Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - CBS CORPFinancial_Report.xls
EX-12 - EXHIBIT 12 - CBS CORPa2195198zex-12.htm
EX-31.(B) - EXHIBIT 31.(B) - CBS CORPa2195198zex-31_b.htm
EX-32.(B) - EXHIBIT 32.(B) - CBS CORPa2195198zex-32_b.htm
EX-32.(A) - EXHIBIT 32.(A) - CBS CORPa2195198zex-32_a.htm
EX-31.(A) - EXHIBIT 31.(A) - CBS CORPa2195198zex-31_a.htm
EX-10.(D) - EXHIBIT 10(D) - CBS CORPa2195198zex-10_d.htm
EX-10.(B) - EXHIBIT 10(B) - CBS CORPa2195198zex-10_b.htm

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-Q


ý

 

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

For the quarterly period ended September 30, 2009

OR

o

 

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

For the transition period from                             to                              

Commission File Number 001-09553

CBS CORPORATION
(Exact name of registrant as specified in its charter)

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

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

 

10019
(Zip Code)

(212) 975-4321
Registrant's telephone number, including area code

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

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

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company o

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

        Number of shares of common stock outstanding at October 30, 2009:

        Class A Common Stock, par value $.001 per share—51,832,018

        Class B Common Stock, par value $.001 per share—625,337,592


CBS CORPORATION
INDEX TO FORM 10-Q

 
   
  Page
 
    PART I - FINANCIAL INFORMATION        

Item 1.

 

Financial Statements.

 

 

 

 

 

 

Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2009 and September 30, 2008

 

 

3

 

 

 

Consolidated Balance Sheets (Unaudited) at September 30, 2009 and December 31, 2008

 

 

4

 

 

 

Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2009 and September 30, 2008

 

 

5

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

 

6

 

Item 2.

 

Management's Discussion and Analysis of Results of Operations and Financial Condition.

 

 

33

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk.

 

 

59

 

Item 4.

 

Controls and Procedures.

 

 

59

 


 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

 

Legal Proceedings.

 

 

60

 

Item 1A.

 

Risk Factors.

 

 

60

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds.

 

 

60

 

Item 5.

 

Other Information.

 

 

61

 

Item 6.

 

Exhibits.

 

 

62

 

-2-


Table of Contents

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
September 30,
    Nine Months Ended
September 30,
 
       

    2009     2008     2009     2008  
   

Revenues

  $ 3,350.0   $ 3,375.7   $ 9,516.2   $ 10,423.5  
   

Expenses:

                         
 

Operating

    2,132.3     2,050.2     6,429.8     6,398.8  
 

Selling, general and administrative

    620.4     680.8     1,842.3     1,930.1  
 

Restructuring charges

        5.9     9.6     53.4  
 

Impairment charges (Note 4)

    31.7     14,117.2     31.7     14,117.2  
 

Depreciation and amortization

    147.4     139.7     434.9     380.9  
   
   

Total expenses

    2,931.8     16,993.8     8,748.3     22,880.4  
   

Operating income (loss)

    418.2     (13,618.1 )   767.9     (12,456.9 )

Interest expense

    (135.4 )   (134.8 )   (402.5 )   (407.8 )

Interest income

    1.6     6.4     4.3     39.2  

Loss on early extinguishment of debt

            (29.8 )    

Other items, net

    15.0     (41.3 )   (.4 )   83.4  
   

Earnings (loss) before income taxes and equity in loss of investee companies

    299.4     (13,787.8 )   339.5     (12,742.1 )

(Provision) benefit for income taxes

    (79.7 )   1,332.1     (145.4 )   947.9  

Equity in loss of investee companies, net of tax

    (12.1 )   (6.5 )   (26.4 )   (15.3 )
   

Net earnings (loss)

  $ 207.6   $ (12,462.2 ) $ 167.7   $ (11,809.5 )
   

Basic net earnings (loss) per common share

  $ .31   $ (18.58 ) $ .25   $ (17.64 )

Diluted net earnings (loss) per common share

 
$

.30
 
$

(18.58

)

$

.25
 
$

(17.64

)

Weighted average number of common sharesoutstanding:

                         
 

Basic

    674.8     670.9     673.2     669.4  
 

Diluted

    685.1     670.9     680.5     669.4  

Dividends per common share

 
$

.05
 
$

.27
 
$

.15
 
$

.79
 
   

See notes to consolidated financial statements.

-3-


Table of Contents

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)

   
 
  At
September 30, 2009

  At
December 31, 2008

 
   

ASSETS

             

Current Assets:

             
 

Cash and cash equivalents

  $ 473.8   $ 419.5  
 

Receivables, less allowances of $152.2 (2009) and $143.9 (2008)

    2,726.9     2,749.9  
 

Programming and other inventory (Note 5)

    861.3     1,027.3  
 

Deferred income tax assets, net

    322.2     318.7  
 

Prepaid expenses and other current assets

    702.7     669.3  
 

Current assets of discontinued operations

    14.4     8.1  
   
   

Total current assets

    5,101.3     5,192.8  
   

Property and equipment:

             
 

Land

    335.5     337.1  
 

Buildings

    710.9     702.3  
 

Capital leases

    196.3     196.8  
 

Advertising structures

    2,014.7     1,885.5  
 

Equipment and other

    1,808.3     1,777.8  
   

    5,065.7     4,899.5  
 

Less accumulated depreciation and amortization

    2,166.5     1,891.2  
   
   

Net property and equipment

    2,899.2     3,008.3  
   

Programming and other inventory (Note 5)

    1,451.8     1,578.1  

Goodwill (Note 4)

    8,661.3     8,647.8  

Intangible assets (Note 4)

    6,953.9     7,104.2  

Other assets

    1,403.3     1,260.9  

Assets of discontinued operations

    89.7     97.2  
   

Total Assets

  $ 26,560.5   $ 26,889.3  
   

LIABILITIES AND STOCKHOLDERS' EQUITY

             

Current Liabilities:

             
 

Accounts payable

  $ 373.6   $ 462.8  
 

Accrued compensation

    251.2     370.7  
 

Participants' share and royalties payable

    890.0     962.3  
 

Program rights

    707.5     840.1  
 

Deferred revenue

    409.4     392.0  
 

Income taxes payable

    81.7     42.9  
 

Current portion of long-term debt (Note 7)

    22.7     21.3  
 

Accrued expenses and other current liabilities

    1,461.6     1,691.5  
 

Current liabilities of discontinued operations

    22.9     17.3  
   
   

Total current liabilities

    4,220.6     4,800.9  
   

Long-term debt (Note 7)

   
6,963.7
   
6,974.8
 

Pension and postretirement benefit obligations

    2,301.9     2,273.7  

Deferred income tax liabilities, net

    484.8     345.1  

Other liabilities

    3,471.4     3,617.3  

Liabilities of discontinued operations

    271.9     280.2  

Commitments and contingencies (Note 11)

             

Stockholders' Equity:

             
 

Class A Common Stock, par value $.001 per share; 375.0 shares authorized; 57.7 (2009 and 2008) shares issued

    .1     .1  
 

Class B Common Stock, par value $.001 per share; 5,000.0 shares authorized; 737.5 (2009) and 733.5 (2008) shares issued

    .7     .7  
 

Additional paid-in capital

    43,485.1     43,495.0  
 

Accumulated deficit

    (30,430.5 )   (30,598.2 )
 

Accumulated other comprehensive loss (Note 1)

    (515.8 )   (606.9 )
   

    12,539.6     12,290.7  
 

Less treasury stock, at cost; 120.4 (2009 and 2008) Class B Shares

    3,693.4     3,693.4  
   
   

Total Stockholders' Equity

    8,846.2     8,597.3  
   

Total Liabilities and Stockholders' Equity

  $ 26,560.5   $ 26,889.3  
   

See notes to consolidated financial statements.

-4-


Table of Contents

CBS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)

   
 
  Nine Months Ended September 30,  
 
  2009
  2008
 
   

Operating Activities:

             

Net earnings (loss)

  $ 167.7   $ (11,809.5 )

Adjustments to reconcile net earnings (loss) to net cash flow provided by operating activities:

             
 

Depreciation and amortization

    434.9     380.9  
 

Impairment charges

    31.7     14,117.2  
 

Deferred income tax provision (benefit)

    148.2     (1,245.8 )
 

Write-down of investments

        56.4  
 

Net gain on dispositions

    (.6 )   (135.4 )
 

Stock-based compensation

    108.2     110.5  
 

Loss on early extinguishment of debt

    29.8      
 

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

    28.1     21.1  
 

Decrease to accounts receivable securitization program

    (150.0 )    
 

Change in assets and liabilities, net of effects of acquisitions

    (230.1 )   218.3  
   

Net cash flow provided by operating activities

    567.9     1,713.7  
   

Investing Activities:

             
 

Acquisitions, net of cash acquired

    (11.8 )   (1,950.9 )
 

Capital expenditures

    (185.5 )   (349.6 )
 

Investments in and advances to investee companies

    (24.5 )   (8.9 )
 

Purchases of marketable securities

    (35.6 )    
 

Proceeds from dispositions

    72.4     366.7  
 

Other, net

    (.5 )   (12.4 )
   

Net cash flow used for investing activities

    (185.5 )   (1,955.1 )
   

Financing Activities:

             
 

Repayments to banks, including commercial paper, net

    (2.3 )   (5.0 )
 

Proceeds from issuance of senior notes

    974.4      
 

Repayment of senior notes

    (1,007.5 )    
 

Payment of capital lease obligations

    (11.6 )   (13.7 )
 

Dividends

    (263.5 )   (524.3 )
 

Purchase of Company common stock

    (18.7 )   (45.6 )
 

Proceeds from exercise of stock options

        31.2  
 

Excess tax benefit from stock-based compensation

    1.1     5.0  
   

Net cash flow used for financing activities

    (328.1 )   (552.4 )
   

Net increase (decrease) in cash and cash equivalents

    54.3     (793.8 )

Cash and cash equivalents at beginning of period

    419.5     1,346.9  
   

Cash and cash equivalents at end of period

  $ 473.8   $ 553.1  
   

Supplemental disclosure of cash flow information

             

Cash paid for interest

  $ 395.0   $ 413.9  

Cash paid for income taxes

  $ 41.4   $ 207.5  

Non-cash investing and financing activities:

             

Equipment acquired under capitalized leases

  $   $ 19.8  
   

See notes to consolidated financial statements.

-5-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)

1) 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: Television (CBS Television, comprised of the CBS Television Network, television stations, its television production and syndication operations, and CBS College Sports Network; CBS Films and Showtime Networks), Radio (CBS Radio), Outdoor (CBS Outdoor), Interactive (CBS Interactive, comprised of Internet brands including CNET, CBS.com, CBSSports.com, TV.com, BNET and Last.fm) and Publishing (Simon & Schuster).

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 ("SEC"). These financial statements should be read in conjunction with the more detailed financial statements and notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

In the opinion of management, the accompanying unaudited financial statements reflect all adjustments, consisting of only 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.

The Company performed an evaluation of subsequent events through November 5, 2009, which is the date the financial statements have been filed with the SEC.

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 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.

Net Earnings (Loss) per Common Share—Basic 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"), market-based performance share units ("PSUs") and restricted shares only in the periods in which such effect would have been dilutive. For the three and nine months ended September 30, 2009, respectively, stock options to purchase 30.3 million and 31.7 million shares of CBS Corp. Class B Common Stock were outstanding but excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive. For the three and nine months ended September 30, 2008, stock options to purchase 36.9 million shares of CBS Corp. Class B Common Stock and 14.3 million RSUs, PSUs and restricted shares were outstanding but excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive since the Company reported a net loss.

-6-


Table of Contents


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 September 30,     Nine Months Ended September 30,  
           

(in millions)

    2009     2008     2009     2008  
   

Weighted average shares for basic EPS

    674.8     670.9     673.2     669.4  

Dilutive effect of shares issuable under stock-based compensation plans

    10.3         7.3      
   

Weighted average shares for diluted EPS

    685.1     670.9     680.5     669.4  
   

Comprehensive Income (Loss)—Total comprehensive income (loss) for the Company includes net earnings (loss) and other comprehensive income (loss) ("OCI") items listed in the table below.

   

    Three Months Ended September 30,     Nine Months Ended September 30,  
           

    2009     2008     2009     2008  
   

Net earnings (loss)

  $ 207.6   $ (12,462.2 ) $ 167.7   $ (11,809.5 )

Other comprehensive income (loss), net of tax:

                         
 

Cumulative translation adjustments

    12.3     (153.8 )   56.8     (71.1 )
 

Net actuarial loss and prior service costs

    11.1     2.5     33.4     11.0  
 

Net unrealized gain (loss) on securities

    .6     (24.5 )   .9     (33.2 )
 

Reclassification adjustment for net realized loss on securities

        32.1         32.1  
   

Total comprehensive income (loss)

  $ 231.6   $ (12,605.9 ) $ 258.8   $ (11,870.7 )
   

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

Additional Paid-In Capital—For the nine months ended September 30, 2009 and 2008, the Company recorded dividends of $103.9 million and $541.0 million, respectively, as a reduction to additional paid-in capital as the Company had an accumulated deficit balance.

Adoption of New Accounting Standards—Beginning in the third quarter of 2009, the Financial Accounting Standards Board ("FASB") established the FASB Accounting Standards Codification as the source of authoritative U.S. generally accepted accounting principles recognized by the FASB.

In the second quarter of 2009, the Company adopted new FASB guidance for subsequent events. This guidance establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued and also requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date.

In the second quarter of 2009, the Company adopted new FASB guidance which requires disclosures about the fair value of financial instruments for interim reporting periods regardless of whether these financial instruments are recognized at fair value on the Consolidated Balance Sheets. (See Note 14.)

-7-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

In the first quarter of 2009, the Company adopted new FASB guidance which requires enhanced disclosures about derivative instruments and hedging activities. (See Note 14.)

Effective January 1, 2009, the Company adopted revised FASB guidance for business combinations. This revised guidance establishes principles and requirements for how an acquirer recognizes and measures identifiable assets acquired, liabilities assumed, any noncontrolling interest and goodwill, and expands disclosure requirements for business combinations. This guidance also amends and clarifies accounting for assets and liabilities arising from contingencies in a business combination.

Effective January 1, 2008, the Company adopted FASB guidance for its financial assets and liabilities which establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. Effective January 1, 2009, the Company adopted this guidance for its nonfinancial assets and liabilities. During August 2009, the FASB issued further guidance on how to measure the fair value of a liability, effective for the third quarter of 2009. The adoption of this guidance did not have a material effect on the Company's consolidated financial statements. (See Note 13.)

Recent Pronouncements—In June 2009, the FASB issued revised guidance relating to the accounting for variable interest entities ("VIEs"). This guidance changes the model for determining whether an entity should consolidate a VIE. This new model requires an assessment of whether an entity has a controlling financial interest in a VIE and is therefore required to consolidate the VIE. This guidance also requires an ongoing reassessment of whether an entity continues to be the primary beneficiary of a VIE. This revised guidance is effective for the Company beginning January 1, 2010. The Company is currently evaluating the impact of the adoption of this guidance on the consolidated financial statements.

In June 2009, the FASB issued amended guidance on accounting for transfers of financial assets, effective for the Company beginning January 1, 2010. This amended guidance removes the concept of a qualifying special-purpose entity, establishes specific conditions for reporting a transfer of a portion of a financial asset as a sale, and limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset and/or when the transferor has continuing involvement with the transferred financial asset. The Company is currently evaluating the impact of the adoption of this guidance on the consolidated financial statements.

In December 2008, the FASB issued guidance requiring enhanced annual disclosures about plan assets of defined benefit pension and other postretirement plans, effective for the Company for the year ended December 31, 2009. These disclosures include the Company's investment policies and strategies, major categories of plan assets, the inputs and valuation techniques used to develop fair value measurements of plan assets and any significant concentrations of risk in plan assets.

-8-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

2) STOCK-BASED COMPENSATION

The following table summarizes the Company's stock-based compensation expense for the three and nine months ended September 30, 2009 and 2008.

   

    Three Months Ended September 30,     Nine Months Ended September 30,  
           

    2009     2008     2009     2008  
   

RSUs, PSUs and restricted shares

  $ 29.4   $ 34.1   $ 84.3   $ 99.0  

Stock options and equivalents

    12.0     4.2     23.9     11.5  
   

Stock-based compensation expense, before income taxes

    41.4     38.3     108.2     110.5  

Related tax benefit

    (16.6 )   (15.1 )   (43.3 )   (43.7 )
   

Stock-based compensation expense, net of tax

  $ 24.8   $ 23.2   $ 64.9   $ 66.8  
   

During the nine months ended September 30, 2009, the Company granted 12.6 million RSUs with a weighted average per unit grant date fair value of $5.17. RSU grants during 2009 generally vest over a three- to four-year service period. Certain RSU awards are also subject to satisfying performance conditions. During the nine months ended September 30, 2009, the Company also granted .4 million PSUs with an aggregate grant date fair value of $4.3 million. The number of shares that will be issued upon vesting of PSUs can range from 0% to 300% of the target award, based on the ranking of the total shareholder return for CBS Corp. Class B Common Stock within the S&P 500 Index over a designated three-year measurement period, or in certain circumstances, based on the achievement of established operating performance goals. During the nine months ended September 30, 2009, the Company also granted 15.6 million stock options with a weighted average exercise price of $5.33. Stock option grants during 2009 generally vest over a three- to four-year service period.

Total unrecognized compensation cost related to non-vested RSUs and PSUs at September 30, 2009 was $150.2 million, which is expected to be expensed over a weighted average period of 2.1 years. Total unrecognized compensation cost related to unvested stock option awards and stock option equivalents at September 30, 2009 was $52.6 million, which is expected to be expensed over a weighted average period of 2.7 years.

3) ACQUISITIONS AND DISPOSITIONS

Acquisitions

During June 2008, the Company completed the acquisition of CNET Networks, Inc. ("CNET") for $1.8 billion. The results of CNET have been included in the Interactive segment since its acquisition.

On April 23, 2008, the Company acquired International Outdoor Advertising Group ("IOA"), the leading out-of-home advertising company in South America, for $110.8 million. IOA has been included as part of the Outdoor segment since the date of acquisition.

Dispositions

On September 30, 2009, the Company completed the sale of four of its owned radio stations in Portland to Alpha Broadcasting for $40.0 million. During the third quarter of 2009, in connection with

-9-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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


the sale, the Company recorded a pre-tax non-cash impairment charge of $31.7 million to reduce the carrying value of intangible assets and the allocated goodwill.

On March 6, 2009, the Company completed the sale of three of its owned radio stations in Denver to Wilks Broadcasting for $19.5 million.

During June 2008, the Company sold its 37% investment in Sundance Channel for $168.4 million resulting in a pre-tax gain of $127.2 million included in "Other Items, net" in the Consolidated Statement of Operations for the nine months ended September 30, 2008.

On January 10, 2008, the Company completed the sale of seven of its owned television stations in Austin, Salt Lake City, Providence and West Palm Beach to Cerberus Capital Management, L.P. for $185.0 million.

Non-cash Transaction

On April 1, 2009, the Company completed a transaction with Clear Channel Communications, Inc. for the swap of five of its mid-size market radio stations in Baltimore, Portland, Sacramento and Seattle, for two radio stations in Houston.

4) GOODWILL AND INTANGIBLE ASSETS

In the third quarter of 2009, in connection with the sale of certain of its radio stations, the Company recorded a pre-tax non-cash impairment charge of $31.7 million to reduce the carrying value of intangible assets and the allocated goodwill.

For the nine months ended September 30, 2009, the changes in the book value of goodwill, by segment, were as follows:

   

    At
December 31, 2008
    Impairment
Charges
   
Dispositions
   
Other (a)
    At
September 30, 2009
 
   

Television

  $ 3,000.9   $   $   $   $ 3,000.9  

Radio

    1,929.2     (11.0 )   (.7 )       1,917.5  

Outdoor

    1,933.7             29.7     1,963.4  

Interactive

    1,368.1         (5.0 )   .2     1,363.3  

Publishing

    415.9             .3     416.2  
   
 

Total

  $ 8,647.8   $ (11.0 ) $ (5.7 ) $ 30.2   $ 8,661.3  
   
(a)
Primarily reflects foreign currency translation adjustments.

In the third quarter of 2008, the Company recorded a pre-tax non-cash impairment charge of $14.12 billion to reduce the carrying value of goodwill by $10.99 billion and intangible assets by $3.13 billion. The charge was reflected as a reduction to goodwill at the Television segment of $5.81 billion, the Radio segment of $2.33 billion and the Outdoor segment of $2.85 billion as well as a reduction to the carrying value of intangible assets related to FCC licenses at the Television segment of $2.13 billion and the Radio segment of $984.6 million, and franchise agreements at the Outdoor segment of $8.2 million.

-10-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

The Company's intangible assets were as follows:

   

At September 30, 2009

    Gross     Accumulated
Amortization
    Net  
   

Intangible assets subject to amortization:

                   

Leasehold agreements

  $ 873.9   $ (487.7 ) $ 386.2  

Franchise agreements

    508.2     (253.9 )   254.3  

Other intangible assets

    463.3     (235.2 )   228.1  
   
 

Total intangible assets subject to amortization

    1,845.4     (976.8 )   868.6  

FCC licenses

    5,916.5         5,916.5  

Trade names

    168.8         168.8  
   
 

Total intangible assets

  $ 7,930.7   $ (976.8 ) $ 6,953.9  
   

   

At December 31, 2008

    Gross     Accumulated
Amortization
    Net  
   

Intangible assets subject to amortization:

                   

Leasehold agreements

  $ 866.5   $ (448.3 ) $ 418.2  

Franchise agreements

    504.3     (233.9 )   270.4  

Other intangible assets

    461.8     (192.3 )   269.5  
   
 

Total intangible assets subject to amortization

    1,832.6     (874.5 )   958.1  

FCC licenses

    5,977.3         5,977.3  

Trade names

    168.8         168.8  
   
 

Total intangible assets

  $ 7,978.7   $ (874.5 ) $ 7,104.2  
   

Amortization expense was $33.4 million and $32.4 million for the three months ended September 30, 2009 and 2008, respectively, and $99.7 million and $83.8 million for the nine months ended September 30, 2009 and 2008, respectively. The Company expects its aggregate annual amortization expense for existing intangible assets subject to amortization for each of the years, 2009 through 2013, to be as follows:

   
 
  2009
  2010
  2011
  2012
  2013
 
       

Amortization expense

  $ 134.0   $ 128.1   $ 115.2   $ 93.7   $ 83.1  
   

-11-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

5) PROGRAMMING AND OTHER INVENTORY

The following table sets forth the Company's programming and other inventory.

   

    At
September 30, 2009
    At
December 31, 2008
 
   

Program rights

  $ 1,518.1   $ 1,915.7  

Television programming:

             
 

Released (including acquired libraries)

    442.7     551.4  
 

In process and other

    196.9     53.6  

Theatrical programming, in process and other

    75.3      

Publishing, primarily finished goods

    78.9     83.7  

Other

    1.2     1.0  
   

Total programming and other inventory

    2,313.1     2,605.4  
 

Less current portion

    861.3     1,027.3  
   

Total noncurrent programming and other inventory

  $ 1,451.8   $ 1,578.1  
   

6) RELATED PARTIES

National Amusements, Inc.    National Amusements, Inc. ("NAI") is the controlling stockholder of CBS Corp. Mr. Sumner M. Redstone, the controlling stockholder, chairman of the board of directors and chief executive officer of NAI, is the Executive Chairman of the Board of Directors and founder of both CBS Corp. and Viacom Inc. At September 30, 2009, NAI beneficially owned CBS Corp. Class A Common Stock representing approximately 81% of the voting power of all classes of CBS Corp.'s Common Stock, and owned approximately 10% of CBS Corp.'s Class A Common Stock and Class B Common Stock on a combined basis.

During October 2009, NAIRI Inc., a wholly owned subsidiary of NAI, converted 5.8 million shares of CBS Corp. Class A Common Stock into shares of Class B Common Stock and then sold 28.6 million shares of CBS Corp. Class B Common Stock. As a result, at October 30, 2009, NAI beneficially owned approximately 79% of CBS Corp.'s Class A Common Stock and approximately 6% of CBS Corp.'s Class A Common Stock and Class B Common Stock on a combined basis.

Viacom Inc.    CBS Corp., as part of its normal course of business, enters into transactions with Viacom Inc. and its subsidiaries. CBS Corp., through its Television segment, licenses its television products to Viacom Inc., primarily MTV Networks and BET. In addition, CBS Corp. recognizes advertising revenues for media spending placed by various subsidiaries of Viacom Inc., primarily Paramount Pictures. Paramount Pictures also distributes certain of the Company's television products in the home entertainment market. CBS Corp.'s total revenues from these transactions were $92.2 million and $244.8 million for the three months ended September 30, 2009 and 2008, respectively, and $204.5 million and $390.2 million for the nine months ended September 30, 2009 and 2008, respectively.

-12-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

Showtime Networks pays license fees to Paramount Pictures for motion picture programming under an exclusive output agreement which covers feature films initially theatrically released in the United States through 2007. Showtime Networks has exhibition rights to each film licensed under this agreement during three pay television exhibition windows over the course of several years after each such film's initial theatrical release. This agreement has not been renewed for new feature films initially theatrically released in the United States after 2007. These license fees are initially recorded as programming inventory and amortized over the shorter of the life of the license agreement or projected useful life of the programming. In addition, CBS Corp. places advertisements with and leases production facilities from various subsidiaries of Viacom Inc. The total spending for all of these transactions was $6.9 million and $46.1 million for the three months ended September 30, 2009 and 2008, respectively, and $15.7 million and $58.2 million for the nine months ended September 30, 2009 and 2008, respectively.

The following table presents the amounts due from or due to Viacom Inc. in the normal course of business as reflected on CBS Corp.'s Consolidated Balance Sheets.

   

    At
September 30, 2009
    At
December 31, 2008
 
   

Amounts due from Viacom Inc.:

             

Receivables

  $ 151.8   $ 182.5  

Other assets (Receivables, noncurrent)

    216.7     249.8  
   

Total amounts due from Viacom Inc.

  $ 368.5   $ 432.3  
   

Amounts due to Viacom Inc.:

             

Accounts payable

  $ 2.2   $ 6.5  

Program rights

    35.9     48.2  

Other liabilities (Program rights, noncurrent)

    4.4     26.5  
   

Total amounts due to Viacom Inc.

  $ 42.5   $ 81.2  
   

Other Related Parties.    The Company owns 50% of The CW, a television broadcast network, which is accounted for by the Company as an equity investment. CBS Corp., through the Television segment, licenses its television products to The CW resulting in total revenues of $15.2 million and $14.8 million for the three months ended September 30, 2009 and 2008, respectively and $49.3 million and $39.5 million for the nine months ended September 30, 2009 and 2008, 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.

-13-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

7) BANK FINANCING AND DEBT

The following table sets forth the Company's debt.

   

    At
September 30, 2009
    At
December 31, 2008
 
   

Notes payable to banks

  $ 1.9   $ 4.3  

Senior debt (4.625% - 8.875% due 2010 - 2056) (a)

    6,908.8     6,904.3  

Other notes

        .2  

Obligations under capital leases

    109.2     120.8  
   

Total debt

    7,019.9     7,029.6  
 

Less discontinued operations debt (b)

    33.5     33.5  
   

Total debt from continuing operations

    6,986.4     6,996.1  
 

Less current portion

    22.7     21.3  
   

Total long-term debt from continuing operations, net of current portion

  $ 6,963.7   $ 6,974.8  
   
(a)
At September 30, 2009 and December 31, 2008, the senior debt balances included (i) a net unamortized premium of $2.2 million and $23.3 million, respectively, and (ii) an increase in the carrying value of the debt relating to previously settled fair value hedges of $84.1 million and $88.0 million, respectively. The September 30, 2009 balance also includes an increase in the carrying value of the debt relating to outstanding fair value hedges of $7.6 million. The face value of the Company's senior debt was $6.81 billion at September 30, 2009 and $6.79 billion at December 31, 2008.

(b)
Included in "Liabilities of discontinued operations" on the Consolidated Balance Sheets.

The senior debt of CBS Corp. is fully and unconditionally guaranteed by its wholly owned subsidiary, CBS Operations Inc. Senior debt in the amount of $52.2 million of the Company's wholly owned subsidiary, CBS Broadcasting Inc., is not guaranteed.

On May 13, 2009, CBS Corp. issued $350.0 million of 8.875% senior notes due 2019 and $400.0 million of 8.200% senior notes due 2014. On June 2, 2009, CBS Corp. issued $250.0 million of 8.875% senior notes due 2019. Interest on these senior notes will be paid semi-annually. The senior notes are fully and unconditionally guaranteed by CBS Operations Inc., a wholly owned subsidiary of CBS Corp.

During the nine months ended September 30, 2009, the Company repurchased $978.3 million of its 7.70% senior notes due 2010 resulting in a loss on early extinguishment of debt of $29.8 million.

At September 30, 2009, the Company classified $416.8 million of senior notes maturing in July 2010 as long-term debt on the Consolidated Balance Sheet, reflecting its intent and ability to refinance this debt on a long-term basis.

Credit Facility

At September 30, 2009, the Company had a $3.0 billion revolving credit facility which expires in December 2010 (the "Credit Facility"). The Credit Facility requires the Company to maintain a minimum Consolidated Coverage Ratio, as defined in the Credit Facility, of 3x for the trailing four quarters. At September 30, 2009, the Company's Consolidated Coverage Ratio was approximately 4x. The primary purpose of the Credit Facility is to support commercial paper borrowings. At September 30, 2009, 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 $2.80 billion.

-14-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

On November 4, 2009, the Company entered into a three-year $2.0 billion revolving credit facility, which expires in December 2012. This credit facility, which replaces the Company's previous credit facility that was set to expire in December 2010, requires the Company to maintain a minimum Consolidated Coverage Ratio and a maximum Consolidated Leverage Ratio, as defined in the credit agreement.

Accounts Receivable Securitization Program

The Company's revolving accounts receivable securitization program provides for the sale of receivables on a non-recourse basis to unrelated third parties on a one-year renewable basis, thereby reducing accounts receivable on the Company's Consolidated Balance Sheets. The Company entered into this arrangement because it provides an additional source of liquidity. Proceeds from this program are used to reduce outstanding borrowings. The terms of the revolving securitization arrangement require that the receivable pools subject to the program meet certain performance ratios. As of September 30, 2009, the Company was in compliance with the required ratios under the receivable securitization program. During the first quarter of 2009, the Company reduced amounts outstanding under its accounts receivable securitization program by $300.0 million and subsequently, during the third quarter of 2009, the Company increased the amounts outstanding by $150.0 million, resulting in a net decrease of $150.0 million for the nine months ended September 30, 2009. At September 30, 2009 the Company had $400.0 million outstanding under its accounts receivable securitization program versus $550.0 million at December 31, 2008.

During the nine months ended September 30, 2009 and 2008, proceeds from collections of securitized accounts receivables of $1.05 billion and $2.09 billion, respectively, were reinvested in the revolving receivable securitization program. The net loss associated with securitizing the program's accounts receivables was $3.3 million and $4.6 million for the three and nine months ended September 30, 2009, respectively, and $4.5 million and $12.2 million for the three and nine months ended September 30, 2008, respectively.

8) PENSION AND OTHER POSTRETIREMENT BENEFITS

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

   

  Pension Benefits     Postretirement Benefits    

Three Months Ended September 30,

    2009     2008     2009     2008  
   

Components of net periodic cost:

                         
 

Service cost

  $ 7.8   $ 8.4   $ .2   $ .2  
 

Interest cost

    72.4     74.9     12.3     11.8  
 

Expected return on plan assets

    (54.8 )   (69.4 )        
 

Amortization of transition obligation

        .1          
 

Amortization of actuarial loss (gain)

    21.2     8.2     (2.8 )   (4.2 )
 

Amortization of prior service cost (credit)

    .2     .1     (.1 )   (.1 )
   

Net periodic cost

  $ 46.8   $ 22.3   $ 9.6   $ 7.7  
   

-15-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

 

   

  Pension Benefits     Postretirement Benefits    

Nine Months Ended September 30,

    2009     2008     2009     2008  
   

Components of net periodic cost:

                         
 

Service cost

  $ 23.0   $ 25.2   $ .6   $ .8  
 

Interest cost

    217.7     224.7     37.0     39.0  
 

Expected return on plan assets

    (164.1 )   (208.4 )        
 

Amortization of transition obligation

        .1          
 

Amortization of actuarial loss (gain)

    63.7     24.6     (8.4 )   (6.4 )
 

Amortization of prior service cost (credit)

    .6     .3     (.3 )   (.3 )
   

Net periodic cost

  $ 140.9   $ 66.5   $ 28.9   $ 33.1  
   

9) STOCKHOLDERS' EQUITY

On July 31, 2009, the Company announced a quarterly cash dividend of $.05 per share on its Class A and Class B Common Stock payable on October 1, 2009. The total dividend was $34.6 million of which $33.8 million was paid on October 1, 2009 and $.8 million was accrued to be paid upon vesting of RSUs. During the third quarter of 2009, the Company paid $34.9 million for the dividend declared on April 7, 2009 and for dividend payments on RSUs that vested during the third quarter of 2009.

10) INCOME TAXES

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

The provision for income taxes was $79.7 million and $145.4 million for the three and nine months ended September 30, 2009, respectively, versus an income tax benefit of $1.33 billion and $947.9 million for the three and nine months ended September 30, 2008, respectively. The provision for income taxes for the three and nine months ended September 30, 2009 included a tax benefit of $41.8 million and $45.3 million, respectively, from the settlements of certain income tax audits. The provision for income taxes for the nine months ended September 30, 2009 was also impacted by the reversal of certain international net operating loss carryforwards of $13.4 million and a reduction of deferred tax assets associated with stock-based compensation of $42.3 million. This reduction reflects the difference between the estimated tax benefit recognized based on the grant date fair value of the stock-based compensation award versus the actual tax benefit realized based on the market value on the date of vest. The income tax benefit for the three and nine months ended September 30, 2008 included a tax benefit of $1.42 billion associated with the non-cash impairment charge of $14.12 billion to reduce the carrying value of goodwill and intangible assets.

During the third quarter of 2009, the Company and the Internal Revenue Service ("IRS") settled the Company's income tax audit for the year 2005. The Company is currently under examination by the IRS for the years 2006 and 2007. In addition, various tax years are currently under examination by state and local and foreign tax authorities. With respect to open tax years in all jurisdictions, the Company believes it is reasonably possible that the total reserve for uncertain tax positions may change within the next twelve months; however, any related estimate of the impact to the reserves for uncertain tax positions can not currently be determined.

-16-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

11) COMMITMENTS AND CONTINGENCIES

Off-Balance Sheet Arrangements

The Company has indemnification obligations with respect to letters of credit and surety bonds primarily used as security against non-performance in the normal course of business. At September 30, 2009, the outstanding letters of credit and surety bonds approximated $367.4 million and were not recorded on the Consolidated Balance Sheet.

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

Legal Matters

Securities Actions.    On December 12, 2008, the City of Pontiac General Employees' Retirement System filed a self-styled class action complaint in the United States District Court for the Southern District of New York against the Company and its Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and Treasurer, alleging violations of federal securities law. The complaint, which was filed on behalf of a putative class of purchasers of the Company's common stock between February 26, 2008 and October 10, 2008 (the "Class Period"), alleges that, among other things, the Company's failure to timely write down the value of certain assets caused the Company's reported operating results during the Class Period to be materially inflated. The plaintiffs seek unspecified compensatory damages. On February 11, 2009, a motion was filed in the case on behalf of The City of Omaha, Nebraska Civilian Employees' Retirement System, and The City of Omaha Police and Fire Retirement System (collectively, the "Omaha Funds") seeking to appoint the Omaha Funds as the lead plaintiffs in this case; on March 5, 2009, the court granted that motion. On May 4, 2009, the plaintiffs filed an Amended Complaint, which removes the Treasurer as a defendant and adds the Executive Chairman. On July 13, 2009, the defendants filed a motion to dismiss this action and, on December 2, 2009, the court is scheduled to hear argument on the motion. The Company believes that the plaintiffs' claims are without merit and intends to vigorously defend itself in the litigation.

On October 2, 2009, a shareholder derivative complaint, Hatcher v. CBS, et. al., was filed in the United States District Court for the Southern District of New York naming the Company, as a nominal defendant, members of its board of directors and its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer as defendants. The complaint alleges that the defendants breached fiduciary duties by failing to timely write down the value of certain of the Company's assets and relates to the same or similar allegations in the Omaha Funds case. The complaint seeks, among other things, unspecified compensatory damages, restitution from the defendants with respect to compensation, benefits and profits obtained and the institution of certain reforms to the Company's internal control functions. The Company intends to ask the court to dismiss this complaint on various grounds.

Indecency Regulation.    In March 2006, the FCC released certain decisions relating to indecency complaints against certain of the Company's owned television stations and affiliated stations. The FCC ordered the Company to pay a forfeiture of $550,000 in the proceeding relating to the broadcast of a Super Bowl half-time show by the Company's television stations (the "Superbowl Proceeding"). In May 2006, the FCC denied the Company's petition for reconsideration. In July 2006, the Company filed a

-17-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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


Petition for Review of the forfeiture with the U.S. Court of Appeals for the Third Circuit and paid the $550,000 forfeiture in order to facilitate the Company's ability to bring the appeal. Oral argument was heard in September 2007. In July 2008, the U.S. Court of Appeals for the Third Circuit vacated the FCC's order to have the Company pay the forfeiture and remanded the case to the FCC. On November 18, 2008, the FCC filed a petition for certiorari with the U.S. Supreme Court, seeking review of the Third Circuit's decision. The petition requested that the U.S. Supreme Court not act on the petition until it ruled in the "fleeting expletives case" mentioned below. On January 8, 2009, the Company filed its opposition to the FCC's petition for certiorari.

In another case involving broadcasts on another network, in June 2007, the U.S. Court of Appeals for the Second Circuit vacated the FCC's November 2006 finding that the broadcast of fleeting and isolated expletives was indecent and remanded the case to the FCC (the "fleeting expletives case"). On March 17, 2008, the U.S. Supreme Court granted the FCC's petition to review the U.S. Court of Appeals for the Second Circuit's decision. On November 4, 2008, the U.S. Supreme Court heard argument in this case. On April 28, 2009, the U.S. Supreme Court issued a 5-4 decision reversing the Second Circuit's judgment on administrative grounds in favor of the FCC and remanding the fleeting expletives case to the Second Circuit.

Following the decision in the fleeting expletives case, on May 4, 2009, the U.S. Supreme Court remanded the Superbowl Proceeding to the U.S. Court of Appeals for the Third Circuit. Both cases will be the subject of further proceedings, in light of the U.S. Supreme Court's April 28, 2009 decision, before the respective U.S. Court of Appeals. The Third Circuit has requested a new round of briefing from the Company and the FCC in light of the U.S. Supreme Court's decision in the fleeting expletives case.

In March 2006, the FCC also notified the Company and certain affiliates of the CBS Television Network of apparent liability for forfeitures relating to a broadcast of the program Without a Trace. The FCC proposed to assess a forfeiture of $32,500 against each of these stations, totaling $260,000 for the Company's owned stations. The Company is contesting the FCC decision and the proposed forfeitures.

Additionally, the Company, from time to time, has received and may receive in the future letters of inquiry from the FCC prompted by complaints alleging that certain programming on the Company's broadcasting stations included indecent material.

Claims Related to Former Businesses: Asbestos, Environmental and Other.    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, or by asbestos containing grades of decorative micarta, a laminate used in commercial ships.

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

-18-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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


September 30, 2009, the Company had pending approximately 61,820 asbestos claims, as compared with approximately 68,520 as of December 31, 2008 and 69,280 as of September 30, 2008. During the third quarter of 2009, the Company received approximately 1,090 new claims and closed or moved to an inactive docket approximately 3,750 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 claim, the quality of evidence supporting the claims and other factors. The Company's total costs for the years 2008 and 2007 for settlement and defense of asbestos claims after insurance recoveries and net of tax benefits were approximately $15.0 million and $17.5 million, respectively. The Company's costs for settlement and defense of asbestos claims may vary year to year as insurance proceeds are not always recovered in the same period as the insured portion of the expenses.

The Company believes that its reserves and insurance are adequate to cover its asbestos liabilities. This belief is based upon many factors and assumptions, including the number of outstanding claims, estimated average cost per claim, the breakdown of claims by disease type, historic claim filings, costs per claim of resolution and the filing of new claims. While the number of asbestos claims filed against the Company has trended down in 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.

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.

General.    On an ongoing basis, the Company defends itself in numerous lawsuits and proceedings and responds to various investigations and inquiries from federal, state and local authorities (collectively, "litigation"). Litigation 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 above-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.

12) RESTRUCTURING CHARGES

During the year ended December 31, 2008, the Company recorded restructuring charges of $136.7 million, of which $53.4 million was recorded during the nine months ended September 30, 2008. The full year 2008 charges reflected $127.5 million of severance costs and $9.2 million of contract termination and other associated costs.

During the nine months ended September 30, 2009, the Company recorded restructuring charges of $9.6 million, reflecting $4.9 million of severance costs associated with headcount reductions and $4.7 million of contract termination costs related to exiting a broadcasting equipment lease upon completion of the digital conversion.

-19-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

As of September 30, 2009, the Company paid $98.6 million of severance costs and $3.2 million of contract termination and other associated costs, of which $12.6 million and $.3 million, respectively, was paid during the third quarter of 2009. The following table sets forth the activity for the restructuring charges by segment.

   
 
  Balance at
December 31, 2008

  2009 Charges
  2009 Payments
  Balance at
September 30, 2009

 
   

Television

  $ 35.9   $ 4.1   $ (21.5 ) $ 18.5  

Radio

    38.9         (18.3 )   20.6  

Outdoor

    7.8     3.3     (8.6 )   2.5  

Interactive

    2.7         (2.7 )    

Publishing

    3.9     2.2     (3.7 )   2.4  

Corporate

    1.5         (1.0 )   .5  
   
 

Total

  $ 90.7   $ 9.6   $ (55.8 ) $ 44.5  
   

13) FAIR VALUE MEASUREMENTS

The following table sets forth the Company's assets and liabilities measured at fair value on a recurring basis at September 30, 2009. 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 (a)     Level 2 (b)     Level 3     Total  
   

Assets:

                                 

Investments

  $ 54.4       $ 100.0       $   $ 154.4  

Interest rate swaps

            6.8             6.8  
   

Total Assets

  $ 54.4       $ 106.8       $   $ 161.2  
   

Liabilities:

                                 

Deferred compensation

  $       $ 127.0       $   $ 127.0  

Foreign currency hedges

            8.4             8.4  
   

Total Liabilities

  $       $ 135.4       $   $ 135.4  
   
(a)
Level 1 valuation is based on quoted prices for the asset in active markets.

(b)
Level 2 valuation is based on inputs that are observable other than quoted market prices in Level 1, such as quoted prices for the asset or liability in inactive markets or quoted prices for similar assets or liabilities.

The fair value of Level 1 investments is determined based on publicly quoted market prices in active markets. The fair value of Level 2 investments is determined by reference to market prices for similar securities. The fair value of interest rate swaps and foreign currency hedges is determined based on the present value of future cash flows using observable inputs, including interest rates, yield curves and foreign currency exchange rates. The fair value of deferred compensation is determined based on the fair value of the investments elected by employees.

In connection with the sale of four radio stations during the third quarter of 2009, the Company recorded a pre-tax non-cash impairment charge of $31.7 million to reduce the carrying value of

-20-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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


intangible assets and the allocated goodwill to its fair value, which was determined based on the price paid by the buyer.

14) FINANCIAL INSTRUMENTS

The Company's carrying value of financial instruments approximates fair value, except for differences with respect to the notes and debentures. At September 30, 2009 and December 31, 2008, the carrying value of the senior debt and senior subordinated debt was $6.91 billion and $6.90 billion, respectively, and the fair value, which is estimated based on quoted market prices and includes accrued interest, was $6.76 billion and $5.47 billion, respectively.

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

Foreign Exchange Contracts

Foreign exchange forward contracts have principally been used to hedge cash flows, generally within the next twelve months, in such currencies as the British Pound, the Euro, the Canadian Dollar, the Mexican Peso and the Australian Dollar. The Company designates forward contracts used to hedge projected future television and film production costs 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 programming costs upon settlement. Additionally, the Company enters into non-designated forward contracts to hedge non-U.S. dollar denominated cash flows.

At September 30, 2009, the notional amount of all foreign exchange contracts was $95.8 million, of which $2.2 million relates to the hedging of future production costs and $93.6 million represents hedges of expected foreign currency cash flows.

Interest Rate Swaps

All of the Company's long-term debt has been issued under fixed interest rate agreements. The Company has entered into fixed-to-floating rate swap agreements for a portion of this debt, which are designated as fair value hedges. Gains or losses on interest rate swaps are recorded as a change in the carrying value of the debt attributable to the risk being hedged. At September 30, 2009, the Company was a party to $350 million notional amount of interest rate swaps which are accounted for as fair value hedges.

The fair value of derivative financial instruments recorded on the Consolidated Balance Sheet at September 30, 2009 was as follows:

 

    Fair Value   Balance Sheet Account
 

Foreign exchange contracts:

         
 

Designated hedging instruments

 
$

(.1

)

Accrued expenses and other current liabilities

 

Non-designated hedging instruments

 
$

(8.3

)

Accrued expenses and other current liabilities

Designated interest rate swaps

 
$

6.8
 

Other assets

 

-21-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

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

 

    Three Months
Ended
September 30, 2009
    Nine Months
Ended
September 30, 2009
  Financial
Statement
Account
 

Foreign exchange contracts:

               

  Designated hedging instruments:

               
 

Recognized in OCI

  $   $   Cumulative translation
adjustments
 

Reclassified from accumulated OCI

  $   $ 3.0   Programming costs

   Non-designated hedging instruments

 
$

(7.0

)

$

(10.1

)

Other items, net

Designated interest rate swaps

 
$

4.0
 
$

6.8
 

Interest expense

 

15) REPORTABLE SEGMENTS

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

   

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
       

    2009     2008     2009     2008  
   

Revenues:

                         
 

Television

  $ 2,269.0   $ 2,075.9   $ 6,447.1   $ 6,781.5    
 

Radio

    318.9     392.5     900.6     1,172.4    
 

Outdoor

    424.9     549.3     1,238.9     1,644.3    
 

Interactive

    121.3     142.3     381.3     235.4    
 

Publishing

    230.4     225.0     573.5     612.6    
 

Eliminations

    (14.5 )   (9.3 )   (25.2 )   (22.7)  
   
   

Total Revenues

  $ 3,350.0   $ 3,375.7   $ 9,516.2   $ 10,423.5    
   

The Company presents segment operating income (loss) before depreciation and amortization and impairment charges ("Segment OIBDA before Impairment Charges") 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 OIBDA before Impairment Charges is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the

-22-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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


primary method used by the Company's management and enhances their ability to understand the Company's operating performance.

   

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
       

    2009     2008     2009     2008  
   

Segment OIBDA before Impairment Charges:

                         
 

Television

  $ 483.9   $ 412.8   $ 1,019.3   $ 1,373.6    
 

Radio

    93.1     139.4     240.6     420.3    
 

Outdoor

    32.6     113.9     99.9     369.0    
 

Interactive

    4.1     3.7     18.0     (12.0)  
 

Publishing

    28.4     25.8     36.6     59.9    
 

Corporate

    (34.8 )   (38.5 )   (98.0 )   (106.4)  

Residual costs

    (7.9 )   (18.3 )   (79.8 )   (63.2)  

Eliminations

    (2.1 )       (2.1 )   —    

Impairment charges

    (31.7 )   (14,117.2 )   (31.7 )   (14,117.2)  

Depreciation and amortization

    (147.4 )   (139.7 )   (434.9 )   (380.9)  
   

Total Operating Income (Loss)

    418.2     (13,618.1 )   767.9     (12,456.9)  
 

Interest expense

    (135.4 )   (134.8 )   (402.5 )   (407.8)  
 

Interest income

    1.6     6.4     4.3     39.2    
 

Loss on early extinguishment of debt

            (29.8 )   —    
 

Other items, net

    15.0     (41.3 )   (.4 )   83.4    
   

Earnings (loss) before income taxes and equity in loss of investee companies

    299.4     (13,787.8 )   339.5     (12,742.1)  

(Provision) benefit for income taxes

    (79.7 )   1,332.1     (145.4 )   947.9    

Equity in loss of investee companies, net of tax

    (12.1 )   (6.5 )   (26.4 )   (15.3)  
   

Net Earnings (Loss)

  $ 207.6   $ (12,462.2 ) $ 167.7   $ (11,809.5)  
   

                         

                         
   

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
       

    2009     2008     2009     2008  
   

Operating Income (Loss):

                         
 

Television

  $ 440.6   $ (7,575.9 ) $ 889.7   $ (6,703.0)  
 

Radio

    51.1     (3,188.1 )   180.8     (2,922.4)  
 

Outdoor

    (34.9 )   (2,803.4 )   (97.9 )   (2,666.9)  
 

Interactive

    (15.6 )   (14.0 )   (41.3 )   (38.0)  
 

Publishing

    26.6     23.4     30.6     52.6    
 

Corporate

    (39.6 )   (41.8 )   (112.1 )   (116.0)  
 

Residual costs

    (7.9 )   (18.3 )   (79.8 )   (63.2)  
 

Eliminations

    (2.1 )       (2.1 )    
   
   

Total Operating Income (Loss)

  $ 418.2   $ (13,618.1 ) $ 767.9   $ (12,456.9)  
   

 

-23-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

   

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
       

    2009     2008     2009     2008  
   

Depreciation and Amortization:

                         
 

Television

  $ 43.3   $ 45.4   $ 129.6   $ 133.3  
 

Radio

    10.3     8.8     28.1     24.0  
 

Outdoor

    67.5     62.1     197.8     180.7  
 

Interactive

    19.7     17.7     59.3     26.0  
 

Publishing

    1.8     2.4     6.0     7.3  
 

Corporate

    4.8     3.3     14.1     9.6  
   
   

Total Depreciation and Amortization

  $ 147.4   $ 139.7   $ 434.9   $ 380.9  
   

 

   

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
       

    2009     2008     2009     2008  
   

Stock-based Compensation:

                         
 

Television

  $ 13.7   $ 17.7   $ 41.6   $ 50.8  
 

Radio

    4.0     5.6     12.2     15.0  
 

Outdoor

    1.5     2.1     4.6     5.6  
 

Interactive

    2.3     1.9     5.8     3.5  
 

Publishing

    .9     1.2     2.7     3.4  
 

Corporate

    19.0     9.8     41.3     32.2  
   
   

Total Stock-based Compensation

  $ 41.4   $ 38.3   $ 108.2   $ 110.5  
   

 

   

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
       

    2009     2008     2009     2008  
   

Capital Expenditures:

                         
 

Television

  $ 19.0   $ 44.6   $ 70.6   $ 137.0  
 

Radio

    6.5     14.5     25.2     33.7  
 

Outdoor

    13.2     53.6     63.3     149.7  
 

Interactive

    3.9     11.4     13.5     14.7  
 

Publishing

    1.9     2.0     2.8     7.1  
 

Corporate

    1.7     3.3     10.1     7.4  
   
   

Total Capital Expenditures

  $ 46.2   $ 129.4   $ 185.5   $ 349.6  
   

-24-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

 

   

    At
September 30, 2009
    At
December 31, 2008
 
   

Total Assets:

             
 

Television

  $ 12,024.4   $ 12,170.3  
 

Radio

    5,936.3     6,047.3  
 

Outdoor

    4,506.2     4,694.5  
 

Interactive

    1,975.1     2,074.8  
 

Publishing

    1,162.7     1,222.0  
 

Corporate

    913.5     675.5  
 

Discontinued operations

    104.1     105.3  
 

Eliminations

    (61.8 )   (100.4 )
   
   

Total Assets

  $ 26,560.5   $ 26,889.3  
   

16) 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 (See Note 7). The following condensed consolidating financial statements present the results of operations, financial position and cash flows of CBS Corp., CBS Operations Inc., the direct and indirect Non-Guarantor Affiliates of CBS Corp. and CBS Operations Inc., and the eliminations necessary to arrive at the information for the Company on a consolidated basis.

   

    Statement of Operations
For the Three Months Ended September 30, 2009
 
       

    CBS
Corp.
    CBS
Operations
Inc.
    Non-
Guarantor
Affiliates
    Eliminations     CBS
Corp.
Consolidated
 
   

Revenues

  $ 26.1   $ 25.4   $ 3,298.5   $   $ 3,350.0  
   

Expenses:

                               
 

Operating

    18.4     20.3     2,093.6         2,132.3  
 

Selling, general and administrative

    14.4     40.9     565.1         620.4  
 

Impairment charges

            31.7         31.7  
 

Depreciation and amortization

    1.1     2.8     143.5         147.4  
   
   

Total expenses

    33.9     64.0     2,833.9         2,931.8  
   

Operating income (loss)

    (7.8 )   (38.6 )   464.6         418.2  

Interest (expense) income, net

    (143.2 )   (80.0 )   89.4         (133.8 )

Other items, net

    (3.7 )   (6.5 )   25.2         15.0  
   

Earnings (loss) before income taxes and equity in earnings (loss) of investee companies

    (154.7 )   (125.1 )   579.2         299.4  

(Provision) benefit for income taxes

    58.1     47.4     (185.2 )       (79.7 )

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

    304.2     298.7     (12.1 )   (602.9 )   (12.1 )
   

Net earnings

  $ 207.6   $ 221.0   $ 381.9   $ (602.9 ) $ 207.6  
   

-25-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

   
 
  Statement of Operations
For the Nine Months Ended September 30, 2009
 
 
  CBS
Corp.

  CBS
Operations
Inc.

  Non-
Guarantor
Affiliates

  Eliminations
  CBS
Corp.
Consolidated

 
   

Revenues

  $ 76.7   $ 68.4   $ 9,371.1   $   $ 9,516.2  
   

Expenses:

                               
 

Operating

    52.5     54.6     6,322.7         6,429.8  
 

Selling, general and administrative

    101.8     117.9     1,622.6         1,842.3  
 

Restructuring charges

            9.6         9.6  
 

Impairment charges

            31.7         31.7  
 

Depreciation and amortization

    3.2     8.0     423.7         434.9  
   
   

Total expenses

    157.5     180.5     8,410.3         8,748.3  
   

Operating income (loss)

    (80.8 )   (112.1 )   960.8         767.9  

Interest (expense) income, net

    (429.8 )   (232.1 )   263.7         (398.2 )

Loss on early extinguishment of debt

    (29.8 )               (29.8 )

Other items, net

    (6.6 )   (17.4 )   23.6         (.4 )
   

Earnings (loss) before income taxes and equity in earnings (loss) of investee companies

    (547.0 )   (361.6 )   1,248.1         339.5  

(Provision) benefit for income taxes

    221.7     134.1     (501.2 )       (145.4 )

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

    493.0     563.5     (26.4 )   (1,056.5 )   (26.4 )
   

Net earnings

  $ 167.7   $ 336.0   $ 720.5   $ (1,056.5 ) $ 167.7  
   

-26-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

 

   
 
  Statement of Operations
For the Three Months Ended September 30, 2008
 
 
  CBS
Corp.

  CBS
Operations
Inc.

  Non-
Guarantor
Affiliates

  Eliminations
  CBS
Corp.
Consolidated

 
   

Revenues

  $ 29.7   $ 21.1   $ 3,324.9   $   $ 3,375.7  
   

Expenses:

                               
 

Operating

    19.8     15.5     2,014.9         2,050.2  
 

Selling, general and administrative

    25.2     45.3     610.3         680.8  
 

Restructuring charges

            5.9         5.9  
 

Impairment charges

    386.1         13,731.1         14,117.2  
 

Depreciation and amortization

    1.8     1.5     136.4         139.7  
   
   

Total expenses

    432.9     62.3     16,498.6         16,993.8  
   

Operating loss

    (403.2 )   (41.2 )   (13,173.7 )       (13,618.1 )

Interest (expense) income, net

    (155.9 )   (66.5 )   94.0         (128.4 )

Other items, net

    (3.8 )   9.2     (46.7 )       (41.3 )
   

Loss before income taxes and equity in earnings (loss) of investee companies

    (562.9 )   (98.5 )   (13,126.4 )       (13,787.8 )

Benefit for income taxes

    222.6     39.0     1,070.5         1,332.1  

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

    (12,121.9 )   847.7     (6.5 )   11,274.2     (6.5 )
   

Net earnings (loss)

  $ (12,462.2 ) $ 788.2   $ (12,062.4 ) $ 11,274.2   $ (12,462.2 )
   

-27-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

   
 
  Statement of Operations
For the Nine Months Ended September 30, 2008
 
 
  CBS
Corp.

  CBS
Operations
Inc.

  Non-
Guarantor
Affiliates

  Eliminations
  CBS
Corp.
Consolidated

 
   

Revenues

  $ 98.8   $ 74.1   $ 10,250.6   $   $ 10,423.5  
   

Expenses:

                               
 

Operating

    58.8     53.6     6,286.4         6,398.8  
 

Selling, general and administrative

    87.6     126.0     1,716.5         1,930.1  
 

Restructuring charges

    3.7         49.7         53.4  
 

Impairment charges

    386.1         13,731.1         14,117.2  
 

Depreciation and amortization

    5.3     4.0     371.6         380.9  
   
   

Total expenses

    541.5     183.6     22,155.3         22,880.4  
   

Operating loss

    (442.7 )   (109.5 )   (11,904.7 )       (12,456.9 )

Interest (expense) income, net

    (445.1 )   (208.1 )   284.6         (368.6 )

Other items, net

    30.2     22.2     31.0         83.4  
   

Loss before income taxes and equity in earnings (loss) of investee companies

    (857.6 )   (295.4 )   (11,589.1 )       (12,742.1 )

Benefit for income taxes

    339.2     116.9     491.8         947.9  

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

    (11,291.1 )   1,220.5     (15.3 )   10,070.6     (15.3 )
   

Net earnings (loss)

  $ (11,809.5 ) $ 1,042.0   $ (11,112.6 ) $ 10,070.6   $ (11,809.5 )
   

-28-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

   
 
  Balance Sheet
At September 30, 2009
 
 
  CBS
Corp.

  CBS
Operations
Inc.

  Non-
Guarantor
Affiliates

  Eliminations
  CBS
Corp.
Consolidated

 
   

Assets

                               

Cash and cash equivalents

  $ 213.5   $ .5   $ 259.8   $   $ 473.8  

Receivables, net

    20.6     29.4     2,676.9         2,726.9  

Programming and other inventory

    4.4     7.0     849.9         861.3  

Prepaid expenses and other current assets

    48.2     77.0     929.9     (15.8 )   1,039.3  
   
 

Total current assets

    286.7     113.9     4,716.5     (15.8 )   5,101.3  
   

Property and equipment

    47.2     76.4     4,942.1         5,065.7  
 

Less accumulated depreciation and amortization

    13.9     32.5     2,120.1         2,166.5  
   
 

Net property and equipment

    33.3     43.9     2,822.0         2,899.2  
   

Programming and other inventory

    6.6     93.6     1,351.6         1,451.8  

Goodwill

    100.3     63.0     8,498.0         8,661.3  

Intangible assets

    255.1         6,698.8         6,953.9  

Investments in consolidated subsidiaries

    33,251.2     5,660.9         (38,912.1 )    

Other assets

    106.3     30.4     1,356.3         1,493.0  
   

Total Assets

  $ 34,039.5   $ 6,005.7   $ 25,443.2   $ (38,927.9 ) $ 26,560.5  
   

Liabilities and Stockholders' Equity

                               

Accounts payable

  $ 1.7   $ 11.7   $ 360.2   $   $ 373.6  

Participants' share and royalties payable

        19.0     871.0         890.0  

Program rights

    4.9     8.9     693.7         707.5  

Current portion of long-term debt

    5.2         17.5         22.7  

Accrued expenses and other

    427.5     271.4     1,544.0     (16.1 )   2,226.8  
   
 

Total current liabilities

    439.3     311.0     3,486.4     (16.1 )   4,220.6  
   

Long-term debt

    6,817.9         145.8         6,963.7  

Other liabilities

    3,151.7     802.1     2,577.9     (1.7 )   6,530.0  

Intercompany payables

    10,075.1     (5,231.8 )   (9,883.7 )   5,040.4      

Stockholders' Equity:

                               
 

Preferred Stock

            128.2     (128.2 )    
 

Common Stock

    .8     122.8     1,135.9     (1,258.7 )   .8  
 

Additional paid-in capital

    43,485.1         61,434.8     (61,434.8 )   43,485.1  
 

Retained earnings (deficit)

    (25,721.2 )   10,332.6     (29,116.2 )   14,074.3     (30,430.5 )
 

Accumulated other comprehensive income (loss)

    (515.8 )   .1     334.0     (334.1 )   (515.8 )
   

    17,248.9     10,455.5     33,916.7     (49,081.5 )   12,539.6  
 

Less treasury stock, at cost

    3,693.4     331.1     4,799.9     (5,131.0 )   3,693.4  
   
   

Total Stockholders' Equity

    13,555.5     10,124.4     29,116.8     (43,950.5 )   8,846.2  
   

Total Liabilities and Stockholders' Equity

  $ 34,039.5   $ 6,005.7   $ 25,443.2   $ (38,927.9 ) $ 26,560.5  
   

-29-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

   
 
  Balance Sheet
At December 31, 2008
 
 
  CBS
Corp.

  CBS
Operations
Inc.

  Non-
Guarantor
Affiliates

  Eliminations
  CBS
Corp.
Consolidated

 
   

Assets

                               

Cash and cash equivalents

  $ 108.6   $ .8   $ 310.1   $   $ 419.5  

Receivables, net

    26.1     37.6     2,686.2         2,749.9  

Programming and other inventory

    4.8     7.2     1,015.3         1,027.3  

Prepaid expenses and other current assets

    57.6     70.6     921.0     (53.1 )   996.1  
   
 

Total current assets

    197.1     116.2     4,932.6     (53.1 )   5,192.8  
   

Property and equipment

    45.7     66.5     4,787.3         4,899.5  
 

Less accumulated depreciation and amortization

    13.9     25.0     1,852.3         1,891.2  
   
 

Net property and equipment

    31.8     41.5     2,935.0         3,008.3  
   

Programming and other inventory

    6.6     36.4     1,535.1         1,578.1  

Goodwill

    100.3     63.0     8,484.5         8,647.8  

Intangible assets

    255.1         6,849.1         7,104.2  

Investments in consolidated subsidiaries

    32,758.2     5,097.3         (37,855.5 )    

Other assets

    76.7     57.9     1,223.5         1,358.1  
   

Total Assets

  $ 33,425.8   $ 5,412.3   $ 25,959.8   $ (37,908.6 ) $ 26,889.3  
   

Liabilities and Stockholders' Equity

                               

Accounts payable

  $ 3.6   $ 54.1   $ 405.1   $   $ 462.8  

Participants' share and royalties payable

        16.8     945.5         962.3  

Program rights

    5.9     8.9     825.3         840.1  

Current portion of long-term debt

    5.1         16.2         21.3  

Accrued expenses and other

    511.4     319.1     1,737.4     (53.5 )   2,514.4  
   
 

Total current liabilities

    526.0     398.9     3,929.5     (53.5 )   4,800.9  
   

Long-term debt

    6,813.6         161.2         6,974.8  

Other liabilities

    3,097.8     912.5     2,506.6     (.6 )   6,516.3  

Intercompany payables

    9,681.8     (5,687.5 )   (9,068.3 )   5,074.0      

Stockholders' Equity:

                               
 

Preferred Stock

            128.2     (128.2 )    
 

Common Stock

    .8     122.8     1,135.9     (1,258.7 )   .8  
 

Additional paid-in capital

    43,495.0         61,434.8     (61,434.8 )   43,495.0  
 

Retained earnings (deficit)

    (25,888.9 )   9,996.6     (29,836.7 )   15,130.8     (30,598.2 )
 

Accumulated other comprehensive income (loss)

    (606.9 )   .1     368.5     (368.6 )   (606.9 )
   

    17,000.0     10,119.5     33,230.7     (48,059.5 )   12,290.7  
 

Less treasury stock, at cost

    3,693.4     331.1     4,799.9     (5,131.0 )   3,693.4  
   
   

Total Stockholders' Equity

    13,306.6     9,788.4     28,430.8     (42,928.5 )   8,597.3  
   

Total Liabilities and Stockholders' Equity

  $ 33,425.8   $ 5,412.3   $ 25,959.8   $ (37,908.6 ) $ 26,889.3  
   

-30-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

   
 
  Statement of Cash Flows
For the Nine Months Ended September 30, 2009
 
 
  CBS
Corp.

  CBS
Operations
Inc.

  Non-
Guarantor
Affiliates

  Eliminations
  CBS
Corp.
Consolidated

 
   

Net cash flow (used for) provided by operating activities

  $ (444.1 ) $ (98.9 ) $ 1,110.9   $   $ 567.9  
   

Investing Activities:

                               
 

Acquisitions, net of cash acquired

            (11.8 )       (11.8 )
 

Capital expenditures

        (10.1 )   (175.4 )       (185.5 )
 

Investments in and advances to investee companies

            (24.5 )       (24.5 )
 

Purchases of marketable securities

        (35.6 )           (35.6 )
 

Proceeds from dispositions

            72.4         72.4  
 

Other, net

    (.5 )               (.5 )
   

Net cash flow used for investing activities

    (.5 )   (45.7 )   (139.3 )       (185.5 )
   

Financing Activities:

                               
 

Repayments to banks, including commercial paper, net

            (2.3 )       (2.3 )
 

Proceeds from issuance of senior notes

    974.4                 974.4  
 

Repayment of senior notes

    (1,007.5 )               (1,007.5 )
 

Payment of capital lease obligations

            (11.6 )       (11.6 )
 

Dividends

    (263.5 )               (263.5 )
 

Purchase of Company common stock

    (18.7 )               (18.7 )
 

Excess tax benefit from stock-based compensation

    1.1                 1.1  
 

Increase (decrease) in intercompany payables

    863.7     144.3     (1,008.0 )        
   

Net cash flow provided by (used for) financing activities

    549.5     144.3     (1,021.9 )       (328.1 )
   
 

Net increase (decrease) in cash and cash equivalents

    104.9     (.3 )   (50.3 )       54.3  
 

Cash and cash equivalents at beginning of period

    108.6     .8     310.1         419.5  
   

Cash and cash equivalents at end of period

  $ 213.5   $ .5   $ 259.8   $   $ 473.8  
   

-31-


Table of Contents


CBS CORPORATION AND SUBSIDIARIES

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

 

   
 
  Statement of Cash Flows
For the Nine Months Ended September 30, 2008
 
 
  CBS
Corp.

  CBS
Operations
Inc.

  Non-
Guarantor
Affiliates

  Eliminations
  CBS
Corp.
Consolidated

 
   

Net cash flow (used for) provided by operating activities

  $ (579.8 ) $ (103.5 ) $ 2,397.0   $   $ 1,713.7  
   

Investing Activities:

                               
 

Acquisitions, net of cash acquired

    (1,814.5 )       (136.4 )       (1,950.9 )
 

Capital expenditures

        (7.4 )   (342.2 )       (349.6 )
 

Investments in and advances to investee companies

            (8.9 )       (8.9 )
 

Proceeds from dispositions

    4.3         362.4         366.7  
 

Other, net

    (1.2 )   (20.8 )   9.6         (12.4 )
   

Net cash flow used for investing activities

    (1,811.4 )   (28.2 )   (115.5 )       (1,955.1 )
   

Financing Activities:

                               
 

Repayments to banks, including commercial paper, net

            (5.0 )       (5.0 )
 

Payment of capital lease obligations

            (13.7 )       (13.7 )
 

Dividends

    (524.3 )               (524.3 )
 

Purchase of Company common stock

    (45.6 )               (45.6 )
 

Proceeds from exercise of stock options

    31.2                 31.2  
 

Excess tax benefit from stock-based compensation

    5.0                 5.0  
 

Increase (decrease) in intercompany payables

    2,445.5     131.8     (2,577.3 )        
   

Net cash flow provided by (used for) financing activities

    1,911.8     131.8     (2,596.0 )       (552.4 )
   
 

Net (decrease) increase in cash and cash equivalents

    (479.4 )   .1     (314.5 )       (793.8 )
 

Cash and cash equivalents at beginning of period

    732.9     .8     613.2         1,346.9  
   

Cash and cash equivalents at end of period

  $ 253.5   $ .9   $ 298.7   $   $ 553.1  
   

-32-


Table of Contents

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 on Form 10-K for the fiscal year ended December 31, 2008.

Overview

For the third quarter of 2009, CBS Corporation reported revenues of $3.35 billion, down 1% from $3.38 billion in the third quarter of 2008, and for the nine months ended September 30, 2009 revenues of $9.52 billion decreased 9% from $10.42 billion in the same prior-year period. Advertising sales during the first nine months of 2009 continued to be negatively impacted by the economic recession; however, advertising in several major categories, including automotive and financial services, began to show signs of improvement in the third quarter. As a result, the Company has seen improved revenue trends during the third quarter and continuing into the fourth quarter. Revenues for the 2009 third quarter and nine-month period also benefited from the domestic syndication sales of Medium, Criminal Minds, Ghost Whisperer, Everybody Hates Chris and Numb3rs.

The Company reported operating income of $418.2 million and $767.9 million for the three and nine months ended September 30, 2009, respectively, versus an operating loss of $13.62 billion and $12.46 billion, respectively, for the comparable prior-year periods, which included a pre-tax non-cash impairment charge of $14.12 billion to reduce the carrying value of goodwill and intangible assets.

The Company generated cash flow from operating activities of $567.9 million for the nine months ended September 30, 2009 versus $1.71 billion for the comparable prior-year period principally reflecting lower advertising sales and increased investment in programming, including higher investment in entertainment programming, contractual increases in sports programming and investment in theatrical programming. Capital expenditures decreased $164.1 million to $185.5 million for the nine months ended September 30, 2009. During the first nine months of 2009, the Company refinanced $978.3 million of its 7.70% senior notes due 2010 through the issuance of $1.0 billion of senior notes with maturities in 2014 and 2019.

Consolidated Results of Operations

Three and Nine Months Ended September 30, 2009 versus Three and Nine Months Ended September 30, 2008

Revenues

The following tables present the Company's consolidated revenues by type for the three and nine months ended September 30, 2009 and 2008.

   
 
  Three Months Ended September 30,  
 
   
  Percentage
of Total

   
  Percentage
of Total

  Increase/(Decrease)
 
Revenues by Type
  2009
  2008
  $
  %
 
   

Advertising sales

  $ 1,805.2       54%   $ 2,081.0       62%   $ (275.8 )   (13)%  

Television license fees

    799.2       24         585.5       17         213.7       36       

Affiliate revenues

    335.1       10         300.6         9         34.5       11       

Publishing

    230.4         7         225.0         7         5.4         2       

Home entertainment

    47.0         1         52.4         1         (5.4 )   (10)      

Other

    133.1         4         131.2         4         1.9         1       
   
 

Total Revenues

  $ 3,350.0     100%   $ 3,375.7     100%   $ (25.7 )     (1)%  
   

-33-


Table of Contents


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

   
 
  Nine Months Ended September 30,  
 
   
  Percentage
of Total

   
  Percentage
of Total

  Increase/(Decrease)
 
Revenues by Type
  2009
  2008
  $
  %
 
   

Advertising sales

  $ 5,819.9       61%   $ 6,853.2       66%   $ (1,033.3 )   (15)%  

Television license fees

    1,609.8       17         1,560.6       15         49.2         3       

Affiliate revenues

    992.2       10         897.4         8         94.8       11       

Publishing

    573.5         6         612.6         6         (39.1 )     (6)      

Home entertainment

    154.1         2         172.1         2         (18.0 )   (10)      

Other

    366.7         4         327.6         3         39.1       12       
   
 

Total Revenues

  $ 9,516.2     100%   $ 10,423.5     100%   $ (907.3 )     (9)%  
   

Advertising sales decreased $275.8 million, or 13%, to $1.81 billion for the three months ended September 30, 2009 principally reflecting continued softness in the local television, radio and outdoor advertising markets resulting from the weak economic environment, and the unfavorable impact of foreign exchange rate changes. For the nine months ended September 30, 2009, advertising sales decreased $1.03 billion, or 15%, to $5.82 billion principally reflecting the continued softness in the advertising market, the unfavorable impact of foreign exchange rate changes and lower political advertising sales, partially offset by the impact of the acquisition of CNET Networks, Inc. ("CNET") in the second quarter of 2008.

Television license fees increased $213.7 million, or 36%, to $799.2 million for the three months ended September 30, 2009 and increased $49.2 million, or 3%, to $1.61 billion for the nine months ended September 30, 2009, principally due to higher domestic syndication sales in 2009, which included the first cycle sales of Medium, Criminal Minds, Ghost Whisperer, Everybody Hates Chris and Numb3rs, compared to 2008, which included the domestic syndication sale of CSI: NY. For the nine-month period, the increase was partially offset by the initial benefit in 2008 of the international self-distribution arrangement for the CSI franchise, which was previously distributed by a third-party.

Affiliate revenues increased $34.5 million, or 11%, to $335.1 million for the three months ended September 30, 2009 and increased $94.8 million, or 11%, to $992.2 million for the nine months ended September 30, 2009, principally reflecting growth in subscriptions and rate increases at Showtime Networks and CBS College Sports Network, and higher retransmission revenues.

Publishing revenues increased $5.4 million, or 2%, to $230.4 million for the three months ended September 30, 2009 principally reflecting the timing of release of titles. Publishing revenues decreased $39.1 million, or 6%, to $573.5 million for the nine months ended September 30, 2009 primarily reflecting a soft retail market and the unfavorable impact of foreign exchange rate changes.

Home entertainment revenues decreased $5.4 million, or 10%, to $47.0 million for the three months ended September 30, 2009 primarily due to lower sales of library titles partially offset by higher 2009 sales of Showtime original series. Home entertainment revenues decreased $18.0 million, or 10%, to $154.1 million for the nine months ended September 30, 2009, as higher sales of certain titles in 2009 including Gossip Girl, Navy NCIS and Showtime original series were more than offset by prior year sales of Charmed.

Other revenues, which include digital media revenues and other ancillary fees for Television, Radio, Outdoor and Interactive operations, increased $1.9 million, or 1%, to $133.1 million for the three

-34-


Table of Contents


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


months ended September 30, 2009. Other revenues increased $39.1 million, or 12%, to $366.7 million for the nine months ended September 30, 2009 primarily reflecting the impact of the acquisition of CNET, partially offset by the absence of 2008 revenues associated with certain of the Company's former agreements with Westwood One, Inc. which were concluded during the first quarter of 2008.

International Revenues

The Company generated approximately 13% and 14% of its total revenues from international regions for the three and nine months ended September 30, 2009, respectively, versus 15% and 17% for the three and nine months ended September 30, 2008, respectively.

Operating Expenses

For the three months ended September 30, 2009, operating expenses increased $82.1 million, or 4%, to $2.13 billion principally reflecting higher television programming and production costs, partially offset by 9% lower compensation expense and the impact of foreign exchange rate changes. For the nine months ended September 30, 2009, operating expenses increased $31.0 million to $6.43 billion principally reflecting higher television programming costs and the acquisition of CNET, partially offset by the impact of foreign exchange rate changes, lower television production costs and lower compensation expense.

The following tables present the Company's consolidated operating expenses by type for the three and nine months ended September 30, 2009 and 2008.

   
 
  Three Months Ended September 30,  
 
   
  Percentage
of Total

   
  Percentage
of Total

  Increase/(Decrease)
 
Operating Expenses by Type
  2009
  2008
  $
  %
 
   

Programming

  $ 623.1       29%   $ 596.8       29%   $ 26.3         4%    

Production

    814.5       38         725.8       36         88.7       12       

Outdoor operations

    296.9       14         328.7       16         (31.8 )   (10)      

Publishing operations

    157.4         8         149.5         7         7.9         5       

Other

    240.4       11         249.4       12         (9.0 )     (4)      
   
 

Total Operating Expenses

  $ 2,132.3     100%   $ 2,050.2     100%   $ 82.1         4%    
   

 

   
 
  Nine Months Ended September 30,  
 
   
  Percentage
of Total

   
  Percentage
of Total

  Increase/(Decrease)
 
Operating Expenses by Type
  2009
  2008
  $
  %
 
   

Programming

  $ 2,471.1       38%   $ 2,363.7       37%   $ 107.4         5%    

Production

    1,927.8       30         1,974.5       31         (46.7 )     (2)      

Outdoor operations

    866.9       14         957.4       15         (90.5 )     (9)      

Publishing operations

    404.7         6         406.1         6         (1.4 )   —       

Other

    759.3       12         697.1       11         62.2         9       
   
 

Total Operating Expenses

  $ 6,429.8     100%   $ 6,398.8     100%   $ 31.0     —%    
   

-35-


Table of Contents


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

Programming expenses for the three months ended September 30, 2009 increased $26.3 million, or 4%, to $623.1 million and for the nine months ended September 30, 2009, programming expenses increased $107.4 million, or 5%, to $2.47 billion, reflecting higher television series costs principally from the impact of the Writers Guild of America ("WGA") strike which reduced programming costs for the 2007/2008 broadcast season.

Production expenses for the three months ended September 30, 2009 increased $88.7 million, or 12%, to $814.5 million, principally due to higher production costs associated with higher syndication revenues partially offset by lower Radio talent costs reflecting restructuring and cost-savings initiatives. For the nine months ended September 30, 2009, production expenses decreased $46.7 million, or 2%, to $1.93 billion principally reflecting the initial impact in 2008 of the international self-distribution arrangement for the CSI franchise and lower Radio talent costs partially offset by higher costs associated with higher syndication revenues, costs for new series and an increased number of pilots produced in 2009.

Outdoor operations expenses for the three months ended September 30, 2009 decreased $31.8 million, or 10%, to $296.9 million and for the nine months ended September 30, 2009, Outdoor operations expenses decreased $90.5 million, or 9%, to $866.9 million, primarily due to the impact of foreign exchange rate changes and lower employee-related costs associated with restructuring and cost-savings initiatives.

Publishing operations expenses for the three months ended September 30, 2009 increased $7.9 million, or 5%, to $157.4 million reflecting higher production and royalty expenses driven by the increase in revenues and higher write-offs of advances for author royalties. For the nine months ended September 30, 2009, Publishing operations expenses decreased $1.4 million to $404.7 million principally reflecting lower royalty and production expenses driven by the decrease in revenues, and lower delivery costs, partially offset by higher write-offs of advances for author royalties.

Other operating expenses for the three months ended September 30, 2009 decreased $9.0 million, or 4%, to $240.4 million principally reflecting lower employee-related costs associated with restructuring and cost-savings initiatives. For the nine months ended September 30, 2009, other operating expenses increased $62.2 million, or 9%, to $759.3 million, primarily reflecting increased costs associated with digital media, including the impact of the acquisition of CNET, partially offset by lower employee-related costs associated with restructuring and cost-savings initiatives.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses, which include expenses incurred for selling and marketing costs, occupancy and back office support, decreased $60.4 million, or 9%, to $620.4 million for the three months ended September 30, 2009 and decreased $87.8 million, or 5%, to $1.84 billion for the nine months ended September 30, 2009, primarily due to lower employee-related costs resulting from restructuring and cost-savings initiatives implemented across the Company's segments, the impact of foreign exchange rate changes and the favorable impacts from the termination of a real estate lease arrangement and the resolution of certain disputes regarding a previously disposed business, partially offset by increased pension costs. For the nine-month period, the decrease was also partially offset by the absence of a 2008 settlement of an international receivable claim and the impact of the acquisition of CNET. Pension and postretirement benefits costs increased $26.4 million to $56.4 million for the third quarter of 2009 and increased $70.2 million to $169.8 million for the nine months ended

-36-


Table of Contents


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


September 30, 2009 versus the comparable prior-year periods due to pension plan asset performance in 2008. SG&A expenses as a percentage of revenues was 19% for both the three and nine months ended September 30, 2009 versus 20% and 19% for the three and nine months ended September 30, 2008, respectively.

Restructuring Charges

During the year ended December 31, 2008, the Company recorded restructuring charges of $136.7 million, of which $53.4 million was recorded during the nine months ended September 30, 2008. The full year 2008 charges reflected $127.5 million of severance costs and $9.2 million of contract termination and other associated costs.

During the nine months ended September 30, 2009, the Company recorded restructuring charges of $9.6 million, reflecting $4.9 million of severance costs associated with headcount reductions and $4.7 million of contract termination costs related to exiting a broadcasting equipment lease upon completion of the digital conversion.

As of September 30, 2009, the Company paid $98.6 million of severance costs and $3.2 million of contract termination and other associated costs, of which $12.6 million and $.3 million, respectively, was paid during the third quarter of 2009. The following table sets forth the activity for the restructuring charges by segment.

   
 
  Balance at
December 31, 2008

  2009 Charges
  2009 Payments
  Balance at
September 30, 2009

 
   

Television

  $ 35.9   $ 4.1   $ (21.5 ) $ 18.5  

Radio

    38.9         (18.3 )   20.6  

Outdoor

    7.8     3.3     (8.6 )   2.5  

Interactive

    2.7         (2.7 )    

Publishing

    3.9     2.2     (3.7 )   2.4  

Corporate

    1.5         (1.0 )   .5  
   
 

Total

  $ 90.7   $ 9.6   $ (55.8 ) $ 44.5  
   

Impairment Charges

In the third quarter of 2009, in connection with the sale of certain of its radio stations, the Company recorded a non-cash impairment charge of $31.7 million to reduce the carrying value of intangible assets and the allocated goodwill.

In the third quarter of 2008, the Company recorded a non-cash impairment charge of $14.12 billion to reduce the carrying value of goodwill by $10.99 billion and intangible assets by $3.13 billion. The charge was reflected as a reduction to goodwill at the Television segment of $5.81 billion, the Radio segment of $2.33 billion and the Outdoor segment of $2.85 billion as well as a reduction to the carrying value of intangible assets related to FCC licenses at the Television segment of $2.13 billion and the Radio segment of $984.6 million, and franchise agreements at the Outdoor segment of $8.2 million.

-37-


Table of Contents


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

Depreciation and Amortization

For the three months ended September 30, 2009, depreciation and amortization increased 6% to $147.4 million principally reflecting higher depreciation resulting from 2008 capital expenditures at Outdoor. For the nine months ended September 30, 2009, depreciation and amortization increased 14% to $434.9 million principally reflecting higher depreciation and amortization associated with fixed assets and intangible assets acquired in connection with CNET and higher depreciation resulting from 2008 capital expenditures at Outdoor.

Interest Expense

For the three months ended September 30, 2009, interest expense increased $.6 million to $135.4 million and for the nine months ended September 30, 2009, interest expense decreased $5.3 million to $402.5 million. The Company had $6.99 billion at September 30, 2009 and $7.10 billion at September 30, 2008, of principal amounts of debt outstanding (including current maturities) at weighted average interest rates of 7.2% and 7.1%, respectively.

Interest Income

For the three months ended September 30, 2009, interest income decreased $4.8 million to $1.6 million and for the nine months ended September 30, 2009, interest income decreased $34.9 million to $4.3 million principally due to lower interest rates and lower average cash balances.

Loss on Early Extinguishment of Debt

For the nine months ended September 30, 2009, loss on early extinguishment of debt of $29.8 million reflected a loss associated with the repurchase of $978.3 million of the Company's 7.70% senior notes due 2010.

Other Items, Net

For the three months ended September 30, 2009, "Other items, net" of $15.0 million principally reflected foreign exchange gains of $19.2 million partially offset by $3.3 million of losses associated with securitizing accounts receivables. For the nine months ended September 30, 2009, "Other items, net" reflected a net loss of $.4 million primarily consisting of losses of $4.6 million associated with securitizing accounts receivables partially offset by foreign exchange gains of $4.5 million.

For the three months ended September 30, 2008, "Other items, net" reflected a net loss of $41.3 million principally reflecting a non-cash charge of $56.4 million associated with other-than-temporary declines in the market value of the Company's investments and $4.5 million of losses associated with securitizing accounts receivables partially offset by foreign exchange gains of $19.3 million. For the nine months ended September 30, 2008, "Other items, net" of $83.4 million principally consisted of a gain of $127.2 million on the sale of the Company's investment in Sundance Channel and foreign exchange gains of $24.5 million partially offset by a non-cash charge of $56.4 million associated with other-than-temporary declines in the market value of the Company's investments and $12.2 million of losses associated with securitizing accounts receivables.

-38-


Table of Contents


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

(Provision) benefit for Income Taxes

The provision for income taxes represents federal, state and local, and foreign income taxes on earnings (loss) before income taxes and equity in loss of investee companies. The provision for income taxes was $79.7 million and $145.4 million for the three and nine months ended September 30, 2009, respectively, versus an income tax benefit of $1.33 billion and $947.9 million for the three and nine months ended September 30, 2008, respectively. The provision for income taxes for the three and nine months ended September 30, 2009 included a tax benefit of $41.8 million and $45.3 million, respectively, from the settlements of certain income tax audits. The provision for income taxes for the nine months ended September 30, 2009 was also impacted by the reversal of certain international net operating loss carryforwards of $13.4 million and a reduction of deferred tax assets associated with stock-based compensation of $42.3 million. This reduction reflects the difference between the estimated tax benefit recognized based on the grant date fair value of the stock-based compensation award versus the actual tax benefit realized based on the market value on the date of vest. The income tax benefit for the three and nine months ended September 30, 2008 included a tax benefit of $1.42 billion associated with the non-cash impairment charge of $14.12 billion to reduce the carrying value of goodwill and intangible assets.

The Company's annual effective income tax rate for 2009 is currently expected to be approximately 45%.

Equity in Loss of Investee Companies, Net of Tax

For the three months ended September 30, 2009, equity in loss of investee companies, net of tax, was $12.1 million versus $6.5 million for the comparable prior-year period and for the nine months ended September 30, 2009, equity in loss of investee companies, net of tax, was $26.4 million versus $15.3 million for the same prior-year period, reflecting the Company's share of the operating results of its equity investments.

Net Earnings (Loss)

The Company reported net earnings of $207.6 million for the three months ended September 30, 2009 versus a net loss of $12.46 billion for the three months ended September 30, 2008 and net earnings of $167.7 million for the nine months ended September 30, 2009 versus a net loss of $11.81 billion for the nine months ended September 30, 2008. The net loss for the three and nine months ended September 30, 2008 was driven by the non-cash impairment charge of $14.12 billion to reduce the carrying value of goodwill and intangible assets.

-39-


Table of Contents


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

Segment Results of Operations

In the fourth quarter of 2009, the Company will realign its operating segments to more effectively highlight its long-term strategy of investing in content businesses and capitalizing on its strong local presence. The new operating segments will be as follows: Entertainment (CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Films and CBS Interactive), Cable Networks (Showtime Networks and CBS College Sports Network), Publishing (Simon & Schuster), Local Broadcasting (CBS Television Stations and CBS Radio) and Outdoor (CBS Outdoor). The Company did not operate under the new segment structure during the periods presented and therefore, results under the new segment presentation will be first disclosed in the Form 10-K for the year ended December 31, 2009. Prior periods will be reclassified to conform to this presentation.

The following tables present the Company's revenues, segment operating income (loss) before depreciation and amortization and impairment charges ("Segment OIBDA before Impairment Charges"), operating income (loss), and depreciation and amortization by segment, for the three and nine months ended September 30, 2009 and 2008, respectively. The Company presents Segment OIBDA before Impairment Charges as the primary measure of profit and loss for its operating segments in accordance with Financial Accounting Standards Board ("FASB") guidance for segment reporting. The Company believes the presentation of Segment OIBDA before Impairment Charges is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company's management and enhances their ability to understand the Company's operating performance. The reconciliation of Segment OIBDA before Impairment Charges to the Company's consolidated Net Earnings (Loss) is presented in Note 15 (Reportable Segments) to the consolidated financial statements.

   
 
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

 
 
     
 
  2009
  2008
  2009
  2008
 
   

Revenues:

                         
 

Television

  $ 2,269.0   $ 2,075.9   $ 6,447.1   $ 6,781.5  
 

Radio

    318.9     392.5     900.6     1,172.4  
 

Outdoor

    424.9     549.3     1,238.9     1,644.3  
 

Interactive

    121.3     142.3     381.3     235.4  
 

Publishing

    230.4     225.0     573.5     612.6  
 

Eliminations

    (14.5 )   (9.3 )   (25.2 )   (22.7 )
   
   

Total Revenues

  $ 3,350.0   $ 3,375.7   $ 9,516.2   $ 10,423.5  
   

-40-


Table of Contents


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

 

 
 
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

 
   
 
  2009
  2008
  2009
  2008
 

Segment OIBDA before Impairment Charges:

                       
 

Television

  $ 483.9   $ 412.8   $ 1,019.3   $ 1,373.6  
 

Radio

    93.1     139.4     240.6     420.3  
 

Outdoor

    32.6     113.9     99.9     369.0  
 

Interactive

    4.1     3.7     18.0     (12.0)
 

Publishing

    28.4     25.8     36.6     59.9  
 

Corporate

    (34.8 )   (38.5 )   (98.0 )   (106.4)

Residual costs

    (7.9 )   (18.3 )   (79.8 )   (63.2)

Eliminations

    (2.1 )       (2.1 )   —  

Impairment charges (a)(b)

    (31.7 )   (14,117.2 )   (31.7 )   (14,117.2)

Depreciation and amortization

    (147.4 )   (139.7 )   (434.9 )   (380.9)
 
   

Total Operating Income (Loss)

  $ 418.2   $ (13,618.1 ) $ 767.9   $ (12,456.9)
 

Operating Income (Loss):

                       
 

Television (b)

  $ 440.6   $ (7,575.9 ) $ 889.7   $ (6,703.0)
 

Radio (a)(b)

    51.1     (3,188.1 )   180.8     (2,922.4)
 

Outdoor (b)

    (34.9 )   (2,803.4 )   (97.9 )   (2,666.9)
 

Interactive

    (15.6 )   (14.0 )   (41.3 )   (38.0)
 

Publishing

    26.6     23.4     30.6     52.6  
 

Corporate

    (39.6 )   (41.8 )   (112.1 )   (116.0)
 

Residual costs

    (7.9 )   (18.3 )   (79.8 )   (63.2)
 

Eliminations

    (2.1 )       (2.1 )   —  
 
   

Total Operating Income (Loss)

  $ 418.2   $ (13,618.1 ) $ 767.9   $ (12,456.9)
 

Depreciation and Amortization:

                       
 

Television

  $ 43.3   $ 45.4   $ 129.6   $ 133.3  
 

Radio

    10.3     8.8     28.1     24.0  
 

Outdoor

    67.5     62.1     197.8     180.7  
 

Interactive

    19.7     17.7     59.3     26.0  
 

Publishing

    1.8     2.4     6.0     7.3  
 

Corporate

    4.8     3.3     14.1     9.6  
 
   

Total Depreciation and Amortization

  $ 147.4   $ 139.7   $ 434.9   $ 380.9  
 
(a)
In connection with the sale of certain of its radio stations, the Company recorded a non-cash impairment charge of $31.7 million during the third quarter of 2009, to reduce the carrying value of intangible assets and the allocated goodwill.

(b)
The Company recorded a non-cash impairment charge of $14.12 billion for the three and nine months ended September 30, 2008, to reduce the carrying value of goodwill and intangible assets. The charge is comprised of $7.94 billion for Television, $3.32 billion for Radio and $2.86 billion for Outdoor.

-41-


Table of Contents


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

Television (CBS Television Network, CBS Television Stations, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS College Sports Network, CBS Films and Showtime Networks)

(Contributed 68% to consolidated revenues for both the three and nine months ended September 30, 2009 versus 61% and 65% for the comparable prior-year periods.)

                         
   
 
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

 
 
     
 
  2009
  2008
  2009
  2008
 
   

Revenues

  $ 2,269.0   $ 2,075.9   $ 6,447.1   $ 6,781.5  
   

OIBDA before impairment charges

  $ 483.9   $ 412.8   $ 1,019.3   $ 1,373.6  

Impairment charges

        (7,943.3 )       (7,943.3 )

Depreciation and amortization

    (43.3 )   (45.4 )   (129.6 )   (133.3 )
   

Operating income (loss)

  $ 440.6   $ (7,575.9 ) $ 889.7   $ (6,703.0 )
   

OIBDA before impairment charges as a % of revenues

    21%     20%     16%     20%  

Operating income as a % of revenues

    19%     NM     14%     NM  

Restructuring charges

  $   $ .2   $ 4.1   $ 35.1  

Capital expenditures

  $ 19.0   $ 44.6   $ 70.6   $ 137.0  
   

  NM—not meaningful

Three months ended September 30, 2009 and 2008

For the three months ended September 30, 2009, Television revenues increased 9% to $2.27 billion from $2.08 billion for the same prior-year period due to higher television license fees and affiliate revenues partially offset by lower local advertising sales. The following table presents revenues by type for the Television segment for the three months ended September 30, 2009 and 2008.

   
 
  Three Months Ended September 30,  
 
   
  % of
Total

   
  % of
Total

  Increase/(Decrease)
 
Television Revenues by Type
  2009
  2008
  $
  %
 
   

Advertising sales

  $ 1,003.3       44%   $ 1,061.1       51%   $ (57.8 )     (5)%  

Television license fees

    799.2       35         585.5       28         213.7       36       

Affiliate revenues

    335.1       15         300.6       14         34.5       11       

Home entertainment

    47.0         2         52.4         3         (5.4 )   (10)      

Other

    84.4         4         76.3         4         8.1       11       
   
 

Total Television Revenues

  $ 2,269.0     100%   $ 2,075.9     100%   $ 193.1         9%    
   

Television license fees increased 36% principally reflecting higher domestic syndication sales in 2009, which included the first cycle sales of Medium, Criminal Minds, Ghost Whisperer, Everybody Hates Chris and Numb3rs, compared to 2008, which included the domestic syndication sale of CSI: NY. Affiliate revenues increased 11% over the same prior-year period primarily driven by growth in subscriptions and rate increases at Showtime Networks and CBS College Sports Network, and higher retransmission

-42-


Table of Contents


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


revenues. Advertising sales decreased 5% primarily reflecting softness in the local advertising marketplace and lower political advertising sales.

For the three months ended September 30, 2009, Television reported operating income of $440.6 million versus an operating loss of $7.58 billion for the same prior-year period. Included in the 2008 operating loss was a non-cash impairment charge of $7.94 billion to reduce the carrying value of goodwill and intangible assets. Television OIBDA before impairment charges increased $71.1 million, or 17%, to $483.9 million from $412.8 million primarily due to higher profits from syndication sales and higher affiliate revenues partially offset by lower local advertising sales and higher television series costs reflecting the impact of the 2008 WGA strike which reduced programming costs for the 2007/2008 broadcast season.

Nine months ended September 30, 2009 and 2008

For the nine months ended September 30, 2009, Television revenues decreased 5% to $6.45 billion from $6.78 billion for the same prior-year period primarily due to lower advertising sales partially offset by higher affiliate revenues and television license fees. The following table presents revenues by type for the Television segment for the nine months ended September 30, 2009 and 2008.

   
 
  Nine Months Ended September 30,  
 
   
  % of
Total

   
  % of
Total

  Increase/(Decrease)
 
Television Revenues by Type
  2009
  2008
  $
  %
 
   

Advertising sales

  $ 3,465.6       54%   $ 3,931.8       58%   $ (466.2 )   (12)%  

Television license fees

    1,609.8       25         1,560.6       23         49.2         3       

Affiliate revenues

    992.2       15         897.4       13         94.8       11       

Home entertainment

    154.1         2         172.1         3         (18.0 )   (10)      

Other

    225.4         4         219.6         3         5.8         3       
   
 

Total Television Revenues

  $ 6,447.1     100%   $ 6,781.5     100%   $ (334.4 )     (5)%  
   

Advertising sales decreased 12% primarily reflecting softness in the advertising marketplace and lower political advertising sales. Affiliate revenues increased 11% over the same prior-year period primarily driven by growth in subscriptions and rate increases at Showtime Networks and CBS College Sports Network, and higher retransmission revenues. Television license fees increased 3% primarily due to higher 2009 domestic syndication sales partially offset by the initial benefit in 2008 of the international self-distribution arrangement for the CSI franchise.

For the nine months ended September 30, 2009, Television reported operating income of $889.7 million versus an operating loss of $6.70 billion for the same prior-year period, which included a $7.94 billion non-cash impairment charge. Television OIBDA before impairment charges decreased $354.3 million, or 26%, to $1.02 billion from $1.37 billion primarily due to lower advertising sales and higher television programming costs, reflecting the impact of the WGA strike which reduced programming costs in 2008, partially offset by higher profits from syndication sales, higher affiliate revenues and lower restructuring charges in 2009.

-43-


Table of Contents


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

Dispositions

On January 10, 2008, the Company completed the sale of seven of its owned television stations in Austin, Salt Lake City, Providence and West Palm Beach to Cerberus Capital Management, L.P. for $185.0 million.

Radio (CBS Radio)

(Contributed 10% and 9% to consolidated revenues for the three and nine months ended September 30, 2009, respectively, versus 12% and 11% for the comparable prior-year periods.)

   
 
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

 
 
     
 
  2009
  2008
  2009
  2008
 
   

Revenues

  $ 318.9   $ 392.5   $ 900.6   $ 1,172.4  
   

OIBDA before impairment charges

  $ 93.1   $ 139.4   $ 240.6   $ 420.3  

Impairment charges

    (31.7 )   (3,318.7 )   (31.7 )   (3,318.7 )

Depreciation and amortization

    (10.3 )