Strong quarter at CBS; stock buyback on tap
Losses drop as cash flow, revenues rise
The strong quarterly performance was highlighted even more by a 77% jump in CBS' cash flow to $241 million on 16% higher revenue of $1.4 billion. (Cash flow is earnings before interest, taxes, depreciation and amortization.)
Underlining its turnaround, CBS also announced plans for a $1 billion stock buyback expected to occur over the next 18 months.
Analysts said the earnings result was significantly better than expected and noted that the stock buyback was in the tradition of Mel Karmazin's Infinity Broadcasting, the top-performing radio group acquired by CBS in 1996. Karmazin is now chairman and CEO of the CBS Station Group, where he is overseeing dramatic growth.
The stock buyback "is a good signal," said Lehman Bros. analyst Tim Wallace, although CBS stock closed down 37¢ to $30 Wednesday. Wallace said CBS did better than expected in all three major areas: radio, TV stations and the network.
The network's losses, on a cash flow basis, shrank from $75 million to $28 million a year ago on 17% higher revenues of $695 million. For the year the network had cash flow losses of $31 million, compared with a profit of $65 million in 1996, on 7.6% higher revenue of $2.8 billion.
"While revenues were up on stronger primetime pricing, ratings increases across other dayparts and higher syndication revenues, they were partially offset by investments in programming and promotion," CBS said in a statement about the quarterly result.
The TV stations group increased cash flow 12% to $127 million on 11% higher sales of $251 million in the quarter. CBS chairman Michael Jordan noted, "We are particularly pleased with the dramatic rebound of our television stations in the second half of this year."
Indeed, for the year the TV station group cash flow rose only 5.1% to $370 million. Karmazin took charge of the TV station group in the early summer.
Radio cash flow jumped 34% to $177 million on 21% higher revenue of $410 million in the quarter. Jordan noted CBS' radio station group "continues to outpace the industry."
CBS completed its acquisition of the Nashville Network and Country Music Television cable networks last September. Cash flow rose 20% to $34 million in the quarter, CBS said.
The quarterly result included the impact of a one-time charge of $15 million to cover "severance costs related to the transfer of various corporate functions to New York and the resulting reductions at the Pittsburgh headquarters." Until December, CBS Corp. was known as Westinghouse Electric Group, which had been based in Pittsburgh.
Westinghouse sold most of its industrial businesses to focus on broadcasting, prompting the name change. It recorded a one-time gain in the quarter of $871 million related to the sale of these businesses.
Jordan said in a statement that CBS enters 1998 "with strong momentum" and sources said the company was very bullish about its earnings prospects.
