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

Thank you. Good afternoon, everyone, and welcome to our third 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 will turn the call over to Les and Joe, who will discuss the strategic and financial results. We will then open up the call 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.

Thank you, Adam. Good afternoon, everyone. Today I want to start by thanking the good people at CBS for their tremendous effort during Hurricane Sandy. My thoughts go out to all those affected by the storm. I'm really glad CBS was able to help along the way. As far as CBS's results are concerned, we have done it again, another quarter of outstanding results on our way to another phenomenal year, and I guarantee you, the momentum keeps building. I couldn't be more pleased. Clearly, CBS has the right strategy in place to take advantage of all the ways it can get paid for its industry-leading content. I'm confident, really confident, that this success will continue in 2013 and for many, many years to come. My confidence is in no small part due to the talented executives at CBS who make it all happen. Simply put, Leslie and his team know how to get this done. And so it's my great pleasure to turn this call over to my good friend and colleague, a man I frequently call a genius for the extraordinary, brilliant ways in which he has operated CBS. And now I turn this over to Chief Executive Les Moonves.

Thank you very much, Sumner. Good afternoon, everybody, and welcome, especially you on the East Coast that are suffering through this nor'easter yet again. This certainly has been a monumental couple of weeks. Hurricane Sandy has devastated many communities in the Northeast and ultimately affected all of us in one way or another. We wish as quick a recovery as possible to everyone in Sandy's path. And as a company, we will continue to help in that effort. I would like to acknowledge the sacrifice and effort of all the CBS employees involved with the relief help during this difficult time. I also want to take a second to thank CBS News and our local TV and radio stations for their tireless work as well. These news outlets did what broadcasters do in times like these. They provided essential services to people in a way that can't be done by any other medium. And of course, last night, we also had another historic event with the election. It's been a difficult campaign. But hopefully, America can come together, and we can now move forward. Once again, I want to point out the outstanding efforts by our terrific team at CBS News from primaries into the wee hours of this morning. Now on to the business at hand. As you can see in today's release, CBS is continuing its streak of record-breaking results with all-time third quarter records in revenue, OIBDA, EPS and virtually all other key metrics as well. The fact that we were able to achieve these results in an economy that is still recovering is a testament to the remarkable transformation underway at our company. Our base businesses continue to be extremely solid performers, and at the same time, we're growing the size of our overall revenue pie…

Thanks, Les, and good afternoon, everyone. Today, I'll provide some more details about our third quarter, and then I'll talk about what we're seeing in the fourth quarter and 2013. Let's start with our third quarter results. As Les highlighted, CBS's record results this quarter once again demonstrate the benefits of the steps we are taking to grow our revenue with a more diverse mix. As we continue this shift, you can see that the overall financial performance of our company is becoming less cyclical and more profitable. For the quarter, as you heard, we delivered record revenue of $3.4 billion, an increase of 2%. Let's take a look on how that breaks down. Content licensing and distribution was up 8%, and affiliate and subscription fees were up 12%. The continued growth in these contractual revenue streams more than offset lower summer advertising dollars. The progress we have made in growing our recurring revenue sources has never been more apparent than this quarter, with advertising accounting for just 56% of total revenue. As we said before, this revenue mix may shift a bit during the next 2 quarters as we gain more political and Super Bowl advertising dollars. But we expect the overall trend towards more non-advertising revenue to continue. Also, during the quarter, as Leslie said, our continued focus on cost controls, along with our high-margin revenue growth, translated into record profits and margins. Our OIBDA margin of 26% was our best ever. Adjusted EPS in the third quarter came in at a record $0.65, up 30%. This excludes a loss of $0.05 per share on the early extinguishment of debt that we told you about during our last call. The story for our year-to-date performance is very consistent with our third quarter results with records across nearly all…

[Operator Instructions] And we'll take our first question from Benjamin Swinburne with Morgan Stanley.

Les, I want to ask about you the TV viewing numbers we're seeing since obviously, everyone's focused on them, not just for the industry but for CBS. The 3 areas that I think are sources of leakage in the Nielsen ratings would be VOD, where the ad loads aren't the same; DVR viewing after 3 days; and then sort of streaming on players like TV.com and now your Hulu Plus deal. How do you address all of those? And how quickly can that get taken care of? Because it's obviously something that's impacting the business. And then I have one follow-up for Joe.

Yes, clearly, Ben, we've been heading in this direction for a long time. We have seen this coming. DVR usage has been growing. And obviously, streaming is sort of a pretty new, as is a VOD. And some of it we're getting paid for. Look, the majority of DVR viewing is in the first 3 days, which is good, and we're pushing to get it to be -- to 7 days. And we think that's going to happen within a relatively short period of time, as well as that. Streaming, once again, we are getting paid for it on cbs.com. We're making all these deals. And VOD is going to get there as well. So as I said, it's a different way of looking at our world. But once again, when you add all these elements together, financially, it is a positive for us. And once again, you have to stop -- people have to stop looking at overnight ratings because it's really a very, very different ballgame than it ever was. And once again, we are encouraged because more and more people are absorbing content, and we're going to get paid more and more.

Sure. And then, Joe, just a separate topic. You mentioned depreciation and amortization. It's down in the quarter year-on-year. When I look at the cash flow statement, your CapEx is running at like $150 million year-to-date versus D&A of $390 million, and I think everyone knows CBS generates more free cash flow than GAAP earnings. How long does it take for that to close? And should it close all the way?

Yes, it'll definitely close, Ben. It'll take a few years because when you depreciate, some -- it's usually our useful life is kind of on a 5- to 7-year average life cycle. So we've been on there -- at this for a few years now. So I think over the coming years, you'll see that continually step down. I think we do kind of give some kind of forward disclosure in our 10-Q and K filings to help you. But it'll take a couple of years, but it's going to converge down with our kind of lower capital spending over the years.

We'll take our next question from Jessica Reif Cohen with Bank of America Merrill Lynch.

I have 2 questions. Is there any limit what you can put through Netflix, any other SVOD players? I mean, besides the CBS shows, are there other shows that can go in?

You mean besides the CBS-produced shows?

Meaning -- no, no, no, like -- no, no, no, not the CBS. I meant, like, Showtime shows or -- besides the network shows. But you mentioned library.

Yes, I mean, Showtime, actually, was one of the first precursors. They had Dexter on Netflix before we even made our CBS deal. So yes, we have deals in place potentially down the line for shows from Showtime, from CBS and The CW. So -- and then once again, once again, the only deals we've made so far are about 7% of our library content. And then we just added CSI: Miami to that mix since we took it off the air in May. So frankly, the sky's the limit in terms of availability and our ability to grow our deal with Netflix.

So as the second part of that question, but not my second question, to be clear, how high can Entertainment margins go?

Well, Jessica, look we're definitely investing in content as we are owning more and more of the content. So clearly, it builds, and you can see that kind of as the overall company, but just look at the overall margin. Again, I always like to focus people on looking at margins more in a year-to-year basis, year-to-date basis as opposed to a quarter. But clearly, these are high-margin revenue dollars that will continue to expand.

Okay. And now you can ask your second question.

And now I can ask my real second question. So the second question is when you guys talked about, both of you, Les and Joe, you talked about 2013 drivers, I didn’t really hear Outdoor or Radio being a driver. Can you talk about the long-term strategy? Do you really need to hang on? And if you don't need to hand on to them, can talk structurally what you guys are thinking of?

Go, Joe.

Yes, well, I'll take it. Yes. Look, I think from a Radio perspective, it's absolutely producing content. Sports and news, it's key to the overall CBS strategy. We have a large market focus, so I think it fits very nicely. Obviously, we like the margins. Obviously, these brands are going online, and it's living outside of just the local region. So we're very bullish on Radio and as well as Outdoor. So Outdoor, we know there's lots of interest in Outdoor. We understand what some of our peers are doing. We're definitely considering all options for it. But again, there is a lot of focus on it because I think everybody sees the value that we see.

And we'll go next to David Bank with RBC Capital Markets.

Two questions. I guess the first one is with respect to your commentary on selling current series’ past seasons into online distribution potentially, what was your thought process there? What made you arrive at this point today where you think you might be ready to do it? And more importantly, what do you think the monetization of that kind of content would be? Do you think it's similar to the kind of levels you're seeing in traditional syndication for that same kind of content? And the second question is can you walk us through 2 things with respect to sort of ratings and ad growth? The first is, that the C3 ratings progression over the first couple of weeks of the season. So have we seen improvement in ratings? And as a progression, do we expect to see that to continue? And second, can you talk a little bit about maybe ad revenue pacings at the network for the quarters just to give us a sense of -- we see these ratings numbers, and I don't think -- I think the correlation between ratings and revenue is a little bit lacking, and so maybe you could kind of help us see that one more clearly.

All right, David. In terms of -- it is definitely a shift for us. And you know what, we've looked at the results from Netflix and Amazon, we're getting more and more information from streaming on our own sites. And in certain cases, we have come to the conclusion that streaming of previous seasons of certain shows will actually give benefit to it, as it has been with syndication. As we saw with NCIS when it went to syndication, ratings went up; Big Bang, ratings went up. So we're now taking a look. And as you know, Netflix really likes -- would like to do that, and we have deals in place for previous seasons at very good rates. So it is looking like it is very attractive, obviously, for the bottom line, as well as we think it will be a help to the network, not a hindrance, to do that. What that could mean? It could mean tens of millions of dollars. It can be the equivalent or even better than or part of syndication. In other words, like we do internationally. You take a show and you look at slicing and then dicing it in very, very different ways than you ever did before, and it's great that now you have 12 revenue streams instead of just basic fast fall down the middle to syndication. Regarding the C3 progression, going to your second question, we absolutely -- as I said, there a lot of factors that influence the start of the season. There was a lot of political things going on, and we have seen it grow. Frankly, the numbers have grown from that, and C3 is becoming a bigger part of our universe. And when you see these numbers, as I said, 3 million, 4 million viewers added to a number, 1.5 points added to an 18 to 49 number, they are substantial, and they are growing, and more and more people are doing that. And that's especially potent when it comes to the 10:00 shows because 10:00 shows people go to sleep, but they may watch that 10:00 show the next day. And we're finding it -- you look at Monday night, and you see there are 3 10:00 shows that are actually working on all 3 networks, and they all are benefited greatly by a C3 number, which is very high. And that's Hawaii Five-O for us, Revolution and Castle on ABC. And in terms of the ad pacing, once again, as Joe mentioned, we are seeing mid-teen growth in the scatter market. Add that to the high single digits that we got in the upfront, and you're looking at substantial growth numbers as we head into the fourth and then the first quarter, which is why we're optimistic and why we stated our pacing is actually growing and it's getting more and more intense. So looking forward, the rest of the season should be terrific.

So Les, ad revenue, you're expecting to be positive in the fourth quarter at the network? Is that what you're saying?

Yes, yes.

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

I have 2 questions. One is I just want to hear a little bit about the new retrans deals that you talked about in your comments. I think you said AT&T, DirecTV, Cablevision. What is kind of the timing of when those start to hit? I'm just wondering, as we kind of model out retrans and reverse comp, how -- what the cadence of those new revenues look like. And is there any point where we should see more of an acceleration? And then just a little bit, anything on color -- on background on how those conversations go and kind of what those deals look like? And then my second question is just around this kind of new topic today on current release, sales of your content. Just to clarify, what would be the monetization vehicle? Would it be -- would those be kind of lumpy onetime content revenues? Or would that be like a revenue share, for example, like with the Hulu? Because I do remember one of the issues on that was your sales force and being able to -- if it is selling advertising against currently leased programming, the idea of relinquishing the sales process to an online distributor. I'm just wondering how that will all work. So if you could comment on those 2, I'd appreciate it.

I'll give you a little color on the retrans, and Joe will go to the number. Look, we have a lot of power. The NFL gives us a lot of power. In addition, as I mentioned, having Showtime is great. So the conversations were heated. They were intense. But we're happy we didn't have to pull our signal and cost ourselves any money. Did Jimmy Dolan and I deal directly? Yes, quite a bit, quite a bit, and it was a good conversation. As you can imagine, there was wrangling. The same thing in all of the conversations, but we came out very well. Joe, why don't you talk about...

Anthony, when they hit is usually again -- as soon as we sign the deals, they're usually effective immediately. So there's obviously -- we can't talk about anything specific, but obviously, we see the value of the long-term deals, and there are escalators in them. And as far as the past seasons of current shows, for instance, a CSI or something like that that’s been sold through, yes, the revenue recognition does get lumpy. But usually, again, it's over periods of time, and then they have to kind of re-up to extend those. So again, it kind of continues. So we look at it more as an annuity, but it does get a little lumpy in the way the accounting rules work.

Okay. And then just online ad sales against your current release programming, can you just talk about that?

We have -- obviously, we've put them up on cbs.com and the shows that we own and...

Yes, and we monetize them at CPM rates higher than -- as high as the network. So...

And with full ad loads.

With ad loads, yes. So we're fully monetizing on that.

Yes, and that's growing every day.

We'll take our next question from Michael Morris from Davenport & Company. Michael C. Morris - Davenport & Company, LLC, Research Division: Two questions. The first one is on your advertising trends, day parts other than prime. We have a lot of focus on prime and the ratings there. I think that that’s about 1/2 your ad revenue. I'm curious as to, number one, sports and the NFL. Are you seeing the growth? Are you seeing better growth at the NFL than you're seeing in kind of these primetime ad pacings you're talking about? Also, we're seeing some more NFL content in prime with the later starts on the East Coast and the AFC Championship Game in prime later this year. So if you could comment on the sports and also just kind of daytime news, what you're seeing there. And then second, just over on the streaming deals, it's a hot topic for us, obviously, but how much of the streaming revenue is coming specifically from Netflix as you look forward and you say 2013 is bigger than 2012? And really, the root of my question is there's some concern that at some point, Netflix can't continue to increase their content payments. Your thoughts there would be appreciated.

I'll deal a little bit with the first part, and I'll have Joe do the streaming. In terms of sports, it's still the hottest ticket in town, specifically the NFL. It's selling very well at every single network. Our ratings are up a couple of points from a sensational year last year. You're not seeing -- that's the part of the universe that streaming doesn't come into play. Live sporting events is still huge, and yes, the pacing is even better, far better, than it is even for primetime. So we're very excited, and we wish the NFL lasted for 32 weeks instead of 17. And once again, having the AFC Championship and the Super Bowl, we're able to put together some pretty compelling packages. Daytime pacing, once again, it's -- I wouldn't call it as robust as prime, but it's doing extremely well. We make -- once again, our daytime programming makes significantly more profit than it made a couple of years ago. News, once again, has been a very active season. And the good news for both of our key news franchises, Scott Pelley's numbers are up considerably, and the Morning is up a lot as well. So we're really pleased with what we're doing there.

Mike, as far as streaming, obviously we have deals with Netflix, Amazon, Hulu Plus and a lot of others that are talking about the marketplace. I think what we rest assured is that consumers want to consume content this way. So I think it's going to find its home. Obviously, we look at Netflix's financials as well when we do deals with them. But they're very successful, and they have a huge installed base. So there's lots of value there. But again, I think it's really being driven by consumer demand. Michael C. Morris - Davenport & Company, LLC, Research Division: And so this putting the prior seasons of currently on-the-air shows, that's not just a Netflix-type of arrangement, that's across a number of these partners or...

Yes, we can do that, again, across the board.

Again, the great news is all these deals are non-exclusive. But once again, we're not going to take the entire schedule and put it on. We're going to pick and choose the shows that we think, a, are already sold into syndication; or b, we think that could help us in terms of raising the ratings on the network. So -- but once again, when you look at what we have on the air and all the seasons that are not streamed, that could be a sizable amount of money over the next couple of years.

And we'll go next to David Miller with Caris & Company. David W. Miller - Caris & Company, Inc., Research Division: Yes, I just have one question for Les. Les, you mentioned the ratings issues. You mentioned sort of the NFL network, the debates, DVR viewing, et cetera, as somewhat of a culprit here. I'm surprised I didn't hear you say anything about sampling of new shows across the other networks -- or the other broadcast networks, I mean. And the reason I cite that is because I think it was the fall of '08, could've been the fall of '07. I think it was the fall of '08, where -- no one really remembers this because the fall of '08, we obviously had other problems. The world was basically ending. But if I recall on the fall of '08, there was a lot of sampling of other new shows on ABC, NBC, Fox, et cetera. And eventually, viewership kind of came back to you at around this time of year. It was around early November. Are you seeing that at all? It seems like you might be, just especially in light of your commentary about the strength of the scatter market.

Yes, I mean, look, the early part of the year is always about sampling. People have spent the whole summer, some of them spent the Olympics, promoting new shows, and people want to try them out. This past week, we had our highest-rated week ever. This is the first -- this is the week that we were comparably better than a year ago in just about every demo -- I think in every demo. So what happens is they do go out and sample. And guess what's winning Wednesday night at 10:00 in every single demo? Year '13 of CSI, by a lot, okay, against 2 new shows, 2 new shows heavily promoted. So you know what, the stability of CBS is coming to the forefront much now -- much more now than in the opening couple of weeks of the season. So I didn't bring it up because it's sort of the same thing every year.

We'll go next to Laura Martin with Needham & Company. Laura A. Martin - Needham & Company, LLC, Research Division: Could you give us an update on film and remind me what the allocation of capital is towards the film business in 2013, Les? And then for you, Joe, Fox was kind enough to tell us that political advertising in the third quarter was $40 million positive swing for their station, and I know it sounds like most of yours is coming in the fourth quarter. But could you size for us over the course of 2012 what you think the political is going to come -- or came in at, actually?

Yes. Laura, on film, we will have released 4 movies this year. '13, it looks like there's going to be 3. Once again, all of these are very low-budget releases, once again, not a great deal of exposure that really affects anything. As Joe said, look, we had P&A on 2 movies within a 3-week period of time, and last year we had 0. So it did affect that. But there is -- it's really very minimal.

And Laura, on political, just to give you some context, in 2008, the last presidential, we generated $140 million total over the full year. We're going to significantly beat that. So -- and again, more of that than normal is coming in, in the fourth quarter. So we're still tabulating those dollars as we speak here today.

And we'll go next to Doug Mitchelson with Deutsche Bank.

Les, I wanted to take a step back and shift the ratings discussion to TV schedule management. You know I agree with you regarding all of the unusual factors so far this season. So let's say CBS now or at some point in the future does have quite a few aging shows. Does the breadth of strength across your schedule go from sort of an important advantage to a disadvantage in sort of 2 areas? First challenge is you have a profit incentive to keep shows in the air, right, even when the ratings decline because you might make a lot of money on those shows international, syndication, plus a lot of your -- any shows you have in decline might still be higher rated than your competitors' shows, right? And that sort of leaves the second challenge. You've got so few open spots to try and launch 2 hit shows. If you get to the point where you need to be ramping development, maybe you need more than 1 or 2 hit shows a year. You need 2 or 3 or 3 or 4. You have a lack of shelf space. So I know it's strange to be asked if you were too successful in the past, but I'm curious, how would you approach those?

I never mind being called too successful. That's okay. No, look, scheduling still does matter. And yes, is it harder to get on our schedule than everybody else? Absolutely. As a matter of fact, last year, when we canceled Unforgettable, one of the papers said, which is true, CBS just canceled a show that was higher-rated than any other show at one other to-be-named-later network. Now we canceled it, and ironically, Sony came back to us, and we're now putting it on the summer. We're going to be doing more summer programming. Plus, you know what, our development costs basically are the same year after year. We really don't cut way back. The only year we cut way back was the year of the strike. So we will keep that going. And once again, we have always pulled our shows off a year early. I could have kept CSI: Miami on, but we pulled it off to make room for a Vegas or an Elementary, and that's what we did. We took CSI: Miami. We moved Mentalist from Thursday to Sunday, and we put Elementary in there, which looks like it's going to be a brand-new hit franchise for us. So look, I still look at the schedule every day. I'm still paying attention to it. We still are in full-scale development. And I think you have to look at the television universe in totality. Network ratings, profitability are all important, but as you know, we like having high ratings.

So if I try to put a fine point on it, Les, would you say at this point that you're worried at all that you have too many shows that are aging at the same time? Or do you still feel like this is an overall healthy schedule?

We have the 2 highest-rated new shows of last year in Person of Interest and Two Broke Girls; highest-rated new drama, highest-rated new comedy. I think we have 2 keepers from this year. So our schedule is still filled with a lot of young shows mixed in with so many hits. Blue Bloods is only 3 years old. Hawaii Five-O is only 3 years old. NCIS: LA is 4 years old. So there is a lot -- Good Wife is 4 years old. There's a lot of youth in the schedule. Just because we have Babe Ruth and Lou Gehrig, it doesn't mean that we don't have the up-and-coming young rookies, too.

And we'll go next to Tuna Amobi with S&P. Tuna N. Amobi - S&P Equity Research: So one for Joe and one for Les. So in regards to the Olympics, it seems like it was a net benefit to the company given the lease in Outdoor segment. Can you perhaps comment on any impact on the network and how -- what changes that you made there to mitigate the impact there? And for Les, I was wondering if you could comment about the noise around ad hopping. I guess specifically, are there any scenarios where you might consider trading off advertising revenues if you felt that you could be adequately compensated by pay TV affiliates that are pushing such ads keeping functionalities given particularly that your business mix is positively moving in that direction anyways? Any comments there would be helpful.

Okay, Doug, I'll start. With the Olympics, clearly the international Outdoor business benefited by that. We were the premier Outdoor advertiser there. So obviously, with a weak macro backdrop, we were able to post those results. We don't break out specific numbers. And as far as here in the States, it was highly rated here. We've generated some ad dollars. But good for that. And again, we'll have an easy comp next year, and we're focused on this season and going forward. Tuna N. Amobi - S&P Equity Research: So not possible -- so quite a side impact on the network, Joe, I’m assuming, right?

Tuna, it's hard to say exactly what the ad dollar shift would have been in dollars in the third quarter.

Yes, I mean, look, did it affect our ratings? Sure, but not substantial, and we've anticipated it. And it happens every couple of years. They have the Olympics, and no big deal. And on your second question regarding the ad hopping, the fact of the matter is we produce content, and we need to get paid for it. I suppose if DISH wanted to pay us $5 a sub, we might consider letting them do that. So that would be the alternative to that, but under the current circumstances, they can eliminate our ads.

We'll take our last question from Alan Gould with Evercore Partners.

I've got a couple of questions. First, on the retrans deals, you said 40% of your footprint has been done this year. Can you give us the average length of those retrans deals? And Joe, you did mention escalators. Are those escalators inflation? Or are they significantly even greater than inflation?

Well, Alan, I’d say inflation isn't too high. So we don't like carrying the inflation. So we never put inflation in. We prescribe what the rates are. We don't like to rely on somebody else to determine what increases the revenue we have. What was your other question?

Well, can you give the average length of those 4 deals?

Look, we like the deal shorter because, again, we like to kind of go back at them again. We're open to doing longer-term deals. But you've got -- the terms have to be right, and I think that's important. But on average, the kind of plus or minus 5 years, I think, is a safe bet. But like I said, we're willing to bet on our content and bet on ourselves.

Okay. And then, Les, you mentioned in your comments that there's no make good situation. I realize the season's early, but you're only getting paid on C plus 3 [ph], not the other items. Can you just explain how C plus 3 [ph], even if you adjust for the Ashton Kutcher effect, the halo effect and others, still running down, say, 10%?

Yes. Number one, most of that 10% is based on one night. And we feel like, and our advertisers agree, that this is going to go away over the next few weeks and as we head into the beginning of the year. So there's no payback necessary. Once again, it's not a cut and dried system where if you've missed the number, they realize by the end of the year, we will be fine, so there's no make goods.

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

Thank you, everyone. That does conclude today's conference. We thank you for your participation.