CBS earnings rise as spinoff plan is revamped

NEW YORK — CBS will emerge from the cocoon of parent Westinghouse with a cleaner break and improved earnings.

Westinghouse on Friday confirmed plans to sell its troubled power-generation unit to Siemens AG for $1.5 billion, and to cancel a planned spinoff of the industrial business in favor of piecemeal sales over the next six months (Daily Variety, Nov. 13).

Meanwhile, the core media business reported improved third-quarter earnings Friday, beating many analysts’ estimates.

Total broadcasting operations turned in sales of $1.28 billion in the quarter, up 41%, with earnings before interest, taxes, depreciation and amortization nearly doubling to $210 million from $108 million in the year-ago quarter, helped by the buyout of Infinity Broadcasting late last year and the overall revenue gains. (All industrial businesses have now been reclassified as discontinued operations).

“They had top-line growth, costs are under control, and things seem to be heading in the right direction,” said Merrill Lynch analyst Jessica Reif Cohen.

The CBS network reported EBITDA, often equated with cash flow, of $76 million, up 35% from the year-ago quarter, on revenues of $195, million a 15% gain attributed equally to improved syndication sales and stronger primetime cost-per-thousand ad rates. The Eye web had the high-rated Emmys and Country Music Awards, and didn’t suffer the way it had last year from NBC’s Olympics coverage.

Still, the network lost $9 million for the year-to-date, and prospects for a break-even for the full-year remain uncertain.

TV station cash flow rose 35%, to $78 million, credited to substantially better performance by CBS programming in its O&O markets compared to the national average.

Radio cash flow, with the Infinity contribution, nearly tripled to $147 million, now representing well over half the company’s total, on sales of $374 million. Cable earned just $2 million in the quarter, down from $4 million last year, on sales of $58 million, a 16% gain.

The decision to sell off the industrials will more immediately focus attention on those media operations, paving the way for share-price growth and allowing stockholders to cash out of the money-losing division to the tune of $2.50 to $3 or more a share.

“This revision to our plan will deliver more overall value to our shareholders,” said CEO Michael Jordan, explaining a reversal from two weeks ago, when he denied plans to sell any units.

With the spinoff a dead issue, the company plans to sell three remaining assets by mid-1998, but will begin trading as CBS Corp. on Dec. 1, using proceeds from the sales to reduce debt, pay down pension liabilities and make selective acquisitions that will help earnings growth. One possibility is a bid for Telemundo, whose Spanish-language station group already runs programming supplied by CBS-owned TeleNoticias (see related story).

“It’s a positive for those shareholders looking to invest in a pure-play (media) company,” said Frank Bodenchak , analyst at Morgan Stanley. “It’s a cleaner way to own the media company.” The new plan also frees CBS shareholders from potential $2 billion-plus liability from lawsuits related to the nuclear power units.

Westinghouse shares Friday closed down 62.5¢, to $28.25.

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