Welcome to the CBS Corporation first quarter 2009 earnings release conference call. Today's call is being recorded. At this time, I would like to turn the call over to the Executive Vice President of Investor Relations Mr. Adam Townsend.

Good afternoon, everyone, and thank you for joining us for our first quarter 2009 earnings call. Joining me for today's discussion are Sumner Redstone, our Executive Chairman, Leslie Moonves, President and CEO; and Fred Reynolds, Executive Vice President and CFO. Sumner will have openings remarks and we'll then turn the call over to Les and Fred who will discuss the strategic and financial results. We will then open the call up to questions. Let me note that statements on this conference call relating to matters which are not historical facts are forward-looking statements, which involve risks and uncertainties that could cause actual results to differ. Risks and uncertainties are disclosed in CBS Corporation's news releases and securities filings. A webcast of this call, the earnings release, and any other information related to today's presentation, can be found on the Investor Relations section of our website at cbscorporation.com. Now, it's my pleasure to turn the call over to Sumner.

Good afternoon, everyone. I thank you for being with us today. As you know, the economic downturn that began last year clearly continues. It has dramatically affected virtually every industry and company operated not only here, but around the world. And CBS, of course, has not been immune, but what also come through is CBS's underlying strength, and its viability. Leslie and his management team remain focused on the things that matter most. Creating, producing, distributing world-class content, evolving that content for emerging platforms. The ratings on this content far exceed the ratings on the content of every other media company, which signifies that when the economy turns, and now there are clear signs that it is starting to turn now. CBS will take advantage of its strength, and lead the other media companies in this recovery. Meanwhile, CBS continues to manage expenses, its capital expenditures and it maintains a strong balance sheet. Is this focus, even during these challenging times that continue to position CBS for long-term success? I have no doubt that a recovery is coming in the not too distant future. When it does, CBS will be among the first who deliver significantly better results. So with that, I will turn this call over to CBS's president and CEO, who remains my friend, my colleague, Les, it is yours.

Thank you, very much, Sumner and good afternoon, everyone. Thank you for joining us to discuss our results for the first quarter of 2009. It should come as no surprise that our results reflect the economic downturn that has affected so many companies in the first quarter. Not only has the advertising market place been particularly challenged recently, but this time last year, it was still relatively robust. In addition, as you saw on our release, year-over-year comparables were affected by a number of special items that benefited results in the first quarter of '08 and were not repeated this year. These special items included the substantial initial benefit we had in the first quarter of '08 when we made the shift to international self-distribution, for our lucrative CSI franchise. Also, there was significantly lower production costs as a result of last year's writers' strike, and finally, record political advertising revenues in last year's first quarter, during the height of the presidential primaries. There is no question that our local businesses, including television, radio and outdoor were hit by the recession. And they have borne the brunt of this economic downturn. Fortunately, we feel that it is starting to turn, and despite the operating environment we face in the first quarter, we have some examples that speak to the resilience of our businesses. For one, we continue to generate growth in our non-advertising supported businesses as well as profitability on an OIBDA basis in every one of our operating segments. We also continue to produce healthy free cash flow. And going forward, we have confidence that the second half of '09 will be much stronger than the first half and here is why. First, we have the strong slate of syndication titles to be released later this year. These titles…

Thank you, Leslie and good afternoon to all of you. I would like to discuss with you our first quarter results, highlighting several significant non-recurring transactions, which Leslie just referred to, which make it difficult to compare the first quarter of 2009 to last year, and also make it difficult to use our first quarter results, as a good indicator of our expected 2009 full year performance. We will also provide our insights as to how we believe the second half of 2009 will perform given a high degree of certainty on several key positive drivers, such as syndication revenues and cost reductions. Along with what appears today to be an emerging improving trend with our local ad sales businesses. Finally, I would like to wrap up with a discussion of our free cash flow, our 2010 to 2012 debt maturities and our strategy, regardless of the vagaries of the credit markets to refinance and/or retire our near-term maturing debt. So let's turn to the first quarter. Our results reflect, both the overall challenging economic conditions all US companies are facing, and importantly for us several significant previous events and transactions which drove our record setting year earlier first quarter performance, which were not repeated in the first quarter of 2009. Revenues for the first quarter totaled $3.2 billion, down 14% from last year. Now, taking into account several non-recurring items, including last year we recognized the benefit of the switch to self-distribution internationally for all three of the CSI franchises, record setting first quarter political spending driven by the presidential primaries, which was doubled any previous first quarter political spending, and a far weaker US dollar at this time last year, which translate into higher revenues in the first quarter of 2008, for our international businesses. And also giving…

(Operator Instructions) For our first question we go to Doug Mitchelson with Deutsche Bank.

Just a question for Les, but also Fred, a clarification, when you said unusual items represented 22% of the drop in EBITDA did you mean 22% of last year's EBITDA or 22% of the change in EBITDA year-over-year?

The change, if you look at the drop in income from the 642 last year to the 250 this year that percentage dropped, 22 points of that had to do with the items I listed on the comments.

Okay. And then Les, just curious, is there going to be any impact from Hulu on the value of TV.com or your video distribution strategy especially now that ABC has jumped in.

We have had a different strategy than some of our competitors. TV.com is doing extremely well. We like the ability to control our own content where and when it goes. We don't like the idea of being exclusive to Hulu. It's not so say that you won't one day see CBS content on Hulu or Hulu content on TV.com, but this gives us the freedom to place our content wherever we want as well as sell it, ourselves, along with our other verticals, and so far it is proving to be extremely successful. So we wish Hulu well. We think it will do well, but we think TV.com will do extremely well and we will be in control of our own destiny.

For our next question we go do Jessica Reif Cohen with Merrill Lynch.

My first question is just on advertising. Can you talk a little bit more about the differences in the second quarter that you are seeing in local versus national? So in national what kind of cancellations have you seen for Q3, and at the TV station level, the show is still really bad, but what percent is it of the station revenue now versus a year ago?

I will take the first and throw the station question to Fred. On a national level all I can tell you, is the volume of scatter just increased dramatically. The rates are slightly above upfront, but the amount that is there is very encouraging over the last literally four to six weeks. So we are encouraged as we head into the upfront that the scatter market is returning. It is returning at good CPM values and we're very pleased by what we're getting.

What about cancellations?

Cancellations on the third quarter, still too early to say. We haven't seen an appreciable amount or anything different. We're still in the midst of the second quarter. So we really don't know about the third yet.

The second Jessica looked pretty good in the cancellation.

The second was rather normal.

On your question, Jessica on the auto, typically at TV stations that you know was in the low 20% range and now it is in the low-teens to mid-teens, again depending on the station and the market. As you got to remember, we are really more impacted by foreign manufacturers because our stations are on the coast, and that's where the foreign manufacturers have a much more significant share of market. So, it's not so much the domestic auto deal. Quite honestly that some of our encouragement is not growing over last year, but we're seeing more dollars put on by auto each week at this point, than we did it last year at this time. So, we're gaining a little bit.

And secondly, just on Showtime. Some of the cable operators and satellite operators that have reported so far, a few have mentioned softer premium penetration, but it sounds like you're still growing subs, so I was wondering if you could address that as well as the cost side with some of the movie contracts rolling off this year and next year. How should we be thinking about the profitability of Showtime?

Number one, as we mentioned in every quarter in the last ten quarters, their subscribers have gone up. Even our recent Time Warner deal, our subs have gone up over 100,000 subs in Time Warner in the last couple of months. So we're extremely encouraged by that. And any softness that have been out there for the premium cable operators, we haven't seen. Obviously, our contracts with the movie studios, all of them were up at the end of last year. So, going forward, starting next year, the cost will be down. We've obviously made three or four deals already and we're picking up movies from a variety of sources, but our costs will definitely be down, in the beginning of '10 for Showtime and we're also investing more in original programming, which we think is the future of that group.

We'll go next to Michael Nathanson with Sanford Bernstein.

On your EBITDA guidance, what kind of assumptions are being made on advertising trends in the second half? Are you expecting a material improvement or a slight improvement to get to the EBITDA guidance?

Michael I think we're seeing a slight improvement; we're not looking for a [V] kind of recovery. I think what we're going to be in is sort of the rate of decline has certainly stopped. And I would say over the last eight to nine weeks, we've seen, each week we had more sales this week than last year and we could see out pretty far like certainly June and maybe early July, but that doesn't mean we're growing over last year. So we still had a big trough to fall in, but I would say, it's a slightly upswing in the drop.

And it has happened in everyone one of our businesses, Radio, Television stations, Outdoor as well as the scatter market. We have seen the rate of increase improve week-to-week over the last eight or nine weeks.

That is the baseline for the guidance plus the cost savings?

Yes, in the syndication. The syndication is very powerful as you know when you have five big programs being syndicated at cable at very good values that is dramatic.

The question would be about normalized margins at TV stations and radio stations back in the day even a year or two ago, EBITDA margins were in the 40% range for TV and radio stations. I know they are much lower now, but I wondered in your minds, where can I get back to in a recovery period. Do you think you can get back to those days or was this downturn so severe that it maybe hard to get back to the 40% range.

Let me make my comments on radio because as you know within a segment we don't break out TV stations, but I think you will see that there is a common theme here. Both, radio stations and TV stations have taken out tremendous cost. Radio I think we said at the end of last year was almost $100 million, TV was a step behind that but real close. If we get any growth in revenue, you're going to see margins start to come back to their historical norm because as Leslie said at the outset, we made fundamental changes in how we operate our business. Not just laying off a clerk here, clerk there. We've restructured sales forces, we've restructured regional management. We've changed talent costs. You can't touch anything in our Radio and TV stations than Outdoor that is similar to what it was before; and yet our ratings are up, obviously thanks to the network. And in Radio, they are seeing listeners grow. So I am somewhat optimistic that if the economy does turn back, it isn't turned yet, but it is showing signs that that won't be an impediment to grow margins again.

For our next question we go to Michael Meltz with JPMorgan.

Related to the question on improvement as the year goes by, can you quantify the syndicated deals? How much of a pop should we be expecting as you get into the second half? And then I have a follow-up.

Michael, we cannot reveal the amount that is in them. All I can tell you is that they are substantial deals on basic cable networks at premium prices for premium content and we have gotten very good deals. In addition to those cable deals, we have syndication deals with those shows in place, as well at the station levels. So you can figure out what other deals have gone for.

Yes. If you look back, because we don't break out each of these prior shows, I don't think that would be fair to Leslie's point to the agreements we have, but if you look back in '07 we had a number of deals that looked very similar to that, or you could even look to the NCISs of last year, which I think we do a pretty good job of describing when they happen when they were recorded, which we will do at this time, too. We will certainly give you a lot of detail in the third quarter.

Fred, do you think, implicating your guidance, is it that earnings will be positive in the second quarter?

We're trying to give you a perspective that the first quarter was our worst comparison because we had one heck of a good first quarter last year and the economy was doing great. So, we just wanted to give you as much and Leslie felt very comfortable as I did that we're far enough in the year that we can give you good full year guidance. It could be still little bit lumpy, but it's clearly a second half, growth. Its clearly going to be where we're going to see more driven by the items we said the syndication costs and hopefully a little bit of a recovery from what we saw in the depths of the first quarter.

You're bumping up your P&L tax rate. It looks from the 10-Q you're lowering your cash tax assumption and you're lowering your CapEx assumption. How should we be thinking about working capital usage this year?

I think you're going to see us, other than the first quarter which was tough, since we didn't have any programming expense last year, and this year we did, I think you're going to see it much more consistent in the flow through from EBITDA or OIBDA to free cash flow is going to be more consistent in the third quarter. As lot of you know when we recognized a large amount of revenue from syndication, a large amount of profit from syndication, a lot of that does not have cash until the next succeeding months and quarters, so it builds in a cash flow stream into the future but accounting rules make us recognize all the revenues and profits at once, but saying that, with the way we have our costs down, with the way that we are turning our receivables even faster, even in spite of all the slowdowns you're seeing, I am confident we will maintain our kind of normal EBITDA to free cash flow conversion rate which we have a good track record on.

For our next question we go to Michael Morris with UBS.

On the syndication I realize you won't quantify what's happening in the second half, but if we look at what happened in the first quarter was $460 million, does that represent a stable run-rate for that business, that we should be looking at excluding the unique sales of content. And then second, as you look at 2010, what does the pipeline look like there and again, realizing you won't quantify but how should we be thinking about the comparables as we roll into 2010 and then also if we can look at the advertising growth of television, can you give us any more detail information about the network stations split and also the political contribution? Thank you.

This is Fred. I would say on your question on the television license fees. It will be consistent with what we disclosed today, I would say, yes, except in the third quarter. It's going to be lot bigger, and so this is more of the run-rate because last year we had an equivalent of the CSIs, you almost think of it as syndication even though it came through distribution. So I think that was one of your questions. I wasn't sure I understood your question on the national versus the TV stations or network versus TV stations. Could you maybe repeat that?

First can you talk about the 2010 syndication pipeline?

2010 is mostly going to be second runs of a variety of our shows, but the CSIs are coming up and the big ticket items are coming up a few of them again.

As you know, this comes in big lumps. We had a big '06, not as big in '07 and then '08 was sort of in the middle, '09 is the biggest. We are going to have, as Leslie said second cycle in 10 and then it's going to start to grow from there, considering the success we have had with shows.

Once again we own a big chunk of our inventory on our network and so these will continue to cycle through.

I guess on the advertising side, I was just asking if you could give us a little more detail on that 15%. How much was the political contribution in the prior year and what did the network versus the station look like in the quarter?

As I mentioned, the network was down, about 8.6% in time period sales, and again some of that had to do with we preempted about 4.5 hours more of the network time because of the presidential speeches. And TV stations, we didn't break out the down, but political in the first quarter of '08 was about $25 million net, and this year it was a small fraction of that. We have a mayoral race in New York which is good because we have a very rich mayor.

For our next question we go to Rich Greenfield with Pali Capital.

First, when you look at the syndication that you talked about, it is all cash deals, we've seen a big shift, it seems like in the syndication marketplace to [barter]. I know part of the Entourage deal was part of it was in barter, at least on the local TV side. Just wondering how you could quantify or qualify what those syndication deals look like and how much they vary. Secondly, I know you mentioned the 22% of the change was one-time items or at least explainable, but when you still look at it, the overall incremental margin of a loss in revenue dollars seemed to still be pretty large for both TV and radio. Is there anything you can do to mitigate that 50% plus impact between revenue and EBITDA that you're experiencing? And then third, what is the epics impact, assuming it does launch on Showtime if there is one at all?

Okay. Number one, I will deal with one and I will let Fred deal with two and I will deal with three. Number one, they are all cable deals. They are all basic cable deals. They are all cash. 100% of the money is in cash. The secondary deals that are made with TV stations may comprise some barter in them, but the bulk of it. The majority of these cable deals pure cash, no barter whatsoever. It doesn't even resemble the Entourage Curb Your Enthusiasm deal that was announced today. So this is cash on the line. In terms of the epics, we do not foresee its affecting us. We haven't heard of any distribution deals. As I said, we've renewed as you know with Time Warner, with Verizon, with many, many other MSOs. We're in the process of renegotiating with everybody. If epics gets carriage, which I guess they will, it won't affect us. The basis for Showtime remains first-run series, quality series programming plus the addition of a bunch of movies and we think we're going to remain a full service cable network. So, I wish epics well, but they won't affect Showtime.

Yeah, and Rich, this is Fred on your comment about the flow through. I think the reason that the revenue was down was mostly ad sales. And as you know very well that the incremental margin on an ad sale, the only cost is commissioned. So it's kind of an 85% to 90% margin business. I think what you see if you look at how we flow through in the case of radio with kind of revenues are down about a $100 million and profits are down about $70 million. It said that we were able to offset that with cost savings and that's what I was trying to emphasize is that the costs are down, but very hard on a 90% margin, 85% margin business to cover it with cost savings.

If I could just follow-up on the epics comment. You said that epics get launched at a very low distribution fee; you're not concerned that that could impact your ability to renegotiate with Comcast which I believe comes up over the next couple of years?

I am really not. We have had conversations with Comcast and obviously with all the MSOs. Showtime is pretty established brand. We're growing in each one of them and it is not a concern to us.

We go next to Marci Ryvicker with Wachovia wells Fargo.

I know that the writers' strike ended mid February of last year, but is there any residual impact in terms of revenue or cost comps in Q2. Secondly, Les, you threw out an $80 million number that I think was referring to cost savings. Just wanted to clarify, are you talking about $80 million in cost savings for each of your segments separately in '09?

It is $80 million in radio and $80 million in television stations approximately. The answer is yes. In terms of the writers' strike, the writers' strike force us to re-look at our entire businesses. We cut over 50% of our overall deals at the studio and it caused us to re-look at how we were producing our television shows and we're doing every single one of them, in a more economical way. They will not be a show on our schedule next year that won't have a different cost structure than is currently on the books. I think we learned from the strike. We made some changes that probably should have been made. I think all the companies realized they didn't need as many overall deals to get their product. And here we are, a year later, as I said, up in every single demographic and doing things in a much more productive way. So as the advertising market comes back and we're seeing those signs, we think we're going to do extraordinarily well.

For our next question we go to Anthony DiClemente with Barclays Capital.

My questions have all been asked, thanks.

(Operator Instructions) We go next to Benjamin Swinburne with Morgan Stanley

It sounds like you guys have thought or rethought the model quite a bit in television over the last year or so with the downturn. And I wanted to ask about how you think about buying shows or putting shows on CBS from the CBS studio versus third-party studios. I think The Mentalist for example I believe is a Warner Brothers, at least they are involved. Are you changing how you think about the mix between in-house and third-party production studios? And then, second, you mentioned Leno in your prepared remarks, but how much does that put up for grabs for you or for the other networks at 10' O Clock? How should we think about just may be in percentage terms or dollars terms, the potential benefit there?

Number one, we always put on the best pilot we have. We are buying more and more of our own shows. I would say the percentage has increased. By the way, The Mentalist is a Warner Brothers show, and they'll do very well in syndication with this, but we make a lot of money having the only biggest new hit show there is from advertising revenue. However, when you look at the total picture of an NCIS, where we keep not only advertising revenue, but also the many millions of dollars we get in both domestic and international syndication, it is a better business. So once again, we look at network studio hand-in-hand run out of the same place and you count all the revenues in the profits together. So, you will see, probably, a larger percentage of CBS-owned shows, although we have owned a lot in the past. The way we look at Leno, let me just describe it in very general terms. If you assume that we were the number one network at 10' O Clock last year, and I am using ballpark figures. And we took in 38% of the revenue available at 10' O Clock on broadcast television, because remember, there are only three networks. And assuming Jay Leno does great, he does what he's doing right now, certainly that 38% will turn into maybe 45%, maybe 47%. So if you take 10% more revenue, in that time period, once again we don't break out how much each time period is worth, but 10% of an arguably many hundreds of millions of dollar pie is a lot of money. That's why, we wish Jay well. We think this is a big plus for us and ABC in terms of revenue.

Do you think you will see any of that 10' O Clock money go into cable or is it all going to stay in broadcast?

Not as long as we keep winning the 10' O Clock hour which we do four to five nights a week.

For our next question we go to Jason Bazinet with Citi.

I Just had one question on new [TV-rad] break that you gave. Can you just tell us where the re-trends fees are being captured and just sort of qualitatively how far long in the total re-trends negotiations you are at this juncture? Thanks.

We don't give specifics because we're contractually not able to do it, but I have made some statements in the past about what sort of rates we were looking at and we are in that neighborhood.

I just meant as a percentage of all the negotiations. Not at dollar terms.

We currently have 51 deals completed and it represents about 10 million subs out of a universe of approximately low $40 million subs. We're somewhere in the 20% to 25% of subs out there that are available for us. In addition, we're starting to look at what happens with re-trends with our affiliates, which is another new revenue source that probably will be coming up in the future.

And in terms of the category, is that under affiliates?

It's in Television segment and is considered affiliate revenue just like Showtime and College Sports.

Our next question will come from Edward Atorino with Benchmark.

Are you saying 22% of OIBDA or operating income, there is not a big difference but I just wanted to get a clarification?

I was using OIBDA.

That's what I thought. Regarding TV outlook could you talk about some of the categories that might be looking to spend some money again and what do you think about the auto business?

I think what we're seeing again is a lot of categories are coming back in. What you've seen with a lot of consumer oriented products and services that those spent to promote their product with consumers did well. They gained market share whether it was in packaged goods, whether it was the Home Depot's or Wall-Marts they gained market share and so I think that has proven. We see auto is coming back, but again not at the amount of sales we had last year at this time. So I would say, pretty much across the board, categories are spending more today, in May, than they were 60 days ago, and as I tried to articulate, if you looked at May last year, overall we're adding more dollars locally and as Leslie said the network scatter is stronger than it was six or eight weeks ago.

Do you think that part of the collapse in television starting last fall and continuing was due to factors beyond the economy like companies sitting on their cash? And is some of the recovery people are getting more courageous about spending some money?

With our local TV stations and radio, the economy is slowing a bit back in the fourth quarter of '07. That's why we started taking actions early in '08 to reduce our cost. I had no idea that the depth of the recession or the length of it was going to happen, but we certainly saw a slowdown and I think the economy obviously peaked somewhere at the end of the third quarter of '07 and people are calling back. I think what you're seeing now is, most companies feel more comfortable taking a little more risk, and therefore willing to spend their advertising dollars. We clearly are a leading indicator.

Thanks everyone for joining us today. That concludes today's call.

Ladies and gentlemen, this does conclude today's conference call. We do appreciate your participation.