CBS Corp COO: Radio IPO Could Happen This Year

Also on Thursday's earning's call, CBS Corp COO Joseph R. Ianniello told analysts that the company has separated out what used to be called Local Broadcasting segment into two segments: Local Media, which includes our TV stations and our local digital websites; and Radio:

"Now that Local Media is a separate segment, in order to better align our results with our industry peers, we are recording 100% of our retrans revenue in Local Media, which then pays reverse comp to the network, again, consistent with publicly traded television station companies.

He added, "Local Media revenue in the third quarter was up 9% to $409 million, driven by strong political spending at our TV stations that you just heard about. In addition, higher retrans also contributed to our results. Local Media operating income for the third quarter was $122 million, up 21%, and our Local Media operating income margin expanded 3 points to 30%."

Joseph Ianniello

As for Radio, Ianniello said third quarter revenue came in at $319 million, up slightly from last year.
"Radio operating income was up 5% to $77 million, thanks in part to the restructuring activities we put in place in 2015. And the operating income margin for Radio expanded 100 basis points to 24%.

"Speaking of Radio, let me give you a brief update on how we're progressing with the separation. Last month, CBS Radio issued $1.46 billion of debt with a weighted average interest rate of 5.25%, and we are on track for an IPO in early 2017. That said, we may have a small window of opportunity to go even earlier if market conditions are favorable here in Q4. Similar to the Outdoor play book a few years ago, the next step after the IPO will be an exchange offer sometime in 2017, resulting in more capital returns for CBS shareholders and further focusing our company on our core content businesses.

"We are fortunate that through our strong free cash flow generation, our solid investment grade balance sheet and the benefits of the Radio transaction we are also able to return this level of capital to our shareholders, and as we look ahead to 2017, with our ongoing share repurchase program, coupled with the proceeds from the Radio IPO and subsequent split off, investors can expect another healthy year of capital returns."

As for the future,  Ianniello expects an extremely strong fourth quarter for Local Media driven by political spending. Local Media is pacing to be up mid-to-high teens, and Radio is pacing to be up low-single digits. And on the national front, he sees underlying network advertising strengthening from third quarter levels driven by our new upfront pricing as well as scatter pricing that is up strong double digits.