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 September 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 October 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— 391,975,900362,580,107
 



CBS CORPORATION
INDEX TO FORM 10-Q
  Page
 PART I – FINANCIAL INFORMATION 
   
Item 1.
Financial Statements.
 
   
 Consolidated Statements of Operations (Unaudited) for the
 Three and Nine Months Ended September 30, 20162017 and September 30, 20152016
3
   
 Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the
 Three and Nine Months Ended September 30, 20162017 and September 30, 20152016
4
   
 Consolidated Balance Sheets (Unaudited) at September 30, 20162017
 and December 31, 20152016
5
   
 Consolidated Statements of Cash Flows (Unaudited) for the
 Nine Months Ended September 30, 20162017 and September 30, 20152016
6
   
 
Notes to Consolidated Financial Statements (Unaudited)
7
   
Item 2.
Management’s Discussion and Analysis of Results of Operations and Financial Condition.
3034
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
5560
   
Item 4.
Controls and Procedures.
5560
   
 
PART II – OTHER INFORMATION
 
   
Item 1A.Risk Factors.
56
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
5661
   
Item 6.
Exhibits.
5762


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 Nine Months Ended
September 30, September 30,September 30, September 30,
2016 2015 2016 20152017 2016 2017 2016
Revenues$3,396
 $3,257
 $10,532
 $9,976
$3,171
 $3,084
 $9,771
 $9,648
Costs and expenses: 
  
     
  
    
Operating1,897
 1,842
 6,114
 5,891
1,862
 1,788
 5,940
 5,818
Selling, general and administrative640
 597
 1,887
 1,790
547
 521
 1,585
 1,534
Depreciation and amortization61
 65
 188
 199
55
 54
 166
 168
Restructuring charges (Note 10)—
 —
 —
 55
Other operating items, net—
 —
 (9) (19)—
 —
 —
 (9)
Total costs and expenses2,598
 2,504
 8,180
 7,916
2,464
 2,363
 7,691
 7,511
Operating income798
 753
 2,352
 2,060
707
 721
 2,080
 2,137
Interest expense(104) (102) (304) (289)(116) (104) (336) (304)
Interest income7
 6
 22
 18
17
 7
 45
 22
Loss on early extinguishment of debt (Note 6)(5) —
 (5) —
Other items, net2
 (4) (5) (23)3
 —
 9
 (7)
Earnings from continuing operations before income taxes and
equity in loss of investee companies
703
 653
 2,065
 1,766
606
 624
 1,793
 1,848
Provision for income taxes(176) (211) (612) (579)(172) (145) (479) (524)
Equity in loss of investee companies, net of tax(13) (16) (43) (35)(16) (13) (45) (43)
Net earnings from continuing operations514
 426
 1,410
 1,152
418
 466
 1,269
 1,281
Loss from discontinued operations (Note 1)(36) —
 (36) —
Net earnings (loss) from discontinued operations, net of tax (Note 3)174
 12
 (871) 93
Net earnings$478
 $426
 $1,374
 $1,152
$592
 $478
 $398
 $1,374
              
Basic net earnings (loss) per common share: 
  
     
  
    
Net earnings from continuing operations$1.16

$.89

$3.13

$2.36
$1.04

$1.05

$3.13

$2.84
Loss from discontinued operations$(.08)
$—

$(.08)
$—
Net earnings (loss) from discontinued operations$.43

$.03

$(2.15)
$.21
Net earnings$1.08

$.89

$3.05

$2.36
$1.48

$1.08

$.98

$3.05
              
Diluted net earnings (loss) per common share: 
  
     
  
    
Net earnings from continuing operations$1.15

$.88

$3.10

$2.33
$1.03

$1.04

$3.10

$2.82
Loss from discontinued operations$(.08)
$—

$(.08)
$—
Net earnings (loss) from discontinued operations$.43

$.03

$(2.12)
$.20
Net earnings$1.07

$.88

$3.02

$2.33
$1.46

$1.07

$.97

$3.02
              
Weighted average number of common shares outstanding: 
  
     
  
    
Basic442
 480
 451
 489
401
 442
 405
 451
Diluted446

484

455

495
406

446

410

455
              
Dividends per common share$.18
 $.15
 $.48
 $.45
$.18
 $.18
 $.54
 $.48
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 Nine Months Ended
September 30, September 30,September 30, September 30,
2016 2015 2016 20152017 2016 2017 2016
Net earnings$478
 $426
 $1,374
 $1,152
$592
 $478
 $398
 $1,374
Other comprehensive income, net of tax:              
Cumulative translation adjustments1
 (5) 2
 (6)2
 1
 4
 2
Amortization of net actuarial loss and prior service cost10
 9
 29
 27
13
 10
 37
 29
Total other comprehensive income, net of tax11
 4
 31
 21
15
 11
 41
 31
Total comprehensive income$489

$430

$1,405

$1,173
$607

$489

$439

$1,405
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, 2015September 30, 2017 December 31, 2016
ASSETS          
Current Assets:          
Cash and cash equivalents $179
 $323
  $144
 $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 $48 (2017) and $60 (2016) 3,598
 3,314
 
Programming and other inventory (Note 4) 1,830
 1,427
 
Prepaid income taxes 39
 101
  —
 30
 
Prepaid expenses 204
 175
  182
 185
 
Other current assets 228
 249
  185
 204
 
Current assets of discontinued operations (Note 3) 355
 305
 
Total current assets 5,457
 5,747
  6,294
 6,063
 
Property and equipment 3,263
 3,243
  3,001
 2,935
 
Less accumulated depreciation and amortization 1,918
 1,838
  1,793
 1,694
 
Net property and equipment 1,345
 1,405
  1,208
 1,241
 
Programming and other inventory (Note 3) 2,237
 1,957
 
Programming and other inventory (Note 4) 2,814
 2,439
 
Goodwill 6,531
 6,481
  4,891
 4,864
 
Intangible assets 5,499
 5,514
  2,617
 2,633
 
Other assets 2,779
 2,661
  2,745
 2,707
 
Assets of discontinued operations (Note 3) 3,325
 4,291
 
Total Assets $23,848

$23,765
  $23,894

$24,238
 
          
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 

  

 

 
Current Liabilities: 

 

  

 

 
Accounts payable $153
 $192
  $233
 $148
 
Accrued compensation 282
 315
  257
 369
 
Participants’ share and royalties payable 979
 1,013
  997
 1,024
 
Program rights 373
 374
  509
 290
 
Deferred revenues 141
 295
 
Commercial paper (Note 5) 33
 —
 
Current portion of long-term debt (Note 5) 22
 222
 
Income taxes payable 55
 —
 
Commercial paper (Note 6) 590
 450
 
Current portion of long-term debt (Note 6) 19
 23
 
Accrued expenses and other current liabilities 1,115
 1,149
  1,238
 1,249
 
Current liabilities of discontinued operations (Note 3) 154
 155
 
Total current liabilities 3,098
 3,560
  4,052
 3,708
 
Long-term debt (Note 5) 8,902
 8,226
 
Long-term debt (Note 6) 9,080
 8,902
 
Pension and postretirement benefit obligations 1,526
 1,575
  1,619
 1,769
 
Deferred income tax liabilities, net 1,667
 1,509
  645
 590
 
Other liabilities 3,240
 3,260
  3,038
 3,129
 
Liabilities of discontinued operations 67
 72
 
Liabilities of discontinued operations (Note 3) 2,466
 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;
833 (2017) and 829 (2016) shares issued		 1
 1
 
Additional paid-in capital 43,935
 44,055
  43,830
 43,913
 
Accumulated deficit (19,144) (20,518)  (18,859) (19,257) 
Accumulated other comprehensive loss (Note 7) (739) (770) 
Accumulated other comprehensive loss (Note 8) (726) (767) 
 24,053
 22,768
  24,246
 23,890
 
Less treasury stock, at cost; 429 (2016) and 401 (2015) Class B shares 18,705
 17,205
 
Less treasury stock, at cost; 471 (2017) and 455 (2016) Class B shares 21,252
 20,201
 
Total Stockholders’ Equity
 5,348
 5,563
  2,994
 3,689
 
Total Liabilities and Stockholders’ Equity
 $23,848
 $23,765
  $23,894
 $24,238
 
See notes to consolidated financial statements.

CBS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Nine Months EndedNine Months Ended
September 30,September 30,
2016 20152017 2016
Operating Activities:      
Net earnings$1,374
 $1,152
$398
 $1,374
Less: Loss from discontinued operations(36) —
Less: Net earnings (loss) from discontinued operations, net of tax(871) 93
Net earnings from continuing operations1,410

1,152
1,269

1,281
Adjustments to reconcile net earnings from continuing operations to net cash flow provided by operating activities from continuing operations:









Depreciation and amortization188

199
166

168
Stock-based compensation134

128
129

123
Equity in loss of investee companies, net of tax and distributions48

37
45

48
Change in assets and liabilities, net of investing and financing activities(472)
(866)(674)
(503)
Net cash flow provided by operating activities from continuing operations1,308

650
935

1,117
Net cash flow used for operating activities from discontinued operations(2)
(27)
Net cash flow provided by operating activities from discontinued operations52

189
Net cash flow provided by operating activities1,306

623
987

1,306
Investing Activities:









Acquisitions(51) (7)
Acquisitions (including acquired television library)(258) (51)
Capital expenditures(125)
(104)(112)
(111)
Investments in and advances to investee companies(44)
(58)(67)
(44)
Proceeds from sale of investments10
 —
Proceeds from dispositions28

75
11

20
Other investing activities11
 (8)17
 7
Net cash flow used for investing activities from continuing operations(181)
(102)(399)
(179)
Net cash flow used for investing activities from discontinued operations—

(4)(18)
(2)
Net cash flow used for investing activities(181)
(106)(417)
(181)
Financing Activities:









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

(313)
Proceeds from short-term debt borrowings, net140

33
Proceeds from issuance of senior notes685
 1,959
889
 685
Repayment of senior debentures(199) —
Repayment of senior notes and debentures(701) (199)
Proceeds from debt borrowings of CBS Radio40
 —
Repayment of debt borrowings of CBS Radio(23) —
Payment of capital lease obligations(13)
(13)(13)
(13)
Payment of contingent consideration(7) —
Dividends(209)
(228)(224)
(209)
Purchase of Company common stock(1,534)
(2,345)(1,111)
(1,534)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation(57)
(96)(89)
(57)
Proceeds from exercise of stock options13

137
81

13
Excess tax benefit from stock-based compensation13

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

13
Other financing activities(1) —
—
 (1)
Net cash flow used for financing activities(1,269)
(812)(1,018)
(1,269)
Net decrease in cash and cash equivalents(144)
(295)(448)
(144)
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 $30 (2017) and $1 (2016) of discontinued operations cash)
$174

$179
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$393
 $358
Discontinued operations$52
 $—
   
Cash paid for income taxes:   
Continuing operations$321
 $310
Discontinued operations$58
 $60
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 connection withPending Acquisition-On August 27, 2017, the Company’s previously announced plansCompany signed a binding agreement to separate its radio business, a preliminary registration statement was filed with the Securities and Exchange Commission duringacquire Ten Networks Holdings Limited (“Network Ten”), one of three major commercial broadcast networks in Australia, after Network Ten entered into voluntary administration. During the third quarter of 20162017, the Company paid $138 million of the purchase price, primarily for the proposed initial public offeringassumption of the common stocksecured debt of Network Ten’s lenders, and funding for working capital. The transaction, which is expected to close in the fourth quarter of 2017, will be completed in accordance with Australian applicable laws and procedures and is subject to certain regulatory approvals.

Discontinued Operations-On February 2, 2017, the Company entered into an agreement with Entercom Communications Corp. (“Entercom”) to combine the Company’s radio business, CBS Radio Inc. (“CBS Radio”). In preparation for the planned separation, the Company changed the manner, with Entercom in a merger to be effected through a Reverse Morris Trust transaction, which it managesis expected to be tax-free to CBS Corp. 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, on October 19, 2017, the presentation of intercompany revenuesCompany commenced an exchange offer through which it will split-off CBS Radio (See Note 3). 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.

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 nine months ended September 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 assumed exercise of stock options and vesting of restricted stock units (“RSUs”) and


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 stockmarket-based performance share units (“RSUs”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 4 million stock options for each of the three and nine months endedSeptember 30, 2017 and 5 million stock options for each of the three and nine months ended September 30, 2016. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, were 7 million stock options and RSUs for the three months ended September 30, 2015 and 4 million stock options for the nine months ended September 30, 2015.

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 Nine Months Ended
September 30, September 30,September 30, September 30,
(in millions)2016 2015 2016 20152017 2016 2017 2016
Weighted average shares for basic EPS442
 480
 451
 489
401
 442
 405
 451
Dilutive effect of shares issuable under stock-based
compensation plans
4
 4
 4
 6
5
 4
 5
 4
Weighted average shares for diluted EPS446
 484
 455
 495
406
 446
 410
 455
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 nine months ended September 30, 20162017 and 2015,2016, the Company recorded dividends of $218$221 million and $222218 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 nine months endedSeptember 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
Targeted Improvements to Accounting for Share-Based Payments WhenHedging Activities
In August 2017, the TermsFASB issued amended guidance for hedge accounting, which expands the eligibility of an Award Provide Thathedging strategies that qualify for hedge accounting, modifies the recognition and presentation of hedges in the financial statements, and changes how companies assess hedge effectiveness. In addition, this guidance amends and expands disclosure requirements. This guidance, which is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted, is not expected to have a Performance Target Could Be Achieved aftermaterial impact on the Requisite Service PeriodCompany’s consolidated financial statements.
DuringStock Compensation: Scope of Modification Accounting
In May 2017, 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


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

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 in the income statement in the period in which the awards vest or are exercised. In the statement of cash flows, excess tax benefits will be classified with other income tax cash flows in operating activities. The amended guidance also gives the option to make a policy election to account for forfeitures as they occur and increases the threshold for awards that are partially settled in cash to qualify for equity classification. The Company expects that the adoption of this guidance will introduce volatility into the Company’s income tax provision, which will be impacted by the timing of employee exercises and changes in the Company’s stock price. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted.

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

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


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

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

Revenue from Contracts with Customers
In May 2014, the FASB issued guidance on the recognition of revenues which provides a single, comprehensive revenue recognition model for all contracts with customers and supersedes most existing revenue recognition guidance. The main principle under this guidance is that an entity should recognize revenue at the amount it expects to be entitled to in exchange for the transfer of goods or services to customers. 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 January 1, 2018. 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 revenues from extensions executed each year approximate revenues from 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.


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

2) STOCK-BASED COMPENSATION
The following table summarizes the Company’s stock-based compensation expense for the three and nine months ended September 30, 20162017 and 2015.2016.
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
2016 2015 2016 20152017 2016 2017 2016
RSUs$39
 $32
 $112
 $105
RSUs and PSUs$38
 $35
 $109
 $102
Stock options7
 7
 22
 23
6
 7
 20
 21
Stock-based compensation expense, before income taxes46
 39
 134
 128
44
 42
 129
 123
Related tax benefit(18) (15) (52) (49)(17) (17) (50) (48)
Stock-based compensation expense, net of tax benefit$28
 $24
 $82
 $79
$27
 $25
 $79
 $75
During the nine months ended September 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.$66.75. RSUs granted during the first nine 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 nine months ended September 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 nine months ended September 30, 2017 was $23 million. 

During the nine months ended September 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 nine 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 September 30, 20162017 was $237$235 million, which is expected to be recognized over a weighted average period of 2.42.3 years. Total unrecognized compensation cost related to unvested stock option awards at September 30, 20162017 was $50$45 million, which is expected to be recognized over a weighted average period of 2.42.5 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, on October 19, 2017, the Company commenced an exchange offer through which it will split-off CBS Radio. In the exchange offer, the Company’s stockholders have the opportunity to exchange their shares of the Company’s Class B Common Stock for shares of CBS Radio common stock, which will be immediately converted into shares of Entercom Class A common stock upon completion of the merger. The exchange ratio is calculated based on the trading prices of CBS Class B Common Stock and Entercom Class A common stock with a 7% discount per-share value, subject to an upper limit of 5.7466 shares of CBS Radio common stock for each share of CBS Class B


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

Common Stock. Based on the exchange ratio at the commencement of the exchange offer, and assuming the exchange offer is fully subscribed, the Company would receive approximately 19 million shares in the exchange offer, thereby reducing the Company’s shares outstanding. However, the exchange ratio will change based on fluctuations in the trading prices of CBS Class B Common Stock and Entercom Class A common stock. A 10% change to the exchange ratio would change the number of shares the Company receives in the exchange offer by approximately 2 million shares. The exchange offer is scheduled to expire on November 16, 2017, unless the exchange offer is extended or terminated. The transaction is subject to certain customary terms and 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 a noncash gain of $100 million for the three months ended September 30, 2017 and a noncash charge of $980 million for the nine months ended September 30, 2017 associated with a valuation allowance to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. The Company will record an additional gain or loss upon the closing of the transaction, which is expected to occur in the fourth quarter of 2017. A 10% change to Entercom’s stock price would change the carrying value of CBS Radio by approximately $110 million.

For the nine months ended September 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 tables set forth details of net earnings (loss) from discontinued operations for the three and nine months ended September 30, 2017 and 2016. Net earnings (loss) from discontinued operations included the operating results of CBS Radio for all periods presented. Net earnings (loss) from discontinued operations also included a tax benefit of $45 million for the three and nine months ended September 30, 2017 and a charge of $36 million for the three and nine months ended September 30, 2016, in each case from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business that was accounted for as a discontinued operation.
Three Months Ended September 30, 2017CBS Radio
Other
Total
Revenues$300

$—

$300
Costs and expenses: (a)








Operating113

—

113
Selling, general and administrative121

(1)
120
Benefit from valuation allowance(100)
—

(100)
Total costs and expenses134

(1)
133
Operating income166

1

167
Interest expense(21)
—

(21)
Earnings from discontinued operations145

1

146
Income tax (provision) benefit(17)
45

28
Net earnings from discontinued operations, net of tax$128

$46

$174
(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.


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

Three Months Ended September 30, 2016CBS Radio
Other
Total
Revenues$317

$—

$317
Costs and expenses:







Operating110

—

110
Selling, general and administrative123

—

123
Depreciation and amortization7

—

7
Total costs and expenses240

—

240
Operating income77

—

77
Other income2

—

2
Earnings from discontinued operations79

—

79
Income tax provision(31)
(36)
(67)
Net earnings (loss) from discontinued operations, net of tax$48

$(36)
$12
Nine Months Ended September 30, 2017CBS Radio
Other
Total
Revenues$856

$—

$856
Costs and expenses: (a)








Operating307

—

307
Selling, general and administrative372

(1)
371
Restructuring charge7

—

7
Provision for valuation allowance980

—

980
Total costs and expenses1,666

(1)
1,665
Operating income (loss)(810)
1

(809)
Interest expense(60)
—

(60)
Earnings (loss) from discontinued operations(870)
1

(869)
Income tax (provision) benefit(47)
45

(2)
Net earnings (loss) from discontinued operations, net of tax$(917)
$46

$(871)
(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.
Nine Months Ended September 30, 2016CBS Radio
Other
Total
Revenues$892

$—

$892
Costs and expenses:







Operating298

—

298
Selling, general and administrative359

—

359
Depreciation and amortization20

—

20
Total costs and expenses677

—

677
Operating income215

—

215
Other income2

—

2
Earnings from discontinued operations217

—

217
Income tax provision(88)
(36)
(124)
Net earnings (loss) from discontinued operations, net of tax$129

$(36)
$93


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

The following table presents the major classes of assets and liabilities of the Company’s discontinued operations.
 At At
 September 30, 2017 December 31, 2016
Receivables, net $254
   $244
 
Other current assets 101
   61
 
Goodwill 1,285
   1,285
 
Intangible assets 2,832
   2,832
 
Net property and equipment 157
   145
 
Other assets 31
   29
 
Valuation allowance for carrying value (980)   —
 
Total Assets $3,680
   $4,596
 
Current portion of long-term debt $10
   $10
 
Other current liabilities 144
   145
 
Long-term debt 1,355
   1,335
 
Deferred income tax liabilities 1,013
   998
 
Other liabilities 98
   118
 
Total Liabilities $2,620
   $2,606
 
The following table presents CBS Radio’s long-term debt.
 At At
 September 30, 2017 December 31, 2016
Term Loan due October 2023, net of discount $947
   $955
 
7.250% Senior Notes due November 2024 400
   400
 
Revolving Credit Facility 36
   10
 
Deferred financing costs (18)   (20) 
Total long-term debt, including current portion $1,365
   $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 substantially concurrently with the closing date of the transaction, subject to customary conditions.


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

3)4) PROGRAMMING AND OTHER INVENTORY
At AtAt At
September 30, 2016 December 31, 2015September 30, 2017 December 31, 2016
Acquired program rights $1,737
 $1,533
  $2,087
 $1,773
 
Acquired television library 99
 —
 
Internally produced programming:          
Released 1,459
 1,261
  1,799
 1,746
 
In process and other 445
 392
  601
 298
 
Publishing, primarily finished goods 55
 42
  58
 49
 
Total programming and other inventory 3,696
 3,228
  4,644
 3,866
 
Less current portion 1,459
 1,271
  1,830
 1,427
 
Total noncurrent programming and other inventory $2,237
 $1,957
  $2,814
 $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 September 30, 20162017, NAI directly or indirectly owned approximately 79.5% of CBS Corp.’s voting Class A Common Stock, and owned approximately 9.0%9.8% of CBS Corp.’s Class A Common Stock and non-voting Class B Common Stock on a combined basis.

On September 29, 2016, NAI is controlled by Mr. Redstone through the Company announced that its Board of Directors received a letter from NAI requesting that the Company consider a potential combinationSumner M. Redstone National Amusements Trust (the “SMR Trust”), which owns 80% of the Companyvoting interest of NAI, and Viacom Inc.such voting interest of NAI held by the SMR Trust is voted solely by Mr. Redstone until his incapacity or death. The Company isSMR Trust provides that in the processevent of evaluating whetherMr. Redstone’s death or incapacity, voting control of the NAI voting interest held by the SMR Trust will pass to pursue any such potential transaction.seven trustees, who will include CBS Corporation directors Ms. Shari Redstone and Mr. David R. Andelman. No assurance can be given regardingmember of the entry into, consummation or termsCompany’s management is a trustee of any such potential transaction.the 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$38 million and $44$16 million for the three months ended September 30, 20162017 and 20152016, respectively, and $85$111 million and $144$83 million for the nine months ended September 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 $4 million and $6 million for each of the three months ended September 30, 20162017 and 20152016, respectively, and $13 million and $17 million for each of the nine months ended September 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 September 30, 20162017 and December 31, 20152016.
At AtAt At
September 30, 2016 December 31, 2015September 30, 2017 December 31, 2016
Receivables $87
 $115
  $112
 $113
 
Other assets (Receivables, noncurrent) 47
 38
  20
 35
 
Total amounts due from Viacom Inc.
 $134
 $153
  $132
 $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 $135 million and $20$13 million for the three months ended September 30, 20162017 and 20152016, respectively, and $69$54 million and $91$69 million for the nine months ended September 30, 20162017 and 2015,2016, respectively. At September 30, 20162017 and December 31, 2015,2016, total amounts due from these joint ventures were $41$29 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)6) BANK FINANCING AND DEBT
The following table sets forth the Company’s debt.

At AtAt At

September 30, 2016 December 31, 2015September 30, 2017 December 31, 2016
Commercial paper
$33

$—


$590

$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)

9,039

8,850

Obligations under capital leases
75

83


60

75

Total debt
8,957

8,448


9,689

9,375

Less commercial paper
33

—


590

450

Less current portion of long-term debt
22

222


19

23

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

$8,226


$9,080

$8,902

(a) At September 30, 20162017 and December 31, 2015,2016, the senior debt balances included (i) a net unamortized discount of $53$55 million and $45$52 million, respectively, (ii) unamortized deferred financing costs of $45 million and $44$43 million, respectively, and (iii) ana $2 million decrease and a $5 million increase, respectively, in the carrying value of the debt relating to previously settled fair value hedges of $7 million and $14 million, respectively.hedges. The face value of the Company’s senior debt was $8.94$9.14 billion and $8.44$8.94 billion at September 30, 20162017 and December 31, 2015,2016, respectively.

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 the repayment of short-term borrowings, including commercial paper.

During January 2016,The early redemption of the Company repaid its $200$300 million 4.625% senior notes due May 2018 resulted in a pre-tax loss on early extinguishment of outstanding 7.625% senior debentures upon maturity.

Atdebt of $5 million ($3 million, net of tax) for the three and nine months ended 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.2017.



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

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 $590 million and $450 million at a weighted average interest rate of 0.75%September 30, 2017 and December 31, 2016, respectively, each with maturities of less than 4560 days. The Company had no outstanding commercial paperweighted average interest rate for these borrowings was 1.44% at September 30, 2017 and 0.98% at December 31, 2015.2016.

Credit Facility
During June 2016,At September 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 September 30, 20162017, the Company’s Consolidated Leverage Ratio was approximately 2.5x3.0x.

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

The Credit Facility is used for general corporate purposes. At September 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.
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 Benefits
Three Months Ended September 30,2017 2016 2017 2016
Components of net periodic cost:       
Service cost$7
 $7
 $—
 $—
Interest cost48
 54
 4
 5
Expected return on plan assets(50) (56) —
 —
Amortization of actuarial loss (gain) (a)
26
 21
 (5) (5)
Net periodic cost$31
 $26
 $(1) $—
 Pension Benefits Postretirement Benefits
Nine Months Ended September 30,2017
2016
2017
2016
Components of net periodic cost:       
Service cost$22
 $22
 $—
 $—
Interest cost143
 161
 13
 15
Expected return on plan assets(151) (170) —
 —
Amortization of actuarial loss (gain) (a)
77
 64
 (16) (16)
Net periodic cost$91
 $77
 $(3) $(1)
(a) Reflects amounts reclassified from accumulated other comprehensive loss to net earnings.


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

On November 1, 2017, the Company entered into a definitive agreement to purchase a group annuity contract, under which an insurance company will be required to pay and administer pension payments to certain of the Company’s pension plan participants, or their designated beneficiaries, who have been receiving pension payments. The purchase of this group annuity contract will reduce the Company’s outstanding pension benefit obligation by approximately $800 million, representing approximately 20% of the total obligations of the Company’s qualified pension plans, and will be funded with pension plan assets. In October 2016, in connection with this transaction, the Company will record a one-time settlement charge in the fourth quarter of 2017 currently estimated at $365 million, reflecting the accelerated recognition of a portion of unamortized actuarial losses in the plan. The actual settlement charge could differ from this estimate due to changes in 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”) andactuarial assumptions. Additionally, during the issuancefourth quarter 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 by2017, the Company expects to repurchasemake a discretionary contribution of $500 million to prefund its qualified plans, which is expected to be partially funded by long-term borrowings.
8) STOCKHOLDERS’ EQUITY
During the third quarter of 2017, the Company repurchased 3.9 million shares of CBS Corp.its Class B Common Stock withunder its share repurchase program for $250 million, at an average cost of $63.52 per share. During the remaindernine months ended September 30, 2017, the Company repurchased 16.2 million shares of its Class B Common Stock for $1.05 billion, at an average cost of $64.70 per share, leaving $3.06 billion of authorization at September 30, 2017.

During the third quarter of 2017, the Company declared a quarterly cash dividend of $.18 on its Class A and Class B Common Stock, resulting in total dividends of $73 million, which were paid on October 1, 2017.
Accumulated Other Comprehensive Income (Loss)
The following tables summarize the changes in the components of accumulated other comprehensive loss.
 
Cumulative
Translation
Adjustments
 
Net Actuarial
Loss and Prior
Service Cost
 
Accumulated
Other
Comprehensive Loss
At December 31, 2016$151
 $(918)  $(767) 
Other comprehensive income before reclassifications4
 —
  4
 
Reclassifications to net earnings—
 37
(a) 
 37
 
Net other comprehensive income4
 37

 41
 
At September 30, 2017$155
 $(881)
 $(726) 
 
Cumulative
Translation
Adjustments
 
Net Actuarial
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) 
(a)Reflects amortization of net actuarial losses. See Note 7.

The net actuarial loss and prior service cost related to be usedpension and other postretirement benefit plans included in other comprehensive income is net of a tax provision of $24 million and $19 million for general corporate purposesthe nine months ended September 30, 2017 and ongoing cash needs.

2016, respectively.


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

6) PENSION AND OTHER POSTRETIREMENT BENEFITS
The components of net periodic cost for the Company’s pension and postretirement benefit plans were as follows:
 Pension Benefits Postretirement Benefits
Three Months Ended September 30,2016 2015 2016 2015
Components of net periodic cost:       
Service cost$7
 $7
 $—
 $—
Interest cost54
 52
 5
 6
Expected return on plan assets(56) (65) —
 —
Amortization of actuarial loss (gain) (a)
21
 20
 (5) (6)
Net periodic cost$26
 $14
 $—
 $—
 Pension Benefits Postretirement Benefits
Nine Months Ended September 30,2016 2015 2016 2015
Components of net periodic cost:       
Service cost$22
 $23
 $—
 $—
Interest cost161
 157
 15
 15
Expected return on plan assets(170) (196) —
 —
Amortization of actuarial loss (gain) (a)
64
 60
 (16) (16)
Net periodic cost$77
 $44
 $(1) $(1)
(a) Reflects amounts reclassified from accumulated other comprehensive income (loss) to net earnings.
7) STOCKHOLDERS’ EQUITY
On July 28, 2016, the Company announced that its Board of Directors approved an increase to the Company’s share repurchase program to a total availability of $6.0 billion. During the third quarter of 2016, the Company repurchased 9.5 million shares of its Class B Common Stock under its share repurchase program for $500 million, at an average cost of $52.77 per share. During the nine months ended September 30, 2016, the Company repurchased 29.0 million shares of its Class B Common Stock for $1.50 billion, at an average cost of $51.76 per share, leaving $5.60 billion of authorization at September 30, 2016.

On July 28, 2016, the Company announced that its Board of Directors approved a 20% increase to the quarterly cash dividend on 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.


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, 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) 
(a)Reflects amortization of net actuarial losses. See Note 6.

The net actuarial gain (loss) and prior service cost related to pension and other postretirement benefit plans included in other comprehensive income (loss) is net of a tax provision of $19 million and $17 million for the nine months ended September 30, 2016 and 2015, respectively.
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 provision for income taxes was $176 million for
 Three Months Ended September 30,
Nine Months Ended September 30,
 2017
2016
2017
2016
Provision for income taxes, including interest and before
other discrete items
$(187) $(207) $(548) $(581)
Excess tax benefits from stock-based compensation (a)
10

—

41

—
Other discrete items (b)
5

62

28

57
Provision for income taxes$(172)
$(145)
$(479)
$(524)
Effective income tax rate28.4%
23.2%
26.7%
28.4%
(a) Reflects excess tax benefits associated with the three months ended September 30, 2016exercise of stock options and $211 million forvesting of RSUs. During the three months ended September 30, 2015, reflecting an effectivefirst 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 rateprovision on the statement of 25.0%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 32.3%, respectively.therefore, excess tax benefits for prior periods remain classified in stockholders’ equity.
(b) For the nine months ended September 30, 2016,2017, primarily reflects tax benefits from the provision for income taxes was $612 million compared to $579 million for the nine months ended September 30, 2015, reflecting anresolution of certain state income tax rate of 29.6% and 32.8%, respectively. The lower tax rate formatters. For the three and nine months ended September 30, 2016, includesprimarily reflects a one-time tax benefit of $47 million associated with a multiyear adjustment to a tax deduction, which was approved by the Internal Revenue ServiceIRS during the third quarter of 2016.

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 September 30, 2016,2017, the outstanding letters of credit and surety bonds approximated $111$99 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 September 30, 2016,2017, the Company had pending approximately 34,40032,760 asbestos claims, as compared with approximately 36,03033,610 as of December 31, 20152016 and 37,19034,400 as of September 30, 2015.2016. During the third quarter of 2016,2017, the Company received approximately 930720 new claims and closed or moved to an inactive docket approximately 1,3201,200 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)
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

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 of September 30, 2016,2017, the cumulative settlements for the 20152016 and 20142015 restructuring charges were $8357 million, of which $5437 million was for severance costs and $2920 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 September 30, 2017
Entertainment $19
 $(13) $6
  $20
 $(12) $8
 
Cable Networks 4
 (2) 2
 
Publishing 1
 (1) —
 
Local Media 11
 (5) 6
  12
 (5) 7
 
Radio 23
 (11) 12
 
Corporate 1
 (1) —
  2
 (1) 1
 
Total $54
 $(30) $24
  $39
 $(21) $18
 
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 September 30, 20162017 and December 31, 2015,2016, the carrying value of the Company’s senior debt was $8.85$9.04 billion and $8.37$8.85 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$9.85 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


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

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

At September 30, 20162017 and December 31, 2015,2016, the notional amount of all foreign exchange contracts was $456$379 million and $291$433 million, respectively.

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 Nine Months Ended 
 September 30, September 30, 
 2017 2016 2017 2016Financial Statement Account
Non-designated foreign exchange contracts$(9) $4
 $(29) $13
Other items, net
The fair value of the Company’s derivative instruments was not material to the Consolidated Balance Sheets for any of the periods presented.
The following tables set forth the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 20162017 and December 31, 20152016. These assets and liabilities have been categorized according to the three-level fair value hierarchy established by the FASB, which prioritizes the inputs used in measuring fair value. Level 1 is based on publicly quoted prices for the asset or liability in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset or liability in inactive markets or quoted prices for similar assets or liabilities. Level 3 is based on unobservable inputs reflecting the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.
At September 30, 2017Level 1 Level 2 Level 3 Total
Assets:       
Foreign currency hedges$—
 $6
 $—
 $6
Total Assets$—
 $6
 $—
 $6
Liabilities:       
Deferred compensation$—
 $347
 $—
 $347
Foreign currency hedges—
 11
 —
 11
Total Liabilities$—
 $358
 $—
 $358
At September 30, 2016Level 1 Level 2 Level 3 Total
At December 31, 2016Level 1 Level 2 Level 3 Total
Assets:              
Foreign currency hedges$—
 $21
 $—
 $21
$—
 $34
 $—
 $34
Total Assets$—
 $21
 $—
 $21
$—
 $34
 $—
 $34
Liabilities:              
Deferred compensation$—
 $329
 $—
 $329
$—
 $324
 $—
 $324
Foreign currency hedges—
 5
 —
 5
—
 1
 —
 1
Total Liabilities$—
 $334
 $—
 $334
$—
 $325
 $—
 $325


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 Nine Months Ended

September 30, September 30,September 30, September 30,

2016 2015
2016 20152017 2016
2017 2016
Revenues:





















Entertainment$1,949

$1,932

$6,483

$5,978
$1,815

$1,949

$6,346

$6,483
Cable Networks598

526

1,659

1,680
840

598

1,954

1,659
Publishing226

203

558

547
228

226

595

558
Local Media409
 376
 1,253
 1,138
397
 409
 1,218
 1,253
Radio319
 318
 898
 907
Corporate/Eliminations(105)
(98)
(319)
(274)(109)
(98)
(342)
(305)
Total Revenues$3,396

$3,257

$10,532

$9,976
$3,171

$3,084

$9,771

$9,648
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 Nine Months Ended
September 30, September 30,September 30, September 30,
2016 2015 2016 20152017 2016 2017 2016
Intercompany Revenues:              
Entertainment$102
 $96
 $321
 $270
$111
 $102
 $348
 $316
Local Media2
 3
 6
 7
4
 2
 10
 6
Radio6
 2
 9
 5
Total Intercompany Revenues$110
 $101
 $336
 $282
$115
 $104
 $358
 $322


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 Nine Months Ended
September 30, September 30,September 30, September 30,
2016 2015 2016 20152017 2016 2017 2016
Segment Operating Income (Loss):              
Entertainment$348
 $339
 $1,148
 $947
$345
 $348
 $1,089
 $1,148
Cable Networks285
 246
 740
 717
294
 285
 795
 740
Publishing44
 43
 83
 80
46
 44
 88
 83
Local Media122
 101
 402
 338
105
 122
 355
 402
Radio77
 73
 215
 195
Corporate(78) (49) (245) (181)(83) (78) (247) (245)
Total Segment Operating Income798
 753
 2,343
 2,096
707
 721
 2,080
 2,128
Restructuring charges—
 —
 —
 (55)
Other operating items, net (a)
—
 —
 9
 19
—
 —
 —
 9
Operating income798

753

2,352

2,060
707

721

2,080

2,137
Interest expense(104) (102) (304) (289)(116) (104) (336) (304)
Interest income7
 6
 22
 18
17
 7
 45
 22
Loss on early extinguishment of debt(5) —
 (5) —
Other items, net2
 (4) (5) (23)3
 —
 9
 (7)
Earnings from continuing operations before income taxes and
equity in loss of investee companies
703
 653
 2,065
 1,766
606
 624
 1,793
 1,848
Provision for income taxes(176) (211) (612) (579)(172) (145) (479) (524)
Equity in loss of investee companies, net of tax(13) (16) (43) (35)(16) (13) (45) (43)
Net earnings from continuing operations514
 426
 1,410
 1,152
418
 466
 1,269
 1,281
Loss from discontinued operations(36) —
 (36) —
Net earnings (loss) from discontinued operations, net of tax174
 12
 (871) 93
Net earnings$478
 $426
 $1,374
 $1,152
$592
 $478
 $398
 $1,374
(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 Nine Months Ended
September 30, September 30,September 30, September 30,
2016 2015 2016 20152017 2016 2017 2016
Depreciation and Amortization:              
Entertainment$28

$31

$88

$95
$29

$28

$85

$88
Cable Networks6

5

17

17
5

6

17

17
Publishing1

1

4

4
2

1

5

4
Local Media11
 12
 33
 37
11
 11
 34
 33
Radio7
 8
 22
 23
Corporate8

8

24

23
8

8

25

26
Total Depreciation and Amortization$61

$65

$188

$199
$55

$54

$166

$168


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 Nine Months Ended
September 30, September 30,September 30, September 30,
2016 2015 2016 20152017 2016 2017 2016
Stock-based Compensation:              
Entertainment$16
 $16
 $47
 $48
$16
 $16
 $48
 $47
Cable Networks3
 3
 9
 8
3
 3
 9
 9
Publishing1
 1
 3
 3
1
 1
 3
 3
Local Media3
 3
 9
 9
3
 3
 9
 9
Radio4
 2
 11
 12
Corporate19
 14
 55
 48
21
 19
 60
 55
Total Stock-based Compensation$46
 $39
 $134
 $128
$44
 $42
 $129
 $123
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
2016 2015 2016 20152017 2016 2017 2016
Capital Expenditures:              
Entertainment$23

$33

$60

$54
$25

$23

$63

$60
Cable Networks4

5

8

8
5

4

12

8
Publishing1

2

7

4
1

1

2

7
Local Media9
 10
 20
 17
8
 9
 20
 20
Radio4
 5
 14
 16
Corporate5
 3
 16
 5
5
 5
 15
 16
Total Capital Expenditures$46
 $58
 $125
 $104
$44
 $42
 $112
 $111
At AtAt At
September 30, 2016 December 31, 2015September 30, 2017 December 31, 2016
Assets:          
Entertainment $11,220
 $10,910
  $12,149
 $11,262
 
Cable Networks 2,526
 2,369
  3,015
 2,618
 
Publishing 835
 880
  895
 880
 
Local Media 3,827
 3,881
  4,006
 4,065
 
Radio 5,167
 5,224
 
Corporate/Eliminations 249
 476
  149
 817
 
Discontinued operations 24
 25
  3,680
 4,596
 
Total Assets $23,848
 $23,765
  $23,894
 $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 September 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
$40
 $3
 $3,128
 $—
 $3,171
Costs and expenses:                  
Operating16
 1
 1,880
 —
 1,897
23
 1
 1,838
 —
 1,862
Selling, general and administrative20
 63
 557
 —
 640
22
 62
 463
 —
 547
Depreciation and amortization2
 6
 53
 —
 61
1
 6
 48
 —
 55
Total costs and expenses38
 70
 2,490
 —
 2,598
46
 69
 2,349
 —
 2,464
Operating income (loss)4
 (67) 861
 —
 798
(6) (66) 779
 —
 707
Interest (expense) income, net(129) (109) 141
 —
 (97)(129) (123) 153
 —
 (99)
Loss on early extinguishment of debt(5) —
 —
 —
 (5)
Other items, net—
 —
 2
 —
 2
—
 (8) 11
 —
 3
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies(125) (176) 1,004
 —
 703
(140) (197) 943
 —
 606
Benefit (provision) for income taxes43
 59
 (278) —
 (176)43
 62
 (277) —
 (172)
Equity in earnings (loss) of investee companies, net of tax560
 327
 (13) (887) (13)689
 369
 (16) (1,058) (16)
Net earnings from continuing operations478
 210
 713
 (887) 514
592
 234
 650
 (1,058) 418
Loss from discontinued operations—
 —
 (36) —
 (36)
Net earnings from discontinued operations, net of tax—
 —
 174
 —
 174
Net earnings$478
 $210
 $677
 $(887) $478
$592
 $234
 $824
 $(1,058) $592
Total comprehensive income$489
 $215
 $675
 $(890) $489
$607

$229

$830

$(1,059) $607


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 Nine Months Ended September 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
$124
 $8
 $9,639
 $—
 $9,771
Cost and expenses:         
Costs and expenses:         
Operating48
 4
 6,062
 —
 6,114
69
 4
 5,867
 —
 5,940
Selling, general and administrative62
 196
 1,629
 —
 1,887
65
 194
 1,326
 —
 1,585
Depreciation and amortization4
 17
 167
 —
 188
3
 18
 145
 —
 166
Other operating items, net—
 —
 (9) —
 (9)
Total costs and expenses114
 217
 7,849
 —
 8,180
137
 216
 7,338
 —
 7,691
Operating income (loss)11
 (208) 2,549
 —
 2,352
(13) (208) 2,301
 —
 2,080
Interest (expense) income, net(377) (319) 414
 —
 (282)(378) (360) 447
 —
 (291)
Loss on early extinguishment of debt(5) —
 —
 —
 (5)
Other items, net(2) 3
 (6) —
 (5)1
 (33) 41
 —
 9
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies(368) (524) 2,957
 —
 2,065
(395) (601) 2,789
 —
 1,793
Benefit (provision) for income taxes120
 170
 (902) —
 (612)120
 184
 (783) —
 (479)
Equity in earnings (loss) of investee companies, net of tax1,622
 876
 (43) (2,498) (43)673
 1,062
 (45) (1,735) (45)
Net earnings from continuing operations1,374
 522
 2,012
 (2,498) 1,410
398
 645
 1,961
 (1,735) 1,269
Loss from discontinued operations—
 —
 (36) —
 (36)
Net loss from discontinued operations, net of tax—
 —
 (871) —
 (871)
Net earnings$1,374
 $522
 $1,976
 $(2,498) $1,374
$398
 $645
 $1,090
 $(1,735) $398
Total comprehensive income$1,405
 $540
 $1,965
 $(2,505) $1,405
$439

$633

$1,111

$(1,744) $439



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 September 30, 2016
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
Revenues$36
 $2
 $3,219
 $—
 $3,257
$42
 $3
 $3,039
 $—
 $3,084
Costs and expenses:                  
Operating17
 1
 1,824
 —
 1,842
16
 1
 1,771
 —
 1,788
Selling, general and administrative3
 49
 545
 —
 597
20
 62
 439
 —
 521
Depreciation and amortization1
 5
 59
 —
 65
2
 6
 46
 —
 54
Total costs and expenses21
 55
 2,428
 —
 2,504
38
 69
 2,256
 —
 2,363
Operating income (loss)15
 (53) 791
 —
 753
4
 (66) 783
 —
 721
Interest (expense) income, net(125) (103) 132
 —
 (96)(129) (109) 141
 —
 (97)
Other items, net(1) 6
 (9) —
 (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(125) (175) 924
 —
 624
Benefit (provision) for income taxes36
 48
 (295) —
 (211)43
 60
 (248) —
 (145)
Equity in earnings (loss) of investee companies, net of tax501
 338
 (16) (839) (16)560
 327
 (13) (887) (13)
Net earnings from continuing operations478
 212
 663
 (887) 466
Net earnings (loss) from discontinued operations, net of tax—
 (1) 13
 —
 12
Net earnings$426
 $236
 $603
 $(839) $426
$478
 $211
 $676
 $(887) $478
Total comprehensive income$430
 $240
 $590
 $(830) $430
$489
 $215
 $675
 $(890) $489


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

Statement of OperationsStatement of Operations
For the Nine Months Ended September 30, 2015For the Nine Months Ended September 30, 2016
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
Revenues$101
 $8
 $9,867
 $—
 $9,976
$125
 $9
 $9,514
 $—
 $9,648
Costs and expenses:                  
Operating47
 4
 5,840
 —
 5,891
48
 4
 5,766
 —
 5,818
Selling, general and administrative27
 165
 1,598
 —
 1,790
62
 194
 1,278
 —
 1,534
Depreciation and amortization4
 15
 180
 —
 199
4
 17
 147
 —
 168
Restructuring charges—
 —
 55
 —
 55
Other operating items, net—
 —
 (19) —
 (19)—
 —
 (9) —
 (9)
Total costs and expenses78
 184
 7,654
 —
 7,916
114
 215
 7,182
 —
 7,511
Operating income (loss)23
 (176) 2,213
 —
��2,060
11
 (206) 2,332
 —
 2,137
Interest (expense) income, net(358) (300) 387
 —
 (271)(377) (319) 414
 —
 (282)
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(368) (522) 2,738
 —
 1,848
Benefit (provision) for income taxes109
 152
 (840) —
 (579)120
 170
 (814) —
 (524)
Equity in earnings (loss) of investee companies, net of tax1,379
 802
 (35) (2,181) (35)1,622
 876
 (43) (2,498) (43)
Net earnings from continuing operations1,374
 524
 1,881
 (2,498) 1,281
Net earnings (loss) from discontinued operations, net of tax—
 (1) 94
 —
 93
Net earnings$1,152
 $484
 $1,697
 $(2,181) $1,152
$1,374
 $523
 $1,975
 $(2,498) $1,374
Total comprehensive income$1,173
 $487
 $1,705
 $(2,192) $1,173
$1,405
 $540
 $1,965
 $(2,505) $1,405



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

Balance SheetBalance Sheet
At September 30, 2016At September 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
$18
 $—
 $126
 $—
 $144
Receivables, net20
 2
 3,326
 —
 3,348
24
 1
 3,573
 —
 3,598
Programming and other inventory4
 3
 1,452
 —
 1,459
3
 3
 1,824
 —
 1,830
Prepaid expenses and other current assets93
 39
 375
 (36) 471
8
 25
 370
 (36) 367
Current assets of discontinued operations—
 —
 355
 —
 355
Total current assets171
 45
 5,277
 (36) 5,457
53
 29
 6,248
 (36) 6,294
Property and equipment47
 184
 3,032
 —
 3,263
48
 207
 2,746
 —
 3,001
Less accumulated depreciation and amortization23
 135
 1,760
 —
 1,918
27
 158
 1,608
 —
 1,793
Net property and equipment24
 49
 1,272
 —
 1,345
21
 49
 1,138
 —
 1,208
Programming and other inventory6
 7
 2,224
 —
 2,237
3
 5
 2,806
 —
 2,814
Goodwill98
 62
 6,371
 —
 6,531
98
 62
 4,731
 —
 4,891
Intangible assets—
 —
 5,499
 —
 5,499
—
 —
 2,617
 —
 2,617
Investments in consolidated subsidiaries44,372
 13,652
 —
 (58,024) —
45,155
 14,915
 —
 (60,070) —
Other assets153
 11
 2,615
 —
 2,779
154
 8
 2,583
 —
 2,745
Intercompany—
 1,901
 25,528
 (27,429) —
—
 1,331
 28,353
 (29,684) —
Assets of discontinued operations—
 —
 3,325
 —
 3,325
Total Assets$44,824
 $15,727
 $48,786
 $(85,489) $23,848
$45,484
 $16,399
 $51,801
 $(89,790) $23,894
Liabilities and Stockholders’ Equity                  
Accounts payable$1
 $2
 $150
 $—
 $153
$1
 $3
 $229
 $—
 $233
Participants’ share and royalties payable—
 —
 979
 —
 979
—
 —
 997
 —
 997
Program rights4
 4
 365
 —
 373
4
 3
 502
 —
 509
Commercial paper33
 —
 —
 —
 33
590
 —
 —
 —
 590
Current portion of long-term debt6
 —
 16
 —
 22
2
 —
 17
 —
 19
Accrued expenses and other current liabilities363
 228
 983
 (36) 1,538
374
 219
 993
 (36) 1,550
Current liabilities of discontinued operations—
 —
 154
 —
 154
Total current liabilities407
 234
 2,493
 (36) 3,098
971
 225
 2,892
 (36) 4,052
Long-term debt8,797
 —
 105
 —
 8,902
8,991
 —
 89
 —
 9,080
Other liabilities2,843
 244
 3,413
 —
 6,500
2,844
 237
 2,221
 —
 5,302
Liabilities of discontinued operations—
 —
 2,466
 —
 2,466
Intercompany27,429
 —
 —
 (27,429) —
29,684
 —
 —
 (29,684) —
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
43,830
 —
 60,894
 (60,894) 43,830
Retained earnings (deficit)(19,144) 15,435
 (14,105) (1,330) (19,144)
Retained earnings (accumulated deficit)(18,859) 16,128
 (12,748) (3,380) (18,859)
Accumulated other comprehensive income (loss)(739) 22
 70
 (92) (739)(726) 17

71

(88) (726)
24,053
 15,580
 47,575
 (63,155) 24,053
24,246
 16,268
 48,933
 (65,201) 24,246
Less treasury stock, at cost18,705
 331
 4,800
 (5,131) 18,705
21,252
 331
 4,800
 (5,131) 21,252
Total Stockholders’ Equity5,348
 15,249
 42,775
 (58,024) 5,348
2,994
 15,937
 44,133
 (60,070) 2,994
Total Liabilities and Stockholders’ Equity$44,824
 $15,727
 $48,786
 $(85,489) $23,848
$45,484
 $16,399
 $51,801
 $(89,790) $23,894


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 Nine Months Ended September 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
$(851) $(180) $2,018
 $—
 $987
Investing Activities:                  
Acquisitions—
 —
 (51) —
 (51)
Acquisitions (including acquired television library)—
 —
 (258) —
 (258)
Capital expenditures—
 (16) (109) —
 (125)—
 (15) (97) —
 (112)
Investments in and advances to investee companies—
 —
 (44) —
 (44)—
 —
 (67) —
 (67)
Proceeds from sale of investments—
 —
 10
 —
 10
Proceeds from dispositions(4) —
 32
 —
 28
—
 —
 11
 —
 11
Other investing activities7
 —
 4
 —
 11
17
 —
 —
 —
 17
Net cash flow provided by (used for) investing activities from continuing operations17
 (15) (401) —
 (399)
Net cash flow provided by (used for) investing activities from discontinued operations1
 (4) (15) —
 (18)
Net cash flow provided by (used for) investing activities3
 (16) (168) —
 (181)18
 (19) (416) —
 (417)
Financing Activities:                  
Proceeds from short-term debt borrowings, net33
 —
 —
 —
 33
140
 —
 —
 —
 140
Proceeds from issuance of senior notes685
 —
 —
 —
 685
889
 —
 —
 —
 889
Repayment of senior debentures(199) —
 —
 —
 (199)
Repayment of senior notes(701) —
 —
 —
 (701)
Proceeds from debt borrowings of CBS Radio—
 —
 40
 —
 40
Repayment of debt borrowings of CBS Radio—
 —
 (23) —
 (23)
Payment of capital lease obligations—
 —
 (13) —
 (13)—
 —
 (13) —
 (13)
Payment of contingent consideration—
 —
 (7) ���
 (7)
Dividends(209) —
 —
 —
 (209)(224) —
 —
 —
 (224)
Purchase of Company common stock(1,534) —
 —
 —
 (1,534)(1,111) —
 —
 —
 (1,111)
Payment of payroll taxes in lieu of issuing
shares for stock-based compensation
(57) —
 —
 —
 (57)(89) —
 —
 —
 (89)
Proceeds from exercise of stock options13
 —
 —
 —
 13
81
 —
 —
 —
 81
Excess tax benefit from stock-based compensation13
 —
 —
 —
 13
Other financing activities(1) —
 —
 —
 (1)
Increase (decrease) in intercompany payables1,736
 162
 (1,898) —
 —
1,545
 199
 (1,744) —
 —
Net cash flow provided by (used for) financing activities480
 162
 (1,911) —
 (1,269)530
 199
 (1,747) —
 (1,018)
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(303) —
 (145) —
 (448)
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 $30 million of discontinued operations cash)
$18
 $—
 $156
 $—
 $174


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 Nine Months Ended September 30, 2016
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
CBS Corp. 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 Eliminations 
CBS Corp.
Consolidated
Net cash flow (used for) provided by operating activities$(557) $(183) $1,363
 $—
 $623
$(696) $(146) $2,148
 $—
 $1,306
Investing Activities:        

        

Acquisitions—
 —
 (7) —
 (7)—
 —
 (51) —
 (51)
Capital expenditures—
 (5) (99) —
 (104)—
 (16) (95) —
 (111)
Investments in and advances to investee companies—
 —
 (58) —
 (58)—
 —
 (44) —
 (44)
Proceeds from dispositions—
 —
 75
 —
 75
(4) —
 24
 —
 20
Other investing activities(8) —
 —
 —
 (8)7
 —
 —
 —
 7
Net cash flow used for investing activities from continuing operations(8)
(5)
(89)
—
 (102)
Net cash flow provided by (used for) investing activities from continuing operations3

(16)
(166)
—
 (179)
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)
Net cash flow provided by (used for) investing activities3

(16)
(168)
—
 (181)
Financing Activities:        

        

Repayments of short-term debt borrowings, net(313) —
 —
 —
 (313)
Proceeds from short-term borrowings, net33
 —
 —
 —
 33
Proceeds from issuance of senior notes1,959
 —
 —
 —
 1,959
685
 —
 —
 —
 685
Repayment of senior debentures(199) —
 —
 —
 (199)
Payment of capital lease obligations—
 —
 (13) —
 (13)—
 —
 (13) —
 (13)
Dividends(228) —
 —
 —
 (228)(209) —
 —
 —
 (209)
Purchase of Company common stock(2,345) —
 —
 —
 (2,345)(1,534) —
 —
 —
 (1,534)
Payment of payroll taxes in lieu of issuing
shares for stock-based compensation
(96) —
 —
 —
 (96)(57) —
 —
 —
 (57)
Proceeds from exercise of stock options137
 —
 —
 —
 137
13
 —
 —
 —
 13
Excess tax benefit from stock-based compensation87
 —
 —
 —
 87
13
 —
 —
 —
 13
Other financing activities(1) —
 —
 —
 (1)
Increase (decrease) in intercompany payables1,353
 188
 (1,541) —
 —
1,736
 162
 (1,898) —
 —
Net cash flow provided by (used for) financing activities554
 188
 (1,554) —
 (812)480
 162
 (1,911) —
 (1,269)
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(213)
—

69

—
 (144)
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 $1 million of discontinued operations cash)
$54

$1

$124

$—
 $179


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 September 30, 20162017 versus Three Months Ended September 30, 20152016
Consolidated results of operations    Increase/(Decrease)     Increase/(Decrease) 
Three Months Ended September 30,2016
2015 $ % 2017
2016 $ % 
GAAP:        
Revenues$3,396
 $3,257
 $139
 4% $3,171
 $3,084
 $87
 3 % 
Operating income$798
 $753
 $45
 6% $707
 $721
 $(14) (2)% 
Net earnings from continuing operations$514
 $426
 $88
 21% $418
 $466
 $(48) (10)% 
Adjusted net earnings from continuing operations (a)
$467
 $426
 $41
 10% 
Net earnings$592
 $478
 $114
 24 % 
Diluted EPS from continuing operations$1.15
 $.88
 $.27
 31% $1.03
 $1.04
 $(.01) (1)% 
Adjusted diluted EPS from continuing operations (a)
$1.05
 $.88
 $.17
 19% 
Diluted EPS$1.46
 $1.07
 $.39
 36 % 
        
Non-GAAP: (a)
        
Adjusted net earnings from continuing operations$421
 $419
 $2
 — % 
Adjusted net earnings$450
 $467
 $(17) (4)% 
Adjusted diluted EPS from continuing operations$1.04
 $.94
 $.10
 11 % 
Adjusted diluted EPS$1.11
 $1.05
 $.06
 6 % 
(a) See page 33pages 37 - 38 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, 2016,2017, the Company reported record third quarter results3% increase in revenues operating incomereflects 52% higher affiliate and diluted earnings per share from continuing operations (‘‘EPS’’), ledsubscription fee revenues, which was driven by Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event, 27% growth in station affiliation fees and retransmission revenues, and higher television licensing sales. Diluted EPS also benefitedgrowth from lower weighted average shares outstanding in the third quarter of 2016 as a result ofnew digital initiatives, including the Company’s ongoing share repurchase program.

For the three months ended September 30, 2016, the 4% revenue growth was driven by a 13% increase in affiliate andowned streaming subscription fee revenues, reflecting 32% growth in station affiliation fees and retransmission revenues, as well as revenues from digital distribution platforms, includingservices, 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 contentand third-party live television streaming services. Content licensing and distribution revenues decreased 22%, as a result of the timing of domestic licensing sales, partially offset by growth in international television licensing. Advertising revenues decreased 5% driven by lower political advertising sales and lower ratings, partially offset 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.pricing.


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


Operating income increased 6%for the three months ended September 30, 2017 decreased 2% and diluted EPS grew 31% fromthe operating income margin decreased one point to 22% for the third quarter of 2015 primarily driven by the revenue growth, which was partially offset by an increased investment in programming. In addition, included in diluted EPS2017 from 23% for the third quarter of 2016, wasmainly as a result of the mix of revenues. Results for 2017 included lower-margin revenues from the pay-per-view boxing event and 2016 included a larger volume of higher-margin political advertising and television licensing revenues.

Net earnings from continuing operations decreased 10% and diluted earnings per share (“EPS”) from continuing operations decreased 1%, reflecting lower operating income as well as a one-time tax benefit of $47 million in the third quarter of 2016 associated with a multiyear adjustment to a tax deduction, which was approved by the Internal Revenue Service (“IRS”) duringdeduction. Adjusted net earnings from continuing operations for the third quarter of 2016. On an adjusted basis, excluding this tax benefit,2017 were comparable with the same prior-year period. Adjusted diluted EPS grew 19%. Diluted EPS also benefited from continuing operations increased 11%, benefiting from lower weighted average shares outstanding in the third quarter of 2017 as a result of the Company’s ongoing share repurchase program. Net earnings for the three months ended September 30, 2017 of $592 million included, in discontinued operations, a noncash gain of $100 million, or $.25 per diluted share, to adjust the carrying value of CBS Radio Inc. (“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 is adjusted based on the trading price of Entercom’s stock, which will result in an additional gain or loss at the time of the closing of the transaction with Entercom. Adjusted net earnings from continuing operations and Adjusted diluted EPS from continuing operations are non-GAAP financial measures. See pages 37 - 38 for details of the discrete items excluded from financial results, and reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

Operational highlights - Nine Months Ended September 30, 2017 versusNine Months Ended September 30, 2016
Consolidated results of operations    Increase/(Decrease) 
Nine Months Ended September 30,2017 2016 $ % 
GAAP:        
Revenues$9,771
 $9,648
 $123
 1 % 
Operating income$2,080
 $2,137
 $(57) (3)% 
Net earnings from continuing operations$1,269
 $1,281
 $(12) (1)% 
Net earnings$398
 $1,374
 $(976) (71)% 
Diluted EPS from continuing operations$3.10
 $2.82
 $.28
 10 % 
Diluted EPS$.97
 $3.02
 $(2.05) (68)% 
         
Non-GAAP: (a)
        
Adjusted operating income$2,080
 $2,128
 $(48) (2)% 
Adjusted net earnings from continuing operations$1,250
 $1,235
 $15
 1 % 
Adjusted net earnings$1,318
 $1,364
 $(46) (3)% 
Adjusted diluted EPS from continuing operations$3.05
 $2.71
 $.34
 13 % 
Adjusted diluted EPS$3.21
 $3.00
 $.21
 7 % 
(a) See pages 38 - 39 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.
For the nine months endedSeptember 30, 2017, revenues increased 1%, driven by 28% higher affiliate and subscription fee revenues, led by Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event, a 27% increase in station affiliation fees and retransmission revenues, and growth from new digital initiatives, including the Company’s owned streaming subscription services, CBS All Access and the Showtime digital streaming subscription service, and third-party live television streaming services. This growth was offset by the benefit to 2016 from CBS’s broadcast of Super Bowl 50.


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


Operating income decreased 3% for the nine months endedSeptember 30, 2017, primarily as a result of a mix of lower-margin revenues in 2017 compared to 2016. Net earnings from continuing operations decreased 1% mainly as a result of the lower operating income. Diluted EPS from continuing operations increased 10% due to 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 increased 1% and 13%, respectively. Net earnings for the nine months ended September 30, 2017of$398 million included a noncash charge of $980 million, or $2.39 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 is adjusted based on the trading price of Entercom’s stock, which will result in an additional gain or loss at the time of the closing of the transaction with Entercom. See pages 38 - 39 for details of the discrete items excluded from financial results, and 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 $935 million for the nine months endedSeptember 30, 2017 compared with $1.12 billion for the nine months ended September 30, 2016. Free cash flow for the nine months endedSeptember 30, 2017 was $823 million compared with $1.01 billion for the same prior-year period. These decreases were driven by the decline in advertising revenues including from 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 nine months ended September 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 54 - 55 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 withOn October 19, 2017, the Company’s previously announced plans to separateCompany commenced an exchange offer for the split-off of its radio business, CBS Radio, as part of its previously announced agreement to combine CBS Radio with Entercom in a preliminary registration statement was filed withmerger. In the Securitiesexchange offer, the Company’s stockholders will have the opportunity to exchange their shares of the Company’s Class B Common Stock for shares of CBS Radio common stock, which will be immediately converted into shares of Entercom Class A common stock upon completion of the merger, which is subject to certain customary terms and Exchange Commission (‘‘SEC’’) duringconditions. The exchange offer is scheduled to expire on November 16, 2017, unless the exchange offer is extended or terminated.
Share Repurchases and Dividends

During the third quarter of 2016 for2017, the proposed initial public offering of the common stock of CBS Radio Inc. (‘‘CBS Radio’’). Additionally, in October 2016, CBS Radio borrowed $1.46 billion through a $1.06 billion senior secured term loan (the “Term Loan”) and the issuance of $400Company repurchased 3.9 million of senior unsecured notes through a private placement. The net debt proceeds will be primarily used by CBS Corp. to repurchase shares of its Class B Common Stock with the remainder to be usedunder its share repurchase program for general corporate purposes and ongoing cash needs.$250 million, at an average cost of $63.52 per share. During the fourth quarter of 2016,nine months ended September 30, 2017, the Company intends to repurchase $1.5 billionrepurchased 16.2 million shares of its Class B Common Stock including $500 million as partfor $1.05 billion, at an average cost of its ongoing repurchase program and $1.0$64.70 per share, leaving $3.06 billion using the net proceeds from the CBS Radio borrowings. These planned repurchases are subject to market and business conditions, and remainof authorization at the discretion of management.September 30, 2017.

On September 29, 2016,During the third quarter of 2017, the Company announced thatdeclared a quarterly cash dividend of $.18 on its BoardClass A and Class B Common Stock, resulting in total dividends of Directors received a letter from National Amusements, Inc. requesting that$73 million, which were paid on October 1, 2017.

Planned Pension Settlement
On November 1, 2017, the Company considerentered into a potential combinationdefinitive agreement to purchase a group annuity contract, under which an insurance company will be required to pay and administer pension payments to certain 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, consummationCompany’s pension plan participants, 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,their designated beneficiaries, who have been receiving pension


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


partially offsetpayments. The purchase of this group annuity contract will reduce the Company’s outstanding pension benefit obligation by growth from international licensing, mainly fromapproximately $800 million, representing approximately 20% of 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 resulttotal obligations 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 comparedqualified pension plans, and will be funded 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 comparedpension plan assets. In connection 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,this transaction, the Company announced that its Boardwill record a one-time settlement charge in the fourth quarter of Directors approved an increase2017 currently estimated at $365 million, reflecting the accelerated recognition of a portion of unamortized actuarial losses in the plan. The actual settlement charge could differ from this estimate due to changes in the Company’s share repurchase program to a total availability of $6.0 billion. Duringactuarial assumptions. Additionally, during the thirdfourth quarter of 2016,2017, the Company repurchased 9.5 million sharesexpects to make a discretionary contribution of its Class B Common Stock under its share repurchase program for $500 million at an average cost of $52.77 per share. During the nine months ended September 30, 2016, the Company repurchased 29.0 million shares ofto prefund its Class B Common Stock for $1.50 billion, at an average cost of $51.76 per share, leaving $5.60 billion of authorization at September 30, 2016.qualified plans, which is expected to be partially funded by long-term borrowings.

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.



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 nine months ended September 30, 20162017 and the nine months ended September 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 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
 
 Three Months Ended September 30, 2017
 Reported Extinguishment of Debt 
Discrete Tax Item (a)
 
CBS Radio Adjustments (b)
 Adjusted 
Operating income$707
  $—
   $—
   $—
  $707
 
Interest expense(116)  —
   —
   —
  (116) 
Interest income17
  —
   —
   —
  17
 
Loss on early extinguishment of debt(5)  5
   —
   —
  —
 
Other items, net3
  —
   —
   —
  3
 
Earnings from continuing operations
before income taxes
606
  5
   —
   —
  611
 
Provision for income taxes(172)  (2)   —
   —
  (174) 
Equity in loss of investee companies,
net of tax
(16)  —
   —
   —
  (16) 
Net earnings from continuing operations418
  3
   —
   —
  421
 
Net earnings from discontinued
operations, net of tax
174
  —
   (45)   (100)  29
 
Net earnings$592
  $3
   $(45)   $(100)  $450
 
Diluted EPS from continuing operations$1.03
  $.01
   $—
   $—
  $1.04
 
Diluted EPS$1.46
  $.01
   $(.11)   $(.25)  $1.11
 
(a) Other operating items, net includes gainsReflects a tax benefit from the sales of internet businesses in China for the nine months ended September 30, 2016 and 2015, and for 2016, also includes a multiyear, retroactive impactresolution of a new operating tax.tax matter in a foreign jurisdiction relating to a previously disposed business.
(b) Reflects a one-time tax benefitnoncash gain associated with a multiyear adjustment to a tax deduction, which was approved byvaluation allowance for the IRS during the third quartercarrying value of 2016.CBS Radio.
(c) Amounts may not sum as a result of rounding.



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


 Three Months Ended September 30, 2016
 Reported 
Discrete Tax Items (a)
 Adjusted 
Earnings from continuing operations before income taxes$624
  $—
  $624
 
Provision for income taxes(145)  (47)  (192) 
Equity in loss of investee companies, net of tax(13)  —
  (13) 
Net earnings from continuing operations466
  (47)  419
 
Net earnings from discontinued operations, net of tax12
  36
  48
 
Net earnings$478
  $(11)  $467
 
Diluted EPS from continuing operations$1.04
  $(.11)  $.94
 
Diluted EPS$1.07
  $(.02)  $1.05
 
(a) Reflects a one-time tax benefit of $47 million associated with a multiyear adjustment to a tax deduction, which was approved by the IRS during the third quarter of 2016, and a charge of $36 million in discontinued operations from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business.
 Nine Months Ended September 30, 2017
 Reported Extinguishment of Debt 
Discrete Tax Items (a)
 
CBS Radio Adjustments (b)
  Adjusted 
Operating income$2,080
  $—
   $—
   $—
   $2,080
 
Interest expense(336)  —
   —
   —
   (336) 
Interest income45
  —
   —
   —
   45
 
Loss on early extinguishment of debt(5)  5
   —
   —
   —
 
Other items, net9
  —
   —
   —
   9
 
Earnings from continuing operations before income taxes1,793
  5
   —
   —
   1,798
 
Provision for income taxes(479)  (2)   (22)   —
   (503) 
Equity in loss of investee companies, net of tax(45)  —
   —
   —
   (45) 
Net earnings from continuing operations1,269
  3
   (22)   —
   1,250
 
Net earnings (loss) from discontinued
operations, net of tax
(871)  —
   (45)   984
   68
 
Net earnings$398
  $3
   $(67)   $984
   $1,318
 
Diluted EPS from continuing operations$3.10
  $.01
   $(.05)   $—
   $3.05
 
Diluted EPS$.97
  $.01
   $(.16)   $2.40
   $3.21
 
(a) Reflects a tax benefit of $22 million from the resolution of certain state income tax matters and a tax benefit of $45 million in discontinued operations from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business.
(b) Reflects a noncash charge of $980 million associated with a valuation allowance for the carrying value of CBS Radio, and a restructuring charge of $7 million ($4 million, net of tax) at CBS Radio.


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
 Reported 
Other Operating Items (a)
 
Discrete Tax Items (b)
 
Write-down of Investment (c)
 Adjusted 
Operating income$2,137
  $(9)  $—
  $—
  $2,128
 
Interest expense(304)  —
  —
  —
  (304) 
Interest income22
  —
  —
  —
  22
 
Other items, net(7)  —
  —
  —
  (7) 
Earnings from continuing operations before
income taxes
1,848
  (9)  —
  —
  1,839
 
Provision for income taxes(524)  4
  (47)  —
  (567) 
Equity in loss of investee companies, net of tax(43)  —
  —
  6
  (37) 
Net earnings from continuing operations1,281
  (5)  (47)  6
  1,235
 
Net earnings from discontinued operations,
net of tax
93
  —
  36
  —
  129
 
Net earnings$1,374
  $(5)  $(11)  $6
  $1,364
 
Diluted EPS from continuing operations$2.82
  $(.01)  $(.10)  $.01
  $2.71
 
Diluted EPS$3.02
  $(.01)  $(.02)  $.01
  $3.00
 
(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 a one-time tax benefit of $47 million associated with a multiyear adjustment to a tax deduction, which was approved by the IRS during the third quarter of 2016, and a charge of $36 million in discontinued operations from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business.
(c) Reflects the write-down of an international television joint venture to its fair value.

Consolidated Results of Operations
Three and Nine Months Ended September 30, 20162017 versus Three and Nine Months Ended September 30, 20152016
Revenues
Three Months Ended September 30, Three Months Ended September 30, 
  
% of Total
Revenues
   
% of Total
Revenues
 Increase/(Decrease)   
% of Total
Revenues
   
% of Total
Revenues
 Increase/(Decrease) 
Revenues by Type2016 2015  $ % 2017 2016  $ % 
Advertising$1,469
 43% $1,481
 46% $(12) (1)% $1,106
 35% $1,162
 38% $(56) (5)% 
Content licensing and distribution1,108
 33
 1,046
 32
 62
 6
 860
 27
 1,108
 36
 (248) (22) 
Affiliate and subscription fees753
 22
 664
 20
 89
 13
 1,145
 36
 753
 24
 392
 52
 
Other66
 2
 66
 2
 —
 —
 60
 2
 61
 2
 (1) (2) 
Total Revenues$3,396
 100% $3,257
 100% $139
 4 % $3,171
 100% $3,084
 100% $87
 3 % 
Nine Months Ended September 30, Nine Months Ended September 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 % $4,008
 41% $4,492
 46% $(484) (11)% 
Content licensing and distribution2,780
 26
 2,889
 29
 (109) (4) 2,761
 28
 2,780
 29
 (19) (1) 
Affiliate and subscription fees2,208
 21
 2,044
 20
 164
 8
 2,835
 29
 2,208
 23
 627
 28
 
Other181
 2
 184
 2
 (3) (2) 167
 2
 168
 2
 (1) (1) 
Total Revenues$10,532
 100% $9,976
 100% $556
 6 % $9,771
 100% $9,648
 100% $123
 1 % 


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


Advertising
For the three months ended September 30, 2016,2017, the 5% decrease in advertising revenues decreased 1%. Advertising revenues wereprimarily reflects lower political advertising sales and lower ratings, partially offset by higher pricing. The comparison was also impacted by 10 hours of primetime preemptions forone less Thursday Night Football game broadcast on the Democratic and Republican conventions and the first Presidential debate, competition from the 2016 Summer Olympics, and sales of internet businessesCBS Television Network in China during 2015. Advertising revenues during the third quarter benefited from increased political advertising sales relating to U.S. federal and state elections.of 2017. For the nine months ended September 30, 2016,2017, the 10% increase11% decrease in advertising revenues was driven by CBS’sprimarily reflects the benefit to 2016 from the broadcast of the Super Bowl which is broadcast on the CBS Television Network once every three years through 2022 under the current contract; 6% growth in underlying network advertising; and higher50 as well as lower political advertising sales. These increases were partially offset by the impact from the sales of internet businesses in China during 2015.

During the fourth quarter of 2016, local2017, the advertising revenues are expected torevenue comparison with the prior year will continue to be negatively affected by the benefit in 2016 from strong political advertising spending associated with U.S. federal and state elections.advertising. Additionally, 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, concluded with increases in pricing increases compared with the prior broadcast season, and a majority of the Company’s deals are 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. During the first nine months of 2017, compared to the same period in 2016, the Company has experienced lower ratings, which was largely offset by higher pricing.

Content Licensing and Distribution
For the three months ended September 30, 2016,2017, the 6% increase22% decrease in content licensing and distribution revenues was driven by higherprimarily reflects the timing of domestic television licensing primarily reflectingsales and the salesbenefit in the third quarter of 2016 from the licensing of ShowtimePenny Dreadful original series, including Penny Dreadful, as well asand various titles from the Company’s television library,library. These decreases were partially offset by the


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


initial domestic availability of Elementary in the third quarter of 2015.international licensing. For the nine months ended September 30, 2016,2017, the 4%1% decrease in content licensing and distribution revenues primarily reflects lowerthe timing of domestic television licensing revenues, asand the first nine months of 2015 included significant sales of NCIS and Elementary. This decrease was partially offset by growthbenefit to 2016 from the international licensing sales of five Star Trek library series, andpartially offset by strong demand for the domestic licensingCompany’s content internationally, reflecting additional titles available for sale as a result of Penny Dreadful.the 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 nine months ended September 30, 2016,2017, the 13% increaseincreases in affiliate and subscription fees reflects 32%of 52% and 28%, respectively, primarily reflect revenues from Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event, which contributed 36 points and 12 points of the growth for the three and nine-month periods, respectively. Underlying affiliate and subscription fee revenues for each of the three and nine months ended September 30, 2017 increased 16%, led by growth in station affiliation fees and retransmission revenues, and higher revenues from new digital distribution platforms,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 subscription fees was driven by 39% growth in station affiliation fees and retransmission revenues, and revenues from digital distribution platforms. These increases were partially offset by the benefit to 2015 from Showtime Networks’ distribution of the Floyd Mayweather/Manny Pacquiao pay-per-view boxing event, which was the highest grossing pay-per-view event of all time.third-party live television streaming offerings.

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, are expected to result in continued growth in affiliateexisting agreements with station affiliates and subscription fees.

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

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


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


increases. Together, these factors are expected to result in continued growth in affiliate and subscription fees over the next several years.

International Revenues
The Company generated approximately 12% and 11% of its total revenues from international regions for the three months ended September 30, 2017 and 2016, respectively, and generated approximately 14% of its total revenues from international regions for each of the nine months ended September 30, 2017 and 2016.

Operating Expenses
Nine Months Ended September 30, Three Months Ended September 30, 
  % of Operating Expenses   % of Operating Expenses Increase/(Decrease)   % of Operating Expenses   % of Operating Expenses Increase/(Decrease) 
Operating Expenses by Type2016 2015  $ % 2017 2016  $ % 
Programming$2,182
 36% $2,033
 34% $149
 7 % $749
 40% $500
 28% $249
 50 % 
Production2,053
 33
 1,940
 33
 113
 6
 572
 31
 666
 37
 (94) (14) 
Participation, distribution and royalty788
 13
 817
 14
 (29) (4) 199
 11
 291
 16
 (92) (32) 
Other1,091
 18
 1,101
 19
 (10) (1) 342
 18
 331
 19
 11
 3
 
Total Operating Expenses$6,114
 100% $5,891
 100% $223
 4 % $1,862
 100% $1,788
 100% $74
 4 % 
 Nine Months Ended September 30, 
   % of Operating Expenses   % of Operating Expenses Increase/(Decrease) 
Operating Expenses by Type2017  2016  $ % 
Programming$2,258
 38% $2,133
 37% $125
 6 % 
Production1,955
 33
 1,933
 33
 22
 1
 
Participation, distribution and royalty725
 12
 788
 13
 (63) (8) 
Other1,002
 17
 964
 17
 38
 4
 
Total Operating Expenses$5,940
 100% $5,818
 100% $122
 2 % 

Programming
For the three and nine months ended September 30, 2017, the increases in programming expenses of 50% and 6%, respectively, were driven by costs associated with Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event, and for the nine months ended September 30, 2017, the increase also reflects costs in 2017 associated with CBS’s broadcast of the semifinals and finals of the NCAA Division I Men’s Basketball Championship. The increases for the nine-month period were partially offset by costs in the first quarter of 2016 associated with the broadcast of Super Bowl 50.

Production
For the three months ended September 30, 2016,2017, the 2% increase14% decrease in programmingproduction expenses was driven by higher sports programmingprimarily reflects lower 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 increasedecrease in television licensing revenues. For the nine months ended September 30, 2016,2017, the 6%1% increase in production expenses was the result ofmainly reflects an increased investment in internally developedinternally-produced television series and higher costs associated with the Super Bowl production in 2016,mix of titles sold under television licensing arrangements. These increases were partially offset by lowerproduction costs in the first quarter of 2016 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 nine months ended September 30, 2016, SG&A expenses increased 7% and 5%, respectively, primarily as a resultCBS’s broadcast of higher pension and other employee-related costs. For the nine months ended September 30, 2016, the increase also reflects higher advertising costs associated with the timing of series premieres on Showtime.Super Bowl 50

.


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


Participation, distribution and royalty
For the three and nine months ended September 30, 2017, the decreases in participation, distribution and royalty costs of 32% and 8%, respectively, were driven by lower television licensing revenues and the mix of titles sold under licensing arrangements.

Selling, General and Administrative Expenses
 Three Months Ended September 30,
 2017 % of Revenues 2016 % of Revenues Increase/(Decrease) 
Selling, general and administrative expenses$547
  17%  $521
  17%   5%  
 Nine Months Ended September 30,
 2017 % of Revenues 2016 % of Revenues Increase/(Decrease) 
Selling, general and administrative expenses$1,585
  16%  $1,534
  16%   3%  

Selling, general and administrative (“SG&A”) expenses include expenses incurred for selling and marketing costs, occupancy and back office support. For the three and nine months endedSeptember 30, 2017, the increases in SG&A expenses of 5% and 3%, respectively, primarily reflect higher advertising and marketing costs, mainly to support the Company’s growth initiatives.

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)%  
For each of the three and nine months ended September 30, 2016, the 6% decrease in depreciation and amortization was the result of intangibles and property and equipment that became fully amortized, as well as the sales of internet businesses in China during 2015.

Restructuring Charges
During the nine months ended September 30, 2015, in a continued effort to reduce its cost structure, the Company initiated restructuring plans across several of its businesses, primarily for the reorganization of certain business operations. As a result, the Company recorded restructuring charges of $55 million, reflecting $34 million of severance costs and $21 million of costs associated with exiting contractual obligations and other related costs.
 Three Months Ended September 30, Nine Months Ended September 30, 
 2017
2016 Increase/(Decrease) 2017
2016 Increase/(Decrease) 
Depreciation and amortization$55
 $54
  2%  $166
 $168
  (1)%  

Other Operating Items, Net
 Nine Months Ended September 30, 
 2016 2015 Increase/(Decrease) 
Other operating items, net$(9) $(19)  (53)%  
For the nine months ended September 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 September 30, Nine Months Ended September 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%  $(116) $(104) 12% $(336) $(304)  11%  
Interest income$7
 $6
 17% $22
 $18
 22% $17
 $7
 143% $45
 $22
 105% 
The following table presents the Company’s outstanding debt balances, excluding capital leases, and the weighted average interest rate as of September 30, 20162017 and 2015:2016:
 At September 30,
   Weighted Average   Weighted Average 
 2016 Interest Rate 2015 Interest Rate 
Total long-term debt$8,849
  4.47%  $8,409
  4.68%  
Commercial paper$33
  0.75%  $303
  0.46%  
In October 2016, in connection with the Company’s previously announced plans to separate its radio business, CBS Radio borrowed $1.46 billion through a $1.06 billion senior secured term loan due 2023 and the issuance of $400 million of 7.25% senior unsecured notes due 2024 through a private placement. The Term Loan bears interest at a rate equal to 3.50% plus the greater of the London Interbank Offered Rate (“LIBOR”) and 1.00%.

 At September 30,
   Weighted Average   Weighted Average 
 2017 Interest Rate 2016 Interest Rate 
Total long-term debt$9,039
  4.43%  $8,849
  4.47%  
Commercial paper$590
  1.44%  $33
  0.75%  


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


Loss on Early Extinguishment of Debt
For the three and nine months ended September 30, 2017, the loss on early extinguishment of debt of $5 million
reflected a pre-tax loss associated with the redemption of the Company’s $300 million outstanding 4.625% senior notes due May 2018.

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%  
 Three Months Ended September 30, Nine Months Ended September 30, 
 2017
2016 Increase/(Decrease) 2017 2016 Increase/(Decrease) 
Other items, net$3
 $—
  n/m  $9
 $(7)  n/m  
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 September 30, Nine Months Ended September 30,
 2017 2016 Increase/(Decrease) 2017 2016 Increase/(Decrease)
Provision for income taxes, including
interest and before other discrete items

$(187) $(207)  (10)%  $(548) $(581)  (6)% 
Excess tax benefits from stock-based
compensation (a)
10
 —
     41
 —
    
Other discrete items (b)
5
 62
     28
 57
    
Provision for income taxes$(172) $(145)  19 %  $(479) $(524)  (9)% 
Effective income tax rate28.4% 23.2%     26.7% 28.4%    
(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 nine months ended September 30, 2017, primarily reflects tax benefits from the resolution of certain state income tax matters. For the three and nine months ended September 30, 2016, includesprimarily reflects a one-time tax benefit of $47 million associated with a multiyear adjustment to a tax deduction, which was approved by the IRS during the third quarter of 2016.

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.

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%  
For the three and nine months ended September 30, 2016, the increases in net earnings from continuing operations of 21% and 22%, respectively, and the increases in diluted EPS from continuing operations of 31% and 33%, 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.
 Three Months Ended September 30, Nine Months Ended September 30, 
 2017
2016
Increase/(Decrease) 2017 2016 Increase/(Decrease) 
Equity in loss of investee companies,
net of tax
$(16) $(13)  23%  $(45) $(43)  5%  



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


LossNet Earnings from Continuing Operations and Diluted EPS from Continuing Operations
 Three Months Ended September 30, Nine Months Ended September 30, 
 2017 2016 Increase/(Decrease) 2017 2016 Increase/(Decrease) 
Net earnings from continuing operations$418
 $466
  (10)%  $1,269
 $1,281
  (1)%  
Diluted EPS from continuing operations$1.03
 $1.04
  (1)%  $3.10
 $2.82
  10 %  
For the three months ended September 30, 2017, the decreases in net earnings from continuing operations and diluted EPS from continuing operations of 10% and 1%, respectively, were primarily the result of lower operating income and the impact of the previously mentioned tax benefit of $47 million in the third quarter of 2016. Diluted EPS from continuing operations benefited from lower weighted average shares outstanding as a result of the Company’s ongoing share repurchase program, which partially offset the lower earnings. For the nine months ended September 30, 2017, the 1% decrease in net earnings from continuing operations primarily reflects lower operating income. The 10% increase in diluted EPS from continuing operations for the nine-month period reflects lower weighted average shares outstanding as a result of the Company’s ongoing share repurchase program, which more than offset the lower earnings.

Net Earnings (Loss) from Discontinued Operations
LossThe following table sets forth details of net earnings (loss) from discontinued operations for the three and nine months ended September 30, 2017 and 2016. Net earnings (loss) from discontinued operations included the operating results of CBS Radio for all periods presented. Net earnings (loss) from discontinued operations also included a tax benefit of $45 million for the three and nine months ended September 30, 2017 and a charge of $36 million for the three and nine months ended September 30, 2016, reflectsin each case from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business that was accounted for as a discontinued operation.
.
Three Months Ended September 30, 2017CBS Radio Other Total
Revenues$300
 $—
 $300
Costs and expenses: (a)


 

 

Operating113
 —
 113
Selling, general and administrative121
 (1) 120
Benefit from valuation allowance(100) —
 (100)
Total costs and expenses134
 (1) 133
Operating income166
 1
 167
Interest expense(21) —
 (21)
Earnings from discontinued operations145
 1
 146
Income tax (provision) benefit(17) 45
 28
Net earnings from discontinued operations, net of tax$128
 $46
 $174
(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.


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


Three Months Ended September 30, 2016CBS Radio Other Total
Revenues$317
 $—
 $317
Costs and expenses:

 

 

Operating110
 —
 110
Selling, general and administrative123
 —
 123
Depreciation and amortization7
 —
 7
Total costs and expenses240
 —
 240
Operating income77
 —
 77
Other income2
 —
 2
Earnings from discontinued operations79
 —
 79
Income tax provision(31) (36) (67)
Net earnings (loss) from discontinued operations, net of tax$48
 $(36) $12
Nine Months Ended September 30, 2017CBS Radio Other Total
Revenues$856
 $—
 $856
Costs and expenses: (a)


 

 

Operating307
 —
 307
Selling, general and administrative372
 (1) 371
Restructuring charge7
 —
 7
Provision for valuation allowance980
 —
 980
Total costs and expenses1,666
 (1) 1,665
Operating income (loss)(810) 1
 (809)
Interest expense(60) —
 (60)
Earnings (loss) from discontinued operations(870) 1
 (869)
Income tax (provision) benefit(47) 45
 (2)
Net earnings (loss) from discontinued operations, net of tax$(917) $46
 $(871)
(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.
Nine Months Ended September 30, 2016CBS Radio Other Total
Revenues$892
 $—
 $892
Costs and expenses:

 

 

Operating298
 —
 298
Selling, general and administrative359
 —
 359
Depreciation and amortization20
 —
 20
Total costs and expenses677
 —
 677
Operating income215
 —
 215
Other income2
 —
 2
Earnings from discontinued operations217
 —
 217
Income tax provision(88) (36) (124)
Net earnings (loss) from discontinued operations, net of tax$129
 $(36) $93

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 a noncash gain of $100 million for the three months ended September 30, 2017 and a noncash charge of $980 million for the nine months ended September 30, 2017 associated with a valuation allowance to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. The


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


Company will record an additional gain or loss upon the closing of the transaction, which is expected to occur in the fourth quarter of 2017. A 10% change to Entercom’s stock price would change the carrying value of CBS Radio by approximately $110 million.

For the nine months ended September 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.

Net Earnings and Diluted EPS
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 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% $592
 $478
 24% $398
 $1,374
  (71)% 
Diluted EPS$1.07
 $.88
 22% $3.02
 $2.33
 30% $1.46
 $1.07
 36% $.97
 $3.02
 (68)% 
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 September 30, 20162017 and 20152016
Three Months Ended September 30,Three Months Ended September 30,
 
% of Total
Revenues
  
% of Total
Revenues
Increase/(Decrease)  
% of Total
Revenues
  
% of Total
Revenues
Increase/(Decrease) 
2016
2015$ % 2017
2016$ % 
Revenues:                        
Entertainment$1,949
 57 % $1,932
 59 % $17
 1 % $1,815
 57 % $1,949
 63 % $(134) (7)% 
Cable Networks598
 18
 526
 16
 72
 14
 840
 26
 598
 20
 242
 40
 
Publishing226
 7
 203
 6
 23
 11
 228
 7
 226
 7
 2
 1
 
Local Media409
 12
 376
 12
 33
 9
 397
 13
 409
 13
 (12) (3) 
Radio319
 9
 318
 10
 1
 —
 
Corporate/Eliminations(105) (3) (98) (3) (7) (7) (109) (3) (98) (3) (11) (11) 
Total Revenues$3,396
 100 % $3,257
 100 % $139
 4 % $3,171
 100 % $3,084
 100 % $87
 3 % 
 Three Months Ended September 30,
  
% of Total
Operating
Income
  
% of Total
Operating
Income
  
    Increase/(Decrease) 
 2017 2016$ % 
Segment Operating Income (Loss):             
Entertainment$345
 49 %  $348
 48 % $(3) (1)% 
Cable Networks294
 42
  285
 40
 9
 3
 
Publishing46
 6
  44
 6
 2
 5
 
Local Media105
 15
  122
 17
 (17) (14) 
Corporate(83) (12)  (78) (11) (5) (6) 
Total Operating Income$707
 100 %  $721
 100 % $(14) (2)% 


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


Three Months Ended September 30,Three Months Ended September 30,
 
% of Total
Operating
Income
  
% of Total
Operating
Income
    Increase/(Decrease) 
   Increase/(Decrease) 2017 2016 $ % 
2016 2015$ % 
Segment Operating Income (Loss):            
Depreciation and Amortization:        
Entertainment$348
 44 % $339
 45 % $9
 3 % $29
 $28
 $1
 4 % 
Cable Networks285
 36
 246
 33
 39
 16
 5
 6
 (1) (17) 
Publishing44
 5
 43
 6
 1
 2
 2
 1
 1
 100
 
Local Media122
 15
 101
 13
 21
 21
 11
 11
 —
 —
 
Radio77
 10
 73
 10
 4
 5
 
Corporate(78) (10) (49) (7) (29) (59) 8
 8
 —
 —
 
Total Operating Income$798
 100 % $753
 100 % $45
 6 % 
Total Depreciation and Amortization$55
 $54
 $1
 2 % 
 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, 20162017 and 20152016
Nine Months Ended September 30,Nine Months Ended September 30, 
 
% of Total
Revenues
  
% of Total
Revenues
Increase/(Decrease)  
% of Total
Revenues
  
% of Total
Revenues
Increase/(Decrease) 
2016 2015$ % 2017 2016$ % 
Revenues:                        
Entertainment$6,483
 62 % $5,978
 60 % $505
 8 % $6,346
 65 % $6,483
 67 % $(137) (2)% 
Cable Networks1,659
 16
 1,680
 17
 (21) (1) 1,954
 20
 1,659
 17
 295
 18
 
Publishing558
 5
 547
 5
 11
 2
 595
 6
 558
 6
 37
 7
 
Local Media1,253
 12
 1,138
 11
 115
 10
 1,218
 13
 1,253
 13
 (35) (3) 
Radio898
 8
 907
 9
 (9) (1) 
Corporate/Eliminations(319) (3) (274) (2) (45) (16) (342) (4) (305) (3) (37) (12) 
Total Revenues$10,532
 100 % $9,976
 100 % $556
 6 % $9,771
 100 % $9,648
 100 % $123
 1 % 
 Nine Months Ended September 30, 
  
% of Total
Segment
Operating
Income
  
% of Total
Segment
Operating
Income
  
    Increase/(Decrease) 
 2017 2016$ % 
Segment Operating Income (Loss):             
Entertainment$1,089
 53 %  $1,148
 54 % $(59) (5)% 
Cable Networks795
 38
  740
 35
 55
 7
 
Publishing88
 4
  83
 4
 5
 6
 
Local Media355
 17
  402
 19
 (47) (12) 
Corporate(247) (12)  (245) (12) (2) (1) 
Total Segment Operating Income2,080
 100 %  2,128
 100 % (48) (2) 
Other operating items, net—
    9
   (9) n/m
 
Total Operating Income$2,080
    $2,137
   $(57) (3)% 
n/m - not meaningful
 Nine Months Ended September 30,
   Increase/(Decrease) 
 2017 2016 $ % 
Depreciation and Amortization:        
Entertainment$85
 $88
 $(3) (3)% 
Cable Networks17
 17
 —
 —
 
Publishing5
 4
 1
 25
 
Local Media34
 33
 1
 3
 
Corporate25
 26
 (1) (4) 
Total Depreciation and Amortization$166
 $168
 $(2) (1)% 


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, 20162017 and 20152016
Three Months Ended September 30,Three Months Ended September 30,
  Increase/(Decrease)   Increase/(Decrease) 
2016
2015 $ % 
Entertainment2017
2016 $ % 
Revenues$1,949
 $1,932
 $17
 1 % $1,815
 $1,949
 $(134) (7)% 
Segment Operating Income$348
 $339
 $9
 3 % $345
 $348
 $(3) (1)% 
Segment Operating Income as a % of revenues18% 18%     19% 18%     
Depreciation and amortization$28
 $31
 $(3) (10)% $29
 $28
 $1
 4 % 
Capital expenditures$23
 $33
 $(10) (30)% $25
 $23
 $2
 9 % 
For the three months ended September 30, 2016,2017, the 1%7% increasedecrease 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 decrease26% decline in content licensing and distribution revenues, reflectsmainly as a result of the initialtiming of domestic availability of Elementary intelevision licensing sales and the third quarter of 2015, partially offset bybenefit to 2016 from sales of various titles from the Company’s television library, duringwhich were partially offset by growth in international licensing sales. Advertising revenues decreased 3% for the three months ended September 30, 2017, reflecting lower ratings, partially offset by higher pricing. The advertising comparison was also impacted by one less Thursday Night Football game broadcast on the CBS Television Network in the third quarter of 2017. These decreases were partially offset by 35% growth in affiliate and subscription fees, reflecting higher station affiliation fees and growth from new digital initiatives, including 2016CBS All Access .and third-party live television streaming services.

For the three months ended September 30, 2017, operating income decreased 1%, while the operating income margin expanded one percentage point reflecting a mix of higher-margin revenues in 2017.

Nine Months Ended September 30, 2017 and 2016
 Nine Months Ended September 30,
   Increase/(Decrease) 
Entertainment2017 2016 $ % 
Revenues$6,346
 $6,483
 $(137) (2)% 
Segment Operating Income$1,089
 $1,148
 $(59) (5)% 
Segment Operating Income as a % of revenues17% 18%     
Depreciation and amortization$85
 $88
 $(3) (3)% 
Capital expenditures$63
 $60
 $3
 5 % 
For the nine months ended September 30, 2017, the 2% decrease in revenues mainly reflects the benefit in 2016 from the broadcast of Super Bowl 50, which was partially offset by a 34% increase in affiliate and subscription fees, reflecting higher station affiliation fees and growth from new digital initiatives, including CBS All Access and third-party live television streaming services. Content licensing and distribution revenues were comparable with the prior-year period, as strong demand for the Company’s content internationally, due in part to increased investment in internally-produced series, was partially offset by the benefit to 2016 from the international licensing sales of five Star Trek library series and the timing of domestic television licensing sales.

For the nine months ended September 30, 2017, the 5% decrease in operating income was primarily driven by the revenue decline.


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, 20162017 and 20152016
Three Months Ended September 30,Three Months Ended September 30,
  Increase/(Decrease)   Increase/(Decrease) 
2016
2015 $ % 
Cable Networks2017
2016 $ % 
Revenues$598
 $526
 $72
 14 % $840
 $598
 $242
 40 % 
Segment Operating Income$285
 $246
 $39
 16 % $294
 $285
 $9
 3 % 
Segment Operating Income as a % of revenues48% 47%     35% 48%     
Depreciation and amortization$6
 $5
 $1
 20 % $5
 $6
 $(1) (17)% 
Capital expenditures$4
 $5
 $(1) (20)% $5
 $4
 $1
 25 % 
For the three months ended September 30, 2016,2017, the 14%40% 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 feeswas driven by Showtime Networks’ over-the-top service.distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event, growth from the Showtime digital streaming subscription offering and higher international television licensing sales. These increases were partially offset by lower domestic television licensing sales, largely due to the sale of Penny Dreadful in the third quarter of 2016. As of September 30, 2016,2017, subscriptions totaled 75approximately 25 million for Showtime, Networks (includingthe Company’s premium television network, and the Showtime, The Movie Channel and Flix), 55 digital streaming subscription offering combined, 52 million for CBS Sports Network and 3330 million for Smithsonian Networks.

For the three months ended September 30, 2016,2017, the 16%3% increase in operating income primarily reflects the revenue growth, which was significantly offset by costs associated with the aforementioned pay-per-view boxing event.

Nine Months Ended September 30, 2017 and 2016
 Nine Months Ended September 30,
   Increase/(Decrease) 
Cable Networks2017 2016 $ % 
Revenues$1,954
 $1,659
 $295
 18% 
Segment Operating Income$795
 $740
 $55
 7% 
Segment Operating Income as a % of revenues41% 45%     
Depreciation and amortization$17
 $17
 $—
 —% 
Capital expenditures$12
 $8
 $4
 50% 
For the nine months ended September 30, 2017, the 18% increase in revenues was driven by the aforementioned pay-per-view boxing event, growth from the Showtime digital streaming subscription offering and higher international television licensing sales. These increases were partially offset by increased investmentlower domestic television licensing sales, largely due to the sale of Penny Dreadful in original series.2016.
For the nine months ended September 30, 2017, the 7% increase in operating income was driven by the revenue growth, which was significantly offset by higher costs associated with the pay-per-view boxing event.


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, 20162017 and 20152016
Three Months Ended September 30,Three Months Ended September 30,
  Increase/(Decrease)   Increase/(Decrease) 
2016
2015 $ % 
Publishing2017
2016 $ % 
Revenues$226
 $203
 $23
 11 % $228
 $226
 $2
 1% 
Segment Operating Income$44
 $43
 $1
 2 % $46
 $44
 $2
 5% 
Segment Operating Income as a % of revenues19% 21%     20% 19%     
Depreciation and amortization$1
 $1
 $—
 — % $2
 $1
 $1
 100% 
Capital expenditures$1
 $2
 $(1) (50)% $1
 $1
 $—
 —% 
For the three months ended September 30, 2016,2017, the 11%1% increase in revenues reflectswas driven by 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-sellingaudio sales. Bestselling titles in the third quarter of 20162017 included Born to RunWhat Happened by Hillary Rodham Clinton and Sleeping Beauties by Bruce SpringsteenStephen King and Owen KingThe Girl with the Lower Back Tattoo. by Amy Schumer.

For the three months ended September 30, 2016,2017, the 5% increase in operating income increased 2% asmainly reflects revenue growth.

Nine Months Ended September 30, 2017 and 2016
 Nine Months Ended September 30,
   Increase/(Decrease) 
Publishing2017 2016 $ % 
Revenues$595
 $558
 $37
 7 % 
Segment Operating Income$88
 $83
 $5
 6 % 
Segment Operating Income as a % of revenues15% 15%     
Depreciation and amortization$5
 $4
 $1
 25 % 
Capital expenditures$2
 $7
 $(5) (71)% 
For the nine months ended September 30, 2017, the 7% increase in revenues was driven by higher print book sales and growth in digital audio sales.

For the nine months ended September 30, 2017, the 6% 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)


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 (CBS Television Stations and CBS Local Digital Media)
Three Months Ended September 30, 20162017 and 20152016
Three Months Ended September 30,Three Months Ended September 30,
  Increase/(Decrease)   Increase/(Decrease) 
2016 2015 $ % 
Local Media2017 2016 $ % 
Revenues$409
 $376
 $33
 9 % $397
 $409
 $(12) (3)% 
Segment Operating Income$122
 $101
 $21
 21 % $105
 $122
 $(17) (14)% 
Segment Operating Income as a % of revenues30% 27%     26% 30%     
Depreciation and amortization$11
 $12
 $(1) (8)% $11
 $11
 $—
 — % 
Capital expenditures$9
 $10
 $(1) (10)% $8
 $9
 $(1) (11)% 
For the three months ended September 30, 2016,2017, the 9% increase3% decrease in revenues was driven by 7% growth in advertising revenues, which benefited from higherlower political advertising sales, and 13%which was partially offset by growth in retransmission and subscription revenues.

For the three months ended September 30, 2016,2017, the 21% increase14% decrease in operating income primarily reflects the revenue growth.a decline in high-margin political advertising sales.

During the fourth quarter of 2016, Local Media revenues are expected to2017, the revenue comparison will continue to be negatively impacted by the benefit in 2016 from higherstrong political spendingadvertising associated with U.S. federal and state elections.

Nine Months Ended September 30, 2017 and 2016
 Nine Months Ended September 30,
   Increase/(Decrease) 
Local Media2017 2016 $ % 
Revenues$1,218
 $1,253
 $(35) (3)% 
Segment Operating Income$355
 $402
 $(47) (12)% 
Segment Operating Income as a % of revenues29% 32%     
Depreciation and amortization$34
 $33
 $1
 3 % 
Capital expenditures$20
 $20
 $—
 — % 
For the nine months ended September 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. This decrease was partially offset by growth in retransmission revenues.
For the nine months ended September 30, 2017, the 12% decrease in operating income primarily reflects lower revenues, as well as the mix of revenues compared to the same prior-year period. Retransmission revenues have associated network affiliation costs paid to the CBS Television Network, whereas political advertising sales have a high operating income margin.


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, 20162017 and 20152016
Three Months Ended September 30,Three Months Ended September 30,
  Increase/(Decrease)   Increase/(Decrease) 
2016
2015 $ % 
Corporate2017
2016 $ % 
Segment Operating Loss$(78) $(49) $(29) (59)% $(83) $(78) $(5) (6)% 
Depreciation and amortization$8
 $8
 $—
 — % $8
 $8
 $—
 — % 
Capital expenditures$5
 $3
 $2
 67 % $5
 $5
 $—
 — % 
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 in2017, corporate expenses increased 6%, driven primarily reflectsby higher pension and other employee-related costs.
Nine Months Ended September 30, 20162017 and 20152016
 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.


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


For the nine months endedSeptember 30, 2016, the 35% increase in corporate expenses primarily reflects higher pension and other employee-related costs.
 Nine Months Ended September 30,
   Increase/(Decrease) 
Corporate2017 2016 $ % 
Segment Operating Loss$(247) $(245) $(2) (1)% 
Depreciation and amortization$25
 $26
 $(1) (4)% 
Capital expenditures$15
 $16
 $(1) (6)% 
Financial Position
At At Increase/(Decrease) At At Increase/(Decrease) 
September 30, 2016
December 31, 2015 $ % September 30, 2017
December 31, 2016 $ % 
Current Assets:                  
Cash and cash equivalents $179
 $323
 $(144) (45)%  $144
 $598
 $(454) (76)% 
Receivables, net (a)
 3,348
 3,628
 (280) (8)  3,598
 3,314
 284
 9
 
Programming and other inventory (b)
 1,459
 1,271
 188
 15
  1,830
 1,427
 403
 28
 
Prepaid income taxes (c)
 39
 101
 (62) (61) 
Prepaid expenses 182
 185
 (3) (2) 
All other current assets 432
 424
 8
 2
  540
 539
 1
 —
 
Total current assets $5,457
 $5,747
 $(290) (5)%  $6,294
 $6,063
 $231
 4 % 
(a) The decrease isincrease primarily duerelates to seasonality.Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event.
(b) The increase mainlyprimarily 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% 
(a) The increase primarily reflects higher 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
 At At Increase/(Decrease) 
 September 30, 2017 December 31, 2016 $ % 
Assets of discontinued operations (a)
 $3,325
   $4,291
  $(966) (23)% 
(a) The decrease is dueprimarily reflects a noncash charge of $980 million associated with a valuation allowance to reduce the carrying value of CBS Radio to the timingvalue indicated by the stock valuation 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.Entercom. (See Note 53 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) 
 September 30, 2017 December 31, 2016 $ % 
Current Liabilities:            
Accounts payable (a)
 $233
   $148
  $85
 57 % 
Accrued compensation (a)
 257
   369
  (112) (30) 
Participants’ share and royalties
payable
 997
   1,024
  (27) (3) 
Program rights (b)
 509
   290
  219
 76
 
Commercial paper 590
   450
  140
 31
 
All other current liabilities 1,466
   1,427
  39
 3
 
Total current liabilities $4,052
   $3,708
  $344
 9 % 
(a) The increase (decrease) reflects the timing of payments.
(b) The increase is primarily associated with Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event.
 At At Increase/(Decrease) 
 September 30, 2017 December 31, 2016 $ % 
Pension and postretirement
benefit obligations (a)
 $1,619
   $1,769
  $(150) (8)% 
(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,Nine Months Ended September 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
 $935
 $1,117
 $(182) 
Discontinued operations(2) (27) 25
 52
 189
 (137) 
Net cash flow provided by operating activities1,306
 623
 683
 987
 1,306
 (319) 
Net cash flow used for investing activities from:            
Continuing operations(181) (102) (79) (399) (179) (220) 
Discontinued operations—
 (4) 4
 (18) (2) (16) 
Net cash flow used for investing activities(181) (106) (75) (417) (181) (236) 
Net cash flow used for financing activities(1,269) (812) (457) (1,018) (1,269) 251
 
Net decrease in cash and cash equivalents$(144) $(295) $151
 $(448) $(144) $(304) 
Operating Activities. For the nine months ended September 30, 2016,2017, the increasedecrease in cash provided by operating activities from continuing operations was primarily driven by growththe decline in affiliate and subscription fees and higher advertising revenues including from 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. 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,Nine Months Ended September 30,
2016
20152017
2016
Acquisitions (a)
 $(51) $(7) 
Acquisitions (including acquired television library) (a)
 $(258) $(51) 
Capital expenditures (b)
 (125) (104)  (112) (111) 
Investments in and advances to investee companies (c)(b)
 (44) (58)  (67) (44) 
Proceeds from dispositions (d)(c)
 28
 75
  11
 20
 
Other investing activities 11
 (8) 
All other investing activities, net 27
 7
 
Net cash flow used for investing activities from continuing operations (181) (102)  (399) (179) 
Net cash flow used for investing activities from discontinued operations —
 (4)  (18) (2) 
Net cash flow used for investing activities $(181) $(106)  $(417) $(181) 
(a) On August 27, 2017, CBS signed a binding agreement to acquire Ten Networks Holdings Limited (“Network Ten”), one of three major commercial broadcast networks in Australia, after Network Ten entered into voluntary administration. During the third quarter of 2017, the Company paid $138 million of the purchase price, primarily for the assumption of the secured debt of Network Ten’s lenders, and funding for working capital. The transaction, which is expected to close in the fourth quarter, will be completed in accordance with Australian applicable laws and procedures and is subject to certain regulatory approvals. 2017 also includes the acquisition of a television library and 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,Nine Months Ended September 30,
2016 20152017 2016
Repurchase of CBS Corp. Class B Common Stock $(1,534) $(2,345)  $(1,111) $(1,534) 
Proceeds from (repayments of) short-term debt borrowings, net 33
 (313) 
Proceeds from short-term debt borrowings, net 140
 33
 
Proceeds from issuance of senior notes 685
 1,959
  889
 685
 
Repayment of senior debentures (199) —
 
Repayment of senior notes and debentures (701) (199) 
Dividends (209) (228)  (224) (209) 
Payment of payroll taxes in lieu of issuing shares for stock-based compensation (89) (57) 
Proceeds from exercise of stock options 13
 137
  81
 13
 
All other financing activities, net (58) (22)  (3) (1) 
Net cash flow used for financing activities $(1,269)   $(812)  $(1,018)   $(1,269) 

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



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


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

As free cash flow is not a measure calculated in accordance with GAAP, free cash flow should not be considered in isolation of, or as a substitute for, either net cash flow provided by (used for) operating activities as a measure of liquidity or net earnings (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 EndedNine Months Ended
September 30,September 30,
2016 20152017 2016
Net cash flow provided by operating activities$1,306
 $623
$987
 $1,306
Capital expenditures(125) (104)(112) (111)
Exclude operating cash flow from discontinued operations(2) (27)52
 189
Free cash flow$1,183
 $546
$823
 $1,006

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 third quarter of 2016,2017, the Company repurchased 9.53.9 million shares of its Class B Common Stock under its share repurchase program for $500$250 million, at an average cost of $52.77$63.52 per share. During the nine months ended September 30, 2016,2017, the Company repurchased 29.016.2 million shares of its Class B Common Stock for $1.50$1.05 billion, at an average cost of $51.76$64.70 per share, leaving $5.60$3.06 billion of authorization at September 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 fourththird 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 October 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, 2015September 30, 2017 December 31, 2016
Commercial paper $33
 $—
  $590
 $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)
 9,039
 8,850
 
Obligations under capital leases 75
 83
  60
 75
 
Total debt 8,957
 8,448
  9,689
 9,375
 
Less commercial paper 33
 —
  590
 450
 
Less current portion of long-term debt 22
 222
  19
 23
 
Total long-term debt, net of current portion $8,902
 $8,226
  $9,080
 $8,902
 
(a) At September 30, 20162017 and December 31, 2015,2016, the senior debt balances included (i) a net unamortized discount of $53$55 million and $45$52 million,, respectively, (ii) unamortized deferred financing costs of $45 million and $44$43 million, respectively, and (iii) ana $2 million decrease and a $5 million increase, respectively, in the carrying value of the debt relating to previously settled fair value hedges of $7 million and $14 million, respectively.hedges. The face value of the Company’s senior debt was $8.94$9.14 billion and $8.44$8.94 billion at September 30, 20162017 and December 31, 2015,2016, respectively.

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 early redemption of the Company repaid its $200$300 million 4.625% senior notes due May 2018 resulted in a pre-tax loss on early extinguishment of outstanding 7.625% senior debentures upon maturity.

Atdebt of $5 million ($3 million, net of tax) for the three and nine months ended 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.2017.

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 $590 million and $450 million at a weighted average interest rate of 0.75%September 30, 2017 and December 31, 2016, respectively, each with maturities of less than 4560 days. The Company had no outstanding commercial paperweighted average interest rate for these borrowings was 1.44% at September 30, 2017 and 0.98% at December 31, 2015.2016.

Credit Facility
During June 2016,At September 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 September 30, 2016,2017, the Company’s Consolidated Leverage Ratio was approximately 2.5x3.0x.

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 September 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 September 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 for theThe Company’s long-term debt obligations due over the next five years of $2.10 billion isare 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.

debt.

Management’s Discussion and AnalysisThe Company expects to make a pension contribution of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)



During $500 million during the fourth quarter of 2016, the Company intends2017, which is expected 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 Radiobe partially funded by long-term borrowings. These planned repurchases are subject to market and business conditions, and remain at the discretion of management.

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

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



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


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 September 30, 2016,2017, the Company had pending approximately 34,40032,760 asbestos claims, as compared with approximately 36,03033,610 as of December 31, 20152016 and 37,19034,400 as of September 30, 2015.2016. During the third quarter of 2016,2017, the Company received approximately 930720 new claims and closed or moved to an inactive docket approximately 1,3201,200 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 Inc. with a subsidiary of Entercom Communications Corp. (“Entercom”) on the anticipated terms, which are 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.

Important Notice
This document is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to sell or the solicitation of an offer to buy any securities. In connection with the separation of CBS Radio Inc. and combination of CBS Radio Inc. with Entercom (the “Transaction”), CBS Corporation filed with the U.S. Securities and Exchange Commission (the “SEC”) a Schedule TO, and CBS Radio Inc. filed with the SEC a registration statement on Form S-4 and Form S-1 containing a prospectus of CBS Radio Inc., in each case, relating to the exchange offer.  Entercom has filed with the SEC a registration statement on Form S-4 relating to the Transaction, containing a prospectus of Entercom, and has also filed a proxy statement. Investors and security holders are urged to read these filings and any amendments or supplements thereto when they become available, as well as any other relevant documents, because they contain important information about CBS Corporation, CBS Radio Inc. and Entercom and the Transaction.  These materials and other documents filed with the SEC may be obtained free of charge at the SEC’s website, www.sec.gov, and at CBS Corporation's corporate website, www.cbscorporation.com.



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


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 September 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
July 1, 2017 - July 31, 2017 1.4
  $64.80
  1.4
   $3,214
 
August 1, 2017 - August 31, 2017 1.6
  $65.10
  1.6
   $3,107
 
September 1, 2017 - September 30, 2017 .9
  $58.36
  .9
   $3,057
 
Total 3.9
  $63.52
  3.9
   $3,057
 



Item 6.Exhibits.
Exhibit No.Description of Document
(2)Plan of acquisition, reorganization, arrangement, liquidation or succession.
(a)
Amendment No. 2, dated as of September 13, 2017, to the Agreement and Plan of Merger, dated as of February 2, 2017, as amended July 10, 2017, by and among CBS Corporation, CBS Radio Inc., Entercom Communications Corp. and Constitution Merger Sub Corp.  (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of CBS Corporation filed September 13, 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 July 20, 2017 between CBS Corporation and Joseph R. Ianniello (filed herewith).
(b)
Employment Agreement dated July 20, 2017 between CBS Corporation and Lawrence P. Tu (filed herewith).
(c)
Letter Agreement dated August 4, 2017 amending the Employment Agreement dated as of September 29, 2016 between CBS Corporation and Anthony G. Ambrosio (filed herewith).
(d)
Letter Agreement dated August 4, 2017 amending the Employment Agreement dated December 17, 2015 (effective as of July 1, 2016) between CBS Corporation and Gil Schwartz (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, 20162017/s/ Joseph R. Ianniello
 
Joseph R. Ianniello
Chief Operating Officer
  
Date: November 3, 20162017/s/ Lawrence Liding
 
Lawrence Liding
Executive Vice President, Controller and
Chief Accounting Officer


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

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

(10)Material Contracts
(a)Employment Agreement dated as of September 29, 2016 between CBS Corporation and Anthony G. Ambrosio (filed herewith).
(12)Statement Regarding Computation of Ratios (filed herewith)
(31)Rule 13a-14(a)/15d-14(a) Certifications
(a)Certification of the Chief Executive Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
(b)Certification of the Chief Operating Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
(32)Section 1350 Certifications
(a)Certification of the Chief Executive Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).
(b)Certification of the Chief Operating Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).
(101)Interactive Data File
101. INS XBRL Instance Document.
101. SCH XBRL Taxonomy Extension Schema.
101. CAL XBRL Taxonomy Extension Calculation Linkbase.
101. DEF XBRL Taxonomy Extension Definition Linkbase.
101. LAB XBRL Taxonomy Extension Label Linkbase.
101. PRE XBRL Taxonomy Extension Presentation Linkbase.

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