Press Release: Simon & Schuster Revenue Flat in CBS Q1 Earnings Report
“CBS delivered a spectacular quarter as we continue to execute on our strategy of creating and distributing the content that audiences have to have,” said Leslie Moonves, Chairman and Chief Executive Officer, CBS Corporation. “We had double-digit revenue growth, and we set records in all key profit measures, with EPS coming in above a dollar for the first time in our Company’s history. Advertising was extremely strong, growing 31% overall and 49% at the CBS Television Network, where we are on track to win the season in adults 25-54 and adults 18-49, as well as in viewers for the 13th time in 14 years. Looking ahead, we are in a very enviable position for this year’s Upfront, given the ongoing strength of our primetime lineup and a robust advertising marketplace. Plus, advertising is poised for even more growth in the back half of the year as political spending ramps up. Our high-margin, non-advertising revenue streams are also on the rise, led by retransmission consent fees and reverse compensation, which are expected to surpass $1 billion this year. At the same time, our subscription streaming services, CBS All Access and Showtime over-the-top, are reaching new and younger audiences and are beginning to make a meaningful contribution to our results. As we grow our Company on the strength of our premium content, we are also moving forward with our initiative to separate our radio business, which will unlock value for shareholders and further diversify our revenue streams. So across the board, we are turning in record results while we position the Company for long-term growth. It clearly continues to be a terrific time to be a CBS investor.”
First Quarter 2016 Results
Revenues for the first quarter of 2016 increased 10% to $3.85 billion from $3.50 billion during the same prior year period. Advertising revenues grew 31%, driven by the CBS Television Network’s broadcast of Super Bowl 50 and additional National Football League (“NFL”) games, as well as a 12% increase in underlying network advertising. Affiliate and subscription fee revenues rose 15%, driven by 42% growth in retransmission revenues and fees from CBS Television Network affiliated stations, as well as revenues from new digital distribution platforms. Content licensing and distribution revenues declined 29%, reflecting the timing of domestic and international television licensing sales.
For the first quarter of 2016, operating income of $821 million grew 14% from $721 million for the same prior year period, and adjusted operating income of $812 million was up 16% from $702 million. In both cases, the increases reflected the Company’s first-quarter revenue growth. Net earnings of $473 million for the first quarter of 2016 rose 20% from $394 million for the first quarter of 2015, and adjusted net earnings of $474 million grew 21% from $391 million in the same prior-year period. The increases were driven by the Company’s higher operating income and lower losses from foreign exchange rate changes.
Diluted earnings per share (“EPS”) for the first quarter of 2016 rose to $1.02 compared with $.78 for the same quarter in 2015, and adjusted EPS grew to $1.02 from $.77. Weighted average shares outstanding were 464 million in this year’s first quarter, down from 506 million in the prior-year period, mainly as a result of the Company’s ongoing share repurchase program. The first quarter of 2016 and 2015 included discrete items, primarily gains from the sales of Internet businesses in China during each of the quarters, which have been excluded from adjusted results. Adjusted net earnings and adjusted EPS for the first quarter of 2016 also exclude a write-down of an international equity investment to its fair value.
Free Cash Flow, Balance Sheet and Liquidity
For the first quarter of 2016, free cash flow was $990 million, up from $400 million in the same prior-year period, and cash flows from operating activities were $1.03 billion compared with $417 million. These increases were primarily driven by growth in underlying advertising revenue and affiliate and subscription fees. The cash flow increases also reflect the benefit from additional NFL games broadcast on CBS in 2016, including Super Bowl 50, while the related program rights are paid to the NFL in other periods. During January 2016, the Company repaid its $200 million of outstanding 7.625% senior debentures upon maturity.
Repurchase of Company Stock
During the first quarter of 2016, the Company repurchased 10.3 million shares of its Class B Common Stock for $500 million, leaving $1.50 billion of authorization remaining under the Company’s share repurchase program at March 31, 2016. The Company expects to complete its share repurchase program by the end of 2016, subject to market conditions. Reconciliations of non-GAAP measures to reported results are included at the end of this earnings release.