Discontinued Operations

3 Months Ended

Mar. 31, 2017

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

3) DISCONTINUED OPERATIONS

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

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

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

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

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

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

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

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

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

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

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