UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~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 ~~October~~July 31, ~~2017:~~2018:

Class A Common Stock, par value $.001 per share— ~~37,598,604~~37,507,609

Class B Common Stock, par value $.001 per share— ~~362,580,107~~338,524,891

CBS CORPORATION

INDEX TO FORM 10-Q



		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

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

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

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

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

	Notes to Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition.	3436

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	6064

Item 4.	Controls and Procedures.	6064

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	65

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	6165

Item 5.	Other Information.	65

Item 6.	Exhibits.	6266

PART I – FINANCIAL INFORMATION



Item 1.	Financial Statements.

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in millions, except per share amounts)


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Revenues	$	3,171		$	3,084		$	9,771		$	9,648		$	3,466		$	3,257		$	7,227		$	6,600
Costs and expenses:
Operating	1,862			1,788			5,940			5,818			2,184			2,004			4,584			4,078
Selling, general and administrative	547			521			1,585			1,534			532			507			1,056			995
Depreciation and amortization	55			54			166			168			56			56			112			111
Other operating items, net	—			—			—			(9		)
Restructuring and other corporate matters (Note 3)													35			—			44			—
Total costs and expenses	2,464			2,363			7,691			7,511			2,807			2,567			5,796			5,184
Operating income	707			721			2,080			2,137			659			690			1,431			1,416
Interest expense	(116		)	(104		)	(336		)	(304		)	(116		)	(111		)	(234		)	(220		)
Interest income	17			7			45			22			14			15			31			28
Loss on early extinguishment of debt (Note 6)	(5		)	—			(5		)	—
Other items, net	3			—			9			(7		)	(24		)	(16		)	(35		)	(37		)
Earnings from continuing operations before income taxes and equity in loss of investee companies	606			624			1,793			1,848			533			578			1,193			1,187
Provision for income taxes	(172		)	(145		)	(479		)	(524		)	(113		)	(169		)	(248		)	(307		)
Equity in loss of investee companies, net of tax	(16		)	(13		)	(45		)	(43		)	(20		)	(12		)	(34		)	(29		)
Net earnings from continuing operations	418			466			1,269			1,281			400			397			911			851
Net earnings (loss) from discontinued operations, net of tax (Note 3)	174			12			(871		)	93
Net earnings	$	592		$	478		$	398		$	1,374
Net loss from discontinued operations, net of tax (Note 13)													—			(339		)	—			(1,045		)
Net earnings (loss)													$	400		$	58		$	911		$	(194	)

Basic net earnings (loss) per common share:
Net earnings from continuing operations	$	1.04		$	1.05		$	3.13		$	2.84		$	1.06		$	.98		$	2.40		$	2.09
Net earnings (loss) from discontinued operations	$	.43		$	.03		$	(2.15	)	$	.21
Net earnings	$	1.48		$	1.08		$	.98		$	3.05
Net loss from discontinued operations													$	—		$	(.84	)	$	—		$	(2.57	)
Net earnings (loss)													$	1.06		$	.14		$	2.40		$	(.48	)

Diluted net earnings (loss) per common share:
Net earnings from continuing operations	$	1.03		$	1.04		$	3.10		$	2.82		$	1.05		$	.97		$	2.38		$	2.06
Net earnings (loss) from discontinued operations	$	.43		$	.03		$	(2.12	)	$	.20
Net earnings	$	1.46		$	1.07		$	.97		$	3.02
Net loss from discontinued operations													$	—		$	(.83	)	$	—		$	(2.53	)
Net earnings (loss)													$	1.05		$	.14		$	2.38		$	(.47	)

Weighted average number of common shares outstanding:
Basic	401			442			405			451			378			405			380			407
Diluted	406			446			410			455			381			410			383			413

Dividends per common share	$	.18		$	.18		$	.54		$	.48		$	.18		$	.18		$	.36		$	.36

See notes to consolidated financial statements.

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; in millions)


	Three Months Ended				Nine Months Ended				Three Months Ended					Six Months Ended
	September 30,				September 30,				June 30,					June 30,
	2017		2016		2017		2016		2018			2017		2018			2017
Net earnings	$	592	$	478	$	398	$	1,374
Net earnings (loss)									$	400		$	58	$	911		$	(194	)
Other comprehensive income, net of tax:
Cumulative translation adjustments	2		1		4		2		(8		)	—		(14		)	2
Amortization of net actuarial loss and prior service cost	13		10		37		29
Amortization of net actuarial loss									15			12		30			24
Total other comprehensive income, net of tax	15		11		41		31		7			12		16			26
Total comprehensive income	$	607	$	489	$	439	$	1,405
Total comprehensive income (loss)									$	407		$	70	$	927		$	(168	)

See notes to consolidated financial statements.

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except per share amounts)


	At				At				At				At
	September 30, 2017				December 31, 2016				June 30, 2018				December 31, 2017
ASSETS
Current Assets:
Cash and cash equivalents		$	144			$	598			$	252			$	285
Receivables, less allowances of $48 (2017) and $60 (2016)		3,598				3,314
Receivables, less allowances of $50 (2018) and $49 (2017)										3,597				3,697
Programming and other inventory (Note 4)		1,830				1,427				1,876				1,828
Prepaid income taxes		—				30				—				78
Prepaid expenses		182				185				117				194
Other current assets		185				204				206				191
Current assets of discontinued operations (Note 3)		355				305
Total current assets		6,294				6,063				6,048				6,273
Property and equipment		3,001				2,935				2,984				3,051
Less accumulated depreciation and amortization		1,793				1,694				1,747				1,771
Net property and equipment		1,208				1,241				1,237				1,280
Programming and other inventory (Note 4)		2,814				2,439				3,197				2,881
Goodwill		4,891				4,864				4,921				4,891
Intangible assets		2,617				2,633				2,655				2,666
Other assets		2,745				2,707				2,327				2,852
Assets of discontinued operations (Note 3)		3,325				4,291
Total Assets		$	23,894			$	24,238			$	20,385			$	20,843

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	233			$	148			$	138			$	231
Accrued compensation		257				369				225				343
Participants’ share and royalties payable		997				1,024				1,071				986
Program rights		509				290				369				373
Income taxes payable		55				—				129				—
Commercial paper (Note 6)		590				450				370				679
Current portion of long-term debt (Note 6)		19				23				16				19
Accrued expenses and other current liabilities		1,238				1,249				1,466				1,341
Current liabilities of discontinued operations (Note 3)		154				155
Total current liabilities		4,052				3,708				3,784				3,972
Long-term debt (Note 6)		9,080				8,902				9,464				9,464
Pension and postretirement benefit obligations		1,619				1,769				1,289				1,328
Deferred income tax liabilities, net		645				590				454				480
Other liabilities		3,038				3,129				3,227				3,621
Liabilities of discontinued operations (Note 3)		2,466				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; 833 (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		43,830				43,913				43,720				43,797
Accumulated deficit		(18,859		)		(19,257		)		(18,250		)		(18,900		)
Accumulated other comprehensive loss (Note 8)		(726		)		(767		)		(646		)		(662		)
		24,246				23,890				24,825				24,236
Less treasury stock, at cost; 471 (2017) and 455 (2016) Class B shares		21,252				20,201
Less treasury stock, at cost; 496 (2018) and 489 (2017) Class B shares										22,658				22,258
Total Stockholders’ Equity		2,994				3,689				2,167				1,978
Total Liabilities and Stockholders’ Equity		$	23,894			$	24,238			$	20,385			$	20,843

See notes to consolidated financial statements.

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)


	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2017			2016			2018			2017
Operating Activities:
Net earnings	$	398		$	1,374
Less: Net earnings (loss) from discontinued operations, net of tax	(871		)	93
Net earnings (loss)							$	911		$	(194	)
Less: Net loss from discontinued operations, net of tax							—			(1,045		)
Net earnings from continuing operations	1,269			1,281			911			851
Adjustments to reconcile net earnings from continuing operations to net cash flow provided by operating activities from continuing operations:
Depreciation and amortization	166			168			112			111
Stock-based compensation	129			123			91			85
Equity in loss of investee companies, net of tax and distributions	45			48			34			29
Change in assets and liabilities, net of investing and financing activities	(674		)	(503		)	(103		)	(167		)
Net cash flow provided by operating activities from continuing operations	935			1,117			1,045			909
Net cash flow provided by operating activities from discontinued operations	52			189
Net cash flow (used for) provided by operating activities from discontinued operations							(2		)	29
Net cash flow provided by operating activities	987			1,306			1,043			938
Investing Activities:
Acquisitions (including acquired television library)	(258		)	(51		)
Investments in and advances to investee companies							(71		)	(65		)
Capital expenditures	(112		)	(111		)	(62		)	(68		)
Investments in and advances to investee companies	(67		)	(44		)
Proceeds from sale of investments	10			—
Proceeds from dispositions	11			20
Acquisitions							(29		)	(21		)
Other investing activities	17			7			2			15
Net cash flow used for investing activities from continuing operations	(399		)	(179		)	(160		)	(139		)
Net cash flow used for investing activities from discontinued operations	(18		)	(2		)	(23		)	(13		)
Net cash flow used for investing activities	(417		)	(181		)	(183		)	(152		)
Financing Activities:
Proceeds from short-term debt borrowings, net	140			33
Proceeds from issuance of senior notes	889			685
Repayment of senior notes and debentures	(701		)	(199		)
Repayments of short-term debt borrowings, net							(309		)	(187		)
Proceeds from debt borrowings of CBS Radio	40			—			—			24
Repayment of debt borrowings of CBS Radio	(23		)	—			—			(5		)
Payment of capital lease obligations	(13		)	(13		)	(8		)	(8		)
Payment of contingent consideration	(7		)	—			(5		)	(7		)
Dividends	(224		)	(209		)	(140		)	(151		)
Purchase of Company common stock	(1,111		)	(1,534		)	(394		)	(845		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation	(89		)	(57		)	(58		)	(89		)
Proceeds from exercise of stock options	81			13			22			39
Excess tax benefit from stock-based compensation (Note 1)	—			13
Other financing activities	—			(1		)	(1		)	—
Net cash flow used for financing activities	(1,018		)	(1,269		)	(893		)	(1,229		)
Net decrease in cash and cash equivalents	(448		)	(144		)	(33		)	(443		)
Cash and cash equivalents at beginning of period (includes $24 (2017) and $6 (2016) of discontinued operations cash)	622			323
Cash and cash equivalents at end of period (includes $30 (2017) and $1 (2016) of discontinued operations cash)	$	174		$	179
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 $9 (2017) of discontinued operations cash)							$	252		$	179
Supplemental disclosure of cash flow information
Cash paid for interest:
Continuing operations	$	393		$	358		$	231		$	217
Discontinued operations	$	52		$	—		$	—		$	39

Cash paid for income taxes:
Continuing operations	$	321		$	310		$	31		$	272
Discontinued operations	$	58		$	60		$	—		$	46

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~~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).

~~Pending Acquisition~~Discontinued Operations-On ~~August 27,~~November 16, 2017, the Company ~~signed a binding agreement to acquire Ten Networks Holdings Limited (“Network Ten”), one~~completed the disposition of three major commercial broadcast networks in Australia, after Network Ten entered into voluntary administration. During the third quarter of 2017, the Company paid $138 million of the purchase price, primarily for the assumption of the secured debt of Network Ten’s lenders, and funding for working capital. The transaction, which is expected to close in the fourth quarter of 2017, will be completed in accordance with Australian applicable laws and procedures and is subject to certain regulatory approvals.

~~Discontinued Operations-On February 2, 2017, the Company entered into an agreement with Entercom Communications Corp. (“Entercom”) to combine the Company’s radio business,~~ CBS Radio Inc. (“CBS Radio”)~~, with Entercom in a merger to be effected~~ through a Reverse Morris Trust transaction, which is expected to be tax-free to CBS Corp. and its stockholders. In connection with this transaction, on October 19, 2017, the Company commenced an exchange offer through which it will split-off CBS Radio (See Note 3).split-off. CBS Radio has been presented as a discontinued operation in the Company’s consolidated financial statements ~~for all periods presented.~~(See Note 13).

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~~the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported ~~amount~~amounts 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 revenues are 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 and the license period has begun. 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 ~~nine~~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, the Local Media segment generates 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 $1.54 billion and $1.59 billion at June 30, 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.

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 $210 million and $284 million at June 30, 2018 and January 1, 2018, respectively. The change in deferred revenue for the six months ended ~~September~~June 30, ~~2016~~

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

2018 reflects $167 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 June 30, 2018, unrecognized revenue attributable to unsatisfied performance obligations under the Company’s long-term contracts was $3.60 billion, of which $1.01 billion is expected to be recognized for the remainder of 2018, $1.40 billion for 2019, $738 million for 2020, and $442 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

~~CBS CORPORATION AND SUBSIDIARIES~~

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

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

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 8 million stock options and RSUs for each of the three and six months endedJune 30, 2018 and 4 million stock options for each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 and 5 million stock options for each of the three and nine months endedSeptember 30, 2016.~~2017.

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


	Three Months Ended		Nine Months Ended		Three Months Ended		Six Months Ended
	September 30,		September 30,		June 30,		June 30,
(in millions)	2017	2016	2017	2016	2018	2017	2018	2017
Weighted average shares for basic EPS	401	442	405	451	378	405	380	407
Dilutive effect of shares issuable under stock-based compensation plans	5	4	5	4	3	5	3	6
Weighted average shares for diluted EPS	406	446	410	455	381	410	383	413

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

Additional Paid-In Capital-For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, the Company recorded dividends of ~~$221~~$138 million and $~~218~~148 million, respectively, as a reduction to additional paid-in capital as the Company had an accumulated deficit balance.

~~Adoption of New~~Recently Adopted Accounting ~~Standards~~Pronouncements

~~Improvements to Employee Share-Based Payment Accounting~~Revenue from Contracts with Customers

During the first quarter of ~~2017,~~2018, the Company adopted ~~amended~~ Financial Accounting Standards Board (“FASB”) guidance on the recognition of revenues which ~~simplifies several aspects of the accounting~~provides a single, comprehensive revenue recognition model for ~~employee share-based payment transactions. Under this amended guidance,~~ all ~~excess tax benefits~~contracts with customers 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 ofsupersedes most existing revenue recognition guidance. The main principle under this guidance ~~the Company’s excess tax benefits associated with the exercise of stock options and vesting of RSUs for the three and nine months endedSeptember 30,~~2017 were recorded in the provision for income taxes on the 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~~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 12).

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 $16 million and $31 million of net benefit costs in “Other items, net” on the Consolidated Statement of Operations for the three and six months ended June 30, 2018, respectively, representing the components of net benefit cost other than service cost. This guidance is required to be applied retrospectively and therefore, $21 million and $43 million of expenses, previously presented within operating income, have been reclassified to “Other items, net” for the three and six months ended June 30, 2017, respectively.

Stock Compensation: Scope of Modification Accounting

During the first quarter of 2018, the Company adopted FASB 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. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements.

Clarifying the Definition of a Business

During the first quarter of 2018, the Company adopted FASB 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. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements.

Intra-Entity Transfers of Assets Other than Inventory

During the first quarter of 2018, the Company adopted 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.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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.

~~Stock Compensation: Scope of Modification Accounting~~

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

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

In October 2016, the FASB issued amended guidance on the accounting for income taxes, which eliminates the exception in existing guidance which defers the recognition of the tax effects of intra-entity asset transfers other than inventory until the transferred asset is sold to a third party. Rather, the amended guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer

~~CBS CORPORATION AND SUBSIDIARIES~~

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

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

occurs. This guidance, which is effective for interim and annual periods beginning after December 15, 2017, is not expected to have a material impact on the Company’s consolidated financial statements.

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

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

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. This guidance is effective for the Company in the first quarter of 2019. The Company is currently reviewing its lease portfolio, evaluating the impact of this guidance on its consolidated balance ~~sheets. This guidance is effective for interim~~sheet 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.assessing system requirements. The main principle under this guidance is that an entity should recognize revenue at the amount it expects to be entitled to in exchange for the transfer of goods or services to customers. This guidance is effective for the Company ~~beginning in the first quarter of 2018. The Company anticipates that it~~ will apply the modified retrospective method of adoption ~~with the cumulative effect of the initial adoption reflected as an adjustment to the opening balance of accumulated deficit~~ as of January 1, ~~2018. The Company has identified the predominant changes~~2019 and comparative periods will continue 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 anpresented under 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 revenues from extensions executed each year approximate revenues from extensions for which the license period has begun.lease guidance.

~~CBS CORPORATION AND SUBSIDIARIES~~

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

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

2) STOCK-BASED COMPENSATION

The following table summarizes the Company’s stock-based compensation expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
RSUs and PSUs	$	38		$	35		$	109		$	102		$	41		$	38		$	79		$	71
Stock options	6			7			20			21			6			7			12			14
Stock-based compensation expense, before income taxes	44			42			129			123			47			45			91			85
Related tax benefit	(17		)	(17		)	(50		)	(48		)	(12		)	(18		)	(23		)	(33		)
Stock-based compensation expense, net of tax benefit	$	27		$	25		$	79		$	75		$	35		$	27		$	68		$	52

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~,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 ~~$66.75.~~$53.95. RSUs granted during the first ~~nine~~six months 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

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

awards the number of shares an employee earns ranges from 0% to 120% of the target award, based on the outcome of established performance conditions. Compensation expense is recorded based on the probable outcome of the performance conditions. During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~$23~~$17 million.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~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 ~~nine~~six months 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 ~~September~~June 30, ~~2017~~2018 was ~~$235 million, which is expected to be recognized over a weighted average period of 2.3 years. Total unrecognized compensation cost related to unvested stock option awards at~~ ~~September 30, 2017~~ ~~was $45~~$278 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, 2018 was $50 million, which is expected to be recognized over a weighted average period of 2.8 years.

3) ~~DISCONTINUED OPERATIONS~~RESTRUCTURING AND OTHER CORPORATE MATTERS

~~On February 2, 2017,~~During the second quarter of 2018, in a continued effort to reduce its cost structure, the Company entered into an agreement with Entercom to combine the Company’s radio business, CBS Radio, with Entercom in a merger to be effected through a Reverse Morris Trust transaction, which is expected to be tax-free to CBS Corp. and its stockholders. In connection with this transaction, on October 19, 2017, the Company commenced an exchange offer through which it will split-off CBS Radio. In the exchange offer, the Company’s stockholders have the opportunity to exchange their shares of the Company’s Class B Common Stock for shares of CBS Radio common stock, which will be immediately converted into shares of Entercom Class A common stock upon completion of the merger. The exchange ratio is calculated based on the trading prices of CBS Class B Common Stock and Entercom Class A common stock with a 7% discount per-share value, subject to an upper limit of 5.7466 shares of CBS Radio common stock for each share of CBS Class B

~~CBS CORPORATION AND SUBSIDIARIES~~

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

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

Common Stock. Based on the exchange ratio at the commencement of the exchange offer, and assuming the exchange offer is fully subscribed, the Company would receive approximately 19 million shares in the exchange offer, thereby reducing the Company’s shares outstanding. However, the exchange ratio will change based on fluctuations in the trading prices of CBS Class B Common Stock and Entercom Class A common stock. A 10% change to the exchange ratio would change the number of shares the Company receives in the exchange offer by approximately 2 million shares. The exchange offer is scheduled to expire on November 16, 2017, unless the exchange offer is extended or terminated. The transaction is subject to certain customary terms and conditions. CBS Radio has been classified as held for sale and presented as a discontinued operation in the Company’s consolidated financial statements for all periods presented.

~~FASB Accounting Standards Codification (“ASC”) 360 requires that an asset classified as held for sale be measured each reporting period at the lower~~initiated restructuring plans across several of its carrying amount or fair value less cost to sell. The ultimate value of the transaction with Entercom will be determined based on Entercom’s stock price at the closing of the transaction. The Company recorded a noncash gain of $100 millionbusinesses, primarily for the three months ended September 30, 2017 and a noncash charge of $980 million for the nine months ended September 30, 2017 associated with a valuation allowance to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. The Company will record an additional gain or loss upon the closing of the transaction, which is expected to occur in the fourth quarter of 2017. A 10% change to Entercom’s stock price would change the carrying value of CBS Radio by approximately $110 million.

~~For the nine months ended September 30, 2017, CBS Radio recorded a restructuring charge of $7 million associated with~~ the reorganization of certain business ~~operations,~~operations. As a result, the Company recorded restructuring charges of $25 million, reflecting $17 million of severance costs and $8 million of costs associated with exiting contractual ~~obligations.~~obligations and other related costs.

During the year ended December 31, 2017, 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.

~~The following tables set forth details~~As of ~~net earnings (loss) from discontinued operations~~June 30, 2018, the cumulative settlements for the ~~three and nine months ended September 30,~~2018, 2017 and ~~2016. Net earnings (loss) from discontinued operations included~~2016 restructuring charges were $48 million, of which $42 million was for severance costs and $6 million was for costs associated with contractual obligations and other related costs. The Company expects to substantially utilize its restructuring reserves by the ~~operating results~~end of CBS Radio for all periods presented. Net earnings (loss) from discontinued operations also included a tax benefit of $45 million for the three and nine months ended September 30, 2017 and a charge of $36 million for the three and nine months ended September 30, 2016, in each case from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business that was accounted for as a discontinued operation.2019.

Three Months Ended September 30, 2017 CBS Radio
Other
Total
Revenues $ 300

$ —

$ 300
Costs and expenses: ^(a)

Operating 113

—

113
Selling, general and administrative 121

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

(100 )
Total costs and expenses 134

(1 )
133
Operating income 166

1

167
Interest expense (21 )
—

(21 )
Earnings from discontinued operations 145

1

146
Income tax (provision) benefit (17 )
45

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

$ 46

$ 174

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



	Balance at			2018			2018				Balance at
	December 31, 2017			Charges			Settlements				June 30, 2018
Entertainment		$	45		$	6		$	(15	)		$	36
Cable Networks		1			—			(1		)		—
Publishing		3			1			(1		)		3
Local Media		14			11			(3		)		22
Corporate		3			7			(1		)		9
Total		$	66		$	25		$	(21	)		$	70

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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

$ —

$ 317
Costs and expenses:

Operating 110

—

110
Selling, general and administrative 123

—

123
Depreciation and amortization 7

—

7
Total costs and expenses 240

—

240
Operating income 77

—

77
Other income 2

—

2
Earnings from discontinued operations 79

—

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

$ (36 )
$ 12



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

During the three and six months ended June 30, 2018, the Company recorded expenses of $10 million and $19 million, respectively, primarily for professional fees related to the evaluation of a potential combination with Viacom Inc. and legal proceedings involving the Company and National Amusements, Inc. (“NAI”) (See Note 14).

Nine Months Ended September 30, 2017 CBS Radio
Other
Total
Revenues $ 856

$ —

$ 856
Costs and expenses: ^(a)

Operating 307

—

307
Selling, general and administrative 372

(1 )
371
Restructuring charge 7

—

7
Provision for valuation allowance 980

—

980
Total costs and expenses 1,666

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

(809 )
Interest expense (60 )
—

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

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

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

$ (871 )

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

Nine Months Ended September 30, 2016 CBS Radio
Other
Total
Revenues $ 892

$ —

$ 892
Costs and expenses:

Operating 298

—

298
Selling, general and administrative 359

—

359
Depreciation and amortization 20

—

20
Total costs and expenses 677

—

677
Operating income 215

—

215
Other income 2

—

2
Earnings from discontinued operations 217

—

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

$ (36 )
$ 93

~~CBS CORPORATION AND SUBSIDIARIES~~

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

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

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

At At
September 30, 2017 December 31, 2016
Receivables, net $ 254
$ 244

Other current assets 101
61

Goodwill 1,285
1,285

Intangible assets 2,832
2,832

Net property and equipment 157
145

Other assets 31
29

Valuation allowance for carrying value (980 ) —

Total Assets $ 3,680
$ 4,596

Current portion of long-term debt $ 10
$ 10

Other current liabilities 144
145

Long-term debt 1,355
1,335

Deferred income tax liabilities 1,013
998

Other liabilities 98
118

Total Liabilities $ 2,620
$ 2,606

~~The following table presents CBS Radio’s long-term debt.~~

At At
September 30, 2017 December 31, 2016
Term Loan due October 2023, net of discount $ 947
$ 955

7.250% Senior Notes due November 2024 400
400

Revolving Credit Facility 36
10

Deferred financing costs (18 ) (20 )
Total long-term debt, including current portion $ 1,365
$ 1,345

CBS Radio’s senior secured term loan (“Term Loan”) bears interest at a rate equal to 3.50% plus the greater of the London Interbank Offered Rate (“LIBOR”) and 1.00%. The Term Loan is part of CBS Radio’s credit agreement which also includes a $250 million senior secured revolving credit facility (the “Revolving Credit Facility”) which expires in 2021. Interest on the Revolving Credit Facility is based on either LIBOR or a base rate plus a margin based on CBS Radio’s Consolidated Net Secured Leverage Ratio. The Consolidated Net Secured Leverage Ratio reflects the ratio of CBS Radio’s secured debt (less up to $150 million of cash and cash equivalents) to CBS Radio’s consolidated EBITDA (as defined in the credit agreement). The Revolving Credit Facility requires CBS Radio to maintain a maximum Consolidated Net Secured Leverage Ratio of 4.00 to 1.00.

In connection with financing for the transaction with Entercom, on March 3, 2017, CBS Radio entered into Amendment No. 1 to its credit agreement, dated as of October 17, 2016, to, among other things, create a tranche of Term B-1 Loans in an aggregate principal amount not to exceed $500 million. The Term B-1 Loans are expected to be funded substantially concurrently with the closing date of the transaction, subject to customary conditions.

~~CBS CORPORATION AND SUBSIDIARIES~~

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

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

4) PROGRAMMING AND OTHER INVENTORY


	At			At			At			At
	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Acquired program rights		$	2,087		$	1,773		$	2,284		$	2,234
Acquired television library		99			—			99			99
Internally produced programming:
Released		1,799			1,746			2,148			1,780
In process and other		601			298			483			543
Publishing, primarily finished goods		58			49			59			53
Total programming and other inventory		4,644			3,866			5,073			4,709
Less current portion		1,830			1,427			1,876			1,828
Total noncurrent programming and other inventory		$	2,814		$	2,439		$	3,197		$	2,881

5) RELATED PARTIES

National Amusements, Inc. ~~National Amusements, Inc. (“NAI”)~~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 ~~September~~June 30, ~~2017~~,2018, NAI directly or indirectly owned approximately ~~79.5%~~79.7% of CBS Corp.’s voting Class A Common Stock, and owned approximately ~~9.8%~~10.4% of CBS Corp.’s Class A Common Stock and non-voting Class B Common Stock on a combined basis. Although the Company has previously disclosed, after receiving confirmation from NAI, that NAI is controlled by Mr. Redstone through the Sumner M. Redstone National Amusements Trust (the “SMR Trust”), ~~which~~in connection with this report, NAI declined the Company’s requests to confirm that NAI is currently controlled by Mr. Redstone through the SMR Trust. NAI continues to confirm that the SMR Trust 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~~death and that 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. The Company has asserted in its amended verified complaint described in “Legal Matters” in Note 14 that Ms. Shari Redstone effectively controls NAI, although issues relating to control are subject to legal proceedings in the Delaware Court of Chancery. See “Legal Matters” in Note 14 for a description of legal proceedings in the Delaware Court of Chancery.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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. In May 2018, the committee determined that a merger of the Company and Viacom Inc. is not in the best interests of the Company’s stockholders (other than NAI). See “Legal Matters” in Note 14 for a description of legal proceedings in the Delaware Court of Chancery.

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 ~~$38~~$10 million and ~~$16~~$19 million for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017, respectively, and ~~$111~~$29 million and ~~$83~~$73 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, 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 $6$4 million for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017, respectively, and ~~$13~~$12 million and ~~$17~~$9 million for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, ~~and 2016,~~ respectively.

~~CBS CORPORATION AND SUBSIDIARIES~~

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

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

The following table presents the amounts due from Viacom Inc. in the normal course of business as reflected on the Company’s Consolidated Balance Sheets. Amounts due to Viacom Inc. were minimal at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017.


	At			At			At			At
	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Receivables		$	112		$	113		$	34		$	93
Other assets (Receivables, noncurrent)		20			35			14			11
Total amounts due from Viacom Inc.		$	132		$	148
Total amounts due from Viacom								$	48		$	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 $522 million and ~~$13~~$20 million for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017, respectively and ~~$54~~$53 million and ~~$69~~$49 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, total amounts due from these joint ventures were ~~$29~~$16 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.

~~6) BANK FINANCING AND DEBT~~

~~The following table sets forth the Company’s debt.~~

At At

September 30, 2017 December 31, 2016
Commercial paper
$ 590

$ 450

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

9,039

8,850

Obligations under capital leases
60

75

Total debt
9,689

9,375

Less commercial paper
590

450

Less current portion of long-term debt
19

23

Total long-term debt, net of current portion
$ 9,080

$ 8,902

(a) At September 30, 2017 and December 31, 2016, the senior debt balances included (i) a net unamortized discount of $55 million and $52 million, respectively, (ii) unamortized deferred financing costs of $45 million and $43 million, respectively, and (iii) a $2 million decrease and a $5 million increase, respectively, in the carrying value of the debt relating to previously settled fair value hedges. The face value of the Company’s senior debt was $9.14 billion and $8.94 billion at September 30, 2017 and December 31, 2016, respectively.

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

The early redemption of the $300 million 4.625% senior notes due May 2018 resulted in a pre-tax loss on early extinguishment of debt of $5 million ($3 million, net of tax) for the three and nine months ended September 30, 2017.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

6) BANK FINANCING AND DEBT

The following table sets forth the Company’s debt.



	At			At
	June 30, 2018			December 31, 2017
Commercial paper		$	370		$	679
Senior debt (2.30% - 7.875% due 2019 - 2045) ^(a)		9,430			9,426
Obligations under capital leases		50			57
Total debt		9,850			10,162
Less commercial paper		370			679
Less current portion of long-term debt		16			19
Total long-term debt, net of current portion		$	9,464		$	9,464

(a) At June 30, 2018 and December 31, 2017, the senior debt balances included (i) a net unamortized discount of $61 million and $65 million, respectively, (ii) unamortized deferred financing costs of $45 million and $47 million, respectively, and (iii) a decrease in the carrying value of the debt relating to previously settled fair value hedges of $4 million and $3 million, respectively. The face value of the Company’s senior debt was $9.54 billion at both June 30, 2018 and December 31, 2017.

Commercial Paper

The Company had outstanding commercial paper borrowings under its $2.5 billion commercial paper program of ~~$590~~$370 million and ~~$450~~$679 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, each with maturities of less than 6090 days. The weighted average interest rate for these borrowings was ~~1.44%~~2.42% at ~~September~~June 30, ~~2017~~2018 and ~~0.98%~~1.88% at December 31, ~~2016.~~2017.

Credit Facility

At ~~September~~June 30, ~~2017,~~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 ~~September~~June 30, ~~2017~~2018, the Company’s Consolidated Leverage Ratio was approximately 3.0x.

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

The Credit Facility is used for general corporate purposes. At ~~September~~June 30, ~~2017~~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						Pension Benefits						Postretirement Benefits
Three Months Ended September 30,	2017			2016			2017			2016
Three Months Ended June 30,													2018			2017			2018			2017
Components of net periodic cost:
Service cost	$	7		$	7		$	—		$	—		$	8		$	8		$	—		$	—
Interest cost	48			54			4			5			37			47			4			5
Expected return on plan assets	(50		)	(56		)	—			—			(45		)	(51		)	—			—
Amortization of actuarial loss (gain) ^(a)	26			21			(5		)	(5		)	24			26			(4		)	(6		)
Net periodic cost	$	31		$	26		$	(1	)	$	—		$	24		$	30		$	—		$	(1	)


	Pension Benefits						Postretirement Benefits						Pension Benefits						Postretirement Benefits
Nine Months Ended September 30,	2017			2016			2017			2016
Six Months Ended June 30,													2018			2017			2018			2017
Components of net periodic cost:
Service cost	$	22		$	22		$	—		$	—		$	16		$	15		$	—		$	—
Interest cost	143			161			13			15			74			95			8			9
Expected return on plan assets	(151		)	(170		)	—			—			(90		)	(101		)	—			—
Amortization of actuarial loss (gain) ^(a)	77			64			(16		)	(16		)	48			51			(9		)	(11		)
Net periodic cost	$	91		$	77		$	(3	)	$	(1	)	$	48		$	60		$	(1	)	$	(2	)

(a) Reflects amounts reclassified from accumulated other comprehensive loss to net ~~earnings.~~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 quarter of 2018, the Company repurchased 3.8 million shares of its Class B Common Stock under its share repurchase program for $200 million, at an average cost of $52.17 per share. During the six months ended June 30, 2018, the Company repurchased 7.6 million shares of its Class B Common Stock for $400 million, at an average cost of $52.42, leaving $2.66 billion of authorization at June 30, 2018.

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

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

On ~~November 1, 2017,~~May 17, 2018, the ~~Company entered into~~Company’s Board of Directors declared a ~~definitive agreement to purchase~~pro rata dividend of 0.5687 of a ~~group annuity contract, under which an insurance company will be required to pay and administer pension payments to certain~~share of the Company’s pension plan participants, or their designated beneficiaries, who have been receiving pension payments. The purchase of this group annuity contract will reduce the Company’s outstanding pension benefit obligation by approximately $800 million, representing approximately 20% of the total obligationsvoting Class A Common Stock for each share of the Company’s ~~qualified pension plans,~~Class A Common Stock and will be funded with pension plan assets. In connection with this transaction, the Company will record a one-time settlement charge in the fourth quarter of 2017 currently estimated at $365 million, reflecting the accelerated recognition of a portion of unamortized actuarial losses in the plan. The actual settlement charge could differ from this estimate due to changes in the Company’s actuarial assumptions. Additionally, during the fourth quarter of 2017, the Company expects to make a discretionary contribution of $500 million to prefund its qualified plans, which is expected to be partially funded by long-term borrowings.

~~8) STOCKHOLDERS’ EQUITY~~

~~During the third quarter of 2017, the Company repurchased 3.9 million shares of its~~non-voting Class B Common Stock ~~under its share repurchase program~~to stockholders of record as of the close of business on the record date, contingent on Delaware court approval. The record date for ~~$250 million,~~the dividend would be 10 days after such Delaware court approval or on the next business day after the 10-day period. If the dividend is issued, shares outstanding and EPS for prior periods would be adjusted to reflect the issuance of additional shares resulting from the dividend. The dividend, if issued, would dilute NAI’s voting interest from approximately 79.7% at ~~an average cost~~June 30, 2018 to approximately 20%. The dividend would not dilute the economic interests of ~~$63.52 per share. During~~any of the ~~nine months ended September 30, 2017,~~Company’s stockholders.See “Legal Matters” in Note 14 for a description of legal proceedings in the ~~Company repurchased 16.2 million shares~~Delaware Court of ~~its Class B Common Stock for $1.05 billion, at an average cost of $64.70 per share, leaving $3.06 billion of authorization at September 30, 2017.~~

During the third quarter of 2017, the Company declared a quarterly cash dividend of $.18 on its Class A and Class B Common Stock, resulting in total dividends of $73 million, which were paid on October 1, 2017.Chancery.

Accumulated Other Comprehensive Income (Loss)

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

Cumulative
Translation
Adjustments

Net Actuarial
Loss and Prior
Service Cost

Accumulated
Other
Comprehensive Loss
At December 31, 2016 $ 151
$ (918 ) $ (767 )
Other comprehensive income before reclassifications 4
—
4

Reclassifications to net earnings —
37
^(a)
37

Net other comprehensive income 4
37

41

At September 30, 2017 $ 155
$ (881 )
$ (726 )



	Cumulative Translation Adjustments			Net Actuarial Loss and Prior Service Cost				Accumulated Other Comprehensive Loss
At December 31, 2017	$	159		$	(821	)			$	(662	)
Other comprehensive loss before reclassifications	(14		)	—					(14		)
Reclassifications to net earnings	—			30			^(a)		30
Net other comprehensive income (loss)	(14		)	30					16
At June 30, 2018	$	145		$	(791	)			$	(646	)

Cumulative
Translation
Adjustments

Net Actuarial
Loss and Prior
Service Cost

Accumulated
Other
Comprehensive Loss
At December 31, 2015 $ 152
$ (922 ) $ (770 )
Other comprehensive income before reclassifications 2
—
2

Reclassifications to net earnings —
29
^(a)
29

Net other comprehensive income 2
29
31

At September 30, 2016 $ 154
$ (893 ) $ (739 )



	Cumulative Translation Adjustments		Net Actuarial 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	—		24			^(a)		24
Net other comprehensive income	2		24					26
At June 30, 2017	$	153	$	(894	)			$	(741	)


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

The net actuarial ~~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 ~~$24~~$9 million and ~~$19~~$16 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, 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 September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Provision for income taxes, including interest and before other discrete items	$	(187	)	$	(207	)	$	(548	)	$	(581	)
Provision for income taxes, including interest and before other discrete items ^(a)													$	112		$	176		$	250		$	361
Excess tax benefits from stock-based compensation ^(a)(b)	10			—			41			—			—			(4		)	—			(31		)
Other discrete items ^(b)(c)	5			62			28			57			1			(3		)	(2		)	(23		)
Provision for income taxes	$	(172	)	$	(145	)	$	(479	)	$	(524	)	$	113		$	169		$	248		$	307
Effective income tax rate	28.4		%	23.2		%	26.7		%	28.4		%	21.2		%	29.2		%	20.8		%	25.9		%

(a) ~~Reflects excess~~The lower tax ~~benefits associated with~~provision for the ~~exercise~~three and six months ended June 30, 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 ~~nine~~six months ended ~~September~~June 30, 2017, primarily reflects tax benefits from the resolution of certain state income tax matters. ~~For~~

In December 2017, the ~~three~~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 ~~nine months ended September 30, 2016, primarily reflects~~ a one-time transition tax ~~benefit of $47 million associated with a multiyear adjustment to a tax deduction, which was approved by the IRS during the third quarter of 2016.~~

~~10) COMMITMENTS AND CONTINGENCIES~~

~~Guarantees~~

~~The Company has indemnification obligations with respect to letters of credit~~on cumulative foreign earnings and surety bonds primarily used as security against non-performance in the normal course of business. At September 30, 2017, the outstanding letters of credit and surety bonds approximated $99 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)~~

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

Claims are frequently filed and/or settled in groups, which may make the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. The Company does not report as pending those claims on inactive, stayed, deferred or similar dockets which some jurisdictions have established for claimants who allege minimal or no impairment. As of September 30, 2017, the Company had pending approximately 32,760 asbestos claims, as compared with approximately 33,610 as of December 31, 2016 and 34,400 as of September 30, 2016. During the third quarter of 2017, the Company received approximately 720 new claims and closed or moved to an inactive docket approximately 1,200 claims. The Company reports claims as closed when it becomes aware that a dismissal order has been entered by a court or when the Company has reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other factors. In 2016, the Company’s costs for settlement and defense of asbestos claims after insurance and taxes were approximately $48 million. In 2015, as the result of an insurance settlement, insurance recoveries exceeded the Company’s after tax costs for settlement and defense of asbestos claims by approximately $5 million. 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.

~~CBS CORPORATION AND SUBSIDIARIES~~

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

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

~~11) RESTRUCTURING CHARGES~~

~~During~~profits. For the year ended December 31, 2016, in a continued effort to reduce its cost structure, the Company initiated restructuring plans across several of its businesses, primarily for the reorganization of certain business operations. As a result,2017, 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 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 of September 30, 2017, the cumulative settlementsa net provisional charge for the ~~2016~~estimated transition tax on cumulative foreign earnings and ~~2015 restructuring charges were~~ ~~$57 million~~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 included the tax on GILTI in its tax provision for the three and six months ended June 30, 2018. The Company will complete its analysis of ~~which~~ ~~$37 million~~ ~~was for severance costs~~the Tax Reform Act within one year from its enactment. Such analysis will include finalizing and ~~$20 million~~ ~~was for costs associated with contractual obligations.~~

Balance at 2017 Balance at
December 31, 2016 Settlements September 30, 2017
Entertainment $ 20
$ (12 ) $ 8

Cable Networks 4
(2 ) 2

Publishing 1
(1 ) —

Local Media 12
(5 ) 7

Corporate 2
(1 ) 1

Total $ 39
$ (21 ) $ 18

Balance at 2016 2016 Balance at
December 31, 2015 Charges Settlements December 31, 2016
Entertainment $ 16
$ 16
$ (12 ) $ 20

Cable Networks —
4
—
4

Publishing —
1
—
1

Local Media 11
6
(5 ) 12

Corporate —
3
(1 ) 2

Total $ 27
$ 30
$ (18 ) $ 39

recording any adjustments to provisional estimates, as well as determining whether to treat the tax on GILTI as a period cost when incurred or as a component of deferred taxes.

~~12)~~ 10) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

The Company’s carrying value of financial instruments approximates fair value, except for notes and debentures, which are not recorded at fair value. At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the carrying value of the Company’s senior debt was ~~$9.04~~$9.43 billion ~~and $8.85 billion, respectively,~~ and the fair value, which is estimated based on quoted market prices for similar liabilities (Level 2) and includes accrued interest, was ~~$9.85~~$9.58 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.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Foreign Exchange Contracts

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

~~CBS CORPORATION AND SUBSIDIARIES~~

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

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

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

At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the notional amount of all foreign exchange contracts was ~~$379~~$381 million and ~~$433~~$410 million, respectively.

Gains (losses) recognized on derivative financial instruments were as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016 Financial Statement Account
Non-designated foreign exchange contracts $ (9 ) $ 4
$ (29 ) $ 13
Other items, net



	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2018		2017			2018		2017			Financial Statement Account
Non-designated foreign exchange contracts	$	17	$	(12	)	$	13	$	(20	)	Other items, net

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

The following tables set forth the Company’s assets and liabilities measured at fair value on a recurring basis at ~~September~~June 30, ~~2017~~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 September 30, 2017	Level 1		Level 2		Level 3		Total
At June 30, 2018									Level 1		Level 2		Level 3		Total
Assets:
Foreign currency hedges	$	—	$	6	$	—	$	6	$	—	$	10	$	—	$	10
Total Assets	$	—	$	6	$	—	$	6	$	—	$	10	$	—	$	10
Liabilities:
Deferred compensation	$	—	$	347	$	—	$	347	$	—	$	364	$	—	$	364
Foreign currency hedges	—		11		—		11		—		2		—		2
Total Liabilities	$	—	$	358	$	—	$	358	$	—	$	366	$	—	$	366


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	$	—	$	324	$	—	$	324	$	—	$	363	$	—	$	363
Foreign currency hedges	—		1		—		1		—		10		—		10
Total Liabilities	$	—	$	325	$	—	$	325	$	—	$	373	$	—	$	373

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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~~11) 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						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Revenues:
Entertainment	$	1,815		$	1,949		$	6,346		$	6,483		$	2,365		$	2,184		$	5,081		$	4,531
Cable Networks	840			598			1,954			1,659			591			571			1,200			1,114
Publishing	228			226			595			558			207			206			367			367
Local Media	397			409			1,218			1,253			420			412			835			821
Corporate/Eliminations	(109		)	(98		)	(342		)	(305		)	(117		)	(116		)	(256		)	(233		)
Total Revenues	$	3,171		$	3,084		$	9,771		$	9,648		$	3,466		$	3,257		$	7,227		$	6,600

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				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Intercompany Revenues:
Entertainment	$	111	$	102	$	348	$	316	$	120	$	118	$	259	$	237
Local Media	4		2		10		6		5		3		10		6
Total Intercompany Revenues	$	115	$	104	$	358	$	322	$	125	$	121	$	269	$	243

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

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Segment Operating Income (Loss):
Entertainment $ 345
$ 348
$ 1,089
$ 1,148
Cable Networks 294
285
795
740
Publishing 46
44
88
83
Local Media 105
122
355
402
Corporate (83 ) (78 ) (247 ) (245 )
Total Segment Operating Income 707
721
2,080
2,128
Other operating items, net ^(a)
—
—
—
9
Operating income 707

721

2,080

2,137
Interest expense (116 ) (104 ) (336 ) (304 )
Interest income 17
7
45
22
Loss on early extinguishment of debt (5 ) —
(5 ) —
Other items, net 3
—
9
(7 )
Earnings from continuing operations before income taxes
and equity in loss of investee companies
606
624
1,793
1,848
Provision for income taxes (172 ) (145 ) (479 ) (524 )
Equity in loss of investee companies, net of tax (16 ) (13 ) (45 ) (43 )
Net earnings from continuing operations 418
466
1,269
1,281
Net earnings (loss) from discontinued operations, net of tax 174
12
(871 ) 93
Net earnings $ 592
$ 478
$ 398
$ 1,374

~~(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						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Segment Operating Income (Loss):
Entertainment	$	356		$	351		$	848		$	754
Cable Networks	256			255			486			505
Publishing	31			29			47			44
Local Media	128			128			246			252
Corporate	(77		)	(73		)	(152		)	(139		)
Restructuring and other corporate matters	(35		)	—			(44		)	—
Operating income	659			690			1,431			1,416
Interest expense	(116		)	(111		)	(234		)	(220		)
Interest income	14			15			31			28
Other items, net	(24		)	(16		)	(35		)	(37		)
Earnings from continuing operations before income taxes and equity in loss of investee companies	533			578			1,193			1,187
Provision for income taxes	(113		)	(169		)	(248		)	(307		)
Equity in loss of investee companies, net of tax	(20		)	(12		)	(34		)	(29		)
Net earnings from continuing operations	400			397			911			851
Net loss from discontinued operations, net of tax	—			(339		)	—			(1,045		)
Net earnings (loss)	$	400		$	58		$	911		$	(194	)


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Depreciation and Amortization:
Entertainment	$	29	$	28	$	85	$	88	$	31	$	27	$	61	$	56
Cable Networks	5		6		17		17		5		6		11		12
Publishing	2		1		5		4		2		2		3		3
Local Media	11		11		34		33		11		12		22		23
Corporate	8		8		25		26		7		9		15		17
Total Depreciation and Amortization	$	55	$	54	$	166	$	168	$	56	$	56	$	112	$	111



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Stock-based Compensation:
Entertainment	$	16	$	17	$	31	$	32
Cable Networks	3		3		6		6
Publishing	1		1		2		2
Local Media	3		3		6		6
Corporate	24		21		46		39
Total Stock-based Compensation	$	47	$	45	$	91	$	85

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Stock-based Compensation:
Capital Expenditures:
Entertainment	$	16	$	16	$	48	$	47	$	20	$	24	$	37	$	38
Cable Networks	3		3		9		9		3		4		7		7
Publishing	1		1		3		3		1		—		2		1
Local Media	3		3		9		9		5		7		9		12
Corporate	21		19		60		55		3		6		7		10
Total Stock-based Compensation	$	44	$	42	$	129	$	123
Total Capital Expenditures									$	32	$	41	$	62	$	68


	Three Months Ended				Nine Months Ended				At			At
	September 30,				September 30,				June 30, 2018			December 31, 2017
	2017		2016		2017		2016
Capital Expenditures:
Assets:
Entertainment	$	25	$	23	$	63	$	60		$	12,236		$	12,626
Cable Networks	5		4		12		8			2,938			2,878
Publishing	1		1		2		7			956			906
Local Media	8		9		20		20			3,993			4,042
Corporate	5		5		15		16
Total Capital Expenditures	$	44	$	42	$	112	$	111
Corporate/Eliminations										249			378
Discontinued operations										13			13
Total Assets										$	20,385		$	20,843

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

At At
September 30, 2017 December 31, 2016
Assets:
Entertainment $ 12,149
$ 11,262

Cable Networks 3,015
2,618

Publishing 895
880

Local Media 4,006
4,065

Corporate/Eliminations 149
817

Discontinued operations 3,680
4,596

Total Assets $ 23,894
$ 24,238



	Three Months Ended				Six Months Ended
	June 30,				June 30,
Revenues by Type	2018		2017		2018		2017
Advertising	$	1,327	$	1,299	$	3,060	$	2,902
Content licensing and distribution:
Programming	889		850		1,724		1,534
Publishing	207		206		367		367
Affiliate and subscription fees	989		848		1,968		1,690
Other	54		54		108		107
Total Revenues	$	3,466	$	3,257	$	7,227	$	6,600

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

12) 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.

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 and six months ended June 30, 2018, respectively, revenues and operating expenses relating to such distribution arrangements were each $61 million and $124 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. Additionally, historically, on an annual basis, revenues from renewals executed each year have approximated revenues associated with renewal periods that began in the same year.

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 and six months ended June 30, 2018 if license renewals were recognized under previous accounting guidance.



	Three Months Ended			Six Months Ended
	June 30, 2018			June 30, 2018
Revenues		$	29		$	141
Operating expenses		14			63
Operating income		15			78
Less: Provision for income taxes		3			16
Net earnings from continuing operations		$	12		$	62
Diluted EPS from continuing operations		$	.03		$	.16

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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 $108 million at June 30, 2018, was previously presented as a reduction to receivables.

The following table presents the amount by which each applicable financial statement line item on the Consolidated Balance Sheet at June 30, 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	$	(82	)
Programming and other inventory (noncurrent)	$	(47	)
Other assets (noncurrent receivables)	$	436

Liabilities
Other current liabilities	$	(151	)
Deferred income tax liabilities, net	$	51
Participants’ share and royalties payable	$	208

Accumulated deficit	$	199

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 11).

13) DISCONTINUED OPERATIONS

On November 16, 2017, the Company completed the split-off of CBS Radio through an exchange offer, in which the Company accepted 17.9 million shares of CBS Corp. Class B Common Stock from its stockholders in exchange for the 101.4 million shares of CBS Radio common stock that it owned. Immediately following the exchange offer, each share of CBS Radio common stock was converted into one share of Entercom Communications Corp. (“Entercom”) Class A common stock upon completion of the merger.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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



	Three Months Ended				Six Months Ended
	June 30, 2017				June 30, 2017
Revenues		$	306			$	556
Costs and expenses:
Operating		105				194
Selling, general and administrative		128				250
Market value adjustment ^(a)		365				1,080
Restructuring charges ^(b)		7				7
Total costs and expenses		605				1,531
Operating loss		(299		)		(975		)
Interest expense		(20		)		(39		)
Other items, net		(1		)		(1		)
Loss from discontinued operations		(320		)		(1,015		)
Income tax provision		(19		)		(30		)
Net loss from discontinued operations, net of tax		$	(339	)		$	(1,045	)

(a) During 2017, prior to its split-off, CBS Radio was measured each reporting period at the lower of its carrying amount or fair value less cost to sell. The value of the transaction with Entercom was determined based on Entercom’s stock price at the closing of the transaction and therefore, the Company recorded a market value adjustment to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom.

(b) Reflects restructuring charges associated with the reorganization of certain business operations, including severance costs and costs associated with exiting contractual obligations.

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 June 30, 2018, the outstanding letters of credit and surety bonds approximated $107 million and were not recorded on the Consolidated Balance Sheet.

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, other than with respect to In re CBS Corporation Litigation, Consol. C.A. No. 2018-0342-AGB (Del. Ch.) described below, the potential impact of which cannot be ascertained at this time. Under the Separation Agreement between

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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.

Litigation Involving the Company and Its Controlling Stockholder, National Amusements, Inc., Among Others, in the Delaware Court of Chancery. On May 14, 2018, the Company and certain of the Company’s independent directors filed a lawsuit in the Delaware Court of Chancery against NAI, Ms. Shari Redstone, Mr. Sumner M. Redstone, NAI Entertainment Holdings LLC (“NAIEH”) and the Sumner M. Redstone National Amusements Trust (the “SMR Trust”). The verified complaint alleged, among other things, that NAI, Mr. Sumner M. Redstone and Ms. Shari Redstone had breached their fiduciary duties to the Company’s stockholders by abusing their control to threaten the independent corporate governance of the Company, and NAIEH and the SMR Trust had aided and abetted those breaches of fiduciary duty.

On May 16, 2018, each of NAI and NAIEH delivered to the Company a written consent purporting to immediately effect certain amendments (the “Purported Bylaw Amendments”) to the Company’s amended and restated bylaws (the “Bylaws”). The Purported Bylaw Amendments, if valid and upon becoming effective, would (1) change the vote required and otherwise restrict the ability of the Company’s Board of Directors to declare and pay any dividend upon the capital stock of the Company, (2) change the vote required and otherwise restrict the ability of the Company’s Board of Directors to adopt, amend, alter, change or repeal any provisions of the Bylaws and (3) modify, in certain respects, the Company's existing Bylaw provision providing that the Court of Chancery of the State of Delaware is the exclusive jurisdiction for certain types of corporate litigation. On May 17, 2018, the Court denied the Company’s motion for a temporary restraining order against NAI, Mr. Sumner M. Redstone, Ms. Shari Redstone, NAIEH and the SMR Trust. Also on May 17, 2018, the Company’s Board of Directors declared a pro rata dividend of 0.5687 of a share of the Company’s voting Class A Common Stock for each share of the Company's Class A Common Stock and non-voting Class B Common Stock to stockholders of record as of the close of business on the record date, contingent on Delaware court approval (the “May 2018 Stock Dividend”).

On May 23, 2018, the Company and certain of the Company’s independent directors filed an amended verified complaint in the above matter. The amended verified complaint alleges, among other things, that NAI, NAIEH, Mr. Sumner M. Redstone, Ms. Shari Redstone and the SMR Trust form a controlling stockholder group and have breached their fiduciary duties to the Company’s stockholders by abusing their control to threaten the independent corporate governance of the Company and that the Purported Bylaw Amendments are invalid or were ineffective as of May 17, 2018. The amended verified complaint seeks a declaration that the May 2018 Stock Dividend is valid and permissible, a declaration that the Purported Bylaw Amendments are invalid or were ineffective as of May 17, 2018 and an injunction against any action by NAI, Mr. Sumner M. Redstone, Ms. Shari Redstone, NAIEH or the SMR Trust to interfere with the composition of the Company’s Board of Directors or to modify the Company’s governance documents before the issuance of any shares pursuant to the May 2018 Stock Dividend.

On May 29, 2018, NAI, NAIEH and Ms. Shari Redstone filed a lawsuit in the Delaware Court of Chancery against certain of the Company’s directors. NAI’s verified complaint, as amended on June 25, 2018, alleges, among other things, that the May 2018 Stock Dividend violates the Company’s bylaws and certificate of incorporation, and that the directors named as defendants had breached their fiduciary duties in approving the May 2018 Stock Dividend. The amended verified complaint seeks a declaration that the Purported Bylaw Amendments are valid, a declaration that the May 2018 Stock Dividend is invalid, an injunction against issuance and payment of the May 2018 Stock Dividend and any action by the defendants to carry out the May 2018 Stock Dividend, and other relief. On July 27, 2018, NAI filed a further amendment to its amended verified complaint. That amendment, effective as of filing, is due to become public on August 3, 2018.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

action captioned In re CBS Corporation Litigation, Consol. C.A. No. 2018-0342-AGB (Del. Ch.). On June 11, 2018, the Delaware Court of Chancery entered a scheduling order calling for a trial of the consolidated action taking place on October 3-5 and 8-9, 2018.

On May 31, 2018, Westmoreland County Employees’ Retirement System (“Westmoreland”), a purported beneficial owner of the Company’s Class B Common Stock, filed a class action complaint in the Delaware Court of Chancery against NAI, NAIEH, Mr. David R. Andelman, Mr. Robert N. Klieger and Ms. Shari Redstone, alleging breaches of contractual obligations, implied obligations and fiduciary duties to the Company’s Class B Common Stock holders in connection with the Purported Bylaw Amendments and interference with the issuance by the Company’s Board of Directors of the May 2018 Stock Dividend. Westmoreland’s complaint seeks a declaratory judgment that the Company’s certificate of incorporation authorizes the May 2018 Stock Dividend, that Westmoreland and the class are entitled to the May 2018 Stock Dividend, that the Purported Bylaw Amendments are invalid and other relief. On June 6, 2018, Westmoreland filed a motion to consolidate its lawsuit with the aforementioned actions filed by the Company and certain of its independent directors and by NAI, NAIEH and Ms. Shari Redstone. On June 11, 2018, NAI, NAIEH and Ms. Shari Redstone opposed that motion and simultaneously filed a motion to stay the lawsuit filed by Westmoreland in favor of the pending consolidated action captioned In re CBS Corporation Litigation described above. On June 20, 2018, the Delaware Court of Chancery denied both motions, but directed the Westmoreland lawsuit to proceed on the same timetable as, and to be coordinated with respect to discovery and trial with, the aforementioned consolidated action.

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 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, 2018, the Company had pending approximately 31,750 asbestos claims, as compared with approximately 31,660 as of December 31, 2017 and 33,240 as of June 30, 2017. During the second quarter of 2018, the Company received approximately 860 new claims and closed or moved to an inactive docket approximately 710 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.

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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.

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															Statement of Operations
	For the Three Months Ended September 30, 2017															For the Three Months Ended June 30, 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
Revenues	$	40		$	3		$	3,128		$	—		$	3,171		$	44		$	2		$	3,420		$	—		$	3,466
Costs and expenses:
Operating	23			1			1,838			—			1,862			23			1			2,160			—			2,184
Selling, general and administrative	22			62			463			—			547			12			68			452			—			532
Depreciation and amortization	1			6			48			—			55			1			5			50			—			56
Restructuring and other corporate matters																—			16			19			—			35
Total costs and expenses	46			69			2,349			—			2,464			36			90			2,681			—			2,807
Operating income (loss)	(6		)	(66		)	779			—			707			8			(88		)	739			—			659
Interest (expense) income, net	(129		)	(123		)	153			—			(99		)	(133		)	(126		)	157			—			(102		)
Loss on early extinguishment of debt	(5		)	—			—			—			(5		)
Other items, net	—			(8		)	11			—			3			(9		)	14			(29		)	—			(24		)
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies	(140		)	(197		)	943			—			606
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies																(134		)	(200		)	867			—			533
Benefit (provision) for income taxes	43			62			(277		)	—			(172		)	28			42			(183		)	—			(113		)
Equity in earnings (loss) of investee companies, net of tax	689			369			(16		)	(1,058		)	(16		)	506			344			(20		)	(850		)	(20		)
Net earnings from continuing operations	592			234			650			(1,058		)	418
Net earnings from discontinued operations, net of tax	—			—			174			—			174
Net earnings	$	592		$	234		$	824		$	(1,058	)	$	592		$	400		$	186		$	664		$	(850	)	$	400
Total comprehensive income	$	607		$	229		$	830		$	(1,059	)	$	607		$	407		$	195		$	644		$	(839	)	$	407

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)


	Statement of Operations															Statement of Operations
	For the Nine Months Ended September 30, 2017															For the Six Months Ended June 30, 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
Revenues	$	124		$	8		$	9,639		$	—		$	9,771		$	87		$	5		$	7,135		$	—		$	7,227
Costs and expenses:
Operating	69			4			5,867			—			5,940			48			2			4,534			—			4,584
Selling, general and administrative	65			194			1,326			—			1,585			25			132			899			—			1,056
Depreciation and amortization	3			18			145			—			166			2			11			99			—			112
Restructuring and other corporate matters																—			25			19			—			44
Total costs and expenses	137			216			7,338			—			7,691			75			170			5,551			—			5,796
Operating income (loss)	(13		)	(208		)	2,301			—			2,080			12			(165		)	1,584			—			1,431
Interest (expense) income, net	(378		)	(360		)	447			—			(291		)	(263		)	(248		)	308			—			(203		)
Loss on early extinguishment of debt	(5		)	—			—			—			(5		)
Other items, net	1			(33		)	41			—			9			(16		)	12			(31		)	—			(35		)
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies	(395		)	(601		)	2,789			—			1,793
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies																(267		)	(401		)	1,861			—			1,193
Benefit (provision) for income taxes	120			184			(783		)	—			(479		)	55			83			(386		)	—			(248		)
Equity in earnings (loss) of investee companies, net of tax	673			1,062			(45		)	(1,735		)	(45		)	1,123			756			(34		)	(1,879		)	(34		)
Net earnings from continuing operations	398			645			1,961			(1,735		)	1,269
Net loss from discontinued operations, net of tax	—			—			(871		)	—			(871		)
Net earnings	$	398		$	645		$	1,090		$	(1,735	)	$	398		$	911		$	438		$	1,441		$	(1,879	)	$	911
Total comprehensive income	$	439		$	633		$	1,111		$	(1,744	)	$	439		$	927		$	440		$	1,424		$	(1,864	)	$	927

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)


	Statement of Operations															Statement of Operations
	For the Three Months Ended September 30, 2016															For the Three Months Ended June 30, 2017
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated			CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated
Revenues	$	42		$	3		$	3,039		$	—		$	3,084		$	42		$	2		$	3,213		$	—		$	3,257
Costs and expenses:
Operating	16			1			1,771			—			1,788			22			2			1,980			—			2,004
Selling, general and administrative	20			62			439			—			521			14			65			428			—			507
Depreciation and amortization	2			6			46			—			54			1			6			49			—			56
Total costs and expenses	38			69			2,256			—			2,363			37			73			2,457			—			2,567
Operating income (loss)	4			(66		)	783			—			721			5			(71		)	756			—			690
Interest (expense) income, net	(129		)	(109		)	141			—			(97		)	(127		)	(120		)	151			—			(96		)
Other items, net																(8		)	(15		)	7			—			(16		)
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies	(125		)	(175		)	924			—			624			(130		)	(206		)	914			—			578
Benefit (provision) for income taxes	43			60			(248		)	—			(145		)	39			62			(270		)	—			(169		)
Equity in earnings (loss) of investee companies, net of tax	560			327			(13		)	(887		)	(13		)	149			339			(12		)	(488		)	(12		)
Net earnings from continuing operations	478			212			663			(887		)	466			58			195			632			(488		)	397
Net earnings (loss) from discontinued operations, net of tax	—			(1		)	13			—			12
Net loss from discontinued operations, net of tax																—			—			(339		)	—			(339		)
Net earnings	$	478		$	211		$	676		$	(887	)	$	478		$	58		$	195		$	293		$	(488	)	$	58
Total comprehensive income	$	489		$	215		$	675		$	(890	)	$	489		$	70		$	190		$	302		$	(492	)	$	70

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)


	Statement of Operations															Statement of Operations
	For the Nine Months Ended September 30, 2016															For the Six Months Ended June 30, 2017
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated			CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated
Revenues	$	125		$	9		$	9,514		$	—		$	9,648		$	84		$	5		$	6,511		$	—		$	6,600
Costs and expenses:
Operating	48			4			5,766			—			5,818			46			3			4,029			—			4,078
Selling, general and administrative	62			194			1,278			—			1,534			24			126			845			—			995
Depreciation and amortization	4			17			147			—			168			2			12			97			—			111
Other operating items, net	—			—			(9		)	—			(9		)
Total costs and expenses	114			215			7,182			—			7,511			72			141			4,971			—			5,184
Operating income (loss)	11			(206		)	2,332			—			2,137			12			(136		)	1,540			—			1,416
Interest (expense) income, net	(377		)	(319		)	414			—			(282		)	(249		)	(237		)	294			—			(192		)
Other items, net	(2		)	3			(8		)	—			(7		)	(18		)	(31		)	12			—			(37		)
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies	(368		)	(522		)	2,738			—			1,848			(255		)	(404		)	1,846			—			1,187
Benefit (provision) for income taxes	120			170			(814		)	—			(524		)	77			122			(506		)	—			(307		)
Equity in earnings (loss) of investee companies, net of tax	1,622			876			(43		)	(2,498		)	(43		)	(16		)	693			(29		)	(677		)	(29		)
Net earnings from continuing operations	1,374			524			1,881			(2,498		)	1,281
Net earnings (loss) from discontinued operations, net of tax	—			(1		)	94			—			93
Net earnings	$	1,374		$	523		$	1,975		$	(2,498	)	$	1,374
Total comprehensive income	$	1,405		$	540		$	1,965		$	(2,505	)	$	1,405
Net earnings (loss) from continuing operations																(194		)	411			1,311			(677		)	851
Net loss from discontinued operations, net of tax																—			—			(1,045		)	—			(1,045		)
Net earnings (loss)																$	(194	)	$	411		$	266		$	(677	)	$	(194	)
Total comprehensive income (loss)																$	(168	)	$	404		$	281		$	(685	)	$	(168	)

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)


	Balance Sheet														Balance Sheet
	At September 30, 2017														At June 30, 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	$	18		$	—	$	126		$	—		$	144		$	106		$	—	$	146		$	—		$	252
Receivables, net	24			1		3,573			—			3,598			22			2		3,573			—			3,597
Programming and other inventory	3			3		1,824			—			1,830			2			2		1,872			—			1,876
Prepaid expenses and other current assets	8			25		370			(36		)	367			19			36		301			(33		)	323
Current assets of discontinued operations	—			—		355			—			355
Total current assets	53			29		6,248			(36		)	6,294			149			40		5,892			(33		)	6,048
Property and equipment	48			207		2,746			—			3,001			40			219		2,725			—			2,984
Less accumulated depreciation and amortization	27			158		1,608			—			1,793			22			174		1,551			—			1,747
Net property and equipment	21			49		1,138			—			1,208			18			45		1,174			—			1,237
Programming and other inventory	3			5		2,806			—			2,814			3			5		3,189			—			3,197
Goodwill	98			62		4,731			—			4,891			98			62		4,761			—			4,921
Intangible assets	—			—		2,617			—			2,617			—			—		2,655			—			2,655
Investments in consolidated subsidiaries	45,155			14,915		—			(60,070		)	—			46,406			15,926		—			(62,332		)	—
Other assets	154			8		2,583			—			2,745			161			5		2,161			—			2,327
Intercompany	—			1,331		28,353			(29,684		)	—			—			902		30,712			(31,614		)	—
Assets of discontinued operations	—			—		3,325			—			3,325
Total Assets	$	45,484		$	16,399	$	51,801		$	(89,790	)	$	23,894		$	46,835		$	16,985	$	50,544		$	(93,979	)	$	20,385
Liabilities and Stockholders’ Equity
Accounts payable	$	1		$	3	$	229		$	—		$	233		$	5		$	11	$	122		$	—		$	138
Participants’ share and royalties payable	—			—		997			—			997			—			—		1,071			—			1,071
Program rights	4			3		502			—			509			2			2		365			—			369
Commercial paper	590			—		—			—			590			370			—		—			—			370
Current portion of long-term debt	2			—		17			—			19			3			—		13			—			16
Accrued expenses and other current liabilities	374			219		993			(36		)	1,550			478			235		1,140			(33		)	1,820
Current liabilities of discontinued operations	—			—		154			—			154
Total current liabilities	971			225		2,892			(36		)	4,052			858			248		2,711			(33		)	3,784
Long-term debt	8,991			—		89			—			9,080			9,381			—		83			—			9,464
Other liabilities	2,844			237		2,221			—			5,302			2,815			230		1,925			—			4,970
Liabilities of discontinued operations	—			—		2,466			—			2,466
Intercompany	29,684			—		—			(29,684		)	—			31,614			—		—			(31,614		)	—
Stockholders’ Equity:
Preferred stock	—			—		126			(126		)	—			—			—		126			(126		)	—
Common stock	1			123		590			(713		)	1			1			123		590			(713		)	1
Additional paid-in capital	43,830			—		60,894			(60,894		)	43,830			43,720			—		60,894			(60,894		)	43,720
Retained earnings (accumulated deficit)	(18,859		)	16,128		(12,748		)	(3,380		)	(18,859		)	(18,250		)	16,695		(11,044		)	(5,651		)	(18,250		)
Accumulated other comprehensive income (loss)	(726		)	17		71			(88		)	(726		)	(646		)	20		59			(79		)	(646		)
	24,246			16,268		48,933			(65,201		)	24,246			24,825			16,838		50,625			(67,463		)	24,825
Less treasury stock, at cost	21,252			331		4,800			(5,131		)	21,252			22,658			331		4,800			(5,131		)	22,658
Total Stockholders’ Equity	2,994			15,937		44,133			(60,070		)	2,994			2,167			16,507		45,825			(62,332		)	2,167
Total Liabilities and Stockholders’ Equity	$	45,484		$	16,399	$	51,801		$	(89,790	)	$	23,894		$	46,835		$	16,985	$	50,544		$	(93,979	)	$	20,385

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			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 Nine Months Ended September 30, 2017														For the Six Months Ended June 30, 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	$	(851	)	$	(180	)	$	2,018		$	—	$	987		$	(234	)	$	(130	)	$	1,407		$	—	$	1,043
Investing Activities:
Acquisitions (including acquired television library)	—			—			(258		)	—		(258		)
Investments in and advances to investee companies															—			—			(71		)	—		(71		)
Capital expenditures	—			(15		)	(97		)	—		(112		)	—			(7		)	(55		)	—		(62		)
Investments in and advances to investee companies	—			—			(67		)	—		(67		)
Proceeds from sale of investments	—			—			10			—		10
Proceeds from dispositions	—			—			11			—		11
Acquisitions															—			—			(29		)	—		(29		)
Other investing activities	17			—			—			—		17			2			—			—			—		2
Net cash flow provided by (used for) investing activities from continuing operations	17			(15		)	(401		)	—		(399		)	2			(7		)	(155		)	—		(160		)
Net cash flow provided by (used for) investing activities from discontinued operations	1			(4		)	(15		)	—		(18		)
Net cash flow provided by (used for) investing activities	18			(19		)	(416		)	—		(417		)
Net cash flow used for investing activities from discontinued operations															(23		)	—			—			—		(23		)
Net cash flow used for investing activities															(21		)	(7		)	(155		)	—		(183		)
Financing Activities:
Proceeds from short-term debt borrowings, net	140			—			—			—		140
Proceeds from issuance of senior notes	889			—			—			—		889
Repayment of senior notes	(701		)	—			—			—		(701		)
Proceeds from debt borrowings of CBS Radio	—			—			40			—		40
Repayment of debt borrowings of CBS Radio	—			—			(23		)	—		(23		)
Repayments of short-term debt borrowings, net															(309		)	—			—			—		(309		)
Payment of capital lease obligations	—			—			(13		)	—		(13		)	—			—			(8		)	—		(8		)
Payment of contingent consideration	—			—			(7		)	��		(7		)	—			—			(5		)	—		(5		)
Dividends	(224		)	—			—			—		(224		)	(140		)	—			—			—		(140		)
Purchase of Company common stock	(1,111		)	—			—			—		(1,111		)	(394		)	—			—			—		(394		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation	(89		)	—			—			—		(89		)	(58		)	—			—			—		(58		)
Proceeds from exercise of stock options	81			—			—			—		81			22			—			—			—		22
Other financing activities															(1		)	—			—			—		(1		)
Increase (decrease) in intercompany payables	1,545			199			(1,744		)	—		—			1,068			137			(1,205		)	—		—
Net cash flow provided by (used for) financing activities	530			199			(1,747		)	—		(1,018		)	188			137			(1,218		)	—		(893		)
Net decrease in cash and cash equivalents	(303		)	—			(145		)	—		(448		)
Cash and cash equivalents at beginning of period (includes $24 million of discontinued operations cash)	321			—			301			—		622
Cash and cash equivalents at end of period (includes $30 million of discontinued operations cash)	$	18		$	—		$	156		$	—	$	174
Net (decrease) increase in cash and cash equivalents															(67		)	—			34			—		(33		)
Cash and cash equivalents at beginning of period															173			—			112			—		285
Cash and cash equivalents at end of period															$	106		$	—		$	146		$	—	$	252

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 Nine Months Ended September 30, 2016														For the Six Months Ended June 30, 2017
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations		CBS Corp. Consolidated			CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations		CBS Corp. Consolidated
Net cash flow (used for) provided by operating activities	$	(696	)	$	(146	)	$	2,148		$	—	$	1,306		$	(608	)	$	(153	)	$	1,699		$	—	$	938
Investing Activities:
Investments in and advances to investee companies															—			—			(65		)	—		(65		)
Capital expenditures															—			(10		)	(58		)	—		(68		)
Acquisitions	—			—			(51		)	—		(51		)	—			—			(21		)	—		(21		)
Capital expenditures	—			(16		)	(95		)	—		(111		)
Investments in and advances to investee companies	—			—			(44		)	—		(44		)
Proceeds from dispositions	(4		)	—			24			—		20
Other investing activities	7			—			—			—		7			14			—			1			—		15
Net cash flow provided by (used for) investing activities from continuing operations	3			(16		)	(166		)	—		(179		)	14			(10		)	(143		)	—		(139		)
Net cash flow used for investing activities from discontinued operations	—			—			(2		)	—		(2		)	—			(1		)	(12		)	—		(13		)
Net cash flow provided by (used for) investing activities	3			(16		)	(168		)	—		(181		)	14			(11		)	(155		)	—		(152		)
Financing Activities:
Proceeds from short-term borrowings, net	33			—			—			—		33
Proceeds from issuance of senior notes	685			—			—			—		685
Repayment of senior debentures	(199		)	—			—			—		(199		)
Repayments of short-term debt borrowings, net															(187		)	—			—			—		(187		)
Proceeds from debt borrowings of CBS Radio															—			—			24			—		24
Repayment of debt borrowings of CBS Radio															—			—			(5		)	—		(5		)
Payment of capital lease obligations	—			—			(13		)	—		(13		)	—			—			(8		)	—		(8		)
Payment of contingent consideration															—			—			(7		)	—		(7		)
Dividends	(209		)	—			—			—		(209		)	(151		)	—			—			—		(151		)
Purchase of Company common stock	(1,534		)	—			—			—		(1,534		)	(845		)	—			—			—		(845		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation	(57		)	—			—			—		(57		)	(89		)	—			—			—		(89		)
Proceeds from exercise of stock options	13			—			—			—		13			39			—			—			—		39
Excess tax benefit from stock-based compensation	13			—			—			—		13
Other financing activities	(1		)	—			—			—		(1		)
Increase (decrease) in intercompany payables	1,736			162			(1,898		)	—		—			1,521			164			(1,685		)	—		—
Net cash flow provided by (used for) financing activities	480			162			(1,911		)	—		(1,269		)
Net (decrease) increase in cash and cash equivalents	(213		)	—			69			—		(144		)
Cash and cash equivalents at beginning of period (includes $6 million of discontinued operations cash)	267			1			55			—		323
Cash and cash equivalents at end of period (includes $1 million of discontinued operations cash)	$	54		$	1		$	124		$	—	$	179
Net cash flow (used for) provided by financing activities															288			164			(1,681		)	—		(1,229		)
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



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~~Highlights - Three Months Ended ~~September~~June 30, ~~2017~~2018 versus Three Months Ended ~~September~~June 30, ~~2016~~2017


Consolidated results of operations					Increase/(Decrease)									Increase/(Decrease)
Three Months Ended September 30,	2017		2016		$			%
Three Months Ended June 30,										2018		2017		$			%
GAAP:
Revenues	$	3,171	$	3,084	$	87		3	%	$	3,466	$	3,257	$	209		6	%
Operating income	$	707	$	721	$	(14	)	(2	)%	$	659	$	690	$	(31	)	(4	)%
Net earnings from continuing operations	$	418	$	466	$	(48	)	(10	)%	$	400	$	397	$	3		1	%
Net earnings	$	592	$	478	$	114		24	%	$	400	$	58	$	342		n/m
Diluted EPS from continuing operations	$	1.03	$	1.04	$	(.01	)	(1	)%	$	1.05	$	.97	$	.08		8	%
Diluted EPS	$	1.46	$	1.07	$	.39		36	%	$	1.05	$	.14	$	.91		n/m

Non-GAAP:^(a)
Adjusted operating income										$	694	$	690	$	4		1	%
Adjusted net earnings from continuing operations	$	421	$	419	$	2		—	%	$	427	$	397	$	30		8	%
Adjusted net earnings	$	450	$	467	$	(17	)	(4	)%	$	427	$	427	$	—		—	%
Adjusted diluted EPS from continuing operations	$	1.04	$	.94	$	.10		11	%	$	1.12	$	.97	$	.15		15	%
Adjusted diluted EPS	$	1.11	$	1.05	$	.06		6	%	$	1.12	$	1.04	$	.08		8	%

n/m - not meaningful

(a) See ~~pages 37 - 38~~page 41 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 three months ended ~~September~~June 30, ~~2017,~~2018, revenues grew 6% reflecting growth across each of the ~~3% increase in revenues reflects 52% higher affiliate~~Company’s main revenue streams and each segment. Affiliate and subscription ~~fee revenues, which was~~fees increased 17%, driven by ~~Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event, 27% growth in~~25% higher station affiliation fees and retransmission revenues, ~~and~~as well as 70% growth from ~~new~~ digital initiatives, including the Company’s owned streaming subscription services ~~CBS All Access~~and ~~the~~ ~~Showtime~~ ~~digital streaming subscription offering,~~virtual MVPDs. Content licensing and distribution revenues grew 4%, benefiting from additional series produced for third-party ~~live television streaming~~ services. Content licensing and distribution revenues ~~decreased 22%,~~also included higher revenues as a result of the ~~timing~~adoption of ~~domestic licensing sales, partially offset by growth~~a new revenue recognition standard in ~~international television licensing. Advertising revenues decreased 5% driven by lower political advertising sales and lower ratings, partially offset by higher pricing.~~

~~Management’s Discussion and Analysis of~~

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

~~(Tabular dollars~~2018, which resulted in ~~millions, except per share amounts)~~

Operating income for the three months ended September 30, 2017 decreased 2% and the operating income margin decreased one point to 22% for the third quarter of 2017 from 23% for the third quarter of 2016, mainly as a result of the mix of revenues. Results for 2017 included lower-margin revenues from the ~~pay-per-view boxing event and 2016 included a larger volume of higher-margin political advertising and television licensing revenues.~~

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

~~Operational highlights~~ - ~~Nine Months Ended September 30, 2017 versusNine Months Ended September 30, 2016~~

Consolidated results of operations Increase/(Decrease)
Nine Months Ended September 30, 2017 2016 $ %
GAAP:
Revenues $ 9,771
$ 9,648
$ 123
1 %
Operating income $ 2,080
$ 2,137
$ (57 ) (3 )%
Net earnings from continuing operations $ 1,269
$ 1,281
$ (12 ) (1 )%
Net earnings $ 398
$ 1,374
$ (976 ) (71 )%
Diluted EPS from continuing operations $ 3.10
$ 2.82
$ .28
10 %
Diluted EPS $ .97
$ 3.02
$ (2.05 ) (68 )%

Non-GAAP:^(a)

Adjusted operating income $ 2,080
$ 2,128
$ (48 ) (2 )%
Adjusted net earnings from continuing operations $ 1,250
$ 1,235
$ 15
1 %
Adjusted net earnings $ 1,318
$ 1,364
$ (46 ) (3 )%
Adjusted diluted EPS from continuing operations $ 3.05
$ 2.71
$ .34
13 %
Adjusted diluted EPS $ 3.21
$ 3.00
$ .21
7 %

~~(a) See pages 38 - 39 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.~~

~~For the nine months endedSeptember 30, 2017, revenues increased 1%, driven by 28% higher affiliate and subscription fee revenues, led by Showtime Networks’~~ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event, a 27% increase in station affiliation fees and retransmission revenues, and growth from new digital initiatives, including the Company’s owned streaming subscription services, ~~CBS All Access~~ ~~and the~~ ~~Showtime~~ ~~digital streaming subscription service, and~~ third-party ~~live television streaming services. This growth was offset by the benefit to 2016 from CBS’s broadcast of~~ ~~Super Bowl 50~~.content now being recognized

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

based on the gross amount of consideration received from the customer, with an offsetting increase to participation expenses. This accounting change contributed three percentage points of growth in content licensing and distribution revenues. Advertising revenues increased 2%, primarily reflecting the Company’s acquisition of Network Ten in the fourth quarter of 2017, which was offset by the absence of the National Semifinals and National Championship games of the NCAA Division I Men’s Basketball Championship (“NCAA Tournament”), which the CBS Television Network broadcast in the second quarter of 2017 and which Turner Broadcasting System, Inc. (“Turner”) broadcast in 2018.

Operating income ~~decreased 3%~~ for the ~~nine~~three months ended~~September~~ June 30, 2018 decreased 4% and included costs for restructuring and other corporate matters that affected the comparability of results. Adjusted operating income increased 1% from the three months ended June 30, 2017, ~~primarily as~~reflecting the revenue growth, which was partially offset by an increased investment in content, including a ~~result~~higher number of ~~a mix~~series produced for distribution on multiple platforms, including third-party services, and the expansion of ~~lower-margin revenues in 2017 compared to 2016.~~ the Company’s digital initiatives.

Net earnings from continuing operations ~~decreased~~for the three months ended June 30, 2018 increased 1% ~~mainly~~from the same prior-year period. Adjusted net earnings from continuing operations increased 8% driven by a lower effective income tax rate in 2018 resulting from the enactment of new federal tax legislation in December 2017. Net earnings for the three months ended June 30, 2018 was $400 million, or $1.05 per diluted share, compared with $58 million, or $.14 per diluted share, for the three months ended June 30, 2017, which included, in discontinued operations, a noncash charge to adjust the carrying value of CBS Radio Inc. (“CBS Radio”). Adjusted diluted earnings per share (“EPS”) increased 8% as a result of ~~the lower operating income. Diluted EPS~~higher adjusted net earnings from continuing operations ~~increased 10% due to~~and lower weighted average shares ~~outstanding in 2017 as a result of the Company’s ongoing share repurchase program.~~outstanding. Adjusted operating income, adjusted net earnings from continuing operations and adjusted diluted EPS ~~from continuing operations increased 1% and 13%, respectively. Net earnings for the nine months ended September 30, 2017~~of$398 million included a noncash charge of $980 million, or $2.39 per diluted share, in discontinued operations to reduce the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. CBS Radio is classified as held for sale and therefore, in accordance with FASB guidance, its carrying value is adjusted based on the trading price of Entercom’s stock, which will result in an additional gain or loss at the time of the closing of the transaction with Entercom.are non-GAAP financial measures. See ~~pages 38 - 39~~page 41 for details of the discrete items excluded from financial results, and reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

Operational Highlights - Six Months Ended June 30, 2018versus Six Months Ended June 30, 2017

~~The Company generated operating cash flow from continuing operations~~



Consolidated results of operations						Increase/(Decrease)
Six Months Ended June 30,	2018		2017			$		%
GAAP:
Revenues	$	7,227	$	6,600		$	627	10	%
Operating income	$	1,431	$	1,416		$	15	1	%
Net earnings from continuing operations	$	911	$	851		$	60	7	%
Net earnings (loss)	$	911	$	(194	)	$	1,105	n/m
Diluted EPS from continuing operations	$	2.38	$	2.06		$	.32	16	%
Diluted EPS	$	2.38	$	(.47	)	$	2.85	n/m

Non-GAAP:^(a)
Adjusted operating income	$	1,475	$	1,416		$	59	4	%
Adjusted net earnings from continuing operations	$	945	$	829		$	116	14	%
Adjusted net earnings	$	945	$	868		$	77	9	%
Adjusted diluted EPS from continuing operations	$	2.47	$	2.01		$	.46	23	%
Adjusted diluted EPS	$	2.47	$	2.10		$	.37	18	%

n/m - not meaningful

(a) See page 42 for reconciliations of ~~$935 million for the nine months endedSeptember 30, 2017 compared with $1.12 billion for the nine months ended September 30, 2016. Free cash flow for the nine months ended~~September 30, 2017 was $823 million compared with $1.01 billion for the same prior-year period. These decreases were driven by the decline in advertising revenues including from the benefit in 2016 from CBS’s broadcast of ~~Super Bowl 50,~~ ~~and discretionary pension contributions of $100 million made during the first quarter of 2017~~adjusted results to prefund the Company’s qualified plans. Free cash flow for the three and nine months ended September 30, 2017 benefited from higher affiliate and subscription fee revenues. Free cash flow is a non-GAAP financial measure. See “Free Cash Flow” on pages 54 - 55 for a reconciliation of net cash flow provided by (used for) operating activities, the most directly comparable ~~GAAP~~ financial ~~measure, to free cash flow.~~measures in accordance with GAAP.

~~Recent Developments~~

~~On October 19, 2017,~~For the Company commenced an exchange offer for the split-off of its radio business, CBS Radio, as part of its previously announced agreement to combine CBS Radio with Entercom in a merger. In the exchange offer, the Company’s stockholders will have the opportunity to exchange their shares of the Company’s Class B Common Stock for shares of CBS Radio common stock, which will be immediately converted into shares of Entercom Class A common stock upon completion of the merger, which is subject to certain customary terms and conditions. The exchange offer is scheduled to expire on November 16, 2017, unless the exchange offer is extended or terminated.

~~Share Repurchases and Dividends~~

During the third quarter of 2017, the Company repurchased 3.9 million shares of its Class B Common Stock under its share repurchase program for $250 million, at an average cost of $63.52 per share. During the ninesix months ended ~~September~~June 30, ~~2017, the Company repurchased 16.2 million shares of its Class B Common Stock for $1.05 billion, at an average cost of $64.70 per share, leaving $3.06 billion of authorization at September 30, 2017.~~

~~During the third quarter of 2017, the Company declared a quarterly cash dividend of $.18 on its Class A~~2018, revenues increased 10% driven by 16% growth in affiliate and ~~Class B Common Stock, resulting in total dividends of $73 million, which were paid on October 1, 2017.~~

~~Planned Pension Settlement~~

~~On November 1, 2017, the Company entered into a definitive agreement to purchase a group annuity contract, under which an insurance company will be required to pay~~subscription fees, led by 25% higher station affiliation fees and ~~administer pension payments to certain of the Company’s pension plan participants, or their designated beneficiaries, who have been receiving pension~~retransmission revenues, as well as 75% growth

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

~~payments. The purchase of this group annuity contract will reduce~~from digital initiatives, including the Company’s ~~outstanding pension benefit obligation by approximately $800 million, representing approximately 20%~~owned streaming subscription services and virtual MVPDs. Content licensing and distribution revenues grew 10%, mainly as a result of growth from the international licensing of new series and the start of the ~~total obligations~~license periods for previously signed renewals of contracts for library programming. Content licensing and distribution revenues also included higher revenues as a result of the adoption of a new revenue recognition standard in 2018, which resulted in revenues from the distribution of third-party content now being recognized based on the gross amount of consideration received from the customer, with an offsetting increase to participation expenses. This accounting change contributed four percentage points of growth in content licensing and distribution revenues for the six months ended June 30, 2018. Advertising revenues increased 5%, primarily driven by the Company’s ~~qualified pension plans, and will be funded with pension plan assets. In connection with this transaction, the Company will record a one-time settlement charge~~acquisition of Network Ten in the fourth quarter of 2017, ~~currently estimated at $365 million, reflecting~~partially offset by the ~~accelerated recognition~~absence of ~~a portion~~the National Semifinals and National Championship games of ~~unamortized actuarial losses~~the NCAA Tournament, which the CBS Television Network broadcast in the ~~plan. The actual settlement charge could differ from this estimate due to changes in the Company’s actuarial assumptions. Additionally, during the fourth~~second quarter of 2017 and which Turner broadcast in 2018.

Operating income for the six months ended June 30, 2018 increased 1% from the same prior-year period and included costs for restructuring and other corporate matters that affected the comparability of results. Adjusted operating income increased 4%, reflecting the revenue growth, which was partially offset by an increased investment in content and digital initiatives.

Net earnings from continuing operations for the six months ended June 30, 2018 increased 7%. Adjusted net earnings from continuing operations increased 14%, driven by the higher adjusted operating income and a lower effective income tax rate in 2018. Net earnings for the six months ended June 30, 2018 was $911 million, or $2.38 per diluted share, compared with a net loss of $194 million, or a loss of $.47 per diluted share, for the six months ended June 30, 2017 which included, in discontinued operations, a noncash charge to adjust the carrying value of CBS Radio. Adjusted diluted EPS increased 18% as a result of higher earnings and lower weighted average shares outstanding. Adjusted operating income, adjusted net earnings from continuing operations and adjusted diluted EPS are non-GAAP financial measures. See page 42 for details of the discrete items excluded from financial results, and reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

The Company generated operating cash flow from continuing operations of $1.05 billion for the six months endedJune 30, 2018 compared with $909 million for the six months ended June 30, 2017. Free cash flow for the six months endedJune 30, 2018 was $983 million compared with $905 million for the same prior-year period. These increases primarily reflect lower payments for income taxes, partially offset by an increased investment in content, including a higher number of series produced for distribution on multiple platforms. Free cash flow is a non-GAAP financial measure. See “Free Cash Flow” on page 58 for a reconciliation of net cash flow provided by (used for) operating activities, the most directly comparable GAAP financial measure, to free cash flow.

Corporate Matters Involving Viacom Inc. and National Amusements, Inc.

On February 1, 2018, the Company ~~expects~~announced that its Board of Directors established a special committee of independent directors to ~~make~~evaluate a ~~discretionary contribution~~potential combination with Viacom Inc. In May 2018, the committee determined that a merger of ~~$500~~the Company and Viacom Inc. is not in the best interests of the Company’s stockholders (other than National Amusements, Inc. (“NAI”)). See “Legal Matters” for a description of legal proceedings in the Delaware Court of Chancery.

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Share Repurchases, Cash Dividends and Contingent Stock Dividend

On May 17, 2018, the Company’s Board of Directors declared a pro rata dividend of 0.5687 of a share of the Company’s voting Class A Common Stock for each share of the Company’s Class A Common Stock and non-voting Class B Common Stock to ~~prefund its qualified plans, which is expected~~stockholders of record as of the close of business on the record date, contingent on Delaware court approval. The record date for the dividend would be 10 days after such Delaware court approval or on the next business day after the 10-day period. The dividend, if issued, would dilute NAI’s voting interest from approximately 79.7% at June 30, 2018 to ~~be partially funded by long-term borrowings.~~approximately 20%. The dividend would not dilute the economic interests of any of the Company’s stockholders.See “Legal Matters” for a description of legal proceedings in the Delaware Court of Chancery.

Adoption of New Revenue Standard

During the first quarter of 2018, the Company adopted Financial Accounting Standards Board (“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.

Revenues from Distribution Arrangements

Revenues from the Renewal of Licensing Agreements

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

The Company applied the modified retrospective method of adoption and therefore, prior periods continue to be presented under previous accounting guidance. The following tables present the Company’s revenues, operating income, net earnings from continuing operations, and diluted EPS from continuing operations, as well as the corresponding year-over-year comparisons, as if results for the three and six months ended June 30, 2017 were recognized under ASC 606. These amounts are non-GAAP financial measures and are reconciled below to the most directly comparable financial measures in accordance with GAAP. The Company believes that presenting its financial results for 2017 under ASC 606 is relevant and useful for investors because it allows investors to view results for 2017 on a basis consistent with the 2018 presentation, and makes it easier to compare the Company’s year-over-year results.



	Three Months Ended June 30,
			2017									2018 vs. 2017
	2018 Reported		Reported		ASC 606 Adjustments				Under ASC 606			Reported			Under ASC 606
Revenues	$	3,466	$	3,257		$	45		$	3,302			6	%	5	%

Operating income	$	659	$	690		$	(2	)	$	688			(4	)%	(4	)%

Net earnings from continuing operations	$	400	$	397		$	(2	)	$	395			1	%	1	%

Diluted EPS from continuing operations	$	1.05	$	.97		$	—		$	.96	^(a)		8	%	9	%

(a) Amount does not sum as a result of rounding.



	Six Months Ended June 30,
			2017							2018 vs. 2017
	2018 Reported		Reported		ASC 606 Adjustments			Under ASC 606		Reported			Under ASC 606
Revenues	$	7,227	$	6,600		$	133	$	6,733		10	%	7	%

Operating income	$	1,431	$	1,416		$	10	$	1,426		1	%	—	%

Net earnings from continuing operations	$	911	$	851		$	7	$	858		7	%	6	%

Diluted EPS from continuing operations	$	2.38	$	2.06		$	.02	$	2.08		16	%	14	%

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Reconciliation of Non-GAAP Measures

Results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 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 September 30, 2017																		Three Months Ended June 30, 2018
	Reported			Extinguishment of Debt				Discrete Tax Item ^(a)				CBS Radio Adjustments ^(b)				Adjusted			Reported			Restructuring and Other Corporate Matters ^(a)				Adjusted
Operating income	$	707			$	—			$	—			$	—		$	707		$	659			$	35		$	694
Interest expense	(116		)		—				—				—			(116		)	(116		)		—			(116		)
Interest income	17				—				—				—			17			14				—			14
Loss on early extinguishment of debt	(5		)		5				—				—			—
Other items, net	3				—				—				—			3			(24		)		—			(24		)
Earnings from continuing operations before income taxes	606				5				—				—			611
Earnings before income taxes																			533				35			568
Provision for income taxes	(172		)		(2		)		—				—			(174		)	(113		)		(8		)	(121		)
Equity in loss of investee companies, net of tax	(16		)		—				—				—			(16		)	(20		)		—			(20		)
Net earnings from continuing operations	418				3				—				—			421
Net earnings from discontinued operations, net of tax	174				—				(45		)		(100		)	29
Net earnings	$	592			$	3			$	(45	)		$	(100	)	$	450		$	400			$	27		$	427
Diluted EPS from continuing operations	$	1.03			$	.01			$	—			$	—		$	1.04
Diluted EPS	$	1.46			$	.01			$	(.11	)		$	(.25	)	$	1.11		$	1.05			$	.07		$	1.12

(a) Reflects restructuring charges of $25 million ($19 million, net of tax), as well as expenses of $10 million ($8 million, net of tax) primarily for professional fees related to the evaluation of a potential combination with Viacom Inc. and legal proceedings involving the Company and NAI (See “Legal Matters”).



	Three Months Ended June 30, 2017
	Reported			Discontinued Operations Items ^(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

(a) Reflects a ~~tax benefit from the resolution~~noncash charge of ~~a tax matter in a foreign jurisdiction relating~~$365 million to ~~a previously disposed business.~~

~~(b) Reflects a noncash gain associated with a valuation allowance for~~adjust the carrying value of CBS ~~Radio.~~

~~Management’s Discussion and Analysis of~~

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

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

Three Months Ended September 30, 2016
Reported
Discrete Tax Items ^(a)
Adjusted
Earnings from continuing operations before income taxes $ 624
$ —
$ 624

Provision for income taxes (145 ) (47 ) (192 )
Equity in loss of investee companies, net of tax (13 ) —
(13 )
Net earnings from continuing operations 466
(47 ) 419

Net earnings from discontinued operations, net of tax 12
36
48

Net earnings $ 478
$ (11 ) $ 467

Diluted EPS from continuing operations $ 1.04
$ (.11 ) $ .94

Diluted EPS $ 1.07
$ (.02 ) $ 1.05

~~(a) Reflects a one-time tax benefit of $47 million associated with a multiyear adjustment~~Radio to ~~a tax deduction, which was approved~~the value indicated by the ~~IRS during the third quarter~~stock valuation of ~~2016, and a charge of $36 million in discontinued operations from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business.~~

Nine Months Ended September 30, 2017
Reported Extinguishment of Debt
Discrete Tax Items ^(a)

CBS Radio Adjustments ^(b)
Adjusted
Operating income $ 2,080
$ —
$ —
$ —
$ 2,080

Interest expense (336 ) —
—
—
(336 )
Interest income 45
—
—
—
45

Loss on early extinguishment of debt (5 ) 5
—
—
—

Other items, net 9
—
—
—
9

Earnings from continuing operations before income taxes 1,793
5
—
—
1,798

Provision for income taxes (479 ) (2 ) (22 ) —
(503 )
Equity in loss of investee companies, net of tax (45 ) —
—
—
(45 )
Net earnings from continuing operations 1,269
3
(22 ) —
1,250

Net earnings (loss) from discontinued
operations, net of tax
(871 ) —
(45 ) 984
68

Net earnings $ 398
$ 3
$ (67 ) $ 984
$ 1,318

Diluted EPS from continuing operations $ 3.10
$ .01
$ (.05 ) $ —
$ 3.05

Diluted EPS $ .97
$ .01
$ (.16 ) $ 2.40
$ 3.21

(a) Reflects a tax benefit of $22 million from the resolution of certain state income tax matters and a tax benefit of $45 million in discontinued operations from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business.

~~(b) Reflects a noncash charge of $980 million associated with a valuation allowance for the carrying value of CBS Radio,~~Entercom Communications Corp. (“Entercom”) and a restructuring charge of $7 million ($4 million, net of tax) at CBS Radio.

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)


	Nine Months Ended September 30, 2016																Six Months Ended June 30, 2018
	Reported			Other Operating Items ^(a)				Discrete Tax Items ^(b)			Write-down of Investment ^(c)			Adjusted			Reported			Restructuring and Other Corporate Matters ^(a)				Adjusted
Operating income	$	2,137			$	(9	)	$	—			$	—	$	2,128		$	1,431			$	44		$	1,475
Interest expense	(304		)		—			—				—		(304		)	(234		)		—			(234		)
Interest income	22				—			—				—		22			31				—			31
Other items, net	(7		)		—			—				—		(7		)	(35		)		—			(35		)
Earnings from continuing operations before income taxes	1,848				(9		)	—				—		1,839
Earnings before income taxes																	1,193				44			1,237
Provision for income taxes	(524		)		4			(47		)		—		(567		)	(248		)		(10		)	(258		)
Equity in loss of investee companies, net of tax	(43		)		—			—				6		(37		)	(34		)		—			(34		)
Net earnings from continuing operations	1,281				(5		)	(47		)		6		1,235
Net earnings from discontinued operations, net of tax	93				—			36				—		129
Net earnings	$	1,374			$	(5	)	$	(11	)		$	6	$	1,364		$	911			$	34		$	945
Diluted EPS from continuing operations	$	2.82			$	(.01	)	$	(.10	)		$	.01	$	2.71
Diluted EPS	$	3.02			$	(.01	)	$	(.02	)		$	.01	$	3.00		$	2.38			$	.09		$	2.47

(a) Reflects restructuring charges of $25 million ($19 million, net of tax), as well as expenses of $19 million ($15 million, net of tax) primarily for professional fees related to the evaluation of a potential combination with Viacom Inc. and legal proceedings involving the Company and NAI (See “Legal Matters”).



	Six Months Ended June 30, 2017
	Reported			Tax Items ^(a)				Discontinued Operations Items ^(b)			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 a ~~gain on~~tax benefit in the ~~sale~~first quarter of ~~an internet business in China and a multiyear, retroactive impact~~2017 from the resolution of ~~a new operating tax.~~certain state income tax matters.

(b) Reflects a ~~one-time tax benefit~~noncash charge of ~~$47 million associated with a multiyear adjustment~~$1.08 billion to ~~a tax deduction, which was approved~~adjust the carrying value of CBS Radio to the value indicated by the ~~IRS during the third quarter~~stock valuation of ~~2016,~~Entercom and a restructuring charge of ~~$36~~$7 million ~~in discontinued operations from the resolution~~($4 million, net of ~~a tax matter in a foreign jurisdiction relating to a previously disposed business.~~

~~(c) Reflects the write-down of an international television joint venture to its fair value.~~

tax) at CBS Radio.

Consolidated Results of Operations

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 versus Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Revenues

Three Months Ended September 30,

% of Total
Revenues

% of Total
Revenues
Increase/(Decrease)
Revenues by Type 2017 2016 $ %
Advertising $ 1,106
35 % $ 1,162
38 % $ (56 ) (5 )%
Content licensing and distribution 860
27
1,108
36
(248 ) (22 )
Affiliate and subscription fees 1,145
36
753
24
392
52

Other 60
2
61
2
(1 ) (2 )
Total Revenues $ 3,171
100 % $ 3,084
100 % $ 87
3 %


	Nine Months Ended September 30,																		Three Months Ended June 30,
			% of Total Revenues						% of Total Revenues			Increase/(Decrease)										% of Total Revenues						% of Total Revenues			Increase/(Decrease)
Revenues by Type	2017				2016				% of Total Revenues		$				%			2018				% of Total Revenues		2017				% of Total Revenues		$				%
Advertising	$	4,008	% of Total Revenues	41	%		$	4,492		46	%		$	(484	)		(11	)%		$	1,327		38	%		$	1,299		40	%		$	28			2	%
Content licensing and distribution	2,761		28			2,780			29			(19		)		(1	)		1,096			32			1,056			32			40				4
Affiliate and subscription fees	2,835		29			2,208			23			627				28			989			28			848			26			141				17
Other	167		2			168			2			(1		)		(1	)		54			2			54			2			—				—
Total Revenues	$	9,771	100	%		$	9,648		100	%		$	123			1	%		$	3,466		100	%		$	3,257		100	%		$	209			6	%

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,
			% of Total Revenues				% of Total Revenues		Increase/(Decrease)
Revenues by Type	2018		% of Total Revenues		2017		% of Total Revenues		$		%
Advertising	$	3,060	42	%	$	2,902	44	%	$	158	5	%
Content licensing and distribution	2,091		29		1,901		29		190		10
Affiliate and subscription fees	1,968		27		1,690		25		278		16
Other	108		2		107		2		1		1
Total Revenues	$	7,227	100	%	$	6,600	100	%	$	627	10	%

Advertising

For the three and six months ended ~~September~~June 30, ~~2017, the 5% decrease in~~2018, advertising revenues increased 2% and 5%, respectively, primarily ~~reflects lower political advertising sales and lower ratings, partially~~driven by the Company’s acquisition of Network Ten in the fourth quarter of 2017. This increase was offset by ~~higher pricing. The comparison was also impacted by one less~~ ~~Thursday Night Football~~ ~~game~~the absence of the National Semifinals and National Championship games of the NCAA Tournament, which the CBS Television Network broadcast in the second quarter of 2017. These games are broadcast on the CBS Television Network inevery other year through 2032 under the ~~third quarter of 2017.~~current agreements with the NCAA and Turner. For the ~~nine~~three months ended ~~September~~June 30, ~~2017,~~2018, underlying CBS Network advertising increased 1% and for the ~~11% decrease in advertising revenues primarily reflects~~six months ended June 30, 2018, it was comparable with the ~~benefit to 2016 from the broadcast of~~ ~~Super Bowl 50~~ ~~as well as lower political advertising sales.~~same prior-year period.

During the fourth quarter of 2017, the advertising revenue comparison with the prior year will continue to be negatively affected by the benefit in 2016 from strong political advertising. Additionally,The Company recently completed the CBS Television Network’s upfront advertising sales (“Upfront”) for the ~~2017/2018~~2018/2019 television broadcast season, which runs from the middle of September ~~2017~~2018 through the middle of September ~~2018,~~2019. 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 and volume compared with the prior broadcast season, ~~and a majority of the Company’s deals are based on a live-plus-seven day viewing window,~~ which are expected to benefit the Company’s advertising revenues during the ~~2017/2018~~2018/2019 broadcast season. However, overall advertising revenues for the Company will be dependent on ratings for its programming and market conditions, including demand in the scatter advertising market, which is when advertisers purchase the remaining advertising spots closer to the broadcast of the related programming. ~~During~~In the ~~first nine months~~second half of ~~2017, compared~~2018, advertising revenues will continue to benefit from the ~~same period~~Network Ten acquisition as well as from political advertising sales associated with the U.S. midterm elections. Additionally, the comparison in ~~2016,~~ the ~~Company has experienced lower ratings, which was largely offset~~second half of 2018 will be impacted by ~~higher pricing.~~the absence of CBS’s broadcast of five Thursday Night Football games in 2017. However, this will result in an improvement in the Company’s operating income margin.

Content Licensing and Distribution

For the three months ended ~~September~~June 30, ~~2017,~~2018, content licensing and distribution revenues increased 4%, benefiting from additional series produced for third-party services. For the ~~22% decrease~~six months ended June 30, 2018, content licensing and distribution revenues increased 10% driven by growth from the international licensing of new series and the start of the license periods for previously signed renewals of contracts for library programming. The revenue comparisons for both the three and six-month periods also benefited from higher revenues from the distribution of third-party content, resulting from such revenues now being recognized at the 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 12 to the consolidated financial statements.) Under previous guidance such distribution revenues were recognized at the net amount retained by the Company after the payment of fees to the third party. This accounting change contributed three percentage points and four percentage points of growth in content licensing and distribution revenues ~~primarily reflects the timing of domestic television licensing sales and the benefit in the third quarter of 2016 from the licensing of~~ ~~Penny Dreadful~~ and various titles from the Company’s television library. These decreases were partially offset by growth in international licensing. For the nine months ended September 30, 2017, the 1% decrease in content licensing and distribution revenues primarily reflects the timing of domestic television licensing and the benefit to 2016 from the international licensing sales of five ~~Star Trek~~ library series, partially offset by strong demand for the Company’s content internationally, reflecting additional titles available for sale as a result of the Company’s recent increased investment in internally-produced series.

For the remainder of 2017, the content licensing and distribution revenues comparison will be impacted by fluctuations resulting from the timing of when Company-owned television series are made available for multiyear licensing agreements. Television license fee revenues are recognized at the beginning of the license period in which programs are made available to the licensee for exhibition.

~~Affiliate and Subscription Fees~~

For the three and nine months ended September 30, 2017, the increases in affiliate and subscription fees of 52% and 28%, respectively, primarily reflect revenues from Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event, which contributed 36 points and 12 points of the growth for the three and ~~nine-month periods, respectively. Underlying affiliate and subscription fee revenues for each of the three and nine~~six months ended ~~September~~June 30, 2017 increased 16%, led by growth in station affiliation fees and retransmission revenues, and higher revenues from new digital initiatives, including the Company’s owned streaming subscription services, ~~CBS All Access~~ ~~and the~~ ~~Showtime~~ ~~digital streaming subscription offering, and third-party live television streaming offerings.~~2018, respectively.

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. In addition, the Company’s existing agreements with station affiliates and MVPDs include annual contractual

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

For the remainder of 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, and the new revenue recognition standard.

Affiliate and Subscription Fees

For the three and six months ended June 30, 2018, affiliate and subscription fees increased 17% and 16%, respectively, reflecting 25% higher station affiliation fees and retransmission revenues in each period as well as higher revenues of 70% and 75%, respectively, from digital initiatives, including the Company’s owned streaming subscription services, CBS All Access and the Showtime digital streaming subscription offering, and virtual MVPDs.

Over the next few years, the Company expects to benefit from the renewal of several of its agreements with station affiliates and MVPDs, 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.

International Revenues

The Company generated approximately ~~12%~~18% and ~~11%~~15% of its total revenues from international regions for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and generated ~~approximately~~19% and 14% of its total revenues from international regions for ~~each of~~ the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, ~~and 2016.~~respectively. The increases in international revenues were primarily driven by the Company’s acquisition of Network Ten in the fourth quarter of 2017.

Operating Expenses


	Three Months Ended September 30,																		Three Months Ended June 30,
			% of Operating Expenses						% of Operating Expenses			Increase/(Decrease)										% of Operating Expenses						% of Operating Expenses			Increase/(Decrease)
Operating Expenses by Type	2017				2016				% of Operating Expenses		$				%			2018				% of Operating Expenses		2017				% of Operating Expenses		$				%
Programming	$	749	% of Operating Expenses	40	%		$	500		28	%		$	249			50	%		$	579		27	%		$	652		33	%		$	(73	)		(11	)%
Production	572		31			666			37			(94		)		(14	)		902			41			726			36			176				24
Participation, distribution and royalty	199		11			291			16			(92		)		(32	)		331			15			290			14			41				14
Other	342		18			331			19			11				3			372			17			336			17			36				11
Total Operating Expenses	$	1,862	100	%		$	1,788		100	%		$	74			4	%		$	2,184		100	%		$	2,004		100	%		$	180			9	%


	Nine Months Ended September 30,																		Six Months Ended June 30,
			% 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	$	2,258	% of Operating Expenses	38	%		$	2,133		37	%		$	125			6	%		$	1,547		34	%		$	1,509		37	%		$	38			3	%
Production	1,955		33			1,933			33			22				1			1,661			36			1,383			34			278				20
Participation, distribution and royalty	725		12			788			13			(63		)		(8	)		653			14			526			13			127				24
Other	1,002		17			964			17			38				4			723			16			660			16			63				10
Total Operating Expenses	$	5,940	100	%		$	5,818		100	%		$	122			2	%		$	4,584		100	%		$	4,078		100	%		$	506			12	%

Programming

For the three ~~and nine~~ months ended ~~September~~June 30, ~~2017,~~2018, the ~~increases~~11% decrease in programming expenses ~~of 50% and 6%, respectively, were~~was primarily driven by lower sports programming costs, ~~associated with Showtime Networks’ distribution~~as the second quarter of ~~the Floyd Mayweather/Conor McGregor pay-per-view boxing event, and for the nine months ended September 30,~~ 2017 ~~the increase also reflects~~included costs ~~in 2017~~ associated with CBS’s broadcast of the ~~semifinals~~National Semifinals and ~~finals~~National Championship games of the NCAA ~~Division I Men’s Basketball Championship. The increases for the nine-month period were partially offset by costs in the first quarter of 2016 associated with the~~Tournament. These games are broadcast of ~~Super Bowl 50.~~

~~Production~~

For the three months ended September 30, 2017, the 14% decrease in production expenses primarily reflects lower costs associated with the decrease in television licensing revenues. For the nine months ended September 30, 2017, the 1% increase in production expenses mainly reflects an increased investment in internally-produced television series and higher costs associated with the mix of titles sold under television licensing arrangements. These increases were partially offset by production costs in the first quarter of 2016 associated with CBS’s broadcast of ~~Super Bowl 50~~.

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

~~Participation, distribution~~by the CBS Television Network every other year through 2032 under the current agreements with the NCAA and ~~royalty~~Turner. This decrease was partially offset by costs for programming on Network Ten, which was acquired in the fourth quarter of 2017. For the six months ended June 30, 2018, the 3% increase in programming expenses was primarily driven by an increased investment in Showtime programming and the acquisition of Network Ten.

Production

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, the ~~decreases~~increases in production expenses of 24% and 20%, respectively, were primarily driven by an increased investment in content, including a higher number of series produced for distribution on multiple platforms, and the acquisition of Network Ten in the fourth quarter of 2017. The increase for the six-month period also included costs associated with the increase in television licensing revenues.

Participation, Distribution and Royalty

For the three and six months ended June 30, 2018, the increases in participation, distribution and royalty costs of ~~32%~~14% and 8%24%, respectively, were primarily driven by ~~lower television licensing~~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 an increase to both revenues and participation expenses of $61 million and $124 million for the ~~mix~~three and six months ended June 30, 2018, respectively, with no impact on the Company’s operating income.

Other

Other operating expenses primarily include compensation and costs associated with book sales, including printing and warehousing. For the three and six months ended June 30, 2018, the increases in other expenses of ~~titles sold under licensing arrangements.~~11% and 10%, respectively, primarily reflected expenses of Network Ten, which was acquired in the fourth quarter of 2017, and higher costs associated with the Company’s digital initiatives.

Selling, General and Administrative Expenses

Three Months Ended September 30,
2017 % of Revenues 2016 % of Revenues Increase/(Decrease)
Selling, general and administrative expenses $ 547
17 % $ 521
17 % 5 %



	Three Months Ended June 30,
	2018		% of Revenues			2017		% of Revenues			Increase/(Decrease)
Selling, general and administrative expenses	$	532		15	%	$	507		16	%		5	%

Nine Months Ended September 30,
2017 % of Revenues 2016 % of Revenues Increase/(Decrease)
Selling, general and administrative expenses $ 1,585
16 % $ 1,534
16 % 3 %



	Six Months Ended June 30,
	2018		% of Revenues			2017		% of Revenues			Increase/(Decrease)
Selling, general and administrative expenses	$	1,056		15	%	$	995		15	%		6	%

Selling, general and administrative (“SG&A”) expenses include expenses incurred for selling and marketing costs, occupancy and back office support. For the three and ~~nine~~six months ended~~September~~ June 30, ~~2017,~~2018, the increases in SG&A expenses of 5% and 3%6%, respectively, were primarily ~~reflect higher advertising and marketing costs, mainly to support~~driven by the Company’s ~~growth initiatives.~~acquisition of Network Ten in the fourth quarter of 2017.

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Depreciation and Amortization

Three Months Ended September 30, Nine Months Ended September 30,
2017
2016 Increase/(Decrease) 2017
2016 Increase/(Decrease)
Depreciation and amortization $ 55
$ 54
2 % $ 166
$ 168
(1 )%



	Three Months Ended June 30,							Six Months Ended June 30,
	2018		2017		Increase/(Decrease)			2018		2017		Increase/(Decrease)
Depreciation and amortization	$	56	$	56		—	%	$	112	$	111		1	%

Restructuring and Other ~~Operating Items, Net~~Corporate Matters

~~For~~During the ~~nine months~~second quarter of 2018, 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 $25 million, reflecting $17 million of severance costs and $8 million of costs associated with exiting contractual obligations and other related costs. These restructuring activities are expected to reduce the Company’s annual cost structure by approximately $25 million.

During the year ended ~~September~~December 31, 2017, 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.

As of June 30, 2018, the cumulative settlements for the 2018, 2017 and 2016 restructuring charges were $48 million, of which $42 million was for severance costs and $6 million was for costs associated with contractual obligations and other ~~operating items, net included a gain from~~related costs. The Company expects to substantially utilize its restructuring reserves by the ~~sale~~end of ~~an internet business in China and a multiyear, retroactive impact of a new operating tax.~~

~~Interest Expense/Income~~2019.

Three Months Ended September 30, Nine Months Ended September 30,
2017
2016
Increase/(Decrease) 2017
2016 Increase/(Decrease)
Interest expense $ (116 ) $ (104 ) 12 % $ (336 ) $ (304 ) 11 %
Interest income $ 17
$ 7
143 % $ 45
$ 22
105 %

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



	Balance at			2018			2018				Balance at
	December 31, 2017			Charges			Settlements				June 30, 2018
Entertainment		$	45		$	6		$	(15	)		$	36
Cable Networks		1			—			(1		)		—
Publishing		3			1			(1		)		3
Local Media		14			11			(3		)		22
Corporate		3			7			(1		)		9
Total		$	66		$	25		$	(21	)		$	70

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



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

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

~~Loss on Early Extinguishment of Debt~~Interest Expense/Income

~~For the three and nine months ended September 30, 2017, the loss on early extinguishment of debt of $5 million~~

~~reflected a pre-tax loss associated with the redemption of~~



	Three Months Ended June 30,									Six Months Ended June 30,
	2018			2017			Increase/(Decrease)			2018			2017			Increase/(Decrease)
Interest expense	$	(116	)	$	(111	)		5	%	$	(234	)	$	(220	)		6	%
Interest income	$	14		$	15			(7	)%	$	31		$	28			11	%

The following table presents the Company’s ~~$300 million~~ outstanding ~~4.625% senior notes due May 2018.~~debt balances, excluding capital leases, and the weighted average interest rate as of June 30, 2018 and 2017:



	At June 30,
			Weighted Average					Weighted Average
	2018		Interest Rate			2017		Interest Rate
Senior debt	$	9,430		4.26	%	$	8,853		4.47	%
Commercial paper	$	370		2.42	%	$	263		1.42	%

Other Items, Net

Three Months Ended September 30, Nine Months Ended September 30,
2017
2016 Increase/(Decrease) 2017 2016 Increase/(Decrease)
Other items, net $ 3
$ —
n/m $ 9
$ (7 ) n/m



	Three Months Ended June 30,								Six Months Ended June 30,
	2018			2017			Increase/(Decrease)		2018			2017			Increase/(Decrease)
Pension and postretirement benefit costs	$	(16	)	$	(21	)	(24	)%	$	(31	)	$	(43	)	(28	)%
Foreign exchange gains (losses)	(5		)	5			n/m		(1		)	6			n/m
Write-down of investment	(3		)	—			n/m		(3		)	—			n/m
Other items, net	$	(24	)	$	(16	)	50	%	$	(35	)	$	(37	)	(5	)%

n/m - not meaningful

~~Other~~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 for all~~net” on the Consolidated Statements of Operations. All prior periods ~~primarily consists~~have been reclassified to conform to this presentation. (See Note 1 to the consolidated financial statements.)

Management’s Discussion and Analysis of ~~foreign exchange gains~~

Results of Operations and ~~losses.~~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 income taxes on earnings from continuing operations before income taxes and equity in loss of investee companies.


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
	2017			2016			Increase/(Decrease)			2017			2016			Increase/(Decrease)			2018			2017			Increase/(Decrease)			2018			2017			Increase/(Decrease)
Provision for income taxes, including interest and before other discrete items	$	(187	)	$	(207	)		(10	)%	$	(548	)	$	(581	)		(6	)%
Provision for income taxes, including interest and before other discrete items ^(a)																			$	112		$	176			(36	)%	$	250		$	361			(31	)%
Excess tax benefits from stock-based compensation ^(a)(b)	10			—						41			—						—			(4		)				—			(31		)
Other discrete items ^(b)(c)	5			62						28			57						1			(3		)				(2		)	(23		)
Provision for income taxes	$	(172	)	$	(145	)		19	%	$	(479	)	$	(524	)		(9	)%	$	113		$	169			(33	)%	$	248		$	307			(19	)%
Effective income tax rate	28.4		%	23.2		%				26.7		%	28.4		%				21.2		%	29.2		%				20.8		%	25.9		%

~~(b)~~(c) For the ~~nine~~six months ended ~~September~~June 30, 2017, primarily reflects tax benefits from the resolution of certain state income tax matters. For the three and nine months ended September 30, 2016, primarily reflects a one-time tax benefit of $47 million associated with a multiyear adjustment to a tax deduction, which was approved by the IRS during the third quarter of 2016.

Equity in Loss of Investee Companies, Net of Tax

Three Months Ended September 30, Nine Months Ended September 30,
2017
2016
Increase/(Decrease) 2017 2016 Increase/(Decrease)
Equity in loss of investee companies,
net of tax
$ (16 ) $ (13 ) 23 % $ (45 ) $ (43 ) 5 %



	Three Months Ended June 30,									Six Months Ended June 30,
	2018			2017			Increase/(Decrease)			2018			2017			Increase/(Decrease)
Equity in loss of investee companies, net of tax	$	(20	)	$	(12	)		67	%	$	(34	)	$	(29	)		17	%

Net Earnings from Continuing Operations and Diluted EPS from Continuing Operations



	Three Months Ended June 30,							Six Months Ended June 30,
	2018		2017		Increase/(Decrease)			2018		2017		Increase/(Decrease)
Net earnings from continuing operations	$	400	$	397		1	%	$	911	$	851		7	%
Diluted EPS from continuing operations	$	1.05	$	.97		8	%	$	2.38	$	2.06		16	%

For the three and six months ended June 30, 2018, net earnings from continuing operations increased 1% and 7%, respectively, driven by the lower effective income tax rate in 2018. Diluted EPS from continuing operations for the three and six months ended June 30, 2018 increased 8% and 16%, respectively, mainly reflecting lower weighted average shares outstanding as well as higher earnings.

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 ~~Continuing~~Discontinued Operations, ~~and Diluted EPS from Continuing Operations~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Increase/(Decrease) 2017 2016 Increase/(Decrease)
Net earnings from continuing operations $ 418
$ 466
(10 )% $ 1,269
$ 1,281
(1 )%
Diluted EPS from continuing operations $ 1.03
$ 1.04
(1 )% $ 3.10
$ 2.82
10 %
net of tax

For the three and six months ended ~~September~~June 30, 2017, ~~the decreases in~~ net earnings from continuing operations and diluted EPS from continuing operations of 10% and 1%, respectively, were primarily the result of lower operating income and the impact of the previously mentioned tax benefit of $47 million in the third quarter of 2016. Diluted EPS from continuing operations benefited from lower weighted average shares outstanding as a result of the Company’s ongoing share repurchase program, which partially offset the lower earnings. For the nine months ended September 30, 2017, the 1% decrease in net earnings from continuing operations primarily reflects lower operating income. The 10% increase in diluted EPS from continuing operations for the nine-month period reflects lower weighted average shares outstanding as a result of the Company’s ongoing share repurchase program, which more than offset the lower earnings.

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

~~The following table sets forth details of net earnings (loss)~~loss from discontinued operations, ~~for~~net of tax, of $339 million and $1.05 billion, respectively, which reflects the ~~three and nine months ended September 30, 2017 and 2016. Net earnings (loss) from discontinued operations included the operating~~ results of CBS Radio, ~~for all periods presented. Net earnings (loss) from discontinued operations also~~ included ~~a tax benefit~~noncash charges of ~~$45~~$365 million ~~for the three~~ and nine months ended September 30, 2017 and a charge of $36 million for the three and nine months ended September 30, 2016, in each case from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business that was accounted for as a discontinued operation.

Three Months Ended September 30, 2017 CBS Radio Other Total
Revenues $ 300
$ —
$ 300
Costs and expenses: ^(a)

Operating 113
—
113
Selling, general and administrative 121
(1 ) 120
Benefit from valuation allowance (100 ) —
(100 )
Total costs and expenses 134
(1 ) 133
Operating income 166
1
167
Interest expense (21 ) —
(21 )
Earnings from discontinued operations 145
1
146
Income tax (provision) benefit (17 ) 45
28
Net earnings from discontinued operations, net of tax $ 128
$ 46
$ 174

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

~~Management’s Discussion and Analysis of~~

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

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

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

Operating 110
—
110
Selling, general and administrative 123
—
123
Depreciation and amortization 7
—
7
Total costs and expenses 240
—
240
Operating income 77
—
77
Other income 2
—
2
Earnings from discontinued operations 79
—
79
Income tax provision (31 ) (36 ) (67 )
Net earnings (loss) from discontinued operations, net of tax $ 48
$ (36 ) $ 12

Nine Months Ended September 30, 2017 CBS Radio Other Total
Revenues $ 856
$ —
$ 856
Costs and expenses: ^(a)

Operating 307
—
307
Selling, general and administrative 372
(1 ) 371
Restructuring charge 7
—
7
Provision for valuation allowance 980
—
980
Total costs and expenses 1,666
(1 ) 1,665
Operating income (loss) (810 ) 1
(809 )
Interest expense (60 ) —
(60 )
Earnings (loss) from discontinued operations (870 ) 1
(869 )
Income tax (provision) benefit (47 ) 45
(2 )
Net earnings (loss) from discontinued operations, net of tax $ (917 ) $ 46
$ (871 )

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

Nine Months Ended September 30, 2016 CBS Radio Other Total
Revenues $ 892
$ —
$ 892
Costs and expenses:

Operating 298
—
298
Selling, general and administrative 359
—
359
Depreciation and amortization 20
—
20
Total costs and expenses 677
—
677
Operating income 215
—
215
Other income 2
—
2
Earnings from discontinued operations 217
—
217
Income tax provision (88 ) (36 ) (124 )
Net earnings (loss) from discontinued operations, net of tax $ 129
$ (36 ) $ 93

FASB Accounting Standards Codification (“ASC”) 360 requires that an asset classified as held for sale be measured each reporting period at the lower of its carrying amount or fair value less cost to sell. The ultimate value of the transaction with Entercom will be determined based on Entercom’s stock price at the closing of the transaction. The Company recorded a noncash gain of $100 million for the three months ended September 30, 2017 and a noncash charge of $980 million for the nine months ended September 30, 2017 associated with a valuation allowance$1.08 billion, respectively, to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. ~~The~~

~~Management’s Discussion and Analysis of~~

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

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

~~Company will record an additional gain or loss upon~~(See Note 13 to the closing of the transaction, which is expected to occur in the fourth quarter of 2017. A 10% change to Entercom’s stock price would change the carrying value of CBS Radio by approximately $110 million.

For the nine months ended September 30, 2017, CBS Radio recorded a restructuring charge of $7 million associated with the reorganization of certain business operations, reflecting severance costs and costs associated with exiting contractual obligations.consolidated financial statements.)

Net Earnings (Loss) and Diluted EPS


	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
	2017		2016		Increase/(Decrease)			2017		2016		Increase/(Decrease)			2018		2017		Increase/(Decrease)		2018		2017			Increase/(Decrease)
Net earnings	$	592	$	478		24	%	$	398	$	1,374		(71	)%
Net earnings (loss)															$	400	$	58		n/m	$	911	$	(194	)		n/m
Diluted EPS	$	1.46	$	1.07		36	%	$	.97	$	3.02		(68	)%	$	1.05	$	.14		n/m	$	2.38	$	(.47	)		n/m

n/m - not meaningful

Segment Results of Operations

Three Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

Three Months Ended September 30,

% of Total
Revenues

% of Total
Revenues
Increase/(Decrease)
2017
2016 $ %
Revenues:
Entertainment $ 1,815
57 % $ 1,949
63 % $ (134 ) (7 )%
Cable Networks 840
26
598
20
242
40

Publishing 228
7
226
7
2
1

Local Media 397
13
409
13
(12 ) (3 )
Corporate/Eliminations (109 ) (3 ) (98 ) (3 ) (11 ) (11 )
Total Revenues $ 3,171
100 % $ 3,084
100 % $ 87
3 %


	Three Months Ended September 30,																	Three Months Ended June 30,
				% of Total Operating Income						% of Total Operating Income											% of Total Revenues						% of Total Revenues			Increase/(Decrease)
													Increase/(Decrease)					2018			% of Total Revenues			2017			% of Total Revenues			$			%
	2017						2016						$			%
Segment Operating Income (Loss):
Revenues:
Entertainment	$	345			49	%	$	348			48	%	$	(3	)	(1	)%	$	2,365			68	%	$	2,184			67	%	$	181		8	%
Cable Networks	294				42		285				40		9			3		591				17		571				18		20			4
Publishing	46				6		44				6		2			5		207				6		206				6		1			—
Local Media	105				15		122				17		(17		)	(14	)	420				12		412				13		8			2
Corporate	(83		)		(12	)	(78		)		(11	)	(5		)	(6	)
Total Operating Income	$	707			100	%	$	721			100	%	$	(14	)	(2	)%
Corporate/Eliminations																		(117		)		(3	)	(116		)		(4	)	(1		)	(1	)
Total Revenues																		$	3,466			100	%	$	3,257			100	%	$	209		6	%

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Three Months Ended September 30,
Increase/(Decrease)
2017 2016 $ %
Depreciation and Amortization:
Entertainment $ 29
$ 28
$ 1
4 %
Cable Networks 5
6
(1 ) (17 )
Publishing 2
1
1
100

Local Media 11
11
—
—

Corporate 8
8
—
—

Total Depreciation and Amortization $ 55
$ 54
$ 1
2 %

~~Nine Months Ended September 30, 2017 and 2016~~

Nine Months Ended September 30,

% of Total
Revenues

% of Total
Revenues
Increase/(Decrease)
2017 2016 $ %
Revenues:
Entertainment $ 6,346
65 % $ 6,483
67 % $ (137 ) (2 )%
Cable Networks 1,954
20
1,659
17
295
18

Publishing 595
6
558
6
37
7

Local Media 1,218
13
1,253
13
(35 ) (3 )
Corporate/Eliminations (342 ) (4 ) (305 ) (3 ) (37 ) (12 )
Total Revenues $ 9,771
100 % $ 9,648
100 % $ 123
1 %


	Nine Months Ended September 30,																	Three Months Ended June 30,
				% of Total Segment Operating Income						% of Total Segment Operating Income											% of Total Segment Operating Income						% of Total Segment Operating Income
													Increase/(Decrease)																	Increase/(Decrease)
	2017						2016						$			%		2018						2017						$			%
Segment Operating Income (Loss):
Entertainment	$	1,089			53	%	$	1,148			54	%	$	(59	)	(5	)%	$	356			51	%	$	351			51	%	$	5		1	%
Cable Networks	795				38		740				35		55			7		256				37		255				37		1			—
Publishing	88				4		83				4		5			6		31				5		29				4		2			7
Local Media	355				17		402				19		(47		)	(12	)	128				18		128				19		—			—
Corporate	(247		)		(12	)	(245		)		(12	)	(2		)	(1	)	(77		)		(11	)	(73		)		(11	)	(4		)	(5	)
Total Segment Operating Income	2,080				100	%	2,128				100	%	(48		)	(2	)	694				100	%	690				100	%	4			1
Other operating items, net	—						9						(9		)	n/m
Restructuring and other corporate matters																		(35		)				—						(35		)	n/m
Total Operating Income	$	2,080					$	2,137					$	(57	)	(3	)%	$	659					$	690					$	(31	)	(4	)%

n/m - not meaningful


	Nine Months Ended September 30,									Three Months Ended June 30,
					Increase/(Decrease)									Increase/(Decrease)
	2017		2016		$			%		2018		2017		$			%
Depreciation and Amortization:
Entertainment	$	85	$	88	$	(3	)	(3	)%	$	31	$	27	$	4		15	%
Cable Networks	17		17		—			—		5		6		(1		)	(17	)
Publishing	5		4		1			25		2		2		—			—
Local Media	34		33		1			3		11		12		(1		)	(8	)
Corporate	25		26		(1		)	(4	)	7		9		(2		)	(22	)
Total Depreciation and Amortization	$	166	$	168	$	(2	)	(1	)%	$	56	$	56	$	—		—	%

Six Months Ended June 30, 2018 and 2017



	Six Months Ended June 30,
				% of Total Revenues						% of Total Revenues			Increase/(Decrease)
	2018			% of Total Revenues			2017			% of Total Revenues			$			%
Revenues:
Entertainment	$	5,081			70	%	$	4,531			69	%	$	550		12	%
Cable Networks	1,200				17		1,114				17		86			8
Publishing	367				5		367				6		—			—
Local Media	835				12		821				12		14			2
Corporate/Eliminations	(256		)		(4	)	(233		)		(4	)	(23		)	(10	)
Total Revenues	$	7,227			100	%	$	6,600			100	%	$	627		10	%

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,
				% of Total Segment Operating Income						% of Total Segment Operating Income
													Increase/(Decrease)
	2018						2017						$			%
Segment Operating Income (Loss):
Entertainment	$	848			57	%	$	754			53	%	$	94		12	%
Cable Networks	486				33		505				36		(19		)	(4	)
Publishing	47				3		44				3		3			7
Local Media	246				17		252				18		(6		)	(2	)
Corporate	(152		)		(10	)	(139		)		(10	)	(13		)	(9	)
Total Segment Operating Income	1,475				100	%	1,416				100	%	59			4
Restructuring and other corporate matters	(44		)				—						(44		)	n/m
Total Operating Income	$	1,431					$	1,416					$	15		1	%

n/m - not meaningful



	Six Months Ended June 30,
					Increase/(Decrease)
	2018		2017		$			%
Depreciation and Amortization:
Entertainment	$	61	$	56	$	5		9	%
Cable Networks	11		12		(1		)	(8	)
Publishing	3		3		—			—
Local Media	22		23		(1		)	(4	)
Corporate	15		17		(2		)	(12	)
Total Depreciation and Amortization	$	112	$	111	$	1		1	%

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, 2018 and 2017



	Three Months Ended June 30,
							Increase/(Decrease)
Entertainment	2018			2017			$			%
Revenues	$	2,365		$	2,184		$	181		8	%
Segment Operating Income	$	356		$	351		$	5		1	%
Segment Operating Income as a % of revenues	15		%	16		%
Restructuring charges	$	6		$	—		$	6		n/m
Depreciation and amortization	$	31		$	27		$	4		15	%
Capital expenditures	$	20		$	24		$	(4	)	(17	)%

n/m - not meaningful

For the three months ended June 30, 2018, the 8%increase in revenues was led by 38% growth in affiliate and subscription fee revenues, driven by higher station affiliation fees and revenues from digital initiatives, including CBS All Access and virtual MVPDs. Advertising revenues increased 3% reflecting the acquisition of Network Ten in the fourth quarter of 2017 and 1% growth in underlying CBS Network advertising, partially offset by the absence of the National Semifinals and National Championship games of the NCAA Tournament, which the CBS Television Network broadcast in the second quarter of 2017. These games are broadcast by the CBS Television Network every other year through 2032 under the current rights agreement with the NCAA and Turner. Content licensing and distribution revenues grew 4%, benefiting from additional series produced for third-party services.

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

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 12 to the consolidated financial statements.)

For the three months ended June 30, 2018, operating income increased 1%, driven by the higher revenues, partially offset by an increased investment in content and digital initiatives. Restructuring charges for the three months ended June 30, 2018 primarily reflected severance costs and costs associated with exiting contractual obligations.

Six Months Ended June 30, 2018 and 2017



	Six Months Ended June 30,
							Increase/(Decrease)
Entertainment	2018			2017			$			%
Revenues	$	5,081		$	4,531		$	550		12	%
Segment Operating Income	$	848		$	754		$	94		12	%
Segment Operating Income as a % of revenues	17		%	17		%
Restructuring charges	$	6		$	—		$	6		n/m
Depreciation and amortization	$	61		$	56		$	5		9	%
Capital expenditures	$	37		$	38		$	(1	)	(3	)%

n/m - not meaningful

For the six months ended June 30, 2018, the 12% increase in revenues mainly reflected 38% growth in affiliate and subscription fee revenues, primarily as a result of higher station affiliation fees and growth from digital initiatives including CBS All Access and virtual MVPDs. Also contributing to the revenue increase was 8% growth in advertising revenues, driven by the acquisition of Network Ten in the fourth quarter of 2017, partially offset by the absence of the National Semifinals and National Championship games of the NCAA Tournament. Content licensing and distribution revenues increased 9%, driven by 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 12 to the consolidated financial statements.)

For the six months ended June 30, 2018, operating income increased 12% as a result of higher revenues, partially offset by an increased investment in content.

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

Three Months Ended June 30, 2018 and 2017



	Three Months Ended June 30,
							Increase/(Decrease)
Cable Networks	2018			2017			$			%
Revenues	$	591		$	571		$	20		4	%
Segment Operating Income	$	256		$	255		$	1		—	%
Segment Operating Income as a % of revenues	43		%	45		%
Depreciation and amortization	$	5		$	6		$	(1	)	(17	)%
Capital expenditures	$	3		$	4		$	(1	)	(25	)%

For the three months ended June 30, 2018, the 4% increase in revenues was driven by growth from the Showtime digital streaming subscription offering. As of June 30, 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)

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

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

Three Months Ended September 30,
Increase/(Decrease)
Entertainment 2017
2016 $ %
Revenues $ 1,815
$ 1,949
$ (134 ) (7 )%
Segment Operating Income $ 345
$ 348
$ (3 ) (1 )%
Segment Operating Income as a % of revenues 19 % 18 %
Depreciation and amortization $ 29
$ 28
$ 1
4 %
Capital expenditures $ 25
$ 23
$ 2
9 %

~~For the three months ended September 30, 2017, the 7%~~decrease in revenues was driven by a 26% decline in content licensing and distribution revenues, mainly as a result of the timing of domestic television licensing sales and the benefit to 2016 from sales of various titles from the Company’s television library, which were partially offset by growth in international licensing sales. Advertising revenues decreased 3% for the three months ended September 30, 2017, reflecting lower ratings, partially offset by higher pricing. The advertising comparison was also impacted by one less ~~Thursday Night Football~~ game broadcast on the CBS Television Network in the third quarter of 2017. These decreases were partially offset by 35% growth in affiliate and subscription fees, reflecting higher station affiliation fees and growth from new digital initiatives, including ~~CBS All Access~~ ~~and third-party live television streaming services.~~

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

~~Nine Months Ended September 30, 2017 and 2016~~

Nine Months Ended September 30,
Increase/(Decrease)
Entertainment 2017 2016 $ %
Revenues $ 6,346
$ 6,483
$ (137 ) (2 )%
Segment Operating Income $ 1,089
$ 1,148
$ (59 ) (5 )%
Segment Operating Income as a % of revenues 17 % 18 %
Depreciation and amortization $ 85
$ 88
$ (3 ) (3 )%
Capital expenditures $ 63
$ 60
$ 3
5 %

~~For the nine months ended September 30, 2017, the 2% decrease in revenues mainly reflects the benefit in 2016 from the broadcast of~~ ~~Super Bowl 50, which was partially offset by a 34% increase in affiliate and subscription fees, reflecting higher station affiliation fees and growth from new digital initiatives, including~~ ~~CBS All Access~~ and third-party live television streaming services. Content licensing and distribution revenues were comparable with the prior-year period, as strong demand for the Company’s content internationally, due in part to increased investment in internally-produced series, was partially offset by the benefit to 2016 from the international licensing sales of five ~~Star Trek~~ ~~library series and the timing of domestic television licensing sales.~~

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

~~Management’s Discussion and Analysis of~~

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

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

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

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

Three Months Ended September 30,
Increase/(Decrease)
Cable Networks 2017
2016 $ %
Revenues $ 840
$ 598
$ 242
40 %
Segment Operating Income $ 294
$ 285
$ 9
3 %
Segment Operating Income as a % of revenues 35 % 48 %
Depreciation and amortization $ 5
$ 6
$ (1 ) (17 )%
Capital expenditures $ 5
$ 4
$ 1
25 %

For the three months ended September 30, 2017, the 40% increase in revenues was driven by Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event, growth from the ~~Showtime~~ digital streaming subscription offering and higher international television licensing sales. These increases were partially offset by lower domestic television licensing sales, largely due to the sale of ~~Penny Dreadful~~ ~~in the third quarter of 2016. As of September 30, 2017, subscriptions totaled approximately 25~~ million for Showtime, the Company’s premium television network, and the Showtime digital streaming subscription offering combined, 5251 million for CBS Sports Network and 3032 million for Smithsonian Networks.

For the three months ended ~~September~~June 30, ~~2017, the 3%increase in~~2018, operating income ~~primarily reflects~~increased $1 million from the ~~revenue growth,~~same prior-year period, as the higher revenues were offset by an increased investment in programming, which was ~~significantly offset~~driven by ~~costs associated with~~a higher number of original series airing on Showtime during the ~~aforementioned pay-per-view boxing event.~~second quarter of 2018, including the limited series Patrick Melrose.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017


	Nine Months Ended September 30,										Six Months Ended June 30,
							Increase/(Decrease)										Increase/(Decrease)
Cable Networks	2017			2016			$		%		2018			2017			$			%
Revenues	$	1,954		$	1,659		$	295	18	%	$	1,200		$	1,114		$	86		8	%
Segment Operating Income	$	795		$	740		$	55	7	%	$	486		$	505		$	(19	)	(4	)%
Segment Operating Income as a % of revenues	41		%	45		%					41		%	45		%
Depreciation and amortization	$	17		$	17		$	—	—	%	$	11		$	12		$	(1	)	(8	)%
Capital expenditures	$	12		$	8		$	4	50	%	$	7		$	7		$	—		—	%

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, the ~~18%~~8% increase in revenues was driven by ~~the aforementioned pay-per-view boxing event,~~ growth from the Showtime digital streaming subscription offering and ~~higher international television licensing sales. These increases were partially offset by lower domestic television licensing sales, largely due to~~ the ~~sale~~start of the license periods for previously signed renewals of contracts for ~~Penny Dreadful~~Showtime ~~in 2016.~~original series.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, the ~~7% increase~~4% decrease in operating income was driven by an increased investment in programming, mainly from additional original series premieres, including The Chi, Our Cartoon President and Patrick Melrose, on Showtime during the ~~revenue growth, which was significantly offset by higher costs associated with the pay-per-view boxing event.~~first half of 2018.

~~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 ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017


	Three Months Ended September 30,										Three Months Ended June 30,
							Increase/(Decrease)										Increase/(Decrease)
Publishing	2017			2016			$		%		2018			2017			$		%
Revenues	$	228		$	226		$	2	1	%	$	207		$	206		$	1	—	%
Segment Operating Income	$	46		$	44		$	2	5	%	$	31		$	29		$	2	7	%
Segment Operating Income as a % of revenues	20		%	19		%					15		%	14		%
Restructuring charges											$	1		$	—		$	1	n/m
Depreciation and amortization	$	2		$	1		$	1	100	%	$	2		$	2		$	—	—	%
Capital expenditures	$	1		$	1		$	—	—	%	$	1		$	—		$	1	n/m

n/m - not meaningful

For the three months ended ~~September~~June 30, ~~2017,~~2018, revenues increased $1 million from the ~~1% increase in revenues was driven by higher print book sales and growth in digital audio sales.~~same prior-year period. Bestselling titles in the ~~third~~second quarter of ~~2017~~2018 included ~~What Happened~~ ~~by Hillary Rodham Clinton and~~ ~~Sleeping Beauties~~The Outsider by Stephen King and ~~Owen King~~.The Restless Wave

by John McCain and Mark Salter.

For the three months ended ~~September~~June 30, ~~2017,~~2018, the 5%7% increase in operating income ~~mainly reflects revenue growth.~~

~~Nine Months Ended September 30, 2017 and 2016~~

Nine Months Ended September 30,
Increase/(Decrease)
Publishing 2017 2016 $ %
Revenues $ 595
$ 558
$ 37
7 %
Segment Operating Income $ 88
$ 83
$ 5
6 %
Segment Operating Income as a % of revenues 15 % 15 %
Depreciation and amortization $ 5
$ 4
$ 1
25 %
Capital expenditures $ 2
$ 7
$ (5 ) (71 )%

~~For the nine months ended September 30, 2017, the 7% increase in revenues~~ was driven by the higher ~~print book sales~~revenues and ~~growth in digital audio sales.~~

~~For the nine months ended September 30, 2017, the 6% increase in operating income reflects the revenue growth, which was partially offset by higher~~lower production costs.

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, 2018 and 2017



	Six Months Ended June 30,
							Increase/(Decrease)
Publishing	2018			2017			$		%
Revenues	$	367		$	367		$	—	—	%
Segment Operating Income	$	47		$	44		$	3	7	%
Segment Operating Income as a % of revenues	13		%	12		%
Restructuring charges	$	1		$	—		$	1	n/m
Depreciation and amortization	$	3		$	3		$	—	—	%
Capital expenditures	$	2		$	1		$	1	100	%

n/m - not meaningful

For the six months ended June 30, 2018, revenues were comparable with the same prior-year period.

For the six months ended June 30, 2018, the 7% increase in operating income reflects lower production costs.

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

Three Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017


	Three Months Ended September 30,											Three Months Ended June 30,
							Increase/(Decrease)											Increase/(Decrease)
Local Media	2017			2016			$			%		2018			2017			$			%
Revenues	$	397		$	409		$	(12	)	(3	)%	$	420		$	412		$	8		2	%
Segment Operating Income	$	105		$	122		$	(17	)	(14	)%	$	128		$	128		$	—		—	%
Segment Operating Income as a % of revenues	26		%	30		%						30		%	31		%
Restructuring charges												$	11		$	—		$	11		n/m
Depreciation and amortization	$	11		$	11		$	—		—	%	$	11		$	12		$	(1	)	(8	)%
Capital expenditures	$	8		$	9		$	(1	)	(11	)%	$	5		$	7		$	(2	)	(29	)%

n/m - not meaningful

For the three months ended ~~September~~June 30, ~~2017,~~2018, the ~~3% decrease~~2% increase in revenues ~~was driven by lower political advertising sales,~~reflects higher retransmission revenues, which ~~was~~were partially offset by ~~growth~~the absence of the National Semifinals and National Championship games of the NCAA Tournament, which were broadcast by CBS in ~~retransmission revenues.~~the second quarter of 2017.

For the three months ended ~~September~~June 30, ~~2017, the 14% decrease in~~2018, operating income ~~primarily reflects~~was comparable with the same prior-year period as a ~~decline in high-margin political advertising sales.~~

~~During the fourth quarter~~result 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.~~

~~Nine Months Ended September 30, 2017 and 2016~~

Nine Months Ended September 30,
Increase/(Decrease)
Local Media 2017 2016 $ %
Revenues $ 1,218
$ 1,253
$ (35 ) (3 )%
Segment Operating Income $ 355
$ 402
$ (47 ) (12 )%
Segment Operating Income as a % of revenues 29 % 32 %
Depreciation and amortization $ 34
$ 33
$ 1
3 %
Capital expenditures $ 20
$ 20
$ —
— %

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

~~For the nine months ended September 30, 2017, the 12% decrease in operating income primarily reflects lower revenues, as well as~~ the mix of revenues. Restructuring charges for the three months ended June 30, 2018 primarily reflected severance costs and costs associated with exiting contractual obligations.

In the second half of 2018, advertising revenues ~~compared~~are expected to ~~the same prior-year period. Retransmission revenues have associated network affiliation costs paid to the CBS Television Network, whereas~~benefit from increased political advertising sales ~~have a high operating income margin.~~associated with the U.S. midterm elections.

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, 2018 and 2017



	Six Months Ended June 30,
							Increase/(Decrease)
Local Media	2018			2017			$			%
Revenues	$	835		$	821		$	14		2	%
Segment Operating Income	$	246		$	252		$	(6	)	(2	)%
Segment Operating Income as a % of revenues	29		%	31		%
Restructuring charges	$	11		$	—		$	11		n/m
Depreciation and amortization	$	22		$	23		$	(1	)	(4	)%
Capital expenditures	$	9		$	12		$	(3	)	(25	)%

n/m - not meaningful

For the six months ended June 30, 2018, the 2% increase in revenues was driven by higher retransmission revenues, partially offset by lower advertising revenues, including from the absence of the National Semifinals and National Championship games of the NCAA Tournament.

For the six months ended June 30, 2018, the 2% decrease in operating income primarily reflects the mix of revenues.

Corporate

Three Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017


	Three Months Ended September 30,											Three Months Ended June 30,
							Increase/(Decrease)											Increase/(Decrease)
Corporate	2017			2016			$			%		2018			2017			$			%
Segment Operating Loss	$	(83	)	$	(78	)	$	(5	)	(6	)%	$	(77	)	$	(73	)	$	(4	)	(5	)%
Restructuring charges												$	7		$	—		$	7		n/m
Depreciation and amortization	$	8		$	8		$	—		—	%	$	7		$	9		$	(2	)	(22	)%
Capital expenditures	$	5		$	5		$	—		—	%	$	3		$	6		$	(3	)	(50	)%

n/m - not meaningful

Corporate expenses include general corporate overhead, unallocated shared company expenses, ~~pension and postretirement benefit costs for plans retained by the Company for previously divested businesses,~~ and intercompany eliminations. For the three months ended ~~September~~June 30, ~~2017,~~2018, corporate expenses increased 6%$4 million. Restructuring charges for the three months ended June 30, 2018 primarily reflected severance and other related costs.

Six Months Ended June 30, 2018 and 2017



	Six Months Ended June 30,
							Increase/(Decrease)
Corporate	2018			2017			$			%
Segment Operating Loss	$	(152	)	$	(139	)	$	(13	)	(9	)%
Restructuring charges	$	7		$	—		$	7		n/m
Depreciation and amortization	$	15		$	17		$	(2	)	(12	)%
Capital expenditures	$	7		$	10		$	(3	)	(30	)%

n/m - not meaningful

For the six months ended June 30, 2018, corporate expenses increased 9%, driven ~~primarily~~ by higher employee-related costs.

~~Nine Months Ended September 30, 2017 and 2016~~

Nine Months Ended September 30,
Increase/(Decrease)
Corporate 2017 2016 $ %
Segment Operating Loss $ (247 ) $ (245 ) $ (2 ) (1 )%
Depreciation and amortization $ 25
$ 26
$ (1 ) (4 )%
Capital expenditures $ 15
$ 16
$ (1 ) (6 )%

~~Financial Position~~

At At Increase/(Decrease)
September 30, 2017
December 31, 2016 $ %
Current Assets:
Cash and cash equivalents $ 144
$ 598
$ (454 ) (76 )%
Receivables, net ^(a)
3,598
3,314
284
9

Programming and other inventory ^(b)
1,830
1,427
403
28

Prepaid expenses 182
185
(3 ) (2 )
All other current assets 540
539
1
—

Total current assets $ 6,294
$ 6,063
$ 231
4 %

~~(a) The increase primarily relates to Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event.~~

~~(b) The increase primarily reflects the timing of payments for sports programming.~~

At At Increase/(Decrease)
September 30, 2017 December 31, 2016 $ %
Assets of discontinued operations ^(a)
$ 3,325
$ 4,291
$ (966 ) (23 )%

(a) The decrease primarily reflects a noncash charge of $980 million associated with a valuation allowance to reduce the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. (See Note 3 to the consolidated financial statements).

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Financial Position

The balance sheet at June 30, 2018 is presented under ASC 606 while December 31, 2017 is presented under previous accounting guidance. See Note 12 to the consolidated financial statements for the amount by which each balance sheet line item at June 30, 2018 was impacted by the adoption of ASC 606.

At At Increase/(Decrease)
September 30, 2017 December 31, 2016 $ %
Current Liabilities:
Accounts payable ^(a)
$ 233
$ 148
$ 85
57 %
Accrued compensation ^(a)
257
369
(112 ) (30 )
Participants’ share and royalties
payable
997
1,024
(27 ) (3 )
Program rights ^(b)
509
290
219
76

Commercial paper 590
450
140
31

All other current liabilities 1,466
1,427
39
3

Total current liabilities $ 4,052
$ 3,708
$ 344
9 %



	At			At			Increase/(Decrease)
	June 30, 2018			December 31, 2017			$			%
Current Assets:
Cash and cash equivalents		$	252		$	285	$	(33	)	(12	)%
Receivables, net ^(a)		3,597			3,697		(100		)	(3	)
Programming and other inventory		1,876			1,828		48			3
Prepaid income taxes^(b)		—			78		(78		)	(100	)
All other current assets ^(c)		323			385		(62		)	(16	)
Total current assets		$	6,048		$	6,273	$	(225	)	(4	)%

(a) The decrease is primarily due to seasonality, partially offset by the reclassification of the sales returns reserve to “Other current liabilities” as a result of the adoption of ASC 606.

(b) The decrease reflects the timing of income tax payments.



	At			At			Increase/(Decrease)
	June 30, 2018			December 31, 2017			$			%
Other assets ^(a)		$	2,327		$	2,852	$	(525	)	(18	)%

(a) The decrease primarily reflects lower noncurrent receivables as a result of the adoption of ASC 606.



	At			At			Increase/(Decrease)
	June 30, 2018			December 31, 2017			$			%
Current Liabilities:
Accounts payable ^(a)		$	138		$	231	$	(93	)	(40	)%
Accrued compensation ^(a)		225			343		(118		)	(34	)
Participants’ share and royalties payable ^(a)		1,071			986		85			9
Program rights		369			373		(4		)	(1	)
Income taxes payable ^(b)		129			—		129			n/m
Commercial paper		370			679		(309		)	(46	)
All other current liabilities ^(c)		1,482			1,360		122			9
Total current liabilities		$	3,784		$	3,972	$	(188	)	(5	)%

n/m - not meaningful

(a) The increase (decrease) reflects the timing of payments.

(b) The increase isreflects the timing of income tax payments.

(c) The increase primarily ~~associated with Showtime Networks’ distribution~~reflects the reclassification of the ~~Floyd Mayweather/Conor McGregor pay-per-view boxing event.~~sales returns reserve to “Other current liabilities” as a result of the adoption of ASC 606.

At At Increase/(Decrease)
September 30, 2017 December 31, 2016 $ %
Pension and postretirement
benefit obligations ^(a)
$ 1,619
$ 1,769
$ (150 ) (8 )%



	At			At			Increase/(Decrease)
	June 30, 2018			December 31, 2017			$			%
Other liabilities^(a)		$	3,227		$	3,621	$	(394	)	(11	)%

(a) The decrease primarily reflects ~~discretionary pension contributions~~lower participation and residual liabilities as a result of ~~$100 million made during~~ the ~~first quarter~~adoption of ~~2017 to prefund the Company’s qualified plans.~~ASC 606.

~~Cash Flows~~

~~The changes in cash and cash equivalents were as follows:~~

Nine Months Ended September 30,
2017 2016 Increase/(Decrease)
Net cash flow provided by operating activities from:
Continuing operations $ 935
$ 1,117
$ (182 )
Discontinued operations 52
189
(137 )
Net cash flow provided by operating activities 987
1,306
(319 )
Net cash flow used for investing activities from:
Continuing operations (399 ) (179 ) (220 )
Discontinued operations (18 ) (2 ) (16 )
Net cash flow used for investing activities (417 ) (181 ) (236 )
Net cash flow used for financing activities (1,018 ) (1,269 ) 251

Net decrease in cash and cash equivalents $ (448 ) $ (144 ) $ (304 )

~~Operating Activities.~~ For the nine months ended September 30, 2017, the decrease in cash provided by operating activities from continuing operations was driven by the decline in advertising revenues including from the benefit in 2016 from CBS’s broadcast of ~~Super Bowl 50~~, and discretionary pension contributions of $100 million made during the first quarter of 2017 to prefund the Company’s qualified plans. These decreases were partially offset by higher affiliate and subscription fee revenues.

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Cash Flows

The changes in cash and cash equivalents were as follows:



	Six Months Ended June 30,
	2018			2017			Increase/(Decrease)
Net cash flow provided by (used for) operating activities from:
Continuing operations	$	1,045		$	909			$	136
Discontinued operations	(2		)	29				(31		)
Net cash flow provided by operating activities	1,043			938				105
Net cash flow used for investing activities from:
Continuing operations	(160		)	(139		)		(21		)
Discontinued operations	(23		)	(13		)		(10		)
Net cash flow used for investing activities	(183		)	(152		)		(31		)
Net cash flow used for financing activities	(893		)	(1,229		)		336
Net decrease in cash and cash equivalents	$	(33	)	$	(443	)		$	410

Operating Activities. For the six months ended June 30, 2018, the increase in cash provided by operating activities from continuing operations was driven by lower cash payments for income taxes, which was partially offset by an increased investment in content, including a higher number of series produced for distribution on multiple platforms. Cash paid for income taxes decreased to $31 million for the six months ended June 30, 2018 from $272 million for the same prior-year period, primarily due to changes in federal tax law.

Investing Activities


	Nine Months Ended September 30,								Six Months Ended June 30,
	2017				2016				2018				2017
Acquisitions (including acquired television library) ^(a)		$	(258	)		$	(51	)
Investments in and advances to investee companies ^(a)										$	(71	)		$	(65	)
Capital expenditures		(112		)		(111		)		(62		)		(68		)
Investments in and advances to investee companies ^(b)		(67		)		(44		)
Proceeds from dispositions ^(c)		11				20
All other investing activities, net		27				7
Acquisitions										(29		)		(21		)
Other investing activities										2				15
Net cash flow used for investing activities from continuing operations		(399		)		(179		)		(160		)		(139		)
Net cash flow used for investing activities from discontinued operations		(18		)		(2		)		(23		)		(13		)
Net cash flow used for investing activities		$	(417	)		$	(181	)		$	(183	)		$	(152	)

(a) On August 27, 2017, CBS signed a binding agreement to acquire Ten Networks Holdings Limited (“Network Ten”), one of three major commercial broadcast networks in Australia, after Network Ten entered into voluntary administration. During the third quarter of 2017, the Company paid $138 million of the purchase price, primarily for the assumption of the secured debt of Network Ten’s lenders, and funding for working capital. The transaction, which is expected to close in the fourth quarter, will be completed in accordance with Australian applicable laws and procedures and is subject to certain regulatory approvals. 2017 also includes the acquisition of a television library and 2016 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


	Nine Months Ended September 30,								Six Months Ended June 30,
	2017				2016				2018				2017
Repayments of short-term debt borrowings, net										$	(309	)		$	(187	)
Repurchase of CBS Corp. Class B Common Stock		$	(1,111	)		$	(1,534	)		(394		)		(845		)
Proceeds from short-term debt borrowings, net		140				33
Proceeds from issuance of senior notes		889				685
Repayment of senior notes and debentures		(701		)		(199		)
Dividends		(224		)		(209		)		(140		)		(151		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation		(89		)		(57		)		(58		)		(89		)
Proceeds from exercise of stock options		81				13				22				39
All other financing activities, net		(3		)		(1		)		(14		)		4
Net cash flow used for financing activities		$	(1,018	)		$	(1,269	)		$	(893	)		$	(1,229	)

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Free Cash Flow

Free cash flow is a non-GAAP financial measure. Free cash flow reflects the Company’s net cash flow provided by (used for) operating activities before operating cash flow from discontinued operations and 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’s Discussion and Analysis of~~

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

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

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

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

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


	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2017			2016			2018			2017
Net cash flow provided by operating activities	$	987		$	1,306		$	1,043		$	938
Capital expenditures	(112		)	(111		)	(62		)	(68		)
Exclude operating cash flow from discontinued operations	52			189
Less:
Discretionary pension plan contributions, net of tax							—			(64		)
Operating cash flow from discontinued operations							(2		)	29
Free cash flow	$	823		$	1,006		$	983		$	905

~~Repurchase of Company Stock and Cash Dividends~~

During the third quarter of 2017, the Company repurchased 3.9 million shares of its Class B Common Stock under its share repurchase program for $250 million, at an average cost of $63.52 per share. During the nine months ended September 30, 2017, the Company repurchased 16.2 million shares of its Class B Common Stock for $1.05 billion, at an average cost of $64.70 per share, leaving $3.06 billion of authorization at September 30, 2017.

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Repurchase of Company Stock, Cash Dividends and Contingent Stock Dividend

On May 17, 2018, the Company’s Board of Directors declared a pro rata dividend of 0.5687 of a share of the Company’s voting Class A Common Stock for each share of the Company’s Class A Common Stock and non-voting Class B Common Stock to stockholders of record as of the close of business on the record date, contingent on Delaware court approval. The record date for the dividend would be 10 days after such Delaware court approval or on the next business day after the 10-day period. If the dividend is issued, shares outstanding and EPS for prior periods would be adjusted to reflect the issuance of additional shares resulting from the dividend. The dividend, if issued, would dilute NAI’s voting interest from approximately 79.7% at June 30, 2018 to approximately 20%. The dividend would not dilute the economic interests of any of the Company’s stockholders. See “Legal Matters” for a description of legal proceedings in the Delaware Court of Chancery.

Capital Structure

The following table sets forth the Company’s debt.


	At			At			At			At
	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Commercial paper		$	590		$	450		$	370		$	679
Senior debt (1.95% – 7.875% due 2017 – 2045) ^(a)		9,039			8,850
Senior debt (2.30% – 7.875% due 2019 – 2045) ^(a)								9,430			9,426
Obligations under capital leases		60			75			50			57
Total debt		9,689			9,375			9,850			10,162
Less commercial paper		590			450			370			679
Less current portion of long-term debt		19			23			16			19
Total long-term debt, net of current portion		$	9,080		$	8,902		$	9,464		$	9,464

(a) At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the senior debt balances included (i) a net unamortized discount of ~~$55~~$61 million and ~~$52~~$65 million, respectively, (ii) unamortized deferred financing costs of $45 million and ~~$43~~$47 million, respectively, and (iii) a ~~$2 million~~ decrease ~~and a $5 million increase, respectively,~~ in the carrying value of the debt relating to previously settled fair value ~~hedges.~~hedges of $4 million and $3 million, respectively. The face value of the Company’s senior debt was ~~$9.14 billion and $8.94~~$9.54 billion at ~~September~~both June 30, ~~2017~~2018 and December 31, ~~2016, respectively.~~

Commercial Paper

Credit Facility

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

at the end of each quarter as further described in the Credit Facility. At ~~September~~June 30, ~~2017,~~2018, the Company’s Consolidated Leverage Ratio was approximately 3.0x.

~~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 outstanding indebtedness. The Company believes that its operating cash flows; cash and cash equivalents; borrowing capacity under the Credit Facility, which had $2.49 billion of remaining availability at ~~September~~June 30, ~~2017~~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.

The Company’s long-term debt obligations due over the next five years of ~~$2.10~~$2.40 billion are expected to be funded by cash generated from operating activities and the Company’s ability to refinance its debt.

~~The Company expects to make a pension contribution of $500 million during the fourth quarter of 2017, which is expected to be partially funded by long-term borrowings.~~

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.~~flows, other than with respect to In re CBS Corporation Litigation, Consol. C.A. No. 2018-0342-AGB (Del. Ch.) described below, the potential impact of which cannot be ascertained at this time. 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.

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

On June 7, 2018, the Court consolidated the aforementioned respective lawsuits filed by the Company and certain of the Company’s independent directors and by NAI, NAIEH and Ms. Shari Redstone under the consolidated action captioned In re CBS Corporation Litigation, Consol. C.A. No. 2018-0342-AGB (Del. Ch.). On June 11, 2018, the Delaware Court of Chancery entered a scheduling order calling for a trial of the consolidated action taking place on October 3-5 and 8-9, 2018.

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (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.

~~Management’s Discussion and Analysis of~~

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

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

Claims are frequently filed and/or settled in groups, which may make the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. The Company does not report as pending those claims on inactive, stayed, deferred or similar dockets which some jurisdictions have established for claimants who allege minimal or no impairment. As of ~~September~~June 30, ~~2017,~~2018, the Company had pending approximately ~~32,760~~31,750 asbestos claims, as compared with approximately ~~33,610~~31,660 as of December 31, ~~2016~~2017 and ~~34,400~~33,240 as of ~~September~~June 30, ~~2016.~~2017. During the ~~third~~second quarter of ~~2017,~~2018, the Company received approximately ~~720~~860 new claims and closed or moved to an inactive docket approximately ~~1,200~~710 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 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

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

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 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 Inc. with a subsidiary of Entercom Communications Corp. (“Entercom”) on the anticipated terms, which are subject to regulatory and Entercom stockholder approvals, an exchange offer and other customary closing conditions, and fluctuations in the market values of Entercom’s Class A common stock and the Company’s Class B Common Stock; other domestic and global economic, business, competitive and/or 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 as of the date of this document and the Company does not have any obligation to publicly update any forward‑looking statements to reflect subsequent events or circumstances.

~~Important Notice~~

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

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

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 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 1.	Legal Proceedings.

The information set forth in Note 14 to the consolidated financial statements appearing in Item 1 of Part I of this report under the caption “Litigation Involving the Company and Its Controlling Stockholder, National Amusements, Inc., Among Others, in the Delaware Court of Chancery” is incorporated herein by reference.



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 ~~September~~June 30, ~~2017~~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
July 1, 2017 - July 31, 2017 1.4
$ 64.80
1.4
$ 3,214

August 1, 2017 - August 31, 2017 1.6
$ 65.10
1.6
$ 3,107

September 1, 2017 - September 30, 2017 .9
$ 58.36
.9
$ 3,057

Total 3.9
$ 63.52
3.9
$ 3,057



(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, 2018 - April 30, 2018		1.3	$	51.12		1.3		$	2,792
May 1, 2018 - May 31, 2018		1.3	$	51.48		1.3		$	2,723
June 1, 2018 - June 30, 2018		1.2	$	54.03		1.2		$	2,657
Total		3.8	$	52.17		3.8		$	2,657



Item 5.	Other Information.

On August 1, 2018, the Company’s Board of Directors unanimously approved the retention of two law firms to conduct an investigation of the allegations in recent press reports about the Company’s Chairman and Chief Executive Officer, CBS News and cultural issues at all levels of the Company. To help facilitate the investigation, a Special Committee of Board members has been formed comprised of Bruce S. Gordon, Linda Griego and Robert N. Klieger.

In addition, the Board appointed Bruce S. Gordon to serve as Lead Independent Director of the Company’s Board of Directors.



Item 6.	Exhibits.



Exhibit No.			Description of Document
(23	)		~~Plan~~Articles of ~~acquisition, reorganization, arrangement, liquidation or succession.~~Incorporation and Bylaws
		~~(a)~~(b)	~~Amendment No. 2, dated as of September 13, 2017, to the Agreement~~Amended and Plan of Merger, dated as of February 2, 2017, as amended July 10, 2017, by and among CBS Corporation, CBS Radio Inc., Entercom Communications Corp. and Constitution Merger Sub Corp. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-KRestated Bylaws of CBS Corporation, as purportedly amended as of May 16, 2018 (filed ~~September 13, 2017) (File No. 001-09553)~~herewith).**
(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)~~			~~Material Contracts~~
		~~(a)~~	~~Employment Agreement dated July 20, 2017 between CBS Corporation and Joseph R. Ianniello (filed herewith)~~.
		~~(b)~~	~~Employment Agreement dated July 20, 2017 between CBS Corporation and Lawrence P. Tu (filed herewith).~~
		~~(c)~~	~~Letter Agreement dated August 4, 2017 amending the Employment Agreement dated as of September 29, 2016 between CBS Corporation and Anthony G. Ambrosio (filed herewith).~~
		~~(d)~~	~~Letter Agreement dated August 4, 2017 amending the Employment Agreement dated December 17, 2015 (effective as of July 1, 2016) between CBS Corporation and Gil Schwartz (filed herewith).~~
(12	)		Statement Regarding Computation of Ratios ~~(filed herewith)~~(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.

** As described in Note 14 to the consolidated financial statements appearing in Item 1 of Part I of this report under “Legal Matters”, the Company is challenging the validity and effectiveness of the purported May 16, 2018 bylaw amendments in litigation in the Delaware Court of Chancery captioned In re CBS Corporation Litigation, Consol. C.A. No. 2018-0342-AGB (Del. Ch.).

SIGNATURES

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



	CBS CORPORATION (Registrant)

Date: ~~November 3, 2017~~August 2, 2018	/s/ Joseph R. Ianniello
	Joseph R. Ianniello Chief Operating Officer

Date: ~~November 3, 2017~~August 2, 2018	/s/ Lawrence Liding
	Lawrence Liding Executive Vice President, Controller and Chief Accounting Officer

~~-64-~~-67-



Three Months Ended September 30, 2017	CBS Radio			Other			Total
Revenues	$	300		$	—		$	300
Costs and expenses: ^(a)
Operating	113			—			113
Selling, general and administrative	121			(1		)	120
Benefit from valuation allowance	(100		)	—			(100		)
Total costs and expenses	134			(1		)	133
Operating income	166			1			167
Interest expense	(21		)	—			(21		)
Earnings from discontinued operations	145			1			146
Income tax (provision) benefit	(17		)	45			28
Net earnings from discontinued operations, net of tax	$	128		$	46		$	174



Three Months Ended September 30, 2016	CBS Radio			Other			Total
Revenues	$	317		$	—		$	317
Costs and expenses:
Operating	110			—			110
Selling, general and administrative	123			—			123
Depreciation and amortization	7			—			7
Total costs and expenses	240			—			240
Operating income	77			—			77
Other income	2			—			2
Earnings from discontinued operations	79			—			79
Income tax provision	(31		)	(36		)	(67		)
Net earnings (loss) from discontinued operations, net of tax	$	48		$	(36	)	$	12



Nine Months Ended September 30, 2017	CBS Radio			Other			Total
Revenues	$	856		$	—		$	856
Costs and expenses: ^(a)
Operating	307			—			307
Selling, general and administrative	372			(1		)	371
Restructuring charge	7			—			7
Provision for valuation allowance	980			—			980
Total costs and expenses	1,666			(1		)	1,665
Operating income (loss)	(810		)	1			(809		)
Interest expense	(60		)	—			(60		)
Earnings (loss) from discontinued operations	(870		)	1			(869		)
Income tax (provision) benefit	(47		)	45			(2		)
Net earnings (loss) from discontinued operations, net of tax	$	(917	)	$	46		$	(871	)



	At				At
	September 30, 2017				December 31, 2016
Term Loan due October 2023, net of discount		$	947			$	955
7.250% Senior Notes due November 2024		400				400
Revolving Credit Facility		36				10
Deferred financing costs		(18		)		(20		)
Total long-term debt, including current portion		$	1,365			$	1,345



	Three Months Ended September 30, 2016
	Reported			Discrete Tax Items ^(a)				Adjusted
Earnings from continuing operations before income taxes	$	624			$	—		$	624
Provision for income taxes	(145		)		(47		)	(192		)
Equity in loss of investee companies, net of tax	(13		)		—			(13		)
Net earnings from continuing operations	466				(47		)	419
Net earnings from discontinued operations, net of tax	12				36			48
Net earnings	$	478			$	(11	)	$	467
Diluted EPS from continuing operations	$	1.04			$	(.11	)	$	.94
Diluted EPS	$	1.07			$	(.02	)	$	1.05



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