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CBS Q2 net income, revenue fall

MUMBAI: US media conglomerate CBS has reported results for the second quarter of 2014 and announced increases to its share repurchase programme and quarterly dividend.

Revenues were $3.19 billion for the second quarter of 2014 compared with $3.37 billion for the same quarter a year ago, which benefited from the timing of television licensing revenues and the semifinals of the NCAA Division I Men’s Basketball Championship (“NCAA Tournament”), which were aired by Turner Broadcasting Systems, Inc. (“Turner”) in 2014 and on the CBS Television Network in 2013.

Operating income before depreciation and amortization (“OIBDA”) of $801 million and operating income of $730 million for the second quarter of 2014 were also each down by six per cent from the same prior-year period as a result of the lower revenues.

Net earnings from continuing operations were also down to $418 million for the second quarter of 2014 compared with $435 million in the same prior-year period. Net earnings from continuing operations per adjusted diluted share of $.78 for the second quarter of 2014 grew from adjusted diluted EPS of $.75 for the same quarter in 2013. The increase reflected lower weighted average shares outstanding as a result of the company’s ongoing share repurchase programme, which more than offset the operating income decline.

CBS executive chairman Sumner Redstone said, “CBS’s strategy of producing premium content across its businesses and all around the world is the cornerstone of our continued success. Regardless of the media landscape, and regardless of the means of distribution, great content will always be king. Les and his team are keenly aware of this fact, and I have full confidence in their ability to manage this company through these times of change and opportunity.”

CBS president, CEO Leslie Moonves said, “Our high-margin, fast-growing revenue streams continue to drive EPS, and they stand to become an even bigger factor in our growth going forward thanks to two recent major events. First, we completed the separation of CBS Outdoor, which makes us less dependent on advertising and allows us to sharpen our focus on our core content business. Second, we received a landmark Supreme Court ruling that removed any distraction from our ability to achieve $2 billion in retransmission consent and station affiliate fees in 2020.

“With so many ways to sell our content before us, we are constantly refilling the pipeline with new hits. Following up on the CBS Television Network’s first place finish in May, we continue to be the most-watched network this summer, with an unprecedented amount of original programming. This fall, we’ll have ownership in four out of five of our new series and more than 70 per cent of our total lineup, positioning us well for continued success in content licensing.

“Of course, the biggest upcoming event on network television is Thursday Night Football, which will further strengthen our schedule and provide an unparalleled platform from which we can launch our new shows. Our strategy of producing more original programming is paying off at Showtime as well, where we have premiered nine successful new shows in a row with more to come this fall. The strong confidence we have in our business is why today we have announced we are significantly expanding the value we return to shareholders. We are reloading the amount authorized under our share buyback program to $6 billion and raising our quarterly dividend by 25 per cent. These actions once again demonstrate our enduring strength as a content company and our continued commitment to our investors.”

For the second quarter of 2014, free cash flow was $4 million compared with $367 million for the same prior-year period, which included pension contributions totaling $150 million. For the first half of 2014, free cash flow was $524 million compared with $941 million for the first half of 2013, and operating cash flow from continuing operations was $593 million compared with $1.01 billion last year. The decreases in the first half of the year reflect higher payments for sports programming, which resulted from the timing of payments under the Company’s new agreement with the National Football League (NFL) and the addition of Thursday night NFL games on CBS beginning in September 2014, as well as the benefit to 2013 from CBS’s Super Bowl broadcast.

Entertainment

Revenues were $1.84 billion for the second quarter of 2014 compared with $2.01 billion for the same prior-year period, the result of lower television licensing revenues from the timing of sales as well as lower advertising revenues during the quarter. The decrease in ad revenues reflected the absence of the semifinals of the NCAA Tournament, which were broadcast by CBS in 2013 but by Turner in 2014, and softness in the advertising marketplace during the quarter. An increase in affiliate and subscription fee revenues partially offset the revenue decline.

Entertainment OIBDA for the second quarter of 2014 was $376 million, down from $429 million for the same prior-year period. The OIBDA decline was driven by lower revenue and an increased investment in original television programming.

The entertainment segment consists of CBS Television Network, CBS Television Studios, CBS Global Distribution Group, CBS Films, and CBS Interactive.

Cable Networks

Cable Networks revenues for the second quarter of 2014 were $516 million, down slightly from $518 million for the same prior-year period, as higher affiliate revenues were offset by lower licensing revenues associated with the timing of international sales. The increase in affiliate revenues was driven by higher rates at Showtime Networks, CBS Sports Network, and Smithsonian Networks as well as growth in telco subscriptions.

Cable Networks OIBDA for the second quarter of 2014 of $219 million rose 6% from $207 million for the same prior-year period, primarily because of growth in high-margin affiliate revenues and lower programming costs.

Local broadcasting

Local broadcasting revenues for the second quarter of 2014 were $665 million compared with $698 million in the same prior-year period, primarily a result of softness in the advertising marketplace. An increase in affiliate and subscription fee revenues partially offset the decline. CBS Television Stations revenues were down 6%, with three percentage points of the decrease attributable to the non renewal of a sports programming contract and the absence of the broadcast of the semifinals of the NCAA Tournament on CBS in 2014. Radio revenues were down 3%.

Local broadcasting OIBDA for the second quarter of 2014 decreased 7% to $238 million from $255 million for the same prior-year period. The decline reflected the lower revenues, partially offset by lower programming costs.

The local broadcasting segment included CBS Television Stations and CBS Radio.