 billion for the first half of 2009 versus $7.05 billion for the same prior-year period reflecting lower advertising sales and lower television license fees, primarily due to the absence of the initial benefit in 2008 of the international self-distribution arrangement for the CSI franchise, which was previously distributed by a third-party. These declines were partially offset by the acquisition of CNET and higher affiliate revenues.
OIBDA for the first half of 2009 was $637.2 million versus $1.40 billion for the same prior-year period, and operating income was $349.7 million versus $1.16 billion for the same prior-year period. These decreases were due to the decline in advertising sales, as well as higher television series costs in the absence of the 2008 Writer's Guild of America ("WGA") strike. These were partially offset by the acquisition of CNET, lower expenses associated with cost-savings initiatives and lower restructuring charges in 2009.
On an adjusted basis, net earnings for the first half of 2009 were $20.4 million, or $.03 per diluted share, versus $574.4 million, or $.85 per diluted share, for the same period last year principally driven by lower operating income. Adjusted results for the first half of 2009 exclude a pre-tax loss of $29.8 million on early extinguishment of debt and a $42.1 million reduction of deferred tax assets associated with stock-based compensation. Adjusted results for the first half of 2008 exclude a pre-tax gain of $127.2 million on the sale of the Company's investment in Sundance Channel.
The Company reported a net loss of $39.9 million, or a loss of $.06 per diluted share, for the first half of 2009 versus net earnings of $652.7 million, or $.97 per diluted share, for the same prior-year period, principally driven by lower operating income.
Free cash flow was $556.0 million for the first half of 2009.
Business Outlook
The Company continues to expect full year 2009 OIBDA to be in the range of $1.725 billion to $1.925 billion.
Consolidated and Segment Results
The tables below present the Company's revenues, OIBDA and operating income (loss) by segment for the three and six months ended June 30, 2009 and 2008 (dollars in millions). Reconciliations of all non-GAAP measures to reported results have been included at the end of this earnings release.
Three Months Ended Six Months Ended
June 30, June 30,
Revenues 2009 2008 2009 2008
---------- ---- ----- ---- -----
Television $1,947.5 $2,160.9 $4,178.1 $4,705.6
Radio 322.0 416.4 581.7 779.9
Outdoor 434.1 598.1 814.0 1,095.0
Interactive 126.4 40.2 260.0 93.1
Publishing 181.4 186.0 343.1 387.6
Eliminations (5.1) (7.9) (10.7) (13.4)
---------- ----- ----- ----- -----
Total Revenues $3,006.3 $3,393.7 $6,166.2 $7,047.8
-------------- -------- -------- -------- --------
Three Months Ended Six Months Ended
June 30, June 30,
OIBDA 2009 2008 2009 2008
----- ---- ----- ---- -----
Television $306.7 $512.4 $535.4 $960.8
Radio 95.3 158.6 147.5 280.9
Outdoor 42.2 153.6 67.3 255.1
Interactive 5.7 (16.8) 13.9 (15.7)
Publishing 8.1 17.0 8.2 34.1
Corporate (34.7) (41.9) (63.2) (67.9)
Residual costs (35.9) (22.5) (71.9) (44.9)
-------------- ----- ----- ----- -----
Total OIBDA $387.4 $760.4 $637.2 $1,402.4
-------------- -------- -------- -------- --------
Three Months Ended Six Months Ended
June 30, June 30,
Operating Income (Loss) 2009 2008 2009 2008
----------------------- ---- ----- ---- -----
Television $264.4 $468.1 $449.1 $872.9
Radio 86.0 150.7 129.7 265.7
Outdoor (24.8) 92.4 (63.0) 136.5
Interactive (14.1) (21.3) (25.7) (24.0)
Publishing 6.1 14.6 4.0 29.2
Corporate (39.5) (45.0) (72.5) (74.2)
Residual costs (35.9) (22.5) (71.9) (44.9)
-------------- ----- ----- ----- -----
Total Operating Income $242.2 $637.0 $349.7 $1,161.2
---------------------- ------ ------ ------ --------
Television (CBS Television Network, CBS Television Stations, CBS Television Studios, CBS Television Distribution, CBS College Sports Network and Showtime Networks)
Television revenues for the second quarter of 2009 decreased 10% to $1.95 billion from $2.16 billion for the same prior-year period primarily due to lower advertising sales, home entertainment revenues and television license fees partially offset by higher affiliate revenues. The following table presents revenues by type for the Television segment for the three months ended June 30, 2009 and 2008.
Three Months Ended June 30,
---------------------------
Television Revenues by % of % of
Type 2009 Total 2008 Total
---------------------- ---- ----- ---- -----
Advertising sales $1,154.4 59% $1,333.6 62%
Television license fees 347.9 18 368.5 17
Affiliate revenues 328.8 17 299.9 14
Home entertainment 44.4 2 82.7 4
Other 72.0 4 76.2 3
----- ---- -- ---- --
Total Television
Revenues $1,947.5 100% $2,160.9 100%
---------------- -------- --- -------- ---
Advertising sales for the Television segment decreased 13% due to softness in the advertising marketplace, primarily at the local level. Television license fees were down 6% primarily due to the absence of the initial benefit in 2008 of the international self-distribution arrangement for the CSI franchise, which was previously distributed by a third-party. Affiliate revenues were up 10% over the prior-year primarily due to growth in subscriptions and rate increases at Showtime Networks and higher retransmission revenues.
Television OIBDA and operating income for the second quarter of 2009 decreased 40% to $306.7 million and 44% to $264.4 million, respectively, resulting from lower advertising sales as well as higher television series costs in the absence of the 2008 WGA strike, partially offset by lower expenses as a result of restructuring and cost-savings initiatives. Second quarter 2009 results also include a $14.0 million charge to write down programming inventory to its net realizable value and $4.1 million of restructuring charges principally related to exiting a broadcasting equipment lease upon completion of the digital conversion.
Radio (CBS Radio)
Radio revenues for the second quarter of 2009 decreased 23% to $322.0 million from $416.4 million for the same prior-year period, primarily due to continued weakness in the radio advertising marketplace.
Radio OIBDA and operating income for the second quarter of 2009 decreased 40% to $95.3 million and 43% to $86.0 million, respectively, due to the aforementioned lower advertising sales. This decrease is partially offset by lower talent and employee-related costs resulting from restructuring and cost-savings initiatives.
Outdoor (CBS Outdoor)
Outdoor revenues for the second quarter of 2009 decreased 27% to $434.1 million from $598.1 million for the same prior-year period, reflecting the soft worldwide advertising marketplace and the unfavorable impact of foreign exchange rate changes as the U.S. dollar strengthened in the second quarter. In constant dollars, Outdoor revenues decreased 21% from the second quarter of 2008.
North America revenues for the second quarter of 2009 decreased 22% (20% in constant dollars) to $278.1 million from $354.8 million for the same prior-year period, primarily due to lower revenues from the U.S. billboards business and changes in foreign exchange rates. For the second quarter of 2009, International revenues decreased 36% (24% in constant dollars) to $156.0 million from $243.3 million for the same quarter last year primarily as a result of lower advertising sales in the soft European marketplace and foreign exchange rate changes.
Outdoor OIBDA for the second quarter of 2009 decreased 73% to $42.2 million from $153.6 million for the same prior-year period. Outdoor reported an operating loss of $24.8 million for the second quarter of 2009 versus operating income of $92.4 million for the same quarter last year. Outdoor's franchise and lease costs are generally fixed in nature and, with lower revenues in the difficult worldwide advertising marketplace, many of Outdoor's current transit contracts are operating at their minimum guarantee levels, which significantly reduced OIBDA and operating income margins in the second quarter of 2009. Second quarter results also include restructuring charges related to headcount reductions of $2.5 million in 2009 and $2.6 million in 2008.
For the second quarter of 2009, North America reported OIBDA of $62.4 million, a decrease of 51% from the same quarter last year, and operating income of $15.1 million versus $79.7 million for the same quarter last year. For the second quarter, International reported an OIBDA loss of $20.2 million in 2009 versus income of $26.9 million for the same prior-year period and an operating loss of $39.9 million in 2009 versus operating income of $12.7 million for the same prior-year period. The operating loss for International was negatively affected by higher depreciation expense in the second quarter of 2009 versus the same quarter last year.
Interactive (CBS Interactive)
Interactive revenues for the second quarter of 2009 increased to $126.4 million from $40.2 million for the same quarter last year, reflecting the acquisition of CNET. On a comparable basis, Interactive revenues decreased 8% from the second quarter of 2008.
Interactive OIBDA of $5.7 million for the second quarter of 2009 increased from a loss of $16.8 million for the same prior-year period primarily due to the acquisition of CNET. Interactive reported an operating loss of $14.1 million for the second quarter of 2009 versus an operating loss of $21.3 million for the same quarter last year resulting from depreciation and amortization expense associated with higher fixed and intangible asset balances as a result of the CNET acquisition.
Publishing (Simon & Schuster)
Publishing revenues for the second quarter of 2009 decreased 2% to $181.4 million from $186.0 million for the same prior-year period principally reflecting the unfavorable impact of foreign exchange rate changes.
Publishing OIBDA and operating income for the second quarter of 2009 decreased 52% to $8.1 million and 58% to $6.1 million, respectively. These decreases were largely driven by higher author royalties and restructuring charges of $2.2 million related to headcount reductions partially offset by lower employee-related expenses resulting from cost-savings initiatives.
Corporate
Corporate expenses before depreciation expense decreased 17% to $34.7 million for the second quarter of 2009 from $41.9 million for the same prior-year period primarily reflecting the favorable impact from the early termination of a real estate lease arrangement.
Residual Costs
Residual costs primarily include pension and postretirement benefits costs for benefit plans retained by the Company for previously divested businesses. Residual costs increased to $35.9 million for the second quarter of 2009 from $22.5 million for the same quarter last year primarily as a result of pension plan asset performance.
Interest Expense
Interest expense of $133.9 million for the second quarter of 2009 decreased from $134.3 million for the same prior-year period.
Interest Income
Interest income of $1.1 million for the second quarter of 2009 decreased from $15.2 million for the same quarter last year reflecting lower average cash balances and lower interest rates.
Loss on Early Extinguishment of Debt
The Company recognized a $30.5 million loss on early extinguishment of debt in the second quarter of 2009 associated with the repurchase of senior notes due 2010.
Other Items, Net
"Other items, net" for the second quarter of 2009 was a net loss of $3.5 million principally reflecting foreign currency exchange losses. "Other items, net" for the same prior-year period included a pre-tax gain of $127.2 million on the sale of the Company's investment in Sundance Channel.
Provision for Income Taxes
For the second quarter, the Company's provision for income taxes was $56.9 million for 2009 and $232.9 million for 2008 on earnings before income taxes of $75.4 million for 2009 and $642.8 million for 2008. The second quarter 2009 income tax provision includes a $23.3 million reduction of deferred tax assets associated with stock-based compensation. On an adjusted basis, excluding the impact of this reduction of deferred tax assets and divestitures, the second quarter effective income tax rate was 42.9% for 2009 versus 35.7% for 2008.
About CBS Corporation
CBS Corporation (NYSE: CBS.A and CBS) is a mass media company with constituent parts that reach back to the beginnings of the broadcast industry, as well as newer businesses that operate on the leading edge of the media industry. The Company, through its many and varied operations, combines broad reach with well-positioned local businesses, all of which provide it with an extensive distribution network by which it serves audiences and advertisers in all 50 states and key international markets. It has operations in virtually every field of media and entertainment, including broadcast television (CBS and The CW - a joint venture between CBS Corporation and Warner Bros.
