CBS Cuts Dividend, Says It Can Repay Debt Maturing Through 2012

CBS Corp. chopped its dividend 81 percent and said it will be able to repay as much as $3 billion in debt maturing over the next three years.

The quarterly payout was reduced to 5 cents a share from 27 cents, New York-based CBS, the broadcaster controlled by Sumner Redstone, said yesterday in a statement. The owner of the most- watched TV network also reported a 52 percent drop in profit.

Redstone said the dividend cut won’t interfere with talks to refinance $1.6 billion in debt at his National Amusements Inc. holding company. He received as much as $70 million annually in CBS dividends. The broadcaster faced a possible loss of its investment-grade credit rating after Standard & Poor’s said the payout should be cut in a climate of falling ad sales.

“Given the current uncertainty in the marketplace, we think it’s more important to retain more of our cash until the breadth and depth of this downturn is realized,” Chief Executive Officer Leslie Moonves said yesterday on a conference call. “When the economy improves we will revisit our dividend.”

CBS shares, which have lost 80 percent of their value in the past 12 months, gained 22 cents to $5.35 after hours yesterday. They fell 12 cents to $5.13 in regular New York Stock Exchange composite trading.

CBS reported fourth-quarter net income fell to $136.1 million, or 20 cents a share, from $286.2 million, or 42 cents, a year earlier, as marketers continue to cut ad spending on television, radio and the company’s billboards.

Sales dropped 6.2 percent to $3.53 billion, compared with the $3.57 billion average of analysts’ estimates.

Maturing Debt

Results included costs to write down some assets, restructuring expenses, stock-based pay and a gain from the sale of some Cnet assets.

Excluding those, CBS reported profit fell to $226.7 million, or 34 cents a share. That beat the 26-cent average of 20 analysts’ estimates compiled by Bloomberg.

Chief Financial Officer Fred Reynolds said on the conference call CBS can self-fund all of its debt maturities through 2012.

Given the “unstable and uncertain” credit markets, CBS is preparing to repay as much as $3 billion in debt maturing between 2010 and 2012, Reynolds said. The company is reducing capital spending to less than $350 million annually, he said.

“It sounds like they built out a plan where they will be able to pay down out of free cash flow everything they need to,” said Alan Gould, a Natixis Bleichroeder Inc. analyst in New York, who recommends holding the shares. “Investors are worried right now. What happens if a company has debt or a bank credit line that matures or expires and they can’t roll it over?”