CBS 2015 Q3 Financial Report

CBS Corporation (NYSE: CBS.A and CBS) today reported results for the third quarter of 2015, including growth in operating income and record diluted earnings per share ("EPS").

"Thanks to the strength of our great content, CBS continues to have a winning hand," said Sumner Redstone, Executive Chairman, CBS Corporation. "Les and his team are capitalizing on all of the opportunities before us, and I'm confident they are setting the Company up for continued, long-term growth."

"During the third quarter, we once again grew our profit and EPS while continuing to increase our investment in content and new distribution services," said Leslie Moonves, President and Chief Executive Officer, CBS Corporation. "I'm particularly pleased with the gains we're seeing in network advertising, including underlying ad growth in the third quarter and even better pricing here in the fourth. Plus, having sold less inventory in the Upfront, we stand to benefit throughout this television season as we sell our #1 network in a very robust scatter marketplace. Add to that CBS's broadcast of Super Bowl 50 in February and the upcoming presidential election, you can see why we feel very good about advertising in 2016. At the same time, our nonadvertising revenue continues to grow even faster, led by retransmission consent and reverse compensation, which were up 50% in the third quarter and are well on their way to exceeding $1 billion next year. Looking ahead, as viewers increasingly want to access and pay for content in new ways, we see continued increases in subscription revenue from our in-house over-the-top services at CBS and Showtime, as well as those from outside distribution partners. The good news is, no matter how quickly the industry changes — from big bundles to 'skinny' ones to a la carte — CBS is positioned to succeed."

Third Quarter 2015 Results

Revenues were $3.26 billion for the third quarter of 2015 compared with $3.37 billion for the same prior-year period, primarily reflecting the timing of television licensing sales and decreases in lower-margin revenues, including the nonrenewal of a sports contract and lower pay-per-view revenues. Meanwhile, revenues for this year's third quarter benefited from growth in underlying network advertising, as well as 9% higher affiliate and subscription fees, including a 50% increase in revenues from retransmission consent and CBS Television Network-affiliated television stations.

The tables below present the Company's revenues by segment and type, operating income (loss) excluding restructuring charges and impairment charges by segment ("Segment Operating Income"), and depreciation and amortization by segment for the three and nine months ended September 30, 2015, and 2014.

Entertainment (CBS Television Network, CBS Television Studios, CBS Global Distribution Group, CBS Interactive, and CBS Films)
Entertainment revenues rose 1% to $1.93 billion for the third quarter of 2015 compared with $1.91 billion for the same prior-year period, primarily reflecting a 55% increase in affiliate and subscription fees. Network advertising revenues were up 1% despite the broadcast of fewer sporting events on the CBS Television Network. Content licensing and distribution revenues decreased 3%, primarily reflecting the timing of television licensing sales.

Entertainment operating income for the third quarter of 2015 was $339 million, up 12% from $302 million for the same prior-year period, driven by growth in higher margin revenues, which were partially offset by an increased investment in programming and digital distribution initiatives.

Cable Networks (Showtime Networks, CBS Sports Network, and Smithsonian Networks)
Cable Networks revenues for the third quarter of 2015 were $526 million compared with $624 million for the same prior-year period, which included significant domestic streaming sales of Dexter and Californication and higher revenues from pay-per-view boxing events. An increase in affiliate and subscription fees, reflecting growth in rates and revenues from new digital distribution platforms, partially offset the decline.

Cable Networks operating income for the third quarter of 2015 was $246 million compared with $266 million for the same prior-year period, primarily reflecting the lower revenues. The decline was partially offset by lower programming costs that were mainly associated with pay-per-view boxing events.

Local Broadcasting (CBS Television Stations and CBS Radio)
Local Broadcasting revenues of $638 million for the third quarter of 2015 decreased 6% from $680 million in the same prior-year period. CBS Television Stations revenues declined 7% from a year ago, as a result of the benefit to 2014 from the midterm elections and the broadcast of fewer sporting events on CBS in 2015. Growth in affiliate fees partially offset the decline. CBS Radio revenues decreased 6%, reflecting several noncomparable items, including fewer stations and lower political revenues, as well as continued softness in the radio advertising marketplace.

Local Broadcasting operating income for the third quarter of 2015 was down 9% to $174 million from $192 million for the same prior-year period, primarily because of the revenue decline, which was partially offset by the recent cost-cutting measures the Company put in place.