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CBS takes hit in second quarter but says recovery is coming

It manages to squeeze out a small profit even though its operating income falls 62%. Third-quarter advertising is stronger than a year ago. 'The worst is behind us,' Moonves says.

August 07, 2009|Joe Flint

CBS Corp., the most advertising-dependent of all the major media conglomerates, said its second-quarter operating income fell 62%, but the company managed to squeeze out a small profit and said third-quarter advertising is stronger than it was a year ago.

"The worst is behind us," CBS President and Chief Executive Leslie Moonves said on the company's earnings call with analysts.

Moonves said CBS saw early signs of economic recovery with second-quarter revenue and profit better than in the first quarter. But revenue was still down at its major units, including television, radio and outdoor advertising.

CBS' television network said it was wrapping up the sale of advertising time for the fall TV season.

"We have been able to achieve flat revenues for the percentage of inventory we've sold so far," Moonves said.

The company is holding back more advertising inventory to sell in the week-to-week, or "scatter," market, and Moonves said scatter pricing for the third quarter was up 30% compared with a year earlier.

Among the advertisers starting to spend more are autos, pharmaceuticals and financial services categories, Moonves said.

CBS said it was not looking to make any major deals.

"Now is not the right time to buy or sell," Moonves said, adding that the company was "playing the hand" it had been dealt.

Nonetheless, Wall Street appeared to take note of Moonves' generally positive comments about the current and upcoming quarters.

Among all the media companies that have recently reported earnings, "CBS was the most overtly optimistic and bullish about a recovery in the ad environment," said Anthony DiClemente, an entertainment analyst with Barclays Capital. He said Moonves expressed "more optimism and ebullience surrounding the third quarter and second half of the year" than many rivals.

For the quarter ended June 30, CBS posted operating income of $242.2 million, compared with $637 million a year earlier. Revenue was $3.01 billion, down 11%. The company had net income of $15.4 million, down 96% from $408.4 million a year earlier. The previous years' results were in part inflated by the company's sale of its stake in the Sundance Channel.

CBS said sales at its television unit, which includes its CBS network, local television stations, production and distribution arms, and cable channels Showtime and College Sports Network, fell 10% to $1.95 billion because of less ad revenue and declining DVD sales of its television product.

Radio continues to be a sore spot for the company, with revenue falling 23% to $322 million, while sales at its outdoor division, which used to be a bright spot, fell 27% to $434.1 million. CBS said it would continue to look to unload smaller-market radio stations.

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joe.flint@latimes.com

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