Paramount Global
Q2 2012 Earnings Call Transcript

Published: 3 Aug 2012

[Operator:]

Good day, everyone, and welcome to the CBS Corporation Second Quarter 2012 Earnings Release Teleconference. Today's call is being recorded. At this time, I'd like to turn the call over to the Executive Vice President of Investor Relations, Mr. Adam Townsend. Please go ahead.

[Adam Townsend:]

Good afternoon, everyone, and welcome to our Second Quarter 2012 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'll 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 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. Reconciliations for non-GAAP financial information related to this call can be found in our earnings release or on our website. And with that, it's now my pleasure to turn the call over to Sumner.

[Sumner M. Redstone:]

Thank you, Adam. Good afternoon, everyone. I could not be more pleased to be reporting yet another quarter of truly spectacular results. Our world-class content remains a driving force behind our success. And we continue to sell our content in new ways that generate higher and higher profits, and there are many more opportunities before us that will enable us to grow year after year and year after year. Our CBS strategy is working better than ever and I am convinced it will keep us at the forefront of our industry for many, many years to come. But as you know, strategy is not everything. You also need the right person at the top to execute that strategy. And obviously, there is nobody better suited for that job than CBS' President, my friend, Les Moonves. So to tell you more about CBS' exceptional performance, I'm going to turn this call over to the man I call a super genius, Les. And Les, the reason I call you a super genius is there are no words to describe the spectacular manner in which you have operated CBS. And you know I'm proud of you and I'm proud of all your achievements, Les.

[Leslie Moonves:]

Thank you, Sumner. I'm blushing. You can't see me, but thank you very much for those very nice remarks.

[Sumner M. Redstone:]

You're entitled to those comments. You are the best.

[Leslie Moonves:]

I'm very flattered. Good afternoon, everybody, and thank you for joining us. I'm very pleased to be reporting another terrific quarter today. In fact, in EPS, operating income and OIBDA, we didn't just break records for the second quarter, we delivered record results that were better than any quarter since CBS Corporation became a standalone company 6.5 years ago. EPS of $0.65 was our highest ever, and so is operating income of $769 million. OIBDA of $901 million was an all-time quarterly high as well, and to top it off, our OIBDA margin of 26% was also the best we've achieved to date. It's important to point out that this was a very clean quarter. No special items drove these results. Clearly, CBS is increasingly benefiting from the steps we've taken to improve our business model. While our traditional businesses continue to grow and provide a tremendous source of strength for our company, we also have multiple sources of recurring high-margin revenue that are increasingly paying off in our results. And the good news is there's still a long way to go in our evolution. Plus, we have several significant contributors to revenues in the quarters and years to come, driving us to what we're confident will be record results for this year and an even better 2013. First, in terms -- in the near term, pacing in the third quarter is accelerating across our local businesses. The London Olympics and the presidential election here in the U.S. will significantly help our results in the back half of the year. Second, we recently sold our network inventory at very attractive pricing in the upfront. This will not only benefit us later this year but throughout the 2012-2013 television season. Third, in 2013 and 2014, we have 4 hit shows going into syndication

[Joseph R. Ianniello:]

Thanks, Les, and good afternoon, everyone. Today, I'm going to provide some more details about our second quarter results. I'll also give you an update on our recent financing activity and on our increased capital return announcement, then I'll conclude with what we see for -- ahead for the back half of 2012 and 2013. Let's start with the second quarter results. As Les highlighted, we delivered record profits in the second quarter, the best single quarter since we became a standalone company in 2006. We clearly benefited from the ownership of premium content and our ability to monetize it in both traditional and emerging platforms. This is a strategy that we've previously laid out for you. As you just heard, revenue for the second quarter totaled $3.5 billion, and the comparison versus prior year was impacted by the 2 noteworthy items Les mentioned. The semifinal games of the NCAA Final Four occurred in the first quarter of this year and in the second quarter of last year. And last year, we made many of our library titles first available for streaming during the second quarter, whereas an even larger availability was made during the first quarter of this year. Combined, these 2 items accounted for the entire difference in revenue between this year's quarter and last. OIBDA came in at a record $901 million, up 3%. And our OIBDA margin expanded 2 percentage points to an all-time high of 26%, again demonstrating the benefit of these growing new revenue streams derived from our premium content, as well as our ability to control costs. Operating income increased 5% in the second quarter to a record $769 million, and our operating income margin also improved 2 percentage points to 22%. And EPS hit an all-time high of $0.65, up 12%, further demonstrating the strong operating leverage in the business. Because of the timing of the 2 items that affected comparability in the second quarter, looking at our year-to-date results gives you an even better picture of our underlying performance. Through the first half of 2012, total revenue grew 4% to a record $7.4 billion and we had growth in every one of our key types of revenue. Advertising grew 1%, affiliate and subscription fees grew 8% and content licensing and distribution grew 13%. Non-advertising revenue accounted for 39% of our total revenue during the first half of 2012, up from 36% a year ago. This mix will be affected a bit during the second half of this year as political advertising and the London Olympics bolster ad sales. But in the long term, we expect non-advertising revenues, which include retrans, reverse compensation, cable affiliate fees, digital streaming and global syndication, to outpace total revenue growth and make up a bigger portion of the revenue pie. Also on a year-to-date basis, OIBDA grew 16%, operating income grew 20% and EPS increased 37% to a record $1.19 per share. Let's turn to our operating segments. Due to the timing of the 2 items we just mentioned, Entertainment revenue was $1.7 billion, down 7%. The same 2 items accounted for virtually all of this delta. Underlying advertising revenue at the CBS Television Network was comparable to the prior year. Second quarter Entertainment OIBDA of $426 million was down just 3%, again as a result of the 2 noncomparable items. But because of our more profitable mix of revenue, our Entertainment OIBDA margin expanded 100 basis points to 25%. In our Cable Networks segment, revenue for the quarter was $446 million, up 8%, driven by increases in rates and subscribers, as well as growth in digital streaming revenue, again a benefit of increased ownership of content. Cable OIBDA was also up 8% to $190 million driven by revenue growth and the timing of certain expenses -- and certain programming and advertising expenses that we discussed during last quarter's call. On a more meaningful year-to-date basis, cable revenue was up 11% and OIBDA was up 21% and our cable OIBDA margin expanded 3 percentage points to 44%. Turning to Publishing. Second quarter revenue of $189 million was up 3%. Sales of our more profitable digital books grew 44% and represented more than 20% of Publishing revenue. OIBDA of $9 million was affected by the proposed settlement of the e-book litigation. As we progress in putting this issue behind us, we look forward to the continued growth in the profitability of this business as it shifts towards a more efficient distribution platform. Local Broadcasting revenue of $704 million was up 2%. TV Station revenue was up 6% and Radio revenue was down 2%. The Radio revenue comparison was affected by the sale of the West Palm Beach radio cluster, which closed on April 1. Radio revenue for our top 10 markets was flat for the quarter. Local Broadcasting OIBDA of $248 million was up 8%. And the OIBDA margin grew 2 percentage points to 35% driven by growth in high-margin revenue and lower programming costs. And finally, Outdoor revenue for the quarter was $481 million, down 2% on a reported basis as a result of the negative impact of -- on -- on foreign exchange rates. On a constant-dollar basis, revenue was up 1% for the segment, with the U.S. up 5% and Europe up 1%. Outdoor OIBDA of $93 million increased 8% in the second quarter as we continue to benefit from our improved operating efficiencies and the elimination or renegotiation of unfavorable contracts. Turning to cash flow and our balance sheet. For the quarter, free cash flow came in at $558 million, and year-to-date, free cash flow was $1.2 billion. We continue to convert our profits into cash flow at a very efficient ratio because our businesses are not capital intensive. We ended the quarter with cash on hand of $1.9 billion, which included approximately $900 million of proceeds from our debt issuance in the second quarter. We then used that $900 million after the quarter end to reduce debt. We said during our last call we will continue to reduce our interest expense and bring our interest cost more in line with current rates. In June, we opportunistically refinanced $900 million of higher-rate notes with 2 new tranches of lower-rate debt, reducing annualized interest expense by about $30 million a year. Along with our first quarter refinancing, we have reduced our annualized interest expense by more than $50 million a year, and you will begin to see the full benefit of these actions later this year and into 2013. As Les said, we also continued to use our excess cash to return value to shareholders. During the second quarter, we retired 9.4 million shares of our stock for $301 million. Since this repurchase program began in 2011, we have repurchased nearly $1.7 billion worth of stock to date, retiring over 63 million shares at an average price of just over $26 per share. Consistent with our commitment of returning value to shareholders, last week, which I'm sure you saw, we announced an increase to our quarterly dividend rate by 20% and we upped our share repurchase program to $4.7 billion, giving us $3 billion remaining now on the program. We expect to complete this program over the next 10 quarters, which would take us to the end of 2014 and represent an acceleration from our previous pace. We are able to put this plan in place now because of the benefits of the ongoing transformation of our business model and the confidence and visibility we have in our cash flow, going forward. Now let me give you a few observations of what we see ahead for the rest of the year, starting with Local Broadcasting. We are seeing accelerating trends across the segment. Local Broadcasting revenue is pacing to be up high single digits for the third quarter, led by our TV Stations which are pacing to be up in the teens driven by political, auto and the Entertainment categories. Our Local Broadcasting segment is set to benefit from strong tailwinds over the coming quarters, starting with political in the third and fourth quarters and then the Super Bowl in Q1 of next year. Outdoor is pacing to be up high single digits for the third quarter on a constant-dollar basis, benefiting from strong Olympic-related ad sales in London as well as continued growth in the U.S. For Q3, Europe is leading the way and is pacing to be up in the teens. At the CBS Television Network, we are poised for a great start to the new season in late September when our new upfront pricing takes effect. As you know, we're always looking ahead, so I'd like to highlight a few things we know about 2013. To start the year, we're set to benefit from the biggest prime time television event of the year, Super Bowl XLVII, and the pricing we are getting for these spots is record-breaking. We also know we will have a strong year of revenue in content licensing and distribution. At least 2 of our hit CBS shows will be going into first cycle syndication in 2013

[Operator:]

[Operator instructions] And we'll go first to Ben Swinburne with Morgan Stanley.

[Benjamin Swinburne:]

I'll ask my question and follow-up all in one shot just for [indiscernible] purposes. Les, a couple of years ago when you did the Netflix deal, I think you said you sold about 7% of your library. And everyone, I think, has a better sense for what online video looks like now. I'm sure you guys feel like you've got a handle on sort of what's the right content to put in that -- on that platform, how to price it. What do you think the renewal looks like just from a big picture perspective? Do you think you'll increase the amount of content on there? Would you change sort of the kind of shows you put into the deal? And do you expect -- or do you just expect simply just to renew sort of the current offering but at higher prices? And then my follow-up is just on international. I remember a couple of years ago, you did Hawaii Five-0. You screened that internationally to a lot of successful demand overseas and then it proved to be a domestic hit that led to syndication, which is now coming up. Do you look at any of the shows that you have coming in this fall? You mentioned Elementary and Vegas as being things that you think would be potential domestic syndication hits. I know that sounds like we're talking about 2015 here, but Five-0 got bought real quick. I think it was 5 episodes then or something, so I thought I'd ask.

[Leslie Moonves:]

Yes, regarding -- let me deal with your 2 questions, Ben. Regarding, obviously, the Netflix deal, the renewal is already preordained per se. And you're right, we have a better idea, although the information is somewhat limited and somewhat preliminary on which shows are working and which aren't. And as you can imagine, some are working better than others. It's good to have the Star Trek franchise, I think that's something that works exceedingly well. And some of the others don't work as well. And I think, frankly, with Netflix, our relationship is so good, we will be adding titles such as CSI

[Operator:]

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

[Jessica Reif Cohen:]

My first question is on -- also on international. Les, you mentioned that you're increasing your footprint. And I was just hoping that either you or Joe could tell us a little bit more about the Chellomedia deal, how we should think about that opportunity. And what percentage is international now of total revenue?

[Joseph R. Ianniello:]

Jessica, it's Joe. International is about 15% of total revenue right now. And obviously, again, that's all international, so that does include our Outdoor business. I think we've said on just exporting content we've crossed over the $1 billion mark in just in sheer -- just U.S. dollars.

[Leslie Moonves:]

Yes. And the Chellomedia deal is -- it's actually fairly simple. We already have the model worked out that we've done with them in the U.K. where we have 4 channels with them where our content acted as our equity. And once again, it's content that wouldn't necessarily have been sold anywhere else. And it's worked out extremely well. So because of that deal, we've expanded into 83 new channels. Once again, we haven't put up a dime, we're putting up library content and some existing content that wouldn't be sold into territories such as Eastern Europe, Middle East and Africa. And we own 30% of these 83 channels that they previously owned. So there's only upside for us in this. And as I said, if they work out as well as the other 4 did, it'll turn out to be a very good venture.

[Jessica Reif Cohen:]

And the second question is on retrans. I know you said in the past that you'll do at least $250 million this year. DirecTV said in their call that you guys are wrapping up your negotiations, so you should have a good sense of how much you're going to get paid. Could you give us any sense of how fast this number will grow? And when do you think that reverse comp really kicks in?

[Joseph R. Ianniello:]

Well, Jessica, it's Joe. Well, reverse comp, we just gave you a number, I think, for 2013. And I will tell you, we're in the very early innings, just because the deals don't expire. Most of the deals for us expire kind of in the 2014-2015 cycle. So what I will also add is some TV affiliates want to comp early, so we are seeing that happen. So that's a good fact -- pattern. And yes, obviously -- when we enter into the deal with DirecTV, it will be a benefit to us albeit a small portion of 2012 but a big full year for 2013. So we also laid out that, again, we expect this to grow pretty rapidly. So you can see the size of these revenue streams, they're starting to really get some size.

[Leslie Moonves:]

And the $250 million is a little bit conservative.

[Operator:]

We'll go next to Michael Morris with Davenport.

[Michael C. Morris:]

Two other questions on retransmission, of course. A popular topic. But the first one is just kind of mechanical. If you look at your content -- not content, but subscription and affiliate revenue that you report for the entire company, it still isn't seeing the ramp or the magnitude I would have expected, to kind of hit that 250 number this year. Can you talk about what the back half of the year looks like? Is this -- how steep is the ramp kind of on a quarterly basis as we work through 2012? And then I have a follow-up.

[Joseph R. Ianniello:]

Yes. I won't get too much specific, but it does ramp, Michael, because deals kick in and start in the middle of the year, in the third quarter. So we're going to be getting those pricing benefits as those deals start. So we do have to cycle through it. So, on an annualized basis, clearly, Q1 will be the lowest and Q4 will be the highest. So I think you're going to continue to see that momentum build.

[Michael C. Morris:]

So -- and when we think about -- we try to figure out 2013, of course, 4Q, which will be significantly higher than 1Q, just based on what you reported, that represents the run rate that you're looking at going into 2013. Is that correct?

[Joseph R. Ianniello:]

Yes. And, look -- like I said, but the run rate should, and as Les just alluded to, be higher than the $250 million.

[Michael C. Morris:]

Okay. And then my second question is a bit more open-ended but in light of the Aereo situation and kind of the failure of the broadcasters getting injunction there, certainly, the question comes up a lot more frequently with respect to the risk to the retransmission revenue stream over time. So it is a bit open-ended, but I'm hoping you can speak just a bit about how you're looking at that. Obviously, Comcast struck a long-term deal with you; they value it. Other distributors talk about maybe trying to avoid their programming cost increases. I'm just interested in your thoughts, if you hear so much from them?

[Leslie Moonves:]

Yes. Well, number one, it does not affect any negotiations we have. It is hardly even brought up. And I don't -- we're very confident that our legal position's going to prevail. It hasn't affected us in terms of one sub, one deal, one anything. The minor loss we had served in the court was really -- it's not even the first out of the first inning, basically. We're sure we're going to prevail. Throughout history, our content has always gotten paid for, so the people who have cried, "Oh, my god, this could hurt retransmission," are really exaggerating greatly. We -- it's not something I leave -- lose sleep over for even 5 minutes. We think it'll go away. We think we'll prevail in the courts. We will always get paid for our content.

[Operator:]

We'll take our next question from David Bank with RBC Capital Markets.

[David Bank:]

Guys, two questions. The first is, can you give us a sense of the order of magnitude that you could see revenue contribution from the new Sports Radio network? And on the cost, I just want to make sure I understand that -- I would think there's really no incremental cost to the content, right? This is your own -- basically your own stuff that you're essentially syndicating. And the second question is -- your op-ed syndication team has really sort of spoiled us for a while here giving us the lead time on the sales of the -- of some of your high-profile deals, as referenced before. But I think Good Wife, while we're all sort of expecting a syndication, I don't think the deal's been inked yet. So could you give us a sense of what you think the timing around that could be?

[Leslie Moonves:]

Yes, go ahead.

[Joseph R. Ianniello:]

Yes. Sure. David, I'll start with the first one. The CBS Radio network, the sports radio -- the Radio Sports business is probably $150 million market. So we're going to be large coming right out of the gate so it's all incremental. It's not in dollars we play in today at the local segment, so we expect to gain our fair share of that. And you're right, there's very little incremental cost for us. We -- a lot of the talent and the content, we're already producing, so this made a whole lot of sense for us. And with the outlook with Cumulus, we do think it is a fantastic partnership with great content and great distribution. So we do expect some upside, again, starting in 2013.

[Leslie Moonves:]

Yes, and we -- I mean, we have so many great sports properties and announcers and on-air personalities, so it's great way to cross-market CBS Sports, the Cable Network, what we already have on Radio. So you'll be seeing a lot of our already existing talent going on, on the sport -- on the Radio network. And as Joe said, incrementally, it's going to cost us very, very little, and there is a real upside to growing the business. And syndication, Good Wife?

[Joseph R. Ianniello:]

Yes. In Good Wife, you're right in that. Good Wife is not sold, which is not unusual. I think the unusual was the NCIS

[Operator:]

We'll go next to Michael Nathanson with Nomura.

[Michael Nathanson:]

I have a couple for Joe. Joe, just help me with the math on this for a second. On Entertainment, you had about an 8% step-down on expenses. What drove most of that decline in expenses? Is that tied to the syndication sales from last year?

[Joseph R. Ianniello:]

The expenses, I would say, Michael, is sports, the timing of the NCAA. The shift that we've talked about in the revenue, obviously, that is a lower-margin profit for us, so that shifts into the first quarter. That's probably one of the bigger drivers.

[Michael Nathanson:]

Okay, and do you have any change -- are you still assuming the same kind of expense growth for that Entertainment segment for the whole year, low single digits? Or is there anything to...

[Joseph R. Ianniello:]

Yes, I would say, once you normalize all the noise and you just look at the way we manage cost at the Entertainment segment, I think we've said and we're committed to low single digits. We're able to manage our cost structure there.

[Michael Nathanson:]

Okay. And the last one will be on the broadcast update on your network. You said it was relative -- it was close to flat, but are you taking out NCAA in both quarters? Is that how you're looking at it?

[Joseph R. Ianniello:]

Yes. Yes, that's normalized.

[Michael Nathanson:]

Okay, normalized.

[Operator:]

We'll go next to David Miller with Caris & Company.

[David W. Miller:]

I think you guys have said in the past that 2013 will be a very strong year for syndication. Joe, you obviously mentioned the 4 shows that are going to be hitting that cycle, the syndication cycle in 2013. As it applies to both domestic and international syndication in 2013, Joe, would you say it's going to be more of a first-half-weighted story and a little weaker in the second half? Or would you say that, that piece of business is going to be fairly smooth for you guys as we go throughout the -- all 4 quarters in 2013?

[Joseph R. Ianniello:]

Yes, I would say it's probably actually second. And just to be clear is, we do have 4 shows. But 2 of them, we said, very likely for 2013. Blue Bloods and Hawaii Five-0 are set for the following year. We'll be -- we do have flexibility in the timing of some of those deals, but we're committed to 2 shows certainly going. I would say, David, though, the back half of the year. Generally, those happen in Q3 for domestic season -- as the new season starts. That's not to say it can't happen earlier, but generally speaking, I would think that -- I would point you to the back half.

[Operator:]

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

[Douglas D. Mitchelson:]

So I'm going to do the same. I'm going to ask a question and I'll also give you my unrelated follow-up right away. Les, if I heard you correctly, you teased us with a comment that would -- that you'd update us soon with new digital offerings, so any more clarity on that would be helpful. Is this just offering the same off-the-air window to new entrants? Is this changing the windows, or expanding rights? And then separately, also for Les, just given your experience, I was hoping you could talk about what you're seeing in the scatter marketplace. Is the 500 basis points or so slowdown that peers are seeing in 3Q ad growth normal relative to the Olympics impact? Is there anything -- any underlying softness in the scatter market that we should be concerned about?

[Leslie Moonves:]

In -- Doug, in terms of the new deals, it's the combination thereof. Obviously, there are certain international markets that are opening up for streaming in addition to expansion of existing deals, and some potential new players as well. So it's coming from all sorts of places. And there's a lot of activity, put it that way. In terms of scatter market, once again, in August, we don't worry about the scatter market especially in a Olympic year and especially an Olympics that's doing this well. And we've just sold such a great percentage of our inventory 6 weeks ago pretty upfront. We're ready for the gun to go off in the middle of September. The -- in terms of any softness, I think it's all attributable to the Olympics and it's something that is totally fine, totally business as usual. We're really pleased with the increase in the pacing of local. And in terms of the scatter for national, it is a non-issue.

[Douglas D. Mitchelson:]

When do you feel like you'll have visibility on the fourth quarter or the new season? Does that sort of come in September when those off-scatter deals are done that you have confidence in what it's going to look like?

[Leslie Moonves:]

Yes, around then. Around then. That sounds about right. When we speak to you next, we'll know.

[Douglas D. Mitchelson:]

Okay. And then just lastly, sorry, but so the off-air window that you currently use for online digital, that's what we should expect to continue, right?

[Joseph R. Ianniello:]

Yes.

[Operator:]

We'll go next to John Janedis with UBS.

[John Janedis:]

Les, you touched on the streaming. You guys -- you've taken CSI off the air. Can you remind us of the timing of the put provision there? And then separately, obviously, one of your peers announced a spin to create shareholder value a few weeks back. There's some speculation over time about your Outdoor business and the potential sale there. Do you see any value creation from a spin of the Outdoor and Publishing assets if a buyer doesn't emerge?

[Leslie Moonves:]

In terms of Outdoor, we have always said we're not actively in the market to sell it. A couple people asked to look at it, and we said okay, with the right offer. And they talked about it openly. So in addressing the question to the street, we said, "Look, we are very pleased with how it's performing. It's growing rapidly. It's growing from where it was 3 years ago every successive year. If somebody came along with the right price, we would have to take a serious look at it." But there's -- so there's going to be no need for us to say anything, in that we're happy operating it. We really are. And the CSI deal?

[Joseph R. Ianniello:]

Yes, John, on CSI, it will be the third quarter.

[Operator:]

We'll go next to Alexia Quadrani with JPMorgan.

[Alexia S. Quadrani:]

Just following up on your comments on the strength of the Outdoor business in Europe in the third quarter around the Olympics. Any sense how long those contracts are? Just trying to get a sense of how long that market may be a bit tightened. And then, another local question, it's just on the good growth you're seeing in local TV. Do you have any sense there about of how much is sort of core growth versus the political benefit?

[Joseph R. Ianniello:]

Alexia, it's Joe. On the Outdoor, yes, what we usually try to do is extend the Olympic season, if you will. Meaning, push it beyond it and pull it some forward, so I think there will be...

[Leslie Moonves:]

I think [indiscernible] would like to extend the Olympic season as well.

[Joseph R. Ianniello:]

So I think you'll see some of that carry into the fourth quarter. Then it will obviously trend down. But on the TV side, I mean, just a couple of categories. Our largest category is auto and auto is extremely strong. So although political comes and goes and stuff, but with the auto category strong, that's a real good fact pattern for our Local Broadcasting segment.

[Operator:]

We'll take our next question from Anthony DiClemente with Barclays.

[Anthony J. DiClemente:]

One for Joe and one for Les. Joe, on the free cash flow trends, you pointed out in the release that there's higher spend on content and higher income tax payments impacting free cash flow. I'm trying to figure out, is that just timing quarter-to-quarter? Is that sequential? Will that smooth out over the course of the year? Or is that -- are those more sustainable, will those have an impact over the course of the full year?

[Joseph R. Ianniello:]

I think, again, in the timing, Anthony, for cash taxes is -- is you've got to remember we made a pension contribution last year on July 1, so we were able to lower cash taxes last year. So clearly, we didn't do that this year, so that's the change in the taxes. And on the programming side, some piece of it is timing but some piece of it is obviously also incremental investment in ownership of the -- of our premium content in the shows that Les talked about at the studio, and that will obviously pay off in the future.

[Anthony J. DiClemente:]

Okay. And then one for Les. You -- I'm sure -- you may have seen that Apple TV added Hulu onto its platform this week. I'm just wondering, when you think about Apple, are you in any way philosophically opposed to offering CBS on the Apple TV platform? And I know I -- just from prior experience, I'm sure your answer will have something to do with getting paid for your content. But more specifically, is there anything you need to see or specifically anything you need to get in order to be convinced that that's a smart strategy for CBS?

[Leslie Moonves:]

Look, Anthony, you've -- we've had this discussion many times before. You're right, it depends what the terms are, it depends what we get paid for. It depends on what effect Apple TV would have on either our advertising, our syndication or our retrans, which are our 3 main buckets of revenue for our content. So if it sits in well, like Netflix did and Amazon did, we're happy to discuss it. If it doesn't and we're -- they're using our content to build a business, we're not quite as favorable to that. So the devil is in the details. I know it sounds like a pat answer, but it's really true.

[Operator:]

We'll go next to William Bird with Lazard.

[William G. Bird:]

I was wondering if you could just talk about Radio and your thoughts in the business. Clearly, a lot of secular activity going on. Is it something that you might consider as non-core at some point?

[Leslie Moonves:]

We really love the Radio business. We really do. Look, it provides plenty of free cash, which helps us increase our dividend and buy back shares. And it's -- we like the changes in the format. It's a creative business. And once again, we're very pleased with the results. We're changing our format, as I mentioned, to more news and sports. And it's performing very nicely, and we think, with some of the new digital offerings, it'll continue to grow. So I would not absolutely say that it's not a -- a non-core asset.

[William G. Bird:]

And just a follow-on. Joe, what was the diluted share base at quarter end and pro forma for the debt deals, what's your cash balance now?

[Joseph R. Ianniello:]

Well, we had $1.9 billion. And I said that we picked -- took about $900 million, so I'd say I'd estimate that bill at about $1 billion. And the weighted average shares outstanding on a diluted basis for Q2 was 661 million.

[William G. Bird:]

How about at quarter end?

[Joseph R. Ianniello:]

Obviously, less than that because that's the weighted average over the time. So they're going to continue to trend down. I think you can just assume, as we buy it at -- you can put -- stick in the stock price, the shares will continue to come down as we spend the $3 billion remaining on our program.

[Operator:]

We'll take our final question from Marci Ryvicker at Wells Fargo.

[Marci Ryvicker:]

Two questions. First, on the Americas Outdoor, Joe, can you just reconcile the plus 2% constant dollar revenue growth in the press release with the plus 5% that you mentioned? Is the difference the Toronto contracts?

[Joseph R. Ianniello:]

Primarily. Obviously, South America and Canada, Marci. And obviously, the loss of the contract contributed negatively.

[Marci Ryvicker:]

Okay. And then for the third quarter, we know Europe is pacing high teens. How is the rest of international and how is the Americas pacing, specifically the U.S.?

[Joseph R. Ianniello:]

Well, we gave you total. We said high teens for the whole business, and we told you Europe in the teens. So therefore, I think, by math, the Americas have to be kind of mid single digits.

[Marci Ryvicker:]

Okay. And then last question. There's been a lot of M&A in the TV business, some pretty robust multiples. Any thoughts about pruning additional stations?

[Leslie Moonves:]

We've always said we're a big-market television company, and we have a few stations outside of the top 15. So if the right offer came along, once again, we would absolutely look at it.

[Adam Townsend:]

And this concludes today's call. Thank you, everyone, for joining us. Have a great evening.

[Operator:]

This does conclude today's conference. Thank you for your participation.