Paramount Global - Quarter Report: 2017 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended March 31, 2017



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

For the transition period from ____________ to ____________

Commission File Number 001-09553

CBS CORPORATION

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)	04-2949533 (I.R.S. Employer Identification No.)

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

(212) 975-4321

Registrant’s telephone number, including area code

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

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

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



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

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

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

Number of shares of common stock outstanding at April 28, 2017:

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

Class B Common Stock, par value $.001 per share— 368,358,084

CBS CORPORATION

INDEX TO FORM 10-Q



		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2017 and March 31, 2016	3

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

	Consolidated Balance Sheets (Unaudited) at March 31, 2017 and December 31, 2016	5

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

	Notes to Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition.	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	46

Item 4.	Controls and Procedures.	46

	PART II – OTHER INFORMATION

Item 1A.	Risk Factors.	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	47

Item 6.	Exhibits.	48

- 2-

PART I – FINANCIAL INFORMATION



Item 1.	Financial Statements.

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in millions, except per share amounts)



	Three Months Ended
	March 31,
	2017			2016
Revenues	$	3,343		$	3,588
Costs and expenses:
Operating	2,074			2,272
Selling, general and administrative	510			503
Depreciation and amortization	55			57
Other operating items, net	—			(9		)
Total costs and expenses	2,639			2,823
Operating income	704			765
Interest expense	(109		)	(100		)
Interest income	13			7
Other items, net	1			(3		)
Earnings from continuing operations before income taxes and equity in loss of investee companies	609			669
Provision for income taxes	(138		)	(206		)
Equity in loss of investee companies, net of tax	(17		)	(21		)
Net earnings from continuing operations	454			442
Net earnings (loss) from discontinued operations, net of tax (Note 3)	(706		)	31
Net earnings (loss)	$	(252	)	$	473

Basic net earnings (loss) per common share:
Net earnings from continuing operations	$	1.11		$	.96
Net earnings (loss) from discontinued operations	$	(1.72	)	$	.07
Net earnings (loss)	$	(.61	)	$	1.03

Diluted net earnings (loss) per common share:
Net earnings from continuing operations	$	1.09		$	.95
Net earnings (loss) from discontinued operations	$	(1.70	)	$	.07
Net earnings (loss)	$	(.61	)	$	1.02

Weighted average number of common shares outstanding:
Basic	410			459
Diluted	416			464

Dividends per common share	$	.18		$	.15

See notes to consolidated financial statements.

-3-

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; in millions)



	Three Months Ended
	March 31,
	2017			2016
Net earnings (loss)	$	(252	)	$	473
Other comprehensive income, net of tax:
Cumulative translation adjustments	2			1
Amortization of net actuarial loss and prior service cost	12			10
Total other comprehensive income, net of tax	14			11
Total comprehensive income (loss)	$	(238	)	$	484

See notes to consolidated financial statements.

-4-

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except per share amounts)



	At				At
	March 31, 2017				December 31, 2016
ASSETS
Current Assets:
Cash and cash equivalents		$	163			$	598
Receivables, less allowances of $60 (2017 and 2016)		3,478				3,314
Programming and other inventory (Note 4)		1,201				1,427
Prepaid income taxes		—				30
Prepaid expenses		165				185
Other current assets		355				204
Current assets of discontinued operations (Note 3)		258				305
Total current assets		5,620				6,063
Property and equipment		2,943				2,935
Less accumulated depreciation and amortization		1,723				1,694
Net property and equipment		1,220				1,241
Programming and other inventory (Note 4)		2,546				2,439
Goodwill		4,889				4,864
Intangible assets		2,631				2,633
Other assets		2,539				2,707
Assets of discontinued operations (Note 3)		3,577				4,291
Total Assets		$	23,022			$	24,238

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	158			$	148
Accrued compensation		182				369
Participants’ share and royalties payable		1,022				1,024
Program rights		477				290
Deferred revenues		173				152
Income taxes payable		92				—
Commercial paper (Note 6)		30				450
Current portion of long-term debt (Note 6)		23				23
Accrued expenses and other current liabilities		1,116				1,097
Current liabilities of discontinued operations (Note 3)		151				155
Total current liabilities		3,424				3,708
Long-term debt (Note 6)		8,900				8,902
Pension and postretirement benefit obligations		1,655				1,769
Deferred income tax liabilities, net		624				590
Other liabilities		3,080				3,129
Liabilities of discontinued operations (Note 3)		2,454				2,451

Commitments and contingencies (Note 10)

Stockholders’ Equity:
Class A Common Stock, par value $.001 per share; 375 shares authorized; 38 (2017 and 2016) shares issued		—				—
Class B Common Stock, par value $.001 per share; 5,000 shares authorized; 831 (2017) and 829 (2016) shares issued		1				1
Additional paid-in capital		43,847				43,913
Accumulated deficit		(19,509		)		(19,257		)
Accumulated other comprehensive loss (Note 8)		(753		)		(767		)
		23,586				23,890
Less treasury stock, at cost; 462 (2017) and 455 (2016) Class B shares		20,701				20,201
Total Stockholders’ Equity		2,885				3,689
Total Liabilities and Stockholders’ Equity		$	23,022			$	24,238

See notes to consolidated financial statements.

-5-

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)



	Three Months Ended
	March 31,
	2017			2016
Operating Activities:
Net earnings (loss)	$	(252	)	$	473
Less: Net earnings (loss) from discontinued operations	(706		)	31
Net earnings from continuing operations	454			442
Adjustments to reconcile net earnings from continuing operations to net cash flow provided by operating activities from continuing operations:
Depreciation and amortization	55			57
Stock-based compensation	40			39
Equity in loss of investee companies, net of tax and distributions	17			22
Change in assets and liabilities, net of investing and financing activities	112			363
Net cash flow provided by operating activities from continuing operations	678			923
Net cash flow provided by operating activities from discontinued operations	41			105
Net cash flow provided by operating activities	719			1,028
Investing Activities:
Acquisitions	(21		)	(50		)
Capital expenditures	(27		)	(34		)
Investments in and advances to investee companies	(49		)	(32		)
Proceeds from dispositions	1			21
Other investing activities	14			(7		)
Net cash flow used for investing activities from continuing operations	(82		)	(102		)
Net cash flow (used for) provided by investing activities from discontinued operations	(7		)	4
Net cash flow used for investing activities	(89		)	(98		)
Financing Activities:
Repayments of short-term debt borrowings, net	(420		)	—
Repayment of senior debentures	—			(200		)
Repayment of debt borrowings of CBS Radio	(3		)	—
Payment of capital lease obligations	(4		)	(4		)
Payment of contingent consideration	(7		)	—
Dividends	(77		)	(73		)
Purchase of Company common stock	(531		)	(533		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation	(76		)	(46		)
Proceeds from exercise of stock options	36			6
Excess tax benefit from stock-based compensation (Note 1)	—			8
Net cash flow used for financing activities	(1,082		)	(842		)
Net (decrease) increase in cash and cash equivalents	(452		)	88
Cash and cash equivalents at beginning of period (includes $24 (2017) and $6 (2016) of discontinued operations cash)	622			323
Cash and cash equivalents at end of period (includes $7 (2017) and $2 (2016) of discontinued operations cash)	$	170		$	411
Supplemental disclosure of cash flow information
Cash paid for interest:
Continuing operations	$	162		$	158
Discontinued operations	$	11		$	—

Cash paid for income taxes:
Continuing operations	$	1		$	7
Discontinued operations	$	12		$	—

See notes to consolidated financial statements.

-6-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollars in millions, except per share amounts)

1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

Basis of Presentation-The accompanying unaudited consolidated financial statements of the Company have been prepared pursuant to the rules of the Securities and Exchange Commission. These financial statements should be read in conjunction with the more detailed financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

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

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

Other Operating Items, Net-Other operating items, net for the three months ended March 31, 2016 included a gain from the sale of a business and a multiyear, retroactive impact of a new operating tax.

Net Earnings (Loss) per Common Share-Basic net earnings (loss) per share (“EPS”) is based upon net earnings (loss) divided by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the effect of the assumed exercise of stock options and vesting of restricted stock units (“RSUs”) and market-based performance share units (“PSUs”) only in the periods in which such effect would have been dilutive. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, were 4 million stock options for the three months ended March 31, 2017 and 8 million stock options and RSUs for the three months ended March 31, 2016.

-7-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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



	Three Months Ended
	March 31,
(in millions)	2017	2016
Weighted average shares for basic EPS	410	459
Dilutive effect of shares issuable under stock-based compensation plans	6	5
Weighted average shares for diluted EPS	416	464

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

Additional Paid-In Capital-For the three months ended March 31, 2017 and 2016, the Company recorded dividends of $75 million and $69 million, respectively, as a reduction to additional paid-in capital as the Company had an accumulated deficit balance.

Adoption of New Accounting Standards

Improvements to Employee Share-Based Payment Accounting

During the first quarter of 2017, the Company adopted amended Financial Accounting Standards Board (“FASB”) guidance which simplifies several aspects of the accounting for employee share-based payment transactions. Under this amended guidance, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the income statement in the period in which the awards vest or are exercised. In the statement of cash flows, excess tax benefits are classified with other income tax cash flows in operating activities. As a result of the adoption of this guidance, the Company’s excess tax benefits associated with the exercise of stock options and vesting of RSUs for the three months ended March 31, 2017 were recorded in the provision for income taxes on the Consolidated Statement of Operations. The guidance requires the income statement classification to be applied prospectively, and therefore, excess tax benefits for prior periods remain classified in stockholders’ equity on the balance sheet. The Company elected to apply the cash flow classification provision of this guidance prospectively and therefore, excess tax benefits for prior periods remain classified as financing activities on the statements of cash flows. The amended guidance also gives the option to make a policy election to account for forfeitures as they occur. The Company, however, has elected to continue its existing practice of estimating forfeitures.

Simplifying the Accounting for Goodwill Impairment

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

-8-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Recent Pronouncements

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

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

Clarifying the Definition of a Business

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

Intra-Entity Transfers of Assets Other than Inventory

In October 2016, the FASB issued amended guidance on the accounting for income taxes, which eliminates the exception in existing guidance which defers the recognition of the tax effects of intra-entity asset transfers other than inventory until the transferred asset is sold to a third party. Rather, the amended guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted as of the beginning of an annual reporting period. The Company is currently assessing the impact of this guidance on its consolidated financial statements.

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

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

Leases

In February 2016, the FASB issued new guidance on the accounting for leases, which supersedes previous lease guidance. Under this guidance, for all leases with terms in excess of one year, including operating leases, the Company will be required to recognize on its balance sheet a lease liability and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance retains a distinction between finance leases and operating leases and the classification criteria is substantially similar to previous guidance. Additionally, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not

-9-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

significantly changed. The Company is currently evaluating the impact of this guidance on its consolidated balance sheets. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted.

Revenue from Contracts with Customers

In May 2014, the FASB issued guidance on the recognition of revenues which provides a single, comprehensive revenue recognition model for all contracts with customers and supersedes most existing revenue recognition guidance. The main principle under this guidance is that an entity should recognize revenue at the amount it expects to be entitled to in exchange for the transfer of goods or services to customers. The Company has identified the predominant changes to its accounting policies resulting from the application of this guidance and is in the process of quantifying the impact on its consolidated financial statements and evaluating the additional disclosures that may be required. The Company anticipates that it will apply the modified retrospective method of adoption. The cumulative effect of the initial adoption will be reflected as an adjustment to the opening balance of retained earnings as of the date of adoption; however, the Company does not expect this guidance to have a significant impact on the Company’s consolidated financial statements on an annual basis. This guidance is effective for the Company beginning in the first quarter of 2018.

2) STOCK-BASED COMPENSATION

The following table summarizes the Company’s stock-based compensation expense for the three months ended March 31, 2017 and 2016.



	Three Months Ended
	March 31,
	2017			2016
RSUs and PSUs	$	33		$	32
Stock options	7			7
Stock-based compensation expense, before income taxes	40			39
Related tax benefit	(15		)	(15		)
Stock-based compensation expense, net of tax benefit	$	25		$	24

During the three months ended March 31, 2017, the Company granted 2 million RSUs for CBS Corp. Class B Common Stock with a weighted average per unit grant-date fair value of $66.29. RSUs granted during the first three months of 2017 generally vest over a one- to four-year service period. Compensation expense for RSUs is determined based upon the market price of the shares underlying the awards on the date of grant. For certain RSU awards the number of shares an employee earns ranges from 0% to 120% of the target award, based on the outcome of established performance conditions. Compensation expense is recorded based on the probable outcome of the performance conditions. During the three months ended March 31, 2017, the Company also granted awards of market-based PSUs. The number of shares that will be issued upon vesting of the PSUs is based on the Company’s stock price performance over a designated measurement period, as well as the achievement of established operating goals. The fair value of the PSUs is determined on the grant date using a Monte Carlo simulation model and is expensed over the required employee service period. The fair value of the PSU awards granted during the three months ended March 31, 2017 was $23 million.

During the three months ended March 31, 2017, the Company also granted 1 million stock options with a weighted average exercise price of $66.31. Stock options granted during the first three months of 2017 vest over a four-year service period and expire eight years from the date of grant. Compensation expense for stock options is determined based on the grant date fair value of the award calculated using the Black-Scholes options-pricing model.

-10-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Total unrecognized compensation cost related to unvested RSUs and PSUs at March 31, 2017 was $284 million, which is expected to be recognized over a weighted average period of 2.7 years. Total unrecognized compensation cost related to unvested stock option awards at March 31, 2017 was $58 million, which is expected to be recognized over a weighted average period of 2.8 years.

3) DISCONTINUED OPERATIONS

On February 2, 2017, the Company entered into an agreement with Entercom to combine the Company’s radio business, CBS Radio, with Entercom in a merger to be effected through a Reverse Morris Trust transaction, which is expected to be tax-free to CBS Corp. and its stockholders. In connection with this transaction, Entercom will issue up to 105 million shares of its Class A common stock on a fully diluted basis, and the Company intends to split-off CBS Radio through an exchange offer, in which the Company’s stockholders may elect to exchange shares of the Company’s Class B Common Stock for shares of CBS Radio, which will then be immediately converted into shares of Entercom Class A common stock at the time of the merger. The Company expects the transaction to be completed during the second half of 2017, subject to customary approvals and closing conditions. CBS Radio has been classified as held for sale and presented as a discontinued operation in the Company’s consolidated financial statements for all periods presented.

FASB Accounting Standards Codification (“ASC”) 360 requires that an asset classified as held for sale be measured each reporting period at the lower of its carrying amount or fair value less cost to sell. The ultimate value of the transaction with Entercom will be determined based on Entercom’s stock price at the closing of the transaction. The Company recorded a noncash charge of $715 million for the three months ended March 31, 2017 to establish a valuation allowance to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. In accordance with ASC 360, the valuation allowance will continue to be adjusted based on the trading price of Entercom’s stock, which could result in future gains or losses. A 10% change to the Entercom stock price would change the carrying value of CBS Radio by approximately $130 million.

The following table sets forth details of net earnings (loss) from discontinued operations for the three months ended March 31, 2017 and 2016.



	Three Months Ended March 31,
	2017			2016
Revenues	$	250		$	262
Costs and expenses:
Operating	89			85
Selling, general and administrative	122			114
Depreciation and amortization^(a)	—			7
Provision for valuation allowance	715			—
Total costs and expenses	926			206
Operating income (loss)	(676		)	56
Interest expense	(19		)	—
Earnings (loss) from discontinued operations	(695		)	56
Income tax provision	(11		)	(25		)
Net earnings (loss) from discontinued operations, net of tax	$	(706	)	$	31

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

-11-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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



	At				At
	March 31, 2017				December 31, 2016
Receivables, net		$	204			$	244
Other current assets		54				61
Goodwill		1,285				1,285
Intangible assets		2,832				2,832
Net property and equipment		148				145
Other assets		27				29
Valuation allowance for carrying value		(715		)		—
Total Assets		$	3,835			$	4,596
Current portion of long-term debt		$	10			$	10
Other current liabilities		141				145
Long-term debt		1,333				1,335
Deferred income tax liabilities		1,004				998
Other liabilities		117				118
Total Liabilities		$	2,605			$	2,606

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



	At				At
	March 31, 2017				December 31, 2016
Term Loan due October 2023, net of discount		$	952			$	955
7.250% Senior Notes due November 2024		400				400
Revolving Credit Facility		10				10
Deferred financing costs		(19		)		(20		)
Total long-term debt, including current portion		$	1,343			$	1,345

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

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

-12-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

4) PROGRAMMING AND OTHER INVENTORY



	At			At
	March 31, 2017			December 31, 2016
Acquired program rights		$	1,539		$	1,773
Internally produced programming:
Released		1,761			1,746
In process and other		392			298
Publishing, primarily finished goods		55			49
Total programming and other inventory		3,747			3,866
Less current portion		1,201			1,427
Total noncurrent programming and other inventory		$	2,546		$	2,439

5) RELATED PARTIES

National Amusements, Inc. National Amusements, Inc. (“NAI”) is the controlling stockholder of CBS Corp. and Viacom Inc. Mr. Sumner M. Redstone, the controlling stockholder, chairman of the board of directors and chief executive officer of NAI, is the Chairman Emeritus of CBS Corp. and the Chairman Emeritus of Viacom Inc. In addition, Ms. Shari Redstone, Mr. Sumner M. Redstone’s daughter, is the president and a director of NAI and the vice chair of the Board of Directors of each of CBS Corp. and Viacom Inc. Mr. David R. Andelman is a director of CBS Corp. and serves as a director of NAI. At March 31, 2017, NAI directly or indirectly owned approximately 79.5% of CBS Corp.’s voting Class A Common Stock, and owned approximately 9.6% of CBS Corp.’s Class A Common Stock and non-voting Class B Common Stock on a combined basis. NAI is controlled by Mr. Redstone through the Sumner M. Redstone National Amusements Trust (the “SMR Trust”), which owns 80% of the voting interest of NAI, and such voting interest of NAI held by the SMR Trust is voted solely by Mr. Redstone until his incapacity or death. The SMR Trust provides that in the event of Mr. Redstone’s death or incapacity, voting control of the NAI voting interest held by the SMR Trust will pass to seven trustees, who will include CBS Corporation directors Ms. Shari Redstone and Mr. David R. Andelman. No member of the Company’s management is a trustee of the SMR Trust.

Viacom Inc. As part of its normal course of business, the Company licenses its television content, leases production facilities and sells advertising spots to various subsidiaries of Viacom Inc. Viacom Inc. also distributes certain of the Company’s television programs in the home entertainment market. The Company’s total revenues from these transactions were $54 million and $36 million for the three months ended March 31, 2017 and 2016, respectively.

The Company places advertisements with and leases production facilities from various subsidiaries of Viacom Inc. The total amounts for these transactions were $5 million and $7 million for the three months ended March 31, 2017 and 2016, respectively.

-13-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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



	At			At
	March 31, 2017			December 31, 2016
Receivables		$	89		$	113
Other assets (Receivables, noncurrent)		60			35
Total amounts due from Viacom Inc.		$	149		$	148

Other Related Parties. The Company has equity interests in two domestic television networks and several international joint ventures for television channels from which the Company earns revenues primarily by selling its television programming. Total revenues earned from sales to these joint ventures were $26 million and $32 million for the three months ended March 31, 2017 and 2016, respectively. At March 31, 2017 and December 31, 2016, total amounts due from these joint ventures were $34 million and $47 million, respectively.

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

6) BANK FINANCING AND DEBT

The following table sets forth the Company’s debt.



	At			At
	March 31, 2017			December 31, 2016
Commercial paper		$	30		$	450
Senior debt (1.95% - 7.875% due 2017 - 2045) ^(a)		8,851			8,850
Obligations under capital leases		72			75
Total debt		8,953			9,375
Less commercial paper		30			450
Less current portion of long-term debt		23			23
Total long-term debt, net of current portion		$	8,900		$	8,902

(a) At March 31, 2017 and December 31, 2016, the senior debt balances included (i) a net unamortized discount of $50 million and $52 million, respectively, (ii) unamortized deferred financing costs of $42 million and $43 million, respectively, and (iii) an increase in the carrying value of the debt relating to previously settled fair value hedges of $4 million and $5 million, respectively. The face value of the Company’s senior debt was $8.94 billion at both March 31, 2017 and December 31, 2016.

At March 31, 2017, the Company classified $400 million of debt maturing in July 2017 as long-term debt on the Consolidated Balance Sheet, reflecting its intent and ability to refinance this debt on a long-term basis.

Commercial Paper

The Company had outstanding commercial paper borrowings under its $2.5 billion commercial paper program of $30 million and $450 million at March 31, 2017 and December 31, 2016, respectively, each with maturities of less than 45 days. The weighted average interest rate for these borrowings was 1.20% at March 31, 2017 and 0.98% at December 31, 2016.

-14-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Credit Facility

At March 31, 2017, the Company had a $2.5 billion revolving credit facility (the “Credit Facility”) which expires in June 2021. The Credit Facility requires the Company to maintain a maximum Consolidated Leverage Ratio of 4.5x at the end of each quarter as further described in the Credit Facility. At March 31, 2017, the Company’s Consolidated Leverage Ratio was approximately 2.8x.

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

The Credit Facility is used for general corporate purposes. At March 31, 2017, the Company had no borrowings outstanding under the Credit Facility and the remaining availability under the Credit Facility, net of outstanding letters of credit, was $2.49 billion.

7) PENSION AND OTHER POSTRETIREMENT BENEFITS

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



	Pension Benefits						Postretirement Benefits
Three Months Ended March 31,	2017			2016			2017			2016
Components of net periodic cost:
Service cost	$	7		$	8		$	—		$	—
Interest cost	48			54			4			5
Expected return on plan assets	(50		)	(57		)	—			—
Amortization of actuarial loss (gain) ^(a)	25			21			(5		)	(5		)
Net periodic cost	$	30		$	26		$	(1	)	$	—

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

8) STOCKHOLDERS’ EQUITY

During the first quarter of 2017, the Company repurchased 7.6 million shares of its Class B Common Stock under its share repurchase program for $500 million, at an average cost of $65.97 per share. At March 31, 2017, the Company had $3.61 billion of authorization remaining under its repurchase program.

During the first quarter of 2017, the Company declared a quarterly cash dividend of $.18 on its Class A and Class B Common Stock, resulting in total dividends of $75 million, which were paid on April 1, 2017.

-15-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Accumulated Other Comprehensive Income (Loss)

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



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



	Cumulative Translation Adjustments		Net Actuarial Gain (Loss) and Prior Service Cost				Accumulated Other Comprehensive Loss
At December 31, 2015	$	152	$	(922	)			$	(770	)
Other comprehensive income before reclassifications	1		—					1
Reclassifications to net earnings (loss)	—		10			^(a)		10
Net other comprehensive income	1		10					11
At March 31, 2016	$	153	$	(912	)			$	(759	)


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

The net actuarial gain (loss) and prior service cost related to pension and other postretirement benefit plans included in other comprehensive income is net of a tax provision of $8 million and $6 million for the three months ended March 31, 2017 and 2016, respectively.

9) INCOME TAXES

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

The provision for income taxes was $138 million for the three months ended March 31, 2017 and $206 million for the three months ended March 31, 2016, reflecting an effective income tax rate of 22.7% and 30.8%, respectively. The income tax provision for the three months ended March 31, 2017 included a tax benefit of $22 million from the resolution of certain state income tax matters and excess tax benefits of $27 million associated with the exercise of stock options and vesting of RSUs. During the first quarter of 2017, the Company adopted FASB guidance which requires excess tax benefits to be recognized within the income tax provision on the statement of operations. Previously, excess tax benefits were recorded in stockholders’ equity on the balance sheet.

10) COMMITMENTS AND CONTINGENCIES

Guarantees

The Company has indemnification obligations with respect to letters of credit and surety bonds primarily used as security against non-performance in the normal course of business. At March 31, 2017, the outstanding letters of credit and surety bonds approximated $103 million and were not recorded on the Consolidated Balance Sheet.

-16-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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

Legal Matters

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

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

Claims are frequently filed and/or settled in groups, which may make the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. The Company does not report as pending those claims on inactive, stayed, deferred or similar dockets which some jurisdictions have established for claimants who allege minimal or no impairment. As of March 31, 2017, the Company had pending approximately 33,600 asbestos claims, as compared with approximately 33,610 as of December 31, 2016 and 35,040 as of March 31, 2016. During the first quarter of 2017, the Company received approximately 860 new claims and closed or moved to an inactive docket approximately 870 claims. The Company reports claims as closed when it becomes aware that a dismissal order has been entered by a court or when the Company has reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other factors. In 2016, the Company’s costs for settlement and defense of asbestos claims after insurance and taxes were approximately $48 million. In 2015, as the result of an insurance settlement, insurance recoveries exceeded the Company’s after tax costs for settlement and defense of asbestos claims by approximately $5 million. The Company’s costs for settlement and defense of asbestos claims may vary year to year and insurance proceeds are not always recovered in the same period as the insured portion of the expenses.

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

-17-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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

11) RESTRUCTURING CHARGES

During the year ended December 31, 2016, in a continued effort to reduce its cost structure, the Company initiated restructuring plans across several of its businesses, primarily for the reorganization of certain business operations. As a result, the Company recorded restructuring charges of $30 million, reflecting $19 million of severance costs and $11 million of costs associated with exiting contractual obligations and other related costs. During the year ended December 31, 2015, the Company recorded restructuring charges of $45 million, reflecting $24 million of severance costs and $21 million of costs associated with exiting contractual obligations and other related costs. As of March 31, 2017, the cumulative settlements for the 2016 and 2015 restructuring charges were $47 million, of which $29 million was for severance costs and $18 million was for costs associated with contractual obligations.



	Balance at			2017				Balance at
	December 31, 2016			Settlements				March 31, 2017
Entertainment		$	20		$	(8	)		$	12
Cable Networks		4			(1		)		3
Publishing		1			—				1
Local Media		12			(1		)		11
Corporate		2			(1		)		1
Total		$	39		$	(11	)		$	28



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

12) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

The Company’s carrying value of financial instruments approximates fair value, except for notes and debentures, which are not recorded at fair value. At March 31, 2017 and December 31, 2016, the carrying value of the Company’s senior debt was $8.85 billion and the fair value, which is estimated based on quoted market prices for similar liabilities (Level 2) and includes accrued interest, was $9.52 billion and $9.51 billion, respectively.

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

-18-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Foreign Exchange Contracts

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

At March 31, 2017 and December 31, 2016, the notional amount of all foreign exchange contracts was $394 million and $433 million, respectively.

Losses recognized on derivative financial instruments were as follows:



	Three Months Ended
	March 31,
	2017			2016			Financial Statement Account
Non-designated foreign exchange contracts	$	(8	)	$	(6	)	Other items, net

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

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



At March 31, 2017	Level 1		Level 2		Level 3		Total
Assets:
Foreign currency hedges	$	—	$	23	$	—	$	23
Total Assets	$	—	$	23	$	—	$	23
Liabilities:
Deferred compensation	$	—	$	358	$	—	$	358
Foreign currency hedges	—		4		—		4
Total Liabilities	$	—	$	362	$	—	$	362



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

-19-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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

13) REPORTABLE SEGMENTS

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



	Three Months Ended
	March 31,
	2017			2016
Revenues:
Entertainment	$	2,347		$	2,587
Cable Networks	543			525
Publishing	161			145
Local Media	409			448
Corporate/Eliminations	(117		)	(117		)
Total Revenues	$	3,343		$	3,588

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



	Three Months Ended
	March 31,
	2017		2016
Intercompany Revenues:
Entertainment	$	119	$	122
Local Media	3		2
Total Intercompany Revenues	$	122	$	124

-20-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

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



	Three Months Ended
	March 31,
	2017			2016
Segment Operating Income (Loss):
Entertainment	$	398		$	449
Cable Networks	248			228
Publishing	14			13
Local Media	123			150
Corporate	(79		)	(84		)
Total Segment Operating Income	704			756
Other operating items, net ^(a)	—			9
Operating income	704			765
Interest expense	(109		)	(100		)
Interest income	13			7
Other items, net	1			(3		)
Earnings from continuing operations before income taxes and equity in loss of investee companies	609			669
Provision for income taxes	(138		)	(206		)
Equity in loss of investee companies, net of tax	(17		)	(21		)
Net earnings from continuing operations	454			442
Net earnings (loss) from discontinued operations, net of tax	(706		)	31
Net earnings (loss)	$	(252	)	$	473

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



	Three Months Ended
	March 31,
	2017		2016
Depreciation and Amortization:
Entertainment	$	29	$	30
Cable Networks	6		6
Publishing	1		1
Local Media	11		11
Corporate	8		9
Total Depreciation and Amortization	$	55	$	57

-21-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)



	Three Months Ended
	March 31,
	2017		2016
Stock-based Compensation:
Entertainment	$	15	$	15
Cable Networks	3		3
Publishing	1		1
Local Media	3		3
Corporate	18		17
Total Stock-based Compensation	$	40	$	39



	Three Months Ended
	March 31,
	2017		2016
Capital Expenditures:
Entertainment	$	14	$	13
Cable Networks	3		2
Publishing	1		3
Local Media	5		7
Corporate	4		9
Total Capital Expenditures	$	27	$	34



	At			At
	March 31, 2017			December 31, 2016
Assets:
Entertainment		$	11,519		$	11,262
Cable Networks		2,620			2,618
Publishing		822			880
Local Media		4,038			4,065
Corporate/Eliminations		188			817
Discontinued operations		3,835			4,596
Total Assets		$	23,022		$	24,238

-22-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

14) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

CBS Operations Inc. is a wholly owned subsidiary of the Company. CBS Operations Inc. has fully and unconditionally guaranteed CBS Corp.’s senior debt securities. The following condensed consolidating financial statements present the results of operations, financial position and cash flows of CBS Corp., CBS Operations Inc., the direct and indirect Non-Guarantor Affiliates of CBS Corp. and CBS Operations Inc., and the eliminations necessary to arrive at the information for the Company on a consolidated basis.



	Statement of Operations
	For the Three Months Ended March 31, 2017
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated
Revenues	$	42		$	3		$	3,298		$	—		$	3,343
Costs and expenses:
Operating	24			1			2,049			—			2,074
Selling, general and administrative	20			64			426			—			510
Depreciation and amortization	1			6			48			—			55
Total costs and expenses	45			71			2,523			—			2,639
Operating income (loss)	(3		)	(68		)	775			—			704
Interest (expense) income, net	(122		)	(117		)	143			—			(96		)
Other items, net	—			(13		)	14			—			1
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies	(125		)	(198		)	932			—			609
Benefit (provision) for income taxes	38			60			(236		)	—			(138		)
Equity in earnings (loss) of investee companies, net of tax	(165		)	354			(17		)	(189		)	(17		)
Net earnings (loss) from continuing operations	(252		)	216			679			(189		)	454
Net loss from discontinued operations, net of tax	—			—			(706		)	—			(706		)
Net earnings (loss)	$	(252	)	$	216		$	(27	)	$	(189	)	$	(252	)
Total comprehensive income (loss)	$	(238	)	$	214		$	(21	)	$	(193	)	$	(238	)

-23-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)



	Statement of Operations
	For the Three Months Ended March 31, 2016
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated
Revenues	$	47		$	3		$	3,538		$	—		$	3,588
Costs and expenses:
Operating	17			1			2,254			—			2,272
Selling, general and administrative	21			66			416			—			503
Depreciation and amortization	1			5			51			—			57
Other operating items, net	—			—			(9		)	—			(9		)
Total costs and expenses	39			72			2,712			—			2,823
Operating income (loss)	8			(69		)	826			—			765
Interest (expense) income, net	(124		)	(104		)	135			—			(93		)
Other items, net	(1		)	(10		)	8			—			(3		)
Earnings (loss) from continuing operations before income taxes and equity in earnings (loss) of investee companies	(117		)	(183		)	969			—			669
Benefit (provision) for income taxes	37			59			(302		)	—			(206		)
Equity in earnings (loss) of investee companies, net of tax	553			260			(21		)	(813		)	(21		)
Net earnings from continuing operations	473			136			646			(813		)	442
Net earnings from discontinued operations, net of tax	—			—			31			—			31
Net earnings	$	473		$	136		$	677		$	(813	)	$	473
Total comprehensive income	$	484		$	140		$	679		$	(819	)	$	484

-24-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)



	Balance Sheet
	At March 31, 2017
	CBS Corp.			CBS Operations Inc.		Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated
Assets
Cash and cash equivalents	$	44		$	—	$	119		$	—		$	163
Receivables, net	25			2		3,451			—			3,478
Programming and other inventory	4			3		1,194			—			1,201
Prepaid expenses and other current assets	16			39		499			(34		)	520
Current assets of discontinued operations	—			—		258			—			258
Total current assets	89			44		5,521			(34		)	5,620
Property and equipment	48			204		2,691			—			2,943
Less accumulated depreciation and amortization	26			146		1,551			—			1,723
Net property and equipment	22			58		1,140			—			1,220
Programming and other inventory	4			6		2,536			—			2,546
Goodwill	98			62		4,729			—			4,889
Intangible assets	—			—		2,631			—			2,631
Investments in consolidated subsidiaries	44,312			14,207		—			(58,519		)	—
Other assets	150			8		2,381			—			2,539
Intercompany	—			1,571		28,051			(29,622		)	—
Assets of discontinued operations	—			—		3,577			—			3,577
Total Assets	$	44,675		$	15,956	$	50,566		$	(88,175	)	$	23,022
Liabilities and Stockholders’ Equity
Accounts payable	$	1		$	1	$	156		$	—		$	158
Participants’ share and royalties payable	—			—		1,022			—			1,022
Program rights	4			3		470			—			477
Commercial paper	30			—		—			—			30
Current portion of long-term debt	6			—		17			—			23
Accrued expenses and other current liabilities	391			192		1,014			(34		)	1,563
Current liabilities of discontinued operations	—			—		151			—			151
Total current liabilities	432			196		2,830			(34		)	3,424
Long-term debt	8,799			—		101			—			8,900
Other liabilities	2,937			242		2,180			—			5,359
Liabilities of discontinued operations	—			—		2,454			—			2,454
Intercompany	29,622			—		—			(29,622		)	—
Stockholders’ Equity:
Preferred stock	—			—		126			(126		)	—
Common stock	1			123		590			(713		)	1
Additional paid-in capital	43,847			—		60,894			(60,894		)	43,847
Retained earnings (accumulated deficit)	(19,509		)	15,699		(13,865		)	(1,834		)	(19,509		)
Accumulated other comprehensive income (loss)	(753		)	27		56			(83		)	(753		)
	23,586			15,849		47,801			(63,650		)	23,586
Less treasury stock, at cost	20,701			331		4,800			(5,131		)	20,701
Total Stockholders’ Equity	2,885			15,518		43,001			(58,519		)	2,885
Total Liabilities and Stockholders’ Equity	$	44,675		$	15,956	$	50,566		$	(88,175	)	$	23,022

-25-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)



	Balance Sheet
	At December 31, 2016
	CBS Corp.			CBS Operations Inc.		Non- Guarantor Affiliates			Eliminations			CBS Corp. Consolidated
Assets
Cash and cash equivalents	$	321		$	—	$	277		$	—		$	598
Receivables, net	27			2		3,285			—			3,314
Programming and other inventory	3			3		1,421			—			1,427
Prepaid expenses and other current assets	102			55		297			(35		)	419
Current assets of discontinued operations	—			—		305			—			305
Total current assets	453			60		5,585			(35		)	6,063
Property and equipment	47			201		2,687			—			2,935
Less accumulated depreciation and amortization	25			140		1,529			—			1,694
Net property and equipment	22			61		1,158			—			1,241
Programming and other inventory	5			7		2,427			—			2,439
Goodwill	98			62		4,704			—			4,864
Intangible assets	—			—		2,633			—			2,633
Investments in consolidated subsidiaries	44,473			13,853		—			(58,326		)	—
Other assets	150			8		2,549			—			2,707
Intercompany	—			1,785		26,976			(28,761		)	—
Assets of discontinued operations	—			3		4,288			—			4,291
Total Assets	$	45,201		$	15,839	$	50,320		$	(87,122	)	$	24,238
Liabilities and Stockholders’ Equity
Accounts payable	$	1		$	3	$	144		$	—		$	148
Participants’ share and royalties payable	—			—		1,024			—			1,024
Program rights	4			4		282			—			290
Commercial paper	450			—		—			—			450
Current portion of long-term debt	6			—		17			—			23
Accrued expenses and other current liabilities	421			284		948			(35		)	1,618
Current liabilities of discontinued operations	—			—		155			—			155
Total current liabilities	882			291		2,570			(35		)	3,708
Long-term debt	8,798			—		104			—			8,902
Other liabilities	3,071			244		2,173			—			5,488
Liabilities of discontinued operations	—			—		2,451			—			2,451
Intercompany	28,761			—		—			(28,761		)	—
Stockholders’ Equity:
Preferred stock	—			—		126			(126		)	—
Common stock	1			123		590			(713		)	1
Additional paid-in capital	43,913			—		60,894			(60,894		)	43,913
Retained earnings (accumulated deficit)	(19,257		)	15,483		(13,838		)	(1,645		)	(19,257		)
Accumulated other comprehensive income (loss)	(767		)	29		50			(79		)	(767		)
	23,890			15,635		47,822			(63,457		)	23,890
Less treasury stock, at cost	20,201			331		4,800			(5,131		)	20,201
Total Stockholders’ Equity	3,689			15,304		43,022			(58,326		)	3,689
Total Liabilities and Stockholders’ Equity	$	45,201		$	15,839	$	50,320		$	(87,122	)	$	24,238

-26-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)



	Statement of Cash Flows
	For the Three Months Ended March 31, 2017
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations		CBS Corp. Consolidated
Net cash flow (used for) provided by operating activities	$	(256	)	$	(118	)	$	1,093		$	—	$	719
Investing Activities:
Acquisitions	—			—			(21		)	—		(21		)
Capital expenditures	—			(4		)	(23		)	—		(27		)
Investments in and advances to investee companies	—			—			(49		)	—		(49		)
Proceeds from dispositions	—			—			1			—		1
Other investing activities	14			—			—			—		14
Net cash flow provided by (used for) investing activities from continuing operations	14			(4		)	(92		)	—		(82		)
Net cash flow used for investing activities from discontinued operations	—			(1		)	(6		)	—		(7		)
Net cash flow provided by (used for) investing activities	14			(5		)	(98		)	—		(89		)
Financing Activities:
Repayments of short-term debt borrowings, net	(420		)	—			—			—		(420		)
Repayment of debt borrowings of CBS Radio	—			—			(3		)	—		(3		)
Payment of capital lease obligations	—			—			(4		)	—		(4		)
Payment of contingent consideration	—			—			(7		)	—		(7		)
Dividends	(77		)	—			—			—		(77		)
Purchase of Company common stock	(531		)	—			—			—		(531		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation	(76		)	—			—			—		(76		)
Proceeds from exercise of stock options	36			—			—			—		36
Increase (decrease) in intercompany payables	1,033			123			(1,156		)	—		—
Net cash flow (used for) provided by financing activities	(35		)	123			(1,170		)	—		(1,082		)
Net decrease in cash and cash equivalents	(277		)	—			(175		)	—		(452		)
Cash and cash equivalents at beginning of period (includes $24 million of discontinued operations cash)	321			—			301			—		622
Cash and cash equivalents at end of period (includes $7 million of discontinued operations cash)	$	44		$	—		$	126		$	—	$	170

-27-

CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)



	Statement of Cash Flows
	For the Three Months Ended March 31, 2016
	CBS Corp.			CBS Operations Inc.			Non- Guarantor Affiliates			Eliminations		CBS Corp. Consolidated
Net cash flow (used for) provided by operating activities	$	(157	)	$	(103	)	$	1,288		$	—	$	1,028
Investing Activities:
Acquisitions	—			—			(50		)	—		(50		)
Capital expenditures	—			(9		)	(25		)	—		(34		)
Investments in and advances to investee companies	—			—			(32		)	—		(32		)
Proceeds from dispositions	(2		)	—			23			—		21
Other investing activities	(7		)	—			—			—		(7		)
Net cash flow used for investing activities from continuing operations	(9		)	(9		)	(84		)	—		(102		)
Net cash flow provided by investing activities from discontinued operations	—			—			4			—		4
Net cash flow used for investing activities	(9		)	(9		)	(80		)	—		(98		)
Financing Activities:
Repayment of senior debentures	(200		)	—			—			—		(200		)
Payment of capital lease obligations	—			—			(4		)	—		(4		)
Dividends	(73		)	—			—			—		(73		)
Purchase of Company common stock	(533		)	—			—			—		(533		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation	(46		)	—			—			—		(46		)
Proceeds from exercise of stock options	6			—			—			—		6
Excess tax benefit from stock-based compensation	8			—			—			—		8
Increase (decrease) in intercompany payables	907			112			(1,019		)	—		—
Net cash flow provided by (used for) financing activities	69			112			(1,023		)	—		(842		)
Net (decrease) increase in cash and cash equivalents	(97		)	—			185			—		88
Cash and cash equivalents at beginning of period (includes $6 million of discontinued operations cash)	267			1			55			—		323
Cash and cash equivalents at end of period (includes $2 million of discontinued operations cash)	$	170		$	1		$	240		$	—	$	411

-28-



Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition.
	(Tabular dollars in millions, except per share amounts)

Management’s discussion and analysis of the results of operations and financial condition of CBS Corporation (the “Company” or “CBS Corp.”) should be read in conjunction with the consolidated financial statements and related notes in the Company’s Annual Report filed on Form 10-K for the fiscal year ended December 31, 2016.

Overview

Business overview and strategy

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

Operational highlights - Three Months Ended March 31, 2017 versus Three Months Ended March 31, 2016



Consolidated results of operations						Increase/(Decrease)
Three Months Ended March 31,	2017			2016		$			%
GAAP:
Revenues	$	3,343		$	3,588	$	(245	)	(7	)%
Operating income	$	704		$	765	$	(61	)	(8	)%
Net earnings from continuing operations	$	454		$	442	$	12		3	%
Net earnings (loss)	$	(252	)	$	473	$	(725	)	(153	)%
Diluted EPS from continuing operations	$	1.09		$	.95	$	.14		15	%
Diluted EPS	$	(.61	)	$	1.02	$	(1.63	)	(160	)%

Non-GAAP:^(a)
Adjusted operating income	$	704		$	756	$	(52	)	(7	)%
Adjusted net earnings from continuing operations	$	432		$	443	$	(11	)	(2	)%
Adjusted diluted EPS from continuing operations	$	1.04		$	.95	$	.09		9	%

(a) See page 31 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with accounting principles generally accepted in the United States (“GAAP”).

Results for the first quarter of 2017 demonstrated strength in the Company’s non-advertising revenues, including retransmission and station affiliation fees, television licensing sales, and revenues from the Company’s digital streaming services. However, comparability with the prior year was affected by the benefit in 2016 from the broadcast of Super Bowl 50 and an additional National Football League (“NFL”) playoff game on the CBS Television Network.

For the three months ended March 31, 2017, the 7% decrease in revenues was driven by lower advertising revenues as a result of the above-mentioned noncomparable NFL games. The decline in advertising revenues was offset by a 17% increase in affiliate and subscription fee revenues, reflecting 28% growth in station affiliation fees

-29-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

and retransmission revenues, as well as subscriber growth for the Company’s streaming subscription services, CBS All Access and the Showtime digital streaming subscription offering. In addition, content licensing and distribution revenues for the first quarter of 2017 increased 16%, reflecting growth in television licensing sales both domestically and in international markets.

Operating income decreased 8% mainly as a result of the lower revenues. Net earnings from continuing operations increased 3%, as a result of tax benefits in the first quarter of 2017 from the resolution of certain state income tax matters and from the exercise of stock options and vesting of restricted stock units (“RSUs”) as a result of the adoption of new accounting guidance during the quarter. Adjusted net earnings from continuing operations, which excludes a tax benefit of $22 million, or $.05 per diluted share, from the resolution of state income tax matters, decreased 2% due to lower operating income. The Company reported a net loss of $252 million for the three months ended March 31, 2017, which included a noncash charge of $715 million, or $1.72 per diluted share, in discontinued operations to establish a valuation allowance to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom Communications Corp (“Entercom”). CBS Radio is classified as held for sale and therefore, in accordance with Financial Accounting Standards Board (“FASB”) guidance, the valuation allowance will continue to be adjusted based on the trading price of Entercom’s stock, which could result in future gains or losses.

Diluted earnings per share (“EPS”) from continuing operations increased 15% due to the above-mentioned tax benefits and lower weighted average shares outstanding in the first quarter of 2017 as a result of the Company’s ongoing share repurchase program. Adjusted diluted EPS from continuing operations increased 9%. Diluted EPS for the first quarter of 2017 was a loss of $.61 as a result of the above-mentioned noncash charge at CBS Radio, compared with diluted EPS of $1.02 for the same prior-year period. Adjusted net earnings from continuing operations and Adjusted diluted EPS from continuing operations are non-GAAP financial measures. See page 31 for details of the discrete items excluded from financial results, along with reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

The Company generated operating cash flow from continuing operations of $678 million for the three months ended March 31, 2017, which included discretionary pension contributions of $100 million to prefund the Company’s qualified plans, compared with operating cash flow from continuing operations of $923 million for the three months ended March 31, 2016, which included the benefit from CBS’s broadcast of Super Bowl 50. Meanwhile, operating cash flow from continuing operations benefited from higher affiliate and subscription fee revenues in the first quarter of 2017. Free cash flow for the three months ended March 31, 2017 was $651 million compared with $889 million for the same prior-year period. Free cash flow is a non-GAAP financial measure. See “Free Cash Flow” on page 42 for a reconciliation of net cash flow provided by (used for) operating activities, the most directly comparable GAAP financial measure, to free cash flow.

Recent Developments

In connection with the Company’s previously announced agreement to combine CBS Radio with Entercom in a merger following the separation of CBS Radio through a tax-free split-off, CBS Radio filed a registration statement on Form S-4 and S-1 with the Securities and Exchange Commission (“SEC”) on April 13, 2017. The Company expects the transaction to be completed during the second half of 2017, subject to customary approvals and closing conditions. CBS Radio has been presented as a discontinued operation in the consolidated financial statements for all periods presented.

-30-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Share Repurchases and Dividends

During the first quarter of 2017, the Company repurchased 7.6 million shares of its Class B Common Stock under its share repurchase program for $500 million, at an average cost of $65.97 per share, leaving $3.61 billion of authorization at March 31, 2017.

Reconciliation of Non-GAAP Measures

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



	Three Months Ended March 31,
	2017		2016
Operating income	$	704	$	765
Exclude:
Other operating items, net ^(a)	—		(9		)
Adjusted operating income	$	704	$	756



	Three Months Ended March 31,
	2017			2016
Net earnings from continuing operations	$	454		$	442
Exclude:
Other operating items, net (net of tax of $4 million) ^(a)	—			(5		)
Discrete tax item ^(b)	(22		)	—
Write-down of equity investment	—			6
Adjusted net earnings from continuing operations	$	432		$	443



	Three Months Ended March 31,
	2017			2016
Diluted EPS from continuing operations	$	1.09		$	.95
Exclude:
Other operating items, net ^(a)	—			(.01		)
Discrete tax item ^(b)	(.05		)	—
Write-down of equity investment	—			.01
Adjusted diluted EPS from continuing operations	$	1.04		$	.95

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

(b) Reflects a tax benefit from the resolution of certain state income tax matters.

-31-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Consolidated Results of Operations

Three Months Ended March 31, 2017 versus Three Months Ended March 31, 2016

Revenues



	Three Months Ended March 31,
			% of Total Revenues				% of Total Revenues		Increase/(Decrease)
Revenues by Type	2017		% of Total Revenues		2016		% of Total Revenues		$			%
Advertising	$	1,603	48	%	$	2,085	58	%	$	(482	)	(23	)%
Content licensing and distribution	845		25		729		20		116			16
Affiliate and subscription fees	842		25		722		20		120			17
Other	53		2		52		2		1			2
Total Revenues	$	3,343	100	%	$	3,588	100	%	$	(245	)	(7	)%

Advertising

For the three months ended March 31, 2017, the 23% decrease in advertising revenues primarily reflects the impact of two noncomparable sporting events that benefited the first quarter of 2016: the broadcast of Super Bowl 50 and one additional NFL playoff game on the CBS Television Network. For the second quarter of 2017, advertising revenues will benefit from CBS’s broadcast of the National Semifinals and National Championship games of the NCAA Division I Men’s Basketball Championship (“NCAA Tournament”), which are broadcast on the CBS Television Network every other year through 2032 under the current agreements with the NCAA and Turner Broadcasting System, Inc. (“Turner”). In addition, in the second half of 2017, the advertising revenue comparison with the prior year will be negatively affected by the benefit in 2016 from strong political advertising.

Content Licensing and Distribution

For the three months ended March 31, 2017, the 16% increase in content licensing and distribution revenues reflects growth in domestic and international television licensing sales as a result of the Company’s recent increased investment in internally-produced series.

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

Affiliate and Subscription Fees

For the three months ended March 31, 2017, the 17% increase in affiliate and subscription fees reflects 28% growth in station affiliation fees and retransmission revenues, and higher revenues from the Company’s streaming subscription services, including CBS All Access and the Showtime digital streaming subscription offering.

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

-32-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

International Revenues

The Company generated approximately 14% and 12% of its total revenues from international regions for the three months ended March 31, 2017 and 2016, respectively.

Operating Expenses



	Three Months Ended March 31,
			% of Operating Expenses				% of Operating Expenses		Increase/(Decrease)
Operating Expenses by Type	2017		% of Operating Expenses		2016		% of Operating Expenses		$			%
Programming	$	857	41	%	$	1,108	49	%	$	(251	)	(23	)%
Production	657		32		637		28		20			3
Participation, distribution and royalty	236		11		212		9		24			11
Other	324		16		315		14		9			3
Total Operating Expenses	$	2,074	100	%	$	2,272	100	%	$	(198	)	(9	)%

For the three months ended March 31, 2017, the 23% decrease in programming expenses was driven by lower sports programming costs, as the first quarter of 2016 included costs associated with the broadcast of Super Bowl 50 and one additional NFL playoff game. The Super Bowl will be broadcast on CBS once every three years through 2022 under the current contract with the NFL. For the second quarter of 2017, programming expenses are expected to be higher than the second quarter of 2016 as a result of CBS’s broadcast of the NCAA Tournament.

For the three months ended March 31, 2017, the 3% increase in production expenses was mainly driven by higher costs associated with the increase in television licensing revenues, and a higher investment in internally produced television series. These increases were partially offset by production costs in the first quarter of 2016 relating to the broadcast of Super Bowl 50.

For the three months ended March 31, 2017, the 11% increase in participation, distribution and royalty costs primarily reflects higher participations and residuals resulting from the increase in television licensing revenues.

Selling, General and Administrative Expenses



	Three Months Ended March 31,
	2017		% of Revenues			2016		% of Revenues			Increase/(Decrease)
Selling, general and administrative expenses	$	510		15	%	$	503		14	%		1	%

Depreciation and Amortization



	Three Months Ended March 31,
	2017		2016		Increase/(Decrease)
Depreciation and amortization	$	55	$	57		(4	)%

For the three months ended March 31, 2017, the 4% decrease in depreciation and amortization was the result of intangibles and property and equipment that became fully amortized.

-33-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Other Operating Items, Net

For the three months ended March 31, 2016, other operating items, net included a gain from the sale of an internet business in China and a multiyear, retroactive impact of a new operating tax.

Interest Expense/Income



	Three Months Ended March 31,
	2017			2016			Increase/(Decrease)
Interest expense	$	(109	)	$	(100	)		9	%
Interest income	$	13		$	7			86	%

The following table presents the Company’s outstanding debt balances, excluding capital leases, and the weighted average interest rate as of March 31, 2017 and 2016:



	At March 31,
			Weighted Average					Weighted Average
	2017		Interest Rate			2016		Interest Rate
Total long-term debt	$	8,851		4.47	%	$	8,166		4.61	%
Commercial paper	$	30		1.20	%	$	—		n/a

n/a - not applicable

Other Items, Net



	Three Months Ended March 31,
	2017		2016			Increase/(Decrease)
Other items, net	$	1	$	(3	)		n/m

n/m - not meaningful

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

Provision for Income Taxes



	Three Months Ended March 31,
	2017			2016			Increase/(Decrease)
Tax provision	$	138		$	206			(33	)%
Effective tax rate	22.7		%	30.8		%

The provision for income taxes represents federal, state and local, and foreign taxes on earnings from continuing operations before income taxes and equity in loss of investee companies. The Company’s income tax provision for the three months ended March 31, 2017 included a tax benefit of $22 million from the resolution of certain state income tax matters and excess tax benefits of $27 million associated with the exercise of stock options and vesting of RSUs. During the first quarter of 2017, the Company adopted FASB guidance which requires excess tax benefits to be recognized within the income tax provision on the statement of operations. Previously, excess tax benefits were recorded in stockholders’ equity on the balance sheet.

-34-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Equity in Loss of Investee Companies, Net of Tax



	Three Months Ended March 31,
	2017			2016			Increase/(Decrease)
Equity in loss of investee companies, net of tax	$	(17	)	$	(21	)		(19	)%

For the three months ended March 31, 2016, equity in loss of investee companies, net of tax includes a $6 million write-down of an international television joint venture to its fair value.

Net Earnings from Continuing Operations and Diluted EPS from Continuing Operations



	Three Months Ended March 31,
	2017		2016		Increase/(Decrease)
Net earnings from continuing operations	$	454	$	442		3	%
Diluted EPS from continuing operations	$	1.09	$	.95		15	%

For the three months ended March 31, 2017, the 3% increase in net earnings from continuing operations, and the 15% increase in diluted EPS from continuing operations were each driven by the previously mentioned tax benefits, partially offset by lower operating income. Diluted EPS also benefited from lower weighted average shares outstanding as a result of the Company’s ongoing share repurchase program.

Net Earnings (Loss) from Discontinued Operations

The following table sets forth details of net earnings (loss) from discontinued operations for the three months ended March 31, 2017 and 2016.



	Three Months Ended March 31,
	2017			2016
Revenues	$	250		$	262
Costs and expenses:
Operating	89			85
Selling, general and administrative	122			114
Depreciation and amortization^(a)	—			7
Provision for valuation allowance	715			—
Total costs and expenses	926			206
Operating income (loss)	(676		)	56
Interest expense	(19		)	—
Earnings (loss) from discontinued operations	(695		)	56
Income tax provision	(11		)	(25		)
Net earnings (loss) from discontinued operations, net of tax	$	(706	)	$	31

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

-35-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

valuation of Entercom. In accordance with ASC 360, the valuation allowance will continue to be adjusted based on the trading price of Entercom’s stock, which could result in future gains or losses. A 10% change to the Entercom stock price would change the carrying value of CBS Radio by approximately $130 million.

Net Earnings (Loss) and Diluted EPS



	Three Months Ended March 31,
	2017			2016		Increase/(Decrease)
Net earnings (loss)	$	(252	)	$	473		(153	)%
Diluted EPS	$	(.61	)	$	1.02		(160	)%

Segment Results of Operations

Three Months Ended March 31, 2017 and 2016



	Three Months Ended March 31,
				% of Total Revenues						% of Total Revenues			Increase/(Decrease)
	2017			% of Total Revenues			2016			% of Total Revenues			$			%
Revenues:
Entertainment	$	2,347			70	%	$	2,587			72	%	$	(240	)	(9	)%
Cable Networks	543				16		525				15		18			3
Publishing	161				5		145				4		16			11
Local Media	409				12		448				12		(39		)	(9	)
Corporate/Eliminations	(117		)		(3	)	(117		)		(3	)	—			—
Total Revenues	$	3,343			100	%	$	3,588			100	%	$	(245	)	(7	)%



	Three Months Ended March 31,
				% of Total Operating Income						% of Total Operating Income
													Increase/(Decrease)
	2017						2016						$			%
Segment Operating Income (Loss):
Entertainment	$	398			57	%	$	449			59	%	$	(51	)	(11	)%
Cable Networks	248				35		228				30		20			9
Publishing	14				2		13				2		1			8
Local Media	123				17		150				20		(27		)	(18	)
Corporate	(79		)		(11	)	(84		)		(11	)	5			6
Total Segment Operating Income	704				100	%	756				100	%	(52		)	(7	)
Other operating items, net	—						9						(9		)	n/m
Total Operating Income	$	704					$	765					$	(61	)	(8	)%

n/m - not meaningful

-36-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)



	Three Months Ended March 31,
					Increase/(Decrease)
	2017		2016		$			%
Depreciation and Amortization:
Entertainment	$	29	$	30	$	(1	)	(3	)%
Cable Networks	6		6		—			—
Publishing	1		1		—			—
Local Media	11		11		—			—
Corporate	8		9		(1		)	(11	)
Total Depreciation and Amortization	$	55	$	57	$	(2	)	(4	)%

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



	Three Months Ended March 31,
							Increase/(Decrease)
	2017			2016			$			%
Revenues	$	2,347		$	2,587		$	(240	)	(9	)%
Segment Operating Income	$	398		$	449		$	(51	)	(11	)%
Segment Operating Income as a % of revenues	17		%	17		%
Depreciation and amortization	$	29		$	30		$	(1	)	(3	)%
Capital expenditures	$	14		$	13		$	1		8	%

Three Months Ended March 31, 2017 and 2016

For the three months ended March 31, 2017, the 9% decrease in revenues was driven by lower advertising revenues primarily as a result of the benefit in 2016 from the broadcast of Super Bowl 50 and one additional NFL playoff game on the CBS Television Network. Affiliate and subscription fees increased 28%, reflecting higher station affiliation fees and subscription growth at CBS All Access. Content licensing and distribution revenues grew 21% driven by higher domestic and international licensing sales.

For the three months ended March 31, 2017, the 11% decrease in operating income was driven by the impact of the above-mentioned noncomparable NFL games, which was partially offset by higher station affiliation fees.

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



	Three Months Ended March 31,
							Increase/(Decrease)
	2017			2016			$		%
Revenues	$	543		$	525		$	18	3	%
Segment Operating Income	$	248		$	228		$	20	9	%
Segment Operating Income as a % of revenues	46		%	43		%
Depreciation and amortization	$	6		$	6		$	—	—	%
Capital expenditures	$	3		$	2		$	1	50	%

Three Months Ended March 31, 2017 and 2016

For the three months ended March 31, 2017, the 3% increase in revenues was driven by higher affiliate and subscription fees, led by subscription growth for the Showtime digital streaming subscription offering, partially offset by the timing of international television licensing sales of Showtime original series. As of March 31, 2017,

-37-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

subscriptions totaled 74 million for Showtime Networks (including Showtime, The Movie Channel and Flix), 54 million for CBS Sports Network and 32 million for Smithsonian Networks.

For the three months ended March 31, 2017, the 9% increase in operating income primarily reflects growth in higher-margin revenues.

Publishing (Simon & Schuster)



	Three Months Ended March 31,
							Increase/(Decrease)
	2017			2016			$			%
Revenues	$	161		$	145		$	16		11	%
Segment Operating Income	$	14		$	13		$	1		8	%
Segment Operating Income as a % of revenues	9		%	9		%
Depreciation and amortization	$	1		$	1		$	—		—	%
Capital expenditures	$	1		$	3		$	(2	)	(67	)%

Three Months Ended March 31, 2017 and 2016

For the three months ended March 31, 2017, the 11% increase in revenues reflects higher print book sales and growth in digital audio sales. Best-selling titles in the first quarter of 2017 included Unshakeable by Tony Robbins and A Man Called Ove by Fredrik Backman.

For the three months ended March 31, 2017, the 8% increase in operating income was driven by the increase in revenues, which was offset by higher production and selling costs.

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



	Three Months Ended March 31,
							Increase/(Decrease)
	2017			2016			$			%
Revenues	$	409		$	448		$	(39	)	(9	)%
Segment Operating Income	$	123		$	150		$	(27	)	(18	)%
Segment Operating Income as a % of revenues	30		%	33		%
Depreciation and amortization	$	11		$	11		$	—		—	%
Capital expenditures	$	5		$	7		$	(2	)	(29	)%

Three Months Ended March 31, 2017 and 2016

For the three months ended March 31, 2017, the 9% decrease in revenues was driven by lower advertising revenues as the first quarter of 2016 benefited from CBS’s broadcast of Super Bowl 50 and one additional NFL playoff game. The lower advertising revenues were partially offset by growth in retransmission revenues.

For the three months ended March 31, 2017, the 18% decrease in operating income mainly reflects the decline in revenues.

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

-38-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Corporate



	Three Months Ended March 31,
							Increase/(Decrease)
	2017			2016			$			%
Segment Operating Loss	$	(79	)	$	(84	)	$	5		6	%
Depreciation and amortization	$	8		$	9		$	(1	)	(11	)%
Capital expenditures	$	4		$	9		$	(5	)	(56	)%

Three Months Ended March 31, 2017 and 2016

Corporate expenses include general corporate overhead, unallocated shared company expenses, pension and postretirement benefit costs for plans retained by the Company for previously divested businesses, and intercompany eliminations. For the three months ended March 31, 2017, corporate expenses decreased 6% mainly reflecting lower employee compensation costs, due partly to changes in the Company’s stock price.

Financial Position



	At			At			Increase/(Decrease)
	March 31, 2017			December 31, 2016			$			%
Current Assets:
Cash and cash equivalents		$	163		$	598	$	(435	)	(73	)%
Receivables, net ^(a)		3,478			3,314		164			5
Programming and other inventory ^(b)		1,201			1,427		(226		)	(16	)
Prepaid income taxes ^(c)		—			30		(30		)	(100	)
Other current assets ^(d)		355			204		151			74
All other current assets		423			490		(67		)	(14	)
Total current assets		$	5,620		$	6,063	$	(443	)	(7	)%

(a) The increase is primarily due to higher receivables from television licensing agreements.

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

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



	At			At			Increase/(Decrease)
	March 31, 2017			December 31, 2016			$			%
Other assets ^(a)		$	2,539		$	2,707	$	(168	)	(6	)%

(a) The decrease primarily reflects lower long-term receivables associated with revenues from television licensing agreements.



	At			At			Increase/(Decrease)
	March 31, 2017			December 31, 2016			$			%
Assets of discontinued operations ^(a)		$	3,577		$	4,291	$	(714	)	(17	)%

(a) The decrease primarily reflects a noncash charge of $715 million to establish a valuation allowance to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. (See Note 3 to the consolidated financial statements).

-39-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)



	At			At			Increase/(Decrease)
	March 31, 2017			December 31, 2016			$			%
Current Liabilities:
Accounts payable		$	158		$	148	$	10		7	%
Accrued compensation ^(a)		182			369		(187		)	(51	)
Program rights ^(b)		477			290		187			64
Deferred revenues		173			152		21			14
Income taxes payable ^(c)		92			—		92			n/m
Commercial paper		30			450		(420		)	(93	)
All other current liabilities		2,312			2,299		13			1
Total current liabilities		$	3,424		$	3,708	$	(284	)	(8	)%

n/m - not meaningful

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

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



	At			At			Increase/(Decrease)
	March 31, 2017			December 31, 2016			$			%
Pension and postretirement benefit obligations ^(a)		$	1,655		$	1,769	$	(114	)	(6	)%

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

Cash Flows

The changes in cash and cash equivalents were as follows:



	Three Months Ended March 31,
	2017			2016			Increase/(Decrease)
Net cash flow provided by operating activities from:
Continuing operations	$	678		$	923			$	(245	)
Discontinued operations	41			105				(64		)
Net cash flow provided by operating activities	719			1,028				(309		)
Net cash flow (used for) provided by investing activities from:
Continuing operations	(82		)	(102		)		20
Discontinued operations	(7		)	4				(11		)
Net cash flow used for investing activities	(89		)	(98		)		9
Net cash flow used for financing activities	(1,082		)	(842		)		(240		)
Net (decrease) increase in cash and cash equivalents	$	(452	)	$	88			$	(540	)

Operating Activities. For the three months ended March 31, 2017, the decrease in cash provided by operating activities was driven by the benefit in 2016 from CBS’s broadcast of Super Bowl 50, and discretionary pension contributions of $100 million made during the first quarter of 2017 to prefund the Company’s qualified plans. These decreases were partially offset by higher affiliate and subscription fee revenues.

-40-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Investing Activities



	Three Months Ended March 31,
	2017				2016
Acquisitions ^(a)		$	(21	)		$	(50	)
Capital expenditures		(27		)		(34		)
Investments in and advances to investee companies ^(b)		(49		)		(32		)
Proceeds from dispositions ^(c)		1				21
Other investing activities		14				(7		)
Net cash flow used for investing activities from continuing operations		(82		)		(102		)
Net cash flow (used for) provided by investing activities from discontinued operations		(7		)		4
Net cash flow used for investing activities		$	(89	)		$	(98	)

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

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

Financing Activities



	Three Months Ended March 31,
	2017				2016
Repurchase of CBS Corp. Class B Common Stock		$	(531	)		$	(533	)
Repayments of short-term debt borrowings, net		(420		)		—
Repayment of senior debentures		—				(200		)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation		(76		)		(46		)
Dividends		(77		)		(73		)
Proceeds from exercise of stock options		36				6
All other financing activities, net		(14		)		4
Net cash flow used for financing activities		$	(1,082	)		$	(842	)

-41-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Free Cash Flow

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

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

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

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



	Three Months Ended
	March 31,
	2017			2016
Net cash flow provided by operating activities	$	719		$	1,028
Capital expenditures	(27		)	(34		)
Exclude operating cash flow from discontinued operations	41			105
Free cash flow	$	651		$	889

Repurchase of Company Stock and Cash Dividends

During the first quarter of 2017, the Company repurchased 7.6 million shares of its Class B Common Stock under its share repurchase program for $500 million, at an average cost of $65.97 per share, leaving $3.61 billion of authorization at March 31, 2017.

-42-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

Capital Structure

The following table sets forth the Company’s debt.



	At			At
	March 31, 2017			December 31, 2016
Commercial paper		$	30		$	450
Senior debt (1.95% – 7.875% due 2017 – 2045) ^(a)		8,851			8,850
Obligations under capital leases		72			75
Total debt		8,953			9,375
Less commercial paper		30			450
Less current portion of long-term debt		23			23
Total long-term debt, net of current portion		$	8,900		$	8,902

Commercial Paper

Credit Facility

Liquidity and Capital Resources

The Company continually projects anticipated cash requirements for its operating, investing and financing needs as well as cash flows generated from operating activities available to meet these needs. The Company’s operating needs include, among other items, commitments for sports programming rights, television and film programming,

-43-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

talent contracts, operating leases, interest payments, and pension funding obligations. The Company’s investing and financing spending includes capital expenditures, share repurchases, dividends and principal payments on its outstanding indebtedness. The Company believes that its operating cash flows; cash and cash equivalents; borrowing capacity under the Credit Facility, which had $2.49 billion of remaining availability at March 31, 2017; and access to capital markets are sufficient to fund its operating, investing and financing requirements for the next twelve months.

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

Funding for the Company’s long-term debt obligations due over the next five years of $2.80 billion is expected to come from the Company’s ability to refinance its debt and cash generated from operating activities.

Legal Matters

-44-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

approximately $48 million. In 2015, as the result of an insurance settlement, insurance recoveries exceeded the Company’s after tax costs for settlement and defense of asbestos claims by approximately $5 million. The Company’s costs for settlement and defense of asbestos claims may vary year to year and insurance proceeds are not always recovered in the same period as the insured portion of the expenses.

Filings include claims for individuals suffering from mesothelioma, a rare cancer, the risk of which is allegedly increased by exposure to asbestos; lung cancer, a cancer which may be caused by various factors, one of which is alleged to be asbestos exposure; other cancers, and conditions that are substantially less serious, including claims brought on behalf of individuals who are asymptomatic as to an allegedly asbestos-related disease. The predominant number of claims against the Company are non-cancer claims. The Company believes that its reserves and insurance are adequate to cover its asbestos liabilities. This belief is based upon many factors and assumptions, including the number of outstanding claims, estimated average cost per claim, the breakdown of claims by disease type, historic claim filings, costs per claim of resolution and the filing of new claims. While the number of asbestos claims filed against the Company has remained generally flat in recent years, it is difficult to predict future asbestos liabilities, as events and circumstances may occur including, among others, the number and types of claims and average cost to resolve such claims, which could affect the Company’s estimate of its asbestos liabilities.

Related Parties

See Note 5 to the consolidated financial statements.

Recent Pronouncements and Adoption of New Accounting Standards

See Note 1 to the consolidated financial statements.

Critical Accounting Policies

See Item 7, Management’s Discussion and Analysis of Results of Operations and Financial Condition in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, for a discussion of the Company’s critical accounting policies.

Cautionary Statement Concerning Forward-Looking Statements

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

-45-

Management’s Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

may cause the actual results, performance or achievements of the Company to be different from any future results, performance and achievements expressed or implied by these statements. These risks, uncertainties and other factors include, among others: advertising market conditions generally; changes in the public acceptance of the Company’s content; changes in technology and its effect on competition in the Company’s markets; changes in the federal communications laws and regulations; the impact of piracy on the Company’s products; the impact of consolidation in the market for the Company’s content; the impact of negotiations or the loss of affiliation agreements or retransmission agreements; the impact of union activity, including possible strikes or work stoppages or the Company’s inability to negotiate favorable terms for contract renewals; the ability to achieve the separation of the Company’s radio business through a merger of CBS Radio with a subsidiary of Entercom Communications Corp. on the anticipated terms, which are subject to regulatory and Entercom stockholder approvals, an exchange offer and other customary closing conditions, and fluctuations in the market values of Entercom’s Class A common stock and the Company’s Class B Common Stock; other domestic and global economic, business, competitive and/or regulatory factors affecting the Company’s businesses generally; and other factors described in the Company’s filings made under the securities laws, including, among others, those set forth under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016 and in our Quarterly Reports on Form 10-Q, and in the Company’s recent Current Reports on Form 8-K. There may be additional risks, uncertainties and factors that the Company does not currently view as material or that are not necessarily known. The forward‑looking statements included in this document are made as of the date of this document and the Company does not have any obligation to publicly update any forward‑looking statements to reflect subsequent events or circumstances.



Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes to market risk since reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.



Item 4.	Controls and Procedures.

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

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

-46-

PART II – OTHER INFORMATION



Item 1A.	Risk Factors.

The following updates the corresponding risk factor included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

The Company's Proposed Separation of its Radio Business Is Subject to Approvals and Closing Conditions

During 2016, the Company announced its intention to explore strategic options to separate its radio business. On February 2, 2017, the Company entered into an agreement with Entercom Communications Corp. to combine the Company’s radio business with Entercom in a merger following a split-off of the Company’s radio business, which is expected to occur through an exchange offer. These transactions are subject to customary approvals and closing conditions and other risks and uncertainties, including the ability to complete the transactions on the anticipated terms and schedule; the ability to obtain regulatory and stockholder approvals; changes in U.S. federal tax laws and interpretations and the ability to obtain the anticipated tax treatment of the transactions; the ability to obtain financing related to the transactions upon acceptable terms or at all; and changes in economic, political and market conditions, including fluctuations in the market values of Entercom’s Class A common stock and the Company’s Class B Common Stock. These risks could adversely impact the Company’s timing and the ability to consummate or achieve the benefits of the transactions.



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

Company Purchases of Equity Securities

In November 2010, the Company announced that its Board of Directors approved a program to repurchase $1.5 billion of the Company’s common stock in open market purchases or other types of transactions (including accelerated stock repurchases or privately negotiated transactions). Since then, various increases totaling $16.4 billion have been approved and announced, including most recently, an increase to the share repurchase program to a total availability of $6.0 billion on July 28, 2016. Below is a summary of CBS Corp.’s purchases of its Class B Common Stock during the three months ended March 31, 2017 under this publicly announced share repurchase program.



(in millions, except per share amounts)	Total Number of Shares Purchased		Average Price Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Remaining Authorization
January 1, 2017 - January 31, 2017		1.7	$	63.60		1.7		$	3,998
February 1, 2017 - February 28, 2017		2.5	$	65.37		2.5		$	3,835
March 1, 2017 - March 31, 2017		3.4	$	67.62		3.4		$	3,607
Total		7.6	$	65.97		7.6		$	3,607

-47-



Item 6.	Exhibits.



Exhibit No.			Description of Document
(4	)		Instruments defining the rights of security holders, including indentures.
		(a)	Amended and Restated Senior Indenture dated as of November 3, 2008 (“2008 Indenture”) between CBS Corporation, CBS Operations Inc., and The Bank of New York Mellon, as senior trustee (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 filed by CBS Corporation on November 3, 2008 (Registration No. 333-154962) (File No. 001-09553)).
		(b)	First Supplemental Indenture to 2008 Indenture dated as of April 5, 2010 between CBS Corporation, CBS Operations Inc., and Deutsche Bank Trust Company Americas, as senior trustee (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by CBS Corporation on April 5, 2010 (File No. 001-09553)).
			The other instruments defining the rights of holders of the long-term debt securities of CBS Corporation and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. CBS Corporation hereby agrees to furnish copies of these instruments to the Securities and Exchange Commission upon request.
(10)			Material Contracts
		(a)	Amendment No. 1, dated as of March 3, 2017, to the CBS Radio Credit Agreement, dated as of October 17, 2016, by and among CBS Radio Inc., the guarantors named therein, the lenders and L/C issuers named therein, and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (filed herewith).
(12	)		Statement Regarding Computation of Ratios (filed herewith)
(31	)		Rule 13a-14(a)/15d-14(a) Certifications
		(a)	Certification of the Chief Executive Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
		(b)	Certification of the Chief Operating Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
(32	)		Section 1350 Certifications
		(a)	Certification of the Chief Executive Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).
		(b)	Certification of the Chief Operating Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).
(101	)		Interactive Data File
			101. INS XBRL Instance Document.
			101. SCH XBRL Taxonomy Extension Schema.
			101. CAL XBRL Taxonomy Extension Calculation Linkbase.
			101. DEF XBRL Taxonomy Extension Definition Linkbase.
			101. LAB XBRL Taxonomy Extension Label Linkbase.
			101. PRE XBRL Taxonomy Extension Presentation Linkbase.

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SIGNATURES

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



	CBS CORPORATION (Registrant)

Date: May 4, 2017	/s/ Joseph R. Ianniello
	Joseph R. Ianniello Chief Operating Officer

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

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EXHIBIT INDEX



Exhibit No.			Description of Document
(4	)		Instruments defining the rights of security holders, including indentures.
		(a)	Amended and Restated Senior Indenture dated as of November 3, 2008 (“2008 Indenture”) between CBS Corporation, CBS Operations Inc., and The Bank of New York Mellon, as senior trustee (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 filed by CBS Corporation on November 3, 2008 (Registration No. 333-154962) (File No. 001-09553)).
		(b)	First Supplemental Indenture to 2008 Indenture dated as of April 5, 2010 between CBS Corporation, CBS Operations Inc., and Deutsche Bank Trust Company Americas, as senior trustee (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by CBS Corporation on April 5, 2010 (File No. 001-09553)).
			The other instruments defining the rights of holders of the long-term debt securities of CBS Corporation and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. CBS Corporation hereby agrees to furnish copies of these instruments to the Securities and Exchange Commission upon request.
(10	)		Material Contracts
		(a)	Amendment No. 1, dated as of March 3, 2017, to the CBS Radio Credit Agreement, dated as of October 17, 2016, by and among CBS Radio Inc., the guarantors named therein, the lenders and L/C issuers named therein, and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (filed herewith).
(12	)		Statement Regarding Computation of Ratios (filed herewith)
(31	)		Rule 13a-14(a)/15d-14(a) Certifications
		(a)	Certification of the Chief Executive Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
		(b)	Certification of the Chief Operating Officer of CBS Corporation pursuant to Rule 13a-14(a), or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
(32	)		Section 1350 Certifications
		(a)	Certification of the Chief Executive Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).
		(b)	Certification of the Chief Operating Officer of CBS Corporation furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith).
(101	)		Interactive Data File
			101. INS XBRL Instance Document.
			101. SCH XBRL Taxonomy Extension Schema.
			101. CAL XBRL Taxonomy Extension Calculation Linkbase.
			101. DEF XBRL Taxonomy Extension Definition Linkbase.
			101. LAB XBRL Taxonomy Extension Label Linkbase.
			101. PRE XBRL Taxonomy Extension Presentation Linkbase.

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