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 SeptemberJune 30, 20162017
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 codecode)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 OctoberJuly 31, 2016:2017:
Class A Common Stock, par value $.001 per share— 37,726,90437,598,604
Class B Common Stock, par value $.001 per share— 391,975,900364,054,978
 




CBS CORPORATION
INDEX TO FORM 10-Q
  Page
 PART I – FINANCIAL INFORMATION 
   
 
   
 Consolidated Statements of Operations (Unaudited) for the
 Three and NineSix Months Ended SeptemberJune 30, 20162017 and SeptemberJune 30, 20152016
   
 Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the
 Three and NineSix Months Ended SeptemberJune 30, 20162017 and SeptemberJune 30, 20152016
   
 Consolidated Balance Sheets (Unaudited) at SeptemberJune 30, 20162017
 and December 31, 20152016
   
 Consolidated Statements of Cash Flows (Unaudited) for the
 NineSix Months Ended SeptemberJune 30, 20162017 and SeptemberJune 30, 20152016
   
 
   
Management’s Discussion and Analysis of Results of Operations and Financial Condition.
   
   
   
  
   
Item 1A.Risk Factors.
   


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 Nine Months EndedThree Months Ended Six Months Ended
September 30, September 30,June 30, June 30,
2016 2015 2016 20152017 2016 2017 2016
Revenues$3,396
 $3,257
 $10,532
 $9,976
$3,257
 $2,976
 $6,600
 $6,564
Costs and expenses: 
  
     
  
    
Operating1,897
 1,842
 6,114
 5,891
2,004
 1,758
 4,078
 4,030
Selling, general and administrative640
 597
 1,887
 1,790
528
 510
 1,038
 1,013
Depreciation and amortization61
 65
 188
 199
56
 57
 111
 114
Restructuring charges (Note 10)
 
 
 55
Other operating items, net
 
 (9) (19)
 
 
 (9)
Total costs and expenses2,598
 2,504
 8,180
 7,916
2,588
 2,325
 5,227
 5,148
Operating income798
 753
 2,352
 2,060
669
 651
 1,373
 1,416
Interest expense(104) (102) (304) (289)(111) (100) (220) (200)
Interest income7
 6
 22
 18
15
 8
 28
 15
Other items, net2
 (4) (5) (23)5
 (4) 6
 (7)
Earnings from continuing operations before income taxes and
equity in loss of investee companies
703
 653
 2,065
 1,766
578
 555
 1,187
 1,224
Provision for income taxes(176) (211) (612) (579)(169) (173) (307) (379)
Equity in loss of investee companies, net of tax(13) (16) (43) (35)(12) (9) (29) (30)
Net earnings from continuing operations514
 426
 1,410
 1,152
397
 373
 851
 815
Loss from discontinued operations (Note 1)(36) 
 (36) 
Net earnings$478
 $426
 $1,374
 $1,152
Net earnings (loss) from discontinued operations, net of tax (Note 3)(339) 50
 (1,045) 81
Net earnings (loss)$58
 $423
 $(194) $896
              
Basic net earnings (loss) per common share: 
  
     
  
    
Net earnings from continuing operations$1.16

$.89

$3.13

$2.36
$.98

$.83

$2.09

$1.79
Loss from discontinued operations$(.08)
$

$(.08)
$
Net earnings$1.08

$.89

$3.05

$2.36
Net earnings (loss) from discontinued operations$(.84)
$.11

$(2.57)
$.18
Net earnings (loss)$.14

$.94

$(.48)
$1.97
              
Diluted net earnings (loss) per common share: 
  
     
  
    
Net earnings from continuing operations$1.15

$.88

$3.10

$2.33
$.97

$.82

$2.06

$1.78
Loss from discontinued operations$(.08)
$

$(.08)
$
Net earnings$1.07

$.88

$3.02

$2.33
Net earnings (loss) from discontinued operations$(.83)
$.11

$(2.53)
$.18
Net earnings (loss)$.14

$.93

$(.47)
$1.95
              
Weighted average number of common shares outstanding: 
  
     
  
    
Basic442
 480
 451
 489
405
 451
 407
 455
Diluted446

484

455

495
410

455

413

459
              
Dividends per common share$.18
 $.15
 $.48
 $.45
$.18
 $.15
 $.36
 $.30
See notes to consolidated financial statements.


CBS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited; in millions)
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
September 30, September 30,June 30, June 30,
2016 2015 2016 20152017 2016 2017 2016
Net earnings$478
 $426
 $1,374
 $1,152
Net earnings (loss)$58
 $423
 $(194) $896
Other comprehensive income, net of tax:              
Cumulative translation adjustments1
 (5) 2
 (6)
 
 2
 1
Amortization of net actuarial loss and prior service cost10
 9
 29
 27
12
 9
 24
 19
Total other comprehensive income, net of tax11
 4
 31
 21
12
 9
 26
 20
Total comprehensive income$489

$430

$1,405

$1,173
Total comprehensive income (loss)$70

$432

$(168)
$916
See notes to consolidated financial statements.


CBS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
At AtAt At
September 30, 2016 December 31, 2015June 30, 2017 December 31, 2016
ASSETS          
Current Assets:          
Cash and cash equivalents $179
 $323
  $170
 $598
 
Receivables, less allowances of $67 (2016) and $63 (2015) 3,348
 3,628
 
Programming and other inventory (Note 3) 1,459
 1,271
 
Receivables, less allowances of $61 (2017) and $60 (2016) 3,299
 3,314
 
Programming and other inventory (Note 4) 1,560
 1,427
 
Prepaid income taxes 39
 101
  41
 30
 
Prepaid expenses 204
 175
  132
 185
 
Other current assets 228
 249
  185
 204
 
Current assets of discontinued operations (Note 3) 299
 305
 
Total current assets 5,457
 5,747
  5,686
 6,063
 
Property and equipment 3,263
 3,243
  2,967
 2,935
 
Less accumulated depreciation and amortization 1,918
 1,838
  1,753
 1,694
 
Net property and equipment 1,345
 1,405
  1,214
 1,241
 
Programming and other inventory (Note 3) 2,237
 1,957
 
Programming and other inventory (Note 4) 2,459
 2,439
 
Goodwill 6,531
 6,481
  4,891
 4,864
 
Intangible assets 5,499
 5,514
  2,627
 2,633
 
Other assets 2,779
 2,661
  2,558
 2,707
 
Assets of discontinued operations (Note 3) 3,218
 4,291
 
Total Assets $23,848

$23,765
  $22,653

$24,238
 
          
LIABILITIES AND STOCKHOLDERS EQUITY
 

 

  

 

 
Current Liabilities: 

 

  

 

 
Accounts payable $153
 $192
  $124
 $148
 
Accrued compensation 282
 315
  223
 369
 
Participants’ share and royalties payable 979
 1,013
  1,005
 1,024
 
Program rights 373
 374
  262
 290
 
Deferred revenues 141
 295
 
Commercial paper (Note 5) 33
 
 
Current portion of long-term debt (Note 5) 22
 222
 
Commercial paper (Note 6) 263
 450
 
Current portion of long-term debt (Note 6) 23
 23
 
Accrued expenses and other current liabilities 1,115
 1,149
  1,169
 1,249
 
Current liabilities of discontinued operations (Note 3) 161
 155
 
Total current liabilities 3,098
 3,560
  3,230
 3,708
 
Long-term debt (Note 5) 8,902
 8,226
 
Long-term debt (Note 6) 8,898
 8,902
 
Pension and postretirement benefit obligations 1,526
 1,575
  1,638
 1,769
 
Deferred income tax liabilities, net 1,667
 1,509
  628
 590
 
Other liabilities 3,240
 3,260
  3,149
 3,129
 
Liabilities of discontinued operations 67
 72
 
Liabilities of discontinued operations (Note 3) 2,483
 2,451
 
 

 

  

 

 
Commitments and contingencies (Note 9) 

 

 
Commitments and contingencies (Note 10) 

 

 
 

 

  

 

 
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
 
Class A Common Stock, par value $.001 per share; 375 shares authorized;
38 (2017 and 2016) shares issued
 
 
 
Class B Common Stock, par value $.001 per share; 5,000 shares authorized;
832 (2017) and 829 (2016) shares issued
 1
 1
 
Additional paid-in capital 43,935
 44,055
  43,820
 43,913
 
Accumulated deficit (19,144) (20,518)  (19,451) (19,257) 
Accumulated other comprehensive loss (Note 7) (739) (770) 
Accumulated other comprehensive loss (Note 8) (741) (767) 
 24,053
 22,768
  23,629
 23,890
 
Less treasury stock, at cost; 429 (2016) and 401 (2015) Class B shares 18,705
 17,205
 
Less treasury stock, at cost; 467 (2017) and 455 (2016) Class B shares 21,002
 20,201
 
Total Stockholders Equity
 5,348
 5,563
  2,627
 3,689
 
Total Liabilities and Stockholders Equity
 $23,848
 $23,765
  $22,653
 $24,238
 
See notes to consolidated financial statements.

CBS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Nine Months EndedSix Months Ended
September 30,June 30,
2016 20152017 2016
Operating Activities:      
Net earnings$1,374
 $1,152
Less: Loss from discontinued operations(36) 
Net earnings (loss)$(194) $896
Less: Net earnings (loss) from discontinued operations, net of tax(1,045) 81
Net earnings from continuing operations1,410

1,152
851

815
Adjustments to reconcile net earnings from continuing operations to net cash flow provided by operating activities from continuing operations:









Depreciation and amortization188

199
111

114
Stock-based compensation134

128
85

81
Equity in loss of investee companies, net of tax and distributions48

37
29

34
Change in assets and liabilities, net of investing and financing activities(472)
(866)(167)
95
Net cash flow provided by operating activities from continuing operations1,308

650
909

1,139
Net cash flow used for operating activities from discontinued operations(2)
(27)
Net cash flow provided by operating activities from discontinued operations29

112
Net cash flow provided by operating activities1,306

623
938

1,251
Investing Activities:









Acquisitions(51) (7)(21) (51)
Capital expenditures(125)
(104)(68)
(69)
Investments in and advances to investee companies(44)
(58)(65)
(43)
Proceeds from dispositions28

75
1

19
Other investing activities11
 (8)14
 4
Net cash flow used for investing activities from continuing operations(181)
(102)(139)
(140)
Net cash flow used for investing activities from discontinued operations

(4)(13)
(2)
Net cash flow used for investing activities(181)
(106)(152)
(142)
Financing Activities:









Proceeds from (repayments of) short-term debt borrowings, net33

(313)
Proceeds from issuance of senior notes685
 1,959
(Repayments of) proceeds from short-term debt borrowings, net(187)
163
Repayment of senior debentures(199) 

 (199)
Proceeds from debt borrowings of CBS Radio24
 
Repayment of debt borrowings of CBS Radio(5) 
Payment of capital lease obligations(13)
(13)(8)
(8)
Payment of contingent consideration(7) 
Dividends(209)
(228)(151)
(142)
Purchase of Company common stock(1,534)
(2,345)(845)
(1,033)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation(57)
(96)(89)
(57)
Proceeds from exercise of stock options13

137
39

10
Excess tax benefit from stock-based compensation13

87
Excess tax benefit from stock-based compensation (Note 1)

11
Other financing activities(1) 

 (1)
Net cash flow used for financing activities(1,269)
(812)(1,229)
(1,256)
Net decrease in cash and cash equivalents(144)
(295)(443)
(147)
Cash and cash equivalents at beginning of period323

428
Cash and cash equivalents at end of period$179

$133
Cash and cash equivalents at beginning of period
(includes $24 (2017) and $6 (2016) of discontinued operations cash)
622

323
Cash and cash equivalents at end of period
(includes $9 (2017 and 2016) of discontinued operations cash)
$179

$176
Supplemental disclosure of cash flow information









Cash paid for interest$358
 $303
Cash paid for income taxes from continuing operations$370
 $230
Cash paid for interest:   
Continuing operations$217
 $207
Discontinued operations$39
 $
   
Cash paid for income taxes:   
Continuing operations$272
 $261
Discontinued operations$46
 $35
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 Media (CBS Television Stations)Stations and Radio (CBS Radio)CBS Local Digital Media).

In connectionDiscontinued Operations-On February 2, 2017, the Company entered into an agreement with Entercom Communications Corp. (“Entercom”) to combine the Company’s previously announced plans to separate its radio business, a preliminary registration statement was filed with the Securities and Exchange Commission during the third quarter of 2016 for the proposed initial public offering of the common stock of CBS Radio, Inc. (“with Entercom in a merger to be effected through a Reverse Morris Trust transaction, which is expected to be tax-free to CBS Radio”). In preparation for the planned separation, the Company changed the manner in which it managesCorp. and 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.stockholders. In connection with this new segment presentation,transaction, the presentationCompany intends to split-off CBS Radio through an exchange offer, in which the Company’s stockholders may elect to exchange shares of intercompany revenuesthe Company’s Class B Common Stock for shares of CBS Radio, which will then be immediately converted into shares of Entercom Class A common stock at the time of the merger. CBS Radio has been revised, including station affiliation fees paid by Local Media topresented as a discontinued operation in the CBS Television Network. Prior period results have been reclassified to conform to this presentation.Company’s consolidated financial statements for all periods presented (See Note 3).

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, 2015.2016.

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 ninesix months ended SeptemberJune 30, 2016 and 2015 includes gainsincluded a gain from the salessale of businesses,a business 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 (Loss) per Common Share-Basic net earnings (loss) per share (“EPS”) is based upon net earnings (loss) 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”) and market-based performance share units (“PSUs”) 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 54 million stock options for each of the three and ninesix months ended SeptemberJune 30, 2016. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, were 7 million stock options2017 and RSUs for the three months ended September 30, 2015 and 46 million stock options for each of the ninethree and six months ended SeptemberJune 30, 2015.2016.



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 Nine Months EndedThree Months Ended Six Months Ended
September 30, September 30,June 30, June 30,
(in millions)2016 2015 2016 20152017 2016 2017 2016
Weighted average shares for basic EPS442
 480
 451
 489
405
 451
 407
 455
Dilutive effect of shares issuable under stock-based
compensation plans
4
 4
 4
 6
5
 4
 6
 4
Weighted average shares for diluted EPS446
 484
 455
 495
410
 455
 413
 459
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 ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, the Company recorded dividends of $218$148 million and $222138 million, respectively, as a reduction to additional paid-in capital as the Company had an accumulated deficit balance.

Adoption of New Accounting Standards
Simplifying theImprovements to Employee Share-Based Payment Accounting for Measurement Period Adjustments
During the first quarter of 2016,2017, 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 assimplifies several aspects of the acquisition date.accounting for employee share-based payment transactions. Under thethis amended guidance, the acquirer is required to recognize such adjustmentsall excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the reportingincome statement in the period in which the adjustment amountsawards vest or are identified. Such adjustments also includeexercised. In the effect on earnings from any changes in depreciation, amortization, orstatement of cash flows, excess tax benefits are classified with 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 facetax cash flows in operating activities. As a result 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 effectthe Company’s excess tax benefits associated with the exercise of stock options and vesting of RSUs for the three and six months endedJune 30,2017 were recorded in the provision for income taxes on the Company’s consolidated financial statements.Consolidated Statements of Operations. The guidance requires the income statement classification to be applied prospectively, and therefore, excess tax benefits for prior periods remain classified in stockholders’ equity on the balance sheet. The Company elected to apply the cash flow classification provision of this guidance prospectively and therefore, excess tax benefits for prior periods remain classified as financing activities on the statements of cash flows. The amended guidance also gives the option to make a policy election to account for forfeitures as they occur. The Company, however, has elected to continue its existing practice of estimating forfeitures.

Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary ItemsAccounting for Goodwill Impairment
During the first quarter of 2016,2017, the Company early adopted amended FASB guidance which eliminatessimplifies the concept of extraordinary items.accounting for goodwill impairment. This guidance removes Step 2 of the requirementgoodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a goodwill impairment charge is recognized for the amount by which the carrying value of a reporting unit exceeds its fair value, not to assess whether an event or transaction is both unusual in nature and infrequent in occurrence and to separately present any such items onexceed the statementcarrying amount 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.goodwill.



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

Recent Pronouncements
Stock Compensation: Scope of Modification Accounting for Share-Based Payments When
In May 2017, 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 issued amended guidance on the accounting for stock-based compensation which clarifies when to account for a change to the terms or conditions of ana share-based payment award provide thatas a performance target that affects vesting could be achieved after the requisite service period.modification. Under this guidance, such performance target should not be reflected in estimatingmodification accounting is required only if the grant-date fair value, the vesting conditions, or the classification of the award. The Company should begin recognizing compensation costaward as equity or liability changes as a result of the change in the period interms or conditions of a share-based payment award. This guidance, which it becomes probable that the performance target will be achieved,is effective for the cumulative amount of compensation cost attributableinterim and annual periods beginning after December 15, 2017, with early adoption permitted, is not expected to the period(s) for which the requisite service has already been rendered. The adoption of this guidance did not have an effectimpact on the Company’s consolidated financial statements.
Recent PronouncementsImproving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
In March 2017, the FASB issued amended guidance on the presentation of net periodic pension and postretirement benefit cost (“net benefit cost”). This guidance requires an employer to present on the statement of operations the service cost component of net benefit cost in the same line item(s) as other compensation costs of the related employees. The other components of net benefit cost will be presented in the statement of operations separately from the service cost component and below the subtotal of operating income. This guidance is required to be applied retrospectively and is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted as of the beginning of an annual reporting period. Upon adoption, the Company’s operating income will increase or decrease by an amount equal to the components of net benefit cost other than service cost, which are disclosed in Note 7.
Clarifying the Definition of a Business
In January 2017, the FASB issued amended guidance on the accounting for business combinations which clarifies the definition of a business and assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under this guidance, when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or group of similar assets), the assets acquired would not represent a business. In addition, in order to be considered a business, an acquisition would have to include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The amended guidance also narrows the definition of outputs by more closely aligning it with how outputs are described in FASB guidance for revenue recognition. This guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted.
Intra-Entity Transfers of Assets Other than Inventory
In October 2016, the FASB issued amended guidance on the accounting for income taxes, which eliminates the exception in existing guidance which defers the recognition of the tax effects of intra-entity asset transfers other than inventory until the transferred asset is sold to a third party. Rather, the amended guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance, which is effective for interim and annual periods beginning after December 15, 2017, is not expected to have a material impact on the Company’s consolidated financial statements.

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

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. This guidance is effective for the Company beginning in the first quarter of 2018. The Company anticipates that it will apply the modified retrospective method of adoption with the cumulative effect of the initial adoption reflected as an adjustment to the opening balance of accumulated deficit as of the date of adoption. The Company has identified the predominant changes to its accounting policies and is in the process of quantifying the impact on its consolidated financial statements and evaluating the additional disclosures that may be required. The adoption of this guidance will result inis not expected to have a significant impact on the Company’s total revenues. The Company has identified changes to its revenue recognition policies primarily relating to two areas of content licensing and distribution revenues. First, revenues from certain distribution arrangements of third-party content will be recognized based on the gross amount of consideration received by the Company for such sale, with an associated expense recognized for the fees paid to the third-party producer. Under current accounting guidance, such revenues are recognized at the net amount retained by the Company after the payment of fees to the third-party producer. This change will not have an impact on the Company’s operating income. Second, revenues associated with the extension of an existing licensing arrangement, which are currently recognized upon the execution of such extension, will be recognized at a later date once the extension period begins. This change is currently assessingnot expected to have a material impact on the impact. This guidance is effectiveCompany’s results on an annual basis, since extensions executed each year are generally offset by extensions 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.which the license period has begun.
2) STOCK-BASED COMPENSATION
The following table summarizes the Company’s stock-based compensation expense for the three and ninesix months ended SeptemberJune 30, 20162017 and 2015.2016.
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
September 30, September 30,June 30, June 30,
2016 2015 2016 20152017 2016 2017 2016
RSUs$39
 $32
 $112
 $105
RSUs and PSUs$38
 $35
 $71
 $67
Stock options7
 7
 22
 23
7
 7
 14
 14
Stock-based compensation expense, before income taxes46
 39
 134
 128
45
 42
 85
 81
Related tax benefit(18) (15) (52) (49)(18) (16) (33) (31)
Stock-based compensation expense, net of tax benefit$28
 $24
 $82
 $79
$27
 $26
 $52
 $50


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

During the ninesix months ended SeptemberJune 30, 20162017, the Company granted 32 million RSUs for CBS Corp. Class B Common Stock with a weighted average per unit grant-date fair value of $47.26.$66.78. RSUs granted during the first ninesix months of 20162017 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 ninesix months ended SeptemberJune 30, 2016,2017, the Company also granted 2awards of market-based PSUs. The number of shares that will be issued upon vesting of the PSUs is based on the Company’s stock price performance over a designated measurement period, as well as the achievement of established operating goals. The fair value of the PSUs is determined on the grant date using a Monte Carlo simulation model and is expensed over the required employee service period. The fair value of the PSU awards granted during the six months ended June 30, 2017 was $23 million. 

During the six months ended June 30, 2017, the Company also granted 1 million stock options with a weighted average exercise price of $45.79.$66.31. Stock options granted during the first ninesix months of 20162017 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 and PSUs at SeptemberJune 30, 20162017 was $237$270 million, which is expected to be recognized over a weighted average period of 2.42.5 years. Total unrecognized compensation cost related to unvested stock option awards at SeptemberJune 30, 20162017 was $50$51 million, which is expected to be recognized over a weighted average period of 2.42.6 years.
3) DISCONTINUED OPERATIONS
On February 2, 2017, the Company entered into an agreement with Entercom to combine the Company’s radio business, CBS Radio, with Entercom in a merger to be effected through a Reverse Morris Trust transaction, which is expected to be tax-free to CBS Corp. and its stockholders. In connection with this transaction, Entercom will issue up to 105 million shares of its Class A common stock on a fully diluted basis, and the Company intends to split-off CBS Radio through an exchange offer, in which the Company’s stockholders may elect to exchange shares of the Company’s Class B Common Stock for shares of CBS Radio, which will then be immediately converted into shares of Entercom Class A common stock at the time of the merger. The Company expects the transaction to be completed during the fourth quarter of 2017, subject to customary approvals and closing conditions. CBS Radio has been classified as held for sale and presented as a discontinued operation in the Company’s consolidated financial statements for all periods presented.

FASB Accounting Standards Codification (“ASC”) 360 requires that an asset classified as held for sale be measured each reporting period at the lower of its carrying amount or fair value less cost to sell. The ultimate value of the transaction with Entercom will be determined based on Entercom’s stock price at the closing of the transaction. The Company recorded noncash charges of $365 million and $1.08 billion for the three and six months ended June 30, 2017, respectively, to record a valuation allowance to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. In accordance with ASC 360, the valuation allowance will continue to be adjusted based on the trading price of Entercom’s stock, which could result in future gains or losses. A 10% change to Entercom’s stock price would change the carrying value of CBS Radio by approximately $100 million.



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

For the three and six months ended June 30, 2017, CBS Radio recorded a restructuring charge of $7 million associated with the reorganization of certain business operations, reflecting severance costs and costs associated with exiting contractual obligations.

The following table sets forth details of net earnings (loss) from discontinued operations for the three and six months ended June 30, 2017 and 2016.
 Three Months Ended June 30, Six Months Ended June 30,
 2017 2016 2017
2016
Revenues$306
 $313
 $556
 $575
Costs and expenses:       
Operating105
 103
 194
 188
Selling, general and administrative129
 122
 251
 236
Depreciation and amortization (a)

 6
 

13
Restructuring charge7
 
 7
 
Provision for valuation allowance365
 
 1,080
 
Total costs and expenses606
 231
 1,532
 437
Operating income (loss)(300) 82
 (976) 138
Interest expense(20) 
 (39) 
Earnings (loss) from discontinued operations(320) 82
 (1,015) 138
Income tax provision(19) (32) (30) (57)
Net earnings (loss) from discontinued operations, net of tax$(339) $50
 $(1,045) $81
(a) CBS Radio has been classified as held for sale beginning in the fourth quarter of 2016. Under ASC 360, assets held for sale are not depreciated or amortized.
The following table presents the major classes of assets and liabilities of the Company’s discontinued operations.
 At At
 June 30, 2017 December 31, 2016
Receivables, net $240
   $244
 
Other current assets 59
   61
 
Goodwill 1,285
   1,285
 
Intangible assets 2,832
   2,832
 
Net property and equipment 153
   145
 
Other assets 28
   29
 
Valuation allowance for carrying value (1,080)   
 
Total Assets $3,517
   $4,596
 
Current portion of long-term debt $10
   $10
 
Other current liabilities 151
   145
 
Long-term debt 1,356
   1,335
 
Deferred income tax liabilities 1,010
   998
 
Other liabilities 117
   118
 
Total Liabilities $2,644
   $2,606
 


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

The following table presents CBS Radio’s long-term debt.
 At At
 June 30, 2017 December 31, 2016
Term Loan due October 2023, net of discount $950
   $955
 
7.250% Senior Notes due November 2024 400
   400
 
Revolving Credit Facility 34
   10
 
Deferred financing costs (18)   (20) 
Total long-term debt, including current portion $1,366
   $1,345
 
CBS Radio’s senior secured term loan (“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 CBS Radio’s credit agreement which also includes a $250 million senior secured revolving credit facility (the “Revolving Credit Facility”) which expires in 2021. Interest on the Revolving Credit Facility is 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 Revolving Credit Facility requires CBS Radio to maintain a maximum Consolidated Net Secured Leverage Ratio of 4.00 to 1.00.

In connection with financing for the transaction with Entercom, on March 3, 2017, CBS Radio entered into Amendment No. 1 to its credit agreement, dated as of October 17, 2016, to, among other things, create a tranche of Term B-1 Loans in an aggregate principal amount not to exceed $500 million. The Term B-1 Loans are expected to be funded on the closing date of the transaction, subject to customary conditions.
3)4) PROGRAMMING AND OTHER INVENTORY
At AtAt At
September 30, 2016 December 31, 2015June 30, 2017 December 31, 2016
Acquired program rights $1,737
 $1,533
  $1,892
 $1,773
 
Internally produced programming:          
Released 1,459
 1,261
  1,668
 1,746
 
In process and other 445
 392
  405
 298
 
Publishing, primarily finished goods 55
 42
  54
 49
 
Total programming and other inventory 3,696
 3,228
  4,019
 3,866
 
Less current portion 1,459
 1,271
  1,560
 1,427
 
Total noncurrent programming and other inventory $2,237
 $1,957
  $2,459
 $2,439
 

4)5) 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 the Chairman Emeritus of 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 SeptemberJune 30, 20162017, NAI directly or indirectly owned approximately 79.5% of CBS Corp.’s voting Class A Common Stock, and owned approximately 9.0%9.7% of CBS Corp.’s Class A Common Stock and non-voting Class B Common Stock on a combined basis. NAI is controlled by Mr. Redstone through the Sumner M. Redstone National Amusements Trust (the “SMR Trust”), which owns 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


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

of the CompanyNAI voting interest held by the SMR Trust will pass to seven trustees, who will include CBS Corporation directors Ms. Shari Redstone and Viacom Inc.  The CompanyMr. David R. Andelman. No member of the Company’s management is ina trustee of 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.SMR Trust.

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 $16$19 million and $44$31 million for the three months ended SeptemberJune 30, 20162017 and 20152016, respectively, and $85$73 million and $144$67 million for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively.

The Company places advertisements with and leases production facilities from various subsidiaries of Viacom Inc. The total amounts for these transactions were $6$4 million for each of the three months ended SeptemberJune 30, 20162017 and 20152016, and $17$9 million and $11 million for each of the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015.respectively.



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 SeptemberJune 30, 20162017 and December 31, 20152016.
At AtAt At
September 30, 2016 December 31, 2015June 30, 2017 December 31, 2016
Receivables $87
 $115
  $86
 $113
 
Other assets (Receivables, noncurrent) 47
 38
  51
 35
 
Total amounts due from Viacom Inc.
 $134
 $153
  $137
 $148
 
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 $1320 million and $20$24 million for the three months ended SeptemberJune 30, 20162017 and 20152016, respectively, and $69$49 million and $91$56 million for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively. At SeptemberJune 30, 20162017 and December 31, 2015,2016, total amounts due from these joint ventures were $41$40 million and $48$47 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.
5) BANK FINANCING AND DEBT
The following table sets forth the Company’s debt.

At At

September 30, 2016 December 31, 2015
Commercial paper
$33



$

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

8,849



8,365

Obligations under capital leases
75



83

Total debt
8,957



8,448

Less commercial paper
33





Less current portion of long-term debt
22



222

Total long-term debt, net of current portion
$8,902



$8,226

(a) At September 30, 2016 and December 31, 2015, the senior debt balances included (i) a net unamortized discount of $53 million and $45 million, respectively, (ii) unamortized deferred financing costs of $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 $7 million and $14 million, respectively. The face value of the Company’s senior debt was $8.94 billion and $8.44 billion at September 30, 2016 and December 31, 2015, respectively.

During July 2016, the Company issued $700 million of 2.90% senior notes due 2027. The Company used 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)

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

At At

June 30, 2017 December 31, 2016
Commercial paper
$263



$450

Senior debt (1.95% - 7.875% due 2017 - 2045) (a)

8,853



8,850

Obligations under capital leases
68



75

Total debt
9,184



9,375

Less commercial paper
263



450

Less current portion of long-term debt
23



23

Total long-term debt, net of current portion
$8,898



$8,902

(a) At June 30, 2017 and December 31, 2016, the senior debt balances included (i) a net unamortized discount of $49 million and $52 million, respectively, (ii) unamortized deferred financing costs of $41 million and $43 million, respectively, and (iii) an increase in the carrying value of the debt relating to previously settled fair value hedges of $2 million and $5 million, respectively. The face value of the Company’s senior debt was $8.94 billion at both June 30, 2017 and December 31, 2016.

In July 2017, the Company issued $400 million of 2.50% senior notes due 2023 and $500 million of 3.375% senior notes due 2028. The Company used the net proceeds from these issuances to repay its $400 million outstanding 1.95% senior notes that matured on July 1, 2017 and to redeem all of its $300 million outstanding 4.625% senior notes due May 2018. The remaining proceeds were used for general corporate purposes, including the repayment of short-term borrowings, including commercial paper.

At June 30, 2017, the Company classified $400 million of debt which matured in July 2017 and $300 million of debt due May 2018 as long-term debt on the Consolidated Balance Sheet, as a result of the above-mentioned debt refinancing.

Commercial Paper
At September 30, 2016, theThe Company had $33 million of outstanding commercial paper borrowings under its $2.5 billion commercial paper program of $263 million and $450 million at a weighted average interest rate of 0.75%June 30, 2017 and December 31, 2016, respectively, each with maturities of less than 45 days. The Company had no outstanding commercial paperweighted average interest rate for these borrowings was 1.42% at June 30, 2017 and 0.98% at December 31, 2015.2016.

Credit Facility
DuringAt June 2016,30, 2017, the Company amended and restated itshad a $2.5 billion revolving credit facility (the “Credit Facility”). The amended Credit Facility which expires in June 2021 and contains provisions that are substantially similar to the previous Credit Facility, which was due to expire in December 2019.2021. 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 SeptemberJune 30, 20162017, the Company’s Consolidated Leverage Ratio was approximately 2.5x2.9x.

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.



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

The Credit Facility is used for general corporate purposes. At SeptemberJune 30, 20162017, 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)7) 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 September 30,2016 2015 2016 2015
Three Months Ended June 30,2017 2016 2017 2016
Components of net periodic cost:              
Service cost$7
 $7
 $
 $
$8
 $7
 $
 $
Interest cost54
 52
 5
 6
47
 53
 5
 5
Expected return on plan assets(56) (65) 
 
(51) (57) 
 
Amortization of actuarial loss (gain) (a)
21
 20
 (5) (6)26
 22
 (6) (6)
Net periodic cost$26
 $14
 $
 $
$30
 $25
 $(1) $(1)
Pension Benefits Postretirement BenefitsPension Benefits Postretirement Benefits
Nine Months Ended September 30,2016 2015 2016 2015
Six Months Ended June 30,2017
2016
2017
2016
Components of net periodic cost:              
Service cost$22
 $23
 $
 $
$15
 $15
 $
 $
Interest cost161
 157
 15
 15
95
 107
 9
 10
Expected return on plan assets(170) (196) 
 
(101) (114) 
 
Amortization of actuarial loss (gain) (a)
64
 60
 (16) (16)51
 43
 (11) (11)
Net periodic cost$77
 $44
 $(1) $(1)$60
 $51
 $(2) $(1)
(a) Reflects amounts reclassified from accumulated other comprehensive income (loss) to net earnings.earnings (loss).
7)8) 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 thirdsecond quarter of 2016,2017, the Company repurchased 9.54.7 million shares of its Class B Common Stock under its share repurchase program for $500$300 million, at an average cost of $52.77$63.64 per share. During the ninesix months ended SeptemberJune 30, 2016,2017, the Company repurchased 29.012.3 million shares of its Class B Common Stock for $1.50 billion,$800 million, at an average cost of $51.76$65.08 per share, leaving $5.60$3.31 billion of authorization at SeptemberJune 30, 2016.2017.

On July 28, 2016,During the second quarter of 2017, the Company announced that its Board of Directors approveddeclared a 20% increase to the quarterly cash dividend of $.18 on its Class A and Class B Common stock to $.18 from $.15 per share. TheStock, resulting in total third quarter 2016 dividend was $80dividends of $73 million, which waswere paid on OctoberJuly 1, 2016.2017.


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
At December 31, 2015$152
 $(922)  $(770) 
Other comprehensive income before reclassifications2
 
  2
 
Reclassifications to net earnings
 29
(a) 
 29
 
Net other comprehensive income2
 29

 31
 
At September 30, 2016$154
 $(893)
 $(739) 
 
Cumulative
Translation
Adjustments
 
Net Actuarial
Gain (Loss)
and Prior
Service Cost
 
Accumulated
Other
Comprehensive Loss
At December 31, 2016$151
 $(918)  $(767) 
Other comprehensive income before reclassifications2
 
  2
 
Reclassifications to net earnings (loss)
 24
(a) 
 24
 
Net other comprehensive income2
 24

 26
 
At June 30, 2017$153
 $(894)
 $(741) 
 
Cumulative
Translation
Adjustments
 
Net Actuarial
Gain (Loss)
and Prior
Service Cost
 
Accumulated Other
Comprehensive Loss
At December 31, 2014$157
 $(892)  $(735) 
Other comprehensive loss before reclassifications(8) 
  (8) 
Reclassifications to net earnings2
 27
(a) 
 29
 
Net other comprehensive income (loss)(6) 27
  21
 
At September 30, 2015$151
 $(865)  $(714) 
 
Cumulative
Translation
Adjustments
 
Net Actuarial
Gain (Loss)
and Prior
Service Cost
 
Accumulated
Other
Comprehensive Loss
At December 31, 2015$152
 $(922)  $(770) 
Other comprehensive income before reclassifications1
 
  1
 
Reclassifications to net earnings (loss)
 19
(a) 
 19
 
Net other comprehensive income1
 19
  20
 
At June 30, 2016$153
 $(903)  $(750) 
(a)Reflects amortization of net actuarial losses. See Note 6.7.

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 $19$16 million and $17$13 million for the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015, respectively.


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

8)9) 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
 Three Months Ended June 30,
Six Months Ended June 30,
 2017
2016
2017
2016
Provision for income taxes, including interest and before
other discrete items
$(176) $(171) $(361) $(374)
Excess tax benefits from stock-based compensation (a)
4



31


Other discrete items (b)
3

(2)
23

(5)
Provision for income taxes$(169)
$(173)
$(307)
$(379)
Effective income tax rate29.2%
31.2%
25.9%
31.0%
(a) Reflects excess tax benefits associated with the exercise of stock options and vesting of RSUs. During the first quarter of 2017, the Company adopted FASB guidance which requires that the difference between the tax benefit from stock-based compensation expense and the deduction on the tax return be recognized within the income tax provision on the statement of operations. Previously, such difference was recognized in stockholders’ equity on the balance sheet. This difference occurs because stock-based compensation expense is recorded based on the grant-date fair value of the award, whereas the tax deduction is based on the fair value on the date the stock option is exercised or the RSU vests. This guidance requires the income statement classification to be applied prospectively, and therefore, excess tax benefits for income taxes was $176 million forprior periods remain classified in stockholders’ equity.
(b) For the threesix months ended SeptemberJune 30, 2016 and $211 million for2017, primarily reflects tax benefits from the three months ended September 30, 2015, reflecting an effectiveresolution of certain state income tax rate of 25.0% and 32.3%, respectively. For the nine months ended September 30, 2016, the provision for income taxes was $612 million compared to $579 million for the nine months ended September 30, 2015, reflecting an income tax rate of 29.6% and 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.matters.

9)10) 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 SeptemberJune 30, 2016,2017, the outstanding letters of credit and surety bonds approximated $111$101 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 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.



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

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 SeptemberJune 30, 2016,2017, the Company had pending approximately 34,40033,240 asbestos claims, as compared with approximately 36,03033,610 as of December 31, 20152016 and 37,19034,790 as of SeptemberJune 30, 2015.2016. During the thirdsecond quarter of 2016,2017, the Company received approximately 9301,030 new claims and closed or moved to an inactive docket approximately 1,3201,390 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 2016, the Company’s costs for settlement and defense of asbestos claims after insurance and taxes were approximately $48 million. 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 generally 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 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)11) RESTRUCTURING CHARGES
During the year ended December 31, 2015,2016, 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$30 million, of which $55 million was recorded during the nine months endedSeptember 30, 2015. The 2015 restructuring charges reflected $48reflecting $19 million of severance costs and $33$11 million of costs associated with exiting contractual obligations and other related costs. During the year ended December 31, 2014,2015, the Company recorded restructuring charges of $26$45 million, reflecting $17$24 million of severance costs and $9$21 million of costs associated with exiting contractual obligations.obligations and other related costs. As


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

of SeptemberJune 30, 2016,2017, the cumulative settlements for the 20152016 and 20142015 restructuring charges were $8353 million, of which $5434 million was for severance costs and $2919 million was for costs associated with contractual obligations.
Balance at 2016 Balance atBalance at 2017 Balance at
December 31, 2015 Settlements September 30, 2016December 31, 2016 Settlements June 30, 2017
Entertainment $19
 $(13) $6
  $20
 $(9) $11
 
Cable Networks 4
 (2) 2
 
Publishing 1
 (1) 
 
Local Media 11
 (5) 6
  12
 (4) 8
 
Radio 23
 (11) 12
 
Corporate 1
 (1) 
  2
 (1) 1
 
Total $54
 $(30) $24
  $39
 $(17) $22
 
Balance at 2015 2015 Balance atBalance at 2016 2016 Balance at
December 31, 2014 Charges Settlements December 31, 2015December 31, 2015 Charges Settlements December 31, 2016
Entertainment $6
 $26
 $(13) $19
  $16
 $16
 $(12) $20
 
Cable Networks 
 4
 
 4
 
Publishing 
 1
 
 1
 
Local Media 5
 19
 (13) 11
  11
 6
 (5) 12
 
Radio 5
 36
 (18) 23
 
Corporate 2
 
 (1) 1
  
 3
 (1) 2
 
Total $18
 $81
 $(45) $54
  $27
 $30
 $(18) $39
 
11)12) 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 SeptemberJune 30, 20162017 and December 31, 2015,2016, the carrying value of the Company’s senior debt was $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 $9.90$9.77 billion and $8.78$9.51 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 hedged item is recognized. Additionally, the Company enters into non-designated forward contracts to hedge non-U.S. dollar denominated cash flows.

At SeptemberJune 30, 20162017 and December 31, 2015,2016, the notional amount of all foreign exchange contracts was $456$356 million and $291$433 million, respectively.



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

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

 Three Months Ended Six Months Ended 
 June 30, June 30, 
 2017 2016 2017 2016Financial Statement Account
Non-designated foreign exchange contracts$(12) $15
 $(20) $9
Other items, net
The fair value of the Company’s derivative instruments was not material to the Consolidated Balance Sheets for any of the periods presented.
The following tables set forth the Company’s assets and liabilities measured at fair value on a recurring basis at SeptemberJune 30, 20162017 and December 31, 20152016. These assets and liabilities have been categorized according to the three-level fair value hierarchy established by the FASB, which prioritizes the inputs used in measuring fair value. Level 1 is based on publicly quoted prices for the asset or liability in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset or liability in inactive markets or quoted prices for similar assets or liabilities. Level 3 is based on unobservable inputs reflecting the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.
At June 30, 2017Level 1 Level 2 Level 3 Total
Assets:       
Foreign currency hedges$
 $12
 $
 $12
Total Assets$
 $12
 $
 $12
Liabilities:       
Deferred compensation$
 $361
 $
 $361
Foreign currency hedges
 6
 
 6
Total Liabilities$
 $367
 $
 $367
At September 30, 2016Level 1 Level 2 Level 3 Total
At December 31, 2016Level 1 Level 2 Level 3 Total
Assets:              
Foreign currency hedges$
 $21
 $
 $21
$
 $34
 $
 $34
Total Assets$
 $21
 $
 $21
$
 $34
 $
 $34
Liabilities:              
Deferred compensation$
 $329
 $
 $329
$
 $347
 $
 $347
Foreign currency hedges
 5
 
 5

 1
 
 1
Total Liabilities$
 $334
 $
 $334
$
 $348
 $
 $348


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)13) 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 Nine Months EndedThree Months Ended Six Months Ended

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

2016 2015
2016 20152017 2016
2017 2016
Revenues:





















Entertainment$1,949

$1,932

$6,483

$5,978
$2,184

$1,947

$4,531

$4,534
Cable Networks598

526

1,659

1,680
571

536

1,114

1,061
Publishing226

203

558

547
206

187

367

332
Local Media409
 376
 1,253
 1,138
412
 396
 821
 844
Radio319
 318
 898
 907
Corporate/Eliminations(105)
(98)
(319)
(274)(116)
(90)
(233)
(207)
Total Revenues$3,396

$3,257

$10,532

$9,976
$3,257

$2,976

$6,600

$6,564
Revenues generated between segments primarily reflect advertising sales, 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 Nine Months EndedThree Months Ended Six Months Ended
September 30, September 30,June 30, June 30,
2016 2015 2016 20152017 2016 2017 2016
Intercompany Revenues:              
Entertainment$102
 $96
 $321
 $270
$118
 $92
 $237
 $214
Local Media2
 3
 6
 7
3
 2
 6
 4
Radio6
 2
 9
 5
Total Intercompany Revenues$110
 $101
 $336
 $282
$121
 $94
 $243
 $218


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,each where applicable, (“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 Nine Months EndedThree Months Ended Six Months Ended
September 30, September 30,June 30, June 30,
2016 2015 2016 20152017 2016 2017 2016
Segment Operating Income (Loss):              
Entertainment$348
 $339
 $1,148
 $947
$346
 $351
 $744
 $800
Cable Networks285
 246
 740
 717
253
 227
 501
 455
Publishing44
 43
 83
 80
28
 26
 42
 39
Local Media122
 101
 402
 338
127
 130
 250
 280
Radio77
 73
 215
 195
Corporate(78) (49) (245) (181)(85) (83) (164) (167)
Total Segment Operating Income798
 753
 2,343
 2,096
669
 651
 1,373
 1,407
Restructuring charges
 
 
 (55)
Other operating items, net (a)

 
 9
 19

 
 
 9
Operating income798

753

2,352

2,060
669

651

1,373

1,416
Interest expense(104) (102) (304) (289)(111) (100) (220) (200)
Interest income7
 6
 22
 18
15
 8
 28
 15
Other items, net2
 (4) (5) (23)5
 (4) 6
 (7)
Earnings from continuing operations before income taxes and
equity in loss of investee companies
703
 653
 2,065
 1,766
578
 555
 1,187
 1,224
Provision for income taxes(176) (211) (612) (579)(169) (173) (307) (379)
Equity in loss of investee companies, net of tax(13) (16) (43) (35)(12) (9) (29) (30)
Net earnings from continuing operations514
 426
 1,410
 1,152
397
 373
 851
 815
Loss from discontinued operations(36) 
 (36) 
Net earnings$478
 $426
 $1,374
 $1,152
Net earnings (loss) from discontinued operations, net of tax(339) 50
 (1,045) 81
Net earnings (loss)$58
 $423
 $(194) $896
(a) Other operating items, net includes gainsa gain from the salessale of an internet businessesbusiness in China for the nine months ended September 30, 2016 and 2015, and for 2016, also includes a multiyear, retroactive impact of a new operating tax.
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
September 30, September 30,June 30, June 30,
2016 2015 2016 20152017 2016 2017 2016
Depreciation and Amortization:              
Entertainment$28

$31

$88

$95
$27

$30

$56

$60
Cable Networks6

5

17

17
6

5

12

11
Publishing1

1

4

4
2

2

3

3
Local Media11
 12
 33
 37
12
 11
 23
 22
Radio7
 8
 22
 23
Corporate8

8

24

23
9

9

17

18
Total Depreciation and Amortization$61

$65

$188

$199
$56

$57

$111

$114


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

Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
September 30, September 30,June 30, June 30,
2016 2015 2016 20152017 2016 2017 2016
Stock-based Compensation:              
Entertainment$16
 $16
 $47
 $48
$17
 $16
 $32
 $31
Cable Networks3
 3
 9
 8
3
 3
 6
 6
Publishing1
 1
 3
 3
1
 1
 2
 2
Local Media3
 3
 9
 9
3
 3
 6
 6
Radio4
 2
 11
 12
Corporate19
 14
 55
 48
21
 19
 39
 36
Total Stock-based Compensation$46
 $39
 $134
 $128
$45
 $42
 $85
 $81
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
September 30, September 30,June 30, June 30,
2016 2015 2016 20152017 2016 2017 2016
Capital Expenditures:              
Entertainment$23

$33

$60

$54
$24

$24

$38

$37
Cable Networks4

5

8

8
4

2

7

4
Publishing1

2

7

4


3

1

6
Local Media9
 10
 20
 17
7
 4
 12
 11
Radio4
 5
 14
 16
Corporate5
 3
 16
 5
6
 2
 10
 11
Total Capital Expenditures$46
 $58
 $125
 $104
$41
 $35
 $68
 $69
At AtAt At
September 30, 2016 December 31, 2015June 30, 2017 December 31, 2016
Assets:          
Entertainment $11,220
 $10,910
  $11,441
 $11,262
 
Cable Networks 2,526
 2,369
  2,594
 2,618
 
Publishing 835
 880
  858
 880
 
Local Media 3,827
 3,881
  4,018
 4,065
 
Radio 5,167
 5,224
 
Corporate/Eliminations 249
 476
  225
 817
 
Discontinued operations 24
 25
  3,517
 4,596
 
Total Assets $23,848
 $23,765
  $22,653
 $24,238
 



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

13)14) 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 September 30, 2016For the Three Months Ended June 30, 2017
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$42
 $3
 $3,351
 $
 $3,396
$42
 $2
 $3,213
 $
 $3,257
Costs and expenses:                  
Operating16
 1
 1,880
 
 1,897
22
 2
 1,980
 
 2,004
Selling, general and administrative20
 63
 557
 
 640
23
 68
 437
 
 528
Depreciation and amortization2
 6
 53
 
 61
1
 6
 49
 
 56
Total costs and expenses38
 70
 2,490
 
 2,598
46
 76
 2,466
 
 2,588
Operating income (loss)4
 (67) 861
 
 798
(4) (74) 747
 
 669
Interest (expense) income, net(129) (109) 141
 
 (97)(127) (120) 151
 
 (96)
Other items, net
 
 2
 
 2
1
 (12) 16
 
 5
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies(125) (176) 1,004
 
 703
(130) (206) 914
 
 578
Benefit (provision) for income taxes43
 59
 (278) 
 (176)39
 62
 (270) 
 (169)
Equity in earnings (loss) of investee companies, net of tax560
 327
 (13) (887) (13)149
 339
 (12) (488) (12)
Net earnings from continuing operations478
 210
 713
 (887) 514
58
 195
 632
 (488) 397
Loss from discontinued operations
 
 (36) 
 (36)
Net loss from discontinued operations, net of tax
 
 (339) 
 (339)
Net earnings$478
 $210
 $677
 $(887) $478
$58
 $195
 $293
 $(488) $58
Total comprehensive income$489
 $215
 $675
 $(890) $489
$70
 $190
 $302
 $(492) $70


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 Nine Months Ended September 30, 2016For the Six Months Ended June 30, 2017
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$125
 $9
 $10,398
 $
 $10,532
$84
 $5
 $6,511
 $
 $6,600
Cost and expenses:         
Costs and expenses:         
Operating48
 4
 6,062
 
 6,114
46
 3
 4,029
 
 4,078
Selling, general and administrative62
 196
 1,629
 
 1,887
43
 132
 863
 
 1,038
Depreciation and amortization4
 17
 167
 
 188
2
 12
 97
 
 111
Other operating items, net
 
 (9) 
 (9)
Total costs and expenses114
 217
 7,849
 
 8,180
91
 147
 4,989
 
 5,227
Operating income (loss)11
 (208) 2,549
 
 2,352
(7) (142) 1,522
 
 1,373
Interest (expense) income, net(377) (319) 414
 
 (282)(249) (237) 294
 
 (192)
Other items, net(2) 3
 (6) 
 (5)1
 (25) 30
 
 6
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies(368) (524) 2,957
 
 2,065
(255) (404) 1,846
 
 1,187
Benefit (provision) for income taxes120
 170
 (902) 
 (612)77
 122
 (506) 
 (307)
Equity in earnings (loss) of investee companies, net of tax1,622
 876
 (43) (2,498) (43)(16) 693
 (29) (677) (29)
Net earnings from continuing operations1,374
 522
 2,012
 (2,498) 1,410
Loss from discontinued operations
 
 (36) 
 (36)
Net earnings$1,374
 $522
 $1,976
 $(2,498) $1,374
Total comprehensive income$1,405
 $540
 $1,965
 $(2,505) $1,405
Net earnings (loss) from continuing operations(194) 411
 1,311
 (677) 851
Net loss from discontinued operations, net of tax
 
 (1,045) 
 (1,045)
Net earnings (loss)$(194) $411
 $266
 $(677) $(194)
Total comprehensive income (loss)$(168) $404
 $281
 $(685) $(168)



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 September 30, 2015For the Three Months Ended June 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
 $2
 $3,219
 $
 $3,257
$36
 $3
 $2,937
 $
 $2,976
Costs and expenses:                  
Operating17
 1
 1,824
 
 1,842
15
 2
 1,741
 
 1,758
Selling, general and administrative3
 49
 545
 
 597
21
 66
 423
 
 510
Depreciation and amortization1
 5
 59
 
 65
1
 6
 50
 
 57
Total costs and expenses21
 55
 2,428
 
 2,504
37
 74
 2,214
 
 2,325
Operating income (loss)15
 (53) 791
 
 753
(1) (71) 723
 
 651
Interest (expense) income, net(125) (103) 132
 
 (96)(124) (106) 138
 
 (92)
Other items, net(1) 6
 (9) 
 (4)(1) 13
 (16) 
 (4)
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies(111) (150) 914
 
 653
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies(126) (164) 845
 
 555
Benefit (provision) for income taxes36
 48
 (295) 
 (211)40
 51
 (264) 
 (173)
Equity in earnings (loss) of investee companies, net of tax501
 338
 (16) (839) (16)509
 289
 (9) (798) (9)
Net earnings from continuing operations423
 176
 572
 (798) 373
Net earnings from discontinued operations, net of tax
 
 50
 
 50
Net earnings$426
 $236
 $603
 $(839) $426
$423
 $176
 $622
 $(798) $423
Total comprehensive income$430
 $240
 $590
 $(830) $430
$432
 $185
 $611
 $(796) $432


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 Nine Months Ended September 30, 2015For the Six Months Ended June 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$101
 $8
 $9,867
 $
 $9,976
$83
 $6
 $6,475
 $
 $6,564
Costs and expenses:                  
Operating47
 4
 5,840
 
 5,891
32
 3
 3,995
 
 4,030
Selling, general and administrative27
 165
 1,598
 
 1,790
42
 132
 839
 
 1,013
Depreciation and amortization4
 15
 180
 
 199
2
 11
 101
 
 114
Restructuring charges
 
 55
 
 55
Other operating items, net
 
 (19) 
 (19)
 
 (9) 
 (9)
Total costs and expenses78
 184
 7,654
 
 7,916
76
 146
 4,926
 
 5,148
Operating income (loss)23
 (176) 2,213
 
��2,060
7
 (140) 1,549
 
 1,416
Interest (expense) income, net(358) (300) 387
 
 (271)(248) (210) 273
 
 (185)
Other items, net(1) 6
 (28) 
 (23)(2) 3
 (8) 
 (7)
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies(336) (470) 2,572
 
 1,766
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies(243) (347) 1,814
 
 1,224
Benefit (provision) for income taxes109
 152
 (840) 
 (579)77
 110
 (566) 
 (379)
Equity in earnings (loss) of investee companies, net of tax1,379
 802
 (35) (2,181) (35)1,062
 549
 (30) (1,611) (30)
Net earnings from continuing operations896
 312
 1,218
 (1,611) 815
Net earnings from discontinued operations, net of tax
 
 81
 
 81
Net earnings$1,152
 $484
 $1,697
 $(2,181) $1,152
$896
 $312
 $1,299
 $(1,611) $896
Total comprehensive income$1,173
 $487
 $1,705
 $(2,192) $1,173
$916
 $325
 $1,290
 $(1,615) $916



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

Balance SheetBalance Sheet
At September 30, 2016At June 30, 2017
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$54
 $1
 $124
 $
 $179
$15
 $
 $155
 $
 $170
Receivables, net20
 2
 3,326
 
 3,348
22
 2
 3,275
 
 3,299
Programming and other inventory4
 3
 1,452
 
 1,459
4
 3
 1,553
 
 1,560
Prepaid expenses and other current assets93
 39
 375
 (36) 471
94
 31
 266
 (33) 358
Current assets of discontinued operations
 
 299
 
 299
Total current assets171
 45
 5,277
 (36) 5,457
135
 36
 5,548
 (33) 5,686
Property and equipment47
 184
 3,032
 
 3,263
48
 205
 2,714
 
 2,967
Less accumulated depreciation and amortization23
 135
 1,760
 
 1,918
26
 151
 1,576
 
 1,753
Net property and equipment24
 49
 1,272
 
 1,345
22
 54
 1,138
 
 1,214
Programming and other inventory6
 7
 2,224
 
 2,237
3
 6
 2,450
 
 2,459
Goodwill98
 62
 6,371
 
 6,531
98
 62
 4,731
 
 4,891
Intangible assets
 
 5,499
 
 5,499

 
 2,627
 
 2,627
Investments in consolidated subsidiaries44,372
 13,652
 
 (58,024) 
44,467
 14,544
 
 (59,011) 
Other assets153
 11
 2,615
 
 2,779
149
 8
 2,401
 
 2,558
Intercompany
 1,901
 25,528
 (27,429) 

 1,455
 28,442
 (29,897) 
Assets of discontinued operations
 
 3,218
 
 3,218
Total Assets$44,824
 $15,727
 $48,786
 $(85,489) $23,848
$44,874
 $16,165
 $50,555
 $(88,941) $22,653
Liabilities and Stockholders’ Equity                  
Accounts payable$1
 $2
 $150
 $
 $153
$1
 $4
 $119
 $
 $124
Participants’ share and royalties payable
 
 979
 
 979

 
 1,005
 
 1,005
Program rights4
 4
 365
 
 373
4
 3
 255
 
 262
Commercial paper33
 
 
 
 33
263
 
 
 
 263
Current portion of long-term debt6
 
 16
 
 22
6
 
 17
 
 23
Accrued expenses and other current liabilities363
 228
 983
 (36) 1,538
383
 212
 830
 (33) 1,392
Current liabilities of discontinued operations
 
 161
 
 161
Total current liabilities407
 234
 2,493
 (36) 3,098
657
 219
 2,387
 (33) 3,230
Long-term debt8,797
 
 105
 
 8,902
8,801
 
 97
 
 8,898
Other liabilities2,843
 244
 3,413
 
 6,500
2,892
 238
 2,285
 
 5,415
Liabilities of discontinued operations
 
 2,483
 
 2,483
Intercompany27,429
 
 
 (27,429) 
29,897
 
 
 (29,897) 
Stockholders’ Equity:                  
Preferred stock
 
 126
 (126) 

 
 126
 (126) 
Common stock1
 123
 590
 (713) 1
1
 123
 590
 (713) 1
Additional paid-in capital43,935
 
 60,894
 (60,894) 43,935
43,820
 
 60,894
 (60,894) 43,820
Retained earnings (deficit)(19,144) 15,435
 (14,105) (1,330) (19,144)
Retained earnings (accumulated deficit)(19,451) 15,894
 (13,572) (2,322) (19,451)
Accumulated other comprehensive income (loss)(739) 22
 70
 (92) (739)(741) 22
 65
 (87) (741)
24,053
 15,580
 47,575
 (63,155) 24,053
23,629
 16,039
 48,103
 (64,142) 23,629
Less treasury stock, at cost18,705
 331
 4,800
 (5,131) 18,705
21,002
 331
 4,800
 (5,131) 21,002
Total Stockholders’ Equity5,348
 15,249
 42,775
 (58,024) 5,348
2,627
 15,708
 43,303
 (59,011) 2,627
Total Liabilities and Stockholders’ Equity$44,824
 $15,727
 $48,786
 $(85,489) $23,848
$44,874
 $16,165
 $50,555
 $(88,941) $22,653


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

Balance SheetBalance Sheet
At December 31, 2015At December 31, 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$267
 $1
 $55
 $
 $323
$321
 $
 $277
 $
 $598
Receivables, net28
 2
 3,598
 
 3,628
27
 2
 3,285
 
 3,314
Programming and other inventory3
 3
 1,265
 
 1,271
3
 3
 1,421
 
 1,427
Prepaid expenses and other current assets192
 26
 337
 (30) 525
102
 55
 297
 (35) 419
Current assets of discontinued operations
 
 305
 
 305
Total current assets490

32

5,255

(30)
5,747
453

60

5,585

(35)
6,063
Property and equipment46
 180
 3,017
 
 3,243
47
 201
 2,687
 
 2,935
Less accumulated depreciation and amortization20
 118
 1,700
 
 1,838
25
 140
 1,529
 
 1,694
Net property and equipment26

62

1,317


 1,405
22

61

1,158


 1,241
Programming and other inventory6
 9
 1,942
 
 1,957
5
 7
 2,427
 
 2,439
Goodwill98
 62
 6,321
 
 6,481
98
 62
 4,704
 
 4,864
Intangible assets
 
 5,514
 
 5,514

 
 2,633
 
 2,633
Investments in consolidated subsidiaries42,744
 12,775
 
 (55,519) 
44,473
 13,853
 
 (58,326) 
Other assets163
 11
 2,487
 
 2,661
150
 8
 2,549
 
 2,707
Intercompany
 2,248
 23,988
 (26,236) 

 1,785
 26,976
 (28,761) 
Assets of discontinued operations
 3
 4,288
 
 4,291
Total Assets$43,527

$15,199

$46,824

$(81,785) $23,765
$45,201

$15,839

$50,320

$(87,122) $24,238
Liabilities and Stockholders Equity
                  
Accounts payable$1
 $4
 $187
 $
 $192
$1
 $3
 $144
 $
 $148
Participants’ share and royalties payable
 
 1,013
 
 1,013

 
 1,024
 
 1,024
Program rights4
 4
 366
 
 374
4
 4
 282
 
 290
Commercial paper450
 
 
 
 450
Current portion of long-term debt206
 
 16
 
 222
6
 
 17
 
 23
Accrued expenses and other current liabilities418
 230
 1,141
 (30) 1,759
421
 284
 948
 (35) 1,618
Current liabilities of discontinued operations
 
 155
 
 155
Total current liabilities629

238

2,723

(30) 3,560
882

291

2,570

(35) 3,708
Long-term debt8,113
 
 113
 
 8,226
8,798
 
 104
 
 8,902
Other liabilities2,986
 252
 3,178
 
 6,416
3,071
 244
 2,173
 
 5,488
Liabilities of discontinued operations
 
 2,451
 
 2,451
Intercompany26,236
 
 
 (26,236) 
28,761
 
 
 (28,761) 
Stockholders’ Equity:        

        

Preferred stock
 
 126
 (126) 

 
 126
 (126) 
Common stock1
 123
 590
 (713) 1
1
 123
 590
 (713) 1
Additional paid-in capital44,055
 
 60,894
 (60,894) 44,055
43,913
 
 60,894
 (60,894) 43,913
Retained earnings (deficit)(20,518) 14,913
 (16,081) 1,168
 (20,518)
Retained earnings (accumulated deficit)(19,257) 15,483
 (13,838) (1,645) (19,257)
Accumulated other comprehensive income (loss)(770) 4
 81
 (85) (770)(767) 29
 50
 (79) (767)
22,768

15,040

45,610

(60,650) 22,768
23,890

15,635

47,822

(63,457) 23,890
Less treasury stock, at cost17,205
 331
 4,800
 (5,131) 17,205
20,201
 331
 4,800
 (5,131) 20,201
Total Stockholders’ Equity5,563
 14,709
 40,810
 (55,519) 5,563
3,689
 15,304
 43,022
 (58,326) 3,689
Total Liabilities and Stockholders’ Equity$43,527

$15,199

$46,824

$(81,785) $23,765
$45,201

$15,839

$50,320

$(87,122) $24,238


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 Nine Months Ended September 30, 2016For the Six Months Ended June 30, 2017
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$(696) $(146) $2,148
 $
 $1,306
$(608) $(153) $1,699
 $
 $938
Investing Activities:                  
Acquisitions
 
 (51) 
 (51)
 
 (21) 
 (21)
Capital expenditures
 (16) (109) 
 (125)
 (10) (58) 
 (68)
Investments in and advances to investee companies
 
 (44) 
 (44)
 
 (65) 
 (65)
Proceeds from dispositions(4) 
 32
 
 28

 
 1
 
 1
Other investing activities7
 
 4
 
 11
14
 
 
 
 14
Net cash flow provided by (used for) investing activities from continuing operations14
 (10) (143) 
 (139)
Net cash flow used for investing activities from discontinued operations
 (1) (12) 
 (13)
Net cash flow provided by (used for) investing activities3
 (16) (168) 
 (181)14
 (11) (155) 
 (152)
Financing Activities:                  
Proceeds from short-term debt borrowings, net33
 
 
 
 33
Proceeds from issuance of senior notes685
 
 
 
 685
Repayment of senior debentures(199) 
 
 
 (199)
Repayments of short-term debt borrowings, net(187) 
 
 
 (187)
Proceeds from debt borrowings of CBS Radio
 
 24
 
 24
Repayment of debt borrowings of CBS Radio
 
 (5) 
 (5)
Payment of capital lease obligations
 
 (13) 
 (13)
 
 (8) 
 (8)
Payment of contingent consideration
 
 (7) 
 (7)
Dividends(209) 
 
 
 (209)(151) 
 
 
 (151)
Purchase of Company common stock(1,534) 
 
 
 (1,534)(845) 
 
 
 (845)
Payment of payroll taxes in lieu of issuing
shares for stock-based compensation
(57) 
 
 
 (57)(89) 
 
 
 (89)
Proceeds from exercise of stock options13
 
 
 
 13
39
 
 
 
 39
Excess tax benefit from stock-based compensation13
 
 
 
 13
Other financing activities(1) 
 
 
 (1)
Increase (decrease) in intercompany payables1,736
 162
 (1,898) 
 
1,521
 164
 (1,685) 
 
Net cash flow provided by (used for) financing activities480
 162
 (1,911) 
 (1,269)288
 164
 (1,681) 
 (1,229)
Net (decrease) increase in cash and cash equivalents(213) 
 69
 
 (144)
Cash and cash equivalents at beginning of period267
 1
 55
 
 323
Cash and cash equivalents at end of period$54
 $1
 $124
 $
 $179
Net decrease in cash and cash equivalents(306) 
 (137) 
 (443)
Cash and cash equivalents at beginning of period
(includes $24 million of discontinued operations cash)
321
 
 301
 
 622
Cash and cash equivalents at end of period
(includes $9 million of discontinued operations cash)
$15
 $
 $164
 $
 $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 Nine Months Ended September 30, 2015For the Six Months Ended June 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$(557) $(183) $1,363
 $
 $623
$(476) $(116) $1,843
 $
 $1,251
Investing Activities:        

        

Acquisitions
 
 (7) 
 (7)
 
 (51) 
 (51)
Capital expenditures
 (5) (99) 
 (104)
 (11) (58) 
 (69)
Investments in and advances to investee companies
 
 (58) 
 (58)
 
 (43) 
 (43)
Proceeds from dispositions
 
 75
 
 75
(4) 
 23
 
 19
Other investing activities(8) 
 
 
 (8)4
 
 
 
 4
Net cash flow used for investing activities from continuing operations(8)
(5)
(89)

 (102)

(11)
(129)

 (140)
Net cash flow used for investing activities from discontinued operations(4) 
 
 
 (4)
 
 (2) 
 (2)
Net cash flow used for investing activities(12)
(5)
(89)

 (106)

(11)
(131)

 (142)
Financing Activities:        

        

Repayments of short-term debt borrowings, net(313) 
 
 
 (313)
Proceeds from issuance of senior notes1,959
 
 
 
 1,959
Proceeds from short-term borrowings, net163
 
 
 
 163
Repayment of senior debentures(199) 
 
 
 (199)
Payment of capital lease obligations
 
 (13) 
 (13)
 
 (8) 
 (8)
Dividends(228) 
 
 
 (228)(142) 
 
 
 (142)
Purchase of Company common stock(2,345) 
 
 
 (2,345)(1,033) 
 
 
 (1,033)
Payment of payroll taxes in lieu of issuing
shares for stock-based compensation
(96) 
 
 
 (96)(57) 
 
 
 (57)
Proceeds from exercise of stock options137
 
 
 
 137
10
 
 
 
 10
Excess tax benefit from stock-based compensation87
 
 
 
 87
11
 
 
 
 11
Other financing activities(1) 
 
 
 (1)
Increase (decrease) in intercompany payables1,353
 188
 (1,541) 
 
1,503
 127
 (1,630) 
 
Net cash flow provided by (used for) financing activities554
 188
 (1,554) 
 (812)255
 127
 (1,638) 
 (1,256)
Net decrease in cash and cash equivalents(15)


(280)

 (295)
Cash and cash equivalents at beginning of period63
 1
 364
 
 428
Cash and cash equivalents at end of period$48

$1

$84

$
 $133
Net (decrease) increase in cash and cash equivalents(221)


74


 (147)
Cash and cash equivalents at beginning of period
(includes $6 million of discontinued operations cash)
267
 1
 55
 
 323
Cash and cash equivalents at end of period
(includes $9 million of discontinued operations cash)
$46

$1

$129

$
 $176


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, 2015.2016.

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 multiple digital and other platforms, through licensing and subscription services, including the Company’s owned digital streaming services;services as well as third-party live television streaming offerings; expanding the distribution of its content internationally; and securing compensation from multichannel video programming distributors (“MVPDs”) and television stations affiliated with the CBS Television Network; and further monetizing delayed viewing.Network. The Company believes thatalso seeks to grow its increased investment in premiumadvertising revenues by monetizing all content viewership as industry measurements evolve to reflect viewers’ changing habits. The Company’s continued ability to capitalize on these and other emerging opportunities will also enableprovide it to stay ahead of changes in the mediawith incremental advertising and entertainment industry, including new distribution platforms and changes in programming packages offered to consumers.non-advertising revenues.

Operational highlights - Three Months Ended SeptemberJune 30, 20162017 versus Three Months Ended SeptemberJune 30, 20152016
Consolidated results of operations    Increase/(Decrease)     Increase/(Decrease) 
Three Months Ended September 30,2016
2015 $ % 
Three Months Ended June 30,2017
2016 $ % 
GAAP:        
Revenues$3,396
 $3,257
 $139
 4% $3,257
 $2,976
 $281
 9 % 
Operating income$798
 $753
 $45
 6% $669
 $651
 $18
 3 % 
Net earnings from continuing operations$514
 $426
 $88
 21% $397
 $373
 $24
 6 % 
Adjusted net earnings from continuing operations (a)
$467
 $426
 $41
 10% 
Net earnings$58
 $423
 $(365) (86)% 
Diluted EPS from continuing operations$1.15
 $.88
 $.27
 31% $.97
 $.82
 $.15
 18 % 
Adjusted diluted EPS from continuing operations (a)
$1.05
 $.88
 $.17
 19% 
Diluted EPS$.14
 $.93
 $(.79) (85)% 
        
Non-GAAP: (a)
        
Adjusted net earnings$427
 $423
 $4
 1 % 
Adjusted diluted EPS$1.04
 $.93
 $.11
 12 % 
(a) See page 3336 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.accounting principles generally accepted in the United States (“GAAP”).

For the three months ended September 30, 2016,second quarter of 2017, the Company reported record third quarterCompany’s results in revenues, operating income and diluted earnings per sharebenefited from continuing operations (‘‘EPS’’), led by growth in retransmission revenues and station affiliation fees and retransmission revenues, and higheras well as an increase in television licensing sales. Diluted EPS also benefited from lower weighted average shares outstanding in the third quartersales, reflecting a higher volume of 2016titles available for sale as a result of recent increased investment in internally-produced series. However, the Company’s ongoing share repurchase program.comparison with the prior year was impacted by the high-margin international licensing of five Star Trek library series in the second quarter of 2016.

For the three months ended SeptemberJune 30, 2016,2017, the 4%9% increase in revenues reflects growth across all of the Company’s major revenue growth was drivenstreams, led by a 13% increase16% growth in affiliate and subscription fee revenues, reflecting 32%which was driven by 25% growth in station affiliation fees and retransmission revenues, as well as revenuesgrowth from digital distribution platforms,new initiatives, including the Company’s owned streaming subscription services, CBS All Access and the 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)


subscription offering, and third-party live television streaming services. Advertising revenues increased 4% as a result of the broadcast of the semifinals and finals of the NCAA Division I Men’s Basketball Championship (“NCAA Tournament”), which are broadcast on the CBS Television Network every other year through 2032 under the current agreements with the NCAA and Turner Broadcasting System, Inc. Content licensing and distribution revenues benefited from a higher volume of television licensing sales and increased 12%, despite the international licensing sales of Star Trek library programming in the second quarter of 2016.

Operating income for the three months ended June 30, 2017 increased 3%, primarily driven by the growth in affiliate and subscription fee revenues, partially offset by lower non-sports advertising revenues. The operating income margin decreased one point to 21% for the second quarter of 2017 from 22% for the second quarter of 2016, primarily as a result of the mix of revenues. 2016 included higher-margin television licensing sales of Star Trek library programming, and 2017 was impacted by lower-margin revenues from the NCAA Tournament. Net earnings from continuing operations increased 6% and diluted earnings per share (“EPS”) from continuing operations increased 18%, reflecting the higher operating income. Diluted EPS grew 31% from continuing operations also benefited from lower weighted average shares outstanding in the thirdsecond 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 quarter2017 as a result 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. Net earnings for the three months ended June 30, 2017 of $58 million included a noncash charge of $365 million, or $.89 per diluted share, in discontinued operations to reduce the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom Communications Corp. (“Entercom”). CBS Radio is classified as held for sale and therefore, in accordance with Financial Accounting Standards Board (“FASB”) guidance, its carrying value will continue to be adjusted based on the trading price of Entercom’s stock, which could result in future gains or losses.

Operational highlights - Six Months Ended June 30, 2017 versusSix Months Ended June 30, 2016
Consolidated results of operations    Increase/(Decrease) 
Six Months Ended June 30,2017 2016 $ % 
GAAP:        
Revenues$6,600
 $6,564
 $36
 1 % 
Operating income$1,373
 $1,416
 $(43) (3)% 
Net earnings from continuing operations$851
 $815
 $36
 4 % 
Net earnings (loss)$(194) $896
 $(1,090) (122)% 
Diluted EPS from continuing operations$2.06
 $1.78
 $.28
 16 % 
Diluted EPS$(.47) $1.95
 $(2.42) (124)% 
         
Non-GAAP: (a)
        
Adjusted operating income$1,373
 $1,407
 $(34) (2)% 
Adjusted net earnings from continuing operations$829
 $816
 $13
 2 % 
Adjusted net earnings$868
 $897
 $(29) (3)% 
Adjusted diluted EPS from continuing operations$2.01
 $1.78
 $.23
 13 % 
Adjusted diluted EPS$2.10
 $1.95
 $.15
 8 % 
(a) See pages 36 - 37 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.
For the six months endedJune 30, 2017, revenues increased 1% despite a difficult comparison to 2016, which included CBS’s broadcast of Super Bowl 50 and international licensing sales of five Star Trek library series. The growth was driven by 16% higher affiliate and subscription fee revenues, led by 27% growth in station affiliation fees and retransmission revenues, as well as growth from new initiatives, including the Company’s owned streaming subscription services, CBS All Access and the Showtime digital streaming subscription service, and third-


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


party live television streaming services. In addition, content licensing and distribution revenues increased 14%, reflecting growth in domestic television licensing sales and strong demand for the Company’s content internationally, partially offset by the aforementioned 2016 sales of Star Trek library programming.
Operating income decreased 3% for the six months endedJune 30, 2017, primarily as a result of a mix of lower-margin revenues in 2017 compared to 2016. Net earnings from continuing operations increased 4% and diluted EPS from continuing operations increased 16%, as a result of tax benefits in 2017 from the resolution of certain state income tax matters and from the exercise of stock options and vesting of restricted stock units (“RSUs”) as a result of the adoption of new accounting guidance during the first quarter of 2017, partially offset by lower operating income. Diluted EPS from continuing operations also benefited from lower weighted average shares outstanding in 2017 as a result of the Company’s ongoing share repurchase program. Adjusted net earnings from continuing operations and adjusted diluted EPS from continuing operations, which exclude a tax benefit of $22 million, or $.05 per diluted share, from the resolution of state income tax matters, increased 2% and 13%, respectively. The Company reported a net loss of $194 million for the six months endedJune 30, 2017, which included a noncash charge of $1.08 billion, or $2.62 per diluted share, in discontinued operations to reduce the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. CBS Radio is classified as held for sale and therefore, in accordance with FASB guidance, its carrying value will continue to be adjusted based on the trading price of Entercom’s stock, which could result in future gains or losses. Adjusted net earnings from continuing operations and Adjusted diluted EPS from continuing operations are non-GAAP financial measures. See pages 36 - 37 for details of the discrete items excluded from financial results, along with reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.
The Company generated operating cash flow from continuing operations of $909 million for the six months endedJune 30, 2017 compared with $1.14 billion for the six months ended June 30, 2016. Free cash flow for the six months endedJune 30, 2017 was $841 million compared with $1.07 billion for the same prior-year period. These decreases were driven by the benefit in 2016 from CBS’s broadcast of Super Bowl 50, and discretionary pension contributions of $100 million made during the first quarter of 2017 to prefund the Company’s qualified plans. Free cash flow for the three and six months ended June 30, 2017 benefited from higher affiliate and subscription fee revenues. Free cash flow is a non-GAAP financial measure. See “Free Cash Flow” on pages 51 - 52 for a reconciliation of net cash flow provided by (used for) operating activities, the most directly comparable GAAP financial measure, to free cash flow.

Recent Developments
In connection with the Company’s previously announced plansagreement to separate its radio business,combine CBS Radio with Entercom in a preliminarymerger following the separation of CBS Radio through a tax-free split-off, CBS Radio filed a registration statement was filedon Forms S-4 and S-1 with the Securities and Exchange Commission (‘‘SEC’’(“SEC”) on April 13, 2017, and two subsequent amendments to such registration statement, with the most recent amendment filed on July 10, 2017. The Company expects the transaction to be completed during the thirdfourth quarter of 2016 for the proposed initial public offering of the common stock of2017, subject to customary approvals and closing conditions. CBS Radio Inc. (‘‘CBS Radio’’). Additionally,has been presented as a discontinued operation in October 2016, CBS Radio borrowed $1.46 billion through a $1.06 billion senior secured term loan (the “Term Loan”) and the issuance ofconsolidated financial statements for all periods presented.

In July 2017, the Company issued $400 million of 2.50% senior unsecured notes through a private placement.due 2023 and $500 million of 3.375% senior notes due 2028. The Company used the net debt proceeds will be primarily used by CBS Corp.from these issuances to repurchase sharesrepay its $400 million outstanding 1.95% senior notes which matured on July 1, 2017, and to redeem all of its Class B Common Stock, with the remainder to be$300 million outstanding 4.625% senior notes due May 2018. The remaining net proceeds were used for general corporate purposes, including the repayment of short-term borrowings, including commercial paper. Subsequent to the July 2017 issuances, repayment and ongoing cash needs. During the fourth quarterredemption of 2016,senior notes, the Company intends to repurchase $1.5had $9.04 billion of its Class B Common Stock, including $500 million as partlong-term debt outstanding, excluding capital leases, at a weighted average interest rate 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 - Nine Months Ended September 30, 2016 versus Nine Months Ended September 30, 2015
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 page 33 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

For the nine months ended September 30, 2016, the 6% increase in revenues was driven by 10% growth in advertising revenues, reflecting CBS’s broadcast of Super Bowl 50 and 6% growth in underlying network advertising. Affiliate and subscription fee revenues increased 8%, driven by 39% growth in station affiliation fees and retransmission revenues, as well as 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 boxing event. Content licensing and distribution revenues declined 4%, reflecting lower domestic licensing sales compared with the first nine months of 2015, which included significant licensing sales of NCIS and Elementary,4.43%.


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


partially offset by growth from international licensing, mainly from the sales of all episodes of five Star Trek series.

Operating income grew 14% and diluted EPS increased 33% for the nine months ended September 30, 2016, primarily driven by the higher revenues. In addition, for the nine months ended September 30, 2015, operating income and diluted EPS included restructuring charges of $55 million and for the three and nine months ended September 30, 2016, diluted EPS included the 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.

The Company generated operating cash flow from continuing operations of $1.31 billion for the nine months ended September 30, 2016 compared with $650 million for the nine months ended September 30, 2015. Free cash flow for the nine months ended September 30, 2016 was $1.18 billion compared with $546 million for the same prior-year period. These 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 pages 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
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 thirdsecond quarter of 2016,2017, the Company repurchased 9.54.7 million shares of its Class B Common Stock under its share repurchase program for $500$300 million, at an average cost of $52.77$63.64 per share. During the ninesix months ended SeptemberJune 30, 2016,2017, the Company repurchased 29.012.3 million shares of its Class B Common Stock for $1.50 billion,$800 million, at an average cost of $51.76$65.08 per share, leaving $5.60$3.31 billion of authorization at SeptemberJune 30, 2016.2017.

On July 28, 2016,During the second quarter of 2017, the Company announced that its Board of Directors approveddeclared a 20% increase to the quarterly cash dividend of $.18 on its Class A and Class B Common Stock, to $.18 from $.15 per share. Theresulting in total third quarter 2016 dividend was $80dividends of $73 million, which waswere paid on OctoberJuly 1, 2016.2017.



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


Reconciliation of Non-GAAP Measures
Results for the three and ninesix months ended SeptemberJune 30, 20162017 and the ninesix months ended SeptemberJune 30, 20152016 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,non-GAAP financial measures, which exclude the impact of these discrete items. These adjusted results are non-GAAP financial measures, which areitems, 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.
 Nine Months Ended September 30, 
 2016
2015 
Operating income$2,352
 $2,060
 
Exclude:    
Restructuring charges
 55
 
Other operating items, net (a)
(9) (19) 
Adjusted operating income$2,343
 $2,096
 
 Three Months Ended June 30, 2017
 Reported 
Discontinued Operations Adjustments (a)
 Adjusted 
Net earnings from continuing operations$397
  $
  $397
 
Net earnings (loss) from discontinued operations, net of tax(339)  369
  30
 
Net earnings$58
  $369
  $427
 
Diluted EPS from continuing operations$.97
  $
  $.97
 
Diluted EPS$.14
  $.90
  $1.04
 

 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
 
 Six Months Ended June 30, 2017
 Reported 
Discrete Tax Item (b)
 
Discontinued Operations Adjustments (a)
  Adjusted 
Earnings from continuing operations before income taxes$1,187
  $
   $
   $1,187
 
Provision for income taxes(307)  (22)   
   (329) 
Equity in loss of investee companies, net of tax(29)  
   
   (29) 
Net earnings from continuing operations851
  (22)   
   829
 
Net earnings (loss) from discontinued operations, net of tax(1,045)  
   1,084
   39
 
Net earnings (loss)$(194)  $(22)   $1,084
   $868
 
Diluted EPS from continuing operations$2.06
  $(.05)   $
   $2.01
 
Diluted EPS$(.47)  $(.05)   $2.62
   $2.10
 
(a) Other operating items, net includes gains from the salesReflects noncash charges of internet businesses in China$365 million and $1.08 billion for the ninethree and six months ended SeptemberJune 30, 20162017, respectively, to record a valuation allowance for the carrying value of CBS Radio, and 2015, and for 2016, also includes a multiyear, retroactive impactrestructuring charge of a new operating tax.$7 million ($4 million, net of tax) at CBS Radio.
(b) Reflects a one-time tax benefit associated with a multiyear adjustment to a tax deduction, which was approved byin the IRS during the thirdfirst quarter of 2016.2017 from the resolution of certain state income tax matters.
(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)


 Six Months Ended June 30, 2016
 Reported 
Other Operating Items (a)
 
Write-down of Investment (b)
 Adjusted 
Operating income$1,416
  $(9)   $
  $1,407
 
Interest expense(200)  
   
  (200) 
Interest income15
  
   
  15
 
Other items, net(7)  
   
  (7) 
Earnings from continuing operations before income taxes1,224
  (9)   
  1,215
 
Provision for income taxes(379)  4
   
  (375) 
Equity in loss of investee companies, net of tax(30)  
   6
  (24) 
Net earnings from continuing operations815
  (5)   6
  816
 
Net earnings from discontinued operations, net of tax81
  
   
  81
 
Net earnings$896
  $(5)   $6
  $897
 
Diluted EPS from continuing operations$1.78
  $(.01)   $.01
  $1.78
 
Diluted EPS$1.95
  $(.01)   $.01
  $1.95
 
(a) Reflects a gain on the sale of an internet business in China and a multiyear, retroactive impact of a new operating tax.
(b) Reflects the write-down of an international television joint venture to its fair value.

Consolidated Results of Operations
Three and NineSix Months Ended SeptemberJune 30, 20162017 versus Three and NineSix Months Ended SeptemberJune 30, 20152016
Revenues
Three Months Ended September 30, Three Months Ended June 30, 
  
% of Total
Revenues
   
% of Total
Revenues
 Increase/(Decrease)   
% of Total
Revenues
   
% of Total
Revenues
 Increase/(Decrease) 
Revenues by Type2016 2015  $ % 2017 2016  $ % 
Advertising$1,469
 43% $1,481
 46% $(12) (1)% $1,299
 40% $1,245
 42% $54
 4 % 
Content licensing and distribution1,108
 33
 1,046
 32
 62
 6
 1,056
 32
 943
 32
 113
 12
 
Affiliate and subscription fees753
 22
 664
 20
 89
 13
 848
 26
 733
 24
 115
 16
 
Other66
 2
 66
 2
 
 
 54
 2
 55
 2
 (1) (2) 
Total Revenues$3,396
 100% $3,257
 100% $139
 4 % $3,257
 100% $2,976
 100% $281
 9 % 
Nine Months Ended September 30, Six Months Ended June 30, 
  
% of Total
Revenues
   
% of Total
Revenues
 Increase/(Decrease)   
% of Total
Revenues
   
% of Total
Revenues
 Increase/(Decrease) 
Revenues by Type2016 2015  $ % 2017 2016  $ % 
Advertising$5,363
 51% $4,859
 49% $504
 10 % $2,902
 44% $3,330
 51% $(428) (13)% 
Content licensing and distribution2,780
 26
 2,889
 29
 (109) (4) 1,901
 29
 1,672
 25
 229
 14
 
Affiliate and subscription fees2,208
 21
 2,044
 20
 164
 8
 1,690
 25
 1,455
 22
 235
 16
 
Other181
 2
 184
 2
 (3) (2) 107
 2
 107
 2
 
 
 
Total Revenues$10,532
 100% $9,976
 100% $556
 6 % $6,600
 100% $6,564
 100% $36
 1 % 
Advertising
For the three months ended SeptemberJune 30, 2016, advertising revenues decreased 1%. Advertising revenues were impacted by 10 hours of primetime preemptions for2017, the Democratic and Republican conventions and the first Presidential debate, competition from the 2016 Summer Olympics, and sales of internet businesses in China during 2015. Advertising revenues during the third quarter benefited from increased political advertising sales relating to U.S. federal and state elections. For the nine months ended September 30, 2016, the 10%4% increase in advertising revenues wasreflects 7% growth in network advertising revenues, driven by CBS’s broadcast of the Super Bowl, which issemifinals and finals of the NCAA Tournament, partially offset by a decline in non-sports advertising revenues. The semifinals and finals of the NCAA Tournament are broadcast on the CBS Television Network once every three yearsother year through 20222032 under the current contract; 6% growthagreements with the NCAA and Turner Broadcasting System, Inc. For the six months ended June 30, 2017, the 13% decrease in underlying network advertising;advertising revenues primarily reflects the impact of two noncomparable sporting events that benefited 2016: the


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


broadcast of Super Bowl 50 and one additional NFL playoff game on the CBS Television Network, as well as lower political and non-sports advertising sales. These increasesdecreases were partially offset by the impact frompreviously mentioned broadcast of additional NCAA Tournament games in the salessecond quarter of internet businesses in China during 2015.2017.

During 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 Company recently completed the CBS Television Network’s upfront advertising sales (“Upfront”) for the 2016/20172017/2018 television broadcast season, which runs from the middle of September 20162017 through the middle of September 2017, resulted2018. A significant portion of advertising spots for the CBS Television Network’s non-sports programming is sold during May through July in the Upfront each year. This year’s Upfront concluded with increases in pricing increases compared with the prior broadcast season, and a majority of the Company’s deals will be based on a live-plus-seven day viewing window, which isare expected to benefit advertising revenues during the 2016/20172017/2018 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 2017, the advertising revenue comparison with the prior year will continue to be negatively affected by the benefit in 2016 from strong political advertising.

Content Licensing and Distribution
For the three months ended SeptemberJune 30, 2016,2017, content licensing and distribution revenues benefited from a higher volume of television licensing sales and increased 12%, despite the 6%international licensing sales of five Star Trek library series in the second quarter of 2016. For the six months ended June 30, 2017, the 14% increase in content licensing and distribution revenues was driven by highergrowth in domestic television licensing primarily reflectingsales and strong demand for the Company’s content internationally, partially offset by the licensing sales of ShowtimeStar Trek original series, including Penny Dreadful, as well as various 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 availability of Elementary in the third quarter of 2015. For the nine months ended September 30, 2016, the 4% decrease in content2016. Content licensing and distribution revenues reflects lower domestic television licensing revenues,for the three and six months ended June 30, 2017 benefited from additional titles available for sale as a result of the first nine months of 2015 included significant sales of NCIS and Elementary. This decrease was partially offset by growth from the international licensing of five Star Trek series and the domestic licensing sale of Penny Dreadful.Company’s recent increased investment in internally-produced series.

For the remainder of 2016,2017, the content licensing and licensing distribution revenuerevenues 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 and six months ended SeptemberJune 30, 2016,2017, the 13% increase in affiliate and subscription fees of 16% in each period reflects 32% growth in station affiliation fees and retransmission revenues, and higher revenues from digital distribution platforms,new initiatives, including the Company’s owned streaming subscription services, CBS All Access and Showtime Networks’ over-the-top service. For the nine months ended September 30, 2016, the 8% increase in affiliateShowtime digital streaming subscription offering, and third-party live television streaming offerings.

Affiliate and subscription fees was driven by 39% growth in station affiliation fees and retransmission revenues, andfor the third quarter of 2017 are expected to include revenues from digital distribution platforms. These increases were partially offset by the benefit to 2015 from Showtime Networks’ distribution of the Floyd Mayweather/Manny PacquiaoConor McGregor pay-per-view boxing event, which was the highest grossing pay-per-view event of all time.event.

Over the next few years, the Company expects to renew a significant portionbenefit from the renewal of several of its agreements with station affiliates and MVPDs. This, alongMVPDs as well as from agreements with new distributors of live television streaming offerings. In addition, the Company’s digital distribution initiatives,existing agreements with station affiliates and MVPDs include annual contractual increases. Together, these factors are expected to result in continued growth in affiliate and subscription fees.fees over the next several years.


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


International Revenues
The Company generated approximately 10%15% and 12%19% of its total revenues from international regions for the three months ended SeptemberJune 30, 20162017 and 2015,2016, respectively, and generated approximately 13%14% and 14%15% of its total revenues from international regions for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively.

Operating Expenses
Three Months Ended September 30, Three Months Ended June 30, 
  % of Operating Expenses   % of Operating Expenses Increase/(Decrease)   % of Operating Expenses   % of Operating Expenses Increase/(Decrease) 
Operating Expenses by Type2016 2015  $ % 2017 2016  $ % 
Programming$526
 28% $518
 28% $8
 2% $652
 33% $525
 30% $127
 24% 
Production706
 37
 683
 37
 23
 3
 726
 36
 630
 36
 96
 15
 
Participation, distribution and royalty291
 15
 271
 15
 20
 7
 290
 14
 285
 16
 5
 2
 
Other374
 20
 370
 20
 4
 1
 336
 17
 318
 18
 18
 6
 
Total Operating Expenses$1,897
 100% $1,842
 100% $55
 3% $2,004
 100% $1,758
 100% $246
 14% 
 Six Months Ended June 30, 
   % of Operating Expenses   % of Operating Expenses Increase/(Decrease) 
Operating Expenses by Type2017  2016  $ % 
Programming$1,509
 37% $1,633
 41% $(124) (8)% 
Production1,383
 34
 1,267
 31
 116
 9
 
Participation, distribution and royalty526
 13
 497
 12
 29
 6
 
Other660
 16
 633
 16
 27
 4
 
Total Operating Expenses$4,078
 100% $4,030
 100% $48
 1 % 

For the three months ended June 30, 2017, the 24% increase in programming expenses was driven by higher sports programming costs, mainly associated with CBS’s broadcast of the semifinals and finals of the NCAA Tournament. For the six months ended June 30, 2017, the 8% decrease in programming expenses was driven by lower sports programming costs, as 2016 included costs associated with the broadcast of Super Bowl 50, which were partially offset by costs associated with the 2017 broadcast of additional NCAA Tournament games.

For the three and six months ended June 30, 2017, the increases in production expenses of 15% and 9%, respectively, reflect higher costs associated with the increase in television licensing revenues and a higher investment in internally-produced television series. For the six months ended June 30, 2017, these increases were partially offset by lower sports production costs as the first quarter of 2016 included CBS’s broadcast of Super Bowl 50.

For the three and six months ended June 30, 2017, the increases in participation, distribution and royalty costs of 2% and 6%, respectively, primarily reflect higher residuals resulting from the increase in television licensing revenues.

Selling, General and Administrative Expenses
 Three Months Ended June 30,
 2017 % of Revenues 2016 % of Revenues Increase/(Decrease) 
Selling, general and administrative expenses$528
  16%  $510
  17%   4%  


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 Operating Expenses   % of Operating Expenses Increase/(Decrease) 
Operating Expenses by Type2016  2015  $ % 
Programming$2,182
 36% $2,033
 34% $149
 7 % 
Production2,053
 33
 1,940
 33
 113
 6
 
Participation, distribution and royalty788
 13
 817
 14
 (29) (4) 
Other1,091
 18
 1,101
 19
 (10) (1) 
Total Operating Expenses$6,114
 100% $5,891
 100% $223
 4 % 
 Six Months Ended June 30,
 2017 % of Revenues 2016 % of Revenues Increase/(Decrease) 
Selling, general and administrative expenses$1,038
  16%  $1,013
  15%   2%  

For the three months ended September 30, 2016, the 2% increase in programming expenses was driven by higher sports programming costs associated 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 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 September 30, 2016, the 3% increase in production expenses was mainly driven by higher costs associated with the increase in television licensing revenues. For the nine months ended September 30, 2016, the 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 September 30, 2016, the 7% increase in participation, distribution and royalty costs primarily reflects higher participations and residuals resulting from the increase in television licensing revenues. For the nine months ended September 30, 2016, the 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 ninesix months ended SeptemberJune 30, 2016,2017, the increases in SG&A expenses increased 7%of 4% and 5%2%, respectively, primarily as a result of higher pension and other employee-related costs. For the nine months ended September 30, 2016, the increase also reflectsreflect higher advertising and marketing costs, mainly associated with the timing of series premieres on Showtime.and to support the Company’s growth initiatives.



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


Depreciation and Amortization
 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)%  
 Three Months Ended June 30, Six Months Ended June 30, 
 2017
2016 Increase/(Decrease) 2017
2016 Increase/(Decrease) 
Depreciation and amortization$56
 $57
  (2)%  $111
 $114
�� (3)%  
For each of the three and ninesix months ended SeptemberJune 30, 2016,2017, the 6% decreasedecreases in depreciation and amortization wasof 2% and 3%, respectively, were 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.amortized.

Other Operating Items, Net
 Nine Months Ended September 30, 
 2016 2015 Increase/(Decrease) 
Other operating items, net$(9) $(19)  (53)%  
For the ninesix months ended SeptemberJune 30, 2016, and 2015, other operating items, net includes gainsincluded a gain from the salessale of an internet businessesbusiness in China and for 2016, also includes a multiyear, retroactive impact of a new operating tax.

Interest Expense/Income
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended June 30, Six Months Ended June 30, 
2016
2015
Increase/(Decrease) 2016
2015 Increase/(Decrease) 2017
2016
Increase/(Decrease) 2017
2016 Increase/(Decrease) 
Interest expense$(104) $(102) 2% $(304) $(289)  5%  $(111) $(100) 11% $(220) $(200)  10%  
Interest income$7
 $6
 17% $22
 $18
 22% $15
 $8
 88% $28
 $15
 87% 
The following table presents the Company’s outstanding debt balances, excluding capital leases, and the weighted average interest rate as of SeptemberJune 30, 20162017 and 2015:2016:
At September 30,At June 30,
  Weighted Average   Weighted Average   Weighted Average   Weighted Average 
2016 Interest Rate 2015 Interest Rate 2017 Interest Rate 2016 Interest Rate 
Total long-term debt$8,849
 4.47% $8,409
 4.68% $8,853
 4.47% $8,167
 4.61% 
Commercial paper$33
 0.75% $303
 0.46% $263
 1.42% $163
 0.72% 
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 2023Other Items, Net
 Three Months Ended June 30, Six Months Ended June 30, 
 2017
2016 Increase/(Decrease) 2017 2016 Increase/(Decrease) 
Other items, net$5
 $(4)  n/m  $6
 $(7)  n/m  
n/m - not meaningful
Other items, net for all periods primarily consists of foreign exchange gains 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%.

losses.


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


Other Items, Net
 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 September 30, Nine Months Ended September 30, 
 2016
2015 Increase/(Decrease) 2016 2015 Increase/(Decrease) 
Tax provision$176
 $211
  (17)%  $612
 $579
  6%  
Effective tax rate25.0% 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
 Three Months Ended June 30, Six Months Ended June 30, 
 2017 2016 Increase/(Decrease) 2017 2016 Increase/(Decrease) 
Provision for income taxes, including interest
and before other discrete items

$(176) $(171)  3 %  $(361) $(374)  (3)%  
Excess tax benefits from stock-based
compensation (a)
4
 
     31
 
     
Other discrete items (b)
3
 (2)     23
 (5)     
Provision for income taxes$(169) $(173)  (2)%  $(307) $(379)  (19)%  
Effective income tax rate29.2% 31.2%     25.9% 31.0%     
(a) Reflects excess tax ratebenefits associated with the exercise of stock options and vesting of RSUs. During the first quarter of 2017, the Company adopted FASB guidance which requires that the difference between the tax benefit from stock-based compensation expense and the deduction on the tax return be recognized within the income tax provision on the statement of operations. Previously, such difference was recognized in stockholders’ equity on the balance sheet. This difference occurs because stock-based compensation expense is recorded based on the grant-date fair value of the award, whereas the tax deduction is based on the fair value on the date the stock option is exercised or the RSU vests. This guidance requires the income statement classification to be applied prospectively, and therefore, excess tax benefits for prior periods remain classified in stockholders’ equity.
(b) For the three and ninesix months ended SeptemberJune 30, 2016 includes a one-time benefit2017, primarily reflects tax benefits from the resolution of $47 million associated with a multiyear adjustment to acertain state income tax deduction, which was approved by the IRS during the third quarter of 2016.matters.

Equity in Loss of Investee Companies, Net of Tax
 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 nine months endedSeptember 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.
 Three Months Ended June 30, Six Months Ended June 30, 
 2017
2016
Increase/(Decrease) 2017 2016 Increase/(Decrease) 
Equity in loss of investee companies,
net of tax
$(12) $(9)  33%  $(29) $(30)  (3)%  

Net Earnings from Continuing Operations and Diluted EPS from Continuing Operations
 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%  
 Three Months Ended June 30, Six Months Ended June 30, 
 2017 2016 Increase/(Decrease) 2017 2016 Increase/(Decrease) 
Net earnings from continuing operations$397
 $373
  6%  $851
 $815
  4%  
Diluted EPS from continuing operations$.97
 $.82
  18%  $2.06
 $1.78
  16%  
For the three and nine months ended SeptemberJune 30, 2016,2017, the increases6% increase in net earnings from continuing operations was primarily the result of 21% and 22%, respectively, andhigher operating income. For the six months ended June 30, 2017, the 4% increase in net earnings from continuing operations reflects the previously mentioned tax benefits, which were partially offset by lower operating income. In addition to the higher earnings, the increases in diluted EPS from continuing operations for the three and six months ended June 30, 2017 of 31%18% and 33%16%, respectively, were each driven by higher operating 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)


LossNet Earnings (Loss) from Discontinued Operations
LossThe following table sets forth details of net earnings (loss) from discontinued operations of $36 million for the three and ninesix months ended SeptemberJune 30, 2016 reflects2017 and 2016.
 Three Months Ended June 30, Six Months Ended June 30,
 2017
2016 2017
2016
Revenues$306
 $313
 $556
 $575
Costs and expenses:       
Operating105
 103
 194
 188
Selling, general and administrative129
 122
 251
 236
Depreciation and amortization (a)

 6
 
 13
Restructuring charge7
 
 7
 
Provision for valuation allowance365
 
 1,080
 
Total costs and expenses606
 231
 1,532
 437
Operating income (loss)(300) 82
 (976) 138
Interest expense(20) 
 (39) 
Earnings (loss) from discontinued operations(320) 82
 (1,015) 138
Income tax provision(19) (32) (30) (57)
Net earnings (loss) from discontinued operations, net of tax$(339) $50
 $(1,045) $81
(a) CBS Radio has been classified as held for sale beginning in the resolutionfourth quarter of 2016. Under ASC 360, assets held for sale are not depreciated or amortized.

FASB Accounting Standards Codification (“ASC”) 360 requires that an asset classified as held for sale be measured each reporting period at the lower of its carrying amount or fair value less cost to sell. The ultimate value of the transaction with Entercom will be determined based on Entercom’s stock price at the closing of the transaction. The Company recorded noncash charges of $365 million and $1.08 billion for the three and six months ended June 30, 2017, respectively, to record a tax mattervaluation allowance to reduce the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. In accordance with ASC 360, the valuation allowance will continue to be adjusted based on the trading price of Entercom’s stock, which could result in future gains or losses. A 10% change to Entercom’s stock price would change the carrying value of CBS Radio by approximately $100 million.

For the three and six months ended June 30, 2017, CBS Radio recorded a foreign jurisdiction relating to a previously disposedrestructuring charge of $7 million associated with the reorganization of certain business that was accounted for as a discontinued operation.operations, reflecting severance costs and costs associated with exiting contractual obligations.

Net Earnings (Loss) and Diluted EPS
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended June 30, Six Months Ended June 30, 
2016
2015
Increase/(Decrease) 2016 2015 Increase/(Decrease) 2017
2016
Increase/(Decrease) 2017 2016 Increase/(Decrease) 
Net earnings$478
 $426
 12% $1,374
 $1,152
  19% 
Net earnings (loss)$58
 $423
 (86)% $(194) $896
  (122)% 
Diluted EPS$1.07
 $.88
 22% $3.02
 $2.33
 30% $.14
 $.93
 (85)% $(.47) $1.95
 (124)% 


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


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,each where applicable, (“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 (loss) is presented in Note 1213 (Reportable Segments) to the consolidated financial statements.
Three Months Ended SeptemberJune 30, 20162017 and 20152016
 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,
  
% of Total
Revenues
  
% of Total
Revenues
Increase/(Decrease) 
 2017
2016$ % 
Revenues:             
Entertainment$2,184
 67 %  $1,947
 66 % $237
 12 % 
Cable Networks571
 18
  536
 18
 35
 7
 
Publishing206
 6
  187
 6
 19
 10
 
Local Media412
 13
  396
 13
 16
 4
 
Corporate/Eliminations(116) (4)  (90) (3) (26) (29) 
Total Revenues$3,257
 100 %  $2,976
 100 % $281
 9 % 
Three Months Ended September 30,Three Months Ended June 30,
 
% of Total
Operating
Income
  
% of Total
Operating
Income
   
% of Total
Operating
Income
  
% of Total
Operating
Income
  
   Increase/(Decrease)    Increase/(Decrease) 
2016 2015$ % 2017 2016$ % 
Segment Operating Income (Loss):                        
Entertainment$348
 44 % $339
 45 % $9
 3 % $346
 52 % $351
 54 % $(5) (1)% 
Cable Networks285
 36
 246
 33
 39
 16
 253
 38
 227
 35
 26
 11
 
Publishing44
 5
 43
 6
 1
 2
 28
 4
 26
 4
 2
 8
 
Local Media122
 15
 101
 13
 21
 21
 127
 19
 130
 20
 (3) (2) 
Radio77
 10
 73
 10
 4
 5
 
Corporate(78) (10) (49) (7) (29) (59) (85) (13) (83) (13) (2) (2) 
Total Operating Income$798
 100 % $753
 100 % $45
 6 % $669
 100 % $651
 100 % $18
 3 % 
 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 September 30, 2016 and 2015
 Nine Months Ended September 30,
  
% of Total
Revenues
  
% of Total
Revenues
Increase/(Decrease) 
 2016 2015$ % 
Revenues:             
Entertainment$6,483
 62 %  $5,978
 60 % $505
 8 % 
Cable Networks1,659
 16
  1,680
 17
 (21) (1) 
Publishing558
 5
  547
 5
 11
 2
 
Local Media1,253
 12
  1,138
 11
 115
 10
 
Radio898
 8
  907
 9
 (9) (1) 
Corporate/Eliminations(319) (3)  (274) (2) (45) (16) 
Total Revenues$10,532
 100 %  $9,976
 100 % $556
 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
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 September 30, 2016 and 2015
 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 September 30, 2016, the 1%increase in revenues was driven by a 39% increase in affiliate and subscription fees, led by higher station affiliation fees 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 were impacted by 10 hours of primetime preemptions for the Democratic and Republican conventions and the first Presidential debate, competition from the 2016 Summer Olympics, and sales of internet businesses in China during 2015. The decrease in content licensing and distribution revenues reflects the initial domestic availability of Elementary in the third quarter of 2015, partially offset by sales of various titles from the Company’s television library during the third quarter of 2016.


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


For the three months ended September 30, 2016, the 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 September 30, 2016 and 2015
 Three Months Ended September 30,
   Increase/(Decrease) 
 2016
2015 $ % 
Revenues$598
 $526
 $72
 14 % 
Segment Operating Income$285
 $246
 $39
 16 % 
Segment Operating Income as a % of revenues48% 47%     
Depreciation and amortization$6
 $5
 $1
 20 % 
Capital expenditures$4
 $5
 $(1) (20)% 
For the three months ended September 30, 2016, the 14% increase in revenues principally reflects higher revenues from the domestic licensing of Showtime original series, including Penny Dreadful, as well as growth in affiliate and subscription fees driven by Showtime Networks’ over-the-top service. As of September 30, 2016, subscriptions totaled 75 million for Showtime Networks (including Showtime, The Movie Channel and Flix), 55 million for CBS Sports Network and 33 million for Smithsonian Networks.
For the three months ended September 30, 2016, the 16%increase in operating income primarily reflects the revenue growth partially offset by increased investment in original series.


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, 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.
Corporate
Three Months Ended September 30, 2016 and 2015
 Three Months Ended September 30,
   Increase/(Decrease) 
 2016
2015 $ % 
Segment Operating Loss$(78) $(49) $(29) (59)% 
Depreciation and amortization$8
 $8
 $
  % 
Capital expenditures$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 September 30, 2016, the 59% increase in corporate expenses primarily reflects higher pension and other employee-related costs.
Nine Months Ended September 30, 2016 and 2015
 Nine Months Ended September 30,
   Increase/(Decrease) 
 2016 2015 $ % 
Segment Operating Loss$(245) $(181) $(64) (35)% 
Depreciation and amortization$24
 $23
 $1
 4 % 
Capital expenditures (a)
$16
 $5
 $11
 n/m
 
n/m - not meaningful
(a) Primarily reflects the timing of capital projects.
 Three Months Ended June 30,
   Increase/(Decrease) 
 2017 2016 $ % 
Depreciation and Amortization:        
Entertainment$27
 $30
 $(3) (10)% 
Cable Networks6
 5
 1
 20
 
Publishing2
 2
 
 
 
Local Media12
 11
 1
 9
 
Corporate9
 9
 
 
 
Total Depreciation and Amortization$56
 $57
 $(1) (2)% 


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


Six Months Ended June 30, 2017 and 2016
 Six Months Ended June 30, 
  
% of Total
Revenues
  
% of Total
Revenues
Increase/(Decrease) 
 2017 2016$ % 
Revenues:             
Entertainment$4,531
 69 %  $4,534
 69 % $(3)  % 
Cable Networks1,114
 17
  1,061
 16
 53
 5
 
Publishing367
 6
  332
 5
 35
 11
 
Local Media821
 12
  844
 13
 (23) (3) 
Corporate/Eliminations(233) (4)  (207) (3) (26) (13) 
Total Revenues$6,600
 100 %  $6,564
 100 % $36
 1 % 
 Six Months Ended June 30, 
  
% of Total
Segment
Operating
Income
  
% of Total
Segment
Operating
Income
  
    Increase/(Decrease) 
 2017 2016$ % 
Segment Operating Income (Loss):             
Entertainment$744
 54 %  $800
 57 % $(56) (7)% 
Cable Networks501
 37
  455
 32
 46
 10
 
Publishing42
 3
  39
 3
 3
 8
 
Local Media250
 18
  280
 20
 (30) (11) 
Corporate(164) (12)  (167) (12) 3
 2
 
Total Segment Operating Income1,373
 100 %  1,407
 100 % (34) (2) 
Other operating items, net
    9
   (9) n/m
 
Total Operating Income$1,373
    $1,416
   $(43) (3)% 
n/m - not meaningful
 Six Months Ended June 30,
   Increase/(Decrease) 
 2017 2016 $ % 
Depreciation and Amortization:        
Entertainment$56
 $60
 $(4) (7)% 
Cable Networks12
 11
 1
 9
 
Publishing3
 3
 
 
 
Local Media23
 22
 1
 5
 
Corporate17
 18
 (1) (6) 
Total Depreciation and Amortization$111
 $114
 $(3) (3)% 


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


Entertainment (CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Interactive and CBS Films)
Three Months Ended June 30, 2017 and 2016
 Three Months Ended June 30,
   Increase/(Decrease) 
 2017
2016 $ % 
Revenues$2,184
 $1,947
 $237
 12 % 
Segment Operating Income$346
 $351
 $(5) (1)% 
Segment Operating Income as a % of revenues16% 18%     
Depreciation and amortization$27
 $30
 $(3) (10)% 
Capital expenditures$24
 $24
 $
  % 
For the ninethree months ended June 30, 2017, the 12% September 30, 2016, the 35% increase in corporate expensesrevenues was driven by 38% growth in affiliate and subscription fees, led by higher station affiliation fees and growth from new initiatives, including CBS All Access and third-party live television streaming services. Content licensing and distribution revenues benefited from a higher volume of television licensing sales and grew 12%, despite the difficult comparison with the second quarter of 2016, which included international licensing sales of five Star Trek library series. Advertising revenues increased 6%, reflecting the broadcast of the semifinals and finals of the NCAA Tournament on the CBS Television Network in the second quarter of 2017, partially offset by a decline in non-sports advertising revenues.

For the three months ended June 30, 2017, operating income decreased 1%, primarily reflects higher pensiondriven by the mix of revenues, reflecting higher-margin revenues in the second quarter of 2016, including the licensing of Star Trek, and other employee-related costs.lower-margin revenues from the NCAA Tournament in the second quarter of 2017.

Six Months Ended June 30, 2017 and 2016
 Six Months Ended June 30,
   Increase/(Decrease) 
 2017 2016 $ % 
Revenues$4,531
 $4,534
 $(3)  % 
Segment Operating Income$744
 $800
 $(56) (7)% 
Segment Operating Income as a % of revenues16% 18%     
Depreciation and amortization$56
 $60
 $(4) (7)% 
Capital expenditures$38
 $37
 $1
 3 % 
For the six months ended June 30, 2017, revenues were comparable with the same prior-year period, despite the benefit in 2016 from the broadcast of Super Bowl 50. Affiliate and subscription fees increased 33%, reflecting higher station affiliation fees and growth from new initiatives, including CBS All Access and third-party live television streaming services. Content licensing and distribution revenues grew 16%, led by higher domestic licensing sales and strong demand for the Company’s content internationally, due in part to increased investment in internally-produced series. These increases were partially offset by the benefit to 2016 from the sales of Star Trek library programming.

For the six months ended June 30, 2017, the 7% decrease in operating income was mainly a result of higher-margin revenues in 2016.


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


Cable Networks (Showtime Networks, CBS Sports Network and Smithsonian Networks)
Three Months Ended June 30, 2017 and 2016
 Three Months Ended June 30,
   Increase/(Decrease) 
 2017
2016 $ % 
Revenues$571
 $536
 $35
 7% 
Segment Operating Income$253
 $227
 $26
 11% 
Segment Operating Income as a % of revenues44% 42%     
Depreciation and amortization$6
 $5
 $1
 20% 
Capital expenditures$4
 $2
 $2
 100% 
For the three months ended June 30, 2017, the 7% increase in revenues was driven by higher affiliate and subscription fees, led by subscription growth for the Showtime digital streaming subscription offering. The revenue growth also reflects higher international television licensing sales of Showtime original series. As of June 30, 2017, subscriptions totaled 73 million for Showtime Networks (including Showtime, The Movie Channel and Flix), 52 million for CBS Sports Network and 31 million for Smithsonian Networks.

For the three months ended June 30, 2017, the 11%increase in operating income primarily reflects revenue growth.

Cable Networks revenues for the third quarter of 2017 are expected to include revenues from the Floyd Mayweather/Conor McGregor pay-per-view boxing event.

Six Months Ended June 30, 2017 and 2016
 Six Months Ended June 30,
   Increase/(Decrease) 
 2017 2016 $ % 
Revenues$1,114
 $1,061
 $53
 5% 
Segment Operating Income$501
 $455
 $46
 10% 
Segment Operating Income as a % of revenues45% 43%     
Depreciation and amortization$12
 $11
 $1
 9% 
Capital expenditures$7
 $4
 $3
 75% 
For the six months ended June 30, 2017, the 5% increase in revenues reflects growth in affiliate and subscription fees, led by the Showtime digital streaming subscription offering. This growth was partially offset by the timing of television licensing sales of Showtime original series.
For the six months ended June 30, 2017, the 10% increase in operating income was driven by growth in higher-margin revenues.



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, 2017 and 2016
 Three Months Ended June 30,
   Increase/(Decrease) 
 2017
2016 $ % 
Revenues$206
 $187
 $19
 10% 
Segment Operating Income$28
 $26
 $2
 8% 
Segment Operating Income as a % of revenues14% 14%     
Depreciation and amortization$2
 $2
 $
 % 
Capital expenditures$
 $3
 $(3) n/m
 
n/m - not meaningful
For the three months ended June 30, 2017, the 10% increase in revenues was driven by higher print book sales and growth in digital audio sales. Best-selling titles in the second quarter of 2017 included Lord of Shadows by Cassandra Clare and I Can’t Make This Up by Kevin Hart.

For the three months ended June 30, 2017, the 8% increase in operating income mainly reflects revenue growth.
Six Months Ended June 30, 2017 and 2016
 Six Months Ended June 30,
   Increase/(Decrease) 
 2017 2016 $ % 
Revenues$367
 $332
 $35
 11 % 
Segment Operating Income$42
 $39
 $3
 8 % 
Segment Operating Income as a % of revenues11% 12%     
Depreciation and amortization$3
 $3
 $
  % 
Capital expenditures$1
 $6
 $(5) (83)% 
For the six months ended June 30, 2017, the 11% increase in revenues was driven by higher print book sales and growth in digital audio sales.
For the six months ended June 30, 2017, the 8% increase in operating income reflects the revenue growth, which was partially 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)


Local Media (CBSTelevision Stations and CBS Local Digital Media)
Three Months Ended June 30, 2017 and 2016
 Three Months Ended June 30,
   Increase/(Decrease) 
 2017 2016 $��% 
Revenues$412
 $396
 $16
 4 % 
Segment Operating Income$127
 $130
 $(3) (2)% 
Segment Operating Income as a % of revenues31% 33%     
Depreciation and amortization$12
 $11
 $1
 9 % 
Capital expenditures$7
 $4
 $3
 75 % 
For the three months ended June 30, 2017, the 4% increase in revenues was driven by growth in retransmission revenues. Advertising revenues benefited from CBS’s broadcast of the semifinals and finals of the NCAA Tournament in the second quarter of 2017; however, advertising revenues decreased 2% mainly due to lower political advertising sales.

For the three months ended June 30, 2017, the 2% decrease in operating income mainly reflects the mix of revenues. Retransmission revenues have associated network affiliation costs paid to the CBS Television Network, whereas political advertising sales have a high operating income margin.

During the second half of 2017, the revenue comparison will continue to be negatively impacted by the benefit in 2016 from strong political advertising associated with U.S. federal and state elections.

Six Months Ended June 30, 2017 and 2016
 Six Months Ended June 30,
   Increase/(Decrease) 
 2017 2016 $ % 
Revenues$821
 $844
 $(23) (3)% 
Segment Operating Income$250
 $280
 $(30) (11)% 
Segment Operating Income as a % of revenues30% 33%     
Depreciation and amortization$23
 $22
 $1
 5 % 
Capital expenditures$12
 $11
 $1
 9 % 
For the six months ended June 30, 2017, the 3% decrease in revenues was driven by lower advertising revenues, reflecting the benefit in 2016 from CBS’s broadcast of Super Bowl 50, and a decline in political advertising sales. The lower advertising revenues were partially offset by growth in retransmission revenues.
For the six months ended June 30, 2017, the 11% decrease in operating income primarily reflects the lower revenues, as well as the mix of revenues compared to the same prior-year period.


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


Corporate
Three Months Ended June 30, 2017 and 2016
 Three Months Ended June 30,
   Increase/(Decrease) 
 2017
2016 $ % 
Segment Operating Loss$(85) $(83) $(2) (2)% 
Depreciation and amortization$9
 $9
 $
  % 
Capital expenditures$6
 $2
 $4
 200 % 

Six Months Ended June 30, 2017 and 2016
 Six Months Ended June 30,
   Increase/(Decrease) 
 2017 2016 $ % 
Segment Operating Loss$(164) $(167) $3
 2 % 
Depreciation and amortization$17
 $18
 $(1) (6)% 
Capital expenditures$10
 $11
 $(1) (9)% 
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.
Financial Position
At At Increase/(Decrease) At At Increase/(Decrease) 
September 30, 2016
December 31, 2015 $ % June 30, 2017
December 31, 2016 $ % 
Current Assets:                  
Cash and cash equivalents $179
 $323
 $(144) (45)%  $170
 $598
 $(428) (72)% 
Receivables, net (a)
 3,348
 3,628
 (280) (8)  3,299
 3,314
 (15) 
 
Programming and other inventory (b)(a)
 1,459
 1,271
 188
 15
  1,560
 1,427
 133
 9
 
Prepaid income taxes (c)
 39
 101
 (62) (61) 
Prepaid expenses 132
 185
 (53) (29) 
All other current assets 432
 424
 8
 2
  525
 539
 (14) (3) 
Total current assets $5,457
 $5,747
 $(290) (5)%  $5,686
 $6,063
 $(377) (6)% 
(a) The decrease is primarily due to seasonality.
(b) The increase 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) 
 September 30, 2016
December 31, 2015 $ % 
Other assets (a)
 $2,779
   $2,661
  $118
 4% 
 At At Increase/(Decrease) 
 June 30, 2017
December 31, 2016 $ % 
Other assets (a)
 $2,558
   $2,707
  $(149) (6)% 
(a) The increasedecrease primarily reflects higherlower long-term receivables associated with revenues from television licensing agreements.
 At At Increase/(Decrease) 
 September 30, 2016 December 31, 2015 $ % 
Current Liabilities:            
Accounts payable (a)
 $153
   $192
  $(39) (20)% 
Accrued compensation (a)
 282
   315
  (33) (10) 
Program rights 373
   374
  (1) 
 
Deferred revenues (b)
 141
   295
  (154) (52) 
Commercial paper 33
   
  33
 n/m
 
Current portion of long-term debt (c)
 22
   222
  (200) (90) 
All other current liabilities 2,094
   2,162
  (68) (3) 
Total current liabilities $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)


 At At Increase/(Decrease) 
 June 30, 2017 December 31, 2016 $ % 
Assets of discontinued operations (a)
 $3,218
   $4,291
  $(1,073) (25)% 
(a) The decrease primarily reflects a noncash charge of $1.08 billion to record a valuation allowance to reduce the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. (See Note 3 to the consolidated financial statements).
 At At Increase/(Decrease) 
 June 30, 2017 December 31, 2016 $ % 
Current Liabilities:            
Accounts payable $124
   $148
  $(24) (16)% 
Accrued compensation (a)
 223
   369
  (146) (40) 
Participants’ share and royalties
payable
 1,005
   1,024
  (19) (2) 
Commercial paper 263
   450
  (187) (42) 
All other current liabilities 1,615
   1,717
  (102) (6) 
Total current liabilities $3,230
   $3,708
  $(478) (13)% 
(a) The decrease is due to the timing of payments.
 At At Increase/(Decrease) 
 June 30, 2017 December 31, 2016 $ % 
Pension and postretirement
benefit obligations (a)
 $1,638
   $1,769
  $(131) (7)% 
(a) The decrease primarily reflects discretionary pension contributions of $100 million made during the first quarter of 2017 to prefund the Company’s qualified plans.
Cash Flows
The changes in cash and cash equivalents were as follows:
Nine Months Ended September 30,Six Months Ended June 30,
2016 2015 Increase/(Decrease)2017 2016 Increase/(Decrease)
Net cash flow provided by (used for) operating activities from:      
Net cash flow provided by operating activities from:      
Continuing operations$1,308
 $650
 $658
 $909
 $1,139
 $(230) 
Discontinued operations(2) (27) 25
 29
 112
 (83) 
Net cash flow provided by operating activities1,306
 623
 683
 938
 1,251
 (313) 
Net cash flow used for investing activities from:            
Continuing operations(181) (102) (79) (139) (140) 1
 
Discontinued operations
 (4) 4
 (13) (2) (11) 
Net cash flow used for investing activities(181) (106) (75) (152) (142) (10) 
Net cash flow used for financing activities(1,269) (812) (457) (1,229) (1,256) 27
 
Net decrease in cash and cash equivalents$(144) $(295) $151
 $(443) $(147) $(296) 
Operating Activities. For the ninesix months ended SeptemberJune 30, 2016,2017, the increasedecrease in cash provided by operating activities was primarily driven by growththe benefit in affiliate and subscription fees and higher advertising revenues, including2016 from theCBS’s broadcast of Super Bowl 50, and discretionary pension contributions of $100 million made during the first quarter of 2017 to prefund the Company’s qualified plans. These decreases were partially offset by increased investment in content.

Cash paid for income taxes for the nine months ended September 30, 2016higher affiliate and 2015 was as follows:
 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 nine months ended September 30, 2016.

subscription fee revenues.


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


Investing Activities
Nine Months Ended September 30,Six Months Ended June 30,
2016
20152017
2016
Acquisitions (a)
 $(51) $(7)  $(21) $(51) 
Capital expenditures (b)
 (125) (104)  (68) (69) 
Investments in and advances to investee companies (c)(b)
 (44) (58)  (65) (43) 
Proceeds from dispositions (d)(c)
 28
 75
  1
 19
 
Other investing activities 11
 (8)  14
 4
 
Net cash flow used for investing activities from continuing operations (181) (102)  (139) (140) 
Net cash flow used for investing activities from discontinued operations 
 (4)  (13) (2) 
Net cash flow used for investing activities $(181) $(106)  $(152) $(142) 
(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(c) 2016 primarily reflects sales of internet businesses in China.

Financing Activities
Nine Months Ended September 30,Six Months Ended June 30,
2016 20152017 2016
Repurchase of CBS Corp. Class B Common Stock $(1,534) $(2,345)  $(845) $(1,033) 
Proceeds from (repayments of) short-term debt borrowings, net 33
 (313) 
Proceeds from issuance of senior notes 685
 1,959
 
(Repayments of) proceeds from short-term debt borrowings, net (187) 163
 
Repayment of senior debentures (199) 
  
 (199) 
Dividends (209) (228)  (151) (142) 
Payment of payroll taxes in lieu of issuing shares for stock-based compensation (89) (57) 
Proceeds from exercise of stock options 13
 137
  39
 10
 
All other financing activities, net (58) (22)  4
 2
 
Net cash flow used for financing activities $(1,269)   $(812)  $(1,229)   $(1,256) 

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


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


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 (loss) 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.
Nine Months EndedSix Months Ended
September 30,June 30,
2016 20152017 2016
Net cash flow provided by operating activities$1,306
 $623
$938
 $1,251
Capital expenditures(125) (104)(68) (69)
Exclude operating cash flow from discontinued operations(2) (27)29
 112
Free cash flow$1,183
 $546
$841
 $1,070

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 thirdsecond quarter of 2016,2017, the Company repurchased 9.54.7 million shares of its Class B Common Stock under its share repurchase program for $500$300 million, at an average cost of $52.77$63.64 per share. During the ninesix months ended SeptemberJune 30, 2016,2017, the Company repurchased 29.012.3 million shares of its Class B Common Stock for $1.50 billion,$800 million, at an average cost of $51.76$65.08 per share, leaving $5.60$3.31 billion of authorization at SeptemberJune 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. 2017.

During the fourthsecond quarter of 2016,2017, the Company intends to repurchase $1.5 billiondeclared a quarterly cash dividend of $.18 on its Class A and Class B Common Stock, including $500resulting in total dividends of $73 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.which were paid on July 1, 2017.



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 a 20% increase to the quarterly cash dividend on its Class A and Class B Common stock to $.18 from $.15 per share. The total third quarter 2016 dividend was $80 million, which was paid on October 1, 2016.

Capital Structure
The following table sets forth the Company’s debt.
At AtAt At
September 30, 2016 December 31, 2015June 30, 2017 December 31, 2016
Commercial paper $33
 $
  $263
 $450
 
Senior debt (1.95% – 7.875% due 2016 – 2045) (a)
 8,849
 8,365
 
Senior debt (1.95% – 7.875% due 2017 – 2045) (a)
 8,853
 8,850
 
Obligations under capital leases 75
 83
  68
 75
 
Total debt 8,957
 8,448
  9,184
 9,375
 
Less commercial paper 33
 
  263
 450
 
Less current portion of long-term debt 22
 222
  23
 23
 
Total long-term debt, net of current portion $8,902
 $8,226
  $8,898
 $8,902
 
(a) At SeptemberJune 30, 20162017 and December 31, 20152016, the senior debt balances included (i) a net unamortized discount of $5349 million and $4552 million, respectively, (ii) unamortized deferred financing costs of $45$41 million and $44$43 million, respectively, and (iii) an increase in the carrying value of the debt relating to previously settled fair value hedges of $7$2 million and $14$5 million, respectively. The face value of the Company’s senior debt was $8.94 billion and $8.44 billion at Septemberboth June 30, 20162017 and December 31, 2015, respectively.2016.

DuringIn July 2016,2017, the Company issued $700$400 million of 2.90%2.50% senior notes due 2027.2023 and $500 million of 3.375% senior notes due 2028. The Company used the net proceeds from this issuancethese issuances to repay its $400 million outstanding 1.95% senior notes that matured on July 1, 2017 and to redeem all of its $300 million outstanding 4.625% senior notes due May 2018. The remaining proceeds were used 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 SeptemberJune 30, 2016,2017, the Company classified $400 million of debt maturingwhich matured in July 2017 and $300 million of debt due May 2018 as long-term debt on the Consolidated Balance Sheet, reflecting its intent and ability to refinance thisas a result of the above-mentioned debt on a long-term basis.refinancing.

Commercial Paper
At September 30, 2016, theThe Company had $33 million of outstanding commercial paper borrowings under its $2.5 billion commercial paper program of $263 million and $450 million at a weighted average interest rate of 0.75%June 30, 2017 and December 31, 2016, respectively, each with maturities of less than 45 days. The Company had no outstanding commercial paperweighted average interest rate for these borrowings was 1.42% at June 30, 2017 and 0.98% at December 31, 2015.2016.

Credit Facility
DuringAt June 2016,30, 2017, the Company amended and restated itshad a $2.5 billion revolving credit facility (the “Credit Facility”). The amended Credit Facility which expires in June 2021 and contains provisions that are substantially similar to the previous Credit Facility, which was due to expire in December 2019.2021. 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 SeptemberJune 30, 2016,2017, the Company’s Consolidated Leverage Ratio was approximately 2.5x2.9x.

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.



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 SeptemberJune 30, 20162017, 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 SeptemberJune 30, 20162017; 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 forSubsequent to the refinancing of $700 million of debt in July 2017, the Company’s long-term debt obligations due over the next five years of $2.10 billion is expected to comebe funded by cash generated from operating activities and 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.debt.

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


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


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 SeptemberJune 30, 2016,2017, the Company had pending approximately 34,40033,240 asbestos claims, as compared with approximately 36,03033,610 as of December 31, 20152016 and 37,19034,790 as of SeptemberJune 30, 2015.2016. During the thirdsecond quarter of 2016,2017, the Company received approximately 9301,030 new claims and closed or moved to an inactive docket approximately 1,3201,390 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 2016, the Company’s costs for settlement and defense of asbestos claims after insurance and taxes were approximately $48 million. 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 generally 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 45 to the consolidated financial statements.
Recent Pronouncements and Adoption of New Accounting Standards
See Note 1 to the consolidated financial statements.

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, 2015,2016, for a discussion of the Company’s critical accounting policies.

Beginning


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


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; the ability to achieve the separation of the Company’s radio business through a merger of CBS Radio with a subsidiary of Entercom Communications Corp. on the anticipated terms, which is subject to regulatory and Entercom stockholder approvals, an exchange offer and other customary closing conditions, and fluctuations in the market values of Entercom’s Class A common stock and the Company’s Class B Common Stock; 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, 20152016 and in our Quarterly Reports on Form 10-Q.10-Q, and in the Company’s recent Current Reports on Form 8-K. 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, 2015.2016.
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

In 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 annual impairment test for FCC licenses performed during the fourth quarter of 2015, 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 three Radio reporting units and/or these FCC licenses could cause the estimated fair values 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 amounttotaling $16.4 billion have been approved and announced, including most recently, an increase to the share repurchase program to a total availability of $6.0 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 SeptemberJune 30, 2016.2017 under this publicly announced share repurchase program.
(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
 
(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, 2017 - April 30, 2017 1.1
  $67.74
  1.1
   $3,529
 
May 1, 2017 - May 31, 2017 1.7
  $62.57
  1.7
   $3,426
 
June 1, 2017 - June 30, 2017 1.9
  $62.10
  1.9
   $3,307
 
Total 4.7
  $63.64
  4.7
   $3,307
 



Item 6.Exhibits.
Exhibit No.Description of Document
(2)Plan of acquisition, reorganization, arrangement, liquidation or succession.
(a)
Amendment No. 1, dated as of July 10, 2017 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of CBS Corporation filed July 10, 2017 (File No. 001-09553)), to Agreement and Plan of Merger, dated as of February 2, 2017, by and among CBS Corporation, CBS Radio Inc., Entercom Communications Corp. and Constitution Merger Sub Corp. (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K of CBS Corporation filed February 2, 2017 (File No. 001-09553)).

(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 byof CBS Corporation onfiled 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 byof CBS Corporation onfiled 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)Employment Agreement dated as of September 29, 2016May 19, 2017 between CBS Corporation and Anthony G. AmbrosioLeslie Moonves (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: November 3, 2016August 7, 2017/s/ Joseph R. Ianniello
 
Joseph R. Ianniello
Chief Operating Officer
  
Date: November 3, 2016August 7, 2017/s/ Lawrence Liding
 
Lawrence Liding
Executive Vice President, Controller and
Chief Accounting Officer


EXHIBIT INDEX
Exhibit No.Description of Document
(2)Plan of acquisition, reorganization, arrangement, liquidation or succession.
(a)Amendment No. 1, dated as of July 10, 2017 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of CBS Corporation filed July 10, 2017 (File No. 001-09553)), to Agreement and Plan of Merger, dated as of February 2, 2017, by and among CBS Corporation, CBS Radio Inc., Entercom Communications Corp. and Constitution Merger Sub Corp. (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K of CBS Corporation filed February 2, 2017 (File No. 001-09553)).
(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 byof CBS Corporation onfiled 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 byof CBS Corporation onfiled 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)Employment Agreement dated as of September 29, 2016May 19, 2017 between CBS Corporation and Anthony G. AmbrosioLeslie Moonves (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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