Welcome to the CBS Corporation second quarter 2006 earnings release teleconference. Today's call is being recorded. At this time I would like to turn the conference over to the Senior Vice President of Investor Relations, Mr. Marty Shea. Please go ahead, sir. Marty Shea: Good morning everyone and thank you for joining us for our second quarter earnings call. Joining me for today's discussion are Sumner Redstone, our Executive Chairman; Leslie Moonves, our President and CEO; and Fred Reynolds, Executive Vice President and CFO. Sumner will have a few opening remarks and then we will turn the call over to Les and Fred for strategic and financial issues. We will then open the call to questions. Let me note that statements on this conference call relating to matters which are not historical facts are forward-looking statements which involves risks and uncertainties that could cause actual results to differ. Risks and uncertainties are disclosed in CBS Corporation's news releases and security filings. A summary of CBS Corporation's second quarter 2006 results should have been sent to all of you. If you did not receive the results please contact Punamb Dusai at 212-975-3667 and she will get a copy to you. A webcast of the call, the earnings release and other information related to the presentation can be found on CBS Corporation's corporate website at the address of cbscorporation.com. Now I will turn the call over to Sumner.

Thanks, Marty. Although I am required, actually required to be here in California instead of there in the room with Les and his team, I must assure you that neither the distance nor the early hour of the day diminishes my enthusiasm for CBS Corporation and for Les and his team. In just six short months, Les and his team have shown great progress in fulfilling the long-term promise we envision. Of course to tell you all about it, here is Les.

Thank you, Sumner. Good morning everybody. I'm very pleased to be here to talk about our second quarter results. We now have two quarters under our belt as a stand-alone Company and we are growing our businesses and strengthening our balance sheet every day. This morning I'm going to share our second quarter results with you and provide highlights on our business operations and then I'll turn it over to Fred Reynolds who will provide a more detailed look at our segment results and free cash flow before we open up the call for your questions. You may remember when we had our first earnings call of the year we said that CBS is a Company on the move. While that description still holds; I'll take it a step further now and say we're a Company in motion. We're doing the things we said we would do. We're delivering on the promises we made to you. In short, we are executing on our strategy. For example, we promised we'd raise the dividend and we have -- twice. On May 25, we announced a 12.5% increase on our quarterly dividend from $0.16 to $0.18 per share. It was the second increase since the start of the Company and a 29% increase since the start of the year. So I think you can see that we are committed to making good on our promises by returning value to shareholders. You can also see that we are very confident in the near future and the many years to come. Now let's take a look at what we did overall in the second quarter. The main headlines were as follows: Net earnings from continuing operations were up 29%; diluted EPS from continuing operations were up 36% to $0.64 per diluted share; and free cash…

Thank you, Leslie and good morning. What I'd like to do this morning is provide highlights for the second quarter of 2006 and give you additional information about our second quarter operating performance, cash flow and our full year outlook. Now as Leslie just mentioned for the second quarter of '06, revenues were almost $3.5 billion, down about nine-tenths of a percent from the second quarter of '05. The primary reasons for the slight decline in revenues were lower ad sales at our radio stations and lower home entertainment or DVD revenues. We will discuss radio results in a few minutes, but first our DVD sales for the second quarter of 2006, which are primarily from our large CBS Paramount Library, are now distributed by a third party. In prior years we distributed our own DVDs. Now at CBS our practice is to record revenues from the sale of our DVDs by third-party distributors, net of their costs and fees. While this accounting treatment had zero impact on profits, it did impact revenues. Our revenues for the quarter were down $50 million versus a year ago. So if you exclude the effect of the DVD revenues overall, the Company's revenues would have been 1.4% higher and the television segment revenues would have been 2.2 percentage points higher than what has been reported. Now for the second half of the year, we expect to see the DVD Home Entertainment net sales increase versus a year ago. TV stations Showtime and Outdoor all had solid revenue growth in the second quarter of '06 versus a year ago and revenues at our international businesses led by the United Kingdom, Canada and Mexico were up about 5% over the second quarter of '05. Operating income before depreciation or amortization for the second quarter of…

(Operator Instructions) Our first question comes from Victor Miller - Bear Stearns. Victor Miller - Bear Stearns: Good morning, thank you for taking the question. First of all, Fred, what you just talked about on returning capital, there's a certain expectation. You've probably seen it written in several analyst notes, articles, that there's a $1 billion plus expected return on capital. Maybe you can talk about what is your dimension is in terms of potential acquisitions relative to that dollar? Also, the reality is that your net debt now is below $4 billion, which is extremely ahead of what anybody had expected here. Even if you ended today you'd be at 1.2 times leverage. So regardless of whether you did something with that cash other than returning that $1 billion from the Parks to the shareholders, wouldn't the balance sheet allow a very substantial repurchase/special dividend/tender regardless? For Les and Fred, I don't know if you can answer this right now, but on the radio side obviously you've made some cuts. Obviously you've decided not to renew the Redskins, the Ravens and the Cowboys. We've got the NFL season coming on right now, it's obviously a lot of revenue generated from those three teams. Can you talk about what impact those two events may have on the revenue and the expense of the radio group in the second half? Thanks.

Victor, wow, that was like three paragraphs, but thank you. I think certainly we understand the focus on the cash. One, we're very pleased to be in this position to have the cash. I think Leslie has been very clear that we would not do any acquisitions that wouldn't be very, very good returns to us. We've said in the past we want to focus on content acquisitions that makes sense. We have a lot of outdoor small tuck-in acquisitions which wouldn't use anywhere near the kind of cash we're talking about. I would say we're probably more in the CSTV kind of level. But there has been, as you know and has been well reported, about opportunities that come along all the time. But I would say to you that Leslie, myself and the team are very, very disciplined in our approach. We don't chase after acquisitions. There's nothing we need to have. But clearly we would like to keep growing the businesses and have a higher growth rate. So again, we can talk about that more as we unfold. We are clearly focused on trying to do the best amount we can on the sale of those radio stations and get the best amount of value to shareholders and some of the structures would allow that. Yes, our debt is low and you will not hear us talk about debt pay down as a priority for our free cash flow. Our free cash flow priorities will be, if they make sense, and they could truly be a great return -- better than just giving the return of capital to our shareholders – then acquisitions would be a priority. Returning capital to shareholders is the other priority. There really aren't other priorities that I would speak of. I'll answer the question on radio and then turn it over to Leslie for your other questions about the direction. Clearly our revenue is suffering. We don't have some of the baseball teams we had last year and also radio doesn't have the Redskins, as you mentioned. So costs will be down but so will revenue be down. As we focused mostly on the revenue growth that is a dampener more so in the third and fourth quarter than so far to date.

Victor, I just want to say, those are indicative of obviously we're paying a lot of attention to the radio business. We're being very careful about every single deal we make in terms of talent, in terms of all those renewals of the football deals that you referred to. Every deal we make will be studied at great length. In terms of specifics how much that will change the equation, we don't know but we're treading with great caution. I think we're going to be able to make a significant difference as we did with the 100-person layoff as well as the ending of some of these bad contracts. Victor Miller - Bear Stearns: Thank you, Les. Thank you, Fred.

Our next question comes from Jessica Reif Cohen - Merrill Lynch.

Hi, two questions. This is sort of acquisition-related, one of them. Given the anemic upfront market for both broadcasting and cable, money is obviously going elsewhere; the Internet, product placement. What is your plan to recapture this money? Do you need to acquire some property, some web-based property or something else or will you go purely the organic route? Secondly, can you flush out your film strategy? Is the plan to make theatrical films, made for TV movies, how will you finance that?

First of all, Jessica, I might disagree with you on the anemic upfront. We didn't view it as anemic. I think three of the four networks did very well -- or should I say, four of the five networks did very well. CW did well, CBS obviously, we had low CPM increases. Our volume was up and we were actually quite encouraged by it. When you look at how much money is shifting to the Internet obviously we're there. We've made a number of deals across the board. Along with our network deals and our syndication deals, there were web properties that got a piece of the upfront. Having said that, the percentage of that was rather small. We did make some cross-platforming deals with a lot of our new shows and a lot of the Internet is there as part of it, but the amount of money is rather small and frankly we were not disappointed with the upfront. The CW did extremely well at the upfront as well, taking in more money than either one of the other two networks and increased from where the WB was, and we view that as a very significant event. We were, at the end of the day, pleased with the upfront. In terms of our film strategy, let me clarify because a lot has been written about it. We have a very valuable asset called Showtime which right now pays hundreds of millions of dollars to three studios for film output deals. These deals end in 18 months. When you look at that as a basis and then you add in the television network and you add in DVDs and you add in international television, we look at being able to get into the film business, and I'm talking about in…

Our next question comes from Doug Mitchelson - Deutsche Bank.

Thank you very much. Les, given your long list of digital initiatives on this call, can you just give us a sense of the amount of digital revenue you expect for full year '06 and what you might see in '07? Maybe as an alternative, what percentage of revenue in each of those two years you think all these initiatives might add up to? Fred, I'm curious based on your DVD commentary, what was the DVD revenue year-to-year change when looking at net this year and net last year in 2Q and maybe year-to-date? Do the new terms of the London Underground contract deliver lower EBITDA at the beginning of the contract that then you earn out in the later years? Thanks.

Doug, I'm going to be evasive. All I can tell you is the revenue from the new media stuff is growing a great deal. It's going to grow more than 100% in '06 from '05. We expect that kind of growth even more significant in '07. In terms of giving a specific number, it is very hard because these initiatives are coming in every single day. It will be in the hundreds of millions of dollars though. Sports Line clearly is our number one area for that and that is growing in leaps and bounds and so there is a lot that is out there, rather difficult to quantify right now but it is all very exciting.

Doug, this is Fred. On the DVD, if I understand your question, year-to-date last year we had about $100 million more in DVDs revenues than we have this year. So if you're looking at our year-to-date revenue numbers, last year was benefited. Again I went to emphasize zero, zero impact on profits. It's just a matter of gross versus net. The profits are the same, our gross margin whatever you want to call it, but the fact that we don't record it gross but we record it net is the only difference. But last year benefited. So if you are looking at the health of our revenue growth, last year had $100 million because we self distributed versus third party this year.

So net to net is flat then?

Pretty much, yes. It is down slightly but it's not significant and we expect to make that up in the second half of the year. The profits should be stronger in the second half or gross margins stronger in the second half on DVD sales than last year. The change in OIBDA is negligible year-to-year. On the London Underground, we do start off with a lower margin than we end it with a caveat; we also have more inventory. So if you just looked at the same inventory or same boards year-to-year, we'd probably have a lower margin. We have more inventory that we're going to be granted. So if we can make more revenue off of that our margins should be equal to. But we are not saying that's in the cards yet. Certainly we have more inventory and it's for us to get more value for.

Thanks.

Our next question comes from Anthony DiClemente - Lehman Brothers.

Hi, thanks for taking the questions. I have two quick questions for Fred. For the leverage ratio, if you layer in your pension liabilities, isn't the leverage ratio as of the end of the 2Q closer to 2.0 times? Do you have a target long-term leverage ratio that you can share with us? Second question is if I look at your recurring free cash flow through the first half, that's excluding the one-time tax benefit, you're at about an even $1 billion and we're only halfway through the year. Most of the analysts are looking for $1.3 billion of free cash for the full year. So that would imply a dramatic use of working capital in the second half. Does that sound plausible or are all of our free cash flow numbers just too low? Thanks.

Okay, thanks, Anthony. On the leverage ratio, I think the way we look at it is the way the rating agencies do. So they tax affect our non-interest-bearing obligations which would be pension and retiree medical and so they tax affect that because on the balance sheet it is pre-tax. So it would be around a 2. As you know, I look at our dividend as a fixed cost or a fixed commitment. So I sort of layer that in. But let me be clear, we are very, very comfortable with our leverage ratio. Again, I think we would certainly be comfortable in the 2.5 range if it was used to acquire something that would grow our businesses faster. As I mentioned at the outset, we see paying down debt as not a priority because we think our debt is terrific where it is. On free cash flow, as you know, the first half of the year in our businesses is where we do produce a lot of free cash flow, the first and second quarters. Because largely we're not in production out in Hollywood. Starting this month or the end of this month, we start really upping production for all the fall series and we have the NFL contracts and NCAA contracts. It has never been and it won't be linear this year, that each quarter you can multiply by four. So we are on the same cycle we always are. Cash flow will not be as strong in the third quarter which it typically isn't as it is in the first half. We don't forecast the full year free cash flow for you but obviously we are very pleased where we are and the businesses throw off a lot of cash.

Okay, thank you Fred.

Our next question comes from Kathy Styponias - Prudential.

Thanks. A couple of questions for you, Les. With respect to Showtime and your movie strategy, to the extent that you mentioned that some of your output deals are coming up for renewal in 18 months, to what degree is the movie strategy looking to replace some of the content that you might lose? Would making five to six movies on your own be enough to kind of continue to sustain Showtime because I imagine the deals that are coming up for expiration provide you with a lot more movies than that? If you're going to make it up on original programming, aren't Showtime's costs going to up? The second question is, could you discuss the programming costs for the CBS Network in light of the fact that you only have four shows to promote in the fall? What kind of growth rates should we expect at the network level for the 06/07 season? Thanks.

Regarding Showtime, you are absolutely right, six movies will not be enough. That is not to say that we're going to preclude from doing other deals. I think right now the cable networks have an advantage in that they don't have to do the large output deals that they have done in the past whereby you have to buy every single movie from the studio. So there is lots of cash that is paid to the studios for these output deals. Obviously we will be making some deals in the future. But if we think the deals will be more advantageous from Showtime than they have in the past, we still plan on doing that. In terms of original programming, right now we do intend to increase production somewhat. Probably the balance will change somewhat from renting movies from the studios and doing more original programming that we do in fact own, or in fact, license from other people. But that should not change the balance of the cost for Showtime. As a matter affect, we think it will be reduced, the cost of Showtime in the future. We think once again their profits should be going up in future years and we like how that looks. It also does give us the advantage of owning some of these movies as opposed to renting from other studios. In terms of programming costs at CBS by and large they were up rather small amounts. We have always been rather smart. Number one, we own most of the programming on our network so we've been able to control the costs that have been there. So it's impossible to predict what the growth rate will be if the network. I think we are keeping with a guidance that we've had for the year. But we've had great discipline and we've been very successful in negotiating appropriate contracts on all our programming, so that continue in the future with rather minimal growth to programming costs.

Thank you.

Our next question comes from John Blackledge – JP Morgan.

Thanks for taking the question. A couple of things on outdoor. If you look at the Company, outdoor should be the highest growth segment within the Company over the next several years. When you look at it, CapEx of sales of CBS Outdoor versus some of its peers CapEx sales about 4% for CBS Outdoor versus CTO at about 7%, the margin around 11% to 12%. In order to sustain a certain level of growth over time, do you need to ramp up investment at CBS Outdoor? Then if you could just outline your current digital strategy? Thank you.

Fred, why don't you talk outdoor and I'll talk about digital.

On outdoor, yes, I think it should be one of our fastest growing. I'm not sure we would see it be the fastest but I think it will be one of the fastest-growing. I think on capital you have to look at where our businesses are different. We are keen on expanding the digital platforms that we have in outdoor. We think it is a truly one of the great technological revolutions there. So we are keen on investing in it, but we're going to invest smart. We want to get a good return on it. Because we are largely a billboard business, we tend to have lower capital spending than some others that have a different mix. We don't have the street furniture business. As we got out of some of the transit contracts which had a heavier capital spend commitment as part of the contract, that is lower. But Leslie is certainly not shy about having the outdoor guys accelerate their growth. We do lots of acquisitions. They are not big. They are $2 million to $10 million, sometimes $20 million. We buy lots of boards. We want to keep buying boards particularly in North America, the United States, Canada, Mexico. But we would love to press the accelerator faster on outdoor, but it has to be a good return.

Yes, I'm assuming you meant digital strategy regarding outdoor. As a Fred said, we're picking our spots. Obviously we're increasing our digital position in cities like New York, San Francisco, Chicago. London is fairly significant but once again, we're weighing the costs of this versus what our return is. Once again, the cost of the digital boards is coming down significantly. Dealing with volume and we view it like plasma televisions where they used to cost $10,000 apiece and now they are $899. So I think that's going to be part of our strategy and costs will be down and hopefully revenues will be up significantly.

Thank you.

Our next question comes from Anthony Noto - Goldman Sachs.

Thank you very much. Fred and Les, I was wondering if you could comment on second half growth. You had mentioned you still feel comfortable with operating income growth excluding stock-based comp of mid single digits. Looking at the growth in the first half of the year and backing out Parks a year ago, it looks like it was down 2% year-to-year -- correct me if I am wrong -- which should imply you would need high single-digit to low double-digit growth in the back half of the year. Is that true? If so, could you give us a more detail on how you think you get there given the trends we've seen so far? Could you also comment on TV advertising excluding CSTV? Thanks.

Anthony, this is Fred. Let me start off. As we look at the way we have said the growth would be over '05 stripping out non-cash, non comparable items or other non-comparable items, we're probably about flat. We're not down 2% at the halfway mark here. As you know, our third and fourth quarters are a lot stronger particularly this year, with it being a political year we will have more strength. So we are confident that we will get to a guidance of mid single-digit operating income and EPS growth. Clearly we weren't going to take credit for the tax benefit we had in that and we noted that we excluded that also. At the halfway point right now, if you take out the stock-based compensation and the write down at UPN, we are about flat to where we were last year. We should be able to deliver. again barring some catastrophic situation in the economy, we should be able to be there.

Yes, and regarding TV advertising. I just want to reiterate what Fred just said. We are going to be there, we are fairly confident that our numbers for the year, our guidance for the year is right on target and we are confident that we are going to hit that. In terms of television advertising, there's a myth out there that the upfront was down. You have to remember we went from a universe of six networks to five networks. So if you exclude some of the money that was taken in by that last network, basically the numbers appear to be flat for the upfront. We're seeing also in syndication the upfront is up low single-digits but we're very pleased with the return and once again, having such great syndicated product, we're encouraged by the upfront for the syndicated shows. It was a soft second quarter in scatter. Political as I said in my earlier remarks is going to exceed budget with the exception of New York and it is heating up. We are looking forward at the station level to hitting our numbers if not exceeding them in the second half of the year.

Fred, could you give us a growth rate number for the second quarter for television without CSTV?

On revenues?

Yes.

Again, I think revenues would have been about flat for television segments. It is down about 2% if you take out that DVDs. If you leave the DVDs in, we're going to be fairly down. But if you take out the non-comparable, the television segment was about flat if you take out CSTV and the DVD accounting change.

Thank you.

Anthony, if you have our earnings release -- I don't know if you have the same page numbers -- you'll see were where we reconciled, page 17 shows you how '06 year-to-date is versus last year's '05 year-to-date. They are within $400,000 to $600,000 of each other year-to-date. So we are about flat.

Thank you.

Our next question comes from Andrew Baker - Cathay Financial.

Thank you very much. When you went through the numbers on TV, I didn't hear you go through CBS Network. I was wondering if you can tell us how the CBS Network did in Q2? And then any indication you can give how scatter pricing is doing in Q3? Thank you.

Okay, on revenue if you look at the time period sales, we were down a little bit in time period sales second quarter of '06 versus second quarter of '05 we were down about 1.5% in revenue. About three-quarters of that was because we had some very significant finales at the end of the '05, May '05 with the Raymond finale which was being priced at an ungodly amount. We also had the JAG and the Amy finales which were smaller along with the big Survivor finale. So about three-quarters of the drop we just had a significant ending of a nine-year run of Raymond and we got a lot of money for it. The other part of it was the scatter market was softer than we would have liked in the second quarter. I think certainly Leslie has said that and we've communicated that. I don't always want to say why things are up or down because probably next May we will have huge finales. But that is one reason why, or the major reason why we were down.

The good news is you know on that, yes, we didn't have the major finales, but the good news is we didn't lose any major shows this year. We go into next year with a fairly pat hand with only four new shows and that bodes very well for the stability of the CBS network as we go forward. Marty Shea: We will have time for one more question.

Our next question comes from David Miller - Sanders Morris Harris.

Marty, you stumped me. All of my questions have been answered. So you guys can move on and take one more question. Thanks very much for taking the question though.

Thank you, David.

Our final question comes from Michael Nathanson - Sanford Bernstein.

Okay, thanks. I have one for Fred and then one for Les. Fred, in the past, you talked about what the revenue growth was in the Howard Stern stations. Can you tell us what that was? Was there any inventory cuts out of those stations? For Les, as a firm we try not to focus too much on the upfront, but as you say, there was low pricing this upfront as people drove volume. So historically CPM pricing has been up in the upfront, it's been strong. So why do you think low pricing occurred this year? Is this beginning of a new trend going forward?

I will go first with the upfront question. Number one, you took out, Johnson & Johnson didn't participate in the upfront this year which was rather unusual. It was have a different strategy where they are going to buy in August and September. If there is any softening in volume, and we didn't have it by the way, that only bodes well we think for scatter pricing. As I said, our volume was up. We were able to take a significant amount of money from other networks and where different advertisers may be looking at the upfront in different ways than they had before. Once again, for the networks that are doing well, the upfront is not necessarily the best way of doing things. It is the system that we have now and we're playing by those rules. But by and large with the exception of possibly second quarter this year, scatter pricing for us has been significantly up. So we don't mind a game change and we think we're going to take a significant part of the J&J money although it may come in somewhat later.

Michael, this is Fred. On the question on the 27 stations that had the programming change. Clearly they are down significantly, as we said, for the full year, we thought they would probably be down about $50 million and you can sort of say each quarter is going to be some percentage of that. So, yes, they are pacing down significantly. The good news is, as Leslie said before, we're starting to get some traction with the Opie and Anthony show here in New York. We're seeing that as we look out to the third quarter which we only have really good visibility out through September, it's starting to pick up pace nicely each week. It is still down, but we are encouraged that it's going to come back. All it takes is a New York and a couple of markets and we should start turning that around. But it is down we said about $50 million for the year, on these 27 stations. So each quarter it would probably be down somewhere pro rata of that $50 million.

Okay, thanks. Marty Shea: Thank you very, very much everyone and we will continue to be around for your further questions during the day.

That does conclude today's conference call. We thank you for your participation. You may disconnect at this time.