Exhibit 99
CBS CORPORATION ANNOUNCES THIRD QUARTER 2006 RESULTS
CBS Corporation (NYSE: CBS.A and CBS) announced on November 2, 2006 results for the third quarter ended September 30, 2006, posting strong growth in net earnings from continuing operations, diluted earnings per share and free cash flow.
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Revenues of $3.4 billion for the third quarter of 2006 were up slightly from the same quarter last year, as growth at Outdoor and Publishing was offset by a decline at Radio, the shutdown of UPN and lower home entertainment revenues due to the switch from self-distribution in 2005 to third party distribution in 2006.
Operating income before depreciation and amortization (“OIBDA”) for the third quarter of 2006 increased 3% to $755.9 million and operating income increased 4% to $646.4 million from the same prior-year period reflecting increases at Television and Outdoor. Excluding the impact of stock-based compensation and adjusted for the 2005 separation from Viacom Inc., OIBDA and operating income increased 6% and 7%, respectively. Stock-based compensation expense for the third quarter of 2006 was $20.9 million versus $4.9 million for the same quarter in 2005.
Net earnings from continuing operations for the third quarter of 2006 increased 26% to $323.6 million from $256.9 million, and diluted earnings per share from continuing operations was up 27% to $.42, compared with $.33 for the same prior-year period, due to higher operating results and interest income, lower interest expense and a lower effective income tax rate. Discontinued operations for the third quarter reflected a net loss of $6.7 million, or $.01 per diluted share, compared with net earnings of $451.6 million, or $.57 per diluted share, in the third quarter of 2005. Net earnings from discontinued operations in 2005 reflected the operating results of Viacom Inc. prior to its separation from the Company and Paramount Parks, which was sold in June 2006. Net earnings were $316.9 million, or $.41 per diluted share, compared with $708.5 million, or $.90 per diluted share for the third quarter of 2005.
Third quarter free cash flow was $431.8 million, up 65% from $261.3 million for the same prior-year period, reflecting higher operating results and interest income, and lower interest expense and income tax payments.
For the nine months ended September 30, 2006, revenues of $10.4 billion increased 1% from the same prior-year period, as growth at Outdoor, Television and Publishing was partially offset by a decline at Radio. OIBDA of $2.3 billion and operating income of $1.9 billion decreased 1% and 2%, respectively, compared to the first nine months of 2005. Results for the first nine months of 2006 reflected $24.0 million of expenses related to the UPN shutdown as well as the impact of stock-based compensation expense of $51.7 million versus $13.1 million for the nine months ended September 30, 2005. Excluding the impact of stock-based compensation and the UPN shutdown expenses and adjusted for the 2005
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separation from Viacom Inc., both OIBDA and operating income for the first nine months of 2006 increased 2%.
For the first nine months of 2006, net earnings from continuing operations increased 20% to $1.0 billion from $871.4 million, with diluted earnings per share from continuing operations up 26% to $1.36, compared with $1.08 for the same prior-year period, reflecting higher interest income, lower interest expense and tax benefits of $132.9 million from the settlement of certain income tax audits. Net earnings from discontinued operations of $277.6 million, or $.36 per diluted share, decreased from $1.2 billion, or $1.46 per diluted share, for the same prior-year period. Net earnings from discontinued operations during the first nine months of 2006 principally reflected the gain on the sale of Paramount Parks. Net earnings from discontinued operations during the first nine months of 2005 primarily reflected the operating results of Paramount Parks as well as Viacom Inc. prior to its separation from the Company. Net earnings were $1.3 billion, or $1.72 per diluted share, versus $2.0 billion, or $2.55 per diluted share, for the first nine months of 2005. For the nine months ended September 30, 2006, free cash flow was $1.6 billion, up 18% from $1.4 billion for the same prior-year period.
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Consolidated and Segment Results
The tables below present the Company’s revenues, OIBDA and operating income for the three and nine months ended September 30, 2006 and 2005 (dollars in millions). Reconciliations of all non-GAAP and adjusted measures to reported results have been included at the end of this document.
| | Three Months Ended
September 30, | | Better/ | | Nine Months Ended
September 30, | | Better/ | |
Revenues | | 2006 | | 2005 | | (Worse)% | | 2006 | | 2005 | | (Worse)% | |
Television | | $ | 2,150.6 | | $ | 2,154.9 | | — | % | $ | 6,926.1 | | $ | 6,834.2 | | 1 | % |
Radio | | 508.1 | | 542.0 | | (6 | ) | 1,461.7 | | 1,571.3 | | (7 | ) |
Outdoor | | 536.2 | | 493.5 | | 9 | | 1,522.8 | | 1,421.9 | | 7 | |
Publishing | | 197.4 | | 193.2 | | 2 | | 554.5 | | 526.6 | | 5 | |
Eliminations | | (13.5 | ) | (11.7 | ) | (15 | ) | (27.8 | ) | (29.9 | ) | 7 | |
Total Revenues | | $ | 3,378.8 | | $ | 3,371.9 | | — | % | $ | 10,437.3 | | $ | 10,324.1 | | 1 | % |
| | Three Months Ended
September 30, | | Better/ | | Nine Months Ended
September 30, | | Better/ | |
OIBDA | | 2006 | | 2005 | | (Worse)% | | 2006 | | 2005 | | (Worse)% | |
Television | | $ | 457.1 | | $ | 421.0 | | 9 | % | $ | 1,416.2 | | $ | 1,380.5 | | 3 | % |
Radio | | 210.2 | | 232.6 | | (10 | ) | 608.7 | | 710.3 | | (14 | ) |
Outdoor | | 142.1 | | 118.2 | | 20 | | 401.2 | | 322.4 | | 24 | |
Publishing | | 22.7 | | 25.3 | | (10 | ) | 39.1 | | 38.5 | | 2 | |
Corporate | | (41.3 | ) | (36.3 | ) | (14 | ) | (108.7 | ) | (82.0 | ) | (33 | ) |
Residual costs | | (34.9 | ) | (29.7 | ) | (18 | ) | (105.5 | ) | (89.0 | ) | (19 | ) |
Total OIBDA | | $ | 755.9 | | $ | 731.1 | | 3 | % | $ | 2,251.0 | | $ | 2,280.7 | | (1 | )% |
| | Three Months Ended
September 30, | | Better/ | | Nine Months Ended
September 30, | | Better/ | |
Operating Income | | 2006 | | 2005 | | (Worse)% | | 2006 | | 2005 | | (Worse)% | |
Television | | $ | 414.4 | | $ | 376.0 | | 10 | % | $ | 1,289.1 | | $ | 1,251.7 | | 3 | % |
Radio | | 201.7 | | 225.2 | | (10 | ) | 583.9 | | 687.6 | | (15 | ) |
Outdoor | | 88.5 | | 65.9 | | 34 | | 240.9 | | 164.1 | | 47 | |
Publishing | | 20.3 | | 23.3 | | (13 | ) | 32.2 | | 32.1 | | — | |
Corporate | | (43.6 | ) | (38.5 | ) | (13 | ) | (115.7 | ) | (89.5 | ) | (29 | ) |
Residual costs | | (34.9 | ) | (29.7 | ) | (18 | ) | (105.5 | ) | (89.0 | ) | (19 | ) |
Total Operating Income | | $ | 646.4 | | $ | 622.2 | | 4 | % | $ | 1,924.9 | | $ | 1,957.0 | | (2 | )% |
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Television (CBS Television Network and Stations, CBS Paramount Network Television, CBS Television Distribution Group, Showtime Networks Inc. and CSTV Networks, Inc.)
For the quarter, Television revenues of $2.2 billion decreased slightly from the prior year as growth in television license fee revenues and affiliate fees was more than offset by lower advertising and home entertainment revenues. Television license fees increased 7% principally due to the domestic syndication sale of CSI: Miami and higher foreign syndication revenues. Affiliate fees increased 6% due to rate increases and subscriber growth at Showtime and the inclusion of CSTV Networks since its acquisition in January 2006. Advertising revenues decreased 3% primarily due to the shutdown of UPN in September of 2006 and the absence of the Primetime Emmy telecast in 2006, partially offset by strong political advertising sales at the television stations. Home entertainment revenues decreased 35% principally due to the switch from self-distribution in 2005 to third party distribution in 2006. Television OIBDA increased 9% to $457.1 million and operating income increased 10% to $414.4 million reflecting lower programming expenses at the broadcast networks and the absence of $18.9 million of impairment charges recorded in 2005 for station sales, partially offset by lower profits from the mix of available titles for syndication. Television results included stock-based compensation of $10.1 million in the third quarter of 2006 versus $2.1 million for the comparable prior-year period.
The CW, a 50/50% joint venture with Warner Brothers Entertainment, was launched in September 2006 and has been accounted for as an equity investment in the third quarter of 2006.
Radio (CBS Radio)
For the quarter, Radio revenues decreased 6% to $508.1 million from $542.0 million, reflecting the impact of programming changes at 27 owned radio stations, coupled with weakness in the radio advertising market. OIBDA and operating income both decreased 10% to $210.2 million and $201.7 million, respectively. The decreases in OIBDA and operating income were driven by the revenue decline as well as higher compensation expense, including stock-based compensation and severance costs relating to the elimination of more than 100 staff positions in the beginning of the third quarter of 2006. These decreases were partially offset by an $11.6 million gain on the sale of a building recognized in the third quarter of 2006 and lower sports programming expenses. Radio results included stock-based compensation of $3.8 million and $.7 million for the third quarter of 2006 and 2005, respectively.
In May 2006, the Company announced its intention to explore the divestiture of radio stations in ten of its smaller markets. To date, the Company has reached agreements to sell the 29 radio stations in eight of these ten markets for a total of $570 million.
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Outdoor (CBS Outdoor)
For the quarter, Outdoor revenues increased 9% to $536.2 million from $493.5 million primarily reflecting a 9% increase in North America and a 6% increase in Europe. North America delivered 9% growth in U.S. revenues, including a 13% increase in the U.S. billboards business, 6% growth in Canada and 7% growth in Mexico. European results were driven by the U.K., which reported a 16% increase in revenues. Canada and Europe benefited from favorable foreign exchange rates in the third quarter of 2006. In constant dollars, Outdoor revenues increased 7%, with Canada down 1% and Europe up 1% from the same quarter of 2005. OIBDA increased 20% to $142.1 million and operating income increased 34% to $88.5 million reflecting the higher revenues noted above, partially offset by higher billboard and transit lease costs and the unfavorable impact of foreign exchange on expenses. OIBDA in the third quarter of 2005 was reduced by approximately $12 million from the impact of hurricanes Katrina and Rita. Outdoor results included stock-based compensation of $1.1 million and $.1 million for the third quarter of 2006 and 2005, respectively.
Publishing (Simon & Schuster)
For the quarter, Publishing revenues increased 2% to $197.4 million from $193.2 million, reflecting higher sales and distribution fees. OIBDA decreased 10% to $22.7 million from $25.3 million, and operating income decreased 13% to $20.3 million from $23.3 million, as the revenue increase was more than offset by an increase of $6.0 million to the allowance for doubtful accounts. Top-selling titles in the third quarter of 2006 included State of Denial by Bob Woodward and Ricochet by Sandra Brown. Publishing results included stock-based compensation of $.5 million and $.1 million for the third quarter of 2006 and 2005, respectively.
Corporate
Corporate expenses, excluding depreciation expense, increased to $41.3 million from $36.3 million primarily due to higher stock-based compensation in 2006 and higher costs associated with operating as a stand-alone entity beginning in 2006. Corporate expenses included stock-based compensation of $5.4 million and $1.9 million for the third quarter of 2006 and 2005, respectively.
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Residual Costs
Residual costs primarily include pension and postretirement benefit costs for benefit plans retained by the Company for previously divested businesses. For the quarter, residual costs increased to $34.9 million from $29.7 million in the same prior-year period. This increase was due primarily to the recognition of higher actuarial losses which resulted from a change in the mortality rate assumption and lower than expected performance of plan assets in 2005.
Interest Expense
Interest expense decreased to $140.1 million in the third quarter of 2006 from $173.7 million for the same prior-year period as a result of lower debt balances in 2006.
Interest Income
For the third quarter of 2006, interest income of $41.4 million increased from $5.4 million in the same prior-year period, primarily resulting from an increase in cash and cash equivalents.
Other Items, Net
Other items, net decreased to a net loss of $9.2 million in the third quarter of 2006 from a net gain of $9.4 million for the same prior-year period, primarily reflecting fluctuations in foreign exchange rates. For the nine months ended September 30, 2006, other items, net decreased to a net loss of $27.3 million from a net gain of $31.0 million, primarily due to the 2005 gain of $64.6 million on the sale of the Company’s investment in Marketwatch.com, Inc.
Provision for Income Taxes
For the third quarter of 2006, the Company’s effective income tax rate decreased to 38.7% from 45.5% in the third quarter of 2005, primarily reflecting lower foreign taxes and a tax benefit from the settlement of certain income tax audits. For the nine months ended September 30, 2006, the Company’s effective income tax rate of 31.7% decreased from 41.8% for the same prior-year period, primarily reflecting tax benefits of $132.9 million from the settlement of certain income tax audits.
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Discontinued Operations
Net earnings (loss) from discontinued operations for the three and nine months ended September 30, 2006 included losses on dispositions related to the Company’s aircraft leases and for the nine months ended, also included the operating results and gain on the sale of Paramount Parks. The sale of Paramount Parks was completed on June 30, 2006. Net earnings from discontinued operations for the three and nine months ended September 30, 2005 included the operating results of Paramount Parks as well as Viacom Inc. prior to its separation from the Company.
Other Matters
On August 14, 2006, the Company’s Board of Directors declared a quarterly cash dividend of $.20 per share to stockholders of record at the close of business on August 31, 2006, and approximately $153 million was paid to these stockholders on October 1, 2006.
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. Entertainment), cable television (Showtime and CSTV Networks), local television (CBS Television Stations), television production and syndication (CBS Paramount Network Television and CBS Television Distribution Group), radio (CBS Radio), advertising on out-of-home media (CBS Outdoor), publishing (Simon & Schuster), digital media (CBS Digital Media Group and CSTV Networks) and consumer products (CBS Consumer Products). For more information, log on to www.cbscorporation.com.
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Cautionary Statement Concerning Forward-looking Statements
This information 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 and 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; whether the Company will achieve results anticipated by the separation; changes in the Federal Communications laws and regulations; the impact of piracy on the Company’s products; the impact of consolidation in the market for the Company’s programming; other domestic and global economic, business, competitive and/or regulatory factors affecting the Company’s businesses generally; 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 Form 10-K for the period ended December 31, 2005. 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.
