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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-977
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CBS CORPORATION
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-0877540
------------------------ -----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
51 WEST 52ND STREET, NEW YORK, NY 10019
(Address of principal executive offices, zip code)
(212) 975-4321
(Registrant's telephone number, including zip code)
Indicate by checkmark 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 _____
COMMON STOCK 715,922,615 SHARES OUTSTANDING AT JULY 31, 1998
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CBS CORPORATION
INDEX
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PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income and Comprehensive Income 3
Condensed Consolidated Balance Sheet 4
Condensed Consolidated Statement of Cash Flows 5
Notes to the Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 15
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURE 27
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CBS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(unaudited, in millions except per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
=========================================================================================================================
Revenues $1,484 $1,283 $ 3,433 $ 2,609
Operating expenses (956) (777) (2,261) (1,779)
Marketing, administration, and general expenses (227) (261) (567) (499)
Depreciation and amortization (136) (105) (266) (210)
Residual costs of discontinued businesses (38) (36) (76) (71)
- -------------------------------------------------------------------------------------------------------------------------
Operating profit 127 104 263 50
Other income (expense), net (note 3) 12 16 17 57
Interest expense (85) (102) (160) (203)
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from Continuing Operations before income taxes
and minority interest in (income) loss of consolidated
subsidiaries 54 18 120 (96)
Income tax expense (48) (29) (95) (7)
Minority interest in (income) loss of consolidated subsidiaries (2) ____ (2) 1
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from Continuing Operations 4 (11) 23 (102)
Income (loss) from Discontinued Operations,
net of income taxes (note 7) ____ 12 ____ (48)
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4 $ 1 $ 23 $ (150)
=========================================================================================================================
Basic earnings (loss) per common share:
Continuing Operations $ .01 $ (.04) $ .03 $ (.21)
Discontinued Operations ____ .02 ____ (.08)
- -------------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per common share $ .01 $ (.02) $ .03 $ (.29)
=========================================================================================================================
Diluted earnings (loss) per common share:
Continuing Operations $ .01 $ (.04) $ .03 $ (.21)
Discontinued Operations ____ .02 ____ (.08)
- -------------------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per common share $ .01 $ (.02) $ .03 $ (.29)
=========================================================================================================================
Cash dividends per common share $ ____ $ .05 $ .05 $ .10
=========================================================================================================================
Comprehensive income (loss):
Net income (loss) $ 4 $ 1 $ 23 $ (150)
- -------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of taxes (note 11):
Unrealized gains on marketable securities,
net of taxes of $2 million and $12 million, respectively 1 ____ 18 ____
Minimum pension liability adjustment,
net of taxes of $14 million and $28 million, respectively (27) ____ (52) ____
- -------------------------------------------------------------------------------------------------------------------------
Other comprehensive loss (26) ____ (34) ____
- -------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ (22) $ 1 $ (11) $ (150)
=========================================================================================================================
See Notes to the Condensed Consolidated Financial Statements.
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CBS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
(unaudited)
June 30, December 31,
1998 1997
===================================================================================================================
ASSETS:
Cash and cash equivalents $ 145 $ 8
Customer receivables (net of allowance for doubtful accounts of $51 million
and $35 million) 995 936
Program rights 411 502
Deferred income taxes 393 394
Prepaid and other current assets 174 135
- -------------------------------------------------------------------------------------------------------------------
Total current assets 2,118 1,975
Property and equipment, net 1,128 1,066
FCC licenses, net (note 2) 4,246 2,171
Goodwill, net 10,604 9,681
Other intangible and noncurrent assets (note 4) 1,556 1,610
Net assets of Discontinued Operations (note 7) 238 212
- -------------------------------------------------------------------------------------------------------------------
Total assets $19,890 $16,715
===================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term debt $ 264 $ 89
Current maturities of long-term debt 177 62
Accounts payable 260 221
Liabilities for talent and program rights 274 309
Other current liabilities (note 6) 930 868
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,905 1,549
Long-term debt (note 5) 5,708 3,236
Pension liability 1,169 1,149
Other noncurrent liabilities (note 6) 3,090 2,696
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 11,872 8,630
- -------------------------------------------------------------------------------------------------------------------
Contingent liabilities and commitments (note 9)
Minority interest in equity of consolidated subsidiaries 9 5
- -------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock, $1.00 par value (25 million shares authorized, none issued) ____ ____
Common stock, $1.00 par value (1,100 million shares
authorized, 727 million and 718 million shares issued) 727 718
Capital in excess of par value 7,310 7,178
Common stock held in treasury, at cost (695) (530)
Retained earnings 1,472 1,485
Accumulated other comprehensive loss (note 11) (805) (771)
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 8,009 8,080
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $19,890 $16,715
===================================================================================================================
See Notes to the Condensed Consolidated Financial Statements.
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CBS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in millions)
Six Months Ended June 30, 1998 1997
===================================================================================================================
Cash flows from operating activities of Continuing Operations:
Income (loss) from Continuing Operations $ 23 $ (102)
Adjustments to reconcile income (loss) from Continuing Operations to
net cash provided (used) by operating activities:
Depreciation and amortization 266 210
Gain on asset dispositions (5) (32)
Other noncash adjustments (122) (33)
Changes in assets and liabilities, net of effects of acquisitions and
divestitures of businesses:
Receivables, current and noncurrent 52 69
Accounts payable 18 (265)
Deferred and current income taxes (14) (26)
Program rights 95 (9)
Other assets and liabilities (41) (22)
- -------------------------------------------------------------------------------------------------------------------
Cash provided (used) by operating activities of Continuing Operations 272 (210)
- -------------------------------------------------------------------------------------------------------------------
Cash used by operating activities of Discontinued Operations (note 7) (343) (428)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Business acquisitions, net of cash acquired, and investments (note 2) (1,397) (47)
Business divestitures and other asset liquidations 330 152
Capital expenditures - Continuing Operations (45) (39)
Capital expenditures - Discontinued Operations (18) (41)
- -------------------------------------------------------------------------------------------------------------------
Cash provided (used) by investing activities (1,130) 25
- -------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase (reduction) in short-term debt 169 (210)
Bank revolver borrowings 3,043 1,940
Bank revolver repayments (2,134) (1,025)
Issuance of senior notes 493 ____
Long-term debt repayments (133) (149)
Stock issued 231 130
Purchase of treasury stock (339) ____
Bank fees paid and other costs (6) (6)
Dividends paid (36) (82)
- -------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 1,288 598
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 87 (15)
Cash and cash equivalents at beginning of period for Continuing
and Discontinued Operations 67 233
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period for Continuing and
Discontinued Operations $ 154 $ 218
===================================================================================================================
Supplemental disclosure of cash flow information:
Interest paid - Continuing Operations $ 148 $ 187
Interest paid - Discontinued Operations 31 48
- -------------------------------------------------------------------------------------------------------------------
Total interest paid $ 179 $ 235
===================================================================================================================
Total income taxes paid $ 108 $ 33
===================================================================================================================
See Notes to the Condensed Consolidated Financial Statements.
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CBS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The condensed consolidated financial statements include the accounts of CBS
Corporation (CBS) and its subsidiary companies (together, the Corporation) after
elimination of intercompany accounts and transactions. When reading the
financial information contained in this Quarterly Report, reference should be
made to the consolidated financial statements, schedule, and notes contained in
the Corporation's Annual Report on Form 10-K for the year ended December 31,
1997. Reference also should be made to the Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998. Certain amounts pertaining to the three months and
six months ended June 30, 1997 have been restated or reclassified for
comparative purposes.
On June 4, 1998, the Corporation completed the acquisition of the radio
broadcasting operations of American Radio Systems Corporation (American Radio)
for $1.4 billion in cash plus the assumption of debt with a fair value of
approximately $1.3 billion. See note 2 to the financial statements.
Under various disposal plans adopted in recent years, the Corporation has either
completed or planned the divestiture of all of its industrial businesses. These
businesses have been classified as Discontinued Operations in accordance with
Accounting Principles Board (APB) Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business and
Extraordinary, Unusual, and Infrequently Occurring Events and Transactions." The
Corporation has signed definitive agreements to sell the majority of the
remaining businesses. See note 7 to the financial statements.
In June 1997, Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information," were issued. SFAS 130, which requires
that an enterprise report by major component and as a single total the change in
its net assets from nonowner sources during the period, was adopted in the first
quarter of 1998. SFAS 131, which establishes annual reporting standards for an
enterprise's operating segments and related disclosures about its products,
geographic areas, and major customers will be incorporated in disclosures for
1998 annual reporting purposes. In February 1998, SFAS No. 132, "Employer's
Disclosures About Pensions and Other Postretirement Benefits," was issued. SFAS
132 requires additional disclosures concerning changes in the Corporation's
pension obligations and assets and eliminates certain other disclosures no
longer considered useful. The Corporation will adopt the provisions of this
standard for 1998 annual reporting purposes. Adoption of these statements does
not impact the Corporation's consolidated financial position, results of
operations, or cash flows, and any effects are limited to the form and content
of its disclosures.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. On an ongoing basis,
management reviews its estimates, including those related to litigation,
environmental liabilities, contracts, program rights, pensions, and Discontinued
Operations, based on currently available information. Changes in facts and
circumstances may result in revised estimates. In the opinion of management, the
condensed consolidated financial statements include all material adjustments
necessary to present fairly the Corporation's financial position, results of
operations, and cash flows. Such adjustments are of a normal recurring nature.
The results for this interim period are not necessarily indicative of results
for the entire year or any other interim period.
2. ACQUISITIONS
On June 4, 1998, the Corporation acquired the radio broadcasting operations of
American Radio. Of the total purchase price of $2.7 billion, $1.4 billion was
paid in cash and approximately $1.3 billion represents the fair value of debt
assumed. The acquisition was accounted for under the purchase method. The fair
value of assets and liabilities acquired includes approximately $2.2 billion for
FCC licenses and $0.6 billion for deferred income taxes. Based on preliminary
estimates, which may be revised at a later date, the excess consideration paid
over the estimated fair value of net assets acquired totaling approximately $1.0
billion was recorded as goodwill and is being amortized on a straight-line basis
over 40 years.
On September 30, 1997, the Corporation acquired Gaylord Entertainment Company's
two major cable networks, The Nashville Network (TNN) and Country Music
Television (CMT). The acquisition included the U.S. and international operations
of TNN, the U.S. and Canadian operations of CMT, and approximately $50 million
of working capital. The total purchase price of $1.55 billion was paid through
the issuance of 59 million shares of the Corporation's common stock. The
acquisition was accounted for under the purchase method. Based on preliminary
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estimates, which may be revised at a later date, the excess of the consideration
paid over the estimated fair value of net assets acquired of approximately $1.2
billion was recorded as goodwill and is being amortized on a straight-line basis
over 40 years. Prior to the acquisition, the Corporation provided certain
services to TNN and CMT for which it received a commission. Additionally, the
Corporation owned a 33 percent interest in CMT.
The following unaudited pro forma information combines the consolidated results
of operations of the Corporation with those of American Radio's broadcasting
operations and TNN and CMT as if these acquisitions had occurred at the
beginning of 1997. The pro forma results give effect to certain purchase
accounting adjustments, additional amortization expense from goodwill and other
identifiable intangible assets, additional interest expense, related income tax
effects, and the issuance of additional shares in connection with the TNN and
CMT acquisition.
PRO FORMA RESULTS OF OPERATIONS
(unaudited, in millions except per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
===================================================================================================================
Revenues $1,563 $1,456 $3,601 $2,918
Interest expense (116) (144) (235) (289)
Income (loss) from Continuing Operations (13) (30) (26) (159)
Basic (loss) per common share - Continuing Operations (.02) (.06) (.04) (.28)
Diluted (loss) per common share - Continuing Operations (.02) (.06) (.04) (.28)
===================================================================================================================
This pro forma information is presented for comparative purposes only and is not
necessarily indicative of the operating results that actually would have
occurred had the American Radio and the TNN and CMT transactions been
consummated on January 1, 1997. In addition, these results are not intended to
be a projection of future results and do not reflect any synergies that might be
achieved from combined operations.
3. OTHER INCOME (EXPENSE), NET (unaudited, in millions)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
===================================================================================================================
Interest income $ 4 $ 3 $ 6 $ 6
Gain on disposition of assets 5 8 5 32
Operating results - non-consolidated affiliates ____ 4 ____ 6
Other 3 1 6 13
- -------------------------------------------------------------------------------------------------------------------
Other income (expense), net $ 12 $ 16 $ 17 $ 57
===================================================================================================================
4. OTHER INTANGIBLE AND NONCURRENT ASSETS (in millions)
(unaudited)
June 30, December 31,
1998 1997
===================================================================================================================
Cable license agreements $ 466 $ 491
Other intangible assets 373 384
Recoverable costs of discontinued businesses (note 9) 203 208
Noncurrent receivables 153 145
Program rights 121 135
Joint ventures and other affiliates 113 122
Deferred charges 29 48
Intangible pension asset 22 22
Other 76 55
- -------------------------------------------------------------------------------------------------------------------
Total other intangible and noncurrent assets $1,556 $1,610
===================================================================================================================
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5. LONG TERM DEBT
Long-term debt for Continuing Operations totaled $5,708 million at June 30,
1998, compared to $3,236 at December 31, 1997. Included in long-term debt were
revolver borrowings of $2,464 million at June 30, 1998, compared to $1,083
million at December 31, 1997.
On June 4, 1998, in connection with the acquisition of the broadcasting
operations of American Radio, the Corporation assumed debt obligations with a
total fair value at the date of acquisition of approximately $1,290 million. The
fair value of these obligations consisted of approximately $570 million of
revolver borrowings, $340 million of subordinated notes, and $380 million of
preferred stock of American Radio. See note 2 to the financial statements. The
revolver borrowings were replaced with revolver borrowings under the
Corporation's $5.5 billion credit facility. Approximately $240 million of the
preferred stock was exchanged into debt securities effective July 15, 1998. The
remaining preferred stock may be redeemed at any time at the option of the
holder for cash and certain securities held by the Corporation for purposes of
the redemption.
On May 20, 1998, the Corporation issued, under Securities and Exchange
Commission Rule 144A, $500 million of Senior Notes due in 2005. Interest on the
Notes will accrue at a rate of 7.15% per annum and is payable semiannually in
arrears commencing November 20, 1998. The Notes are redeemable, at the option of
the Corporation, at any time or in part from time to time, subject to certain
requirements. The Corporation currently is offering to exchange these
restricted securities for registered notes, which have the same interest rate
and have other terms and conditions similar to the restricted notes.
6. OTHER CURRENT AND NONCURRENT LIABILITIES (in millions)
(unaudited)
June 30, December, 31,
1998 1997
===================================================================================================================
OTHER CURRENT LIABILITIES
Accrued employee compensation $ 100 $ 119
Income taxes payable 49 30
Accrued liabilities 326 309
Retained liabilities of discontinued businesses (note 9) 186 191
Accrued interest and insurance 109 54
Other 160 165
- -------------------------------------------------------------------------------------------------------------------
Total other current liabilities $ 930 $ 868
===================================================================================================================
OTHER NONCURRENT LIABILITIES
Postretirement benefits $1,170 $1,160
Postemployment benefits 28 28
Deferred income taxes 712 224
Liabilities for talent and program rights 98 68
Accrued liabilities 165 201
Retained liabilities of discontinued businesses (note 9) 727 767
Other 190 248
- -------------------------------------------------------------------------------------------------------------------
Total other noncurrent liabilities $3,090 $2,696
===================================================================================================================
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7. DISCONTINUED OPERATIONS
In recent years, the Corporation has adopted various disposal plans that, in the
aggregate, provide for the disposal of all of its industrial businesses. The
assets and liabilities and the results of operations for all of the industrial
businesses are classified as Discontinued Operations except for certain
liabilities expected to be retained by the Corporation. See note 9 to the
financial statements. The following table summarizes each of the Corporation's
segment disposal plans as well as the assets remaining at June 30, 1998.
Measurement Date Business Segment Remaining Assets
- ---------------------------------------------------------------------------------------------------------
September 1997 Thermo King None
All remaining industrial businesses All assets
November 1996 Communication & Information Systems Two miscellaneous operations
(CISCO)
March 1996 Environmental Services Three waste incineration plants
December 1995 The Knoll Group (Knoll) None
Defense and Electronic Systems None
July 1995 Land Development (WCI) Mortgage notes receivable
November 1992 Financial Services Leasing portfolio
Distribution & Control (DCBU) None
Westinghouse Electric Supply Company None
(WESCO)
- ---------------------------------------------------------------------------------------------------------
During the second quarter of 1998, the Corporation sold one of the CISCO
operations as well as certain securities remaining from the disposals of WCI and
WESCO. In July 1998, the Corporation completed the sale of another CISCO
operation. Generally, the remaining assets are expected to be divested in 1998,
except for the leasing portfolio, which is expected to liquidate in accordance
with its contractual terms.
The Power Generation, Energy Systems, and Government Operations businesses
represent the majority of the remaining industrial businesses included in the
September 1997 disposal plan. In November 1997, the Corporation reached a
definitive agreement to sell its Power Generation business for $1.5 billion in
cash subject to certain adjustments. It is expected that adjustments will reduce
the proceeds by approximately $300 million. The sale is expected to close by the
end of August 1998.
In the second quarter of 1998, the Corporation announced a definitive agreement
to sell the Process Control Division of its Energy Systems business for $265
million in cash plus the assumption of pension and other liabilities. The
transaction is expected to close in the third quarter of 1998. Also in the
second quarter, the Corporation announced a definitive agreement to sell the
remainder of its Energy Systems business and its Government Operations business
for $238 million in cash, subject to certain adjustments, plus the assumption of
liabilities, commitments, and obligations totaling approximately $950 million.
This transaction is expected to close before the end of 1998.
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The assets and liabilities of Discontinued Operations have been separately
classified on the balance sheet as net assets of Discontinued Operations. A
summary of these assets and liabilities follows:
NET ASSETS OF DISCONTINUED OPERATIONS
(in millions)
(unaudited)
June 30, December 31,
1998 1997
===================================================================================================================
ASSETS:
Cash and cash equivalents $ 9 $ 59
Customer receivables 602 537
Inventories 527 560
Costs and estimated earnings over billings on
uncompleted contracts 497 437
Portfolio investments 776 791
Plant and equipment, net 636 681
Deferred income taxes 487 491
Other assets 356 545
- -------------------------------------------------------------------------------------------------------------------
Total assets $3,890 $4,101
===================================================================================================================
LIABILITIES:
Accounts payable $ 332 $ 384
Billings over costs and estimated earnings on
uncompleted contracts 446 377
Short-term debt 6 7
Current maturities of long-term debt 35 96
Long-term debt 499 440
Liability for estimated loss on disposal 826 989
Settlements and environmental liabilities (note 9) 541 625
Other liabilities 967 971
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 3,652 3,889
- -------------------------------------------------------------------------------------------------------------------
Net assets of Discontinued Operations $ 238 $ 212
===================================================================================================================
Certain environmental and litigation-related liabilities are expected to be
assumed by buyers and are included in the net assets of Discontinued Operations.
Those that are not expected to be assumed by other parties in divestiture
transactions have been separately presented as retained liabilities of
discontinued businesses. See note 9 to the financial statements.
Long-term debt of Discontinued Operations is not expected to be assumed by
buyers in divestiture transactions. It is expected to be repaid using cash
proceeds from the liquidation of the portfolio investments of Discontinued
Operations.
The liability for estimated loss on disposal of $826 million at June 30, 1998,
includes estimated losses and disposal costs associated with each divestiture
transaction, including estimated results of operations through the expected
closing date and other costs expected subsequent to the divestiture.
Satisfaction of these liabilities is expected to occur over the next several
years. Management believes that the liability for estimated loss on disposal at
June 30, 1998, is adequate to cover divestiture or liquidation of the remaining
assets and liabilities of Discontinued Operations.
Cash proceeds from the sale or liquidation of all assets of Discontinued
Operations, except for portfolio investments, as well as cash requirements to
satisfy non-debt obligations of Discontinued Operations will affect cash flows
of Continuing Operations.
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In accordance with APB 30, the consolidated financial statements reflect the
results of Discontinued Operations separately from those of Continuing
Operations. Pre-tax operating results after the measurement date are charged to
the liability for estimated loss on disposal. Summarized in the following table
are the operating results of Discontinued Operations:
OPERATING RESULTS (unaudited, in millions)
Net Income
Sale of Products (Loss) Before Net Loss After
or Services Measurement Date Measurement Date
----------------- ---------------- ----------------
Three Months Ended June 30, 1998 1997 1998 1997 1998 1997
===================================================================================================================
Industrial businesses included in
September 1997 plan $ 760 $ 871 $____ $ (25) $ (18) $____
Thermo King ____ 259 ____ 37 ____ ____
Pre-1997 disposal plans 56 73 ____ ____ (11) (16)
- -------------------------------------------------------------------------------------------------------------------
Total $ 816 $1,203 $____ $ 12 $ (29) $ (16)
===================================================================================================================
Six Months Ended June 30, 1998 1997 1998 1997 1998 1997
===================================================================================================================
Industrial businesses included in
September 1997 plan $1,309 $1,521 $____ $(116) $(107) $____
Thermo King ____ 506 ____ 68 ____ ____
Pre-1997 disposal plans 101 185 ____ ____ (15) (34)
- -------------------------------------------------------------------------------------------------------------------
Total $1,410 $2,212 $____ $ (48) $(122) $ (34)
===================================================================================================================
Interest expense on debt of Continuing Operations totaling $3 million and $5
million for the three and six months ended June 30, 1998, respectively, and $13
million and $26 million for the three and six months ended June 30, 1997,
respectively, was allocated to Discontinued Operations based on the ratio of the
net assets of Discontinued Operations to the sum of total consolidated net
assets plus consolidated debt.
Operating cash flows of Discontinued Operations are presented separately from
those of Continuing Operations in the consolidated statement of cash flows.
Total operating cash flows of Discontinued Operations consist of the following:
CASH FLOWS FROM OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS
(unaudited, in millions)
Six Months Ended June 30, 1998 1997
===================================================================================================================
Industrial businesses included in September 1997 plan $(291) $(456)
Thermo King (6) 89
Financial Services (24) (22)
Other pre-1997 disposal plans (22) (39)
- -------------------------------------------------------------------------------------------------------------------
Cash used by operating activities $(343) $(428)
===================================================================================================================
Cash flows presented in the preceding table include cash flows from the
operations of the businesses prior to disposal as well as payments for
disposition-related costs.
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8. RESTRUCTURING
In recent years, the Corporation has restructured its corporate headquarters and
certain aspects of its businesses in an effort to reduce its cost structure and
remain competitive in its markets. Restructuring activities primarily involve
the separation of employees, the termination of leases, and similar actions.
Costs for restructuring activities are limited to incremental costs that
directly result from the restructuring activities and provide no future benefit
to the Corporation.
At June 30, 1998, the Corporation's accrued restructuring liability of $19
million primarily related to (a) the 1997 restructuring plan, which involved the
separation of 118 employees at the Pittsburgh headquarters related to the
transfer of the Corporation's overhead functions to New York, and (b) the
restructuring plan adopted by the Corporation in 1996, as the acquiring company,
to integrate the activities of CBS Inc. into the Corporation's existing media
businesses. An additional restructuring plan was adopted at the time of the CBS
Inc. acquisition in 1995 to recognize the impact of integration activities on
CBS Inc. and the elimination of duplicate facilities and functions.
Implementation of that plan is essentially complete.
During the six months ended June 30, 1998 and 1997, no new restructuring plans
were initiated. Expenditures relating to restructuring programs from the 1997
and 1996 plans totaled $3 million and $12 million for the three and six months
ended June 30, 1998. The remaining restructuring expenditures for these plans
are expected to be incurred primarily by the end of 1999, although certain
expenditures for lease commitments will extend over the next several years.
9. CONTINGENT LIABILITIES AND COMMITMENTS
Certain of the environmental and litigation-related liabilities associated with
the industrial businesses are not expected to be assumed by other parties in the
pending divestiture transactions and, therefore, would be retained by the
Corporation. These liabilities include environmental obligations that are not
related to active properties of operating businesses, accrued product liability
claims for divested businesses, liabilities associated with asbestos claims, and
general litigation claims not involving active businesses. Accrued liabilities
associated with these matters, which have been separately presented as retained
liabilities of discontinued businesses, totaled $913 million at June 30, 1998,
including amounts related to previously discontinued businesses of CBS Inc. Of
this amount, $727 million is classified as noncurrent. A separate asset of $238
million was recorded for estimated amounts recoverable from third parties, of
which $203 million is classified as noncurrent.
Legal Matters
Steam Generators
The Corporation has been defending various lawsuits brought by utilities
claiming a substantial amount of damages in connection with alleged tube
degradation in steam generators sold by the Energy Systems business unit as
components of nuclear steam supply systems. Since 1993, settlement agreements
have been entered resolving ten litigation claims. These agreements generally
require the Corporation to provide certain products and services at prices
discounted at varying rates. Two cases were resolved in favor of the Corporation
after trial or arbitration. One steam generator lawsuit remains.
The Corporation is also a party to four tolling agreements with utilities or
utility plant owners' groups that have asserted steam generator claims. The
tolling agreements delay initiation of any litigation for various specified
periods of time and permit the parties time to engage in discussions.
Accrued liabilities for previous and potential settlement agreements that
provide for costs in excess of discounted prices are expected to be assumed by
the buyer of the Energy Systems and, therefore, are included in Discontinued
Operations.
Securities Class Actions - Financial Services
The Corporation has been defending derivative and class action lawsuits alleging
federal securities law and common law violations arising out of purported
misstatements or omissions contained in the Corporation's public filings
concerning the financial condition of the Corporation and certain of its former
subsidiaries in connection with charges to earnings of $975 million in 1990 and
$1,680 million in 1991 and a public offering of the Corporation's common stock
in 1991. The court dismissed both the derivative claim and the class action
claims in their entirety.
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These dismissals were appealed. In July 1996, the United States Court of Appeals
for the Third Circuit (the Circuit Court) affirmed the court's dismissal of the
derivative claim. The Circuit Court also affirmed in part and reversed in part
the dismissal of the class action claims. Those class action claims that were
not dismissed by the Circuit Court have been remanded to the lower court for
further proceedings.
Asbestos
The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries, which allegedly occurred from use or
inclusion of asbestos in certain of the Corporation's products supplied by its
industrial businesses, generally in the pre-1970 time period. Typically, these
lawsuits are brought against multiple defendants. The Corporation was neither a
manufacturer nor a producer of asbestos and is oftentimes dismissed from these
lawsuits on the basis that the Corporation has no relationship to the products
in question or the claimant did not have exposure to the Corporation's product.
At June 30, 1998, the Corporation had approximately 97,000 unresolved claims
pending.
In court actions that have been resolved, the Corporation has prevailed in the
majority of the asbestos claims and has resolved others through settlement.
Furthermore, the Corporation has brought suit against certain of its insurance
carriers with respect to these asbestos claims. Under the terms of a settlement
agreement resulting from this suit, carriers that have agreed to the settlement
are now reimbursing the Corporation for a substantial portion of its current
costs and settlements associated with asbestos claims. The Corporation has
recorded a liability for asbestos-related matters that are deemed probable and
can be reasonably estimated and has separately recorded an asset equal to the
amount of such estimated liability that will be recovered pursuant to agreements
with insurance carriers. The Corporation cannot reasonably estimate costs for
unasserted asbestos claims.
General
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in the steam generator claims, the securities class action,
and certain groupings of asbestos claims, and, although management believes a
significant adverse judgment is unlikely, any such judgment could have a
material adverse effect on the Corporation's results of operations for a quarter
or a year. However, based on its understanding and evaluation of the relevant
facts and circumstances, management believes that the Corporation has
meritorious defenses to the litigation described previously and that the
Corporation has adequately provided for costs arising from potential settlement
of these matters when in the best interest of the Corporation. Management
believes that the litigation should not have a material adverse effect on the
financial condition of the Corporation.
Environmental Matters
Compliance with federal, state, and local laws and regulations relating to the
discharge of pollutants into the environment, the disposal of hazardous wastes,
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. It is difficult to estimate the
timing and ultimate costs to be incurred in the future due to uncertainties
about the status of laws, regulations, and technology; the adequacy of
information available for individual sites; the extended time periods over which
site remediation occurs; and the identification of new sites. The Corporation
has, however, recognized an estimated liability, measured in current dollars,
for those sites where it is probable that a loss has been incurred and the
amount of the loss can be reasonably estimated. The Corporation recognizes
changes in estimates as new remediation requirements are defined or as more
information becomes available.
With regard to remedial actions under federal and state Superfund laws, the
Corporation has been named a potentially responsible party (PRP) at numerous
sites located throughout the country. At many of these sites, the Corporation is
either not a responsible party or its site involvement is very limited or de
minimis. However, the Corporation may have varying degrees of cleanup
responsibilities at approximately 90 sites. The Corporation believes that any
liability incurred for cleanup at these sites will be satisfied over a number of
years, and in many cases, the costs will be shared with other responsible
parties. These sites include certain sites for which the Corporation, as part of
an agreement for sale, has retained obligations for remediation of environmental
contamination and for other Comprehensive Environmental Response Compensation
and Liability Act (CERCLA) issues.
Based on the costs associated with the most probable alternative remediation
strategy for the above mentioned sites, the Corporation has an accrued liability
of $372 million at June 30, 1998. Depending on the remediation alternatives
ultimately selected, the costs related to these sites could differ from the
amounts currently accrued. The accrued liability includes $254 million for site
investigation and remediation, and $118 million for post closure and
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14
monitoring activities. Management anticipates that the majority of expenditures
for site investigation and remediation will occur during the next five to ten
years. Expenditures for post-closure and monitoring activities will be made over
periods up to 30 years. In addition, included in Discontinued Operations are
environmental liabilities directly related to active sites that are expected to
be assumed by buyers in divestiture transactions.
Management believes, based on its best estimate, that the Corporation has
adequately provided for its present environmental obligations and that complying
with existing government regulations will not materially impact the
Corporation's financial position, liquidity, or results of operations.
Commitments
The Corporation routinely enters into commitments to purchase the rights to
broadcast programs, including feature films and sporting events. These contracts
permit the broadcast of such programs for various periods. At June 30, 1998, the
Corporation was committed to make payments under such broadcasting contracts,
along with commitments for talent contracts, totaling $7.4 billion.
In addition, the Corporation has commitments under operating and capital leases
for certain facilities and equipment as well as commitments to pay for certain
franchise rights entitling it to display advertising on buses, taxis, trains,
bus shelters, terminals, and phone kiosks.
10. EARNINGS (LOSS) PER COMMON SHARE
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE - CONTINUING OPERATIONS
(unaudited, in millions except per-share amounts)
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
===================================================================================================================
Income (loss) from Continuing Operations $ 4 $ (11) $ 23 $(102)
Less preferred stock dividends ____ (11) ____ (23)
- -------------------------------------------------------------------------------------------------------------------
Income (loss) applicable to common stock $ 4 $ (22) $ 23 $(125)
===================================================================================================================
Average shares outstanding, basic 701 604 700 596
Average shares outstanding, diluted 721 604 719 596
- -------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per common share $ .01 $(.04) $ .03 $(.21)
- -------------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per common share $ .01 $(.04) $ .03 $(.21)
===================================================================================================================
Shares of common stock issuable under deferred compensation arrangements were
excluded from the computation of diluted earnings per common share for the three
and six months ended June 30, 1998 because their inclusion would have been
antidilutive. Options to purchase shares of common stock were included in the
computation. For the same periods of 1997, shares of common stock issuable under
deferred compensation arrangements, options to purchase shares of common stock,
and preferred stock convertible into common stock were excluded from the
computation of diluted earnings per common share because their inclusion would
have been antidilutive.
11. COMPREHENSIVE INCOME
At March 31, 1998, the Corporation adopted the provisions of SFAS 130 which
establishes standards for reporting and disclosing comprehensive income in the
financial statements. Comprehensive income is used to describe all changes in
equity from transactions and other events and circumstances, including net
income, from nonowner sources. The following table presents the accumulated
components of comprehensive income other than net income reflected within
shareholders' equity at June 30, 1998 and December 31, 1997:
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(in millions)
(unaudited)
June 30, December 31,
1998 1997
===================================================================================================================
Unrealized gains on securities $ 18 $____
Minimum pension liability adjustment (823) (771)
- -------------------------------------------------------------------------------------------------------------------
Total accumulated other comprehensive income (loss) $(805) $(771)
===================================================================================================================
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
On June 4, 1998, the Corporation completed the acquisition of the radio
broadcasting operations of American Radio Systems Corporation (American Radio)
for $1.4 billion in cash plus the assumption of debt with a fair value of $1.3
billion. The results of operations since the closing date are included in the
Radio segment's second quarter results.
The Corporation reported a 16 percent and 32 percent increase in revenues for
the three and six months ended June 30, 1998. In addition, for the three and six
months ended June 30, 1998, operating profit grew by 22 percent and 426 percent,
respectively.
Net income increased to $4 million, or $.01 per share, for the second quarter of
1998 and increased to $23 million, or $.03 per share, for the first half of the
year. Included in the 1997 results for the six month period is a loss from
Discontinued Operations of $48 million, or $.08 per share, which represents the
operating results of certain industrial businesses prior to the adoption of the
September 1997 disposal plan.
On August 5, 1998, the Corporation announced that its Board of Directors
authorized a $2 billion increase in its stock repurchase program, bringing the
total stock repurchase program to $3 billion. Purchases under the program
through June 30, 1998, totaled 10,448,000 shares for $339 million.
SEGMENT RESULTS OF OPERATIONS
In recognition of the interdependence of certain of its businesses, the
Corporation changed its segment reporting to combine the results of its
television stations, the CBS television network, and the cable television
operations into one segment called Television. Prior period information has been
restated to be consistent with the new presentation.
The following table presents the segment results for the Corporation's
Continuing Operations for the three and six months ended June 30, 1998 and 1997.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) is
presented in the table because it is a widely accepted financial indicator of a
company's ability to incur and service debt and is a measure used by the
Corporation's management to assess the performance of the business. It is
commonly used in the media industry as a surrogate for cash flows. EBITDA
differs from operating cash flows primarily because it does not consider certain
changes in assets and liabilities from period to period.
SEGMENT RESULTS OF OPERATIONS
(unaudited, in millions)
Revenues Operating Profit (Loss) EBITDA
- -------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 1998 1997 1998 1997 1998 1997
===================================================================================================================
Radio $ 456 $ 378 $146 $113 $198 $157
Television 1,030 905 69 66 133 100
Corporate and Other (2) ____ (50) (39) (18) 4
Residual costs of discontinued businesses ____ ____ (38) (36) (38) (36)
- -------------------------------------------------------------------------------------------------------------------
Total $1,484 $1,283 $127 $104 $275 $225
===================================================================================================================
Revenues Operating Profit (Loss) EBITDA
- -------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1998 1997 1998 1997 1998 1997
===================================================================================================================
Radio $ 786 $ 691 $215 $160 $311 $248
Television 2,650 1,920 221 57 345 149
Corporate and Other (3) (2) (97) (96) (34) (9)
Residual costs of discontinued businesses ____ ____ (76) (71) (76) (71)
- -------------------------------------------------------------------------------------------------------------------
Total $3,433 $2,609 $263 $ 50 $546 $317
===================================================================================================================
The reported results for each of the segments include depreciation and
amortization of specifically identifiable assets based on their fair values when
acquired. Amortization of goodwill arising from the 1995 acquisition of CBS
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Inc., which approximates $120 million per year, is included in the results of
Corporate and Other. Where appropriate, the separate business discussions that
follow provide comparisons of actual 1998 results with the pro forma results for
1997.
Radio
With the acquisition of American Radio's broadcasting operations, which closed
on June 4, 1998, the Corporation now owns and operates approximately 170 AM and
FM radio stations in 35 markets. Radio also includes TDI Worldwide, Inc. (TDI),
which provides outdoor advertising throughout the United States and abroad.
Radio's revenue increased $78 million, or 21 percent, and $95 million, or 14
percent, for the three and six months ended June 30, 1998. In addition to the
June acquisition of American Radio's broadcasting operations, driving this
increase was the continued strong performance of the stations operating in the
top tier markets, including New York, Los Angeles, Chicago, and San Francisco,
as well as double-digit growth at TDI.
Operating profit for Radio increased $33 million, or 29 percent, and $55
million, or 34 percent, for the three and six months ended June 30, 1998. This
increase was primarily attributable to the incremental revenues recognized at
the stations and TDI. Consistent with the growth in operating profit, EBITDA
increased 26 percent for the quarter and 25 percent for the year-to-date period.
Television
The Television segment now includes the results of the television stations, the
CBS television network, and the cable television operations.
Television's revenue increased $125 million, or 14 percent, and $730 million, or
38 percent, for the three and six months ended June 30, 1998. The increase in
the second quarter revenue primarily reflects the inclusion of three months of
activity related to the TNN and CMT cable networks acquired in September 1997
and the continued strong performance of the television stations. The
year-to-date increase is primarily attributable to the airing of the 1998 Winter
Olympics and the inclusion of six months of revenue related to TNN and CMT.
Operating profit improved slightly for the three months ended June 30, 1998,
while increasing $164 million, or 288 percent, for the year-to-date period. The
second quarter operating profit reflects the positive impact of the TNN and CMT
acquisition and strong gains at the television stations partially offset by
declines in television network profitability. The year-to-date increase reflects
the airing of the 1998 Winter Olympics and the inclusion of six months of
activity related to TNN and CMT. EBITDA for Television increased 33 percent and
132 percent for the three and six months ended June 30, 1998.
The television stations reported strong growth in revenue for both the three and
six months ended June 30, 1998 compared to the prior-year periods. Year-to-date
revenue was enhanced by CBS's coverage of the 1998 Winter Olympics in Nagano,
Japan. Operating costs were relatively flat during the second quarter of 1998
despite the growth in revenue. On a year-to-date basis, increased costs
primarily reflect the incremental commissions on the strong sales generated
during the first half of 1998.
The CBS television network reported a slight increase in revenue for the second
quarter of 1998 compared to the prior year. For the first six months of 1998,
network revenue increased significantly due to the airing of the 1998 Winter
Olympics. Operating costs increased in both periods. The Corporation is
currently evaluating a variety of opportunities to reduce the cost structure and
improve the operations at the network.
On a pro forma basis, the cable operations reported significant growth in
revenue for both the second quarter and the first half of 1998 driven by strong
performances at TNN and CMT. Pro forma operating costs increased, primarily
reflecting higher programming costs, although the growth in revenue exceeded the
increase in costs.
On July 27, 1998, the Corporation announced that it had signed a letter of
intent with Discovery Communications, Inc. to form a joint venture to operate
CBS's cable network, Eye On People.
Corporate and Other
Corporate and Other consists of corporate overhead costs and amortization of
goodwill arising from the November 1995 acquisition of CBS Inc., which
approximates $120 million per year. The decision to transfer the corporate
overhead functions from Pittsburgh to New York may result in the recognition of
certain transition costs during 1998. The Corporation continues to evaluate
opportunities for improving its operations and reducing its cost structure.
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Residual Costs of Discontinued Businesses
The Corporation's results of operations are unfavorably affected by certain
costs remaining from past divestitures of its industrial businesses. Following
those divestitures, certain liabilities arising from the businesses remained
with the Corporation, such as pension and postretirement benefit obligations for
inactive and retired employees, environmental liabilities, and
litigation-related liabilities. The pension and postretirement benefit costs
associated with these former employees, as well as administration costs
associated with managing the retained liabilities, have been presented
separately in the income statement. For 1998 and 1997, these costs primarily
reflect pension and postretirement benefit costs. Following the sale of Power
Generation, the quarterly costs will increase approximately $8 million.
Following the sale of Energy Systems and Government Operations, the quarterly
costs will increase an additional $10 million. Prior to the sales, these costs
are included in the respective businesses' results of operations, which are
reported in Discontinued Operations.
Although the Corporation's objective is to reduce this earnings constraint over
the next few years by fully funding the pension plan, management expects that
these costs will continue to negatively affect operating results during future
years.
OTHER INCOME (EXPENSES), NET
Other income and expenses during the three and six months ended June 30, 1998
generated income of $12 million and $17 million, respectively, compared to
income of $16 million and $57 million, respectively, for the same periods in
1997. Generally, other income (expenses) includes interest income, miscellaneous
gains and losses on dispositions of non-strategic assets, and operating results
of non-consolidated affiliates. In 1997, other income included a gain of $24
million on the sale of an equity investment.
INTEREST EXPENSE
Interest expense from Continuing Operations for the three and six months ended
June 30, 1998 totaled $85 million and $160 million, respectively compared to
$102 million and $203 million, respectively, for the same periods in 1997. The
decrease in interest expense was driven by a reduction in average debt,
primarily revolver borrowings, during the first half of 1998 compared to the
first half of 1997. Interest rates remained relatively constant.
In connection with the September 1997 plan to dispose of the remaining
industrial businesses, interest expense on Continuing Operations debt totaling
$3 million and $5 million was reclassified to Discontinued Operations for the
three and six months ended June 30, 1998, respectively. For the same periods
during 1997, interest expense of $13 million and $26 million, respectively, was
reclassified.
Average debt for the remainder of the year will be affected by incremental
revolver borrowings and other debt assumed in connection with the June 4, 1998
acquisition of the broadcasting operations of American Radio, which totaled $2.7
billion. This incremental debt will be partially offset by proceeds from the
sales of the remaining industrial businesses, which are expected to approximate
$1.6 billion in the third quarter and $0.2 billion in the fourth quarter of
1998.
INCOME TAXES
The Corporation's results for the three and six months ended June 30, 1998
reflect 89 percent and 79 percent effective tax rates, respectively. These rates
result primarily from the amortization of non-deductible goodwill associated
with the CBS Inc., Infinity, TNN and CMT, and American Radio acquisitions.
Depending on the level of the Corporation's income or losses and the effect of
any special transactions, these permanent differences between book income and
taxable income can dramatically impact the resulting tax provision or benefit in
relation to pre-tax results. For the three months ended June 30, 1997, the
income tax expense was 161 percent of pre-tax income from Continuing Operations.
For the six months ended June 30, 1997, the Corporation reported a pre-tax loss
with income tax expense.
At June 30, 1998, the Corporation had recognized a net deferred income tax
benefit totaling $168 million compared to $661 million at December 31, 1997. At
June 30, 1998, the net benefit of $168 million consisted of a net deferred tax
liability of $319 million for Continuing Operations offset by a $487 million
deferred tax benefit for Discontinued Operations. At year-end 1997, Continuing
Operations reflected a deferred tax benefit of $170 million. The change
primarily reflects deferred tax liabilities recognized in connection with the
acquisition of American Radio's broadcasting operations.
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YEAR 2000
The Corporation is addressing the issues associated with its existing computer
systems and their ability to operate effectively as the millennium (year 2000)
approaches. Both internal and external resources are being utilized to address
these matters throughout the Corporation. For the Corporation's Continuing
Operations, the assessment and planning phases of the project are essentially
complete. The Corporation believes that, based on available information, its
year 2000 transition will not have a material adverse effect on its business,
operations, or financial results.
For the businesses that the Corporation expects to divest in 1998, the
assessment phase of the project is complete and the planning phase is well under
way. These matters are not anticipated to materially affect the disposition of
the businesses or the sale proceeds.
DISCONTINUED OPERATIONS
With the Corporation's decision in late 1997 to divest its remaining industrial
businesses, all of its industrial businesses are presented in the financial
statements as Discontinued Operations. As of December 31, 1997, Power
Generation, the largest of the remaining industrial businesses, was under
agreement to be sold to a subsidiary of Siemens A.G. for $1.5 billion of cash
subject to certain adjustments. It is expected that adjustments will reduce the
proceeds by approximately $300 million. The sale is expected to close by the end
of August 1998. In May, the Corporation announced a definitive agreement to sell
the Process Control Division of its Energy Systems business for $265 million in
cash and the assumption of pension and other liabilities. This sale is expected
to close in the third quarter of 1998. In June, the Corporation announced a
definitive agreement to sell the remainder of its Energy Systems business and
its Government Operations business for $238 million in cash, subject to certain
adjustments, and the assumption of liabilities, commitments, and obligations
totaling approximately $950 million. This transaction is expected to close
before the end of 1998. Any remaining assets of Discontinued Operations, except
for the leasing portfolio, generally are expected to be divested in 1998.
During the second quarter of 1998, the Corporation sold certain securities
remaining from the divestitures of WCI and WESCO and sold its security
electronics business. In July 1998, the Corporation completed the sale of
Westinghouse Communications. Proceeds from these transactions totaled more than
$360 million.
Following the divestitures of the remaining industrial businesses, the assets of
Discontinued Operations will consist primarily of the remaining leasing
portfolio, which is expected to liquidate through the year 2015. Debt of
Discontinued Operations, which totaled $540 million at June 30, 1998, will
include only that amount which can be repaid through liquidation of the leasing
portfolio. Other liabilities, lagging divestiture costs, or unresolved issues
related to the industrial businesses also may remain at year-end 1998.
Except for cash flows related to the leasing portfolio and the associated debt,
all future cash inflows and outflows of Discontinued Operations will affect
Continuing Operations. Management believes that the liability for estimated loss
on disposal of Discontinued Operations of $826 million at June 30, 1998 is
adequate to cover future operating costs, estimated losses on disposal, and the
remaining divestiture costs associated with all Discontinued Operations.
The Corporation is in the process of reevaluating the classification of certain
assets and liabilities between Continuing Operations and Discontinued
Operations, as well as its remaining obligations related to all prior and
pending divestitures. If any adjustments are appropriate, they will be made upon
completion of the evaluation.
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The following represents the segment results for Discontinued Operations for the
three and six months ended June 30, 1998 and 1997:
SEGMENT RESULTS OF OPERATIONS - DISCONTINUED OPERATIONS
(unaudited, in millions)
Sale of Products Operating Profit
and Services (Loss)
- -------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 1998 1997 1998 1997
===================================================================================================================
Industrial businesses included in September 1997 plan $ 760 $ 871 $ (20) $ (9)
Thermo King ____ 259 ____ 51
Pre-1997 disposal plans 56 73 (12) (19)
- -------------------------------------------------------------------------------------------------------------------
Total Discontinued Operations $ 816 $1,203 $ (32) $ 23
===================================================================================================================
Sale of Products Operating Profit
and Services (Loss)
- -------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1998 1997 1998 1997
===================================================================================================================
Industrial businesses included in September 1997 plan $1,309 $1,521 $(163) $(132)
Thermo King ____ 506 ____ 98
Pre-1997 disposal plans 101 185 (19) (44)
- -------------------------------------------------------------------------------------------------------------------
Total Discontinued Operations $1,410 $2,212 $(182) $ (78)
===================================================================================================================
The 1997 segment results shown in the table above include sales and operating
profit prior to the measurement date of the plans as well as those after the
measurement date. Pre-tax operating results after the measurement date,
including all results for 1998, are charged to the liability for estimated loss
on disposal.
The industrial businesses included in the September 1997 disposal plan include
Power Generation, Energy Systems, Government Operations, and other miscellaneous
operations. Sales and operating profit for Power Generation declined in the
three and six months ended June 30, 1998, primarily due to delays in projects
resulting in part from uncertainty concerning deregulation of the U.S. utility
market. However, new orders in the first half of 1998 were nearly 50 percent
higher than year-to-date 1997 orders. The strong demand for new equipment due to
increasing electricity consumption resulted in strong orders at Energy Systems
as well as at Power Generation. Energy Systems reported improved results for the
six months ended June 30, 1998 over the prior-year period following an
unfavorable contract adjustment in the first quarter of 1997. Government
Operations reported higher revenues for both periods accompanied by declines in
operating profit. The higher revenues include revenues related to a new company
established to sell safety management solutions to the government. The decline
in operating profit reflects the loss of a major contract in late 1996.
Thermo King was sold in October 1997. Divestitures of certain Communication &
Information Systems and environmental services businesses resulted in lower
sales and reduced operating losses associated with operations included in
pre-1997 disposal plans. Results for pre-1997 disposal plans also include income
related to the leasing portfolio as well as interest on the debt of Discontinued
Operations.
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Corporation generally manages its liquidity as a consolidated enterprise
without regard to whether assets or liabilities are classified for balance sheet
purposes as part of Continuing Operations or Discontinued Operations. As a
result, the discussion below focuses on the Corporation's consolidated cash
flows and capital resources.
On May 20, 1998, the Corporation issued $500 million of Senior Notes due in
2005. Interest on the Notes will accrue at a rate of 7.15% per annum and is
payable semiannually commencing November 20, 1998. Initially, the net proceeds
of $493 million were used to repay revolver borrowings.
On June 4, 1998, the Corporation completed the acquisition of the radio
broadcasting operations of American Radio for $1.4 billion in cash plus the
assumption of debt with a fair value of approximately $1.3 billion. The cash
portion of the consideration was funded through additional revolver borrowings.
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During the third quarter of 1998, the Corporation has completed or expects to
complete the sales of Westinghouse Communications, Power Generation, and Process
Control. Cash proceeds are expected to total approximately $1.6 billion. By the
end of the year, the Corporation expects to complete the sale of Energy Systems
and Government Operations for cash proceeds of $0.2 billion. In addition to the
cash proceeds, these transactions include the assumption of various liabilities,
commitments, and obligations.
On August 5, 1998, the Corporation announced that its Board of Directors
authorized a $2 billion increase in its stock repurchase program, bringing the
total stock repurchase program to $3 billion. During the first half of 1998, the
Corporation purchased 10,448,000 shares for $339 million.
Management expects that the Corporation will have sufficient liquidity to meet
ordinary business needs. Sources of liquidity generally available to the
Corporation include cash from operations, proceeds from sales of non-strategic
assets, cash and cash equivalents, availability under its credit facility,
borrowing from other sources, including funds from the capital markets, and the
issuance of additional capital stock.
Operating Activities
The operating activities of Continuing Operations provided $272 million of cash
during the first six months of 1998 compared to cash used of $210 million during
the first six months of 1997. The $482 million improvement in operating cash
flow reflects improved operating results as well as favorable payment terms for
certain program rights. Also, during the first quarter of 1997, cash flows
included substantial payments to reduce accounts payable.
The Corporation's pension contribution level for 1998, which is expected to
approximate $300 million, is consistent with the Corporation's goal to fully
fund its qualified pension plans over the next several years. In January, April,
and July 1998, the Corporation contributed $73 million, $72 million, and $53
million, respectively, to the plan pursuant to certain quarterly minimum funding
requirements. No pension contributions were made in the first six months of
1997.
The operating activities of Discontinued Operations used $343 million of cash
during the first six months of 1998 compared to $428 million of cash used during
the same period of 1997 principally related to the Power Generation and Energy
Systems businesses. The primary factors contributing to the larger use of cash
in 1997 were reductions in accounts payable and settlement liabilities.
Future operating cash flows of Discontinued Operations will consist primarily of
operating revenues, operating costs, and disposal costs associated with the
remaining industrial businesses. These cash flows, along with proceeds generated
through divestiture of these businesses, will affect the cash flows of
Continuing Operations. Interest costs on debt of Discontinued Operations, as
well as the repayment of that debt, will be paid through the continued
liquidation of the leasing portfolio and are not expected to impact future cash
flows of Continuing Operations.
Investing Activities
Investing activities used $1.1 billion of cash during the first six months of
1998 compared to $25 million of cash provided during the same period of 1997. In
the first six months of 1998, the Corporation completed the acquisition of the
radio broadcasting operations of American Radio for $1.4 billion in cash plus
the assumption of debt, with a fair value of $1.3 billion, while for the same
period of 1997, the Corporation had investing cash outflows related to the
acquisition of Buspack, a transit advertising company in the United Kingdom, and
a $20 million payment in connection with a swap of radio stations.
Investing cash inflows from business divestitures and other asset liquidations
in the first six months of 1998 totaled $330 million from miscellaneous asset
liquidations compared to $152 million in the prior-year period. Asset
liquidations in 1998 relate to Discontinued Operations and include the security
electronics business and certain securities remaining from previous
divestitures. Divestitures in 1997 include several radio stations, various
operations from the environmental services business, an equity investment in a
regional sports network, and other non-strategic assets.
Capital expenditures for Continuing Operations were $45 million for the first
six months of 1998 compared to $39 million for the same period of 1997. Capital
spending for Continuing Operations during 1998 could range from $150 to $175
million compared to 1997 spending of $121 million. For Discontinued Operations,
capital spending will continue to decline as the businesses are divested.
-20-
21
Financing Activities
Cash provided by financing activities during the first six months of 1998
totaled $1.3 billion compared to cash provided of $598 million during the same
period of 1997. Net short-term and long-term borrowings totaled $1.4 billion
during the first six months of 1998 compared to $556 million during the 1997
period. The net borrowings during the first six months of 1998 primarily reflect
revolver borrowings for the acquisition of the broadcasting operations of
American Radio. In the second quarter, the Corporation received net proceeds of
$493 million related to the May 20, 1998 issuance of Senior Notes due in 2005
and repaid revolver borrowings. The net borrowings in the first six months of
1997 included a $149 million cash outflow to extinguish the long-term debt
previously issued by Infinity Broadcasting.
During the first half of 1998, the Corporation expended $339 million to purchase
10,448,000 shares of its common stock. The Corporation's Board of Directors has
authorized purchases up to $3 billion of stock under its multi-year stock
repurchase program. Future purchases will adhear with financial policies that
are consistent with attaining and maintaining an investment grade rating.
Cash provided by the issuance of stock totaled $231 million during the first six
months of 1998 compared to $130 million for the 1997 period. The stock was
issued in connection with certain employee stock plans.
Total borrowings under the Corporation's $5.5 billion revolving credit facility
were $3.2 billion at June 30, 1998, including $0.5 billion classified as
Discontinued Operations (see Revolving Credit Facility). These borrowings were
subject to a floating interest rate of 6.4 percent at June 30, 1998, which was
based on the London Interbank Offer Rate (LIBOR), plus a margin based on the
Corporation's senior unsecured debt rating and leverage.
After payment of the March 1, 1998 dividend, the Corporation suspended dividend
payments on its common stock so that cash could be used to better enhance
shareholder value. Dividends paid in the first six months of 1997 included $23
million for the Series C preferred stock. On May 30, 1997, the Series C
preferred stock was converted into 32 million shares of the Corporation's common
stock.
Revolving Credit Facility
On August 29, 1996, the Corporation executed a five-year revolving credit
agreement with total commitments of $5.5 billion. This agreement was amended on
March 3, 1998 to modify the financial covenants and to provide that, upon
completion of the sale of Power Generation, the maximum borrowing would be
reduced to $4.0 billion. The unused capacity under the facility equaled $2.2
billion at June 30, 1998. Borrowing availability under the revolver is subject
to compliance with certain covenants, representations, and warranties, including
a no material adverse change provision with respect to the Corporation taken as
a whole, restrictions on liens incurred, a maximum leverage ratio, minimum
interest coverage ratio, and minimum consolidated net worth. Certain of the
financial covenants become more restrictive over the term of the agreement. At
June 30, 1998, the Corporation was in compliance with the financial covenants.
Legal, Environmental, and Other Matters
The Corporation is addressing a number of environmental and litigation matters,
including those discussed in note 9 to the financial statements. Litigation is
inherently uncertain and always difficult to predict. Substantial damages are
sought in certain of the Corporation's pending cases and, although management
believes that a significant adverse judgment is unlikely, any such judgment
could have a material adverse effect on the Corporation's results of operations
for a quarter or a year. However, based on its understanding and evaluation of
the relevant facts and circumstances, management believes that the Corporation
has meritorious defenses to the litigation referenced in note 9 and that the
Corporation has adequately provided for costs arising from potential settlement
of these matters when in the best interest of the Corporation. Management
believes that the litigation should not have a material adverse effect on the
financial condition of the Corporation.
Liabilities for certain of the Corporation's environmental matters as well as
certain litigation matters, although arising from discontinued businesses, are
expected to be retained by the Corporation following the divestiture of the
remaining industrial businesses. These liabilities include environmental
obligations that are not related to active properties of operating businesses,
accrued product liability claims for divested businesses, liabilities associated
with asbestos claims, and general litigation claims not involving active
businesses. Accrued liabilities associated with these matters, which have been
separately presented as retained liabilities of discontinued businesses, totaled
$913 million at June 30, 1998, including amounts related to previously
discontinued businesses of CBS Inc. Of this amount, $727 million is classified
as noncurrent. A separate asset of $238 million has been recorded for amounts
recoverable from insurance carriers under previous settlement arrangements, of
which $203 million is classified as noncurrent. See note 9 to the financial
statements.
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The costs associated with resolving these matters are recognized in the period
in which the costs are deemed probable and can be reasonably estimated.
Management believes that the Corporation has adequately provided for the
estimated costs of resolving these matters.
Information Relating to Forward-Looking Statements
This Quarterly Report on Form 10-Q, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations," contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, that are not historical facts but rather reflect the Corporation's
current expectations concerning future results and events. The words "believes,"
"expects," "intends," "plans," "anticipates," "likely," "will," and similar
expressions identify such forward-looking statements. These forward-looking
statements are subject to risks, uncertainties, and other factors, some of which
are beyond the Corporation's control, that could cause actual results to differ
materially from those forecast or anticipated in such forward-looking
statements.
Such risks, uncertainties, and factors include, but are not limited to: the
Corporation's ability to develop and/or acquire television programming and to
attract and retain advertisers; the impact of significant competition from both
over-the-air broadcast stations and programming alternatives such as cable
television, wireless cable, in-home satellite distribution services, and
pay-per-view and home video entertainment services; the Corporation's ability to
complete its transition from a multi-faceted industrial conglomerate to a pure
media company in a timely and cost-effective manner; the impact of new
technologies; the impact of the year 2000 transition; changes in Federal
Communications Commission regulations; and such other competitive and business
risks as from time to time may be detailed in the Corporation's Securities and
Exchange Commission reports.
Readers are cautioned not to place undue reliance on these forward-looking
statements which reflect management's view only as of the date of this Report on
Form 10-Q. The Corporation undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
(a) In January 1997, Innovative Business Systems (Overseas) Ltd. and Innovative
Business Software, Inc. (collectively Innovative) brought suit against the
Corporation and others in the Judicial District Court, Dallas County,
Texas. The suit alleges that in connection with the sale by the Corporation
of its residential security business on December 31, 1996 the Corporation
wrongfully transferred software to the buyers of that business. Innovative
has filed four amended complaints against the Corporation; and the latest
amended complaint, filed in the fourth quarter of 1997, seeks money
damages, specific performance, and injunctive relief against the
Corporation for alleged violations by the Corporation relating to software
license agreements between the parties. Innovative seeks monetary damages
in an amount of $425 million, punitive damages, and attorney's fees. The
Corporation has denied the allegations, believes the allegations to be
without merit, and has filed a counterclaim against Innovative and others
based upon fraud, breach of contract, and tortious interference with a
business relationship. Unless continued, trial of this case is scheduled
for September 1998.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in certain of the matters set forth in Item
3 of the Corporation's 1997 Form 10-K and, although management believes a
significant adverse judgment is unlikely, any such judgment could have a
material adverse effect on the Corporation's results of operations for a
quarter or a year. However, based on its understanding and evaluation of
the relevant facts and circumstances, management believes that the
Corporation has meritorious defenses to these matters, and that the
Corporation has adequately provided for costs arising from potential
settlement of these matters when in the best interest of the Corporation.
Management believes that the litigation should not have a material adverse
effect on the financial condition of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders of the Corporation was held on May 6,
1998.
(b) The following matters were submitted to a vote of the shareholders at the
annual meeting with the following results:
(i) In connection with the election of twelve directors, the following
votes were cast for or withheld from the following candidates:
FOR WITHHELD
--- --------
Robert E. Cawthorn 616,688,706 4,610,406
George H. Conrades 616,752,295 4,546,817
Martin C. Dickinson 616,689,189 4,609,923
William H. Gray III 616,009,160 5,289,952
Michael H. Jordan 616,077,730 5,221,382
Mel Karmazin 616,490,959 4,808,153
Jan Leschly 616,719,695 4,579,417
David T. McLaughlin 616,277,904 5,021,208
Richard R. Pivirotto 616,019,167 5,279,945
Raymond W. Smith 616,599,214 4,699,898
Paula Stern 616,441,062 4,858,050
Robert D. Walter 616,690,102 4,609,010
(ii) A management proposal regarding the election of KPMG Peat Marwick LLP
as independent auditors: 618,273,143 shares of common stock were voted
for, 1,701,383 shares were voted against, and 1,324,586 shares
abstained in connection with the adoption of this proposal.
(iii)A management proposal concerning approval of the CBS Corporation 1998
Executive Annual Incentive Plan: 529,934,695 shares of common stock
were voted for, 86,698,695 shares were voted against, and 4,665,722
shares abstained in connection with the adoption of this proposal.
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(iv) A shareholder proposal concerning a change in the annual meeting date:
12,842,453 shares of common stock were voted for, 495,595,608 shares
were voted against, 12,690,543 shares abstained, and there were
100,170,508 broker non-votes in connection with this proposal.
(v) A shareholder proposal concerning the reporting of soft dollar
contributions: 33,418,053 shares of common stock were voted for,
462,931,705 shares were voted against, 24,778,846 shares abstained,
and there were 100,170,508 broker non-votes in connection with this
proposal.
(vi) A shareholder proposal concerning stopping expansion into China and
not beginning any new operations in China: 13,760,622 shares of common
stock were voted for, 478,737,665 shares were voted against,
28,630,317 shares abstained, and there were 100,170,508 broker
non-votes in connection with this proposal.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
(3) ARTICLES OF INCORPORATION AND BYLAWS
(a) The Restated Articles of the Corporation, as amended to
December 11, 1997, are incorporated herein by reference
to Exhibit 3(b) to Form 10-K for the year ended December
31, 1997.
(b) The Bylaws of the Corporation, as amended to May 6, 1998,
are incorporated herein by reference to Exhibit 4.2 to
Pose Effective Amendment No. 1 to Form S-8 (Registration
Statement No. 333-30127) filed on July 1, 1998.
(4) RIGHTS OF SECURITY HOLDERS
(a) There are no instruments with respect to long-term debt
of the Corporation that involve securities authorized
thereunder exceeding 10 percent of the total assets of
the Corporation and its subsidiaries on a consolidated
basis. The Corporation agrees to provide to the
Securities and Exchange Commission, upon request, a copy
of instruments defining the rights of holders of
long-term debt of the Corporation and its subsidiaries.
(b) Rights Agreement is incorporated herein by reference to
Exhibit 1 to Form 8-A filed with the Securities and
Exchange Commission on January 9, 1996.
(10) MATERIAL CONTRACTS
(a*) The Annual Performance Plan, as amended to November 1,
1996, is incorporated herein by reference to Exhibit
10(a) to Form 10-Q for the quarter ended September 30,
1996.
(b*) The 1993 Long-Term Incentive Plan, as amended to January
28, 1998, is incorporated herein by reference to Exhibit
10(b) to Form 10-K for the year ended December 31, 1997.
(c*) The 1984 Long-Term Incentive Plan, as amended to November
1, 1996, is incorporated herein by reference to Exhibit
10(c) to Form 10-Q for the quarter ended September 30,
1996.
(d*) The Westinghouse Executive Pension Plan, as amended to
December 1, 1997, is incorporated herein by reference to
Exhibit 10(d) to Form 10-K for the year ended December
31, 1997.
(e*) The Deferred Compensation and Stock Plan for Directors,
as amended to January 1, 1998, is incorporated herein by
reference to Exhibit 10(e) to Form 10-K for the year
ended December 31, 1997.
(f*) The Director's Charitable Giving Program, as amended to
April 30, 1996, is incorporated herein by reference to
Exhibit 10(g) to Form 10-Q for the quarter ended June 30,
1996.
(g*) The 1991 Long-Term Incentive Plan, as amended to January
28, 1998, is incorporated herein by reference to Exhibit
10(g) to Form 10-K for the year ended December 31, 1997.
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(h*) Advisory Director's Plan Termination Fee Deferral Terms
and Conditions, dated April 30, 1996, is incorporated
herein by reference to Exhibit 10(i) to Form 10-Q for the
quarter ended June 30, 1996.
(i*) Employment Agreement between the Corporation and Michael
H. Jordan is hereby incorporated by reference to Exhibit
10 to the Corporation's Form 8-K, dated September 1,
1993.
(j*) Employment Agreement between the Corporation and Fredric
G. Reynolds is incorporated herein by reference to
Exhibit 10(j) to Form 10-K for the year ended December
31, 1994.
(k) $5.5 billion Credit Agreement among the Corporation, the
Lenders parties thereto, Nationsbank, N.A. and The
Toronto-Dominion Bank as Syndication Agents, The Chase
Manhattan Bank as Documentation Agent, and Morgan
Guaranty Trust Company of New York as Administrative
Agent, dated August 29, 1996, is incorporated herein by
reference to Exhibit 10(l) to Form 10-Q for the quarter
ended September 30, 1996.
(l*) CBS Supplemental Executive Retirement Plan, as amended to
November 15, 1995, is incorporated herein by reference to
Exhibit 10(n) to Form 10-K for the year ended December
31, 1996.
(m*) CBS Bonus Supplemental Executive Retirement Plan, as
amended to November 15, 1995, is incorporated herein by
reference to Exhibit 10(o) to Form 10-K for the year
ended December 31, 1996.
(n) First Amendment, dated as of January 29, 1997 to the
Credit Agreement, dated as of August 29, 1996, among CBS
Corporation, the Lenders parties thereto, Nationsbank,
N.A. and The Toronto-Dominion Bank as Syndication Agents,
The Chase Manhattan Bank as Documentation Agent, and
Morgan Guarantee Trust Company of New York as
Administrative Agent, is hereby incorporated by reference
to Exhibit 10(p) to Form 10-Q for the quarter ended March
31, 1997.
(o) Second Amendment, dated as of March 21, 1997, to the
Credit Agreement, dated as of August 29, 1996, as amended
by the First Amendment thereto dated as of January 29,
1997, among the Corporation, the Subsidiary Borrowers
parties thereto, the Lenders parties thereto,
Nationsbank, N.A. and The Toronto-Dominion Bank as
Syndication Agents, The Chase Manhattan Bank as
Documentation Agent, and Morgan Guarantee Trust Company
of New York as Administrative Agent, is hereby
incorporated by reference to Exhibit 10(q) to Form 10-Q
for the quarter ended March 31, 1997.
(p*) Employment Agreement between the Corporation and Mel
Karmazin, made as of June 20, 1996 and effective as of
December 31, 1996, is hereby incorporated by reference to
Exhibit 10(s) to Form 10-Q for the quarter ended March
31, 1997.
(q*) Amended and restated Infinity Broadcasting Corporation
Stock Option Plan is incorporated herein by reference to
Exhibit 4.4 to the Corporation's Registration Statement
No. 333-13219 on Post-Effective Amendment No. 1 on Form
S-8 to Form S-4 filed with the Securities and Exchange
Commission on January 2, 1997.
(r*) Infinity Broadcasting Corporation Warrant Certificate No.
3 to Mel Karmazin is incorporated herein by reference to
Exhibit 4.6 to the Corporation's Registration Statement
No. 333-13219 on Post-Effective Amendment No. 1 on Form
S-8 to Form S-4 filed with the Securities and Exchange
Commission on January 2, 1997.
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(s*) Employment Agreement between a subsidiary of the
Corporation, CBS Broadcasting, Inc. (formerly CBS Inc.)
and Leslie Moonves entered into as of May 17, 1995, and
amended as of January 20, 1998 is incorporated herein by
reference to Exhibit 10(u) to Form 10-K for the year
ended December 31, 1997.
(t) Asset Purchase Agreement between the Corporation and
Siemens Power Generation Corporation, a subsidiary of
Siemens A.G., dated as of November 14, 1997 is
incorporated herein by reference to Exhibit 10(v) to Form
10-K for the year ended December 31, 1997.
(u) Third Amendment dated as of March 3, 1998, to the Credit
Agreement dated as of August 29, 1996, as amended by the
First Amendment thereto dated as of January 29, 1997, as
amended by the Second Amendment thereto dated as of March
21, 1997 among the Corporation, the Subsidiaries
Borrowers parties thereto, the Lenders parties thereto, ,
Nationsbank, N.A. and The Toronto-Dominion Bank as
Syndication Agents, The Chase Manhattan Bank as
Documentation Agent, and Morgan Guaranty Trust Company of
New York as Administrative Agent is incorporated by
reference to Exhibit 10 (x) to Form 10-Q for the quarter
ended March 31, 1998.
(v*) The CBS Corporation 1998 Executive Annual Incentive Plan
is incorporated herein by reference to Exhibit A to the
Corporation's Definitive Proxy Statement for the Annual
Meeting of Shareholders held on May 6, 1998, as filed
with the Commission on March 25, 1998.
(w) Asset Purchase Agreement, dated June 25, 1998, between
the Corporation and WGNH Acquisition, LLC, an entity
owned 60% by Morrison Knudson Corporation and 40% by BNFL
USA Group, Inc., relating to the Corporation's Energy
Systems Business Unit.
(x) Asset Purchase Agreement, dated June 25, 1998, between
the Corporation and WGNH Acquisition, LLC, an entity
owned 60% by Morrison Knudson Corporation and 40% by BNFL
USA Group, Inc., relating to the Corporation's Government
and Environmental Services Company.
(y) Amendment No. 1 to the Asset Purchase Agreement, dated
January 23, 1998, to the Asset Purchase Agreement, dated
November 14, 1997, between the Corporation and Siemens
Power Generations Corporation, a subsidiary of Siemens
A.G. is incorporated by reference to Exhibit 10(y) to
Form 10-Q for the quarter ended March 31, 1998.
* Identifies management contract or compensatory plan or arrangement.
(27) FINANCIAL DATA SCHEDULE
B) REPORTS ON FORM 8-K
A Current Report on Form 8-K (Items 5 and 7) dated April 30, 1998, filing a
press release concerning the Corporation's earnings for the first quarter of
1998.
A Current Report on Form 8-K (Items 5 and 7) dated June 5, 1998, announcing the
completion of the acquisition of the radio broadcast operations of American
Radio.
A Current Report on Form 8-K (Items 5 and 7) dated June 26, 1998, regarding the
Corporation's announcement of definitive agreements to sell its Energy Systems
and Government Operations businesses.
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SIGNATURE
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, on the 14th day of August, 1998.
CBS CORPORATION
Carol V. Savage
-----------------------
Vice President ,Finance
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