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 ~~June 30, 2017~~March 31, 2018



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. 52^nd Street, New York, New York (Address of principal executive offices)	10019 (Zip Code)

(212) 975-4321

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Number of shares of common stock outstanding at ~~July 31, 2017:~~April 30, 2018:

Class A Common Stock, par value $.001 per share— ~~37,598,604~~37,507,617

Class B Common Stock, par value $.001 per share— ~~364,054,978~~341,480,807

CBS CORPORATION

INDEX TO FORM 10-Q



		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Consolidated Statements of Operations (Unaudited) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2018 and March 31, 2017 ~~and June 30, 2016~~	3

	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2018 and March 31, 2017 ~~and June 30, 2016~~	4

	Consolidated Balance Sheets (Unaudited) at ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017	5

	Consolidated Statements of Cash Flows (Unaudited) for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2018 and March 31, 2017 ~~and June 30, 2016~~	6

	Notes to Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition.	3332

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	5650

Item 4.	Controls and Procedures.	5650

	PART II – OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	5751

Item 6.	Exhibits.	5852

PART I – FINANCIAL INFORMATION



Item 1.	Financial Statements.

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in millions, except per share amounts)


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2017			2016			2017			2016			2018			2017
Revenues	$	3,257		$	2,976		$	6,600		$	6,564		$	3,761		$	3,343
Costs and expenses:
Operating	2,004			1,758			4,078			4,030			2,400			2,074
Selling, general and administrative	528			510			1,038			1,013			524			488
Depreciation and amortization	56			57			111			114			56			55
Other operating items, net	—			—			—			(9		)
Merger and acquisition-related costs													9			—
Total costs and expenses	2,588			2,325			5,227			5,148			2,989			2,617
Operating income	669			651			1,373			1,416			772			726
Interest expense	(111		)	(100		)	(220		)	(200		)	(118		)	(109		)
Interest income	15			8			28			15			17			13
Other items, net	5			(4		)	6			(7		)	(11		)	(21		)
Earnings from continuing operations before income taxes and equity in loss of investee companies	578			555			1,187			1,224			660			609
Provision for income taxes	(169		)	(173		)	(307		)	(379		)	(135		)	(138		)
Equity in loss of investee companies, net of tax	(12		)	(9		)	(29		)	(30		)	(14		)	(17		)
Net earnings from continuing operations	397			373			851			815			511			454
Net earnings (loss) from discontinued operations, net of tax (Note 3)	(339		)	50			(1,045		)	81
Net loss from discontinued operations, net of tax (Note 3)													—			(706		)
Net earnings (loss)	$	58		$	423		$	(194	)	$	896		$	511		$	(252	)

Basic net earnings (loss) per common share:
Net earnings from continuing operations	$	.98		$	.83		$	2.09		$	1.79		$	1.34		$	1.11
Net earnings (loss) from discontinued operations	$	(.84	)	$	.11		$	(2.57	)	$	.18
Net loss from discontinued operations													$	—		$	(1.72	)
Net earnings (loss)	$	.14		$	.94		$	(.48	)	$	1.97		$	1.34		$	(.61	)

Diluted net earnings (loss) per common share:
Net earnings from continuing operations	$	.97		$	.82		$	2.06		$	1.78		$	1.32		$	1.09
Net earnings (loss) from discontinued operations	$	(.83	)	$	.11		$	(2.53	)	$	.18
Net loss from discontinued operations													$	—		$	(1.70	)
Net earnings (loss)	$	.14		$	.93		$	(.47	)	$	1.95		$	1.32		$	(.61	)

Weighted average number of common shares outstanding:
Basic	405			451			407			455			382			410
Diluted	410			455			413			459			386			416

Dividends per common share	$	.18		$	.15		$	.36		$	.30		$	.18		$	.18

See notes to consolidated financial statements.

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; in millions)


	Three Months Ended				Six Months Ended					Three Months Ended
	June 30,				June 30,					March 31,
	2017		2016		2017			2016		2018			2017
Net earnings (loss)	$	58	$	423	$	(194	)	$	896	$	511		$	(252	)
Other comprehensive income, net of tax:
Cumulative translation adjustments	—		—		2			1		(6		)	2
Amortization of net actuarial loss and prior service cost	12		9		24			19
Amortization of net actuarial loss										15			12
Total other comprehensive income, net of tax	12		9		26			20		9			14
Total comprehensive income (loss)	$	70	$	432	$	(168	)	$	916	$	520		$	(238	)

See notes to consolidated financial statements.

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except per share amounts)


	At				At				At				At
	June 30, 2017				December 31, 2016				March 31, 2018				December 31, 2017
ASSETS
Current Assets:
Cash and cash equivalents		$	170			$	598			$	147			$	285
Receivables, less allowances of $61 (2017) and $60 (2016)		3,299				3,314
Receivables, less allowances of $49 (2018 and 2017)										3,820				3,697
Programming and other inventory (Note 4)		1,560				1,427				1,593				1,828
Prepaid income taxes		41				30				52				78
Prepaid expenses		132				185				164				194
Other current assets		185				204				415				191
Current assets of discontinued operations (Note 3)		299				305
Total current assets		5,686				6,063				6,191				6,273
Property and equipment		2,967				2,935				3,036				3,051
Less accumulated depreciation and amortization		1,753				1,694				1,777				1,771
Net property and equipment		1,214				1,241				1,259				1,280
Programming and other inventory (Note 4)		2,459				2,439				3,252				2,881
Goodwill		4,891				4,864				4,891				4,891
Intangible assets		2,627				2,633				2,661				2,666
Other assets		2,558				2,707				2,337				2,852
Assets of discontinued operations (Note 3)		3,218				4,291
Total Assets		$	22,653			$	24,238			$	20,591			$	20,843

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	124			$	148			$	230			$	231
Accrued compensation		223				369				198				343
Participants’ share and royalties payable		1,005				1,024				1,104				986
Program rights		262				290				631				373
Commercial paper (Note 6)		263				450
Short-term debt (Note 6)										217				679
Current portion of long-term debt (Note 6)		23				23				19				19
Accrued expenses and other current liabilities		1,169				1,249				1,670				1,341
Current liabilities of discontinued operations (Note 3)		161				155
Total current liabilities		3,230				3,708				4,069				3,972
Long-term debt (Note 6)		8,898				8,902				9,470				9,464
Pension and postretirement benefit obligations		1,638				1,769				1,309				1,328
Deferred income tax liabilities, net		628				590				493				480
Other liabilities		3,149				3,129				3,267				3,621
Liabilities of discontinued operations (Note 3)		2,483				2,451

Commitments and contingencies (Note 10)
Commitments and contingencies (Note 14)

Stockholders’ Equity:
Class A Common Stock, par value $.001 per share; 375 shares authorized; 38 (2017 and 2016) shares issued		—				—
Class B Common Stock, par value $.001 per share; 5,000 shares authorized; 832 (2017) and 829 (2016) shares issued		1				1
Class A Common Stock, par value $.001 per share; 375 shares authorized; 38 (2018 and 2017) shares issued										—				—
Class B Common Stock, par value $.001 per share; 5,000 shares authorized; 835 (2018) and 834 (2017) shares issued										1				1
Additional paid-in capital		43,820				43,913				43,743				43,797
Accumulated deficit		(19,451		)		(19,257		)		(18,650		)		(18,900		)
Accumulated other comprehensive loss (Note 8)		(741		)		(767		)		(653		)		(662		)
		23,629				23,890				24,441				24,236
Less treasury stock, at cost; 467 (2017) and 455 (2016) Class B shares		21,002				20,201
Less treasury stock, at cost; 492 (2018) and 489 (2017) Class B shares										22,458				22,258
Total Stockholders’ Equity		2,627				3,689				1,983				1,978
Total Liabilities and Stockholders’ Equity		$	22,653			$	24,238			$	20,591			$	20,843

See notes to consolidated financial statements.

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)


	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2017			2016			2018			2017
Operating Activities:
Net earnings (loss)	$	(194	)	$	896		$	511		$	(252	)
Less: Net earnings (loss) from discontinued operations, net of tax	(1,045		)	81
Less: Net loss from discontinued operations, net of tax							—			(706		)
Net earnings from continuing operations	851			815			511			454
Adjustments to reconcile net earnings from continuing operations to net cash flow provided by operating activities from continuing operations:
Depreciation and amortization	111			114			56			55
Stock-based compensation	85			81			44			40
Equity in loss of investee companies, net of tax and distributions	29			34			14			17
Change in assets and liabilities, net of investing and financing activities	(167		)	95			92			112
Net cash flow provided by operating activities from continuing operations	909			1,139			717			678
Net cash flow provided by operating activities from discontinued operations	29			112			—			41
Net cash flow provided by operating activities	938			1,251			717			719
Investing Activities:
Investments in and advances to investee companies							(40		)	(49		)
Capital expenditures							(30		)	(27		)
Acquisitions	(21		)	(51		)	—			(21		)
Capital expenditures	(68		)	(69		)
Investments in and advances to investee companies	(65		)	(43		)
Proceeds from dispositions	1			19
Other investing activities	14			4			3			15
Net cash flow used for investing activities from continuing operations	(139		)	(140		)	(67		)	(82		)
Net cash flow used for investing activities from discontinued operations	(13		)	(2		)	(23		)	(7		)
Net cash flow used for investing activities	(152		)	(142		)	(90		)	(89		)
Financing Activities:
(Repayments of) proceeds from short-term debt borrowings, net	(187		)	163
Repayment of senior debentures	—			(199		)
Proceeds from debt borrowings of CBS Radio	24			—
Repayments of short-term debt borrowings, net							(462		)	(420		)
Repayment of debt borrowings of CBS Radio	(5		)	—			—			(3		)
Payment of capital lease obligations	(8		)	(8		)	(4		)	(4		)
Payment of contingent consideration	(7		)	—			(5		)	(7		)
Dividends	(151		)	(142		)	(71		)	(77		)
Purchase of Company common stock	(845		)	(1,033		)	(186		)	(531		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation	(89		)	(57		)	(52		)	(76		)
Proceeds from exercise of stock options	39			10			16			36
Excess tax benefit from stock-based compensation (Note 1)	—			11
Other financing activities	—			(1		)	(1		)	—
Net cash flow used for financing activities	(1,229		)	(1,256		)	(765		)	(1,082		)
Net decrease in cash and cash equivalents	(443		)	(147		)	(138		)	(452		)
Cash and cash equivalents at beginning of period (includes $24 (2017) and $6 (2016) of discontinued operations cash)	622			323
Cash and cash equivalents at end of period (includes $9 (2017 and 2016) of discontinued operations cash)	$	179		$	176
Cash and cash equivalents at beginning of period (includes $24 (2017) of discontinued operations cash)							285			622
Cash and cash equivalents at end of period (includes $7 (2017) of discontinued operations cash)							$	147		$	170
Supplemental disclosure of cash flow information
Cash paid for interest:
Continuing operations	$	217		$	207		$	182		$	162
Discontinued operations	$	39		$	—		$	—		$	11

Cash paid for income taxes:
Continuing operations	$	272		$	261		$	29		$	1
Discontinued operations	$	46		$	35		$	—		$	12

See notes to consolidated financial statements.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollars in millions, except per share amounts)

1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business-CBS Corporation (together with its consolidated subsidiaries unless the context otherwise requires, the “Company” or “CBS Corp.”) is comprised of the following segments: Entertainment (CBS Television, comprised of the CBS Television Network, CBS Television Studios, CBS Studios International, and CBS Television Distribution; Network Ten; CBS Interactive and CBS Films), Cable Networks (Showtime Networks, CBS Sports Network and Smithsonian Networks), Publishing (Simon & Schuster) and Local Media (CBS Television Stations and CBS Local Digital Media).

Discontinued Operations-On ~~February 2,~~November 16, 2017, the Company ~~entered into an agreement with Entercom Communications Corp. (“Entercom”) to combine~~completed the Company’s radio business, CBS Radio, with Entercom in a merger to be effected through a Reverse Morris Trust transaction, which is expected to be tax-free to CBS Corp. and its stockholders. In connection with this transaction, the Company intends to split-off CBS Radio through an exchange offer, in which the Company’s stockholders may elect to exchange shares of the Company’s Class B Common Stock for sharesdisposition of CBS Radio ~~which will then be immediately converted into shares of Entercom Class A common stock at the time of the merger.~~Inc. (“CBS Radio”) through a split-off. CBS Radio has been presented as a discontinued operation in the Company’s consolidated financial statements ~~for all periods presented~~ (See Note 3).

Basis of Presentation-The accompanying unaudited consolidated financial statements of the Company have been prepared pursuant to the rules of the Securities and Exchange ~~Commission.~~Commission (“SEC”). 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, ~~2016.~~2017.

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 (“GAAP”) 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.

Revenues

~~Other Operating Items, Net~~Advertising Revenues-~~-Other operating items,~~Advertising revenues, net of agency commissions, are recognized when the advertising spots are aired on television or displayed on digital platforms. If there is a guarantee to deliver a targeted audience rating or number of impressions, revenues are recognized as the actual audience rating or impressions are delivered. Audience ratings and impressions are determined based on data provided by independent third-party companies. Advertising contracts, which are generally short-term, are billed monthly, with payments due shortly after the invoice date.

Advertising revenues are primarily generated by the Entertainment and Local Media segments.

Content Licensing and Distribution Revenues-Content licensing and distribution revenue is generated from the licensing of internally-produced television programming, fees from the distribution of third-party programming, and the publishing and distribution of consumer books.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Program Licensing and Distribution

Revenues from the licensing of internally produced television programming are recognized when the content is made available to the licensee for exhibition at the beginning of the license period. For license agreements containing multiple deliverables, revenues are allocated based on the relative standalone selling price of each program. Agreements to license programming are often long term, with collection terms ranging from one to five years.

The Company also distributes programs on behalf of third parties. In such arrangements, the Company generally obtains control of the program before selling it to the customer. Therefore, revenues from such distribution arrangements, which include both content licensing and advertising revenues, are recognized based on the gross amount of consideration received from the customer, with a participation expense recognized for the ~~six~~fees paid to the third party producer.

Substantially all of the Company’s program licensing and distribution revenues are generated by the Entertainment segment, with the remainder generated by the Cable Networks segment.

Publishing

Publishing revenues are recognized when merchandise is shipped or electronically delivered to the consumer. Consumer print books are generally sold with a right of return. The Company records a returns reserve and corresponding decrease in revenue at the time of sale based upon historical trends. For publishing revenues, payments are due shortly after shipment or electronic delivery.

Affiliate and Subscription Fees-A majority of the Company’s affiliate and subscription fees are generated by the Cable Networks segment and consist of fees received from multichannel video programming distributors (“MVPDs”) for carriage of the Company’s cable networks and subscription fees for the Showtime digital streaming subscription offering. The Entertainment segment generates affiliate and subscription fees primarily from television stations affiliated with the CBS Television Network and subscribers to CBS All Access, its owned streaming subscription service. In addition, Local Media receives retransmission fees from MVPDs for carriage of the Company’s television stations.

Affiliate and subscription fees are recognized as access to the Company’s content is provided to the customer over the term of the agreement. For agreements that provide for a variable fee, revenues are determined each month based on an agreed upon contractual rate applied to the number of subscribers tothe customer’s service. For agreements that provide for a fixed fee, revenues are recognized based on the relative fair value provided over the term of the agreement. For affiliate and subscription fee revenues, payments are generally due monthly.

Noncurrent Receivables-Noncurrent receivables of $1.58 billion and $1.59 billion at March 31, 2018 and January 1, 2018, respectively, are included in “Other assets” on the Company’s Consolidated Balance Sheets and primarily relate to revenues recognized under long-term television licensing arrangements.

Deferred Revenues-Deferred revenues primarily consist of cash received related to advertising arrangements and the licensing of television programming for which the revenues have not yet been earned. Advertising revenues that have been deferred are recognized when the required audience rating or impressions are delivered and revenues deferred under licensing arrangements are recognized when the content is made available to the customer.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Deferred revenues are primarily short term and included within “Accrued expenses and other current liabilities” on the Company’s Consolidated Balance Sheets. Total deferred revenues were $259 million and $284 million at March 31, 2018 and January 1, 2018, respectively. The change in deferred revenue for the three months ended ~~June 30, 2016~~March 31, 2018 reflects $115 million of revenues recognized that were included in deferred revenues at January 1, 2018, offset by cash payments received during the period for which the performance obligation was not satisfied prior to the end of the period.

Unrecognized Revenues Under Contract-As of March 31, 2018, unrecognized revenue attributable to unsatisfied performance obligations under the Company’s long-term contracts was $3.93 billion, of which $1.56 billion is expected to be recognized for the remainder of 2018, $1.28 billion for 2019, $683 million for 2020, and $405 million thereafter. These amounts only include contracts subject to a ~~gain from~~guaranteed fixed amount or the guaranteed minimum under variable contracts. Such amounts change on a regular basis as the Company renews existing agreements or enters into new agreements. Unrecognized revenues under contract disclosed above do not include (i) contracts with an original expected term of one year or less, mainly consisting of the Company’s advertising contracts (ii) contracts for which variable consideration is determined based on the customer’s subsequent sale or usage, mainly consisting of ~~a business~~affiliate and ~~a multiyear, retroactive impact~~subscription fee agreements and (iii) long-term licensing agreements for multiple programs for which the Company’s right to invoice corresponds with the value of ~~a new operating tax.~~the programs provided to the customer.

Net Earnings (Loss) per Common Share-Basic net earnings (loss) per share (“EPS”) is based upon net earnings (loss) divided by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the effect of the assumed exercise of stock options and vesting of restricted stock units (“RSUs”) and market-based performance share units (“PSUs”) only in the periods in which such effect would have been dilutive. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, were 10 million stock options and RSUs for the three months endedMarch 31, 2018 and 4 million stock options for ~~each of~~ the three ~~and six~~ months ended ~~June 30, 2017 and 6 million stock options for each of the three and six months ended~~March 31, 2017.~~June 30, 2016.~~

~~CBS CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

The table below presents a reconciliation of weighted average shares used in the calculation of basic and diluted EPS.


	Three Months Ended		Six Months Ended		Three Months Ended
	June 30,		June 30,		March 31,
(in millions)	2017	2016	2017	2016	2018	2017
Weighted average shares for basic EPS	405	451	407	455	382	410
Dilutive effect of shares issuable under stock-based compensation plans	5	4	6	4	4	6
Weighted average shares for diluted EPS	410	455	413	459	386	416

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 ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ the Company recorded dividends of ~~$148~~$69 million and $~~138~~75 million, respectively, as a reduction to additional paid-in capital as the Company had an accumulated deficit balance.

~~Adoption of New Accounting Standards~~

~~Improvements to Employee Share-Based Payment Accounting~~

During the first quarter of 2017, the Company adopted amended Financial Accounting Standards Board (“FASB”) 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 are 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 are classified with other income tax cash flows in operating activities. As a result of the adoption of this guidance, the Company’s excess tax benefits associated with the exercise of stock options and vesting of RSUs for the three and six months ended~~June 30,~~2017 were recorded in the provision for income taxes on the Consolidated Statements of Operations. The guidance requires the income statement classification to be applied prospectively, and therefore, excess tax benefits for prior periods remain classified in stockholders’ equity on the balance sheet. The Company elected to apply the cash flow classification provision of this guidance prospectively and therefore, excess tax benefits for prior periods remain classified as financing activities on the statements of cash flows. The amended guidance also gives the option to make a policy election to account for forfeitures as they occur. The Company, however, has elected to continue its existing practice of estimating forfeitures.

~~Simplifying the Accounting for Goodwill Impairment~~

During the first quarter of 2017, the Company early adopted amended FASB guidance which simplifies the accounting for goodwill impairment. This guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a goodwill impairment charge is recognized for the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

~~Recent~~Recently Adopted Accounting Pronouncements

Revenue from Contracts with Customers

During the first quarter of 2018, the Company adopted Financial Accounting Standards Board (“FASB”) 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 applied the modified retrospective method of adoption with the cumulative effect of the initial adoption of $261 million, reflected as an adjustment to the opening balance of accumulated deficit as of January 1, 2018. Prior periods continue to be presented under previous accounting guidance (See Note 13).

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

During the first quarter of 2018, the Company adopted FASB amended guidance on the presentation of net periodic pension and postretirement benefit cost (“net benefit cost”). This guidance requires the Company to present the service cost component of net benefit cost in the same line item(s) on the statement of operations as other compensation costs of the related employees. All of the other components of net benefit cost are presented in the statement of operations separately from the service cost component and below the subtotal of operating income. As a result of the adoption of this guidance, the Company presented $15 million of net benefit costs in “Other items, net” on the Consolidated Statement of Operations for the three months ended March 31, 2018, representing the components of net benefit cost other than service cost. This guidance is required to be applied retrospectively and therefore, $22 million of expenses, previously presented within operating income, have been reclassified to “Other items, net” for the three months ended March 31, 2017.

Stock Compensation: Scope of Modification Accounting

~~In May 2017,~~During the first quarter of 2018, the Company adopted FASB ~~issued~~ amended guidance on the accounting for stock-based compensation which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under this guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award as equity or liability changes as a result of the change in the terms or conditions of a share-based payment award. ~~This~~The adoption of this guidance ~~which is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted, is~~did not ~~expected to~~ have an impact on the Company’s consolidated financial statements.

~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~

In March 2017, the FASB issued amended guidance on the presentation of net periodic pension and postretirement benefit cost (“net benefit cost”). This guidance requires an employer to present on the statement of operations the service cost component of net benefit cost in the same line item(s) as other compensation costs of the related employees. The other components of net benefit cost will be presented in the statement of operations separately from the service cost component and below the subtotal of operating income. This guidance is required to be applied retrospectively and is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted as of the beginning of an annual reporting period. Upon adoption, the Company’s operating income will increase or decrease by an amount equal to the components of net benefit cost other than service cost, which are disclosed in Note 7.

Clarifying the Definition of a Business

~~In January 2017,~~During the first quarter of 2018, the Company adopted FASB ~~issued~~ amended guidance on the accounting for business combinations which clarifies the definition of a business and assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under this guidance, when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or group of similar assets), the assets acquired would not represent a business. In addition, in order to be considered a business, an acquisition would have to include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The amended guidance also narrows the definition of outputs by more closely aligning it with how outputs are described in FASB guidance for revenue recognition. ~~This~~The adoption of this guidance ~~is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted.~~

~~Intra-Entity Transfers of Assets Other than Inventory~~

In October 2016, the FASB issued amended guidance on the accounting for income taxes, which eliminates the exception in existing guidance which defers the recognition of the tax effects of intra-entity asset transfers other than inventory until the transferred asset is sold to a third party. Rather, the amended guidance requiresdid not have an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance, which is effective for interim and annual periods beginning after December 15, 2017, is not expected to have a material impact on the Company’s consolidated financial statements.

~~Statement of Cash Flows: Classification of Cash Receipts and Cash Payments~~

In August 2016, the FASB issued amended guidance which clarifies how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. The new guidance is intended to reduce the existing diversity in practice in how certain transactions are classified in the statement of cash flows. This guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Intra-Entity Transfers of Assets Other than Inventory

During the first quarter of 2018, the Company adopted the FASB amended guidance on the accounting for income taxes, which eliminates the exception in existing guidance that defers the recognition of the tax effects of intra-entity asset transfers other than inventory until the transferred asset is sold to a third party. Under this guidance, an entity recognizes the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued amended guidance that permits an entity to reclassify the income tax effects of federal tax legislation enacted in December 2017 (the “Tax Reform Act”) on items within accumulated other comprehensive income to retained earnings. The Company is currently evaluating the impact of this guidance, which is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted.

Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued amended guidance for hedge accounting, which expands the eligibility of hedging strategies that qualify for hedge accounting, modifies the recognition and presentation of hedges in the financial statements, and changes how companies assess hedge effectiveness. In addition, this guidance amends and expands disclosure requirements. This guidance, which is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted, is not expected to have a material impact on the Company’s consolidated financial statements.

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 reviewing its lease portfolio, evaluating the impact of this guidance on its consolidated balance ~~sheets.~~sheet and assessing system requirements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted.

~~Revenue from Contracts with Customers~~

In May 2014, the FASB issued guidance on the recognition of revenues which provides a single, comprehensive revenue recognition model for all contracts with customers and supersedes most existing revenue recognition guidance. The main principle under this guidance is that an entity should recognize revenue at the amount it expects to be entitled to in exchange for the transfer of goods or services to customers. This guidance is effective for the Company beginning in the first quarter of 2018. The Company anticipates that it will apply the modified retrospective method of adoption with the cumulative effect of the initial adoption reflected as an adjustment to the opening balance of accumulated deficit as of the date of adoption. The Company has identified the predominant changes to its accounting policies and is in the process of quantifying the impact on its consolidated financial statements and evaluating the additional disclosures that may be required. The adoption of this guidance is not expected to have a significant impact on the Company’s total revenues. The Company has identified changes to its revenue recognition policies primarily relating to two areas of content licensing and distribution revenues. First, revenues from certain distribution arrangements of third-party content will be recognized based on the gross amount of consideration received by the Company for such sale, with an associated expense recognized for the fees paid to the third-party producer. Under current accounting guidance, such revenues are recognized at the net amount retained by the Company after the payment of fees to the third-party producer. This change will not have an impact on the Company’s operating income. Second, revenues associated with the extension of an existing licensing arrangement, which are currently recognized upon the execution of such extension, will be recognized at a later date once the extension period begins. This change is not expected to have a material impact on the Company’s results on an annual basis, since extensions executed each year are generally offset by extensions for which the license period has begun.

~~2) STOCK-BASED COMPENSATION~~

~~The following table summarizes the Company’s stock-based compensation expense for the three and six months ended June 30, 2017 and 2016.~~

Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
RSUs and PSUs $ 38
$ 35
$ 71
$ 67
Stock options 7
7
14
14
Stock-based compensation expense, before income taxes 45
42
85
81
Related tax benefit (18 ) (16 ) (33 ) (31 )
Stock-based compensation expense, net of tax benefit $ 27
$ 26
$ 52
$ 50

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

2) STOCK-BASED COMPENSATION

The following table summarizes the Company’s stock-based compensation expense for the three months ended March 31, 2018 and 2017.



	Three Months Ended
	March 31,
	2018			2017
RSUs and PSUs	$	38		$	33
Stock options	6			7
Stock-based compensation expense, before income taxes	44			40
Related tax benefit	(11		)	(15		)
Stock-based compensation expense, net of tax benefit	$	33		$	25

During the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018, the Company granted 23 million RSUs for CBS Corp. Class B Common Stock with a weighted average per unit grant-date fair value of ~~$66.78.~~$54.61. RSUs granted during the first ~~six months~~quarter of ~~2017~~2018 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 ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, the Company also granted awards of market-based PSUs. The number of shares that will be issued upon vesting of the PSUs is based on the Company’s stock price performance over a designated measurement period, as well as the achievement of established operating goals. The fair value of the PSUs is determined on the grant date using a Monte Carlo simulation model and is expensed over the required employee service period. The fair value of the PSU awards granted during the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 was ~~$23~~$17 million.

During the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, the Company also granted 12 million stock options with a weighted average exercise price of ~~$66.31.~~$54.32. Stock options granted during the first ~~six months~~quarter of ~~2017~~2018 vest over a four-year service period and expire eight years from the date of grant. Compensation expense for stock options is determined based on the grant date fair value of the award calculated using the Black-Scholes options-pricing model.

Total unrecognized compensation cost related to unvested RSUs and PSUs at ~~June 30, 2017~~March 31, 2018 was ~~$270 million, which is expected to be recognized over a weighted average period of 2.5 years. Total unrecognized compensation cost related to unvested stock option awards at~~ ~~June 30, 2017~~ ~~was $51~~$295 million, which is expected to be recognized over a weighted average period of 2.6 years. Total unrecognized compensation cost related to unvested stock option awards at March 31, 2018 was $56 million, which is expected to be recognized over a weighted average period of 3.0 years.

3) DISCONTINUED OPERATIONS

On ~~February 2,~~November 16, 2017, the Company ~~entered into an agreement with Entercom to combine~~completed the Company’s radio business, CBS Radio, with Entercom in a merger to be effected through a Reverse Morris Trust transaction, which is expected to be tax-free to CBS Corp. and its stockholders. In connection with this transaction, Entercom will issue up to 105 million sharessplit-off of ~~its Class A common stock on a fully diluted basis, and the Company intends to split-off~~ CBS Radio through an exchange offer, in which the ~~Company’s stockholders may elect to exchange~~Company accepted 17.9 million shares of ~~the Company’s~~CBS Corp. Class B Common Stock from its stockholders in exchange for the 101.4 million shares of CBS Radio ~~which will then be immediately~~common stock that it owned. Immediately following the exchange offer, each share of CBS Radio common stock was converted into ~~shares~~one share of Entercom Communications Corp. (“Entercom”) Class A common stock ~~at the time~~upon completion of the merger. The Company expects the transaction to be completed during the fourth quarter of 2017, subject to customary approvals and closing conditions. CBS Radio has been classified as held for sale and presented as a discontinued operation in the Company’s consolidated financial statements for all periods presented.

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

~~CBS CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

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

~~The following table sets forth details of net earnings (loss) from discontinued operations for the three and six months ended June 30, 2017 and 2016.~~

Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017
2016
Revenues $ 306
$ 313
$ 556
$ 575
Costs and expenses:
Operating 105
103
194
188
Selling, general and administrative 129
122
251
236
Depreciation and amortization^(a)
—
6
—

13
Restructuring charge 7
—
7
—
Provision for valuation allowance 365
—
1,080
—
Total costs and expenses 606
231
1,532
437
Operating income (loss) (300 ) 82
(976 ) 138
Interest expense (20 ) —
(39 ) —
Earnings (loss) from discontinued operations (320 ) 82
(1,015 ) 138
Income tax provision (19 ) (32 ) (30 ) (57 )
Net earnings (loss) from discontinued operations, net of tax $ (339 ) $ 50
$ (1,045 ) $ 81

~~(a) CBS Radio has been classified as held for sale beginning in the fourth quarter of 2016. Under ASC 360, assets held for sale are not depreciated or amortized.~~

~~The following table presents the major classes of assets and liabilities of the Company’s discontinued operations.~~

At At
June 30, 2017 December 31, 2016
Receivables, net $ 240
$ 244

Other current assets 59
61

Goodwill 1,285
1,285

Intangible assets 2,832
2,832

Net property and equipment 153
145

Other assets 28
29

Valuation allowance for carrying value (1,080 ) —

Total Assets $ 3,517
$ 4,596

Current portion of long-term debt $ 10
$ 10

Other current liabilities 151
145

Long-term debt 1,356
1,335

Deferred income tax liabilities 1,010
998

Other liabilities 117
118

Total Liabilities $ 2,644
$ 2,606

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

The following table ~~presents CBS Radio’s long-term debt.~~sets forth details of net loss from discontinued operations for the three months ended March 31, 2017.

At At
June 30, 2017 December 31, 2016
Term Loan due October 2023, net of discount $ 950
$ 955

7.250% Senior Notes due November 2024 400
400

Revolving Credit Facility 34
10

Deferred financing costs (18 ) (20 )
Total long-term debt, including current portion $ 1,366
$ 1,345



	Three Months Ended March 31, 2017
Revenues	$	250
Costs and expenses:
Operating	89
Selling, general and administrative	122
Market value adjustment ^(a)	715
Total costs and expenses	926
Operating loss	(676		)
Interest expense	(19		)
Loss from discontinued operations	(695		)
Income tax provision	(11		)
Net loss from discontinued operations, net of tax	$	(706	)

~~CBS Radio’s senior secured term loan (“Term Loan”) bears interest at a rate equal~~(a) During 2017, prior to 3.50% plus the greater of the London Interbank Offered Rate (“LIBOR”) and 1.00%. The Term Loan is part of CBS Radio’s credit agreement which also includes a $250 million senior secured revolving credit facility (the “Revolving Credit Facility”) which expires in 2021. Interest on the Revolving Credit Facility is based on either LIBOR or a base rate plus a margin based on CBS Radio’s Consolidated Net Secured Leverage Ratio. The Consolidated Net Secured Leverage Ratio reflects the ratio of CBS Radio’s secured debt (less up to $150 million of cash and cash equivalents) to CBS Radio’s consolidated EBITDA (as defined in the credit agreement). The Revolving Credit Facility requiresits split-off, CBS Radio was measured each reporting period at the lower of its carrying amount or fair value less cost to ~~maintain a maximum Consolidated Net Secured Leverage Ratio~~sell. The value of ~~4.00 to 1.00.~~

~~In connection with financing for~~ the transaction with Entercom was determined based on March 3, 2017, CBS Radio entered into Amendment No. 1 to its credit agreement, dated as of October 17, 2016, to, among other things, create a tranche of Term B-1 Loans in an aggregate principal amount not to exceed $500 million. The Term B-1 Loans are expected to be funded onEntercom’s stock price at the closing ~~date~~ of the transaction ~~subject~~and therefore, the Company recorded a market value adjustment to ~~customary conditions.~~adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom.

4) PROGRAMMING AND OTHER INVENTORY


	At			At			At			At
	June 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Acquired program rights		$	1,892		$	1,773		$	2,008		$	2,234
Acquired television library								99			99
Internally produced programming:
Released		1,668			1,746			2,089			1,780
In process and other		405			298			590			543
Publishing, primarily finished goods		54			49			59			53
Total programming and other inventory		4,019			3,866			4,845			4,709
Less current portion		1,560			1,427			1,593			1,828
Total noncurrent programming and other inventory		$	2,459		$	2,439		$	3,252		$	2,881

5) RELATED PARTIES

National Amusements, Inc. National Amusements, Inc. (“NAI”) is the controlling stockholder of CBS Corp. and Viacom Inc. Mr. Sumner M. Redstone, the controlling stockholder, chairman of the board of directors and chief executive officer of NAI, is the Chairman Emeritus of CBS Corp. and the Chairman Emeritus of Viacom Inc. In addition, Ms. Shari Redstone, Mr. Sumner M. Redstone’s daughter, is the president and a director of NAI and the vice chair of the Board of Directors of each of CBS Corp. and Viacom Inc. Mr. David R. Andelman is a director of CBS Corp. and serves as a director of NAI. At ~~June 30, 2017~~March 31, 2018, NAI directly or indirectly owned approximately ~~79.5%~~79.7% of CBS Corp.’s voting Class A Common Stock, and owned approximately ~~9.7%~~10.3% of CBS Corp.’s Class A Common Stock and non-voting Class B Common Stock on a combined basis. NAI is controlled by Mr. Redstone through the Sumner M. Redstone National Amusements Trust (the “SMR Trust”), which owns 80% of the voting interest of NAI, and such voting interest of NAI held by the SMR Trust is voted solely by Mr. Redstone until his ~~incapacity or death. The SMR Trust provides that in the event of Mr. Redstone’s death or incapacity, voting control~~

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

incapacity or death. The SMR Trust provides that in the event of Mr. Redstone’s death or incapacity, voting control of the NAI voting interest held by the SMR Trust will pass to seven trustees, who will include CBS Corporation directors Ms. Shari Redstone and Mr. David R. Andelman. No member of the Company’s management is a trustee of the SMR Trust.

Viacom Inc. On February 1, 2018, the Company announced that its Board of Directors established a special committee of independent directors to evaluate a potential combination with Viacom Inc. There can be no assurance that this process will result in a transaction or on what terms any transaction may occur.

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 $19 million and ~~$31~~$54 million for the three months ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~, ~~respectively, and $73 million and $67 million for the six months ended June 30, 2017 and 2016,~~ respectively.

The Company ~~places advertisements with and~~ leases production facilities and purchases advertising spots from various subsidiaries of Viacom Inc. The total amounts for these transactions were $4$6 million and $5 million for ~~each of~~ the three months ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ ~~and $9 million and $11 million for the six months ended June 30, 2017 and 2016,~~, respectively.

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 ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017.


	At			At			At			At
	June 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Receivables		$	86		$	113		$	43		$	93
Other assets (Receivables, noncurrent)		51			35			14			11
Total amounts due from Viacom Inc.		$	137		$	148		$	57		$	104

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 $2031 million and ~~$24~~$26 million for the three months ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~, ~~respectively, and $49 million and $56 million for the six months ended June 30, 2017 and 2016,~~ respectively. At ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, total amounts due from these joint ventures were ~~$40~~$24 million and ~~$47~~$27 million, respectively.

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

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

6) BANK FINANCING AND DEBT

The following table sets forth the Company’s debt.


	At			At			At			At
	June 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Commercial paper		$	263		$	450		$	197		$	679
Senior debt (1.95% - 7.875% due 2017 - 2045) ^(a)		8,853			8,850
Short-term bank borrowings								20			—
Senior debt (2.30% - 7.875% due 2019 - 2045) ^(a)								9,428			9,426
Obligations under capital leases		68			75			61			57
Total debt		9,184			9,375			9,706			10,162
Less commercial paper		263			450
Less short-term debt								217			679
Less current portion of long-term debt		23			23			19			19
Total long-term debt, net of current portion		$	8,898		$	8,902		$	9,470		$	9,464

(a) At ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the senior debt balances included (i) a net unamortized discount of ~~$49~~$63 million and ~~$52~~$65 million, respectively, (ii) unamortized deferred financing costs of ~~$41~~$46 million and ~~$43~~$47 million, respectively, and (iii) ~~an increase~~a $3 million decrease in the carrying value of the debt relating to previously settled fair value hedges ~~of $2 million~~at both March 31, 2018 and ~~$5 million, respectively.~~December 31, 2017. The face value of the Company’s senior debt was ~~$8.94~~$9.54 billion at both ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016.~~

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

Commercial Paper

The Company had outstanding commercial paper borrowings under its $2.5 billion commercial paper program of ~~$263~~$197 million and ~~$450~~$679 million at ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively, each with maturities of less than 4590 days. The weighted average interest rate for these borrowings was ~~1.42%~~2.34% at ~~June 30, 2017~~March 31, 2018 and ~~0.98%~~1.88% at December 31, ~~2016.~~2017.

Credit Facility

At ~~June 30, 2017,~~March 31, 2018, the Company had a $2.5 billion revolving credit facility (the “Credit Facility”) which expires in June 2021. The Credit Facility requires the Company to maintain a maximum Consolidated Leverage Ratio of 4.5x at the end of each quarter as further described in the Credit Facility. At ~~June 30, 2017~~March 31, 2018, the Company’s Consolidated Leverage Ratio was approximately 2.9x.

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

~~CBS CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

The Credit Facility is used for general corporate purposes. At ~~June 30, 2017~~March 31, 2018, 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 CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

7) PENSION AND OTHER POSTRETIREMENT BENEFITS

The components of net periodic cost for the Company’s pension and postretirement benefit plans were as follows:

Pension Benefits Postretirement Benefits
Three Months Ended June 30, 2017 2016 2017 2016
Components of net periodic cost:
Service cost $ 8
$ 7
$ —
$ —
Interest cost 47
53
5
5
Expected return on plan assets (51 ) (57 ) —
—
Amortization of actuarial loss (gain) ^(a)
26
22
(6 ) (6 )
Net periodic cost $ 30
$ 25
$ (1 ) $ (1 )


	Pension Benefits						Postretirement Benefits						Pension Benefits						Postretirement Benefits
Six Months Ended June 30,	2017			2016			2017			2016
Three Months Ended March 31,													2018			2017			2018			2017
Components of net periodic cost:
Service cost	$	15		$	15		$	—		$	—		$	8		$	7		$	—		$	—
Interest cost	95			107			9			10			37			48			4			4
Expected return on plan assets	(101		)	(114		)	—			—			(45		)	(50		)	—			—
Amortization of actuarial loss (gain) ^(a)	51			43			(11		)	(11		)	24			25			(5		)	(5		)
Net periodic cost	$	60		$	51		$	(2	)	$	(1	)	$	24		$	30		$	(1	)	$	(1	)

(a) Reflects amounts reclassified from accumulated other comprehensive ~~income (loss)~~loss to net earnings (loss).

The service cost component of net periodic cost is presented on the Consolidated Statements of Operations within operating income and all other components of net periodic cost are presented within “Other items, net.”

8) STOCKHOLDERS’ EQUITY

During the ~~second~~first quarter of ~~2017,~~2018, the Company repurchased ~~4.7~~3.8 million shares of its Class B Common Stock under its share repurchase program for ~~$300~~$200 million, at an average cost of ~~$63.64 per share. During the six months ended June 30, 2017, the Company repurchased 12.3 million shares of its Class B Common Stock for $800 million, at an average cost of $65.08~~$52.67 per share, leaving ~~$3.31~~$2.86 billion of authorization at ~~June 30, 2017.~~March 31, 2018.

During the ~~second~~first quarter of ~~2017,~~2018, the Company declared a quarterly cash dividend of $.18 on its Class A and Class B Common Stock, resulting in total dividends of ~~$73~~$69 million, which were paid on ~~July~~April 1, ~~2017.~~2018.

Accumulated Other Comprehensive Income (Loss)

The following tables summarize the changes in the components of accumulated other comprehensive loss.



	Cumulative Translation Adjustments			Net Actuarial Loss and Prior Service Cost				Accumulated Other Comprehensive Loss
At December 31, 2017	$	159		$	(821	)			$	(662	)
Other comprehensive income before reclassifications	(6		)	—					(6		)
Reclassifications to net earnings	—			15			^(a)		15
Net other comprehensive income (loss)	(6		)	15					9
At March 31, 2018	$	153		$	(806	)			$	(653	)



	Cumulative Translation Adjustments		Net Actuarial Loss and Prior Service Cost				Accumulated Other Comprehensive Loss
At December 31, 2016	$	151	$	(918	)			$	(767	)
Other comprehensive income before reclassifications	2		—					2
Reclassifications to net loss	—		12			^(a)		12
Net other comprehensive income	2		12					14
At March 31, 2017	$	153	$	(906	)			$	(753	)


(a)	Reflects amortization of net actuarial losses. See Note 7.

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, 2016 $ 151
$ (918 ) $ (767 )
Other comprehensive income before reclassifications 2
—
2

Reclassifications to net earnings (loss) —
24
^(a)
24

Net other comprehensive income 2
24

26

At June 30, 2017 $ 153
$ (894 )
$ (741 )

Cumulative
Translation
Adjustments

Net Actuarial
Gain (Loss)
and Prior
Service Cost

Accumulated
Other
Comprehensive Loss
At December 31, 2015 $ 152
$ (922 ) $ (770 )
Other comprehensive income before reclassifications 1
—
1

Reclassifications to net earnings (loss) —
19
^(a)
19

Net other comprehensive income 1
19
20

At June 30, 2016 $ 153
$ (903 ) $ (750 )


~~(a)~~	~~Reflects amortization of net actuarial losses. See Note 7.~~

The net actuarial ~~gain (loss) and prior service cost~~losses related to pension and other postretirement benefit plans included in other comprehensive income isare net of a tax ~~provision~~provisions of ~~$16~~$4 million and ~~$13~~$8 million for the ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively.

~~CBS CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

9) INCOME TAXES

The provision for income taxes represents federal, state and local, and foreign income taxes on earnings from continuing operations before income taxes and equity in loss of investee companies.


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2018			2017
Provision for income taxes, including interest and before other discrete items	$	(176	)	$	(171	)	$	(361	)	$	(374	)
Provision for income taxes, including interest and before other discrete items ^(a)													$	(138	)	$	(185	)
Excess tax benefits from stock-based compensation ^(a)(b)	4			—			31			—			—			27
Other discrete items ^(b)(c)	3			(2		)	23			(5		)	3			20
Provision for income taxes	$	(169	)	$	(173	)	$	(307	)	$	(379	)	$	(135	)	$	(138	)
Effective income tax rate	29.2		%	31.2		%	25.9		%	31.0		%	20.5		%	22.7		%

(a) ~~Reflects excess~~The lower tax ~~benefits associated with~~provision for the ~~exercise~~three months ended March 31, 2018 primarily reflects a reduction in the federal corporate income tax rate from 35% to 21% as a result of ~~stock options and vesting~~the enactment of ~~RSUs. During the first quarter of 2017, the Company adopted FASB guidance which requires that~~new federal tax legislation in December 2017.

(b) Reflects the difference between the tax benefit from stock-based compensation expense and the deduction on the tax return ~~be recognized within~~associated with the ~~income tax provision on the statement~~exercise of ~~operations. Previously, such difference was recognized in stockholders’ equity on the balance sheet.~~stock options and vesting of RSUs. This difference occurs because stock-based compensation expense is recorded based on the grant-date fair value of the award, whereas the tax deduction is based on the fair value on the date the stock option is exercised or the RSU vests. ~~This guidance requires the income statement classification to be applied prospectively, and therefore, excess tax benefits for prior periods remain classified in stockholders’ equity.~~

~~(b)~~(c) For the ~~six~~three months ended ~~June 30,~~March 31, 2017, primarily reflects a one-time tax ~~benefits~~benefit of $22 million from the resolution of certain state income tax matters.

~~10) COMMITMENTS AND CONTINGENCIES~~

~~Guarantees~~

In December 2017, the U.S. government enacted the Tax Reform Act containing significant changes to U.S. federal tax law, including a reduction in the federal corporate tax rate from 35% to 21% and a one-time transition tax on cumulative foreign earnings and profits. For the year ended December 31, 2017 the Company recorded a net provisional charge for the estimated transition tax on cumulative foreign earnings and profits, offset by an estimated benefit to adjust the Company’s deferred income tax balances as a result of the reduced corporate income tax rate. The Tax Reform Act also includes a deduction for foreign derived intangible income and a tax on global intangible low-taxed income (“GILTI”), which imposes a U.S. tax on certain income earned by the Company’s foreign subsidiaries. The Company ~~has indemnification obligations with respect to letters of credit and surety bonds primarily used as security against non-performance~~included the tax on GILTI in its tax provision for the ~~normal course of business. At June 30, 2017, the outstanding letters of credit and surety bonds approximated $101 million and were not recorded on the Consolidated Balance Sheet.~~

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.three months ended March 31, 2018. The Company ~~records a liability for~~will complete 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 evaluationanalysis of the ~~relevant facts~~Tax Reform Act within one year from its enactment. Such analysis will include finalizing and ~~circumstances,~~recording any adjustments to provisional estimates, as well as determining whether to treat the ~~Company believes that the below-described legal matters and other litigation to which it is~~tax on GILTI as a ~~party are not likely, in the aggregate, to have~~period cost when incurred or as a ~~material adverse effect on its results~~component 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.deferred taxes.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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

Claims are frequently filed and/or settled in groups, which may make the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. The Company does not report as pending those claims on inactive, stayed, deferred or similar dockets which some jurisdictions have established for claimants who allege minimal or no impairment. As of June 30, 2017, the Company had pending approximately 33,240 asbestos claims, as compared with approximately 33,610 as of December 31, 2016 and 34,790 as of June 30, 2016. During the second quarter of 2017, the Company received approximately 1,030 new claims and closed or moved to an inactive docket approximately 1,390 claims. The Company reports claims as closed when it becomes aware that a dismissal order has been entered by a court or when the Company has reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other factors. In 2016, the Company’s costs for settlement and defense of asbestos claims after insurance and taxes were approximately $48 million. In 2015, as the result of an insurance settlement, insurance recoveries exceeded the Company’s after tax costs for settlement and defense of asbestos claims by approximately $5 million. 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 remained generally flat in recent years, it is difficult to predict future asbestos liabilities, as events and circumstances may occur including, among others, the number and types of claims and average cost to resolve such claims, which could affect the Company’s estimate of its asbestos liabilities.

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

~~11)~~10) RESTRUCTURING CHARGES

During the year ended December 31, ~~2016,~~2017, 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 $63 million, reflecting $54 million of severance costs and $9 million of costs associated with exiting contractual obligations and other related costs. During the year ended December 31, 2016, the Company recorded restructuring charges of $30 million, reflecting $19 million of severance costs and $11 million of costs associated with exiting contractual obligations and other related costs. ~~During the year ended December~~As of March 31, 2015, the Company recorded restructuring charges of $45 million, reflecting $24 million of severance costs and $21 million of costs associated with exiting contractual obligations and other related costs. As

~~CBS CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

~~of June 30, 2017,~~2018, the cumulative settlements for the ~~2016~~2017 and ~~2015~~2016 restructuring charges were $5340 million, of which $34 million was for severance costs and $196 million was for costs associated with contractual ~~obligations.~~obligations and other related costs.


	Balance at			2017				Balance at			Balance at			2018				Balance at
	December 31, 2016			Settlements				June 30, 2017			December 31, 2017			Settlements				March 31, 2018
Entertainment		$	20		$	(9	)		$	11		$	45		$	(10	)		$	35
Cable Networks		4			(2		)		2			1			—				1
Publishing		1			(1		)		—			3			(1		)		2
Local Media		12			(4		)		8			14			(1		)		13
Corporate		2			(1		)		1			3			(1		)		2
Total		$	39		$	(17	)		$	22		$	66		$	(13	)		$	53


	Balance at			2016			2016				Balance at			Balance at			2017			2017				Balance at
	December 31, 2015			Charges			Settlements				December 31, 2016			December 31, 2016			Charges			Settlements				December 31, 2017
Entertainment		$	16		$	16		$	(12	)		$	20		$	17		$	44		$	(16	)		$	45
Cable Networks		—			4			—				4			4			—			(3		)		1
Publishing		—			1			—				1			1			5			(3		)		3
Local Media		11			6			(5		)		12			6			12			(4		)		14
Corporate		—			3			(1		)		2			2			2			(1		)		3
Total		$	27		$	30		$	(18	)		$	39		$	30		$	63		$	(27	)		$	66

~~12)~~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 ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the carrying value of the Company’s senior debt was ~~$8.85~~$9.43 billion and the fair value, which is estimated based on quoted market prices for similar liabilities (Level 2) and includes accrued interest, was ~~$9.77~~$9.76 billion and ~~$9.51~~$10.16 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.

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 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 June 30, 2017 and December 31, 2016, the notional amount of all foreign exchange contracts was $356 million and $433 million, respectively.~~

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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

At March 31, 2018 and December 31, 2017, the notional amount of all foreign exchange contracts was $362 million and $410 million, respectively.

Losses recognized on derivative financial instruments were as follows:

Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016 Financial Statement Account
Non-designated foreign exchange contracts $ (12 ) $ 15
$ (20 ) $ 9
Other items, net



	Three Months Ended
	March 31,
	2018			2017			Financial Statement Account
Non-designated foreign exchange contracts	$	(4	)	$	(8	)	Other items, net

The fair value of the Company’s derivative instruments was not material to the Consolidated Balance Sheets for any of the periods presented.

The following tables set forth the Company’s assets and liabilities measured at fair value on a recurring basis at ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017. These assets and liabilities have been categorized according to the three-level fair value hierarchy established by the FASB, which prioritizes the inputs used in measuring fair value. Level 1 is based on publicly quoted prices for the asset or liability in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset or liability in inactive markets or quoted prices for similar assets or liabilities. Level 3 is based on unobservable inputs reflecting the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.


At June 30, 2017	Level 1		Level 2		Level 3		Total
At March 31, 2018									Level 1		Level 2		Level 3		Total
Assets:
Foreign currency hedges	$	—	$	12	$	—	$	12	$	—	$	3	$	—	$	3
Total Assets	$	—	$	12	$	—	$	12	$	—	$	3	$	—	$	3
Liabilities:
Deferred compensation	$	—	$	361	$	—	$	361	$	—	$	354	$	—	$	354
Foreign currency hedges	—		6		—		6		—		11		—		11
Total Liabilities	$	—	$	367	$	—	$	367	$	—	$	365	$	—	$	365


At December 31, 2016	Level 1		Level 2		Level 3		Total
At December 31, 2017									Level 1		Level 2		Level 3		Total
Assets:
Foreign currency hedges	$	—	$	34	$	—	$	34	$	—	$	5	$	—	$	5
Total Assets	$	—	$	34	$	—	$	34	$	—	$	5	$	—	$	5
Liabilities:
Deferred compensation	$	—	$	347	$	—	$	347	$	—	$	363	$	—	$	363
Foreign currency hedges	—		1		—		1		—		10		—		10
Total Liabilities	$	—	$	348	$	—	$	348	$	—	$	373	$	—	$	373

The fair value of foreign currency hedges is determined based on the present value of future cash flows using observable inputs including foreign currency exchange rates. The fair value of deferred compensation liabilities is determined based on the fair value of the investments elected by employees.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

~~13) REPORTABLE SEGMENTS~~12) SEGMENT AND REVENUE INFORMATION

The following tables set forth the Company’s financial ~~performance~~information 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.


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2017			2016			2017			2016			2018			2017
Revenues:
Entertainment	$	2,184		$	1,947		$	4,531		$	4,534		$	2,716		$	2,347
Cable Networks	571			536			1,114			1,061			609			543
Publishing	206			187			367			332			160			161
Local Media	412			396			821			844			415			409
Corporate/Eliminations	(116		)	(90		)	(233		)	(207		)	(139		)	(117		)
Total Revenues	$	3,257		$	2,976		$	6,600		$	6,564		$	3,761		$	3,343

Revenues generated between segments primarily reflect advertising sales, ~~television license fees~~content licensing and station affiliation fees. These transactions are recorded at market value as if the sales were to third parties and are eliminated in consolidation.


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2017		2016		2017		2016		2018		2017
Intercompany Revenues:
Entertainment	$	118	$	92	$	237	$	214	$	139	$	119
Local Media	3		2		6		4		5		3
Total Intercompany Revenues	$	121	$	94	$	243	$	218	$	144	$	122

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~~merger and ~~other operating items, net, each~~acquisition-related costs, where applicable, (“Segment Operating Income”) as the primary measure of profit and loss for its operating segments in accordance with FASB guidance for segment reporting. The Company believes the presentation of Segment Operating Income is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company’s management and enhances their ability to understand the Company’s operating performance.

Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Segment Operating Income (Loss):
Entertainment $ 346
$ 351
$ 744
$ 800
Cable Networks 253
227
501
455
Publishing 28
26
42
39
Local Media 127
130
250
280
Corporate (85 ) (83 ) (164 ) (167 )
Total Segment Operating Income 669
651
1,373
1,407
Other operating items, net ^(a)
—
—
—
9
Operating income 669

651

1,373

1,416
Interest expense (111 ) (100 ) (220 ) (200 )
Interest income 15
8
28
15
Other items, net 5
(4 ) 6
(7 )
Earnings from continuing operations before income taxes
and equity in loss of investee companies
578
555
1,187
1,224
Provision for income taxes (169 ) (173 ) (307 ) (379 )
Equity in loss of investee companies, net of tax (12 ) (9 ) (29 ) (30 )
Net earnings from continuing operations 397
373
851
815
Net earnings (loss) from discontinued operations, net of tax (339 ) 50
(1,045 ) 81
Net earnings (loss) $ 58
$ 423
$ (194 ) $ 896

~~(a) Other operating items, net includes a gain from the sale of an internet business in China and a multiyear, retroactive impact of a new operating tax.~~



	Three Months Ended
	March 31,
	2018			2017
Segment Operating Income (Loss):
Entertainment	$	492		$	403
Cable Networks	230			250
Publishing	16			15
Local Media	118			124
Corporate	(75		)	(66		)
Merger and acquisition-related costs	(9		)	—
Operating income	772			726
Interest expense	(118		)	(109		)
Interest income	17			13
Other items, net	(11		)	(21		)
Earnings from continuing operations before income taxes and equity in loss of investee companies	660			609
Provision for income taxes	(135		)	(138		)
Equity in loss of investee companies, net of tax	(14		)	(17		)
Net earnings from continuing operations	511			454
Net loss from discontinued operations, net of tax	—			(706		)
Net earnings (loss)	$	511		$	(252	)


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2017		2016		2017		2016		2018		2017
Depreciation and Amortization:
Entertainment	$	27	$	30	$	56	$	60	$	30	$	29
Cable Networks	6		5		12		11		6		6
Publishing	2		2		3		3		1		1
Local Media	12		11		23		22		11		11
Corporate	9		9		17		18		8		8
Total Depreciation and Amortization	$	56	$	57	$	111	$	114	$	56	$	55



	Three Months Ended
	March 31,
	2018		2017
Stock-based Compensation:
Entertainment	$	15	$	15
Cable Networks	3		3
Publishing	1		1
Local Media	3		3
Corporate	22		18
Total Stock-based Compensation	$	44	$	40

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2017		2016		2017		2016		2018		2017
Stock-based Compensation:
Capital Expenditures:
Entertainment	$	17	$	16	$	32	$	31	$	17	$	14
Cable Networks	3		3		6		6		4		3
Publishing	1		1		2		2		1		1
Local Media	3		3		6		6		4		5
Corporate	21		19		39		36		4		4
Total Stock-based Compensation	$	45	$	42	$	85	$	81
Total Capital Expenditures									$	30	$	27


	Three Months Ended				Six Months Ended				At			At
	June 30,				June 30,				March 31, 2018			December 31, 2017
	2017		2016		2017		2016
Capital Expenditures:
Assets:
Entertainment	$	24	$	24	$	38	$	37		$	12,430		$	12,626
Cable Networks	4		2		7		4			2,920			2,878
Publishing	—		3		1		6			929			906
Local Media	7		4		12		11			4,010			4,042
Corporate	6		2		10		11
Total Capital Expenditures	$	41	$	35	$	68	$	69
Corporate/Eliminations										289			378
Discontinued operations										13			13
Total Assets										$	20,591		$	20,843

The following table presents the Company’s revenues disaggregated into categories based on the nature of such revenues.

At At
June 30, 2017 December 31, 2016
Assets:
Entertainment $ 11,441
$ 11,262

Cable Networks 2,594
2,618

Publishing 858
880

Local Media 4,018
4,065

Corporate/Eliminations 225
817

Discontinued operations 3,517
4,596

Total Assets $ 22,653
$ 24,238



	Three Months Ended March 31,
Revenues by Type	2018		2017
Advertising	$	1,733	$	1,603
Content licensing and distribution:
Programming	835		684
Publishing	160		161
Affiliate and subscription fees	979		842
Other	54		53
Total Revenues	$	3,761	$	3,343

13) ADOPTION OF “REVENUE FROM CONTRACTS WITH CUSTOMERS”

On January 1, 2018, the Company adopted FASB Accounting Standards Codification 606 (“ASC 606”) on the recognition of revenues using the modified retrospective method applied to all contracts. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior periods have not been adjusted. The Company recorded an increase to accumulated deficit of $261 million as of January 1, 2018 reflecting the cumulative impact of the adoption of ASC 606.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

The adoption of ASC 606 primarily resulted in two changes to the Company’s revenue recognition policies.

Revenues from Distribution Arrangements

Revenues from the Company’s distribution of third-party content are now recognized based on the gross amount of consideration received from the customer, with an offsetting participation expense recognized for the fees paid to the third party. Under previous accounting guidance, such revenues, which include content licensing and distribution revenues and advertising revenues, were recognized at the net amount retained by the Company after the payment of fees to the third party. For the three months ended March 31, 2018, revenues and operating expenses relating to such distribution arrangements were each $63 million higher under ASC 606 than the amounts that would have been reported under previous accounting guidance, with no impact to operating income.

Revenues from the Renewal of Licensing Agreements

Revenues associated with the renewal of an existing license agreement are now recognized at the beginning of the renewal period. Under previous accounting guidance, these revenues were recognized upon the execution of such renewal. Content licensing and distribution revenue comparisons will continue to be impacted by fluctuations resulting from the timing of when Company-owned television series are made available for multiyear licensing agreements. Therefore, this change is not expected to have a material impact on the trend of the Company’s financial results because historically, on an annual basis, revenues from renewals executed each year have approximated revenues associated with renewal periods that began in the same year. In addition, for the first quarter of 2018 as compared to the first quarter of 2017, the Company’s growth in revenues, net earnings and EPS would not be materially different if contract renewals were recognized under ASC 606 for 2017.

The following table presents the amount by which each applicable financial statement line item on the Consolidated Statement of Operations would have decreased for the three months ended March 31, 2018 if license renewals were recognized under previous accounting guidance.



Revenues	$	112
Operating expenses	49
Operating income	63
Provision for income taxes	13
Net earnings from continuing operations	$	50
Diluted EPS from continuing operations	$	.13

In addition, the adoption of ASC 606 resulted in certain classification changes on the Consolidated Balance Sheet. The primary change is the reclassification of the sales returns reserve relating to the publishing business to “Other current liabilities.” Such amount, which was $127 million at March 31, 2018, was previously presented as a reduction to receivables.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

The following table presents the amount by which each applicable financial statement line item on the Consolidated Balance Sheet at March 31, 2018 would increase (decrease) if all of the above changes resulting from the adoption of ASC 606 were presented under previous accounting guidance.



Assets
Receivables, net	$	(97	)
Programming and other inventory (noncurrent)	$	(47	)
Other assets (noncurrent receivables)	$	458

Liabilities
Participants’ share and royalties payable (current)	$	10
Other current liabilities	$	(170	)
Deferred income tax liabilities, net	$	54
Participants’ share and royalties payable (noncurrent)	$	209

Accumulated deficit	$	211

ASC 606 also requires enhanced disclosures relating to the Company’s revenues from contracts with customers (See Note 1), including the disaggregation of revenues into categories (See Note 12).

14) 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 March 31, 2018, the outstanding letters of credit and surety bonds approximated $97 million and were not recorded on the Consolidated Balance Sheet.

In the course of its business, the Company both provides and receives indemnities which are intended to allocate certain risks associated with business transactions. Similarly, the Company may remain contingently liable for various obligations of a business that has been divested in the event that a third party does not live up to its obligations under an indemnification obligation. The Company records a liability for its indemnification obligations and other contingent liabilities when probable and reasonably estimable.

Legal Matters

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

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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 March 31, 2018, the Company had pending approximately 31,600 asbestos claims, as compared with approximately 31,660 as of December 31, 2017 and 33,600 as of March 31, 2017. During the first quarter of 2018, the Company received approximately 870 new claims and closed or moved to an inactive docket approximately 930 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. The Company’s total costs for the years 2017 and 2016 for settlement and defense of asbestos claims after insurance recoveries and net of tax were approximately $57 million and $48 million, respectively. 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.

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.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

~~14)~~15) 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 June 30, 2017
CBS Corp.
CBS
Operations
Inc.

Non-
Guarantor
Affiliates
Eliminations
CBS Corp.
Consolidated
Revenues $ 42
$ 2
$ 3,213
$ —
$ 3,257
Costs and expenses:
Operating 22
2
1,980
—
2,004
Selling, general and administrative 23
68
437
—
528
Depreciation and amortization 1
6
49
—
56
Total costs and expenses 46
76
2,466
—
2,588
Operating income (loss) (4 ) (74 ) 747
—
669
Interest (expense) income, net (127 ) (120 ) 151
—
(96 )
Other items, net 1
(12 ) 16
—
5
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies (130 ) (206 ) 914
—
578
Benefit (provision) for income taxes 39
62
(270 ) —
(169 )
Equity in earnings (loss) of investee companies, net of tax 149
339
(12 ) (488 ) (12 )
Net earnings from continuing operations 58
195
632
(488 ) 397
Net loss from discontinued operations, net of tax —
—
(339 ) —
(339 )
Net earnings $ 58
$ 195
$ 293
$ (488 ) $ 58
Total comprehensive income $ 70
$ 190
$ 302
$ (492 ) $ 70

~~CBS CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~



	Statement of Operations
	For the Three Months Ended March 31, 2018
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated
Revenues	$	43		$	3		$	3,715		$	—		$	3,761
Costs and expenses:
Operating	25			1			2,374			—			2,400
Selling, general and administrative	13			64			447			—			524
Depreciation and amortization	1			6			49			—			56
Merger and acquisition-related costs	—			9			—			—			9
Total costs and expenses	39			80			2,870			—			2,989
Operating income (loss)	4			(77		)	845			—			772
Interest (expense) income, net	(130		)	(122		)	151			—			(101		)
Other items, net	(7		)	(2		)	(2		)	—			(11		)
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies	(133		)	(201		)	994			—			660
Benefit (provision) for income taxes	27			41			(203		)	—			(135		)
Equity in earnings (loss) of investee companies, net of tax	617			412			(14		)	(1,029		)	(14		)
Net earnings	$	511		$	252		$	777		$	(1,029	)	$	511
Total comprehensive income	$	520		$	245		$	780		$	(1,025	)	$	520

Statement of Operations
For the Six Months Ended June 30, 2017
CBS Corp.
CBS
Operations
Inc.

Non-
Guarantor
Affiliates
Eliminations
CBS Corp.
Consolidated
Revenues $ 84
$ 5
$ 6,511
$ —
$ 6,600
Costs and expenses:
Operating 46
3
4,029
—
4,078
Selling, general and administrative 43
132
863
—
1,038
Depreciation and amortization 2
12
97
—
111
Total costs and expenses 91
147
4,989
—
5,227
Operating income (loss) (7 ) (142 ) 1,522
—
1,373
Interest (expense) income, net (249 ) (237 ) 294
—
(192 )
Other items, net 1
(25 ) 30
—
6
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies (255 ) (404 ) 1,846
—
1,187
Benefit (provision) for income taxes 77
122
(506 ) —
(307 )
Equity in earnings (loss) of investee companies, net of tax (16 ) 693
(29 ) (677 ) (29 )
Net earnings (loss) from continuing operations (194 ) 411
1,311
(677 ) 851
Net loss from discontinued operations, net of tax —
—
(1,045 ) —
(1,045 )
Net earnings (loss) $ (194 ) $ 411
$ 266
$ (677 ) $ (194 )
Total comprehensive income (loss) $ (168 ) $ 404
$ 281
$ (685 ) $ (168 )



	Statement of Operations

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 June 30, 2016
CBS Corp.
CBS
Operations
Inc.

Non-
Guarantor
Affiliates
Eliminations
CBS Corp.
Consolidated
Revenues $ 36
$ 3
$ 2,937
$ —
$ 2,976
Costs and expenses:
Operating 15
2
1,741
—
1,758
Selling, general and administrative 21
66
423
—
510
Depreciation and amortization 1
6
50
—
57
Total costs and expenses 37
74
2,214
—
2,325
Operating income (loss) (1 ) (71 ) 723
—
651
Interest (expense) income, net (124 ) (106 ) 138
—
(92 )
Other items, net (1 ) 13
(16 ) —
(4 )
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies (126 ) (164 ) 845
—
555
Benefit (provision) for income taxes 40
51
(264 ) —
(173 )
Equity in earnings (loss) of investee companies, net of tax 509
289
(9 ) (798 ) (9 )
Net earnings from continuing operations 423
176
572
(798 ) 373
Net earnings from discontinued operations, net of tax —
—
50
—
50
Net earnings $ 423
$ 176
$ 622
$ (798 ) $ 423
Total comprehensive income $ 432
$ 185
$ 611
$ (796 ) $ 432

~~CBS CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~



	Statement of Operations
	For the Three Months Ended March 31, 2017
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated
Revenues	$	42		$	3		$	3,298		$	—		$	3,343
Costs and expenses:
Operating	24			1			2,049			—			2,074
Selling, general and administrative	10			61			417			—			488
Depreciation and amortization	1			6			48			—			55
Total costs and expenses	35			68			2,514			—			2,617
Operating income (loss)	7			(65		)	784			—			726
Interest (expense) income, net	(122		)	(117		)	143			—			(96		)
Other items, net	(10		)	(16		)	5			—			(21		)
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies	(125		)	(198		)	932			—			609
Benefit (provision) for income taxes	38			60			(236		)	—			(138		)
Equity in earnings (loss) of investee companies, net of tax	(165		)	354			(17		)	(189		)	(17		)
Net earnings (loss) from continuing operations	(252		)	216			679			(189		)	454
Net loss from discontinued operations, net of tax	—			—			(706		)	—			(706		)
Net earnings (loss)	$	(252	)	$	216		$	(27	)	$	(189	)	$	(252	)
Total comprehensive income (loss)	$	(238	)	$	214		$	(21	)	$	(193	)	$	(238	)

Statement of Operations
For the Six Months Ended June 30, 2016
CBS Corp.
CBS
Operations
Inc.

Non-
Guarantor
Affiliates
Eliminations
CBS Corp.
Consolidated
Revenues $ 83
$ 6
$ 6,475
$ —
$ 6,564
Costs and expenses:
Operating 32
3
3,995
—
4,030
Selling, general and administrative 42
132
839
—
1,013
Depreciation and amortization 2
11
101
—
114
Other operating items, net —
—
(9 ) —
(9 )
Total costs and expenses 76
146
4,926
—
5,148
Operating income (loss) 7
(140 ) 1,549
—
1,416
Interest (expense) income, net (248 ) (210 ) 273
—
(185 )
Other items, net (2 ) 3
(8 ) —
(7 )
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies (243 ) (347 ) 1,814
—
1,224
Benefit (provision) for income taxes 77
110
(566 ) —
(379 )
Equity in earnings (loss) of investee companies, net of tax 1,062
549
(30 ) (1,611 ) (30 )
Net earnings from continuing operations 896
312
1,218
(1,611 ) 815
Net earnings from discontinued operations, net of tax —
—
81
—
81
Net earnings $ 896
$ 312
$ 1,299
$ (1,611 ) $ 896
Total comprehensive income $ 916
$ 325
$ 1,290
$ (1,615 ) $ 916



	Statement of Operations

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)


	Balance Sheet														Balance Sheet
	At June 30, 2017														At March 31, 2018
	CBS Corp.			CBS Operations Inc.		Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated			CBS Corp.			CBS Operations Inc.		Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated
Assets
Cash and cash equivalents	$	15		$	—	$	155		$	—		$	170		$	21		$	—	$	126		$	—		$	147
Receivables, net	22			2		3,275			—			3,299			23			2		3,795			—			3,820
Programming and other inventory	4			3		1,553			—			1,560			2			2		1,589			—			1,593
Prepaid expenses and other current assets	94			31		266			(33		)	358			99			25		542			(35		)	631
Current assets of discontinued operations	—			—		299			—			299
Total current assets	135			36		5,548			(33		)	5,686			145			29		6,052			(35		)	6,191
Property and equipment	48			205		2,714			—			2,967			43			217		2,776			—			3,036
Less accumulated depreciation and amortization	26			151		1,576			—			1,753			25			169		1,583			—			1,777
Net property and equipment	22			54		1,138			—			1,214			18			48		1,193			—			1,259
Programming and other inventory	3			6		2,450			—			2,459			3			6		3,243			—			3,252
Goodwill	98			62		4,731			—			4,891			98			62		4,731			—			4,891
Intangible assets	—			—		2,627			—			2,627			—			—		2,661			—			2,661
Investments in consolidated subsidiaries	44,467			14,544		—			(59,011		)	—			45,858			15,635		—			(61,493		)	—
Other assets	149			8		2,401			—			2,558			161			5		2,171			—			2,337
Intercompany	—			1,455		28,442			(29,897		)	—			—			974		30,150			(31,124		)	—
Assets of discontinued operations	—			—		3,218			—			3,218
Total Assets	$	44,874		$	16,165	$	50,555		$	(88,941	)	$	22,653		$	46,283		$	16,759	$	50,201		$	(92,652	)	$	20,591
Liabilities and Stockholders’ Equity
Accounts payable	$	1		$	4	$	119		$	—		$	124		$	6		$	1	$	223		$	—		$	230
Participants’ share and royalties payable	—			—		1,005			—			1,005			—			—		1,104			—			1,104
Program rights	4			3		255			—			262			3			2		626			—			631
Commercial paper	263			—		—			—			263
Short-term debt															217			—		—			—			217
Current portion of long-term debt	6			—		17			—			23			2			—		17			—			19
Accrued expenses and other current liabilities	383			212		830			(33		)	1,392			310			212		1,381			(35		)	1,868
Current liabilities of discontinued operations	—			—		161			—			161
Total current liabilities	657			219		2,387			(33		)	3,230			538			215		3,351			(35		)	4,069
Long-term debt	8,801			—		97			—			8,898			9,380			—		90			—			9,470
Other liabilities	2,892			238		2,285			—			5,415			3,258			232		1,579			—			5,069
Liabilities of discontinued operations	—			—		2,483			—			2,483
Intercompany	29,897			—		—			(29,897		)	—			31,124			—		—			(31,124		)	—
Stockholders’ Equity:
Preferred stock	—			—		126			(126		)	—			—			—		126			(126		)	—
Common stock	1			123		590			(713		)	1			1			123		590			(713		)	1
Additional paid-in capital	43,820			—		60,894			(60,894		)	43,820			43,743			—		60,894			(60,894		)	43,743
Retained earnings (accumulated deficit)	(19,451		)	15,894		(13,572		)	(2,322		)	(19,451		)	(18,650		)	16,509		(11,708		)	(4,801		)	(18,650		)
Accumulated other comprehensive income (loss)	(741		)	22		65			(87		)	(741		)	(653		)	11		79			(90		)	(653		)
	23,629			16,039		48,103			(64,142		)	23,629			24,441			16,643		49,981			(66,624		)	24,441
Less treasury stock, at cost	21,002			331		4,800			(5,131		)	21,002			22,458			331		4,800			(5,131		)	22,458
Total Stockholders’ Equity	2,627			15,708		43,303			(59,011		)	2,627			1,983			16,312		45,181			(61,493		)	1,983
Total Liabilities and Stockholders’ Equity	$	44,874		$	16,165	$	50,555		$	(88,941	)	$	22,653		$	46,283		$	16,759	$	50,201		$	(92,652	)	$	20,591

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)


	Balance Sheet														Balance Sheet
	At December 31, 2016														At December 31, 2017
	CBS Corp.			CBS Operations Inc.		Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated			CBS Corp.			CBS Operations Inc.		Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated
Assets
Cash and cash equivalents	$	321		$	—	$	277		$	—		$	598		$	173		$	—	$	112		$	—		$	285
Receivables, net	27			2		3,285			—			3,314			29			2		3,666			—			3,697
Programming and other inventory	3			3		1,421			—			1,427			3			3		1,822			—			1,828
Prepaid expenses and other current assets	102			55		297			(35		)	419			130			28		341			(36		)	463
Current assets of discontinued operations	—			—		305			—			305
Total current assets	453			60		5,585			(35		)	6,063			335			33		5,941			(36		)	6,273
Property and equipment	47			201		2,687			—			2,935			49			217		2,785			—			3,051
Less accumulated depreciation and amortization	25			140		1,529			—			1,694			27			163		1,581			—			1,771
Net property and equipment	22			61		1,158			—			1,241			22			54		1,204			—			1,280
Programming and other inventory	5			7		2,427			—			2,439			3			4		2,874			—			2,881
Goodwill	98			62		4,704			—			4,864			98			62		4,731			—			4,891
Intangible assets	—			—		2,633			—			2,633			—			—		2,666			—			2,666
Investments in consolidated subsidiaries	44,473			13,853		—			(58,326		)	—			45,504			15,225		—			(60,729		)	—
Other assets	150			8		2,549			—			2,707			162			5		2,685			—			2,852
Intercompany	—			1,785		26,976			(28,761		)	—			—			1,221		29,562			(30,783		)	—
Assets of discontinued operations	—			3		4,288			—			4,291
Total Assets	$	45,201		$	15,839	$	50,320		$	(87,122	)	$	24,238		$	46,124		$	16,604	$	49,663		$	(91,548	)	$	20,843
Liabilities and Stockholders’ Equity
Accounts payable	$	1		$	3	$	144		$	—		$	148		$	1		$	30	$	200		$	—		$	231
Participants’ share and royalties payable	—			—		1,024			—			1,024			—			—		986			—			986
Program rights	4			4		282			—			290			4			4		365			—			373
Commercial paper	450			—		—			—			450
Short-term debt															679			—		—			—			679
Current portion of long-term debt	6			—		17			—			23			2			—		17			—			19
Accrued expenses and other current liabilities	421			284		948			(35		)	1,618			352			269		1,099			(36		)	1,684
Current liabilities of discontinued operations	—			—		155			—			155
Total current liabilities	882			291		2,570			(35		)	3,708			1,038			303		2,667			(36		)	3,972
Long-term debt	8,798			—		104			—			8,902			9,378			—		86			—			9,464
Other liabilities	3,071			244		2,173			—			5,488			2,947			234		2,248			—			5,429
Liabilities of discontinued operations	—			—		2,451			—			2,451
Intercompany	28,761			—		—			(28,761		)	—			30,783			—		—			(30,783		)	—
Stockholders’ Equity:
Preferred stock	—			—		126			(126		)	—			—			—		126			(126		)	—
Common stock	1			123		590			(713		)	1			1			123		590			(713		)	1
Additional paid-in capital	43,913			—		60,894			(60,894		)	43,913			43,797			—		60,894			(60,894		)	43,797
Retained earnings (accumulated deficit)	(19,257		)	15,483		(13,838		)	(1,645		)	(19,257		)	(18,900		)	16,257		(12,224		)	(4,033		)	(18,900		)
Accumulated other comprehensive income (loss)	(767		)	29		50			(79		)	(767		)	(662		)	18		76			(94		)	(662		)
	23,890			15,635		47,822			(63,457		)	23,890			24,236			16,398		49,462			(65,860		)	24,236
Less treasury stock, at cost	20,201			331		4,800			(5,131		)	20,201			22,258			331		4,800			(5,131		)	22,258
Total Stockholders’ Equity	3,689			15,304		43,022			(58,326		)	3,689			1,978			16,067		44,662			(60,729		)	1,978
Total Liabilities and Stockholders’ Equity	$	45,201		$	15,839	$	50,320		$	(87,122	)	$	24,238		$	46,124		$	16,604	$	49,663		$	(91,548	)	$	20,843

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)


	Statement of Cash Flows														Statement of Cash Flows
	For the Six Months Ended June 30, 2017														For the Three Months Ended March 31, 2018
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations		CBS Corp. Consolidated			CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations		CBS Corp. Consolidated
Net cash flow (used for) provided by operating activities	$	(608	)	$	(153	)	$	1,699		$	—	$	938		$	(193	)	$	(102	)	$	1,012		$	—	$	717
Investing Activities:
Acquisitions	—			—			(21		)	—		(21		)
Investments in and advances to investee companies															—			—			(40		)	—		(40		)
Capital expenditures	—			(10		)	(58		)	—		(68		)	—			(4		)	(26		)	—		(30		)
Investments in and advances to investee companies	—			—			(65		)	—		(65		)
Proceeds from dispositions	—			—			1			—		1
Other investing activities	14			—			—			—		14			3			—			—			—		3
Net cash flow provided by (used for) investing activities from continuing operations	14			(10		)	(143		)	—		(139		)	3			(4		)	(66		)	—		(67		)
Net cash flow used for investing activities from discontinued operations	—			(1		)	(12		)	—		(13		)	(23		)	—			—			—		(23		)
Net cash flow provided by (used for) investing activities	14			(11		)	(155		)	—		(152		)
Net cash flow used for investing activities															(20		)	(4		)	(66		)	—		(90		)
Financing Activities:
Repayments of short-term debt borrowings, net	(187		)	—			—			—		(187		)	(462		)	—			—			—		(462		)
Proceeds from debt borrowings of CBS Radio	—			—			24			—		24
Repayment of debt borrowings of CBS Radio	—			—			(5		)	—		(5		)
Payment of capital lease obligations	—			—			(8		)	—		(8		)	—			(1		)	(3		)	—		(4		)
Payment of contingent consideration	—			—			(7		)	—		(7		)	—			—			(5		)	—		(5		)
Dividends	(151		)	—			—			—		(151		)	(71		)	—			—			—		(71		)
Purchase of Company common stock	(845		)	—			—			—		(845		)	(186		)	—			—			—		(186		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation	(89		)	—			—			—		(89		)	(52		)	—			—			—		(52		)
Proceeds from exercise of stock options	39			—			—			—		39			16			—			—			—		16
Other financing activities															(1		)	—			—			—		(1		)
Increase (decrease) in intercompany payables	1,521			164			(1,685		)	—		—			817			107			(924		)	—		—
Net cash flow provided by (used for) financing activities	288			164			(1,681		)	—		(1,229		)	61			106			(932		)	—		(765		)
Net decrease in cash and cash equivalents	(306		)	—			(137		)	—		(443		)
Cash and cash equivalents at beginning of period (includes $24 million of discontinued operations cash)	321			—			301			—		622
Cash and cash equivalents at end of period (includes $9 million of discontinued operations cash)	$	15		$	—		$	164		$	—	$	179
Net (decrease) increase in cash and cash equivalents															(152		)	—			14			—		(138		)
Cash and cash equivalents at beginning of period															173			—			112			—		285
Cash and cash equivalents at end of period															$	21		$	—		$	126		$	—	$	147

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)


	Statement of Cash Flows														Statement of Cash Flows
	For the Six Months Ended June 30, 2016														For the Three Months Ended March 31, 2017
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations		CBS Corp. Consolidated			CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations		CBS Corp. Consolidated
Net cash flow (used for) provided by operating activities	$	(476	)	$	(116	)	$	1,843		$	—	$	1,251		$	(256	)	$	(118	)	$	1,093		$	—	$	719
Investing Activities:
Investments in and advances to investee companies															—			—			(49		)	—		(49		)
Capital expenditures															—			(4		)	(23		)	—		(27		)
Acquisitions	—			—			(51		)	—		(51		)	—			—			(21		)	—		(21		)
Capital expenditures	—			(11		)	(58		)	—		(69		)
Investments in and advances to investee companies	—			—			(43		)	—		(43		)
Proceeds from dispositions	(4		)	—			23			—		19
Other investing activities	4			—			—			—		4			14			—			1			—		15
Net cash flow used for investing activities from continuing operations	—			(11		)	(129		)	—		(140		)
Net cash flow provided by (used for) investing activities from continuing operations															14			(4		)	(92		)	—		(82		)
Net cash flow used for investing activities from discontinued operations	—			—			(2		)	—		(2		)	—			(1		)	(6		)	—		(7		)
Net cash flow used for investing activities	—			(11		)	(131		)	—		(142		)
Net cash flow provided by (used for) investing activities															14			(5		)	(98		)	—		(89		)
Financing Activities:
Proceeds from short-term borrowings, net	163			—			—			—		163
Repayment of senior debentures	(199		)	—			—			—		(199		)
Repayments of short-term debt borrowings, net															(420		)	—			—			—		(420		)
Repayment of debt borrowings of CBS Radio															—			—			(3		)	—		(3		)
Payment of capital lease obligations	—			—			(8		)	—		(8		)	—			—			(4		)	—		(4		)
Payment of contingent consideration															—			—			(7		)	—		(7		)
Dividends	(142		)	—			—			—		(142		)	(77		)	—			—			—		(77		)
Purchase of Company common stock	(1,033		)	—			—			—		(1,033		)	(531		)	—			—			—		(531		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation	(57		)	—			—			—		(57		)	(76		)	—			—			—		(76		)
Proceeds from exercise of stock options	10			—			—			—		10			36			—			—			—		36
Excess tax benefit from stock-based compensation	11			—			—			—		11
Other financing activities	(1		)	—			—			—		(1		)
Increase (decrease) in intercompany payables	1,503			127			(1,630		)	—		—			1,033			123			(1,156		)	—		—
Net cash flow provided by (used for) financing activities	255			127			(1,638		)	—		(1,256		)
Net (decrease) increase in cash and cash equivalents	(221		)	—			74			—		(147		)
Cash and cash equivalents at beginning of period (includes $6 million of discontinued operations cash)	267			1			55			—		323
Cash and cash equivalents at end of period (includes $9 million of discontinued operations cash)	$	46		$	1		$	129		$	—	$	176
Net cash flow (used for) provided by financing activities															(35		)	123			(1,170		)	—		(1,082		)
Net decrease in cash and cash equivalents															(277		)	—			(175		)	—		(452		)
Cash and cash equivalents at beginning of period (includes $24 million of discontinued operations cash)															321			—			301			—		622
Cash and cash equivalents at end of period (includes $7 million of discontinued operations cash)															$	44		$	—		$	126		$	—	$	170



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, ~~2016.~~2017.

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 stations, internet-based businesses, and consumer publishing. The Company’s principal strategy is to create and acquire premium content that is widely accepted by audiences and generate both advertising and non-advertising revenues from the distribution of this content on multiple media platforms and to various geographic locations. The Company continues to increase its investment in ~~both Company-owned and acquired~~ premium content to enhance its opportunities for revenue growth, which include exhibiting the Company’s content on multiple digital platforms, including the Company’s owned digital streaming services as well as third-party live television streaming ~~offerings;~~offerings (“virtual MVPDs”); expanding the distribution of its content internationally; and securing compensation from multichannel video programming distributors (“MVPDs”) and television stations affiliated with the CBS Television Network. The Company also seeks to grow its advertising revenues by monetizing all content viewership as industry measurements evolve to reflect viewers’ changing habits. The Company’s continued ability to capitalize on these and other emerging opportunities will provide it with incremental advertising and non-advertising revenues.

Operational highlights - Three Months Ended ~~June 30, 2017~~March 31, 2018 versus Three Months Ended ~~June 30, 2016~~March 31, 2017


Consolidated results of operations					Increase/(Decrease)										Increase/(Decrease)
Three Months Ended June 30,	2017		2016		$			%
Three Months Ended March 31,										2018		2017			$		%
GAAP:
Revenues	$	3,257	$	2,976	$	281		9	%	$	3,761	$	3,343		$	418	13	%
Operating income	$	669	$	651	$	18		3	%	$	772	$	726		$	46	6	%
Net earnings from continuing operations	$	397	$	373	$	24		6	%	$	511	$	454		$	57	13	%
Net earnings	$	58	$	423	$	(365	)	(86	)%
Net earnings (loss)										$	511	$	(252	)	$	763	n/m
Diluted EPS from continuing operations	$	.97	$	.82	$	.15		18	%	$	1.32	$	1.09		$	.23	21	%
Diluted EPS	$	.14	$	.93	$	(.79	)	(85	)%	$	1.32	$	(.61	)	$	1.93	n/m

Non-GAAP:^(a)
Adjusted operating income										$	781	$	726		$	55	8	%
Adjusted net earnings from continuing operations										$	518	$	432		$	86	20	%
Adjusted net earnings	$	427	$	423	$	4		1	%	$	518	$	441		$	77	17	%
Adjusted diluted EPS from continuing operations										$	1.34	$	1.04		$	.30	29	%
Adjusted diluted EPS	$	1.04	$	.93	$	.11		12	%	$	1.34	$	1.06		$	.28	26	%

n/m - not meaningful

(a) See ~~page 36~~pages 34 - 35 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with accounting principles generally accepted in the United States (“GAAP”).

For the second quarter of 2017, the Company’s results benefited from growth in retransmission revenues and station affiliation fees as well as an increase in television licensing sales, reflecting a higher volume of titles available for sale as a result of recent increased investment in internally-produced series. However, the comparison with the prior year was impacted by the high-margin international licensing of five ~~Star Trek~~ ~~library series in the second quarter of 2016.~~

For the three months ended ~~June 30, 2017,~~March 31, 2018, the 9%13% increase in revenues reflects growth across ~~all~~each of the Company’s ~~major~~main revenue ~~streams, led by 16% growth in affiliate~~streams. Affiliate and subscription ~~fee revenues, which was~~fees increased 16%, driven by 25% ~~growth in~~higher station affiliation fees and retransmission revenues as well as growth from ~~new~~digital initiatives, including the Company’s owned streaming subscription services ~~CBS All Access~~and virtual MVPDs. Advertising revenues grew 8%, primarily driven by the ~~Showtime~~ ~~digital streaming~~Company’s acquisition of Network Ten in the fourth quarter of 2017. Content licensing and distribution revenues increased 18%, benefiting from growth from the international licensing of new series, as well as the start of the license periods for previously signed renewals of contracts for library programming. Content licensing and

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

~~subscription offering, and~~distribution revenues also included higher revenues from the distribution of third-party ~~live television streaming services. Advertising revenues increased 4%~~content, with an offsetting increase to participation expenses, as a result of the ~~broadcast~~adoption of ~~the semifinals and finals~~a new revenue recognition standard. This change contributed four percentage points of ~~the~~ ~~NCAA Division I Men’s Basketball Championship~~ ~~(“NCAA Tournament”), which are broadcast on the CBS Television Network every other year through 2032 under the current agreements with the NCAA and Turner Broadcasting System, Inc. Content~~growth in content licensing and distribution ~~revenues benefited from a higher volume of television licensing sales and increased 12%, despite the international licensing sales of~~ ~~Star Trek~~ ~~library programming in the second quarter of 2016~~.revenues.

~~Operating income for~~For the three months ended ~~June 30, 2017~~March 31, 2018, operating income increased 3%6%, ~~primarily driven by~~reflecting the revenue growth, ~~in affiliate and subscription fee revenues,~~which was partially offset by lower non-sports advertising revenues. The operating income margin decreased one point to 21% for the second quarter of 2017 from 22% for the second quarter of 2016, primarily as a result of the mix of revenues. 2016 included higher-margin television licensing sales of ~~Star Trek~~ ~~library programming,~~an increased investment in content and 2017 was impacted by lower-margin revenues from the NCAA Tournament. Net earnings from continuing operations increased 6% and diluted earnings per share (“EPS”) from continuing operations increased 18%, reflecting the higher operating income. Diluted EPS from continuing operations also benefited from lower weighted average shares outstanding in the second quarter of 2017 as a result of the Company’s ongoing share repurchase program. digital initiatives.

Net earnings for the three months ended ~~June 30,~~March 31, 2018 was $511 million, or $1.32 per diluted share, compared with a net loss of $252 million, or a loss of $.61 per diluted share, for the three months ended March 31, 2017 ~~of $58 million~~which included, in discontinued operations, a noncash charge ~~of $365 million, or $.89 per diluted share, in discontinued operations~~ to ~~reduce~~adjust the carrying value of CBS Radio Inc. (“CBS Radio”) to the value indicated by the stock valuation of Entercom Communications Corp. (“Entercom”). ~~CBS Radio is classified as held for sale~~Adjusted net earnings increased 17% and ~~therefore, in accordance with Financial Accounting Standards Board~~adjusted diluted earnings per share (“~~FASB”~~EPS”) ~~guidance, its carrying value will continue to be~~increased 26% primarily reflecting the higher operating income. The EPS comparison also benefited from lower weighted average shares outstanding. Adjusted net earnings and adjusted ~~based on the trading price of Entercom’s stock, which could result in future gains or losses.~~

~~Operational highlights~~ - ~~Six Months Ended June 30, 2017 versusSix Months Ended June 30, 2016~~

Consolidated results of operations Increase/(Decrease)
Six Months Ended June 30, 2017 2016 $ %
GAAP:
Revenues $ 6,600
$ 6,564
$ 36
1 %
Operating income $ 1,373
$ 1,416
$ (43 ) (3 )%
Net earnings from continuing operations $ 851
$ 815
$ 36
4 %
Net earnings (loss) $ (194 ) $ 896
$ (1,090 ) (122 )%
Diluted EPS from continuing operations $ 2.06
$ 1.78
$ .28
16 %
Diluted EPS $ (.47 ) $ 1.95
$ (2.42 ) (124 )%

Non-GAAP:^(a)

Adjusted operating income $ 1,373
$ 1,407
$ (34 ) (2 )%
Adjusted net earnings from continuing operations $ 829
$ 816
$ 13
2 %
Adjusted net earnings $ 868
$ 897
$ (29 ) (3 )%
Adjusted diluted EPS from continuing operations $ 2.01
$ 1.78
$ .23
13 %
Adjusted diluted EPS $ 2.10
$ 1.95
$ .15
8 %

~~(a)~~diluted EPS are non-GAAP financial measures. See pages 3634 - 3735 for details of the discrete items excluded from financial results, and reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

~~For the six months endedJune 30, 2017, revenues increased 1% despite a difficult comparison to 2016, which included CBS’s broadcast of~~ ~~Super Bowl 50~~ ~~and international licensing sales of five~~ ~~Star Trek~~ library series. The growth was driven by 16% higher affiliate and subscription fee revenues, led by 27% growth in station affiliation fees and retransmission revenues, as well as growth from new initiatives, including the Company’s owned streaming subscription services, ~~CBS All Access~~ ~~and the~~ ~~Showtime~~ ~~digital streaming subscription service, and third-~~

~~Management’s Discussion and Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

party live television streaming services. In addition, content licensing and distribution revenues increased 14%, reflecting growth in domestic television licensing sales and strong demand for the Company’s content internationally, partially offset by the aforementioned 2016 sales of ~~Star Trek~~ ~~library programming.~~

~~Operating income decreased 3% for the six months ended~~June 30, 2017, primarily as a result of a mix of lower-margin revenues in 2017 compared to 2016. Net earnings from continuing operations increased 4% and diluted EPS from continuing operations increased 16%, as a result of tax benefits in 2017 from the resolution of certain state income tax matters and from the exercise of stock options and vesting of restricted stock units (“RSUs”) as a result of the adoption of new accounting guidance during the first quarter of 2017, partially offset by lower operating income. Diluted EPS from continuing operations also benefited from lower weighted average shares outstanding in 2017 as a result of the Company’s ongoing share repurchase program. Adjusted net earnings from continuing operations and adjusted diluted EPS from continuing operations, which exclude a tax benefit of $22 million, or $.05 per diluted share, from the resolution of state income tax matters, increased 2% and 13%, respectively. The Company reported a net loss of $194 million for the six months endedJune 30, 2017, which included a noncash charge of $1.08 billion, or $2.62 per diluted share, in discontinued operations to reduce the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. CBS Radio is classified as held for sale and therefore, in accordance with FASB guidance, its carrying value will continue to be adjusted based on the trading price of Entercom’s stock, which could result in future gains or losses. Adjusted net earnings from continuing operations and Adjusted diluted EPS from continuing operations are non-GAAP financial measures. See pages 36 - 37 for details of the discrete items excluded from financial results, along with reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

The Company generated operating cash flow from continuing operations of ~~$909~~$717 million for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 compared with ~~$1.14 billion~~$678 million for the ~~six~~three months ended ~~June 30, 2016. Free~~March 31, 2017. Operating cash flow for the ~~six months endedJune 30, 2017 was $841 million~~first quarter of 2018 included a higher investment in premium content compared with ~~$1.07 billion for the same prior-year period. These decreases were driven by the benefit in 2016 from CBS’s broadcast of~~ ~~Super Bowl 50,~~ ~~and discretionary pension contributions of $100 million made during~~ the first quarter of 2017, which included discretionary contributions of $100 million to prefund the Company’s qualified pension plans. Free cash flow for the three ~~and six~~ months ended ~~June 30, 2017 benefited from higher affiliate and subscription fee revenues.~~March 31, 2018 was $687 million compared with $751 million for the same prior-year period, primarily reflecting the above-mentioned increased investment in content. Free cash flow is a non-GAAP financial measure. See “Free Cash Flow” on pages 5145 - 5246 for a reconciliation of net cash flow provided by (used for) operating activities, the most directly comparable GAAP financial measure, to free cash flow.

~~Recent Developments~~Special Committee to Evaluate Potential Combination with Viacom Inc.

~~In connection~~

On February 1, 2018, the Company announced that its Board of Directors established a special committee of independent directors to evaluate a potential combination with ~~the Company’s previously announced agreement to combine CBS Radio with Entercom~~Viacom Inc. There can be no assurance that this process will result in a ~~merger following~~transaction or on what terms any transaction may occur. During the separation of CBS Radio through a tax-free split-off, CBS Radio filed a registration statement on Forms S-4 and S-1 with the Securities and Exchange Commission (“SEC”) on April 13, 2017, and two subsequent amendments to such registration statement, with the most recent amendment filed on July 10, 2017. The Company expects the transaction to be completed during the fourthfirst quarter of ~~2017, subject to customary approvals and closing conditions. CBS Radio has been presented as a discontinued operation in~~2018, the ~~consolidated financial statements for all periods presented.~~Company incurred $9 million of related professional fees.

In July 2017, the Company issued $400 million of 2.50% senior notes due 2023 and $500 million of 3.375% senior notes due 2028. The Company used the net proceeds from these issuances to repay its $400 million outstanding 1.95% senior notes which matured on July 1, 2017, and to redeem all of its $300 million outstanding 4.625% senior notes due May 2018. The remaining net proceeds were used for general corporate purposes, including the repayment of short-term borrowings, including commercial paper. Subsequent to the July 2017 issuances, repayment and redemption of senior notes, the Company had $9.04 billion of long-term debt outstanding, excluding capital leases, at a weighted average interest rate of 4.43%.

~~Management’s Discussion and Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

Share Repurchases and Dividends

Adoption of New Revenue Standard

During the first quarter of 2018, the Company adopted FASB Accounting Standards Codification 606 (“ASC 606”) on the recognition of revenues which primarily resulted in two changes to the Company’s revenue recognition policies. First, revenues from the Company’s distribution of third-party content are now recognized based on the gross amount of consideration received from the customer, with an offsetting participation expense recognized for

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

the fees paid to the third party. Under previous accounting guidance, such revenues, which include content licensing and distribution and advertising revenues, were recognized at the net amount retained by the Company after the payment of fees to the third party. For the three months ended March 31, 2018, revenues and operating expenses relating to such distribution arrangements were each $63 million higher under ASC 606 than the amounts that would have been reported under previous accounting guidance, with no impact to operating income.

Second, revenues associated with the renewal of an existing license agreement are now recognized when the renewal period begins. Under previous accounting guidance, these revenues were recognized upon the execution of such renewal. Content licensing and distribution revenue comparisons will continue to be impacted by fluctuations resulting from the timing of when Company-owned television series are made available for multiyear licensing agreements. Therefore, this change is not expected to have a material impact on the trend of the Company’s financial results because historically, on an annual basis, revenues from renewals executed each year have approximated revenues associated with renewal periods that began in the same year. For the first quarter of 2018 as compared to the first quarter of 2017, the Company’s growth in revenues, net earnings and EPS would not be materially different if contract renewals were recognized under ASC 606 for 2017.

Reconciliation of Non-GAAP Measures

Results for the three ~~and six~~ months ended ~~June 30,~~March 31, 2018 and 2017 ~~and the six months endedJune 30, 2016~~ included discrete items that were not part of the normal course of operations. The following tables present non-GAAP financial measures, which exclude the impact of these discrete items, reconciled to the most directly comparable financial measures in accordance with GAAP. The Company believes that presenting its financial results adjusted for the impact of discrete items is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by the Company’s management and provides a clearer perspective on the underlying performance of the Company.

Three Months Ended June 30, 2017
Reported
Discontinued Operations Adjustments ^(a)
Adjusted
Net earnings from continuing operations $ 397
$ —
$ 397

Net earnings (loss) from discontinued operations, net of tax (339 ) 369
30

Net earnings $ 58
$ 369
$ 427

Diluted EPS from continuing operations $ .97
$ —
$ .97

Diluted EPS $ .14
$ .90
$ 1.04

Six Months Ended June 30, 2017
Reported
Discrete Tax Item ^(b)

Discontinued Operations Adjustments ^(a)
Adjusted
Earnings from continuing operations before income taxes $ 1,187
$ —
$ —
$ 1,187

Provision for income taxes (307 ) (22 ) —
(329 )
Equity in loss of investee companies, net of tax (29 ) —
—
(29 )
Net earnings from continuing operations 851
(22 ) —
829

Net earnings (loss) from discontinued operations, net of tax (1,045 ) —
1,084
39

Net earnings (loss) $ (194 ) $ (22 ) $ 1,084
$ 868

Diluted EPS from continuing operations $ 2.06
$ (.05 ) $ —
$ 2.01

Diluted EPS $ (.47 ) $ (.05 ) $ 2.62
$ 2.10

(a) Reflects noncash charges of $365 million and $1.08 billion for the three and six months ended June 30, 2017, respectively, to record a valuation allowance for the carrying value of CBS Radio, and a restructuring charge of $7 million ($4 million, net of tax) at CBS Radio.

~~(b) Reflects a tax benefit in the first quarter of 2017 from the resolution of certain state income tax matters.~~



	Three Months Ended March 31, 2018
	Reported			Merger and acquisition-related costs				Adjusted
Operating income	$	772			$	9		$	781
Interest expense	(118		)		—			(118		)
Interest income	17				—			17
Other items, net	(11		)		—			(11		)
Earnings before income taxes	660				9			669
Provision for income taxes	(135		)		(2		)	(137		)
Equity in loss of investee companies, net of tax	(14		)		—			(14		)
Net earnings	$	511			$	7		$	518
Diluted EPS	$	1.32			$	.02		$	1.34

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)


	Six Months Ended June 30, 2016													Three Months Ended March 31, 2017
	Reported			Other Operating Items ^(a)				Write-down of Investment ^(b)			Adjusted			Reported			Tax Items ^(a)				Market Value Adjustment ^(b)			Adjusted
Operating income	$	1,416			$	(9	)		$	—	$	1,407
Interest expense	(200		)		—				—		(200		)
Interest income	15				—				—		15
Other items, net	(7		)		—				—		(7		)
Earnings from continuing operations before income taxes	1,224				(9		)		—		1,215			$	609			$	—			$	—	$	609
Provision for income taxes	(379		)		4				—		(375		)	(138		)		(22		)		—		(160		)
Equity in loss of investee companies, net of tax	(30		)		—				6		(24		)	(17		)		—				—		(17		)
Net earnings from continuing operations	815				(5		)		6		816			454				(22		)		—		432
Net earnings from discontinued operations, net of tax	81				—				—		81
Net earnings	$	896			$	(5	)		$	6	$	897
Net earnings (loss) from discontinued operations, net of tax														(706		)		—				715		9
Net earnings (loss)														$	(252	)		$	(22	)		$	715	$	441
Diluted EPS from continuing operations	$	1.78			$	(.01	)		$	.01	$	1.78		$	1.09			$	(.05	)		$	—	$	1.04
Diluted EPS	$	1.95			$	(.01	)		$	.01	$	1.95		$	(.61	)		$	(.05	)		$	1.72	$	1.06

(a) Reflects a ~~gain on~~tax benefit from the ~~sale~~resolution of ~~an internet business in China and a multiyear, retroactive impact of a new operating tax.~~certain state income tax matters.

(b) Reflects a noncash charge to reduce the ~~write-down~~carrying value of ~~an international television joint venture~~CBS Radio to ~~its fair value.~~

the value indicated by the stock valuation of Entercom.

Consolidated Results of Operations

Three ~~and Six~~ Months Ended ~~June 30, 2017~~March 31, 2018 versus Three ~~and Six~~ Months Ended ~~June 30, 2016~~March 31, 2017

Revenues

Three Months Ended June 30,

% of Total
Revenues

% of Total
Revenues
Increase/(Decrease)
Revenues by Type 2017 2016 $ %
Advertising $ 1,299
40 % $ 1,245
42 % $ 54
4 %
Content licensing and distribution 1,056
32
943
32
113
12

Affiliate and subscription fees 848
26
733
24
115
16

Other 54
2
55
2
(1 ) (2 )
Total Revenues $ 3,257
100 % $ 2,976
100 % $ 281
9 %


	Six Months Ended June 30,																		Three Months Ended March 31,
			% of Total Revenues						% of Total Revenues			Increase/(Decrease)										% of Total Revenues						% of Total Revenues			Increase/(Decrease)
Revenues by Type	2017				2016				% of Total Revenues		$				%			2018				% of Total Revenues		2017				% of Total Revenues		$				%
Advertising	$	2,902	% of Total Revenues	44	%		$	3,330		51	%		$	(428	)		(13	)%		$	1,733		46	%		$	1,603		48	%		$	130			8	%
Content licensing and distribution	1,901		29			1,672			25			229				14			995			27			845			25			150				18
Affiliate and subscription fees	1,690		25			1,455			22			235				16			979			26			842			25			137				16
Other	107		2			107			2			—				—			54			1			53			2			1				2
Total Revenues	$	6,600	100	%		$	6,564		100	%		$	36			1	%		$	3,761		100	%		$	3,343		100	%		$	418			13	%

Advertising

For the three months ended ~~June 30, 2017,~~March 31, 2018, the 4%8% increase in advertising revenues ~~reflects 7% growth~~is primarily driven by the Company’s acquisition of Network Ten in ~~network~~the fourth quarter of 2017, which contributed seven percentage points of advertising revenue growth.

For the remainder of 2018, advertising revenues ~~driven~~will continue to benefit from the Network Ten acquisition as well as from political spending associated with the U.S. midterm elections, primarily in the second half of the year. For the second quarter of 2018, the advertising revenue comparison will be negatively affected by the benefit in 2017 from CBS’s broadcast of the ~~semifinals~~National Semifinals and ~~finals~~National Championship games of the NCAA ~~Tournament, partially offset by a decline in non-sports advertising revenues. The semifinals and finals of the~~ Division I Men’s Basketball Championship (“NCAA ~~Tournament~~Tournament”), which are broadcast on the CBS Television Network every other year through 2032 under the current agreements with the NCAA and Turner Broadcasting System, Inc. ~~For~~(“Turner”). Additionally, the ~~six months ended June 30, 2017, the 13% decrease in advertising revenues primarily reflects the impact of two noncomparable sporting events that benefited 2016: the~~

~~Management’s Discussion and Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

~~broadcast of~~ ~~Super Bowl 50~~ and one additional NFL playoff game on the CBS Television Network, as well as lower political and non-sports advertising sales. These decreases were partially offset by the previously mentioned broadcast of additional NCAA Tournament games in the second quarter of 2017.

The Company recently completed the CBS Television Network’s upfront advertising sales (“Upfront”) for the 2017/2018 television broadcast season, which runs from the middle of September 2017 through the middle of September 2018. A significant portion of advertising spots for the CBS Television Network’s non-sports programming is sold during May through July in the Upfront each year. This year’s Upfront concluded with increases in pricing compared with the prior broadcast season, and a majority of the Company’s deals will be based on a live-plus-seven day viewing window, which are expected to benefit advertising revenues during the 2017/2018 broadcast season. However, overall advertising revenues for the Company will be dependent on ratings for its programming and market conditions, including demand in the scatter advertising market, which is when advertisers purchase the remaining advertising spots closer to the broadcast of the related programming. Additionally,comparison in the second half of ~~2017, the advertising revenue comparison with the prior year~~2018 will ~~continue to~~ be ~~negatively affected~~impacted by the ~~benefit~~absence of CBS’ broadcast of five Thursday Night Football games in ~~2016 from strong political advertising.~~2017. However, this will result in an improvement in the Company’s operating income margin.

Content Licensing and Distribution

For the three months ended ~~June 30, 2017,~~March 31, 2018, content licensing and distribution revenues ~~benefited~~increased 18%, benefiting from ~~a higher volume of television licensing sales and increased 12%, despite~~growth from the international licensing ~~sales~~ of ~~five~~ ~~Star Trek~~new series, as well as the start of the license periods for previously signed renewals of contracts for library ~~series~~programming. The revenue comparison also benefited from higher revenues from the distribution of third-party content, resulting from such revenues now being recognized at the

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

gross amount of consideration received from the customer, with an offsetting increase to participation expense, as a result of the adoption of a new revenue recognition standard. (See Note 13 to the consolidated financial statements.) Under previous guidance such distribution revenues were recognized in the ~~second quarter~~net amount retained by the Company after the payment of ~~2016. For~~fees to the ~~six months ended June 30, 2017,~~third party. This change contributed four percentage points of the ~~14% increase~~growth in content licensing and distribution ~~revenues was driven by growth in domestic television licensing sales and strong demand for the Company’s content internationally, partially offset by the licensing sales of~~ ~~Star Trek~~ in 2016. Content licensing and distribution revenues for the three and six months ended June 30, 2017 benefited from additional titles available for sale as a result of the Company’s recent increased investment in internally-produced series.revenues.

For the remainder of ~~2017,~~2018, the content licensing and distribution revenues 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~~agreements, and the ~~beginning of the license period in which programs are made available to the licensee for exhibition.~~new revenue recognition standard.

Affiliate and Subscription Fees

For the three ~~and six~~ months ended ~~June 30, 2017,~~March 31, 2018, the 16% increase in affiliate and subscription fees ~~of 16% in each period~~primarily reflects ~~growth in~~25% higher station affiliation fees and retransmission revenues, ~~and~~as well as higher revenues from ~~new~~digital initiatives, including the Company’s owned streaming subscription services, CBS All Accessand the Showtime digital streaming subscription offering, and ~~third-party live television streaming offerings.~~virtual MVPDs.

~~Affiliate and subscription fees for the third quarter of 2017 are expected to include revenues from the Floyd Mayweather/Conor McGregor pay-per-view boxing event.~~

Over the next few years, the Company expects to benefit from the renewal of several of its agreements with station affiliates and MVPDs, ~~as well as from agreements with new distributors of live television streaming offerings.~~including virtual MVPDs. In addition, the Company’s existing agreements with station affiliates and MVPDs include annual contractual increases. Together, these factors are expected to result in continued growth in affiliate and subscription fees over the next several years.

~~Management’s Discussion and Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

International Revenues

The Company generated approximately ~~15%~~19% and ~~19%~~14% of its total revenues from international regions for the three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016, respectively, and generated approximately 14% and 15%~~respectively. The increase in international revenues is primarily driven by the Company’s acquisition of ~~its total revenues from international regions for~~Network Ten in the ~~six months ended June 30, 2017 and 2016, respectively.~~fourth quarter of 2017.

Operating Expenses

Three Months Ended June 30,
% of Operating Expenses % of Operating Expenses Increase/(Decrease)
Operating Expenses by Type 2017 2016 $ %
Programming $ 652
33 % $ 525
30 % $ 127
24 %
Production 726
36
630
36
96
15

Participation, distribution and royalty 290
14
285
16
5
2

Other 336
17
318
18
18
6

Total Operating Expenses $ 2,004
100 % $ 1,758
100 % $ 246
14 %


	Six Months Ended June 30,																		Three Months Ended March 31,
			% of Operating Expenses						% of Operating Expenses			Increase/(Decrease)										% of Operating Expenses						% of Operating Expenses			Increase/(Decrease)
Operating Expenses by Type	2017				2016				% of Operating Expenses		$				%			2018				% of Operating Expenses		2017				% of Operating Expenses		$				%
Programming	$	1,509	% of Operating Expenses	37	%		$	1,633		41	%		$	(124	)		(8	)%		$	968		40	%		$	857		41	%		$	111			13	%
Production	1,383		34			1,267			31			116				9			759			32			657			32			102				16
Participation, distribution and royalty	526		13			497			12			29				6			322			13			236			11			86				36
Other	660		16			633			16			27				4			351			15			324			16			27				8
Total Operating Expenses	$	4,078	100	%		$	4,030		100	%		$	48			1	%		$	2,400		100	%		$	2,074		100	%		$	326			16	%

Programming

For the three months ended ~~June 30, 2017,~~March 31, 2018, the ~~24%~~13% increase in programming expenses was primarily driven by ~~higher~~increased sports programming costs mainly associated with CBS’s broadcast of the semifinals and finals of the NCAA Tournament. For the six months ended June 30, 2017, the 8% decrease in programming expenses was driven by lower sports programming costs, as ~~2016 included costs associated with the broadcast of~~ ~~Super Bowl 50, which were partially offset by costs associated with the 2017 broadcast~~a result of additional ~~NCAA Tournament games.~~

~~For the three and six months ended June 30, 2017, the increases~~sporting events broadcast by CBS in production expenses of 15% and 9%, respectively, reflect higher costs associated with the increase in television licensing revenues and a higher investment in internally-produced television series. For the six months ended June 30, 2017, these increases were partially offset by lower sports production costs as the first quarter of ~~2016 included CBS’s broadcast of~~2018, and an increased investment in ~~Super Bowl 50~~Showtime. programming.

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

~~Selling, General and Administrative Expenses~~

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

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Production

For the three months ended March 31, 2018, the 16% increase in production expenses is primarily driven by the acquisition of Network Ten in the fourth quarter of 2017 and costs associated with the increase in television licensing revenues.

Participation, Distribution and Royalty

For the three months ended March 31, 2018, the 36% increase in participation, distribution and royalty costs was primarily driven by the adoption of new revenue recognition guidance, which resulted in revenues from the Company’s distribution of third-party content now being recognized based on the gross amount of consideration received from the customer, with an offsetting participation expense recognized for the fees paid to the third party. Under previous accounting guidance, such revenues were recognized at the net amount retained by the Company after the payment of fees to the third party. This change resulted in a $63 million increase to both revenues and participation expenses for the three months ended March 31, 2018, with no impact on the Company’s operating income. The remaining increase in participation, distribution and royalty costs was driven by higher revenues from the licensing of the Company’s content.

Other

Other operating expenses primarily include compensation and costs associated with book sales, including printing and warehousing. For the three months ended March 31, 2018, the increase in other expenses of 8% primarily reflects expenses of Network Ten, which was acquired in the fourth quarter of 2017, and higher employee-related expenses associated with the Company’s digital initiatives.

Selling, General and Administrative Expenses

Six Months Ended June 30,
2017 % of Revenues 2016 % of Revenues Increase/(Decrease)
Selling, general and administrative expenses $ 1,038
16 % $ 1,013
15 % 2 %



	Three Months Ended March 31,
	2018		% of Revenues			2017		% of Revenues			Increase/(Decrease)
Selling, general and administrative expenses	$	524		14	%	$	488		15	%		7	%

Selling, general and administrative (“SG&A”) expenses include expenses incurred for selling and marketing costs, occupancy and back office support. For the three ~~and six~~ months ended ~~June 30, 2017,~~March 31, 2018, the ~~increases~~increase in SG&A expenses of ~~4% and 2%, respectively,~~7% is primarily ~~reflect higher advertising and marketing costs, mainly associated with the timing of series premieres and to support~~driven by the Company’s ~~growth initiatives.~~acquisition of Network Ten in the fourth quarter of 2017.

Depreciation and Amortization

Three Months Ended June 30, Six Months Ended June 30,
2017
2016 Increase/(Decrease) 2017
2016 Increase/(Decrease)
Depreciation and amortization $ 56
$ 57
(2 )% $ 111
$ 114
�� (3 )%

For the three and six months ended June 30, 2017, the decreases in depreciation and amortization of 2% and 3%, respectively, were the result of intangibles and property and equipment that became fully amortized.

~~Other Operating Items, Net~~

~~For the six months ended June 30, 2016, other operating items, net included a gain from the sale of an internet business in China and a multiyear, retroactive impact of a new operating tax.~~

~~Interest Expense/Income~~

Three Months Ended June 30, Six Months Ended June 30,
2017
2016
Increase/(Decrease) 2017
2016 Increase/(Decrease)
Interest expense $ (111 ) $ (100 ) 11 % $ (220 ) $ (200 ) 10 %
Interest income $ 15
$ 8
88 % $ 28
$ 15
87 %

~~The following table presents the Company’s outstanding debt balances, excluding capital leases, and the weighted average interest rate as of June 30, 2017 and 2016:~~

At June 30,
Weighted Average Weighted Average
2017 Interest Rate 2016 Interest Rate
Total long-term debt $ 8,853
4.47 % $ 8,167
4.61 %
Commercial paper $ 263
1.42 % $ 163
0.72 %

~~Other Items, Net~~

Three Months Ended June 30, Six Months Ended June 30,
2017
2016 Increase/(Decrease) 2017 2016 Increase/(Decrease)
Other items, net $ 5
$ (4 ) n/m $ 6
$ (7 ) n/m

~~n/m - not meaningful~~

~~Other items, net for all periods primarily consists of foreign exchange gains and losses.~~



	Three Months Ended March 31,
	2018		2017		Increase/(Decrease)
Depreciation and amortization	$	56	$	55		2	%

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Merger and Acquisition-Related Costs

During the first quarter of 2018, the Company incurred professional fees of $9 million associated with merger and acquisition-related activities.

Interest Expense/Income



	Three Months Ended March 31,
	2018			2017			Increase/(Decrease)
Interest expense	$	(118	)	$	(109	)		8	%
Interest income	$	17		$	13			31	%

The following table presents the Company’s outstanding debt balances, excluding capital leases, and the weighted average interest rate as of March 31, 2018 and 2017:



	At March 31,
			Weighted Average					Weighted Average
	2018		Interest Rate			2017		Interest Rate
Senior debt	$	9,428		4.26	%	$	8,851		4.47	%
Commercial paper	$	197		2.34	%	$	30		1.20	%
Short-term bank borrowings	$	20		2.31	%	$	—		n/a

n/a - not applicable

Other Items, Net



	Three Months Ended March 31,
	2018			2017			Increase/(Decrease)
Pension and postretirement benefit costs	$	(15	)	$	(22	)		(32	)%
Foreign exchange gains	4			1				n/m
Other items, net	$	(11	)	$	(21	)		(48	)%

n/m - not meaningful

Beginning in the first quarter of 2018, as a result of the adoption of new accounting guidance, the Company presents pension and postretirement benefit costs, other than service cost, within “Other items, net”. All prior periods have been reclassified to conform to this presentation. (See Note 1 to the consolidated financial statements.)

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Provision for Income Taxes

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.


	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended March 31,
	2017			2016			Increase/(Decrease)			2017			2016			Increase/(Decrease)			2018			2017			Increase/(Decrease)
Provision for income taxes, including interest and before other discrete items	$	(176	)	$	(171	)		3	%	$	(361	)	$	(374	)		(3	)%
Excess tax benefits from stock-based compensation ^(a)	4			—						31			—
Provision for income taxes, including interest and before other discrete items ^(a)																			$	(138	)	$	(185	)	(25	)%
Excess tax benefits from stock-based compensation^(b)																			—			27
Other discrete items ^(b)(c)	3			(2		)				23			(5		)				3			20
Provision for income taxes	$	(169	)	$	(173	)		(2	)%	$	(307	)	$	(379	)		(19	)%	$	(135	)	$	(138	)	(2	)%
Effective income tax rate	29.2		%	31.2		%				25.9		%	31.0		%				20.5		%	22.7		%

~~(b)~~(c) For the ~~six~~three months ended ~~June 30,~~March 31, 2017, primarily reflects a one-time tax ~~benefits~~benefit of $22 million from the resolution of certain state income tax matters.

Equity in Loss of Investee Companies, Net of Tax

Three Months Ended June 30, Six Months Ended June 30,
2017
2016
Increase/(Decrease) 2017 2016 Increase/(Decrease)
Equity in loss of investee companies,
net of tax
$ (12 ) $ (9 ) 33 % $ (29 ) $ (30 ) (3 )%



	Three Months Ended March 31,
	2018			2017			Increase/(Decrease)
Equity in loss of investee companies, net of tax	$	(14	)	$	(17	)		(18	)%

Net Earnings from Continuing Operations and Diluted EPS from Continuing Operations


	Three Months Ended June 30,							Six Months Ended June 30,							Three Months Ended March 31,
	2017		2016		Increase/(Decrease)			2017		2016		Increase/(Decrease)			2018		2017		Increase/(Decrease)
Net earnings from continuing operations	$	397	$	373		6	%	$	851	$	815		4	%	$	511	$	454		13	%
Diluted EPS from continuing operations	$	.97	$	.82		18	%	$	2.06	$	1.78		16	%	$	1.32	$	1.09		21	%

For the three months ended ~~June 30, 2017,~~March 31, 2018, the 6% increase in net earnings from continuing operations ~~was~~and diluted EPS from continuing operations of 13% and 21%, respectively, were primarily the result of higher operating income. ~~For the six months ended June 30, 2017, the 4% increase in net earnings~~The EPS comparison also benefited from continuing operations reflects the previously mentioned tax benefits, which were partially offset by lower operating income. In addition to the higher earnings, the increases in diluted EPS from continuing operations for the three and six months ended June 30, 2017 of 18% and 16%, respectively, reflect lower weighted average shares ~~outstanding as~~outstanding.

Net Loss from Discontinued Operations

For the three months ended March 31, 2017, net loss from discontinued operations of $706 million, which reflects the results of CBS Radio, included a ~~result~~noncash charge of $715 million to adjust the ~~Company’s ongoing share repurchase program.~~carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. (See Note 3 to the consolidated financial statements.)

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Net Earnings (Loss) ~~from Discontinued Operations~~

~~The following table sets forth details of net earnings (loss) from discontinued operations for the three and six months ended June 30, 2017 and 2016.~~

Three Months Ended June 30, Six Months Ended June 30,
2017
2016 2017
2016
Revenues $ 306
$ 313
$ 556
$ 575
Costs and expenses:
Operating 105
103
194
188
Selling, general and administrative 129
122
251
236
Depreciation and amortization^(a)
—
6
—
13
Restructuring charge 7
—
7
—
Provision for valuation allowance 365
—
1,080
—
Total costs and expenses 606
231
1,532
437
Operating income (loss) (300 ) 82
(976 ) 138
Interest expense (20 ) —
(39 ) —
Earnings (loss) from discontinued operations (320 ) 82
(1,015 ) 138
Income tax provision (19 ) (32 ) (30 ) (57 )
Net earnings (loss) from discontinued operations, net of tax $ (339 ) $ 50
$ (1,045 ) $ 81

~~(a) CBS Radio has been classified as held for sale beginning in the fourth quarter of 2016. Under ASC 360, assets held for sale are not depreciated or amortized.~~

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

~~Net Earnings (Loss)~~ and Diluted EPS


	Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended March 31,
	2017		2016		Increase/(Decrease)			2017			2016		Increase/(Decrease)			2018		2017			Increase/(Decrease)
Net earnings (loss)	$	58	$	423		(86	)%	$	(194	)	$	896		(122	)%	$	511	$	(252	)		n/m
Diluted EPS	$	.14	$	.93		(85	)%	$	(.47	)	$	1.95		(124	)%	$	1.32	$	(.61	)		n/m

n/m - not meaningful

~~Management’s Discussion and Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

Segment Results of Operations

~~Three Months Ended June 30, 2017 and 2016~~



	Three Months Ended March 31,
				% of Total Revenues						% of Total Revenues			Increase/(Decrease)
	2018			% of Total Revenues			2017			% of Total Revenues			$			%
Revenues:
Entertainment	$	2,716			72	%	$	2,347			70	%	$	369		16	%
Cable Networks	609				16		543				16		66			12
Publishing	160				4		161				5		(1		)	(1	)
Local Media	415				11		409				12		6			1
Corporate/Eliminations	(139		)		(3	)	(117		)		(3	)	(22		)	(19	)
Total Revenues	$	3,761			100	%	$	3,343			100	%	$	418		13	%


	Three Months Ended June 30,																	Three Months Ended March 31,
				% of Total Revenues						% of Total Revenues			Increase/(Decrease)								% of Total Segment Operating Income							% of Total Segment Operating Income
	2017			% of Total Revenues			2016			% of Total Revenues			$			%																Increase/(Decrease)
Revenues:
																		2018						% of Total Segment Operating Income								2017			% of Total Segment Operating Income				$	%
Segment Operating Income (Loss):
Entertainment	$	2,184			67	%	$	1,947			66	%	$	237		12	%	$	492			$	403					$	89			22	%
Cable Networks	571				18		536				18		35			7		230				30					250				34			(20		)		(8	)
Publishing	206				6		187				6		19			10		16				2			15				2			1				7
Local Media	412				13		396				13		16			4		118				15			124				17			(6		)		(5	)
Corporate/Eliminations	(116		)		(4	)	(90		)		(3	)	(26		)	(29	)
Total Revenues	$	3,257			100	%	$	2,976			100	%	$	281		9	%
Corporate																		(75		)		(10	)		(66		)		(9	)		(9		)		(14	)
Total Segment Operating Income																		781				100	%		726				100	%		55				8
Merger and acquisition-related costs																		(9		)					—							(9		)		n/m
Total Operating Income																		$	772						$	726						$	46			6	%

n/m - not meaningful

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)


	Three Months Ended June 30,																	Three Months Ended March 31,
				% of Total Operating Income						% of Total Operating Income												Increase/(Decrease)
													Increase/(Decrease)					2018		2017		$		%
	2017						2016						$			%
Segment Operating Income (Loss):
Depreciation and Amortization:
Entertainment	$	346			52	%	$	351			54	%	$	(5	)	(1	)%	$	30	$	29	$	1	3	%
Cable Networks	253				38		227				35		26			11		6		6		—		—
Publishing	28				4		26				4		2			8		1		1		—		—
Local Media	127				19		130				20		(3		)	(2	)	11		11		—		—
Corporate	(85		)		(13	)	(83		)		(13	)	(2		)	(2	)	8		8		—		—
Total Operating Income	$	669			100	%	$	651			100	%	$	18		3	%
Total Depreciation and Amortization																		$	56	$	55	$	1	2	%

Entertainment (CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, Network Ten, CBS Interactive and CBS Films)

Three Months Ended June 30,
Increase/(Decrease)
2017 2016 $ %
Depreciation and Amortization:
Entertainment $ 27
$ 30
$ (3 ) (10 )%
Cable Networks 6
5
1
20

Publishing 2
2
—
—

Local Media 12
11
1
9

Corporate 9
9
—
—

Total Depreciation and Amortization $ 56
$ 57
$ (1 ) (2 )%



	Three Months Ended March 31,
							Increase/(Decrease)
Entertainment	2018			2017			$		%
Revenues	$	2,716		$	2,347		$	369	16	%
Segment Operating Income	$	492		$	403		$	89	22	%
Segment Operating Income as a % of revenues	18		%	17		%
Depreciation and amortization	$	30		$	29		$	1	3	%
Capital expenditures	$	17		$	14		$	3	21	%

For the three months ended March 31, 2018, the 16%increase in revenues was driven by 11% growth in advertising revenues, primarily from the acquisition of Network Ten in the fourth quarter of 2017. CBS Television Network advertising revenues increased 1% for the first quarter. Also contributing to the revenue increase was affiliate and subscription fee revenues, which increased 39% as a result of higher station affiliation fees and growth from digital initiatives including CBS All Access and virtual MVPDs. Content licensing and distribution revenues grew 16%, benefiting from growth from the international licensing of new series and the start of the license periods for previously signed renewals of contracts for library programming. Entertainment revenues also included higher revenues from distribution arrangements, with an offsetting increase to operating expenses, as a result of the adoption of a new revenue recognition standard in the first quarter of 2018. (See Note 13 to the consolidated financial statements.)

For the three months ended March 31, 2018, operating income increased 22%, driven by the higher revenues.

Cable Networks (Showtime Networks, CBS Sports Network and Smithsonian Networks)



	Three Months Ended March 31,
							Increase/(Decrease)
Cable Networks	2018			2017			$			%
Revenues	$	609		$	543		$	66		12	%
Segment Operating Income	$	230		$	250		$	(20	)	(8	)%
Segment Operating Income as a % of revenues	38		%	46		%
Depreciation and amortization	$	6		$	6		$	—		—	%
Capital expenditures	$	4		$	3		$	1		33	%

For the three months ended March 31, 2018, the 12% increase in revenues was driven by growth from the Showtime digital streaming subscription offering and the start of the license periods for previously signed renewals of contracts for Showtime original series. As of March 31, 2018, subscriptions totaled approximately 25

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

~~Six Months Ended June 30, 2017 and 2016~~

Six Months Ended June 30,

% of Total
Revenues

% of Total
Revenues
Increase/(Decrease)
2017 2016 $ %
Revenues:
Entertainment $ 4,531
69 % $ 4,534
69 % $ (3 ) — %
Cable Networks 1,114
17
1,061
16
53
5

Publishing 367
6
332
5
35
11

Local Media 821
12
844
13
(23 ) (3 )
Corporate/Eliminations (233 ) (4 ) (207 ) (3 ) (26 ) (13 )
Total Revenues $ 6,600
100 % $ 6,564
100 % $ 36
1 %

Six Months Ended June 30,

% of Total
Segment
Operating
Income

% of Total
Segment
Operating
Income

Increase/(Decrease)
2017 2016 $ %
Segment Operating Income (Loss):
Entertainment $ 744
54 % $ 800
57 % $ (56 ) (7 )%
Cable Networks 501
37
455
32
46
10

Publishing 42
3
39
3
3
8

Local Media 250
18
280
20
(30 ) (11 )
Corporate (164 ) (12 ) (167 ) (12 ) 3
2

Total Segment Operating Income 1,373
100 % 1,407
100 % (34 ) (2 )
Other operating items, net —
9
(9 ) n/m

Total Operating Income $ 1,373
$ 1,416
$ (43 ) (3 )%

~~n/m - not meaningful~~

Six Months Ended June 30,
Increase/(Decrease)
2017 2016 $ %
Depreciation and Amortization:
Entertainment $ 56
$ 60
$ (4 ) (7 )%
Cable Networks 12
11
1
9

Publishing 3
3
—
—

Local Media 23
22
1
5

Corporate 17
18
(1 ) (6 )
Total Depreciation and Amortization $ 111
$ 114
$ (3 ) (3 )%

~~Management’s Discussion and Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

~~Entertainment~~million for ~~(CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Interactive and CBS Films)~~

~~Three Months Ended June 30, 2017 and 2016~~

Three Months Ended June 30,
Increase/(Decrease)
2017
2016 $ %
Revenues $ 2,184
$ 1,947
$ 237
12 %
Segment Operating Income $ 346
$ 351
$ (5 ) (1 )%
Segment Operating Income as a % of revenues 16 % 18 %
Depreciation and amortization $ 27
$ 30
$ (3 ) (10 )%
Capital expenditures $ 24
$ 24
$ —
— %

~~For the three months ended June 30, 2017, the 12%increase in revenues was driven by 38% growth in affiliate and subscription fees, led by higher station affiliation fees and growth from new initiatives, including~~Showtime, ~~CBS All Access~~ and third-party live television streaming services. Content licensing and distribution revenues benefited from a higher volume of television licensing sales and grew 12%, despite the difficult comparison with the second quarter of 2016, which included international licensing sales of five ~~Star Trek~~ library series. Advertising revenues increased 6%, reflecting the broadcast of the semifinals and finals of the NCAA Tournament on the CBS Television Network in the second quarter of 2017, partially offset by a decline in non-sports advertising revenues.

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

~~Six Months Ended June 30, 2017 and 2016~~

Six Months Ended June 30,
Increase/(Decrease)
2017 2016 $ %
Revenues $ 4,531
$ 4,534
$ (3 ) — %
Segment Operating Income $ 744
$ 800
$ (56 ) (7 )%
Segment Operating Income as a % of revenues 16 % 18 %
Depreciation and amortization $ 56
$ 60
$ (4 ) (7 )%
Capital expenditures $ 38
$ 37
$ 1
3 %

~~For the six months ended June 30, 2017, revenues were comparable with the same prior-year period, despite the benefit in 2016 from the broadcast of~~ ~~Super Bowl 50. Affiliate and subscription fees increased 33%, reflecting higher station affiliation fees and growth from new initiatives, including~~ ~~CBS All Access~~ ~~and third-party live television streaming services. Content licensing and distribution revenues grew 16%, led by higher domestic licensing sales and strong demand for~~ the Company’s ~~content internationally, due in part to increased investment in internally-produced series. These increases were partially offset by the benefit to 2016 from the sales of~~ ~~Star Trek~~ ~~library programming.~~

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

~~Management’s Discussion~~premium television network, and ~~Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

~~Cable Networks~~ ~~(Showtime Networks, CBS Sports Network and Smithsonian Networks)~~

~~Three Months Ended June 30, 2017 and 2016~~

Three Months Ended June 30,
Increase/(Decrease)
2017
2016 $ %
Revenues $ 571
$ 536
$ 35
7 %
Segment Operating Income $ 253
$ 227
$ 26
11 %
Segment Operating Income as a % of revenues 44 % 42 %
Depreciation and amortization $ 6
$ 5
$ 1
20 %
Capital expenditures $ 4
$ 2
$ 2
100 %

~~For the three months ended June 30, 2017, the 7% increase in revenues was driven by higher affiliate and subscription fees, led by subscription growth for~~ the Showtimedigital streaming subscription ~~offering. The revenue growth also reflects higher international television licensing sales of~~ ~~Showtime~~ ~~original series. As of June 30, 2017, subscriptions totaled 73 million for Showtime Networks (including~~ ~~Showtime~~, ~~The Movie Channel~~ ~~and~~ ~~Flix), 52~~offering combined, 51 million for CBS Sports Network and 3130 million for Smithsonian Networks.

For the three months ended ~~June 30, 2017,~~March 31, 2018, the ~~11%~~8% ~~increase~~decrease in operating income primarily reflects ~~revenue growth.~~an increased investment in programming, including two additional original series premieres,

~~Cable Networks revenues for~~The Chi and Our Cartoon President on Showtime during the ~~third~~first quarter of ~~2017 are expected to include revenues from the Floyd Mayweather/Conor McGregor pay-per-view boxing event.~~2018.

~~Six Months Ended June 30, 2017 and 2016~~

Six Months Ended June 30,
Increase/(Decrease)
2017 2016 $ %
Revenues $ 1,114
$ 1,061
$ 53
5 %
Segment Operating Income $ 501
$ 455
$ 46
10 %
Segment Operating Income as a % of revenues 45 % 43 %
Depreciation and amortization $ 12
$ 11
$ 1
9 %
Capital expenditures $ 7
$ 4
$ 3
75 %

~~For the six months ended June 30, 2017, the 5% increase in revenues reflects growth in affiliate and subscription fees, led by the~~ ~~Showtime~~ ~~digital streaming subscription offering. This growth was partially offset by the timing of television licensing sales of~~ ~~Showtime~~ ~~original series.~~

~~For the six months ended June 30, 2017, the 10% increase in operating income was driven by growth in higher-margin revenues.~~

~~Management’s Discussion and Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

Publishing (Simon & Schuster)

~~Three Months Ended June 30, 2017 and 2016~~

Three Months Ended June 30,
Increase/(Decrease)
2017
2016 $ %
Revenues $ 206
$ 187
$ 19
10 %
Segment Operating Income $ 28
$ 26
$ 2
8 %
Segment Operating Income as a % of revenues 14 % 14 %
Depreciation and amortization $ 2
$ 2
$ —
— %
Capital expenditures $ —
$ 3
$ (3 ) n/m

~~n/m - not meaningful~~



	Three Months Ended March 31,
							Increase/(Decrease)
Publishing	2018			2017			$			%
Revenues	$	160		$	161		$	(1	)	(1	)%
Segment Operating Income	$	16		$	15		$	1		7	%
Segment Operating Income as a % of revenues	10		%	9		%
Depreciation and amortization	$	1		$	1		$	—		—	%
Capital expenditures	$	1		$	1		$	—		—	%

For the three months ended ~~June 30, 2017,~~March 31, 2018, Publishing revenues decreased $1 million from the ~~10% increase in revenues was driven by higher print book sales and growth in digital audio sales. Best-selling~~same prior-year period. Bestselling titles in the ~~second~~first quarter of ~~2017~~2018 included ~~Lord of Shadows~~I’ve Got My Eyes On You by ~~Cassandra Clare~~Mary Higgins Clark and ~~I Can’t Make This Up~~The Last Black Unicorn by ~~Kevin Hart~~Tiffany Haddish.

For the three months ended ~~June 30, 2017,~~March 31, 2018, the ~~8% increase in operating income mainly reflects revenue growth.~~

~~Six Months Ended June 30, 2017 and 2016~~

Six Months Ended June 30,
Increase/(Decrease)
2017 2016 $ %
Revenues $ 367
$ 332
$ 35
11 %
Segment Operating Income $ 42
$ 39
$ 3
8 %
Segment Operating Income as a % of revenues 11 % 12 %
Depreciation and amortization $ 3
$ 3
$ —
— %
Capital expenditures $ 1
$ 6
$ (5 ) (83 )%

~~For the six months ended June 30, 2017, the 11% increase in revenues was driven by higher print book sales and growth in digital audio sales.~~

~~For the six months ended June 30, 2017, the 8%~~$1 million increase in operating income reflects lower operating expenses from the ~~revenue growth, which was partially offset by higher production and selling costs.~~

mix of revenues.

~~Management’s Discussion and Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

Local Media (CBS Television Stations and CBS Local Digital Media)

~~Three Months Ended June 30, 2017 and 2016~~


	Three Months Ended June 30,												Three Months Ended March 31,
							Increase/(Decrease)												Increase/(Decrease)
	2017			2016			$			��	%
Local Media													2018			2017			$			%
Revenues	$	412		$	396		$	16			4	%	$	415		$	409		$	6		1	%
Segment Operating Income	$	127		$	130		$	(3	)		(2	)%	$	118		$	124		$	(6	)	(5	)%
Segment Operating Income as a % of revenues	31		%	33		%							28		%	30		%
Depreciation and amortization	$	12		$	11		$	1			9	%	$	11		$	11		$	—		—	%
Capital expenditures	$	7		$	4		$	3			75	%	$	4		$	5		$	(1	)	(20	)%

For the three months ended ~~June 30, 2017,~~March 31, 2018, the 4%1% increase in revenues ~~was driven~~reflects higher retransmission revenues, which were partially offset by ~~growth~~a decrease in ~~retransmission~~advertising revenues. Advertising revenues benefited from CBS’s broadcast of the semifinals and finals of the NCAA Tournament in the second quarter of 2017; however, advertising revenues decreased 2% mainly due to lower political advertising sales.

For the three months ended ~~June 30, 2017,~~March 31, 2018, the 2%5% decrease in operating income ~~mainly~~primarily reflects the mix of revenues. Retransmission revenues have associated intercompany network affiliation costs paid to the CBS Television Network, whereas ~~political~~ advertising sales have a high operating income margin.

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

~~Six Months Ended June 30, 2017 and 2016~~

Six Months Ended June 30,
Increase/(Decrease)
2017 2016 $ %
Revenues $ 821
$ 844
$ (23 ) (3 )%
Segment Operating Income $ 250
$ 280
$ (30 ) (11 )%
Segment Operating Income as a % of revenues 30 % 33 %
Depreciation and amortization $ 23
$ 22
$ 1
5 %
Capital expenditures $ 12
$ 11
$ 1
9 %

~~For the six months ended June 30, 2017, the 3% decrease in revenues was driven by lower advertising revenues, reflecting the benefit in 2016 from CBS’s broadcast of~~ ~~Super Bowl 50,~~ ~~and a decline in political advertising sales. The lower advertising revenues were partially offset by growth in retransmission revenues.~~

~~For the six months ended June 30, 2017, the 11% decrease in operating income primarily reflects the lower revenues, as well as the mix of revenues compared to the same prior-year period.~~

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Corporate

~~Three Months Ended June 30, 2017 and 2016~~

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

~~Six Months Ended June 30, 2017 and 2016~~


	Six Months Ended June 30,											Three Months Ended March 31,
							Increase/(Decrease)											Increase/(Decrease)
	2017			2016			$			%
Corporate												2018			2017			$			%
Segment Operating Loss	$	(164	)	$	(167	)	$	3		2	%	$	(75	)	$	(66	)	$	(9	)	(14	)%
Depreciation and amortization	$	17		$	18		$	(1	)	(6	)%	$	8		$	8		$	—		—	%
Capital expenditures	$	10		$	11		$	(1	)	(9	)%	$	4		$	4		$	—		—	%

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 March 31, 2018, corporate expenses increased 14%, driven by higher employee-related costs.

Financial Position

The balance sheet at March 31, 2018 is presented under ASC 606 while December 31, 2017 is presented under previous accounting guidance. See Note 13 to the consolidated financial statements for the amount by which each balance sheet line item at March 31, 2018 was impacted by the adoption of ASC 606.


	At			At			Increase/(Decrease)					At			At			Increase/(Decrease)
	June 30, 2017			December 31, 2016			$			%		March 31, 2018			December 31, 2017			$			%
Current Assets:
Cash and cash equivalents		$	170		$	598	$	(428	)	(72	)%		$	147		$	285	$	(138	)	(48	)%
Receivables, net(a)		3,299			3,314		(15		)	—			3,820			3,697		123			3
Programming and other inventory ^(a)(b)		1,560			1,427		133			9			1,593			1,828		(235		)	(13	)
Prepaid expenses		132			185		(53		)	(29	)		164			194		(30		)	(15	)
All other current assets(c)		525			539		(14		)	(3	)		467			269		198			74
Total current assets		$	5,686		$	6,063	$	(377	)	(6	)%		$	6,191		$	6,273	$	(82	)	(1	)%

(a) The increase ~~mainly~~primarily reflects the ~~timing~~reclassification of ~~payments~~the sales returns reserve to “Other current liabilities” as a result of the adoption of ASC 606.

(b) The decrease primarily reflects the expensing of prepaid sports program rights.

(c) The increase primarily reflects amounts collectible on behalf of Turner under the rights agreement with Turner and the NCAA for ~~sports programming.~~the NCAA Tournament. In connection with this agreement, the Company collects all television advertising receivables, including those generated by Turner.

At At Increase/(Decrease)
June 30, 2017
December 31, 2016 $ %
Other assets ^(a)
$ 2,558
$ 2,707
$ (149 ) (6 )%



	At			At			Increase/(Decrease)
	March 31, 2018			December 31, 2017			$			%
Other assets ^(a)		$	2,337		$	2,852	$	(515	)	(18	)%

(a) The decrease primarily reflects lower ~~long-term~~noncurrent receivables ~~associated with revenues from television licensing agreements.~~as a result of the adoption of ASC 606.

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

At At Increase/(Decrease)
June 30, 2017 December 31, 2016 $ %
Assets of discontinued operations ^(a)
$ 3,218
$ 4,291
$ (1,073 ) (25 )%



	At			At			Increase/(Decrease)
	March 31, 2018			December 31, 2017			$			%
Current Liabilities:
Accounts payable		$	230		$	231	$	(1	)	—	%
Accrued compensation ^(a)		198			343		(145		)	(42	)
Participants’ share and royalties payable ^(a)		1,104			986		118			12
Program rights ^(b)		631			373		258			69
Short-term debt ^(c)		217			679		(462		)	(68	)
All other current liabilities ^(d)		1,689			1,360		329			24
Total current liabilities		$	4,069		$	3,972	$	97		2	%

(a) The change reflects the timing of payments.

(b) The increase primarily reflects the timing of payments under the rights agreement with Turner and the NCAA for the NCAA Tournament.

(d) The increase primarily reflects amounts due to Turner related to the NCAA Tournament and the reclassification of the sales returns reserve to “Other current liabilities” as a result of the adoption of ASC 606.



	At			At			Increase/(Decrease)
	March 31, 2018			December 31, 2017			$			%
Other liabilities^(a)		$	3,267		$	3,621	$	(354	)	(10	)%

(a) The decrease primarily reflects lower participation and residual liabilities as a ~~noncash charge~~result of ~~$1.08 billion to record a valuation allowance to reduce~~ the ~~carrying value~~adoption of ~~CBS Radio to the value indicated by the stock valuation of Entercom. (See Note 3 to the consolidated financial statements).~~

At At Increase/(Decrease)
June 30, 2017 December 31, 2016 $ %
Current Liabilities:
Accounts payable $ 124
$ 148
$ (24 ) (16 )%
Accrued compensation ^(a)
223
369
(146 ) (40 )
Participants’ share and royalties
payable
1,005
1,024
(19 ) (2 )
Commercial paper 263
450
(187 ) (42 )
All other current liabilities 1,615
1,717
(102 ) (6 )
Total current liabilities $ 3,230
$ 3,708
$ (478 ) (13 )%

~~(a) The decrease is due to the timing of payments.~~

At At Increase/(Decrease)
June 30, 2017 December 31, 2016 $ %
Pension and postretirement
benefit obligations ^(a)
$ 1,638
$ 1,769
$ (131 ) (7 )%

~~(a) The decrease primarily reflects discretionary pension contributions of $100 million made during the first quarter of 2017 to prefund the Company’s qualified plans.~~ASC 606.

Cash Flows

The changes in cash and cash equivalents were as follows:


	Six Months Ended June 30,										Three Months Ended March 31,
	2017			2016			Increase/(Decrease)				2018			2017			Increase/(Decrease)
Net cash flow provided by operating activities from:
Continuing operations	$	909		$	1,139			$	(230	)	$	717		$	678			$	39
Discontinued operations	29			112				(83		)	—			41				(41		)
Net cash flow provided by operating activities	938			1,251				(313		)	717			719				(2		)
Net cash flow used for investing activities from:
Continuing operations	(139		)	(140		)		1			(67		)	(82		)		15
Discontinued operations	(13		)	(2		)		(11		)	(23		)	(7		)		(16		)
Net cash flow used for investing activities	(152		)	(142		)		(10		)	(90		)	(89		)		(1		)
Net cash flow used for financing activities	(1,229		)	(1,256		)		27			(765		)	(1,082		)		317
Net decrease in cash and cash equivalents	$	(443	)	$	(147	)		$	(296	)	$	(138	)	$	(452	)		$	314

Operating Activities. For the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, the ~~decrease~~increase in cash provided by operating activities from continuing operations was driven by ~~the benefit in 2016 from CBS’s broadcast of~~ ~~Super Bowl 50, and~~a discretionary pension ~~contributions~~contribution of $100 million made during the first quarter of 2017 to prefund the Company’s qualified ~~plans. These decreases were~~plans, which was partially offset by ~~higher affiliate and subscription fee revenues.~~an increased investment in content.

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Investing Activities


	Six Months Ended June 30,								Three Months Ended March 31,
	2017				2016				2018				2017
Acquisitions ^(a)		$	(21	)		$	(51	)
Investments in and advances to investee companies ^(a)										$	(40	)		$	(49	)
Capital expenditures		(68		)		(69		)		(30		)		(27		)
Investments in and advances to investee companies ^(b)		(65		)		(43		)
Proceeds from dispositions ^(c)		1				19
Other investing activities		14				4
Acquisitions										—				(21		)
All other investing activities, net										3				15
Net cash flow used for investing activities from continuing operations		(139		)		(140		)		(67		)		(82		)
Net cash flow used for investing activities from discontinued operations		(13		)		(2		)		(23		)		(7		)
Net cash flow used for investing activities		$	(152	)		$	(142	)		$	(90	)		$	(89	)

(a) ~~2016 reflects the acquisition of a sports-focused digital media business.~~

~~(b)~~ Mainly includes the Company’s investment in The CW as well as its other domestic and international television joint ventures.

Financing Activities


	Six Months Ended June 30,								Three Months Ended March 31,
	2017				2016				2018				2017
Repayments of short-term debt borrowings, net										$	(462	)		$	(420	)
Repurchase of CBS Corp. Class B Common Stock		$	(845	)		$	(1,033	)		(186		)		(531		)
(Repayments of) proceeds from short-term debt borrowings, net		(187		)		163
Repayment of senior debentures		—				(199		)
Dividends		(151		)		(142		)		(71		)		(77		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation		(89		)		(57		)		(52		)		(76		)
Proceeds from exercise of stock options		39				10				16				36
All other financing activities, net		4				2				(10		)		(14		)
Net cash flow used for financing activities		$	(1,229	)		$	(1,256	)		$	(765	)		$	(1,082	)

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 discretionary contributions to prefund the Company’s pension plans, 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. Free cash flow excludes discretionary contributions to prefund the Company’s pension plans because management assesses the Company’s ability to generate operating cash flows without considering the impact from discretionary pension contributions, and decisions regarding the timing of pension plan funding are not dependent on the level of operating cash flows generated during the period. The Company’s net cash flow provided by (used for) operating activities is the most directly comparable GAAP financial measure.

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

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

peers for purposes of valuation and comparison of the Company’s operating performance to other companies in its industry.

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

The following table presents a reconciliation of the Company’s net cash flow provided by operating activities to free cash flow.


	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2017			2016			2018			2017
Net cash flow provided by operating activities	$	938		$	1,251		$	717		$	719
Capital expenditures	(68		)	(69		)	(30		)	(27		)
Exclude operating cash flow from discontinued operations	29			112
Less:
Discretionary pension plan contributions							—			(100		)
Operating cash flow from discontinued operations							—			41
Free cash flow	$	841		$	1,070		$	687		$	751

Repurchase of Company Stock and Cash Dividends

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Capital Structure

The following table sets forth the Company’s debt.


	At			At			At			At
	June 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Commercial paper		$	263		$	450		$	197		$	679
Senior debt (1.95% – 7.875% due 2017 – 2045) ^(a)		8,853			8,850
Short-term bank borrowings								20			—
Senior debt (2.30% – 7.875% due 2019 – 2045) ^(a)								9,428			9,426
Obligations under capital leases		68			75			61			57
Total debt		9,184			9,375			9,706			10,162
Less commercial paper		263			450
Less short-term debt								217			679
Less current portion of long-term debt		23			23			19			19
Total long-term debt, net of current portion		$	8,898		$	8,902		$	9,470		$	9,464

(a) At ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~,2017, the senior debt balances included (i) a net unamortized discount of ~~$49~~$63 million and ~~$52~~$65 million,, respectively, (ii) unamortized deferred financing costs of ~~$41~~$46 million and ~~$43~~$47 million, respectively, and (iii) ~~an increase~~a $3 million decrease in the carrying value of the debt relating to previously settled fair value hedges ~~of $2 million~~at both March 31, 2018 and ~~$5 million, respectively.~~December 31, 2017. The face value of the Company’s senior debt was ~~$8.94~~$9.54 billion at both ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016.~~

Commercial Paper

Credit Facility

At ~~June 30, 2017,~~March 31, 2018, the Company had a $2.5 billion revolving credit facility (the “Credit Facility”) which expires in June 2021. The Credit Facility requires the Company to maintain a maximum Consolidated Leverage Ratio of 4.5x at the end of each quarter as further described in the Credit Facility. At ~~June 30, 2017,~~March 31, 2018, the Company’s Consolidated Leverage Ratio was approximately 2.9x.

~~Management’s Discussion and Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

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

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

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 ~~June 30, 2017~~March 31, 2018; 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.

~~Subsequent to the refinancing of $700 million of debt in July 2017, the~~The Company’s long-term debt obligations due over the next five years of ~~$2.10~~$2.00 billion isare expected to be funded by cash generated from operating activities and the Company’s ability to refinance its debt.

Legal Matters

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

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

~~Management’s Discussion and Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

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 ~~June 30, 2017,~~March 31, 2018, the Company had pending approximately ~~33,240~~31,600 asbestos claims, as compared with approximately ~~33,610~~31,660 as of December 31, ~~2016~~2017 and ~~34,790~~33,600 as of ~~June 30, 2016.~~March 31, 2017. During the ~~second~~first quarter of ~~2017,~~2018, the Company received approximately ~~1,030~~870 new claims and closed or moved to an inactive docket approximately ~~1,390~~930 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. InThe Company’s total costs for the years 2017 and 2016 ~~the Company’s costs~~ for settlement and defense of asbestos claims after insurance recoveries and ~~taxes~~net of tax were approximately $57 million and $48 ~~million. In 2015, as the result of an insurance settlement, insurance recoveries exceeded the Company’s after tax costs for settlement and defense of asbestos claims by approximately $5 million.~~million, respectively. The Company’s costs for

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

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 pending 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 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 remained generally flat in recent years, it is difficult to predict future asbestos liabilities, as events and circumstances may occur including, among others, the number and types of claims and average cost to resolve such claims, which could affect the Company’s estimate of its asbestos liabilities.

Related Parties

See Note 5 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, ~~2016,~~2017, for a discussion of the Company’s critical accounting policies.

~~Management’s Discussion and Analysis of~~

~~Results of Operations and Financial Condition (Continued)~~

~~(Tabular dollars in millions, except per share amounts)~~

Cautionary Statement Concerning Forward-Looking Statements

This quarterly report on Form 10-Q, including “Item 2 - Management’s Discussion and Analysis of Results of Operations and Financial Condition,” contains both historical and forward‑looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward‑looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. These forward‑looking statements are not based on historical facts, but rather reflect the Company’s current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “may,” “could,” “estimate” 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~~or achievements expressed or implied by these statements. These risks, uncertainties and other factors

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

include, among others: ~~advertising market conditions generally;~~ changes in the public acceptance of the Company’s content; advertising market conditions generally; changes in technology and its effect on competition in the Company’s markets; changes in the 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; the impact of union activity, including possible strikes or work stoppages or the Company’s inability to negotiate favorable terms for contract renewals; the ability to achieve the separation of the Company’s radio business through a merger of CBS Radio with a subsidiary of Entercom Communications Corp. on the anticipated terms, which is subject to regulatory and Entercom stockholder approvals, an exchange offer and other customary closing conditions, and fluctuations in the market values of Entercom’s Class A common stock and the Company’s Class B Common Stock; other domestic and global economic, business, competitive and/or other 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, ~~2016~~2017 and in our Quarterly Reports on Form 10-Q, and in the Company’s recent Current Reports on Form 8-K. There may be additional risks, uncertainties and factors that the Company does not currently view as material or that are not necessarily known. The forward‑looking statements included in this document are made only as of the date of this document and the Company does not ~~have~~undertake 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, ~~2016.~~2017.



Item 4.	Controls and Procedures.

The Company’s chief executive officer and chief operating officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) were effective, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Securities Exchange Act of 1934, as amended.

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

PART II – OTHER INFORMATION



Item 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 totaling $16.4 billion have been approved and announced, including most recently, an increase to the share repurchase program to a total availability of $6.0 billion on July 28, 2016. Below is a summary of CBS Corp.’s purchases of its Class B Common Stock during the three months ended ~~June 30, 2017~~March 31, 2018 under this publicly announced share repurchase program.

(in millions, except per share amounts)
Total
Number of
Shares
Purchased

Average
Price Per
Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Programs

Remaining
Authorization
April 1, 2017 - April 30, 2017 1.1
$ 67.74
1.1
$ 3,529

May 1, 2017 - May 31, 2017 1.7
$ 62.57
1.7
$ 3,426

June 1, 2017 - June 30, 2017 1.9
$ 62.10
1.9
$ 3,307

Total 4.7
$ 63.64
4.7
$ 3,307



(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
January 1, 2018 - January 31, 2018		—	$	—		—		$	3,057
February 1, 2018 - February 28, 2018		1.0	$	55.22		1.0		$	3,002
March 1, 2018 - March 31, 2018		2.8	$	51.76		2.8		$	2,857
Total		3.8	$	52.67		3.8		$	2,857



Item 6.	Exhibits.



Exhibit No.			Description of Document
(2	)		~~Plan of acquisition, reorganization, arrangement, liquidation or succession.~~
		~~(a)~~	Amendment No. 1, dated as of July 10, 2017 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of CBS Corporation filed July 10, 2017 (File No. 001-09553)), to Agreement and Plan of Merger, dated as of February 2, 2017, by and among CBS Corporation, CBS Radio Inc., Entercom Communications Corp. and Constitution Merger Sub Corp. (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K of CBS Corporation filed February 2, 2017 (File No. 001-09553)).
(4	)		Instruments defining the rights of security holders, including ~~indentures.~~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 of CBS Corporation filed 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 of CBS Corporation filed 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)~~(10	)		Material Contracts
		(a)	Letter Agreement dated April 25, 2018 amending the Employment Agreement dated ~~May 19,~~as of June 1, 2017 between CBS Corporation and ~~Leslie Moonves (filed herewith)~~Lawrence P. Tu (filed herewith).
(12	)		Statement Regarding Computation of Ratios ~~(filed herewith)~~(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)~~(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)~~(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)~~(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)~~(furnished herewith).
(101	)		Interactive Data File
			101. INS XBRL Instance Document.
			101. SCH XBRL Taxonomy Extension Schema.
			101. CAL XBRL Taxonomy Extension Calculation Linkbase.
			101. DEF XBRL Taxonomy Extension Definition Linkbase.
			101. LAB XBRL Taxonomy Extension Label Linkbase.
			101. PRE XBRL Taxonomy Extension Presentation Linkbase.

SIGNATURES

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



	CBS CORPORATION (Registrant)

Date: ~~August 7, 2017~~May 4, 2018	/s/ Joseph R. Ianniello
	Joseph R. Ianniello Chief Operating Officer

Date: ~~August 7, 2017~~May 4, 2018	/s/ Lawrence Liding
	Lawrence Liding Executive Vice President, Controller and Chief Accounting Officer

~~EXHIBIT INDEX~~



~~Exhibit No.~~			~~Description of Document~~
(2	)		~~Plan of acquisition, reorganization, arrangement, liquidation or succession.~~
		~~(a)~~	Amendment No. 1, dated as of July 10, 2017 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of CBS Corporation filed July 10, 2017 (File No. 001-09553)), to Agreement and Plan of Merger, dated as of February 2, 2017, by and among CBS Corporation, CBS Radio Inc., Entercom Communications Corp. and Constitution Merger Sub Corp. (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K of CBS Corporation filed February 2, 2017 (File No. 001-09553)).
(4	)		~~Instruments defining the rights of security holders, including indentures.~~
		~~(a)~~	Amended and Restated Senior Indenture dated as of November 3, 2008 (“2008 Indenture”) between CBS Corporation, CBS Operations Inc., and The Bank of New York Mellon, as senior trustee (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 of CBS Corporation filed 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 of CBS Corporation filed 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 May 19, 2017 between CBS Corporation and Leslie Moonves (filed herewith).~~
~~(12~~	)		~~Statement Regarding Computation of Ratios (filed herewith)~~
~~(31~~	)		~~Rule 13a-14(a)/15d-14(a) Certifications~~
		~~(a)~~	~~Certification of the Chief Executive Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).~~
		~~(b)~~	~~Certification of the Chief Operating Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).~~
~~(32~~	)		~~Section 1350 Certifications~~
		~~(a)~~	~~Certification of the Chief Executive Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).~~
		~~(b)~~	~~Certification of the Chief Operating Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).~~
~~(101~~	)		~~Interactive Data File~~
			~~101. INS XBRL Instance Document.~~
			~~101. SCH XBRL Taxonomy Extension Schema.~~
			~~101. CAL XBRL Taxonomy Extension Calculation Linkbase.~~
			~~101. DEF XBRL Taxonomy Extension Definition Linkbase.~~
			~~101. LAB XBRL Taxonomy Extension Label Linkbase.~~
			~~101. PRE XBRL Taxonomy Extension Presentation Linkbase.~~

~~-60-~~-53-



	At				At
	June 30, 2017				December 31, 2016
Term Loan due October 2023, net of discount		$	950			$	955
7.250% Senior Notes due November 2024		400				400
Revolving Credit Facility		34				10
Deferred financing costs		(18		)		(20		)
Total long-term debt, including current portion		$	1,366			$	1,345



	Cumulative Translation Adjustments		Net Actuarial Gain (Loss) and Prior Service Cost				Accumulated Other Comprehensive Loss
At December 31, 2016	$	151	$	(918	)			$	(767	)
Other comprehensive income before reclassifications	2		—					2
Reclassifications to net earnings (loss)	—		24			^(a)		24
Net other comprehensive income	2		24					26
At June 30, 2017	$	153	$	(894	)			$	(741	)



	Statement of Operations
	For the Three Months Ended June 30, 2016
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated
Revenues	$	36		$	3		$	2,937		$	—		$	2,976
Costs and expenses:
Operating	15			2			1,741			—			1,758
Selling, general and administrative	21			66			423			—			510
Depreciation and amortization	1			6			50			—			57
Total costs and expenses	37			74			2,214			—			2,325
Operating income (loss)	(1		)	(71		)	723			—			651
Interest (expense) income, net	(124		)	(106		)	138			—			(92		)
Other items, net	(1		)	13			(16		)	—			(4		)
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies	(126		)	(164		)	845			—			555
Benefit (provision) for income taxes	40			51			(264		)	—			(173		)
Equity in earnings (loss) of investee companies, net of tax	509			289			(9		)	(798		)	(9		)
Net earnings from continuing operations	423			176			572			(798		)	373
Net earnings from discontinued operations, net of tax	—			—			50			—			50
Net earnings	$	423		$	176		$	622		$	(798	)	$	423
Total comprehensive income	$	432		$	185		$	611		$	(796	)	$	432



	Three Months Ended June 30, 2017
	Reported			Discontinued Operations Adjustments ^(a)			Adjusted
Net earnings from continuing operations	$	397			$	—	$	397
Net earnings (loss) from discontinued operations, net of tax	(339		)		369		30
Net earnings	$	58			$	369	$	427
Diluted EPS from continuing operations	$	.97			$	—	$	.97
Diluted EPS	$	.14			$	.90	$	1.04



	Six Months Ended June 30, 2017
	Reported			Discrete Tax Item ^(b)				Discontinued Operations Adjustments ^(a)			Adjusted
Earnings from continuing operations before income taxes	$	1,187			$	—			$	—	$	1,187
Provision for income taxes	(307		)		(22		)		—		(329		)
Equity in loss of investee companies, net of tax	(29		)		—				—		(29		)
Net earnings from continuing operations	851				(22		)		—		829
Net earnings (loss) from discontinued operations, net of tax	(1,045		)		—				1,084		39
Net earnings (loss)	$	(194	)		$	(22	)		$	1,084	$	868
Diluted EPS from continuing operations	$	2.06			$	(.05	)		$	—	$	2.01
Diluted EPS	$	(.47	)		$	(.05	)		$	2.62	$	2.10



	At June 30,
			Weighted Average					Weighted Average
	2017		Interest Rate			2016		Interest Rate
Total long-term debt	$	8,853		4.47	%	$	8,167		4.61	%
Commercial paper	$	263		1.42	%	$	163		0.72	%