CBS Corp. profits down 52%

Quarterly dividend slashed to 5 cents per share

By JILL GOLDSMITH

Moonves

A soft ad market sent CBS Corp. profits plunging 52% last quarter, forcing the company to slash its signature dividend to conserve cash amid the severe downturn.

But the Eye's earnings, $136 million vs. $286 million a year earlier, were still better than Wall Street anticipated. And CEO Leslie Moonves predicted Wednesday that the company's performance will improve in the second half of this year regardless of the state of the economy -- an unusually upbeat claim amid the dire forecasts of other media moguls in recent weeks.

Asked how CBS would pull it off, given its heavy dependence on advertising, Moonves said on a conference call that he expects CBS' current position as the nation's most-watched TV network to continue through this year, allowing it to capture the lion's share of ad revenue. He also sees strong syndication sales, and the impact of some cost cutting, to help its bottom line in the second half.

Layoffs and other belt-tightening measures that started in late 2007 will result in annual savings of $220 million, CBS execs said.

CBS shares, which fell 2.3% Wednesday to close at $5.13, surged nearly 9% in after-hours trading when it reported its numbers.

Revenue for the quarter eased to $3.5 billion from $3.8 billion.

The company gutted its dividend to 5¢ from 27¢. Investors figured it would be cut, but not by so much. Moonves and chief financial officer Fred Reynolds said uncertain and unstable credit markets make it imperative for CBS to conserve its cash.

CBS chairman Sumner Redstone reiterated comments he'd made on the Viacom earnings call last week that his holding company National Amusements "is making very good progress with our creditors. We have not, since our original sale, sold a single share of CBS and Viacom, and our lenders are not urging us to do so." He said CBS' dividend cut would not impact discussions with lenders.

Moonves said the capital crunch in the banking sector will have no impact on the company's fledging movie production biz. Last week, in its biggest acquisition since the unit was formed last year, CBS Films acquired rights to a bestselling series of espionage novels by Vince Flynn with the intent of building a franchise around its protag, CIA operative Mitch Rapp.

CBS said operating income at its television operation dropped 40% to $272 million for the quarter.

Revenue fell 8% to $2.2 billion. The company cited soft advertising, partly offset by higher political advertising and higher affiliate sales.

The segment houses a wide mix of businesses, including CBS Television Network and stations, CBS Paramount Network Television, CBS Television Distribution, Showtime and CBS College Sports Network.

Moonves got one of the first upfront questions this earnings season: "There is going to be an upfront. There is going to be an upfront market. And we have the best story to tell," he said, referring to the network's ratings perf.

Pay cabler Showtime, syndication, DVD sales and retransmission consent fees, which are all lumped into the TV group, are some nonadvertising-dependent businesses that are going strong despite the recession, Moonves said.

On retransmission, CBS has inked pacts with Verizon, Time Warner Cable and EchoStar's Dish Network satcaster.

"They all recognize the value of our content. We said we would get paid for our network, and we are," Moonves said.

In radio, profits were down 56% to $71 million. Radio revenue slipped 18% to $367 million, also reflecting a weak advertising market as well as the impact of selling some stations.

Earnings at the billboard business, or outdoor advertising, fell 75% to $35 million.

Sales fell 15% to $526 million. Soft advertising was also a factor. Foreign exchange fluctuations squeezed overseas revenue as the dollar rose against other currencies.

Interactive profit surged to $29 million from $1.4 million the year earlier. Revenue jumped to $186 million from $59 million.

CBS created the division last summer after acquiring CNET in June.

Publisher Simon & Schuster bucked an industry slump with revenue up 1% to $245 million. Profits eased 3% to $26 million. For the full year 2008, CBS Corp. revenue slipped to $13.9 billion from $14.1 billion.

The company posted a loss of $11.7 billion compared with a profit of $1.2 billion the year before, due largely to a hefty one-time charge of more than $14 billion to write down the value of some of its assets.