Paramount Global (PARA) 2011 Q4 法說會逐字稿

Good day, everyone, and welcome to the CBS Corporation fourth-quarter 2011 earnings release teleconference.

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.

Please go ahead, sir.

Thank you.

Good afternoon, everyone, and welcome to our fourth-quarter and full-year 2011 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 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.

Please note that during today's conference call, the fourth-quarter and full-year 2011 financial results and prior-year comparisons, with the exception of revenue, will be discussed on an adjusted basis unless otherwise specified.

Reconciliations for non-GAAP financial information related to this call can be found on our earnings release or on our website.

In addition, 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 Investors section of our website at cbscorporation.com.

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

Thank you, Adam.

Good afternoon, everyone.

Thank all of you for being with us today.

I am more than pleased that CBS had such a tremendous year once again in 2011.

As you will all hear, momentum continues to build and build.

Our world-class content continues to be the cornerstone of our success.

We have the number one television network; we have the top TV and radio stations in the big market; we have Showtime and all of this critically acclaimed programs; we have Simon & Schuster and all of its bestsellers; we have Outdoor in all of the right places.

Every one of these assets is becoming more and more valuable than ever in the new digital era.

I am confident we have the right strategy in place to help us grow this Company year after year after year in the future.

And the reason for that is we have a first-class management team that knows how to make such things happen, and that starts at the top with none other than my very good friend and colleague Les Moonves.

But let me tell you, as you know, I have often called Les a genius.

Les's uncommon success in operating CBS is, indeed, the work of a genius.

And now I will formally turn this over to my friend, my colleague and the man I call a genius, and he is, Les Moonves.

Thank you, Sumner, very much for that overly kind introduction.

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

The fourth-quarter numbers we are reporting today capped off a terrific and much better than expected 2011 for the CBS Corporation.

Quarterly EPS came in at $0.57, up 24%, and we posted full-year EPS of $1.94.

That was a record for our Company and up 75% over 2010.

Quarterly OIBDA was also very strong, up 9%, and for the year, OIBDA was $753 million to $3.1 billion, up 32%.

We did this in a year when the overall economy faced lots of uncertainty, and as you know, the S&P was flat.

It is very encouraging that we were able to be so successful in this kind of environment.

Clearly our ongoing strategy of de-risking and diversifying our businesses is paying off, and it is only getting better.

As we sit here today nearly seven weeks into the new year, I am truly excited about what we are seeing.

The first quarter alone is looking to be extremely strong, leading to an extraordinary 2012.

For a number of reasons, I am confident this will be an even better year than the last and one in which we are poised to break records in financial metrics across the Board.

Here is why.

First, the ways we get paid for our content continue to grow and become more profitable, improving the quality of our earnings.

From broadcast to streaming, from retrans to reverse costs, from international to local, we have increasing number of diverse revenue sources that expand margins and drive earnings.

Next, in a content-driven industry, our program is leading the pack better than ever.

This is led by the CBS Television Network, which just completed the first half of its broadcast seasons in one of the best competitive positions in the history of television.

At the halfway mark, we were the number one network in every key measurable demographic.

The distance between CBS and our closest competitor was the biggest it has been in 24 years, and we continue to reload.

And third, as you have heard from our peers, we are seeing clear signs that the economy is improving.

We are seeing this on a national level where scatter pricing is up mid-teens over upfront, and we are seeing in our local businesses where pacing is up without even counting political and where auto advertising -- the number one category in local -- is up an impressive high single digits.

So, as you could imagine, we are very pleased with the state of our Company and even more pleased with what we see ahead.

Today I'm going to walk you through some of our financial and operational highlights for the fourth quarter and full year, and then I'm going to spend a little time highlighting why our Company is in fundamentally better place than we were just a few short years ago.

Then I will turn it over to Joe for his remarks, and we will take your questions.

Let's start with the financials where, as I said, we posted very strong fourth-quarter EPS of $0.57, up 24%, and where we posted record full-year EPS of $1.94, up 75%.

Fourth-quarter OIBDA came in at $837 million, up 9%, and during the quarter, our margin expanded 2 percentage points to 22%.

As I also mentioned, full-year OIBDA was $3.1 billion, up 32%, and for the year, new more profitable content deals helped our margins grow 5 percentage points to 22%.

These new content deals that are driving our margins are long-term.

Meaning we will see these kinds of benefits for years to come.

Revenue grew for the year and was down a bit for the quarter due to our significant CSI syndication sale a year ago, as well as last year's large political advertising sales in the fourth quarter.

Without these two non-comparable items, revenue would also have been up for the quarter.

Of course, our businesses continue to throw off a lot of cash as well, even making a voluntary pension contribution of $410 million.

2011 free cash flow was up from 2010, reaching $1.5 billion.

Meanwhile, our focus remains on using our cash to return value to our shareholders.

During the year we repurchased more than $1 billion of stock, and we doubled our dividend.

We will continue buying back stock as part of our ongoing $3 billion program, repurchasing at least $1 billion per year.

And, as we take advantage of all the opportunities that cross our businesses, using our healthy free cash to return value to shareholders will continue to be the number one priority for our Company.

Let's take a quick look at each of those businesses now starting with entertainment.

As I mentioned, the CBS Television Network had a phenomenal first half of the season.

We had 14 of the top 20 programs, the most since People Meter measurements began in 1987.

We had the top five scripted series, the top eight dramas and six of the 10 -- six of the seven top comedies.

We also had the number one scripted series with NCIS, the number one comedy with Two and a Half Men, and the number one new program with Person of Interest.

In addition, The Big Bang Theory is now often beating a previously invincible talent show that happens to air on another network.

Plus, we continue to have success across all demographics.

Season to date, through this week, we are up year over year in every single key demographic.

Once again, as we look ahead to next season, we have very few holes to fill.

The development process is well underway, and our team is doing another terrific job.

The bar will be very, very high to get on a schedule.

Next fall we anticipate presenting a lineup that will be even stronger than the one that is dominant right now.

We are also keeping our expenses in check because we have few requirements for new programming.

We have also had tremendous success with ratings over at CBS Sports led during the quarter by the NFL.

In each of the three weeks we recently broadcast NFL playoff games, we brought in ratings we had not seen in decades.

As you know, we have extended our agreement with the NFL for another nine years past the two that are remaining.

The NFL has been a terrific partner, and this new deal will be profitable from day one.

With the new deal, we will add seven high quality NFC games to our schedule in addition to our AFC package.

And, remember, based on these less few years, the number one show in television history will be broadcast next February when we air Super Bowl XLVII on CBS where we are anticipating a potential $4 million a spot.

Our coverage of SEC football has also been very strong.

We had the highest rated college football package of any network this season, and during the quarter our prime time coverage of the regular season's LSU-Alabama matchup was the most watched college football game on any network since 2006.

In the next couple of months, we are looking forward to broadcasting the recently renegotiated and also profitable men's NCAA basketball tournament immediately followed, of course, by The Masters.

Speaking of big-ticket television, the Grammys on Sunday night brought in 39.9 million viewers, the most since 1984 and second largest Grammys audience ever.

This shows ratings have been coming in at significantly higher levels these past few years, and as they have, ad rates have spiked dramatically.

Going forward the Grammys are another tentpole event that we have also locked up on good terms for the next decade.

The growing interest in events like these, along with the steady success of our regular network programming, are the key drivers that allow us to keep growing our retrans and reverse compensation revenue.

Just last month we reached a new agreement with DISH Network for CBS and Showtime.

We are continually getting paid increasing value for our programming from both distributors and our affiliates.

Once again, just a few short years ago, retrans revenue was virtually nonexistent, and we were paying our affiliates to carry our programs.

Now we are growing retrans at a very fast clip, and our affiliates are paying us as well.

Both of these developments are progressing faster than even we anticipated in 2012, and we know that growth in retrans and reverse comp will accelerate significantly from here and in the coming years represent multiples of what we are realizing today.

Plus, for the first time, international fees for our programming broke the $1 billion mark in 2011.

Just like in retrans and reverse comp, this is a continuing opportunity that is doing very well for us and has lots of room to grow.

Our very innovative CBS Interactive division is performing extremely well, too.

Not only is a standalone operation, but also in terms of working hand-in-hand with our traditional businesses in news, sports, music and entertainment.

For example, in addition to our historic ratings for the Grammys on Sunday night, CBS's Interactive's Grammys Live iPad reached number one on the iTunes chart, and social media mentions surrounding the events went from less than 1 million a year to 13 million this year.

It is clear that this kind of second screen interest is achieved by broadcast television working hand-in-hand with Interactive better than anywhere else.

Going forward one of our primary goals will be to continue to exploit that opportunity.

And, finally, our entertainment segment also include CBS Films, which a week and a half ago had a terrific opening with The Woman in Black.

This film is already profitable and follows precisely the kind of model in terms of limited budget and low risk that we plan to continue as we nurture this small business.

Moving to our cable network segment, we ended the year with healthy increases in Showtime subscribers.

This is the eight consecutive year that we grew subscriptions at Showtime, which have now gone over the 21 million mark.

Quality programming continues to drive the success.

Homeland won two Golden Globe Awards, including the Best Drama show on television and is considered right now by many to be the hottest show on television.

Dexter just finished its sixth season with its best ratings ever.

Last month's premiere of the second season of Shameless was up 61% over last year, and new shows House of Lies and Inside Comedy have opened strongly as well.

In publishing Simon & Schuster had the best-selling book of the quarter in Walter Isaacson's biography of Steve Jobs.

We also had another massive bestseller in Stephen King's 11/22/63, and King and Vince Flynn were recently our first two authors to go over the 1 million mark in terms of e-book sales.

Over at local broadcasting, we expect political advertising to be extremely robust.

It is clear this is not going to be a very pleasant campaign.

So, while it may not be very much fun for the politicians, it should be very good for us at CBS.

Plus, even without political advertising, local is pacing ahead of a year ago.

In all sorts of categories, we are seeing a healthier advertising market all the time, particularly in automotive, as I mentioned.

At our TV stations, our ratings remained very strong.

In primetime we have the country's most watched TV station in WCBS Channel 2 New York, and we continue to have success with our radio programming as well.

We have been updating you on the remarkable growth of our sports format stations, and we are expanding our news footprint, too.

We recently launched an all-news station in Washington DC, and it has quickly performed very well for us.

The station now joins our roster of number one news stations in New York, L.A., Chicago, San Francisco, Philadelphia, Boston and Detroit.

At the same time, we continue to put a great emphasis on our local interactive content.

Users of our CBS local media sites increased 43% last year, giving us the fastest growth in our entire peer group.

Finally, our Outdoor business performed very well for the year and for the quarter.

We have restructured many contracts and made them more profitable, which will benefit us for years to come, and we were very pleased with the settlement resolution that we reached with the London Underground.

Right now we are seeing particular strength in our American operations, but with the Olympics in London this year, we expect to see much better results internationally as well.

Here and abroad, we also continue to roll out high marginal digital signage where we will get the biggest return for our investment.

So, as you can see, our operating segments are performing very well across the board.

What I want to do now is tell you a few things about how we look at our business overall.

Three years ago this Company was receiving virtually zero dollars from retrans, zero dollars from our affiliates, and zero dollars from streaming, and we were getting about 40% of what we are today in international sales of our programming.

At the time we said that in addition to growing our base business through blocking and tackling, these four areas were all key opportunities to grow non-advertising revenue, which would derisk and diversify our businesses.

Many people did not agree, but we were confident we would get it done.

Today all of these developments are real, and they are meaningful.

That is why our OIBDA was up $753 million last year.

I am confident the numbers from these areas -- retrans, reverse comp, streaming and international -- will grow every single year, and that is why 2012 and many years to come are positioned to be even better.

Clearly the world has changed, and it's going to continue changing in our favor.

We have constant revenue streams that are just getting started to show in our results, and they will be there in good times and bad.

We told you about this retrans, reverse comps, streaming international at our Investor Day just less than one year ago.

And now from everything we see, we are on pace to do even better than the impressive numbers we shared with you that day.

Plus, our recent long-term deals with the NCAA, the NFL, the SEC, the Grammys and others will also boost our profits for many years to come.

Add to this the prospects of an improving economy, including the impressive pacing figures we are seeing in the first quarter, and our results should only get better.

So yes, we are very happy with our performance in 2011, but we are now entirely focused on surpassing those numbers in 2012 and taking advantage of every possibility to grow CBS for many years to come.

With that, I will turn it over to my friend and colleague, Joe Ianniello.

Thanks, Les.

Good afternoon, everyone.

Today I will give you some more detail on the results for the quarter and for the year; then I'm going to update you on what we are seeing in 2012.

But first let's start with 2011.

We had a great year in 2011.

We achieved our strong results, despite some difficult comps and economic uncertainties.

As you have seen and heard, the actions we have taken to implement our strategy of producing great content and receiving our fair share of recurring revenue is having a clear impact on our results.

The best part is that we are still in the early innings of this multiyear growth story.

Turning to the fourth quarter, OIBDA of $837 million rose 9%, despite a 3% decline in revenue which is attributable to the second cycle syndication sale of CSI and strong political advertising during 2010.

These two items combined contributed more than 100% of the revenue decline.

Affiliate and subscription fees were up 8% for the quarter, showing the steady growth in cable and retransmission consent fees.

Our OIBDA margin of 22% expanded 200 basis points.

This increase was driven by the growth in high margin revenue, including streaming deals, higher international syndication revenue and retrans fees, as well as our efforts to control costs.

Operating income of $701 million was up 11% for the quarter.

Also, during the quarter, we took restructuring actions that resulted in a $46 million charge, which reduces our cost on a sustainable basis by more efficiently utilizing real estate that we own.

We will realize the benefits of these actions in 2012 and beyond.

Now let's quickly go through the full-year results.

For 2011 revenue was up 1% to $14.2 billion.

This is despite lower revenue from our new profitable NCAA arrangement that started in March 2011 and the absence of the 2010 Super Bowl on CBS.

These two items alone affected our total revenue growth by 3 percentage points.

Content licensing and distribution revenue was up 6%, and affiliate and subscription fees were up 9%.

These two increases speak to the improving stability in our business model, which is driven by the growing number of committed revenue streams that serve to de-risk our business.

For the year OIBDA of $3.1 billion was up 32%, and as Les said, that is $753 million higher than 2010, and our margin grew 500 basis points to 22%.

Operating income for the year was up 43% to $2.6 billion, and Les already mentioned our record EPS for the year.

Now let's turn to our operating segments.

Q4 entertainment revenue of $2 billion was down 1%, again due to the CSI syndication sale in 2010.

For the full year, revenue was up 1% to $7.5 billion driven by our new digital streaming agreements, growth in underlying advertising revenue at the network and higher retrans fees.

During the quarter, OIBDA for the entertainment segment was up 28% to $318 million, and for the year OIBDA was up 60% to $1.4 billion due to the combination of revenue drivers I just discussed, as well as lower programming costs.

In our cable segment, revenue for the quarter was $395 million, up 7%, and for the year it was $1.6 billion, up 10%.

Our cable networks continue to see healthy increases in rates and subscribers, and we are getting more revenue from licensing our Showtime original series internationally and on new platforms.

Cable OIBDA of $175 million was up 4% for the quarter with a margin of 44%.

These results were affected by the timing of promotional expenses related to the launch of two new shows, Homeland and House of Lies.

For the full-year 2011, OIBDA of $707 million was up 24%, also posting a solid margin of 44%.

That is up from 39% in 2010.

Publishing revenue was $229 million for the quarter and $787 million for the year.

Both were down 1% as we continued the shift to more profitable e-books, which sell at lower price points but also with significantly lower costs.

Digital revenue now represents approximately 17% of our overall publishing revenue for the year.

Publishing OIBDA grew 40% to $28 million for the quarter and grew 28% to $92 million for the year, again reflecting the benefit of our transition to digital and lower bad debt expense.

Strong OIBDA growth and operational efficiency led to margins of 12% for both the quarter and the year.

Local broadcasting revenue and OIBDA both for the quarter and the year were affected by the absence of significant political advertising.

In addition, the NBA lockout affected our fourth-quarter revenues, which were down 12%, and not having a Super Bowl also affected our annual results, which were down 3%.

Underlying nonpolitical revenues at TV stations grew 1% in the quarter.

We also continue to see growth across a broad base of advertising categories at this segment with automotive, financial and other professional services growing the fastest.

Local broadcasting OIBDA was down $56 million for the quarter to $266 million and down only $16 million for the year to $849 million.

We expanded our local broadcasting OIBDA margin in 2011 by 100 basis points to 32%.

This is the first time we grew our margin in a nonpolitical year in well over a decade.

This was achieved through our continued cost containment measures and by increasing retrans fees of which only about half are recorded at this segment.

And, finally, Outdoor revenue for the quarter was up 1% to $514 million, and for the year it was up 4% to $1.9 billion.

We posted gains despite the softness in the European economy, as well as the non-renewal of some transient contracts.

The base business continues to grow with US billboards leading the way.

In Q4 pricing for our US billboard business was up 2% on the same high occupancy levels.

For the quarter Outdoor EBITDA was 30% to $131 million, and for the year it was up 20% to $346 million, again helped by our more profitable contracts and the settlement of the London Underground legal matter.

Turning to cash flow on our balance sheet, we had a use of cash of $44 million in the quarter due to a $200 million voluntary pension contribution.

For the year free cash flow came in at $1.5 billion, up 2% despite the absence of the Super Bowl and a more than $200 million increase to our discretionary pension funding.

During the quarter we spent $170 million on our share buyback program, retiring 7 million shares, reaching our target of $1 billion of share repurchased in 2011.

As a result, for the year we bought back a little over 42 million shares at an average price of $24 per share.

Our cash on hand at the end of 2011 was $660 million.

Now let me tell you what we are seeing in 2012.

As Les said, the momentum is building towards a record year.

Scatter pricing at the network is up mid-teens on increased demand.

In local broadcasting we are seeing an acceleration from Q4 trends.

Our nonpolitical revenues are currently pacing to be up low single digits in Q1, and of course, political will build throughout the year, significantly benefiting our second half of the year, especially Q4.

In addition, the automotive category is a great story.

Domestic spending continues to be strong, and we are seeing a sizable rebound in Japanese spending as well.

And in Outdoor the first quarter is pacing to be up mid-single digits.

So the marketplace is steadily improving, making us optimistic about 2012 and our future.

Plus, there are a few other factors that I would like to point out that will also drive EPS going forward.

First, we expect our CapEx spending to remain at current levels for the foreseeable future.

However, when you look at our income statement, depreciation expense is still significantly higher than our capital needs.

Over time our depreciation expense will trend down in line with our CapEx levels, giving us more operating leverage on the P&L.

In addition, all of our debt is fixed rate, and most of it was issued years ago at much higher interest rates.

As we refinance our debt and bring down interest cost to current market rates, you will continue to see a notable benefit to the interest expense line.

And finally, we will continue with our remaining $2 billion share repurchase program to meaningfully reduce shares outstanding.

All of these factors will help strengthen our bottom line.

So, in summary, as you have heard today, we continue to make good on our commitment to produce high-quality programming, grow our nonadvertising revenue streams and maximize the monetization of our content through new platforms.

Plus, we are staying focused on controlling our costs.

And, as the general economy improves, we stand to benefit even more.

So we are very excited about what the future holds, and we look forward to speaking with you on our next earnings call.

With that, Jay, can we open the line up for questions?

(Operator Instructions).

Ben Swinburne, Morgan Stanley.

I have two questions, both about the entertainment segment.

Maybe starting on the cost side, Joe, if you look at the quarter and the year, expenses were down, I think, 5% to 7%.

I know there is a lot of moving pieces in there, particularly around the studio and syndication.

But I don't know if there is a way to isolate out the noise and help us think about going forward what you think the expense trends are, maybe particularly for the network and your schedule.

I think everyone understands qualitatively the schedule is in a great place, but how does that translate on the cost line as we look into 2012?

And then related to that last -- I think everyone has seen Q4 advertising trends across the sector.

Scatter volumes have been pretty light.

You guys have a lot of ratings strengths and particularly as compared to some of your competitors who might have some make goods.

Are you able to benefit from that either in Q4 or were you able to in Q4, or do you think you can start to benefit from that in Q1 if volumes come back?

Are you seeing them come back?

Can you just sort of talk about that strategy in the marketplace on the ad sales side?

Yes, let me go first.

Number one, in terms of pacing, we have kept our scatter pricing up, and obviously because of our ratings strength, we are commanding the bulk of the scatter market.

There were some decisions on our part to push some of the scatters because we're not getting the pricing that we were not getting the demand at that pricing to push some of it into the first quarter.

So, once again, we are in a very, very strong position, and I think we are going to benefit for it more in Q1 than we did in Q4.

On the cost side, yes, clearly again as total company, you can see operating costs down 7% for the quarter and for the full year.

So, as we look forward, as we said, we are going to continue to obviously drive the topline, but we think we can control the costs, particularly in the entertainment segment, kind of low single digits.

And let me expand on that a little bit.

We are always going to be doing 16 pileups this year.

We have put on five new shows last season at the beginning of the year.

We are probably going to have less than that now.

Some of our competitors are doing over 30 pilots.

So, in certain instances, I would state that our development expenses are less than some of our competitors by over $100 million.

The ability to promote within our schedule, I am confident we are going to be extremely strong next year and be able to keep our costs down and that trend continues.

And maybe if I could just squeeze a follow-up in on the retrans side.

Les, you have talked about, I think, at least $250 million in 2012.

I don't believe that includes reverse comp, but correct me if I'm wrong.

Now that you have got this DISH deal done and you have probably got some other reverse comp deals finished, any updates of that number for 2012?

All I can say is the $250 million number is low.

You are right.

It is a retrans number.

It does not include reverse comp.

More and more, the reverse comp deals are going to come up this year.

So it is low, but we're not going to quantify exactly how low at this point.

But it is a low number.

Jessica Reif Cohen, Bank of America/Merrill Lynch.

A couple of questions.

You said on the restructuring charge for real estate, can you quantify what the savings will be in this year and next?

Look, we think we are usually 12 to 18 months.

We expect to get that return on our money.

Okay.

So --

So it is $46 million.

The charge is $46 million, so kind of 12 to 18 months is a general rule of thumb.

Okay.

Thanks.

And then obviously it is a very heated political climate.

I was wondering if you could quantify and put your arms around and help us -- how should we think about political in the upcoming year?

Can you size it at all?

You know what?

They are talking about the number of $2 billion.

That is the number I have seen thrown around.

Generally speaking we get 9% to 10%.

That is generally the ballpark, so that is what we are looking at.

Whether that number goes up or down, the $2 billion, I don't know.

But what I am especially pleased about is not only we are taking a large share from our TV stations, but radio is now becoming a bigger player in that area as well.

So we are looking forward to a lot of nastiness on both sides.

Incredible.

And, Les, I just wanted to ask you, can you give us an update on your thoughts on SVOD in 2012 of what you -- will we see new entrants?

There is a lot of noise today in the papers.

Do you expect new entrants that will be meaningful this year domestically?

There seems to be a rise in players outside the US.

Can you just talk about what can happen over the next year or so?

Well, the good news is obviously we already have deals with Netflix and Amazon.

At The CW we also added to that Hulu Plus, which we support Hulu Plus, not Hulu without the Plus, which is an SVOD, and there is a possibility that could happen there, and there are a lot of conversations.

You know what?

It is hard to predict whether there will be a major deal, but we are talking to an awful lot of people.

I also want to remind you and everybody else, as soon as we pull a show from our schedule, that automatically goes into one of those deals, so we expect our numbers of our pre-existing deals to go up.

In addition, as you mentioned, there is a lot more international players in this getting involved, and so we are making more deals internationally as well.

And I would just add that just from the deals we've signed today, we are going to be receiving more revenue in 2012 than 2011.

Just one last follow-up, I just want to ask you about the buyback.

I know that you said it would be at least $1 billion a year.

But is there any reason why there was so much of a slowdown in Q4?

No, I think we look at that as a long-term strategy, so we don't really manage it day-to-day.

It's just we said we are going to target $1 billion.

We hit $1 billion.

We have $2 billion remaining, which right now where our stock is it is 10% of our market cap.

So we are focused and committed to returning capital, and if you just looked at our free cash flow for 2011 of $1.5 billion, between the buyback and the dividend, we've returned over 80% of our cash to our shareholders.

So that remains our primary focus.

Michael Morris, Davenport.

A couple of questions on the television studio, the production side.

It is definitely a great asset that you have and arguably still has a lot of runway ahead of it.

So my questions are a couple.

Number one, when you look at the capacity to produce new content, where do you think you are with respect to your current production versus where you could be?

And if you think about what the opportunity is there, how are you thinking about whether or not you need to buy another outlet to push the content through relative to what you currently have?

And then also with some of these digital players now putting new original content or looking to launch new original shows, do you see yourself as potentially being a player in that space, or is there more to think about with respect to that being another place that you could sell content?

Yes, I will put my answer into three different areas.

Once again, having the studio is an extraordinary benefit to us.

When you are able to produce a property like a NCIS, and as we look down the road, we have going into syndication, which we have not accounted for yet, which will happen in 2012 and 2013, NCIS L.A., Hawaii Five-0, Blue Bloods and The Good Wife.

That is going to be how many episodes, Joe, that go into syndication?

(multiple speakers)

There will be over 300 episodes we have in the can by 2013.

By 2013 that will be going into syndication, and that will return to our studios since we own 100% of those shows.

We are approximately producing around 20 shows most for CBS and The CW.

We are also doing a show for TNT.

Right now we have a pilot for USA.

We still have more capacity.

And when you look at the Netflix of the world and the Amazons of the world doing new production, we welcome that.

We are talking to Netflix about a potential deal to produce a show for them.

Once again, we do not look at them until they are doing 22 hours a week of premium content.

We don't look at them as a competitor, but rather another place to put our content whether it is original or buying our libraries as they have.

So the good news is the production company is very strong, and there is a lot more room to do more.

Thanks.

So when you look at -- and we have discussed this in the past, but you look at potentially expanding your portfolio, if you will, I guess specifically buying cable networks beyond what you have with Showtime, is that a possibility, or do you think that given all these different places that currently exist that you could sell into, it is really not something that you need to consider?

We don't -- with the valuation right now what these cable networks are and we are getting paid so much for our content through all of these various platforms, we do not find any need to go out and purchase one of them.

When you see that a NCIS, each one of them is going to make north of $1 billion profit, each one of those shows.

That is a very good business for us to be in, and it is a better business than buying a cable network.

Laura Martin, Needham & Co.

Two questions, one on international and one on TV Everywhere.

On international we had rioting in Greece today, and I am just wondering whether -- I know international is a key driver of your revenue.

Talk to us about the content.

Is there any risk there?

Do you have long-term contracts?

Do you get prepaid?

Is some of this growth potentially at risk as we get more disruption in the European markets?

And then on TV Everywhere, it seems like best practices here is Time Warner where they take their linear feed, they put it directly onto the Internet with all the commercials, and Nielsen is able to measure that.

And so they are aggregating that 1% to 2% lift of a very attractive demographic into the TBS and TNT overall ratings.

Could you update us on where you are in TV Everywhere and whether you think that is a good idea, or you want to keep ripping apart the programming and putting in new commercials online?

Well, first, I will deal with international.

No matter what has happened with the economy, internationally our numbers have grown in leaps and bounds as you have seen.

In the last five years, we have doubled the amount of revenue we are taking in internationally.

A lot of them are long-term output deals.

But, in addition, there is such a demand for the top-quality programming that we have seen no slowdown whatsoever in our major European markets or in Canada or in Australia.

The good news is it continues to grow.

As long as we keep producing original top-notch content, we are getting going to get paid for it, and those numbers should continue to go up.

In terms of TV Everywhere, look, we are a supporter.

If someone is paying us a retrans fee, then we welcome people being able to get our content whenever or wherever they can.

As long as Nielsen is counting them, we are welcoming that even more.

Because what we want eventually to have happen is an eyeball is an eyeball is an eyeball, that we get Nielsen ratings and we get advertising for everything.

And I would prefer to keep the system where the commercial load is exactly the same, and we get paid the same whether it is TV Everywhere, whether it is online or on the air.

Once again, as the MSOs get ready to do it, we are prepared to do it, but, at the same time, we are able to sell wherever we want.

Doug Mitchelson, Deutsche Bank.

I was thinking about exploring your comment that retrans should accelerate significantly, but maybe we will leave that for another day.

On the scatter market for the first quarter, we are all poking around in volumes because of some of the setbacks we saw in December and in the fourth quarter generally.

You said mid-teens.

I think scatter pricing was stronger last year.

How should we think about scatter pricing?

What is a good number given it was higher last year?

How are you balancing upfront in the scatter?

I think we said again it is mid-teens over the upfront.

Again, I think the good news is what we are saying is we are seeing increased demand, and again obviously the strength of our schedule is really giving us a lot of confidence.

We are seeing it -- in terms of categories, we are seeing a big pickup for auto, so that continues to be strong.

It is a big category.

So we are pretty optimistic about the rest of this broadcast season.

The absolute numbers last year, you are right.

The scattered numbers were higher, higher percentage up off of a lower number at the upfront.

So (multiple speakers) this year's upfront we were up between 13% and 14%, and then you add that mid-teens number, and it is pretty strong.

Once again, we think that our demand is higher than our competitors right now.

Yes, and I guess to paraphrase what you already said in your prepared remarks, it is more likely that strong upfront flows through in the March quarter than what we saw in the December quarter?

That is correct.

You are absolutely right.

Just a clarification, Joe, that Outdoor mid-single-digit revenue growth, that is ex any unusual items, right, that is what we would see in the print?

Yes, that's on a content dollar basis.

Obviously we don't -- I don't know what the exchange rate is going to do plus or minus, so that is what we have done in underlying apples to apples basis.

So obviously if the exchange rate move plus or minus, we will adjust for that, but that is constant dollar.

Michael Meltz, JPMorgan.

Can you help us a little bit with the earnings progression throughout the year?

Any factors that we should consider that might skew the numbers a bit in terms of either the syndication deals or the online video deals?

Well, like I said, we just said the online streaming deals on a full*year basis will be higher.

Obviously we will have some quarter issues.

I think last year's second quarter we had a big inflow of those deals, so we might have a comp issue there in the second quarter.

But our fourth quarter obviously will be very strong because of political.

So I think again you will have your normal seasonality I think with the year, but, again, if you step back and you look at the full year, we are pretty confident, as we've said in our remarks, it is going to be a record year for us.

Right.

And what about the tax rate, please?

The tax rate?

As we are filing it in our 10-K, you will see that again.

What we are saying is comparable to 2010 and 2009, so the effective tax rate somewhere between 36% and 38% is what we are anticipating.

David Miller, Caris & Company.

Congratulations on the stellar results.

A couple of questions.

Les, on March Madness -- correct me if I'm wrong -- but last year at this time or just last year for the tournament, the Final Four games were actually in April, and the championship game was also in April.

This year I think the Final Four games are on March 31 with the National Championship in April.

So is it nice and neat and clean where you will capture most of that ad revenue or at least your share of it on March 31, or is there a couple of day delay?

I'm just trying to model this out as best I can.

And then I have a follow-up.

(multiple speakers).

Yes, I think the Saturday games will fall into Q1 this year as opposed to Q2 next year -- last year.

So we will have a little calendarization issue.

But, again, that's only the Saturday games.

The final will obviously all be in the second quarter.

Okay.

Great.

Also, with regard to your exposure to the London tube as it applies to the Outdoor business, I mean it just seems like you guys could get really aggressive here come the London Olympics and just telling marketers that, hey, look, if you want your brand or if you want your sign out there displayed in front of an extra 4 million people that are going to be descending on London, you have got to buy a contract now.

Can you characterize how aggressive you guys are right now in selling that inventory right now?

Thanks.

There's not too many people who ask us how aggressive we are going to be.

(multiple speakers).

I think they generally know the answer to that question, and you are absolutely right.

It is an event we are looking forward to, and it makes the investment of London Underground very valuable because we are going to cash in well, and there is a lot of activity right now over there for our growth.

And according to -- you know, I think people are booking early, getting those orders booked, and obviously will benefit our third quarter.

David Bank, RBC Capital Markets.

Two quick ones.

The first is in terms of upfront option activity, I think we are sort of bumping around a deadline here.

Can you comment in terms of what you are seeing for Q2 option taking in?

GM had canceled a bunch of buys not long ago, so are you seeing them come back into the scatter market and anything -- any more of the automakers falling behind?

And then second, it looks like in terms of first quarter, you did a nice needle moving syndication deal with respect to CSI Miami and the AMC network.

That I think could give you a pretty decent bump in the first quarter.

Is there anything offsetting that a year ago, or does it look like you could get a nice bump-up from that?

I will do the first, and I will let Joe do the second.

The upfront options are remaining very strong.

Nobody -- it is no different than any other year.

What General Motors did was de minimis, and frankly, with our schedule being as strong as it is, we are having no trouble replacing the money at much higher rates.

So we are seeing very few options, and it is a normal, normal year, nothing abnormal.

As a matter of fact, it may be just the opposite, and people want our schedule, and it is good to be in the position we are in.

Yes, as far as AMC, look, we are obviously very pleased that they see again the value in one of our core franchises in CSI.

So it will be incremental, David.

There is nothing again comping against something unusual there.

So, again, just another example of our content in demand and thus monetizing it.

And new people getting in and wanting the content.

A channel like AMC, which is made a pretty good name for themselves on original programming, getting into the syndication market.

There are more and more of those and, being as we have the most valuable current content and library content, new ways of maximizing it.

Thanks, David.

We have time for one more question.

Marci Ryvicker, Wells Fargo.

Two quick ones.

In local OIBDA was helped in Q4, the press release said, by cost containment and the NBA lockout.

So how should we think about costs in 2012 and beyond?

Is there more room to cut costs, or will most of the margin expansion comes from increased revenue?

And then my second question is, in Outdoor what was the London Underground settlement?

Okay.

Let me start with the local to cost.

I think, again, we always look at our costs on our local segment, so we think we can manage that cost-effectively.

So I think margin expansion will clearly come from the top line, driving the top line.

But, again, we have demonstrated year in and year out that we are able to cut costs, control costs and manage it very effectively.

So 2012 is going to be no different, but obviously, again, the top line we should be benefiting from, again, our number one category in automotive is strong, and we have an incremental category in political.

So we are feeling pretty optimistic about that.

Regarding the London Underground, because of confidentiality, we cannot provide details, but what we can tell you is we are pleased with the outcome, and we are positioned again with the Olympics coming near to really enjoy the benefits of this contract the next few years.

So, again, we are pleased with the outcome, but that is really all we can say.

The NBA we have KCAL; we have the Lakers.

So we had a few games that were missed during the quarter for the Lakers, but that is, once again, not a huge number.

But it did affect the cost.

This concludes today's call.

Thank you, everyone, for joining us.

Have a great evening.

That does conclude today's conference.

Thank you for your participation.