Paramount Global (PARA) 2005 Q4 法說會逐字稿

Good day, everyone, and welcome to the CBS Corporation fourth quarter and full year 2005 earnings release teleconference.

Today's call is being recorded.

At this time, I would like to turn the call over to the Senior Vice President of Investor Relations, Mr. Marty Shay.

Please go ahead, sir.

Good morning, everyone.

Thank you for taking time to join us for our fourth quarter and full year 2005 earnings call.

Joining me for today's discussion are Sumner Redstone, our chairman;

Leslie Moonves, our president and CEO; and Fred Reynolds, our executive vice president and CFO.

Sumner will have some opening remarks, and then we'll turn the call over to Les and Fred for strategic and financial issues.

We will then open up the call to questions.

Let me note that statements on this conference call relating to matters which are not historical facts are forward-looking statements, which involve risks and uncertainties that could cause actual results to differ.

Risks and uncertainties are disclosed in CBS' corporation news release and securities filings.

A summary of CBS Corporation's fourth quarter and full year 2005 results should have been sent to all of you.

If you did not receive the results, please contact [Punam Desai] at 975-3667, and she will get it to you.

A webcast of the call, the earnings released and any other information related to the presentation can be found on CBS Corporation's corporate website on the internet address of cbscorporation.com.

Now, I'll turn the call over to Sumner.

Thanks, Marty.

And good morning everyone, and thanks a lot for joining us.

I just want to offer a couple of thoughts before I turn the call over to Leslie.

First of all, I could not be more pleased with the execution of the split, which went smoother than anyone could have expected.

We now have two focused and nimble companies, they each have clear investment strategies.

Here at CBS, we have a tremendous content company with the best management in the media business.

CBS is a company that will generate great cash flow as it grows, and we intend to continually return the value we create to the shareholders.

Let's face it, the old media in era is gone.

It's behind us.

And the new media horizon, founded on outstanding content creation, untapped digital opportunity, that lies ahead.

We can count on Leslie and his team to seize that new day and execute our vision for the long term benefit of the shareholders.

I am, without exaggeration, enthusiastically confident that this company, the new CBS Corporation, is well positioned to assume its place as the leader among its media peers, and to continually expand on this leadership for a long, long, long, Leslie, long, long time to come.

With that said, I'll pass this over to the real boss, Leslie Moonves.

Thank you very much, Sumner.

Good morning, everybody, and once again, thank you for joining us.

I'm very, very excited to be here today, as we put the split behind us and tell you about the strategies and the businesses of the new CBS Corporation.

First, I'd like to say a couple of words about our overall performance and some significant positive events.

Keep in mind, these numbers are pro forma, as if the separation had occurred on January 1, 2005.

Given that assumption, we were at $0.41 per share for the fourth quarter of 2005, and $1.59 for the full year.

And our free cash flow of $1.5 billion was up 10% for the year.

As you know, building businesses that throw off cash is what we do.

Excess cash allows us to do a number of things, most importantly, share it with our investors in the form of what we hope to be an increasing dividend.

In a few minutes, I'm going to hand it off to our CFO, Fred Reynolds, who will discuss these results a bit more.

But before I do, I want to take a couple of minutes, number one, to thank and commend our chairman for his vision about this split.

Thank you, Sumner.

The new company has been in existence for less than two months, and we are already seeing the benefit.

We are more focused, more nimble than we were just eight weeks ago.

Our management team is extremely strong.

It is so good to be out on our own.

Just look at what we've accomplished in the short time since we began trading as the CBS Corporation on January 3.

We increased our dividend rate by 14% to demonstrate our confidence in our ability to generate strong, free cash flow.

The same week, we announced the creation of a new broadcast network, the CW, to appeal to valuable young demographics, while at the same time eliminating a network that was posting losses year after year.

Also in our first month, we closed on the acquisition of CSTV, expanding our holdings in the lucrative world of college sports, cable and new media.

Plus we announced our intention to divest Paramount Parks, a great business that just didn't fit with our strengths.

Also as part of our effort to extend the reach of our world class content to emerging technology platforms, we launched the first partnership of its kind with Google.

A lot of activity in such a short time, and these are just the highlights.

Add it all up, and you've got a company that's leaving the past behind, a company that is totally on the move.

I want to talk briefly about our businesses and where we are with them right now.

Television, our largest segment, CBS continues to have more breadth and depth of success than any other network.

Number one in viewers; number one in 25 to 54; a close number two in 18 to 49; and by the way, we have one 10 of 21 weeks in this important demo, more than any other network, and this includes not having the Super Bowl, which by the way we will have in '07, and, obviously, not having the Olympics.

We've also widened our lead on the very important Thursday night, which is the largest monetary night of the week.

We have five of the top 10 shows, 9 of the top 20; and we have a leadership position in almost every genre; number one series in CSI; number one sitcom in Two and a Half Men; number on news magazine in 60 Minutes.

And it's not only our entertainment content fueling our success, news and sports are also big players.

CBS News is having a renaissance on its own.

The CBS News is the only network evening news to increase season to date in total viewers while as our competitors are down more than three quarters of a million viewers each.

Bob Schieffer is doing a terrific job.

Over at CBS Sports, we're coming off another incredible NFL season, and this time was the third time in four years that we topped Fox in the all important post season, beating Fox's NFC championship by 13%.

And as I said, we look forward to having the Super Bowl again next year on CBS.

We just announced recently a new PGA deal, so we are very excited about that.

A minute about the CW Network.

A more powerful, new network that will launch in the fall with a lineup of well known hit shows aimed at the valuable younger audience, a combination of the best of CBS and Warner Bros., two great brands.

The affiliation process for the stations across the country that are not aligned with Tribune or CBS is underway, and we're already seeing a major activity in many, many markets, with many lucrative deals to come.

Moving on to syndication, we have another great story.

As you know, we control most of the top shows in syndication.

In fact, we have 8 of the top 10 syndication shows, and they are all renewed past 2010.

Plus many of our shows are doing extremely well internationally.

Just a few years ago, our product had a first run and a rerun, and that was it.

But now we get it all, the original, the rerun, syndication, international, internet, wireless, DVD, cellular, all new revenue streams for the same exact piece of programming.

Turning to television stations, we are now poised to benefit from CBS's primetime success, number one.

Number two, our CW stations obviously are a lot more valuable today than they were as just UPN stations.

They'll get stronger with the addition of all these new shows.

In addition, we expect strong station results this year from the amount of political advertising that is going to come our way.

I don't want to leave the subject of television without saying a few words about our two cable networks, Showtime and CSTV.

The quality and recognition of Showtime programming is growing, Weeds, Sleeper Cell and The L WORD, that's how HB) increased their amount of subs.

We're going to be doing the same.

And by the way, Weeds is one of the top TV downloads on iTunes.

As Showtime continues to add high quality programs, there's no reason it won't become for CBS what HBO is for Time Warner.

And CSTV, our college sports cable network powerhouse is a perfect example of a tuck-in acquisition that makes sense for us.

Working with CBS Sports and the NCAA, CSTV will provide unprecedented coverage of March Madness, the most coverage of the tournament by any cable network ever, and it will include live streaming of outer market game coverage, once again, getting us additional revenue for the same product.

Radio.

Let's turn to our next largest segment.

CBS Radio, obviously, we've had some challenges losing Howard Stern.

However, we are going to successfully make this work.

We've got the best local brands in the most attractive markets, now it's about content and promotion.

And again, historically, that's what we do.

We've recently launched over 20 new programming initiatives and several format changes, including free FM; ratings for Jack FM, which we flipped last year are up in 9 of 11 markets; our Spanish formats continue to perform very well; and just last week we announced that Jim Cramer, the host of Mad Money, will host a one-hour live show on 8 CBS stations.

Welcome, Jim.

Some of our news shows, some of them won't work, but we're constantly evaluating these new programs; and as we did with the CBS television group, we're going to increase the programming quality on the CBS radio group.

Outdoor.

As you know, we are already the largest out-of-home media company in North America.

Today, the improved reliability and lower access cost of digital technology is beginning to have an impact on this marketplace.

As digital continues to gain a lot of traction, we're taking full advantage of it.

We're also moving fast into the huge domestic Hispanic market, a segment that we've been growing about 100% per year for the last three years across this nation, as well as Mexico.

And we are being very selective about our major market transit contracts, opting out of those, which we've done quite a few times in the last year, which do not meet our profit and return criteria.

Outdoor has done extremely well in the fourth quarter, and they're looking extremely well as we head towards this year.

It's a great part of our business.

Publishing.

Stephen King's last thriller, Cell, has been the number one on the New York Times bestseller list for the past three weeks, and Simon and Schuster's fast growing audio division has been moving ahead.

Once again, they are entering into the world of audio as well as digital.

And we see a great progress for Simon and Schuster, as well.

New media.

Very quickly, I want to address something that I know is on your mind and that is very important to us, and that is all these areas of new media.

It's not one of our reporting segments, but it's an opportunity, as we mentioned before, for all of our divisions to expand their existing operations.

I've challenged all of our businesses to drive our world class content into new platforms and to get paid for it.

There are three primary ways we are already doing this, On Demand subscriber fees, subscription, On Demand fees, and online advertising.

Along these lines, we've announced a bunch of deals in recent months.

Earlier this month, we began offering Survivor downloads on cbs.com at $1.99 per episode, the first television network to make our own primetime hit programming available on our own website for a fee, without going through a middleman.

As I mentioned earlier, we have a new deal with Google.

We have a deal in place with Comcast for Video On Demand.

Showtime is now offering episodes on iTunes.

And radio, as well, is bringing new revenues with streaming channels.

We also have a great deal with Verizon, and we are entering into the telephone space.

Add to that all of the exciting developments in the digital world of publishing and outdoor, and you can see, as Sumner mentioned, we are not an old media company.

To help us put this all into perspective, we've just launched a new major research initiative called CBS Vision, which will help us better understand our many audiences.

As you can tell, we are pretty excited about the opportunities that lie ahead.

At our core, we remain committed to operating world class assets with total distinction, being the best at what we do, while once again, and I emphasize this, returning value to our shareholders.

Before I close, I just want to point out that one of the questions we always get is what is management doing to improve the financial structure of this business.

You should know that our entire management team is committed to improving our return on invested capital.

Every investment we make, every decision we make is made with the goal of getting a superior return on our capital.

We are very strong, and we're looking forward to the future.

And now to turn it over to our terrific CFO, Fred Reynolds.

Thank you, Leslie.

What I'd like to do this morning is first highlight our fourth quarter performance, focusing on the pro forma results.

As Leslie mentioned, our pro forma financial statements are consistent with the S4, which was filed late last year, and assumes that the separation occurred at the very start of 2005.

The three most significant changes that the pro forma financials reflect are the number of shares outstanding; they're reduced in half to about 765 million shares.

New Viacom is shown as discontinued operation.

And our interest expense is lower than as-reported results, as we assume that our debt was fixed at $7 billion.

So with that, let me discuss our performance.

I'd like to then wrap up with the discussion of the non-cash impairment charge, which we announced today of $9.5 billion, and then briefly discuss our as-reported results for the fourth quarter of 2005.

So let's start off with the fourth quarter of 2005.

Total revenues for the CBS Corporation were $3.8 billion, up 2% to a year ago's fourth quarter.

Pro forma operating profit before depreciation and amortization or OIBDA, excluding the impairment charge, was $779 million, up 3% over the fourth quarter of '04.

Now, our OIBDA margin in the fourth quarter of '05 were 20.4%, and that's up slightly from about 20% last year's fourth quarter margin.

So we saw improvement in our operating margins.

As Leslie mentioned, our largest segment is television, which consists of the CBS and UPN networks, TV stations, King World, Paramount TV and Showtime.

Our television segment had revenues in the fourth quarter of '05 of $2.5 billion, up 1.4% over year ago.

Revenue growth in the quarter was led by our broadcast networks, where sales were up 5.8%.

TV stations were down 2% in the fourth quarter overall.

However, if you look at November and December, they were up 2.5 and 6% respectively over 2004, as these two months were largely unaffected by the heavy political spending in the fourth quarter of '04.

Television OIBDA in the fourth quarter was $444 million, up 9% over the comparable period in '04, driven by higher revenue and lower cost, largely lower programming expenses at the CBS network.

Radio's revenue in the fourth quarter were $543 million, down 1% to a year ago.

OIBDA for radio totaled $215 million, and that was down 10%.

OIBDA was down approximately $30 million, due to a gain on the sale of the radio station in the fourth quarter of '04.

If you exclude the gain on the sale of the radio station in the fourth quarter of '04, radio's OIBDA would have been up 2% in 2005's fourth quarter, so up 2% if you exclude the one-time gain in the prior year.

Outdoor, as Leslie mentioned, had a really solid fourth quarter.

Revenues were up 3%, somewhat muted by some foreign exchange, the dollar strengthened against the euro and the UK pound, while OIBDA increased to $147 million or up 7% over 2004's first quarter.

As you know, our outdoor business in New Orleans was really whacked very hard by Hurricane Katrina, with losses and extraordinary expenses hitting us in the third and fourth quarters of 2005.

Outdoors fourth quarter OIBDA would have been up in the mid-teens had we not incurred these hurricane related expenses, but still up a solid a 7%.

Parks and publishing had a strong fourth quarter, closing out 2005 with a strong revenue gain and OIBDA of $40 million, up 60%.

Our parks business extended their season into the fall into the winter, and drove incremental revenues and profits; and Simon and Schuster had a number of best sellers in the fourth quarter that drove its profitability.

Now, turning to the non-cash impairment charge.

As you know, FASB 142 requires an annual review of goodwill for possible impairment.

In the fourth quarter of last year, we analyzed our market value of the company, versus the goodwill we carry on the books, which is approximately $39 billion.

Based on our current market value, the amount of goodwill needed to be reduced. $9.5 billion non cash charge resets our goodwill for our television and radio segments, the appropriate amount, using very realistic assumptions.

Now let's quickly turn to the fourth quarter results on an as reported basis.

Operating income, excluding the impairment charge was $647 million, up 3% over 2004's fourth quarter.

As reported, earnings per share was $0.17 on a diluted share basis, assuming the shares outstanding were pre split or again about 1.5 billion shares outstanding.

Finally, as Sunder and Leslie both said, free cash flow, big hit for us in the fourth quarter and all of 2005.

Full year free cash flow for CBS Corporation, $1.5 billion, up 10% over 2004.

Not only were we successful in converting a significant amount of our OIBDA to free cash flow we were also very successful in managing our working capital, an area of continue focus and opportunity for us.

And before we wrap up, we want to mention that we did provide guidance for the full year.

As we've stated in the past, we expect our revenues to grow in the low single digits and we expect our operating income and earnings per share to be mid-single digit growth, and this excludes any of the expenses that would relate to expensing stock options going forward.

So with that I think I'll turn it over to Marty and we'll take your questions.

Right, we'll open the call to questions.

[OPERATOR INSTRUCTIONS]

And we'll go first to Victor Miller with Bear Stearns.

Good morning, thanks for taking the question.

First of all, could you contrast the offering that you'll have for your potential affiliate base of CW versus what Fox announced yesterday, which is My Network TV.

Secondly, could you talk a little bit about the transition radio.

Obviously the radio business is down 270 basis points we think as an industry in the fourth quarter.

You beat that by 170 basis points.

But now, you added another 27 stations into the mix.

What should we realistically expect as we go into the first quarter, the earliest part of the transition and as we look twardo the year, what should we expect really for the radio business?

What can you do?

All right, Victor, I'll answer the first question, this is Leslie and I'll turn over the second to Fred.

The CW versus My TV, number one, we already have a base of 50% of the country between the Tribune stations and the CBS stations, we have a very, very strong station base.

We're also getting a lot of activity right now as we speak from different affiliate groups throughout the country who are bidding on getting CW.

I know the Fox people announced My TV and nobody should ever underestimate Roger Ailes, but it took UPN 12 years and WB 12 years and they are better off together, so we're very excited about the affiliate base we have.

The economics are we're looking at a number of things.

Obviously, we want to have what we call programming fees from them but we're also looking at what is the best station for our network.

That is also a factor, so there are a number of factors in there but we are putting together a group of affiliates that are going to be spectacular and as I said, out of the box, CW is going to be stronger than UPN, it's 1 plus 1 equals 4 and we're very excited about it and we wish My TV good luck.

Okay, Victor, let me just, try on the radio side, to answer your question, clearly the comparables with 27 Howard stations are going to be difficult not only in the first quarter but for the first few quarters of 2006.

We look at the business, both the Howard stations, the 27 and the non-Howard, the 151.

And so I think you've seen our CBS radio group outperform the segment.

The non-Howard stations we expect would outperform the radio industry.

And I guess we'd only caution the first quarter is always difficult when you have an Olympic year in there.

Everything is breaking a little bit later.

We're more encouraged today than we were maybe two weeks ago when we started February because it seems like the back half of February and March are picking up a little bit.

So it's going tough to read, I don't want to be any less clear that it's going to be tough to read the first quarter because of the Olympics, because of the non-Howard stations, we look at both and we expect to outperform the industry.

Thank you.

Thank you.

We'll go next to Jessica Reif Cohen with Merrill Lynch.

Thank you.

A couple questions.

Could you discuss any interest you might have in Univision.

Even given your, you said regulatory issues, I was just wondering if you could participate possibly as a minority strategic partner.

And secondly, Les, could you expand on what you said in your opening remarks about the dividend.

You mentioned that you, hopefully, will have a higher dividend over time, I just wanted to know what you're thinking about that currently.

And then finally, just to go back to the Fox network question, how does it, it's not really 100% clear how your affiliates will get compensated.

So could you be more specific about how it effects affiliate compensation and maybe even marketing plans?

Okay, sure, let me go through them.

Univision, look, we look at everything Jessica.

We have major FCC issues.

As you know our television station group's at its limit, right now, our radio stations in many markets is at its limit.

Whenever an opportunity like that, I don't think there's a media company in the world that's looking at Univision.

I don't want to comment anymore than that, but the regulatory issues are pretty extreme there and I don't foresee anything further on that.

In terms of the dividend, I thought it was significant that we went out and Fred and I did an investors meeting about three or four weeks ago and we announced an increase in our stated dividend.

I think that was as much financial as it was symbolic about our intent as how we're going to use our cash that we intend to continue to increase the dividend.

And I think shareholders and investors should feel very confident in that, that we are going to be giving money back constantly and it's our goal to keep increasing it.

And I think the fact that we did that three weeks into our operation should have been fairly significant.

Now, regarding the Fox television station, the Fox announcement and the CW station, let me just announce, when we did the deal, the initial deal was made up of Tribune and CBS stations, which encompass almost 50% of the country.

Tribune is paying reverse compensation to the CW network.

That's happening.

We already have offers in many, many markets to pay reverse compensation.

Once again, as I've said earlier, that's only going to be one of the factors because the other factor is having a very, very strong affiliate base so the network [soars] which we think it will and as I stated, I think this network will be profitable from day one.

The other advantage for us is obviously our 11 CW stations already become immensely more valuable than they had been as UPN television stations.

And the third part that CW works for us is that most of the new content are going to be joint ventures between Warner Brothers and us, CBS.

And as you know, as we go forward, content is going to be extremely important not only for the CW network but for all the other uses that we can have.

So we're looking at it as a three-way victory, CW, both network stations and content for us.

And once again, Fox will have it a bit tougher than we will.

Thank you.

And we'll go next to Anthony DiClemente with Lehman Brothers.

Hi good morning and thanks for taking the question.

You just posted $1.5 billion in free cash flow in 2005.

Many of the Street analysts, ourselves included are looking for about $1.15 to $1.2 billion in free cash in 2006.

Now, I think the difference and the big reason for the gap is negative working capital, people are looking for about $350 to $400 million in negative working capital in '06.

This question is for Fred and the question is, can you just remind everybody what is exactly included in that number, number one.

And number two, how recurring is that number, meaning should we be modeling, and you alluded to working capital earlier but should we be modeling such a big negative number, $350 to $400 million going onto 2007 and 2008?

Thank you.

Anthony, thanks, let me take you through, free cash flow for us, is our after everything, capital spending, taxes, you name it, change in working capital, change in net assets, it's everything, so we don't change that number, it is the cash in the bank at the end of the year.

Well, let me take it through, yes, we had an extraordinary year on working capital.

Part of that as you would expect, with revenue sort of flat, we did collect a lot of the receivables and that is the focus is to drive down our day sales outstanding.

So that was part of the reason.

With revenues up only a little for the year or relatively flat, that we were able to drive down working capital.

You have to look at our business a little differently.

One, the normal business does not use a lot of working capital.

Probably $0.20 on every incremental dollar of revenue somewhere in that range is what we need in working capital.

But we do have some non-cash revenue and non-cash profits that come in, in our syndication arm.

When we announced, and that has a little bit of variability year to year, because in the second quarter of '05 when we announced a Raymond syndication to cable, the accounting rules make us recognize all that revenue and we have both a current and long term receivable, from, in that case I guess it was one of the cable networks.

So that is something we look at and that could drive the variability.

I do think we're going to see a lot of growth as we've said.

We'll grow low single digits in revenue, so we won't be able to work down the working capital as much as we did in 2005, but you can count on us driving down -- the big numbers we can drive down are receivables.

We don't have inventory, we don't have widgets, we just have receivables and we have programming costs.

So we will try and be as illuminating to you when we have the periodic each quarter sales of syndicated product to the cable networks that may drive non-cash for that quarter revenue and profits we will illuminate that as best as possible.

But we are a cash flow machine, that's what we're about.

That's what Leslie holds us to, that's what Sumner holds us to and we're going to be focused, all of our divisions, driving down our receivables and holding the payments going out as long as we can to make -- we only have about $12 billion of non-goodwill assets, so we want to make those turn real fast, that's certainly our commitment to you.

Okay.

We'll go next to Doug Mitchelson with Deutsche Bank.

Thank you very much.

General consensus is the upfront will be flat to down slightly this year.

First, do you feel differently, Les and second, the big story last year for CBS was Thursday night, it seems that's the big story again this year.

Are you already achieving the same PPM pricing on Thursday as NBC and if so, how much revenue upside do you still see left on Thursday night?

Number one, I don't know who you're getting that consensus from, but our people are telling us that the up front is going to be up close to 4% if not more.

And we have, by the way, in most of the last 10 years far exceeded what the expectations are.

I think you've been talking to too many advertising executives, Doug, who always at this time of the year start the march, the up front is going to be down, the up front is going to be down and then guess what, come June, the up front is up.

And I can almost guarantee you the up front will be up.

In terms of Thursday night, we are obviously very pleased with our performance on Thursday.

It continues to be strong.

Overall, it gives me an opportunity, broadcast television is doing extremely well.

You look at ABC, you look at Fox, you look at us, we're all doing extremely well.

NBC is having some gains here and there.

The network groups are doing extremely well.

It's time that people realized that broadcast television is still the place to be and once again, some of the drumbeats maybe, should be around broadcast more than some of the cable assets.

In terms of CPMs, it's hard to, you know what, we don't necessarily split out a CPM, we make overall deals.

When you buy CSI on Thursday night, you're also buying some other shows.

So it's hard to assess how much CPM growth there will be on Thursday night but it continues to be the best night for us and we continue to be pretty strong on that night.

Do you think there's some more revenue gains from NBC on Thursday night coming for CBS?

No question about it, there's more money flowing in every day on Thursday night.

Thank you.

We'll go next to Kathy Styponias with Prudential Securities.

Hi.

Two questions.

One, Les, you mentioned the traction that Showtime is gaining especially with the shows, just the L Word and Sleeper Cell, etc.

I was just wondering if you could go over for us how much cash flow is currently being generated by Showtime and/or where the margins are given that HBO throws off about $1 billion plus in cash flow.

So how much upside potential, how much of a swing factor could Showtime be?

And then second, if someone could comment on what sort of trends you're seeing so far into the first quarter with respect to television advertising?

Yesterday on the call, Viacom mentioned that the dollars are being placed later and later into the quarter.

I'm wondering if you're seeing the same sort of trend.

Thanks.

Let me talk about Showtime first Kathy.

Obviously, HBO was built on great programming first and then the money and the subs followed.

I think the fact that Weeds won a Golden Globe award and that the star of that show won a Golden Globe award and for the first time, I think in many, many years, Showtime is on the map and being talked about in the same breath as HBO.

Yes, HBO makes considerably more money than Showtime.

Fred, what is the number on Showtime right now?

We don't break out the segment numbers.

Right, it's part of the TV segment but there's a lot of upside.

There's a tremendous amount --.

There's a lot of upside.

We don't make nearly as much as HBO but we are growing every year and I think this original programming is absolutely going to help us in terms of that.

In terms of first quarter scatter, one thing that Fred said, this is a screwy first quarter.

In February, by the way, this has all changed recently, in February this year, we have the Olympics, we have the Academy Awards.

We have the Super Bowl and we have the Grammy's all squished together.

I know the Academy Awards is at the beginning of March but it's sort of all together in one month.

It used to be Super Bowl was January, the Academy Awards was April and the Olympics only comes around in February once every four years.

So it's hard to ascertain what the scatter market is, all we know is as we head towards the rest of the season, we are starting to get a great deal of post Olympic interest.

And we're starting to get very high rates for our scatter post Olympics so we're excited, we've held our powder so we have original programming through March, April and May and we expect the scatter market to be very, very strong for us.

Thank you.

And we'll go next to [Andy Baker] at [Café] Financial.

Thank you very much.

A couple of questions.

One, could you just give us a sense of how much revenue might be at risk and how much, on the money losing transit contracts, if you were to get out of those and then how much potential there is on the profit side for getting out of money losing contracts.

That's one.

And then secondly, on Showtime, can you remind us when your studio deals expire.

Okay, I'll do the Showtime question first.

Most of the deals expire within a couple of years, within two years, so that's very exciting for us as we look down the future because we can have more freedom to do what we want to do and get the product we want on Showtime.

So once again, another reason why we're confident Showtime can grow considerably.

And Andy, on your transit comment, this is sort of like addition by subtraction.

I'm not as worried and Leslie is not as worried about the revenue and that's why outdoor maybe, the revenue growth wasn't as strong but the profit growth was very strong.

We don't want profitless revenue.

We want to make a lot of money on all our contracts and if they don't meet the hurdle, we don't bid.

So again, you should be focused on that too.

We're going to have a lot more profitability out of outdoors and have a strong 2006.

And can you give us a sense of how much the unprofitable contracts have been draining from your bottom line then over the past year?

Let's say it certainly has put a damper on the profit growth of outdoor.

Probably my guess is at least in 4 or 5 points of growth.

And maybe more depending on the year, but it's at least been 4 or 5 points of growth on the bottom line.

Thanks a lot.

Thank you.

And we'll go next to [Arian Maller] with Credit Suisse.

Yes, thank you, good morning.

Two questions.

One, can you give an update on the potential sale of theme parks and are you looking at publishing, perhaps since we saw Warner Books [inaudible] there recently.

And secondly I'm trying to model free cash flow going forward using the various components.

You've talked about working capital.

Could you talk about taxes, CapEx on taxes, do you have NOLs, what kind of effective tax rate should we model for?

Thank you.

I'll take those.

On parks, the process is underway, we have a number of interested parties that are going to be looking at the business over the next several weeks and hopefully by sometime in the second half of this year we'll have very attractive proposal from suitors to buy.

Leslie does, and I think we all agree that Simon and Schuster is a good content company and particularly you can get real excited about the digital devices that come down that are going to be wanted to have something in those devices such as the electronic books.

So I don't think that is something we'd want to to consider because of the content aspect.

As far as tax rate I think you ought to assume kind of a 42% tax provision.

We're working hard to get that down.

It's a tick or two higher than we were--than we had when we were combined with Viacom because we don't have the--as much exposure outside the U.S. to low tax countries, but we are working feverishly both at the state and local level and on Federal to see if we can't work on that but you ought to assume a tax rate kind of in the 42% range.

I think that answers--

CapEx.

Oh and CapEx should be just a tick--thank you Leslie I'm getting old and I forget the question.

The CapEx should be just slightly higher than this year as we showed in the--in the release today for the year was $376 million.

We're only going to be up slightly higher because it's a timing difference.

We're building out a new station out in L.A.

We sold the Chicago station this year and we sold the [take-out] station but the building of the new one is next year.

So it's probably going to be $20 million to $25 million more.

It may not be that high but you should sort of count on that.

We hope to beat it.

Okay great, thanks.

We'll go next to Anthony Noto with Goldman Sachs.

Thank you very much.

There's been a lot of questions about free cash flow and I was wondering for 2006 if you could just lay out a target for EBITDA to free cash flow conversion both with and without the pension liability.

And then the second question, obviously most investors are going to look past these--these write-downs and impairment charges.

And I was just wondering there's been a lot of, you know, statements about upside and guarantees and I was wondering if I could bait you into giving us a target for return on invested capital for the next couple of years?

And as you do acquisitions, if you will commit to disclosing what the internal rate of return on that acquisition is from a forecasted standpoint and main components?

Thanks.

Anthony, I'll take that, Les.

Thanks, Anthony.

We're not going--we don't really give an outlook on the free cash flow but again we are focused on making sure the OIBDA converts at a high rate to free cash flow and again our commitment is to really work our assets to get more cash out of them.

So I think you can count on that.

I think it's--because of just the timing of the pension investments and all the things that we do to prefund the pension plan I think it would be difficult right now to give you that kind of guidance.

As we make the decisions we will certainly communicate them so you won't be guessing where we went on that.

On return on invested capital I think at this point we introduced to all our management that we're looking very closely, and as Leslie said at the outset this is something he's focused on every day.

So we've introduced to our management that we're going to look at no [pass].

We're going to look on return on investment capital with the goodwill, without the goodwill and so that we can drive that return.

Clearly our goal is to exceed our cost of capital by a lot.

If you take goodwill out, which I can't do, Leslie can't do and Sumner, because that's our shareholders' money.

But if you take that out kind of the low teens return on invested capital with a cost of capital of around--some of you have it to 9%, some 8.5% but somewhere between 8.5/9%.

Obviously as you load in now some $30 billion of goodwill we're below that cost of capital.

That's unacceptable to us and it's unacceptable to our shareholders.

Great thank you.

We'll take one more question please.

That question will come from Michael Nathanson with Sanford Bernstein.

Okay thanks I have one for Fred and it's following up on Anthony's question.

Rather than talking about forward-looking commentary on conversion rates the question I think people are trying to struggle with is in '05 specifically how much benefit was working capital as a real number and then what was the pension investment in '05 that you guys put through?

Okay we did use some working capital but not a significant amount.

And so that--it wasn't a negative.

In other words it wasn't a source but we did use some working capital.

We did not make and we are not required to make a pension investment in 2005.

We're not required to make a pension investment in 2006.

However, in January I think we noted this is a previous meeting we did put $50 million into the pension plan and my guess--so it's a prefunding and it's tax deductible and we're going to look at that again as a source of our--of a use of our working--of our free cash flow.

We think and I think many of you believe that's a pretty good return on our investment.

It's probably low teens.

I calculated it around 13% IRR on putting prefunding--as long as we get the tax deduction, and you can't over prefund because then you don't get the tax deduction.

It was a quarter in which you have to stay within in order to get a tax deduction.

So we put in 50.

We will likely put in more this year but some--some analysts said that we should fund it all up in one fell swoop.

That won't happen this year because, one, we won't get a tax deduction.

Thank you very much for joining us this morning. [Deborah] and I will be around for the rest of the day to answer any more questions and have a good day everyone.

Thank you.

This does conclude today's conference.

We do thank you for your participation.

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