CBS Corporation Reports First Quarter 2015 Results

CBS Corporation Reports First Quarter 2015 Results

Revenues of $3.5 Billion

Operating Income of $702 Million

Record Diluted EPS of $.78

NEW YORK, May 7, 2015 /PRNewswire/ -- CBS Corporation (NYSE: CBS.A and CBS) today reported results for the first quarter of 2015, including its highest-ever net earnings from continuing operations per diluted share ("EPS").

"There are tremendous opportunities afforded to companies that create premium programming, and Les and his team are capitalizing on all of them," said Sumner Redstone, Executive Chairman, CBS Corporation. "I am confident they have the strategy to keep CBS at the top of its game for many years to come."

"CBS turned in another quarter of record EPS, and our investment in world-class content will lay the foundation to drive future profits," said Leslie Moonves, President and Chief Executive Officer, CBS Corporation. "We are set to close the season with four of the top five new scripted series, all of which we have ownership in and can monetize in a growing number of ways. We will also win the season as the most-watched network in America, with a solid performance across all demographics at a time when others are facing ratings erosion. Looking ahead, we will continue to build upon our position of great strength with a new primetime lineup that we will announce next week, and we expect to be #1 in the Upfront marketplace as well. At the same time, our premium content is also driving growth in our nonadvertising revenue sources. We had terrific first-quarter results in streaming, both internationally and domestically, as well as retransmission consent and reverse compensation, which are steadily making their way toward $2 billion in revenue by 2020 if not before. In addition, our online news channel, CBSN, and our over-the-top service, CBS All Access, are exceeding expectations. We have already expanded CBS All Access to more than half of the country, and we expect it to be offered to 75% of all households by year's end. As we continue to find new ways to monetize our content, our investment in programming will pay off well into the future, and we remain as committed as ever to returning value to our shareholders."

First Quarter 2015 Results

Revenues were $3.50 billion for the first quarter of 2015 compared with $3.57 billion for the same prior-year period. The quarter was affected by the broadcast of one fewer National Football League ("NFL") playoff game on the CBS Television Network and lower advertising revenues at the Company's Local Broadcasting segment. Content licensing and distribution revenues decreased 4%, while affiliate and subscription fees increased 11%, driven by growth in rates.

Operating income was $702 million for the first quarter of 2015 compared with $791 million for the same prior-year period, reflecting a higher investment in sports and entertainment programming.

Net earnings from continuing operations were $394 million for the first quarter of 2015 compared with $462 million for the same prior-year period as a result of the lower operating income. EPS was a record for the quarter at $.78 compared with $.77 for the same quarter in 2014. Weighted average shares outstanding were 506 million in this year's first quarter, down from 600 million in the prior-year period.

Free Cash Flow, Balance Sheet and Liquidity

For the first quarter of 2015, free cash flow was $400 million compared with $520 million for the same prior-year period. Operating cash flow from continuing operations was $417 million compared with $548 million for last year's first quarter. This performance was primarily driven by a higher investment in programming.

During January 2015, the Company issued $600 million of 3.50% senior notes due 2025 and $600 million of 4.60% senior notes due 2045. The Company used the net proceeds for the repurchase of CBS Corp. Class B Common Stock and repayment of short-term borrowings, including commercial paper. Also during the quarter, the Company repurchased 17.2 million shares of its Class B Common Stock for $1.00 billion, at an average cost of $58.07 per share.

Reconciliations of non-GAAP measures to reported results are included at the end of this earnings release.

Consolidated and Segment Results (dollars in millions)

The tables below present the Company's revenues by segment and type as well as operating income (loss) by segment and depreciation and amortization by segment for the three months ended March 31, 2015, and 2014.


Three Months Ended

March 31,
---------

Revenues by Segment 2015 2014
------------------- ---- ----

Entertainment $2,261 $2,303

Cable Networks 539 537

Publishing 145 153

Local Broadcasting 596 626

Eliminations (41) (49)
------------ --- ---

Total Revenues $3,500 $3,570
-------------- ------ ------



Three Months Ended

March 31,
---------

Revenues by Type 2015 2014
---------------- ---- ----

Advertising $1,784 $1,873

Content licensing and
distribution 1,028 1,073

Affiliate and subscription fees 628 567

Other 60 57
----- --- ---

Total Revenues $3,500 $3,570
-------------- ------ ------



Three Months Ended

March 31,
---------

Operating Income (Loss) 2015 2014
---------------------- ---- ----

Entertainment $346 $420

Cable Networks 251 254

Publishing 12 11

Local Broadcasting 161 179

Corporate (68) (73)
--------- --- ---

Total Operating Income $702 $791
---------------------- ---- ----



Three Months Ended

March 31,
---------

Depreciation and Amortization 2015 2014
----------------------------- ---- ----

Entertainment $32 $37

Cable Networks 6 5

Publishing 1 2

Local Broadcasting 21 21

Corporate 8 6
--------- --- ---

Total Depreciation and Amortization $68 $71
----------------------------------- --- ---


Entertainment(CBS Television Network, CBS Television Studios, CBS Global Distribution Group, CBS Interactive, and CBS Films)

Entertainment revenues were $2.26 billion for the first quarter of 2015 compared with $2.30 billion for the same prior-year period, when the CBS Television Network aired one additional NFL playoff game. Higher affiliate and subscription fee revenues from growth in rates offset a decline in content licensing and distribution revenues.

Entertainment operating income for the first quarter of 2015 was $346 million compared with $420 million for the same prior-year period, reflecting a higher investment in sports and entertainment programming.

Cable Networks (Showtime Networks, CBS Sports Network, and Smithsonian Networks)

Cable Networks revenues were $539 million for the first quarter of 2015 compared with $537 million for the same prior-year period. Higher revenues from growth in affiliate rates and from the international licensing of Showtime original series offset lower domestic licensing revenues as the first quarter of 2014 included a significant domestic streaming sale of Dexter.

Cable Networks operating income for the first quarter of 2015 of $251 million decreased 1% from $254 million for the same prior-year period, reflecting higher operating expenses, mainly from the timing of theatrical programming.

Publishing (Simon & Schuster)

Publishing revenues for the first quarter of 2015 were $145 million compared with $153 million for the same prior-year period, reflecting lower print book sales. Digital revenues represented 31% of Publishing's total revenues for the first quarter of 2015. Bestselling titles for the quarter include the 2014 release, All the Light We Cannot See by Anthony Doerr, and Get What's Yours: The Secrets to Maxing Out Your Social Security by Laurence J. Kotlikoff, Philip Moeller, and Paul Solman.

Publishing operating income for the first quarter of 2015 of $12 million increased from $11 million in the first quarter of 2014 as the revenue decline was more than offset by lower selling and inventory costs.

Local Broadcasting (CBS Television Stations and CBS Radio)

Local Broadcasting revenues of $596 million for the first quarter of 2015 decreased 5% from $626 million in the same prior-year period. The decline was due to lower advertising revenues, particularly from the entertainment and retail industries, and was partially offset by growth in affiliate and subscription fee revenues. CBS Television Stations revenues were down 3%, and CBS Radio revenues decreased 7%.

Local Broadcasting operating income for the first quarter of 2015 declined 10% to $161 million from $179 million for the same prior-year period, primarily reflecting lower revenues.

Corporate

Corporate expenses for the first quarter of 2015 decreased 7% to $68 million from $73 million for the same prior-year period primarily reflecting lower employee-related expenses.

About CBS Corporation

CBS Corporation (NYSE: CBS.A and CBS) is a mass media company that creates and distributes industry-leading content across a variety of platforms to audiences around the world. The Company has businesses with origins that date back to the dawn of the broadcasting age as well as new ventures that operate on the leading edge of media. CBS owns the most-watched television network in the U.S. and one of the world's largest libraries of entertainment content, making its brand -"the Eye" - one of the most recognized in business. The Company's operations span virtually every field of media and entertainment, including cable, publishing, radio, local TV, film, and interactive and socially responsible media. CBS's businesses include CBS Television Network, The CW (a joint venture between CBS Corporation and Warner Bros. Entertainment), CBS Television Studios, CBS Global Distribution Group (CBS Studios International and CBS Television Distribution), CBS Consumer Products, CBS Home Entertainment, CBS Interactive, CBS Films, Showtime Networks, CBS Sports Network, Pop (a joint venture between CBS Corporation and Lionsgate), Smithsonian Networks, Simon & Schuster, CBS Television Stations, CBS Radio and CBS EcoMedia. For more information, go to www.cbscorporation.com.

Cautionary Statement Concerning Forward-Looking Statements
This news release contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. These forward-looking statements are not based on historical facts, but rather reflect the Company's current expectations concerning future results and events. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause the actual results, performance or achievements of the Company to be different from any future results, performance or achievements expressed or implied by these statements. These risks, uncertainties and other factors include, among others: advertising market conditions generally; changes in the public acceptance of the Company's programming; changes in technology and its effect on competition in the Company's markets; changes in the Federal Communications laws and regulations; the impact of piracy on the Company's products; the impact of the consolidation in the market for the Company's programming; the impact of negotiations or the loss of affiliation agreements or retransmission agreements; other domestic and global economic, business, competitive and/or other regulatory factors affecting the Company's businesses generally; the impact of union activity, including possible strikes or work stoppages or the Company's inability to negotiate favorable terms for contract renewals; and other factors described in the Company's news releases and filings with the Securities and Exchange Commission including but not limited to the Company's most recent Form 10-K, Form 10-Qs and Form 8-Ks. The forward-looking statements included in this document are made only as of the date of this document, and under section 27A of the Securities Act and section 21E of the Exchange Act, we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.




CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in millions, except per share amounts)


Three Months Ended

March 31,
---------

2015 2014
---- ----


Revenues $3,500 $3,570
-------- ------ ------

Operating
income 702 791

Interest
expense (93) (93)

Interest income 5 3

Other items,
net (4) 5
------------ --- ---

Earnings from
continuing
operations
before income
taxes 610 706

Provision for
income taxes (203) (234)

Equity in loss
of investee
companies, net
of tax (13) (10)
--------------- --- ---

Net earnings
from
continuing
operations 394 462

Net earnings
from
discontinued
operations,
net of tax - 6

Net earnings $394 $468
------------ ---- ----


Basic net
earnings per
common share:

Net earnings
from
continuing
operations $.79 $.79

Net earnings
from
discontinued
operations $ - $.01

Net earnings $.79 $.80


Diluted net
earnings per
common share:

Net earnings
from
continuing
operations $.78 $.77

Net earnings
from
discontinued
operations $ - $.01

Net earnings $.78 $.78


Weighted
average number
of common
shares
outstanding:

Basic 498 585

Diluted 506 600


Dividends per
common share $.15 $.12
------------- ---- ----





CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions)


At At

March 31, 2015 December 31, 2014
-------------- -----------------

Assets

Cash and cash
equivalents $331 $428

Receivables,
net 3,295 3,459

Programming and
other
inventory 764 922

Prepaid
expenses and
other current
assets 830 780

Total current
assets 5,220 5,589
------------- ----- -----

Property and
equipment 3,166 3,164

Less
accumulated
depreciation
and
amortization 1,772 1,731

Net property
and equipment 1,394 1,433
-------------- ----- -----

Programming and
other
inventory 1,854 1,817

Goodwill 6,664 6,698

Intangible
assets 6,002 6,008

Other assets 2,622 2,488

Assets of
discontinued
operations 30 39

Total Assets $23,786 $24,072
------------ ------- -------

Liabilities and
Stockholders'
Equity

Accounts
payable $175 $302

Participants'
share and
royalties
payable 929 999

Program rights 449 404

Commercial
paper - 616

Current portion
of long-term
debt 21 20

Accrued
expenses and
other current
liabilities 1,474 1,666

Current
liabilities of
discontinued
operations 44 26

Total current
liabilities 3,092 4,033
------------- ----- -----

Long-term debt 7,693 6,510

Other
liabilities 6,510 6,441

Liabilities of
discontinued
operations 94 118

Total
Stockholders'
Equity 6,397 6,970

Total
Liabilities
and
Stockholders'
Equity $23,786 $24,072
-------------- ------- -------








CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)


Three Months Ended

March 31,
---------

2015 2014
---- ----

Operating Activities:

Net
earnings $394 $468

Less: Net
earnings
from
discontinued
operations - 6
------------- --- ---

Net
earnings
from
continuing
operations 394 462

Adjustments to reconcile
net earnings from
continuing operations to
net cash flow
provided by operating
activities from
continuing operations:

Depreciation
and
amortization 68 71

Stock-
based
compensation 46 40

Equity in
loss of
investee
companies,
net of tax
and
distributions 13 12

Change in
assets and
liabilities,
net of
investing
and
financing
activities (104) (37)

Net cash
flow
provided
by
operating
activities
from
continuing
operations 417 548

Net cash
flow used
for
operating
activities
from
discontinued
operations - (47)
------------- --- ---

Net cash
flow
provided
by
operating
activities 417 501
----------- --- ---

Investing Activities:

Capital
expenditures (17) (28)

Investments
in and
advances to
investee
companies (39) (39)

Proceeds
from
dispositions 59 6

Other
investing
activities 2 5
----------- --- ---

Net cash
flow
provided
by (used
for)
investing
activities
from
continuing
operations 5 (56)

Net cash
flow used
for
investing
activities
from
discontinued
operations (3) (9)
------------- --- ---

Net cash
flow
provided
by (used
for)
investing
activities 2 (65)
----------- --- ---

Financing Activities:

Repayments
of short-
term debt
borrowings,
net (616) (35)

Proceeds
from
issuance
of notes,
net 1,178 -

Payment of
capital
lease
obligations (4) (4)

Dividends (80) (75)

Purchase of
Company
common
stock (1,049) (2,032)

Payment of
payroll
taxes in
lieu of
issuing
shares for
stock-
based
compensation (82) (125)

Proceeds
from
exercise
of stock
options 80 76

Excess tax
benefit
from
stock-
based
compensation 57 103

Net cash
flow used
for
financing
activities
from
continuing
operations (516) (2,092)
----------- ---- ------

Net cash
flow
provided
by
financing
activities
from
discontinued
operations - 1,570
------------- --- -----

Net cash
flow used
for
financing
activities (516) (522)
----------- ---- ----

Net
decrease
in cash
and cash
equivalents (97) (86)

Cash and
cash
equivalents
at
beginning
of period 428 397
(includes $29 (2014)
of discontinued
operations cash)
--------------------

Cash and
cash
equivalents
at end of
period $331 $311
(includes $114 (2014)
of discontinued
operations cash)
---------------------


CBS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
(Unaudited; in millions)

Free Cash Flow

The Company defines free cash flow as its net cash flow provided by (used for) operating activities before operating cash flow from discontinued operations and less capital expenditures. The Company's calculation of free cash flow includes capital expenditures because investment in capital expenditures is a use of cash that is directly related to the Company's operations. The Company's net cash flow provided by (used for) operating activities is the most directly comparable GAAP financial measure.

Management believes free cash flow provides investors with an important perspective on the cash available to the Company to service debt, make strategic acquisitions and investments, maintain its capital assets, satisfy its tax obligations, and fund ongoing operations and working capital needs. As a result, free cash flow is a significant measure of the Company's ability to generate long-term value. It is useful for investors to know whether this ability is being enhanced or degraded as a result of the Company's operating performance. The Company believes the presentation of free cash flow is relevant and useful for investors because it allows investors to evaluate the cash generated from the Company's underlying operations in a manner similar to the method used by management. Free cash flow is one of several components of incentive compensation targets for certain management personnel. In addition, free cash flow is a primary measure used externally by the Company's investors, analysts and industry peers for purposes of valuation and comparison of the Company's operating performance to other companies in its industry.

As free cash flow is not a measure calculated in accordance with GAAP, free cash flow should not be considered in isolation of, or as a substitute for, either net cash flow provided by (used for) operating activities as a measure of liquidity or net earnings as a measure of operating performance. Free cash flow, as the Company calculates it, may not be comparable to similarly titled measures employed by other companies. In addition, free cash flow as a measure of liquidity has certain limitations, does not necessarily represent funds available for discretionary use, and is not necessarily a measure of the Company's ability to fund its cash needs. When comparing free cash flow to net cash flow provided by (used for) operating activities, the most directly comparable GAAP financial measure, users of this financial information should consider the types of events and transactions that are not reflected in free cash flow.

The following table presents a reconciliation of the Company's net cash flow provided by operating activities to free cash flow:


Three Months Ended

March 31,
---------

2015 2014
---- ----

Net cash flow provided by
operating activities $417 $501

Capital expenditures (17) (28)

Exclude operating cash flow from
discontinued operations - (47)

Free cash flow $400 $520
-------------- ---- ----


The following table presents a summary of the Company's cash flows:


Three Months Ended

March 31,
---------

2015 2014
---- ----

Net cash flow provided by
operating activities $417 $501

Net cash flow provided by
(used for) investing
activities $2 $(65)

Net cash flow used for
financing activities $(516) $(522)
---------------------- ----- -----


SOURCE CBS Corporation

CBS Corporation

CONTACT: Press: Gil Schwartz, Senior Executive Vice President and Chief Communications Officer, (212) 975-2121, gdschwartz@cbs.com, or Dana McClintock, Executive Vice President of Communications, (212) 975-1077, dlmcclintock@cbs.com; Investors: Adam Townsend, Executive Vice President, Investor Relations, (212) 975-5292, adam.townsend@cbs.com, or Jessica Kourakos, Vice President, Investor Relations, (212) 975-6106, jessica.kourakos@cbs.com

Web Site: http://www.cbscorporation.com


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