Sharply Lower Results From Television, Radio Push Earnings LowerCBS Corp. reported lackluster second-quarter earnings, as sharply lower results from television and radio were offset by a one-time gain from the sale of the company's stake in the Sundance Channel.
Facing a weakening advertising market, CBS lowered full-year expectations for its operating profit and now anticipates flat performance, compared with earlier forecasts of 3% to 5% growth.
The broadcaster's net income for the quarter rose 1% to $408.4 million, or 61 cents a share, from $404 million, or 55 cents a share, a year earlier. The Sundance Channel sale yielded a profit of $127.2 million before taxes. Excluding the gain, restructuring charges and stock-based compensation expense, CBS said net fell 15% to $355.3 million from a year earlier. Revenue rose to $3.39 billion from $3.37 billion a year earlier.
In a conference call with investors, Chief Executive Leslie Moonves said CBS has been "challenged by the economic conditions affecting many industries, particularly local businesses," hurting ad sales. About two-thirds of CBS's revenue comes from advertising.
Even outdoor advertising, a smaller division in the company but in recent years a strongly performing one, saw operating profits fall 20% because of higher billboard and transit costs and the loss of major municipal contracts in Toronto and San Francisco.
CBS stock, which has fallen 38% this year, fell 52 cents, or 3%, to $16.36 at 4 p.m. in New York Stock Exchange composite trading.
Mr. Moonves noted that CBS in recent months has taken steps, such as its recent $1.8 billion purchase of the CNET Networks Web concern, to "shift our asset mix out of slow-growth businesses." In a further step, he said, CBS plans to sell 50 midsize radio stations, freeing up cash to fund share buybacks. CBS has sold a number of radio stations in smaller markets in recent years. The company now operates 140 stations, down from around 180 in 2006 when the sales began.
Radio has been one of CBS's biggest trouble spots, reflecting a years-long stagnation in the radio ad market. In the latest quarter, operating profit from CBS Radio fell 16% on 10% lower revenue.
Television, which includes the CBS network and station group, posted 12% lower operating income on 2% higher revenue. But the revenue growth was due to higher syndication sales on series like "CSI," whereas ad revenue fell 6%. The CBS network fell to second-place last season after five years as the most-watched network, fueling concerns that it has failed to develop new hits to supplement its aging crime-procedural shows.
By: Rebecca Dana
Wall Street Journal; August 1, 2008
