Radio, TV stations boost CBS profits

Earnings offset higher network losses

NEW YORK — Higher profits from radio and TV stations drove CBS Corp. to a $4 million net profit in the second quarter, compared with an $11 million loss a year earlier, despite a sharply higher loss at the CBS network.

Earnings before cash flow (interest, taxes, depreciation and amortization), which analysts consider the best measure of operating performance, improved 22% to $275 million on 16% higher revenues of $1.48 billion.

CBS announced a $2 billion increase in its stock buyback program to a maximum of $3 billion. Since the program began in February, CBS has bought back about $500 million of stock, a spokesman said.

Despite the strong profit performance, the quarterly result disappointed Wall Street and CBS stock plunged $2 to $31.68 on a very choppy day in the market.

Lehman Bros. analyst Tim Wallace said the quarterly cash flow result was in line with most analyst expectations, but Wall Street overreacted negatively because the market “is generally very nervous” and stocks that don’t do better than expectations “get ripped apart.”

CBS television operations, including the network, TV station group and the cable networks, increased cash flow 33% to $133 million on 14% higher sales of $1.03 billion.

Previously CBS has separately disclosed the results of the network, station group and cable networks, but the broadcaster is frustrated with what it sees as Wall Street’s overemphasis on the losses generated by the network, compared with the profits made by the station group. CBS’ financial disclosure was also (and remains) more detailed than that of NBC, ABC or Fox.

Analysts estimated that the CBS network’s cash flow loss jumped from $6 million last year to about $30 million despite slightly higher revenues, while the station group’s cash flow is estimated to have grown almost 20% to about $115 million. CBS declined comment.

“The TV station group performed extremely well,” said Salomon Smith Barney analyst Paul Sweeney, noting that the GM strike had not hurt its earnings in the quarter.

Lehman’s Wallace said the strike and soft national advertising generally contributed to the heavier losses at the network, however.

CBS’ radio station group, which the broadcaster chairman Michael Jordan describes as “the jewel in the crown,” continued to post strong profit growth. Its cash flow rose 26% to $198 million on 21% higher sales of $456 million.

“We are pleased with the ongoing growth of radio and outdoor, the television stations and the network. We look forward to the return of the NFL and the debut of our new fall programming schedule to drive our television operations,” CBS president Mel Karmazin said in a statement.

CBS’ cable operations, mainly the Nashville Network and Country Music Television, continued to do well and earned about $50 million in cash flow in the quarter, analysts estimated, up from $40 million a year earlier.

CBS’ remaining industrial operations, which it has agreed to sell, increased its cash flow loss slightly to $38 million in the quarter. CBS’ interest expense fell 17% to $85 million.

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