NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
1
)
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business-
CBS Corporation (together with its consolidated subsidiaries unless the context otherwise requires, the “Company” or “CBS Corp.”) is comprised of the following segments: Entertainment (CBS Television, comprised of the CBS Television Network, CBS Television Studios and CBS Global Distribution Group; Network 10; CBS Interactive; CBS Sports Network and CBS Films), Cable Networks (Showtime Networks, Pop and Smithsonian Networks), Publishing (Simon & Schuster) and Local Media (CBS Television Stations and CBS Local Digital Media).
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 year ended
December 31, 2018
.
In the opinion of management, the accompanying unaudited financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair statement of the financial position, results of operations and cash flows of the Company for the periods presented. Certain previously reported amounts have been reclassified to conform to the current presentation.
Use of Estimates
-The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Noncurrent Receivables-
Noncurrent receivables of
$1.77 billion
at
June 30, 2019
and
$1.55 billion
at
December 31, 2018
are included in “Other assets” on the Company’s Consolidated Balance Sheets and primarily relate to revenues recognized under long-term television licensing arrangements. Television license fee revenues are recognized at the beginning of the license period in which programs are made available to the licensee for exhibition, while the related cash is collected over the term of the license period.
Deferred Revenues-
Deferred revenues of
$287 million
at
June 30, 2019
and
$274 million
at
December 31, 2018
are primarily included within “Accrued expenses and other current liabilities” on the Company’s Consolidated Balance Sheets. These amounts consist mainly of cash received related to advertising arrangements and the licensing of television programming for which the revenues have not yet been earned. The change in deferred revenues for the
six months ended
June 30, 2019
primarily reflects cash payments received during the period for which the performance obligation was not satisfied prior to the end of the period offset by
$152 million
of revenues recognized that were included in deferred revenues at
December 31, 2018
.
Unrecognized Revenues Under Contract-
As of
June 30, 2019
, unrecognized revenue attributable to unsatisfied performance obligations under the Company’s long-term contracts was
$3.47 billion
, of which
$984 million
is expected to be recognized for the remainder of
2019
,
$1.21 billion
for
2020
,
$833 million
for
2021
, and
$434 million
thereafter. These amounts only include contracts subject to a guaranteed fixed amount or the guaranteed minimum under variable contracts. Such amounts change on a regular basis as the Company renews existing agreements or enters into new agreements. Unrecognized revenues under contract disclosed above do not include
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
(i) contracts with an original expected term of one year or less, mainly consisting of the Company’s advertising contracts (ii) contracts for which variable consideration is determined based on the customer’s subsequent sale or usage, mainly consisting of affiliate and subscription fee agreements and (iii) long-term licensing agreements for multiple programs for which the Company’s right to invoice corresponds with the value of the programs provided to the customer.
Leases-
The Company has operating leases primarily for office space, equipment, satellite transponders and studio facilities and finance leases for satellite transponders and office equipment. The Company determines that a contract contains a lease if it obtains substantially all of the economic benefits of, and the right to direct the use of, an asset identified in the contract. For leases with terms greater than 12 months, the Company records a right-of-use asset and a lease liability representing the present value of future lease payments. The discount rate used to measure the lease asset and liability is determined at the beginning of the lease term using the rate implicit in the lease, if readily determinable, or the Company’s collateralized incremental borrowing rate. For those contracts that include fixed rental payments for both the use of the asset (“lease costs”) as well as for other occupancy or service costs relating to the asset (“non-lease costs”), the Company includes both the lease costs and non-lease costs in the measurement of the lease asset and liability. The Company also owns buildings and production facilities where it leases space to lessees.
The Company’s leases have remaining terms ranging from
one
to
16
years and often contain renewal options to extend the lease for periods of generally up to
five
years. For leases that contain renewal options, the Company includes the renewal period in the lease term if it is reasonably certain that the option will be exercised. Lease expenses and income are recognized on a straight-line basis over the lease term, with the exception of variable lease costs, which are expensed as incurred, and leases of assets used in the production of programming, which are capitalized in programming assets and amortized over the projected useful life of the related programming.
Restricted Cash
-Restricted cash of
$122 million
at
June 30, 2019
and
$120 million
at
December 31, 2018
is included within “Other assets” on the Company’s Consolidated Balance Sheets and consists of amounts held in a grantor trust related to the separation and settlement agreement between the Company and the former Chairman of the Board, President and Chief Executive Officer of the Company (see Note
13
).
Net Earnings per Common Share
-Basic net earnings per share (“EPS”) is based upon net earnings 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”) only in the periods in which such effect would have been dilutive. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, were
7 million
stock options and RSUs for each of the
three and six months ended
June 30, 2019
, and
8 million
stock options and RSUs for each of the
three and six months ended
June 30, 2018
.
The table below presents a reconciliation of weighted average shares used in the calculation of basic and diluted EPS.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Weighted average shares for basic EPS
|
374
|
|
|
378
|
|
|
374
|
|
|
380
|
|
Dilutive effect of shares issuable under stock-based
compensation plans
|
2
|
|
|
3
|
|
|
2
|
|
|
3
|
|
Weighted average shares for diluted EPS
|
376
|
|
|
381
|
|
|
376
|
|
|
383
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Other Liabilities
-Other liabilities consist primarily of the noncurrent portion of residual liabilities of previously disposed businesses, participants’ share and royalties payable, program rights obligations, long-term tax liabilities, deferred compensation and other employee benefit accruals.
Additional Paid-In Capital
-For the
six months ended
June 30, 2019 and 2018
, the Company recorded dividends of
$136 million
and
$138 million
, respectively, as a reduction to additional paid-in capital as the Company had an accumulated deficit balance.
Gain on Sale of Assets
-During the first quarter of 2019, the Company completed the sale of its CBS Television City property and sound stage operation (“CBS Television City”) for
$750 million
. The Company has guaranteed a specified level of cash flows to be generated by the business during the first five years following the completion of the sale. Included on the Company’s Consolidated Balance Sheet at
June 30, 2019
is a liability of
$122 million
, reflecting the present value of the estimated amount payable under the guarantee obligation. This transaction resulted in a gain of
$549 million
(
$386 million
, net of tax), which includes a reduction for the guarantee obligation. CBS Television City has been classified as held for sale on the Company’s Consolidated Balance Sheet at
December 31, 2018
.
Acquisition
-In March 2019, the Company acquired the remaining
50%
interest in
Pop
, a general entertainment cable network, for
$50 million
, bringing the Company’s ownership to
100%
. The assets acquired primarily consist of goodwill and other identifiable intangible assets. The results of
Pop
are included in the Cable Networks segment from the date of acquisition.
Recently Adopted Accounting Pronouncements
Leases
During the first quarter of
2019
, the Company adopted Financial Accounting Standards Board (“FASB”) guidance on the accounting for leases, which supersedes previous lease guidance. Under this guidance, for all leases with terms in excess of one year, the Company recognizes on its balance sheet a lease liability and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance retains a distinction between finance leases and operating leases and the classification criteria is substantially similar to previous guidance. Additionally, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed. The Company applied the modified retrospective method of adoption and therefore, results for reporting periods beginning after
January 1, 2019
are presented under the new guidance while prior periods have not been adjusted. As a result of this guidance, the Company’s Consolidated Balance Sheet at
June 30, 2019
included right-of-use assets of
$922 million
and lease liabilities of
$1.0 billion
for its operating leases. This guidance did not have an impact on the Company’s Consolidated Statement of Operations. See Note
12
for additional information.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
During the first quarter of
2019
, the Company adopted FASB guidance that permits an entity to reclassify certain income tax effects of federal tax legislation enacted in December 2017 (the “Tax Reform Act”) on items within accumulated other comprehensive income (“AOCI”) to retained earnings. As a result of the Tax Reform Act, in 2017, the Company remeasured its deferred income tax assets and liabilities to reflect the reduction in the federal income tax rate from 35% to 21%. The remeasurement was recognized in net earnings and as a result, the income tax effects of the Tax Reform Act on items within AOCI remained at historical rates (“stranded tax effects”). During the first quarter of 2019, as a result of the adoption of this guidance, the Company elected to reclassify the stranded tax effects of
$176 million
relating to its pension and postretirement obligations from AOCI to
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
accumulated deficit. This guidance also requires entities to disclose their accounting policy for releasing stranded tax effects, unrelated to the Tax Reform Act, from AOCI. For pension and postretirement benefit plans, the Company releases stranded tax effects from AOCI when the pension and postretirement plans are terminated.
Targeted Improvements to Accounting for Hedging Activities
During the first quarter of
2019
, the Company adopted FASB amended guidance for hedge accounting, which expands the eligibility of hedging strategies that qualify for hedge accounting, modifies the recognition and presentation of hedges in the financial statements, and changes how companies assess hedge effectiveness. In addition, this guidance amends and expands disclosure requirements. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
Improvements to Accounting for Costs of Films and License Agreements for Program Materials
In March 2019, the FASB issued guidance on the accounting for costs of films and episodic television series, which aligns the accounting for capitalizing production costs of episodic television series with the guidance for films. As a result, the capitalization of costs incurred to produce episodic television series will no longer be limited to the amount of revenue contracted in the initial market until persuasive evidence of a secondary market exists. In addition, this guidance requires the Company to test for impairment of television series on a title-by-title basis or together with other series as part of a group, based on the predominant monetization strategy of the series. This guidance also removes the requirement to classify all capitalized costs for produced television series as noncurrent on the balance sheet and adds new disclosure requirements relating to costs for acquired and produced television series. The Company is currently evaluating the impact of this guidance, which is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted.
Collaborative Arrangements: Clarifying the Interaction with the New Revenue Standard
In November 2018, the FASB issued guidance to clarify that certain transactions between parties to collaborative arrangements should be accounted for in accordance with FASB revenue guidance when the counterparty is a customer. This guidance also prohibits the presentation of collaborative arrangements as revenues from contracts with customers if the counterparty is not a customer. This guidance, which is required to be applied retrospectively and is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted, is not expected to have an impact on the Company’s consolidated financial statements.
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract
In August 2018, the FASB issued guidance on the accounting for implementation costs of a cloud computing arrangement that is considered to be a service contract. This guidance requires companies to follow the guidance for capitalizing costs associated with internal-use software to determine which costs to capitalize in a cloud computing arrangement that is a service contract. The guidance also specifies the financial statement presentation for capitalized implementation costs and the related amortization, as well as required financial statement disclosures. The Company is currently evaluating the impact of this guidance, which is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted.
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued amended guidance that eliminates, adds and clarifies certain disclosure requirements for defined benefit pension or other postretirement plans. The Company is currently evaluating the impact of this guidance, which is required to be applied retrospectively and is effective for annual periods ending after December 15, 2020, with early adoption permitted.
Changes to the Disclosure Requirements for Fair Value Measurements
In August 2018, the FASB issued amended guidance that eliminates, adds and modifies certain disclosure requirements for fair value measurements. This guidance, which is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted, is not expected to have an impact on the Company’s consolidated financial statements.
2
)
STOCK-BASED COMPENSATION
The following table summarizes the Company’s stock-based compensation expense for the
three and six months ended
June 30, 2019 and 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
RSUs and PSUs
|
$
|
33
|
|
|
$
|
41
|
|
|
$
|
66
|
|
|
$
|
79
|
|
Stock options
|
3
|
|
|
6
|
|
|
9
|
|
|
12
|
|
Stock-based compensation expense, before income taxes
|
36
|
|
|
47
|
|
|
75
|
|
|
91
|
|
Related tax benefit
|
(10
|
)
|
|
(12
|
)
|
|
(19
|
)
|
|
(23
|
)
|
Stock-based compensation expense, net of tax benefit
|
$
|
26
|
|
|
$
|
35
|
|
|
$
|
56
|
|
|
$
|
68
|
|
During the
six months ended
June 30, 2019
, the Company granted
3 million
RSUs for CBS Corp. Class B Common Stock with a weighted average per unit grant-date fair value of
$50.45
. RSUs granted during the first
six months
of
2019
generally vest over a
one
- to
four
-year service period. Compensation expense for RSUs is determined based upon the market price of the shares underlying the awards on the date of grant. For certain RSU awards the number of shares an employee earns ranges from
0%
to
120%
of the target award, based on the outcome of established performance conditions. Compensation expense is recorded based on the probable outcome of the performance conditions.
Total unrecognized compensation cost related to unvested RSUs at
June 30, 2019
was
$253 million
, which is expected to be recognized over a weighted average period of
2.8 years
. Total unrecognized compensation cost related to unvested stock option awards at
June 30, 2019
was
$21 million
, which is expected to be recognized over a weighted average period of
2.1 years
.
3
)
RESTRUCTURING AND OTHER CORPORATE MATTERS
During the first quarter of
2019
, the Company initiated a restructuring plan under which severance payments are being provided to certain eligible employees who voluntarily elected to participate. The Company also implemented additional restructuring plans during the first quarter of
2019
across several of its businesses in connection with a continued effort to reduce its cost structure. As a result, the Company recorded restructuring charges of
$108 million
in the first quarter of
2019
, reflecting
$98 million
of severance costs and
$10 million
of costs associated with exiting contractual obligations and other related costs.
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
During the year ended
December 31, 2018
, the Company recorded restructuring charges of
$67 million
, reflecting
$57 million
of severance costs and
$10 million
of costs associated with exiting contractual obligations and other related costs. During the year ended
December 31, 2017
, the Company recorded restructuring charges of
$63 million
, reflecting
$54 million
of severance costs and
$9 million
of costs associated with exiting contractual obligations and other related costs.
As of
June 30, 2019
, the cumulative settlements for the
2019
,
2018
and
2017
restructuring charges were
$112 million
, of which
$100 million
was for severance costs and
$12 million
was for costs associated with contractual obligations and other related costs. The Company expects to substantially utilize its restructuring reserves by the end of 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
2019
|
|
2019
|
|
Balance at
|
|
December 31, 2018
|
|
Charges
|
|
Settlements
|
|
June 30, 2019
|
Entertainment
|
|
$
|
31
|
|
|
|
|
$
|
48
|
|
|
|
|
$
|
(23
|
)
|
|
|
|
$
|
56
|
|
|
Cable Networks
|
|
—
|
|
|
|
|
5
|
|
|
|
|
—
|
|
|
|
|
5
|
|
|
Publishing
|
|
2
|
|
|
|
|
5
|
|
|
|
|
(1
|
)
|
|
|
|
6
|
|
|
Local Media
|
|
23
|
|
|
|
|
28
|
|
|
|
|
(11
|
)
|
|
|
|
40
|
|
|
Corporate
|
|
12
|
|
|
|
|
22
|
|
|
|
|
(15
|
)
|
|
|
|
19
|
|
|
Total
|
|
$
|
68
|
|
|
|
|
$
|
108
|
|
|
|
|
$
|
(50
|
)
|
|
|
|
$
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
2018
|
|
2018
|
|
Balance at
|
|
December 31, 2017
|
|
Charges
|
|
Settlements
|
|
December 31, 2018
|
Entertainment
|
|
$
|
39
|
|
|
|
|
$
|
27
|
|
|
|
|
$
|
(35
|
)
|
|
|
|
$
|
31
|
|
|
Publishing
|
|
3
|
|
|
|
|
1
|
|
|
|
|
(2
|
)
|
|
|
|
2
|
|
|
Local Media
|
|
11
|
|
|
|
|
18
|
|
|
|
|
(6
|
)
|
|
|
|
23
|
|
|
Corporate
|
|
2
|
|
|
|
|
21
|
|
|
|
|
(11
|
)
|
|
|
|
12
|
|
|
Total
|
|
$
|
55
|
|
|
|
|
$
|
67
|
|
|
|
|
$
|
(54
|
)
|
|
|
|
$
|
68
|
|
|
The Company recorded expenses of
$7 million
and
$10 million
during the three months ended
June 30, 2019 and 2018
, respectively, and
$13 million
and
$19 million
during the
six months ended
June 30, 2019 and 2018
, respectively, primarily for costs associated with legal proceedings involving the Company (see Note
13
) and other corporate matters.
4
)
PROGRAMMING AND OTHER INVENTORY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
June 30, 2019
|
|
December 31, 2018
|
Acquired program rights
|
|
$
|
2,480
|
|
|
|
|
$
|
2,400
|
|
|
Acquired television library
|
|
99
|
|
|
|
|
99
|
|
|
Internally produced programming:
|
|
|
|
|
|
|
|
Released
|
|
2,839
|
|
|
|
|
2,477
|
|
|
In process and other
|
|
731
|
|
|
|
|
839
|
|
|
Publishing, primarily finished goods
|
|
65
|
|
|
|
|
56
|
|
|
Total programming and other inventory
|
|
6,214
|
|
|
|
|
5,871
|
|
|
Less current portion
|
|
1,945
|
|
|
|
|
1,988
|
|
|
Total noncurrent programming and other inventory
|
|
$
|
4,269
|
|
|
|
|
$
|
3,883
|
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
5
)
RELATED PARTIES
National Amusements, Inc.
National Amusements, Inc. (“NAI”) is the controlling stockholder of CBS Corp. and Viacom Inc. Mr. Sumner M. Redstone, the controlling stockholder, chairman of the board of directors and chief executive officer of NAI, is the Chairman Emeritus of CBS Corp. and the Chairman Emeritus of Viacom Inc. In addition, Ms. Shari Redstone, Mr. Sumner M. Redstone’s daughter, is the president and a director of NAI and the vice chair of the Board of Directors of each of CBS Corp. and Viacom Inc. At
June 30, 2019
, NAI directly or indirectly owned approximately
78.7%
of CBS Corp.’s voting Class A Common Stock, and owned approximately
10.4%
of CBS Corp.’s Class A Common Stock and non-voting Class B Common Stock on a combined basis. NAI is controlled by Mr. Redstone through the Sumner M. Redstone National Amusements Trust (the “SMR Trust”), which owns
80%
of the voting interest of NAI, and such voting interest of NAI held by the SMR Trust is voted solely by Mr. Redstone until his incapacity or death. The SMR Trust provides that in the event of Mr. Redstone’s death or incapacity, voting control of the NAI voting interest held by the SMR Trust will pass to
seven
trustees, who will include CBS Corporation director Ms. Shari Redstone. No member of the Company’s management is a trustee of the SMR Trust.
Viacom Inc.
As part of its normal course of business, the Company licenses its television content, leases production facilities and sells advertising spots to various subsidiaries of Viacom Inc. Viacom Inc. also distributes certain of the Company’s television programs in the home entertainment market. The Company’s total revenues from these transactions were
$14 million
and
$10 million
for the three months ended
June 30, 2019 and 2018
, respectively, and
$26 million
and
$29 million
for the
six months ended
June 30, 2019 and 2018
, respectively.
The Company leases production facilities, licenses feature films and purchases advertising spots from various subsidiaries of Viacom Inc. The total amounts for these transactions were
$8 million
and
$6 million
for the three months ended
June 30, 2019 and 2018
, respectively, and
$18 million
and
$12 million
for the
six months ended
June 30, 2019 and 2018
, respectively.
The following table presents the amounts due from Viacom Inc. in the normal course of business as reflected on the Company’s Consolidated Balance Sheets. Amounts due to Viacom Inc. were minimal at
June 30, 2019
and
December 31, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
June 30, 2019
|
|
December 31, 2018
|
Receivables
|
|
$
|
28
|
|
|
|
|
$
|
38
|
|
|
Other assets (Receivables, noncurrent)
|
|
15
|
|
|
|
|
23
|
|
|
Total amounts due from Viacom
|
|
$
|
43
|
|
|
|
|
$
|
61
|
|
|
Other Related Parties.
The Company has equity interests in a domestic television network and several international joint ventures for television channels from which the Company earns revenues primarily by licensing its television programming. In addition, the Company held a
50%
equity interest in
Pop
, a general entertainment cable network. In March 2019, the Company acquired the remaining
50%
interest in
Pop
for
$50 million
, bringing the Company’s ownership to
100%
. Total revenues earned from sales to these joint ventures were
$44 million
and
$22 million
for the three months ended
June 30, 2019 and 2018
, respectively, and
$89 million
and
$53 million
for the
six months ended
June 30, 2019 and 2018
, respectively. At
June 30, 2019
and
December 31, 2018
, total amounts due from these joint ventures were
$15 million
and
$34 million
, respectively. Amounts associated with
Pop
are included above through the date of acquisition.
The Company, through the normal course of business, is involved in transactions with other related parties that have not been material in any of the periods presented.
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
6
)
BANK FINANCING AND DEBT
The following table sets forth the Company’s debt.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
June 30, 2019
|
|
December 31, 2018
|
Commercial paper
|
|
$
|
—
|
|
|
|
|
$
|
674
|
|
|
Senior debt (2.30% - 7.875% due 2019 - 2045)
(a)
|
|
9,332
|
|
|
|
|
9,435
|
|
|
Obligations under finance leases
|
|
38
|
|
|
|
|
43
|
|
|
Total debt
|
|
9,370
|
|
|
|
|
10,152
|
|
|
Less commercial paper
|
|
—
|
|
|
|
|
674
|
|
|
Less current portion of long-term debt
|
|
11
|
|
|
|
|
13
|
|
|
Total long-term debt, net of current portion
|
|
$
|
9,359
|
|
|
|
|
$
|
9,465
|
|
|
(a) At
June 30, 2019
and
December 31, 2018
, the senior debt balances included (i) a net unamortized discount of
$59 million
and
$58 million
, respectively, (ii) unamortized deferred financing costs of
$43 million
at both
June 30, 2019
and
December 31, 2018
, and (iii) a decrease in the carrying value of the debt relating to previously settled fair value hedges of
$6 million
and
$5 million
, respectively. The face value of the Company’s senior debt was
$9.44 billion
and
$9.54 billion
at
June 30, 2019
and
December 31, 2018
, respectively.
In March 2019, the Company issued
$500 million
of
4.20%
senior notes due 2029
. The Company used the net proceeds from this issuance in the redemption of its
$600 million
outstanding
2.30%
senior notes due
August 2019
.
Commercial Paper
At
December 31, 2018
, the Company had
$674 million
of outstanding commercial paper borrowings under its
$2.5 billion
commercial paper program at a weighted average interest rate of
3.02%
and with maturities of less than
60
days. There were
no
outstanding commercial paper borrowings at
June 30, 2019
.
Credit Facility
At
June 30, 2019
, the Company had a
$2.5 billion
revolving credit facility (the “Credit Facility”) which expires in
June 2021
. The Credit Facility requires the Company to maintain a maximum Consolidated Leverage Ratio of
4.5x
at the end of each quarter as further described in the Credit Facility. At
June 30, 2019
, the Company’s Consolidated Leverage Ratio was approximately
3.0x
.
The Consolidated Leverage Ratio is the ratio of the Company’s indebtedness from continuing operations, adjusted to exclude certain finance lease obligations, at the end of a quarter, to the Company’s Consolidated EBITDA for the trailing four consecutive quarters. Consolidated EBITDA is defined in the Credit Facility as operating income plus interest income and before depreciation, amortization and certain other noncash items.
The Credit Facility is used for general corporate purposes. At
June 30, 2019
, the Company had
no
borrowings outstanding under the Credit Facility and the remaining availability under the Credit Facility, net of outstanding letters of credit, was
$2.49 billion
.
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
7
)
PENSION AND OTHER POSTRETIREMENT BENEFITS
The components of net periodic cost for the Company’s pension and postretirement benefit plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
Three Months Ended June 30,
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Components of net periodic cost:
|
|
|
|
|
|
|
|
Service cost
|
$
|
7
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
39
|
|
|
37
|
|
|
3
|
|
|
4
|
|
Expected return on plan assets
|
(38
|
)
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
Amortization of actuarial loss (gain)
(a)
|
23
|
|
|
24
|
|
|
(4
|
)
|
|
(4
|
)
|
Net periodic cost
|
$
|
31
|
|
|
$
|
24
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
Six Months Ended June 30,
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Components of net periodic cost:
|
|
|
|
|
|
|
|
Service cost
|
$
|
14
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
78
|
|
|
74
|
|
|
7
|
|
|
8
|
|
Expected return on plan assets
|
(76
|
)
|
|
(90
|
)
|
|
—
|
|
|
—
|
|
Amortization of actuarial loss (gain)
(a)
|
46
|
|
|
48
|
|
|
(9
|
)
|
|
(9
|
)
|
Net periodic cost
|
$
|
62
|
|
|
$
|
48
|
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
(a) Reflects amounts reclassified from accumulated other comprehensive income (loss) to net earnings.
The service cost component of net periodic cost is presented on the Consolidated Statements of Operations within operating income and all other components of net periodic cost are presented within “Other items, net.”
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
8
)
STOCKHOLDERS’ EQUITY
During the
second quarter
of
2019
, the Company declared a quarterly cash dividend of
$.18
per share on its Class A and Class B Common Stock, resulting in total dividends of
$68 million
, which were paid on
July 1, 2019
.
Accumulated Other Comprehensive Income (Loss)
The following tables summarize the changes in the components of accumulated other comprehensive loss.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
Translation
Adjustments
|
|
Net Actuarial
Loss and Prior
Service Cost
|
|
Accumulated
Other
Comprehensive Loss
|
At December 31, 2018
|
$
|
133
|
|
|
$
|
(908
|
)
|
|
|
$
|
(775
|
)
|
|
Other comprehensive income before reclassifications
|
2
|
|
|
—
|
|
|
|
2
|
|
|
Reclassifications to net earnings
|
—
|
|
|
27
|
|
(a)
|
|
27
|
|
|
Other comprehensive income
|
2
|
|
|
27
|
|
|
|
29
|
|
|
Tax effects reclassified to accumulated deficit
|
—
|
|
|
(176
|
)
|
(b)
|
|
(176
|
)
|
|
At June 30, 2019
|
$
|
135
|
|
|
$
|
(1,057
|
)
|
|
|
$
|
(922
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
Translation
Adjustments
|
|
Net Actuarial
Loss and Prior
Service Cost
|
|
Accumulated
Other
Comprehensive Loss
|
At December 31, 2017
|
$
|
159
|
|
|
$
|
(821
|
)
|
|
|
$
|
(662
|
)
|
|
Other comprehensive loss before reclassifications
|
(14
|
)
|
|
—
|
|
|
|
(14
|
)
|
|
Reclassifications to net earnings
|
—
|
|
|
30
|
|
(a)
|
|
30
|
|
|
Other comprehensive income (loss)
|
(14
|
)
|
|
30
|
|
|
|
16
|
|
|
At June 30, 2018
|
$
|
145
|
|
|
$
|
(791
|
)
|
|
|
$
|
(646
|
)
|
|
|
|
(a)
|
Reflects amortization of net actuarial losses (see Note
7
). Amounts are net of tax benefits of
$10 million
and
$9 million
for the
six months ended
June 30, 2019 and 2018
, respectively.
|
|
|
(b)
|
Reflects the reclassification of certain income tax effects of the Tax Reform Act on items within accumulated other comprehensive loss to accumulated deficit upon the adoption of new FASB guidance (see Note
1
).
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
9
)
INCOME TAXES
The (provision) benefit for income taxes represents federal, state and local, and foreign income taxes on earnings before income taxes and equity in loss of investee companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Provision for income taxes before discrete items
|
$
|
(128
|
)
|
|
$
|
(111
|
)
|
|
$
|
(240
|
)
|
|
$
|
(245
|
)
|
Tax benefit from transfer of assets
(a)
|
—
|
|
|
—
|
|
|
768
|
|
|
—
|
|
Provision for gain on sale of assets
(b)
|
—
|
|
|
—
|
|
|
(163
|
)
|
|
—
|
|
Other discrete items
|
9
|
|
|
(2
|
)
|
|
12
|
|
|
(3
|
)
|
(Provision) benefit for income taxes
|
$
|
(119
|
)
|
|
(113
|
)
|
|
$
|
377
|
|
|
$
|
(248
|
)
|
Effective income tax rate
|
20.8
|
%
|
|
21.2
|
%
|
|
(22.5
|
)%
|
|
20.8
|
%
|
(a) Reflects a deferred tax benefit resulting from the transfer of intangible assets between subsidiaries of the Company in connection with a reorganization of the Company’s international operations. The related deferred tax asset is primarily expected to be realized over the next
25 years
.
(b) Reflects the tax provision from the gain on the sale of CBS Television City.
In January 2019, the United States government issued guidance relating to the one-time transition tax on cumulative foreign earnings and profits required by the Tax Reform Act. This guidance resulted in a decrease of
$146 million
to the Company’s reserve for uncertain tax positions during the
six months ended
June 30, 2019
for amounts paid as a result of this guidance; however, it did not have a material impact on the Company’s Consolidated Statement of Operations.
10
)
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
The Company’s carrying value of financial instruments approximates fair value, except for notes and debentures, which are not recorded at fair value. At
June 30, 2019
and
December 31, 2018
, the carrying value of the Company’s senior debt was
$9.33 billion
and
$9.43 billion
, respectively, and the fair value, which is estimated based on quoted market prices for similar liabilities (Level 2) and includes accrued interest, was
$10.28 billion
and
$9.48 billion
, respectively.
The Company uses derivative financial instruments primarily to modify its exposure to market risks from fluctuations in foreign currency exchange rates. The Company does not use derivative instruments unless there is an underlying exposure and, therefore, the Company does not hold or enter into derivative financial instruments for speculative trading purposes.
Foreign Exchange Contracts
Foreign exchange forward contracts have principally been used to hedge projected cash flows, in currencies such as the British Pound, the Euro, the Canadian Dollar and the Australian Dollar, generally for periods up to
24
months. The Company designates forward contracts used to hedge committed and forecasted foreign currency transactions as cash flow hedges. Gains or losses on the effective portion of designated cash flow hedges are initially recorded in other comprehensive income and reclassified to the statement of operations when the hedged item is recognized. Additionally, the Company enters into non-designated forward contracts to hedge non-U.S. dollar denominated cash flows.
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
At
June 30, 2019
and
December 31, 2018
, the notional amount of all foreign exchange contracts was
$422 million
and
$325 million
, respectively.
Gains recognized on derivative financial instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Financial Statement Account
|
Non-designated foreign exchange contracts
|
$
|
3
|
|
|
$
|
17
|
|
|
$
|
2
|
|
|
$
|
13
|
|
Other items, net
|
The fair value of the Company’s derivative instruments was not material to the Company’s Consolidated Balance Sheets for any of the periods presented.
The following tables set forth the Company’s assets and liabilities measured at fair value on a recurring basis at
June 30, 2019
and
December 31, 2018
. These assets and liabilities have been categorized according to the three-level fair value hierarchy established by the FASB, which prioritizes the inputs used in measuring fair value. Level 1 is based on publicly quoted prices for the asset or liability in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset or liability in inactive markets or quoted prices for similar assets or liabilities. Level 3 is based on unobservable inputs reflecting the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2019
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
Foreign currency hedges
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
10
|
|
Total Assets
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
10
|
|
Liabilities:
|
|
|
|
|
|
|
|
Deferred compensation
|
$
|
—
|
|
|
$
|
326
|
|
|
$
|
—
|
|
|
$
|
326
|
|
Foreign currency hedges
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Total Liabilities
|
$
|
—
|
|
|
$
|
327
|
|
|
$
|
—
|
|
|
$
|
327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2018
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
Foreign currency hedges
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
15
|
|
Total Assets
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
15
|
|
Liabilities:
|
|
|
|
|
|
|
|
Deferred compensation
|
$
|
—
|
|
|
$
|
336
|
|
|
$
|
—
|
|
|
$
|
336
|
|
Foreign currency hedges
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Total Liabilities
|
$
|
—
|
|
|
$
|
337
|
|
|
$
|
—
|
|
|
$
|
337
|
|
The fair value of foreign currency hedges is determined based on the present value of future cash flows using observable inputs including foreign currency exchange rates. The fair value of deferred compensation liabilities is determined based on the fair value of the investments elected by employees.
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
11
)
SEGMENT AND REVENUE INFORMATION
The following tables set forth the Company’s financial information by reportable segment. The Company’s operating segments, which are the same as its reportable segments, have been determined in accordance with the Company’s internal management structure, which is organized based upon products and services.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment
|
$
|
2,741
|
|
|
$
|
2,402
|
|
|
$
|
5,917
|
|
|
$
|
5,155
|
|
Cable Networks
|
562
|
|
|
553
|
|
|
1,114
|
|
|
1,124
|
|
Publishing
|
218
|
|
|
207
|
|
|
382
|
|
|
367
|
|
Local Media
|
423
|
|
|
420
|
|
|
880
|
|
|
835
|
|
Corporate/Eliminations
|
(135
|
)
|
|
(116
|
)
|
|
(317
|
)
|
|
(254
|
)
|
Total Revenues
|
$
|
3,809
|
|
|
$
|
3,466
|
|
|
$
|
7,976
|
|
|
$
|
7,227
|
|
Revenues generated between segments primarily reflect advertising sales, content licensing and station affiliation fees. These transactions are recorded at market value as if the sales were to third parties and are eliminated in consolidation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Intercompany Revenues:
|
|
|
|
|
|
|
|
Entertainment
|
$
|
135
|
|
|
$
|
118
|
|
|
$
|
318
|
|
|
$
|
257
|
|
Cable Networks
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
Local Media
|
6
|
|
|
5
|
|
|
11
|
|
|
10
|
|
Total Intercompany Revenues
|
$
|
142
|
|
|
$
|
123
|
|
|
$
|
331
|
|
|
$
|
267
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The Company presents operating income (loss) excluding costs for restructuring and other corporate matters and gain on sale of assets, each where applicable, (“Segment Operating Income”) as the primary measure of profit and loss for its operating segments in accordance with FASB guidance for segment reporting. The Company believes the presentation of Segment Operating Income is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company’s management and enhances their ability to understand the Company’s operating performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Segment Operating Income (Loss):
|
|
|
|
|
|
|
|
Entertainment
|
$
|
426
|
|
|
$
|
367
|
|
|
$
|
956
|
|
|
$
|
853
|
|
Cable Networks
|
185
|
|
|
245
|
|
|
360
|
|
|
481
|
|
Publishing
|
33
|
|
|
31
|
|
|
50
|
|
|
47
|
|
Local Media
|
130
|
|
|
128
|
|
|
268
|
|
|
246
|
|
Corporate
|
(72
|
)
|
|
(77
|
)
|
|
(139
|
)
|
|
(152
|
)
|
Restructuring and other corporate matters
|
(7
|
)
|
|
(35
|
)
|
|
(121
|
)
|
|
(44
|
)
|
Gain on sale of assets
|
—
|
|
|
—
|
|
|
549
|
|
|
—
|
|
Operating income
|
695
|
|
|
659
|
|
|
1,923
|
|
|
1,431
|
|
Interest expense
|
(115
|
)
|
|
(116
|
)
|
|
(232
|
)
|
|
(234
|
)
|
Interest income
|
12
|
|
|
14
|
|
|
26
|
|
|
31
|
|
Other items, net
|
(21
|
)
|
|
(24
|
)
|
|
(42
|
)
|
|
(35
|
)
|
Earnings before income taxes and equity in loss of
investee companies
|
571
|
|
|
533
|
|
|
1,675
|
|
|
1,193
|
|
(Provision) benefit for income taxes
|
(119
|
)
|
|
(113
|
)
|
|
377
|
|
|
(248
|
)
|
Equity in loss of investee companies, net of tax
|
(12
|
)
|
|
(20
|
)
|
|
(29
|
)
|
|
(34
|
)
|
Net earnings
|
$
|
440
|
|
|
$
|
400
|
|
|
$
|
2,023
|
|
|
$
|
911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
Entertainment
|
$
|
29
|
|
|
$
|
32
|
|
|
$
|
59
|
|
|
$
|
63
|
|
Cable Networks
|
6
|
|
|
4
|
|
|
10
|
|
|
9
|
|
Publishing
|
2
|
|
|
2
|
|
|
3
|
|
|
3
|
|
Local Media
|
9
|
|
|
11
|
|
|
20
|
|
|
22
|
|
Corporate
|
7
|
|
|
7
|
|
|
14
|
|
|
15
|
|
Total Depreciation and Amortization
|
$
|
53
|
|
|
$
|
56
|
|
|
$
|
106
|
|
|
$
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Stock-based Compensation:
|
|
|
|
|
|
|
|
Entertainment
|
$
|
17
|
|
|
$
|
16
|
|
|
$
|
33
|
|
|
$
|
31
|
|
Cable Networks
|
3
|
|
|
3
|
|
|
6
|
|
|
6
|
|
Publishing
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
Local Media
|
3
|
|
|
3
|
|
|
6
|
|
|
6
|
|
Corporate
|
12
|
|
|
24
|
|
|
28
|
|
|
46
|
|
Total Stock-based Compensation
|
$
|
36
|
|
|
$
|
47
|
|
|
$
|
75
|
|
|
$
|
91
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Capital Expenditures:
|
|
|
|
|
|
|
|
Entertainment
|
$
|
23
|
|
|
$
|
20
|
|
|
$
|
43
|
|
|
$
|
38
|
|
Cable Networks
|
1
|
|
|
3
|
|
|
4
|
|
|
6
|
|
Publishing
|
2
|
|
|
1
|
|
|
2
|
|
|
2
|
|
Local Media
|
5
|
|
|
5
|
|
|
7
|
|
|
9
|
|
Corporate
|
2
|
|
|
3
|
|
|
4
|
|
|
7
|
|
Total Capital Expenditures
|
$
|
33
|
|
|
$
|
32
|
|
|
$
|
60
|
|
|
$
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
June 30, 2019
|
|
December 31, 2018
|
Assets:
|
|
|
|
|
|
|
|
Entertainment
(a)
|
|
$
|
14,816
|
|
|
|
|
$
|
13,579
|
|
|
Cable Networks
|
|
3,238
|
|
|
|
|
2,693
|
|
|
Publishing
|
|
1,231
|
|
|
|
|
1,054
|
|
|
Local Media
|
|
4,156
|
|
|
|
|
4,037
|
|
|
Corporate/Eliminations
|
|
381
|
|
|
|
|
484
|
|
|
Discontinued operations
|
|
13
|
|
|
|
|
12
|
|
|
Total Assets
|
|
$
|
23,835
|
|
|
|
|
$
|
21,859
|
|
|
(a) Includes assets held for sale of
$33 million
at
December 31, 2018
.
The following table presents the Company’s revenues disaggregated into categories based on the nature of such revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
Revenues by Type
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Advertising
|
$
|
1,424
|
|
|
$
|
1,327
|
|
|
$
|
3,468
|
|
|
$
|
3,060
|
|
Content licensing and distribution:
|
|
|
|
|
|
|
|
Programming
|
1,006
|
|
|
889
|
|
|
1,805
|
|
|
1,724
|
|
Publishing
|
218
|
|
|
207
|
|
|
382
|
|
|
367
|
|
Affiliate and subscription fees
|
1,113
|
|
|
989
|
|
|
2,224
|
|
|
1,968
|
|
Other
|
48
|
|
|
54
|
|
|
97
|
|
|
108
|
|
Total Revenues
|
$
|
3,809
|
|
|
$
|
3,466
|
|
|
$
|
7,976
|
|
|
$
|
7,227
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
12
)
LEASES
On
January 1, 2019
, the Company adopted new FASB guidance on the accounting for leases. The Company applied the modified retrospective method of adoption and therefore, results for reporting periods beginning after
January 1, 2019
are presented under the new guidance while prior periods have not been adjusted.
The adoption of this guidance resulted in the recognition on the Company’s Consolidated Balance Sheet of right-of-use assets and lease liabilities representing the present value of future lease payments of all leases with terms in excess of one year. At
June 30, 2019
, the following amounts were recorded on the Company’s Consolidated Balance Sheet relating to its leases.
|
|
|
|
|
|
|
|
|
|
Leases
|
|
Operating
|
|
Finance
|
Right-of-Use Assets
|
|
|
|
Operating lease assets
|
$
|
922
|
|
|
$
|
—
|
|
Property and equipment, net
|
$
|
—
|
|
|
$
|
34
|
|
|
|
|
|
Lease Liabilities
|
|
|
|
Accrued expenses and other current liabilities
|
$
|
146
|
|
|
$
|
12
|
|
Noncurrent operating lease liabilities
|
858
|
|
|
—
|
|
Long-term debt
|
—
|
|
|
26
|
|
Total lease liabilities
|
$
|
1,004
|
|
|
$
|
38
|
|
|
|
|
|
|
|
|
|
Leases
|
|
Operating
|
|
Finance
|
Weighted average remaining lease term
|
9 years
|
|
|
4 years
|
|
|
|
|
|
Weighted average discount rate
|
4.3
|
%
|
|
4.2
|
%
|
For existing leases at the time of adoption, the Company elected to not reassess (i) whether each contract is or contains a lease, (ii) the classification of leases as operating or finance leases, and (iii) initial direct costs for existing leases.
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Lessee Contracts
The Company has operating leases primarily for office space, equipment, satellite transponders and studio facilities. The Company also has finance leases for satellite transponders and office equipment. Lease costs are generally fixed, with certain contracts containing variable payments for non-lease costs based on usage and escalations in the lessors’ annual costs.
The following table presents the Company’s lease cost.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30, 2019
|
|
June 30, 2019
|
Operating lease cost
(a) (b)
|
|
$
|
54
|
|
|
|
|
$
|
108
|
|
|
Finance lease cost:
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
3
|
|
|
|
|
6
|
|
|
Interest expense on lease liabilities
|
|
1
|
|
|
|
|
1
|
|
|
Short-term lease cost
(b) (c)
|
|
24
|
|
|
|
|
41
|
|
|
Variable lease cost
(d)
|
|
5
|
|
|
|
|
11
|
|
|
Sublease income
|
|
(6
|
)
|
|
|
|
(12
|
)
|
|
Total lease cost
|
|
$
|
81
|
|
|
|
|
$
|
155
|
|
|
(a) Includes fixed lease costs and non-lease costs (consisting of other occupancy and service costs relating to the use of an asset) associated with long-term operating leases.
(b) Includes costs capitalized in programming assets during the period for leased assets used in the production of programming.
(c) Short-term leases have a term of 12 months or less and exclude month-to-month leases. Short-term leases are not recorded on the Company’s Consolidated Balance Sheet.
(d) Primarily includes non-lease costs (consisting of other occupancy and service costs relating to the use of an asset) and costs for equipment leases that vary based on usage.
The following table presents supplemental cash flow information related to the Company’s leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30, 2019
|
|
June 30, 2019
|
Cash paid for amounts included in lease liabilities
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
53
|
|
|
|
|
$
|
107
|
|
|
Financing cash flows from finance leases
|
|
$
|
3
|
|
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
Noncash additions to operating lease assets
|
|
$
|
32
|
|
|
|
|
$
|
166
|
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The expected future payments relating to the Company’s operating and finance lease liabilities at
June 30, 2019
are as follows:
|
|
|
|
|
|
|
|
|
|
Leases
|
|
Operating
|
|
Finance
|
2019 (July 1 through December 31)
|
$
|
104
|
|
|
$
|
7
|
|
2020
|
168
|
|
|
12
|
|
2021
|
157
|
|
|
11
|
|
2022
|
133
|
|
|
7
|
|
2023
|
120
|
|
|
2
|
|
2024 and thereafter
|
568
|
|
|
2
|
|
Total minimum payments
|
1,250
|
|
|
41
|
|
Less amounts representing interest
|
246
|
|
|
3
|
|
Present value of minimum payments
|
$
|
1,004
|
|
|
$
|
38
|
|
At
December 31, 2018
, future minimum payments under noncancellable operating leases with terms in excess of one year and payments under finance leases were as follows:
|
|
|
|
|
|
|
|
|
|
Leases
|
|
Operating
|
|
Finance
|
2019
|
$
|
174
|
|
|
$
|
13
|
|
2020
|
129
|
|
|
12
|
|
2021
|
122
|
|
|
11
|
|
2022
|
110
|
|
|
7
|
|
2023
|
101
|
|
|
2
|
|
2024 and thereafter
|
465
|
|
|
2
|
|
Total minimum payments
|
$
|
1,101
|
|
|
$
|
47
|
|
Less amounts representing interest
|
|
|
4
|
|
Present value of minimum payments
|
|
|
|
$
|
43
|
|
Future minimum operating lease payments at
December 31, 2018
have been reduced by future minimum sublease income of
$30 million
.
As of
June 30, 2019
, the Company had signed additional operating leases with lease terms ranging from
two
to
16
years that have not yet commenced. The total future undiscounted lease payments under these leases are
$150 million
, which were not recorded on the Company’s Consolidated Balance Sheet at
June 30, 2019
.
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Lessor Contracts
The Company enters into operating leases for the use of its owned production facilities and office buildings. Lease payments received under these agreements consist of fixed payments for the rental of space and certain building operating costs, as well as variable payments based on usage of production facilities and services, and escalating costs of building operations. The Company recorded total lease income of
$31 million
and
$63 million
, including both fixed and variable amounts, for the
three and six months ended
June 30, 2019
, respectively.
At
June 30, 2019
, future fixed lease income under noncancellable operating leases is as follows:
|
|
|
|
|
2019 (July 1 through December 31)
|
$
|
27
|
|
2020
|
52
|
|
2021
|
48
|
|
2022
|
44
|
|
2023
|
43
|
|
2024 and thereafter
|
85
|
|
Total
|
$
|
299
|
|
13
)
COMMITMENTS AND CONTINGENCIES
Guarantees
On
January 31, 2019
, the Company completed the sale of CBS Television City. The Company has guaranteed a specified level of cash flows to be generated by the business during the first five years following the completion of the sale. Included on the Company’s Consolidated Balance Sheet at
June 30, 2019
is a liability of
$122 million
, reflecting the present value of the estimated amount payable under the guarantee obligation (Level 3 in the fair value hierarchy).
The Company has indemnification obligations with respect to letters of credit and surety bonds primarily used as security against non-performance in the normal course of business. At
June 30, 2019
, the outstanding letters of credit and surety bonds approximated
$99 million
and were not recorded on the Company’s Consolidated Balance Sheet.
In the course of its business, the Company both provides and receives indemnities which are intended to allocate certain risks associated with business transactions. Similarly, the Company may remain contingently liable for various obligations of a business that has been divested in the event that a third party does not live up to its obligations under an indemnification obligation. The Company records a liability for its indemnification obligations and other contingent liabilities when probable and reasonably estimable.
Legal Matters
General.
On an ongoing basis, the Company vigorously defends itself in numerous lawsuits and proceedings and responds to various investigations and inquiries from federal, state, local and international authorities (collectively, “litigation’’). Litigation may be brought against the Company without merit, is inherently uncertain and always difficult to predict. However, based on its understanding and evaluation of the relevant facts and circumstances, the Company believes that the below-described legal matters and other litigation to which it is a party are not likely, in the aggregate, to have a material adverse effect on its results of operations, financial position or cash flows. Under the separation agreement between the Company and Viacom Inc., the Company and Viacom Inc. have agreed to defend and indemnify the other in certain litigation in which the Company and/or Viacom Inc. is named.
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Investigation-Related Matters
. As announced on August 1, 2018, the Company’s Board of Directors (“Board”) retained two law firms to conduct a full investigation of the allegations in press reports about the Company’s former Chairman of the Board, President and Chief Executive Officer, Mr. Leslie Moonves, CBS News and cultural issues at all levels of the Company. On December 17, 2018, the Board announced the completion of the investigation, certain findings of the investigation and the Board’s determination, discussed below, with respect to the termination of Mr. Moonves’s employment. The Company has received subpoenas from the New York County District Attorney’s Office and the New York City Commission on Human Rights regarding the subject matter of this investigation and related matters. The New York State Attorney General’s Office and the United States Securities and Exchange Commission have also requested information about these matters, including with respect to the Company’s related public disclosures. The Company may continue to receive additional related regulatory and investigative inquiries from these and other entities in the future. The Company is cooperating with these inquiries.
On August 27, 2018 and on October 1, 2018, each of Gene Samit and John Lantz, respectively, filed putative class action suits in the United States District Court for the Southern District of New York, individually and on behalf of others similarly situated, for claims that are similar to those alleged in the amended complaint described below. On November 6, 2018, the Court entered an order consolidating the two actions. On November 30, 2018, the Court appointed Construction Laborers Pension Trust for Southern California as the lead plaintiff of the consolidated action. On February 11, 2019, the lead plaintiff filed a consolidated amended putative class action complaint against the Company, certain current and former senior executives and members of the Board. The consolidated action is stated to be on behalf of purchasers of the Company’s Class A Common Stock and Class B Common Stock between September 26, 2016 and December 4, 2018. This action seeks to recover damages arising during this time period allegedly caused by the defendants’ purported violations of the federal securities laws, including by allegedly making materially false and misleading statements or failing to disclose material information, and seeks costs and expenses as well as remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On April 12, 2019, the defendants filed motions to dismiss this action, which are pending. The Company believes that the claims are without merit and is currently unable to determine a range of potential liability, if any. Accordingly, no accrual for this matter has been made in the Company’s consolidated financial statements.
Separation Agreement
. On September 9, 2018, the Company entered into a separation and settlement agreement and releases (the “Separation Agreement”) with Mr. Leslie Moonves, pursuant to which Mr. Moonves resigned as a director and as Chairman of the Board, President and Chief Executive Officer of the Company. In October 2018, the Company contributed
$120 million
to a grantor trust pursuant to the Separation Agreement. On December 17, 2018, the Board announced that, following its consideration of the findings of the investigation referred to above, it had determined that there were grounds to terminate Mr. Moonves’s employment for cause under his employment agreement with the Company. Any dispute related to the Board’s determination is subject to binding arbitration as set forth in the Separation Agreement. On January 16, 2019, Mr. Moonves commenced a binding arbitration proceeding with respect to this matter and the related Board investigation, which proceeding is ongoing. The assets of the grantor trust will remain in the trust until a final determination in the arbitration. The Company is currently unable to determine the outcome of the arbitration and the amount, if any, that may be awarded thereunder and, accordingly, no accrual for this matter has been made in the Company’s consolidated financial statements.
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Claims Related to Former Businesses: Asbestos.
The Company is a defendant in lawsuits claiming various personal injuries related to asbestos and other materials, which allegedly occurred 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 most commonly relate to allegations of exposure to asbestos-containing insulating material used in conjunction with turbines.
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 that some jurisdictions have established for claimants who allege minimal or no impairment. As of
June 30, 2019
, the Company had pending approximately
32,120
asbestos claims, as compared with approximately
31,570
as of
December 31, 2018
and
31,750
as of
June 30, 2018
. During the
second quarter
of
2019
, the Company received approximately
1,000
new claims and closed or moved to an inactive docket approximately
720
claims. The Company reports claims as closed when it becomes aware that a dismissal order has been entered by a court or when the Company has reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other factors. The Company’s total costs for the years
2018
and
2017
for settlement and defense of asbestos claims after insurance recoveries and net of tax were approximately
$45 million
and
$57 million
, respectively. The Company’s costs for settlement and defense of asbestos claims may vary year to year and insurance proceeds are not always recovered in the same period as the insured portion of the expenses.
The Company believes that its reserves and insurance are adequate to cover its asbestos liabilities. This belief is based upon many factors and assumptions, including the number of outstanding claims, estimated average cost per claim, the breakdown of claims by disease type, historic claim filings, costs per claim of resolution and the filing of new claims. While the number of asbestos claims filed against the Company has remained generally flat in recent years, it is difficult to predict future asbestos liabilities, as events and circumstances may occur, including, among others, the number and types of claims and average cost to resolve such claims, which could affect the Company’s estimate of its asbestos liabilities.
Other.
The Company from time to time receives claims from federal and state environmental regulatory agencies and other entities asserting that it is or may be liable for environmental cleanup costs and related damages principally relating to historical and predecessor operations of the Company. In addition, the Company from time to time receives personal injury claims including toxic tort and product liability claims (other than asbestos) arising from historical operations of the Company and its predecessors.
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
14
)
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
CBS Operations Inc. is a wholly owned subsidiary of the Company. CBS Operations Inc. has fully and unconditionally guaranteed CBS Corp.’s senior debt securities. The following condensed consolidating financial statements present the results of operations, financial position and cash flows of CBS Corp., CBS Operations Inc., the direct and indirect Non-Guarantor Affiliates of CBS Corp. and CBS Operations Inc., and the eliminations necessary to arrive at the information for the Company on a consolidated basis. Changes to the entities that comprise the guarantor group are reflected for the prior periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
|
|
For the Three Months Ended June 30, 2019
|
|
CBS Corp.
|
|
CBS
Operations
Inc.
|
|
Non-
Guarantor
Affiliates
|
|
Eliminations
|
|
CBS Corp.
Consolidated
|
Revenues
|
$
|
43
|
|
|
$
|
2
|
|
|
$
|
3,764
|
|
|
$
|
—
|
|
|
$
|
3,809
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
Operating
|
24
|
|
|
1
|
|
|
2,484
|
|
|
—
|
|
|
2,509
|
|
Selling, general and administrative
|
12
|
|
|
68
|
|
|
465
|
|
|
—
|
|
|
545
|
|
Depreciation and amortization
|
1
|
|
|
5
|
|
|
47
|
|
|
—
|
|
|
53
|
|
Restructuring and other corporate matters
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Total costs and expenses
|
37
|
|
|
81
|
|
|
2,996
|
|
|
—
|
|
|
3,114
|
|
Operating income (loss)
|
6
|
|
|
(79
|
)
|
|
768
|
|
|
—
|
|
|
695
|
|
Interest (expense) income, net
|
(138
|
)
|
|
(137
|
)
|
|
172
|
|
|
—
|
|
|
(103
|
)
|
Other items, net
|
(10
|
)
|
|
(9
|
)
|
|
(2
|
)
|
|
—
|
|
|
(21
|
)
|
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies
|
(142
|
)
|
|
(225
|
)
|
|
938
|
|
|
—
|
|
|
571
|
|
Benefit (provision) for income taxes
|
32
|
|
|
50
|
|
|
(201
|
)
|
|
—
|
|
|
(119
|
)
|
Equity in earnings (loss) of investee companies, net of tax
|
550
|
|
|
402
|
|
|
(12
|
)
|
|
(952
|
)
|
|
(12
|
)
|
Net earnings
|
$
|
440
|
|
|
$
|
227
|
|
|
$
|
725
|
|
|
$
|
(952
|
)
|
|
$
|
440
|
|
Total comprehensive income
|
$
|
452
|
|
|
$
|
232
|
|
|
$
|
720
|
|
|
$
|
(952
|
)
|
|
$
|
452
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
|
|
For the Six Months Ended June 30, 2019
|
|
CBS Corp.
|
|
CBS
Operations
Inc.
|
|
Non-
Guarantor
Affiliates
|
|
Eliminations
|
|
CBS Corp.
Consolidated
|
Revenues
|
$
|
89
|
|
|
$
|
5
|
|
|
$
|
7,882
|
|
|
$
|
—
|
|
|
$
|
7,976
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
Operating
|
50
|
|
|
2
|
|
|
5,205
|
|
|
—
|
|
|
5,257
|
|
Selling, general and administrative
|
26
|
|
|
125
|
|
|
967
|
|
|
—
|
|
|
1,118
|
|
Depreciation and amortization
|
2
|
|
|
10
|
|
|
94
|
|
|
—
|
|
|
106
|
|
Restructuring and other corporate matters
|
3
|
|
|
30
|
|
|
88
|
|
|
—
|
|
|
121
|
|
Gain on sale of assets
|
—
|
|
|
—
|
|
|
(549
|
)
|
|
—
|
|
|
(549
|
)
|
Total costs and expenses
|
81
|
|
|
167
|
|
|
5,805
|
|
|
—
|
|
|
6,053
|
|
Operating income (loss)
|
8
|
|
|
(162
|
)
|
|
2,077
|
|
|
—
|
|
|
1,923
|
|
Interest (expense) income, net
|
(275
|
)
|
|
(268
|
)
|
|
337
|
|
|
—
|
|
|
(206
|
)
|
Other items, net
|
(18
|
)
|
|
(20
|
)
|
|
(4
|
)
|
|
—
|
|
|
(42
|
)
|
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies
|
(285
|
)
|
|
(450
|
)
|
|
2,410
|
|
|
—
|
|
|
1,675
|
|
Benefit from income taxes
|
61
|
|
|
96
|
|
|
220
|
|
|
—
|
|
|
377
|
|
Equity in earnings (loss) of investee companies, net of tax
|
2,247
|
|
|
344
|
|
|
(29
|
)
|
|
(2,591
|
)
|
|
(29
|
)
|
Net earnings (loss)
|
$
|
2,023
|
|
|
$
|
(10
|
)
|
|
$
|
2,601
|
|
|
$
|
(2,591
|
)
|
|
$
|
2,023
|
|
Total comprehensive income (loss)
|
$
|
2,052
|
|
|
$
|
(7
|
)
|
|
$
|
2,592
|
|
|
$
|
(2,585
|
)
|
|
$
|
2,052
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
|
|
For the Three Months Ended June 30, 2018
|
|
CBS Corp.
|
|
CBS
Operations
Inc.
|
|
Non-
Guarantor
Affiliates
|
|
Eliminations
|
|
CBS Corp.
Consolidated
|
Revenues
|
$
|
44
|
|
|
$
|
2
|
|
|
$
|
3,420
|
|
|
$
|
—
|
|
|
$
|
3,466
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
Operating
|
23
|
|
|
1
|
|
|
2,160
|
|
|
—
|
|
|
2,184
|
|
Selling, general and administrative
|
12
|
|
|
68
|
|
|
452
|
|
|
—
|
|
|
532
|
|
Depreciation and amortization
|
1
|
|
|
5
|
|
|
50
|
|
|
—
|
|
|
56
|
|
Restructuring and other corporate matters
|
—
|
|
|
16
|
|
|
19
|
|
|
—
|
|
|
35
|
|
Total costs and expenses
|
36
|
|
|
90
|
|
|
2,681
|
|
|
—
|
|
|
2,807
|
|
Operating income (loss)
|
8
|
|
|
(88
|
)
|
|
739
|
|
|
—
|
|
|
659
|
|
Interest (expense) income, net
|
(133
|
)
|
|
(126
|
)
|
|
157
|
|
|
—
|
|
|
(102
|
)
|
Other items, net
|
(9
|
)
|
|
14
|
|
|
(29
|
)
|
|
—
|
|
|
(24
|
)
|
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies
|
(134
|
)
|
|
(200
|
)
|
|
867
|
|
|
—
|
|
|
533
|
|
Benefit (provision) for income taxes
|
28
|
|
|
42
|
|
|
(183
|
)
|
|
—
|
|
|
(113
|
)
|
Equity in earnings (loss) of investee companies, net of tax
|
506
|
|
|
351
|
|
|
(20
|
)
|
|
(857
|
)
|
|
(20
|
)
|
Net earnings
|
$
|
400
|
|
|
$
|
193
|
|
|
$
|
664
|
|
|
$
|
(857
|
)
|
|
$
|
400
|
|
Total comprehensive income
|
$
|
407
|
|
|
$
|
202
|
|
|
$
|
644
|
|
|
$
|
(846
|
)
|
|
$
|
407
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
|
|
For the Six Months Ended June 30, 2018
|
|
CBS Corp.
|
|
CBS
Operations
Inc.
|
|
Non-
Guarantor
Affiliates
|
|
Eliminations
|
|
CBS Corp.
Consolidated
|
Revenues
|
$
|
87
|
|
|
$
|
5
|
|
|
$
|
7,135
|
|
|
$
|
—
|
|
|
$
|
7,227
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
Operating
|
48
|
|
|
2
|
|
|
4,534
|
|
|
—
|
|
|
4,584
|
|
Selling, general and administrative
|
25
|
|
|
132
|
|
|
899
|
|
|
—
|
|
|
1,056
|
|
Depreciation and amortization
|
2
|
|
|
11
|
|
|
99
|
|
|
—
|
|
|
112
|
|
Restructuring and other corporate matters
|
—
|
|
|
25
|
|
|
19
|
|
|
—
|
|
|
44
|
|
Total costs and expenses
|
75
|
|
|
170
|
|
|
5,551
|
|
|
—
|
|
|
5,796
|
|
Operating income (loss)
|
12
|
|
|
(165
|
)
|
|
1,584
|
|
|
—
|
|
|
1,431
|
|
Interest (expense) income, net
|
(263
|
)
|
|
(248
|
)
|
|
308
|
|
|
—
|
|
|
(203
|
)
|
Other items, net
|
(16
|
)
|
|
12
|
|
|
(31
|
)
|
|
—
|
|
|
(35
|
)
|
Earnings (loss) before income taxes and equity in earnings (loss) of investee companies
|
(267
|
)
|
|
(401
|
)
|
|
1,861
|
|
|
—
|
|
|
1,193
|
|
Benefit (provision) for income taxes
|
55
|
|
|
83
|
|
|
(386
|
)
|
|
—
|
|
|
(248
|
)
|
Equity in earnings (loss) of investee companies, net of tax
|
1,123
|
|
|
764
|
|
|
(34
|
)
|
|
(1,887
|
)
|
|
(34
|
)
|
Net earnings
|
$
|
911
|
|
|
$
|
446
|
|
|
$
|
1,441
|
|
|
$
|
(1,887
|
)
|
|
$
|
911
|
|
Total comprehensive income
|
$
|
927
|
|
|
$
|
448
|
|
|
$
|
1,424
|
|
|
$
|
(1,872
|
)
|
|
$
|
927
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
At June 30, 2019
|
|
CBS Corp.
|
|
CBS
Operations
Inc.
|
|
Non-
Guarantor
Affiliates
|
|
Eliminations
|
|
CBS Corp.
Consolidated
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
205
|
|
|
$
|
—
|
|
|
$
|
216
|
|
Receivables, net
|
21
|
|
|
1
|
|
|
3,773
|
|
|
—
|
|
|
3,795
|
|
Programming and other inventory
|
2
|
|
|
2
|
|
|
1,941
|
|
|
—
|
|
|
1,945
|
|
Prepaid expenses and other current assets
|
6
|
|
|
40
|
|
|
367
|
|
|
(33
|
)
|
|
380
|
|
Total current assets
|
40
|
|
|
43
|
|
|
6,286
|
|
|
(33
|
)
|
|
6,336
|
|
Property and equipment
|
30
|
|
|
227
|
|
|
2,674
|
|
|
—
|
|
|
2,931
|
|
Less accumulated depreciation and amortization
|
14
|
|
|
194
|
|
|
1,546
|
|
|
—
|
|
|
1,754
|
|
Net property and equipment
|
16
|
|
|
33
|
|
|
1,128
|
|
|
—
|
|
|
1,177
|
|
Programming and other inventory
|
4
|
|
|
3
|
|
|
4,262
|
|
|
—
|
|
|
4,269
|
|
Goodwill
|
98
|
|
|
62
|
|
|
4,902
|
|
|
—
|
|
|
5,062
|
|
Intangible assets
|
—
|
|
|
—
|
|
|
2,660
|
|
|
—
|
|
|
2,660
|
|
Operating lease assets
|
5
|
|
|
110
|
|
|
807
|
|
|
—
|
|
|
922
|
|
Investments in consolidated subsidiaries
|
50,017
|
|
|
17,246
|
|
|
—
|
|
|
(67,263
|
)
|
|
—
|
|
Deferred income tax assets, net
|
—
|
|
|
—
|
|
|
785
|
|
|
—
|
|
|
785
|
|
Other assets
|
292
|
|
|
—
|
|
|
2,332
|
|
|
—
|
|
|
2,624
|
|
Intercompany
|
—
|
|
|
104
|
|
|
33,255
|
|
|
(33,359
|
)
|
|
—
|
|
Total Assets
|
$
|
50,472
|
|
|
$
|
17,601
|
|
|
$
|
56,417
|
|
|
$
|
(100,655
|
)
|
|
$
|
23,835
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
4
|
|
|
$
|
9
|
|
|
$
|
201
|
|
|
$
|
—
|
|
|
$
|
214
|
|
Participants’ share and royalties payable
|
—
|
|
|
—
|
|
|
1,188
|
|
|
—
|
|
|
1,188
|
|
Accrued programming and production costs
|
3
|
|
|
2
|
|
|
585
|
|
|
—
|
|
|
590
|
|
Accrued expenses and other current liabilities
|
451
|
|
|
254
|
|
|
1,179
|
|
|
(33
|
)
|
|
1,851
|
|
Total current liabilities
|
458
|
|
|
265
|
|
|
3,153
|
|
|
(33
|
)
|
|
3,843
|
|
Long-term debt
|
9,287
|
|
|
—
|
|
|
72
|
|
|
—
|
|
|
9,359
|
|
Noncurrent operating lease liabilities
|
5
|
|
|
104
|
|
|
749
|
|
|
—
|
|
|
858
|
|
Other liabilities
|
2,610
|
|
|
211
|
|
|
2,201
|
|
|
—
|
|
|
5,022
|
|
Intercompany
|
33,359
|
|
|
—
|
|
|
—
|
|
|
(33,359
|
)
|
|
—
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
—
|
|
|
—
|
|
|
126
|
|
|
(126
|
)
|
|
—
|
|
Common stock
|
1
|
|
|
123
|
|
|
590
|
|
|
(713
|
)
|
|
1
|
|
Additional paid-in capital
|
43,534
|
|
|
—
|
|
|
60,894
|
|
|
(60,894
|
)
|
|
43,534
|
|
Retained earnings (accumulated deficit)
|
(15,002
|
)
|
|
17,204
|
|
|
(6,604
|
)
|
|
(10,600
|
)
|
|
(15,002
|
)
|
Accumulated other comprehensive income (loss)
|
(922
|
)
|
|
25
|
|
|
36
|
|
|
(61
|
)
|
|
(922
|
)
|
|
27,611
|
|
|
17,352
|
|
|
55,042
|
|
|
(72,394
|
)
|
|
27,611
|
|
Less treasury stock, at cost
|
22,858
|
|
|
331
|
|
|
4,800
|
|
|
(5,131
|
)
|
|
22,858
|
|
Total Stockholders’ Equity
|
4,753
|
|
|
17,021
|
|
|
50,242
|
|
|
(67,263
|
)
|
|
4,753
|
|
Total Liabilities and Stockholders’ Equity
|
$
|
50,472
|
|
|
$
|
17,601
|
|
|
$
|
56,417
|
|
|
$
|
(100,655
|
)
|
|
$
|
23,835
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
At December 31, 2018
|
|
CBS Corp.
|
|
CBS
Operations
Inc.
|
|
Non-
Guarantor
Affiliates
|
|
Eliminations
|
|
CBS Corp.
Consolidated
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
148
|
|
|
$
|
—
|
|
|
$
|
174
|
|
|
$
|
—
|
|
|
$
|
322
|
|
Receivables, net
|
27
|
|
|
1
|
|
|
4,013
|
|
|
—
|
|
|
4,041
|
|
Programming and other inventory
|
2
|
|
|
2
|
|
|
1,984
|
|
|
—
|
|
|
1,988
|
|
Prepaid expenses and other current assets
|
81
|
|
|
46
|
|
|
310
|
|
|
(36
|
)
|
|
401
|
|
Total current assets
|
258
|
|
|
49
|
|
|
6,481
|
|
|
(36
|
)
|
|
6,752
|
|
Property and equipment
|
31
|
|
|
223
|
|
|
2,672
|
|
|
—
|
|
|
2,926
|
|
Less accumulated depreciation and amortization
|
14
|
|
|
184
|
|
|
1,519
|
|
|
—
|
|
|
1,717
|
|
Net property and equipment
|
17
|
|
|
39
|
|
|
1,153
|
|
|
—
|
|
|
1,209
|
|
Programming and other inventory
|
5
|
|
|
4
|
|
|
3,874
|
|
|
—
|
|
|
3,883
|
|
Goodwill
|
98
|
|
|
62
|
|
|
4,760
|
|
|
—
|
|
|
4,920
|
|
Intangible assets
|
—
|
|
|
—
|
|
|
2,638
|
|
|
—
|
|
|
2,638
|
|
Investments in consolidated subsidiaries
|
47,600
|
|
|
16,901
|
|
|
—
|
|
|
(64,501
|
)
|
|
—
|
|
Deferred income tax assets, net
|
—
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
29
|
|
Other assets
|
281
|
|
|
—
|
|
|
2,114
|
|
|
—
|
|
|
2,395
|
|
Assets held for sale
|
—
|
|
|
—
|
|
|
33
|
|
|
—
|
|
|
33
|
|
Intercompany
|
—
|
|
|
526
|
|
|
31,686
|
|
|
(32,212
|
)
|
|
—
|
|
Total Assets
|
$
|
48,259
|
|
|
$
|
17,581
|
|
|
$
|
52,768
|
|
|
$
|
(96,749
|
)
|
|
$
|
21,859
|
|
Liabilities and Stockholders
’
Equity
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
5
|
|
|
$
|
31
|
|
|
$
|
165
|
|
|
$
|
—
|
|
|
$
|
201
|
|
Participants’ share and royalties payable
|
—
|
|
|
—
|
|
|
1,177
|
|
|
—
|
|
|
1,177
|
|
Accrued programming and production costs
|
3
|
|
|
2
|
|
|
699
|
|
|
—
|
|
|
704
|
|
Commercial paper
|
674
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
674
|
|
Accrued expenses and other current liabilities
|
396
|
|
|
308
|
|
|
1,149
|
|
|
(36
|
)
|
|
1,817
|
|
Total current liabilities
|
1,078
|
|
|
341
|
|
|
3,190
|
|
|
(36
|
)
|
|
4,573
|
|
Long-term debt
|
9,388
|
|
|
—
|
|
|
77
|
|
|
—
|
|
|
9,465
|
|
Other liabilities
|
2,777
|
|
|
212
|
|
|
2,028
|
|
|
—
|
|
|
5,017
|
|
Intercompany
|
32,212
|
|
|
—
|
|
|
—
|
|
|
(32,212
|
)
|
|
—
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
—
|
|
|
—
|
|
|
126
|
|
|
(126
|
)
|
|
—
|
|
Common stock
|
1
|
|
|
123
|
|
|
590
|
|
|
(713
|
)
|
|
1
|
|
Additional paid-in capital
|
43,637
|
|
|
—
|
|
|
60,894
|
|
|
(60,894
|
)
|
|
43,637
|
|
Retained earnings (accumulated deficit)
|
(17,201
|
)
|
|
17,214
|
|
|
(9,381
|
)
|
|
(7,833
|
)
|
|
(17,201
|
)
|
Accumulated other comprehensive income (loss)
|
(775
|
)
|
|
22
|
|
|
44
|
|
|
(66
|
)
|
|
(775
|
)
|
|
25,662
|
|
|
17,359
|
|
|
52,273
|
|
|
(69,632
|
)
|
|
25,662
|
|
Less treasury stock, at cost
|
22,858
|
|
|
331
|
|
|
4,800
|
|
|
(5,131
|
)
|
|
22,858
|
|
Total Stockholders’ Equity
|
2,804
|
|
|
17,028
|
|
|
47,473
|
|
|
(64,501
|
)
|
|
2,804
|
|
Total Liabilities and Stockholders’ Equity
|
$
|
48,259
|
|
|
$
|
17,581
|
|
|
$
|
52,768
|
|
|
$
|
(96,749
|
)
|
|
$
|
21,859
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows
|
|
For the Six Months Ended June 30, 2019
|
|
CBS Corp.
|
|
CBS
Operations
Inc.
|
|
Non-
Guarantor
Affiliates
|
|
Eliminations
|
|
CBS Corp.
Consolidated
|
Net cash flow (used for) provided by operating activities
|
$
|
(525
|
)
|
|
$
|
(223
|
)
|
|
$
|
1,062
|
|
|
$
|
—
|
|
|
$
|
314
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
Investments in and advances to investee companies
|
—
|
|
|
—
|
|
|
(72
|
)
|
|
—
|
|
|
(72
|
)
|
Capital expenditures
|
—
|
|
|
(4
|
)
|
|
(56
|
)
|
|
—
|
|
|
(60
|
)
|
Acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
—
|
|
|
(39
|
)
|
Proceeds from dispositions
|
—
|
|
|
—
|
|
|
736
|
|
|
—
|
|
|
736
|
|
Proceeds from sale of investments
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
Other investing activities
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Net cash flow provided by (used for) investing activities
|
2
|
|
|
(4
|
)
|
|
584
|
|
|
—
|
|
|
582
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Repayments of short-term debt borrowings, net
|
(674
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(674
|
)
|
Proceeds from issuance of senior notes
|
493
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
493
|
|
Repayment of senior notes
|
(600
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(600
|
)
|
Payment of finance lease obligations
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
Payment of contingent consideration
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
Dividends
|
(138
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(138
|
)
|
Purchase of Company common stock
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
Payment of payroll taxes in lieu of issuing
shares for stock-based compensation
|
(43
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(43
|
)
|
Acquisition of noncontrolling interest
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
—
|
|
|
(26
|
)
|
Proceeds from exercise of stock options
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
Increase (decrease) in intercompany payables
|
1,353
|
|
|
227
|
|
|
(1,580
|
)
|
|
—
|
|
|
—
|
|
Net cash flow provided by (used for) financing activities
|
388
|
|
|
227
|
|
|
(1,615
|
)
|
|
—
|
|
|
(1,000
|
)
|
Net (decrease) increase in cash, cash equivalents and restricted cash
|
(135
|
)
|
|
—
|
|
|
31
|
|
|
—
|
|
|
(104
|
)
|
Cash, cash equivalents and restricted cash at beginning
of period (includes $120 of restricted cash)
|
268
|
|
|
—
|
|
|
174
|
|
|
—
|
|
|
442
|
|
Cash, cash equivalents and restricted cash at end
of period (includes $122 of restricted cash)
|
$
|
133
|
|
|
$
|
—
|
|
|
$
|
205
|
|
|
$
|
—
|
|
|
$
|
338
|
|
CBS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows
|
|
For the Six Months Ended June 30, 2018
|
|
CBS Corp.
|
|
CBS
Operations
Inc.
|
|
Non-
Guarantor
Affiliates
|
|
Eliminations
|
|
CBS Corp.
Consolidated
|
Net cash flow (used for) provided by operating activities
|
$
|
(234
|
)
|
|
$
|
(130
|
)
|
|
$
|
1,407
|
|
|
$
|
—
|
|
|
$
|
1,043
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
Investments in and advances to investee companies
|
—
|
|
|
—
|
|
|
(71
|
)
|
|
—
|
|
|
(71
|
)
|
Capital expenditures
|
—
|
|
|
(7
|
)
|
|
(55
|
)
|
|
—
|
|
|
(62
|
)
|
Acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
Other investing activities
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Net cash flow provided by (used for) investing activities from continuing operations
|
2
|
|
|
(7
|
)
|
|
(155
|
)
|
|
—
|
|
|
(160
|
)
|
Net cash flow used for investing activities from discontinued operations
|
(23
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23
|
)
|
Net cash flow used for investing activities
|
(21
|
)
|
|
(7
|
)
|
|
(155
|
)
|
|
—
|
|
|
(183
|
)
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Repayments of short-term debt borrowings, net
|
(309
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(309
|
)
|
Payment of finance lease obligations
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
Payment of contingent consideration
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
Dividends
|
(140
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(140
|
)
|
Purchase of Company common stock
|
(394
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(394
|
)
|
Payment of payroll taxes in lieu of issuing
shares for stock-based compensation
|
(58
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(58
|
)
|
Proceeds from exercise of stock options
|
22
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
Other financing activities
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Increase (decrease) in intercompany payables
|
1,068
|
|
|
137
|
|
|
(1,205
|
)
|
|
—
|
|
|
—
|
|
Net cash flow provided by (used for) financing activities
|
188
|
|
|
137
|
|
|
(1,218
|
)
|
|
—
|
|
|
(893
|
)
|
Net (decrease) increase in cash and cash equivalents
|
(67
|
)
|
|
—
|
|
|
34
|
|
|
—
|
|
|
(33
|
)
|
Cash and cash equivalents at beginning of period
|
173
|
|
|
—
|
|
|
112
|
|
|
—
|
|
|
285
|
|
Cash and cash equivalents at end of period
|
$
|
106
|
|
|
$
|
—
|
|
|
$
|
146
|
|
|
$
|
—
|
|
|
$
|
252
|
|