Paramount Global (PARA) 2010 Q1 法說會逐字稿

Good day everyone and welcome to the CBS Corporation first-quarter 2010 earnings conference call.

Today's call is being recorded.

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

Adam Townsend.

Good afternoon everyone and welcome to our first-quarter 2010 earnings call.

Joining me for today's discussion are Sumner Redstone, our Executive Chairman; Leslie Moonves, President and CEO; and Joe Ianniello, Executive Vice President and CFO.

Sumner will have opening remarks and we will then turn the call over to Les and Joe who will discuss the strategic and financial results.

We will then open the call up 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's news releases and securities filings.

A webcast of this call and the earnings release related to today's presentation can be found on the Investor Relations section of our website at CBSCorporation.com.

Reconciliations for non-GAAP financial information related to this call can be found in our earnings release, our full-year Form 10-K, or on our website.

With that, it is now my pleasure to turn the call over to Sumner.

Thank you, Adam.

Good afternoon everyone, and I thank you for being with us today.

What a difference a year makes.

As we look back on a truly great quarter, it is really gratifying to see the rewards of all the hard work put in by Les and his management team.

Even in the most challenging times we have never wavered in our focus.

We reduced expenses, we strengthened our balance sheet, we invested in premium content, and we maintained our leading position in local TV and radio.

In good times and in bad, we have kept to our long-term strategy, observing growth and shareholder value.

As a result, no company, no company today is poised to benefit from the improving economy more than we are.

The CBS Television Network continues its reign as number one.

CBS Studio shows are thriving in global syndication.

Premium cable continues to grow.

We are ideally positioned in the largest local markets as they rebound.

And we have built a leading global presence on the Internet as well.

Without a doubt CBS is built for long-term success.

The results we are reporting today are not only a sign of momentum, but a preview of the kind of success that I believe -- that I know -- CBS will have for many, many years to come.

And now I would like to turn the call over to my very good friend and my colleague, CBS' President and CEO, the incomparable Leslie Moonves.

Thank you, Sumner, very much.

And good afternoon to everybody.

Thank you for joining us today.

As you can see from our numbers today, we have just finished an extraordinary quarter.

We are off to a terrific start this year.

And the momentum reflected in these first-quarter results is continuing right into the second quarter and beyond.

Obviously, we are in a much better operating environment.

In addition to that, we are now seeing the results of many significant steps we have taken to position CBS for success, not just this year, but for many years to come.

With proper cost cutting and by establishing consistent new revenue streams the future is indeed bright.

As the strong ad market continues to shine, our results are very satisfying.

Today I'm going to briefly review our results and some operating highlights for the first quarter, as well as discuss what we are seeing in the second quarter and into the future.

Then I will turn it over to Joe to offer some more details on our financial results and balance sheet.

Then, as always, we will be happy to take your questions.

Beginning with our very strong first-quarter results, revenues of $3.5 billion were up 12% from the same quarter last year.

This is our first double-digit year-over-year revenue increase since we became a standalone company at the end of 2005.

It represents strength in our biggest businesses across the organization.

Our adjusted OIBDA of $351 million was up 40% year-over-year.

And our adjusted operating income of $211 million was up 94%.

As you know, we have spent the past two years reducing our cost structure across the entire Company, and we now have the operating leverage to show for it.

We have expanded our margins and we can build on that progress going forward.

At the same time we generated $660 million in free cash flow during the first quarter, more than triple the amount for the same period last year.

And we continue to take steps to fortify our already strong financial position.

We have reduced our debt, and taken advantage of favorable markets to refinance near-term debt at favorable terms.

More on that later from Joe.

There are three major factors that not only drove our strong results in the quarter, but point to continued momentum throughout 2010 as well.

First, in our Entertainment segment, at the network we had great success in both our regularly scheduled programming and our major events.

All of our tentpole events, including the Super Bowl, the Grammys, the NCAA Basketball Tournament, have posted multiyear highs and even broken records this year.

Our number one network schedule and the growing success of our big event programming have been sold into what has become a very, very hot scatter market.

And we are very well-positioned going into the upfront.

It will be the strongest one in years.

The second factor is the remarkable turnaround in Local Broadcasting, where the advertising marketplace has improved significantly.

We've got a great story here with 29% revenue growth at our TV stations and 9% growth in radio, which is also due to better programming.

The growth we are seeing today validates our long-term commitment to large market local presence.

Third, there is continuing and strong growth at Cable Networks, where OIBDA was up 21% in the quarter.

This business has grown every single year since the separation in 2005.

And it will continue to grow, and remains a big part of our overall portfolio going forward.

All of these areas play an instrumental role in our fourth-quarter topline results.

We continue to deliver on our promise to position CBS for success in both the near and long term.

That is clear from the many first-quarter financial and operational highlights of our content and local businesses we are sharing with you today.

Let's take a quick look at some of them now.

Beginning with our Content Group and its largest segment, Entertainment.

Within Entertainment the CBS Television Network was our best performer, benefiting from the dramatic improvement in national advertising, the continued strength of our number one network, and as I said, our record-breaking Super Bowl performance.

Network advertising revenues were up 25% in the quarter.

We have been the biggest beneficiary of a very strong primetime scatter market, with pricing up 30% over last year's upfront.

Scatter continues to be very strong in the second quarter, and things are looking very positive for us heading into the upfront.

We expect to see solid increases when we sell our number-one primetime schedule in this year's upfront marketplace.

Along with the Super Bowl, we also had tremendous ratings success with the NCAA Men's Basketball Tournament this year.

The championship game was up 31% over a year ago, and the most watched since 1997.

Going forward we will continue to broadcast television's biggest event with costs that allow us to grow our profits as well.

To that end, a couple of weeks ago we finalized a deal with the NCAA, along with Turner Broadcasting Group, to extend our relationship for the tournament through 2024.

As you have heard, this is a terrific deal for our Company.

It secures CBS as the year-round sports broadcast leader well into the next decade.

And what is most important is that we will keep this franchise in a way that is profitable for us.

Previously we had escalating rights fees that would have been challenging in the next three years.

Now we have a deal that will have a positive impact to our results in its very first year and for the life of the contract.

Also importantly, CBS' position in primetime programming and sports rights enhances our ability to benefit from the dual revenue stream broadcast model that continues to emerge.

Retrans is a significant reality today.

The value of broadcast content is finally being recognized and paid for.

As we read every day, the financial model of broadcast television is being greatly improved, and CBS is capturing the benefits of that.

We are on pace for north of $100 million in retrans revenues this year, and we will achieve multiples of that number going forward.

In addition to that, we are also now receiving incremental affiliate fees from our non-owned CBS television stations.

We recently announced one significant new deal which follows others, and there'll be many, many more to come.

All of this is adding up to meaningful additional revenues that have never been accrued before.

So now we are getting paid for our premium television content through advertising, through retrans and through affiliate fees.

Domestic and international syndication is another business that produces recurring and steady revenues.

It continues to perform well for us.

Our shows are being syndicated faster and are reaching broader global audiences than ever before.

And NCIS is shaping up to be a global franchise for us that may rival CSI in power and reach.

As we capture more and more of these non-advertising driven revenues, we are better monetizing our leading television content and diversifying our revenue base.

We are focusing on monetizing our content online as well.

And CBS Interactive turned in a strong performance in the first quarter of 2010.

Display advertising revenues were up 19% year-over-year, as this business benefited from both our growing online presence and the recovery that is taking hold in the online marketplace.

We have consistently grown traffic levels, and that has driven our ad growth.

Leading sites like CNET, BNET, CBSSports.com and CBSNews.com continue to post year-over-year increases, and offer our advertisers a unique combination of original Internet content and broadcast video.

At CBS Films our most recent movie, The Backup Plan, is having a very respectable run.

It has performed considerably better than our first film, and we anticipate continuing improvement for this new division going forward.

Turning to Cable Network.

This content business turns out single-digit revenue growth and double-digit profit growth quarter after quarter.

As I said, it continues to deliver for the Company year in and year out, both financially and creatively.

Showtime Networks, the Smithsonian Channel and the CBS College Sports Network all added subscribers during the quarter.

Showtime's content of original programming, sports and movies, makes it must-have premium cable channel.

In the future Showtime's movie lineup will include the recent Academy award-winning, The Hurt Locker, the very popular Twilight series, as well as [Inglorious Bastards].

The final component of our Content Group is Publishing.

Simon & Schuster's first-quarter revenues were off from last year, but we have done a lot in this division to reduce costs.

As a result, despite lower revenues, first-quarter OIBDA was up from last year.

S&S has also made great strides in the fast-growing digital space.

Our e-book library is up nearly -- up to nearly 8,000 titles.

And we have custom apps and downloads for virtually every mobile device.

Digital sales more than tripled in the first quarter, and represent a growing share of our overall publishing revenues.

Turning to our Local Group, we are seeing an even more pronounced improvement in market conditions, particularly in our local TV and radio operations.

Local Broadcasting revenues of $606 million for the first quarter of 2010 were up 19% from last year's first quarter.

TV stations led the way, but radio joined in the momentum as well.

Based on current pacing, local TV ad revenue will be up north of 25% in the second quarter.

And looking forward, a very strong political marketplace is just beginning.

The many hotly contested races that are picking up steam, and the recent Supreme Court ruling, give us great optimism that political spending will be a positive development for us.

The great majority of this will be seen in the third and fourth quarters.

In radio, fixing programming in our large markets continue to pay off, with audience share growing fastest in our top 10 markets.

In fact, in the first quarter we added nearly 2 million listeners in our top 10 markets over last year's quarter.

This audience growth is translating to revenue.

So far in the second quarter radio pacing is up high single digits, with major markets leading the way.

For the first time in five years we are seeing major plus signs in every financial metric in radio.

Healthy revenues across our Local Broadcasting segment are translating to strong profit growth, helped significantly by our reduced cost structure.

As you saw in our release, adjusted OIBDA of $134 million was up 148% year-over-year.

At Outdoor we are seeing improvment as well.

Sales pacing, which was flat year-over-year at this time last quarter, is now up mid-single digits, with particular strength in large markets.

So our revenue outlook for this year is brightening.

Like our other local businesses, the generally fixed nature of our expenses in Outdoor means that when revenues rise, we quickly see the positive impact on our operating profits.

Taken together, our local businesses which were hit the hardest in 2009 are now producing nearly $1 billion in quarterly revenues for our Company, an improvement of 12% over a year ago.

In thinking about the quarter 2010 and beyond, we are optimistic.

CBS is doing a lot more than just reaping the benefits of an improving economy.

We have taken a number of actions to position this Company for success, both in the near term and for years to come.

For some time now we have committed to make sure CBS would thrive in a changing media landscape.

We continue to execute on that vision every day.

We have long worked to establish a dual revenue stream for broadcast television, and now retrans is a fact in our business.

Our goal has always been to produce and broadcast the best content.

And year after year we have the number one network.

We said that syndication is a lucrative marketplace and one that ultimately rewards the best content, and we have since made record-breaking deals like the one for NCIS Los Angeles.

We promised to get bigger in the emerging digital marketplace, and today we are among the leading global Internet companies.

When others did not, we believed in large market local broadcasting.

And that strategy is paying us off through our actions to capitalize on the dramatic recovery that is underway.

We said we would successfully refinance our debt, and we are.

I think it is clear that this Company delivers on its promises.

Going forward we will continue to do so, and I assure you the best is yet to come.

With that, I will turn it over to Joe.

Thanks, Leslie.

And good afternoon everyone.

Today I'm going to touch on some highlights for the quarter, then discuss our recent financing activities, and lastly update you on trends we are seeing in Q2.

I will start with the total Company results.

As we said on our last call, 2010 was going to be about driving the top line, continuing to focus on controlling costs, and generating significant amounts of free cash flow.

This quarter results demonstrate just that.

Revenues for the quarter were up 12% to $3.5 billion.

We continued to restructure our operations and recorded a $57 million charge with the associated savings starting to kick in next quarter.

Free cash flow is up over threefold to $660 million for the quarter.

Our 12% revenue increase was driven by a solid advertising marketplace.

Total Company advertising revenue was up 17% for the quarter, led by the Super Bowl.

Without the Super Bowl, our ad revenues are still up high single digits.

Affiliate and subscription fees also increased 11%.

Adjusted OIBDA, which only excludes the restructuring charge I just mentioned, was up 40% for the quarter to $351 million.

Our quarter-over-quarter OIBDA margin expanded 200 basis points.

Adjusted EPS came in at $0.05 from a loss of $0.05 last year.

We are adjusting for the restructuring charge and some discreet tax items.

In 2010 we recorded a $26 million tax expense, which included the impact of the change in the Health Care Reform Act, as well as favorable settlement of some state and local audits.

These items taken as a whole had a negative $0.09 per share impact to our reported results.

In 2009 we had a $19 million cash charge related to stock-based compensation, which amounted to $0.03 per share.

Full reconciliations can be found in our press release.

Let me discuss a few segment highlights.

Entertainment revenues increased 15% to $2.1 billion, led by the Super Bowl.

Leading categories at network ad sales included financial services, telcos, auto and retail.

We saw a slight decline in our Entertainment OIBDA before restructuring charges to $145 million from $151 million last year.

The OIBDA was impacted by lower margin revenues from the Super Bowl, as well as timing of programming costs.

As an example, during G1 we produced more of our own hit shows like NCIS Los Angeles and The Good Wife.

This will result in higher margins later in the year and subsequent years as a result of syndication of our studio product and expansion into additional international territories.

Cable Networks revenues increased 8% to $368 million due to rate and subscriber increases.

Cable OIBDA increased 21% due to the solid revenue growth.

OIBDA growth would have been even higher except for the timing of costs associated with series premieres.

The OIBDA margin for the remainder of the year for this segment will be considerably higher than Q1.

Publishing revenue for the quarter decreased $10 million from $162 million to $152 million, reflecting the continued softness in the base retail market.

Publishing still managed to turn in higher OIBDA before restructuring despite lower revenues as our reduced cost base took effect.

Local Broadcasting revenues were up 19% to $606 million, with TV stations up 29%.

Without the Super Bowl, TV stations were up north of 20%, and radio was up 9%.

On a same station basis, radio would have been a double digits.

Local Broadcasting OIBDA before restructuring was $134 million, up 148%, as Les said.

We doubled the margin of this business and achieved about an 85% flow through from revenue.

And we continue to take costs out of this segment.

So with modest revenue growth, we will see continued further margin expansion.

Outdoor revenues for the quarter were up 3% to $392 million.

However, foreign currency contributed favorably 4 points of that growth.

European revenues were up 1% in constant dollars.

Outdoor OIBDA before restructuring charges increased 24%, reflecting lower costs due to the cost savings initiatives we implemented last year.

We have also taken further costs out of the infrastructure this quarter, so we should see strong margin expansion in the next couple of quarters.

Turning to our balance sheet.

We said we were focused on delevering the balance sheet.

And let me discuss how we delivered on that promise.

We said -- we paid down $400 million of our asset securitization, as that source of financing became inefficient.

Under the new accounting rules this paydown is reflected in financing activities on our cash flow statement.

We also pulled the [$415] million of debt that was due in July of this year, and paid it down with cash on hand in April.

You'll see that affect on our second-quarter balance sheet.

Also, during the quarter, we were able to buy back $20 million of our longer dated security at a discount in the open market.

So that brings our total deleveraging to $835 million already this year, and we ended the quarter with $873 million of cash on hand.

In April we also issued a new $500 million ten-year bond at a coupon of 5.75%.

We took those proceeds [and tendered] for our near-term maturities due in 2011 and 2012.

So right now we don't have any more debt maturing in 2010.

And in 2011 we are down to $550 million due, a very manageable amount considering our cash position, and a $2 billion undrawn credit facility.

We are still focused on our balance sheet.

And we will continuously monitor the credit markets to tap them opportunistically.

Our strong cash flow gave us the ability to delever as quickly as we have.

Capital spending, cash taxes and interest were all better for the quarter.

But the biggest benefit came from working capital.

On our last call we mentioned our strong historical conversion of OIBDA into free cash flow.

Because of our strong first-quarter, we are positioned to have a very strong cash flow year, which will be helped by political spending, particularly in the fourth quarter, as all the cash is paid up front before airing.

Next, let me tell you about some trends we are seeing, starting with our content assets.

Our Q1 strength is continuing into Q2.

Scatter pricing at the network in the second quarter is currently up 20% plus, and we are well-positioned for a strong upfront.

Q2 domestic ad sales is pacing 20% plus for our Interactive unit.

And our Cable Network revenue should continue to grow steadily in Q2.

Turning to our local assets.

The 25% plus pacing increase Leslie mentioned at our Television Station Group for the second quarter is even more impressive when you consider that there is no Super Bowl in Q2.

Our top 10 radio markets are leading the way in the second quarter and pacing up double digits.

Our Outdoor Group is currently pacing up mid-single-digits on a constant dollar basis, and high single digits on a reported basis.

We said outdoor was lagging our local businesses in the recovery, but now that growth seems to be accelerating.

Q1 is historically our lowest margin quarter of the year, and you can expect our operating margin to expand throughout the year, with the fourth quarter being our strongest.

As a reminder, our Q2 financing activities will result in an accounting charge for the early extinguishment of the debt of approximately $40 million pretax, which will be recorded in the second quarter.

However, this cost will be offset by future interest savings.

So to wrap up, our businesses are growing the topline.

We are expanding our margins.

And we are generating lots of free cash flow.

I want to underscore what Les said about CBS going forward.

We are positioning the Company for the long-term success and increased stability in our operations, and reduce balance sheet exposure, and our recent actions demonstrate that.

Thank you.

And we will now take your questions.

Operator, please open the lines.

(Operator Instructions).

Anthony DiClemente, Barclays Capital.

Thanks for taking my questions.

I would have one for Joe and one for Les.

Joe, this is an annoying analyst question, but wondering in the quarter what did ad revenues do at the network if I exclude sports on a year-over-year basis?

We don't break out that.

Packages are sold across sports, entertainment, news products, so we don't break out that.

Obviously, you saw the strong scatter pricing and it is going to continue to the upfront.

And that scatter pricing, by the way, that we mentioned, that is primarily prime time.

That has nothing to do with sports.

So you could take out -- that has nothing to do with sports and (multiple speakers).

Can I at least assume that primetime revenues at the network were up in the quarter?

I think that is a fair assumption.

Yes.

And one for Les.

You know, the deal that you announced with your affiliate, the Nexstar affiliate in Pennsylvania, one thing it said in the release was that you appreciate Nexstar's recognition of the value of being a CBS affiliate.

I am just curious as to what that value was.

How much that was back to the CBS Network?

And is that a sign of things to come?

And how will those deals be structured in the future?

Thanks.

Thanks for the question.

We don't tell an exact amount.

As the world of retrans has increased across-the-board, and the assumption was there should be affiliate fees, our affiliates should pay us, or should share with us what they're getting, because we are delivering top-quality programming and top-quality sports rights.

So it is a deal that reflects us getting a share of what they're getting.

It is affiliate fees.

And frankly, as each affiliate deal comes up, there will be the recognition that the reason they are able to get what they're able to get from MSOs is because of what the network is providing, and it is important for us to share in that revenue.

This is Joe.

Just to add, we could structure those deals in different ways.

There could be recurring fees, as well as upside as a percentage of revenue.

So they all kind of take different forms and different actions, but we are obviously just focused on maximizing cash and getting fair market value for our content.

Jessica Reif Cohen, Bank of America.

I have two questions.

Given the improving market overall, given the refinancing of the balance sheet, could you discuss the possibility of increasing the dividends, since you had to take a cut when the market fell apart -- or a buyback?

Just talk about returning capital and how you view that.

The second question is clearly this year is going to be an amazing comeback year.

I was hoping you could address next year, some of the swings for next year.

How much will film losses come down?

What will TV syndication look like year-over-year?

It looks like NCAA losses will come down with the Turner deal.

Retrans reverse comp, it looks like it will go up.

Obviously, the upfront will be good.

Are there more cost savings from -- there is a lot of speculation with CNN doing new kind of deals.

So can you just go through some of the swing factors we may see over the next year?

You asked six questions all at once.

That was a long second question.

I will talk about our cash and return on capital.

Obviously we are very pleased with where we are with the cash flow, and what we have been doing.

And Joe has done a terrific job of restructuring our debt.

And we are in very good -- a very good place in terms of de-risking our balance sheet.

And we constantly monitor our position.

All we can say now is, A., we do not see any major acquisitions on the horizon.

We will look -- we'll continue to look at what our cash position is, where we are.

We will look at it very, very constantly and very carefully.

As you know, we have always been a proponent of continuously returning value to shareholders.

So we will let you know what we are thinking in a few quarters and how it goes.

But at the moment we feel really good about our balance sheet and really good about our cash position.

And stay tuned.

On the second part, it is Joe, 2011 obviously is not a political year and we don't have the Super Bowl, but the revenue mix is obviously going to be much more profitable.

Our base business should continue to grow.

Subscription and affiliate fees, such as retrans, and as Les mentioned, the non-owned and operated affiliate fees are growing.

We are heading into a strong upfront, which only the first quarter of the benefit in 2010, so the other three quarters are going to benefit 2011.

We have consistently taken costs out with our restructuring that we just announced this quarter, as well as the NCAA.

And so we are constantly operating that.

So I think it is fair to say, although we don't give guidance, we see our margins expanding in 2011.

Can you comment on the rumors about CNN?

We look at all our businesses all the time and how we can improve them.

We looked at an NCAA deal, and we looked out and said, all right, what is the best situation for CBS?

And we were able to make a terrific deal with Turner, and then a terrific deal with NCAA, which as we said, turned a challenging contract into a positive one.

In terms of every part of our operation we talk to everybody constantly.

We have been talking to CNN for years about what we can do together.

As you noticed, Anderson Cooper currently appears on 60 Minutes.

So there is a lot of sharing going on.

We are in constant dialogue about how do we make our businesses better?

How do we make it more efficient?

And we will continue to do that.

(Operator Instructions).

Doug Mitchelson, Deutsche Bank.

I do have to say, Les, the NCAA deal was very innovative.

So a question about, Les, you are often asked about CBS' asset mix and whether you see any opportunities to refine it through, for example, selling Outdoor and Radio.

We are starting to head into an environment where you could sell something from strength rather than weakness.

So has reconfiguring your asset base become more appealing at all?

And a follow-up for Joe.

You said scatter of 20% plus in the second quarter.

And I think Les said 30% in the first quarter.

Has scatter softened, because I haven't been hearing that from anyone?

Thanks.

You know in terms of the asset mix, Doug, you're right, we are in an environment where people are much more interested in our assets.

And we are in a very good position.

As we have been saying for a while, we are a large market organization in terms of our local assets, so we would look to continue to trim Radio in the not largest markets, and even potentially a couple of television stations.

In terms of the other pieces of our business, we like them all.

Do we look out and see what is out there?

We are strong in the Internet.

We are strong in broadcast.

So I would like to sell some of the Radio assets, and there is nothing that I am being driven to acquire.

So you'll probably see our asset mix being trimmed down a bit in Radio and Television, and that is probably the extent of it.

And scatter pricing, Doug, is just -- I mean, it is clearly -- right now I just gave you the current pacing of this week.

Clearly obviously it changes from week to week, but I would say anything north of 20% is going into a strong upfront marketplace.

And, Doug, may I add, usually the first quarter is usually stronger than the second quarter in terms of pricing on scatter marketing.

As you get closer to the upfront there is less activity in the scatter marketplace.

But considering that we can say we are north of 25% since the first of the year, we are very much looking forward to the upfront.

What is the strategy here, Les?

Scatter pricing was so strong this year, does that become a tough comparison and you want to minimize how much you sell on the upfront?

Or if you get a high single-digit number is that such a great number that you will sell as much as you can, and you worry about the inventory comps later?

Look, we have always bettered ourselves.

And we -- as you know, the last upfront marketplace wasn't that terrific, so we only sold around 65% of the inventory that we had.

We anticipate selling more of that this year, but only if the pricing is up a decent amount to equal what we have been getting in scatter.

Otherwise, we will be happy to sell less and wait for our schedule, which we believe will be strong once again.

Ben Swinburne, Morgan Stanley.

Two if I may, Joe.

On cash flow, I always had you at about $1.2 billion of free cash for the year.

You just did $650 million in the first quarter.

Could you spend a little more time on the working capital cash taxes and what happens for the remainder of the year?

I can't think of anything significant that will swing things in the other direction.

Then I have a follow-up for Les.

Sure.

Again, just to remind you, we don't give guidance on cash flow.

But again, let me tell you what we see.

We gave guidance on CapEx in our 10-K.

We said $250 million to $300 million.

Cash taxes, again, we will monitor.

I think we have strategies in place to keep those minimalized.

But the benefit -- obviously, we benefited from the Super Bowl in the first quarter, as well as the syndication shows that hit last year where we recognized a profit.

But if you recall, we said the cash flow would then follow, and I think you're seeing that.

So as far as any kind of predictive drivers, I pointed out political is paid upfront, so that is going to obviously benefit the fourth quarter.

So it is just from this point forward another normal year in terms of any calls on our cash.

And with the delevering we have run rate of interest expense that has gone down kind of plus $40 million.

So that should just give you an indication of where we are headed.

Great.

Les, one of the things we talked about on the News Corp.

call yesterday was the network, and what is happening with costs and margins and sports costs at Fox.

I was wondering if you could talk about -- you obviously (inaudible) deal, which helps you a lot next year versus this year.

But on the primetime side, how are you managing the expenses for your shows?

How are you thinking about pilot development cost?

And now that the world has healed, or appears to have healed on advertising, are you seeing -- you at CBS or maybe your peers starting to get a little bit comfortable on spending more money on costs?

How do you keep the margins going in the right direction at the network on primetime?

Once again, the good news for us is that we own about two-thirds of our schedule.

And frankly, the costs we are really keeping down.

Because our schedule is so solid, we did a number of less pilots this year, so our development costs were down considerably.

The cost cutting that we did a year ago, we have maintained.

So our schedule going into next year will be flat or even potentially down, depending on which news shows we pick up.

So it has not gone back to the same old profligate ways of television programming.

We have kept it down.

As you said, the redoing of the NCAA deal, we used a lot of creativity in doing it.

We had a great partner in Turner, and we turned a bad deal into a good one.

So we are very mindful of what our programming is.

And it hasn't -- the cost discipline certainly hasn't hurt our ratings.

Michael Meltz, JPMorgan.

You had mentioned, Joe, the timing that impacted, or depressed, the entertainment EBITDA in the quarter.

Can you quantify that please?

We don't break out.

It is just -- obviously producing around shows based on a number of episodes we had last year in the first quarter we weren't producing those.

So we are just paying a license fee.

So we are now producing our own shows and so the revenue in syndication will adjust our ultimate, and we will recognize when -- for example, NCIS Los Angeles, when those shows are made available to syndication, we will recognize all of that revenue.

So it is just really a timing thing, but we are not going to break out individual shows.

Can you maybe an order of magnitude, can you say is it something that is a $10 million hit or $50 million plus?

I would say it is in the tens of millions.

Then on the working capital comment, I guess what you said about advertising would imply the Super Bowl gave you $170 million or something like that of advertising in the quarter.

What was your actual positive working capital for the quarter, and what is your expectation for the year?

Again, we don't give guidance, and I am certainly not going to project out what our positive working capital for the year is.

But clearly our working capital is positive north of $300 million quarter-over-quarter for the first quarter.

As I said from the last question, the Super Bowl clearly was one of the beneficiaries of that as it is paid in the prior year, and we receive the cash this year.

Is the Super Bowl actually profitable at the network or it is low-margin?

Low-margin, profitable, I think is consistent with what we said.

Yes, it is profitable.

Okay, thank you for your time.

Marci Ryvicker, Wells Fargo.

Two quick questions.

But first, can you just address is there a specific reason why you decided to not provide formal full-year guidance?

Yes, this is Joe.

We figured we would tell you what we see.

We thought you didn't need somebody else predicting what GDP was going to do.

So obviously with a 65% base of advertising we are going to be tied somewhat to the economy.

So everything we are doing is derisking that and creating additional revenue streams, so we are confident in that.

But positive GDP for the last three quarters in this country has clearly helped us, but we are positioning this Company and derisking the balance sheet for the future.

So we kind of gave you some guidance in the trends we are seeing.

And we want have some credibility saying this is what we are seeing, and we are delivering on what we said.

Then a question on Outdoor.

It looks like Outdoor was actually lower than the pacings you talked about on the last quarter.

I believe you are pacing flat.

And the pacings were improving each week, yet you are down 1% in the quarter.

So I am just curious what happened.

I think that was just on a reported basis.

I think FX is the only exchange there.

But I will just tell you is that in Q2 it is accelerating.

Alan Gould, Soleil Securities.

Les, I was wondering if you can give us some view on what the value of some of this broadcast spectrum could be in terms of reallocation of the spectrum, using it for mobile, or whether the government would actually end up taking that back?

It is impossible right now to quantify what we are talking about.

We are obviously in discussions with Mr.

Genachowski on what it would mean to us.

We are discussing it.

We obviously -- our spectrum is very important to us.

It is important to us with retrans.

It is important to us with our HD signal.

To quantify the value of it now is way too difficult a task to do.

It hasn't gotten to that point yet with the government.

Any timeframe that -- benchmarks that we might hear of in terms of, will I get more data on this?

You will have to ask the FCC.

Obviously, it is a long way to go before anything happens with this.

Jim Goss, Barrington Research.

(technical difficulty) color in the interactive area in terms of maybe any suggestion about overall size of the revenue and profitability, the strongest units, and maybe the TV.com versus Hulu approach that has gotten some press?

Jim, we lost -- you are blocked out for the first half of your question.

Can you repeat it please?

Sure.

I am sorry.

I was wondering about some added color on the interactive space in terms of the overall size of the revenue and profit base, the strongest units on a relative basis.

And maybe some color on the TV.com versus Hulu approach that has gotten some attention.

It is Joe.

So on the revenue you cited, our Interactive Group kind of annually does kind of $600 million plus.

Just the first quarter is a little bit -- is the smallest of the quarters.

What we will just tell you is driving it is obviously sports, as well as tech.

Those are the two big drivers for the quarter.

So we continue to enhance the content on these site and drive users, and the monetization is here.

That is why we gave you the pacing data that is up 20% plus on display sales.

So that tells you a little bit of something about the content as well as the marketplace.

And regarding TV.com versus Hulu, obviously we felt owning 100% of our advertising is a lot better than owning only 70%.

In addition, selling it ourselves has been very effective.

And we think we have a model that works.

In addition, we are able to protect our content better in a nonexclusive manner.

Frankly, I don't know what the numbers with Hulu, but it is clear that they're going to be adding a subscription model.

So one doesn't know how effective Hulu for free has been.

I know there has been some rumblings about some dissatisfaction with some of the partners, and we like to control our own content.

One other thing related to -- going back to what I think Doug was talking about, I was wondering if your successful development of affiliate fees and retransmission revenues has increased your potential consideration of a formal separation into two companies, rather than just trimming down on certain of the properties?

Not at all.

Not at all.

That would not make sense at all.

We thank our TV stations are related to our network, which is related to our programming.

And they all work hand-in-hand together.

In fact, just the opposite.

Retrans is only made the network model a far, far stronger model than it was before.

Laura Martin, Needham & Company.

Just a couple of things.

One is news Corp.

was talking about strength in some of its categories.

I was wondering, are you seeing strength in auto, real estate and financial services, these big categories that really fell off a cliff last year?

And also the distinction between local and national, where are you seeing strength?

Then the other thing we are hearing about -- and I am not even sure this is legal, so I would be interested in your views.

Is there any concept that you would band together with some of your affiliates to try to jointly negotiate these affiliate deals so that everybody could make more money?

Regarding the first, obviously auto has made a huge difference in our local businesses.

When you see the numbers of auto in the first quarter up something like 80% at our local television stations.

It has made a huge, huge difference.

And financial and real estate also.

Real estate probably less so for us.

In terms of local versus national, frankly, we have seen improvements across-the-board.

I would say probably local has been enhanced even more by the improving economy.

Specifically local television stations are up considerably because of these categories.

And once again when you have auto falling by the wayside that really hurts local television stations.

In terms of -- we have had a number of conversations with different affiliate groups about talking to the MSOs together.

It is not illegal.

Frankly, every CBS affiliate shares the same programming, the same primetime, the same NFL, the same NCAA, the same Letterman, etc.

We have discussed the benefits of that, and we have discussed it frankly openly with our MSOs.

And some of them have felt it might be a better way to go.

So it is something that is certainly on the table.

Brian Shipman, Jefferies.

A quick question on Outdoor.

I am wondering if you could add a little color on how occupancy and rates are trending?

And then second question, I am just wondering if you could talk generally about the current size of the movie studio business?

Is this an area you would like to grow?

Are you happy doing four to five movies a year?

Where do you see that going in the future?

Thank you.

I will deal with the movie question first, and then I would turn Outdoor over to Joe.

You know what, we decided to put our toe in the water before diving in.

We like the idea of doing movies that have been under $40 million.

And frankly, the next two are under $20 million, our investment in it.

Basically forming a group and making sure our group is strong, making sure they are performing at the top of their game.

But at the moment that is what our game plan is.

What happens three, four, five years down the road you never know.

But basically I like this model, and I think we can make it work.

It is Joe.

On the Outdoor question, the occupancy has helped throughout the recession and recovery.

So this is all pricing.

So I think as local TV and radio are increasing their pricing because of the demand, Outdoor is now following.

So the revenue increase you will be seeing will be coming from price.

Why don't we go to our last question, please.

James Dix, Wedbush.

Thanks very much guys.

I just had two I will try to sneak in at the very end here.

First, I guess for Joe, any color you could give on the incremental impact of your cost reductions in 2010 for the full year versus 2009?

And in particular what you're going to get out of the restructuring charge you took in the first quarter?

Then second, I guess this is more for Les.

There is a number of new potential growth drivers for the television network model.

You have alluded to some on the call.

There is others like new platforms such as the iPad.

Just tell me your perspective as a CEO, and based in your discussions with investors, where do you think there is the most disconnect between the potential you see and the potential you think investors and the Street is giving you credit for?

I will start.

On your cost reduction question, we typically -- if we are going to take a restructuring charge, we want at least a 1X return on a 12 month period.

The $57 million, we expect to get that kind of savings on an annualized basis.

It doesn't always work out exactly that math.

And that will be similar to the 2009 charge as well.

We continue -- by the way, we continue to monitor the cost.

We are never done making our operations more efficient.

So stay tuned.

I don't think there is a huge disconnect between what we have seen investors see.

They are investors and it is a natural push and pull, or naturally skeptical.

Three years ago on this call, Pete would say, gee, you're really not going to get paid for retrans.

We have spoked to all the MSOs, they are not giving you nothing.

And the world is a different place now, where retrans is now a standard operating procedure, and it is extended to our affiliates.

We are looking for all sorts of new platforms for our content.

Once again, we have to be smart about it.

We believe in an open structure where it makes sense for us financially.

As I discussed before, TV.com made better sense for us than becoming part of Hulu.

iPad, very interesting -- there is a real possibility.

You can see some of our content going on there.

There already is some of it in some of the areas, and we are right now exploring every possible means.

I think every content company is aware that we are in a brave new world.

And we are trying -- and it is all experimentation, authentication, etc.

I think the significant thing to realize is today -- 10 years ago we got paid for our television shows in one way, now we're getting paid in a dozen ways, between all these new forms of technology.

And frankly, it has only made the network content even stronger.

Thanks, James.

And thanks everyone for joining us tonight.

Have a great evening.

That does include today's conference.

Thank you for your participation today.