Document




 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 001-09553
CBS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
04-2949533
(I.R.S. Employer Identification No.)
 
 
51 W. 52nd Street, New York, New York
(Address of principal executive offices)
10019
(Zip Code)
(212) 975-4321
Registrant’s telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x
Number of shares of common stock outstanding at October 31, 2016:
Class A Common Stock, par value $.001 per share— 37,726,904
Class B Common Stock, par value $.001 per share— 391,975,900
 



CBS CORPORATION
INDEX TO FORM 10-Q
 
 
Page
 
PART I – FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
Consolidated Statements of Operations (Unaudited) for the
 Three and Nine Months Ended September 30, 2016 and September 30, 2015
 
 
 
 
Consolidated Statements of Comprehensive Income (Unaudited) for the
 Three and Nine Months Ended September 30, 2016 and September 30, 2015
 
 
 
 
Consolidated Balance Sheets (Unaudited) at September 30, 2016
 and December 31, 2015
 
 
 
 
Consolidated Statements of Cash Flows (Unaudited) for the
 Nine Months Ended September 30, 2016 and September 30, 2015
 
 
 
 
 
 
 
Management’s Discussion and Analysis of Results of Operations and Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1A.
Risk Factors.
 
 
 
 
 
 

- 2-


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 Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Revenues
$
3,396

 
$
3,257

 
$
10,532

 
$
9,976

Costs and expenses:
 

 
 

 
 
 
 
Operating
1,897

 
1,842

 
6,114

 
5,891

Selling, general and administrative
640

 
597

 
1,887

 
1,790

Depreciation and amortization
61

 
65

 
188

 
199

Restructuring charges (Note 10)
—

 
—

 
—

 
55

Other operating items, net
—

 
—

 
(9
)
 
(19
)
Total costs and expenses
2,598

 
2,504

 
8,180

 
7,916

Operating income
798

 
753

 
2,352

 
2,060

Interest expense
(104
)
 
(102
)
 
(304
)
 
(289
)
Interest income
7

 
6

 
22

 
18

Other items, net
2

 
(4
)
 
(5
)
 
(23
)
Earnings from continuing operations before income taxes and
equity in loss of investee companies
703

 
653

 
2,065

 
1,766

Provision for income taxes
(176
)
 
(211
)
 
(612
)
 
(579
)
Equity in loss of investee companies, net of tax
(13
)
 
(16
)
 
(43
)
 
(35
)
Net earnings from continuing operations
514

 
426

 
1,410

 
1,152

Loss from discontinued operations (Note 1)
(36
)
 
—

 
(36
)
 
—

Net earnings
$
478

 
$
426

 
$
1,374

 
$
1,152

 
 
 
 
 
 
 
 
Basic net earnings (loss) per common share:
 

 
 

 
 
 
 
Net earnings from continuing operations
$
1.16


$
.89


$
3.13


$
2.36

Loss from discontinued operations
$
(.08
)

$
—


$
(.08
)

$
—

Net earnings
$
1.08


$
.89


$
3.05


$
2.36

 
 
 
 
 
 
 
 
Diluted net earnings (loss) per common share:
 

 
 

 
 
 
 
Net earnings from continuing operations
$
1.15


$
.88


$
3.10


$
2.33

Loss from discontinued operations
$
(.08
)

$
—


$
(.08
)

$
—

Net earnings
$
1.07


$
.88


$
3.02


$
2.33

 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 

 
 

 
 
 
 
Basic
442

 
480

 
451

 
489

Diluted
446


484


455


495

 
 
 
 
 
 
 
 
Dividends per common share
$
.18

 
$
.15

 
$
.48

 
$
.45

See notes to consolidated financial statements.

-3-


CBS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; in millions)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Net earnings
$
478

 
$
426

 
$
1,374

 
$
1,152

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Cumulative translation adjustments
1

 
(5
)
 
2

 
(6
)
Amortization of net actuarial loss and prior service cost
10

 
9

 
29

 
27

Total other comprehensive income, net of tax
11

 
4

 
31

 
21

Total comprehensive income
$
489


$
430


$
1,405


$
1,173

See notes to consolidated financial statements.

-4-


CBS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
 
At
 
At
 
September 30, 2016
 
December 31, 2015
ASSETS
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
179

 
 
 
$
323

 
Receivables, less allowances of $67 (2016) and $63 (2015)
 
3,348

 
 
 
3,628

 
Programming and other inventory (Note 3)
 
1,459

 
 
 
1,271

 
Prepaid income taxes
 
39

 
 
 
101

 
Prepaid expenses
 
204

 
 
 
175

 
Other current assets
 
228

 
 
 
249

 
Total current assets
 
5,457

 
 
 
5,747

 
Property and equipment
 
3,263

 
 
 
3,243

 
Less accumulated depreciation and amortization
 
1,918

 
 
 
1,838

 
Net property and equipment
 
1,345

 
 
 
1,405

 
Programming and other inventory (Note 3)
 
2,237

 
 
 
1,957

 
Goodwill
 
6,531

 
 
 
6,481

 
Intangible assets
 
5,499

 
 
 
5,514

 
Other assets
 
2,779

 
 
 
2,661

 
Total Assets
 
$
23,848




$
23,765

 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 


 
 
 


 
Current Liabilities:
 


 
 
 


 
Accounts payable
 
$
153

 
 
 
$
192

 
Accrued compensation
 
282

 
 
 
315

 
Participants’ share and royalties payable
 
979

 
 
 
1,013

 
Program rights
 
373

 
 
 
374

 
Deferred revenues
 
141

 
 
 
295

 
Commercial paper (Note 5)
 
33

 
 
 
—

 
Current portion of long-term debt (Note 5)
 
22

 
 
 
222

 
Accrued expenses and other current liabilities
 
1,115

 
 
 
1,149

 
Total current liabilities
 
3,098

 
 
 
3,560

 
Long-term debt (Note 5)
 
8,902

 
 
 
8,226

 
Pension and postretirement benefit obligations
 
1,526

 
 
 
1,575

 
Deferred income tax liabilities, net
 
1,667

 
 
 
1,509

 
Other liabilities
 
3,240

 
 
 
3,260

 
Liabilities of discontinued operations
 
67

 
 
 
72

 
 
 


 
 
 


 
Commitments and contingencies (Note 9)
 


 
 
 


 
 
 


 
 
 


 
Stockholders’ Equity:
 


 
 
 


 
Class A Common Stock, par value $.001 per share; 375 shares authorized;
 38 (2016 and 2015) shares issued
 
—

 
 
 
—

 
Class B Common Stock, par value $.001 per share; 5,000 shares authorized;
 828 (2016) and 826 (2015) shares issued
 
1

 
 
 
1

 
Additional paid-in capital
 
43,935

 
 
 
44,055

 
Accumulated deficit
 
(19,144
)
 
 
 
(20,518
)
 
Accumulated other comprehensive loss (Note 7)
 
(739
)
 
 
 
(770
)
 
 
 
24,053

 
 
 
22,768

 
Less treasury stock, at cost; 429 (2016) and 401 (2015) Class B shares
 
18,705

 
 
 
17,205

 
Total Stockholders’ Equity
 
5,348

 
 
 
5,563

 
Total Liabilities and Stockholders’ Equity
 
$
23,848

 
 
 
$
23,765

 
See notes to consolidated financial statements.

-5-

CBS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
 
Nine Months Ended
 
September 30,
 
2016
 
2015
Operating Activities:
 
 
 
Net earnings
$
1,374

 
$
1,152

Less: Loss from discontinued operations
(36
)
 
—

Net earnings from continuing operations
1,410


1,152

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





Depreciation and amortization
188


199

Stock-based compensation
134


128

Equity in loss of investee companies, net of tax and distributions
48


37

Change in assets and liabilities, net of investing and financing activities
(472
)

(866
)
Net cash flow provided by operating activities from continuing operations
1,308


650

Net cash flow used for operating activities from discontinued operations
(2
)

(27
)
Net cash flow provided by operating activities
1,306


623

Investing Activities:





Acquisitions
(51
)
 
(7
)
Capital expenditures
(125
)

(104
)
Investments in and advances to investee companies
(44
)

(58
)
Proceeds from dispositions
28


75

Other investing activities
11

 
(8
)
Net cash flow used for investing activities from continuing operations
(181
)

(102
)
Net cash flow used for investing activities from discontinued operations
—


(4
)
Net cash flow used for investing activities
(181
)

(106
)
Financing Activities:





Proceeds from (repayments of) short-term debt borrowings, net
33


(313
)
Proceeds from issuance of senior notes
685

 
1,959

Repayment of senior debentures
(199
)
 
—

Payment of capital lease obligations
(13
)

(13
)
Dividends
(209
)

(228
)
Purchase of Company common stock
(1,534
)

(2,345
)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation
(57
)

(96
)
Proceeds from exercise of stock options
13


137

Excess tax benefit from stock-based compensation
13


87

Other financing activities
(1
)
 
—

Net cash flow used for financing activities
(1,269
)

(812
)
Net decrease in cash and cash equivalents
(144
)

(295
)
Cash and cash equivalents at beginning of period
323


428

Cash and cash equivalents at end of period
$
179


$
133

Supplemental disclosure of cash flow information





Cash paid for interest
$
358

 
$
303

Cash paid for income taxes from continuing operations
$
370

 
$
230

See notes to consolidated financial statements.

-6-


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), Local Media (CBS Television Stations) and Radio (CBS Radio).

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

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

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

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

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

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

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

-7-


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

assumed exercise of stock options and vesting of restricted stock units (“RSUs”) only in the periods in which such effect would have been dilutive. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, were 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 Ended
 
September 30,
 
September 30,
(in millions)
2016
 
2015
 
2016
 
2015
Weighted average shares for basic EPS
442

 
480

 
451

 
489

Dilutive effect of shares issuable under stock-based
compensation plans
4

 
4

 
4

 
6

Weighted average shares for diluted EPS
446

 
484

 
455

 
495

Other Liabilities-Other liabilities consist primarily of the noncurrent portion of residual liabilities of previously disposed businesses, participants’ share and royalties payable, program rights obligations, deferred compensation and other employee benefit accruals.

Additional Paid-In Capital-For the nine months ended September 30, 2016 and 2015, the Company recorded dividends of $218 million and $222 million, respectively, as a reduction to additional paid-in capital as the Company had an accumulated deficit balance.

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


-8-


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

Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period
During the first quarter of 2016, the Company adopted FASB guidance on the accounting for stock-based compensation when the terms of an award provide that a performance target that affects vesting could be achieved after the requisite service period. Under this guidance, such performance target should not be reflected in estimating the grant-date fair value of the award. The Company should begin recognizing compensation cost in the period in which it becomes probable that the performance target will be achieved, for the cumulative amount of compensation cost attributable to the period(s) for which the requisite service has already been rendered. The adoption of this guidance did not have an effect on the Company’s consolidated financial statements.
Recent Pronouncements
Statement of Cash Flows: Classification of Cash Receipts and Cash Payments
In August 2016, the FASB issued amended guidance which clarifies how certain cash receipts and cash payments should be presented and classified in the statement of cash flows.  The new guidance is intended to reduce the existing diversity in practice in how certain transactions are classified in the statement of cash flows. This guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the impact of this guidance on its consolidated statements of cash flows.

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

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

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

-9-


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

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

Revenue from Contracts with Customers
In May 2014, the FASB issued guidance on the recognition of revenues which provides a single, comprehensive revenue recognition model for all contracts with customers and supersedes most existing revenue recognition guidance. The main principle under this guidance is that an entity should recognize revenue at the amount it expects to be entitled to in exchange for the transfer of goods or services to customers. The Company anticipates that this guidance will result in changes to its revenue recognition and is currently assessing the impact. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted for interim and annual reporting periods beginning after December 15, 2016.
2) STOCK-BASED COMPENSATION
The following table summarizes the Company’s stock-based compensation expense for the three and nine months ended September 30, 2016 and 2015.
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
RSUs
$
39

 
$
32

 
$
112

 
$
105

Stock options
7

 
7

 
22

 
23

Stock-based compensation expense, before income taxes
46

 
39

 
134

 
128

Related tax benefit
(18
)
 
(15
)
 
(52
)
 
(49
)
Stock-based compensation expense, net of tax benefit
$
28

 
$
24

 
$
82

 
$
79

During the nine months ended September 30, 2016, the Company granted 3 million RSUs for CBS Corp. Class B Common Stock with a weighted average per unit grant-date fair value of $47.26. RSUs granted during the first nine months of 2016 generally vest over a one- to four-year service period. Compensation expense for RSUs is determined based upon the market price of the shares underlying the awards on the date of grant. For certain RSU awards the number of shares an employee earns ranges from 0% to 120% of the target award, based on the outcome of established performance conditions. Compensation expense is recorded based on the probable outcome of the performance conditions. During the nine months ended September 30, 2016, the Company also granted 2 million stock options with a weighted average exercise price of $45.79. Stock options granted during the first nine months of 2016 vest over a four-year service period and expire eight years from the date of grant. Compensation expense for stock options is determined based on the grant date fair value of the award calculated using the Black-Scholes options-pricing model.

Total unrecognized compensation cost related to unvested RSUs at September 30, 2016 was $237 million, which is expected to be recognized over a weighted average period of 2.4 years. Total unrecognized compensation cost related to unvested stock option awards at September 30, 2016 was $50 million, which is expected to be recognized over a weighted average period of 2.4 years.

-10-


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

3) PROGRAMMING AND OTHER INVENTORY
 
At
 
At
 
September 30, 2016
 
December 31, 2015
Acquired program rights
 
$
1,737

 
 
 
$
1,533

 
Internally produced programming:
 
 
 
 
 
 
 
Released
 
1,459

 
 
 
1,261

 
In process and other
 
445

 
 
 
392

 
Publishing, primarily finished goods
 
55

 
 
 
42

 
Total programming and other inventory
 
3,696

 
 
 
3,228

 
Less current portion
 
1,459

 
 
 
1,271

 
Total noncurrent programming and other inventory
 
$
2,237

 
 
 
$
1,957

 

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

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

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

The Company places advertisements with and leases production facilities from various subsidiaries of Viacom Inc. The total amounts for these transactions were $6 million for each of the three months ended September 30, 2016 and 2015, and $17 million for each of the nine months ended September 30, 2016 and 2015.


-11-


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, 2016 and December 31, 2015.
 
At
 
At
 
September 30, 2016
 
December 31, 2015
Receivables
 
$
87

 
 
 
$
115

 
Other assets (Receivables, noncurrent)
 
47

 
 
 
38

 
Total amounts due from Viacom Inc.
 
$
134

 
 
 
$
153

 
Other Related Parties. The Company has equity interests in two domestic television networks and several international joint ventures for television channels from which the Company earns revenues primarily by selling its television programming. Total revenues earned from sales to these joint ventures were $13 million and $20 million for the three months ended September 30, 2016 and 2015, respectively, and $69 million and $91 million for the nine months ended September 30, 2016 and 2015, respectively. At September 30, 2016 and December 31, 2015, total amounts due from these joint ventures were $41 million and $48 million, respectively.

The Company, through the normal course of business, is involved in transactions with other related parties that have not been material in any of the periods presented.
5) BANK FINANCING AND DEBT
The following table sets forth the Company’s debt.

At
 
At

September 30, 2016
 
December 31, 2015
Commercial paper

$
33




$
—


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

8,849




8,365


Obligations under capital leases

75




83


Total debt

8,957




8,448


Less commercial paper

33




—


Less current portion of long-term debt

22




222


Total long-term debt, net of current portion

$
8,902




$
8,226


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

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

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

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


-12-


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

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

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

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

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

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

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

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


-13-


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 cost
54

 
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 cost
161

 
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.

-14-


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 reclassifications
2

 
—

 
 
2

 
Reclassifications to net earnings
—

 
29

(a) 
 
29

 
Net other comprehensive income
2

 
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 earnings
2

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


-15-


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.

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, the Company had pending approximately 34,400 asbestos claims, as compared with approximately 36,030 as of December 31, 2015 and 37,190 as of September 30, 2015. During the third quarter of 2016, the Company received approximately 930 new claims and closed or moved to an inactive docket approximately 1,320 claims. The Company reports claims as closed when it becomes aware that a dismissal order has been entered by a court or when the Company has reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other factors. In 2015, as the result of an insurance settlement, insurance recoveries exceeded the Company’s after tax costs for settlement and defense of asbestos claims by approximately $5 million. In 2014, the Company’s costs for settlement and defense of asbestos claims after insurance and taxes were approximately $11 million. The Company’s costs for settlement and defense of asbestos claims may vary year to year and insurance proceeds are not always recovered in the same period as the insured portion of the expenses.

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

-16-


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) RESTRUCTURING CHARGES
During the year ended December 31, 2015, in a continued effort to reduce its cost structure, the Company initiated restructuring plans across several of its businesses, primarily for the reorganization of certain business operations. As a result, the Company recorded restructuring charges of $81 million, of which $55 million was recorded during the nine months ended September 30, 2015. The 2015 restructuring charges reflected $48 million of severance costs and $33 million of costs associated with exiting contractual obligations and other related costs. During the year ended December 31, 2014, the Company recorded restructuring charges of $26 million reflecting $17 million of severance costs and $9 million of costs associated with exiting contractual obligations. As of September 30, 2016, the cumulative settlements for the 2015 and 2014 restructuring charges were $83 million, of which $54 million was for severance costs and $29 million was for costs associated with contractual obligations.
 
Balance at
 
2016
 
Balance at
 
December 31, 2015
 
Settlements
 
September 30, 2016
Entertainment
 
$
19

 
 
 
$
(13
)
 
 
 
$
6

 
Local Media
 
11

 
 
 
(5
)
 
 
 
6

 
Radio
 
23

 
 
 
(11
)
 
 
 
12

 
Corporate
 
1

 
 
 
(1
)
 
 
 
—

 
Total
 
$
54

 
 
 
$
(30
)
 
 
 
$
24

 
 
Balance at
 
2015
 
2015
 
Balance at
 
December 31, 2014
 
Charges
 
Settlements
 
December 31, 2015
Entertainment
 
$
6

 
 
 
$
26

 
 
 
$
(13
)
 
 
 
$
19

 
Local Media
 
5

 
 
 
19

 
 
 
(13
)
 
 
 
11

 
Radio
 
5

 
 
 
36

 
 
 
(18
)
 
 
 
23

 
Corporate
 
2

 
 
 
—

 
 
 
(1
)
 
 
 
1

 
Total
 
$
18

 
 
 
$
81

 
 
 
$
(45
)
 
 
 
$
54

 
11) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
The Company’s carrying value of financial instruments approximates fair value, except for notes and debentures, which are not recorded at fair value. At September 30, 2016 and December 31, 2015, the carrying value of the Company’s senior debt was $8.85 billion and $8.37 billion, respectively, and the fair value, which is estimated based on quoted market prices for similar liabilities (Level 2) and includes accrued interest, was $9.90 billion and $8.78 billion, respectively.

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


-17-


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

Foreign Exchange Contracts

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

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

Gains recognized on derivative financial instruments were as follows:
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2016
 
2015
 
2016
 
2015
Financial 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.

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, 2016 and December 31, 2015. These assets and liabilities have been categorized according to the three-level fair value hierarchy established by the FASB, which prioritizes the inputs used in measuring fair value. Level 1 is based on publicly quoted prices for the asset or liability in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset or liability in inactive markets or quoted prices for similar assets or liabilities. Level 3 is based on unobservable inputs reflecting the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.
At September 30, 2016
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Foreign currency hedges
$
—

 
$
21

 
$
—

 
$
21

Total Assets
$
—

 
$
21

 
$
—

 
$
21

Liabilities:
 
 
 
 
 
 
 
Deferred compensation
$
—

 
$
329

 
$
—

 
$
329

Foreign currency hedges
—

 
5

 
—

 
5

Total Liabilities
$
—

 
$
334

 
$
—

 
$
334


-18-


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

At December 31, 2015
Level 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.
12) REPORTABLE SEGMENTS
The following tables set forth the Company’s financial performance by reportable segment. The Company’s operating segments, which are the same as its reportable segments, have been determined in accordance with the Company’s internal management structure, which is organized based upon products and services.

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

Three Months Ended
 
Nine Months Ended

September 30,
 
September 30,

2016
 
2015

2016
 
2015
Revenues:











Entertainment
$
1,949


$
1,932


$
6,483


$
5,978

Cable Networks
598


526


1,659


1,680

Publishing
226


203


558


547

Local Media
409

 
376

 
1,253

 
1,138

Radio
319

 
318

 
898

 
907

Corporate/Eliminations
(105
)

(98
)

(319
)

(274
)
Total Revenues
$
3,396


$
3,257


$
10,532


$
9,976

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 Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Intercompany Revenues:
 
 
 
 
 
 
 
Entertainment
$
102

 
$
96

 
$
321

 
$
270

Local Media
2

 
3

 
6

 
7

Radio
6

 
2

 
9

 
5

Total Intercompany Revenues
$
110

 
$
101

 
$
336

 
$
282


-19-


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

The Company presents operating income (loss) excluding restructuring charges, impairment charges, and other operating items, net, if any, (“Segment Operating Income”) as the primary measure of profit and loss for its operating segments in accordance with FASB guidance for segment reporting. The Company believes the presentation of Segment Operating Income is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company’s management and enhances their ability to understand the Company’s operating performance.
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Segment Operating Income (Loss):
 
 
 
 
 
 
 
Entertainment
$
348

 
$
339

 
$
1,148

 
$
947

Cable Networks
285

 
246

 
740

 
717

Publishing
44

 
43

 
83

 
80

Local Media
122

 
101

 
402

 
338

Radio
77

 
73

 
215

 
195

Corporate
(78
)
 
(49
)
 
(245
)
 
(181
)
Total Segment Operating Income
798

 
753

 
2,343

 
2,096

Restructuring charges
—

 
—

 
—

 
(55
)
Other operating items, net (a)
—

 
—

 
9

 
19

Operating income
798


753


2,352


2,060

Interest expense
(104
)
 
(102
)
 
(304
)
 
(289
)
Interest income
7

 
6

 
22

 
18

Other items, net
2

 
(4
)
 
(5
)
 
(23
)
Earnings from continuing operations before income taxes and
equity in loss of investee companies
703

 
653

 
2,065

 
1,766

Provision for income taxes
(176
)
 
(211
)
 
(612
)
 
(579
)
Equity in loss of investee companies, net of tax
(13
)
 
(16
)
 
(43
)
 
(35
)
Net earnings from continuing operations
514

 
426

 
1,410

 
1,152

Loss from discontinued operations
(36
)
 
—

 
(36
)
 
—

Net earnings
$
478

 
$
426

 
$
1,374

 
$
1,152

(a) Other operating items, net includes gains 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 impact of a new operating tax.
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Depreciation and Amortization:
 
 
 
 
 
 
 
Entertainment
$
28


$
31


$
88


$
95

Cable Networks
6


5


17


17

Publishing
1


1


4


4

Local Media
11

 
12

 
33

 
37

Radio
7

 
8

 
22

 
23

Corporate
8


8


24


23

Total Depreciation and Amortization
$
61


$
65


$
188


$
199


-20-


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

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Stock-based Compensation:
 
 
 
 
 
 
 
Entertainment
$
16

 
$
16

 
$
47

 
$
48

Cable Networks
3

 
3

 
9

 
8

Publishing
1

 
1

 
3

 
3

Local Media
3

 
3

 
9

 
9

Radio
4

 
2

 
11

 
12

Corporate
19

 
14

 
55

 
48

Total Stock-based Compensation
$
46

 
$
39

 
$
134

 
$
128

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Capital Expenditures:
 
 
 
 
 
 
 
Entertainment
$
23


$
33


$
60


$
54

Cable Networks
4


5


8


8

Publishing
1


2


7


4

Local Media
9

 
10

 
20

 
17

Radio
4

 
5

 
14

 
16

Corporate
5

 
3

 
16

 
5

Total Capital Expenditures
$
46

 
$
58

 
$
125

 
$
104

 
At
 
At
 
September 30, 2016
 
December 31, 2015
Assets:
 
 
 
 
 
 
 
Entertainment
 
$
11,220

 
 
 
$
10,910

 
Cable Networks
 
2,526

 
 
 
2,369

 
Publishing
 
835

 
 
 
880

 
Local Media
 
3,827

 
 
 
3,881

 
Radio
 
5,167

 
 
 
5,224

 
Corporate/Eliminations
 
249

 
 
 
476

 
Discontinued operations
 
24

 
 
 
25

 
Total Assets
 
$
23,848

 
 
 
$
23,765

 


-21-


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

13) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
CBS Operations Inc. is a wholly owned subsidiary of the Company. CBS Operations Inc. has fully and unconditionally guaranteed CBS Corp.’s senior debt securities. The following condensed consolidating financial statements present the results of operations, financial position and cash flows of CBS Corp., CBS Operations Inc., the direct and indirect Non-Guarantor Affiliates of CBS Corp. and CBS Operations Inc., and the eliminations necessary to arrive at the information for the Company on a consolidated basis.
 
Statement of Operations
 
For the Three Months Ended September 30, 2016
 
CBS Corp.
 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 
Eliminations
 
CBS Corp.
Consolidated
Revenues
$
42

 
$
3

 
$
3,351

 
$
—

 
$
3,396

Costs and expenses:
 
 
 
 
 
 
 
 
 
Operating
16

 
1

 
1,880

 
—

 
1,897

Selling, general and administrative
20

 
63

 
557

 
—

 
640

Depreciation and amortization
2

 
6

 
53

 
—

 
61

Total costs and expenses
38

 
70

 
2,490

 
—

 
2,598

Operating income (loss)
4

 
(67
)
 
861

 
—

 
798

Interest (expense) income, net
(129
)
 
(109
)
 
141

 
—

 
(97
)
Other items, net
—

 
—

 
2

 
—

 
2

Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies
(125
)
 
(176
)
 
1,004

 
—

 
703

Benefit (provision) for income taxes
43

 
59

 
(278
)
 
—

 
(176
)
Equity in earnings (loss) of investee companies, net of tax
560

 
327

 
(13
)
 
(887
)
 
(13
)
Net earnings from continuing operations
478

 
210

 
713

 
(887
)
 
514

Loss from discontinued operations
—

 
—

 
(36
)
 
—

 
(36
)
Net earnings
$
478

 
$
210

 
$
677

 
$
(887
)
 
$
478

Total comprehensive income
$
489

 
$
215

 
$
675

 
$
(890
)
 
$
489


-22-


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

 
Statement of Operations
 
For the Nine Months Ended September 30, 2016
 
CBS Corp.
 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 
Eliminations
 
CBS Corp.
Consolidated
Revenues
$
125

 
$
9

 
$
10,398

 
$
—

 
$
10,532

Cost and expenses:
 
 
 
 
 
 
 
 
 
Operating
48

 
4

 
6,062

 
—

 
6,114

Selling, general and administrative
62

 
196

 
1,629

 
—

 
1,887

Depreciation and amortization
4

 
17

 
167

 
—

 
188

Other operating items, net
—

 
—

 
(9
)
 
—

 
(9
)
Total costs and expenses
114

 
217

 
7,849

 
—

 
8,180

Operating income (loss)
11

 
(208
)
 
2,549

 
—

 
2,352

Interest (expense) income, net
(377
)
 
(319
)
 
414

 
—

 
(282
)
Other items, net
(2
)
 
3

 
(6
)
 
—

 
(5
)
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies
(368
)
 
(524
)
 
2,957

 
—

 
2,065

Benefit (provision) for income taxes
120

 
170

 
(902
)
 
—

 
(612
)
Equity in earnings (loss) of investee companies, net of tax
1,622

 
876

 
(43
)
 
(2,498
)
 
(43
)
Net earnings from continuing operations
1,374

 
522

 
2,012

 
(2,498
)
 
1,410

Loss from discontinued operations
—

 
—

 
(36
)
 
—

 
(36
)
Net earnings
$
1,374

 
$
522

 
$
1,976

 
$
(2,498
)
 
$
1,374

Total comprehensive income
$
1,405

 
$
540

 
$
1,965

 
$
(2,505
)
 
$
1,405


-23-


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

 
Statement of Operations
 
For the Three Months Ended September 30, 2015
 
CBS Corp.
 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 
Eliminations
 
CBS Corp.
Consolidated
Revenues
$
36

 
$
2

 
$
3,219

 
$
—

 
$
3,257

Costs and expenses:
 
 
 
 
 
 
 
 
 
Operating
17

 
1

 
1,824

 
—

 
1,842

Selling, general and administrative
3

 
49

 
545

 
—

 
597

Depreciation and amortization
1

 
5

 
59

 
—

 
65

Total costs and expenses
21

 
55

 
2,428

 
—

 
2,504

Operating income (loss)
15

 
(53
)
 
791

 
—

 
753

Interest (expense) income, net
(125
)
 
(103
)
 
132

 
—

 
(96
)
Other items, net
(1
)
 
6

 
(9
)
 
—

 
(4
)
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies
(111
)
 
(150
)
 
914

 
—

 
653

Benefit (provision) for income taxes
36

 
48

 
(295
)
 
—

 
(211
)
Equity in earnings (loss) of investee companies, net of tax
501

 
338

 
(16
)
 
(839
)
 
(16
)
Net earnings
$
426

 
$
236

 
$
603

 
$
(839
)
 
$
426

Total comprehensive income
$
430

 
$
240

 
$
590

 
$
(830
)
 
$
430


-24-


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

 
Statement of Operations
 
For the Nine Months Ended September 30, 2015
 
CBS Corp.
 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 
Eliminations
 
CBS Corp.
Consolidated
Revenues
$
101

 
$
8

 
$
9,867

 
$
—

 
$
9,976

Costs and expenses:
 
 
 
 
 
 
 
 
 
Operating
47

 
4

 
5,840

 
—

 
5,891

Selling, general and administrative
27

 
165

 
1,598

 
—

 
1,790

Depreciation and amortization
4

 
15

 
180

 
—

 
199

Restructuring charges
—

 
—

 
55

 
—

 
55

Other operating items, net
—

 
—

 
(19
)
 
—

 
(19
)
Total costs and expenses
78

 
184

 
7,654

 
—

 
7,916

Operating income (loss)
23

 
(176
)
 
2,213

 
—

 
2,060

Interest (expense) income, net
(358
)
 
(300
)
 
387

 
—

 
(271
)
Other items, net
(1
)
 
6

 
(28
)
 
—

 
(23
)
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies
(336
)
 
(470
)
 
2,572

 
—

 
1,766

Benefit (provision) for income taxes
109

 
152

 
(840
)
 
—

 
(579
)
Equity in earnings (loss) of investee companies, net of tax
1,379

 
802

 
(35
)
 
(2,181
)
 
(35
)
Net earnings
$
1,152

 
$
484

 
$
1,697

 
$
(2,181
)
 
$
1,152

Total comprehensive income
$
1,173

 
$
487

 
$
1,705

 
$
(2,192
)
 
$
1,173


-25-


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

 
Balance Sheet
 
At September 30, 2016
 
CBS Corp.
 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 
Eliminations
 
CBS Corp.
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
54

 
$
1

 
$
124

 
$
—

 
$
179

Receivables, net
20

 
2

 
3,326

 
—

 
3,348

Programming and other inventory
4

 
3

 
1,452

 
—

 
1,459

Prepaid expenses and other current assets
93

 
39

 
375

 
(36
)
 
471

Total current assets
171

 
45

 
5,277

 
(36
)
 
5,457

Property and equipment
47

 
184

 
3,032

 
—

 
3,263

Less accumulated depreciation and amortization
23

 
135

 
1,760

 
—

 
1,918

Net property and equipment
24

 
49

 
1,272

 
—

 
1,345

Programming and other inventory
6

 
7

 
2,224

 
—

 
2,237

Goodwill
98

 
62

 
6,371

 
—

 
6,531

Intangible assets
—

 
—

 
5,499

 
—

 
5,499

Investments in consolidated subsidiaries
44,372

 
13,652

 
—

 
(58,024
)
 
—

Other assets
153

 
11

 
2,615

 
—

 
2,779

Intercompany
—

 
1,901

 
25,528

 
(27,429
)
 
—

Total Assets
$
44,824

 
$
15,727

 
$
48,786

 
$
(85,489
)
 
$
23,848

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Accounts payable
$
1

 
$
2

 
$
150

 
$
—

 
$
153

Participants’ share and royalties payable
—

 
—

 
979

 
—

 
979

Program rights
4

 
4

 
365

 
—

 
373

Commercial paper
33

 
—

 
—

 
—

 
33

Current portion of long-term debt
6

 
—

 
16

 
—

 
22

Accrued expenses and other current liabilities
363

 
228

 
983

 
(36
)
 
1,538

Total current liabilities
407

 
234

 
2,493

 
(36
)
 
3,098

Long-term debt
8,797

 
—

 
105

 
—

 
8,902

Other liabilities
2,843

 
244

 
3,413

 
—

 
6,500

Intercompany
27,429

 
—

 
—

 
(27,429
)
 
—

Stockholders’ Equity:
 
 
 
 
 
 
 
 
 
Preferred stock
—

 
—

 
126

 
(126
)
 
—

Common stock
1

 
123

 
590

 
(713
)
 
1

Additional paid-in capital
43,935

 
—

 
60,894

 
(60,894
)
 
43,935

Retained earnings (deficit)
(19,144
)
 
15,435

 
(14,105
)
 
(1,330
)
 
(19,144
)
Accumulated other comprehensive income (loss)
(739
)
 
22

 
70

 
(92
)
 
(739
)
 
24,053

 
15,580

 
47,575

 
(63,155
)
 
24,053

Less treasury stock, at cost
18,705

 
331

 
4,800

 
(5,131
)
 
18,705

Total Stockholders’ Equity
5,348

 
15,249

 
42,775

 
(58,024
)
 
5,348

Total Liabilities and Stockholders’ Equity
$
44,824

 
$
15,727

 
$
48,786

 
$
(85,489
)
 
$
23,848


-26-


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

 
Balance Sheet
 
At December 31, 2015
 
CBS Corp.
 
CBS
Operations
Inc.
 
Non-
Guarantor
Affiliates
 
Eliminations
 
CBS Corp.
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
267

 
$
1

 
$
55

 
$
—

 
$
323

Receivables, net
28

 
2

 
3,598

 
—

 
3,628

Programming and other inventory
3

 
3

 
1,265

 
—

 
1,271

Prepaid expenses and other current assets
192

 
26

 
337

 
(30
)
 
525

Total current assets
490


32


5,255


(30
)

5,747

Property and equipment
46

 
180

 
3,017

 
—

 
3,243

Less accumulated depreciation and amortization
20

 
118

 
1,700

 
—

 
1,838

Net property and equipment
26


62


1,317


—

 
1,405

Programming and other inventory
6

 
9

 
1,942

 
—

 
1,957

Goodwill
98

 
62

 
6,321

 
—

 
6,481

Intangible assets
—

 
—

 
5,514

 
—

 
5,514

Investments in consolidated subsidiaries
42,744

 
12,775

 
—

 
(55,519
)
 
—

Other assets
163

 
11

 
2,487

 
—

 
2,661

Intercompany
—

 
2,248

 
23,988

 
(26,236
)
 
—

Total Assets
$
43,527


$
15,199


$
46,824


$
(81,785
)
 
$
23,765

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Accounts payable
$
1

 
$
4

 
$
187

 
$
—

 
$
192

Participants’ share and royalties payable
—

 
—

 
1,013

 
—

 
1,013

Program rights
4

 
4

 
366

 
—

 
374

Current portion of long-term debt
206

 
—

 
16

 
—

 
222

Accrued expenses and other current liabilities
418

 
230

 
1,141

 
(30
)
 
1,759

Total current liabilities
629


238


2,723


(30
)
 
3,560

Long-term debt
8,113

 
—

 
113

 
—

 
8,226

Other liabilities
2,986

 
252

 
3,178

 
—

 
6,416

Intercompany
26,236

 
—

 
—

 
(26,236
)
 
—

Stockholders’ Equity:
 
 
 
 
 
 
 
 


Preferred stock
—

 
—

 
126

 
(126
)
 
—

Common stock
1

 
123

 
590

 
(713
)
 
1

Additional paid-in capital
44,055

 
—

 
60,894

 
(60,894
)
 
44,055

Retained earnings (deficit)
(20,518
)
 
14,913

 
(16,081
)
 
1,168

 
(20,518
)
Accumulated other comprehensive income (loss)
(770
)
 
4

 
81

 
(85
)
 
(770
)
 
22,768


15,040


45,610


(60,650
)
 
22,768

Less treasury stock, at cost
17,205

 
331

 
4,800

 
(5,131
)
 
17,205

Total Stockholders’ Equity
5,563

 
14,709

 
40,810

 
(55,519
)
 
5,563

Total Liabilities and Stockholders’ Equity
$
43,527


$
15,199


$
46,824


$
(81,785
)
 
$
23,765


-27-


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

 
Statement of Cash Flows
 
For the Nine Months Ended September 30, 2016
 
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

Investing Activities:
 
 
 
 
 
 
 
 
 
Acquisitions
—

 
—

 
(51
)
 
—

 
(51
)
Capital expenditures
—

 
(16
)
 
(109
)
 
—

 
(125
)
Investments in and advances to investee companies
—

 
—

 
(44
)
 
—

 
(44
)
Proceeds from dispositions
(4
)
 
—

 
32

 
—

 
28

Other investing activities
7

 
—

 
4

 
—

 
11

Net cash flow provided by (used for) investing activities
3

 
(16
)
 
(168
)
 
—

 
(181
)
Financing Activities:
 
 
 
 
 
 
 
 
 
Proceeds from short-term debt borrowings, net
33

 
—

 
—

 
—

 
33

Proceeds from issuance of senior notes
685

 
—

 
—

 
—

 
685

Repayment of senior debentures
(199
)
 
—

 
—

 
—

 
(199
)
Payment of capital lease obligations
—

 
—

 
(13
)
 
—

 
(13
)
Dividends
(209
)
 
—

 
—

 
—

 
(209
)
Purchase of Company common stock
(1,534
)
 
—

 
—

 
—

 
(1,534
)
Payment of payroll taxes in lieu of issuing
shares for stock-based compensation
(57
)
 
—

 
—

 
—

 
(57
)
Proceeds from exercise of stock options
13

 
—

 
—

 
—

 
13

Excess tax benefit from stock-based compensation
13

 
—

 
—

 
—

 
13

Other financing activities
(1
)
 
—

 
—

 
—

 
(1
)
Increase (decrease) in intercompany payables
1,736

 
162

 
(1,898
)
 
—

 
—

Net cash flow provided by (used for) financing activities
480

 
162

 
(1,911
)
 
—

 
(1,269
)
Net (decrease) increase in cash and cash equivalents
(213
)
 
—

 
69

 
—

 
(144
)
Cash and cash equivalents at beginning of period
267

 
1

 
55

 
—

 
323

Cash and cash equivalents at end of period
$
54

 
$
1

 
$
124

 
$
—

 
$
179


-28-


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

 
Statement of Cash Flows
 
For the Nine Months Ended September 30, 2015
 
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

Investing Activities:
 
 
 
 
 
 
 
 


Acquisitions
—

 
—

 
(7
)
 
—

 
(7
)
Capital expenditures
—

 
(5
)
 
(99
)
 
—

 
(104
)
Investments in and advances to investee companies
—

 
—

 
(58
)
 
—

 
(58
)
Proceeds from dispositions
—

 
—

 
75

 
—

 
75

Other investing activities
(8
)
 
—

 
—

 
—

 
(8
)
Net cash flow used for investing activities from continuing operations
(8
)

(5
)

(89
)

—

 
(102
)
Net cash flow used for investing activities from discontinued operations
(4
)
 
—

 
—

 
—

 
(4
)
Net cash flow used for investing activities
(12
)

(5
)

(89
)

—

 
(106
)
Financing Activities:
 
 
 
 
 
 
 
 


Repayments of short-term debt borrowings, net
(313
)
 
—

 
—

 
—

 
(313
)
Proceeds from issuance of senior notes
1,959

 
—

 
—

 
—

 
1,959

Payment of capital lease obligations
—

 
—

 
(13
)
 
—

 
(13
)
Dividends
(228
)
 
—

 
—

 
—

 
(228
)
Purchase of Company common stock
(2,345
)
 
—

 
—

 
—

 
(2,345
)
Payment of payroll taxes in lieu of issuing
shares for stock-based compensation
(96
)
 
—

 
—

 
—

 
(96
)
Proceeds from exercise of stock options
137

 
—

 
—

 
—

 
137

Excess tax benefit from stock-based compensation
87

 
—

 
—

 
—

 
87

Increase (decrease) in intercompany payables
1,353

 
188

 
(1,541
)
 
—

 
—

Net cash flow provided by (used for) financing activities
554

 
188

 
(1,554
)
 
—

 
(812
)
Net decrease in cash and cash equivalents
(15
)

—


(280
)

—

 
(295
)
Cash and cash equivalents at beginning of period
63

 
1

 
364

 
—

 
428

Cash and cash equivalents at end of period
$
48


$
1


$
84


$
—

 
$
133


-29-


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

Overview

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

Operational highlights - Three Months Ended September 30, 2016 versus Three Months Ended September 30, 2015
Consolidated results of operations
 
 
 
 
Increase/(Decrease)
 
Three Months Ended September 30,
2016

2015
 
$
 
%
 
Revenues
$
3,396

 
$
3,257

 
$
139

 
4
%
 
Operating income
$
798

 
$
753

 
$
45

 
6
%
 
Net earnings from continuing operations
$
514

 
$
426

 
$
88

 
21
%
 
Adjusted net earnings from continuing operations (a)
$
467

 
$
426

 
$
41

 
10
%
 
Diluted EPS from continuing operations
$
1.15

 
$
.88

 
$
.27

 
31
%
 
Adjusted diluted EPS from continuing operations (a)
$
1.05

 
$
.88

 
$
.17

 
19
%
 
(a) See page 33 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

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

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

-30-


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


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

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

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

Operational highlights - 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,

-31-


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


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

Operating income grew 14% and diluted EPS increased 33% for the nine months ended September 30, 2016, primarily driven by the higher revenues. In addition, for the nine months ended September 30, 2015, operating income and diluted EPS included restructuring charges of $55 million and for the three and nine months ended September 30, 2016, diluted EPS included the aforementioned tax benefit of $47 million. The EPS comparison also benefited from lower weighted average shares outstanding as a result of the Company’s ongoing share repurchase program.

The Company generated operating cash flow from continuing operations of $1.31 billion for the nine months ended September 30, 2016 compared with $650 million for the nine months ended September 30, 2015. Free cash flow for the nine months ended September 30, 2016 was $1.18 billion compared with $546 million for the same prior-year period. These increases were primarily driven by growth in affiliate and subscription fees and higher advertising revenues, including from the broadcast of Super Bowl 50 on CBS, partially offset by increased investment in content. Free cash flow is a non-GAAP financial measure. See “Free Cash Flow” on pages 49 - 50 for a reconciliation of net cash flow provided by (used for) operating activities, the most directly comparable GAAP financial measure, to free cash flow.

Share Repurchases and Dividends
On July 28, 2016, the Company announced that its Board of Directors approved an increase to the Company’s share repurchase program to a total availability of $6.0 billion. During the 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.


-32-


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, 2016 and the nine months ended September 30, 2015 included discrete items that were not part of the normal course of operations. The following tables present adjusted operating income, adjusted net earnings from continuing operations, and adjusted diluted EPS from continuing operations, which exclude the impact of these discrete items. These adjusted results are non-GAAP financial measures, which are reconciled below to the most directly comparable financial measures in accordance with GAAP. The Company believes that presenting its financial results adjusted for the impact of discrete items is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by the Company’s management and provides a clearer perspective on the underlying performance of the Company.
 
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

 
(a) Other operating items, net includes gains 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 impact of a new operating tax.
(b) Reflects a one-time tax benefit associated with a multiyear adjustment to a tax deduction, which was approved by the IRS during the third quarter of 2016.
(c) Amounts may not sum as a result of rounding.


-33-


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


Consolidated Results of Operations
Three and Nine Months Ended September 30, 2016 versus Three and Nine Months Ended September 30, 2015
Revenues
 
Three Months Ended September 30,
 
 
 
 
% of Total
Revenues
 
 
 
% of Total
Revenues
 
Increase/(Decrease)
 
Revenues by Type
2016
 
 
2015
 
 
$
 
%
 
Advertising
$
1,469

 
43
%
 
$
1,481

 
46
%
 
$
(12
)
 
(1
)%
 
Content licensing and distribution
1,108

 
33

 
1,046

 
32

 
62

 
6

 
Affiliate and subscription fees
753

 
22

 
664

 
20

 
89

 
13

 
Other
66

 
2

 
66

 
2

 
—

 
—

 
Total Revenues
$
3,396

 
100
%
 
$
3,257

 
100
%
 
$
139

 
4
 %
 
 
Nine Months Ended September 30,
 
 
 
 
% of Total
Revenues
 
 
 
% of Total
Revenues
 
Increase/(Decrease)
 
Revenues by Type
2016
 
 
2015
 
 
$
 
%
 
Advertising
$
5,363

 
51
%
 
$
4,859

 
49
%
 
$
504

 
10
 %
 
Content licensing and distribution
2,780

 
26

 
2,889

 
29

 
(109
)
 
(4
)
 
Affiliate and subscription fees
2,208

 
21

 
2,044

 
20

 
164

 
8

 
Other
181

 
2

 
184

 
2

 
(3
)
 
(2
)
 
Total Revenues
$
10,532

 
100
%
 
$
9,976

 
100
%
 
$
556

 
6
 %
 
Advertising
For the three months ended September 30, 2016, advertising revenues decreased 1%. 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. Advertising revenues during the third quarter benefited from increased political advertising sales relating to U.S. federal and state elections. For the nine months ended September 30, 2016, the 10% increase in advertising revenues was driven by CBS’s broadcast of the Super Bowl, which is broadcast on the CBS Television Network once every three years through 2022 under the current contract; 6% growth in underlying network advertising; and higher 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, local advertising revenues are expected to continue to benefit from political advertising spending associated with U.S. federal and state elections. Additionally, the CBS Television Network’s upfront advertising sales (“Upfront”) for the 2016/2017 television broadcast season, which runs from the middle of September 2016 through the middle of September 2017, resulted in pricing increases compared with the prior broadcast season, which is expected to benefit advertising revenues during the 2016/2017 broadcast season. However, overall advertising revenues for the Company will be dependent on ratings for its programming and market conditions, including demand in the scatter advertising market, which is when advertisers purchase the remaining advertising spots closer to the broadcast of the related programming.

Content Licensing and Distribution
For the three months ended September 30, 2016, the 6% increase in content licensing and distribution revenues was driven by higher domestic television licensing, primarily reflecting the sales of Showtime original series, including Penny Dreadful, as well as various titles from the Company’s television library, partially offset by the

-34-


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


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

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

Affiliate and Subscription Fees
For the three months ended September 30, 2016, the 13% increase in affiliate and subscription fees reflects 32% growth in station affiliation fees and retransmission revenues, and revenues from digital distribution platforms, including CBS All Access and Showtime Networks’ over-the-top service. For the nine months ended September 30, 2016, the 8% increase in affiliate and subscription fees was driven by 39% growth in station affiliation fees and retransmission revenues, and revenues from digital distribution platforms. These increases were partially offset by the benefit to 2015 from Showtime Networks’ distribution of the Floyd Mayweather/Manny Pacquiao pay-per-view boxing event, which was the highest grossing pay-per-view event of all time.

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

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

Operating Expenses
 
Three Months Ended September 30,
 
 
 
 
% of Operating Expenses
 
 
 
% of Operating Expenses
 
Increase/(Decrease)
 
Operating Expenses by Type
2016
 
 
2015
 
 
$
 
%
 
Programming
$
526

 
28
%
 
$
518

 
28
%
 
$
8

 
2
%
 
Production
706

 
37

 
683

 
37

 
23

 
3

 
Participation, distribution and royalty
291

 
15

 
271

 
15

 
20

 
7

 
Other
374

 
20

 
370

 
20

 
4

 
1

 
Total Operating Expenses
$
1,897

 
100
%
 
$
1,842

 
100
%
 
$
55

 
3
%
 

-35-


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


 
Nine Months Ended September 30,
 
 
 
 
% of Operating Expenses
 
 
 
% of Operating Expenses
 
Increase/(Decrease)
 
Operating Expenses by Type
2016
 
 
2015
 
 
$
 
%
 
Programming
$
2,182

 
36
%
 
$
2,033

 
34
%
 
$
149

 
7
 %
 
Production
2,053

 
33

 
1,940

 
33

 
113

 
6

 
Participation, distribution and royalty
788

 
13

 
817

 
14

 
(29
)
 
(4
)
 
Other
1,091

 
18

 
1,101

 
19

 
(10
)
 
(1
)
 
Total Operating Expenses
$
6,114

 
100
%
 
$
5,891

 
100
%
 
$
223

 
4
 %
 

For the three months ended September 30, 2016, the 2% increase in programming expenses was driven by higher sports programming costs associated with the broadcast of NFL games partially offset by lower costs for acquired television series. For the nine months ended September 30, 2016, the 7% increase in programming expenses was primarily driven by increased sports programming costs associated with the broadcast of NFL games, including Super Bowl 50 which was broadcast by CBS in 2016. This increase was partially offset by costs in 2015 associated with Showtime Networks’ distribution of the Floyd Mayweather/Manny Pacquiao pay-per-view boxing event and lower costs for acquired television series as a result of a shift to a higher mix of internally developed television series.

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

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

Selling, General and Administrative Expenses
 
Three Months Ended September 30,
 
2016
 
% of Revenues
 
2015
 
% of Revenues
 
Increase/(Decrease)
 
Selling, general and administrative expenses
$
640

 
 
19
%
 
 
$
597

 
 
18
%
 
 
 
7
%
 
 
 
Nine Months Ended September 30,
 
2016
 
% of Revenues
 
2015
 
% of Revenues
 
Increase/(Decrease)
 
Selling, general and administrative expenses
$
1,887

 
 
18
%
 
 
$
1,790

 
 
18
%
 
 
 
5
%
 
 
Selling, general and administrative (“SG&A”) expenses include expenses incurred for selling and marketing costs, occupancy and back office support. For the three and nine months ended September 30, 2016, SG&A expenses increased 7% and 5%, respectively, primarily as a result of higher pension and other employee-related costs. For the nine months ended September 30, 2016, the increase also reflects higher advertising costs associated with the timing of series premieres on Showtime.


-36-


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


Depreciation and Amortization
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016

2015
 
Increase/(Decrease)
 
2016

2015
 
Increase/(Decrease)
 
Depreciation and amortization
$
61

 
$
65

 
 
(6
)%
 
 
$
188

 
$
199

 
 
(6
)%
 
 
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.

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 gains from the sales of internet businesses in China, and for 2016, also includes a multiyear, retroactive impact of a new operating tax.

Interest Expense/Income
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016

2015

Increase/(Decrease)
 
2016

2015
 
Increase/(Decrease)
 
Interest expense
$
(104
)
 
$
(102
)
 
 
2
%
 
 
$
(304
)
 
$
(289
)
 
 
5
%
 
 
Interest income
$
7

 
$
6

 
 
17
%
 
 
$
22

 
$
18

 
 
22
%
 
 
The following table presents the Company’s outstanding debt balances, excluding capital leases, and the weighted average interest rate as of September 30, 2016 and 2015:
 
At September 30,
 
 
 
Weighted Average
 
 
 
Weighted Average
 
 
2016
 
Interest Rate
 
2015
 
Interest Rate
 
Total long-term debt
$
8,849

 
 
4.47
%
 
 
$
8,409

 
 
4.68
%
 
 
Commercial paper
$
33

 
 
0.75
%
 
 
$
303

 
 
0.46
%
 
 
In October 2016, in connection with the Company’s previously announced plans to separate its radio business, CBS Radio borrowed $1.46 billion through a $1.06 billion senior secured term loan due 2023 and the issuance of $400 million of 7.25% senior unsecured notes due 2024 through a private placement. The Term Loan bears interest at a rate equal to 3.50% plus the greater of the London Interbank Offered Rate (“LIBOR”) and 1.00%.


-37-


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


Other Items, Net
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016

2015
 
Increase/(Decrease)
 
2016
 
2015
 
Increase/(Decrease)
 
Other items, net
$
2

 
$
(4
)
 
 
n/m
 
 
$
(5
)
 
$
(23
)
 
 
78
%
 
 
n/m - not meaningful
Other items, net for all periods primarily consists of foreign exchange gains and losses. For the three and nine months ended September 30, 2016, other items, net also includes a gain on the sale of an investment.
Provision for Income Taxes
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016

2015
 
Increase/(Decrease)
 
2016
 
2015
 
Increase/(Decrease)
 
Tax provision
$
176

 
$
211

 
 
(17
)%
 
 
$
612

 
$
579

 
 
6
%
 
 
Effective tax rate
25.0
%
 
32.3
%
 
 
 
 
 
29.6
%
 
32.8
%
 
 
 
 
 
The provision for income taxes represents federal, state and local, and foreign taxes on earnings from continuing operations before income taxes and equity in loss of investee companies. The lower tax rate for the three and nine months ended September 30, 2016 includes a one-time benefit of $47 million associated with a multiyear adjustment to a tax deduction, which was approved by the 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 ended September 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.


-38-


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


Loss from Discontinued Operations
Loss from discontinued operations of $36 million for the three and nine months ended September 30, 2016 reflects the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business that was accounted for as a discontinued operation.

Net Earnings and Diluted EPS
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016

2015

Increase/(Decrease)
 
2016
 
2015
 
Increase/(Decrease)
 
Net earnings
$
478

 
$
426

 
 
12
%
 
 
$
1,374

 
$
1,152

 
 
19
%
 
 
Diluted EPS
$
1.07

 
$
.88

 
 
22
%
 
 
$
3.02

 
$
2.33

 
 
30
%
 
 
Segment Results of Operations
In preparation for the planned separation of its radio business, the Company changed the manner in which it manages its television and radio operations during the third quarter of 2016. Accordingly, the Company’s previously reported operating segment, Local Broadcasting, has been separated into two operating segments, Local Media and Radio. In connection with this new segment presentation, the presentation of intercompany revenues has been revised, including station affiliation fees paid by Local Media to the CBS Television Network. Prior period results have been reclassified to conform to this presentation.

The Company presents operating income (loss) excluding restructuring charges, impairment charges, and other operating items, net, if any, (“Segment Operating Income”) as the primary measure of profit and loss for its operating segments in accordance with FASB guidance for segment reporting. The Company believes the presentation of Segment Operating Income is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company’s management and enhances their ability to understand the Company’s operating performance. The reconciliation of Segment Operating Income to the Company’s consolidated Net earnings is presented in Note 12 (Reportable Segments) to the consolidated financial statements.
Three Months Ended September 30, 2016 and 2015
 
Three Months Ended September 30,
 
 
% of Total
Revenues
 
 
% of Total
Revenues
Increase/(Decrease)
 
 
2016

2015
$
 
%
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Entertainment
$
1,949

 
57
 %
 
 
$
1,932

 
59
 %
 
$
17

 
1
 %
 
Cable Networks
598

 
18

 
 
526

 
16

 
72

 
14

 
Publishing
226

 
7

 
 
203

 
6

 
23

 
11

 
Local Media
409

 
12

 
 
376

 
12

 
33

 
9

 
Radio
319

 
9

 
 
318

 
10

 
1

 
—

 
Corporate/Eliminations
(105
)
 
(3
)
 
 
(98
)
 
(3
)
 
(7
)
 
(7
)
 
Total Revenues
$
3,396

 
100
 %
 
 
$
3,257

 
100
 %
 
$
139

 
4
 %
 

-39-


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,
 
 
% of Total
Operating
Income
 
 
% of Total
Operating
Income
 
 
 
 
 
 
Increase/(Decrease)
 
 
2016
 
2015
$
 
%
 
Segment Operating Income (Loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
Entertainment
$
348

 
44
 %
 
 
$
339

 
45
 %
 
$
9

 
3
 %
 
Cable Networks
285

 
36

 
 
246

 
33

 
39

 
16

 
Publishing
44

 
5

 
 
43

 
6

 
1

 
2

 
Local Media
122

 
15

 
 
101

 
13

 
21

 
21

 
Radio
77

 
10

 
 
73

 
10

 
4

 
5

 
Corporate
(78
)
 
(10
)
 
 
(49
)
 
(7
)
 
(29
)
 
(59
)
 
Total Operating Income
$
798

 
100
 %
 
 
$
753

 
100
 %
 
$
45

 
6
 %
 
 
Three Months Ended September 30,
 
 
 
Increase/(Decrease)
 
 
2016

2015
 
$
 
%
 
Depreciation and Amortization:
 
 
 
 
 
 
 
 
Entertainment
$
28

 
$
31

 
$
(3
)
 
(10
)%
 
Cable Networks
6

 
5

 
1

 
20

 
Publishing
1

 
1

 
—

 
—

 
Local Media
11

 
12

 
(1
)
 
(8
)
 
Radio
7

 
8

 
(1
)
 
(13
)
 
Corporate
8

 
8

 
—

 
—

 
Total Depreciation and Amortization
$
61

 
$
65

 
$
(4
)
 
(6
)%
 
Nine Months Ended September 30, 2016 and 2015
 
Nine Months Ended September 30,
 
 
% of Total
Revenues
 
 
% of Total
Revenues
Increase/(Decrease)
 
 
2016
 
2015
$
 
%
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Entertainment
$
6,483

 
62
 %
 
 
$
5,978

 
60
 %
 
$
505

 
8
 %
 
Cable Networks
1,659

 
16

 
 
1,680

 
17

 
(21
)
 
(1
)
 
Publishing
558

 
5

 
 
547

 
5

 
11

 
2

 
Local Media
1,253

 
12

 
 
1,138

 
11

 
115

 
10

 
Radio
898

 
8

 
 
907

 
9

 
(9
)
 
(1
)
 
Corporate/Eliminations
(319
)
 
(3
)
 
 
(274
)
 
(2
)
 
(45
)
 
(16
)
 
Total Revenues
$
10,532

 
100
 %
 
 
$
9,976

 
100
 %
 
$
556

 
6
 %
 

-40-


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 Networks
740

 
32

 
 
717

 
34

 
23

 
3

 
Publishing
83

 
3

 
 
80

 
4

 
3

 
4

 
Local Media
402

 
17

 
 
338

 
16

 
64

 
19

 
Radio
215

 
9

 
 
195

 
9

 
20

 
10

 
Corporate
(245
)
 
(10
)
 
 
(181
)
 
(8
)
 
(64
)
 
(35
)
 
Total Segment Operating Income
2,343

 
100
 %
 
 
2,096

 
100
 %
 
247

 
12

 
Restructuring charges
—

 
 
 
 
(55
)
 
 
 
55

 
n/m

 
Other operating items, net
9

 
 
 
 
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 Networks
17

 
17

 
—

 
—

 
Publishing
4

 
4

 
—

 
—

 
Local Media
33

 
37

 
(4
)
 
(11
)
 
Radio
22

 
23

 
(1
)
 
(4
)
 
Corporate
24

 
23

 
1

 
4

 
Total Depreciation and Amortization
$
188

 
$
199

 
$
(11
)
 
(6
)%
 
Entertainment (CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Interactive and CBS Films)
Three Months Ended September 30, 2016 and 2015
 
Three Months Ended September 30,
 
 
 
Increase/(Decrease)
 
 
2016

2015
 
$
 
%
 
Revenues
$
1,949

 
$
1,932

 
$
17

 
1
 %
 
Segment Operating Income
$
348

 
$
339

 
$
9

 
3
 %
 
Segment Operating Income as a % of revenues
18
%
 
18
%
 
 
 
 
 
Depreciation and amortization
$
28

 
$
31

 
$
(3
)
 
(10
)%
 
Capital expenditures
$
23

 
$
33

 
$
(10
)
 
(30
)%
 
For the three months ended September 30, 2016, the 1% increase in revenues was driven by a 39% increase in affiliate and subscription fees, led by higher station affiliation fees and subscription growth for CBS All Access. This growth was largely offset by 4% lower advertising revenues and 3% lower content licensing and distribution revenues. Advertising revenues were impacted by 10 hours of primetime preemptions for the Democratic and Republican conventions and the first Presidential debate, competition from the 2016 Summer Olympics, and sales of internet businesses in China during 2015. The decrease in content licensing and distribution revenues reflects the initial domestic availability of Elementary in the third quarter of 2015, partially offset by sales of various titles from the Company’s television library during the third quarter of 2016.

-41-


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 revenues
18
%
 
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 also impacted by the sales of internet businesses in China during 2015.

For the nine months ended September 30, 2016, the 21% increase in operating income was primarily a result of the increase in revenues. Restructuring charges for the nine months ended September 30, 2015 primarily reflected severance costs.
Cable Networks (Showtime Networks, CBS Sports Network and Smithsonian Networks)
Three Months Ended September 30, 2016 and 2015
 
Three Months Ended September 30,
 
 
 
Increase/(Decrease)
 
 
2016

2015
 
$
 
%
 
Revenues
$
598

 
$
526

 
$
72

 
14
 %
 
Segment Operating Income
$
285

 
$
246

 
$
39

 
16
 %
 
Segment Operating Income as a % of revenues
48
%
 
47
%
 
 
 
 
 
Depreciation and amortization
$
6

 
$
5

 
$
1

 
20
 %
 
Capital expenditures
$
4

 
$
5

 
$
(1
)
 
(20
)%
 
For the three months ended September 30, 2016, the 14% increase in revenues principally reflects higher revenues from the domestic licensing of Showtime original series, including Penny Dreadful, as well as growth in affiliate and subscription fees driven by Showtime Networks’ over-the-top service. As of September 30, 2016, subscriptions totaled 75 million for Showtime Networks (including Showtime, The Movie Channel and Flix), 55 million for CBS Sports Network and 33 million for Smithsonian Networks.
For the three months ended September 30, 2016, the 16% increase in operating income primarily reflects the revenue growth partially offset by increased investment in original series.

-42-


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 revenues
45
%
 
43
%
 
 
 
 
 
Depreciation and amortization
$
17

 
$
17

 
$
—

 
—
 %
 
Capital expenditures
$
8

 
$
8

 
$
—

 
—
 %
 
For the nine months ended September 30, 2016, revenues decreased 1% as the 2015 period benefited from the distribution of the Floyd Mayweather/Manny Pacquiao boxing event, which was the highest grossing pay-per-view event of all time. The decrease in pay-per-view revenues negatively impacted the revenue comparison by nine percentage points. Underlying results reflect higher revenues from the licensing of Showtime original series and Showtime Networks’ over-the-top service.
For the nine months ended September 30, 2016, the 3% increase in operating income was driven by growth from the licensing of Showtime original series and Showtime Networks’ over-the-top service, partially offset by increased investment in programming.
Publishing (Simon & Schuster)
Three Months Ended September 30, 2016 and 2015
 
Three Months Ended September 30,
 
 
 
Increase/(Decrease)
 
 
2016

2015
 
$
 
%
 
Revenues
$
226

 
$
203

 
$
23

 
11
 %
 
Segment Operating Income
$
44

 
$
43

 
$
1

 
2
 %
 
Segment Operating Income as a % of revenues
19
%
 
21
%
 
 
 
 
 
Depreciation and amortization
$
1

 
$
1

 
$
—

 
—
 %
 
Capital expenditures
$
1

 
$
2

 
$
(1
)
 
(50
)%
 
For the three months ended September 30, 2016, the 11% increase in revenues reflects higher print book sales and growth in digital book sales, mainly from digital audio. Digital revenues represented 23% of Publishing’s total revenues for the third quarter of 2016. Best-selling titles in the third quarter of 2016 included Born to Run by Bruce Springsteen and The Girl with the Lower Back Tattoo by Amy Schumer.
For the three months ended September 30, 2016, operating income increased 2% as the increase in revenues was offset by higher production and selling costs.

-43-


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 revenues
15
%
 
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)
Three Months Ended September 30, 2016 and 2015
 
Three Months Ended September 30,
 
 
 
Increase/(Decrease)
 
 
2016
 
2015
 
$
 
%
 
Revenues
$
409

 
$
376

 
$
33

 
9
 %
 
Segment Operating Income
$
122

 
$
101

 
$
21

 
21
 %
 
Segment Operating Income as a % of revenues
30
%
 
27
%
 
 
 
 
 
Depreciation and amortization
$
11

 
$
12

 
$
(1
)
 
(8
)%
 
Capital expenditures
$
9

 
$
10

 
$
(1
)
 
(10
)%
 
For the three months ended September 30, 2016, the 9% increase in revenues was driven by 7% growth in advertising revenues, which benefited from higher political advertising sales, and 13% growth in retransmission and subscription revenues.
For the three months ended September 30, 2016, the 21% increase in operating income primarily reflects the revenue growth.

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


-44-


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 revenues
32
%
 
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 revenues
24
%
 
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.


-45-


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 revenues
24
%
 
21
%
 
 
 
 
 
Restructuring charges
$
—

 
$
24

 
$
(24
)
 
n/m

 
Depreciation and amortization
$
22

 
$
23

 
$
(1
)
 
(4
)%
 
Capital expenditures
$
14

 
$
16

 
$
(2
)
 
(13
)%
 
n/m - not meaningful
For the nine months ended September 30, 2016, the 1% decrease in revenues was driven by lower local advertising sales, which were partially offset by higher national advertising sales.
For the nine months ended September 30, 2016, the 10% increase in operating income primarily reflects lower employee compensation and talent costs resulting from restructuring charges in 2015, which more than offset the revenue decline. Restructuring charges for the nine months ended September 30, 2015 primarily reflected severance costs.
In connection with the Company’s previously announced plans to separate its radio business, a preliminary registration statement was filed with the SEC during the third quarter of 2016 for the proposed initial public offering of the common stock of CBS Radio.
Corporate
Three Months Ended September 30, 2016 and 2015
 
Three Months Ended September 30,
 
 
 
Increase/(Decrease)
 
 
2016

2015
 
$
 
%
 
Segment Operating Loss
$
(78
)
 
$
(49
)
 
$
(29
)
 
(59
)%
 
Depreciation and amortization
$
8

 
$
8

 
$
—

 
—
 %
 
Capital expenditures
$
5

 
$
3

 
$
2

 
67
 %
 
Corporate expenses include general corporate overhead, unallocated shared company expenses, pension and postretirement benefit costs for plans retained by the Company for previously divested businesses, and intercompany eliminations. For the three months ended September 30, 2016, the 59% increase in corporate expenses primarily reflects higher pension and other employee-related costs.
Nine Months Ended September 30, 2016 and 2015
 
Nine Months Ended September 30,
 
 
 
Increase/(Decrease)
 
 
2016
 
2015
 
$
 
%
 
Segment Operating Loss
$
(245
)
 
$
(181
)
 
$
(64
)
 
(35
)%
 
Depreciation and amortization
$
24

 
$
23

 
$
1

 
4
 %
 
Capital expenditures (a)
$
16

 
$
5

 
$
11

 
n/m

 
n/m - not meaningful
(a) Primarily reflects the timing of capital projects.

-46-


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 ended September 30, 2016, the 35% increase in corporate expenses primarily reflects higher pension and other employee-related costs.
Financial Position
 
At
 
At
 
Increase/(Decrease)
 
 
September 30, 2016

December 31, 2015
 
$
 
%
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
179

 
 
 
$
323

 
 
$
(144
)
 
(45
)%
 
Receivables, net (a)
 
3,348

 
 
 
3,628

 
 
(280
)
 
(8
)
 
Programming and other inventory (b)
 
1,459

 
 
 
1,271

 
 
188

 
15

 
Prepaid income taxes (c)
 
39

 
 
 
101

 
 
(62
)
 
(61
)
 
All other current assets
 
432

 
 
 
424

 
 
8

 
2

 
Total current assets
 
$
5,457

 
 
 
$
5,747

 
 
$
(290
)
 
(5
)%
 
(a) The decrease is primarily due to seasonality.
(b) The increase mainly reflects the timing of payments for sports programming.
(c) The decrease is primarily due to the timing of income tax payments.
 
At
 
At
 
Increase/(Decrease)
 
 
September 30, 2016

December 31, 2015
 
$
 
%
 
Other assets (a)
 
$
2,779

 
 
 
$
2,661

 
 
$
118

 
4
%
 
(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
(a) The decrease is due to the timing of payments.
(b) The decrease primarily reflects the timing of advertising revenues.
(c) The decrease is the result of the repayment of $200 million of outstanding senior debentures upon maturity in January 2016.
 
At
 
At
 
Increase/(Decrease)
 
 
September 30, 2016
 
December 31, 2015
 
$
 
%
 
Long-term debt (a)
 
$
8,902

 
 
 
$
8,226

 
 
$
676

 
8
%
 
(a) The increase is primarily the result of the Company’s issuance of $700 million of senior notes during July 2016. (See Note 5 to the consolidated financial statements).

-47-


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


Cash Flows
The changes in cash and cash equivalents were as follows:
 
Nine Months Ended September 30,
 
2016
 
2015
 
Increase/(Decrease)
Net cash flow provided by (used for) operating activities from:
 
 
 
 
 
 
 
Continuing operations
$
1,308

 
$
650

 
 
$
658

 
Discontinued operations
(2
)
 
(27
)
 
 
25

 
Net cash flow provided by operating activities
1,306

 
623

 
 
683

 
Net cash flow used for investing activities from:
 
 
 
 
 
 
 
Continuing operations
(181
)
 
(102
)
 
 
(79
)
 
Discontinued operations
—

 
(4
)
 
 
4

 
Net cash flow used for investing activities
(181
)
 
(106
)
 
 
(75
)
 
Net cash flow used for financing activities
(1,269
)
 
(812
)
 
 
(457
)
 
Net decrease in cash and cash equivalents
$
(144
)
 
$
(295
)
 
 
$
151

 
Operating Activities. For the nine months ended September 30, 2016, the increase in cash provided by operating activities was primarily driven by growth in affiliate and subscription fees and higher advertising revenues, including from the broadcast of Super Bowl 50, partially offset by increased investment in content.

Cash paid for income taxes for the nine months ended September 30, 2016 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.


-48-


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,
 
2016

2015
Acquisitions (a)
 
$
(51
)
 
 
 
$
(7
)
 
Capital expenditures (b)
 
(125
)
 
 
 
(104
)
 
Investments in and advances to investee companies (c)
 
(44
)
 
 
 
(58
)
 
Proceeds from dispositions (d)
 
28

 
 
 
75

 
Other investing activities
 
11

 
 
 
(8
)
 
Net cash flow used for investing activities from continuing operations
 
(181
)
 
 
 
(102
)
 
Net cash flow used for investing activities from discontinued operations
 
—

 
 
 
(4
)
 
Net cash flow used for investing activities
 
$
(181
)
 
 
 
$
(106
)
 
(a) 2016 primarily reflects the acquisition of a sports-focused digital media business.
(b) Primarily reflects the timing of capital projects. Capital expenditures for the full year 2016 are expected to be at a similar level as the prior three years, which ranged from $193 million to $212 million.
(c) Mainly includes the Company’s investment in The CW as well as its other domestic and international television joint ventures.
(d) Primarily reflects sales of internet businesses in China.

Financing Activities
 
Nine Months Ended September 30,
 
2016
 
2015
Repurchase of CBS Corp. Class B Common Stock
 
$
(1,534
)
 
 
 
$
(2,345
)
 
Proceeds from (repayments of) short-term debt borrowings, net
 
33

 
 
 
(313
)
 
Proceeds from issuance of senior notes
 
685

 
 
 
1,959

 
Repayment of senior debentures
 
(199
)
 
 
 
—

 
Dividends
 
(209
)
 
 
 
(228
)
 
Proceeds from exercise of stock options
 
13

 
 
 
137

 
All other financing activities, net
 
(58
)
 
 
 
(22
)
 
Net cash flow used for financing activities
 
$
(1,269
)
 
 
 
$
(812
)
 

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.


-49-


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


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

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

The following table presents a reconciliation of the Company’s net cash flow provided by operating activities to free cash flow.
 
Nine Months Ended
 
September 30,
 
2016
 
2015
Net cash flow provided by operating activities
$
1,306

 
$
623

Capital expenditures
(125
)
 
(104
)
Exclude operating cash flow from discontinued operations
(2
)
 
(27
)
Free cash flow
$
1,183

 
$
546


Repurchase of Company Stock and Cash Dividends
On July 28, 2016, the Company announced that its Board of Directors approved an increase to the Company’s share repurchase program to a total availability of $6.0 billion. During the 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. Repurchases are expected to be funded by cash flows from operations, and, as appropriate, with short-term borrowings, including commercial paper, and/or the issuance of long-term debt. During the fourth quarter of 2016, the Company intends to repurchase $1.5 billion of its Class B Common Stock, including $500 million as part of its ongoing repurchase program and $1.0 billion using the net proceeds from the CBS Radio borrowings. These planned repurchases are subject to market and business conditions, and remain at the discretion of management.


-50-


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

 
 
 
$
—

 
Senior debt (1.95% – 7.875% due 2016 – 2045) (a)
 
8,849

 
 
 
8,365

 
Obligations under capital leases
 
75

 
 
 
83

 
Total debt
 
8,957

 
 
 
8,448

 
Less commercial paper
 
33

 
 
 
—

 
Less current portion of long-term debt
 
22

 
 
 
222

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

 
 
 
$
8,226

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

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

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

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

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

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

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

-51-


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, 2016, the Company had no borrowings outstanding under the Credit Facility and the remaining availability under the Credit Facility, net of outstanding letters of credit, was $2.49 billion.

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

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

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

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

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

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

-52-


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



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

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

Claims Related to Former Businesses: Asbestos.    The Company is a defendant in lawsuits claiming various personal injuries related to asbestos and other materials, which allegedly occurred principally as a result of exposure caused by various products manufactured by Westinghouse, a predecessor, generally prior to the early 1970s. Westinghouse was neither a producer nor a manufacturer of asbestos. The Company is typically named as one of a large number of defendants in both state and federal cases. In the majority of asbestos lawsuits, the 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, the Company had pending approximately 34,400 asbestos claims, as compared with approximately 36,030 as of December 31, 2015 and 37,190 as of September 30, 2015. During the third quarter of 2016, the Company received approximately 930 new claims and closed or moved to an inactive docket approximately 1,320 claims. The Company reports claims as closed when it becomes aware that a dismissal order has been entered by a court or when the Company has reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other factors. In 2015, as the result of an insurance settlement, insurance recoveries exceeded the Company’s after tax costs for settlement and defense of asbestos claims by approximately $5 million. In 2014, the Company’s costs for settlement and defense of asbestos claims after insurance and taxes were approximately $11 million. The Company’s costs for settlement and defense of asbestos claims may vary year to year and insurance proceeds are not always recovered in the same period as the insured portion of the expenses.

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

-53-


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


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

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

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

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

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

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

-54-


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


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

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

-55-


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 amount 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.
(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

 


-56-


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

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

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

(10)

 
Material Contracts
 
(a)
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.

-57-


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, 2016
/s/ Joseph R. Ianniello
 
Joseph R. Ianniello
Chief Operating Officer
 
 
Date: November 3, 2016
/s/ Lawrence Liding
 
Lawrence Liding
Executive Vice President, Controller and
Chief Accounting Officer

-58-


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.

-59-