UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2016
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 001-09553
CBS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
04-2949533
(I.R.S. Employer Identification No.)
  
51 W. 52nd Street, New York, New York
(Address of principal executive offices)
10019
(Zip Code)
(212) 975-4321
Registrant’s telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x
Number of shares of common stock outstanding at July 25,October 31, 2016:
Class A Common Stock, par value $.001 per share— 37,726,904
Class B Common Stock, par value $.001 per share— 406,874,849391,975,900
 



CBS CORPORATION
INDEX TO FORM 10-Q
  Page
 PART I – FINANCIAL INFORMATION 
   
Item 1.
Financial Statements.
 
   
 Consolidated Statements of Operations (Unaudited) for the
 Three and SixNine Months Ended JuneSeptember 30, 2016 and JuneSeptember 30, 2015
3
   
 Consolidated Statements of Comprehensive Income (Unaudited) for the
 Three and SixNine Months Ended JuneSeptember 30, 2016 and JuneSeptember 30, 2015
4
   
 Consolidated Balance Sheets (Unaudited) at JuneSeptember 30, 2016
 and December 31, 2015
5
   
 Consolidated Statements of Cash Flows (Unaudited) for the
 SixNine Months Ended JuneSeptember 30, 2016 and JuneSeptember 30, 2015
6
   
 
Notes to Consolidated Financial Statements (Unaudited)
7
   
Item 2.
Management’s Discussion and Analysis of Results of Operations and Financial Condition.
2930
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
5155
   
Item 4.
Controls and Procedures.
5155
   
 
PART II – OTHER INFORMATION
 
   
Item 1A.Risk Factors.
5256
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
52
Item 5.Other Information.
5356
   
Item 6.
Exhibits.
5457


PART I – FINANCIAL INFORMATION
Item 1.Financial Statements.
CBS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
Three Months Ended Six Months EndedThree Months Ended Nine Months Ended
June 30, June 30,September 30, September 30,
2016 2015 2016 20152016 2015 2016 2015
Revenues$3,287
 $3,219
 $7,136
 $6,719
$3,396
 $3,257
 $10,532
 $9,976
Costs and expenses: 
  
     
  
    
Operating1,861
 1,907
 4,217
 4,049
1,897
 1,842
 6,114
 5,891
Selling, general and administrative630
 605
 1,247
 1,193
640
 597
 1,887
 1,790
Depreciation and amortization63
 66
 127
 134
61
 65
 188
 199
Restructuring charges (Note 10)—
 55
 —
 55
—
 —
 —
 55
Other operating items, net—
 —
 (9) (19)—
 —
 (9) (19)
Total costs and expenses2,554
 2,633
 5,582
 5,412
2,598
 2,504
 8,180
 7,916
Operating income733
 586
 1,554
 1,307
798
 753
 2,352
 2,060
Interest expense(100) (94) (200) (187)(104) (102) (304) (289)
Interest income8
 7
 15
 12
7
 6
 22
 18
Other items, net(4) 4
 (7) (19)2
 (4) (5) (23)
Earnings before income taxes and equity in loss of
investee companies
637
 503
 1,362
 1,113
Earnings from continuing operations before income taxes and
equity in loss of investee companies
703
 653
 2,065
 1,766
Provision for income taxes(205) (165) (436) (368)(176) (211) (612) (579)
Equity in loss of investee companies, net of tax(9) (6) (30) (19)(13) (16) (43) (35)
Net earnings from continuing operations514
 426
 1,410
 1,152
Loss from discontinued operations (Note 1)(36) —
 (36) —
Net earnings$423
 $332
 $896
 $726
$478
 $426
 $1,374
 $1,152
              
Basic net earnings per common share$.94

$.68

$1.97

$1.47
Basic net earnings (loss) per common share: 
  
    
Net earnings from continuing operations$1.16

$.89

$3.13

$2.36
Loss from discontinued operations$(.08)
$—

$(.08)
$—
Net earnings$1.08

$.89

$3.05

$2.36
              
Diluted net earnings per common share$.93

$.67

$1.95

$1.45
Diluted net earnings (loss) per common share: 
  
    
Net earnings from continuing operations$1.15

$.88

$3.10

$2.33
Loss from discontinued operations$(.08)
$—

$(.08)
$—
Net earnings$1.07

$.88

$3.02

$2.33
              
Weighted average number of common shares outstanding: 
  
     
  
    
Basic451
 490
 455
 494
442
 480
 451
 489
Diluted455

495

459

500
446

484

455

495
              
Dividends per common share$.15
 $.15
 $.30
 $.30
$.18
 $.15
 $.48
 $.45
See notes to consolidated financial statements.


CBS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; in millions)
Three Months Ended Six Months EndedThree Months Ended Nine Months Ended
June 30, June 30,September 30, September 30,
2016 2015 2016 20152016 2015 2016 2015
Net earnings$423
 $332
 $896
 $726
$478
 $426
 $1,374
 $1,152
Other comprehensive income, net of tax:              
Cumulative translation adjustments—
 2
 1
 (1)1
 (5) 2
 (6)
Amortization of net actuarial loss and prior service cost9
 9
 19
 18
10
 9
 29
 27
Total other comprehensive income, net of tax9
 11
 20
 17
11
 4
 31
 21
Total comprehensive income$432

$343

$916

$743
$489

$430

$1,405

$1,173
See notes to consolidated financial statements.


CBS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
At AtAt At
June 30, 2016 December 31, 2015September 30, 2016 December 31, 2015
ASSETS          
Current Assets:          
Cash and cash equivalents $176
 $323
  $179
 $323
 
Receivables, less allowances of $66 (2016) and $63 (2015) 3,243
 3,628
 
Receivables, less allowances of $67 (2016) and $63 (2015) 3,348
 3,628
 
Programming and other inventory (Note 3) 1,224
 1,271
  1,459
 1,271
 
Prepaid income taxes 39
 101
  39
 101
 
Prepaid expenses 174
 175
  204
 175
 
Other current assets 240
 249
  228
 249
 
Total current assets 5,096
 5,747
  5,457
 5,747
 
Property and equipment 3,242
 3,243
  3,263
 3,243
 
Less accumulated depreciation and amortization 1,886
 1,838
  1,918
 1,838
 
Net property and equipment 1,356
 1,405
  1,345
 1,405
 
Programming and other inventory (Note 3) 2,069
 1,957
  2,237
 1,957
 
Goodwill 6,531
 6,481
  6,531
 6,481
 
Intangible assets 5,504
 5,514
  5,499
 5,514
 
Other assets 2,582
 2,661
  2,779
 2,661
 
Total Assets $23,138

$23,765
  $23,848

$23,765
 
          
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 

  

 

 
Current Liabilities: 

 

  

 

 
Accounts payable $121
 $192
  $153
 $192
 
Accrued compensation 231
 315
  282
 315
 
Participants’ share and royalties payable 1,007
 1,013
  979
 1,013
 
Program rights 322
 374
  373
 374
 
Deferred revenues 156
 295
  141
 295
 
Commercial paper (Note 5) 163
 —
  33
 —
 
Current portion of long-term debt (Note 5) 23
 222
  22
 222
 
Accrued expenses and other current liabilities 1,064
 1,149
  1,115
 1,149
 
Total current liabilities 3,087
 3,560
  3,098
 3,560
 
Long-term debt (Note 5) 8,223
 8,226
  8,902
 8,226
 
Pension and postretirement benefit obligations 1,545
 1,575
  1,526
 1,575
 
Deferred income tax liabilities, net 1,574
 1,509
  1,667
 1,509
 
Other liabilities 3,253
 3,260
  3,240
 3,260
 
Liabilities of discontinued operations 68
 72
  67
 72
 
 

 

  

 

 
Commitments and contingencies (Note 9) 

 

  

 

 
 

 

  

 

 
Stockholders’ Equity:
 

 

  

 

 
Class A Common Stock, par value $.001 per share; 375 shares authorized;
38 (2016 and 2015) shares issued		 —
 —
  —
 —
 
Class B Common Stock, par value $.001 per share; 5,000 shares authorized;
828 (2016) and 826 (2015) shares issued		 1
 1
  1
 1
 
Additional paid-in capital 43,964
 44,055
  43,935
 44,055
 
Accumulated deficit (19,622) (20,518)  (19,144) (20,518) 
Accumulated other comprehensive loss (Note 7) (750) (770)  (739) (770) 
 23,593
 22,768
  24,053
 22,768
 
Less treasury stock, at cost; 420 (2016) and 401 (2015) Class B shares 18,205
 17,205
 
Less treasury stock, at cost; 429 (2016) and 401 (2015) Class B shares 18,705
 17,205
 
Total Stockholders’ Equity
 5,388
 5,563
  5,348
 5,563
 
Total Liabilities and Stockholders’ Equity
 $23,138
 $23,765
  $23,848
 $23,765
 
See notes to consolidated financial statements.

CBS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Six Months EndedNine Months Ended
June 30,September 30,
2016 20152016 2015
Operating Activities:      
Net earnings$896
 $726
$1,374
 $1,152
Adjustments to reconcile net earnings to net cash flow provided by
operating activities from continuing operations:





Less: Loss from discontinued operations(36) —
Net earnings from continuing operations1,410

1,152
Adjustments to reconcile net earnings from continuing operations to net cash flow provided by operating activities from continuing operations:




Depreciation and amortization127

134
188

199
Stock-based compensation88

89
134

128
Equity in loss of investee companies, net of tax and distributions34

22
48

37
Change in assets and liabilities, net of investing and financing activities108

(90)(472)
(866)
Net cash flow provided by operating activities from continuing operations1,253

881
1,308

650
Net cash flow used for operating activities from discontinued operations(2)
(18)(2)
(27)
Net cash flow provided by operating activities1,251

863
1,306

623
Investing Activities:









Acquisitions(51) (1)(51) (7)
Capital expenditures(79)
(46)(125)
(104)
Investments in and advances to investee companies(43)
(55)(44)
(58)
Proceeds from dispositions27

59
28

75
Other investing activities4
 4
11
 (8)
Net cash flow used for investing activities from continuing operations(142)
(39)(181)
(102)
Net cash flow used for investing activities from discontinued operations—

(3)—

(4)
Net cash flow used for investing activities(142)
(42)(181)
(106)
Financing Activities:









Proceeds from (repayments of) short-term debt borrowings, net163

(222)33

(313)
Proceeds from issuance of senior notes—
 1,178
685
 1,959
Repayment of senior debentures(199) —
(199) —
Payment of capital lease obligations(8)
(8)(13)
(13)
Dividends(142)
(155)(209)
(228)
Purchase of Company common stock(1,033)
(1,832)(1,534)
(2,345)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation(57)
(95)(57)
(96)
Proceeds from exercise of stock options10

123
13

137
Excess tax benefit from stock-based compensation11

82
13

87
Other financing activities(1) —
(1) —
Net cash flow used for financing activities(1,256)
(929)(1,269)
(812)
Net decrease in cash and cash equivalents(147)
(108)(144)
(295)
Cash and cash equivalents at beginning of period323

428
323

428
Cash and cash equivalents at end of period$176

$320
$179

$133
Supplemental disclosure of cash flow information









Cash paid for interest$207
 $163
$358
 $303
Cash paid for income taxes$296
 $125
Cash paid for income taxes from continuing operations$370
 $230
See notes to consolidated financial statements.


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)

1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business-CBS Corporation (together with its consolidated subsidiaries unless the context otherwise requires, the “Company” or “CBS Corp.”) is comprised of the following segments: Entertainment (CBS Television, comprised of the CBS Television Network, CBS Television Studios, CBS Studios International, and CBS Television Distribution; CBS Interactive and CBS Films), Cable Networks (Showtime Networks, CBS Sports Network and Smithsonian Networks), Publishing (Simon & Schuster) and, Local BroadcastingMedia (CBS Television StationsStations) and CBSRadio (CBS Radio).

In connection with the Company’s previously announced plans to separate its radio business, a preliminary registration statement was filed with the Securities and Exchange Commission in Julyduring the third quarter of 2016 for the proposed initial public offering of the common stock of CBS Radio Inc. (“CBS Radio”). In preparation for the planned separation, the Company changed the manner in which it manages its television and radio operations during the third quarter of 2016. Accordingly, the Company's previously reported operating segment, Local Broadcasting, has been separated into two operating segments, Local Media and Radio. In connection with this new segment presentation, the presentation of intercompany revenues has been revised, including station affiliation fees paid by Local Media to the CBS Television Network. Prior period results have been reclassified to conform to this presentation.

Basis of Presentation-The accompanying unaudited consolidated financial statements of the Company have been prepared pursuant to the rules of the Securities and Exchange Commission. These financial statements should be read in conjunction with the more detailed financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

In the opinion of management, the accompanying unaudited financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair statement of the financial position, results of operations and cash flows of the Company for the periods presented. Certain previously reported amounts have been reclassified to conform to the current presentation.

Use of Estimates-The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Other Operating Items, Net-Other operating items, net for the sixnine months ended JuneSeptember 30, 2016 and 2015 includes gains from the sales of businesses, and for 2016 also includes a multiyear, retroactive impact of a new operating tax.

Loss from Discontinued Operations-Loss from discontinued operations for the three and nine months ended September 30, 2016 reflects the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business that was accounted for as a discontinued operation.

Net Earnings per Common Share-Basic net earnings per share (“EPS”) is based upon net earnings divided by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the effect of the


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

assumed exercise of stock options and vesting of restricted stock units (“RSUs”) only in the periods in which such effect would have been dilutive. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, were 65 million stock options for botheach of the three and sixnine months ended JuneSeptember 30, 20162016. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, were 7 million stock options and RSUs for the three months ended September 30, 2015 and 4 million stock options for both the three and sixnine months ended JuneSeptember 30, 2015.



CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

The table below presents a reconciliation of weighted average shares used in the calculation of basic and diluted EPS.
Three Months Ended Six Months EndedThree Months Ended Nine Months Ended
June 30, June 30,September 30, September 30,
(in millions)2016 2015 2016 20152016 2015 2016 2015
Weighted average shares for basic EPS451
 490
 455
 494
442
 480
 451
 489
Dilutive effect of shares issuable under stock-based
compensation plans
4
 5
 4
 6
4
 4
 4
 6
Weighted average shares for diluted EPS455
 495
 459
 500
446
 484
 455
 495
Other Liabilities-Other liabilities consist primarily of the noncurrent portion of residual liabilities of previously disposed businesses, participants’ share and royalties payable, program rights obligations, deferred compensation and other employee benefit accruals.

Additional Paid-In Capital-For the sixnine months ended JuneSeptember 30, 2016 and 2015, the Company recorded dividends of $138218 million and $150222 million, respectively, as a reduction to additional paid-in capital as the Company had an accumulated deficit balance.

Adoption of New Accounting Standards
Simplifying the Accounting for Measurement Period Adjustments
During the first quarter of 2016, the Company adopted amended Financial Accounting Standards Board (“FASB”) guidance which eliminates the requirement to retrospectively account for adjustments to provisional amounts recognized in a business combination when new information is obtained during the measurement period about facts and circumstances that existed as of the acquisition date. Under the amended guidance the acquirer is required to recognize such adjustments in the reporting period in which the adjustment amounts are identified. Such adjustments also include the effect on earnings from any changes in depreciation, amortization, or other income effects resulting from the change to provisional amounts, as if the change occurred at the acquisition date. The amendment also requires disclosure or separate presentation on the face of the income statement of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The adoption of this guidance did not have an effect on the Company’s consolidated financial statements.
Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items
During the first quarter of 2016, the Company adopted amended FASB guidance which eliminates the concept of extraordinary items. This guidance removes the requirement to assess whether an event or transaction is both unusual in nature and infrequent in occurrence and to separately present any such items on the statement of operations after income from continuing operations. Rather, such items are required to be presented as a separate component of income from continuing operations or disclosed in the notes to the financial statements. The adoption of this guidance did not have an effect on the Company’s consolidated financial statements.



CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period
During the first quarter of 2016, the Company adopted FASB guidance on the accounting for stock-based compensation when the terms of an award provide that a performance target that affects vesting could be achieved after the requisite service period. Under this guidance, such performance target should not be reflected in estimating the grant-date fair value of the award. The Company should begin recognizing compensation cost in the


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

period in which it becomes probable that the performance target will be achieved, for the cumulative amount of compensation cost attributable to the period(s) for which the requisite service has already been rendered. The adoption of this guidance did not have an effect on the Company’s consolidated financial statements.
Recent Pronouncements
Statement of Cash Flows: Classification of Cash Receipts and Cash Payments
In August 2016, the FASB issued amended guidance which clarifies how certain cash receipts and cash payments should be presented and classified in the statement of cash flows.  The new guidance is intended to reduce the existing diversity in practice in how certain transactions are classified in the statement of cash flows. This guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the impact of this guidance on its consolidated statements of cash flows.

Improvements to Employee Share-Based Payment Accounting
In March 2016, the FASB issued amended guidance which simplifies several aspects of the accounting for employee share-based payment transactions. Under this amended guidance, all excess tax benefits and tax deficiencies will be recognized as income tax expense or benefit in the income statement in the period in which the awards vest or are exercised. In the statement of cash flows, excess tax benefits will be classified with other income tax cash flows in operating activities. The amended guidance also gives the option to make a policy election to account for forfeitures as they occur and increases the threshold for awards that are partially settled in cash to qualify for equity classification. The Company expects that the adoption of this guidance will introduce volatility into the Company’s income tax provision, which will be impacted by the timing of employee exercises and changes in the Company’s stock price. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted.

Leases
In February 2016, the FASB issued new guidance on the accounting for leases, which supersedes previous lease guidance. Under this guidance, for all leases with terms in excess of one year, including operating leases, the Company will be required to recognize on its balance sheet a lease liability and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance retains a distinction between finance leases and operating leases and the classification criteria is substantially similar to previous guidance. Additionally, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed. The Company is currently evaluating the impact of this guidance on its consolidated balance sheets. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted.

Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
In August 2014, the FASB issued guidance which requires management to evaluate, for each interim and annual reporting period, whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date the financial statements are issued. If management


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

identifies conditions or events that raise substantial doubt, disclosures are required in the financial statements, including any plans that will alleviate the substantial doubt about the entity’s ability to continue as a going concern. This guidance, which is effective for the first annual period ending after December 15, 2016, is not expected to have an impact on the Company’s consolidated financial statements.

Revenue from Contracts with Customers
In May 2014, the FASB issued guidance on the recognition of revenues which provides a single, comprehensive revenue recognition model for all contracts with customers and supersedes most existing revenue recognition guidance. The main principle under this guidance is that an entity should recognize revenue at the amount it expects to be entitled to in exchange for the transfer of goods or services to customers. The Company anticipates that this guidance will result in changes to its revenue recognition and is currently assessing the impact. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted for interim and annual reporting periods beginning after December 15, 2016.


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

2) STOCK-BASED COMPENSATION
The following table summarizes the Company’s stock-based compensation expense for the three and sixnine months ended JuneSeptember 30, 2016 and 2015.
Three Months Ended Six Months EndedThree Months Ended Nine Months Ended
June 30, June 30,September 30, September 30,
2016 2015 2016 20152016 2015 2016 2015
RSUs$37
 $35
 $73
 $73
$39
 $32
 $112
 $105
Stock options8
 8
 15
 16
7
 7
 22
 23
Stock-based compensation expense, before income taxes45
 43
 88
 89
46
 39
 134
 128
Related tax benefit(17) (16) (34) (34)(18) (15) (52) (49)
Stock-based compensation expense, net of tax benefit$28
 $27
 $54
 $55
$28
 $24
 $82
 $79
During the sixnine months ended JuneSeptember 30, 2016, the Company granted 3 million RSUs for CBS Corp. Class B Common Stock with a weighted average per unit grant-date fair value of $47.24.$47.26. RSUs granted during the first sixnine months of 2016 generally vest over a one- to four-year service period. Compensation expense for RSUs is determined based upon the market price of the shares underlying the awards on the date of grant. For certain RSU awards the number of shares an employee earns ranges from 0% to 120% of the target award, based on the outcome of established performance conditions. Compensation expense is recorded based on the probable outcome of the performance conditions. During the sixnine months ended JuneSeptember 30, 2016, the Company also granted 2 million stock options with a weighted average exercise price of $45.79. Stock options granted during the first sixnine months of 2016 vest over a four-year service period and expire eight years from the date of grant. Compensation expense for stock options is determined based on the grant date fair value of the award calculated using the Black-Scholes options-pricing model.

Total unrecognized compensation cost related to unvested RSUs at JuneSeptember 30, 2016 was $276$237 million, which is expected to be recognized over a weighted average period of 2.52.4 years. Total unrecognized compensation cost related to unvested stock option awards at JuneSeptember 30, 2016 was $58$50 million, which is expected to be recognized over a weighted average period of 2.52.4 years.
3) PROGRAMMING AND OTHER INVENTORY
 At At
 June 30, 2016 December 31, 2015
Acquired program rights $1,490
   $1,533
 
Internally produced programming:       
Released 1,447
   1,261
 
In process and other 308
   392
 
Publishing, primarily finished goods 48
   42
 
Total programming and other inventory 3,293
   3,228
 
Less current portion 1,224
   1,271
 
Total noncurrent programming and other inventory $2,069
   $1,957
 



CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

3) PROGRAMMING AND OTHER INVENTORY
 At At
 September 30, 2016 December 31, 2015
Acquired program rights $1,737
   $1,533
 
Internally produced programming:       
Released 1,459
   1,261
 
In process and other 445
   392
 
Publishing, primarily finished goods 55
   42
 
Total programming and other inventory 3,696
   3,228
 
Less current portion 1,459
   1,271
 
Total noncurrent programming and other inventory $2,237
   $1,957
 

4) RELATED PARTIES
National Amusements, Inc. National Amusements, Inc. (“NAI”) is the controlling stockholder of CBS Corp. and Viacom Inc. Mr. Sumner M. Redstone, the controlling stockholder, chairman of the board of directors and chief executive officer of NAI, is the Chairman Emeritus of each of CBS Corp. and Viacom Inc. In addition, Ms. Shari Redstone, Mr. Sumner M. Redstone’s daughter, is the president and a director of NAI and the vice chair of the Board of Directors of each of CBS Corp. and Viacom Inc. Mr. David R. Andelman is a director of CBS Corp. and serves as a director of NAI. At JuneSeptember 30, 2016, NAI directly or indirectly owned approximately 79.5% of CBS Corp.’s voting Class A Common Stock, and owned approximately 8.8%9.0% of CBS Corp.’s Class A Common Stock and non-voting Class B Common Stock on a combined basis.

On September 29, 2016, the Company announced that its Board of Directors received a letter from NAI requesting that the Company consider a potential combination of the Company and Viacom Inc.  The Company is in the process of evaluating whether to pursue any such potential transaction.  No assurance can be given regarding the entry into, consummation or terms of any such potential transaction.

Viacom Inc. As part of its normal course of business, the Company licenses its television content, leases production facilities and sells advertising spots to various subsidiaries of Viacom Inc. Viacom Inc. also distributes certain of the Company’s television programs in the home entertainment market. The Company’s total revenues from these transactions were $31$16 million and $54$44 million for the three months ended JuneSeptember 30, 2016 and 2015, respectively, and $69$85 million and $100$144 million for the sixnine months ended JuneSeptember 30, 2016 and 2015, respectively.

The Company places advertisements with and leases production facilities from various subsidiaries of Viacom Inc. The total amounts for these transactions were $4$6 million and $5 million for each of the three months ended JuneSeptember 30, 2016 and 2015, respectively, and $11$17 million for botheach of the sixnine months ended JuneSeptember 30, 2016 and 2015.



CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

The following table presents the amounts due from Viacom Inc. in the normal course of business as reflected on the Company’s Consolidated Balance Sheets. Amounts due to Viacom Inc. were minimal at JuneSeptember 30, 2016 and December 31, 2015.
At AtAt At
June 30, 2016 December 31, 2015September 30, 2016 December 31, 2015
Receivables $111
 $115
  $87
 $115
 
Other assets (Receivables, noncurrent) 34
 38
  47
 38
 
Total amounts due from Viacom Inc.
 $145
 $153
  $134
 $153
 
Other Related Parties. The Company has equity interests in two domestic television networks and several international joint ventures for television channels from which the Company earns revenues primarily by selling its television programming. Total revenues earned from sales to these joint ventures were $2413 million and $23$20 million for the three months ended JuneSeptember 30, 2016 and 2015, respectively, and $56$69 million and $71$91 million for the sixnine months ended JuneSeptember 30, 2016 and 2015, respectively. At JuneSeptember 30, 2016 and December 31, 2015, total amounts due from these joint ventures were $41 million and $48 million, respectively.

The Company, through the normal course of business, is involved in transactions with other related parties that have not been material in any of the periods presented.


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

5) BANK FINANCING AND DEBT
The following table sets forth the Company’s debt.

At AtAt At

June 30, 2016 December 31, 2015September 30, 2016 December 31, 2015
Commercial paper
$163

$—


$33

$—

Senior debt (1.95% - 7.875% due 2016 - 2045) (a)

8,167

8,365


8,849

8,365

Obligations under capital leases
79

83


75

83

Total debt
8,409

8,448


8,957

8,448

Less commercial paper
163

—


33

—

Less current portion of long-term debt
23

222


22

222

Total long-term debt, net of current portion
$8,223

$8,226


$8,902

$8,226

(a) At JuneSeptember 30, 2016 and December 31, 2015, the senior debt balances included (i) a net unamortized discount of $43$53 million and $45 million, respectively, (ii) unamortized deferred financing costs of $42$45 million and $44 million, respectively, and (iii) an increase in the carrying value of the debt relating to previously settled fair value hedges of $11$7 million and $14 million, respectively. The face value of the Company’s senior debt was $8.24$8.94 billion and $8.44 billion at JuneSeptember 30, 2016 and December 31, 2015, respectively.

During July 2016, the Company issued $700 million of 2.90% senior notes due 2027. The Company is usingused the net proceeds from this issuance for general corporate purposes, including the repurchase of CBS Corp. Class B Common Stock and the repayment of short-term borrowings, including commercial paper.

During January 2016, the Company repaid its $200 million of outstanding 7.625% senior debentures upon maturity.

At September 30, 2016, the Company classified $400 million of debt maturing in July 2017 as long-term debt on the Consolidated Balance Sheet, reflecting its intent and ability to refinance this debt on a long-term basis.



CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Commercial Paper
At JuneSeptember 30, 2016, the Company had $163$33 million of outstanding commercial paper borrowings under its $2.5 billion commercial paper program at a weighted average interest rate of 0.72%0.75% and with maturities of less than 45 days. The Company had no outstanding commercial paper borrowings at December 31, 2015.

Credit Facility
During June 2016, the Company amended and restated its $2.5 billion revolving credit facility (the “Credit Facility”). The amended Credit Facility expires in June 2021 and contains provisions that are substantially similar to the previous Credit Facility, which was due to expire in December 2019. The Credit Facility requires the Company to maintain a maximum Consolidated Leverage Ratio of 4.5x at the end of each quarter as further described in the Credit Facility. At JuneSeptember 30, 2016, the Company’s Consolidated Leverage Ratio was approximately 2.4x2.5x.

The Consolidated Leverage Ratio is the ratio of the Company’s indebtedness from continuing operations, adjusted to exclude certain capital lease obligations, at the end of a quarter, to the Company’s Consolidated EBITDA for the trailing four consecutive quarters. Consolidated EBITDA is defined in the Credit Facility as operating income plus interest income and before depreciation, amortization and certain other noncash items.

The Credit Facility is used for general corporate purposes. At JuneSeptember 30, 2016, the Company had no borrowings outstanding under the Credit Facility and the remaining availability under the Credit Facility, net of outstanding letters of credit, was $2.49 billion.

CBS Radio Indebtedness
In October 2016, in connection with the Company’s previously announced plans to separate its radio business, CBS Radio borrowed $1.46 billion through a $1.06 billion senior secured term loan due 2023 (the “Term Loan”) and the issuance of $400 million of 7.25% senior unsecured notes due 2024 through a private placement. The Term Loan bears interest at a rate equal to 3.50% plus the greater of the London Interbank Offered Rate (“LIBOR”) and 1.00%.

The Term Loan is part of a credit agreement which also includes a $250 million senior secured revolving credit facility (the “Radio Revolving Credit Facility”) which expires in 2021. Interest on the Radio Revolving Credit Facility will be based on either LIBOR or a base rate plus a margin based on CBS Radio’s Consolidated Net Secured Leverage Ratio. The Consolidated Net Secured Leverage Ratio reflects the ratio of CBS Radio’s secured debt (less up to $150 million of cash and cash equivalents) to CBS Radio’s consolidated EBITDA (as defined in the credit agreement). The Radio Revolving Credit Facility requires CBS Radio to maintain a maximum Consolidated Net Secured Leverage Ratio of 4.00 to 1.00. As of November 3, 2016, there were no borrowings outstanding under the Radio Revolving Credit Facility.

This debt is guaranteed by certain subsidiaries of CBS Radio. The Company does not guarantee, or otherwise provide credit support for, the senior notes, Term Loan, or Radio Revolving Credit Facility. The net debt proceeds will be primarily used by the Company to repurchase shares of CBS Corp. Class B Common Stock, with the remainder to be used for general corporate purposes and ongoing cash needs.



CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

6) PENSION AND OTHER POSTRETIREMENT BENEFITS
The components of net periodic cost for the Company’s pension and postretirement benefit plans were as follows:
Pension Benefits Postretirement BenefitsPension Benefits Postretirement Benefits
Three Months Ended June 30,2016 2015 2016 2015
Three Months Ended September 30,2016 2015 2016 2015
Components of net periodic cost:              
Service cost$7
 $8
 $—
 $—
$7
 $7
 $—
 $—
Interest cost53
 53
 5
 4
54
 52
 5
 6
Expected return on plan assets(57) (66) —
 —
(56) (65) —
 —
Amortization of actuarial loss (gain) (a)
22
 20
 (6) (5)21
 20
 (5) (6)
Net periodic cost$25
 $15
 $(1) $(1)$26
 $14
 $—
 $—
Pension Benefits Postretirement BenefitsPension Benefits Postretirement Benefits
Six Months Ended June 30,2016 2015 2016 2015
Nine Months Ended September 30,2016 2015 2016 2015
Components of net periodic cost:              
Service cost$15
 $16
 $—
 $—
$22
 $23
 $—
 $—
Interest cost107
 105
 10
 9
161
 157
 15
 15
Expected return on plan assets(114) (131) —
 —
(170) (196) —
 —
Amortization of actuarial loss (gain) (a)
43
 40
 (11) (10)64
 60
 (16) (16)
Net periodic cost$51
 $30
 $(1) $(1)$77
 $44
 $(1) $(1)
(a) Reflects amounts reclassified from accumulated other comprehensive income (loss) to net earnings.
7) STOCKHOLDERS’ EQUITY
On July 28, 2016, the Company announced that its Board of Directors approved an increase to the Company’s share repurchase program to a total availability of $6.0 billion. During the secondthird quarter of 2016, the Company repurchased 9.29.5 million shares of its Class B Common Stock under its share repurchase program for $500 million, at an average cost of $54.21$52.77 per share. During the sixnine months ended JuneSeptember 30, 2016, the Company repurchased 19.529.0 million shares of its Class B Common Stock for $1.00$1.50 billion, at an average cost of $51.27$51.76 per share, leaving $1.00$5.60 billion of authorization at JuneSeptember 30, 2016.

During the second quarter ofOn July 28, 2016, the Company declaredannounced that its Board of Directors approved a 20% increase to the quarterly cash dividend of $.15 on its Class A and Class B Common Stock, resulting instock to $.18 from $.15 per share. The total dividends of $69third quarter 2016 dividend was $80 million, payablewhich was paid on JulyOctober 1, 2016.


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Accumulated Other Comprehensive Income (Loss)
The following tables summarize the changes in the components of accumulated other comprehensive income (loss).
Cumulative
Translation
Adjustments
 
Net Actuarial
Gain (Loss)
and Prior
Service Cost
 
Accumulated Other
Comprehensive Loss
Cumulative
Translation
Adjustments
 
Net Actuarial
Gain (Loss)
and Prior
Service Cost
 
Accumulated Other
Comprehensive Loss
At December 31, 2015$152
 $(922) $(770) $152
 $(922) $(770) 
Other comprehensive income before reclassifications1
 —
 1
 2
 —
 2
 
Reclassifications to net earnings—
 19
(a) 
 19
 —
 29
(a) 
 29
 
Net other comprehensive income1
 19

 20
 2
 29

 31
 
At June 30, 2016$153
 $(903)
 $(750) 
At September 30, 2016$154
 $(893)
 $(739) 
Cumulative
Translation
Adjustments
 
Net Actuarial
Gain (Loss)
and Prior
Service Cost
 
Accumulated Other
Comprehensive Loss
Cumulative
Translation
Adjustments
 
Net Actuarial
Gain (Loss)
and Prior
Service Cost
 
Accumulated Other
Comprehensive Loss
At December 31, 2014$157
 $(892) $(735) $157
 $(892) $(735) 
Other comprehensive loss before reclassifications(1) —
 (1) (8) —
 (8) 
Reclassifications to net earnings—
 18
(a) 
 18
 2
 27
(a) 
 29
 
Net other comprehensive income (loss)(1) 18
 17
 (6) 27
 21
 
At June 30, 2015$156
 $(874) $(718) 
At September 30, 2015$151
 $(865) $(714) 
(a)Reflects amortization of net actuarial losses. See Note 6.

The net actuarial gain (loss) and prior service cost related to pension and other postretirement benefit plans included in other comprehensive income (loss) is net of a tax provision of $13$19 million and $12$17 million for the sixnine months ended JuneSeptember 30, 2016 and 2015, respectively.
8) INCOME TAXES
The provision for income taxes represents federal, state and local, and foreign income taxes on earnings from continuing operations before income taxes and equity in loss of investee companies.

The provision for income taxes was $205176 million for the three months ended JuneSeptember 30, 2016 and $165$211 million for the three months ended JuneSeptember 30, 2015, reflecting an effective income tax rate of 32.2%25.0% and 32.8%32.3%, respectively. For the sixnine months ended JuneSeptember 30, 2016, the provision for income taxes was $436$612 million compared to $368$579 million for the sixnine months ended JuneSeptember 30, 2015, reflecting an income tax rate of 32.0%29.6% and 33.1%32.8%, respectively. The lower tax rate for the three and nine months ended September 30, 2016 includes a one-time benefit of $47 million associated with a multiyear adjustment to a tax deduction, which was approved by the Internal Revenue Service during the third quarter of 2016.
9) COMMITMENTS AND CONTINGENCIES
Guarantees
The Company has indemnification obligations with respect to letters of credit and surety bonds primarily used as security against non-performance in the normal course of business. At JuneSeptember 30, 2016, the outstanding letters of credit and surety bonds approximated $110$111 million and were not recorded on the Consolidated Balance Sheet.



CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

In the course of its business, the Company both provides and receives indemnities which are intended to allocate certain risks associated with business transactions. Similarly, the Company may remain contingently liable for various obligations of a business that has been divested in the event that a third party does not live up to its


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

obligations under an indemnification obligation. The Company records a liability for its indemnification obligations and other contingent liabilities when probable and reasonably estimable.

Legal Matters
General. On an ongoing basis, the Company vigorously defends itself in numerous lawsuits and proceedings and responds to various investigations and inquiries from federal, state, local and international authorities (collectively, ‘‘litigation’’). Litigation may be brought against the Company without merit, is inherently uncertain and always difficult to predict. However, based on its understanding and evaluation of the relevant facts and circumstances, the Company believes that the below-described legal matters and other litigation to which it is a party are not likely, in the aggregate, to have a material adverse effect on its results of operations, financial position or cash flows. Under the Separation Agreement between the Company and Viacom Inc., the Company and Viacom Inc. have agreed to defend and indemnify the other in certain litigation in which the Company and/or Viacom Inc. is named.

Claims Related to Former Businesses: Asbestos. The Company is a defendant in lawsuits claiming various personal injuries related to asbestos and other materials, which allegedly occurred principally as a result of exposure caused by various products manufactured by Westinghouse, a predecessor, generally prior to the early 1970s. Westinghouse was neither a producer nor a manufacturer of asbestos. The Company is typically named as one of a large number of defendants in both state and federal cases. In the majority of asbestos lawsuits, the plaintiffs have not identified which of the Company’s products is the basis of a claim. Claims against the Company in which a product has been identified principally relate to exposures allegedly caused by asbestos-containing insulating material in turbines sold for power-generation, industrial and marine use.

Claims are frequently filed and/or settled in groups, which may make the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. The Company does not report as pending those claims on inactive, stayed, deferred or similar dockets which some jurisdictions have established for claimants who allege minimal or no impairment. As of JuneSeptember 30, 2016, the Company had pending approximately 34,79034,400 asbestos claims, as compared with approximately 36,030 as of December 31, 2015 and 38,00037,190 as of JuneSeptember 30, 2015. During the secondthird quarter of 2016, the Company received approximately 1,190930 new claims and closed or moved to an inactive docket approximately 1,4401,320 claims. The Company reports claims as closed when it becomes aware that a dismissal order has been entered by a court or when the Company has reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other factors. In 2015, as the result of an insurance settlement, insurance recoveries exceeded the Company’s after tax costs for settlement and defense of asbestos claims by approximately $5 million. In 2014, the Company’s costs for settlement and defense of asbestos claims after insurance and taxes were approximately $11 million. The Company’s costs for settlement and defense of asbestos claims may vary year to year and insurance proceeds are not always recovered in the same period as the insured portion of the expenses.

The Company believes that its reserves and insurance are adequate to cover its asbestos liabilities. This belief is based upon many factors and assumptions, including the number of outstanding claims, estimated average cost per claim, the breakdown of claims by disease type, historic claim filings, costs per claim of resolution and the filing of new claims. While the number of asbestos claims filed against the Company has trended down in the past five to ten years and has remained flat in recent years, it is difficult to predict future asbestos liabilities, as events and circumstances may occur including, among others, the number and types of claims and average cost to resolve such claims, which could affect the Company’s estimate of its asbestos liabilities.


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Other. The Company from time to time receives claims from federal and state environmental regulatory agencies and other entities asserting that it is or may be liable for environmental cleanup costs and related damages


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

principally relating to historical and predecessor operations of the Company. In addition, the Company from time to time receives personal injury claims including toxic tort and product liability claims (other than asbestos) arising from historical operations of the Company and its predecessors.
10) RESTRUCTURING CHARGES
During the year ended December 31, 2015, in a continued effort to reduce its cost structure, the Company initiated restructuring plans across several of its businesses, primarily for the reorganization of certain business operations. As a result, the Company recorded restructuring charges of $81 million, reflectingof which $55 million was recorded during the nine months endedSeptember 30, 2015. The 2015 restructuring charges reflected $48 million of severance costs and $33 million of costs associated with exiting contractual obligations and other related costs. During the year ended December 31, 2014, the Company recorded restructuring charges of $26 million reflecting $17 million of severance costs and $9 million of costs associated with exiting contractual obligations. As of JuneSeptember 30, 2016, the cumulative settlements for the 2015 and 2014 restructuring charges were $7683 million, of which $5054 million was for severance costs and $2629 million was for costs associated with contractual obligations. The Company expects to substantially utilize its restructuring reserves by the end of 2016.
Balance at 2016 Balance atBalance at 2016 Balance at
December 31, 2015 Settlements June 30, 2016December 31, 2015 Settlements September 30, 2016
Entertainment $19
 $(10) $9
  $19
 $(13) $6
 
Local Broadcasting 34
 (12) 22
 
Local Media 11
 (5) 6
 
Radio 23
 (11) 12
 
Corporate 1
 (1) —
  1
 (1) —
 
Total $54
 $(23) $31
  $54
 $(30) $24
 
Balance at 2015 2015 Balance atBalance at 2015 2015 Balance at
December 31, 2014 Charges Settlements December 31, 2015December 31, 2014 Charges Settlements December 31, 2015
Entertainment $6
 $26
 $(13) $19
  $6
 $26
 $(13) $19
 
Local Broadcasting 10
 55
 (31) 34
 
Local Media 5
 19
 (13) 11
 
Radio 5
 36
 (18) 23
 
Corporate 2
 —
 (1) 1
  2
 —
 (1) 1
 
Total $18
 $81
 $(45) $54
  $18
 $81
 $(45) $54
 
11) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
The Company’s carrying value of financial instruments approximates fair value, except for notes and debentures, which are not recorded at fair value. At JuneSeptember 30, 2016 and December 31, 2015, the carrying value of the Company’s senior debt was $8.17$8.85 billion and $8.37 billion, respectively, and the fair value, which is estimated based on quoted market prices for similar liabilities (Level 2) and includes accrued interest, was $9.18$9.90 billion and $8.78 billion, respectively.

The Company uses derivative financial instruments primarily to modify its exposure to market risks from fluctuations in foreign currency exchange rates. The Company does not use derivative instruments unless there is an underlying exposure and, therefore, the Company does not hold or enter into derivative financial instruments for speculative trading purposes.



CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Foreign Exchange Contracts

Foreign exchange forward contracts have principally been used to hedge projected cash flows, in currencies such as the British Pound, the Euro, the Canadian Dollar and the Australian Dollar, generally for periods up to 24 months. The Company designates forward contracts used to hedge committed and forecasted foreign currency transactions as cash flow hedges. Gains or losses on the effective portion of designated cash flow hedges are initially recorded in other comprehensive income (“OCI”) and reclassified to the statement of operations when the


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

hedged item is recognized. Additionally, the Company enters into non-designated forward contracts to hedge non-U.S. dollar denominated cash flows.

At JuneSeptember 30, 2016 and December 31, 2015, the notional amount of all foreign exchange contracts was $398$456 million and $291 million, respectively.

Gains (losses) recognized on derivative financial instruments were as follows:
Three Months Ended Six Months Ended Three Months Ended Nine Months Ended 
June 30, June 30, September 30, September 30, 
2016 2015 2016 2015Financial Statement Account2016 2015 2016 2015Financial Statement Account
Non-designated foreign exchange contracts$15
 $(7) $9
 $6
Other items, net$4
 $10
 $13
 $13
Other items, net
                
Designated interest rate swaps (a)
$—
 $3
 $—
 $5
Interest expense$—
 $2
 $—
 $7
Interest expense
(a) The gains during the three and sixnine months ended JuneSeptember 30, 2015 related to interest rate swaps that were settled during 2015.

The fair value of the Company’s derivative instruments was not material to the Consolidated Balance Sheets for any of the periods presented.
The following tables set forth the Company’s assets and liabilities measured at fair value on a recurring basis at JuneSeptember 30, 2016 and December 31, 2015. These assets and liabilities have been categorized according to the three-level fair value hierarchy established by the FASB, which prioritizes the inputs used in measuring fair value. Level 1 is based on publicly quoted prices for the asset or liability in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset or liability in inactive markets or quoted prices for similar assets or liabilities. Level 3 is based on unobservable inputs reflecting the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.
At June 30, 2016Level 1 Level 2 Level 3 Total
Assets:       
Foreign currency hedges$—
 $19
 $—
 $19
Total Assets$—
 $19
 $—
 $19
Liabilities:       
Deferred compensation$—
 $317
 $—
 $317
Foreign currency hedges—
 4
 —
 4
Total Liabilities$—
 $321
 $—
 $321
At September 30, 2016Level 1 Level 2 Level 3 Total
Assets:       
Foreign currency hedges$—
 $21
 $—
 $21
Total Assets$—
 $21
 $—
 $21
Liabilities:       
Deferred compensation$—
 $329
 $—
 $329
Foreign currency hedges—
 5
 —
 5
Total Liabilities$—
 $334
 $—
 $334


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

At December 31, 2015Level 1 Level 2 Level 3 Total
Assets:       
Foreign currency hedges$—
 $13
 $—
 $13
Total Assets$—
 $13
 $—
 $13
Liabilities:       
Deferred compensation$—
 $312
 $—
 $312
Total Liabilities$—
 $312
 $—
 $312
The fair value of foreign currency hedges is determined based on the present value of future cash flows using observable inputs including foreign currency exchange rates. The fair value of deferred compensation liabilities is determined based on the fair value of the investments elected by employees.


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

12) REPORTABLE SEGMENTS
The following tables set forth the Company’s financial performance by reportable segment. The Company’s operating segments, which are the same as its reportable segments, have been determined in accordance with the Company’s internal management structure, which is organized based upon products and services.

In preparation for the planned separation of its radio business, the Company changed the manner in which it manages its television and radio operations during the third quarter of 2016. Accordingly, the Company’s previously reported operating segment, Local Broadcasting, has been separated into two operating segments, Local Media and Radio. In connection with this new segment presentation, the presentation of intercompany revenues has been revised, including station affiliation fees paid by Local Media to the CBS Television Network. Prior period results have been reclassified to conform to this presentation.

Three Months Ended Six Months EndedThree Months Ended Nine Months Ended

June 30, June 30,September 30, September 30,

2016 2015
2016 20152016 2015
2016 2015
Revenues:





















Entertainment$1,947

$1,785

$4,534

$4,046
$1,949

$1,932

$6,483

$5,978
Cable Networks536

615

1,061

1,154
598

526

1,659

1,680
Publishing187

199

332

344
226

203

558

547
Local Broadcasting647

654

1,296

1,250
Local Media409
 376
 1,253
 1,138
Radio319
 318
 898
 907
Corporate/Eliminations(30)
(34)
(87)
(75)(105)
(98)
(319)
(274)
Total Revenues$3,287

$3,219

$7,136

$6,719
$3,396

$3,257

$10,532

$9,976
Revenues generated between segments primarily reflect advertising sales, and television license fees and station affiliation fees. These transactions are recorded at market value as if the sales were to third parties and are eliminated in consolidation.
Three Months Ended Six Months EndedThree Months Ended Nine Months Ended
June 30, June 30,September 30, September 30,
2016 2015 2016 20152016 2015 2016 2015
Intercompany Revenues:              
Entertainment$31
 $34
 $92
 $74
$102
 $96
 $321
 $270
Local Broadcasting3
 3
 6
 6
Local Media2
 3
 6
 7
Radio6
 2
 9
 5
Total Intercompany Revenues$34
 $37
 $98
 $80
$110
 $101
 $336
 $282


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

The Company presents operating income (loss) excluding restructuring charges, impairment charges, and other operating items, net, if any, (“Segment Operating Income”) as the primary measure of profit and loss for its operating segments in accordance with FASB guidance for segment reporting. The Company believes the presentation of Segment Operating Income is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company’s management and enhances their ability to understand the Company’s operating performance.
Three Months Ended Six Months EndedThree Months Ended Nine Months Ended
June 30, June 30,September 30, September 30,
2016 2015 2016 20152016 2015 2016 2015
Segment Operating Income (Loss):              
Entertainment$351
 $262
 $800
 $608
$348
 $339
 $1,148
 $947
Cable Networks227
 220
 455
 471
285
 246
 740
 717
Publishing26
 25
 39
 37
44
 43
 83
 80
Local Broadcasting212
 198
 418
 359
Local Media122
 101
 402
 338
Radio77
 73
 215
 195
Corporate(83) (64) (167) (132)(78) (49) (245) (181)
Total Segment Operating Income733
 641
 1,545
 1,343
798
 753
 2,343
 2,096
Restructuring charges—
 (55) —
 (55)—
 —
 —
 (55)
Other operating items, net (a)
—
 —
 9
 19
—
 —
 9
 19
Operating income733

586

1,554

1,307
798

753

2,352

2,060
Interest expense(100) (94) (200) (187)(104) (102) (304) (289)
Interest income8
 7
 15
 12
7
 6
 22
 18
Other items, net(4) 4
 (7) (19)2
 (4) (5) (23)
Earnings before income taxes and equity in loss of
investee companies
637
 503
 1,362
 1,113
Earnings from continuing operations before income taxes and
equity in loss of investee companies
703
 653
 2,065
 1,766
Provision for income taxes(205) (165) (436) (368)(176) (211) (612) (579)
Equity in loss of investee companies, net of tax(9) (6) (30) (19)(13) (16) (43) (35)
Net earnings from continuing operations514
 426
 1,410
 1,152
Loss from discontinued operations(36) —
 (36) —
Net earnings$423
 $332
 $896
 $726
$478
 $426
 $1,374
 $1,152
(a) Other operating items, net includes gains from the sales of internet businesses in China for the sixnine months ended JuneSeptember 30, 2016 and 2015, and for 2016, also includes a multiyear, retroactive impact of a new operating tax.
Three Months Ended Six Months EndedThree Months Ended Nine Months Ended
June 30, June 30,September 30, September 30,
2016 2015 2016 20152016 2015 2016 2015
Depreciation and Amortization:              
Entertainment$30

$32

$60

$64
$28

$31

$88

$95
Cable Networks5

6

11

12
6

5

17

17
Publishing2

2

3

3
1

1

4

4
Local Broadcasting18

19

37

40
Local Media11
 12
 33
 37
Radio7
 8
 22
 23
Corporate8

7

16

15
8

8

24

23
Total Depreciation and Amortization$63

$66

$127

$134
$61

$65

$188

$199


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Three Months Ended Six Months EndedThree Months Ended Nine Months Ended
June 30, June 30,September 30, September 30,
2016 2015 2016 20152016 2015 2016 2015
Stock-based Compensation:              
Entertainment$16
 $16
 $31
 $32
$16
 $16
 $47
 $48
Cable Networks3
 2
 6
 5
3
 3
 9
 8
Publishing1
 1
 2
 2
1
 1
 3
 3
Local Broadcasting6
 9
 13
 16
Local Media3
 3
 9
 9
Radio4
 2
 11
 12
Corporate19
 15
 36
 34
19
 14
 55
 48
Total Stock-based Compensation$45
 $43
 $88
 $89
$46
 $39
 $134
 $128
Three Months Ended Six Months EndedThree Months Ended Nine Months Ended
June 30, June 30,September 30, September 30,
2016 2015 2016 20152016 2015 2016 2015
Capital Expenditures:              
Entertainment$24

$13

$37

$21
$23

$33

$60

$54
Cable Networks2

2

4

3
4

5

8

8
Publishing3

2

6

2
1

2

7

4
Local Broadcasting10

11

21

18
Local Media9
 10
 20
 17
Radio4
 5
 14
 16
Corporate2
 1
 11
 2
5
 3
 16
 5
Total Capital Expenditures$41
 $29
 $79
 $46
$46
 $58
 $125
 $104
At AtAt At
June 30, 2016 December 31, 2015September 30, 2016 December 31, 2015
Assets:          
Entertainment $10,610
 $10,910
  $11,220
 $10,910
 
Cable Networks 2,410
 2,369
  2,526
 2,369
 
Publishing 828
 880
  835
 880
 
Local Broadcasting 8,992
 9,105
 
Corporate 274
 476
 
Local Media 3,827
 3,881
 
Radio 5,167
 5,224
 
Corporate/Eliminations 249
 476
 
Discontinued operations 24
 25
  24
 25
 
Total Assets $23,138
 $23,765
  $23,848
 $23,765
 



CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

13) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
CBS Operations Inc. is a wholly owned subsidiary of the Company. CBS Operations Inc. has fully and unconditionally guaranteed CBS Corp.’s senior debt securities. The following condensed consolidating financial statements present the results of operations, financial position and cash flows of CBS Corp., CBS Operations Inc., the direct and indirect Non-Guarantor Affiliates of CBS Corp. and CBS Operations Inc., and the eliminations necessary to arrive at the information for the Company on a consolidated basis.
Statement of OperationsStatement of Operations
For the Three Months Ended June 30, 2016For the Three Months Ended September 30, 2016
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
Revenues$36
 $3
 $3,248
 $—
 $3,287
$42
 $3
 $3,351
 $—
 $3,396
Costs and expenses:                  
Operating15
 2
 1,844
 —
 1,861
16
 1
 1,880
 —
 1,897
Selling, general and administrative21
 67
 542
 —
 630
20
 63
 557
 —
 640
Depreciation and amortization1
 6
 56
 —
 63
2
 6
 53
 —
 61
Total costs and expenses37
 75
 2,442
 —
 2,554
38
 70
 2,490
 —
 2,598
Operating income (loss)(1) (72) 806
 —
 733
4
 (67) 861
 —
 798
Interest (expense) income, net(124) (106) 138
 —
 (92)(129) (109) 141
 —
 (97)
Other items, net(1) 13
 (16) —
 (4)—
 —
 2
 —
 2
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies(126) (165) 928
 —
 637
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies(125) (176) 1,004
 —
 703
Benefit (provision) for income taxes40
 52
 (297) —
 (205)43
 59
 (278) —
 (176)
Equity in earnings (loss) of investee companies,
net of tax
509
 289
 (9) (798) (9)560
 327
 (13) (887) (13)
Net earnings from continuing operations478
 210
 713
 (887) 514
Loss from discontinued operations—
 —
 (36) —
 (36)
Net earnings$423
 $176
 $622
 $(798) $423
$478
 $210
 $677
 $(887) $478
Total comprehensive income$432
 $185
 $611
 $(796) $432
$489
 $215
 $675
 $(890) $489


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Statement of OperationsStatement of Operations
For the Six Months Ended June 30, 2016For the Nine Months Ended September 30, 2016
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
Revenues$83
 $6
 $7,047
 $—
 $7,136
$125
 $9
 $10,398
 $—
 $10,532
Cost and expenses:                  
Operating32
 3
 4,182
 —
 4,217
48
 4
 6,062
 —
 6,114
Selling, general and administrative42
 133
 1,072
 —
 1,247
62
 196
 1,629
 —
 1,887
Depreciation and amortization2
 11
 114
 —
 127
4
 17
 167
 —
 188
Other operating items, net—
 —
 (9) —
 (9)—
 —
 (9) —
 (9)
Total costs and expenses76
 147
 5,359
 —
 5,582
114
 217
 7,849
 —
 8,180
Operating income (loss)7
 (141) 1,688
 —
 1,554
11
 (208) 2,549
 —
 2,352
Interest (expense) income, net(248) (210) 273
 —
 (185)(377) (319) 414
 —
 (282)
Other items, net(2) 3
 (8) —
 (7)(2) 3
 (6) —
 (5)
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies(243) (348) 1,953
 —
 1,362
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies(368) (524) 2,957
 —
 2,065
Benefit (provision) for income taxes77
 111
 (624) —
 (436)120
 170
 (902) —
 (612)
Equity in earnings (loss) of investee companies,
net of tax
1,062
 549
 (30) (1,611) (30)1,622
 876
 (43) (2,498) (43)
Net earnings from continuing operations1,374
 522
 2,012
 (2,498) 1,410
Loss from discontinued operations—
 —
 (36) —
 (36)
Net earnings$896
 $312
 $1,299
 $(1,611) $896
$1,374
 $522
 $1,976
 $(2,498) $1,374
Total comprehensive income$916
 $325
 $1,290
 $(1,615) $916
$1,405
 $540
 $1,965
 $(2,505) $1,405


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Statement of OperationsStatement of Operations
For the Three Months Ended June 30, 2015For the Three Months Ended September 30, 2015
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
Revenues$34
 $3
 $3,182
 $—
 $3,219
$36
 $2
 $3,219
 $—
 $3,257
Costs and expenses:                  
Operating14
 2
 1,891
 —
 1,907
17
 1
 1,824
 —
 1,842
Selling, general and administrative12
 55
 538
 —
 605
3
 49
 545
 —
 597
Depreciation and amortization2
 5
 59
 —
 66
1
 5
 59
 —
 65
Restructuring charges—
 —
 55
 —
 55
Total costs and expenses28
 62
 2,543
 —
 2,633
21
 55
 2,428
 —
 2,504
Operating income (loss)6
 (59) 639
 —
 586
15
 (53) 791
 —
 753
Interest (expense) income, net(118) (99) 130
 —
 (87)(125) (103) 132
 —
 (96)
Other items, net1
 (11) 14
 —
 4
(1) 6
 (9) —
 (4)
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies(111) (169) 783
 —
 503
(111) (150) 914
 —
 653
Benefit (provision) for income taxes36
 55
 (256) —
 (165)36
 48
 (295) —
 (211)
Equity in earnings (loss) of investee companies,
net of tax
407
 149
 (6) (556) (6)501
 338
 (16) (839) (16)
Net earnings$332
 $35
 $521
 $(556) $332
$426
 $236
 $603
 $(839) $426
Total comprehensive income$343
 $34
 $542
 $(576) $343
$430
 $240
 $590
 $(830) $430


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)


Statement of OperationsStatement of Operations
For the Six Months Ended June 30, 2015For the Nine Months Ended September 30, 2015
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
Revenues$65
 $6
 $6,648
 $—
 $6,719
$101
 $8
 $9,867
 $—
 $9,976
Costs and expenses:                  
Operating30
 3
 4,016
 —
 4,049
47
 4
 5,840
 —
 5,891
Selling, general and administrative24
 116
 1,053
 —
 1,193
27
 165
 1,598
 —
 1,790
Depreciation and amortization3
 10
 121
 —
 134
4
 15
 180
 —
 199
Restructuring charges—
 —
 55
 —
 55
—
 —
 55
 —
 55
Other operating items, net—
 —
 (19) —
 (19)—
 —
 (19) —
 (19)
Total costs and expenses57
 129
 5,226
 —
 5,412
78
 184
 7,654
 —
 7,916
Operating income (loss)8
 (123) 1,422
 —
 1,307
23
 (176) 2,213
 —
��2,060
Interest (expense) income, net(233) (197) 255
 —
 (175)(358) (300) 387
 —
 (271)
Other items, net—
 —
 (19) —
 (19)(1) 6
 (28) —
 (23)
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies(225) (320) 1,658
 —
 1,113
(336) (470) 2,572
 —
 1,766
Benefit (provision) for income taxes73
 104
 (545) —
 (368)109
 152
 (840) —
 (579)
Equity in earnings (loss) of investee companies, net of tax878
 464
 (19) (1,342) (19)1,379
 802
 (35) (2,181) (35)
Net earnings$726
 $248
 $1,094
 $(1,342) $726
$1,152
 $484
 $1,697
 $(2,181) $1,152
Total comprehensive income$743
 $247
 $1,115
 $(1,362) $743
$1,173
 $487
 $1,705
 $(2,192) $1,173


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)


Balance SheetBalance Sheet
At June 30, 2016At September 30, 2016
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
Assets                  
Cash and cash equivalents$46
 $1
 $129
 $—
 $176
$54
 $1
 $124
 $—
 $179
Receivables, net22
 2
 3,219
 —
 3,243
20
 2
 3,326
 —
 3,348
Programming and other inventory4
 3
 1,217
 —
 1,224
4
 3
 1,452
 —
 1,459
Prepaid expenses and other current assets91
 39
 350
 (27) 453
93
 39
 375
 (36) 471
Total current assets163
 45
 4,915
 (27) 5,096
171
 45
 5,277
 (36) 5,457
Property and equipment46
 183
 3,013
 —
 3,242
47
 184
 3,032
 —
 3,263
Less accumulated depreciation and amortization23
 129
 1,734
 —
 1,886
23
 135
 1,760
 —
 1,918
Net property and equipment23
 54
 1,279
 —
 1,356
24
 49
 1,272
 —
 1,345
Programming and other inventory5
 7
 2,057
 —
 2,069
6
 7
 2,224
 —
 2,237
Goodwill98
 62
 6,371
 —
 6,531
98
 62
 6,371
 —
 6,531
Intangible assets—
 —
 5,504
 —
 5,504
—
 —
 5,499
 —
 5,499
Investments in consolidated subsidiaries43,808
 13,326
 —
 (57,134) —
44,372
 13,652
 —
 (58,024) —
Other assets161
 11
 2,410
 —
 2,582
153
 11
 2,615
 —
 2,779
Intercompany—
 2,000
 25,313
 (27,313) —
—
 1,901
 25,528
 (27,429) —
Total Assets$44,258
 $15,505
 $47,849
 $(84,474) $23,138
$44,824
 $15,727
 $48,786
 $(85,489) $23,848
Liabilities and Stockholders’ Equity                  
Accounts payable$1
 $3
 $117
 $—
 $121
$1
 $2
 $150
 $—
 $153
Participants’ share and royalties payable—
 —
 1,007
 —
 1,007
—
 —
 979
 —
 979
Program rights3
 4
 315
 —
 322
4
 4
 365
 —
 373
Commercial paper163
 —
 —
 —
 163
33
 —
 —
 —
 33
Current portion of long-term debt7
 —
 16
 —
 23
6
 —
 16
 —
 22
Accrued expenses and other current liabilities380
 222
 876
 (27) 1,451
363
 228
 983
 (36) 1,538
Total current liabilities554
 229
 2,331
 (27) 3,087
407
 234
 2,493
 (36) 3,098
Long-term debt8,114
 —
 109
 —
 8,223
8,797
 —
 105
 —
 8,902
Other liabilities2,889
 242
 3,309
 —
 6,440
2,843
 244
 3,413
 —
 6,500
Intercompany27,313
 —
 —
 (27,313) —
27,429
 —
 —
 (27,429) —
Stockholders’ Equity:                  
Preferred stock—
 —
 126
 (126) —
—
 —
 126
 (126) —
Common stock1
 123
 590
 (713) 1
1
 123
 590
 (713) 1
Additional paid-in capital43,964
 —
 60,894
 (60,894) 43,964
43,935
 —
 60,894
 (60,894) 43,935
Retained earnings (deficit)(19,622) 15,225
 (14,782) (443) (19,622)(19,144) 15,435
 (14,105) (1,330) (19,144)
Accumulated other comprehensive income (loss)(750) 17
 72
 (89) (750)(739) 22
 70
 (92) (739)
23,593
 15,365
 46,900
 (62,265) 23,593
24,053
 15,580
 47,575
 (63,155) 24,053
Less treasury stock, at cost18,205
 331
 4,800
 (5,131) 18,205
18,705
 331
 4,800
 (5,131) 18,705
Total Stockholders’ Equity5,388
 15,034
 42,100
 (57,134) 5,388
5,348
 15,249
 42,775
 (58,024) 5,348
Total Liabilities and Stockholders’ Equity$44,258
 $15,505
 $47,849
 $(84,474) $23,138
$44,824
 $15,727
 $48,786
 $(85,489) $23,848


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

 Balance Sheet
 At December 31, 2015
 CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
Assets         
Cash and cash equivalents$267
 $1
 $55
 $—
 $323
Receivables, net28
 2
 3,598
 —
 3,628
Programming and other inventory3
 3
 1,265
 —
 1,271
Prepaid expenses and other current assets192
 26
 337
 (30) 525
Total current assets490

32

5,255

(30)
5,747
Property and equipment46
 180
 3,017
 —
 3,243
Less accumulated depreciation and amortization20
 118
 1,700
 —
 1,838
Net property and equipment26

62

1,317

—
 1,405
Programming and other inventory6
 9
 1,942
 —
 1,957
Goodwill98
 62
 6,321
 —
 6,481
Intangible assets—
 —
 5,514
 —
 5,514
Investments in consolidated subsidiaries42,744
 12,775
 —
 (55,519) —
Other assets163
 11
 2,487
 —
 2,661
Intercompany—
 2,248
 23,988
 (26,236) —
Total Assets$43,527

$15,199

$46,824

$(81,785) $23,765
Liabilities and Stockholders’ Equity
         
Accounts payable$1
 $4
 $187
 $—
 $192
Participants’ share and royalties payable—
 —
 1,013
 —
 1,013
Program rights4
 4
 366
 —
 374
Current portion of long-term debt206
 —
 16
 —
 222
Accrued expenses and other current liabilities418
 230
 1,141
 (30) 1,759
Total current liabilities629

238

2,723

(30) 3,560
Long-term debt8,113
 —
 113
 —
 8,226
Other liabilities2,986
 252
 3,178
 —
 6,416
Intercompany26,236
 —
 —
 (26,236) —
Stockholders’ Equity:        

Preferred stock—
 —
 126
 (126) —
Common stock1
 123
 590
 (713) 1
Additional paid-in capital44,055
 —
 60,894
 (60,894) 44,055
Retained earnings (deficit)(20,518) 14,913
 (16,081) 1,168
 (20,518)
Accumulated other comprehensive income (loss)(770) 4
 81
 (85) (770)
 22,768

15,040

45,610

(60,650) 22,768
Less treasury stock, at cost17,205
 331
 4,800
 (5,131) 17,205
Total Stockholders’ Equity5,563
 14,709
 40,810
 (55,519) 5,563
Total Liabilities and Stockholders’ Equity$43,527

$15,199

$46,824

$(81,785) $23,765


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Statement of Cash FlowsStatement of Cash Flows
For the Six Months Ended June 30, 2016For the Nine Months Ended September 30, 2016
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
Net cash flow (used for) provided by operating activities$(476) $(116) $1,843
 $—
 $1,251
$(696) $(146) $2,148
 $—
 $1,306
Investing Activities:                  
Acquisitions—
 —
 (51) —
 (51)—
 —
 (51) —
 (51)
Capital expenditures—
 (11) (68) —
 (79)—
 (16) (109) —
 (125)
Investments in and advances to investee companies—
 —
 (43) —
 (43)—
 —
 (44) —
 (44)
Proceeds from dispositions(4) —
 31
 —
 27
(4) —
 32
 —
 28
Other investing activities4
 —
 —
 —
 4
7
 —
 4
 —
 11
Net cash flow used for investing activities—
 (11) (131) —
 (142)
Net cash flow provided by (used for) investing activities3
 (16) (168) —
 (181)
Financing Activities:                  
Proceeds from short-term debt borrowings, net163
 —
 —
 —
 163
33
 —
 —
 —
 33
Proceeds from issuance of senior notes685
 —
 —
 —
 685
Repayment of senior debentures(199) —
 —
 —
 (199)(199) —
 —
 —
 (199)
Payment of capital lease obligations—
 —
 (8) —
 (8)—
 —
 (13) —
 (13)
Dividends(142) —
 —
 —
 (142)(209) —
 —
 —
 (209)
Purchase of Company common stock(1,033) —
 —
 —
 (1,033)(1,534) —
 —
 —
 (1,534)
Payment of payroll taxes in lieu of issuing
shares for stock-based compensation
(57) —
 —
 —
 (57)(57) —
 —
 —
 (57)
Proceeds from exercise of stock options10
 —
 —
 —
 10
13
 —
 —
 —
 13
Excess tax benefit from stock-based compensation11
 —
 —
 —
 11
13
 —
 —
 —
 13
Other financing activities(1) —
 —
 —
 (1)(1) —
 —
 —
 (1)
Increase (decrease) in intercompany payables1,503
 127
 (1,630) —
 —
1,736
 162
 (1,898) —
 —
Net cash flow provided by (used for) financing activities255
 127
 (1,638) —
 (1,256)480
 162
 (1,911) —
 (1,269)
Net (decrease) increase in cash and cash equivalents(221) —
 74
 —
 (147)(213) —
 69
 —
 (144)
Cash and cash equivalents at beginning of period267
 1
 55
 —
 323
267
 1
 55
 —
 323
Cash and cash equivalents at end of period$46
 $1
 $129
 $—
 $176
$54
 $1
 $124
 $—
 $179


CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Statement of Cash FlowsStatement of Cash Flows
For the Six Months Ended June 30, 2015For the Nine Months Ended September 30, 2015
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
Net cash flow (used for) provided by operating activities$(301) $(150) $1,314
 $—
 $863
$(557) $(183) $1,363
 $—
 $623
Investing Activities:        

        

Acquisitions—
 —
 (1) —
 (1)—
 —
 (7) —
 (7)
Capital expenditures—
 (2) (44) —
 (46)—
 (5) (99) —
 (104)
Investments in and advances to investee companies—
 —
 (55) —
 (55)—
 —
 (58) —
 (58)
Proceeds from dispositions—
 —
 59
 —
 59
—
 —
 75
 —
 75
Other investing activities4
 —
 —
 —
 4
(8) —
 —
 —
 (8)
Net cash flow provided by (used for) investing activities from continuing operations4

(2)
(41)
—
 (39)
Net cash flow used for investing activities from continuing operations(8)
(5)
(89)
—
 (102)
Net cash flow used for investing activities from discontinued operations(3) —
 —
 —
 (3)(4) —
 —
 —
 (4)
Net cash flow provided by (used for) investing activities1

(2)
(41)
—
 (42)
Net cash flow used for investing activities(12)
(5)
(89)
—
 (106)
Financing Activities:        

        

Repayments of short-term debt borrowings, net(222) —
 —
 —
 (222)(313) —
 —
 —
 (313)
Proceeds from issuance of senior notes1,178
 —
 —
 —
 1,178
1,959
 —
 —
 —
 1,959
Payment of capital lease obligations—
 —
 (8) —
 (8)—
 —
 (13) —
 (13)
Dividends(155) —
 —
 —
 (155)(228) —
 —
 —
 (228)
Purchase of Company common stock(1,832) —
 —
 —
 (1,832)(2,345) —
 —
 —
 (2,345)
Payment of payroll taxes in lieu of issuing
shares for stock-based compensation
(95) —
 —
 —
 (95)(96) —
 —
 —
 (96)
Proceeds from exercise of stock options123
 —
 —
 —
 123
137
 —
 —
 —
 137
Excess tax benefit from stock-based compensation82
 —
 —
 —
 82
87
 —
 —
 —
 87
Increase (decrease) in intercompany payables1,185
 152
 (1,337) —
 —
1,353
 188
 (1,541) —
 —
Net cash flow provided by (used for) financing activities264
 152
 (1,345) —
 (929)554
 188
 (1,554) —
 (812)
Net decrease in cash and cash equivalents(36)
—

(72)
—
 (108)(15)
—

(280)
—
 (295)
Cash and cash equivalents at beginning of period63
 1
 364
 —
 428
63
 1
 364
 —
 428
Cash and cash equivalents at end of period$27

$1

$292

$—
 $320
$48

$1

$84

$—
 $133


Item 2.Management’s Discussion and Analysis of Results of Operations and Financial Condition.
 (Tabular dollars in millions, except per share amounts)
Management’s discussion and analysis of the results of operations and financial condition of CBS Corporation (the “Company” or “CBS Corp.”) should be read in conjunction with the consolidated financial statements and related notes in the Company’s Annual Report filed on Form 10-K for the fiscal year ended December 31, 2015.

Overview

Business overview and strategy
The Company operates businesses which span the media and entertainment industries, including the CBS Television Network, cable networks, content production and distribution, television and radio stations, internet-based businesses, and consumer publishing. The Company’s principal strategy is to create and acquire premium content that is widely accepted by audiences and generate both advertising and non-advertising revenues from the distribution of this content on multiple media platforms and to various geographic locations. The Company continues to increase its investment in both Company-owned and acquired premium content to enhance its opportunities for revenue growth, which include exhibiting the Company’s content on digital and other platforms through licensing and subscription services, including the Company’s owned digital streaming services; expanding the distribution of its content internationally; securing compensation from multichannel video programming distributors (“MVPDs”) and television stations affiliated with the CBS Television Network; and further monetizing delayed viewing. The Company believes that its increased investment in premium content will also enable it to stay ahead of changes in the media and entertainment industry, including new distribution platforms and changes in programming packages offered to consumers.

Operational highlights - Three Months Ended September 30, 2016 versusThree Months Ended September 30, 2015
Consolidated results of operations    Increase/(Decrease) 
Three Months Ended September 30,2016
2015 $ % 
Revenues$3,396
 $3,257
 $139
 4% 
Operating income$798
 $753
 $45
 6% 
Net earnings from continuing operations$514
 $426
 $88
 21% 
Adjusted net earnings from continuing operations (a)
$467
 $426
 $41
 10% 
Diluted EPS from continuing operations$1.15
 $.88
 $.27
 31% 
Adjusted diluted EPS from continuing operations (a)
$1.05
 $.88
 $.17
 19% 
(a) See page 33 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

For the three months ended September 30, 2016, the Company reported record third quarter results in revenues, operating income and diluted earnings per share from continuing operations (‘‘EPS’’), led by growth in station affiliation fees and retransmission revenues, and higher television licensing sales. Diluted EPS also benefited from lower weighted average shares outstanding in the third quarter of 2016 as a result of the Company’s ongoing share repurchase program.

For the three months ended September 30, 2016, the 4% revenue growth was driven by a 13% increase in affiliate and subscription fee revenues, reflecting 32% growth in station affiliation fees and retransmission revenues, as well as revenues from digital distribution platforms, including CBS All Access and Showtime Networks’ over-the-top digital streaming subscription offering (“Showtime Networks’ over-the-top service”). Revenue growth for the third quarter of 2016 also reflected a 6% increase in content licensing and distribution revenues, driven by higher domestic television licensing sales. Advertising revenues for the quarter were impacted by 10 hours of primetime preemptions for the Democratic and Republican conventions and the first Presidential debate as well as competition from the 2016 Summer Olympics, while advertising benefited from higher political spending.


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Operating income increased 6% and diluted EPS grew 31% from the third quarter of 2015 primarily driven by the revenue growth, which was partially offset by an increased investment in programming. In addition, included in diluted EPS for the third quarter of 2016 was a one-time tax benefit of $47 million associated with a multiyear adjustment to a tax deduction, which was approved by the Internal Revenue Service (“IRS”) during the third quarter of 2016. On an adjusted basis, excluding this tax benefit, diluted EPS grew 19%. Diluted EPS also benefited from the Company’s ongoing share repurchase program.

Recent Developments
In connection with the Company’s previously announced plans to separate its radio business, a preliminary registration statement was filed with the Securities and Exchange Commission (‘‘SEC’’) in Julyduring the third quarter of 2016 for the proposed initial public offering of the common stock of CBS Radio Inc. (‘‘CBS Radio’’). Additionally, in October 2016, CBS Radio borrowed $1.46 billion through a $1.06 billion senior secured term loan (the “Term Loan”) and the issuance of $400 million of senior unsecured notes through a private placement. The net debt proceeds will be primarily used by CBS Corp. to repurchase shares of its Class B Common Stock, with the remainder to be used for general corporate purposes and ongoing cash needs. During the fourth quarter of 2016, the Company intends to repurchase $1.5 billion of its Class B Common Stock, including $500 million as part of its ongoing repurchase program and $1.0 billion using the net proceeds from the CBS Radio borrowings. These planned repurchases are subject to market and business conditions, and remain at the discretion of management.

On September 29, 2016, the Company announced that its Board of Directors received a letter from National Amusements, Inc. requesting that the Company consider a potential combination of the Company and Viacom Inc. National Amusements, Inc., directly and indirectly, owns approximately 80% of the voting shares of each of the Company and Viacom Inc. The Company is in the process of evaluating whether to pursue any such potential transaction. No assurance can be given regarding the entry into, consummation or terms of any such potential transaction.

Operational highlights - ThreeNine Months Ended JuneSeptember 30, 2016 versusThree Nine Months Ended JuneSeptember 30, 2015
Consolidated results of operations    Increase/(Decrease) 
Three Months Ended June 30,2016
2015 $ % 
Revenues$3,287
 $3,219
 $68
 2% 
Operating income$733
 $586
 $147
 25% 
Adjusted operating income (a)
$733
 $641
 $92
 14% 
Net earnings$423
 $332
 $91
 27% 
Adjusted net earnings (a)
$423
 $365
 $58
 16% 
Diluted EPS$.93
 $.67
 $.26
 39% 
Adjusted diluted EPS (a)
$.93
 $.74
 $.19
 26% 
Consolidated results of operations    Increase/(Decrease) 
Nine Months Ended September 30,2016 2015 $ % 
Revenues$10,532
 $9,976
 $556
 6% 
Operating income$2,352
 $2,060
 $292
 14% 
Adjusted operating income (a)
$2,343
 $2,096
 $247
 12% 
Net earnings from continuing operations$1,410
 $1,152
 $258
 22% 
Adjusted net earnings from continuing operations (a)
$1,364
 $1,182
 $182
 15% 
Diluted EPS from continuing operations$3.10
 $2.33
 $.77
 33% 
Adjusted diluted EPS from continuing operations (a)
$3.00
 $2.39
 $.61
 26% 
(a) See pages 31-32page 33 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with accounting principles generally accepted in the United States (“GAAP”).GAAP.

For the threenine months ended JuneSeptember 30, 2016, the Company reported6% increase in revenues was driven by 10% growth in advertising revenues, operating incomereflecting CBS’s broadcast of Super Bowl 50 and diluted earnings per share (‘‘EPS’’)6% growth in underlying network advertising. Affiliate and subscription fee revenues increased 8%, driven by higher television licensing sales in international markets and continued39% growth in station affiliation fees and retransmission revenues.

Forrevenues, as well as revenues from digital distribution platforms. These increases were partially offset by the three months ended June 30, 2016, revenues increased 2%; however, comparability was impacted by two significant events in the second quarter ofbenefit to 2015 which did not recur in 2016:from Showtime Networks’ distribution of the Floyd Mayweather/Manny Pacquiao boxing event,event. Content licensing and distribution revenues declined 4%, reflecting lower domestic licensing sales compared with the highest-grossing pay-per-view eventfirst nine months of all time, 2015, which included significant licensing sales of NCIS and CBS’s broadcast of the NCAA Division I Men’s Basketball ChampionshipElementary (“NCAA Tournament”) finals, which was broadcast by Turner Broadcasting Systems (“Turner”) in 2016. These two events impacted the second quarter revenue comparison by six percentage points. Revenue growth for the second quarter of 2016 was led by a 16%,


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


increase in contentpartially offset by growth from international licensing, and distribution revenues, driven mainly byfrom the international licensingsales of all episodes of five Star Trek series. Affiliate and subscription fee revenues decreased 3% as a result of the previously mentioned pay-per-view boxing event, which was offset by 44% growth in station affiliation fees and retransmission revenues, as well as revenues from new digital distribution platforms, including CBS All Access and Showtime Networks’ over-the-top digital streaming subscription offering (“Showtime Networks’ over-the-top service”). Advertising revenues decreased 3% reflecting the previously mentioned benefit to 2015 from the broadcast of the NCAA Tournament finals, as well as the impact from the sales of internet businesses in China during 2015, partially offset by 2% growth in underlying network advertising revenues.

Operating income grew 25% and diluted EPS increased 39% from the second quarter of 2015 primarily driven by increases from higher-margin revenues. In addition, included in operating income and diluted EPS for the second quarter of 2015 were restructuring charges of $55 million. On an adjusted basis, excluding these restructuring charges, operating income grew 14% and diluted EPS increased 26%. The previously mentioned impact to revenues from33% for the nine months ended September 30, 2016, primarily driven by the higher revenues. In addition, for the nine months ended September 30, 2015, pay-per-view boxing event did not have a significant impact to operating income asand diluted EPS included restructuring charges of $55 million and for the revenues were largely offset bythree and nine months ended September 30, 2016, diluted EPS included the associated costs.aforementioned tax benefit of $47 million. The EPS comparison also benefited from lower weighted average shares outstanding as a result of the Company’s ongoing share repurchase program.

Operational highlights - Six Months Ended June 30, 2016 versus Six Months Ended June 30, 2015
Consolidated results of operations    Increase/(Decrease) 
Six Months Ended June 30,2016 2015 $ % 
Revenues$7,136
 $6,719
 $417
 6% 
Operating income$1,554
 $1,307
 $247
 19% 
Adjusted operating income (a)
$1,545
 $1,343
 $202
 15% 
Net earnings$896
 $726
 $170
 23% 
Adjusted net earnings (a)
$897
 $756
 $141
 19% 
Diluted EPS$1.95
 $1.45
 $.50
 34% 
Adjusted diluted EPS (a)
$1.95
 $1.51
 $.44
 29% 
(a) See pages 31 - 32 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

For the six months ended June 30, 2016, the 6% increase in revenues was driven by 15% growth in advertising revenues, reflecting CBS’s broadcast of Super Bowl 50 and 7% growth in underlying network advertising. Affiliate and subscription fee revenues increased 5%, driven by 43% growth in station affiliation fees and retransmission revenues, as well as revenues from new digital distribution platforms, partially offset by the benefit to the second quarter of 2015 from the previously mentioned pay-per-view boxing event. Content licensing and distribution revenues declined 9%, reflecting lower domestic licensing sales compared to the first half of 2015 which included significant domestic licensing sales of NCIS and CSI, partially offset by growth from international licensing, mainly from the sales of Star Trek series.

Operating income grew 19% and diluted EPS increased 34% primarily driven by the higher revenues, as well as restructuring charges of $55 million recorded during the six months ended June 30, 2015. The EPS comparison also benefited from lower weighted average shares outstanding as a result of the Company’s ongoing share repurchase program.

The Company generated operating cash flow from continuing operations of $1.25$1.31 billion for the sixnine months ended JuneSeptember 30, 2016 compared with $881$650 million for the sixnine months ended JuneSeptember 30, 2015. Free cash flow for the sixnine months ended JuneSeptember 30, 2016 was $1.17$1.18 billion compared with $835$546 million for the same prior-year period. These


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


increases were primarily driven by growth in affiliate and subscription fees and higher advertising revenues, including from the broadcast of Super Bowl 50 on CBS, partially offset by increased investment in content. Free cash flow is a non-GAAP financial measure. See “Free Cash Flow” on page 47pages 49 - 50 for a reconciliation of net cash flow provided by (used for) operating activities, the most directly comparable GAAP financial measure, to free cash flow.

Share Repurchases and Dividends
During the second quarter of 2016, the Company repurchased 9.2 million shares of its Class B Common Stock under its share repurchase program for $500 million, at an average cost of $54.21 per share. During the six months ended June 30, 2016, the Company repurchased 19.5 million shares of its Class B Common Stock for $1.00 billion, at an average cost of $51.27 per share, leaving $1.00 billion of authorization at June 30, 2016.

During the second quarter of 2016, the Company declared a quarterly cash dividend of $.15 on its Class A and Class B Common Stock, resulting in total dividends of $69 million, payable on July 1, 2016.

On July 28, 2016, the Company announced that its Board of Directors approved an increase to the Company’s share repurchase program to a total availability of $6.0 billion. During the third quarter of 2016, the Company repurchased 9.5 million shares of its Class B Common Stock under its share repurchase program for $500 million, at an average cost of $52.77 per share. During the nine months ended September 30, 2016, the Company repurchased 29.0 million shares of its Class B Common Stock for $1.50 billion, as well asat an average cost of $51.76 per share, leaving $5.60 billion of authorization at September 30, 2016.

On July 28, 2016, the Company announced that its Board of Directors approved a 20% increase to the quarterly cash dividend on the Company’sits Class A and Class B Common Stock to $.18 from $.15 to $.18 per share, payableshare. The total third quarter 2016 dividend was $80 million, which was paid on October 1, 2016, to shareholders of record on September 9, 2016.

Debt

During July 2016, the Company issued $700 million
Management’s Discussion and Analysis of 2.90% senior notes due 2027. The Company is using the net proceeds from this issuance for general corporate purposes, including the repurchase
Results of CBS Corp. Class B Common StockOperations and the repayment of short-term borrowings, including commercial paper. Upon settlement of the debt issuance on July 11, 2016, the Company had $8.85 billion of long-term debt outstanding, excluding capital leases, at a weighted average interest rate of 4.47%.Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Reconciliation of Non-GAAP Measures
Results for the sixthree and nine months ended JuneSeptember 30, 2016 and the three and sixnine months ended JuneSeptember 30, 2015 included discrete items that were not part of the normal course of operations. The following tables present adjusted operating income, adjusted net earnings from continuing operations, and adjusted diluted EPS from continuing operations, which exclude the impact of these discrete items. These adjusted results are non-GAAP financial measures, which are reconciled below to the most directly comparable financial measures in accordance with GAAP. The Company believes that presenting its financial results adjusted for the impact of discrete items is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by the Company’s management and provides a clearer perspective on the underlying performance of the Company.
Three Months Ended June 30, Six Months Ended June 30, Nine Months Ended September 30, 
2016
2015 2016
2015 2016
2015 
Operating income$733
 $586
 $1,554
 $1,307
 $2,352
 $2,060
 
Exclude:            
Restructuring charges—
 55
 —
 55
 —
 55
 
Other operating items, net (a)
—
 —
 (9) (19) (9) (19) 
Adjusted operating income$733
 $641
 $1,545
 $1,343
 $2,343
 $2,096
 

 Three Months Ended September 30, Nine Months Ended September 30, 
 2016
2015 2016 2015 
Net earnings from continuing operations$514
 $426
 $1,410
 $1,152
 
Exclude:        
Restructuring charges (net of tax of
$22 million in 2015)
—

—
 —
 33
 
Other operating items, net (net of tax of
$4 million in 2016 and $16 million in 2015) (a)
—
 —
 (5) (3) 
Write-down of an equity investment—
 —
 6
 —
 
Discrete tax item (b)
(47) —
 (47) —
 
Adjusted net earnings from continuing operations$467

$426
 $1,364
 $1,182

 Three Months Ended September 30, Nine Months Ended September 30, 
 2016
2015 2016 2015 
Diluted EPS from continuing operations$1.15
 $.88
 $3.10
 $2.33
 
Exclude:        
Restructuring charges—
 —
 —
 .07
 
Other operating items, net (a)
—
 —
 (.01) (.01) 
Write-down of an equity investment—
 —
 .01
 —
 
Discrete tax item (b)
(.11) —
 (.10) —
 
Adjusted diluted EPS from continuing operations (c)
$1.05
 $.88
 $3.00
 $2.39
 
(a) Other operating items, net includes gains from the sales of internet businesses in China for the sixnine months ended JuneSeptember 30, 2016 and 2015, and for 2016, also includes a multiyear, retroactive impact of a new operating tax.
(b) Reflects a one-time tax benefit associated with a multiyear adjustment to a tax deduction, which was approved by the IRS during the third quarter of 2016.
(c) Amounts may not sum as a result of rounding.



Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


 Three Months Ended June 30, Six Months Ended June 30, 
 2016
2015 2016 2015 
Net earnings$423
 $332
 $896
 $726
 
Exclude:        
Restructuring charges (net of tax of
$22 million in 2015)
—

33
 —
 33
 
Other operating items, net (net of tax of
$4 million in 2016 and $16 million in 2015) (a)
—
 —
 (5) (3) 
Write-down of an equity investment—
 —
 6
 —
 
Adjusted net earnings$423

$365
 $897
 $756

 Three Months Ended June 30, Six Months Ended June 30, 
 2016
2015 2016 2015 
Diluted EPS$.93
 $.67
 $1.95
 $1.45
 
Exclude:        
Restructuring charges—
 .07
 —
 .07
 
Other operating items, net (a)
—
 —
 (.01) (.01) 
Write-down of an equity investment—
 —
 .01
 —
 
Adjusted diluted EPS$.93
 $.74
 $1.95
 $1.51
 
(a) Other operating items, net includes gains from the sales of internet businesses in China for the six months ended June 30, 2016 and 2015, and for 2016, also includes a multiyear, retroactive impact of a new operating tax.

Consolidated Results of Operations
Three and SixNine Months Ended JuneSeptember 30, 2016 versus Three and SixNine Months Ended JuneSeptember 30, 2015
Revenues
Three Months Ended June 30, Three Months Ended September 30, 
  
% of Total
Revenues
   
% of Total
Revenues
 Increase/(Decrease)   
% of Total
Revenues
   
% of Total
Revenues
 Increase/(Decrease) 
Revenues by Type2016 2015  $ % 2016 2015  $ % 
Advertising$1,552
 47% $1,594
 50% $(42) (3)% $1,469
 43% $1,481
 46% $(12) (1)% 
Content licensing and distribution943
 29
 815
 25
 128
 16
 1,108
 33
 1,046
 32
 62
 6
 
Affiliate and subscription fees733
 22
 752
 23
 (19) (3) 753
 22
 664
 20
 89
 13
 
Other59
 2
 58
 2
 1
 2
 66
 2
 66
 2
 —
 —
 
Total Revenues$3,287
 100% $3,219
 100% $68
 2 % $3,396
 100% $3,257
 100% $139
 4 % 
 Six Months Ended June 30, 
   
% of Total
Revenues
   
% of Total
Revenues
 Increase/(Decrease) 
Revenues by Type2016  2015  $ % 
Advertising$3,894
 55% $3,378
 50% $516
 15 % 
Content licensing and distribution1,672
 23
 1,843
 27
 (171) (9) 
Affiliate and subscription fees1,455
 20
 1,380
 21
 75
 5
 
Other115
 2
 118
 2
 (3) (3) 
Total Revenues$7,136
 100% $6,719
 100% $417
 6 % 


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


 Nine Months Ended September 30, 
   
% of Total
Revenues
   
% of Total
Revenues
 Increase/(Decrease) 
Revenues by Type2016  2015  $ % 
Advertising$5,363
 51% $4,859
 49% $504
 10 % 
Content licensing and distribution2,780
 26
 2,889
 29
 (109) (4) 
Affiliate and subscription fees2,208
 21
 2,044
 20
 164
 8
 
Other181
 2
 184
 2
 (3) (2) 
Total Revenues$10,532
 100% $9,976
 100% $556
 6 % 
Advertising
For the three months ended JuneSeptember 30, 2016, the 3% decrease in advertising revenues was principally drivendecreased 1%. Advertising revenues were impacted by 10 hours of primetime preemptions for the absence of CBS’s broadcast ofDemocratic and Republican conventions and the NCAA Tournament finals, which was broadcast by Turner in 2016. Under the rights agreement with the NCAA, CBS and Turner alternate broadcasting both the semifinals and finals of the NCAA Tournament, with these games being broadcast by CBS in 2017. The decline in advertising also reflected the impactfirst Presidential debate, competition from the 2016 Summer Olympics, and sales of internet businesses in China during 2015, partially offset by 2% growth in underlying network2015. Advertising revenues during the third quarter benefited from increased political advertising revenues.sales relating to U.S. federal and state elections. For the sixnine months ended JuneSeptember 30, 2016, the 15%10% increase in advertising revenues was driven by CBS’s broadcast of the Super Bowl, which is broadcast on the CBS Television Network once every three years through 2022 under the current contract; one additional NFL playoff game broadcast on CBS in 2016; and 7%6% growth in underlying network advertising.advertising; and higher political advertising sales. These increases were partially offset by the impact from the sales of internet businesses in China during 2015.

The Company recently completedDuring the fourth quarter of 2016, local advertising revenues are expected to continue to benefit from political advertising spending associated with U.S. federal and state elections. Additionally, the CBS Television Network’s upfront advertising sales (“Upfront”) for the 2016/2017 television broadcast season, which runs from the middle of September 2016 through the middle of September 2017. A significant portion of advertising spots for the CBS Television Network’s non-sports programming is sold during the Upfront each year. This year’s Upfront concluded with increases2017, resulted in pricing increases compared with the prior broadcast season, which is expected to benefit advertising revenues during the 2016/2017 broadcast season. However, overall advertising revenues for the Company will be dependent on ratings for its programming and market conditions, including demand in the scatter advertising market, which is when advertisers purchase the remaining advertising spots closer to the broadcast of the related programming. Additionally, in the second half of 2016, local advertising revenues are expected to benefit from political advertising spending associated with U.S. federal and state elections.

Content Licensing and Distribution
For the three months ended JuneSeptember 30, 2016, the 16%6% increase in content licensing and distribution revenues was driven by higher internationaldomestic television licensing, mainly fromprimarily reflecting the sales of all episodes of five Star TrekShowtime original series, including Penny Dreadful, as well as growthvarious titles from the Company’s television library, partially offset by the


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


initial domestic television licensing revenues.availability of Elementary in the third quarter of 2015. For the sixnine months ended JuneSeptember 30, 2016, the 9%4% decrease in content licensing and distribution revenues reflects lower domestic television licensing revenues, as the first sixnine months of 2015 included significant sales of NCISand and CSIElementary. This decrease was partially offset by growth from the international licensing of five Star Trek series. series and the domestic licensing sale of Penny Dreadful.

For the remainder of 2016, the content and licensing distribution revenue comparison will continue to be impacted by fluctuations resulting from the timing of when Company-owned television series are made available for multiyear licensing agreements. Television license fee revenues are recognized at the beginning of the license period in which programs are made available to the licensee for exhibition.

Affiliate and Subscription Fees
For the three months ended JuneSeptember 30, 2016, the 3% decrease13% increase in affiliate and subscription fees reflects 32% growth in station affiliation fees and retransmission revenues, and revenues from digital distribution platforms, including CBS All Access and Showtime Networks’ over-the-top service. For the nine months ended September 30, 2016, the 8% increase in affiliate and subscription fees was driven by 39% growth in station affiliation fees and retransmission revenues, and revenues from digital distribution platforms. These increases were partially offset by the benefit to 2015 from Showtime Networks’ distribution of the Floyd Mayweather/Manny Pacquiao pay-per-view boxing event, which impactedwas the second quarter affiliate and subscription fees comparison by 21 percentage points. Underlying results reflect 44% growth in station affiliation fees and retransmission revenues, and revenues from new digital distribution platforms, including CBS All Access and Showtime Networks’ over-the-top service. For the six months ended June 30, 2016, the 5% increase in affiliate and subscription fees was driven by 43% growth in station affiliation fees and retransmission revenues, and revenues from new digital distribution platforms. These increases were partially offset by the impact from the previously mentionedhighest grossing pay-per-view boxing event. event of all time.

Over the next few years the Company expects to renew a significant portion of its agreements with station affiliates and MVPDs. This, along with the Company’s digital distribution initiatives, are expected to result in continued growth in affiliate and subscription fees.

International Revenues
The Company generated approximately 10% and 12% of its total revenues from international regions for the three months ended September 30, 2016 and 2015, respectively, and generated approximately 13% and 14% of its total revenues from international regions for the nine months ended September 30, 2016 and 2015, respectively.

Operating Expenses
 Three Months Ended September 30, 
   % of Operating Expenses   % of Operating Expenses Increase/(Decrease) 
Operating Expenses by Type2016  2015  $ % 
Programming$526
 28% $518
 28% $8
 2% 
Production706
 37
 683
 37
 23
 3
 
Participation, distribution and royalty291
 15
 271
 15
 20
 7
 
Other374
 20
 370
 20
 4
 1
 
Total Operating Expenses$1,897
 100% $1,842
 100% $55
 3% 


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


MVPDs. This, along with the Company’s new digital distribution initiatives, are expected to result in continued growth in affiliate and subscription fees.

International Revenues
The Company generated approximately 17% and 14% of its total revenues from international regions for the three months ended June 30, 2016 and 2015, respectively, and generated approximately 14% and 15% of its total revenues from international regions for the six months ended June 30, 2016 and 2015, respectively.

Operating Expenses
 Three Months Ended June 30, 
   % of Operating Expenses   % of Operating Expenses Increase/(Decrease) 
Operating Expenses by Type2016  2015  $ % 
Programming$543
 29% $683
 36% $(140) (20)% 
Production672
 36
 600
 32
 72
 12
 
Participation, distribution and royalty285
 15
 244
 12
 41
 17
 
Other361
 20
 380
 20
 (19) (5) 
Total Operating Expenses$1,861
 100% $1,907
 100% $(46) (2)% 
Six Months Ended June 30, Nine Months Ended September 30, 
  % of Operating Expenses   % of Operating Expenses Increase/(Decrease)   % of Operating Expenses   % of Operating Expenses Increase/(Decrease) 
Operating Expenses by Type2016 2015  $ % 2016 2015  $ % 
Programming$1,656
 39% $1,515
 38% $141
 9 % $2,182
 36% $2,033
 34% $149
 7 % 
Production1,347
 32
 1,257
 31
 90
 7
 2,053
 33
 1,940
 33
 113
 6
 
Participation, distribution and royalty497
 12
 546
 13
 (49) (9) 788
 13
 817
 14
 (29) (4) 
Other717
 17
 731
 18
 (14) (2) 1,091
 18
 1,101
 19
 (10) (1) 
Total Operating Expenses$4,217
 100% $4,049
 100% $168
 4 % $6,114
 100% $5,891
 100% $223
 4 % 

For the three months ended JuneSeptember 30, 2016, the 20% decrease2% increase in programming expenses was driven by lowerhigher sports programming costs as a resultassociated with the broadcast of NFL games partially offset by lower costs for acquired television series. For the nine months ended September 30, 2016, the 7% increase in programming expenses was primarily driven by increased sports programming costs associated with the broadcast of NFL games, including Super Bowl 50 which was broadcast by CBS in 2016. This increase waspartially offset by costs in 2015 associated with Showtime Networks’ distribution of the Floyd Mayweather/Manny Pacquiao pay-per-view boxing event and CBS’s broadcast of the NCAA Tournament finals, which was broadcast by Turner in 2016. For the six months ended June 30, 2016, the 9% increase in programming expenses was primarily driven by increased sports programming costs as a result of additional NFL games broadcast on CBS in 2016, including Super Bowl 50, partially offset by the absence of the previously mentioned pay-per-view boxing event and lower costs for acquired television series as a result of a shift to a higher mix of internally developed television series.

For the three months ended JuneSeptember 30, 2016, the 12%3% increase in production expenses was mainly driven by higher costs associated with the increase in television licensing revenues. For the sixnine months ended JuneSeptember 30, 2016, the 7%6% increase in production expenses was the result of increased investment in internally developed series and costs associated with the Super Bowl production in 2016, partially offset by lower costs associated with the decrease in television licensing revenues.

For the three months ended JuneSeptember 30, 2016, the 17%7% increase in participation, distribution and royalty costs primarily reflects higher participations and residuals resulting from higherthe increase in television licensing revenues. For the sixnine months ended JuneSeptember 30, 2016, the 9%4% decrease in participation, distribution and royalty costs primarily reflects lower participations and residuals associated with lower television licensing revenues.

Selling, General and Administrative Expenses
 Three Months Ended September 30,
 2016 % of Revenues 2015 % of Revenues Increase/(Decrease) 
Selling, general and administrative expenses$640
  19%  $597
  18%   7%  
 Nine Months Ended September 30,
 2016 % of Revenues 2015 % of Revenues Increase/(Decrease) 
Selling, general and administrative expenses$1,887
  18%  $1,790
  18%   5%  
Selling, general and administrative (“SG&A”) expenses include expenses incurred for selling and marketing costs, occupancy and back office support. For the three and nine months ended September 30, 2016, SG&A expenses increased 7% and 5%, respectively, primarily as a result of higher pension and other employee-related costs. For the nine months ended September 30, 2016, the increase also reflects higher advertising costs associated with the timing of series premieres on Showtime.



Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Selling, General and Administrative Expenses
 Three Months Ended June 30,
 2016 % of Revenues 2015 % of Revenues Increase/(Decrease) 
Selling, general and administrative
expenses
$630
  19%  $605
  19%   4%  
 Six Months Ended June 30,
 2016 % of Revenues 2015 % of Revenues Increase/(Decrease) 
Selling, general and administrative
expenses
$1,247
  17%  $1,193
  18%   5%  
Selling, general and administrative (“SG&A”) expenses include expenses incurred for selling and marketing costs, occupancy and back office support. For the three and six months ended June 30, 2016, SG&A expenses increased 4% and 5%, respectively, primarily as a result of higher pension and other employee-related costs. For the six months ended June 30, 2016, the increase also reflects higher advertising costs associated with the timing of series premieres on Showtime.

Depreciation and Amortization
 Three Months Ended June 30, Six Months Ended June 30, 
 2016
2015 Increase/(Decrease) 2016 2015 Increase/(Decrease) 
Depreciation and amortization$63
 $66
  (5)%  $127
 $134
  (5)%  
 Three Months Ended September 30, Nine Months Ended September 30, 
 2016
2015 Increase/(Decrease) 2016
2015 Increase/(Decrease) 
Depreciation and amortization$61
 $65
  (6)%  $188
 $199
  (6)%  
For botheach of the three and sixnine months ended JuneSeptember 30, 2016, the 5%6% decrease in depreciation and amortization was the result of intangibles and property and equipment that became fully amortized, as well as the sales of internet businesses in China during 2015.

Restructuring Charges
During the nine months ended September 30, 2015, in a continued effort to reduce its cost structure, the Company initiated restructuring plans across several of its businesses, primarily for the reorganization of certain business operations. As a result, the Company recorded restructuring charges of $55 million, reflecting $34 million of severance costs and $21 million of costs associated with exiting contractual obligations and other related costs.

Other Operating Items, Net
 Six Months Ended June 30, 
 2016 2015 Increase/(Decrease) 
Other operating items, net$(9) $(19)  (53)%  
 Nine Months Ended September 30, 
 2016 2015 Increase/(Decrease) 
Other operating items, net$(9) $(19)  (53)%  
For the sixnine months ended JuneSeptember 30, 2016 and 2015, other operating items, net includes gains from the sales of internet businesses in China, and for 2016, also includes a multiyear, retroactive impact of a new operating tax.

Interest Expense/Income
Three Months Ended June 30, Six Months Ended June 30, Three Months Ended September 30, Nine Months Ended September 30, 
2016
2015
Increase/(Decrease) 2016
2015 Increase/(Decrease) 2016
2015
Increase/(Decrease) 2016
2015 Increase/(Decrease) 
Interest expense$(100) $(94) 6% $(200) $(187)  7%  $(104) $(102) 2% $(304) $(289)  5%  
Interest income$8
 $7
 14% $15
 $12
 25% $7
 $6
 17% $22
 $18
 22% 
The following table presents the Company’s outstanding debt balances, excluding capital leases, and the weighted average interest rate as of September 30, 2016 and 2015:
 At September 30,
   Weighted Average   Weighted Average 
 2016 Interest Rate 2015 Interest Rate 
Total long-term debt$8,849
  4.47%  $8,409
  4.68%  
Commercial paper$33
  0.75%  $303
  0.46%  
In October 2016, in connection with the Company’s previously announced plans to separate its radio business, CBS Radio borrowed $1.46 billion through a $1.06 billion senior secured term loan due 2023 and the issuance of $400 million of 7.25% senior unsecured notes due 2024 through a private placement. The Term Loan bears interest at a rate equal to 3.50% plus the greater of the London Interbank Offered Rate (“LIBOR”) and 1.00%.



Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


The following table presents the Company’s outstanding debt balances, excluding capital leases, and the weighted average interest rate as of June 30, 2016 and 2015:
 At June 30,
   Weighted Average   Weighted Average 
 2016 Interest Rate 2015 Interest Rate 
Total long-term debt$8,167
  4.61%  $7,574
  4.75%  
Commercial paper$163
  0.72%  $394
  0.47%  

Other Items, Net
 Three Months Ended June 30, Six Months Ended June 30, 
 2016
2015 Increase/(Decrease) 2016 2015 Increase/(Decrease) 
Other items, net$(4) $4
  (200)%  $(7) $(19)  63%  
 Three Months Ended September 30, Nine Months Ended September 30, 
 2016
2015 Increase/(Decrease) 2016 2015 Increase/(Decrease) 
Other items, net$2
 $(4)  n/m  $(5) $(23)  78%  
n/m - not meaningful
Other items, net for all periods primarily consists of foreign exchange gains and losses. For the three and nine months ended September 30, 2016, other items, net also includes a gain on the sale of an investment.
Provision for Income Taxes
Three Months Ended June 30, Six Months Ended June 30, Three Months Ended September 30, Nine Months Ended September 30, 
2016
2015 Increase/(Decrease) 2016 2015 Increase/(Decrease) 2016
2015 Increase/(Decrease) 2016 2015 Increase/(Decrease) 
Tax provision$205
 $165
 24%  $436
 $368
 18% $176
 $211
 (17)%  $612
 $579
 6% 
Effective tax rate32.2% 32.8%   32.0% 33.1%   25.0% 32.3%   29.6% 32.8%   
The provision for income taxes represents federal, state and local, and foreign taxes on earnings from continuing operations before income taxes and equity in loss of investee companies. The lower tax rate for the three and sixnine months ended JuneSeptember 30, 2016 includes a higher domestic productionone-time benefit of $47 million associated with a multiyear adjustment to a tax deduction, resulting fromwhich was approved by the mix of revenuesIRS during the period and a lower effective state tax rate.third quarter of 2016.

Equity in Loss of Investee Companies, Net of Tax
 Three Months Ended June 30, Six Months Ended June 30, 
 2016
2015
Increase/(Decrease) 2016 2015 Increase/(Decrease) 
Equity in loss of investee
companies, net of tax
$(9) $(6)  50%  $(30) $(19)  58%  
 Three Months Ended September 30, Nine Months Ended September 30, 
 2016
2015
Increase/(Decrease) 2016 2015 Increase/(Decrease) 
Equity in loss of investee
companies, net of tax
$(13) $(16)  (19)%  $(43) $(35)  23%  
For the sixnine months ended JuneSeptember 30, 2016, equity in loss of investee companies, net of tax includes a $6 million write-down of an international television joint venture to its fair value.

Net Earnings from Continuing Operations and Diluted EPS from Continuing Operations
 Three Months Ended June 30, Six Months Ended June 30, 
 2016
2015
Increase/(Decrease) 2016 2015 Increase/(Decrease) 
Net earnings$423
 $332
  27%  $896
 $726
  23%  
Diluted EPS$.93
 $.67
  39%  $1.95
 $1.45
  34%  
 Three Months Ended September 30, Nine Months Ended September 30, 
 2016 2015 Increase/(Decrease) 2016 2015 Increase/(Decrease) 
Net earnings from continuing
operations
$514
 $426
  21%  $1,410
 $1,152
  22%  
Diluted EPS from continuing
operations
$1.15
 $.88
  31%  $3.10
 $2.33
  33%  
For the three and sixnine months ended JuneSeptember 30, 2016, the increases in net earnings from continuing operations of 27%21% and 23%22%, respectively, and the increases in diluted EPS from continuing operations of 39%31% and 34%33%, respectively, were each driven by higher operating income.income and a lower effective tax rate. The increases in diluted EPS also reflect lower weighted average shares outstanding as a result of the Company’s ongoing share repurchase program.



Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Loss from Discontinued Operations
Loss from discontinued operations of $36 million for the three and nine months ended September 30, 2016 reflects the resolution of a tax matter in diluted EPS also reflect lower weighted average shares outstandinga foreign jurisdiction relating to a previously disposed business that was accounted for as a result of the Company’s ongoing share repurchase program.discontinued operation.

Net Earnings and Diluted EPS
 Three Months Ended September 30, Nine Months Ended September 30, 
 2016
2015
Increase/(Decrease) 2016 2015 Increase/(Decrease) 
Net earnings$478
 $426
  12%  $1,374
 $1,152
  19%  
Diluted EPS$1.07
 $.88
  22%  $3.02
 $2.33
  30%  
Segment Results of Operations
In preparation for the planned separation of its radio business, the Company changed the manner in which it manages its television and radio operations during the third quarter of 2016. Accordingly, the Company’s previously reported operating segment, Local Broadcasting, has been separated into two operating segments, Local Media and Radio. In connection with this new segment presentation, the presentation of intercompany revenues has been revised, including station affiliation fees paid by Local Media to the CBS Television Network. Prior period results have been reclassified to conform to this presentation.

The Company presents operating income (loss) excluding restructuring charges, impairment charges, and other operating items, net, if any, (“Segment Operating Income”) as the primary measure of profit and loss for its operating segments in accordance with FASB guidance for segment reporting. The Company believes the presentation of Segment Operating Income is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company’s management and enhances their ability to understand the Company’s operating performance. The reconciliation of Segment Operating Income to the Company’s consolidated Net earnings is presented in Note 12 (Reportable Segments) to the consolidated financial statements.
Three Months Ended JuneSeptember 30, 2016 and 2015
 Three Months Ended June 30,
  
% of Total
Revenues
  
% of Total
Revenues
Increase/(Decrease) 
 2016
2015$ % 
Revenues:             
Entertainment$1,947
 59 %  $1,785
 55% $162
 9 % 
Cable Networks536
 16
  615
 19
 (79) (13) 
Publishing187
 6
  199
 6
 (12) (6) 
Local Broadcasting647
 20
  654
 20
 (7) (1) 
Corporate/Eliminations(30) (1)  (34) —
 4
 12
 
Total Revenues$3,287
 100 %  $3,219
 100% $68
 2 % 
 Three Months Ended June 30,
  
% of Total
Segment
Operating
Income
  
% of Total
Segment
Operating
Income
  
        
    Increase/(Decrease) 
 2016 2015$ % 
Segment Operating Income (Loss):             
Entertainment$351
 48 %  $262
 41 % $89
 34 % 
Cable Networks227
 31
  220
 34
 7
 3
 
Publishing26
 3
  25
 4
 1
 4
 
Local Broadcasting212
 29
  198
 31
 14
 7
 
Corporate(83) (11)  (64) (10) (19) (30) 
Total Segment Operating Income733
 100 %  641
 100 % 92
 14
 
Restructuring charges—
    (55)   55
 n/m
 
Total Operating Income$733
    $586
   $147
 25 % 
n/m - not meaningful
 Three Months Ended September 30,
  
% of Total
Revenues
  
% of Total
Revenues
Increase/(Decrease) 
 2016
2015$ % 
Revenues:             
Entertainment$1,949
 57 %  $1,932
 59 % $17
 1 % 
Cable Networks598
 18
  526
 16
 72
 14
 
Publishing226
 7
  203
 6
 23
 11
 
Local Media409
 12
  376
 12
 33
 9
 
Radio319
 9
  318
 10
 1
 —
 
Corporate/Eliminations(105) (3)  (98) (3) (7) (7) 
Total Revenues$3,396
 100 %  $3,257
 100 % $139
 4 % 


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Three Months Ended June 30,Three Months Ended September 30,
  Increase/(Decrease)  
% of Total
Operating
Income
  
% of Total
Operating
Income
  
2016
2015 $ %    Increase/(Decrease) 
Depreciation and Amortization:        
2016
% of Total
Operating
Income
 2015
% of Total
Operating
Income
$ % 
Segment Operating Income (Loss):      
Entertainment$30
 $32
 $(2) (6)% $348
 $339
$9
 3 % 
Cable Networks5
 6
 (1) (17) 285
 36
 246
 33
 39
 16
 
Publishing2
 2
 —
 —
 44
 5
 43
 6
 1
 2
 
Local Broadcasting18
 19
 (1) (5) 
Local Media122
 15
 101
 13
 21
 21
 
Radio77
 10
 73
 10
 4
 5
 
Corporate8
 7
 1
 14
 (78) (10) (49) (7) (29) (59) 
Total Depreciation and Amortization$63
 $66
 $(3) (5)% 
Total Operating Income$798
 100 % $753
 100 % $45
 6 % 
Six
 Three Months Ended September 30,
   Increase/(Decrease) 
 2016
2015 $ % 
Depreciation and Amortization:        
Entertainment$28
 $31
 $(3) (10)% 
Cable Networks6
 5
 1
 20
 
Publishing1
 1
 —
 —
 
Local Media11
 12
 (1) (8) 
Radio7
 8
 (1) (13) 
Corporate8
 8
 —
 —
 
Total Depreciation and Amortization$61
 $65
 $(4) (6)% 
Nine Months Ended JuneSeptember 30, 2016 and 2015
Six Months Ended June 30,Nine Months Ended September 30,
 
% of Total
Revenues
  
% of Total
Revenues
Increase/(Decrease)  
% of Total
Revenues
  
% of Total
Revenues
Increase/(Decrease) 
2016 2015$ % 2016 2015$ % 
Revenues:                        
Entertainment$4,534
 63 % $4,046
 60 % $488
 12 % $6,483
 62 % $5,978
 60 % $505
 8 % 
Cable Networks1,061
 15
 1,154
 17
 (93) (8) 1,659
 16
 1,680
 17
 (21) (1) 
Publishing332
 5
 344
 5
 (12) (3) 558
 5
 547
 5
 11
 2
 
Local Broadcasting1,296
 18
 1,250
 19
 46
 4
 
Local Media1,253
 12
 1,138
 11
 115
 10
 
Radio898
 8
 907
 9
 (9) (1) 
Corporate/Eliminations(87) (1) (75) (1) (12) (16) (319) (3) (274) (2) (45) (16) 
Total Revenues$7,136
 100 % $6,719
 100 % $417
 6 % $10,532
 100 % $9,976
 100 % $556
 6 % 
 Six Months Ended June 30,
  
% of Total
Segment
Operating
Income
  
% of Total
Segment
Operating
Income
  
        
    Increase/(Decrease) 
 2016 2015$ % 
Segment Operating Income (Loss):             
Entertainment$800
 52 %  $608
 45 % $192
 32 % 
Cable Networks455
 29
  471
 35
 (16) (3) 
Publishing39
 3
  37
 3
 2
 5
 
Local Broadcasting418
 27
  359
 27
 59
 16
 
Corporate(167) (11)  (132) (10) (35) (27) 
Total Segment Operating Income1,545
 100 %  1,343
 100 % 202
 15
 
Restructuring charges—
    (55)   55
 n/m
 
Other operating items, net9
    19
   (10) (53) 
Total Operating Income$1,554
    $1,307
   $247
 19 % 
n/m - not meaningful
 Six Months Ended June 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Depreciation and Amortization:        
Entertainment$60
 $64
 $(4) (6)% 
Cable Networks11
 12
 (1) (8) 
Publishing3
 3
 —
 —
 
Local Broadcasting37
 40
 (3) (8) 
Corporate16
 15
 1
 7
 
Total Depreciation and Amortization$127
 $134
 $(7) (5)% 


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


 Nine Months Ended September 30,
  
% of Total
Segment
Operating
Income
  
% of Total
Segment
Operating
Income
  
        
    Increase/(Decrease) 
 2016 2015$ % 
Segment Operating Income (Loss):             
Entertainment$1,148
 49 %  $947
 45 % $201
 21 % 
Cable Networks740
 32
  717
 34
 23
 3
 
Publishing83
 3
  80
 4
 3
 4
 
Local Media402
 17
  338
 16
 64
 19
 
Radio215
 9
  195
 9
 20
 10
 
Corporate(245) (10)  (181) (8) (64) (35) 
Total Segment Operating Income2,343
 100 %  2,096
 100 % 247
 12
 
Restructuring charges—
    (55)   55
 n/m
 
Other operating items, net9
    19
   (10) (53) 
Total Operating Income$2,352
    $2,060
   $292
 14 % 
n/m - not meaningful
 Nine Months Ended September 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Depreciation and Amortization:        
Entertainment$88
 $95
 $(7) (7)% 
Cable Networks17
 17
 —
 —
 
Publishing4
 4
 —
 —
 
Local Media33
 37
 (4) (11) 
Radio22
 23
 (1) (4) 
Corporate24
 23
 1
 4
 
Total Depreciation and Amortization$188
 $199
 $(11) (6)% 
Entertainment (CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Interactive and CBS Films)
Three Months Ended JuneSeptember 30, 2016 and 2015
 Three Months Ended June 30,
   Increase/(Decrease) 
 2016
2015 $ % 
Revenues$1,947
 $1,785
 $162
 9 % 
Segment Operating Income$351
 $262
 $89
 34 % 
Segment Operating Income as a % of revenues18% 15%     
Restructuring charges$—
 $12
 $(12) n/m
 
Depreciation and amortization$30
 $32
 $(2) (6)% 
Capital expenditures$24
 $13
 $11
 85 % 
n/m - not meaningful
 Three Months Ended September 30,
   Increase/(Decrease) 
 2016
2015 $ % 
Revenues$1,949
 $1,932
 $17
 1 % 
Segment Operating Income$348
 $339
 $9
 3 % 
Segment Operating Income as a % of revenues18% 18%     
Depreciation and amortization$28
 $31
 $(3) (10)% 
Capital expenditures$23
 $33
 $(10) (30)% 
For the three months ended JuneSeptember 30, 2016, the 9%1% increase in revenues reflects 19% higher content licensing and distribution revenueswas driven by growth in international television licensing, mainly from the sales of all episodes of five Star Trek series. The revenue growth also reflects a 59%39% increase in affiliate and subscription fees, led by higher station affiliation fees retransmission revenues and subscription growth for CBS All Access. This growth was largely offset by 4% lower advertising revenues and 3% lower content licensing and distribution revenues. Advertising revenues decreased 3% reflectingwere impacted by 10 hours of primetime preemptions for the absence of the broadcast of the NCAA Tournament finals on CBS in 2016Democratic and Republican conventions and the impactfirst Presidential debate, competition from the 2016 Summer Olympics, and sales of internet businesses in China during 2015, partially offset by 2% growth2015. The decrease in underlying network advertising revenues.
For the three months ended June 30, 2016, the 34% increase in operating income was primarily driven by the growth in revenues. Restructuring charges for the second quarter of 2015 primarily reflected severance costs.
Six Months Ended June 30, 2016 and 2015
 Six Months Ended June 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Revenues$4,534
 $4,046
 $488
 12 % 
Segment Operating Income$800
 $608
 $192
 32 % 
Segment Operating Income as a % of revenues18% 15%     
Restructuring charges$—
 $12
 $(12) n/m
 
Depreciation and amortization$60
 $64
 $(4) (6)% 
Capital expenditures$37
 $21
 $16
 76 % 
n/m - not meaningful
For the six months ended June 30, 2016, the 12% increase in revenues was driven by 26% growth in network advertising revenues, driven by the broadcast of Super Bowl 50; one additional NFL playoff game broadcast on CBS in 2016 compared to 2015; and 7% growth in underlying network advertising. Additionally, affiliate and subscription fees grew 63% for the six months ended June 30, 2016 as a result of higher station affiliation fees, retransmission revenues and subscription growth for CBS All Access. These increases were partially offset by lower content licensing and distribution revenues due to lowerreflects the initial domestic licensing, as 2015 benefited from significant domestic licensing salesavailability of NCISElementary and CSI,in the third quarter of 2015, partially offset by growth in international licensing revenuessales of various titles from the salesCompany’s television library during the third quarter of Star Trek series2016.The revenue comparison was alsoimpacted by the sales of internet businesses in China during 2015.



Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


For the sixthree months ended JuneSeptember 30, 2016, the 32%3% increase in operating income was primarily driven by the increase in revenues.
Nine Months Ended September 30, 2016 and 2015
 Nine Months Ended September 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Revenues$6,483
 $5,978
 $505
 8 % 
Segment Operating Income$1,148
 $947
 $201
 21 % 
Segment Operating Income as a % of revenues18% 16%     
Restructuring charges$—
 $12
 $(12) n/m
 
Depreciation and amortization$88
 $95
 $(7) (7)% 
Capital expenditures$60
 $54
 $6
 11 % 
n/m - not meaningful
For the nine months ended September 30, 2016, the 8% increase in revenues was driven by 19% growth in network advertising revenues, driven by the broadcast of Super Bowl 50 and 6% growth in underlying network advertising. Additionally, affiliate and subscription fees grew 54% for the nine months ended September 30, 2016 as a result of higher station affiliation fees and subscription growth for CBS All Access. These increases were partially offset by 8% lower content licensing and distribution revenues due to lower domestic television licensing, as 2015 benefited from the significant licensing sales of NCIS and Elementary, partially offset by growth in international licensing revenues mainly from the sales of five Star Trek series.The revenue comparison was alsoimpacted by the sales of internet businesses in China during 2015.

For the nine months ended September 30, 2016, the 21% increase in operating income was primarily a result of the increase in revenues. Restructuring charges for the nine months ended September 30, 2015 primarily reflected severance costs.
Cable Networks (Showtime Networks, CBS Sports Network and Smithsonian Networks)
Three Months Ended JuneSeptember 30, 2016 and 2015
Three Months Ended June 30,Three Months Ended September 30,
  Increase/(Decrease)   Increase/(Decrease) 
2016
2015 $ % 2016
2015 $ % 
Revenues$536
 $615
 $(79) (13)% $598
 $526
 $72
 14 % 
Segment Operating Income$227
 $220
 $7
 3 % $285
 $246
 $39
 16 % 
Segment Operating Income as a % of revenues42% 36%     48% 47%     
Depreciation and amortization$5
 $6
 $(1) (17)% $6
 $5
 $1
 20 % 
Capital expenditures$2
 $2
 $—
 — % $4
 $5
 $(1) (20)% 
For the three months ended JuneSeptember 30, 2016, the 14% increase in revenues decreased 13%as the second quarter of 2015 benefited from the distribution of the Floyd Mayweather/Manny Pacquiao boxing event, which was the highest-grossing pay-per-view event of all time. This boxing event negatively impacted the revenue comparison by 24 percentage points. Underlying results reflectprincipally reflects higher revenues from the domestic and international licensing of Showtimeoriginal series, including House of Lies,Penny Dreadful and 5%, as well as growth in affiliate and subscription fees driven by Showtime Networks’ over-the-top service. As of JuneSeptember 30, 2016, subscriptions totaled 7775 million for Showtime Networks (including Showtime, The Movie Channel and Flix), 5655 million for CBS Sports Network and 3433 million for Smithsonian Networks.
For the three months ended JuneSeptember 30, 2016, the 3%16% increase in operating income primarily reflects growth from the licensing of Showtime original series and Showtime Networks’ over-the-top service,revenue growth partially offset by increased investment in original series. The pay-per-view boxing event did not have a significant impact on operating income as the 2015 revenues were significantly offset by associated costs.
Six Months Ended June 30, 2016 and 2015
 Six Months Ended June 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Revenues$1,061
 $1,154
 $(93) (8)% 
Segment Operating Income$455
 $471
 $(16) (3)% 
Segment Operating Income as a % of revenues43% 41%     
Depreciation and amortization$11
 $12
 $(1) (8)% 
Capital expenditures$4
 $3
 $1
 33 % 
For the six months ended June 30, 2016, revenues decreased 8% as the 2015 period benefited from the distribution of the aforementioned pay-per-view boxing event. The decrease in pay-per-view revenues negatively impacted the revenue comparison by 12 percentage points. This decrease was partially offset by growth in revenues from Showtime Networks’ over-the-top service.
For the six months ended June 30, 2016, the 3% decrease in operating income was primarily driven by increased investment in programming, including costs associated with the 2016 series premiere of Billions. Growth from Showtime Networks’ over-the-top service partially offset this decline.


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Publishing (Simon & Schuster)
Three Months Ended June 30, 2016 and 2015
 Three Months Ended June 30,
   Increase/(Decrease) 
 2016
2015 $ % 
Revenues$187
 $199
 $(12) (6)% 
Segment Operating Income$26
 $25
 $1
 4 % 
Segment Operating Income as a % of revenues14% 13%     
Depreciation and amortization$2
 $2
 $—
 — % 
Capital expenditures$3
 $2
 $1
 50 % 
For the three months ended June 30, 2016, the 6% decrease in revenues reflects lower book sales partially offset by growth in digital audio sales. Digital revenues represented 23% of Publishing’s total revenues for the second quarter of 2016. Best-selling titles in the second quarter of 2016 included End of Watch by Stephen King and Foreign Agent by Brad Thor.
For the three months ended June 30, 2016, the 4% increase in operating income was driven by lower production, selling and inventory costs, which more than offset the revenue decline.
Six Months Ended June 30, 2016 and 2015
 Six Months Ended June 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Revenues$332
 $344
 $(12) (3)% 
Segment Operating Income$39
 $37
 $2
 5 % 
Segment Operating Income as a % of revenues12% 11%     
Depreciation and amortization$3
 $3
 $—
 — % 
Capital expenditures$6
 $2
 $4
 200 % 
For the six months ended June 30, 2016, the 3% decrease in revenues reflects lower digital and print book sales.
For the six months ended June 30, 2016, the 5% increase in operating income was driven by lower production, selling and inventory costs, which more than offset the decline in revenues.


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Local Broadcasting (CBS Television Stations and CBS Radio)
Three Months Ended June 30, 2016 and 2015
 Three Months Ended June 30,
   Increase/(Decrease) 
 2016
2015 $ % 
Revenues$647
 $654
 $(7) (1)% 
Segment Operating Income$212
 $198
 $14
 7 % 
Segment Operating Income as a % of revenues33% 30%     
Restructuring charges$—
 $43
 $(43) n/m
 
Depreciation and amortization$18
 $19
 $(1) (5)% 
Capital expenditures$10
 $11
 $(1) (9)% 
n/m - not meaningful
For the three months ended June 30, 2016, the 1% decrease in revenues was primarily driven by the absence of CBS’s broadcast of the NCAA Tournament finals, which was broadcast by Turner in 2016, and lower local radio advertising, partially offset by growth in retransmission revenues. Revenues for CBS Television Stations and CBS Radio each decreased 1%.
For the three months ended June 30, 2016, the 7% increase in operating income reflects lower expenses as a result of restructuring activities in 2015, which more than offset the revenue decline. Restructuring charges of $43 million for the three months ended June 30, 2015 primarily reflected severance costs and costs associated with exiting contractual obligations at CBS Television Stations and CBS Radio.
In the second half of 2016, local advertising revenues are expected to benefit from higher political spending associated with U.S. federal and state elections.

Six Months Ended June 30, 2016 and 2015
 Six Months Ended June 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Revenues$1,296
 $1,250
 $46
 4 % 
Segment Operating Income$418
 $359
 $59
 16 % 
Segment Operating Income as a % of revenues32% 29%     
Restructuring charges$—
 $43
 $(43) n/m
 
Depreciation and amortization$37
 $40
 $(3) (8)% 
Capital expenditures$21
 $18
 $3
 17 % 
n/m - not meaningful
For the six months ended June 30, 2016, the 4% increase in revenues was driven by 8% growth at CBS Television Stations, reflecting the broadcast of Super Bowl 50 on CBS during the first quarter of 2016, higher political advertising sales and growth in retransmission revenues. This growth was partially offset by lower radio revenues, which decreased 2%.
For the six months ended June 30, 2016, the 16% increase in operating income was driven by the revenue growth and lower expenses resulting from restructuring activities in 2015.


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Nine Months Ended September 30, 2016 and 2015
 Nine Months Ended September 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Revenues$1,659
 $1,680
 $(21) (1)% 
Segment Operating Income$740
 $717
 $23
 3 % 
Segment Operating Income as a % of revenues45% 43%     
Depreciation and amortization$17
 $17
 $—
 — % 
Capital expenditures$8
 $8
 $—
 — % 
For the nine months ended September 30, 2016, revenues decreased 1% as the 2015 period benefited from the distribution of the Floyd Mayweather/Manny Pacquiao boxing event, which was the highest grossing pay-per-view event of all time. The decrease in pay-per-view revenues negatively impacted the revenue comparison by nine percentage points. Underlying results reflect higher revenues from the licensing of Showtime original series and Showtime Networks’ over-the-top service.
For the nine months ended September 30, 2016, the 3% increase in operating income was driven by growth from the licensing of Showtime original series and Showtime Networks’ over-the-top service, partially offset by increased investment in programming.
Publishing (Simon & Schuster)
Three Months Ended September 30, 2016 and 2015
 Three Months Ended September 30,
   Increase/(Decrease) 
 2016
2015 $ % 
Revenues$226
 $203
 $23
 11 % 
Segment Operating Income$44
 $43
 $1
 2 % 
Segment Operating Income as a % of revenues19% 21%     
Depreciation and amortization$1
 $1
 $—
 — % 
Capital expenditures$1
 $2
 $(1) (50)% 
For the three months ended September 30, 2016, the 11% increase in revenues reflects higher print book sales and growth in digital book sales, mainly from digital audio. Digital revenues represented 23% of Publishing’s total revenues for the third quarter of 2016. Best-selling titles in the third quarter of 2016 included Born to Run by Bruce Springsteen and The Girl with the Lower Back Tattoo by Amy Schumer.
For the three months ended September 30, 2016, operating income increased 2% as the increase in revenues was offset by higher production and selling costs.


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Nine Months Ended September 30, 2016 and 2015
 Nine Months Ended September 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Revenues$558
 $547
 $11
 2% 
Segment Operating Income$83
 $80
 $3
 4% 
Segment Operating Income as a % of revenues15% 15%     
Depreciation and amortization$4
 $4
 $—
 —% 
Capital expenditures$7
 $4
 $3
 75% 
For the nine months ended September 30, 2016, the 2% increase in revenues reflects higher print book sales and growth in digital audio sales, partially offset by lower digital book sales.
For the nine months ended September 30, 2016, the 4% increase in operating income was driven by the revenue growth partially offset by higher production costs.
Local Media (CBSTelevision Stations)
Three Months Ended September 30, 2016 and 2015
 Three Months Ended September 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Revenues$409
 $376
 $33
 9 % 
Segment Operating Income$122
 $101
 $21
 21 % 
Segment Operating Income as a % of revenues30% 27%     
Depreciation and amortization$11
 $12
 $(1) (8)% 
Capital expenditures$9
 $10
 $(1) (10)% 
For the three months ended September 30, 2016, the 9% increase in revenues was driven by 7% growth in advertising revenues, which benefited from higher political advertising sales, and 13% growth in retransmission and subscription revenues.
For the three months ended September 30, 2016, the 21% increase in operating income primarily reflects the revenue growth.

During the fourth quarter of 2016, Local Media revenues are expected to continue to benefit from higher political spending associated with U.S. federal and state elections.



Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Nine Months Ended September 30, 2016 and 2015
 Nine Months Ended September 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Revenues$1,253
 $1,138
 $115
 10 % 
Segment Operating Income$402
 $338
 $64
 19 % 
Segment Operating Income as a % of revenues32% 30%     
Restructuring charges$—
 $19
 $(19) n/m
 
Depreciation and amortization$33
 $37
 $(4) (11)% 
Capital expenditures$20
 $17
 $3
 18 % 
n/m - not meaningful
For the nine months ended September 30, 2016, the 10% increase in revenues was led by the broadcast of Super Bowl 50 on CBS during the first quarter of 2016, higher political advertising sales and 16% growth in retransmission and subscription revenues.
For the nine months ended September 30, 2016, the 19% increase in operating income primarily reflects the revenue growth. Restructuring charges for the nine months ended September 30, 2015 primarily reflected severance costs and costs associated with exiting contractual obligations.

Radio (CBS Radio)
Three Months Ended September 30, 2016 and 2015
 Three Months Ended September 30,
   Increase/(Decrease) 
 2016
2015 $ % 
Revenues$319
 $318
 $1
 — % 
Segment Operating Income$77
 $73
 $4
 5 % 
Segment Operating Income as a % of revenues24% 23%     
Depreciation and amortization$7
 $8
 $(1) (13)% 
Capital expenditures$4
 $5
 $(1) (20)% 
For the three months ended September 30, 2016, the increase in revenues was primarily driven by higher national advertising sales, offset by lower local advertising sales.
For the three months ended September 30, 2016, the 5% increase in operating income primarily reflects lower employee compensation and talent costs resulting from restructuring activities put in place in 2015.
During the fourth quarter of 2016, Radio revenues are expected to continue to benefit from higher political spending associated with U.S. federal and state elections.



Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Nine Months Ended September 30, 2016 and 2015
 Nine Months Ended September 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Revenues$898
 $907
 $(9) (1)% 
Segment Operating Income$215
 $195
 $20
 10 % 
Segment Operating Income as a % of revenues24% 21%     
Restructuring charges$—
 $24
 $(24) n/m
 
Depreciation and amortization$22
 $23
 $(1) (4)% 
Capital expenditures$14
 $16
 $(2) (13)% 
n/m - not meaningful
For the nine months ended September 30, 2016, the 1% decrease in revenues was driven by lower local advertising sales, which were partially offset by higher national advertising sales.
For the nine months ended September 30, 2016, the 10% increase in operating income primarily reflects lower employee compensation and talent costs resulting from restructuring charges in 2015, which more than offset the revenue decline. Restructuring charges for the nine months ended September 30, 2015 primarily reflected severance costs.
In connection with the Company’s previously announced plans to separate its radio business, in July 2016, a preliminary registration statement was filed with the SEC during the third quarter of 2016 for the proposed initial public offering of the common stock of CBS Radio Inc.Radio.
Corporate
Three Months Ended JuneSeptember 30, 2016 and 2015
Three Months Ended June 30,Three Months Ended September 30,
  Increase/(Decrease)   Increase/(Decrease) 
2016
2015 $ % 2016
2015 $ % 
Segment Operating Loss$(83) $(64) $(19) (30)% $(78) $(49) $(29) (59)% 
Depreciation and amortization$8
 $7
 $1
 14 % $8
 $8
 $—
 — % 
Capital expenditures$2
 $1
 $1
 100 % $5
 $3
 $2
 67 % 
Corporate expenses include general corporate overhead, unallocated shared company expenses, pension and postretirement benefit costs for plans retained by the Company for previously divested businesses, and intercompany eliminations. For the three months ended JuneSeptember 30, 2016, the 30%59% increase in corporate expenses primarily reflects higher pension and other employee-related costs.
SixNine Months Ended JuneSeptember 30, 2016 and 2015
Six Months Ended June 30,Nine Months Ended September 30,
  Increase/(Decrease)   Increase/(Decrease) 
2016 2015 $ % 2016 2015 $ % 
Segment Operating Loss$(167) $(132) $(35) (27)% $(245) $(181) $(64) (35)% 
Depreciation and amortization$16
 $15
 $1
 7 % $24
 $23
 $1
 4 % 
Capital expenditures (a)
$11
 $2
 $9
 n/m
 $16
 $5
 $11
 n/m
 
n/m - not meaningful
(a) Primarily reflects the timing of capital projects.
For the six months ended June 30, 2016, the 27% increase in corporate expenses primarily reflects higher pension and other employee-related costs.


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


For the nine months endedSeptember 30, 2016, the 35% increase in corporate expenses primarily reflects higher pension and other employee-related costs.
Financial Position
At At Increase/(Decrease) At At Increase/(Decrease) 
June 30, 2016
December 31, 2015 $ % September 30, 2016
December 31, 2015 $ % 
Current Assets:                  
Cash and cash equivalents $176
 $323
 $(147) (46)%  $179
 $323
 $(144) (45)% 
Receivables, net (a)
 3,243
 3,628
 (385) (11)  3,348
 3,628
 (280) (8) 
Programming and other inventory (b)
 1,224
 1,271
 (47) (4)  1,459
 1,271
 188
 15
 
Prepaid income taxes (c)
 39
 101
 (62) (61)  39
 101
 (62) (61) 
All other current assets 414
 424
 (10) (2)  432
 424
 8
 2
 
Total current assets $5,096
 $5,747
 $(651) (11)%  $5,457
 $5,747
 $(290) (5)% 
(a) The decrease is primarily due to seasonality.
(b) The decreaseincrease mainly reflects the timing of payments for sports programming.
(c) The decrease is primarily due to the timing of income tax payments.
 At At Increase/(Decrease) 
 June 30, 2016
December 31, 2015 $ % 
Other assets (a)
 $2,582
   $2,661
  $(79) (3)% 
 At At Increase/(Decrease) 
 September 30, 2016
December 31, 2015 $ % 
Other assets (a)
 $2,779
   $2,661
  $118
 4% 
(a) The decreaseincrease primarily reflects lowerhigher long-term receivables associated with revenues from television licensing agreements.
At At Increase/(Decrease) At At Increase/(Decrease) 
June 30, 2016 December 31, 2015 $ % September 30, 2016 December 31, 2015 $ % 
Current Liabilities:                  
Accounts payable(a) $121
 $192
 $(71) (37)%  $153
 $192
 $(39) (20)% 
Accrued compensation (a)
 231
 315
 (84) (27)  282
 315
 (33) (10) 
Program rights 322
 374
 (52) (14)  373
 374
 (1) —
 
Deferred revenues (b)
 156
 295
 (139) (47)  141
 295
 (154) (52) 
Commercial paper 163
 —
 163
 n/m
  33
 —
 33
 n/m
 
Current portion of long-term debt (c)
 23
 222
 (199) (90)  22
 222
 (200) (90) 
All other current liabilities 2,071
 2,162
 (91) (4)  2,094
 2,162
 (68) (3) 
Total current liabilities $3,087
 $3,560
 $(473) (13)%  $3,098
 $3,560
 $(462) (13)% 
n/m - not meaningful
(a) The decrease is due to the timing of payments.
(b) The decrease primarily reflects the timing of advertising revenues.
(c) The decrease is the result of the repayment of $200 million of outstanding senior debentures upon maturity in January 2016.

 At At Increase/(Decrease) 
 September 30, 2016 December 31, 2015 $ % 
Long-term debt (a)
 $8,902
   $8,226
  $676
 8% 
(a) The increase is primarily the result of the Company’s issuance of $700 million of senior notes during July 2016. (See Note 5 to the consolidated financial statements).


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Cash Flows
The changes in cash and cash equivalents were as follows:
Six Months Ended June 30,Nine Months Ended September 30,
2016 2015 Increase/(Decrease)2016 2015 Increase/(Decrease)
Net cash flow provided by (used for) operating activities from:            
Continuing operations$1,253
 $881
 $372
 $1,308
 $650
 $658
 
Discontinued operations(2) (18) 16
 (2) (27) 25
 
Net cash flow provided by operating activities1,251
 863
 388
 1,306
 623
 683
 
Net cash flow used for investing activities from:            
Continuing operations(142) (39) (103) (181) (102) (79) 
Discontinued operations—
 (3) 3
 —
 (4) 4
 
Net cash flow used for investing activities(142) (42) (100) (181) (106) (75) 
Net cash flow used for financing activities(1,256) (929) (327) (1,269) (812) (457) 
Net decrease in cash and cash equivalents$(147) $(108) $(39) $(144) $(295) $151
 
Operating Activities. For the sixnine months ended JuneSeptember 30, 2016, the increase in cash provided by operating activities was primarily driven by growth in affiliate and subscription fees and higher advertising revenues, including from the broadcast of Super Bowl 50, partially offset by increased investment in content and higher payments for income taxes.content.

Cash paid for income taxes for the sixnine months ended JuneSeptember 30, 2016 and 2015 was as follows:
 Six Months Ended June 30,
 2016 2015
Cash taxes included in operating activities $307
   $207
 
Excess tax benefits from the exercise of stock options and
vesting of restricted stock units, included in financing activities
 (11)   (82) 
Cash paid for income taxes $296
   $125
 
 Nine Months Ended September 30,
 2016 2015
Cash taxes included in operating activities from continuing operations $383
   $317
 
Excess tax benefits from the exercise of stock options and
vesting of restricted stock units, included in financing activities
 (13)   (87) 
Cash paid for income taxes from continuing operations $370
   $230
 
The increase in cash paid for income taxes was driven by the increase in pretax earnings, as well lower federal tax refunds applied during the sixnine months ended JuneSeptember 30, 2016.



Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Investing Activities
Six Months Ended June 30,Nine Months Ended September 30,
2016
20152016
2015
Acquisitions (a)
 $(51) $(1)  $(51) $(7) 
Capital expenditures (b)
 (79) (46)  (125) (104) 
Investments in and advances to investee companies (c)
 (43) (55)  (44) (58) 
Proceeds from dispositions (d)
 27
 59
  28
 75
 
Other investing activities 4
 4
  11
 (8) 
Net cash flow used for investing activities from continuing operations (142) (39)  (181) (102) 
Net cash flow used for investing activities from discontinued operations —
 (3)  —
 (4) 
Net cash flow used for investing activities $(142) $(42)  $(181) $(106) 
(a) 2016 primarily reflects the acquisition of a sports-focused digital media business.
(b) Primarily reflects the timing of capital projects. Capital expenditures for the full year 2016 are expected to be at a similar level as the prior three years, which ranged from $193 million to $212 million.
(c) Mainly includes the Company’s investment in The CW as well as its other domestic and international television joint ventures.
(d) Primarily reflects sales of internet businesses in China.

Financing Activities
 Six Months Ended June 30,
 2016 2015
Repurchase of CBS Corp. Class B Common Stock $(1,033)   $(1,832) 
Proceeds from (repayments of) short-term debt borrowings, net 163
   (222) 
Proceeds from issuance of senior notes —
   1,178
 
Repayment of senior debentures (199)   —
 
Dividends (142)   (155) 
Proceeds from exercise of stock options 10
   123
 
All other financing activities, net (55)   (21) 
Net cash flow used for financing activities $(1,256)   $(929) 

 Nine Months Ended September 30,
 2016 2015
Repurchase of CBS Corp. Class B Common Stock $(1,534)   $(2,345) 
Proceeds from (repayments of) short-term debt borrowings, net 33
   (313) 
Proceeds from issuance of senior notes 685
   1,959
 
Repayment of senior debentures (199)   —
 
Dividends (209)   (228) 
Proceeds from exercise of stock options 13
   137
 
All other financing activities, net (58)   (22) 
Net cash flow used for financing activities $(1,269)   $(812) 

Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Free Cash Flow
Free cash flow is a non-GAAP financial measure. Free cash flow reflects the Company’s net cash flow provided by (used for) operating activities before operating cash flow from discontinued operations and less capital expenditures. The Company’s calculation of free cash flow includes capital expenditures because investment in capital expenditures is a use of cash that is directly related to the Company’s operations. The Company’s net cash flow provided by (used for) operating activities is the most directly comparable GAAP financial measure.



Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Management believes free cash flow provides investors with an important perspective on the cash available to the Company to service debt, make strategic acquisitions and investments, maintain its capital assets, satisfy its tax obligations, and fund ongoing operations and working capital needs. As a result, free cash flow is a significant measure of the Company’s ability to generate long-term value. It is useful for investors to know whether this ability is being enhanced or degraded as a result of the Company’s operating performance. The Company believes the presentation of free cash flow is relevant and useful for investors because it allows investors to evaluate the cash generated from the Company’s underlying operations in a manner similar to the method used by management. Free cash flow is one of several components of incentive compensation targets for certain management personnel. In addition, free cash flow is a primary measure used externally by the Company’s investors, analysts and industry peers for purposes of valuation and comparison of the Company’s operating performance to other companies in its industry.

As free cash flow is not a measure calculated in accordance with GAAP, free cash flow should not be considered in isolation of, or as a substitute for, either net cash flow provided by (used for) operating activities as a measure of liquidity or net earnings as a measure of operating performance. Free cash flow, as the Company calculates it, may not be comparable to similarly titled measures employed by other companies. In addition, free cash flow as a measure of liquidity has certain limitations, does not necessarily represent funds available for discretionary use and is not necessarily a measure of the Company’s ability to fund its cash needs. When comparing free cash flow to net cash flow provided by (used for) operating activities, the most directly comparable GAAP financial measure, users of this financial information should consider the types of events and transactions that are not reflected in free cash flow.

The following table presents a reconciliation of the Company’s net cash flow provided by operating activities to free cash flow.
Six Months EndedNine Months Ended
June 30,September 30,
2016 20152016 2015
Net cash flow provided by operating activities$1,251
 $863
$1,306
 $623
Capital expenditures(79) (46)(125) (104)
Exclude operating cash flow from discontinued operations(2) (18)(2) (27)
Free cash flow$1,174
 $835
$1,183
 $546

Repurchase of Company Stock and Cash Dividends
On July 28, 2016, the Company announced that its Board of Directors approved an increase to the Company’s share repurchase program to a total availability of $6.0 billion. During the secondthird quarter of 2016, the Company repurchased 9.29.5 million shares of its Class B Common Stock under its share repurchase program for $500 million, at an average cost of $54.21$52.77 per share. During the sixnine months ended JuneSeptember 30, 2016, the Company repurchased 19.529.0 million shares of its Class B Common Stock for $1.00$1.50 billion, at an average cost of $51.27$51.76 per share, leaving $1.00$5.60 billion of authorization at JuneSeptember 30, 2016. Repurchases are expected to be funded by cash flows from operations, and, as appropriate, with short-term borrowings, including commercial paper, and/or the issuance of long-term debt. During the fourth quarter of 2016, the Company intends to repurchase $1.5 billion of its Class B Common Stock, including $500 million as part of its ongoing repurchase program and $1.0 billion using the net proceeds from the CBS Radio borrowings. These planned repurchases are subject to market and business conditions, and remain at the discretion of management.



Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


On July 28, 2016, the Company announced that its Board of Directors approved an increase to the Company’s share repurchase program to a total availability of $6.0 billion. Repurchases are expected to be funded by cash flows from operations and, as appropriate, with short-term borrowings, including commercial paper, and/or the issuance of long-term debt.

During the second quarter of 2016, the Company declared a quarterly cash dividend of $.15 on its Class A and Class B Common Stock, resulting in total dividends of $69 million, payable on July 1, 2016.

On July 28, 2016, the Company announced that its Board of Directors approved a 20% increase to the quarterly cash dividend on the Company’sits Class A and Class B Common Stockstock to $.18 from $.15 to $.18 per share, payableshare. The total third quarter 2016 dividend was $80 million, which was paid on October 1, 2016, to shareholders of record on September 9, 2016.

Capital Structure
The following table sets forth the Company’s debt.
At AtAt At
June 30, 2016 December 31, 2015September 30, 2016 December 31, 2015
Commercial paper $163
 $—
  $33
 $—
 
Senior debt (1.95% – 7.875% due 2016 – 2045) (a)
 8,167
 8,365
  8,849
 8,365
 
Obligations under capital leases 79
 83
  75
 83
 
Total debt 8,409
 8,448
  8,957
 8,448
 
Less commercial paper 163
 —
  33
 —
 
Less current portion of long-term debt 23
 222
  22
 222
 
Total long-term debt, net of current portion $8,223
 $8,226
  $8,902
 $8,226
 
(a) At JuneSeptember 30, 2016 and December 31, 2015, the senior debt balances included (i) a net unamortized discount of $4353 million and $45 million, respectively, (ii) unamortized deferred financing costs of $42$45 million and $44 million, respectively, and (iii) an increase in the carrying value of the debt relating to previously settled fair value hedges of $11$7 million and $14 million, respectively. The face value of the Company’s senior debt was $8.24$8.94 billion and $8.44 billion at JuneSeptember 30, 2016 and December 31, 2015, respectively.

During July 2016, the Company issued $700 million of 2.90% senior notes due 2027. The Company is usingused the net proceeds from this issuance for general corporate purposes, including the repurchase of CBS Corp. Class B Common Stock and repayment of short-term borrowings, including commercial paper.

During January 2016, the Company repaid its $200 million of outstanding 7.625% senior debentures upon maturity.

At September 30, 2016, the Company classified $400 million of debt maturing in July 2017 as long-term debt on the Consolidated Balance Sheet, reflecting its intent and ability to refinance this debt on a long-term basis.

Commercial Paper
At JuneSeptember 30, 2016, the Company had $163$33 million of outstanding commercial paper borrowings under its $2.5 billion commercial paper program at a weighted average interest rate of 0.72%0.75% and with maturities of less than 45 days. The Company had no outstanding commercial paper borrowings at December 31, 2015.

Credit Facility
During June 2016, the Company amended and restated its $2.5 billion revolving credit facility (the “Credit Facility”). The amended Credit Facility expires in June 2021 and contains provisions that are substantially similar to the previous Credit Facility, which was due to expire in December 2019. The Credit Facility requires the Company to maintain a maximum Consolidated Leverage Ratio of 4.5x at the end of each quarter as further


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


described in the Credit Facility. At JuneSeptember 30, 2016, the Company’s Consolidated Leverage Ratio was approximately 2.4x2.5x.

The Consolidated Leverage Ratio is the ratio of the Company’s indebtedness from continuing operations, adjusted to exclude certain capital lease obligations, at the end of a quarter, to the Company’s Consolidated EBITDA for the


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


trailing four consecutive quarters. Consolidated EBITDA is defined in the Credit Facility as operating income plus interest income and before depreciation, amortization and certain other noncash items.

The Credit Facility is used for general corporate purposes. At JuneSeptember 30, 2016, the Company had no borrowings outstanding under the Credit Facility and the remaining availability under the Credit Facility, net of outstanding letters of credit, was $2.49 billion.

CBS Radio Indebtedness
In October 2016, in connection with the Company’s previously announced plans to separate its radio business, CBS Radio borrowed $1.46 billion through a $1.06 billion senior secured term loan due 2023 and the issuance of $400 million of 7.25% senior unsecured notes due 2024 through a private placement. The Term Loan bears interest at a rate equal to 3.50% plus the greater of LIBOR and 1.00%.

The Term Loan is part of a credit agreement which also includes a $250 million senior secured revolving credit facility (the “Radio Revolving Credit Facility”) which expires in 2021. Interest on the Radio Revolving Credit Facility will be based on either LIBOR or a base rate plus a margin based on CBS Radio’s Consolidated Net Secured Leverage Ratio. The Consolidated Net Secured Leverage Ratio reflects the ratio of CBS Radio’s secured debt (less up to $150 million of cash and cash equivalents) to CBS Radio’s consolidated EBITDA (as defined in the credit agreement). The Radio Revolving Credit Facility requires CBS Radio to maintain a maximum Consolidated Net Secured Leverage Ratio of 4.00 to 1.00. As of November 3, 2016, there were no borrowings outstanding under the Radio Revolving Credit Facility.

This debt is guaranteed by certain subsidiaries of CBS Radio. The Company does not guarantee, or otherwise provide credit support for, the senior notes, Term Loan, or Radio Revolving Credit Facility. The net debt proceeds will be primarily used by the Company to repurchase shares of CBS Corp. Class B Common Stock, with the remainder to be used for general corporate purposes and ongoing cash needs.

Liquidity and Capital Resources
The Company continually projects anticipated cash requirements for its operating, investing and financing needs as well as cash flows generated from operating activities available to meet these needs. The Company’s operating needs include, among other items, commitments for sports programming rights, television and film programming, talent contracts, operating leases, interest payments, and pension funding obligations. The Company’s investing and financing spending includes capital expenditures, share repurchases, dividends and principal payments on its outstanding indebtedness. The Company believes that its operating cash flows; cash and cash equivalents; borrowing capacity under the Credit Facility, which had $2.49 billion of remaining availability at JuneSeptember 30, 2016; and access to capital markets are sufficient to fund its operating, investing and financing requirements for the next twelve months.

The Company’s funding for short-term and long-term obligations will come primarily from cash flows from operating activities. Any additional cash funding requirements are financed with short-term borrowings, including commercial paper, and long-term debt. To the extent that commercial paper is not available to the Company, the existing Credit Facility provides sufficient capacity to satisfy short-term borrowing needs. The Company routinely assesses its capital structure and opportunistically enters into transactions to lower its interest expense, which could result in a charge from the early extinguishment of debt.

Funding for the Company’s long-term debt obligations due over the next five years of $2.10 billion is expected to come from the Company’s ability to refinance its debt and cash generated from operating activities.


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)



During the fourth quarter of 2016, the Company intends to repurchase $1.5 billion of its Class B Common Stock, including $500 million as part of its ongoing repurchase program and $1.0 billion using the net proceeds from the CBS Radio borrowings. These planned repurchases are subject to market and business conditions, and remain at the discretion of management.

Legal Matters
General.    On an ongoing basis, the Company vigorously defends itself in numerous lawsuits and proceedings and responds to various investigations and inquiries from federal, state, local and international authorities (collectively, ‘‘litigation’’). Litigation may be brought against the Company without merit, is inherently uncertain and always difficult to predict. However, based on its understanding and evaluation of the relevant facts and circumstances, the Company believes that the below-described legal matters and other litigation to which it is a party are not likely, in the aggregate, to have a material adverse effect on its results of operations, financial position or cash flows. Under the Separation Agreement between the Company and Viacom Inc., the Company and Viacom Inc. have agreed to defend and indemnify the other in certain litigation in which the Company and/or Viacom Inc. is named.

Claims Related to Former Businesses: Asbestos.    The Company is a defendant in lawsuits claiming various personal injuries related to asbestos and other materials, which allegedly occurred principally as a result of exposure caused by various products manufactured by Westinghouse, a predecessor, generally prior to the early 1970s. Westinghouse was neither a producer nor a manufacturer of asbestos. The Company is typically named as one of a large number of defendants in both state and federal cases. In the majority of asbestos lawsuits, the


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


plaintiffs have not identified which of the Company’s products is the basis of a claim. Claims against the Company in which a product has been identified principally relate to exposures allegedly caused by asbestos-containing insulating material in turbines sold for power-generation, industrial and marine use.

Claims are frequently filed and/or settled in groups, which may make the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. The Company does not report as pending those claims on inactive, stayed, deferred or similar dockets which some jurisdictions have established for claimants who allege minimal or no impairment. As of JuneSeptember 30, 2016, the Company had pending approximately 34,79034,400 asbestos claims, as compared with approximately 36,030 as of December 31, 2015 and 38,00037,190 as of JuneSeptember 30, 2015. During the secondthird quarter of 2016, the Company received approximately 1,190930 new claims and closed or moved to an inactive docket approximately 1,4401,320 claims. The Company reports claims as closed when it becomes aware that a dismissal order has been entered by a court or when the Company has reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other factors. In 2015, as the result of an insurance settlement, insurance recoveries exceeded the Company’s after tax costs for settlement and defense of asbestos claims by approximately $5 million. In 2014, the Company’s costs for settlement and defense of asbestos claims after insurance and taxes were approximately $11 million. The Company’s costs for settlement and defense of asbestos claims may vary year to year and insurance proceeds are not always recovered in the same period as the insured portion of the expenses.

Filings include claims for individuals suffering from mesothelioma, a rare cancer, the risk of which is allegedly increased by exposure to asbestos; lung cancer, a cancer which may be caused by various factors, one of which is alleged to be asbestos exposure; other cancers, and conditions that are substantially less serious, including claims brought on behalf of individuals who are asymptomatic as to an allegedly asbestos-related disease. The predominant number of claims against the Company are non-cancer claims. The Company believes that its reserves and insurance are adequate to cover its asbestos liabilities. This belief is based upon many factors and assumptions, including the number of outstanding claims, estimated average cost per claim, the breakdown of claims by disease


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


type, historic claim filings, costs per claim of resolution and the filing of new claims. While the number of asbestos claims filed against the Company has trended down in the past five to ten years and has remained flat in recent years, it is difficult to predict future asbestos liabilities, as events and circumstances may occur including, among others, the number and types of claims and average cost to resolve such claims, which could affect the Company’s estimate of its asbestos liabilities.

Other.    The Company from time to time receives claims from federal and state environmental regulatory agencies and other entities asserting that it is or may be liable for environmental cleanup costs and related damages principally relating to historical and predecessor operations of the Company. In addition, the Company from time to time receives personal injury claims including toxic tort and product liability claims (other than asbestos) arising from historical operations of the Company and its predecessors.

Related Parties
See Note 4 to the consolidated financial statements.
Recent Pronouncements and Adoption of New Accounting Standards
See Note 1 to the consolidated financial statements.



Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Critical Accounting Policies
See Item 7, Management’s Discussion and Analysis of Results of Operations and Financial Condition in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, for a discussion of the Company’s critical accounting policies.

Beginning in the third quarter of 2016, in connection with its new segment presentation, the Company allocated the goodwill for its Radio segment into three reporting units. The estimated fair value of each of these three reporting units exceeded their respective carrying value by less than 1%, which is consistent with the results of the Company’s 2015 annual impairment test for its CBS Radio reporting unit. The assumptions used in the calculation of the estimated fair values of the three Radio reporting units were similar to those used in the Company’s 2015 annual impairment test for its CBS Radio reporting unit, as disclosed in the discussion of critical accounting policies in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

Cautionary Statement Concerning Forward-Looking Statements
This quarterly report on Form 10-Q, including “Item 2 - Management’s Discussion and Analysis of Results of Operations and Financial Condition,” contains both historical and forward‑looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward‑looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. These forward‑looking statements are not based on historical facts, but rather reflect the Company’s current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “may,” “could,” or other similar words or phrases. Similarly, statements that describe the Company’s objectives, plans or goals are or may be forward‑looking statements. These forward‑looking statements involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause the actual results, performance or achievements of the Company to be different from any future results, performance and achievements expressed or implied by these statements. These risks, uncertainties and other factors include, among others: advertising market conditions generally; changes in the public acceptance of the Company’s content; changes in technology and its effect on competition in the Company’s markets; changes in the


Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


federal communications laws and regulations; the impact of piracy on the Company’s products; the impact of consolidation in the market for the Company’s content; the impact of negotiations or the loss of affiliation agreements or retransmission agreements; effects relating to the Company exploring, entering into, and/or consummating any potential transaction with Viacom Inc.; the ability to achieve the separation of the Company’s radio business on terms that the Company finds acceptable; the impact of union activity, including possible strikes or work stoppages or the Company’s inability to negotiate favorable terms for contract renewals; other domestic and global economic, business, competitive and/or regulatory factors affecting the Company’s businesses generally; and other factors described in the Company’s filings made under the securities laws, including, among others, those set forth under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 and in our Quarterly Reports on Form 10-Q. There may be additional risks, uncertainties and factors that the Company does not currently view as material or that are not necessarily known. The forward‑looking statements included in this document are made as of the date of this document and the Company does not have any obligation to publicly update any forward‑looking statements to reflect subsequent events or circumstances.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
There have been no significant changes to market risk since reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
Item 4.Controls and Procedures.
The Company’s chief executive officer and chief operating officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) were effective, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Securities Exchange Act of 1934, as amended.

No change in the Company’s internal control over financial reporting occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


PART II – OTHER INFORMATION
Item 1A.Risk Factors.
The following updates the corresponding risk factor included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

The Company Could Suffer Losses Due to Asset Impairment Charges for Goodwill, Intangible Assets, FCC Licenses and Programming

AsIn connection with the Company’s new segment presentation, the Company allocated the goodwill for its Radio segment into three reporting units. The estimated fair value of each of these three reporting units exceeded their respective carrying value by less than 1%, which is consistent with the results of the Company’s 2015 annual impairment test for its CBS Radio reporting unit. In addition, as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, based on the Company’s most recent annual impairment teststest for goodwill and FCC licenses performed during the fourth quarter of 2015, the estimated fair value of the Company’s CBS Radio reporting unit exceeded its carrying value by less than 1%, the carrying value of FCC licenses in eighteen radio markets was equal to their respective fair values, and the carrying value of FCC licenses in four radio markets was within 10% of their respective estimated fair values. Any downward revisions to the estimated fair value of the CBSthree Radio reporting unitunits and/or these FCC licenses could cause the estimated fair valuevalues to fall below their respective carrying values, which could result in a noncash impairment charge. Any impairment charge for goodwill and/or FCC licenses could have a material adverse effect on the Company’s reported net earnings.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
Company Purchases of Equity Securities
In November 2010, the Company announced that its Board of Directors approved a program to repurchase $1.5 billion of the Company’s common stock in open market purchases or other types of transactions (including accelerated stock repurchases or privately negotiated transactions). Since then, various increases to such amount have been approved and announced, including a $3.0 billion increase to the amount available under such program on August 7, 2014. The program had $1.0 billion remaining as of June 30, 2016. On July 28, 2016, the Company announced that its Board of Directors approvedmost recently, an increase to the share purchaserepurchase program to a total availability of $6.0 billion.billion on July 28, 2016. Below is a summary of CBS Corp.’s purchases of its Class B Common Stock during the three months ended JuneSeptember 30, 2016.
(in millions, except per share amounts)
Total
Number of
Shares
Purchased
 
Average
Price Per
Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Programs
 
Remaining
Authorization
April 1, 2016 - April 30, 2016 2.3
  $54.97
  2.3
   $1,374
 
May 1, 2016 - May 31, 2016 3.1
  $54.75
  3.1
   $1,206
 
June 1, 2016 - June 30, 2016 3.8
  $53.33
  3.8
   $1,002
 
Total 9.2
  $54.21
  9.2
   $1,002
 


Item 5.Other Information.
As of July 25, 2016, National Amusements, Inc. (“NAI”) directly or indirectly owned approximately 79.5% of the shares of the Company’s voting Class A Common Stock, and owned approximately 8.8% of the shares of the Company’s voting Class A Common Stock and non-voting Class B Common Stock on a combined basis. Mr. Sumner M. Redstone is the beneficial owner of the controlling interest in NAI and, accordingly, beneficially owns all such shares. NAI is controlled by Mr. Redstone through the Sumner M. Redstone National Amusements Trust (the “SMR Trust”), which owns approximately 80% of the voting interest of NAI, and such voting interest of NAI held by the SMR Trust is voted solely by Mr. Redstone until his incapacity or death. The SMR Trust provides that in the event of Mr. Redstone’s death or incapacity, voting control of the NAI voting interest held by the SMR Trust will pass to seven trustees, who will include CBS Corporation directors Ms. Shari Redstone and Mr. David R. Andelman. No member of the Company’s management is a trustee of the SMR Trust.
(in millions, except per share amounts)
Total
Number of
Shares
Purchased
 
Average
Price Per
Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Programs
 
Remaining
Authorization
July 1, 2016 - July 31, 2016 2.2
  $55.39
  2.2
   $5,982
 
August 1, 2016 - August 31, 2016 3.5
  $52.05
  3.5
   $5,798
 
September 1, 2016 - September 30, 2016 3.8
  $51.91
  3.8
   $5,603
 
Total 9.5
  $52.77
  9.5
   $5,603
 



Item 6.Exhibits.
Exhibit No.Description of Document
(4) Instruments defining the rights of security holders, including indentures.
 (a)
Amended and Restated Senior Indenture dated as of November 3, 2008 (“2008 Indenture”) between CBS Corporation, CBS Operations Inc., and The Bank of New York Mellon, as senior trustee (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 filed by CBS Corporation on November 3, 2008 (Registration No. 333-154962) (File No. 001-09553)).

 (b)
First Supplemental Indenture to 2008 Indenture dated as of April 5, 2010 between CBS Corporation, CBS Operations Inc., and Deutsche Bank Trust Company Americas, as senior trustee (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by CBS Corporation on April 5, 2010 (File No. 001-09553)).

  
The other instruments defining the rights of holders of the long-term debt securities of CBS Corporation and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. CBS Corporation hereby agrees to furnish copies of these instruments to the Securities and Exchange Commission upon request.

(10)
 Material Contracts
 (a)
Amended and Restated $2.5 Billion CreditEmployment Agreement dated as of June 9,September 29, 2016 among CBS Corporation; CBS Operations Inc.; the Subsidiary Borrowers Parties thereto; the Lenders named therein; JPMorgan Chase Bank, N.A., as Administrative Agent; Citibank, N.A., as Syndication Agent; and Bank of America, N.A., Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Mizuho Bank, Ltd., Morgan Stanley MUFG Loan Partners, LLC and Wells Fargo Bank, N.A., as Co‑Documentation Agents (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K ofbetween CBS Corporation filed June 10, 2016) (File No. 001-09553)and Anthony G. Ambrosio (filed herewith).

(12) Statement Regarding Computation of Ratios (filed herewith)
(31) Rule 13a-14(a)/15d-14(a) Certifications
 (a)Certification of the Chief Executive Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
 (b)Certification of the Chief Operating Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
(32) Section 1350 Certifications
 (a)Certification of the Chief Executive Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).
 (b)Certification of the Chief Operating Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).
(101) Interactive Data File
  101. INS XBRL Instance Document.
  101. SCH XBRL Taxonomy Extension Schema.
  101. CAL XBRL Taxonomy Extension Calculation Linkbase.
  101. DEF XBRL Taxonomy Extension Definition Linkbase.
  101. LAB XBRL Taxonomy Extension Label Linkbase.
  101. PRE XBRL Taxonomy Extension Presentation Linkbase.


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
CBS CORPORATION
(Registrant)
  
Date: July 28,November 3, 2016/s/ Joseph R. Ianniello
 
Joseph R. Ianniello
Chief Operating Officer
  
Date: July 28,November 3, 2016/s/ Lawrence Liding
 
Lawrence Liding
Executive Vice President, Controller and
Chief Accounting Officer


EXHIBIT INDEX
Exhibit No.Description of Document
(4) Instruments defining the rights of security holders, including indentures.
 (a)
Amended and Restated Senior Indenture dated as of November 3, 2008 (“2008 Indenture”) between CBS Corporation, CBS Operations Inc., and The Bank of New York Mellon, as senior trustee (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 filed by CBS Corporation on November 3, 2008 (Registration No. 333-154962) (File No. 001-09553)).

 (b)First Supplemental Indenture to 2008 Indenture dated as of April 5, 2010 between CBS Corporation, CBS Operations Inc., and Deutsche Bank Trust Company Americas, as senior trustee (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by CBS Corporation on April 5, 2010 (File No. 001-09553)).
  
The other instruments defining the rights of holders of the long-term debt securities of CBS Corporation and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. CBS Corporation hereby agrees to furnish copies of these instruments to the Securities and Exchange Commission upon request.

(10) Material Contracts
 (a)Amended and Restated $2.5 Billion CreditEmployment Agreement dated as of June 9,September 29, 2016 among CBS Corporation; CBS Operations Inc.; the Subsidiary Borrowers Parties thereto; the Lenders named therein; JPMorgan Chase Bank, N.A., as Administrative Agent; Citibank, N.A., as Syndication Agent; and Bank of America, N.A., Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Mizuho Bank, Ltd., Morgan Stanley MUFG Loan Partners, LLC and Wells Fargo Bank, N.A., as Co‑Documentation Agents (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K ofbetween CBS Corporation filed June 10, 2016) (File No. 001-09553)and Anthony G. Ambrosio (filed herewith).
(12) Statement Regarding Computation of Ratios (filed herewith)
(31) Rule 13a-14(a)/15d-14(a) Certifications
 (a)Certification of the Chief Executive Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
 (b)Certification of the Chief Operating Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
(32) Section 1350 Certifications
 (a)Certification of the Chief Executive Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).
 (b)Certification of the Chief Operating Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).
(101) Interactive Data File
  101. INS XBRL Instance Document.
  101. SCH XBRL Taxonomy Extension Schema.
  101. CAL XBRL Taxonomy Extension Calculation Linkbase.
  101. DEF XBRL Taxonomy Extension Definition Linkbase.
  101. LAB XBRL Taxonomy Extension Label Linkbase.
  101. PRE XBRL Taxonomy Extension Presentation Linkbase.

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