Paramount Global (PARA) 2006 Q1 法說會逐字稿

Good day, everyone and welcome to the CBS Corporation first-quarter 2006 earnings release teleconference.

Today's call is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to Executive Vice President of Investor Relations, Mr. Marty Shea.

Please go ahead, sir.

Good morning, everyone and thank you for taking time to join us for our first-quarter 2006 earnings conference call.

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

Leslie Moonves, our President and CEO and Fred Reynolds, our Executive Vice President and CFO.

Sumner will have some opening remarks and then 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 considered forward-looking statements, which involve risks and uncertainties that could cause actual results to differ.

Risks and uncertainty are disclosed in CBS Corporation's news releases and security filings.

A summary of CBS Corporation's first-quarter results should have been sent to all of you.

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

A webcast of the call, the earnings release and other information related to the presentation can be found on CBS Corporation's corporate Website at the address CBSCorporation.com.

Now I'll turn the call over to Sumner.

Thanks, Marty.

Good morning, everyone.

Thanks for joining us.

I couldn't be happier with CBS's performance since it became a standalone company.

As you see with the results today, this is a company on the move.

It is clear that Les and his team are determined to grow demonstrating the ability to grow revenue, to grow profit and indeed to increase value for shareholders.

The new CBS is completely focused on this strategy to maximize the strong prospects of our existing businesses while using world-class contents to fuel new media platforms.

From its leading broadcast networks to its television production hit factories to its powerful TV and radio station groups, CBS Corporation is leveraging its reach of popularity to capture new opportunities across the board.

Through the host of strategic moves already underway and our debut in 2006 with very solid first-quarter results, we see excellent momentum building towards the long-term goals that we have set.

The fact is we are off to a terrific start.

And I am truly excited about what the future holds for CBS and with that, I will pass it over to Les.

Thank you very much, Sumner.

Good morning, everyone and it is a pleasure to be here to talk about a very good quarter.

As you know, this is our first full quarter of results as the new CBS Corporation.

I am pleased to report that our fundamental growth pattern is working.

We are absolutely achieving the results we expected from our core businesses.

From revenues to operating income to earnings per share to free cash flow, we are well positioned for long-term stable growth.

The headlines are as follows.

Revenues were up 4% to $3.6 billion compared with the first quarter of 2005.

Free cash flow was up a very strong 12% to $585 million.

Strong double-digit free cash flow growth off of mid single digit revenue growth is something we are particularly pleased with.

And on a pro forma basis, diluted earnings per share came in at $0.30, up 11%.

As you see from these results, our core business is producing the kind of performance we expect and demand.

In a few minutes, Fred Reynolds, our CFO, will discuss our results in greater detail, but first I want to walk you through each of our operating units and also briefly highlight how they are using the new media opportunities to make more money off the things they are already doing.

So first let's start with our largest segment, television.

We remain the number one most watched television.

The top network in advertising billings according to broadcasting and cable and our prime time lineup was number one for fourth consecutive year.

Plus, we have just announced large-scale renewals and have successfully launched both of our midseason hits, Old Christine and The Unit.

With the breadth and depth of our hit dramas, comedies and reality shows, we have unparalleled strength across the board with successful shows every night of the week.

And our hit shows are also quite young in there lifecycles.

In fact, we expect with strong development this year that the CBS television network will extend its lead.

Plus, our revenue growth for the first quarter was achieved in spite of tough competition from the Olympics.

While many of the other networks aired original programming, we saved most of our new episodes to air in the second quarter to maximize our audience and optimize revenues.

And since our last earnings call in February, we took a major step forward in our news division.

As I am sure all of you know, Katie Couric will become the anchor and managing editor of the evening news and our newest contributor to 60 minutes.

Katie's arrival is just further proof that CBS is the place to be for the most talented professionals out there.

And I am extremely proud to welcome her to our news division and our Company.

With Katie on board, we see a significant upside for the evening news where a single ratings point can translate into tens of millions of dollars for us.

Katie's switch also changes the entire landscape of the morning news.

This is a move that will boost the overall performance and profitability of the news division across the board.

As always, the first quarter was a big one for CBS Sports with the NCAA tournament and as I will tell you in a moment this year we added an online component to that valuable asset that broke records.

Also in the television segment, we had significant revenue growth in syndication mostly from the second cycle sale of Fraser at CBS Paramount Television in pay cable from higher fees and increasing subscribers at Showtime and in the television stations group, which also had a terrific quarter.

As we have said before, success in local television tends to trail success of the network.

Our very profitable stations are starting to pull ahead and they will benefit from a great deal of political advertising later in the year with a number of key competitive races about to unfold throughout the country.

Radio.

Turning to radio, our toughest story.

We're clearly not yet achieving the level of growth we look for, but these are extremely valuable assets, which we believe will again become a significant contributor to our growth profile very soon.

We are already on our way with changes in programming and we continue to strategically invest in that programming and we are pleased with the early signs.

For instance, the new Jack and Spanish formats have shown success in many major markets and this week's return of Opie and Anthony is a good example of the flexibility of our radio business.

We made a quick midcourse change and brought in proven talent who we believe should greatly improve the revenue and profit performance of our nation's largest East Coast markets.

These guys were number one in their depart when they were last on our air in 2002 and we look forward to the new excitement they will bring in the morning beginning with their first broadcast with us, which happens today.

We are also seriously looking at readjusting our portfolio.

We're in more than 40 markets and we will continue to focus on those that are large and fast growing.

Where these criteria aren't met, we will consider selling some stations if it makes sense.

That process has begun and is ongoing.

We are encouraged by the very strong exit values that radio stations have realized recently.

Turning around radio and making it the revenue and profit contributor that it can be is one of our top priorities.

In outdoor, we have a really terrific story.

OIBDA surged 43% and operating income nearly tripled.

This stellar performance was due largely from double-digit top-line growth in North America and to our decision to exit low margin transit contracts towards the end of the year.

And the Hispanic market has also been booming for us.

We have been growing this key demographic at a pace of [110] % per year for the past three years in the U.S.

We continue to lock in attractive deals, such as the New York City subway contract.

Plus we are evaluating several tuck-in acquisition opportunities in the U.S., Europe, China and in Mexico.

And as we have said, digital technology offers great potential for what is already our fastest-growing segment.

Digital technology brings lower operating costs and a significant upside to advertising revenue.

We expect to see a great deal more from this business in the future.

Last but not least, our Parks and Publishing division had a great quarter.

Parks is off to an excellent start with strong attendance this year.

As you know, we plan to sell the Parks business and you can expect an announcement on that in the second half of 2006.

Our Publishing segment also did very well in the strength of first-quarter titles, including Two Little Girls in Blue by Mary Higgins Clark and Cell by Stephen King.

Simon & Schuster is extremely active in the growing business of downloading its content.

And we believe that here as elsewhere in our Company digital distribution holds great promise for all of our divisions.

This brings us to the new media announcements we made over the quarter that highlight our strategy of getting new revenue streams from already existing content.

For instance, this was our 25th year broadcasting the NCAA men's basketball tournament and this spring, we offered Internet streaming off out of market games.

With over 19 million streams served, it was the biggest live sporting event in the history of the Internet.

Ratings for the simultaneous broadcast games weren't affected, so all of those Web hits were incremental as was the revenue produced.

That business is clearly on the rise.

The revenue was considerable and will clearly increase greatly every year for the future years of the tournament.

We have also made advances in our efforts to get paid for our programming by content distributors.

Last month, we announced a pure retransmission consent agreement with Verizon.

With each subscriber that Verizon's fiber-optic TV adds, CBS will directly benefit.

The days of retransmission consent for broadcast networks are here.

Last month, we announced a partnership with Yahoo! to bring 60 Minutes, video content and robust news packages to Yahoo!'s media properties.

Downloads of our shows, our entertainment shows, from numerous platforms, including Google, iTunes, Comcast, ONdemand and our own CBS.com continue to grow.

We look forward to what the future holds.

With every new distribution outlet comes a new way to generate revenues.

Also the Verizon VCAST deal, which lets VCAST subscribers view CBS content on their cell phones, will bring in some $3 million in incremental revenue through subscription dollars this year alone. $3 million -- that is genuine growth in what will be a real business for us going forward and it all goes directly to the bottom line.

So I think you can see that our ability to monetize content in new ways is rapidly increasing and there will be many, many more of these opportunities for us in the future.

In conclusion, it has been a terrific start for us these past few months.

This is just the first quarter of our new Company and we are right on track.

Looking forward, I am confident with the guidance we have given in our business outlook for the full year.

We continue to produce lots of cash.

We believe there are no better businesses we can invest in today than our own.

Reinvesting in our businesses and returning capital to our shareholders are the best uses of our free cash flow going forward.

Plus, our strong balance sheet and the upcoming sale of our Parks division will give the opportunity to review a possible dividend increase and other ways to return capital to shareholders in 2006 and beyond.

In three months of our new Company, we have delivered on all of our major promises to our investors.

We said we would raise the dividend and we did.

We said we would get paid for retransmission of our content and we are with more to come in the future.

We said we would stay on top at our TV network and we are.

We said we would get paid in many different ways on new platforms and we did.

We said we would grow revenues and we did that too.

When we say we are going to do something we do it.

You can count on us to keep our commitment to be the best in all of our businesses and to translate our success into shareholder value over the long term.

It has been a terrific quarter.

We are very proud of that.

And with that, I will now turn it over to our CFO, Fred Reynolds.

Thank you, Leslie.

Good morning.

What I would like to do this morning is briefly take you through the highlights of our first-quarter 2006 performance.

So let's start with revenues.

As Leslie mentioned, they were up 4% to $3.6 billion over the first quarter of 2005 led by 5% growth at the Television segment and 5.4% growth at Outdoor.

Our operating profit before depreciation and amortization, or OIBDA, was $634 million, up 1.1% over the first quarter of 2005.

Now included in our results for the first quarter 2006 was $8.5 million of stock option expense.

On a pro forma basis assuming that the separation had occurred as of January 1, 2005 and excluding the $8.5 million of stock option expense, OIBDA in the first quarter of 2006 would have increased by approximately 4% over the first quarter of 2005.

On an as reported basis, operating income was $511 million, up 1%.

Now again on a pro forma basis, excluding stock option expense, operating income would have increased by 4%.

So let's move down the P&L.

You will note that other items net is down significantly by $42 million from the first quarter of 2005.

In last year's first quarter, we recognized a significant net gain of $38 million pretax or about $0.028 a share after tax primarily from the sale of our interest in MarketWatch.

Interest expense was $144 million for the quarter and it is down from $175 million in the first quarter a year ago.

This drop in interest expense reflects our lower debt as a result of the $5.4 billion year-end dividend we received at the time of the separation.

Also during the quarter, we retired $52 million of our 7.7% coupon bonds, which were due in 2010, which resulted in an early extinguishment loss of $4 million.

Our tax rate for the first quarter of 2006 was 40.8%, slightly below the tax rate from a year ago.

This reduction in tax rate is a result of numerous initiatives that we have taken at the state and local level.

Our tax rate was dropped from over 42% in 2005.

Based on these and other initiatives at the state and local level, we currently project our tax rate for 2006 to be at or slightly below 41%.

Earnings per share on a fully diluted basis was $0.30 for the first quarter of 2006, up 7.6% on an as reported basis.

Now on a pro forma basis, and again excluding stock option expense, earnings per share would have been up 11% over the first quarter a year ago.

As Leslie mentioned, free cash flow for the first quarter totaled $585 million, up approximately 12% over the first quarter of 2005.

Included in free cash flow was the prefunding of $50 million, which we contributed to our qualified pension plans.

Adding back the $50 million, which was a discretionary use of free cash flow, free cash flow in the first quarter 2006 would've increased by over 20% from a year ago.

This was driven by strong accounts receivable collections, lower cash interest, lower cash taxes and a modest increase in capital spending.

Our capital spending was up $4 million over the first quarter of 2005 to $62 million in the first quarter of this year.

So strong cash collections of receivables, lower interest cost, lower cash taxes and a modest increase in CapEx drove our strong free cash flow performance.

On a per share basis, are first-quarter free cash flow was $0.76 per share.

Now if you add back that $50 million, which was the discretionary use of cash to put into the pension plan, that $0.76 would have risen to $0.83 and this compares to $0.64 a share in the first quarter of '05.

Let's briefly turn to our Business segment.

Our Television segment revenues of $2.5 billion were up 5% over the first quarter a year ago.

CBS Paramount led the way with growth of revenues over 20% and as Leslie mentioned driven by the syndication of the second cycle of Fraser in this first quarter.

TV station revenues were up 2.5% over last year's first quarter led by good growth in our top markets.

Operating profit before depreciation and amortization was $424 million, up 3% over the first quarter a year ago.

Again excluding stock option expense, our first-quarter 2006 operating profit before depreciation and amortization would have been up 4%.

Radio's revenues for the first quarter was $434 million, down 6% from last year.

As you know, 27 of our 179 radio stations had a significant change in programming with the loss of the Howard Stern show.

The 152 stations not experiencing a change in programming fared significantly better from a revenue standpoint with sales declining 1.5% from a year ago.

Radio's operating profit before depreciation and amortization was $171 million, down 14% from the first quarter of '05.

And as Leslie mentioned, Outdoor had a terrific quarter, just a terrific quarter with revenues up 5.4%, but that masks really the strength of Outdoor.

North America's revenues were up over 10% led by double-digit growth in revenues in our U.S. billboard business.

Europe's revenue in dollar terms was down 3.8%.

However, revenues in Europe and local currency were up 5%.

Outdoor's operating profit before depreciation and amortization was $99 million, up 43% over the first quarter of '05.

This terrific performance is driven by higher revenue, particularly the United States and the rest of North America, and as Leslie mentioned the absence of unprofitable contracts, which had been entered into in prior years.

Next is corporate expenses.

For the first quarter, totaled $28 million.

On a pro forma basis and excluding stock option expense, corporate expense for the first quarter of 2006 increased by just $700,000 over the first quarter of last year.

We expect corporate expenses to be relatively flat on a pro forma basis and again excluding stock option expense for the full year 2006 compared to 2005.

Residual costs, which consist primarily of pension and retiree medical expenses, are related to our divested businesses with $35 million for the first quarter, up from $30 million in the first quarter last year.

This increase in cost related primarily to our pension expense as we updated our mortality assumptions.

The increase in pension expense was somewhat offset by lower retiree medical expenses as we are benefiting from lower prescription drug costs due to the Medicare Part D subsidies.

And finally, during the first quarter, as you know, we increased our dividend from $0.14 per share per quarter to $0.16 a share per quarter, a 14% increase.

So to wrap up, as Leslie and Sumner just mentioned, we are off to a very, very good start to 2006.

Thank you for taking the time and with that, we will now open the telephone line for your questions.

Operator?

(OPERATOR INSTRUCTIONS).

Victor Miller, Bear Stearns.

Thanks for taking the call.

Fred, I was struck by the significant decrease in debt that you've -- since year end, almost $429 million.

As we look to predict net debt by the end of the year of '06, could you update us on the Viacom special dividend, what you expect in the net proceeds of Parks, what kind of proceeds you'd like to do ultimately in radio?

Could you be levered at under 1.25 times by year-end?

If that is the case, how would you look at prioritizing share repurchase dividends and pension?

Then for Les of course with three weeks away, the upfront, could you tell us what you expect from CBS and CW?

Thanks.

Well, Victor, let me take the first part obviously.

Yes, as you know, we've ended '05 in a better shape from the debt standpoint and we added to that in the first quarter of '06.

We have no desire to have our leverage fall below where it is now.

So as Leslie I think alluded to and we're considering certainly as we monetize the Parks business.

No, Victor, I'm not going to give you the values of what we think we will get out of Park, I can tell you though we have extremely interested group of bidders.

Numerous people have been through.

We expect to again know in the next say six weeks or eight weeks we'll have a good idea of where we are in Parks.

But everything we see is very, very encouraging and it couldn't be better that they are off to just a terrific start.

Attendance is up and per caps are up at the park.

So everything is going the right way there.

You can expect -- as Leslie said, we're going to look at raising the dividend at some point this year.

We'd like to wait for the second half, third quarter-ish and my guess is -- as Leslie said, our best investment is in our own businesses, but our businesses don't use a lot of capital.

So we would probably look at one of the options that we all are focusing on is shrinking some of the equity base, which would be a share buyback.

We are not committed to it yet.

Give us a little more time.

Let's get the Parks monetized.

Let's good through the second quarter and I think we can certainly -- if we stay on the track we're on, I think you all will be pleased with the recommendations we will come up with.

Victor, on the question regarding the upfront, in about three weeks when the upfront comes, we are very excited about it.

I think network television has had an extraordinary year across the board.

I think three of the four major networks have done exceedingly well.

And we are, as you know, we have renewed a great deal of our programming.

We have very strong developments.

The bar is going to be set extremely high for CBS.

Scatter is proving to be good in the second quarter and post Olympics, which is sailing into the upfront and we are very bullish about it.

Regarding CW, once again the marketplace has now gone from six networks to five.

When you add the programming from the two networks together, once again an extremely solid schedule there.

We are reorganized; our team is in place.

We have gotten the best of development from UPN and from the WB and once again the bar is going to be very high there and we expect to have distribution in over 90% of the country by the time the upfront comes, which will be stronger than the distribution of either UPN or the CW.

So we expect CPMs to be up there as well.

As I have mentioned before, we expect the CW to be profitable from day one, which not only helps us in owning half the network, but also 11 of its TV stations for us become much stronger.

So we are looking forward with a great deal of excitement for the upfront.

Jessica Reif Cohen, Merrill Lynch.

Two questions.

With the announcement that you may sell radio, could you talk about the number of markets you ultimately expect to be in and how soon you would expect the sale to occur?

And then on the potential for acquisitions, you guys continually get mentioned as a potential bidder for Univision.

So could you just elaborate on your current views on something like that?

You know in terms of radio, Jessica, as you know, we are a big market company primarily.

So without giving specific numbers, we want to stay in the bigger markets and in some of the smaller markets that are faster growing.

We are going to do that.

We are already exploring a number of radio stations at this point in time in the smaller nonrapidly growing markets and we are already getting some interest.

We were very pleased with what ABC radio was able to sell their stations for.

So without quantifying a number, we are being quite aggressive about that.

Regarding Univision, Univision is a wonderful company.

As you know, there are major, major FCC obstacles for us.

We are very happy with the hand we are playing now.

We are not looking for an acquisition of that size.

Kathy Styponias, Prudential.

I have two questions as well.

Les, first, can you talk about how much you are currently earning in revenues from new platforms and where you expect that to be over the next three to five years?

And then the second question is for Fred.

Fred, your free cash flow growth in the quarter was very impressive.

When you have talked about free cash flow for the year for 2006, you have alluded to the fact that it should be lower for various reasons than 2005, but looking at what you have done with the tax rate, could you give us an update on that, whether or not that might prove to be conservative and to the extent that you can tell us how we should expect -- whether we should expect more prefunding on your pension costs?

Kathy, regarding new media is a tough question.

As I mentioned, this year alone with VCAST, with Verizon, we're going to make over $3 million.

We took in north of $4 million in revenue from the NCAA basketball tournament on the webcast as well.

The downloads -- we are still gathering information on that.

It just --- these experiments just began in January.

They are really brand new, but each month is growing in leaps and bounds.

Our news site is up about 300%.

Now granted the base is rather low, but as years ago by, we expect it to shortly be in the tens of millions of dollars and that is really as specific as I can get right now, but every month they are growing and we are very excited about what is happening out there.

I would just add on the new media, Kathy, is that we have a pretty big base with something called SportsLine.

It's doing really well and growing very rapidly as it is now integrated for the first time this year because we got it last year at one point in the year.

So that is growing very quickly in and of itself.

Now whether you count that as new media, we sort of do because it's Internet and it is doing great.

On your point on the free cash flow, yes, we are very pleased with the first quarter and as you can tell the first quarter is always very strong for us.

It was strong last year.

We obviously did better this year because we have higher revenues, higher profits and a lower tax rate.

As I was trying to say in my comments, I expect the tax rate to be lower than what we had guided to before.

I think we guided to a little north of 42% tax provision and we feel pretty good at 41%, maybe a tick below that slightly, but I would count on 41%.

So that would be a driver for increasing the free cash flow for the full year.

On the pension prefunding, again, I think conservatively we put that in free cash flow.

I think economically it's a discretionary decision and we will only do it if it gives us a great return.

We believe it is about a 13% internal rate of return after-tax to do that.

Will we do more?

Likely, unless there is something else we can do that would give us a better return, but it won't impact the effects it will have on free cash flow to do things such as raise dividends or if we decide to buy back shares at the end of this year.

We want to return the capital in an efficient way.

We know we have a onetime event with the Parks monetization.

That is not in our free cash flow as you would guess.

That is just a onetime event.

My guess is that we would want to return that to shareholders in the most efficient way whether that is raising the dividend higher onetime or share buyback; we're still sorting that out.

But I guess you're hearing from both Leslie, myself and Sumner, we feel really good about how the year started.

First quarter, very important to get off to a strong start on cash flow.

Really pleased with the way our DSOs, or days sales outstanding, are going.

We manage that as you know every single day.

We look at the cash and we drive that number down or get the cash in as fast as we can.

So, yes, we were conservative on free cash flow.

I don't think we gave specific guidance on it, but for sure you can count on tax rate being lower than what we had first communicated.

Doug Mitchelson, Deutsche Bank.

Just wondering on [pay], it looks like CBS network grew about 3% revenue in the first quarter.

Is that right?

Do you have a sense of what the impact from competing with the Olympics was during the quarter and give us a sense of TV and radio station and TV network scatter basics in Q2 and then if I could just also ask -- Les, you talked a little about the upfront.

On the fourth-quarter call, you talk about 4% upfront growth being what your guys thought it might come out at.

Has anything changed in your outlook there?

I will answer the last question first and then I'll turn it over to Fred.

No, nothing has really changed.

In the fourth quarter, we talked about this was pre-CW, which I think potentially tightens inventory and I think it makes it even more valuable.

In addition, I think network television as a whole -- I even made mention of some of the other networks with American Idol doing what it is doing and Lost doing what it is doing and CSI continuing to be very strong, I think network television has probably never been stronger.

So I see nothing to change that number that I said.

Maybe I am being a little conservative.

Let me jump in on the Television segment.

It is always a little bit confusing when you have a big syndicated show that hits in the quarter and into the second cycle of Fraser.

Very profitable, good for us.

Last year's first quarter, we didn't have as much revenue, but we sold a lot of product out of the library that has very, very -- I'll add another one -- very high gross margins on it.

Andy Griffith, God bless them, still produces a lot of money.

The other was Beverly Hills 90210 774, whatever it was and so those are very profitable.

So it's sort of hues good profits on a Fraser, extremely gross profits on the other.

We also had very good cost controls at the network.

Again we're still riding the lack of Raymond cost, the Jag cost and a Judging Amy cost.

So our costs at the network are actually down in programming.

So we had a lot of different pieces.

The stations, as we said, did well.

Showtime did well.

Across the board, the divisions within the Television segment, everyone was up in the quarter, but again we get a little bit skewed because of when we have a big first run or a second cycle of Fraser.

And we are going to the Olympics.

We are very pleased with the first-quarter results because we hung low during the Olympics and had mostly repeats on as a result.

Post Olympics, we have been running almost originals across the board through the end of the year.

So our product is very, very strong and we're seeing the benefits of a lot of good scatter market and some of the networks don't have quite as much as we do.

So we're very pleased.

And then just 2Q scatter or 2Q pacings if you can?

It's hard to give that right now.

I would just say that life in the first quarter -- right now, we are up.

Our businesses are up, but it tends to build in the quarter.

It did in the first quarter.

It got much stronger after the Olympics.

We see May and June looking a lot stronger than April, but April was still up.

So we are not going to get into specific pacings by group, but it tends to be building and of course now we're starting to see, as Leslie said in his opening remarks, the politicals starting to kick in much stronger in May and June.

Yes, the later you get, the more politicals coming in and we are seeing that ball starting -- that snowball starting to come downhill and there is a lot of money beginning to come in for May and June.

John Blackledge, JPMorgan.

Thanks for taking my question.

With the current growth prospects and evaluation for the pure play outdoor companies, just wondered if you would consider selling the Outdoor business or spinning some of it off to investors as a way to tap into the inherent value that CBS may not be getting credit for at the current moment?

Thanks.

Well, we believe we are going to get credit for it.

We love the Outdoor business.

You can see the results are sensational and there is no intent whatsoever to sell off Outdoor.

We love it; we love the business.

We are going to get paid appropriately for our stock.

We know we are.

Michael Nathanson, Sanford Bernstein.

I have three.

The first two will be for Fred; the third will be for Les.

Fred, on CBS, I guess the question was in the quarter what was revenue growth for the network in the quarter because I (indiscernible)?

I just wanted to confirm that.

I missed the last part of your comment.

Sorry.

The question was what was revenue growth for CBS networks in the quarter?

It was up 1%.

Secondly, the last time we talked, there was a guidance without options expense.

I wonder has the Board met and do you have a better idea of what we can expect from options expense in the quarter?

For the year, the Board has not met to grant the 2006 equity compensation yet.

We have a Board meeting in May.

I believe that is -- Leslie, you can confirm that.

I think that's when they will meet.

But at this point, we don't have any more information than we did at the start of the year, which is they have not been granted yet.

And then for Les, the Opie/Anthony move was a very bold move to try to get back some audience.

Given that you're suing Howard Stern for promoting Sirius on the air, are you concerned at all that this could benefit satellite radio by having people tune in to Opie and Anthony and then move onto satellite?

No, we are really not.

They are a terrific talent.

We were very happy to be able to make the deal with XM.

We think it benefits us; it can benefit them.

We don't think it hurts us one iota and our ratings can go up considerably.

So I am not at all concerned.

Do you have protection that they are not going to promote -- is there anything that you have in the contract?

No.

As a matter-of-fact, they are allowed to mention XM on the air.

That was part of the deal with XM and they were XM property.

So we were fine with that.

Andy Baker, Cathay Financial.

A couple of questions, one on radio, one on outdoor.

You talked about the improvement in outdoor coming from trends.

Was I correct in that that has already started?

I thought they were going to be sort of later in the second half of '06?

And if so, how much of this improvement did come from that versus how much is just fundamental improvement.

And secondly, on radio, do you have any sense of in the Howard Stern market how those markets performed and -- you know, in other words, how much of your loss in those markets was Howard Stern-related and how much was just organic market decline?

This is Fred.

If I can ask you to clarify your first part.

You said something about outdoor?

Was it about the transit contract?

Yes, I'm sorry.

I mean, are you already getting out of those transit contracts?

I thought that was a second half of the year event.

Yes, yes.

No, no.

Most of them, the bad contracts are gone.

There are only one or two left and we will be out of those.

But the bigger ones are already done.

The margin we're looking at now for this quarter then is sort of a sustainable margin going forward we should be looking at?

Actually, Andy, it should get better because again while getting out of the unprofitable contracts was good, the biggest driver and I was trying to allude to that is the strength of the billboard business.

It is our highest margin segment within Outdoor and it is growing double digits.

The revenue growth is terrific and it almost all flows through because our costs are very, very fixed.

Again, transit contracts are great.

Billboard growth was a more powerful driver and will continue.

But to Leslie's point, those all -- we're down to one bad contract.

Not bad -- it is not what we would like it to be and the rest are gone.

Regarding the radio, obviously we have said this before.

Howard was a loss, but it was very funny.

We were looking at who could make up for that loss.

Once again, we kept coming back to the guys that can do it are Opie and Anthony.

This is something we've been working on for a while and the fact we were able to get them, we think that is the best solution to this problem.

When you look at, as I mentioned, their ratings when they were on the air with us in 2002 in the afternoon, which is a far worse period of time, putting them on in the morning without Howard there, we think we are going to see marked improvement.

We're very excited about it.

Great.

Thanks.

Les, just one last question.

As you mentioned earlier, you had seen some -- given the radio multiples you had seen in the market right now that might be attractive for some of your slower growing stations, can you quantify what multiples you've seen in the market?

Well, I think to the ABC, we are close to 14.

The ABC station sale just a few months ago were about 14 times.

So that is pretty attractive.

Anthony DiClemente, Lehman Brothers.

Thanks for taking my questions.

A couple for Fred.

First off, on the Fraser syndication sale, can you give us the dollar amount of that and then did you receive the cash for that in the 1Q or just book it on the P&L?

Secondly, can you give us -- I think Victor had asked this question earlier -- an update on the adjustment of the special dividend that was mentioned in the K, the $460 million?

Fred, can you just let us know what is the timing of the resolution of that and your expectation of at least what portion of that can come through?

And then finally, do you expect free cash flow to grow in the 2Q?

Thanks.

Anthony, on the Fraser sale, I don't think I will.

We sold it to Lifetime and I am not sure whether we have any confidentiality agreement.

We got a very good value per episode of Fraser and no, we didn't monetize it yet through our securitization program.

So it did grow our receivables, both current and noncurrent receivables, which again is one more reason why I'm really pleased with our receivables.

Our trade receivables actually went down, so it didn't cause much of a blip.

So no, we didn't monetize that; we will get that cash in over the next -- the window, which I think is 36 months.

On the special dividend, I really don't have much of an update from where we last were.

I think as of Friday of this week and maybe it's Monday -- I just don't recall -- is the date that we will get another response back from New Viacom and again we believe nothing has come to light in our review of the submission that we made that would change our point of view.

So I have nothing new.

Again hopefully in the next few weeks we will be able to understand more if there are any issues and I don't know if there will be any issues.

So on that, I guess it is going to be a second quarter to maybe early third quarter before it's all through -- the mechanics of it get resolved.

But we are owed a response I believe it's on Friday of this week about what we submitted.

On free cash flow growing in the second quarter, I will give you my standard response.

We don't forecast free cash flow by quarter.

I knew that was coming.

But I know you appreciate it though.

You like the consistency.

Alan Gould, Bleichroeder.

Most of my questions have been answered, but are there any more major syndication availabilities coming up this year?

Yes, well, we are discussing -- Numbers becomes available, Medium becomes available and there is a lot of activity with that going on.

There are new cycles of Raymond that we will be sharing in and we are sharing in King of Queens, which is out there right now.

So there is a number of shows.

What we are clearly doing now that we are in control of the majority, this amount of product, is to eliminate the rollercoaster effect of syndication sales.

So we're going to be very strong.

I would just add, Leslie, we have Star Trek Voyager second cycle and we will have the first cable cycle for CSI Miami.

So those will happen probably fourth quarter, maybe we will pull them into third, but I don't think they will happen in the second.

So those will be the big ones in addition to going to library product too.

But it would be second cycle Star Trek Voyager and first run on cable for Miami, CSI Miami.

Last question please.

Tuna Amobi, Standard & Poor's Equity Group.

Thank you very much for taking the question.

I have got a couple.

The first one is on the CW.

My understanding is that right now you have approximately mid 80s percentage of reach with the affiliate signage and --.

We are at 85 right now and before the upfront, which will be in about three weeks, I expect to be in the low 90s.

Now Les, of that percentage, how many are currently signed up to pay reverse compensation as you would call them programming fees?

That is question number one.

And question number two is what kind of new media rights are you signing up with these agreements?

Do these agreements encompass the rights to new media with these affiliates and another question is to clarify that the tens of millions of dollars on the upside potential for new media rights, does that include radio, the things that you're doing, the podcasting, online streams and so on?

Finally on the upfront, Les, if you could comment on your possible change in strategy this year given ABC's lead-off last year.

It seemed like kind of capped the CPM growth there.

Are you going to be more aggressive this year and how do you see the new DVR ratings from Nielsen factoring into your negotiations?

Tuna, you just asked 17 questions.

You asked 17 questions;

I'll try to do them briefly.

The CW, there are stations that are paying reverse comp.

I am not allowed nor will I get into which ones specifically, but there is reverse comp being paid to the network.

New media rights, yes, they are being encompassed in all of our new deals and with our affiliates that they are part of it and it is an ongoing conversation with our affiliates both at the CBS side and the C W side.

We are very satisfied with how that is going and everybody is going to share and everybody is going to be happy.

The tens of millions of dollars is just a number I threw out there and no, it didn't include anything for radio or their podcasting numbers, which are unquantifiable at this time and the upfront strategy, our strategy has always been the same.

If you stay more aggressive, those of you who know me think it is impossible for me to be more aggressive.

We are expecting a very good upfront as is ABC, as is FOX, as is CW.

I think it's going to be a very strong year.

ABC has had a lot of hits.

We are strong throughout the week.

Every night, we have hits.

The advertising community is very pleased with our performance.

They're buying scatter.

They are going to buy at the upfront.

I think that covered your 17 questions in 17 seconds.

Thank you very much.

Thank you.

Tuna, thank you.

And everyone, thank you.

Deborah and I will be around for more questions.

Again, thank you very much.

Thank you.

That does conclude our call today.

I'd like to thank everybody for their participation.

Have a great day.