CBS Earnings Rise 14%; Redstone Praises Moonves’ Management

Bright Spots Include Syndication-TV-Program Sales; Bad News Includes Lower Ad Sales from TV, Radio
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CBS’ net income rose a healthy 14% in the first quarter and president and CEO Leslie Moonves received a conspicuous endorsement in the Tuesday earnings statement from executive chairman Sumner Redstone, coming after the media company experienced several bumpy months.

CBS also increased its quarterly dividend payment to shareholders 8% to $0.27 per share, which Moonves noted is among the highest in the industry.

“Leslie and his team are consistently delivering strong results while positioning CBS for future growth and returning significant cash to shareholders," Redstone said in a press release issued before a company conference call with investors. The comments signaled Redstone’s support after the company’s Showtime unit lost its three biggest film-output deals and CBS Television experienced some knocks, including poor ratings for its evening newscast.

There were dark clouds as well in the first-quarter earnings, with CBS experiencing weak local TV and radio ad sales, downbeat results in its radio segment, a smaller-than-anticipated gain in its buoyant outdoor-advertising segment and a less-robust forecast for full-year results.

Fully-diluted earnings per share increased 29% to 36 cents in the quarter ended March 31 from 28 cents, which exceeded analysts’ forecasts by about three cents. The per-share percentage is higher than the rise in lump-sum net income because CBS has been buying back stock, reducing its share count in the current period. Net income climbed to $244.3 million from $213.5 million, reflecting the 14% increase. Revenue was down very slightly to $3.654 billion from $3.658 billion a year earlier.

On an adjusted basis, operating income -- a barometer of core profitability -- increased 11% to $602.2 million, although unadjusted, it was up just 1%.Another interesting metric was an impressive 25% hike in first-quarter free cash flow, but that was attributed in part to the nonrecurring absence of TV-program production due to the now-settled Hollywood writers’ strike.

In its TV segment, CBS credited higher profits from syndication-TV-program sales stemming from a new international self-distribution arrangement for the CSI franchise and second-cycle domestic syndication sales from Everybody Loves Raymond. Television-segment revenue rose 1% and its operating income climbed a healthy 15%.

During the conference call, Moonves was upbeat, saying that that CBS Television expects "very healthy" ad sales for the upfront market. But company brass acknowledged that local TV and radio advertising was weaker than hoped, which was addressed with staff cutbacks.

The company also forecast that operating income will be up 3%-5% in 2008, excluding stock-based executive compensation and restructuring charges.

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