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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] 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 1-977
CBS CORPORATION
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(Exact name of registrant as specified in its charter)
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PENNSYLVANIA 25-0877540
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(State of Incorporation) (I.R.S. Employer Identification No.)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019 (212) 975-4321
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(Address of Principal Executive Offices) (Telephone No.)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, par value $1.00 per Share New York Stock Exchange Boston Stock Exchange
Pacific Stock Exchange Philadelphia Stock Exchange
Chicago Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by checkmark whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
CBS Corporation had 707,422,490 shares of common stock outstanding at January
31, 1999. As of that date, the aggregate market value of common stock held by
non-affiliates was $23.0 billion.
DOCUMENT INCORPORATED BY REFERENCE INTO THE PARTS OF THIS REPORT INDICATED:
1. Portions of CBS Corporation's Notice of 1999 Annual Meeting and Proxy
Statement to be filed with the Commission pursuant to Regulation 14A of the
Securities Exchange Act of 1934 (the Proxy Statement). (Parts I and III)
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The terms "CBS" and "Corporation" as used in this Report on Form 10-K refer to
CBS Corporation and its consolidated subsidiaries unless the context indicates
otherwise.
PART I
ITEM 1. BUSINESS.
GENERAL
CBS Corporation (formerly Westinghouse Electric Corporation) is one of the
largest radio and television broadcasters in the United States. The Corporation
operates its businesses primarily in the United States through its Radio and
Outdoor Advertising (Radio or out-of-home media) and Television business
segments. The Radio segment consists of 160 AM and FM radio stations operated
under licenses from the Federal Communications Commission (FCC) and the
Corporation's outdoor advertising business. The Television segment consists of
the Corporation's 14 owned and operated television stations, the television
network and the cable business.
During recent years, the Corporation dramatically redefined its business
portfolio. The Corporation acquired CBS Inc. in November 1995; Infinity Media
Broadcasting Corporation, formerly known as Infinity Broadcasting Corporation
(Old Infinity), in December 1996; Gaylord Entertainment Company's two major
cable networks, The Nashville Network (TNN) and Country Music Television (CMT),
in September 1997; and the radio broadcasting operations of American Radio
Systems Corporation (American Radio) in June 1998.
In August 1998, the Corporation announced that it would form a new company to be
named Infinity Broadcasting Corporation (Infinity) comprising the Radio segment
of the Corporation and that Infinity would issue up to 20 percent of the new
company's common stock in an initial public offering. In December 1998, the
offering was completed and, after giving effect to the offering, the Corporation
beneficially owned approximately 81.8 percent of Infinity's equity, which
represents 95.8 percent of its combined voting power.
In 1995 and 1996, the Corporation identified a number of industrial businesses
to be divested. In 1997, the Corporation decided to divest all of its remaining
industrial businesses. The Energy Systems and Government Operations businesses
represent the majority of the Corporation's industrial businesses remaining at
December 31, 1998. In the second quarter of 1998, the Corporation announced
definitive agreements to sell these businesses. The transactions are expected to
close early in 1999. Upon completion of the sales, the remaining assets of
Discontinued Operations principally will comprise the Corporation's leasing
portfolio, which is expected to liquidate in accordance with its contractual
terms. The leasing portfolio represents the assets remaining from the
liquidation of the financial services business, which began in 1992.
The Corporation was founded in 1886 and operates under a corporate charter
granted by the Commonwealth of Pennsylvania in 1872.
Financial results for 1998 and prior years include as Discontinued Operations
the Corporation's industrial businesses previously divested or expected to be
divested in early 1999 and the financial services business. For information
about principal acquisitions and divestitures, see notes 1, 3, and 10 to the
financial statements included in Part II, Item 8 of this report.
Financial and other information by segment is included in note 19 to the
financial statements included in Part II, Item 8 of this report.
BUSINESS SEGMENTS
RADIO AND OUTDOOR ADVERTISING
During 1998, the Corporation formed Infinity, a new company comprising the Radio
segment; and in December 1998, Infinity, through an initial public offering,
sold 18.2 percent of its equity. Also during 1998, the Radio segment continued
its strategy of pursuing acquisitions in the top 50 markets with the completion
of the American Radio acquisition in June.
Infinity owns and operates 160 AM and FM radio stations located in 34 markets.
Sixty-two of these radio stations are in the nation's ten largest radio markets.
Management believes that the presence of Infinity's radio stations in large
markets makes it attractive to advertisers and that the overall diversity of its
stations reduces its dependence
2 CBS CORPORATION
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on any single station, local economy, or advertiser. These stations serve
diverse target demographics through a broad range of programming formats, such
as rock, oldies, news/talk, adult contemporary, sports/talk, and country, and
include leading franchises in news, sports, and personality programming.
Infinity also has a minority equity investment in Westwood One, Inc. (Westwood
One), which it manages. Westwood One is a leader in producing and distributing
syndicated and network radio programming and also manages the CBS Radio Network.
In order to take advantage of the growing opportunity in the new media market,
the vast majority of the radio stations operate web sites. These web sites focus
on the local markets, promoting the stations' talent, and programming, and
providing news, information, entertainment, as well as other services to the
stations' listeners.
Infinity also participates in the outdoor advertising business through its
wholly owned subsidiary, TDI Worldwide, Inc. (TDI). TDI is based in New York
with 18 branch offices throughout the United States, United Kingdom, and the
Republic of Ireland. TDI is one of the largest outdoor advertising companies in
the United States, operating some 100 franchises. The majority of these
franchises are located in large metropolitan areas. TDI sells space on various
media, including buses, trains, train platforms and terminals throughout
commuter rail systems, and on painted billboards, thirty-sheet billboards, and
phone kiosks.
TELEVISION
The Television segment consists of the Corporation's owned and operated
television stations, the CBS television network, and the cable television
operations.
Television Stations
The Corporation owns and operates 14 television stations located in seven of the
nation's ten largest markets and 11 of the nation's top 20 markets reaching
approximately 31 percent of all U.S. television households. The CBS owned
stations are: WCBS-TV New York, KCBS-TV Los Angeles, WBBM-TV Chicago, WCCO-TV
Minneapolis, WFRV-TV Green Bay, WWJ-TV Detroit, WJZ-TV Baltimore, WBZ-TV Boston,
KCNC-TV Denver, WFOR-TV Miami, KYW-TV Philadelphia, KDKA-TV Pittsburgh, KUTV-TV
Salt Lake City, and KPIX-TV San Francisco. The stations produce news and
broadcast public affairs and other programming to serve their local markets and
offer CBS network and other syndicated programming. Many of the Corporation's
television stations currently operate web sites which promote the station's
talent and programming and provide news, information, entertainment as well as
other services to the stations' viewers.
Television Network
The CBS television network distributes a comprehensive schedule of news and
public affairs broadcasts, entertainment and sports programming, and feature
films to more than 200 domestic affiliates, including the 14 owned and operated
television stations, and to certain overseas affiliated stations. These
affiliates serve, in the aggregate, all 50 states and the District of Columbia.
The television network is responsible for sales of advertising time for the
television network broadcasts.
The CBS television network operations are subdivided into five areas: CBS
Entertainment; CBS News; CBS Sports; CBS Enterprises; and CBS New Media. CBS
Entertainment produces and otherwise acquires and schedules entertainment series
and other programming (primetime comedy and drama series, motion pictures made
for television, mini-series, theatrical films, specials, and children's
programs) broadcast on the CBS television network.
CBS Enterprises is involved in the production, distribution, and marketing of
first-run and off-network programming to broadcast, cable, home video,
in-flight, and emerging media worldwide. EYEMARK Entertainment oversees domestic
syndication, while CBS Broadcast International is responsible for selling
programming internationally.
CBS New Media consists of the Corporation's internet businesses, primarily
CBS.com and Country.com. CBS.com, launched in February 1998, offers a broad
range of informational, entertainment, news, and promotional services. More than
150 of the television network affiliates currently participate in this web site.
Country.com features the latest in country/outdoor lifestyles, entertainment,
information and news and promotes TNN and CMT programming. Also part of CBS New
Media are the Corporation's minority investments in SportsLine USA, Inc.
CBS CORPORATION 3
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(which publishes several sports web sites, including CBS.SportsLine.com) and
MarketWatch.com, Inc. (which publishes the web site CBS.MarketWatch.com).
Cable
The CBS cable operations consist of the Corporation's cable networks, including
TNN, CMT, and two regional sports networks, and a minority equity interest in a
Spanish language cable news network. These networks are distributed by cable
television and other multichannel technologies.
TNN is an advertiser-supported cable network featuring country lifestyle and
entertainment programming. The network serves approximately 73 million U.S.
homes. TNN's programming includes country music performances, interviews with
country music artists and personalities, specials, variety shows, talk shows,
news, and sports. TNN's weekend programming focuses on outdoor sports, such as
hunting, fishing, and motor sports, some of which, including a portion of the
NASCAR Winston Cup Series, is broadcast live.
CMT is an advertiser-supported, 24-hour cable network with a country music video
format. It reaches approximately 41 million U.S. homes.
In addition, the Corporation owns and operates the Midwest Sports Channel, a
regional sports network in Minne-apolis, and is a majority owner of Home Team
Sports, a regional sports network serving the mid-Atlantic states.
Also part of the cable operations, Group W Network Services (GWNS) is a global
provider of satellite services to broadcast, cable, and corporate networks.
Based in Stamford, Connecticut, GWNS handles approximately 7,000 hours of
television and video programming each week, providing transmission and other
technical services to U.S. broadcast networks and to many major cable networks.
COMPETITION
The broadcast environment is highly competitive. The Telecommunications Act of
1996 (the Act) provides both new opportunities and potential new competition for
the Corporation. By deregulating station ownership limits, the Act has allowed
the Corporation to pursue strategic growth in its businesses.
The Corporation's radio stations and outdoor advertising properties compete for
audiences and advertising revenues directly with other radio stations and
outdoor advertising companies, as well as with other media, such as broadcast
television, newspapers, magazines, cable television, the Internet and direct
mail, within their respective markets.
The radio and outdoor advertising industry is also subject to competition from
new media technologies that are being developed or introduced, such as the
delivery of audio programming by cable television systems, by satellite and by
terrestrial delivery of digital audio broadcasting. The FCC has recently
authorized spectrum for the use of a new technology, satellite digital audio
radio services, to deliver audio programming. Satellite digital audio radio
service may provide a medium for the delivery by satellite of multiple new audio
programming formats to local and national audiences. It is not known at this
time whether digital technology also may be used in the future by existing radio
broadcast stations either on existing or alternate broadcasting frequencies.
There are also proposals before the FCC to permit a new "low power" radio or
"microbroadcasting" service which could open up opportunities for low cost
neighborhood service on frequencies which would not interfere with existing
stations. No FCC action has been taken on these proposals to date.
The CBS television network, television stations, and the cable operations
compete for audiences with other television networks, television stations, and
cable networks, as well as with other media, including satellite television
services, videocassettes, and the Internet. In recent years, broadcast
television has seen a decline in total audience viewership. In the sale of
advertising time, the CBS television network, television stations, and the cable
operations compete with other broadcast networks, other television stations,
other cable networks, the Internet, and other advertising media. The CBS
television network, television stations, and the cable operations also compete
with other video media for distribution rights to television programming. In
addition, the CBS television network competes with other television networks to
secure affiliations with independently owned television stations in markets
across the country, which are necessary to ensure the effective distribution of
network programming to a nationwide audience.
4 CBS CORPORATION
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An extended conversion to digital television broadcasting has begun. Current and
future technological developments may affect competition within the television
marketplace. Developing technology to compress digital signals will increasingly
permit the same broadcast, cable, or satellite channel to carry multiple video
and data services which could result in an expanded field of competing services.
Television broadcasters will continue to operate their current stations while
gradually building and operating digital facilities concurrently on separate
channels. This transition is expected to continue well over the next decade.
In April 1997, the FCC adopted a schedule under which television stations must
build digital television transmission facilities and begin digital
transmissions. Under that schedule, CBS is required to build digital facilities
by May 1, 1999 for the stations it owns in seven of the ten largest television
markets. Construction is required by November 1, 1999 for five CBS owned
television stations in the 11th through 30th largest television markets. CBS's
two owned television stations in markets below the largest 30 must construct
digital facilities by May 1, 2002. In addition, CBS, as well as other major
station group owners, have volunteered to the FCC to make a good faith effort to
construct digital facilities for some stations in the ten largest markets on an
accelerated basis. Pursuant to that voluntary commitment, the Corporation is
currently transmitting digital broadcasts in New York, San Francisco,
Philadelphia, and Los Angeles.
All of the Corporation's television and radio stations operate under licenses
from the FCC, which is empowered by the Communications Act of 1934, as amended,
to, among other things, license and regulate television and radio broadcasting
stations. The FCC has authority to grant or renew broadcast licenses for a
maximum statutory term of eight years if it determines that the "public
convenience, interest, or necessity" will be served thereby. During a specified
period after an application for renewal of a broadcast station license has been
filed, persons objecting to the license renewal application may file petitions
to deny.
The FCC's approval of the Corporation's acquisitions of Old Infinity in 1996,
and American Radio in 1998 contained a number of temporary waivers of the FCC's
television and radio cross-ownership rules (the "One-to-a-Market" Rule). These
waivers were granted subject to the outcome of the pending ownership rulemaking
in which certain deregulation of the "One-to-a-Market" Rule has been proposed.
In the event that any station divestitures are required at the conclusion of
this rulemaking, the Corporation would be required to file applications with the
FCC for consent to the necessary divestitures within six months of the
rulemaking order.
DISCONTINUED OPERATIONS
At December 31, 1998, Discontinued Operations principally consists of the Energy
Systems and Government Operations businesses which are described below.
Discontinued Operations also includes portfolio investments from the financial
services business and certain other miscellaneous assets from its previously
divested industrial busi-nesses that are being managed pending liquidation or
divestiture. Essentially all of the businesses remaining in Discontinued
Operations are expected to be divested in 1999, while the leasing portfolio is
generally expected to liquidate in accordance with its contractual terms. See
note 10 to the financial statements included in Part II, Item 8 of this report.
Energy Systems serves the domestic and international electric power industry by
supplying fuel and other products and services to owners and operators of
nuclear power plants. The unit supplies operating plant services ranging from
performance-based maintenance programs, including operations and safety
upgrades, to new products and services that enhance plant performance.
Government Operations provides management services for: (1) certain
government-owned facilities under contracts with the Department of Energy in the
areas of waste management, environmental cleanup, and the safe management of the
nation's nuclear materials inventory; (2) the nuclear reactors programs for the
U.S. Navy; and (3) a chemical agent and weapons destruction program for the
Department of Defense. It also manufactures nuclear waste storage containers,
pumps, motors, generators, and other equipment for various applications.
TRADEMARKS AND PATENTS
CBS has a worldwide trademark portfolio that it considers important in the
marketing of its products and services, including, among others, the trademarks
"CBS," the CBS "Eye" logo, "WESTINGHOUSE," and the "CIRCLE W" logo. CBS believes
that its rights in these trademarks are adequately protected and of unlimited
duration.
CBS CORPORATION 5
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CBS owns or is licensed under a large number of patents and patent applications
(primarily related to its industrial businesses which are classified as
Discontinued Operations) in the United States and other countries that, taken
together, are of material importance to the industrial businesses. Such patent
rights are, in the judgment of CBS, adequate for the conduct of these
businesses. No patents that CBS considers material to the industrial businesses
as a whole will expire within the next five years.
ENVIRONMENTAL MATTERS
Information with respect to Environmental Matters is incorporated herein by
reference to Management's Discussion and Analysis--Environmental Matters
included in Part II, Item 7 and in note 11 to the financial statements included
in Part II, Item 8 of this report.
RESEARCH AND DEVELOPMENT
The Corporation's Continuing Operations do not engage in any material research
and development activities.
EMPLOYEE RELATIONS
During 1998, the Corporation employed an average of 46,189 people, of whom
44,248 were located in the United States. During the same period, 8,845 domestic
employees were represented in collective bargaining by 23 labor organizations.
The 1998 average number of employees includes 27,255 employees employed by
businesses classified as Discontinued Operations.
ITEM 2. PROPERTIES.
The Corporation's corporate headquarters is located at 51 West 52nd Street, New
York, New York, where the Corporation currently owns approximately 900,000
square feet of floor space, which is utilized for executive and certain
operating division offices or is leased to third parties. The majority of other
properties used by the media businesses consist of both owned and leased office
space, studio facilities, transmitter equipment, and antenna sites throughout
the United States and in 14 countries around the world. As of December 31, 1998,
the Corporation's Continuing Operations owned or leased 532 U.S. properties
totaling 9,461,273 square feet of floor area and 36 foreign locations totaling
111,627 square feet. Domestic locations of Continuing Operations comprised
approximately 99 percent of the total space. Leased facilities in the United
States accounted for approximately 43 percent of the total space occupied by
Continuing Operations, while facilities leased in foreign countries accounted
for approximately 1 percent of the total space occupied by Continuing
Operations. No individual lease was material. The physical properties described
above are adequate and suitable, with an appropriate level of utilization, for
the conduct of its business in the future.
At December 31, 1998, the Corporation's Discontinued Operations owned or leased
75 locations totaling 9,487,738 square feet of floor area within the United
States and 21 locations totaling 818,244 square feet in 11 foreign countries.
Domestic operations of Discontinued Operations accounted for approximately 92
percent of the total space occupied by Discontinued Operations. Leased
facilities in the United States accounted for approximately 15 percent of the
total space occupied by Discontinued Operations, while facilities leased in
foreign countries accounted for approximately 3 percent of the total space
occupied by Discontinued Operations. No individual lease was material. A number
of manufacturing plants and other facilities formerly used in operations are
either vacant, partially utilized, or leased to others. All of these facilities
are expected to be sold.
ITEM 3. LEGAL PROCEEDINGS.
(a) On February 27, 1996, suit was brought against the Corporation in the United
States District Court (USDC) for the District of New Jersey by Public Service
Electric & Gas Company, PECO Energy Company, Atlantic City Electric Company, and
Delaware Power & Light Company, the owners of the Salem Generating Station. The
suit alleges counts under the Racketeer Influenced and Corrupt Organization Act
(RICO) for fraud, negligent misrepresentation, and breach of contract in
connection with the Corporation's supply of steam generators and for service
orders in 1993 and 1995 related to these steam generators. On October 1, 1997,
the Corporation filed a motion for summary judgement in this case. On November
6, 1998, the USDC granted the Corporation's motion for summary judgement based
on the statute of limitations with respect to plaintiffs' RICO
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claims and dismissed the RICO claims (with prejudice) and plaintiffs' state
claims, i.e., fraud, negligent misrepresentation and breach of contract (without
prejudice). Plaintiffs have appealed the dismissal of the RICO claim to the
United States Court of Appeals for the Third Circuit (Third Circuit) and have
refiled their state claims in New Jersey Superior Court. The parties have agreed
to stay the state court action pending the outcome of the Third Circuit appeal.
The Corporation is also a party to three tolling agreements with utility owners
that have asserted steam generator claims. See note 10 to the financial
statements included in Part II, Item 8 of this report.
(b) In August 1988, the Pennsylvania Department of Environmental Resources
(PDER) filed a complaint against the Corporation alleging violations of the
Pennsylvania Clean Streams Law at the Corporation's Gettysburg, Pennsylvania,
elevator plant. PDER requested that the Environmental Hearing Board assess a
penalty in the amount of $9 million. The Corporation denied these allegations.
In November 1996, the Board assessed a civil penalty of approximately $5.5
million. The Corporation appealed the Board's decision to the Commonwealth
Court. On January 2, 1998, the Commonwealth Court upheld the Board's findings
with respect to violations of the Pennsylvania Clean Streams Law but not with
respect to the amount of the penalty assessed. The Commonwealth Court returned
the matter to the Board for a reassessment of the penalty. The Corporation's
application for a rehearing before the Commonwealth Court was denied. Also on
October 9, 1998, the Corporation's petition for a rehearing before the
Pennsylvania Supreme Court was denied. The matter is now before the Board for
recalculation of the penalty pursuant to the earlier opinion of the Commonwealth
Court. Oral arguments were completed in February 1999.
(c) The Corporation has been defending, in the USDC for the Western District of
Pennsylvania (the District Court), consolidated class and derivative actions and
an individual lawsuit brought by shareholders against the Corporation,
Westinghouse Financial Services, Inc. (WFSI) and Westinghouse Credit Corporation
(WCC), previously subsidiaries of the Corporation, and/or certain present and
former directors and officers of the Corporation, as well as other unrelated
parties. Together, these actions allege various federal securities law and
common law violations arising out of alleged misstatements or omissions
contained in the Corporation's public filings concerning the financial condition
of the Corporation, WFSI, and WCC in connection with a $975 million charge to
earnings announced on February 27, 1991; a public offering of the Corporation's
common stock in May 1991; a $1,680 million charge to earnings announced on
October 7, 1991; and alleged misrepresentations regarding the adequacy of
internal controls at the Corporation, WFSI, and WCC. In July 1993, the court
dismissed in its entirety the derivative claim and dismissed most of the class
action claims with leave to replead certain claims in both actions. Both actions
were subsequently repled. On January 20, 1995, the District Court again
dismissed the derivative complaint in its entirety. On February 8, 1995, this
dismissal was appealed. Also on January 20, 1995, the court dismissed the class
action claims but granted plaintiffs the right to replead certain of the claims.
Plaintiffs in the class action did not replead the claims, and on February 28,
1995, the court dismissed these claims in their entirety. Plaintiffs in both the
derivative and class action suits appealed the rulings and dismissals of their
claims by the District Court to the Third Circuit. In July 1996, the Third
Circuit affirmed in part and reversed in part the class action claims. Pursuant
to this ruling, the class action claims have been remanded to the District
Court. In 1997, two similar class action suits were brought against the
Corporation in the District Court. These cases allege similar facts and include
the same defendants as in the previous class action complaint filed in the
District Court. In November 1997, the District Court dismissed both of these
actions. The Corporation has reached an agreement in principle to resolve all
claims in the class actions. The settlement is subject to the execution of
definitive documentation, notice to the class upon whose behalf the action was
brought, a fairness hearing, and approval by the Court of the settlement. In the
derivative action, the Third Circuit affirmed the dismissal of this action by
the District Court.
(d) The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries, which allegedly occurred from use or
inclusion of asbestos in certain of the Corporation's products supplied by its
industrial businesses, generally in the pre-1970 time period. Typically, these
lawsuits are brought against multiple defendants. The Corporation was neither a
manufacturer nor a producer of asbestos and is oftentimes dismissed from these
lawsuits on the basis that the Corporation has no relationship to the products
in question or the claimant was not exposed to the Corporation's products. At
December 31, 1998, the Corporation had approximately 113,200 unresolved claims
pending against it. In court actions that have been resolved, the
CBS CORPORATION 7
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Corporation has prevailed in the majority of the asbestos claims and has
resolved others through settlement. Furthermore, the Corporation has brought
suit against certain of its insurance carriers with respect to these asbestos
claims. Under the terms of a settlement agreement resulting from this suit,
carriers that have agreed to the settlement are now reimbursing the Corporation
for a substantial portion of its current costs and settlements associated with
asbestos claims.
A number of the asbestos-related cases pending against the Corporation,
including those in Louisiana, Mississippi, Pennsylvania, and West Virginia, are
consolidated or purported class action cases. In consolidated cases, the claims
of a group of plaintiffs are tried together, and oftentimes limited findings
with respect to common issues of fact and punitive damages are decided with
respect to a representative grouping of plaintiffs and then applied to other
individuals in the group. However, for the Corporation to be liable for damages
to any particular claimant, that individual claimant must prove that he
developed an asbestos-related disease, that he was exposed to a product
manufactured or supplied by the Corporation, and that this exposure was a
substantial factor in the development of the disease.
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in certain of the foregoing matters and although management
believes a significant adverse judgment is unlikely, any such judgment could
have a material adverse effect on the Corporation's results of operations for a
quarter or a year. However, based on its understanding and evaluation of the
relevant facts and circumstances, management believes that the Corporation has
meritorious defenses to the litigation described in items (a) through (d) above,
and that the Corporation has adequately provided for resolution of these
matters. Management believes that the litigation should not have a material
adverse effect on the financial condition of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None during the fourth quarter of 1998.
EXECUTIVE OFFICERS
The names, ages, offices, and positions held during the past five years by each
of the executive officers of the Corporation as of February 19, 1999 are listed
below. Officers are elected annually. There are no family relationships among
any of the executive officers of the Corporation.
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AGE AT
FEBRUARY 19,
NAME, OFFICES, AND POSITIONS 1999
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Mel Karmazin--President and Chief Executive Officer since 55
January 1999; President and Chief Operating Officer from
April 1998 to January 1999; Chairman and Chief Executive
Officer of CBS Station Group from May 1997 to January
1999; Chairman and Chief Executive Officer of CBS Radio
from December 1996 to May 1997; President and Chief
Executive Officer, Infinity Media Corporation (then known
as Infinity Broadcasting Corporation) from 1981 to
December 1996. Mr. Karmazin also currently serves as
Chairman, President, and Chief Executive Officer of
Infinity Broadcasting Corporation, a subsidiary of the
Corporation, since September 1998.
Louis J. Briskman--Executive Vice President and General 50
Counsel since April 1998; Senior Vice President and
General Counsel from January 1994 to April 1998.
Robert G. Freedline -- Vice President and Controller since 41
May 1998; Director, Corporate Reporting, Policies and
Business Planning from June 1996 to May 1998; Director,
Corporate Audit from March 1995 to June 1996; Manager,
Corporate Reporting and Policies, Zurn Industries from
November 1992 to March 1995.
Leslie Moonves--President and Chief Executive Officer, CBS 49
Television, since April 1998; President, CBS Television
from August 1997 to April 1998; President, CBS
Entertainment Division from May 1995 to August 1997;
President, Warner Bros. Television from July 1993 to May
1995.
Fredric G. Reynolds--Executive Vice President and Chief 48
Financial Officer since March 1994; Senior Vice President,
Finance, and Chief Financial Officer, PepsiCo
International Foods from December 1990 to March 1994.
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8 CBS CORPORATION
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal markets for the Corporation's common stock are identified on page
1 of this report. The remaining information required by this item appears on
page 50 of this report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item appears on page 50 of this report and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item appears on pages 10 through 21 of this
report and is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this item appears on pages 19 and 20 of this report
and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item, together with the report of KPMG LLP
dated January 27, 1999, appears on pages 23 through 49 of this report and is
incorporated herein by reference.
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Report of Management 22
Independent Auditors' Report 23
Consolidated Statement of Income and Comprehensive Income
for each of the three years in the period ended December
31, 1998 24
Consolidated Balance Sheet at December 31, 1998 and 1997 25
Consolidated Statement of Cash Flows for each of the three
years in the period ended December 31, 1998 26
Consolidated Statement of Shareholders' Equity for each of
the three years in the period ended
December 31, 1998 27
Notes to the Financial Statements 28
Quarterly Financial Information (unaudited) 49
Five-Year Summary of Selected Financial and Statistical Data
(unaudited) 50
- ------------------------------------------------------------------
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There were no reportable events.
CBS CORPORATION 9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
CBS Corporation (formerly Westinghouse Electric Corporation) dramatically
redefined its business portfolio and strategic direction in recent years through
acquisitions and divestitures with the intent of increasing its media holdings,
divesting its industrial operations, and increasing shareholder value. A number
of significant accomplishments in 1998 contributed to the achievement of those
objectives.
- - In January 1998, the Corporation and the NFL announced that CBS was awarded
the rights to broadcast American Football Conference games. The eight-year
agreement, subject to rebid at the end of five years at the discretion of the
NFL, will cost approximately $4 billion. The contract began with the 1998
football season and includes two Super Bowls.
- - In June 1998, the Corporation completed the acquisition of the radio
broadcasting operations of American Radio Systems Corporation (American Radio)
for $1.4 billion in cash plus the assumption of debt with a fair value of
approximately $1.3 billion.
- - In September 1998, the Corporation formed a new company named Infinity
Broadcasting Corporation (Infinity) comprising the Radio segment of the
Corporation. In December 1998, Infinity completed an initial public offering
of 18.2 percent of its common stock, generating proceeds of $3.2 billion.
- - In February 1998, the Corporation's Board of Directors authorized the purchase
of up to $1 billion of its common stock. The stock purchase program was
subsequently increased to $3 billion. Through December 31, 1998, the
Corporation had purchased 28,342,000 shares for $859 million.
- - In August 1998, the Corporation sold its Power Generation business for $1.2
billion in cash.
- - In November 1998, the Corporation sold the Process Control Division of its
Energy Systems business for approximately $260 million in cash plus the
assumption of pension and other liabilities. Agreements to sell the remainder
of Energy Systems and the Government Operations businesses were signed in June
1998. Upon completion of these sales, which is expected in early 1999, the
Corporation will have successfully completed divestitures of essentially all
of its industrial businesses.
These significant accomplishments followed successful strategic initiatives from
the prior year. Highlights from 1997 included the acquisition of The Nashville
Network (TNN) and Country Music Television (CMT) for $1.55 billion as well as
the divestiture of Thermo King for $2.56 billion.
The Corporation has essentially completed its transformation from an industrial
company to a high growth media company. It captured strong values for its
industrial properties while building a strong portfolio of broadcasting assets.
CONSOLIDATED OPERATING RESULTS
The Corporation reported a net loss for 1998 of $21 million, or $0.03 per share,
compared to net income of $549 million, or $.84 per share, for 1997 and $95
million, or $.12 per share, for 1996. Net income (loss) includes results from
Continuing Operations, Discontinued Operations, and extraordinary losses on
early extinguishment of debt, as presented below:
COMPONENTS OF NET INCOME (LOSS)
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ------------------------------------------------------
<S> <C> <C> <C>
Loss from Continuing Operations $(12) $(131) $(221)
Income from Discontinued
Operations -- 680 409
Extraordinary loss (9) -- (93)
- ------------------------------------------------------
Net income (loss) $(21) $ 549 $ 95
- ------------------------------------------------------
</TABLE>
The Corporation generally reported strong performances by the media businesses
in each of the last three years. The net loss from Continuing Operations
improved 91 percent during 1998 following a 41 percent improvement the prior
year.
Despite these strong performances, two primary factors more than offset the
profit from the businesses: interest expense and residual costs of discontinued
businesses. These factors reduced earnings each year by more than $500 million.
Earnings were also unfavorably affected by significant levels of amortization of
FCC licenses and non-deductible goodwill arising from recent acquisitions.
10 CBS CORPORATION
<PAGE> 11
In addition, included in results of Continuing Operations were restructuring
costs of $62 million in 1998, $15 million in 1997, and $57 million in 1996. A
charge of $28 million related to litigation matters was also included in 1996
results.
The results of Discontinued Operations include the operating results of the
industrial businesses prior to adoption of the related disposal plan as well as
the estimated gain or loss from disposal of those businesses. In 1997, the
Corporation recorded a net gain of $871 million, primarily from the sale of
Thermo King, and in 1996, a net gain of $1,018 million, primarily from the sale
of the defense and electronic systems business.
The extraordinary losses in 1998 and 1996 primarily reflect the write-off of
debt issue costs in connection with the early extinguishment of debt. In 1998,
the Corporation purchased, at market value, debt securities with a face value of
approximately $300 million and reduced availability under its credit facility.
In 1996, the Corporation prepaid $6.8 billion of debt under its then-existing
credit facility.
SEGMENT RESULTS OF OPERATIONS--
CONTINUING OPERATIONS
The following table presents the segment results for the Corporation's
Continuing Operations for each of the years in the three-year period ended
December 31, 1998. Earnings before interest, taxes, depreciation, and
amortization (EBITDA) is presented in the table because management believes that
EBITDA is an appropriate measure for evaluating the operating performance of the
Corporation's businesses. EBITDA eliminates the effect of depreciation and
amortization of tangible and intangible assets, most of which were from
acquisitions accounted for under the purchase method of accounting. However,
EBITDA should be considered in addition to, not as a substitute for, operating
earnings, net earnings, cash flows, and other measures of financial performance
reported in accordance with generally accepted accounting principles. EBITDA
differs from cash flows from operating activities primarily because it does not
consider changes in assets and liabilities from period to period, and it does
not include cash flows for interest and taxes.
SEGMENT RESULTS OF OPERATIONS--CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
REVENUES OPERATING PROFIT (LOSS) EBITDA
------------------------ ------------------------ ----------------------
YEAR ENDED DECEMBER 31, 1998 1997 1996 1998 1997 1996 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Radio $1,893 $1,480 $ 554 $ 542 $ 372 $ 140 $ 798 $ 575 $ 197
Television 4,919 3,891 3,563 188 129 229 529 412 467
Corporate and other (7) (4) 26 (85) (105) (201) (68) (72) (162)
Residual costs of discontinued
businesses -- -- -- (163) (143) (114) (163) (143) (114)
- ----------------------------------------------------------------------------------------------------------------
Total Continuing Operations $6,805 $5,367 $4,143 $ 482 $ 253 $ 54 $1,096 $ 772 $ 388
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Revenues of the Corporation's Continuing Operations increased $1,438 million, or
27 percent, in 1998 compared to 1997 and increased $1,224 million, or 30
percent, in 1997 compared to 1996. The significant factors contributing to the
1998 and 1997 increases include the acquisitions of American Radio, TNN and CMT
and Old Infinity. In addition, both the Radio segment and Television segment
reported strong improvements for their existing properties.
Operating profit and EBITDA improved dramatically during the past three years.
In 1998, operating profit and EBITDA increased $229 million and $324 million
over 1997, and during 1997 increased $199 million and $384 million over 1996.
These increases reflect the favorable effects of recent acquisitions as well as
strong performance for both the Radio and Television segments. Most of the
improvement in corporate and other costs resulted from a reduction in costs for
restructuring activities.
As reflected in the table above, results for Continuing Operations have been
unfavorably affected by residual costs of discontinued businesses. These costs
primarily represent pension and postretirement benefit costs for inactive and
retired employees of previously divested businesses. Although the Corporation's
objective is to reduce this earnings constraint over the next few years,
management expects that these costs will continue to negatively affect operating
results in 1999 and future years.
The reported results for each of the segments include depreciation and
amortization of specifically identifiable assets based on their fair values when
acquired. Where appropriate, the separate business discussions that follow
provide a comparison of the actual 1998 results with the pro forma results for
1997 and 1996 determined by adjusting prior-period amounts for recent
acquisitions.
CBS CORPORATION 11
<PAGE> 12
RADIO
The Radio segment owns and operates 160 radio stations and TDI Worldwide, Inc.
(TDI), its outdoor advertising business. Revenues and operating profit, as
reported, increased dramatically in 1998 compared to 1997 and in 1997 compared
to 1996. This growth was primarily driven by the inclusion of the results of
operations for American Radio and Old Infinity, which were acquired on June 4,
1998 and December 31, 1996, respectively. The overall strong performance at the
Corporation's existing stations and TDI also contributed to these dramatic
increases. On a pro forma same station basis, revenue growth continued to
outpace the industry for the Radio segment, increasing 12 percent in 1998
compared to 1997 and 20 percent in 1997 compared to 1996. These increases
reflect strong growth primarily in the top 15 markets as well as double-digit
growth at TDI during 1998.
Pro forma same station operating profit and EBITDA increased at a greater rate
than revenues resulting in improved operating profit of 36 percent and 26
percent and EBITDA of 21 percent and 29 percent for 1998 and 1997, respectively.
These increases are primarily due to the higher revenues from the strong results
at the Corporation's existing stations and TDI combined with management's
continued cost control efforts. The higher rate of growth in operating profit
and EBITDA compared to the rate of growth in revenues is attributable to the
fact that a substantial portion of the Radio segment's costs are fixed.
TELEVISION
The Television segment consists of the Corporation's 14 owned and operated
television stations, the CBS television network, and the cable television
operations.
The Television segment's 1998 revenue increased over 1997 by $1,028 million, or
26 percent, and its 1997 revenue increased $328 million, or 9 percent, over
1996. The 1998 increase is primarily attributable to the broadcast of the 1998
Winter Olympics during the first quarter of 1998 and the broadcast of the 1998
NFL American Football Conference games during the third and fourth quarters.
Also contributing to the 1998 increase is the inclusion of revenues from the TNN
and CMT cable networks which were acquired on September 30, 1997. On a pro forma
basis, assuming the acquisition of TNN and CMT occurred on January 1, 1997,
Television segment revenue would have increased 21 percent. The 1997 increase
primarily reflects increased program syndication, as well as additional revenues
generated by special programs such as the Emmy Awards. While pricing was
generally higher in 1997 compared to 1996, declines in ratings on certain
dayparts partially offset these improvements. The cable operations also
contributed to the 1997 increase with the acquisition of TNN and CMT as well as
the higher commissions earned on the increased sales levels achieved by TNN
earlier in 1997 prior to its acquisition by the Corporation.
The Television segment's 1998 operating profit compared to 1997 increased $59
million, or 46 percent, and its 1997 operating profit decreased $100 million, or
44 percent, from 1996. The increase in 1998 is primarily a result of the
inclusion of 1998 operating profits of TNN and CMT, the results achieved at the
television stations, and the first quarter broadcast of the 1998 Winter
Olympics. These improvements were partially offset by a $60 million
restructuring charge and a $4 million charge for asset impairment recognized
during the third quarter, as well as declines in profitability at the CBS
television network during the third and fourth quarters.
The decrease in 1997 Television segment operating profit is driven by the
declines in profitability at the CBS television network and the CBS cable
operations. The declines at the network were due to lower audience levels in key
demographic categories and higher programming costs. The 1997 declines at CBS
cable were the result of increased expenditures related to TeleNoticias and
costs to develop and launch Eye on People. These 1997 declines were partially
offset by increases in operating profit at the television stations, which were
driven by a strong advertising market and management's renewed focus on revenue
growth.
The 1998 Television segment EBITDA increased over 1997 by $117 million, or 28
percent, and the 1997 EBITDA decreased by $55 million, or 12 percent, over 1996.
These results were driven by the same factors impacting operating profit. On a
pro forma basis, assuming the acquisition of TNN and CMT occurred on January 1,
1997, Television segment EBITDA would have increased 7 percent.
In November 1998, the Corporation finalized a joint venture agreement pursuant
to which 70 percent of the Corporation's TeleNoticias cable channel business was
sold. Under the terms of the agreement, the Corporation retained a 30 percent
equity interest in the business and will continue to provide it with news
gathering resources and programming. In December 1998, the Corporation sold its
cable network, Eye On People.
12 CBS CORPORATION
<PAGE> 13
CORPORATE AND OTHER
Corporate and other consists of two primary components: corporate overhead costs
and special charges relating to corporate restructuring and other matters. Costs
for restructuring plans charged to Corporate and other initiated in 1998, 1997,
and 1996, totaled $2 million, $15 million, and $57 million, respectively. In
1998 the Corporation also recognized special severance payments of $7 million.
In addition, during 1996, the Corporation recognized a provision of $28 million
related to litigation matters. These restructuring actions resulted in a
reduction of approximately 15 percent in corporate overhead costs from 1997 to
1998 and approximately 20 percent from 1996 to 1997.
RESIDUAL COSTS OF DISCONTINUED BUSINESSES
The Corporation's results of operations are unfavorably affected by certain
costs remaining from past divestitures of its industrial businesses. Following
those divestitures, certain liabilities arising from the businesses remained
with the Corporation, such as pension and postretirement benefit obligations for
inactive and retired employees, environmental liabilities, and
litigation-related liabilities. The pension and postretirement benefit costs
associated with these former employees, as well as administration costs
associated with managing the retained liabilities, have been presented
separately in the income statement.
For all three years, these costs primarily reflect pension and postretirement
benefit costs. The slight increase in costs during 1998 is a result of the
closing of the sale of Power Generation in August 1998 and the retention of
these benefit obligations. Following the sales of Energy Systems and Government
Operations, the quarterly costs are expected to increase by an additional $4
million. Prior to the sales, these costs are included in the respective
businesses' results of operations which are reported in Discontinued Operations.
The Corporation's objective is to reduce this earnings constraint over the next
few years by fully funding the pension plan and modifying postretirement
benefits. However, management expects that these costs will continue to
negatively affect operating results during future years.
RESTRUCTURING OF OPERATIONS
The Corporation is committed to strengthening its businesses and improving its
profitability through restructuring actions ranging from changes in business
strategies to downsizing for process reengineering and productivity
improvements. See note 17 to the financial statements.
During the last three years, the Corporation has undertaken restructuring
programs in its businesses, primarily at the network, as well as at its former
and current corporate headquarters. The majority of the restructuring costs
recognized in the last three years involved the elimination of positions and
separation of employees.
Restructuring actions have resulted in the recognition of costs totaling $62
million in 1998, $15 million in 1997, and $57 million in 1996. All costs were
reflected in operating profit of Continuing Operations in the financial
statements. Except for costs totaling $12 million in 1998 and $32 million in
1996, these restructuring costs were essentially for the separation of
employees. The 1998 and 1996 plans included asset write-downs of $2 million and
$15 million, respectively, and lease termination and other facility closure
costs of $10 million and $17 million, respectively.
Cash expenditures for these three plans totaled $117 million, of which $53
million was spent through December 31, 1998. Cash expenditures of $36 million
are projected for 1999, with the remaining $28 million occurring over the next
several years. Employee separation costs generally are paid over a period of up
to two years following the separation but can extend longer in certain cases.
Lease cancellation costs continue over the remaining terms of the leases.
Cost reduction initiatives are undertaken when the expected benefits are
substantial in relation to the cost of the programs and are realizable in the
near term.
OTHER INCOME (EXPENSE), NET
Other income and expense items generated income of $43 million in 1998, $74
million in 1997, and $55 million in 1996. Generally, other income (expense)
includes interest income, gains and losses on dispositions of non-strategic
assets, and operating results of non-consolidated affiliates.
Interest income totaled $19 million in 1998, $11 million in 1997, and $17
million in 1996. Other income in 1997 also included a $24 million gain on the
sale of a partnership interest.
INTEREST EXPENSE
Interest expense from Continuing Operations totaled $370 million in 1998, $386
million in 1997, and $401 million in 1996. The decrease in interest
CBS CORPORATION 13
<PAGE> 14
expense during 1998 was driven by a reduction in average debt, primarily
revolving credit borrowings, compared to 1997. Average debt was affected by the
proceeds received from Infinity subsequent to its initial public offering, the
timing of major acquisition and divestiture transactions, and the repurchase of
shares under the Corporation's stock repurchase program. Interest rates also
declined from the prior year.
During 1998, the Corporation purchased, at market value, debt securities with a
face value of $298 million and reduced its availability under its credit
facility from $5.5 billion to $4.0 billion. During the first quarter of 1996,
the Corporation prepaid $3.6 billion of debt with proceeds received on the sale
of certain industrial businesses. Later in 1996, the remaining $3.2 billion of
debt under the Corporation's then-existing credit facility was prepaid and
replaced with borrowings under a new revolving credit facility with more
favorable borrowing rates (see Revolving Credit Facility). As a result of these
prepayments of debt during 1998 and 1996, the Corporation recognized
extraordinary losses of $9 million and $93 million, net of taxes of $6 million
and $60 million, respectively.
In connection with the presentation of various businesses as Discontinued
Operations, interest expense on Continuing Operations debt totaling $5 million,
$42 million and $60 million was reclassified to Discontinued Operations for the
years ended December 31, 1998, 1997, and 1996, respectively. This allocation is
based on the quarterly ratio of the net assets of Discontinued Operations to the
sum of total consolidated net assets plus consolidated debt.
Future interest expense will depend on the Corporation's financing strategy in
future acquisitions, additional activity under the Corporation's stock
repurchase program, use of proceeds from future dispositions, and payment of
pension benefits, postretirement benefits, remaining divestiture costs and
retained liabilities of discontinued businesses as well as the Corporation's
performance.
DISCONTINUED OPERATIONS
With the Corporation's decision in late 1997 to divest its remaining industrial
businesses, all of its industrial businesses are presented in the financial
statements as Discontinued Operations. In August 1998, Power Generation, the
largest of these industrial businesses, was sold to a subsidiary of Siemens A.G.
for $1.2 billion of cash. In the third quarter of 1998, the Corporation sold the
Process Control Division of its Energy Systems business for approximately $260
million in cash and the assumption of pension and other liabilities. During the
second and third quarters of 1998, the Corporation sold certain securities
remaining from previous divestitures and portions of its Communication &
Information Systems (CISCO) segment. Proceeds from these transactions totaled
more than $360 million.
Also in 1998, the Corporation announced a definitive agreement to sell the
remainder of its Energy Systems business and its Government Operations business
for $200 million in cash, subject to certain adjustments, and the assumption of
liabilities, commitments, and obligations of approximately $950 million, all in
accordance with the divestiture agreement. This transaction is scheduled to
close in early 1999 and is expected to result in a gain, which will be
recognized upon realization.
In prior years, the Corporation completed the sale of Thermo King on October 31,
1997 for $2.56 billion of cash. In the fourth quarter of 1997, the Corporation
recognized an after-tax gain totaling $871 million in connection with the
divestiture of Thermo King, the decision to divest the remaining industrial
businesses, and an adjustment of prior disposal plans. During 1996, the
Corporation completed the sales of Knoll and its defense and electronic systems
business for a combined after-tax gain of $1.2 billion. The combined purchase
price totaled $3.6 billion of cash plus the assumption by the buyer of certain
pension and postretirement liabilities associated with the active employees of
the defense and electronic systems business.
Also in 1996, the Corporation adopted plans to dispose of its environmental
services businesses and its CISCO segment. The combined after-tax losses from
these disposals approximated $200 million in 1996. Various businesses comprising
these segments were divested in 1998, 1997 and 1996.
Following the divestitures of the Energy Systems and Government Operations
businesses, which are expected in early 1999, the assets of Discontinued
Operations will consist primarily of the portfolio investments remaining from
the 1992 decision to exit the financial services business. These portfolio
investments, which consist primarily of the leasing portfolio, generally are
expected to liquidate through the year 2015 in accordance with contractual
terms. Debt of Discontinued Operations, which totaled $428 million at December
31, 1998, includes only that amount which can be
14 CBS CORPORATION
<PAGE> 15
repaid through liquidation of the portfolio investments. Other divestiture costs
and certain contingencies related to the industrial businesses also will remain
in 1999.
Except for cash flows related to the portfolio investments and the associated
debt, all future cash inflows and outflows of Discontinued Operations will
affect Continuing Operations. Management believes that the liability for
estimated loss on disposal of Discontinued Operations of $1,309 million at
December 31, 1998 is adequate to cover future operating costs, estimated losses
on disposal, and the remaining divestiture costs associated with all
Discontinued Operations.
SEGMENT RESULTS OF OPERATIONS--DISCONTINUED OPERATIONS
(in millions)
<TABLE>
<CAPTION>
SALES OF PRODUCTS
& SERVICES OPERATING LOSS
------------------------ ---------------------
YEAR ENDED DECEMBER 31, 1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Industrial businesses $2,235 $4,257 $5,389 $(118) $(362) $(881)
Financial services 21 12 26 (20) (29) (16)
- --------------------------------------------------------------------------------------------------
Total Discontinued Operations $2,256 $4,269 $5,415 $(138) $(391) $(897)
- --------------------------------------------------------------------------------------------------
</TABLE>
The segment results shown in the table above include sales and operating profit
for each segment prior to the measurement date of the plan as well as those
after the measurement date. All operating results after the measurement date are
charged directly to the liability for estimated loss on disposal.
Sales for the industrial businesses declined from $5.4 billion in 1996 to $4.3
billion in 1997 and to $2.2 billion in 1998. The decline in 1997 primarily
reflects the sale of Thermo King in October as well as several other smaller
businesses throughout the year. The continued effects of the 1997 disposals and
the sales of several businesses throughout 1998, most notably the Power
Generation business in August, resulted in the dramatic decline in 1998.
Financial services revenues reflect the continued liquidation of the remaining
portfolio investments.
The divestitures of the industrial businesses also reduced the operating losses
over the three-year period. Sales and operating profit improved in 1998 for both
Energy Systems and Government Operations, the two major industrial businesses
remaining at year-end 1998. The operating loss for financial services reflects
interest expense on the debt that supports the portfolio investments and other
administrative costs.
INCOME TAXES
The Corporation's 1998 provision for income taxes is in excess of 100 percent of
the income before taxes and minority interest. The 1998 total provision of $155
million consists of a $161 million expense from Continuing Operations and a $6
million benefit on an extraordinary item. There was no income tax provision for
Discontinued Operations in 1998. The Corporation's 1997 provision for income
taxes in total was 57 percent of the income before taxes and minority interest.
The 1997 total provision of $740 million consists of a $73 million expense from
Continuing Operations and a $667 million expense from Discontinued Operations
primarily related to the gain on the sale of Thermo King. The Corporation's 1996
provision for income taxes in total was 81 percent of the income before taxes
and minority interest. The 1996 total provision of $442 million consists of a
$71 million benefit from Continuing Operations, a $573 million expense from
Discontinued Operations primarily related to the gain on the sale of the defense
and electronic systems business, and a $60 million benefit from an extraordinary
item.
The Corporation's tax provision for Continuing Operations is significantly
higher than the U.S. federal statutory tax rate of 35 percent of pre-tax income.
This higher tax provision results primarily from the amortization of
non-deductible goodwill associated with the media acquisitions in recent years.
Such permanent differences between book income and taxable income can
significantly impact the provision, and depending upon the Corporation's level
of income or loss and the effect of non-recurring transactions, can cause
dramatic fluctuations in the Corporation's effective tax rate. The components of
the income tax provision (benefit) for Continuing Operations are set forth in
note 5 to the financial statements.
The net deferred tax asset at December 31, 1998 and 1997 totaled $53 million and
$661 million, respectively. At December 31, 1998, the significant sources of the
net deferred tax asset are: (i) the cumulative net temporary differences between
the carrying amounts of assets and liabilities for financial reporting
CBS CORPORATION 15
<PAGE> 16
purposes and the amounts used for income tax purposes representing future net
income tax deductions, and (ii) alternative minimum tax and foreign tax credit
carryforwards. The remaining net temporary differences relate to a net pension
obligation, obligations for postretirement and postemployment benefits,
liability for estimated loss on disposal, reserves for restructuring and other
matters. The temporary differences resulting in deferred income taxes are shown
in the Consolidated Deferred Income Taxes by Source table in note 5 to the
financial statements. Management believes that the Corporation will have
sufficient future taxable income to make it more likely than not that the net
deferred tax asset will be realized.
The following table shows a reconciliation of income (loss) from Continuing
Operations before income taxes to taxable income (loss) from Continuing
Operations:
RECONCILIATION OF PRE-TAX INCOME (LOSS) FROM CONTINUING OPERATIONS TO U.S.
FEDERAL TAXABLE INCOME (LOSS)
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ------------------------------------------------------
<S> <C> <C> <C>
Pre-tax income (loss) from
Continuing Operations $ 155 $ (59) $(292)
State income tax (benefit) (28) (21) 26
Stock-based compensation
deduction (346) (84) (10)
- ------------------------------------------------------
Permanent differences:
Goodwill 253 225 120
Other 5 66 115
- ------------------------------------------------------
Net permanent differences 258 291 235
- ------------------------------------------------------
Temporary differences:
Pensions (172) 41 94
Depreciation and amortization 57 18 7
Provision for restructuring
and other actions 68 (107) (19)
Other (23) 83 (122)
- ------------------------------------------------------
Net temporary differences (70) 35 (40)
- ------------------------------------------------------
U.S. federal taxable income
(loss) $ (31) $ 162 $ (81)
- ------------------------------------------------------
</TABLE>
Certain prior year balances in the table above have been reclassified to conform
with the 1998 presentation.
YEAR 2000
The Year 2000 issue results from the development of computer programs and
computer chips using two digits rather than four digits to define the applicable
year. Computer programs and equipment with time-sensitive software or computer
chips may recognize the date using "00" as the year 1900 rather than the year
2000. This could result in system failure or miscalculations and cause
disruptions to business operations.
To address the Year 2000 issue, the Corporation has undertaken efforts to
identify, modify or replace, and test systems that may not be Year 2000
compliant. The Corporation estimates its cost to achieve Year 2000 compliance to
be approximately $36 million, of which $15 million has been incurred through
December 31, 1998. Approximately 36 percent of the total expenditures relate to
replacement of existing systems. The Corporation expects to fund these costs
through its cash flows from operations. All modification costs are expensed as
incurred.
Several centrally managed critical systems are currently Year 2000 compliant or
will be replaced by Year 2000 compliant applications by mid-1999. A significant
portion of the Year 2000 work for the Corporation's systems has been performed
or is underway. The various businesses are currently in the process of
developing Year 2000 procedures and guidelines. The Corporation plans to have
all systems tested and compliant by the end of 1999.
The Year 2000 effort also includes communication with all significant third
party suppliers and customers to determine the extent to which the Corporation's
systems are vulnerable to those parties' failures to reach Year 2000 compliance.
There can be no guarantee that the Corporation's third party suppliers or
customers will be Year 2000 compliant on a timely basis and that failure to
achieve compliance would not have a material adverse impact on the Corporation's
business operations.
Overall, the Corporation believes that it will complete its Year 2000 effort and
will be compliant on time. Although there can be no assurances that this will
occur, the Corporation will continuously monitor its progress and evaluate the
need for a contingency plan. Based on its current plan, the Corporation believes
that it will have adequate time to prepare for contingency measures if the need
arises.
The Corporation believes that it is difficult to fully assess the risks of the
Year 2000 problem due to numerous uncertainties surrounding the issue.
Management believes the primary risks are external to the Corporation and relate
to the Year 2000 readiness of its suppliers and customers. The inability of the
Corporation or its suppliers and customers to adequately address the Year 2000
issues on a timely basis could result in a material financial risk, including
loss of revenue, substantial unanticipated costs and service interruptions.
Accordingly, the Corporation plans to
16 CBS CORPORATION
<PAGE> 17
devote the resources it concludes are appropriate to address all significant
Year 2000 issues in a timely manner.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
In 1998, the Corporation formed Infinity, a new company comprising the Radio
segment of the Corporation. In December 1998, Infinity sold 18.2 percent of its
common stock in an initial public offering, generating $3.2 billion of proceeds
($3.0 billion, net of offering costs). The Corporation, as the parent company of
Infinity, received the benefit of nearly 90 percent of the proceeds from
Infinity's stock offering through the payment by Infinity of an intercompany
note and certain other intercompany transactions. These proceeds were used by
the Corporation to repay its revolving credit borrowings and for general
corporate purposes.
Because of the minority interest in Infinity following the stock offering,
certain modifications have been made to the Corporation's cash management
practices. Infinity's cash generally would be available to the Corporation under
the terms of the Tax Sharing Agreement and the intercompany agreement between
Infinity and the Corporation or if Infinity would pay a dividend on all of its
common stock. However, Infinity does not anticipate paying any dividends in the
near term. Cash generated by Infinity's operations is expected to be retained by
Infinity for use in its operations or for investing. Management does not believe
that this segregation of cash will materially impact the Corporation's
liquidity.
On June 4, 1998, the Corporation completed the acquisition of American Radio for
$1.4 billion in cash plus the assumption of debt with a fair value of
approximately $1.3 billion. The cash portion of the consideration was funded
through additional revolving credit borrowings.
In February 1998, the Corporation announced that it would suspend dividend
payments on its common stock after payment of the March 1, 1998 dividend. At
that time, the Corporation also adopted a stock repurchase program under which
the Corporation is now authorized to purchase up to $3 billion of its common
stock. During 1998, the Corporation purchased 28,342,000 shares for $859
million.
During the third quarter of 1998, the Corporation completed the sales of
Westinghouse Communications and Power Generation and during the fourth quarter
completed the sale of its Process Control Division. These divestitures combined
with other divestitures and asset liquidations resulted in cash proceeds
totaling $2.2 billion in 1998. The Corporation expects to complete the sales of
Energy Systems and Government Operations for cash proceeds of $200 million in
early 1999. In addition to the cash proceeds, these transactions include the
assumption by the buyers of various liabilities, commitments, and obligations of
approximately $950 million, all in accordance with the terms of the divestiture
agreement.
The acquisitions of TNN and CMT on September 30, 1997 and Old Infinity on
December 31, 1996 were accomplished through the issuance of additional shares of
the Corporation's common stock. As a result of these acquisitions, the
Corporation's equity increased more than $5 billion through the issuance of
nearly 250 million additional shares.
Management expects that the Corporation will have sufficient liquidity to meet
ordinary future business needs. Sources of liquidity generally available to the
Corporation include cash from operations, proceeds from sales of investments and
non-strategic assets, cash and cash equivalents, availability under its credit
facility, borrowings from other sources, including funds from the capital
markets, and the issuance of additional capital stock of the Corporation.
OPERATING ACTIVITIES
The operating activities of Continuing Operations provided $295 million of cash
in 1998. In 1997 and 1996, operating activities used cash of $201 million and
$95 million, respectively. The $496 million improvement in operating cash flows
in 1998 reflects significant improvements in the results of operations,
partially offset by an increase in customer receivables. In 1997, the
improvements in the operating results were more than offset by an increase in
receivables and by substantial payments of accrued liabilities.
In general, the media businesses generate significant cash through their
operations. The Corporation continues to invest in program rights in an ongoing
effort to maintain quality programming and improve ratings in key demographic
categories. In each of the last three years, the Corporation has paid
approximately $400 million for interest on debt of Continuing Operations, much
of which was incurred to substantially expand the media operations. In future
periods, the Corporation's operating cash flows from Continuing Operations will
be favorably impacted by lower interest attributable to the reduction in debt
during 1998. However, the Corporation will continue to
CBS CORPORATION 17
<PAGE> 18
make payments for pensions, postretirement benefits, divestiture costs and
retained liabilities associated with the industrial businesses.
Cash contributions to all of the Corporation's pension plans totaled $296
million in 1998, $164 million in 1997, and $250 million in 1996. A $65 million
cash contribution was made in January 1999 in accordance with applicable funding
requirements. The Corporation's contribution level for 1999 is expected to
approximate $270 million (including the $65 million contribution made in January
1999), and is consistent with the Corporation's goal to fully fund its qualified
pension plans over the next several years.
At December 31, 1998, alternative minimum tax credit carryforwards of $266
million as well as foreign tax credit carryforwards of $87 million were
available for utilization against future tax liabilities. See note 5 to the
financial statements.
The operating activities of Discontinued Operations used $331 million of cash
during 1998 compared to $437 million of cash during 1997 and $312 million in
1996. The cash flows in 1998, 1997, and 1996 primarily reflect cash used in the
operations of the Power Generation and Energy Systems businesses, particularly
in 1998 and 1997. Cash used in 1996 included substantial payments related to the
sale of the defense and electronic systems business.
Future operating cash flows of Discontinued Operations will consist primarily of
operating revenues and operating costs for the Energy Systems and Government
Operations businesses until their divestiture in early 1999 as well as disposal
costs associated with the industrial businesses. These cash flows, along with
proceeds generated through divestiture of these businesses, will affect the cash
flows of Continuing Operations. Cash flows associated with the financial
services business, including interest costs on debt of Discontinued Operations
and the repayment of that debt, will be paid through the continued liquidation
of portfolio investments and are not expected to impact future cash flows of
Continuing Operations.
INVESTING ACTIVITIES
Investing activities provided cash of $467 million during 1998, $2.5 billion
during 1997, and $2.9 billion during 1996. Investing cash inflows from business
divestitures and other asset liquidations totaled $2.2 billion in 1998, $2.8
billion during 1997, and $4.2 billion during 1996. Asset liquidations in 1998
primarily relate to Discontinued Operations and include the sale of Power
Generation for $1.2 billion, the sale of the Process Control Division of Energy
Systems for approximately $260 million, and the sale of other discontinued
businesses, investments, and securities for nearly $500 million. In addition,
approximately $200 million of proceeds was received from divestitures of several
media properties. Divestitures in 1997 and 1996 primarily include the sales of
Thermo King for $2.6 billion in 1997 and the sales of Knoll and the defense and
electronic systems business for $3.6 billion in 1996. The Corporation expects to
liquidate a significant portion of the remaining industrial assets of
Discontinued Operations early in 1999.
Investing cash outflows during 1998 primarily relate to the acquisition of
American Radio for $1.4 billion in cash plus the assumption of debt. For 1997,
the Corporation had investing cash outflows related to a $59 million payment in
connection with a swap of radio stations and the acquisition of a transit
advertising company in the United Kingdom. During 1997 and 1996, the
acquisitions of TNN and CMT and Old Infinity were accomplished using common
stock and, except as noted below, did not require the use of cash. Acquisitions
of $1.1 billion completed during 1996 included the cash investment associated
with the repayment of Old Infinity debt at the time of its acquisition, as well
as purchases of two Chicago radio stations, TeleNoticias, and several smaller
businesses and investments.
The Corporation's capital expenditures for Continuing Operations totaled $139
million in 1998 compared to $121 million in 1997 and $93 million in 1996. The
increase is primarily attributable to recent acquisitions. Over the next five
years, the Corporation expects to spend approximately $120 million for equipment
and other capital assets to meet commitments for digital multichannel and high
definition transmission capability. Capital expenditures for Discontinued
Operations will continue to decline as these businesses are sold.
In 1996, the Corporation generated $44 million of cash through the sales of
investments held in trusts that were established to fund executive benefit
plans. The trust investments were replaced with the Corporation's common stock.
18 CBS CORPORATION
<PAGE> 19
FINANCING ACTIVITIES
Cash provided by financing activities during 1998 totaled $327 million compared
to cash used in financing activities of $2.0 billion in 1997 and $2.5 billion in
1996.
Financing cash inflows in 1998 include the net proceeds of $3.0 billion received
from Infinity's initial public offering and $493 million received upon the
issuance of Senior Notes due in 2005. These proceeds were primarily utilized to
repay revolver borrowings (see Revolving Credit Facility). Financing cash
outflows in 1998 include revolver and other debt repayments as well as the
purchase of 28,342,000 shares of the Corporation's common stock for $859 million
under its $3 billion multi-year stock repurchase program. Future purchases will
be guided by financial policies that are consistent with maintaining an
investment grade rating.
Financing cash outflows in 1997 include $2.56 billion of debt prepaid upon the
sale of Thermo King. Financing cash outflows in 1996 include $3.6 billion of
debt prepaid upon the sales of Knoll and the defense and electronic systems
business. Also in 1996, the Corporation prepaid the remaining outstanding debt
under its then-existing $7.5 billion credit facility and replaced it with
borrowings under a new $5.5 billion credit facility.
Cash provided by the issuance of the Corporation's stock totaled $351 million
during 1998 compared to $287 million and $130 million for 1997 and 1996,
respectively. The stock was issued in connection with certain employee
compensation and benefit plans.
After the payment of the March 1, 1998 dividend of $36 million, the Corporation
suspended dividend payments on its common stock so that cash could be used to
better enhance shareholder value. Dividends paid in 1997 include $125 million
for common stock dividends and $23 million for Series C preferred stock, which
converted into 32 million shares of common stock in the second quarter of 1997.
Dividends paid in 1996 include $80 million for common stock dividends and $47
million for Series C preferred stock. The increase in the common stock dividends
from 1996 to 1997 reflects nearly 250 million additional shares issued to
acquire TNN and CMT and Old Infinity.
As a result of the increase in equity from the TNN and CMT acquisition and the
financing activities described previously, the Corporation's net debt decreased
from 50 percent of consolidated net capitalization at December 31, 1996 to 32
percent at December 31, 1997 and to 20 percent at December 31, 1998.
REVOLVING CREDIT FACILITY
On August 29, 1996, the Corporation executed a five-year revolving credit
agreement with total commitments of $5.5 billion to replace the previous
facility. This agreement was amended on March 3, 1998 to modify the financial
covenants and to provide that, upon completion of the sale of Power Generation,
the maximum borrowing would be reduced to $4.0 billion. The availability was
reduced in August 1998 upon completion of the sale of Power Generation. Up to
$1.0 billion of the current capacity is available to Infinity. With the
completion of Infinity's initial public offering in December 1998, all remaining
revolving credit borrowings were repaid. Thus, the unused capacity under the
existing credit facility equaled $4.0 billion at December 31, 1998.
Borrowing availability under the credit agreement is subject to compliance with
certain covenants, a maximum leverage ratio, minimum interest coverage ratio,
and minimum consolidated net worth. Certain of the financial covenants become
more restrictive over the term of the agreement. At December 31, 1998, the
Corporation was in compliance with the financial covenants.
Management is currently in the process of evaluating the Corporation's future
credit needs under the facility in light of the recent Infinity stock offering,
which may include a further reduction in the available borrowing capacity.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Corporation is exposed to market risk from changes in interest rates and
foreign exchange rates. To manage this exposure, the Corporation periodically
enters into interest rate and currency exchange agreements. The Corporation does
not use financial instruments for trading purposes and is not a party to any
leveraged derivatives.
At December 31, 1998, the Corporation's debt of Continuing Operations was $2,665
million, of which $2,634 million was fixed rate obligations. Assuming a 1
percent increase in interest rates, annual interest expense would be
approximately $0.3 million higher based on the balance of variable-rate debt
outstanding at December 31, 1998. With regard to fixed-rate obligations, a 1
percent decrease in interest rates would increase the value of these instruments
by
CBS CORPORATION 19
<PAGE> 20
approximately $151 million. At year-end 1998, the Corporation had no interest
rate exchange agreements outstanding.
The Corporation continually monitors its economic exposure to changes in foreign
exchange rates and enters into foreign exchange forward or option contracts to
hedge its transaction exposure where appropriate. The notional amount of the
Corporation's Continuing Operations foreign currency forward contracts, which
were hedging firm commitments at year-end 1998, was $5 million. The majority of
these related to the German Mark, Canadian Dollar, French Franc, and Australian
Dollar. A 10 percent change in foreign exchange rates across all currencies in
the Corporation's portfolio would not be material.
The Corporation's credit exposure under these agreements is limited to the cost
of replacing an agreement in the event of non-performance by its counterparty.
To minimize this risk, the Corporation selects high credit quality
counterparties.
For further information regarding the Corporation's debt, see note 8 to the
financial statements.
ENVIRONMENTAL MATTERS
Compliance with federal, state, and local laws and regulations relating to the
discharge of pollutants into the environment, the disposal of hazardous wastes,
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. It is difficult to estimate the
timing and ultimate costs to be incurred in the future due to uncertainties
about the status of laws, regulations, and technology; the adequacy of
information available for individual sites; the extended time periods over which
site remediation occurs; and the identification of new sites. See note 11 to the
financial statements. The majority of the environmental matters being addressed
by the Corporation have arisen from past operation of its industrial businesses.
Although the majority of the industrial businesses were divested by year-end
1998, the Corporation has retained certain obligations relating to these past
activities. At December 31, 1998, the Corporation had an accrued liability of
$312 million. Of this amount, $228 million covers site investigation and
remediation, and $84 million is for post-closure and monitoring activities for
approximately 70 sites for which environmental responsibility remains with the
Corporation. Management anticipates that the majority of expenditures for site
investigation and remediation will occur during the next five to ten years.
Expenditures for post-closure and monitoring activities will be made over
periods up to 30 years. Should alternative remediation strategies be selected,
the costs related to these sites could differ from the amounts currently
accrued. The Corporation recognizes changes in estimates as new remediation
requirements are defined or as more information becomes available.
In addition, included in Discontinued Operations are environmental liabilities
directly related to sites that are expected to be assumed by buyers pursuant to
divestiture transactions or to surplus properties awaiting disposition.
Management believes, based on its best estimate, that the Corporation has
adequately provided for its present environmental obligations and that complying
with existing government regulations will not materially impact the
Corporation's financial position, liquidity, or results of operations.
LEGAL MATTERS
The Corporation is defending a number of lawsuits on various matters. See notes
10 and 11 to the financial statements. The Corporation has provided for
management's best estimate of costs associated with resolution of these matters.
The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries. The Corporation was neither a manufacturer
nor a producer of asbestos and is oftentimes dismissed from these lawsuits on
this basis. In court actions resolved, the Corporation has prevailed in the
majority of these claims and has resolved others through settlement. The
Corporation is reimbursed for a substantial portion of its current costs and
settlements through its insurance carriers. The Corporation has provided for its
share of estimated costs associated with outstanding claims. Factors considered
in evaluating this litigation include: claimed product involvement, alleged
exposure to product, alleged disease, validity of medical claims, number of
resolved claims, available insurance proceeds, and status of litigation in
multiple jurisdictions. The Corporation has not been able to reasonably estimate
costs for unasserted asbestos claims. However, the Corporation reviews asbestos
claims on an ongoing basis and adjusts its liability as appropriate.
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in certain of the Corporation's pending cases and, although
management believes a significant adverse judgment is unlikely, any such
judgment could have a material adverse effect on the Corporation's results of
opera-
20 CBS CORPORATION
<PAGE> 21
tions for a quarter or a year. However, based on its understanding and
evaluation of the relevant facts and circumstances, management believes that the
Corporation has meritorious defenses to the litigation referenced in notes 10
and 11 and that the Corporation has adequately provided for costs arising from
resolution of these matters. Management believes that the litigation should not
have a material adverse effect on the financial condition of the Corporation.
RETAINED LIABILITIES OF DISCONTINUED BUSINESSES
Liabilities for certain environmental, litigation, and other matters, although
arising from discontinued businesses, have been or are expected to be retained
by the Corporation following the divestiture of those businesses. As a result,
liabilities totaling $1.0 billion at December 31, 1998 and related assets of
$225 million have been separately presented in Continuing Operations on the
Corporation's consolidated balance sheet. See notes 9 and 11 to the financial
statements.
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including Item 7--"Management's Discussion and
Analysis of Financial Condition and Results of Operations," contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, that are not historical facts but rather reflect the Corporation's
current expectations concerning future results and events. The words "believes,"
"expects," "intends," "plans," "anticipates," "likely," "will," and similar
expressions identify such forward-looking statements. These forward-looking
statements are subject to risks, uncertainties, and other factors, some of which
are beyond the Corporation's control, that could cause actual results to differ
materially from those forecast or anticipated in such forward-looking
statements.
Such risks, uncertainties, and factors include, but are not limited to: the
Corporation's ability to develop and/or acquire television programming and to
attract and retain advertisers; the impact of significant competition from both
over-the-air broadcast stations and programming alternatives such as cable
television, wireless cable, in-home satellite distribution services, and
pay-per-view and home video entertainment services; the impact of new
technologies; changes in Federal Communications Commission regulations; and such
other competitive and business risks as from time to time may be detailed in the
Corporation's Securities and Exchange Commission reports.
Readers are cautioned not to place undue reliance on these forward-looking
statements which reflect management's view only as of the date of this Annual
Report. The Corporation undertakes no obligation to publicly release the result
of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
CBS CORPORATION 21
<PAGE> 22
REPORT OF MANAGEMENT
The Corporation has prepared the consolidated financial statements and related
financial information included in this report. Management has the primary
responsibility for the financial statements and other financial information and
for ascertaining that the data fairly reflect the financial position, results of
operations, and cash flows of the Corporation. The financial statements were
prepared in accordance with generally accepted accounting principles appropriate
in the circumstances, and necessarily include amounts that are based on best
estimates and judgments with appropriate consideration given to materiality.
Financial information included elsewhere in this report is presented on a basis
consistent with the financial statements.
The Corporation maintains a system of internal accounting controls, supported by
adequate documentation, to provide reasonable assurance that assets are
safeguarded and that the books and records reflect the authorized transactions
of the Corporation. Limitations exist in any system of internal accounting
controls based on the recognition that the cost of the system should not exceed
the benefits derived. The Corporation believes its system of internal accounting
controls, augmented by its corporate auditing function, appropriately balances
the cost/benefit relationship.
The independent auditors provide an objective assessment of the degree to which
management meets its responsibility for fair financial reporting. They regularly
evaluate elements of the internal control structure and perform such tests and
procedures as they deem necessary to express an opinion on the fairness of the
financial statements.
The Board of Directors pursues its responsibility for the Corporation's
financial statements through its Audit Review Committee composed of directors
who are not officers or employees of the Corporation. The Audit Review Committee
meets regularly with the independent auditors, management, and the corporate
auditors. The independent auditors and the corporate auditors have direct access
to the Audit Review Committee, with and without the presence of management
representatives, to discuss the scope and results of their audit work and their
comments on the adequacy of internal accounting controls and the quality of
financial reporting.
We believe that the Corporation's policies and procedures, including its system
of internal accounting controls, provide reasonable assurance that the financial
statements are prepared in accordance with the applicable securities laws and
with a corresponding standard of business conduct.
22 CBS CORPORATION
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CBS CORPORATION
We have audited the accompanying consolidated balance sheet of CBS Corporation
and subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of income and comprehensive income, cash flows, and shareholders'
equity for each of the years in the three year period ended December 31, 1998.
These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CBS Corporation and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
KPMG LLP
New York, New York
January 27, 1999
CBS CORPORATION 23
<PAGE> 24
CONSOLIDATED STATEMENT OF INCOME AND
COMPREHENSIVE INCOME
(in millions except per-share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 6,805 $ 5,367 $ 4,143
Operating expenses (4,373) (3,483) (2,786)
Depreciation and amortization (571) (445) (279)
Marketing, administration, and general expenses (1,216) (1,043) (910)
Residual costs of discontinued businesses (163) (143) (114)
- -----------------------------------------------------------------------------------------------
Operating profit 482 253 54
Other income (expense), net (note 18) 43 74 55
Interest expense (370) (386) (401)
- -----------------------------------------------------------------------------------------------
Income (loss) from Continuing Operations before income taxes
and minority interest in income of consolidated
subsidiaries 155 (59) (292)
Income tax (expense) benefit (161) (73) 71
Minority interest in (income) loss of consolidated
subsidiaries (6) 1 --
- -----------------------------------------------------------------------------------------------
Loss from Continuing Operations (12) (131) (221)
- -----------------------------------------------------------------------------------------------
Discontinued Operations, net of income taxes (notes 1 and
10):
Loss from Discontinued Operations -- (191) (609)
Gain on disposal of Discontinued Operations -- 871 1,018
- -----------------------------------------------------------------------------------------------
Income from Discontinued Operations -- 680 409
Extraordinary item, net of income taxes:
Loss on early extinguishment of debt (note 2) (9) -- (93)
- -----------------------------------------------------------------------------------------------
Net income (loss) $ (21) $ 549 $ 95
- -----------------------------------------------------------------------------------------------
BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE (NOTE
15):
Continuing Operations $ (.02) $ (.24) $ (.67)
Discontinued Operations -- 1.08 1.02
Extraordinary item (.01) -- (.23)
- -----------------------------------------------------------------------------------------------
Basic and diluted earnings (loss) per common share $ (.03) $ .84 $ .12
- -----------------------------------------------------------------------------------------------
Cash dividends per common share $ .05 $ .20 $ .20
- -----------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS):
Net income (loss) $ (21) $ 549 $ 95
- -----------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of taxes (note 13)
Unrealized gains (losses) on marketable securities, net of
taxes of $.1 million in 1998 1 -- --
Minimum pension liability adjustment, net of taxes of $19
million, $14 million, and $229 million, respectively (37) 25 424
- -----------------------------------------------------------------------------------------------
Other comprehensive income (loss) (36) 25 424
- -----------------------------------------------------------------------------------------------
Comprehensive income (loss) $ (57) $ 574 $ 519
- -----------------------------------------------------------------------------------------------
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
24 CBS CORPORATION
<PAGE> 25
CONSOLIDATED BALANCE SHEET
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents (note 2) $ 798 $ 8
Customer receivables (net of allowance for doubtful
accounts of $48 million
and $35 million) 1,180 936
Program rights 533 502
Deferred income taxes (note 5) 138 394
Prepaid and other current assets 140 135
- ----------------------------------------------------------------------------------
Total current assets 2,789 1,975
Property and equipment, net (note 6) 1,149 1,066
FCC licenses, net (note 7) 4,308 2,171
Goodwill, net (note 7) 10,357 9,681
Net assets of Discontinued Operations (note 10) -- 212
Other intangible and noncurrent assets (note 7) 1,536 1,610
- ----------------------------------------------------------------------------------
Total assets $20,139 $16,715
- ----------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term debt (note 8) $ -- $ 89
Current maturities of long-term debt (note 8) 159 62
Accounts payable 336 221
Liabilities for talent and program rights 290 309
Other current liabilities (note 9) 820 868
- ----------------------------------------------------------------------------------
Total current liabilities 1,605 1,549
Long-term debt (note 8) 2,506 3,236
Pension liability (note 4) 945 1,149
Postretirement benefit liability (note 4) 1,046 1,160
Net liabilities of Discontinued Operations (note 10) 1,284 --
Other noncurrent liabilities (note 9) 2,081 1,536
- ----------------------------------------------------------------------------------
Total liabilities 9,467 8,630
- ----------------------------------------------------------------------------------
Contingent liabilities and commitments (notes 11 and 12)
Minority interest in equity of consolidated subsidiaries
(note 14) 1,618 5
- ----------------------------------------------------------------------------------
Shareholders' equity (note 13):
Preferred stock, $1.00 par value (25 million shares
authorized, no shares issued) -- --
Common stock, $1.00 par value (1,100 million shares
authorized, 734 million and 718 million shares issued) 734 718
Capital in excess of par value 8,914 7,178
Common stock held in treasury, at cost (1,215) (530)
Retained earnings 1,428 1,485
Accumulated other comprehensive loss (807) (771)
- ----------------------------------------------------------------------------------
Total shareholders' equity 9,054 8,080
- ----------------------------------------------------------------------------------
Total liabilities and shareholders' equity $20,139 $16,715
- ----------------------------------------------------------------------------------
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
CBS CORPORATION 25
<PAGE> 26
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities of Continuing
Operations:
Loss from Continuing Operations $ (12) $ (131) $ (221)
Adjustment to reconcile loss from Continuing Operations to
net cash provided (used) by operating activities:
Depreciation and amortization 571 445 279
Gains on asset dispositions (5) (39) (29)
Other noncash adjustments (150) (81) (164)
Changes in assets and liabilities, net of effects of
acquisitions and divestitures of businesses:
Receivables, current and noncurrent (178) (144) (22)
Accounts payable 94 14 67
Program rights 72 (79) (148)
Deferred and current income taxes 10 5 37
Other assets and liabilities (107) (191) 106
- -----------------------------------------------------------------------------------------------
Cash provided (used) by operating activities of Continuing
Operations 295 (201) (95)
- -----------------------------------------------------------------------------------------------
Cash used by operating activities of Discontinued Operations
(note 10) (331) (437) (312)
- -----------------------------------------------------------------------------------------------
Cash flows from investing activities:
Business acquisitions, net of cash acquired, and
investments (1,487) (59) (1,110)
Business divestitures and other asset liquidations 2,168 2,752 4,165
Capital expenditures -- Continuing Operations (139) (121) (93)
Capital expenditures -- Discontinued Operations (40) (85) (113)
Asset liquidations of trust investments -- -- 44
Deposits in acquisition trust (35) -- --
- -----------------------------------------------------------------------------------------------
Cash provided by investing activities 467 2,487 2,893
- -----------------------------------------------------------------------------------------------
Cash flows from financing activities:
Bank revolver borrowings 4,129 2,970 7,263
Bank revolver repayments (6,161) (4,555) (4,318)
Issuance of subsidiary stock 3,047 -- --
Net reduction in other short-term debt (89) (406) (403)
Issuance of senior notes 493 -- --
Repayments of long-term debt (539) (153) (5,012)
Stock issued 351 287 130
Purchase of treasury stock (859) -- --
Bank fees and other costs (9) (10) (12)
Dividends paid (36) (148) (127)
- -----------------------------------------------------------------------------------------------
Cash provided (used) by financing activities 327 (2,015) (2,479)
- -----------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 758 (166) 7
Cash and cash equivalents at beginning of period for
Continuing and
Discontinued Operations (notes 2 and 10) 67 233 226
- -----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period for Continuing
and
Discontinued Operations (notes 2 and 10) $ 825 $ 67 $ 233
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid -- Continuing Operations $ 373 $ 395 $ 392
Interest paid -- Discontinued Operations 51 95 106
- -----------------------------------------------------------------------------------------------
Total interest paid $ 424 $ 490 $ 498
- -----------------------------------------------------------------------------------------------
Income taxes paid (refunded) $ 145 $ 68 $ (34)
- -----------------------------------------------------------------------------------------------
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements and include descriptions of noncash transactions.
26 CBS CORPORATION
<PAGE> 27
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in millions)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON CAPITAL IN OTHER
PREFERRED STOCK AT EXCESS OF TREASURY RETAINED COMPREHENSIVE
STOCK PAR VALUE PAR VALUE STOCK EARNINGS INCOME (LOSS) TOTAL
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 4 $ 426 $ 1,847 $ (720) $ 1,116 $(1,220) $ 1,453
Shares issued under various
compensation and benefit
plans (41) 161 120
Shares issued under dividend
reinvestment plan (3) 13 10
Shares issued for Old
Infinity acquisition 183 3,573 3,756
Comprehensive income:
Pension liability
adjustment, net of
deferred taxes 424 424
Net income 95 95
Dividends paid (127) (127)
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $ 4 $ 609 $ 5,376 $ (546) $ 1,084 $ (796) $ 5,731
Series C preferred shares
converted (4) 32 (28) --
Shares issued under various
compensation and benefit
plans 18 333 15 366
Shares issued under dividend
reinvestment plan 7 1 8
Shares issued for TNN and
CMT acquisition 59 1,490 1,549
Comprehensive income:
Pension liability
adjustment, net of
deferred taxes 25 25
Net income 549 549
Dividends paid (148) (148)
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ -- $ 718 $ 7,178 $ (530) $ 1,485 $ (771) $ 8,080
Gain on issuance of
subsidiary stock (note 14) 1,439 1,439
Shares issued under various
compensation and benefit
plans 16 293 174 483
Shares issued under dividend
reinvestment plan 4 4
Shares repurchased (859) (859)
Comprehensive income:
Pension liability
adjustment, net of
deferred taxes (37) (37)
Unrealized gain on
marketable securities,
net of deferred taxes 1 1
Net loss (21) (21)
Dividends paid (36) (36)
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 $ -- $ 734 $ 8,914 $(1,215) $ 1,428 $ (807) $ 9,054
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
CBS CORPORATION 27
<PAGE> 28
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
CONSOLIDATION
These consolidated financial statements include the accounts of CBS Corporation
and its subsidiary companies (together, the Corporation) after elimination of
intercompany accounts and transactions. Investments in joint ventures and other
companies that the Corporation does not control but has the ability to exercise
significant management influence over operating and financial policies are
accounted for by the equity method.
The Corporation's Continuing Operations include the Radio and Outdoor
Advertising (Radio) segment and the Television segment. The Television segment
was formed in 1998 to include the operations of the CBS television network, the
television stations, and the cable operations. In addition, goodwill acquired in
connection with the 1995 acquisition of CBS Inc. was allocated between the Radio
and Television segments. Such goodwill and related amortization were previously
included in corporate and other costs. As a result of these actions taken by the
Corporation during 1998, certain previously reported amounts have been restated
to conform to the 1998 presentations. None of these actions impacted the
consolidated results of operations or financial position for any current or
prior period. Segment information is included in note 19 to the financial
statements.
In 1998, the Corporation formed a new company named Infinity Broadcasting
Corporation (Infinity) comprising the Radio segment of the Corporation. In
December 1998, Infinity sold 18.2 percent of its common stock in an initial
public offering, generating net proceeds of $3.0 billion. See note 14 to the
financial statements.
On June 4, 1998, the Corporation completed the acquisition of the radio
broadcasting operations of American Radio Systems Corporation (American Radio).
On September 30, 1997, the Corporation acquired two major cable networks: The
Nashville Network (TNN) and Country Music Television (CMT). On December 31,
1996, the Corporation acquired Infinity Media Corporation, formerly known as
Infinity Broadcasting Corporation (Old Infinity). The Corporation's Consolidated
Statement of Income and Comprehensive Income includes the operating results of
the acquired entities from their respective dates of acquisition. See note 3 to
the financial statements.
DISCONTINUED OPERATIONS
Under various disposal plans adopted in recent years, the Corporation has either
completed or entered into definitive agreements to divest essentially all of its
industrial businesses. These businesses have been classified as Discontinued
Operations in accordance with Accounting Principles Board (APB) Opinion No. 30,
"Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." See note 10 to the financial statements.
Certain previously reported amounts have been reclassified to conform to the
1998 presentation.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenues are primarily derived from the sale of advertising spots and are
recognized when the spots are broadcast. The Corporation also receives
syndication revenues on sales of owned programming, cable license fees from
distribution of its cable networks, and advertising revenues on the sale of
outdoor advertising space. Syndication revenues are recognized when the
programming is available to telecast and certain other conditions are met.
Revenues from cable license fees are recorded in the period that service is
provided. Revenues on outdoor advertising space are recognized proportionately
over the contract term.
STOCK-BASED COMPENSATION
The Corporation measures compensation cost for stock-based awards using the
intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." The pro forma net income and pro
forma earnings per share disclosures using the fair value based method defined
in Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," are provided in note 16 to the financial statements.
28 CBS CORPORATION
<PAGE> 29
ENVIRONMENTAL COSTS
The Corporation records liabilities when environmental assessments or remedial
efforts are probable and the costs can be reasonably estimated. Such estimates
are adjusted if necessary as new remediation requirements are defined or as more
information becomes available.
EXTRAORDINARY ITEM
During 1998, the Corporation purchased, at market value, debt securities with a
face value of $298 million and reduced the availability under its credit
facility from $5.5 billion to $4.0 billion. In 1996, the Corporation
extinguished prior to maturity $6.8 billion of debt under its then-existing $7.5
billion credit facility. As a result of these early extinguishments and the
write-off of related debt issue costs, the Corporation recognized extraordinary
losses of $9 million in 1998 and $93 million in 1996, net of tax benefits of $6
million and $60 million, respectively.
CASH AND CASH EQUIVALENTS
The Corporation considers all investment securities with a maturity of three
months or less when acquired to be cash equivalents. All cash and temporary
investments are placed with high credit quality financial institutions, and the
amount of credit exposure to any one financial institution is limited.
PROGRAM RIGHTS
Costs incurred in connection with the production of, or the purchase of, rights
to programs to be broadcast within one year are classified as current assets
while costs of programs to be broadcast after one year are considered
noncurrent. Program costs are amortized as the respective programs are
broadcast. Program rights are carried at the lower of unamortized cost or
estimated net realizable value.
PROPERTY AND EQUIPMENT
Property and equipment assets are recorded at cost and depreciated over their
estimated useful lives. Depreciation is generally computed on the straight-line
method based on useful lives of 27.5 to 60 years for buildings, 20 years for
land improvements, and three to 12 years for equipment. Leasehold improvements
are amortized over the shorter of the useful life or the term of the lease.
Expenditures for additions and improvements are capitalized, and costs for
repairs and maintenance are charged to operations as incurred.
INTANGIBLE ASSETS
Identifiable intangible assets primarily include Federal Communications
Commission (FCC) licenses, which are limited as to availability and have
historically appreciated in value with the passage of time, and cable license
agreements. Identifiable intangible assets and goodwill are amortized using the
straight-line method over their estimated lives but not in excess of 40 years.
Subsequent to the acquisition of an intangible or other long-lived asset, the
Corporation evaluates whether later events and circumstances indicate the
remaining estimated useful life of that asset may warrant revision or that the
remaining carrying value of such an asset may not be recoverable. If definitive
cash flows are not available for a specific intangible or other long-lived
asset, the Corporation evaluates recoverability of the specific business to
which the asset relates. When factors indicate that an intangible or other
long-lived asset should be evaluated for possible impairment, the Corporation
uses an estimate of the related asset's undiscounted future cash flows over the
remaining life of that asset in measuring recoverability. If such an analysis
indicates that impairment has in fact occurred, the Corporation writes down the
book value of the intangible or other long-lived asset to its fair value.
GAINS AND LOSSES ON ISSUANCE OF SUBSIDIARY STOCK
Gains and losses on the issuance of subsidiary stock are recognized directly in
the Corporation's shareholders' equity through an increase or decrease to
capital in excess of par value in the period in which the sale occurs.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments, from time to time, have been utilized by the
Corporation to manage its interest rate risk. Under interest rate contracts, the
differentials to be received or paid are recognized in income over the life of
the contract as adjustments to interest expense. Gains and losses on
terminations of hedge contracts are recognized as interest expense when
terminated in conjunction with the termination of the anticipated hedged
transaction, or to the extent that such hedged transaction remains outstanding,
deferred and amortized to interest expense over the remaining life of that
transaction. As of December 31, 1998, no interest exchange contracts were
outstanding.
CBS CORPORATION 29
<PAGE> 30
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. On an ongoing basis,
management reviews its estimates, including those related to litigation,
environmental liabilities, product liabilities, program rights, contracts,
pensions, income taxes, and Discontinued Operations, based on currently
available information. Changes in facts and circumstances may result in revised
estimates.
NEW PRONOUNCEMENTS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. SFAS 133 standardizes the accounting for derivative
instruments by requiring that an entity recognize those items as assets or
liabilities in the statement of financial position and measure them at fair
value. This statement is effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. The Corporation's derivative and hedging
transactions at December 31, 1998 are not material and adoption of this standard
will not materially impact its financial results or disclosure.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information," were
issued. SFAS 130, which requires that an enterprise report by major component
and as a single total the change in its net assets from nonowner sources during
the period, was adopted in the first quarter of 1998. SFAS 131, which
establishes annual reporting standards for an enterprise's operating segments
and related disclosures about its products, geographic areas, and major
customers, is incorporated in disclosures for 1998 annual reporting purposes. In
February 1998, SFAS No. 132, "Employer's Disclosures About Pensions and Other
Postretirement Benefits," was issued. SFAS 132 requires additional disclosures
concerning changes in the Corporation's pension and other postretirement benefit
obligations and assets and eliminates certain disclosures no longer considered
useful. The Corporation has adopted the provisions of this standard for 1998
annual reporting purposes. Adoption of these statements did not impact the
Corporation's consolidated financial position, results of operations, or cash
flows, and any effects are limited to the form and content of its disclosures.
At December 31, 1997, the Corporation adopted SFAS No. 128, "Earnings per
Share," which establishes standards for computing and disclosing basic and
diluted earnings per common share. Earnings per common share for all periods
presented are computed in accordance with SFAS 128. See note 15 to the financial
statements.
NOTE 3: ACQUISITIONS
On June 4, 1998, the Corporation acquired the radio broadcasting operations of
American Radio for $1.4 billion in cash plus the assumption of debt with a fair
value of approximately $1.3 billion. The acquisition was accounted for under the
purchase method. Based on preliminary estimates, which may be revised at a later
date, the excess consideration paid over the estimated fair value of net assets
acquired totaling approximately $0.8 billion was recorded as goodwill and is
being amortized on a straight-line basis over 40 years.
On September 30, 1997, the Corporation acquired TNN and CMT, Gaylord
Entertainment Company's (Gaylord) two major cable networks. The total purchase
price of $1.55 billion was paid through the issuance of 59 million shares of the
Corporation's common stock. The acquisition was accounted for under the purchase
method. The excess of the consideration paid over the estimated fair value of
net assets acquired of $1.2 billion was recorded as goodwill and is being
amortized on a straight-line basis over 40 years. Prior to the acquisition, the
Corporation provided certain services to TNN and CMT for which it received a
commission. Additionally, the Corporation owned a 33 percent interest in CMT.
30 CBS CORPORATION
<PAGE> 31
The estimated fair values of assets acquired and liabilities assumed are
summarized in the following table:
FAIR VALUES OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
(in millions)
<TABLE>
<CAPTION>
AMERICAN
RADIO TNN AND CMT
AT JUNE 4, AT SEPTEMBER 30,
1998 1997
- --------------------------------------------------------------
<S> <C> <C>
Cash $ 18 $ 8
Receivables 88 63
Program rights -- 22
Property and equipment 129 49
Identifiable intangible
assets:
FCC licenses 2,346 --
Cable license agreements -- 506
Goodwill 825 1,196
Other assets 53 4
Liabilities for talent,
program rights, and similar
contracts -- (39)
Debt (1,316) --
Deferred income taxes (654) (182)
Other liabilities (89) (77)
- --------------------------------------------------------------
Total purchase price $1,400 $1,550
- --------------------------------------------------------------
</TABLE>
The following unaudited pro forma information combines the consolidated results
of operations of the Corporation with those of American Radio and TNN and CMT as
if these acquisitions had occurred on January 1, 1997. The pro forma results
give effect to certain purchase accounting adjustments, including additional
depreciation expense resulting from a step-up in the basis of fixed assets,
additional amortization expense from goodwill and other identifiable intangible
assets, increased interest expense from acquisition debt, related income tax
effects, and the issuance of additional shares in connection with the
acquisitions.
PRO FORMA RESULTS
(unaudited, in millions except per-share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997
- ------------------------------------------------------
<S> <C> <C>
Revenues $6,973 $5,950
Interest expense (445) (559)
Loss from Continuing Operations (61) (232)
Basic and diluted loss per common
share -
Continuing Operations (.09) (.38)
- ------------------------------------------------------
</TABLE>
This pro forma financial information is presented for comparative purposes only
and is not necessarily indicative of the operating results that actually would
have occurred had the American Radio and the TNN and CMT transactions been
consummated on January 1, 1997. In addition, these results are not intended to
be a projection of future results and do not reflect any synergies that might be
achieved from combined operations.
NOTE 4: PENSIONS, OTHER
POSTRETIREMENT BENEFITS, AND
POSTEMPLOYMENT BENEFITS
The Corporation has a number of defined benefit pension and other postretirement
benefit plans.
The change in benefit obligation and plan assets and the amounts recognized in
the consolidated balance sheet are presented in the following tables:
RECONCILIATION OF FUNDED STATUS
(in millions)
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
----------------- -----------------
AT DECEMBER 31, 1998 1997 1998 1997
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT
OBLIGATION:
Benefit obligation at
beginning of year $ 5,276 $ 5,194 $ 1,425 $ 1,405
Service cost 60 62 10 11
Interest cost 359 384 98 104
Plan participants'
contributions 13 16 3 3
Actuarial loss 463 386 58 54
Foreign currency
exchange rate change (13) (11) (1) (2)
Benefits paid (644) (706) (114) (114)
Plan amendments -- (69) (112) (14)
Divestitures (136) (59) (52) (22)
Special termination
benefits 52 79 -- --
- ---------------------------------------------------------------
Benefit obligation at
end of year $ 5,430 $ 5,276 $ 1,315 $ 1,425
- ---------------------------------------------------------------
CHANGE IN PLAN ASSETS:
Fair value of plan
assets at beginning of
year $ 4,014 $ 3,930 $ 69 $ 68
Actual return on plan
assets 705 636 6 6
Employer contributions 296 164 97 106
Plan participants'
contributions 13 16 3 3
Benefits paid (644) (706) (114) (114)
Foreign currency
exchange rate change (13) -- -- --
Divestitures (118) (26) -- --
- ---------------------------------------------------------------
Fair value of plan
assets at end of year $ 4,253 $ 4,014 $ 61 $ 69
- ---------------------------------------------------------------
FUNDED STATUS:
Net amount recognized $ 128 $ 76 $(1,144) $(1,195)
Unrecognized actuarial
loss (1,366) (1,385) (247) (197)
Unrecognized prior
service benefit 105 135 137 36
Unrecognized net
transition obligation (44) (88) -- --
- ---------------------------------------------------------------
Funded status $(1,177) $(1,262) $(1,254) $(1,356)
- ---------------------------------------------------------------
</TABLE>
CBS CORPORATION 31
<PAGE> 32
AMOUNTS RECOGNIZED IN THE CONSOLIDATED
BALANCE SHEET
(in millions)
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
----------------- -----------------
AT DECEMBER 31, 1998 1997 1998 1997
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Prepaid benefit cost $ 5 $ 36 $ -- $ --
Accrued benefit
liability (1,105) (1,149) (1,144) (1,195)
Intangible asset 5 22 -- --
Accumulated other
comprehensive income 808 771 -- --
Deferred tax effects of
accumulated other
comprehensive income 415 396 -- --
- ---------------------------------------------------------------
Net amount recognized $ 128 $ 76 $(1,144) $(1,195)
- ---------------------------------------------------------------
</TABLE>
Of the amounts above, the following are included in the balance sheet of
Discontinued Operations. All other amounts are included in the balance sheet of
Continuing Operations.
AMOUNTS RECOGNIZED IN DISCONTINUED OPERATIONS
(in millions)
<TABLE>
<CAPTION>
PENSION POSTRETIREMENT
BENEFITS BENEFITS
------------- ---------------
AT DECEMBER 31, 1998 1997 1998 1997
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
Prepaid benefit cost $ 5 $ 36 $ -- $ --
Accrued benefit liability (160) -- (98) (35)
- -----------------------------------------------------------
Total $(155) $ 36 $ (98) $ (35)
- -----------------------------------------------------------
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for pension plans with accumulated benefit obligations in excess
of plan assets were $4,495 million, $4,316 million, and $3,234 million,
respectively, as of December 31, 1998, and $4,292 million, $4,104 million, and
$2,991 million, respectively, as of December 31, 1997.
Included in plan assets at December 31, 1998 are 5,614,600 shares of the
Corporation's common stock with a market value of $184 million.
The assumptions used to measure the present value of benefit obligations and net
periodic benefit cost are shown in the following table:
SIGNIFICANT ASSUMPTIONS
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
------------------ ------------------
AT DECEMBER 31, 1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 6.75% 7.25% 7.75% 6.75% 7.25% 7.75%
Expected return on
plan assets 9.5 9.5 9.5 7.0 7.0 7.0
Compensation increase
rate 4.0 4.0 4.0 4.0 4.0 4.0
- --------------------------------------------------------------
</TABLE>
For measurement purposes, an 8.5 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease gradually to 4.75 percent for 2007 and remain at that level
thereafter.
COMPONENTS OF NET PERIODIC BENEFIT COST
(in millions)
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
--------------------- ------------------------
YEAR ENDED DECEMBER 31, 1998 1997 1996 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 60 $ 62 $ 70 $ 10 $ 11 $ 11
Interest cost 359 384 371 98 104 97
Expected return on plan assets (342) (346) (347) (5) (5) (5)
Amortization of unrecognized net transition obligation 22 27 25 -- -- --
Amortization of unrecognized prior service benefit (14) (10) (7) (3) (3) (3)
Recognized actuarial loss 93 83 108 5 4 7
- -------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 178 $ 200 $ 220 $105 $111 $107
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTION OF NET PERIODIC BENEFIT COST:
Continuing Operations $ 106 $ 117 $ 99 $ 80 $ 69 $ 52
Discontinued Operations 72 83 121 25 42 55
- -------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 178 $ 200 $ 220 $105 $111 $107
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
A one percentage point increase or decrease in the assumed health care cost
trend rates would have an approximate effect of a $3 million increase or
decrease on the total of service and interest cost components and a $32 million
increase or decrease on the postretirement benefit obligation.
The Corporation also participates in various multi-employer, union-administered
defined benefit plans that cover certain broadcast employees. Pension expense
related to these multi-employer plans for 1998, 1997 and 1996 was $12 million,
$11 million and $10 million, respectively.
32 CBS CORPORATION
<PAGE> 33
The Corporation also provides certain postemployment benefits to former or
inactive employees and their dependents during the time period following
employment but before retirement. At December 31, 1998 and 1997, the
Corporation's liability for postemployment benefits totaled $55 million and $66
million, respectively. The portion of this liability included in the net assets
of Discontinued Operations was $26 million and $38 million at December 31, 1998
and 1997, respectively.
NOTE 5: INCOME TAXES
Income tax expense (benefit) included in the consolidated financial statements
follows:
COMPONENTS OF CONSOLIDATED INCOME TAX EXPENSE (BENEFIT)
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ---------------------------------------------------------
<S> <C> <C> <C>
Continuing Operations $161 $ 73 $(71)
Discontinued Operations -- 667 573
Extraordinary item (6) -- (60)
- ---------------------------------------------------------
Income tax expense $155 $740 $442
- ---------------------------------------------------------
</TABLE>
The tax provision for Discontinued Operations includes tax expense of $779
million in 1997 and $868 million in 1996 related to the gain on disposal of
Discontinued Operations.
INCOME TAX EXPENSE (BENEFIT) FROM
CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ---------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $119 $ 37 $(17)
State 28 19 (19)
Foreign 9 1 --
- ---------------------------------------------------------
Total current income tax expense
(benefit) 156 57 (36)
- ---------------------------------------------------------
Deferred:
Federal 5 14 (28)
State -- 2 (7)
- ---------------------------------------------------------
Total deferred income tax expense
(benefit) 5 16 (35)
- ---------------------------------------------------------
Income tax expense (benefit) $161 $ 73 $(71)
- ---------------------------------------------------------
</TABLE>
CONSOLIDATED INCOME TAX EXPENSE (BENEFIT)
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ---------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $127 $ 79 $ 88
State 28 73 52
Foreign 9 46 27
- ---------------------------------------------------------
Total current income tax expense 164 198 167
- ---------------------------------------------------------
Deferred:
Federal (9) 553 269
State -- (41) (2)
Foreign -- 30 8
- ---------------------------------------------------------
Total deferred income tax expense
(benefit) (9) 542 275
- ---------------------------------------------------------
Income tax expense $155 $740 $442
- ---------------------------------------------------------
</TABLE>
The tax benefit associated with stock based compensation plans reduced taxes
currently payable by $121 million for 1998, $29 million for 1997, and $4 million
for 1996.
During 1998, 1997, and 1996, $19 million, $14 million, and $229 million of
deferred tax effects, respectively, were recorded in shareholders' equity
(comprehensive income) as part of the minimum pension liability adjustment. See
note 4 to the financial statements.
Deferred income taxes result from temporary differences in the financial bases
and tax bases of assets and liabilities. The types of differences that give rise
to significant portions of deferred income tax liabilities or assets are shown
in the following table:
CONSOLIDATED DEFERRED INCOME TAXES BY SOURCE
(in millions)
<TABLE>
<CAPTION>
YEAR DECEMBER 31, 1998 1997
- ---------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Provision for expenses and losses $ 1,514 $ 1,204
Postretirement and postemployment
benefits 421 442
Minimum pension liability 415 396
Tax credit carryforwards 353 316
Long-term contracts in process 9 91
Other 362 267
- ---------------------------------------------------------
Total deferred tax assets 3,074 2,716
Valuation allowance (84) (137)
- ---------------------------------------------------------
Net deferred tax asset 2,990 2,579
- ---------------------------------------------------------
Deferred tax liabilities:
Property, equipment, and intangibles
assets (1,768) (1,176)
Leasing activities (526) (572)
Other (643) (170)
- ---------------------------------------------------------
Total deferred tax liabilities (2,937) (1,918)
- ---------------------------------------------------------
Deferred income taxes, net asset $ 53 $ 661
- ---------------------------------------------------------
</TABLE>
CBS CORPORATION 33
<PAGE> 34
At December 31, 1998 and 1997, included in the balance sheet of Continuing
Operations and net assets of Discontinued Operations are the following deferred
tax assets and liabilities:
BALANCE SHEET STATUS
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998 1997
- -----------------------------------------------------
<S> <C> <C>
Continuing Operations $(361) $170
Discontinued Operations 414 491
- -----------------------------------------------------
Deferred income taxes, net asset $ 53 $661
- -----------------------------------------------------
</TABLE>
The valuation allowance for deferred taxes primarily reflects foreign tax
credits not anticipated to be utilized as a result of the reduction in foreign
source income caused by the divestiture of foreign subsidiaries principally
related to Discontinued Operations.
Management believes that the Corporation will have sufficient future taxable
income to make it more likely than not that the net deferred tax asset will be
realized.
At December 31, 1998, there were alternative minimum tax credit carryforwards of
$266 million that have no expiration date and foreign tax credit carryforwards
of $87 million that will expire through 2003.
INCOME TAX EXPENSE (BENEFIT) FROM
CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ------------------------------------------------------
<S> <C> <C> <C>
Federal income tax expense
(benefit) at statutory rate $ 54 $ (21) $(102)
Increase (decrease) in tax
resulting from:
Amortization of goodwill 88 78 42
State income tax expense
(benefit), net of federal
effect 18 13 (17)
Lower tax rate on income of
foreign sales corporation (5) (5) (2)
Nondeductible expenses 4 3 4
Other differences, net 2 5 4
- ------------------------------------------------------
Income tax expense (benefit)
from Continuing Operations $161 $ 73 $ (71)
- ------------------------------------------------------
</TABLE>
The foreign portion of income or loss from Continuing Operations before income
taxes and minority interest in income of consolidated subsidiaries consisted of
income of $26 million in 1998, $13 million in 1997, and $0 million in 1996. Such
income consists of profits and losses generated from foreign operations that can
be subject to both U.S. and foreign income taxes.
The federal income tax returns of the Corporation and its wholly owned
subsidiaries are settled through the year ended December 31, 1989. The
Corporation has reached an agreement with the Internal Revenue Service regarding
certain issues for the years 1990 through 1992 and a tentative agreement for
1993. Management believes that adequate provisions for taxes have been made
through December 31, 1998.
NOTE 6: PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998 1997
- -------------------------------------------------------
<S> <C> <C>
Land and buildings $ 613 $ 642
Equipment 932 802
Construction in progress 77 37
- -------------------------------------------------------
Property and equipment, at cost 1,622 1,481
Accumulated depreciation (473) (415)
- -------------------------------------------------------
Property and equipment, net $1,149 $1,066
- -------------------------------------------------------
</TABLE>
For the years ended December 31, 1998, 1997, and 1996, depreciation expense
totaled $137 million, $120 million, and $105 million, respectively.
NOTE 7: OTHER INTANGIBLE AND
NONCURRENT ASSETS
OTHER INTANGIBLE AND NONCURRENT ASSETS
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998 1997
- -------------------------------------------------------
<S> <C> <C>
Cable license agreements $ 441 $ 491
Other intangible assets 357 384
Intangible pension asset (note 4) 5 22
Deferred charges 33 48
Joint ventures and other affiliates 116 122
Recoverable costs of discontinued
businesses (note 11) 180 208
Noncurrent receivables 228 145
Program rights 93 135
Other 83 55
- -------------------------------------------------------
Other intangible and noncurrent
assets $1,536 $1,610
- -------------------------------------------------------
</TABLE>
Cable license agreements and other intangible assets are presented in the
preceding table net of accumulated amortization of $122 million at December 31,
1998 and $70 million at December 31, 1997.
Joint ventures and other affiliates include investments in companies over which
the Corporation exercises significant influence but does not control.
FCC licenses and goodwill are shown on the consolidated balance sheet net of
accumulated amortization. At December 31, 1998 and 1997, accumulated
amortization for FCC licenses is $173 million and $105 million and for goodwill
is $721 million and $435 million, respectively.
34 CBS CORPORATION
<PAGE> 35
NOTE 8: DEBT
SHORT-TERM DEBT
(in millions)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------- ---------------------------------------------
AT DECEMBER 31 DURING THE YEAR AT DECEMBER 31 DURING THE YEAR
------------------- ----------------------- ------------------- -----------------------
COMPOSITE AVG. OUT- WEIGHTED COMPOSITE AVG. OUT- WEIGHTED
BALANCE RATE STANDING AVG. RATE BALANCE RATE STANDING AVG. RATE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Credit facility $-- --% $367 5.9% $-- --% $362 6.0%
Short-term foreign bank loans -- -- 19 5.7 96 4.8 81 5.9
Other -- -- 16 6.0 -- -- 19 5.9
- ---------------------------------------------------------------------------------------------------------------------------------
Total short-term debt $-- $96
Less amount directly attributable
to Discontinued Operations -- (7)
- ---------------------------------------------------------------------------------------------------------------------------------
Short-term debt - Continuing
Operations $-- $89
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Average outstanding borrowings were determined based on daily amounts
outstanding for the credit facilities and on monthly balances outstanding for
short-term foreign bank loans.
LONG-TERM DEBT
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997
- ------------------------------------------------------
<S> <C> <C>
Revolver $ -- $1,465
7.15% senior notes due 2005 498 --
8-3/8% notes due 2002 322 348
6-7/8% notes due 2003 275 275
8-5/8% debentures due 2012 272 273
7-7/8% debentures due 2023 267 325
8-7/8% notes due 2001 229 250
9% senior subordinated notes due
2006 165 --
9-3/4% senior notes due 2005 163 --
7-5/8% notes due 2002 143 150
7-3/4% notes due 1999 125 125
11-3/8% subordinated exchange
debentures due 2009 115 --
8-7/8% notes due 2014 112 150
8-7/8% debentures due 2022 91 92
7-1/8% notes due 2023 80 97
7% convertible subordinated
debentures due 2011 79 --
Medium-term notes due through 2001 77 230
Other 80 54
- ------------------------------------------------------
3,093 3,834
Less current maturities:
Continuing Operations (159) (62)
Discontinued Operations (note 10) (46) (96)
- ------------------------------------------------------
Total long-term debt 2,888 3,676
Long-term debt -- Discontinued
Operations (note 10) (382) (440)
- ------------------------------------------------------
Long-term debt -- Continuing
Operations $2,506 $3,236
- ------------------------------------------------------
</TABLE>
In connection with the acquisition of American Radio on June 4, 1998, the
Corporation assumed American Radio debt with a fair value of approximately $1.3
billion. Revolver borrowings under American Radio's revolving credit agreement
of $567 million were repaid shortly after the acquisition. The remaining debt
assumed consisted of 9% and 9-3/4% senior notes with a combined face value of
$325 million, 11-3/8% Cumulative Exchangeable Preferred Stock (exchanged to
11-3/8% Subordinated Exchange Debentures on July 15, 1998) with a face value of
$211 million, and 7% Convertible Exchangeable Preferred Stock (exchanged to 7%
Convertible Subordinated Debentures on September 30, 1998) with a redemption
value of $142 million. The Senior Subordinated Notes and the 11-3/8% Cumulative
Exchangeable Preferred Stock were recorded at their fair market value as of the
acquisition date, which resulted in an increase in the carrying value of
approximately $73 million.
The indentures for each of these obligations contain covenants applicable to
American Radio including, among others, limitations on sales of assets, dividend
payments, and future indebtedness. As a result of the change in control related
to the acquisition of American Radio by the Corporation, an offer to purchase
the outstanding securities was made in June 1998, and $8 million of the Senior
Subordinated Notes were redeemed. Another offer was made in December 1998 as a
result of the transfer of American Radio to Infinity. Under the most restrictive
of the indentures relating to the American Radio long-term debt, approximately
$2 billion of American Radio's net assets at December 31, 1998 are restricted.
This, in turn, limits the ability of American Radio to pay dividends.
During the third and fourth quarters of 1998, the Corporation also redeemed $64
million of the 7% Convertible Subordinated Debentures. The debentures may be
redeemed at any time at the option of the holder for cash and certain securities
held by the Corporation for the purpose of the redemption.
In addition to the redemptions noted above, during the year the Corporation
purchased, at market value, $298 million face value of debt securities
consisting of both debt assumed in the American Radio acquisition
CBS CORPORATION 35
<PAGE> 36
and other Corporation debt. This purchase of debt resulted in an extraordinary
loss of $9 million, net of a $6 million tax benefit, on the early extinguishment
of debt.
On May 20, 1998, the Corporation issued, under Securities and Exchange
Commission Rule 144A, $500 million of Senior Notes due in 2005. Interest on the
Notes will accrue at a rate of 7.15 percent per annum and is payable
semiannually commencing November 20, 1998. During the third quarter, the
Corporation exchanged the restricted securities for registered notes, which have
the same interest rate and have other terms and conditions similar to the
restricted notes.
The Corporation executed a five-year revolving credit agreement with total
commitments of $5.5 billion in August 1996. This agreement was amended in 1998
to modify the financial covenants and reduce the maximum borrowing to $4.0
billion. Of the $4.0 billion of borrowing capacity, up to $1.0 billion is
available to Infinity. The credit facility provides for short-term money market
loans and revolver borrowings. Borrowing rates under the facility are determined
at the time of each borrowing and are based generally on a floating rate index,
the London Interbank Offer Rate (LIBOR), plus a margin based on the
Corporation's senior unsecured debt rating and leverage. The cost of the
facility includes commitment fees, which are based on the unutilized facility
and vary with the Corporation's debt ratings. For financial reporting purposes,
revolver borrowings are classified as long term. No facility borrowings were
outstanding as of December 31, 1998. There are no compensating balance
requirements under the facility.
The 8-7/8% debentures due 2022, the 11-3/8% Subordinated Exchange Debentures due
2009, the 9-3/4% and 9% senior notes due 2005 and 2006, respectively, and the 7%
Convertible Subordinated Debentures due 2011 may be redeemed at specified
redemption prices plus accrued and unpaid interest after June 1, 2002, January
15, 2002, December 1, 2000, February 1, 2001, and July 15, 1999, respectively.
The 7.15% Senior Notes due 2005 may be redeemed by the Corporation at specified
redemption prices at any time. The 8-7/8% notes due 2014 are redeemable at 100%
of principal plus accrued interest at the election of the holder on June 14,
1999 or June 14, 2004. The Corporation may redeem the notes only if the total
outstanding principal is $10 million or less. Except for these debentures and
notes, the remaining long-term debt outstanding at December 31, 1998 may not be
redeemed prior to maturity.
At December 31, 1998, medium-term notes had interest rates ranging from 8.75% to
9.44%, with an average interest rate of 9.1%. During 1999, $46 million of the
medium term notes will mature.
The scheduled maturities of long-term debt outstanding at December 31, 1998 for
each of the next five years are as follows:
SCHEDULED MATURITIES OF LONG-TERM DEBT
(in millions)
<TABLE>
<CAPTION>
YEAR OF MATURITY
--------------------------------
AT DECEMBER 31, 1998 1999 2000 2001 2002 2003
- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Continuing Operations $159 $ 6 $ 4 $348 $279
Discontinued Operations 46 11 250 121 --
- ----------------------------------------------------------
Total long-term debt $205 $17 $254 $469 $279
- ----------------------------------------------------------
</TABLE>
NOTE 9: OTHER CURRENT AND
NONCURRENT LIABILITIES
OTHER CURRENT LIABILITIES
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998 1997
- ------------------------------------------------------
<S> <C> <C>
Accrued employee compensation $ 108 $ 119
Income taxes payable 24 30
Accrued restructuring costs 38 28
Accrued interest and insurance 67 54
Accrued liabilities 318 309
Retained liabilities of discontinued
businesses (note 11) 254 191
Other 11 137
- ------------------------------------------------------
Total other current liabilities $ 820 $ 868
- ------------------------------------------------------
</TABLE>
OTHER NONCURRENT LIABILITIES
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998 1997
- ------------------------------------------------------
<S> <C> <C>
Deferred income taxes (note 5) $ 499 $ 224
Accrued restructuring costs 28 13
Liabilities for talent and program
rights 119 68
Accrued liabilities 156 201
Retained liabilities of discontinued
businesses (note 11) 766 767
Postemployment benefits (note 4) 29 28
Other 484 235
- ------------------------------------------------------
Total other noncurrent liabilities $2,081 $1,536
- ------------------------------------------------------
</TABLE>
36 CBS CORPORATION
<PAGE> 37
NOTE 10: DISCONTINUED OPERATIONS
In recent years, the Corporation adopted various disposal plans that, in the
aggregate, provide for the disposal of all of its industrial businesses and its
financial services business. The assets and liabilities and the results of
operations for all of these businesses are classified as Discontinued Operations
for all periods presented except for certain liabilities expected to be retained
by the Corporation. See note 11 to the financial statements.
In connection with the adoption of a plan in 1997 to divest all of the
industrial businesses remaining at that time, the Corporation recognized a net
gain of $871 million. The adoption of two separate disposal plans in 1996
combined with realization of a gain from a 1995 disposal plan resulted in the
recognition of a net gain of $1,018 million in 1996.
In connection with these disposal plans, during 1998, the Corporation sold
several businesses as well as certain securities and other assets. The most
significant of these divestitures was the August 1998 sale of the Power
Generation business for $1.2 billion in cash. At December 31, 1998, the
remaining assets and liabilities of Discontinued Operations generally consist of
(a) the Energy Systems and Government Operations businesses, (b) portfolio
investments and related debt, and (c) other miscellaneous assets, including
surplus properties, that are expected to be divested. In addition, Discontinued
Operations includes a liability for estimated loss on disposal that covers
transaction related costs, results of operations through the estimated date of
disposal, and other obligations associated with the disposal of the industrial
businesses.
The Energy Systems and Government Operations businesses are currently under
agreement to be sold for $200 million in cash, subject to certain adjustments,
plus the assumption of liabilities, commitments, and obligations of
approximately $950 million, all in accordance with the terms of the divestiture
agreement. The transaction is expected to be completed in early 1999 and is
expected to result in a gain, which will be recognized upon realization.
The assets and liabilities of Discontinued Operations have been separately
classified on the consolidated balance sheet as net assets of Discontinued
Operations. A summary of these assets and liabilities follows:
NET ASSETS OF DISCONTINUED OPERATIONS
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997
- ------------------------------------------------------
<S> <C> <C>
Assets:
Cash and cash equivalents $ 27 $ 59
Customer receivables 224 537
Inventories 94 560
Costs and estimated earnings over
billings on uncompleted
contracts 87 437
Portfolio investments 642 791
Plant and equipment, net 269 681
Deferred income taxes (note 5) 414 491
Other assets 162 545
- ------------------------------------------------------
Total assets $ 1,919 $4,101
- ------------------------------------------------------
Liabilities:
Accounts payable $ 190 $ 384
Billings over costs and estimated
earnings on uncompleted
contracts 137 377
Short-term debt -- 7
Current maturities of long-term
debt 46 96
Long-term debt 382 440
Settlements and environmental
liabilities 569 625
Liability for estimated loss on
disposal 1,309 989
Other liabilities 570 971
- ------------------------------------------------------
Total liabilities 3,203 3,889
- ------------------------------------------------------
Net assets (liabilities) of
Discontinued Operations $(1,284) $ 212
- ------------------------------------------------------
</TABLE>
PORTFOLIO INVESTMENTS
Portfolio investments, which remain from the financial services business,
consist of direct financing and leveraged lease receivables of $615 million and
$761 million at December 31, 1998 and 1997, respectively. Generally, these
leases are expected to liquidate in accordance with their contractual terms,
which extend to 2015. At December 31, 1998 and 1997, 81 percent and 83 percent
of the leases, respectively, related to aircraft while the remainder primarily
related to cogeneration facilities. Other portfolio investments, totaled $27
million and $30 million at December 31, 1998 and 1997, respectively. The
Corporation has provided for all of the estimated costs associated with
liquidation of this portfolio. Cash inflows from contractual liquidation of the
leasing portfolio are expected to be sufficient to repay the principal amount of
the debt as well as interest and other costs associated with the portfolio.
CBS CORPORATION 37
<PAGE> 38
The following table presents the Corporation's net investment in leases:
NET INVESTMENT IN LEASES
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997
- -----------------------------------------------------
<S> <C> <C>
Rental payments receivable (net of
principal and interest on
non-recourse loans) $ 465 $ 689
Estimated residual value of leased
assets 324 366
Unearned and deferred income (174) (294)
- -----------------------------------------------------
Investment in leases (leasing
receivables) 615 761
Deferred taxes and deferred
investment tax credits arising from
leases (526) (572)
- -----------------------------------------------------
Investment in leases, net $ 89 $ 189
- -----------------------------------------------------
</TABLE>
At December 31, 1998 and 1997, deferred investment tax credits totaled $19
million and $20 million, respectively. These deferred investment tax credits are
amortized over the contractual terms of the respective leases.
Contractual maturities for the Corporation's leasing rental payments receivable
at December 31, 1998 are as follows:
CONTRACTUAL MATURITIES FOR LEASING RENTAL
PAYMENTS RECEIVABLE AT DECEMBER 31, 1998
(in millions)
<TABLE>
<CAPTION>
YEAR OF MATURITY
----------------------------------------
AFTER
TOTAL 1999 2000 2001 2002 2003 2003
- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$465 $26 $33 $42 $36 $40 $288
- -----------------------------------------------
</TABLE>
SETTLEMENTS AND ENVIRONMENTAL LIABILITIES
Certain environmental and litigation-related liabilities are expected to be
assumed by buyers pursuant to divestiture agreements or relate directly to
surplus properties and are included in the net assets (liabilities) of
Discontinued Operations. Those obligations that are expected to be retained by
the Corporation are separately presented in Continuing Operations as retained
liabilities of discontinued businesses. See note 11 to the financial statements.
The Corporation has been defending various lawsuits brought by utilities
claiming a substantial amount of damages in connection with alleged tube
degradation in steam generators sold by the Energy Systems business as
components of nuclear steam supply systems. Since 1993, settlement agreements
have been entered resolving ten litigation claims. These agreements generally
require the Corporation to provide certain products and services at prices
discounted at varying rates. Two cases were resolved in favor of the Corporation
after trial or arbitration. In the one remaining steam generator lawsuit, the
Corporation's motion for summary judgment was recently granted, in significant
part. The plaintiffs have appealed this decision.
The Corporation is also a party to three tolling agreements with utilities or
utility plant owners' groups that have asserted steam generator claims. The
tolling agreements delay initiation of any litigation for various specified
periods of time and permit the parties time to engage in discussions.
The Corporation has provided for estimated costs for previous and potential
settlement agreements that provide for costs in excess of discounted prices.
These obligations will be assumed by the buyer of the Energy Systems business in
accordance with the terms of the divestiture agreement.
LIABILITY FOR ESTIMATED LOSS ON DISPOSAL
The liability for estimated loss on disposal of $1,309 million at December 31,
1998, includes estimated losses and disposal costs associated with each
divestiture transaction, including estimated results of operations through the
expected date of disposition and certain contingencies related to the industrial
businesses, as well as interest and other costs associated with the liquidation
of portfolio investments. Satisfaction of these liabilities is expected to occur
over the next several years. Management believes that the liability for
estimated loss on disposal at December 31, 1998, is adequate to cover
divestiture or liquidation of the remaining assets and liabilities of
Discontinued Operations.
RESULTS OF OPERATIONS
In accordance with APB 30, the consolidated financial statements reflect the
operating results of Discontinued Operations separately from Continuing
Operations.
38 CBS CORPORATION
<PAGE> 39
Summarized in the following table are the operating results of Discontinued
Operations:
OPERATING RESULTS OF DISCONTINUED OPERATIONS
(in millions)
<TABLE>
<CAPTION>
SALE OF PRODUCTS
OR SERVICES
------------------------
YEAR ENDED DECEMBER 31, 1998 1997 1996
- -------------------------------------------------------
<S> <C> <C> <C>
Industrial businesses $2,235 $4,257 $5,389
Financial services 21 12 26
- -------------------------------------------------------
Total Discontinued Operations $2,256 $4,269 $5,415
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NET INCOME (LOSS)
BEFORE MEASUREMENT DATE
------------------------
YEAR ENDED DECEMBER 31, 1998 1997 1996
- -------------------------------------------------------
<S> <C> <C> <C>
Industrial businesses $ -- $ (191) $ (609)
Financial services -- -- --
- -------------------------------------------------------
Total Discontinued Operations $ -- $ (191) $ (609)
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NET INCOME (LOSS) AFTER
MEASUREMENT DATE
------------------------
YEAR ENDED DECEMBER 31, 1998 1997 1996
- -------------------------------------------------------
<S> <C> <C> <C>
Industrial businesses $ (100) $ (45) $ (134)
Financial services (12) (18) (9)
Other (3) (25) (36)
- -------------------------------------------------------
Total Discontinued Operations $ (115) $ (88) $ (179)
- -------------------------------------------------------
</TABLE>
All operating results after the measurement date are charged to the liability
for estimated loss on disposal.
In connection with the presentation of various businesses as Discontinued
Operations, interest expense on Continuing Operations debt totaling $5 million,
$42 million and $60 million was reclassified to Discontinued Operations for the
years ended December 31, 1998, 1997, and 1996, respectively. This allocation is
based on the quarterly ratio of the net assets of Discontinued Operations to the
sum of total consolidated net assets plus consolidated debt.
CASH FLOWS
Cash proceeds from the sale or liquidation of all assets of Discontinued
Operations except for portfolio investments, as well as cash requirements to
satisfy non-debt obligations of Discontinued Operations will affect cash flows
of Continuing Operations. Operating cash flows of Discontinued Operations, which
include cash flows from the operations of the businesses as well as payments for
disposition-related costs, are presented separately from Continuing Operations
in the consolidated financial statements and consist of the following:
CASH FLOWS FROM OPERATING ACTIVITIES OF
DISCONTINUED OPERATIONS
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ---------------------------------------------------
<S> <C> <C> <C>
Industrial businesses $(286) $(382) $(279)
Financial services (42) (30) 3
Other (3) (25) (36)
- ---------------------------------------------------
Cash used by operating
activities $(331) $(437) $(312)
- ---------------------------------------------------
</TABLE>
NOTE 11: CONTINGENT LIABILITIES
Certain environmental, litigation, and other liabilities associated with the
industrial businesses were not or are not expected to be assumed by other
parties in the divestiture transactions and, therefore, would be retained by the
Corporation. These liabilities include certain environmental, general
litigation, and other matters not involving active businesses. Accrued
liabilities associated with these matters, which have been separately presented
in Continuing Operations as retained liabilities of discontinued businesses,
totaled $1.0 billion at December 31, 1998, including amounts related to
previously discontinued businesses of CBS Inc. Of this amount, $766 million is
classified as non-current. A separate asset of $225 million was re-corded for
estimated amounts recoverable from third parties, of which $180 million is
classified as noncurrent.
LEGAL MATTERS
SECURITIES CLASS ACTIONS--FINANCIAL SERVICES
The Corporation has been defending derivative and class action lawsuits alleging
federal securities law and common law violations arising out of purported
misstatements or omissions contained in the Corporation's public filings
concerning the financial condition of the Corporation and certain of its former
subsidiaries in connection with charges to earnings of $975 million in 1990 and
$1,680 million in 1991 and a public offering of the Corporation's common stock
in 1991. The court dismissed both the derivative claim and the class action
claims in their entirety. These dismissals were appealed. In July 1996, the
United States Court of Appeals for the Third Circuit (the Third Circuit)
affirmed the court's dismissal of the derivative claim. The Third Circuit also
affirmed in part and reversed in part the dismissal of the class action claims.
Those class action claims that were not dismissed by the Third Circuit have been
remanded to the lower court for further proceedings. The parties to the class
actions have reached an agreement in principle to resolve all claims.
CBS CORPORATION 39
<PAGE> 40
ASBESTOS
The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries, which allegedly occurred from use or
inclusion of asbestos in certain of the Corporation's products supplied by its
industrial businesses, generally in the pre-1970 time period. Typically, these
lawsuits are brought against multiple defendants. The Corporation was neither a
manufacturer nor a producer of asbestos and is oftentimes dismissed from these
lawsuits on the basis that the Corporation has no relationship to the products
in question or the claimant was not exposed to the Corporation's product. At
December 31, 1998, the Corporation had approximately 113,200 unresolved claims
pending.
In court actions that have been resolved, the Corporation has prevailed in the
majority of the asbestos claims and has resolved others through settlement.
Furthermore, the Corporation has brought suit against certain of its insurance
carriers with respect to these asbestos claims. Under the terms of a settlement
agreement resulting from this suit, carriers that have agreed to the settlement
are reimbursing the Corporation for a substantial portion of its current costs
and settlements associated with asbestos claims. The Corporation has recorded a
liability for asbestos-related matters that are deemed probable and can be
reasonably estimated, and has separately recorded an asset equal to the amount
of such estimated liabilities that will be recovered pursuant to agreements with
insurance carriers. Factors considered in evaluating this litigation include:
claimed product involvement, alleged exposure to product, alleged disease,
validity of medical claims, number of resolved claims, available insurance
proceeds, and status of litigation in multiple jurisdictions. The Corporation
has not been able to reasonably estimate costs for unasserted asbestos claims.
However, the Corporation reviews asbestos claims on an ongoing basis and adjusts
its liability as appropriate.
GENERAL
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in the securities class action and certain groupings of
asbestos claims, and, although management believes a significant adverse
judgment is unlikely, any such judgment could have a material adverse effect on
the Corporation's results of operations for a quarter or a year. However, based
on its understanding and evaluation of the relevant facts and circumstances,
management believes that the Corporation has meritorious defenses to the
litigation described previously, and that the Corporation has adequately
provided for costs arising from potential resolution of these matters.
Management believes that the litigation should not have a material adverse
effect on the financial condition of the Corporation.
ENVIRONMENTAL MATTERS
Compliance with federal, state, and local laws and regulations relating to the
discharge of pollutants into the environment, the disposal of hazardous wastes,
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. It is difficult to estimate the
timing and ultimate costs to be incurred in the future due to uncertainties
about the status of laws, regulations, and technology; the adequacy of
information available for individual sites; the extended time periods over which
site remediation occurs; and the identification of new sites. The Corporation
has, however, recognized an estimated liability, measured in current dollars,
for those sites where it is probable that a loss has been incurred and the
amount of the loss can be reasonably estimated. The Corporation recognizes
changes in estimates as new remediation requirements are defined or as more
information becomes available.
With regard to remedial actions under federal and state Superfund laws, the
Corporation has been named a potentially responsible party (PRP) at numerous
sites located throughout the country. At many of these sites, the Corporation is
either not a responsible party or its site involvement is very limited or de
minimis. However, the Corporation may have varying degrees of cleanup
responsibilities at approximately 70 sites. The Corporation believes that any
liability incurred for cleanup at these sites will be satisfied over a number of
years, and in many cases, the costs will be shared with other responsible
parties. These sites include certain sites for which the Corporation, as part of
an agreement for sale, has retained obligations for remediation of environmental
contamination and for other Comprehensive Environmental Response Compensation
and Liability Act (CERCLA) issues.
Based on the costs associated with the most probable alternative remediation
strategy for the previously mentioned sites, the Corporation has an accrued
liability of $312 million at December 31, 1998. Depending on the remediation
alternatives ultimately selected, the costs related to these sites could differ
from the amounts currently accrued. The accrued liability includes $228 million
for site investigation and remediation, and $84 million for post-closure and
40 CBS CORPORATION
<PAGE> 41
monitoring activities. Management anticipates that the majority of expenditures
for site investigation and remediation will occur during the next five to ten
years. Expenditures for post-closure and monitoring activities will be made
during periods of up to 30 years. In addition, included in Discontinued
Operations are environmental liabilities directly related to sites that are
expected to be assumed by buyers in divestiture transactions.
OTHER
The Corporation is involved with several administrative actions alleging
violations of federal, state, or local environmental regulations. For these
matters, the Corporation has estimated its remaining reasonably possible costs
and determined them to be immaterial.
Management believes, based on its best estimate, that the Corporation has
adequately provided for its present environmental obligations and that complying
with existing government regulations will not materially impact the
Corporation's financial position, liquidity, or results of operations.
NOTE 12: LEASES AND OTHER COMMITMENTS
LEASES
The Corporation has commitments under operating and capital leases for certain
facilities and equipment. Rental expense for Continuing Operations in 1998,
1997, and 1996 was $85 million, $64 million, and $51 million, respectively.
These amounts include immaterial amounts for contingent rentals and sublease
income.
Additionally, the Corporation's outdoor advertising business has franchise
rights entitling it to display advertising on such media as buses, taxis,
trains, bus shelters, terminals, billboards, and phone kiosks. Under most of
these franchise agreements, the franchiser is entitled to receive the greater of
a percentage of the relevant advertising revenues, net of advertising agency
fees, or a specified guaranteed minimum annual payment. Franchise payments
totaled $222 million in 1998 and $192 million in 1997.
MINIMUM RENTAL PAYMENTS
(in millions)
<TABLE>
<CAPTION>
GUARANTEED
LEASES MINIMUM
--------------------- FRANCHISE
AT DECEMBER 31, 1998 CAPITAL OPERATING PAYMENTS
- -----------------------------------------------------------
<S> <C> <C> <C>
1999 $ 6 $ 73 $161
2000 5 64 147
2001 5 56 120
2002 5 50 53
2003 5 39 14
Thereafter 23 103 20
- -----------------------------------------------------------
Minimum rental payments $49 $385 $515
- -----------------------------------------------------------
Less: interest and
executory cost 15
- -----------------------------------------------------------
Present value of
minimum rental
payments $34
- -----------------------------------------------------------
</TABLE>
OTHER COMMITMENTS
The Corporation routinely enters into commitments to purchase the rights to
broadcast programs, including feature films and sports events. These contracts
permit the broadcast of such properties for various periods. At December 31,
1998, the Corporation was committed to make payments under such broadcasting
contracts, along with commitments for talent contracts, of $7.7 billion. At
December 31, 1998, aggregate payments related to these commitments during the
next five years and thereafter are as follows:
OTHER COMMITMENTS
(in millions)
<TABLE>
<CAPTION>
AGGREGATE
AT DECEMBER 31, 1998 PAYMENTS
- --------------------------------------------------------
<S> <C>
1999 $1,349
2000 1,401
2001 1,178
2002 1,150
2003 845
Thereafter 1,786
- --------------------------------------------------------
Total other commitments $7,709
- --------------------------------------------------------
</TABLE>
NOTE 13: SHAREHOLDERS' EQUITY
In 1998, the Corporation's Board of Directors authorized a $3 billion multi-year
stock repurchase program. During the year, the Corporation purchased 28,342,000
shares of common stock under the program at a cost of $859 million. At December
31, 1998 and 1997, 43,204,000 shares and 21,673,000 shares, respectively, of the
Corporation's common stock were held in treasury. Of the common stock held in
treasury on these dates, 16 million and 18 million shares, respectively, were
held by the Corporation's rabbi trusts for the payment of benefits under
executive benefit plans.
CBS CORPORATION 41
<PAGE> 42
On May 30, 1997, the Corporation redeemed all outstanding shares of its Series C
Conversion Preferred Stock (Series C Preferred) and, in connection with the
redemption, issued 32 million shares of common stock. All accrued and unpaid
dividends on the redeemed shares of Series C Preferred were paid on May 30,
1997.
COMMON SHARES
(shares in thousands)
<TABLE>
<CAPTION>
IN
ISSUED TREASURY OUTSTANDING
- ----------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1,
1996 425,970 29,952 396,018
Shares issued for
dividend reinvestment
plan -- (1,071) 1,071
Shares issued for
employee plans -- (6,254) 6,254
Shares issued for
Infinity acquisition 183,002 -- 183,002
- ----------------------------------------------------------
Balance at December 31,
1996 608,972 22,627 586,345
Shares issued for
dividend reinvestment
plan 384 (29) 413
Shares issued for
employee plans 17,245 (925) 18,170
Shares issued for TNN
and CMT acquisition 59,058 -- 59,058
Shares issued for
conversion of Series
C Preferred 31,859 -- 31,859
- ----------------------------------------------------------
Balance at December 31,
1997 717,518 21,673 695,845
Shares used for
dividend reinvestment
plan 132 -- 132
Shares issued for
employee plans 15,881 (6,811) 22,692
Shares repurchased -- 28,342 (28,342)
- ----------------------------------------------------------
BALANCE AT DECEMBER 31,
1998 733,531 43,204 690,327
- ----------------------------------------------------------
</TABLE>
On December 29, 1995, the Board of Directors adopted a shareholder rights plan
providing for the distribution of one right for each share of common stock
outstanding on January 9, 1996 or issued thereafter until the occurrence of
certain events. The rights become exercisable only in the event, with certain
exceptions, that an acquiring party accumulates 15 percent or more of the
Corporation's voting stock or a party announces an offer to acquire 30 percent
or more of the voting stock. The rights have an exercise price of $64 per share
and expire on January 9, 2006. The Board of Directors has adopted a resolution
affirming its intention to redeem the rights in January 2001 (if still
outstanding). Upon the occurrence of certain events, holders of the rights will
be entitled to purchase either CBS Corporation preferred shares or shares in an
acquiring entity at half of market value. The Corporation is entitled to redeem
the rights at a value of $.01 per right at any time until the tenth day
following the acquisition of a 15 percent position in its voting stock.
OTHER COMPREHENSIVE INCOME
At March 31, 1998, the Corporation adopted the provisions of SFAS 130 which
establishes standards for reporting and disclosing comprehensive income in the
financial statements. Comprehensive income is used to describe all changes in
equity from transactions and other events and circumstances, including net
income, from nonowner sources. The following table presents the accumulated
components of comprehensive income other than net income reflected within
shareholders' equity at December 31, 1998 and December 31, 1997:
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998 1997
- ------------------------------------------------------------
<S> <C> <C>
Unrealized gains on
securities $ 1 $ --
Minimum pension liability
adjustment (808) (771)
- ------------------------------------------------------------
Total accumulated other
comprehensive loss $(807) $(771)
- ------------------------------------------------------------
</TABLE>
NOTE 14: ISSUANCE OF SUBSIDIARY STOCK
In December 1998, Infinity, the Corporation's wholly owned subsidiary, issued
155,250,000 shares of its class A common stock in an initial public offering.
The Corporation owns all of the 700,000,000 outstanding shares of Infinity's
class B common stock. Holders of class A common stock generally have identical
rights to the holders of class B common stock except that the holders of class A
common stock are entitled to one vote per share, while holders of class B common
stock are entitled to five votes per share on matters submitted to a vote of
Infinity stockholders and the shares of class B common stock maintain certain
conversion rights and transfer restrictions. As a result of the initial public
offering, at December 31, 1998, the Corporation beneficially owned 81.8 percent
of Infinity's equity, which represented 95.8 percent of the voting power.
Proceeds from the offering, based on the offering price of $20.50 per share,
totaled $3.2 billion ($3.0 billion, net of offering expenses). A gain of $1.4
billion was recognized by the Corporation in shareholders' equity as a direct
increase in capital in excess of par value.
Under an intercompany agreement, the Corporation provides to Infinity a number
of services, including executive, human resources, legal, finance, information
management, internal audit, tax, and treasury services. The costs of these
services are allocated according to established methodologies determined by the
Corpora-
42 CBS CORPORATION
<PAGE> 43
tion on an annual basis. In addition, a tax sharing agreement generally provides
that, for any taxable period in which Infinity is included in the Corporation's
consolidated tax return, the amount of income taxes to be paid by Infinity will
be determined as if Infinity had filed separate income tax returns.
NOTE 15: EARNINGS (LOSS) PER COMMON SHARE--CONTINUING OPERATIONS
The following is the computation of basic and diluted earnings per common share:
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE--CONTINUING OPERATIONS
(in millions except per-share amounts)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998 1997 1996
- ---------------------------------------------------
<S> <C> <C> <C>
Loss from Continuing
Operations $ (12) $(131) $(221)
Less: preferred stock
dividends -- (23) (47)
- ---------------------------------------------------
Loss applicable to common
stock $ (12) $(154) $(268)
Average shares outstanding 696 629 401
Basic and diluted loss per
common share $(.02) $(.24) $(.67)
- ---------------------------------------------------
</TABLE>
For the year ended December 31, 1998, 1997 and 1996, options to purchase shares
of common stock as well as shares of common stock issuable under deferred
compensation arrangements and preferred stock of 20 million, 33 million and 43
million, respectively, were not included in the computation of diluted earnings
per common share because their inclusion would result in a smaller loss per
common share. During 1998, 1997, and 1996, common shares issuable under deferred
compensation arrangements approximated 5 million, 6 million and 6 million,
respectively. See note 16 to the financial statements for additional information
on stock options.
NOTE 16: STOCK-BASED COMPENSATION PLANS
At December 31, 1998, the Corporation had several stock-based compensation plans
that provide for the granting of stock options, restricted stock, and other
performance awards to employees or directors of the Corporation. At December 31,
1998 and 1997, shares authorized for awards under these plans totaled 59.9
million and 49.5 million, respectively. Of these amounts, 9.7 million and 8.1
million, respectively, remained available for award. Generally, stock option
awards are granted for terms of 10 years or less. Pre-1998 grants generally
become exercisable in whole or in part after the commencement of the second year
of the term, and 1998 grants generally become exercisable in thirds after the
first, second, and third anniversaries of the grant date. Certain exceptions to
the general rule exist with respect to stock options granted in 1998 to
employees of the industrial businesses, which are generally exercisable
beginning after the first anniversary of the grant date and for 90 days
subsequent to the latter of such date or termination of their employment with
the Corporation.
In addition to the stock options shown in the following table, the Corporation
granted 9,493 and 9,449 shares of restricted stock to employees and directors in
1998 and 1997, respectively. These shares had a weighted-average fair value at
date of grant of $29.96 and $18.52, respectively, with a weighted-average
vesting period of one year for the 1998 and 1997 grants.
In connection with the acquisitions of TNN and CMT and Old Infinity, the
Corporation assumed options outstanding under the Gaylord and Old Infinity plans
as of the date of the acquisition. The then-outstanding options were converted
to options to acquire the Corporation's common stock and are included in the
following table as awards assumed. Exercise prices for awards assumed in the
1997 TNN and CMT acquisition, which generally have ten-year terms and become
exercisable ratably in years two through five, range from $9.45 to $25.41.
Exercise prices for awards assumed in the 1996 Old Infinity acquisition, which
generally have ten-year terms and become exercisable ratably over a five-year
period, range from $.0002 to $19.66.
CBS CORPORATION 43
<PAGE> 44
STOCK OPTION INFORMATION
(shares in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
-------------------- ------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1 60,409 $14.05 57,816 $13.15 28,384 $17.41
Options granted 9,494 29.86 12,917 19.30 10,990 19.09
Options exercised (14,483) 7.90 (8,106) 14.62 (1,728) 13.22
Options forfeited (799) 26.45 (1,945) 10.69 (1,750) 15.93
Options expired (4) 26.19 (397) 30.70 (306) 27.41
Awards assumed -- -- 124 17.06 22,226 5.18
- --------------------------------------------------------------------------------------------------------------
Balance at December 31 54,617 $18.14 60,409 $14.05 57,816 $13.15
- --------------------------------------------------------------------------------------------------------------
Exercisable at December 31 44,990 $15.90 45,267 $18.87 41,251 $12.07
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
FAIR EXERCISE FAIR EXERCISE FAIR EXERCISE
VALUE PRICE VALUE PRICE VALUE PRICE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options granted:
Exercise price equaled
grant date stock price $12.85 $29.86 $ 7.92 $19.30 $ 7.41 $18.86
Exercise price exceeded
grant date stock price -- -- 6.51 23.46 5.92 20.74
- -------------------------------------------------------------------------------------------------------------
</TABLE>
STOCK OPTIONS OUTSTANDING AT DECEMBER 31, 1998
(shares in thousands)
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE WEIGHTED-
OPTIONS WEIGHTED- REMAINING AVERAGE
RANGE OF OUTSTANDING AT AVERAGE CONTRACTUAL EXERCISABLE AT EXERCISE
EXERCISE PRICES DECEMBER 31, 1998 EXERCISE PRICE LIFE IN YEARS DECEMBER 31, 1998 PRICE OF EXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$.0002 -- 4.99 4,072 $ 1.81 3.2 4,072 $ 1.81
5 -- 9.99 5,111 7.05 5.5 5,111 7.05
10 -- 14.99 6,391 13.40 3.8 6,391 13.40
15 -- 19.99 23,409 17.82 6.6 22,850 17.80
20 -- 29.99 14,272 27.83 5.6 5,695 26.01
30 -- 36.53 1,362 34.71 4.6 871 36.10
- ------------------------------------------------------------------------------------------------------------------------
Total 54,617 44,990
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1998, 1997, and 1996, respectively: risk-free
interest rates of 5.5%, 6.4%, and 6.1%; expected dividend yields of 0%, 1.0%,
and 1.1%; expected volatility of 31%, 30%, and 30% and expected lives of 6.6
years, 7.3 years, and 7.4 years.
The Corporation accounts for its stock-based compensation plans under APB 25.
For stock options granted, the option price is not less than the market value of
shares on the grant date; therefore, no compensation cost has been recognized
for stock options granted. Had compensation cost for these plans been determined
under the provisions of SFAS 123, the Corporation's net income and earnings per
share would have been reduced to the following pro forma amounts:
RESULTS OF OPERATIONS
(in millions except per share-amounts)
<TABLE>
<CAPTION>
1998 1997 1996
------------------- ------------------- -------------------
AS PRO AS PRO AS PRO
YEAR ENDED DECEMBER 31, REPORTED FORMA REPORTED FORMA REPORTED FORMA
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $(21) $(55) $549 $487 $ 95 $ 57
Basic and diluted earnings
(loss) per common share (.03) (.08) .84 .74 .12 .02
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
44 CBS CORPORATION
<PAGE> 45
NOTE 17: RESTRUCTURING
In recent years, the Corporation has restructured its corporate headquarters and
certain of its businesses in an effort to reduce its cost structure and remain
competitive in its markets. Restructuring activities primarily involve the
separation of employees, termination of leases, and other similar actions. Costs
for restructuring activities are limited to incremental costs that directly
result from the restructuring activities and provide no future benefit to the
Corporation.
Restructuring costs totaling $62 million in 1998, $15 million in 1997, and $57
million in 1996 are included in the Corporation's results of operations. Except
for costs totaling $12 million in 1998 and $32 million in 1996, these costs were
essentially for the separation of employees. The 1998 and 1996 plans included
asset write-downs of $2 million and $15 million, respectively, and lease
termination and other facility closure costs of $10 million and $17 million,
respectively.
Generally, separated employees receive benefits under certain plans, including
layoff income benefits, permanent job separation benefits, retraining, and/or
outplacement assistance. The amount included for these benefits in the
restructuring charge represents the incremental cost of such benefits over those
amounts previously accrued under SFAS No. 112, "Employers' Accounting for
Postemployment Benefits."
The 1998 plan primarily includes the separation of 441 employees and the
termination of leases at the Corporation's Television segment. Implementation of
the plan began in September 1998 and is generally expected to be completed in
1999. Expenditures for employee separation costs generally are paid over a
period of up to two years following the separation although payments can extend
longer in certain cases. Certain expenditures for lease commitments will extend
over the next several years.
The 1997 plan primarily involves the separation of 118 employees at the former
Pittsburgh headquarters related to the transfer of the Corporation's overhead
functions to New York. Implementation of this plan began in January 1998 and
generally is expected to be completed by the end of 1999. Of the employee
separations in the 1996 plan, the majority were completed by December 31, 1998.
Future expenditures for 1997 and 1996 plans consist primarily of remaining
separation costs and lease commitments for actions already taken.
In connection with the acquisition of CBS Inc., the Corporation developed a
restructuring plan to integrate the operations of CBS Inc. with those of the
Corporation and eliminate duplicate facilities and functions. The cost of this
plan, which approximated $100 million, was recorded in connection with the
purchase, and the plan is now complete. In addition, the costs for integration
activities for the acquiring company are included in the 1996 costs described
previously.
The following is a reconciliation of the restructuring liability for Continuing
Operations:
RECONCILIATION OF RESTRUCTURING LIABILITY
(in millions)
<TABLE>
<S> <C>
- -------------------------------------------------
Balance at January 1, 1996 $117
Provision for restructuring 57
Cash expenditures (50)
Noncash charges (7)
- -------------------------------------------------
Balance at December 31, 1996 117
Provision for restructuring 15
Cash expenditures (83)
Noncash charges (8)
- -------------------------------------------------
Balance at December 31, 1997 41
Provision for restructuring 62
Cash expenditures (37)
Noncash charges --
- -------------------------------------------------
Balance at December 31, 1998 $ 66
- -------------------------------------------------
</TABLE>
NOTE 18: OTHER INCOME (EXPENSE), NET
OTHER INCOME (EXPENSE), NET
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- --------------------------------------------------
<S> <C> <C> <C>
Interest income $19 $11 $17
Gain on disposition of
equity investments -- 24 12
Gain on disposition of other
assets 5 15 17
Operating results -- non-
consolidated affiliates (2) 5 10
Other 21 19 (1)
- --------------------------------------------------
Other income (expense), net $43 $74 $55
- --------------------------------------------------
</TABLE>
NOTE 19: SEGMENT INFORMATION
The Corporation's Continuing Operations is aligned into two business segments:
Radio and Television. These business segments are consistent with the
Corporation's management of these businesses and its financial reporting
structure and generally reflect the operating focus of out-of-home media and
in-home media.
CBS CORPORATION 45
<PAGE> 46
Management characterizes its Radio segment as out-of-home because the majority
of radio listening and virtually all viewing of outdoor advertising takes place
in automobiles, transit systems, on the street and other locations outside the
consumer's home. The Radio segment owns and operates 160 radio stations and
participates in the outdoor advertising business through its subsidiary, TDI.
Similarly, the Corporation characterizes its Television segment as in-home
because the majority of television and cable viewing takes place within the
consumer's home. The Television segment consists of (i) the CBS television
network, which provides entertainment, sports, and news programming for
approximately 200 affiliates throughout the country; (ii) the 14 CBS owned and
operated television stations; (iii) the CBS cable operations, which primarily
consist of two country entertainment networks, TNN and CMT, two regional sports
networks, and an equity interest in a 24-hour, Spanish-language cable news
network, TeleNoticias; and (iv) CBS New Media, which is responsible for the
Corporation's involvement with evolving technologies, including the Internet on
which the Corporation operates web services and owns minority interests in web
service providers.
The Corporation's Discontinued Operations generally consists of the remaining
industrial businesses, which are expected to be divested in 1999, and the
leasing portfolio, which is expected to liquidate in accordance with contractual
terms. Certain segment data for Discontinued Operations are provided in note 10
to the financial statements.
The Corporation's segments operate primarily in the United States. The
accounting policies as described in the summary of significant accounting
policies are applied consistently across the segment.
The Corporation evaluates performance based on earnings before interest expense,
taxes, depreciation and amortization (EBITDA). Management believes that EBITDA
is an appropriate measure for evaluating the operating performance of the
Corporation's business. EBITDA eliminates the effect of depreciation and
amortization of tangible and intangible assets, most of which arises from
acquisitions accounted for under the purchase method of accounting, including
American Radio, TNN and CMT, and Old Infinity. The exclusion of amortization
expense eliminates variations in results caused by the timing of acquisitions.
However, EBITDA should be considered in addition to, not as a substitute for,
operating earnings, net earnings, cash flows, and other measures of financial
performance reported in accordance with generally accepted accounting
principles.
SEGMENT DATA - CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
DEPRECIATION
REVENUES EBITDA AND AMORTIZATION UNUSUAL ITEMS
------------------------ -------------------- ------------------ ------------------
YEAR ENDED DECEMBER 31, 1998 1997 1996 1998 1997 1996 1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Radio $1,893 $1,480 $ 554 $ 798 $575 $197 $250 $197 $ 57 $ -- $ -- $ --
Television 4,919 3,891 3,563 529 412 467 316 244 213 60 -- --
Corporate and other (7) (4) 26 (68) (72) (162) 5 4 9 9 15 85
Residual costs of
discontinued businesses -- -- -- (163) (143) (114) -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total $6,805 $5,367 $4,143 $1,096 $772 $388 $571 $445 $279 $ 69 $ 15 $ 85
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EXPENDITURES FOR
LONG-LIVED ASSETS TOTAL ASSETS LONG-LIVED ASSETS
------------------------ --------------------------- ------------------
YEAR ENDED DECEMBER 31, 1998 1997 1996 1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Radio $ 422 $ 242 $ 236 $10,798 $ 7,074 $ 7,262 $ 32 $ 15 $ 7
Television 1,098 1,132 997 8,543 8,568 6,687 356 381 464
Corporate and other 362 405 601 798 861 1,457 5 4 17
- --------------------------------------------------------------------------------------------------------------
Total $1,882 $1,779 $1,834 $20,139 $16,503 $15,406 $393 $400 $488
- --------------------------------------------------------------------------------------------------------------
</TABLE>
46 CBS CORPORATION
<PAGE> 47
The Corporation's consolidated income from Continuing Operations before taxes
and minority interest for the year ended December 31, 1998 totaled $155 million.
The losses from Continuing Operations before taxes and minority interest for the
years ended December 31, 1997 and 1996 totaled $59 million and $292 million,
respectively. Consolidated EBITDA noted in the table above varies from the
Consolidated income (loss) from Continuing Operations before taxes and minority
interest because it excludes depreciation, amortization, and interest expense.
The category "Corporate and other" includes certain assets and results of
operations that are either not identifiable to a specific operating segment or
relate to the maintenance of corporate functions. These assets primarily include
cash and cash equivalents, deferred income taxes, property, equipment and other
assets associated with corporate headquarters as well as certain receivables.
Included in the results of operations are certain intersegment eliminations,
non-allocated income and costs related to interest, taxes and employee benefits
as well as certain other headquarter related income and expenses.
Intersegment sales and transfers are not material to the Corporation's Radio or
Television segment results.
Unusual items noted above relate to certain restructuring plans initiated during
1998, 1997, and 1996 as well as other special severance costs in 1998 and
litigation costs in 1996. Long-lived assets in the preceding table include
primarily property and equipment, programming, noncurrent receivables, and
investments in joint ventures or other affiliates, and exclude such assets as
goodwill, FCC licenses, other intangible assets, financial instruments, deferred
acquisition costs, and deferred tax assets. Increases in long-lived assets
during 1998 and 1997 are due primarily to acquisitions.
Expenditures for long-lived assets are primarily related to the Corporation's
spending on programming of $232 million, $261 million, and $391 million as well
as capital spending of $139 million, $121 million, and $93 million during 1998,
1997, and 1996, respectively.
Residual costs of discontinued businesses primarily include certain costs, such
as pension and postretirement benefit costs, remaining from past divestitures of
the Corporation's industrial businesses.
NOTE 20: FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments is determined by the
Corporation using the best available market information and appropriate
valuation methodologies. However, considerable judgment is necessary in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented are not necessarily indicative of the amounts that the
Corporation could realize in a current market exchange or the value that
ultimately will be realized by the Corporation upon maturity or disposition.
Additionally, because of the variety of valuation techniques permitted under
SFAS No. 107, "Disclosures about Fair Values of Financial Instruments,"
comparability of fair values among entities may not be meaningful. The use of
different market assumptions or estimation methodologies may have a material
effect on the estimated fair value amounts.
CBS CORPORATION 47
<PAGE> 48
FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
1998 1997
--------------------------------- ---------------------------------
CARRYING ESTIMATED CONTRACT CARRYING ESTIMATED CONTRACT
AT DECEMBER 31, AMOUNT FAIR VALUE AMOUNT AMOUNT FAIR VALUE AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 798 $ 798 $ -- $ 8 $ 8 $ --
Investments in marketable
securities 30 30 -- 36 36 --
Noncurrent customer and other
receivables 228 228 -- 145 145 --
LIABILITIES:
Short-term debt -- -- -- 89 89 --
Current maturities of long-term
debt 159 160 -- 62 62 --
Long-term debt 2,506 2,674 -- 3,236 3,305 --
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS:
Interest rate exchange agreements -- -- -- -- (5) --
Foreign currency exchange
contracts:
Unrealized losses -- -- -- -- (1) --
Letters of credit -- -- 148 -- -- 133
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The following methods and assumptions were used to estimate the fair value of
financial instruments for which it was practicable to estimate that value.
CASH AND CASH EQUIVALENTS
The carrying amount for cash and cash equivalents approximates fair value.
INVESTMENTS IN MARKETABLE SECURITIES
The fair value of investments in marketable securities is based on quoted market
prices.
NONCURRENT CUSTOMER AND OTHER RECEIVABLES
The fair value of noncurrent customer and other receivables is estimated by
discounting the expected future cash flows at interest rates commensurate with
the creditworthiness of the customer or other third party.
SHORT-TERM DEBT
The carrying amount of the Corporation's borrowings under credit facilities and
other arrangements approximates fair value.
LONG-TERM DEBT
The fair value of long-term debt is estimated using quoted market prices or
discounted cash flow methods based on the Corporation's current borrowing rates
for similar types of borrowing arrangements with comparable terms and
maturities.
INTEREST RATE AND FOREIGN CURRENCY EXCHANGE CONTRACTS
The fair value of interest rate and foreign exchange contracts is based on
quoted market prices to terminate the contracts.
48 CBS CORPORATION
<PAGE> 49
QUARTERLY FINANCIAL INFORMATION
(unaudited, in millions except per-share amounts)
<TABLE>
<CAPTION>
1998 QUARTER ENDED 1997 QUARTER ENDED
-------------------------------------- --------------------------------------
DEC 31 SEPT 30 JUNE 30 MARCH 31 DEC 31 SEPT 30 JUNE 30 MARCH 31
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $1,791 $1,581 $1,484 $1,949 $1,473 $1,285 $1,283 $1,326
Gross margin 659 601 528 644 541 513 506 324
Depreciation and
amortization (151) (154) (136) (130) (128) (107) (105) (105)
Marketing, administration,
and general expenses (345) (304) (227) (340) (278) (266) (261) (238)
Residual costs of
discontinued businesses (46) (41) (38) (38) (37) (35) (36) (35)
Operating profit (loss)(a) 117 102 127 136 98 105 104 (54)
Other income (expense), net 14 12 12 5 15 2 16 41
Income (loss) from
Continuing Operations 3 (38) 4 19 (10) (19) (11) (91)
Income (loss) from
Discontinued Operations(b) -- -- -- -- 871 (143) 12 (60)
Extraordinary item (4) (5) -- -- -- -- -- --
Net income (loss) (1) (43) 4 19 861 (162) 1 (151)
- ------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings
(loss) per common share:
Continuing Operations (.00) (.05) .01 .03 (.01) (.03) (.04) (.18)
Discontinued Operations -- -- -- -- 1.25 (.23) .02 (.10)
Extraordinary item (.00) (.01) -- -- -- -- -- --
Basic and diluted earnings
(loss) per common share (.00) (.06) .01 .03 1.24 (.26) (.02) (.28)
- ------------------------------------------------------------------------------------------------------------------
Dividends per common share -- -- -- .05 .05 .05 .05 .05
New York Stock Exchange
market price per share:
High 33-1/8 35-1/2 36-5/8 34-3/16 32-1/16 27-15/16 23-13/16 20-3/8
Low 18 21-7/8 29-11/16 26-3/4 23-3/8 22-3/4 16 16-3/4
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes restructuring charges of $62 million in the third quarter of 1998
and $15 million in the fourth quarter of 1997.
(b) Includes net gain of $871 million in the fourth quarter of 1997 from
disposals of business segments.
CBS CORPORATION 49
<PAGE> 50
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL AND
STATISTICAL DATA
(unaudited, dollars in millions except per-share amounts)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 6,805 $ 5,367 $ 4,143 $ 1,074 $ 744
Operating profit 482 253 54 160 151
Other income (expense), net 43 74 55 152 (131)
Interest expense (370) (386) (401) (184) (26)
Income (loss) from
Continuing Operations
before income taxes and
minority interest 155 (59) (292) 128 (6)
Income tax (expense)
benefit (161) (73) 71 (75) 1
Income (loss) from
Continuing Operations (12) (131) (221) 47 (10)
Income (loss) from
Discontinued Operations -- 680 409 (57) 58
Extraordinary item (9) -- (93) -- --
Net income (loss) (21) 549 95 (10) 48
- -----------------------------------------------------------------------------------------------------------------
Basic and diluted earnings
(loss) per common share:
Continuing Operations $ (.02) $ (.24) $ (.67) $ (.09) $ (.27)
Discontinued Operations -- 1.08 1.02 (.16) .16
Extraordinary item (.01) -- (.23) -- --
Basic and diluted earnings
(loss) per common share (.03) .84 .12 (.25) (.11)
Dividends per common share .05 .20 .20 .20 .20
- -----------------------------------------------------------------------------------------------------------------
Total assets:
Continuing Operations $20,139 $16,503 $15,406 $10,391 $2,524
Discontinued Operations 1,919 4,101 5,710 8,157 9,273
Total assets 22,058 20,604 21,116 18,548 11,797
Long-term debt:
Continuing Operations 2,506 3,236 5,147 7,222 1,865
Discontinued Operations 382 440 419 161 589
Total debt:
Continuing Operations 2,665 3,387 5,635 7,840 2,471
Discontinued Operations 428 543 439 528 1,266
Shareholders' equity 9,054 8,080 5,731 1,453 1,789
- -----------------------------------------------------------------------------------------------------------------
Average common and common
equivalent shares
outstanding (if dilutive) 696,434,970 629,205,801 400,512,154 369,612,697 354,580,674
Market price range per
share $36-5/8 - 18 $32-1/16 - 16 $21-1/8 - 15-3/8 $17-7/8 - 12-1/8 $15-1/4 - 10-7/8
Market price at year end 32-13/16 29-7/16 19-7/8 16-3/8 12-1/4
Common shareholders at
year end 113,024 122,548 127,802 125,962 125,376
Average number of
employees:
Continuing Operations 18,934 13,581 9,353 3,819 2,588
Discontinued Operations 27,255 37,863 49,922 73,994 81,811
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Previously reported financial information has been restated to reflect the
reclassification of certain businesses as Discontinued Operations.
50 CBS CORPORATION
<PAGE> 51
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Part of the information concerning executive officers required by this item is
set forth in Part I pursuant to General Instruction G to Form 10-K and part is
incorporated herein by reference to "Security Ownership" in the Proxy Statement.
The information as to directors is incorporated herein by reference to "Election
of Directors" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein by reference to
"Director Compensation" and "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated herein by reference to
"Security Ownership" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated herein by reference to
"Related Party Transactions" in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) FINANCIAL STATEMENTS
The financial statements required by this item are listed under Part II, Item 8,
which list is incorporated herein by reference.
(a)(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule for CBS Corporation and the
Independent Auditors' Reports thereon are included in Part IV of this report:
<TABLE>
<CAPTION>
PAGES
----
<S> <C>
Independent Auditors' Report on Financial Statement Schedule 55
For the three years ended December 31, 1998: Schedule
II--Valuation and Qualifying Accounts 56
</TABLE>
Other schedules are omitted because they are not applicable or because the
required information is included in the financial statements or notes thereto.
<TABLE>
<S> <C> <C> <C>
(a)(3) EXHIBITS
(3) Articles of Incorporation and Bylaws
(a) The Restated Articles of the Corporation, as amended to
December 11, 1997, are incorporated herein by reference to
Exhibit 3(b) to Form 10-K for the year ended December 31,
1997.
(b) The Bylaws of the Corporation, as amended to March 11, 1999.
(4) Rights of Security Holders
(a) There are no instruments with respect to long-term debt of
the Corporation that involve securities authorized
thereunder exceeding 10 percent of the total assets of the
Corporation and its subsidiaries on a consolidated basis.
The Corporation agrees to provide to the Securities and
Exchange Commission, upon request, a copy of instruments
defining the rights of holders of long-term debt of the
Corporation and its subsidiaries.
</TABLE>
CBS CORPORATION 51
<PAGE> 52
<TABLE>
<S> <C> <C> <C>
(b) Rights Agreement is incorporated herein by reference to
Exhibit 1 to Form 8-A filed with the Securities and Exchange
Commission on January 9, 1996.
(10) Material Contracts
(a*) The CBS Corporation 1998 Executive Annual Incentive Plan is
incorporated herein by reference to Exhibit A to the
Corporation's Definitive Proxy Statement for the Annual
Meeting of Shareholders held on May 6, 1998, as filed with
the Commission on March 25, 1998.
(b*) The Annual Performance Plan, as amended to November 1, 1996,
is incorporated herein by reference to Exhibit 10(a) to Form
10-Q for the quarter ended September 30, 1996.
(c*) The 1993 Long-Term Incentive Plan, as amended to January 28,
1998, is incorporated herein by reference to Exhibit 10(b)
to Form 10-K for the year ended December 31, 1997.
(d*) The 1991 Long-Term Incentive Plan, as amended to January 28,
1998, is incorporated herein by reference to Exhibit 10(g)
to Form 10-K for the year ended December 31, 1997.
(e*) The 1984 Long-Term Incentive Plan, as amended to November 1,
1996, is incorporated herein by reference to Exhibit 10(c)
to Form 10-Q for the quarter ended September 30, 1996.
(f*) Amended and restated Infinity Broadcasting Corporation Stock
Option Plan is incorporated herein by reference to Exhibit
4.4 to the Corporation's Registration Statement No.
333-13219 on Post-Effective Amendment No. 1 on Form S-8 to
Form S-4 filed with the Securities and Exchange Commission
on January 2, 1997.
(g*) The Westinghouse Executive Pension Plan, as amended as of
August 19, 1998.
(h*) CBS Supplemental Executive Retirement Plan, as amended to
November 15, 1995, is incorporated herein by reference to
Exhibit 10(n) to Form 10-K for the year ended December 31,
1996.
(i*) CBS Bonus Supplemental Executive Retirement Plan, as amended
to November 15, 1995, is incorporated herein by reference to
Exhibit 10(o) to Form 10-K for the year ended December 31,
1996.
(j*) CBS Supplemental Employee Investment Fund, as amended as of
November 24, 1995.
(k*) The Deferred Compensation and Stock Plan for Directors, as
amended as of January 27, 1999.
(l*) The Director's Charitable Giving Program, as amended to
April 30, 1996, is incorporated herein by reference to
Exhibit 10(g) to Form 10-Q for the quarter ended June 30,
1996.
(m*) Advisory Director's Plan Termination Fee Deferral Terms and
Conditions, dated April 30, 1996, is incorporated herein by
reference to Exhibit 10(i) to Form 10-Q for the quarter
ended June 30, 1996.
(n*) Employment Agreement between the Corporation and Mel
Karmazin, made as of June 20, 1996 and effective as of
December 31, 1996, is hereby incorporated by reference to
Exhibit 10(s) to Form 10-Q for the quarter ended March 31,
1997.
(o*) Infinity Broadcasting Corporation Warrant Certificate No. 3
to Mel Karmazin is incorporated herein by reference to
Exhibit 4.6 to the Corporation's Registration Statement No.
333-13219 on Post-Effective Amendment No. 1 on Form S-8 to
Form S-4 filed with the Securities and Exchange Commission
on January 2, 1997.
(p*) Employment Agreement between a subsidiary of the
Corporation, CBS Broadcasting, Inc. (formerly CBS Inc.) and
Leslie Moonves entered into as of May 17, 1995, and amended
as of January 20, 1998 is incorporated herein by reference
to Exhibit 10(u) to Form 10-K for the year ended December
31, 1997.
(q*) Employment Agreement between the Corporation and Fredric G.
Reynolds is incorporated herein by reference to Exhibit
10(j) to Form 10-K for the year ended December 31, 1994.
(r) The $5.5 billion Credit Agreement among the Corporation, the
Lenders parties thereto, NationsBank, N.A. and The
Toronto-Dominion Bank as Syndication Agents, The Chase
Manhattan Bank as Documentation Agent, and Morgan Guaranty
Trust Company of New York as Administrative Agent, dated
August 29, 1996, is incorporated herein by reference to
Exhibit 10(l) to Form 10-Q for the quarter ended September
30, 1996.
</TABLE>
52 CBS CORPORATION
<PAGE> 53
<TABLE>
<S> <C> <C> <C>
(s) First Amendment, dated as of January 29, 1997 to the Credit
Agreement, dated as of August 29, 1996, among CBS
Corporation, the Lenders parties thereto, NationsBank, N.A.
and The Toronto-Dominion Bank as Syndication Agents, The
Chase Manhattan Bank as Documentation Agent, and Morgan
Guaranty Trust Company of New York as Administrative Agent,
is hereby incorporated by reference to Exhibit 10(p) to Form
10-Q for the quarter ended March 31, 1997.
(t) Second Amendment, dated as of March 21, 1997, to the Credit
Agreement, dated as of August 29, 1996, as amended by the
First Amendment thereto dated as of January 29, 1997, among
the Corporation, the Subsidiary Borrowers parties thereto,
the Lenders parties thereto, NationsBank, N.A. and The
Toronto-Dominion Bank as Syndication Agents, The Chase
Manhattan Bank as Documentation Agent, and Morgan Guaranty
Trust Company of New York as Administrative Agent, is hereby
incorporated by reference to Exhibit 10(q) to Form 10-Q for
the quarter ended March 31, 1997.
(u) Third Amendment dated as of March 3, 1998, to the Credit
Agreement dated as of August 29, 1996, as amended by the
First Amendment thereto dated as of January 29, 1997, as
amended by the Second Amendment thereto dated as of March
21, 1997 among the Corporation, the Subsidiaries Borrowers
parties thereto, the Lenders parties thereto, NationsBank,
N.A. and The Toronto-Dominion Bank as Syndication Agents,
The Chase Manhattan Bank as Documentation Agent, and Morgan
Guaranty Trust Company of New York as Administrative Agent
is incorporated by reference to Exhibit 10(x) to Form 10-Q
for the quarter ended March 31, 1998.
(v) Asset Purchase Agreement, dated June 25, 1998, between the
Corporation and WGNH Acquisition, LLC, an entity owned 60
percent by Morrison Knudson Corporation and 40 percent by
BNFL USA Group, Inc., relating to the Corporation's Energy
Systems Business Unit is incorporated by reference to
Exhibit 10(w) to Form 10-Q for the quarter ended June 30,
1998.
(w) Asset Purchase Agreement, dated June 25, 1998, between the
Corporation and WGNH Acquisition, LLC, an entity owned 60
percent by Morrison Knudson Corporation and 40 percent by
BNFL USA Group, Inc., relating to the Corporation's
Government and Environmental Services Company is
incorporated by reference to Exhibit 10(x) to Form 10-Q for
the quarter ended June 30, 1998.
(x) Intercompany Agreement between CBS Corporation and Infinity
Broadcasting Corporation dated as of December 15, 1998.
(y) Tax Sharing Agreement between CBS Corporation and Infinity
Broadcasting Corporation dated as of December 15, 1998.
(21) Subsidiaries of the Registrant
(23) Consent of Independent Auditors
(24) Power of Attorney and Extract of Resolutions of Board of Directors
(27) Financial Data Schedule
</TABLE>
* Identifies management contract or compensatory plan or arrangement.
CBS CORPORATION 53
<PAGE> 54
(b) REPORTS ON FORM 8-K
A Current Report on Form 8-K (Items 5 and 7) dated October 28, 1998, announcing
Mel Karmazin to succeed Michael H. Jordan as Chief Executive Officer of CBS
Corporation, effective January 1, 1999.
A Current Report on Form 8-K (Items 5 and 7) dated October 29, 1998, filing a
press release concerning the Corporation's earnings for the third quarter of
1998.
A Current Report on Form 8-K (Items 5 and 7) dated December 30, 1998, announcing
the election of David T. McLaughlin as non-executive Chairman of CBS
Corporation, effective January 1, 1999.
54 CBS CORPORATION
<PAGE> 55
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CBS CORPORATION
Under date of January 27, 1999, we reported on the consolidated balance sheet of
CBS Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income and comprehensive income, cash flows,
and shareholders' equity, for each of the years in the three year period ended
December 31, 1998, which are included in the 1998 Annual Report on Form 10-K. In
connection with our audits of the aforementioned consolidated financial
statements, we have also audited the related consolidated financial statement
schedule included in the 1998 Annual Report on Form 10-K. The consolidated
financial statement schedule is the responsibility of the Corporation's
management. Our responsibility is to express an opinion on this consolidated
financial statement schedule based on our audits.
In our opinion, the December 31, 1998, 1997, and 1996 consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ KPMG LLP
- ---------------------
KPMG LLP
New York, New York
January 27, 1999
CBS CORPORATION 55
<PAGE> 56
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
CUSTOMER RECEIVABLES FROM CONTINUING OPERATIONS -
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Balance at beginning of year $ 35 $ 27 $ 20
Charged to costs and expenses 21 12 8
Increase resulting from business acquisitions 8 7 7
Write-offs, net of recoveries (16) (11) (8)
- -----------------------------------------------------------------------------------------
Balance at end of year $ 48 $ 35 $ 27
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
DEFERRED INCOME TAXES -- VALUATION ALLOWANCE:
Balance at beginning of year $137 $ 52 $ 98
Charged to costs and expenses, net of reclassification (53) 85(a) 3
Decrease resulting from business divestitures -- -- (49)
- -----------------------------------------------------------------------------------------
Balance at end of year $ 84 $137 $ 52
- -----------------------------------------------------------------------------------------
</TABLE>
(a) Relates to foreign tax credit carryforwards not expected to be realized.
56 CBS CORPORATION
<PAGE> 57
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 24th day of March,
1999.
CBS CORPORATION
By: /s/ ROBERT G. FREEDLINE
---------------------------------------
Robert G. Freedline
Vice President and
Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
SIGNATURE AND TITLE
Robert E. Cawthorn, Director
George H. Conrades, Director
Martin C. Dickinson, Director
Robert G. Freedline, Vice President and Controller
(principal accounting officer)
William H. Gray III, Director
Mel Karmazin, President and Chief Executive Officer
and Director (principal executive officer)
Jan Leschly, Director
David T. McLaughlin, Chairman and Director
Richard R. Pivirotto, Director
Fredric G. Reynolds, Executive Vice President and
Chief Financial Officer (principal financial officer)
Raymond W. Smith, Director
Dr. Paula Stern, Director
Robert D. Walter, Director
CBS CORPORATION
By: /s/ ROBERT G. FREEDLINE
---------------------------------------
Robert G. Freedline
Vice President and
Controller
Original powers of attorney authorizing Robert G. Freedline and certain others,
individually, to sign this report on behalf of the listed directors and officers
of the Corporation and a certified copy of resolutions of the Board of Directors
of the Corporation authorizing Robert G. Freedline and certain others to sign on
behalf of the Corporation have been filed with the Securities and Exchange
Commission and are included as Exhibit 24 to this report.
CBS CORPORATION 57
<PAGE> 1
EXHIBIT 3(b)
BY-LAWS
OF
CBS CORPORATION
--------
AS AMENDED TO
MARCH 11, 1999
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
Article I Meetings of Shareholders................................1
Article II Board of Directors - Committees -
Their Powers and Duties.................................8
Article III Contributions..........................................11
Article IV Election and Term of Chairman of
the Board and Officers.................................11
Article V Meetings of Directors..................................12
Article VI Chairman of the Board..................................15
Article VII President; Chief Executive Officer.....................15
Article VIII Secretary..............................................16
Article IX Treasurer..............................................16
Article X Assistant Secretary, Assistant Treasurer
and Other Officers.....................................17
Article XI Corporate Seal.........................................18
Article XII Certificates of Stock..................................18
Article XIII Transfers of Stock.....................................18
Article XIV Rights.................................................19
Article XV Fiscal Year............................................20
Article XVI Certain Issues of Stock................................20
Article XVII Indemnification........................................21
Article XVIII Director Liability.....................................28
Article XIX Pennsylvania Opt Out...................................29
Article XX Amendments.............................................29
Article XXI Confidentiality in Voting..............................30
<PAGE> 3
BY-LAWS
OF
CBS CORPORATION
------------
ARTICLE I
MEETINGS OF SHAREHOLDERS
The annual meeting of the shareholders of the Company shall be held on
such date and at such hour as the Board of Directors may designate and on any
subsequent day or days to which such meeting may be adjourned, for the purpose
of electing directors and for the transaction of such other business as may
lawfully come before the meeting. If for any reason the annual meeting shall not
have been held on the day designated by the Board or on the day specified above,
the Board of Directors shall cause the annual meeting to be called and held as
soon thereafter as may be convenient.
At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting.
Subject to the rights of the holders of any class or series of stock
having a preference over the common stock of the Company as to dividends or upon
liquidation to elect additional directors under specified circumstances and to
the other provisions of this Article I, nominations for the election of
directors may be made by the Board of Directors or by any shareholder entitled
to vote for the election of directors.
Special meetings of the shareholders of the Company may be called at
any time, for the purpose or purposes set forth in the call, by the Board of
Directors or by the Chairman, to be held on such date as the Board or the
Chairman determines. Only such
-1-
<PAGE> 4
matter or matters as are specified in the Company's notice of meeting, or any
supplement thereto, delivered at the direction of the Board of Directors or the
Chairman, and matters which are incidental or germane thereto, shall be acted
upon at a special meeting of shareholders.
Notice of Shareholder Business and Nominations.
-----------------------------------------------
(i) Subject to the rights of the holders of any class or series of
stock having a preference over the Common Stock of the Company as to dividends
or upon liquidation to elect additional directors under specified circumstances,
nominations of persons for election to the Board of Directors may be made at an
annual meeting of shareholders or at a special meeting of shareholders at which
directors are to be elected pursuant to the Company's notice of meeting and the
proposal of other business to be considered by the shareholders may be made at
an annual meeting of shareholders or, where proposed by the Board or the
Chairman in the Company's notice of meeting, at a special meeting, (a) pursuant
to the Company's notice of meeting, or any supplement thereto, delivered by or
at the direction of the Board of Directors, (b) otherwise by or at the direction
of the Board of Directors or (c) in the case of election of directors at an
annual meeting or at a special meeting pursuant to the Company's notice of
meeting and in the case of other business only at an annual meeting, by any
shareholder of the Company who is entitled to vote for the election of directors
or with respect to such other business, as the case may be, at the meeting, who
complies with the procedures set forth in clauses (ii) and (iii) of this Notice
Section, and who is a shareholder of record at the time the notice required by
such procedures is delivered to the Secretary of the Company and at the time of
the meeting.
(ii) For nominations for the election of directors to be properly
brought by a shareholder before an annual meeting or a special meeting at which
directors are to be
-2-
<PAGE> 5
elected pursuant to the Company's notice of meeting or for other business to be
properly brought by a shareholder before an annual meeting, in either case
pursuant to (i)(c) of this Notice Section, the shareholder must have given
timely notice thereof in writing to the Secretary of the Company and the
shareholder must be entitled by Pennsylvania law to present such business at the
meeting. To be timely, a shareholder's notice must be delivered to the Secretary
at the principal executive offices of the Company: (a) in the case of an annual
meeting, for receipt not less than 90 days nor more than 120 days prior to the
first anniversary of the preceding year's annual meeting; provided, however, in
the event that the date of the annual meeting is advanced by more than 30 days,
or delayed by more than 90 days, from such anniversary date, notice by the
shareholder to be timely must be so delivered not earlier than the 120th day
prior to such annual meeting and not later than the close of business on the
later of the 90th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made; and
(b) with respect to the nomination of a person or persons (as the case may be)
for election to such position(s) as are specified in the Company's notice of
meeting in the case of a special meeting, for receipt no more than 120 days
prior to the date of such special meeting and no later than the 90th day prior
to the date of such special meeting or the 10th day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event will the public announcement of an adjournment or postponement of an
annual or special meeting commence a new time period for the giving of a
shareholder's notice as described in this Notice Section. Such shareholder's
notice shall set forth (1) as to each person whom the shareholder proposes to
nominate for election or reelection as a director, a description of all
arrangements or understandings
-3-
<PAGE> 6
between the shareholder and each proposed nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder, and all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest or is otherwise required in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14a-11 thereunder (or any successor to
such rules or regulations), including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected; (2) as to any other business that the shareholder proposes to bring
before an annual meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting, any material interest in such business of such shareholder and the
beneficial owner, if any, on whose behalf the proposal is made, and, in the
event that such business includes a proposal to amend the By-laws of the
Company, the language of the proposed amendment; and (3) as to the shareholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such shareholder, as
they appear on the Company's books, and of such beneficial owner, (ii) the class
and number of shares of the Company which are owned beneficially and of record
by such shareholder and such beneficial owner, and (iii) a representation that
the shareholder is and intends to remain a shareholder of record of stock of the
Company entitled to vote at the meeting and intends to appear in person at the
meeting to make the nomination(s) or propose such business.
(iii) Notwithstanding anything in (ii)(a) of this Notice Section to the
contrary, in the event that the number of directors to be elected to the Board
of Directors is increased
-4-
<PAGE> 7
and there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the Company at
least 100 days prior to the first anniversary of the preceding year's annual
meeting, a shareholder's notice required by this Notice Section shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it is delivered to the Secretary at the principal
executive offices of the Company for receipt not later than the close of
business on the 10th calendar day following the day on which such public
announcement is first made by the Company.
(iv) For purposes of this Notice Section, "public announcement" means
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news serviced or in a document publicly filed by
the Company with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
Subject to the rights of the holders of any class or series of stock
having a preference over the common stock of the Company as to dividends or upon
liquidation to elect additional directors under specified circumstances, only
persons who are nominated in accordance with the procedures set forth in the
above Notice Section will be eligible to be elected as directors at a meeting of
shareholders and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Article I. Except as otherwise provided by law,
the Restated Articles of Incorporation of the Company or these By-laws, the
Chairman (or the chairman of any shareholder meeting) will have the power and
duty to determine whether a nomination or any business proposed to be brought
before the meeting was made in accordance with the procedures set forth in this
Article I and, if any proposed
-5-
<PAGE> 8
nomination or business is not in compliance with this Article I, to declare that
such defective proposal or nomination will be disregarded.
Notwithstanding the foregoing provisions of this Article I, a
shareholder must also comply with all applicable requirements of Pennsylvania
law and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in the foregoing provisions. Nothing in this
Article I will be deemed to affect any rights of shareholders to request
inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8
under the Exchange Act, or any successor thereto.
Every meeting of the shareholders, annual or special, shall be held at
such place within or without the Commonwealth of Pennsylvania as the Board of
Directors may designate or, in the absence of such designation, at the
registered office of the Company in the Commonwealth of Pennsylvania.
Written notice of every meeting of the shareholders shall be given by,
or at the direction of, the person authorized to call the meeting, to each
shareholder of record entitled to vote at the meeting, at the shareholder's
address appearing on the books of the Company. The notice of every meeting of
the shareholders shall specify the place, day and hour of the meeting and, in
the case of a special meeting, the matter or matters to be acted upon at such
meeting. Only the matter or matters specified in the notice of a special meeting
shall be acted upon thereat. All notices of meetings of the shareholders shall
be provided in accordance with Pennsylvania law.
The notice of every meeting of the shareholders may be accompanied by a
form of proxy approved by the Board of Directors in favor of such person or
persons as the Board of Directors may select.
-6-
<PAGE> 9
Except as otherwise provided by law or by the Restated Articles of the
Company, as from time to time amended (hereinafter called the Articles of the
Company), or by these By-laws, the presence in person or by proxy of
shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast on a particular matter shall constitute a
quorum at the meeting of shareholders, and all questions shall be decided by a
majority of the votes cast, in person or by proxy, at a duly organized meeting
by the holders of shares entitled to vote thereon. The shareholders present at
any duly organized meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Any meeting of the shareholders may be adjourned from time to time,
without notice other than by announcement at the meeting at which such
adjournment is taken, and at any such adjourned meeting at which a quorum shall
be present any action may be taken that could have been taken at the meeting
originally called; provided, that any meeting at which directors are to be
elected shall be adjourned only from day to day, or for such longer periods, not
exceeding fifteen days each, as the holders of a majority of the shares present
in person or by proxy shall direct, until such directors have been elected.
If a meeting cannot be organized because of lack of a quorum, those
present may, except as otherwise provided by law, adjourn the meeting to such
time and place as they may determine, but in the case of any meeting called for
the election of directors those who attend the second of such adjourned
meetings, although less than a quorum, shall nevertheless constitute a quorum
for the purpose of electing directors.
At each meeting, each shareholder entitled to vote may vote in person or
by proxy executed in writing by the shareholder or by his or her duly authorized
attorney-in-fact and filed with the Secretary of the Company. Except as
otherwise provided by law or the
-7-
<PAGE> 10
Articles of the Company or these By-laws, each holder of record of shares of any
class of the Company shall be entitled to one vote, on each matter submitted to
a vote at a meeting of the shareholders, and in respect of which shares of such
class shall be entitled to be voted, for every share of such class standing in
his or her name on the books of the Company.
ARTICLE II
BOARD OF DIRECTORS - COMMITTEES -
THEIR POWERS AND DUTIES
The business, affairs and property of the Company shall be managed and
controlled by a Board of Directors, which, except as otherwise provided by law
or the Articles of the Company, shall exercise all the powers of the Company.
The number, qualifications, manner of election, time and place of meeting,
compensation and powers and duties of the directors of the Company shall be
fixed from time to time by or pursuant to these By-laws. Nominees for election
to the Board of Directors who qualify as Independent Directors on the date of
their nomination shall be such that the majority of all directors holding office
immediately after such nomination, assuming the election of such nominees, shall
be Independent Directors.
The number of directors which shall constitute the Board of Directors
shall be fixed from time to time by a vote of a majority of the Board of
Directors, provided, however, that the number of directors of the Company shall
be not less than three nor more than twenty-four. The shareholders shall, at
each annual meeting, elect directors, each of whom shall serve until the annual
meeting of shareholders next following his or her election and until his
successor is elected and shall qualify; provided, however, that
-8-
<PAGE> 11
directors with terms expiring at the annual meetings of shareholders to be held
in 1994 and 1995 shall serve until the expiration of their respective terms.
Each election of directors by the shareholders shall be conducted by one
or three judges of election appointed by the Board of Directors in advance of
the meeting to act at that meeting and at any adjournment thereof. If any or all
of such appointees shall fail to appear or fail or refuse to act, the vacancy or
vacancies shall be filled by the Board of Directors or the presiding officer of
the meeting. No person who is a candidate for office to be filled at the meeting
shall act as a judge.
Except as the law may otherwise provide, the shareholders shall not
remove any director from office without assigning any cause (as such term is
defined in the Articles) prior to the expiration of the term of office unless
holders of at least 80% of the shares of capital stock of the Company entitled
to vote thereon, vote to remove the director from office.
In case of any vacancy in the Board of Directors through death,
resignation, disqualification, removal, increase in the number of directors or
other cause, the remaining directors, though less than a quorum, by affirmative
vote of a majority thereof or by a sole remaining director, may fill such
vacancy to serve for the balance of the unexpired term and until his or her
successor shall have been elected and qualified; provided, however, that any
director elected to fill a vacancy for a director having a term expiring at the
annual meeting of shareholders to be held in 1994 or 1995 shall serve only until
the annual election of shareholders next following his or her election.
There shall be a Compensation Committee, an Audit Review Committee, a
Finance Committee, a Public Policy Committee, and a Nominating and Governance
Committee. The Compensation Committee may determine to retain an independent
compensation
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consultant to assist it in carrying out its duties. Each of these committees
shall consist of not less than two members of the Board of Directors, at least
two of whom, on the date of their appointment to the committee, are Independent
Directors. All members of the Compensation Committee, the Nominating and
Governance Committee and the Public Policy Committee must, on the date of their
appointment to said committee, be Independent Directors. With respect to each
such committee, the Board of Directors shall, by one or more resolutions adopted
by a majority of the whole Board, determine the duties and responsibilities,
determine the number of members, appoint the members and the committee chair and
fill each vacancy occurring in the membership.
The Board of Directors may from time to time appoint such further
standing or special committees as it may deem in the best interest of the
Company, but no such committee shall have any powers, except such as are
expressly conferred upon it by the Board. Each committee referred to in this
Article II shall act only as a committee and the individual members shall have
no power as such.
Each director shall be entitled to receive from the Company such annual
and other fees and compensation as the Board of Directors shall from time to
time determine and to be reimbursed for his reasonable expenses in connection
with attendance at meetings. Nothing herein contained shall preclude any
director from serving the Company or its subsidiaries in any other capacity and
receiving compensation therefor.
For purposes of this Article II, the term "Independent Director" shall
mean a director who: (a) is not and has not been employed by the Company or a
subsidiary in an executive capacity within the five years immediately prior to
the annual meeting at which he or she will be voted upon; (b) is not an employee
or five percent or more owner of an entity that is a regular advisor or
consultant to the Company or its subsidiaries; (c) is not
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an employee or five percent or more owner of a significant customer or supplier
of the Company or its subsidiaries; (d) does not have a personal services
contract with the Company or its subsidiaries; (e) is not employed by a
tax-exempt organization that receives significant contributions from the Company
or its subsidiaries; and (f) is not a spouse, parent, sibling, child,
parent-in-law, brother or sister-in-law or son or daughter-in-law of an officer
of the Company.
The Board of Directors shall have the exclusive right and power to
interpret and apply the provisions of this Article II, including, without
limitation, the adoption of written definitions of terms used in and guidelines
for its application (any such definitions and guidelines shall be filed with the
Secretary, and such definitions and guidelines as may prevail shall be made
available to any shareholder upon written request). Any such definitions or
guidelines and any other interpretation or application of the provisions of this
Article II made in good faith shall be binding and conclusive.
ARTICLE III
CONTRIBUTIONS
The Board of Directors shall have the power, at any time and from time
to time, to make contributions and donations for the public welfare or for
religious, charitable, scientific or educational purposes.
ARTICLE IV
ELECTION AND TERM OF
CHAIRMAN OF THE BOARD AND OFFICERS
The Board of Directors shall elect a Chairman of the Board, who may be
designated an officer of the Company, a President or a Chief Executive Officer
or both, such Vice
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Presidents as may from time to time be necessary or desirable, a Secretary and a
Treasurer. There shall also be one or more assistant secretaries and treasurers
and such other officers and assistant officers as the Board may deem
appropriate. The Board of Directors shall elect all officers, except assistant
officers.
The term of office for all officers shall be until the organization
meeting of the Board of Directors following the next annual meeting of
shareholders and until their respective successors are elected or appointed and
shall qualify, or until their earlier death, resignation or removal. The
Chairman of the Board or any officer may be removed from office, either with or
without cause, at any time by the affirmative vote of the majority of the
members of the Board then in office. A vacancy in any office arising from any
cause may be filled for the unexpired term by the Board.
ARTICLE V
MEETINGS OF DIRECTORS
Regular meetings of the Board of Directors shall be held without notice
at such place or places either within or without the Commonwealth of
Pennsylvania, at such hour and on such day as may be fixed by resolution of the
Board of Directors.
The Board of Directors shall meet for organization at its first regular
meeting after the annual meeting of shareholders or at a special meeting of the
Board of Directors called after the annual meeting of shareholders and prior to
said first regular meeting. If no special meeting of the Board of Directors for
organization shall be called, all provisions of these By-laws in respect of
notice of special meetings of the Board of Directors shall apply to the first
regular meeting of the Board of Directors held after the annual meeting of
shareholders.
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Special meetings of the Board of Directors shall be held, whenever
called by the Chairman or by four directors or by resolution adopted by the
Board of Directors, at such place or places either within or without the
Commonwealth of Pennsylvania as may be stated in the notice of the meeting.
Notice of the time and place of all special meetings of the Board of
Directors, and notice of any change in the time or place of holding the regular
meetings of the Board of Directors, shall be given to each director in person,
by telephone, or by sending a copy thereof by first class or express mail,
postage prepaid, or by telegram (with messenger service specified), telex or TWX
(with answerback received) or courier service, charges prepaid, or by facsimile
transmission, or by any type of electronic communication to the address (or to
the telephone, telex, TWX, fax or other number or address) supplied by the
director to the Corporation for the purpose of notice at least one day before
the day of the meeting; provided, however, that notice of any meeting need not
be given to any director if waived by such director in writing, whether before
or after the time stated therein, or if such director shall be present at the
beginning of such meeting and does not object to the transaction of business
because the meeting was not lawfully called or convened. If the notice is sent
by mail, telegraph or courier service, it shall be deemed to have been given to
the director when deposited in the United States mail or with a telegraph office
or courier service for delivery to the director or, in the case of telex, TWX,
fax or other electronic communication, it shall be deemed to have been given to
the director when dispatched. In the absence of any resolution of the Board of
Directors or any committee governing rules of procedure to the contrary, notice
of meetings of any committee referred to or provided for in these By-laws shall
follow the same procedures as those set forth in these By-laws for meetings of
the Board of Directors.
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Except as otherwise provided in these By-laws, a majority of the
directors in office shall constitute a quorum of the Board competent to transact
business; but a lesser number may adjourn from day to day until a quorum is
present. Except as otherwise provided in these By-laws, all questions shall be
decided by a vote of a majority of the directors present.
All or any number less than all of the directors may participate in a
meeting of the Board of Directors or of a committee of the Board of Directors by
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
Each committee referred to or provided for in these By-laws shall have
authority, except as may otherwise be required by law or by resolution of the
Board of Directors, to fix its own rules of procedure and to meet where and as
provided by such rules. The presence at any meeting of any such committee of a
majority of the members, including alternate members thereof, shall be necessary
to constitute a quorum for the transaction of business and in every case the
affirmative vote of a majority of such members present at any meeting shall be
necessary for the adoption of any resolution of such committee. In the absence
or disqualification of any member of such committee or committees, the member or
members thereof, including alternate members, present at any meeting and not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another director to act at the meeting in the place of
any such absent or disqualified member.
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ARTICLE VI
CHAIRMAN OF THE BOARD
The Chairman of the Board shall preside at all meetings of the Board of
Directors at which he or she is present and shall call meetings of the Board and
Board committees when he or she deems them necessary. Unless otherwise precluded
from doing so by these By-laws, the Chairman of the Board may be a member of the
committees of the Board. He or she shall act as chairman at all meetings of the
shareholders at which he or she is present unless he or she elects that the
Chief Executive Officer shall so preside. The Chairman of the Board may be
designated by the Board as an officer of the Company and may be elected by the
Board as the Chief Executive Officer. The Chairman of the Board shall perform
all duties as may be assigned to him or her by the Board of Directors.
ARTICLE VII
PRESIDENT; CHIEF EXECUTIVE OFFICER
The President shall have such powers and duties as may, from time to
time, be prescribed by the Board of Directors or the Chairman of the Board.
Unless the Board of Directors shall otherwise direct, the President shall be the
Chief Executive Officer of the Company. In the absence of the Chairman of the
Board, the President or, if none, the Chief Executive Officer shall perform the
duties and have the powers of the Chairman of the Board, as determined by the
Board of Directors.
The Chief Executive Officer shall have general charge of the affairs of
the Company, subject to the control of the Board of Directors. He or she may
appoint all officers and employees of the Company for whose election no other
provision is made in these By-laws, and may discharge or remove any officer or
employee, subject to action thereon
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by the Board of Directors as required by these By-laws. The Chief Executive
Officer shall be the officer through whom the Board delegates authority to
corporate management, and shall be responsible to see that all orders and
resolutions of the Board are carried into effect by the proper officers or other
persons. The Chief Executive Officer shall also perform all duties as may be
assigned to him or her by the Board of Directors.
ARTICLE VIII
SECRETARY
The Secretary shall attend meetings of the shareholders and the Board of
Directors, shall keep minutes thereof in suitable books, and shall send out all
notices of meetings as required by law or by these By-laws. He or she shall, in
general, perform all duties incident to the office of the Secretary and perform
such other duties as may be assigned to him or her by the Board, the Chairman of
the Board or the President.
ARTICLE IX
TREASURER
The Treasurer shall have custody of, and shall manage and invest, all
moneys and securities of the Company, and shall have such powers and duties as
generally pertain to the office of Treasurer.
To the extent not invested, the Treasurer shall deposit all moneys in
such banks or other places of deposit as the Board of Directors may from time to
time designate or as may be designated by any officer or officers of the Company
so authorized by resolution of the Board of Directors. Unless otherwise provided
by the Board of Directors, all checks, drafts, notes and other orders for the
payment of money from a disbursing account shall
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<PAGE> 19
be signed by the Treasurer or such person or persons as may be designated by
name by the Treasurer in writing. The Treasurer's signature and, if authorized
by the Treasurer in writing, the signature of such person or persons as may be
designated by the Treasurer as provided above, to a check, draft, note or other
order for the payment of money from a disbursing account may be by facsimile or
other means. Procedures for withdrawal of moneys from accounts other than
disbursing accounts shall be established from time to time by the Treasurer.
The Treasurer shall have such other powers and perform such other duties
as may be assigned by the Board of Directors. The Chief Financial Officer of the
Company shall have all of the powers granted to the Treasurer under these
By-laws, including the power to sign any check, draft, note or other order for
the payment of money from a disbursing account, including by facsimile signature
or other means.
ARTICLE X
ASSISTANT SECRETARY, ASSISTANT TREASURER AND OTHER OFFICERS
In the event of the absence or inability to serve of the Secretary, an
assistant secretary shall perform all the duties of the Secretary; and in the
event of the absence or inability to serve of the Treasurer, an assistant
treasurer shall perform all the duties of the Treasurer.
The powers and duties of other officers of the Company shall be such as
may, from time to time, be prescribed by the Board of Directors, the Chairman of
the Board, the President or the Chief Executive Officer.
In case of the absence of any officer of the Company, or for any other
reason that the Board of Directors may deem sufficient, the Board, or in the
absence of action by the Board, the Chief Executive Officer, or in his or her
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absence, the President, or in his or her absence, the Chairman of the Board, may
delegate for the time being the powers and duties of any officer to any other
officer or to any director.
ARTICLE XI
CORPORATE SEAL
The Company shall have a corporate seal, which shall contain within a
circle the name of the Company, together with the following: "Incorporated
1872".
ARTICLE XII
CERTIFICATES OF STOCK
The shares of stock of the Company shall be represented by certificates
of stock, signed by the President or one of the Vice Presidents or other officer
designated by the Board of Directors, countersigned by the Treasurer or an
assistant treasurer and sealed with the corporate seal of the Company; and if
such certificates of stock are signed or countersigned by a corporate transfer
agent or a corporate registrar of this Company, such signature of the President,
Vice President or other officer, such counter-signature of the Treasurer or
assistant treasurer, and such seal, or any of them, may be executed in
facsimile, engraved or printed.
ARTICLE XIII
TRANSFERS OF STOCK
Transfers of shares of stock of the Company shall be made on the books
of the Company by the holder of record thereof or his or her legal
representative, acting by his or her attorney-in-fact duly authorized by written
power of attorney filed with the Secretary of
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the Company, or with one of its transfer agents, and on surrender for
cancellation of the certificate or certificates for such shares. Except as
otherwise provided in these By-laws, the person in whose name shares of stock
stand on the books of the Company shall be deemed the owner thereof for all
purposes as regards the Company. The Company may have one or more transfer
offices or agencies and/or registrars for the transfer and/or registration of
shares of stock of the Company.
The Board of Directors may fix in advance a time, which shall not be
more than ninety days prior to the date of any meeting of shareholders, or the
date for the payment of any dividend or distribution, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
shares will be made or go into effect, as a record date, for the determination
of the shareholders entitled to notice of, or to vote at, any such meeting, or
entitled to receive payment of any such dividend or distribution, or to receive
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of shares; and in such case only shareholders of
record at the time so fixed as a record date shall be entitled to notice of, or
to vote at, such meeting or to vote at any adjournment thereof, or to receive
payment of such dividend or distribution, or to receive such allotment of
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of stock on the books of the Company after any such record date fixed
as aforesaid.
ARTICLE XIV
RIGHTS
Those rights having the terms provided under the Rights Agreement
between CBS Corporation and First Chicago Trust Company of New York (the "Rights
Agent") dated as
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of December 28, 1995, as it may be amended from time to time (the "Rights" and
the Rights Agreement") and issued to or Beneficially Owned by Acquiring Persons
or their Affiliates or Associates (as such terms are defined in the Rights
Agreement) shall, under certain circumstances as provided in the Rights
Agreement, be null and void and may not be transferred to any person.
ARTICLE XV
FISCAL YEAR
The fiscal year of the Company shall be the calendar year.
ARTICLE XVI
CERTAIN ISSUES OF STOCK
The Company may from time to time issue shares of its stock and may
create and issue (whether or not in connection with the issuance of any of its
shares or other securities) option rights or securities having conversion or
option rights entitling the holders thereof to purchase or acquire shares,
option rights, securities having conversion or option rights, or obligations, of
any class or series, or assets of the Company, or to purchase or acquire from
the Company shares, option rights, securities having conversion or option
rights, or obligations, of any class or series owned by the Company and issued
by any other person. Such shares, rights or securities may be issued to
directors, officers (including assistant officers) or employees of the Company
or any of its subsidiaries or to such other persons as the Company may determine
appropriate.
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ARTICLE XVII
INDEMNIFICATION
A. Indemnification Provisions Applicable to Proceedings Not Covered
by Section B of this Article.
Every person who is or was a director, officer or employee of the
Company, or of any other corporation which he or she serves or served as such at
the request of the Company, shall, in accordance with this Article XVII but not
if prohibited by law, be indemnified by the Company as hereinafter provided
against reasonable expense and any liability paid or incurred by him or her in
connection with or resulting from any threatened or actual claim, action, suit
or proceeding (whether brought by or in the right of the Company or such other
corporation or otherwise), civil, criminal administrative or investigative, in
which he or she may be involved, as a party or otherwise, by reason of his or
her being or having been a director, officer or employee of the Company or such
other corporation, whether or not he or she continues to be such at the time
such expense or liability shall have been paid or incurred.
As used in this Article XVII, the term "expense" shall mean counsel fees
and disbursements and all other expenses (except any liability) relating to any
such claim, action, suit or proceeding, and the term "liability" shall mean
amounts of judgments, fines or penalties against, and amounts paid in settlement
by, a director, officer or employee with respect to any such claim, action, suit
or proceeding.
Any person referred to in the first paragraph of this Article XVII who
has been wholly successful, on the merits or otherwise, with respect to any
claim, action, suit or proceeding of the character described in such first
paragraph shall be reimbursed by the Company for his or her reasonable expense.
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Any other person claiming indemnification under the first paragraph of
this Article XVII shall be reimbursed by the Company for his or her reasonable
expense and for any liability (other than any amount paid to the Company) if a
Referee shall deliver to the Company his or her written finding that such person
acted, in good faith, in what he or she reasonably believed to be the best
interests of the Company, and in addition with respect to any criminal action or
proceeding, reasonably believed that his or her conduct was lawful. The
termination of any claim, action, suit or proceeding by judgment, settlement
(whether with or without court approval), adverse decision or conviction after
trial or upon a plea of guilty or of nolo contendere, or its equivalent, shall
not create a presumption that a director, officer or employee did not meet the
foregoing standards of conduct. The person claiming indemnification shall at the
request of the Referee appear before him or her and answer questions which the
Referee deems relevant and shall be given ample opportunity to present to the
Referee evidence upon which he or she relies for indemnification; and the
Company shall, at the request of the Referee, make available to the Referee
facts, opinions or other evidence in any way relevant for his or her finding
which are within the possession or control of the Company. As used in this
Article XVII, the term "Referee" shall mean independent legal counsel (who may
be regular counsel of the Company), or other disinterested person or persons,
selected to act as such hereunder by the Board of Directors of the Company,
whether or not a disinterested quorum exists.
Any expense incurred with respect to any claim, action, suit or
proceeding of the character described in the first paragraph of this Article
XVII may be advanced by the Company prior to the final disposition thereof upon
receipt of an undertaking made by or
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on behalf of the recipient to repay such amount if it is ultimately determined
that he or she is not indemnified under this Article XVII.
The rights of indemnification provided in this Article XVII shall be in
addition to any rights to which any such director, officer or employee may
otherwise be entitled by contract or as a matter of law and, in the event of
such person's death, such rights shall extend to his or her heirs and legal
representatives.
B. Indemnification Provisions Applicable to Proceedings Based on
Acts or Omissions on or after January 27, 1987.
SECTION 1. Right to Indemnification and Effect of Amendments.
(a) Right to Indemnification. The Company, unless prohibited by
applicable law, shall indemnify any person who is or was a director or officer
of the Company and who is or was involved in any manner (including, without
limitation, as a party or a witness) or is threatened to be made so involved in
any threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
Proceeding) (whether or not the indemnified liability arises or arose from any
threatened, pending or completed Proceeding by or in the right of the Company)
by reason of the fact that such person is or was a director, officer, employee
or agent of the Company, or is or was serving at the request of the Company as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise (including, without limitation, any employee benefit plan) (a
Covered Entity) against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such Proceeding; provided, however, that except as
provided in Section 4(c) of this Article, the foregoing shall not apply to a
director or officer of the Company with respect to a Proceeding that was
commenced by such director or officer.
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Any director or officer of the Company entitled to indemnification as provided
in this Section 1, is hereinafter called an "Indemnitee." Any right of an
Indemnitee to indemnification shall be a contract right and shall include the
right to receive, prior to the conclusion of any Proceeding, payment of any
expenses incurred by the Indemnitee in connection with such Proceeding,
consistent with the provisions of applicable law as then in effect and the other
provisions of this Article.
(b) Effect of Amendments. Neither the alteration, amendment or repeal
of, nor the adoption of a provision inconsistent with, any provision of this
Article (including, without limitation, this Section 1(b)) shall adversely
affect the rights of any director or officer under this Article with respect to
any Proceeding commenced or threatened, or any alleged act or omission, prior to
such alteration, amendment, repeal or adoption of an inconsistent provision,
without the written consent of such director or officer.
SECTION 2. Insurance; Contracts and Funding. The Company may purchase
and maintain insurance to protect itself and any indemnified person against any
expenses, judgments, fines and amounts paid in settlement as specified in
Section 1 or Section 5 of this Article or incurred by any indemnified person in
connection with any Proceeding referred to in such Sections, to the fullest
extent permitted by applicable law as then in effect. The Company may enter into
contracts with any director, officer, employee or agent of the Company or of any
Covered Entity in furtherance of the provisions of this Article and may create a
trust fund, grant a security interest or use other means (including, without
limitation, a letter of credit) to insure the payment of such amounts as may be
necessary to effect indemnification as provided in this Article.
SECTION 3. Indemnification and Not Exclusive Right. The right of
indemnification provided in this Article shall not be exclusive of any other
rights to which any indemnified
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person may otherwise be entitled, and the provisions of this Article shall inure
to the benefit of the heirs and legal representatives of any indemnified person
under this Article and shall be applicable to Proceedings arising from acts or
omissions occurring on or after January 27, 1987.
SECTION 4. Advancement of Expenses; Request for Indemnification;
Remedies; Presumptions and Defenses. In furtherance, but not in limitation of
the foregoing provisions, the following procedures, presumptions and remedies
shall apply with respect to advancement of expenses and the right to
indemnification under this Article:
(a) Advancement of Expenses. All reasonable expenses incurred by or on
behalf of the Indemnitee in connection with any Proceeding (including any
Proceeding commenced by the Indemnitee under Section 4(c) but excluding any
other Proceeding commenced by the Indemnitee) shall be advanced to the
Indemnitee by the Company within 20 days after the receipt by the Company of a
statement or statements from the Indemnitee requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the expenses
incurred by the Indemnitee and, if required by law at the time of such advance,
shall include or be accompanied by an undertaking by or on behalf of the
Indemnitee to repay the amounts advanced if it should ultimately be determined
that the Indemnitee is not entitled to be indemnified against such expenses
pursuant to this Article.
(b) Request for Indemnification. To obtain indemnification under this
Article, an Indemnitee shall submit to the Secretary of the Company a written
request, including such documentation and information as is reasonably available
to the Indemnitee and reasonably necessary to determine whether and to what
extent the Indemnitee is entitled to indemnification (the Supporting
Documentation).
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(c) Remedies; Presumptions and Defenses. If (i) expenses are not
advanced in full within 20 days after receipt by the Company of the statement or
statements and the undertaking (if an undertaking is required by law, By-law,
agreement or otherwise at the time of such advance) required by Section 4(a) of
this Article, or (ii) indemnification is not paid in full within 60 days after
receipt by the Company of the written request for indemnification and Supporting
Documentation required by Section 4(b) of this Article, then the person claiming
advancement of expenses or indemnification shall be entitled to seek judicial
enforcement of the Company's obligation to pay such advancement of expenses or
indemnification. It shall be a defense to any Proceeding seeking judicial
enforcement of the Company's obligation to pay indemnification that the conduct
of the person claiming indemnification was such that under Pennsylvania law the
Company is prohibited from indemnifying such person for the amount claimed. The
Company shall have the burden of proving such defense. Neither the failure of
the Company (including its Board of Directors, independent legal counsel and its
shareholders) to have made a determination prior to the commencement of such
Proceeding that indemnification is proper in the circumstances, nor an actual
determination by the Company (including its Board of Directors, independent
legal counsel or its shareholders) that such indemnification is prohibited by
law, shall be a defense to a Proceeding seeking enforcement of the provisions of
this Article or create a presumption that such indemnification is prohibited by
law. The only defense to any such Proceeding to receive payment of expenses in
advance shall be failure to make an undertaking to reimburse, if such an
undertaking is required by law, By-law, agreement or otherwise. Notwithstanding
the foregoing, the Company may bring an action, in an appropriate court in the
Commonwealth of Pennsylvania or any other court of competent jurisdiction,
contesting
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the right of a person claiming advancement of expenses or indemnification to
receive such advancement or indemnification hereunder because such advancement
or indemnification is prohibited by law; provided, however, that in any such
action the Company shall have the burden of proving that such advancement or
indemnification is prohibited by law.
The Company shall be precluded from asserting in any action or
Proceeding commenced pursuant to this Section 4(c) that the procedure and
presumptions of this Article are not valid, binding and enforceable and shall
stipulate in any such court that the Company is bound by all the provisions of
this Article.
If the person claiming advancement of expenses or indemnification,
pursuant to this Section 4(c), seeks to enforce his or her rights under, or to
recover damages for breach of this Article, that person shall be entitled to
recover from the Company, and shall be indemnified by the Company against, any
expenses actually and reasonably incurred by such person if such person prevails
in such Proceeding. If it shall be determined in such Proceeding that such
person is entitled to receive part but not all of the indemnification or
advancement of expenses sought, the expenses incurred by such person in
connection with such Proceeding shall be prorated accordingly.
SECTION 5. Indemnification of Employees and Agents. Notwithstanding any
other provision or provisions of this Article, the Company, unless prohibited by
applicable law, may indemnify any person other than a director or officer of the
Company who is or was an employee or agent of the Company and who is or was
involved in any manner (including, without limitation, as a party or a witness)
or is threatened to be made so involved in any threatened, pending or completed
Proceeding by reason of the fact that such person is or was a director, officer,
employee or agent of a Covered Entity against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
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actually and reasonably incurred by such person in connection with such
Proceeding. The Company may also advance expenses incurred by such employee or
agent in connection with any such Proceeding, consistent with the provisions of
applicable law as then in effect.
SECTION 6. Severability. If any provision or provisions of this Article
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Article (including, without limitation, all portions of any Section of this
Article containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Article (including, without limitation, all
portions of any Section of this Article containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
ARTICLE XVIII
DIRECTOR LIABILITY
To the fullest extent that the law of the Commonwealth of Pennsylvania,
as it exists on January 27, 1987, or as it may thereafter be amended, permits
the elimination of the liability of directors, no director of the Company shall
be liable for monetary damages for any action taken, or any failure to take any
action. This Article shall not apply to any breach of performance of duty or any
failure of performance of duty by any director occurring prior to January 27,
1987. No amendment to or repeal of this Article shall apply to or have any
effect on the liability or alleged liability of any director of the Company for
or
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<PAGE> 31
with respect to any act or failure to act on the part of such director
occurring prior to such amendment or repeal.
ARTICLE XIX
PENNSYLVANIA OPT OUT
A. "Subsections (e) through (g) of Section 1721, "Board of Directors,"
of Title 15 of the Pennsylvania Consolidated Statutes, or any successor
subsections thereto, shall not be applicable to the Company.
B. Subchapter G, "Control-Share Acquisitions," of Chapter 25, Title 15
of the Pennsylvania Consolidated Statutes, or any successor subchapter thereto,
shall not be applicable to the Company.
C. Subchapter H, "Disgorgement By Certain Controlling Shareholders
Following Attempts to Acquire Control," of Chapter 25, Title 15 of the
Pennsylvania Consolidated Statutes, or any successor subchapter thereto, shall
not be applicable to the Company."
ARTICLE XX
AMENDMENTS
The By-laws of the Company, regardless of whether adopted by the
shareholders or by the Board of Directors, may be altered, amended or repealed
by the Board of Directors, to the extent permitted by applicable law, or,
subject to Article I hereof, by the shareholders. Such action at a meeting of
the Board of Directors shall be taken by the affirmative vote of a majority of
the members of the Board of Directors in office at the time;
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<PAGE> 32
and such action by the shareholders shall be taken by the affirmative vote of
the holders of 80% of the shares of capital stock of the Company entitled to
vote thereon.
These By-laws are subject to any requirements of law, any provisions of
the Articles of the Company, as from time to time amended, and any terms of any
series of preferred stock or any other securities of the Company.
ARTICLE XXI
CONFIDENTIALITY IN VOTING
Shareholders shall be provided permanent confidentiality in all voting,
except as necessary to meet applicable legal requirements. The Company shall
engage the services of an independent third party to receive, inspect, count and
tabulate proxies. A representative of the independent third party shall also act
as a judge of election at the annual meeting of shareholders.
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<PAGE> 1
EXHIBIT 10(g)
WESTINGHOUSE EXECUTIVE PENSION PLAN
As Amended and Restated
Effective August 19, 1998
<PAGE> 2
TABLE OF CONTENTS
-----------------
PAGE
----
Section 1. Definitions 1
Section 2. Qualification for Benefits;
Mandatory Retirement 4
Section 3. Calculation of Executive Pension 5
Supplement
Section 4. Death in Active Service 5
Section 5. Payment of Benefits 6
Section 6. Plan Costs 7
Section 7. Conditions to Receipt of Executive 7
Pension Supplement
Section 8. Administration 7
Section 9. Modification or Termination 8
Section 10. Miscellaneous 9
Section 11. Creditors' Claims 9
Section 12. Change in Control 9
Section 13. Governing Law 11
Section 14. Severability 11
Section 15. Authority to Expand Benefits 12
Appendix A Executive Buy Back 13
Appendix B Rehired Executives 14
Appendix C Amendment to the Westinghouse Executive
Pension Plan for the Sale of PGBU 17
<PAGE> 3
WESTINGHOUSE EXECUTIVE PENSION PLAN
WHEREAS, Westinghouse Electric Corporation ("Westinghouse") established
the Westinghouse Executive Pension Plan (the "Plan") in order to provide
supplemental pension benefits for its eligible employees and their
beneficiaries; and
WHEREAS, the Plan has been established by Westinghouse primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees; and
WHEREAS, the Board of Directors of Westinghouse has determined to amend
the Plan in certain respects;
NOW, THEREFORE, the Plan is hereby amended and restated in its entirety,
effective as of December 4, 1997, as follows:
Section 1. Definitions
----------------------
(a) Administrative Managers. Administrative Managers means the persons
or entities identified from time to time by the chief executive officer of
Westinghouse to serve as administrative managers for the Plan, the Westinghouse
Pension Plan and certain other plans, and to have authority with respect to
administration and all other fiduciary matters with respect to such plans that
are not within the authority of the Financial Managers.
(b) Average Annual Compensation. Average Annual Compensation means the
amount determined by multiplying 12 times the average of the five highest of the
Executive's December l monthly base salaries during the ten year period
immediately preceding the earliest of the Executive's date of death, the
Executive's actual retirement date or the Executive's Normal Retirement Date,
and adding to that product the average of the Executive's five highest annual
incentive compensation awards paid under the Westinghouse Annual Incentive
Programs or equivalent annual program or programs during the ten-year period
ending with the earliest of the year of the Executive's death, the year of the
Executive's actual retirement date or the year of the Executive's Normal
Retirement Date. In the case of an Eligible Affected Employee, the Executive's
Effective Termination Date will be substituted for "actual retirement date" in
determining Average Annual Compensation.
(c) Board. Board means the Board of Directors of Westinghouse.
(d) Credited Service. Credited Service shall have the same meaning as
defined in the Westinghouse Pension Plan, provided for purposes of the Plan it
shall also include such service with a Designated Entity or Designated Group;
but it shall not include any "deemed" service which may be awarded under a
special retirement window or similar arrangements.
(e) Defined contribution plan. When used in the Plan, the term "defined
contribution plan" shall not include (1) the Westinghouse Savings Program or any
similar program of, or made
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<PAGE> 4
available to employees of, an Employer, a Designated Entity or a Designated
Group or (2) any amount received pursuant to a cash or deferred arrangement (as
that term is defined in the Internal Revenue Code of 1986, as amended)
maintained by, or made available to employees of, Westinghouse, an Employer, a
Designated Entity or a Designated Group.
(f) Designated Entity. Designated Entity means an Affiliated Entity or
other entity that has been and is still designated by the Managers as
participating in the Plan.
(g) Designated Group. Designated Group means a group of employees that
has been and is still both defined and designated by the Managers as
participating in the Plan.
(h) Employer. Employer means a participating Employer under the
Westinghouse Pension Plan.
(i) Executive. Executive means any Employee who is employed in a
corporate grade 40 or above position or a comparable position with Westinghouse,
an Employer, a Designated Entity or a Designated Group, or in a position with
Westinghouse, an Employer, a Designated Entity or a Designated Group that is
otherwise determined by the chief executive officer of Westinghouse or the
Managers to be eligible as an Executive position under the Plan based upon the
duties and responsibilities of the position, and the Employee has been so
notified in writing.
By participating in the Westinghouse Executive Pension Plan, an
Executive is also deemed to be a "bona fide executive" and/or "high policymaking
employee," as defined under the federal Age Discrimination in Employment Act, as
amended.
(j) Executive Benefit Service. Executive Benefit Service means the
Executive's total years of Eligibility Service if: (1) the Executive was making
the Maximum Contribution during each of those years; or (2) the Executive (i)
was making the Maximum Contribution during each of those years after the date he
or she first became an Executive and (ii) has complied with the provisions of
the Executive Buy Back process (as set forth in Appendix A of the Plan) as to
those years prior to his or her first becoming an Executive. The Executive
Benefit Service of an Executive who did not make the Maximum Contribution during
those years prior to the date he or she first became an Executive and has not
complied with the Executive Buy Back process will be based solely on the
period(s) of Eligibility Service during which he or she made the Maximum
Contribution.
(k) Executive Pension Base. Executive Pension Base means the amount
determined by multiplying 1.47 percent times Average Annual Compensation times
the number of years of Executive Benefit Service accrued to the earliest of the
Executive's actual retirement date, the Executive's Normal Retirement Date or
the date of the Executive's death; or, in the case of an Eligible Affected
Employee, the Executive's Effective Termination Date. Also, in the case of an
Eligible Affected Employee, in the event that benefits commence under this Plan
prior to age 65, then the Executive Pension Base will be actuarially reduced by
the same percentage that the Executive's benefit under the Westinghouse Pension
Plan would be actuarially reduced for life annuity benefits commencing at the
time.
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<PAGE> 5
(l) Executive Pension Supplement. Executive Pension Supplement means the
pension calculated pursuant to Sections 3 and 4 of this Plan. There will be no
Executive Pension Supplement payable if the Executive's Qualified Plan Benefit
equals or exceeds his or her Executive Pension Base.
(m) Financial Managers. Financial Managers means the persons or entities
identified from time to time by the chief executive officer of Westinghouse to
serve as financial managers for the Plan, the Westinghouse Pension Plan and
certain other plans, and to have authority with respect to establishing
investment policy, appointing, directing, providing guidelines to and monitoring
the performance of investment managers and trustees, establishing funding and
actuarial policies and practices, and managing the funding, cost and financial
aspects of such plans.
(n) Managers. Managers means the Financial Managers and the
Administrative Managers.
(o) Maximum Contribution. Maximum Contribution means: (1) during such
time as the Employee was eligible to participate in the Westinghouse Pension
Plan, the Employee contributed the maximum amount the Employee was permitted to
contribute to the Westinghouse Pension Plan, and (2) during such time as the
Employee was employed by a Designated Entity or as part of a Designated Group,
the Employee (i) contributed the maximum amount the Employee was permitted to
contribute, if any, to that Designated Entity's or Designated Group's defined
benefit pension or defined contribution plan, if any, or to such defined benefit
pension or defined contribution plan as was made available to employees of said
Designated Entity or Designated Group, if any, and (ii) paid Westinghouse an
amount of each of his or her annual incentive compensation awards based on the
maximum Westinghouse Pension Plan contribution formula applied to 50% of said
awards.
(p) Plan. Plan means the Westinghouse Executive Pension Plan.
(q) Qualified Plan Benefit. Qualified Plan Benefit means (1) the annual
amount of pension the Executive has accrued under the Westinghouse Pension Plan
and any applicable defined benefit pension plan of, or made available to
employees of, a Designated Entity or Designated Group based on Credited Service
accumulated up to the earlier of the Executive's actual retirement date or
death, (2) the amount the Executive is entitled to receive on a life annuity
basis for retirement under any applicable defined contribution plan of, or made
available to employees of, a Designated Entity or Designated Group, and (3) in
any case where service included in the Executive's Eligibility Service also
entitles that Executive to benefits under one or more retirement plans (whether
a defined benefit or defined contribution plan or both) of another company, the
amount the Executive is entitled to receive on a life annuity basis for
retirement from those plans; provided, the method of benefit measurement, in the
case of (2) and (3) above, shall be on the basis of procedures determined by the
Administrative Managers on a plan-by-plan basis. The Qualified Plan Benefit does
not include any early pension retirement supplement or any amount received
pursuant to a cash or deferred arrangement (as that term is defined in the
Internal Revenue Code of 1986, as amended) maintained by Westinghouse, an
Employer, a Designated Entity or a Designated Group or any amount received
pursuant to the Westinghouse Savings Program or any similar program of, or made
available to employees of, an Employer, a Designated Entity or a Designated
Group. In the case of an Eligible Affected Employee, the Executive's Effective
Termination Date will be substituted for "actual retirement date" in determining
his or her Qualified Plan Benefit.
-3-
<PAGE> 6
(r) Retirement Eligible. Retirement Eligible means that the Executive is
accruing Eligibility Service and (i) has attained age 65 and completed five or
more years of Eligibility Service, (ii) has attained age 60 and completed 10 or
more years of Eligibility Service, (iii) has attained age 58 and completed 30 or
more years of Eligibility Service, (iv) has satisfied the requirements for an
immediate pension under the Special Retirement Pension provisions of the
Westinghouse Pension Plan, or (v) is an Eligible Affected Employee.
(s) Westinghouse. Westinghouse means Westinghouse Electric Corporation.
(t) Westinghouse Annual Incentive Programs. Westinghouse Annual
Incentive Programs means the Westinghouse Annual Performance Plan, the
Westinghouse Annual Incentive Plan, and the former Westinghouse By-law XVI
Incentive Compensation Program.
(u) Westinghouse Pension Plan Definitions. Terms used in this Plan which
are defined in the Westinghouse Pension Plan, as amended, shall have the same
meanings unless otherwise expressly stated in this Plan.
Section 2. Qualification for Benefits; Mandatory Retirement
------------------------------------------------------------
(a) Qualification for Benefits. Subject to Section 8 and other
applicable provisions hereof, if any, each Executive shall be entitled to the
benefits of this Plan on separation of service from Westinghouse, an Employer, a
Designated Entity or a Designated Group, provided that such Executive: (i) has
been employed in a position that meets the definition of Executive for five or
more continuous years immediately preceding the earlier of the Executive's
actual retirement date or the Executive's Normal Retirement Date; (ii) has made
the Maximum Contribution during each year of Eligibility Service from the date
he or she first became an Executive until the earliest of his or her date of
death, actual retirement date or Normal Retirement Date; (iii) is a participant
in the Westinghouse Pension Plan or in the defined benefit or defined
contribution plan of, or made available to employees of, a Designated Entity or
Designated Group, if any; and (iv) is Retirement Eligible on the date of
voluntary or involuntary separation of service from Westinghouse, an Employer, a
Designated Entity or a Designated Group or, in the case of a Surviving Spouse
benefit, satisfies the requirements for benefits under Section 4 of the Plan. In
the case of an Eligible Affected Employee, the Executive's Effective Termination
Date will be substituted for "actual retirement date" in clauses (i) and (ii)
above, and clause (iv) will not apply.
(b) Mandatory Retirement. Pursuant to this Plan, Westinghouse shall be
entitled, at its option, to retire any Executive who has attained sixty-five
years of age and who, for the two-year period immediately before his or her
retirement, has participated in this Plan, if such Executive is entitled to an
immediate nonforfeitable annual retirement benefit from a pension,
profit-sharing, savings or deferred compensation plan, or any combination of
such plans, of Westinghouse, an Employer or any Affiliated Entity, which equals,
in the aggregate, at least $44,000. The calculation of such $44,000 (or greater)
amount shall be performed in a manner consistent with 29 U.S.C.A. Section
631(c)(2).
-4-
<PAGE> 7
Section 3. Calculation of Executive Pension Supplement
-------------------------------------------------------
The Executive Pension Supplement for an Executive who meets the
qualifications of Section 2 of the Plan retiring on an Early, Normal or Special
Retirement Date shall be calculated as follows:
(a) If the Executive (i) has attained age 60 and completed 10 or more
years of Eligibility Service, (ii) has attained age 65, or (iii) has satisfied
the eligibility requirements for an immediate pension under the Special
Retirement Pension provisions of the Westinghouse Pension Plan, the Executive
Pension Supplement is determined by subtracting the Executive's Qualified Plan
Benefit that would be payable if he or she elected a Life Annuity Option (after
any reduction for early retirement, if applicable) from his or her Executive
Pension Base.
(b) If the Executive has not met the requirements of Section 3(a) above
but has attained age 58 and completed 30 or more years of Eligibility Service,
the Executive Pension Supplement is determined by subtracting the Executive's
Qualified Plan Benefit that would be payable if he or she elected a Life Annuity
Option (before any reduction for retirement prior to age 60) from his or her
Executive Pension Base.
If the Executive is an Eligible Affected Employee, the Executive Pension
Supplement is determined by subtracting the Executive's Qualified Plan Benefit
that would be payable if he or she elected a Life Annuity Option at his or her
Effective Termination Date (after reduction for early retirement) from his or
her Executive Pension Base (also after reduction by the same percentage for
early retirement).
Section 4. Death in Active Service
----------------------------------
(a) Eligibility For an Immediate Benefit. If an Executive dies in active
service and, on his or her date of death, satisfies the requirements of the
Surviving Spouse Benefit for Death Before Retirement provisions of the
Westinghouse Pension Plan and satisfied the requirements of Section 2(a)(ii) and
(iii) at the time of death, a Surviving Spouse benefit shall also be payable
under this Plan if his or her Executive Pension Base exceeds his or her
Qualified Plan Benefit. The duration portion of the requirement of Section 2(i)
of the Plan that the Executive be employed in a position that meets the
definition of Executive for five or more continuous years is waived in this
case.
The Surviving Spouse Benefit under this Section 4(a) shall be the
Executive Pension Supplement reduced in the same manner as though the benefit
were payable under the Westinghouse Pension Plan. For purposes of this
paragraph, the Executive Pension Supplement shall be calculated as follows:
(i) If the Executive had attained age 60 or if the Executive had
completed 30 years of Eligibility Service, the Executive Pension Supplement
would be calculated as described in Section 3(a);
(ii) If the Executive did not meet either of the requirements set forth
in subparagraph (i) above, the Executive Pension Supplement would be 80% of the
difference between the Executive Pension Base and the unreduced Qualified Plan
Benefit.
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<PAGE> 8
(b) Eligibility for a Deferred Benefit. If an Executive dies in active
service who does not satisfy the requirements of Section 4(a) above but who
satisfies the requirements of the Surviving Spouse Benefit for Certain Vested
Employees provisions of the Westinghouse Pension Plan and satisfied the
requirements of Section 2(a)(ii) and (iii) at the time of death, a Surviving
Spouse benefit shall also be payable under this Plan if his or her Executive
Pension Base exceeds his or her Qualified Plan Benefit. The duration portion of
the requirement of Section 2(a)(i) of the Plan that the Executive be employed in
a position that meets the definition of Executive for five or more continuous
years is waived in this case.
The Surviving Spouse benefit under this Section 4(b) shall be the
Executive Pension Supplement reduced in the same manner as though the benefit
were payable under the Westinghouse Pension Plan. For purposes of this
paragraph, the Executive Pension Supplement shall be calculated by subtracting
the Executive's Qualified Plan Benefit (before any reductions) from his or her
Executive Pension Base.
Section 5. Payment of Benefits
------------------------------
No benefits shall be payable under this Plan to any Executive whose
employment terminates for any reason other than death prior to satisfying the
definition of Retirement Eligible hereunder.
The Executive Pension Supplement shall be paid in monthly installments,
each equal to 1/12th of the annual amount determined in Section 3 or 4,
whichever is applicable. If the Executive or Surviving Spouse is eligible for
Plan benefits, such payments shall commence at the same time as payments under
the Westinghouse Pension Plan, if any. If the Executive or Surviving Spouse is
eligible for Plan benefits and is receiving payments from a defined benefit or
defined contribution plan of, or made available to employees of, a Designated
Entity or Designated Group and not from the Westinghouse Pension Plan, payments
shall commence at the same time as payments under such Designated Entity or
Designated Group plan provided the requirements of Section 2(a)(iv) have been
met. The payments shall be payable for the life of the Executive or the
Executive's Surviving Spouse, as the case may be.
Unless the Financial Managers determine otherwise, the Executive may
elect that the Executive Pension Supplement determined in Section 3 be paid in
accordance with any of the optional forms of payment, other than as a lump sum,
then available under the Westinghouse Pension Plan, subject to the same
reductions or other provisions that apply to the elected form of payment under
the Westinghouse Pension Plan. Any election hereunder as to optional forms of
payment may be revoked prior to the effective date of such election, but may not
be revoked on or after the Executive's actual retirement date for any reason.
All elections hereunder become effective on the Executive's actual retirement
date.
Regardless of the form of payment elected by the Executive, after the
Executive retires and begins receiving an Executive Pension Supplement a minimum
of 60 times the monthly payment he or she would have received on a life annuity
basis is guaranteed hereunder.
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<PAGE> 9
Surviving Spouse benefits under this Plan will be paid in accordance
with the form of payment made for Surviving Spouse Benefits under the
Westinghouse Pension Plan. Once a Surviving Spouse Benefit determined under
Section 4(a) has commenced, a minimum of 60 times the monthly benefit payable to
the Surviving Spouse is guaranteed hereunder.
In the event that an Executive retires or otherwise ceases to be an
Employee of Westinghouse, an Employer, a Designated Entity or a Designated Group
and is later rehired by one of those entities, the additional provisions set
forth in Appendix B to the Plan will apply.
Section 6. Plan Costs
---------------------
Benefits payable under the Plan and any expenses in connection therewith
will be paid by Westinghouse to the extent they are not available to be paid
from any trust fund established by Westinghouse to help defray the costs of
providing Plan benefits.
Section 7. Conditions to Receipt of Executive Pension Supplement
----------------------------------------------------------------
Payments of benefits under this Plan to Executives are subject to the
condition that the recipient shall not engage directly or indirectly in any
business which is at the time competitive with any business or part thereof, or
activity then conducted by, Westinghouse, any of its subsidiaries or any other
corporation, partnership, joint venture or other entity of which Westinghouse
directly or indirectly holds a 10% or greater interest (together, the "Company")
in the area in which such business, or part thereof, or activity is then being
conducted by the Company, unless such condition is specifically waived with
respect to such recipient by the Westinghouse Board of Directors. Breach of the
condition contained in the preceding sentence shall be deemed to occur
immediately upon an Executive's engaging in competitive activity. Payments
suspended for breach of the condition shall not thereafter be resumed whether or
not the Executive terminates the competitive activity. A recipient shall be
deemed to be engaged in such a business indirectly if he or she is an employee,
officer, director, trustee, agent or partner of, or a consultant or advisor to
or for, a person, firm, corporation, association, trust or other entity which is
engaged in such a business or if he or she owns, directly or indirectly, in
excess of five percent of any such firm, corporation, association, trust or
other entity. The ongoing condition of this Section 7 shall not apply to an
Executive age 65 or older.
Section 8. Administration
--------------------------
This Plan shall be administered by the Administrative Managers. The
Administrative Managers shall have the right to make reasonable rules from time
to time regarding the Plan; such rules shall be consistent with the policy
provided herein. The Administrative Managers shall have full and absolute
discretion and authority to control and manage the operation and administration
of the Plan, and to interpret and apply the terms of the Plan. This full and
absolute discretion and authority shall include the power to interpret, construe
and apply the provisions of the Plan, and any construction adopted by the
Administrative Managers in good faith shall be final and binding.
In accordance with the provisions of Section 503 of the Employee
Retirement Income Security Act of 1974, the Administrative Managers shall
provide a procedure for handling claims of
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<PAGE> 10
participants or their beneficiaries under this Plan. Such procedure shall be in
accordance with regulations issued by the Secretary of Labor and shall provide
adequate written notice within a reasonable period of time with respect to the
denial of any such claim as well as a reasonable opportunity for a full and fair
review of any such denial.
The Board may authorize the establishment of one or more trusts and the
appointment of a trustee or trustees ("Trustee") to hold any and all assets of
the Plan in trust.
Section 9. Modification or Termination
--------------------------------------
(a) Westinghouse reserves the right, at any time and from time to
time, without notice, to suspend or terminate the Plan or to amend, in whole or
in part, any and all provisions of the Plan, acting as follows:
(i) The Board may suspend the Plan, terminate the Plan, or adopt Plan
amendments that amend any and all provisions of the Plan in whole or in part;
(ii) The Compensation Committee of the Board may adopt Plan amendments
that amend any and all provisions of the Plan in whole or in part;
(iii) The Managers may adopt Plan amendments that amend any and all
provisions of the Plan in whole or in part, provided that no amendments may be
adopted by the Managers that would materially change any Plan benefits or
materially increase the costs of the Plan; and
(iv) The Administrative Managers may adopt Plan amendments that relate
solely to the administration of the Plan and do not materially change any Plan
benefits or materially increase the costs of the Plan.
Any such change, termination or suspension shall be effective at such
time as is specified by the Board, the Compensation Committee, the Managers, or
the Administrative Managers, as applicable, or, if no such time is so specified,
upon the adoption thereof.
(b) Notwithstanding the above, no such change or termination may
adversely affect (i) the benefits of any Executive who retires prior to such
change or termination or (ii) the right of any then current Executive to receive
upon retirement (or to have a Surviving Spouse or beneficiary receive upon the
Executive's death), an Executive Pension Supplement, calculated as of the
effective date of such change or termination, under the Plan provided that the
Executive meets the following two conditions: (1) at the time of such change or
termination the Executive has vested pension benefits under the Westinghouse
Pension Plan and/or any applicable pension plan of a Designated Entity or
Designated Group, and (2) at the date of such change or termination and at the
date of actual retirement or death the Executive has occupied, for the then
required period next preceding such dates, a position that meets the definition
of Executive in Section 1(i) of this Plan as in effect at the date of such
change or termination.
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<PAGE> 11
Section 10. Miscellaneous
--------------------------
(a) No Executive, former Executive or Surviving Spouse shall have the
right to anticipate, alienate, sell, transfer, assign, pledge, encumber, or
otherwise subject to lien any of the benefits provided under this Plan. Such
rights may not be subject to the debts, contracts, liabilities, engagements or
torts of the Executive, former Executive or Surviving Spouse of an Executive.
(b) If, in the opinion of Westinghouse, a person to whom a benefit is
payable is unable to care for his or her affairs because of illness, accident or
any other reason, any payment due the person, unless prior claim therefore shall
have been made by a duly qualified guardian or other duly appointed and
qualified representative of such person, may be paid to some member of the
person's family, or to some other party who, in the opinion of Westinghouse, has
incurred expense for such person. Any such payment shall be a payment for the
account of such person and shall be a complete discharge of Westinghouse's
liability under this Plan.
(c) Westinghouse, in adopting this Plan, shall not be held to create or
vest in any Executive or any other person any interest, pension or benefits
other than the benefits specifically provided herein, or to confer upon any
Executive the right to remain in the service of Westinghouse.
Section 11. Creditors' Claims
-----------------------------
Any assets purchased by Westinghouse to provide benefits under this Plan
shall at all times remain subject to the claims of general creditors of
Westinghouse and any Executive, former Executive or Surviving Spouse of an
Executive participating in the Plan has only an unsecured promise to pay
benefits from Westinghouse.
Section 12. Change in Control
------------------------------
A. The term "Change in Control" means the occurrence of one or more of
the following events:
(a) there shall be consummated (i) any consolidation or merger of
Westinghouse in which Westinghouse is not the continuing or surviving
corporation or pursuant to which shares of Westinghouse's Common Stock would be
converted into cash, securities or other property, other than a merger of
Westinghouse in which the holders of Westinghouse's Common Stock immediately
prior to the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of Westinghouse, or
(b) the stockholders of Westinghouse shall approve any plan or proposal for the
liquidation or dissolution of Westinghouse, or (c) (i) any person (as such term
is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), corporation or other entity shall purchase any Common
Stock of Westinghouse (or securities convertible into Westinghouse Common Stock)
for cash, securities or any other consideration pursuant to a tender offer or
exchange offer, unless, prior to the making of such purchase of Westinghouse
Common Stock (or securities convertible into Westinghouse Common Stock), the
Board shall determine that the making of such purchase shall not constitute a
Change in Control, or (ii) any person (as such
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<PAGE> 12
term is defined in Section 13(d) of the Exchange Act), corporation or other
entity (other than Westinghouse or any benefit plan sponsored by Westinghouse or
any of its subsidiaries) shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Westinghouse representing twenty percent or more of the combined
voting power of Westinghouse's then outstanding securities ordinarily (and apart
from any rights accruing under special circumstances) having the right to vote
in the election of directors (calculated as provided in Rule 13d-3(d) in the
case of rights to acquire any such securities), unless, prior to such person so
becoming such beneficial owner, the Board of Directors of Westinghouse shall
determine that such person so becoming such beneficial owner shall not
constitute a Change in Control, or (d) at any time during any period of two
consecutive years, individuals who at the beginning of such period constituted
the entire Board of Directors of Westinghouse shall cease for any reason to
constitute at least a majority thereof, unless the election or the nomination
for election of each new director during such two-year period was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such two-year period.
B. Notwithstanding any other provision of this Plan, upon a Change in
Control, as defined above, the following shall apply: (i) all Executives shall
be deemed vested; (ii) an amount sufficient to fund all unpaid benefits and any
Surviving Spouse Benefits payable under this Plan, shall be paid immediately by
Westinghouse to the Trustee pursuant to a trust agreement for the Westinghouse
Executive Pension Plan Trust for payment of such benefits at the earliest date
available in accordance with the provisions hereof and on such other terms as a
committee composed of the Chief Executive Officer, the Chief Financial Officer
and the Chief Legal Officer of Westinghouse, shall deem appropriate (including a
direction to the Trustee to pay immediately all benefits on a present value
basis and/or such other terms as they may deem appropriate). Notwithstanding
this funding, Westinghouse shall be obligated to pay benefits to Executives and
to Surviving Spouses of Executives to the extent such funding proves to be
insufficient. To the extent such funding proves to be more than sufficient, the
excess shall revert to Westinghouse.
Upon a Change in Control, for any Executive in the Plan who is
involuntarily separated and who is not then eligible for a Normal or Special
Retirement Pension under the Westinghouse Pension Plan, such separation shall be
deemed to be a separation due to a Permanent Job Separation, and the Special
Retirement Pension provisions under the Westinghouse Pension Plan shall be used
for purposes of determining eligibility and payment of benefits to such
Executive under the Plan.
The present value of benefits payable by the Trustee shall be calculated
for specific groups of Executives at the time of the Change in Control as
follows:
a. The present value of the benefits payable from this Plan to
Executives who have retired at the time of the Change in Control
(as well as benefits payable from this Plan to any Surviving
Spouse of an Executive) shall be calculated by using the PBGC
immediate discount rate established and in effect for the
beginning of the calendar year in which the Change in Control
occurs.
b. The present value of the benefits payable from this Plan to
Executives who are eligible to retire under the terms of this
Plan at the time of the Change in Control shall be calculated by
using the PBGC immediate discount rates established and in
effect at the
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beginning of the calendar year in which the Change in Control
occurs, assuming a pension which is immediately payable at the
time of the Change in Control.
c. The present value of the benefits payable from this Plan to
Executives who have completed at least thirty (30) years of
service with Westinghouse, an Employer, a Designated Entity or a
Designated Group but have not yet attained age 58 at the time of
the Change in Control shall be calculated by using the PBGC
deferred discount rates established and in effect for the
beginning of the calendar year in which the Change in Control
occurs, assuming a pension which is payable at age 58.
d. The present value of benefits payable from this Plan to
Executives who have completed at least ten (10) years of service
with Westinghouse, an Employer, a Designated Entity or a
Designated Group but less than thirty (30) years of service at
the time of the Change in Control, but have not yet attained age
60 at the time of the Change in Control, shall be calculated by
using the PBGC deferred discount rates established and in effect
for the beginning of the calendar year in which the Change in
Control occurs, assuming a pension which is payable at age 60.
e. The present value of benefits payable from this Plan to
Executives who have completed less than ten (10) years of
service with Westinghouse, an Employer, a Designated Entity or a
Designated Group at the time of the Change in Control shall be
calculated by using the PBGC deferred discount rates established
and in effect for the beginning of the calendar year in which
the Change in Control occurs, assuming a pension which is
payable at age 65.
In calculating the benefit payable to each Executive, any offset for the
Westinghouse Pension Plan or other qualified plan in which the Executive
participates, shall be based upon the last official pension file data available,
adjusted to the date of any Change in Control by assuming that the most recent
salary reflected in the pension file remains constant.
Notwithstanding any provision of this Plan, at any time following a
Change in Control, this Plan may not be (a) amended such that future benefits
would be reduced, (b) suspended or (c) terminated (i) as to the further accrual
of benefits, and (ii) as to the payment of benefits, at any time prior to the
last payment, determined in accordance with the provisions of this Plan, to each
Executive, former Executive receiving benefits under the Plan, or eligible
spouse.
Section 13. Governing Law
-------------------------
To the extent not preempted by federal law, the law of the Commonwealth
of Pennsylvania shall govern the construction and administration of the Plan.
Section 14. Severability
------------------------
If any provision of this Plan or the application thereof to any
circumstance or person is held to be invalid by a court of competent
jurisdiction, the remainder of the Plan and the application of such provision to
other circumstances or persons shall not be affected thereby.
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<PAGE> 14
Section 15. Authority to Expand Benefits
----------------------------------------
The Board or the Compensation Committee of the Board may, from time to
time and without notice, by resolution of the Board or of the Compensation
Committee of the Board, authorize the payment of benefits or expand the benefits
otherwise payable or to be payable hereunder to any one or more individuals. The
Board and the Compensation Committee shall each have the right to delegate
authority to take any action that they may take under this Section 15 of the
Plan within such limits as they each may approve from time to time.
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<PAGE> 15
APPENDIX A
EXECUTIVE BUY BACK
The Executive Buy Back process permits newly eligible Executives to "buy
back" past years of Executive Benefit Service under the Plan for periods of time
during which they did not make the Maximum Contribution.
If an Employee did not make the Maximum Contribution during each of the
years of his or her Eligibility Service prior to the time he or she first became
an Executive, the Employee will be permitted to pay an amount equal to the
Maximum Contributions that would have been payable during the ten years prior to
the date he or she first became an Executive (or such lesser period from the
later of January 1, 1985 or the date the Employee was employed by Westinghouse,
an Employer, a Designated Entity or a Designated Group) plus compounded interest
on that amount in order to "buy back" his or her non-contributory years of
service.
Upon qualifying as an Executive, an Executive will be offered an
Executive Buy Back opportunity at the time he or she first becomes an Executive.
The actual terms of the Executive Buy Back will be determined from time to time
by the Administrative Managers. This election will be offered one time to the
Executive and his or her decision whether or not to "buy back" will be
irrevocable.
Executive Buy Back payments will be made to Westinghouse and will not be
deposited into the Westinghouse Pension Plan Trust. Any Executive Buy Back
payments made by the Executive will not increase the Executive's Qualified Plan
Benefit.
If, at some point, an Employee is no longer an Executive or otherwise
becomes ineligible to receive an Executive Pension Supplement, any Executive Buy
Back payments the Employee has made (including any interest the Employee paid)
plus any other amount as defined in Section 1(o)(2)(ii) in the definition of
Maximum Contribution paid by the Employee to Westinghouse will be refunded, with
interest, at such time as the Employee meets one of the following criteria:
termination or retirement from Westinghouse, an Employer, a Designated Entity or
a Designated Group; or death; provided, however, no refund shall be made if the
Employee is an eligible Executive, whether or not the amount of his or her
Executive Pension Supplement exceeds zero. All interest rates will be determined
at the discretion of Westinghouse.
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APPENDIX B
REHIRED EXECUTIVES
Section 1. Retired Executives Rehired as Executives
- ---------------------------------------------------
If an Executive who retired from Westinghouse, an Employer, a Designated
Entity or a Designated Group and who received or is receiving an Executive
Pension Supplement as a lump sum or on a monthly basis is rehired in an
Executive position by Westinghouse, an Employer, a Designated Entity or a
Designated Group, the following provisions apply:
(a) For an Executive who elected a monthly Executive Pension
Supplement, the Plan will:
(i) suspend all Executive Pension Supplement payments; and
(ii) if, but only if, the Executive is Retirement Eligible
at the time of subsequent actual retirement:
(1) restore previous years of Eligibility Service
and Executive Benefit Service accrued prior to
the Executive's retirement; and
(2) recalculate the Executive's Executive Pension
Supplement in accordance with the Plan at his
or her subsequent actual retirement date as
long as the Executive then meets all Plan
benefit qualification requirements.
The Executive, having previously met the five years of continuous
service as an Executive requirement prior to his or her first retirement, need
not again meet that requirement. The Executive's Average Annual Compensation
will be computed without regard to the break in service, using zero for any
periods during which the Executive was a retiree.
In addition, if the Executive elected to take a lump sum Qualified Plan
Benefit with respect to his or her initial retirement, then in any subsequent
calculation of the Executive's Executive Pension Supplement, the Executive's
Executive Pension Base will be reduced by both the Executive's Qualified Plan
Benefit received at the time of the initial retirement and the Executive's
Qualified Plan Benefit accrued from the date of rehire through the date of his
or her subsequent retirement.
(b) For an Executive who elected a lump sum Executive Pension
Supplement and who is Retirement Eligible at the time of subsequent actual
retirement, the Plan will:
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(i) restore previous years of Eligibility Service but not
previous years of Executive Benefit Service; and
(ii) calculate the Executive's additional Executive Pension
Supplement at his or her subsequent actual retirement
date on the basis of years of service after the rehire
in accordance with the Plan as long as the Executive
then meets all Plan benefit qualification requirements.
As under Section 1(a) of this Appendix B, the Executive, having
previously met the five years of continuous service as an Executive requirement
prior to his or her first retirement, need not again meet that requirement. The
Executive's Average Annual Compensation will be computed without regard to the
break in service, using zero for any periods during which the Executive was a
retiree.
In addition, if the Executive elected a monthly Qualified Plan Benefit
with respect to his or her initial retirement, then the Executive's Qualified
Plan Benefit accrued from the date of rehire through the subsequent date of
actual retirement will be subtracted from the Executive's Executive Pension Base
in calculating the Executive's additional Executive Pension Supplement at his or
her subsequent retirement.
Section 2. Former Executives with Vested Pensions Rehired as Executives
- ------------------------------------------------------------------------
If the employment of an Executive of Westinghouse, an Employer, a
Designated Entity or a Designated Group who was eligible only for a vested
pension under the relevant qualified defined benefit or defined contribution
plan, if any, was terminated and the Executive is rehired by Westinghouse, an
Employer, a Designated Entity or a Designated Group, the following provisions
apply:
(i) restore previous years of Eligibility Service and
Executive Benefit Service accrued prior to the
Executive's termination of employment;
(ii) the Executive must meet the five years of continuous
service as an Executive requirement prior to a
subsequent actual retirement counting only years of
service after the rehire; and
(iii) only base salary and incentive awards earned after the
rehire will be used in computing Average Annual
Compensation.
In addition, if the Executive elected to take his or her Vested Pension
as a lump sum, in any calculation of an Executive Pension Supplement at actual
retirement the Executive's Executive Pension Base will be reduced by both the
Executive's Qualified Plan Benefit at the time of the initial termination of
employment and the Executive's Qualified Plan Benefit accrued from the date of
rehire through the date of actual retirement.
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Section 3. Retired Executives Rehired in Non-Executive Positions
- ----------------------------------------------------------------
If an Executive who retired from Westinghouse, an Employer, a Designated
Entity or a Designated Group and who received or is receiving an Executive
Pension Supplement as a lump sum or on a monthly basis is rehired by
Westinghouse, an Employer, a Designated Entity or a Designated Group in a
non-Executive position, the following provisions apply:
(a) For a former Executive who elected a monthly Executive Pension
Supplement, the Plan will:
(i) suspend all Executive Pension Supplement payments; and
(ii) if, but only if, the former Executive is still
Retirement Eligible at time of subsequent actual
retirement, recommence Executive Pension Supplement
payments at the time of the Executive's subsequent
actual retirement without recalculation of amount.
At subsequent actual retirement, the former Executive may re-select any
form of payment of his or her Executive Pension Supplement then permitted under
the Plan.
(b) For a former Executive who elected to take his or her Executive
Pension Supplement as a lump sum, no further benefits will be paid by the Plan.
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APPENDIX C
AMENDMENT TO THE WESTINGHOUSE EXECUTIVE
PENSION PLAN FOR THE SALE OF PGBU
Effective as of the Closing Date of the sale by CBS Corporation
(formerly Westinghouse Electric Corporation) of its Power Generation Business
("PGBU" or "Business") to Siemens Power Generation Corporation (the
"Purchaser"), the Westinghouse Executive Pension Plan (the "Plan") retains
liability, if any, for benefits earned to the Closing Date with respect to
employees of PGBU who transfer to the Purchaser and are described as "Business
Employees" in Section 5.5(a)(i) of the Asset Purchase Agreement between CBS
Corporation and the Purchaser dated November 14, 1997, as amended (the
"Agreement") and are, pursuant to the Agreement, deemed to be employees of the
Purchaser as of the Closing Date (hereinafter known as "PGBU Employees") subject
to the following conditions:
(1) The Plan shall recognize and credit the period of employment
with the Purchaser or its Affiliates on and after the Closing
Date solely for purposes of calculating eligibility for the
payment of benefits; provided that the Plan shall not
recognize and credit any period of employment with the
Business after the Purchaser and its Affiliates have sold or
divested the Business, or a portion thereof (whether by asset
or stock sale, merger or spin-off (each a "Disposition")) with
respect to the PGBU Employees who are transferred or
terminated in connection with such Disposition.
(2) The executive pension plan established by the Purchaser
pursuant to Section 5.5(h)(i) of the Agreement (the "Purchaser
Executive Plan") shall be solely responsible for (and the Plan
shall not provide for):
(a) any benefit that becomes payable with respect to PGBU
Employees retiring after the Closing Date that is the
result of any reduction in force, mass layoff, or
plant closing by the Purchaser or its Affiliates
(that is, if the benefit would not be payable absent
such an event); or
(b) any other early retirement subsidy or supplement that
is not described in (1) above.
(3) Average Annual Compensation and Executive Benefit Service
under the Plan with respect to PGBU Employees will be
determined and frozen as of August 31, 1998, and service by
PGBU Employees for Siemens Power Generation Corporation from
August 19, 1998 through August 31, 1998 shall be treated as
Executive Benefit Service for purposes of the Plan.
(4) The Purchaser and its Affiliates (but not any successor to the
Purchaser and its Affiliates as owner of the Business or any
part thereof) will be considered a Designated Entity solely
for purposes of determining eligibility for payment (including
suspension of payment) of benefits.
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<PAGE> 1
EXHIBIT 10(j)
CBS SUPPLEMENTAL EMPLOYEE INVESTMENT FUND
(As amended as of November 24, 1995)
CBS Inc. hereby establishes the CBS Supplemental Employee Investment Fund, a
nonqualified unfunded plan, for the exclusive benefit of select key management
and highly compensated employees who participate in the CBS Employee Investment
Fund.
ARTICLE I
INTRODUCTION
Section 1.1 Name of Plan. The name of this Plan is the "CBS Supplemental
Employee Investment Fund."
Section 1.2 Effective Date. The effective date of this Plan is January
1, 1995. This Plan shall not apply to any Participant who has
retired or terminated from active service with CBS prior to
the Effective Date.
Section 1.3 Purpose. The purpose of this Plan is to provide a means by
which an Eligible Employee may be provided benefits which
otherwise would be provided as pre-tax contributions,
after-tax contributions, or Employer Matching Contributions
under the Employee Investment Fund in the absence of certain
restrictions imposed by applicable law on the dollar amount of
Salary that can be taken into account under the Employee
Investment Fund.
ARTICLE II
DEFINITIONS
Capitalized items which are not defined herein shall have the meaning ascribed
to them in the Employee Investment Fund. Whenever reference is made herein to
"this Plan," such reference shall be to this CBS Supplemental Employee
Investment Fund.
Section 2.1 "Account" shall mean a Participant's individual account as
described in Section 3.2 of this Plan.
Section 2.2 "Beneficiary" shall mean the person or persons designated
by the Participant to receive any payments provided for under
Section 3.8, and, if and to the extent that such designation
shall not be in force at the time of
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<PAGE> 2
such payment, his spouse, or if he has no spouse, his
executors or administrators.
Section 2.3 "Board" shall mean the Board of Directors of CBS Inc.
Section 2.4 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
Section 2.5 "Committee" shall mean the Committee established under
Section 4.1 of the Plan or its designee.
Section 2.6 "CBS" shall mean CBS Inc. and any of its affiliated companies
as may be authorized to participate in this Plan by the Board.
Section 2.7 "Compensation Limitation" shall mean the limitation on Salary
that is required to be taken into account in determining
contributions under the Employee Investment Fund in accordance
with Section 401(a)(17) of the Code and the regulations and
other guidance issued thereunder for plan years beginning on
and after January 1, 1994, as indexed for increases in the
cost-of-living under Section 401(a)(17)(B) of the Code.
Section 2.8 "Eligible Employee" shall mean an employee of CBS who is
designated by the Committee pursuant to Section 4.1 as
eligible to participate in this Plan.
Section 2.9 "Employee Deferrals" shall mean the portion of a Participant's
Salary which he elects to defer under the terms of this Plan
and shall include Required Basic Deferrals and Voluntary
Deferrals.
Section 2.10 "Employee Investment Fund" shall mean the CBS Employee
Investment Fund as amended from time to time.
Section 2.11 "Employer Match" shall mean the amounts credited in accordance
with Section 3.4 of this Plan.
Section 2.12 "Excess Salary" shall mean the amount of the Participant's
Salary equal to the difference between: (i) his actual Salary
for the Plan Year up to $235,840 (without regard to any
cost-of-living adjustments); and (ii) his Salary for the Plan
Year up to the Compensation Limitation.
Section 2.13 "Participant" shall mean an Eligible Employee who participates
in this Plan pursuant to Article III. An Eligible Employee
shall remain a Participant under this Plan until all amounts
payable on his behalf from this Plan have been paid.
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<PAGE> 3
Section 2.14 "Plan Year" shall mean the calendar year.
Section 2.15 "Required Basic Contributions" shall mean the pre-tax
contributions or after-tax contributions made to the Employee
Investment Fund by or on behalf of a Participant as required
basic contributions with respect to which Employer Matching
Contributions under Employee Investment Fund are made.
Section 2.16 "Required Basic Deferrals" shall mean the deferrals made
by a Participant under Section 3.3(A) hereunder with respect
to which Employer Match amounts are credited under Section
3.4.
Section 2.17 "Targeted Investment Options" shall mean those investment
options designed in Section 3.6 as measurements of the rate of
return to be credited on amounts deferred hereunder.
Section 2.18 "Voluntary Deferrals" shall mean the deferrals made by a
Participant under Section 3.3(B) hereunder, if any, after a
Participant has elected to make Required Basic Deferrals.
Section 2.19 "Voluntary Supplemental Contributions" shall mean the
pre-tax contributions or after-tax contributions made to the
Employee Investment Fund by or on behalf of a Participant as
voluntary supplemental contributions.
ARTICLE III
PARTICIPATION
Section 3.1 Participation
-------------
(A) Employee Deferrals Participation: An Eligible
Employee may elect to participate in the Required Basic
Deferrals feature of the Plan for a Plan Year if he has
elected to make the maximum allowable pre-tax Required Basic
Contribution and pre-tax Voluntary Supplemental Contribution
to the Employee Investment Fund for the Plan Year. An Eligible
Employee who is eligible and elects to participate in the
Required Basic Deferrals feature of the Plan may further elect
to participate in the Voluntary Deferrals feature of the Plan.
In order to participate in the foregoing features of the Plan,
a Participant must file an election with the Committee, in
accordance with Section 3.3 and the rules and regulations
established by the Committee.
(B) Employer Match Participation: An Eligible
Employee will participate in the Employer Match feature of
this Plan for a Plan year if: (i)
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<PAGE> 4
he has elected to have the maximum allowable pre-tax Required
Basic Contribution and pre-tax Voluntary Supplemental
Contribution to the Employee Investment Fund for the Plan
Year; (ii) as a result of the application of the Compensation
Limitation, he loses the opportunity to be credited with
Employer Matching Contributions under the Employee Investment
Fund based on the amount of his Excess Salary; and (iii) he
has elected to defer a Required Basic Deferral hereunder.
Section 3.2 Establishment of Plan Accounts. CBS shall establish an Account
for each Participant. During each Plan Year, each
Participant's Account will be credited with the amount of the
Participant's Employee Deferrals elected under Section 3.3, if
any, and the Employer Match with which the Participant is
entitled to be credited with under Section 3.4, if any. Such
amounts shall be credited, as a bookkeeping entry only, to the
Participant's Account at such times as the Participant's
Required Basic Contributions, Voluntary Supplemental
Contributions, or Employer Matching Contributions would have
been made to the Employee Investment Fund.
Section 3.3 Employee Deferrals. Participants may make Employee Deferrals
as described in Section 3.3(A) and Section 3.3(B) for any Plan
Year, subject to the limitation in Section 3.5.
(A) Amount of Employee Required Basic Deferrals. A
Participant who meets the requirements of Section 3.1(A) for a
Plan Year may elect to have Required Basic Deferrals credited
to his Account for such Plan Year. For each Plan Year, the
amount of Required Basic Deferrals that may be credited to a
Participant's Account shall equal the Participant's Required
Basic Contribution percentage applicable under the Employee
Investment Fund multiplied by the Participant's Excess Salary.
If the Participant elects to make the Required Basic Deferral,
he will be entitled to an Employer Match credited under
Section 3.4 hereof.
(B) Amount of Voluntary Deferrals. A Participant who
meets the requirements of Section 3.1(A) and has elected to
make a Required Basic Deferral under Section 3.3(A) for a Plan
Year may then elect to have Voluntary Deferrals credited to
his account for such Plan Year. For each Plan Year, a
Participant may elect a Voluntary Deferral equal to any
percentage of Excess Salary in one-half percent increments;
provided, however, that the total amount of Required Basic
Deferrals cannot exceed twelve and one-half percent of Excess
Salary.
(C) Election of Employee Deferrals. An election by a
Participant to commence Employee Deferrals must be made prior
to January 1 of a Plan Year to be effective for Employee
Deferrals with respect to that Plan Year. The election will be
effective on a prospective
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<PAGE> 5
basis beginning with the payroll period that occurs as soon as
administratively practicable following January 1 of that Plan
Year. Notwithstanding the foregoing, if an Eligible Employee
first becomes a Participant after January 1 of a Plan Year,
his election to commence Employee Deferrals must be made
within 30 days of his participation. The election will be
effective on a prospective basis beginning with the payroll
period that occurs as soon as administratively practicable
following receipt of the election by the Committee. Any
election previously made remains in effect unless the Eligible
Employee amends or suspends such election as set forth in this
Plan.
(D) Amendment or Suspension of Election. A
Participant may change his election under this Plan any time
during the Plan Year by filing an election on a prescribed
form. Any such change or new election will become effective as
of the first payroll period in the calendar quarter which
begins after the date such election is received by the
Committee (or as soon as practicable thereafter). Participants
may elect to suspend all their Employee Deferrals, if any, by
filing a written election with the Committee on prescribed
forms. Such a suspension election shall be effective as soon
as practicable after it is received by the Committee. In order
to resume such Employee Deferrals, a Participant must follow
the procedure described in subsection (B) above as though he
were a new Participant. A Participant will not be permitted to
make up suspended Employee Deferrals.
Section 3.4 Crediting of Employer Match. Subject to the limitation in
Section 3.5, for each Plan Year, the amount of Employer Match
that will be credited to the Account of a Participant who
meets the requirements of Section 3.1(B) shall equal the
amount of such Participant's Required Basic Deferrals.
Section 3.5 Overall Limitation on Amounts Credited to an Account.
Notwithstanding anything to the contrary in this Plan, in no
event shall the amounts credited to a Participant's Account
under Sections 3.3 and 3.4 with respect to a Plan Year, when
combined with all actual contributions made to the Employee
Investment Fund with respect to such Plan Year by or on behalf
of the Participant (to wit: Required Basic, Voluntary
Supplemental, Periodic Special, if any, and Employer Matching
Contributions) exceed the dollar limitation amount referred to
in Section 415(c) of the Code (as indexed for cost-of-living
increases for such Plan Year). If amounts in excess of the
foregoing combined plan limitation are credited under this
Plan for any Participant, the overall amounts credited
hereunder for the affected Participant shall be reduced in the
following order: (i) reductions in future deferrals shall be
made in the following order to the extent necessary to meet
the foregoing limitation: Voluntary Deferrals under Section
3.3(B), Required Basic Deferrals under Section 3.3(A), and
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<PAGE> 6
Employer Matches under Section 3.4; thereafter (ii) amounts
already credited under this Plan shall be forfeited in the
following order to the extent necessary to meet the foregoing
limitation: Employer Matches under Section 3.4, Voluntary
Deferrals under Section 3.3(B), and Required Basic Deferrals
under Section 3.3(A).
Section 3.6 Changes in Amounts Credited to an Account. Additional amounts
shall be credited to a Participant's Account to reflect the
earnings that would have been earned had the deferred amounts
been invested in the following Targeted Investment Options, as
elected by the Participant: Supplemental Fund Q (AIM Value
Fund), Supplemental Fund R (Franklin U.S. Government
Securities Fund), or Supplemental Fund S (Merrill Lynch
Capital Fund). Notwithstanding the foregoing, the Employer
Match amounts credited under Section 3.4 shall be credited
with additional amounts to reflect the earnings that would
have been earned had the deferred amounts been invested
entirely in CBS common stock. A Participant shall be notified
of the amount credited as a bookkeeping entry to his Account
as soon as practicable following the end of each Plan Year.
Section 3.7 Vesting of Amounts in a Participant's Account. Subject to
Section 3.5, a Participant shall be vested in the portion of
his Account attributable to any Employer Match to the same
extent as such Participant is vested in any Employer Matching
Contributions credited to his account under the Employee
Investment Fund. Subject to Section 3.5, a Participant shall
be fully vested in Employee Deferrals at all times.
Section 3.8 Distribution of Amounts Credited to a Participant's Account.
Upon termination of employment for any reason, a Participant
shall be entitled to distribution of the vested portion of his
Account in the form of a single sum cash payment as soon as
practicable following the Participant's termination of
employment. If the Participant dies before the distribution of
his Account balance, the remaining balance of his vested
Account shall be paid in a single sum cash payment to the
Participant's Beneficiary as soon as practicable following the
Participant's Death.
ARTICLE IV
PLAN ADMINISTRATION
Section 4.1 Committee. This Plan shall be administered by the Retirement
Plans Committee of the Board of Directors of CBS. The
Committee or its designee shall have full authority in its
discretion to administer and interpret this Plan, make
payments to Participants, and maintain records hereunder,
which authority shall include the discretionary authority to
determine eligibility for benefits hereunder and the proper
amounts to be
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<PAGE> 7
credited to each Participant's Account. All decisions by the
Committee shall be final and binding on all parties affected
by the decisions.
Section 4.2 Delegated Responsibilities. The Committee shall have the
authority to delegate any or all of its responsibilities to
the Plans Administration Committee.
Section 4.3 Claims Procedure. The Committee or its designee shall have the
exclusive right in its discretion to interpret the Plan and to
decide any and all matters arising thereunder. In the event of
a claim by a Participant as to the amount of any distribution
or method of payment under the Plan, such person will be given
notice in writing of any denial within 90 days of the filing
of such claim unless special circumstances require an
extension of such period, which notice will set forth the
reason for the denial, the Plan provisions on which the denial
is based, an explanation of what other material or
information, if any, is needed to perfect the claim, and an
explanation of the claims review procedure. The Participant
may request a review of such denial within 60 days of the date
of receipt of such denial by filing notice in writing with the
Committee or its designee. The Participant will have the right
to review pertinent Plan documents and to submit issues and
comments in writing. The Committee or its designee will
respond in writing to a request for review within 60 days of
receiving it, unless special circumstances require an
extension of such period. The Committee or its designee, at
its discretion, may request a meeting to clarify any matters
deemed appropriate. All decisions by the Committee or its
designee shall be final and binding on all parties affected by
the decisions.
Section 4.4 Amendment and Termination. The Plans Administration Committee
may amend, modify, or terminate this Plan at any time
provided, however, that no such amendment, modification, or
termination shall reduce any benefit under this Plan to which
a Participant or the Participant's Beneficiary is entitled
under Article III prior to the date of such amendment or
termination, and in which such Participant or Beneficiary
would have been vested if such benefit had been provided under
the Employee Investment Fund, unless the Participant or
Beneficiary becomes entitled to an amount equal to the
actuarial value, to be determined in the sole discretion of
the Plans Administration Committee, of such benefit under
another plan, program, or practice adopted CBS. However, this
Plan may not be suspended, amended, otherwise modified, or
terminated within the two-year period following the "Effective
Time" of the merger of CBS under the Agreement and Plan of
Merger dated August 1, 1995, among Westinghouse Electric
Corporation, Group W Acquisition Corp. and CBS without the
written consent of each affected Participant.
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Section 4.5 Source of Payments. CBS will pay all benefits arising under
the Plan and all costs, charges and expenses relating thereto
out of the trust established for this purpose pursuant to
Section 4.7, or out of its general assets.
Section 4.6 Nonassignability of Benefits. Except as otherwise required by
law, neither any benefit payable hereunder nor the right to
receive any future benefit under this Plan may be anticipated,
alienated, sold, transferred, assigned, pledged, encumbered,
or subjected to any charge or legal process, and if any
attempt is made to do so, or a person eligible for any
benefits under this Plan becomes bankrupt, the interest under
this Plan of the person affected may be terminated by the
Plans Administration Committee which, in its sole discretion,
may cause the same to be held or applied for the benefit of
one or more of the dependents of such person or make any other
disposition of such benefits that it deems appropriate.
Section 4.7 Plan Unfunded. Nothing in this Plan shall be interpreted or
construed to require CBS in any manner to fund any obligation
to the Participants, terminated Participants, or Beneficiaries
hereunder. Nothing contained in this Plan nor any action taken
hereunder shall create, or be construed to create, a trust of
any kind, or a fiduciary relationship between CBS and the
Participants, terminated Participants, Beneficiaries, or any
other persons. Any funds which may be accumulated in order to
meet any obligation under this Plan shall, for all purposes,
continue to be a part of the general assets of the CBS;
provided, however, that CBS shall establish a trust to hold
funds intended to provide benefits hereunder to the extent the
assets of such trust become subject to the claim of the
general creditors of CBS in the event of bankruptcy or
insolvency of CBS. To the extent that any Participant,
terminated Participant, or Beneficiary acquires a right to
receive payments from CBS under this Plan, such rights shall
be no greater than the rights of any unsecured general
creditor of the CBS.
Section 4.8 Applicable Law. All questions pertaining to the construction,
validity, and effect of this Plan shall be determined in
accordance with the laws of the State of New York, to the
extent not pre-empted by Federal Law.
Section 4.9 Limitation of Rights. This Plan is a voluntary undertaking on
the part of CBS. Neither the establishment of the Plan nor the
payment of any benefits hereunder, nor any action of CBS, the
Committee, or its designee shall be held or construed to be a
contract of employment between CBS and any Eligible Employee
or to confer upon any person any legal right to be continued
in the employ of CBS. CBS expressly reserves the right to
discharge, discipline, or otherwise terminate the employment
of any Eligible Employee at any time. Participation in this
Plan gives no right or claim to any benefits beyond those
which are expressly provided herein and all rights and claims
hereunder are limited as set forth in this Plan.
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Section 4.10 Severability. In the event any provision of this Plan shall be
held illegal or invalid, or would serve to invalidate the
Plan, that provision shall be deemed to be null and void, and
the Plan shall be construed as if it did not contain that
provision.
Section 4.11 Headings, Gender and Number. The headings to the Articles and
Sections of this Plan are inserted for reference only, and are
not to be taken as limiting or extending the provisions
hereof. Unless the context clearly indicates to the contrary,
in interpreting this Plan, the masculine shall include the
feminine, and the singular shall include the plural.
Section 4.12 Incapacity. If the Committee or its designee shall determine
that a Participant, terminated Participant, or any other
person entitled to a benefit under this Plan (the "Recipient")
is unable to care for his affairs because of illness,
accident, or mental or physical incapacity, or because the
Recipient is a minor, the Committee or its designee may direct
that any benefit payment due the Recipient be paid to his duly
appointed legal representative; or if no such representative
is appointed, to the Recipient's spouse, child, parent, or
other blood relative, or to a person with whom the Recipient
resides or who has incurred expense on behalf of the
Recipient. Any such payment so made shall be a complete
discharge of the liabilities of the Plan with respect to the
Recipient.
Section 4.13 Binding Effect and Release. All persons accepting benefits
under this Plan shall be deemed to have consented to the terms
of this Plan. Any final payment or distribution to any person
entitled to benefits under the Plan shall be in full
satisfaction of all claims against the Plan, the Committee or
its designee and CBS arising by virtue of this Plan.
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Exhibit 10(k)
DEFERRED COMPENSATION AND STOCK PLAN
FOR DIRECTORS
(As Amended as of January 27, 1999)
SECTION 1. INTRODUCTION
1.1 Establishment. CBS Corporation, a Pennsylvania corporation formerly
known as Westinghouse Electric Corporation (the "Company"), has established the
Deferred Compensation and Stock Plan for Directors, as amended from time to time
(the "Plan"), for those directors of the Company who are neither officers (other
than non-executive officers) nor employees of the Company. The Plan provides,
among other things, for the payment of specified portions of the Annual
Director's Fee and the Annual Board Chairman's Fee, if applicable, in the form
of Stock Options and Restricted Stock, the payment of the Annual Committee
Chair's Fee in the form of Restricted Stock, the granting of Stock Options and
Restricted Stock as additional Director compensation, and the opportunity for
the Directors to defer receipt of all or a part of their cash compensation.
Unless otherwise provided for herein, the term Company includes CBS Corporation
and its subsidiaries.
1.2 Purposes. The purposes of the Plan are to encourage the Directors
to own shares of the Company's stock and thereby to align their interests more
closely with the interests of the other shareholders of the Company, to
encourage the highest level of Director performance, and to provide a financial
incentive that will help attract and retain the most qualified Directors.
SECTION 2. DEFINITIONS
2.1 Definitions. The following terms will have the meanings set forth
below:
(a) "Annual Board Chairman's Fee" means the annual amount
(which may be prorated) established from time to time by the Board as the annual
fee to be paid to the Board Chairman, if any, for his or her services as Board
Chairman.
(b) "Annual Committee Chair's Fee" means the annual amount
(which may be prorated for a Director serving as a committee chair for less than
a full year) established from time to time by the Board as the annual fee to be
paid to Directors for their services as chairs of standing committees of the
Board.
(c) "Annual Director's Fee" means the annual amount (which may
be prorated for a Director serving less than a full calendar year, as in the
case of a Director who will be retiring or not standing for reelection at the
annual meeting of shareholders or a Director joining the Board (or otherwise
first becoming a Director) after the beginning of the year) established from
time to time by the Board as the annual fee to be paid to Directors for their
services as directors.
(d) "Attendance Percentage" for a Director with respect to a
particular Grant Year means the percentage of the aggregate of all meetings of
the Board and committees of which the Director was a member held during the
Grant Year (or, for Directors who join the Board or otherwise first become
Directors after the beginning of the Grant Year, Directors who
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retire at the annual meeting of shareholders (as described in the Company's
By-laws) held during the Grant Year, Directors who do not stand for reelection
at the annual meeting of shareholders held during the Grant Year, or Directors
who die during the Grant Year, the aggregate of all such meetings held for the
portion of the Grant Year during which the Director served as a director),
excluding any meeting(s) not attended because of illness, which were attended by
the Director. Except as otherwise provided below, in the event that a Director
ceases to be a director at any time during the Grant Year for any reason other
than retirement at the annual meeting of shareholders, not standing for
reelection at the annual meeting of shareholders, or death, all meetings held
during the Grant Year of the Board and committees of which he was a member at
the time of termination of service will continue to be included as meetings when
calculating the Attendance Percentage.
(e) "Board" means the Board of Directors of the Company.
(f) "Board Chairman" means the director who is the
non-employee, non-executive chairman of the Board, if any.
(g) "Cash Account" means the account established by the
Company in respect of each Director pursuant to Section 6.3(a) hereof and to
which deferred cash compensation has been or will be credited pursuant to the
Plan.
(h) "Cause" means any act of (i) fraud or intentional
misrepresentation or (ii) embezzlement, misappropriation or conversion of assets
or opportunities of the Company or any of its direct or indirect majority-owned
subsidiaries.
(i) "Change in Control" will have the meaning assigned to it
in Section 9.2 hereof.
(j) "Committee" means the Compensation Committee of the Board
(or any subcommittee thereof) or any successor committee established by the
Board, or any subcommittee thereof, in each case consisting of two or more
members each of whom is a "non-employee director" as that term is defined by
Rule 16b-3 under the Exchange Act, as such rule may be amended, or any successor
rule.
(k) "Common Stock Equivalent" means a hypothetical share of
Stock which will have a value on any date equal to the mean of the high and low
prices of the Stock as reported by the composite tape of the New York Stock
Exchange on that date, except as otherwise provided under Section 9.1.
(l) "Common Stock Equivalent Award" means an award of Common
Stock Equivalents granted to a Director pursuant to Section 5 of the Plan prior
to its amendment as of April 26, 1995.
(m) "Debenture" means a hypothetical debenture of the Company
that has a face value of $100, bears interest at a rate equal to the ten-year
U.S. Treasury Bond rate (prior to January 1, 1995, the seven-year U.S. Treasury
Bond rate) in effect the week prior to the regular January meeting of the Board
(or, if no such meeting is held, the week prior to the first trading day of the
New York Stock Exchange in February) in the year in respect of which deferred
amounts are earned, and is convertible into Stock at a conversion rate
determined by dividing $100 by the mean of the high and low prices of the Stock
as reported by the composite tape of
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the New York Stock Exchange on the date the Debenture is credited to the
Deferred Debenture Account pursuant to Section 6.3 hereof.
(n) "Deferred Debenture Account" means the account established
by the Company pursuant to Section 6.3(c) hereof in respect of each Director
electing to defer cash compensation under the Plan for 1997 and/or for an
earlier year or years and to which has been or will be credited Debentures and
other amounts pursuant to the Plan.
(o) "Deferred Stock Account" means the account established by
the Company in respect of each Director pursuant to Section 5.2 hereof and to
which has been or will be credited Common Stock Equivalents pursuant to the
Plan.
(p) "Director" means a member of the Board who is neither an
officer nor an employee of the Company. For purposes of the Plan, an employee is
an individual whose wages are subject to the withholding of federal income tax
under Section 3401 of the Internal Revenue Code, and an officer is an individual
elected or appointed by the Board or chosen in such other manner as may be
prescribed in the By-laws of the Company to serve as such, other than a
non-executive officer (such as the Board Chairman).
(q) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(r) "Fair Market Value" means the mean of the high and low
prices of the Stock as reported by the composite tape of the New York Stock
Exchange (or such successor reporting system as the Committee may select) on the
relevant date or, if no sale of the Stock has been reported for that day, the
average of such prices on the next preceding day and the next following day for
which there were reported sales.
(s) "Grant Date" means, as to a Stock Option Award, the date
of grant pursuant to Section 7.1 and as to a Restricted Stock Award, the date of
grant pursuant to Section 8.1.
(t) "Grant Year" means, as to a particular award, the calendar
year in which the award was granted.
(u) "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.
(v) "Option Vesting Date" will have the meaning assigned to it
in Section 7.2.
(w) "Restricted Stock" means shares of Stock awarded to a
Director pursuant to Section 8 and subject to certain restrictions in accordance
with the Plan.
(x) "Restricted Stock Award" means an award of shares of
Restricted Stock granted to a Director pursuant to Section 8 of the Plan.
(y) "Stock" means the common stock, $1.00 par value, of the
Company.
(z) "Stock Option" means a non-statutory stock option to
purchase shares of Stock for a purchase price per share equal to the Exercise
Price (as defined in Section 7.2(a)) in accordance with the provisions of the
Plan.
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(aa) "Stock Option Award" means an award of Stock Options
granted to a Director pursuant to Section 7 of the Plan.
(bb) "Stock Option Value" means the value of a Stock Option
for one share of Stock on the relevant date as determined by an outside firm
selected by the Company.
2.2 Gender and Number. Except when otherwise indicated by the context,
the masculine gender will also include the feminine gender, and the definition
of any term herein in the singular will also include the plural.
SECTION 3. PLAN ADMINISTRATION
(a) The Plan will be administered by the Committee. The
members of the Committee will be members of the Board appointed by the Board,
and any vacancy on the Committee will be filled by the Board or in a manner
authorized by the Board.
The Committee will keep minutes of its meetings and of any action taken
by it without a meeting. A majority of the Committee will constitute a quorum,
and the acts of a majority of the members present at any meeting at which a
quorum is present will be the acts of the Committee. Any action that may be
taken at a meeting of the Committee may be taken without a meeting if a consent
or consents in writing setting forth the action so taken is signed by all of the
members of the Committee. The Committee will make appropriate reports to the
Board concerning the operations of the Plan.
(b) Subject to the limitations of the Plan, the Committee
and/or the Board, will have the sole and complete authority: (i) to impose such
limitations, restrictions and conditions upon such awards as it deems
appropriate; (ii) to interpret the Plan and to adopt, amend and rescind
administrative guidelines and other rules and regulations relating to the Plan;
and (iii) to make all other determinations and to take all other actions
necessary or advisable for the implementation and administration of the Plan.
The Committee's or the Board's determinations on matters within its authority
will be conclusive and binding upon the Company and all other persons.
(c) The Company will be the sponsor of the Plan. All expenses
associated with the Plan will be borne by the Company.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. 600,000 shares of Stock are authorized for
issuance under the Plan in accordance with the provisions of the Plan, subject
to adjustment and substitution as set forth in this Section 4. This
authorization may be increased from time to time by approval of the Board and,
if such approval is required, by the shareholders of the Company. The Company
will at all times during the term of the Plan retain as authorized and unissued
Stock at least the number of shares from time to time required under the
provisions of the Plan, or otherwise assure itself of its ability to perform its
obligations hereunder.
4.2 Other Shares of Stock. Any shares of Stock that are subject to a
Common Stock Equivalent Award, a Stock Option Award, a Restricted Stock Award or
a Debenture and which are forfeited, any shares of Stock that for any other
reason are not issued to a Director, and any shares of Stock tendered by a
Director to pay the Exercise Price of a Stock Option will
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automatically become available again for use under the Plan if Rule 16b-3 under
the Exchange Act, as such rule may be amended, or any successor rule, and
interpretations thereof by the Securities and Exchange Commission or its staff
permit such share replenishment.
4.3 Adjustments Upon Changes in Stock. If there is any change in the
Stock of the Company, through merger, consolidation, division, share exchange,
combination, reorganization, recapitalization, stock dividend, stock split,
spin-off, split up, dividend in kind or other change in the corporate structure
or distribution to the shareholders, appropriate adjustments may be made by the
Committee (or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) in the
aggregate number and kind of shares subject to the Plan, and the number and kind
of shares which may be issued under the Plan. Appropriate adjustments may also
be made by the Committee in the terms of any awards or Debentures under the Plan
to reflect such changes and to modify any other terms of outstanding awards on
an equitable basis as the Committee in its discretion determines.
SECTION 5. COMMON STOCK EQUIVALENT AWARDS
5.1 Grants of Common Stock Equivalent Awards. Common Stock Equivalents
equal to a fixed number of shares of Stock were granted automatically to
Directors on a formula basis under Section 5.1 of the Plan prior to its
amendment as of April 26, 1995. All Common Stock Equivalents granted pursuant to
Section 5.1 prior to its amendment as of April 26, 1995 are subject to
adjustment as provided in Section 4.3.
5.2 Deferred Stock Account. A Deferred Stock Account has been
established for each Director elected prior to the annual meeting of
shareholders held in 1995. The Deferred Stock Account consists of compensation
in the form of Common Stock Equivalents which have been awarded to the Director
hereunder by the Company plus Common Stock Equivalents credited to the Deferred
Stock Account in respect of dividends and other distributions on the Stock
pursuant to Sections 5.3 and 5.4.
5.3 Hypothetical Investment. Compensation awarded hereunder in the form
of Common Stock Equivalents is assumed to be a hypothetical investment in shares
of Stock, and is subject to adjustment to reflect stock dividends, splits and
reclassifications and as otherwise set forth in Section 4.3.
5.4 Hypothetical Dividends. Dividends and other distributions on Common
Stock Equivalents will be deemed to have been paid as if such Common Stock
Equivalents were actual shares of Stock issued and outstanding on the respective
record or distribution dates. Common Stock Equivalents will be credited to the
Deferred Stock Account in respect of cash dividends and any other securities or
property issued on the Stock in connection with reclassifications, spin-offs and
the like on the basis of the value of the dividend or other asset distributed
and the value of the Common Stock Equivalents on the date of the announcement of
the dividend or asset distribution, all at the same time and in the same amount
as dividends or other distributions are paid or issued on the Stock. Such Common
Stock Equivalents are subject to adjustment as provided in Section 4.3.
Fractional shares will be credited to a Director's Deferred Stock Account
cumulatively but the balance of shares of Common Stock Equivalents in a
Director's Deferred Stock Account will be rounded to the next highest whole
share for any payment to such Director pursuant to Section 5.6.
5.5 Statement of Account. A statement will be sent to each Director as
to the balance of his Deferred Stock Account at least once each calendar year.
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5.6 Payment of Deferred Stock. Upon termination of services as a
Director, the balance of the Director's Deferred Stock Account will be paid to
such Director in Stock in January of the year following the year of termination
of services as a director on the basis of one share of Stock for each Common
Stock Equivalent in such Director's Deferred Stock Account.
5.7 Payments to a Deceased Director's Estate. In the event of a
Director's death before the balance of his or her Deferred Stock Account is
fully paid to the Director, payment of the balance of the Director's Deferred
Stock Account will then be made to the beneficiary properly designated by the
Director pursuant to Section 5.8, if any, or to his or her estate in the absence
of such a beneficiary designation, in the time and manner selected by the
Committee. The Committee may take into account the application of any duly
appointed administrator or executor of a Director's estate and direct that the
balance of the Director's Deferred Stock Account be paid to his or her estate in
the manner requested by such application.
5.8 Designation of Beneficiary. A Director may designate a beneficiary
in the event of the Director's death in a form approved by the Company.
SECTION 6. DEFERRAL OF COMPENSATION
6.1 Amount of Deferral. A Director may elect to defer receipt of all or
a specified portion of the cash compensation otherwise payable to the Director
for services rendered to the Company in any capacity as a director.
6.2 Manner of Electing Deferral. A Director will make elections
permitted hereunder by giving written notice to the Company in a form approved
by the Committee and in compliance with Section 6.4. The notice will include:
(i) the percentage of cash compensation to be deferred, which amount must be
stated in whole increments of five percent; and (ii) the time as of which
deferral is to commence.
6.3 Accounts.
(a) Cash Account. A Cash Account has been or will be
established for each Director electing to defer hereunder. Each Cash Account
will be credited with the amounts deferred on the date such compensation is
otherwise payable and will be debited with the amount of any such compensation
forfeited in accordance with applicable Board policy.
(b) Interest. Deferred amounts in the Cash Account will
accrue interest from time to time as follows:
(1) Pre-1998. For deferred amounts credited to the
Cash Account prior to January 1, 1998 (including but not
limited to Annual Director's Fees for the calendar year
1997), such deferred amounts will accrue interest from time
to time at a rate equal to the ten-year U.S. Treasury Bond
rate (prior to January 1, 1995, the seven-year U.S. Treasury
Bond rate) in effect the week prior to the regular January
meeting of the Board (or, if no such meeting is held, the
week prior to the first trading day of the New York Stock
Exchange in February) in the year in respect of which such
deferred amounts are earned until the last trading day of the
New York Stock Exchange prior to the regular January meeting
of the Board (or, if no such meeting is held, until the first
trading day of February) in the year following the year in
respect of which deferred amounts are earned, at
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which time such deferred amounts, including interest, will be
invested in Debentures and credited to the Deferred Debenture
Account. Deferred amounts will be credited to the Deferred
Debenture Account only in $100 amounts. Fractional amounts of
$100 will remain in the Cash Account and continue to accrue
interest.
(2) 1998 and Thereafter. For deferred amounts
credited to the Cash Account on or after January 1, 1998 (and
any fractional amounts remaining in the Cash Account from
prior deferrals), unless otherwise determined by the Board or
the Committee prior to the deferral date such deferred
amounts will accrue interest from time to time at the
Interest Credit Rate then in effect, compounded annually. The
"Interest Credit Rate" will be reset by the Company on an
annual basis in January of the year, and will equal the then
current one-year U.S. Treasury Bill rate or such other fixed
rate as the Committee may from time to time determine.
(c) Deferred Debenture Account. A Deferred Debenture Account
has been established for each Director electing to defer cash compensation
hereunder for the calendar year 1997 and/or for an earlier year or years.
Deferred amounts credited to the Cash Account prior to January 1, 1998 will be
invested in Debentures and credited to the Deferred Debenture Account at the
time and in the manner set forth in Section 6.3(b)(1). Deferred amounts credited
to the Cash Account on or after January 1, 1998 will not be invested in
Debentures but will remain in the Cash Account and accrue interest until payment
hereunder.
6.4 Time for Electing Deferral. Any election to (i) defer cash
compensation, (ii) alter the portion of such amounts deferred, or (iii) revoke
an election to defer such amounts, must be made prior to the time such
compensation is earned by the Director and otherwise in compliance with any
deadline which the Company may from time to time impose and in the manner set
forth in Section 6.2.
6.5 Payment of Deferred Amounts. Payments from a Deferred Debenture
Account and/or from a Cash Account will be made in five consecutive annual
installments beginning in the January following the Director's termination of
service.
Payments from a Deferred Debenture Account will consist of accumulated
interest on the Debentures (which amount will only be payable in cash) plus the
greater value of (i) the face value of the Debentures or (ii) the shares of
Stock into which the Debentures are convertible. In the event the value of the
payment is determined by the amount referred to in clause (i), payment will be
made in cash. In the event such value is determined by clause (ii), such payment
will be made in Stock, other than the value of fractional shares which will be
paid in cash.
Payments from a Cash Account will consist of the deferred cash
compensation and accumulated interest in said account and will be made in cash.
6.6 Payments to a Deceased Director's Estate. In the event of a
Director's death before the balance of his or her Cash Account or Deferred
Debenture Account is fully paid to the Director, payment of the balance of the
Cash Account or Deferred Debenture Account will then be made to the beneficiary
properly designated by the Director pursuant to Section 6.7, if any, or to his
or her estate in the absence of such a beneficiary designation, in the time and
manner selected by the Committee. The Committee may take into account the
application of any duly appointed administrator or executor of a Director's
estate and direct that the balance of the
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Director's Cash Account or Deferred Debenture Account be paid to his or her
estate in the manner requested by such application.
6.7 Designation of Beneficiary. A Director may designate a beneficiary
in the event of the Director's death in a form approved by the Company.
SECTION 7. STOCK OPTION AWARDS
7.1 Grants of Stock Option Awards.
(a) For calendar year 1995, Stock Options for a fixed number
of shares of Stock were granted automatically to Directors on a formula basis
under Section 7.1(a) of the Plan.
(b) For calendar year 1995, Stock Options for a fixed number
of shares of Stock were granted automatically on a formula basis under Section
7.1(b) of the Plan to Directors serving as chairs of standing committees of the
Board.
(c) For calendar years 1996 and 1997, Stock Options were
granted automatically under Section 7.1(c) of the Plan to Directors for
one-fourth of the value of their Annual Director's Fees.
(d) Annual Director's Fee Grants. Beginning with calendar
year 1998, unless otherwise determined by the Board or the Committee each
Director will receive 5/16ths (31.25%) of the value of his or her Annual
Director's Fee in the form of a Stock Option Award. Such Stock Options will be
granted automatically each year on the last Wednesday in January of such year to
each Director in office on such Grant Date.
If a person joins the Board or otherwise first becomes a Director at
any time after the last Wednesday in January of a given calendar year (beginning
with 1998) but before the end of that calendar year, whether by action of the
shareholders of the Company or the Board or otherwise, unless otherwise
determined by the Board or the Committee such person upon becoming a Director
will be granted automatically 5/16ths (31.25%) of the value of his or her Annual
Director's Fee for that calendar year (which may be prorated) in the form of a
Stock Option Award on the last Wednesday of the calendar month in which such
person first becomes a Director (or in the next following calendar month if such
person first becomes a Director after the last Wednesday of the month). The
total number of shares of Stock subject to any such Stock Option Award will be
the number of shares determined by dividing the amount of the Annual Director's
Fee to be paid in the form of a Stock Option Award by the Stock Option Value on
the Grant Date, rounded up to the nearest whole share.
(e) Annual Board Chairman's Fee Grants. Beginning with
calendar year 1999, unless otherwise determined by the Board or the Committee,
the Board Chairman, if any, will receive 5/16ths (31.25%) of the value of his or
her Annual Board Chairman's Fee in the form of a Stock Option Award, and such
Stock Options will be granted automatically each year on the last Wednesday in
January of such year to the Board Chairman in office on such Grant Date, if any.
If a director becomes Board Chairman at any time after the last
Wednesday in January of a given calendar year (beginning with calendar year
1999) but before the end of that calendar year, whether by action of the Board
or otherwise, unless otherwise determined by the Board or the Committee such
director upon so becoming the Board Chairman will be granted
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automatically 5/16ths (31.25%) of the value of his or her Annual Board
Chairman's Fee for that calendar year (which may be prorated) in the form of a
Stock Option Award on the last Wednesday of the calendar month in which such
person first becomes Board Chairman (or in the next following calendar month if
such person first becomes Board Chairman after the last Wednesday of the month).
The total number of shares of Stock subject to any such Stock Option Award will
be the number of shares determined by dividing the amount of the Annual Board
Chairman's Fee to be paid in the form of a Stock Option Award by the Stock
Option Value on the Grant Date, rounded up to the nearest whole share.
(f) Other Stock Option Grants. Beginning with calendar year
1999, the Board or the Committee may, from time to time, grant Stock Option
Awards to one or more Directors or to the Board Chairman for such number of
shares as the Board or the Committee may determine as additional compensation to
such Director or Directors or to such Board Chairman for their services as such.
(g) All Stock Options granted pursuant to Section 7.1 are
subject to adjustment as provided in Section 4.3.
7.2 Terms and Conditions of Stock Options. Unless otherwise determined
by the Board or the Committee, Stock Options granted under the Plan will be
subject to the following terms and conditions:
(a) Exercise Price. Beginning with Stock Options granted in
calendar year 1998 and thereafter, the purchase price per share at which a Stock
Option may be exercised ("Exercise Price") will be equal to the Fair Market
Value of a share of Stock on the Grant Date. Notwithstanding anything herein to
the contrary, in no event may the Board or the Committee establish an Exercise
Price that is less than the Fair Market Value of a share of Stock on the Grant
Date.
For Stock Options granted in 1995, 1996 and 1997, the Exercise Price
was determined as follows: on any Grant Date, (1) Stock Options for two-thirds
of the option shares granted on the Grant Date had an Exercise Price per share
equal to 100% of the Fair Market Value of a share of Stock on the Grant Date;
and (2) Stock Options for the remaining one-third of the option shares granted
on the Grant Date had an Exercise Price per share equal to 125% of the Fair
Market Value of a share of Stock on the Grant Date.
(b) Exercisability. Subject to the terms and conditions of the
Plan and of the agreement referred to in Section 7.2(j), a Stock Option may be
exercised in whole or in part upon notice of exercise to the Company: (1) as to
any Stock Option granted in calendar year 1995, commencing on the first day
after the Grant Date and until it terminates; and (2) as to any Stock Option
granted after January 1, 1996 that vests as provided in Section 7.2(c)(2),
7.2(c)(3) or 7.2(c)(4), commencing on January 1 of the calendar year next
following the Grant Year (the "Option Vesting Date") or upon the occurrence of a
Change in Control, if earlier, and until it terminates. During a Director's
lifetime, a Stock Option may be exercised only by the Director or the Director's
guardian or legal representative.
(c) Vesting of Stock Option Awards.
(1) Stock Options granted in calendar year 1995 vested
immediately on grant.
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<PAGE> 10
(2) Annual Director's Fee Grants. Except as otherwise set
forth in Section 7.1(c)(4), Stock Options granted as part of a Director's Annual
Director's Fee after January 1, 1996 will vest on the Option Vesting Date if the
Director has an Attendance Percentage of at least seventy-five percent (75%) for
the Grant Year.
In the event that a Director has an Attendance Percentage of less than
seventy-five percent (75%) for a Grant Year, Stock Options granted in that Grant
Year for a number of shares equal to the Director's Attendance Percentage for
that year multiplied by the total number of option shares granted for that year
(rounded up to the nearest whole share) will vest on the Option Vesting Date,
and Stock Options granted in that Grant Year as to the remaining option shares
will be forfeited and will terminate as of the Option Vesting Date.
(3) Annual Board Chairmen's Fee Grants and Other Grants.
Except as otherwise set forth in Section 7.1(c)(4), Stock Options granted as
part of an Annual Board Chairman's Fee, if any, or granted to a Director or to
the Board Chairman, if any, pursuant to Section 7.1(f) will vest on the Option
Vesting Date.
(4) Notwithstanding anything to the contrary herein, (i) in
the event that a director is removed for Cause from office as a director of the
Company (and/or, in the case of Stock Options granted to a director in his or
her capacity as Board Chairman, from office as Board Chairman, if applicable),
all outstanding Stock Options will be forfeited immediately as of the time the
grantee is so removed from office, and (ii) upon the occurrence of a Change in
Control, all outstanding Stock Options will vest and become immediately
exercisable.
(d) Mandatory Holding of Stock. Except as otherwise provided
in Section 7.5 or Section 10, any Stock acquired on exercise of a Stock Option
must be held by the grantee for a minimum of: (1) three years from the date of
exercise; (2) two years from the date the grantee ceases to be a director of the
Company; or (3) until the occurrence of a Change in Control, whichever first
occurs (the "Option Shares Holding Period").
(e) Option Term. The term of a Stock Option (the "Option
Term") will be the shorter of: (1) the period of ten years from its Grant Date;
(2) the period from the Grant Date until the Option Vesting Date for a Stock
Option that does not vest and is terminated on said date as provided in Section
7.2(c)(2), if applicable (or with respect to any portion of a Stock Option that
does not vest on the Option Vesting Date and is terminated as provided in
Section 7.2(c)(2), if applicable); (3) the period from the Grant Date until the
time the Stock Option is forfeited as provided in Section 7.2(c)(4)(i) in the
event a director is removed from office as a director of the Company and/or as
Board Chairman, if applicable, for Cause; or (4) the period from the Grant Date
until the date the Stock Option ceases to be exercisable as provided in Section
7.2(h).
(f) Payment of Exercise Price. Stock purchased on exercise of
a Stock Option must be paid for as follows: (1) in cash or by check (acceptable
to the Company), bank draft or money order payable to the order of the Company,
(2) through the delivery of shares of Stock which are then outstanding and which
have a Fair Market Value on the date of exercise equal to the Exercise Price per
share multiplied by the number of shares as to which the Stock Option is being
exercised (the "Aggregate Exercise Price"); (3) by delivery of an unconditional
and irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the Aggregate Exercise Price, or (4) by a combination of
the permissible forms of payment; provided, however, that any portion of the
Exercise Price representing a fraction of a share must be paid in cash and no
share of Stock held for less than six months may be delivered in payment of the
Aggregate Exercise Price.
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<PAGE> 11
(g) Rights as a Shareholder. The holder of a Stock Option will
not have any of the rights of a shareholder with respect to any shares of Stock
subject to the Stock Option until such shares are issued by the Company
following the exercise of the Stock Option.
(h) Termination of Eligibility. If a grantee ceases to be a
director and/or ceases to be Board Chairman, if applicable, for any reason, any
outstanding Stock Options will be exercisable according to the following
provisions:
(1) If a grantee ceases to be a director and/or ceases to be
Board Chairman, if applicable, for any reason other than removal for Cause or
death, any outstanding Stock Options held by such grantee which are vested or
which thereafter vest will be exercisable by the grantee in accordance with
their terms at any time prior to the expiration of the Option Term;
(2) If a grantee is removed from office as a director of the
Company and/or as Board Chairman, if applicable, for Cause, any outstanding
vested Stock Options held by such grantee will be exercisable by the grantee in
accordance with their terms at any time prior to the earlier of (a) the time the
grantee is so removed from office and (b) the expiration of the Option Term; and
(3) Following the death of a grantee while a director and/or
while Board Chairman, if applicable, or after the grantee ceased to be a
director and/or ceased to be Board Chairman, if applicable, for any reason other
than removal for Cause, any Stock Options that are outstanding and exercisable
by such grantee at the time of death or which thereafter vest will be
exercisable in accordance with their terms by the person or persons entitled to
do so under the grantee's will, by a beneficiary properly designated by the
director in the event of death pursuant to Section 7.4, if any, or by the person
or persons entitled to do so under the applicable laws of descent and
distribution at any time prior to the earlier of (a) the expiration of the
Option Term and (b) two years after the date of death.
(i) Termination of Stock Option. A Stock Option will terminate
on the earlier of (1) exercise of the Stock Option in accordance with the terms
of the Plan, and (2) expiration of the Option Term as specified in Sections
7.2(e) and 7.2(h).
(j) Stock Option Agreement. All Stock Options will be
confirmed by an agreement, or an amendment thereto, which will be executed on
behalf of the Company by the Chief Executive Officer, the President or any Vice
President and by the grantee.
(k) General Restrictions.
(1) The obligation of the Company to issue Stock pursuant to
Stock Options under the Plan will be subject to the condition that, if at any
time the Company determines that (a) the listing, registration or qualification
of shares of Stock upon any securities exchange or under any state or federal
law, or (b) the consent or approval of any government or regulatory body is
necessary or desirable, then such Stock will not be issued unless such listing,
registration, qualification, consent or approval has been effected or obtained
free from any conditions not acceptable to the Company.
(2) Shares of Stock for use under the provisions of this
Section 7 will not be issued until they have been duly listed, upon official
notice of issuance, upon the New York Stock Exchange and such other exchanges,
if any, as the Board may determine, and a registration
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<PAGE> 12
statement under the Securities Act of 1933 with respect to such shares has
become, and is, effective.
Subject to the foregoing provisions of this Section 7.2 and the other
provisions of the Plan, any Stock Option granted under the Plan will be subject
to such restrictions and other terms and conditions, if any, as the Board and/or
the Committee may determine, in its or their discretion, and as are set forth in
the agreement referred to in Section 7.2(j), or an amendment thereto; provided,
however, that in no event will the Committee or the Board have any power or
authority which would cause transactions pursuant to the Plan to cease to be
exempt from the provisions of Section 16(b) of the Exchange Act pursuant to Rule
16b-3, as such rule may be amended, or any successor rule.
7.3 Annual Statement. A statement will be sent to each Director as to
the status of his or her Stock Options at least once each calendar year.
7.4 Designation of a Beneficiary. A Director may designate a
beneficiary to hold and exercise outstanding Stock Options in accordance with
the Plan in the event of the Director's death in a form approved by the Company.
7.5 Holding Period Applicable to a Deceased Grantee's Estate. As long
as at least six months have elapsed since the Grant Date, a beneficiary properly
designated by the Director pursuant to Section 7.4, if any, or a person holding
a Stock Option under a deceased grantee's will or under the applicable laws of
descent or distribution, exercising a Stock Option in accordance with Section
7.2(h) will not be subject to the Holding Period with respect to shares of Stock
received on exercise of a Stock Option.
SECTION 8. RESTRICTED STOCK AWARDS.
8.1 Grants of Restricted Stock Awards.
(a) Annual Director's Fee Grants. For calendar years 1996 and
1997, each Director received one-fourth of the value of his or her Annual
Director's Fee in the form of a Restricted Stock Award.
Beginning with calendar year 1998, unless otherwise determined by the
Board or the Committee each Director will receive 5/16ths (31.25%) of the value
of his or her Annual Director's Fee in the form of a Restricted Stock Award, and
such Restricted Stock will be granted automatically each year on the last
Wednesday in January of such year to each Director in office on such Grant Date.
If a person joins the Board or otherwise first becomes a Director at
any time after the last Wednesday in January of a given calendar year (beginning
with 1998) but before the end of that calendar year, whether by action of the
shareholders of the Company or the Board or otherwise, unless otherwise
determined by the Board or the Committee such person upon becoming a Director
will be granted automatically 5/16ths (31.25%) of the value of his or her Annual
Director's Fee for that calendar year (which may be prorated) in the form of a
Restricted Stock Award on the last Wednesday in the calendar month in which such
person first becomes a Director (or in the next following calendar month if said
person first becomes a Director after the last Wednesday of the month).
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<PAGE> 13
(b) Annual Committee Chair's Fee Grants. Beginning with
calendar year 1996, unless otherwise determined by the Board or the Committee
each Director who is the chair of a standing committee of the Board will receive
the full value of his or her Annual Committee Chair's Fee in the form of a
Restricted Stock Award, and such Restricted Stock will be granted automatically
each year immediately following the annual meeting of shareholders and the
organization meeting of the Board related to such annual meeting of
shareholders, beginning with the annual meeting of shareholders and related
organization meeting held in 1996, to each Director who is elected at such
organization meeting to serve as the chair of a standing committee of the Board.
Beginning after the 1998 organization meeting of the Board, if a
Director is elected to serve as the chair of a standing committee of the Board
at any time after the organization meeting of the Board held in connection with
the annual meeting of shareholders for a given year but before the next
organization meeting of the Board is held, unless otherwise determined by the
Board or the Committee such Director will, upon so becomming a committee chair,
receive the value of his or her Annual Committee Chair's Fee for that year
(which may be prorated) in the form of a Restricted Stock Award on the later of:
(1) the last Wednesday in the calendar month in which such Director becomes a
standing committee chair (or in the next following calendar month if said
Director becomes a standing committee chair after the last Wednesday of the
month); and (2) January 27, 1999.
(c) Annual Board Chairman's Fee Grants. Beginning with
calendar year 1999, unless otherwise determined by the Board or the Committee,
the Board Chairman, if any, will receive 5/16ths (31.25%) of the value of his or
her Annual Board Chairman's Fee in the form of a Restricted Stock Award, and
such Restricted Stock will be granted automatically each year on the last
Wednesday in January of such year to the Board Chairman in office on such Grant
Date, if any.
If a director becomes Board Chairman at any time after the last
Wednesday in January of a given calendar year (beginning with calendar year
1999) but before the end of that calendar year, whether by action of the Board
or otherwise, unless otherwise determined by the Board or the Committee such
director upon so becoming the Board Chairman will receive 5/16ths (31.25%) of
the value of his or her Annual Board Chairman's Fee for that year (which may be
prorated) in the form of a Restricted Stock Award on the last Wednesday in the
calendar month in which such director becomes the Board Chairman (or in the next
following calendar month if said director becomes Board Chairman after the last
Wednesday of the month.
(d) The total number of shares of Stock representing any such
Restricted Stock Award will be the number of shares determined by dividing the
amount of the Annual Director's Fee, the Annual Committee Chair's Fee or the
Annual Board Chairman's Fee, as the case may be, to be paid in the form of a
Restricted Stock Award by the Fair Market Value of a share of Stock on the Grant
Date, rounded up to the nearest whole share.
(e) Other Restricted Stock Grants. Beginning with calendar
year 1999, the Board or the Committee may, from time to time, grant Restricted
Stock Awards to one or more Directors or to the Board Chairman for such number
of shares of Restricted Stock as the Board or the Committee may determine as
additional compensation to such Director or Directors or to such Board Chairman
for their services as such.
(f) Restricted Stock granted pursuant to Section 8.1 is
subject to adjustment as provided in Section 4.3.
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<PAGE> 14
8.2 Terms and Conditions of Restricted Stock. Unless otherwise
determined by the Board or the Committee, Restricted Stock granted under the
Plan will be subject to the following terms and conditions:
(a) Restriction Period. Restricted Stock will be subject to a
Restriction Period ("Restriction Period") beginning on the Grant Date and
continuing through December 31 of the Grant Year.
(b) Vesting.
(1) Annual Director's Fee Grants. Except as set forth in
Section 8.2(b)(3), a Director's right to ownership in shares of Restricted Stock
granted to a Director pursuant to Section 8.1(a) will vest on the January 1
immediately following the expiration of the Restriction Period for such shares
(the "Restricted Stock Vesting Date") if the Director has an Attendance
Percentage of at least seventy-five percent (75%) for the Grant Year.
In the event that a Director has an Attendance Percentage of less than
seventy-five percent (75%) for a Grant Year, a number of shares of Restricted
Stock equal to the Director's Attendance Percentage for the Grant Year
multiplied by the total number of shares of Restricted Stock granted pursuant to
Section 8.1(a) during the Grant Year (rounded up to the nearest whole share)
will vest on the Restricted Stock Vesting Date and the remaining shares of
Restricted Stock granted pursuant to Section 8.1(a) during the Grant Year will
be forfeited as of the Restricted Stock Vesting Date.
(2) Annual Committee Chair's Fee Grants, Annual Board
Chairman's Fee Grants, and Other Grants. Except as set forth in Section
8.2(b)(3) below, a Director's right to ownership in shares of Restricted Stock
granted to a Director pursuant to Section 8.1(e), to a committee chair pursuant
to Section 8.1(b), or to the Board Chairman, if any, pursuant to Section 8.1(c)
will vest on the Restricted Stock Vesting Date.
(3) Notwithstanding anything to the contrary herein, (i) in
the event that a director is removed for Cause from office as a director of the
Company (and/or in the case of Restricted Stock granted to a director in his or
her capacity as Board Chairman, from office as Board Chairman, if applicable)
prior to the Restricted Stock Vesting Date, all of said Director's shares of
Restricted Stock that have not yet vested will be forfeited immediately as of
the time the grantee is so removed from office and the Company will have the
right to complete the blank stock power described below with respect to such
shares, and (ii) upon the occurrence of a Change in Control, all shares of
Restricted Stock that have not yet vested will immediately vest.
(c) Issuance of Shares. On or about the Grant Date, a
certificate representing the shares of Restricted Stock will be registered in
the Director's name and deposited by the Director, together with a stock power
endorsed in blank, with the Company. Subject to the transfer restrictions set
forth in Section 8.2(d) and to the last sentence of this Section 8.2(c), the
Director as owner of shares of Restricted Stock will have the rights of the
holder of such Restricted Stock during the Restriction Period. On the Restricted
Stock Vesting Date following expiration of the Restriction Period, vested shares
of Restricted Stock will be re-delivered by the Company to the Director, and
non-vested shares of Restricted Stock will be forfeited and the Company will
have the right to complete the blank stock power with respect to such non-vested
shares; provided, however, with respect to shares of Restricted Stock granted in
1996 prior to shareholder approval of an amendment to the Plan on April 24,
1996, no
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<PAGE> 15
certificates were issued, such shares were not issued and outstanding, and the
Directors did not have any of the rights of an owner of the shares until the
date such shareholder approval occurred.
(d) Transfer Restrictions; Mandatory Holding of Stock. Except
as otherwise provided in Section 8.5 or Section 10, shares of Restricted Stock
are not transferable during the Restriction Period. Once the Restriction Period
lapses and shares vest, except as otherwise provided in Section 8.5 or Section
10, shares acquired as a Restricted Stock Award must be held by the grantee for
a minimum of: (1) three years from the Grant Date; (2) two years from the date
the grantee ceases to be a director of the Company; or (3) until the occurrence
of a Change of Control, whichever first occurs (the "Restricted Shares Holding
Period").
(e) Restricted Stock Agreement. All Restricted Stock Awards
will be confirmed by an agreement, or an amendment thereto, which will be
executed on behalf of the Company by the Chief Executive Officer, the President
or any Vice President and by the grantee.
(f) General Restriction.
(1) The obligation of the Company to issue shares of
Restricted Stock under the Plan will be subject to the condition that if, at any
time, the Committee determines that (a) the listing, registration or
qualification of shares of Restricted Stock upon any securities exchange or
under any state or federal law or (b) the consent or approval of any government
or regulatory body is necessary or desirable, then such Restricted Stock will
not be issued unless such listing, registration, qualification, consent or
approval has been effected or obtained free from any conditions not acceptable
to the Company.
(2) Shares of Stock for use under the provisions of this
Section 8 will not be issued until they have been duly listed, upon official
notice of issuance, upon the New York Stock Exchange and such other exchanges,
if any, as the Board may determine, and a registration statement under the
Securities Act of 1933 with respect to such shares has become, and is,
effective.
Subject to the foregoing provisions of this Section 8.2 and the other
provisions of the Plan, any shares of Restricted Stock granted under the Plan
will be subject to such restrictions and other terms and conditions, if any, as
the Board or the Committee may be determine, in its discretion, and as are set
forth in the agreement referred to in Section 8.2(e), or an amendment thereto;
provided, however, that in no event will either the Committee or the Board have
any power or authority which would cause transactions pursuant to the Plan to
cease to be exempt from the provisions of Section 16(b) of the Exchange Act
under Rule 16b-3, as such rule may be amended, or any successor rule.
8.3 Annual Statement. A statement will be sent to each Director as to
the status of his or her Restricted Stock at least once each calendar year.
8.4 Designation of a Beneficiary. A Director may designate a
beneficiary to hold shares of Restricted Stock in accordance with the Plan in
the event of the Director's death in a form approved by the Company.
8.5 Holding Period Applicable to a Deceased Grantee's Estate. As long
as at least six months have elapsed since the Grant Date, a beneficiary properly
designated by the Director pursuant to Section 8.4 in the event of death, if
any, or a person holding shares of Restricted
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<PAGE> 16
Stock under a deceased grantee's will or under the applicable laws of descent or
distribution, will not be subject to the Restricted Shares Holding Period with
respect to such shares of Restricted Stock.
SECTION 9. CHANGE IN CONTROL
9.1 Settlement of Compensation. In the event of a Change in Control of
the Company as defined herein, (a) to the extent not already vested, all Stock
Option Awards, Restricted Stock Awards and other benefits hereunder will be
vested immediately; and (b) the value of all unpaid benefits and deferred
amounts will be paid in cash to PNC Bank, National Association, the trustee
pursuant to a trust agreement dated as of June 22, 1995, as amended from time to
time, or any successor trustee, or otherwise on such terms as the Committee may
prescribe or permit. For purposes of this Section 9.1, the value of deferred
amounts will be equal to the sum of (i) the value of all Common Stock Equivalent
Awards then held in such Director's Deferred Stock Account (the value of which
will be based upon the highest price of the Stock as reported by the composite
tape of the New York Stock Exchange during the 30 days immediately preceding the
Change in Control), (ii) the value of the Director's Cash Account, and (iii) the
greater value of (x) the cash amount equal to the face value of the Debentures
in the Director's Deferred Debenture Account plus cash equal to accrued interest
on the Debentures or (y) the number of shares of Stock into which the Debentures
in the Director's Deferred Debenture Account are convertible (the value of which
will be based upon the highest price of the Stock as reported by the composite
tape of the New York Stock Exchange during the 30 days immediately preceding the
Change in Control), plus cash equal to accrued interest on the Debentures.
9.2 Definition of Change in Control. A Change in Control will mean the
occurrence of one or more of the following events:
(a) there shall be consummated (i) any consolidation or merger
of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Stock immediately prior to the
merger have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (ii) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; or
(b) the shareholders of the Company shall approve of any plan
or proposal for the liquidation or dissolution of the Company; or
(c) (i) any person (as such term is defined in Section 13(d)
of the Exchange Act), corporation or other entity shall purchase any Stock of
the Company (or securities convertible into the Company's Stock) for cash,
securities or any other consideration pursuant to a tender offer or exchange
offer, unless, prior to the making of such purchase of Stock (or securities
convertible into Stock), the Board shall determine that the making of such
purchase shall not constitute a Change in Control, or (ii) any person (as such
term is defined in Section 13(d) of the Exchange Act), corporation or other
entity (other than the Company or any benefit plan sponsored by the Company or
any of its subsidiaries) shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent or more of the combined
voting power of the Company's then outstanding securities ordinarily (and apart
from any rights accruing under special circumstances) having the right to vote
in the election of directors (calculated as provided in Rule 13d-3(d) in the
case of rights to acquire any such securities), unless, prior to such person
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<PAGE> 17
so becoming such beneficial owner, the Board shall determine that such person so
becoming such beneficial owner shall not constitute a Change in Control; or
(d) at any time during any period of two consecutive years,
individuals who at the beginning of such period constituted the entire Board
shall cease for any reason to constitute at least a majority thereof, unless the
election or nomination for election of each new director during such two-year
period is approved by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such two-year period.
SECTION 10. ASSIGNABILITY
10.1 The right to receive payments or distributions hereunder
(including any "derivative security" issued pursuant to the Plan, as such term
is defined by the rules promulgated under Section 16 of the Exchange Act), any
shares of Restricted Stock granted hereunder during the Restriction Period, and
any Stock Options granted hereunder will not be transferable or assignable by a
Director other than by will, by the laws of descent and distribution, to a
beneficiary properly designated by the Director pursuant to the appropriate
section of the Plan in the event of death, if any, or pursuant to a domestic
relations order as defined by Section 414(p)(1)(B) of the Internal Revenue Code
or the rules thereunder that satisfies Section 414(p)(1)(A) of the Internal
Revenue Code or the rules thereunder.
10.2 In addition, Stock acquired on exercise of a Stock Option will not
be transferable prior to the end of the applicable Option Shares Holding Period,
if any, set forth in Sections 7.2(d) and 7.5, and Stock acquired as Restricted
Stock will not be transferable prior to the end of the applicable Restricted
Shares Holding Period, if any, set forth in Sections 8.2(d) and 8.5, in either
case other than by will, by transfer to a beneficiary properly designated by the
Director pursuant to the appropriate section of the Plan in the event of death,
if any, by the applicable laws of descent and distribution, or pursuant to a
domestic relations order as defined by Section 414(p)(1)(B) of the Internal
Revenue Code or the rules thereunder that satisfies Section 414(p)(1)(A) of the
Internal Revenue Code or the rules thereunder.
SECTION 11. RETENTION; WITHHOLDING OF TAX
11.1 Retention. Nothing contained in the Plan or in any Stock Option
Award or Restricted Stock Award granted under the Plan will interfere with or
limit in any way the right of the Company to remove any director from the Board
or to remove the Board Chairman, if any, from office as such pursuant to the
Restated Articles of Incorporation and the By-laws of the Company, nor confer
upon any Director any right to continue in the service of the Company.
11.2 Withholding of Tax. To the extent required by applicable law and
regulation, each Director must arrange with the Company for the payment of any
federal, state or local income or other tax applicable to any payment or any
delivery of Stock hereunder before the Company will be required to make such
payment or issue (or, in the case of Restricted Stock, deliver) such shares
under the Plan.
SECTION 12. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time to time may amend or
modify the Plan, provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the shareholders
if shareholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements.
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<PAGE> 18
SECTION 13. REQUIREMENTS OF LAW
13.1 Federal Securities Law Requirements. Implementation and
interpretations of, transactions pursuant to, the Plan will be subject to all
conditions required under Rule 16b-3, as such rule may be amended, or any
successor rule, to qualify such transactions for any exemption from the
provisions of Section 16(b) of the Exchange Act available under that rule, or
any successor rule.
13.2 Governing Law. The Plan and all agreements hereunder will be
construed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
SECTION 14. OTHER COMPENSATION
Nothing contained in the Plan will be deemed to limit or restrict the
right of the Company to compensate directors for their services in any capacity
in whole or in part under separate compensation or deferral plans or programs
for directors or under other compensation arrangements.
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EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Subsidiary companies of the Registrant are listed below. With respect to the
companies named, all voting securities are owned directly or indirectly by the
Registrant, except where otherwise indicated.
<TABLE>
<CAPTION>
INCORPORATED OWNED BY
UNDER IMMEDIATE
NAME LAWS OF PARENT
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Bay County Energy Systems, Inc. Delaware 100.00
Bonneville Wind Corporation Utah 100.00
CBS Cable Networks, Inc. Delaware 100.00
Network Enterprises, Inc. (1) Tennessee 100.00
Peppercorn Productions, Inc. Tennessee 100.00
Lunker Lake Productions, Inc. Delaware 50.00
Silver Spice Productions, LLC Delaware 50.00
TNN Productions, Inc. Delaware 100.00
World Sports Enterprises Tennessee 51.00
World Skating League, LLC Tennessee 50.00
CBS Mass Media Corporation Delaware 100.00
Central Fidelity Insurance Company Vermont 100.00
Communities IP Holdings, Inc. Delaware 100.00
Communities LP Holdings, Inc. Delaware 100.00
Computerized and Advanced Technologies Company Pennsylvania 50.00
Delaware Resource Beneficiary, Inc. Delaware 100.00
Delaware Resource Lessee Trust (Business Trust) Delaware 100.00
Delaware Resource Management, Inc. Delaware 100.00
Dutchess Resource Management, Inc. Delaware 100.00
Empire Distributors Michigan 100.00
Entech Leasing, Inc. Michigan 100.00
Entech Services, Inc. Michigan 100.00
Fauske and Associates, Inc. Illinois 100.00
First Hotel Investment Corporation Delaware 100.00
First Westinghouse Capital Corporation Delaware 100.00
GLD Holdings, L.L.C 80.00
Group W Television Stations, Inc. Delaware 100.00
Group W Television Stations L.P. Delaware 100.00
Home Team Sports Limited Partnership Delaware 65.70
PCI Energy Services, Inc. Illinois 100.00
Peak FSC, Ltd. Bermuda 100.00
PN Services Inc. Washington 100.00
Rocky Mount Town Associates Limited Partnership Delaware 100.00
Safe Sites of Colorado L.L.C Delaware 65.00
Station Holdings B, Inc. Delaware 100.00
Group W/CBS Television Stations Partners Delaware 100.00
KUTV, L.P. Delaware 88.00
KUTV Real Estate Company, L.L.C Delaware 99.00
KUTV Associates Delaware 99.90
KUTV Holdings, Inc. Delaware 100.00
Symphonette Recording Society, L.L.C Delaware 50.00
Tube Mill, Inc. Alabama 100.00
Waste Resource Energy Delaware 100.00
WBCE Corporation New York 100.00
WCC FSC I, Inc. Delaware 100.00
WCC FSC III, Inc. US Virgin Islands 100.00
WCC FSC IV, Inc. US Virgin Islands 100.00
WCC FSC V, Inc. Bermuda 100.00
</TABLE>
58 CBS CORPORATION
<PAGE> 2
<TABLE>
<CAPTION>
INCORPORATED OWNED BY
UNDER IMMEDIATE
NAME LAWS OF PARENT
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
WCC FSC VIII, Inc. US Virgin Islands 100.00
WCC FSC IX, Inc. US Virgin Islands 100.00
WCC Project Corp. Delaware 100.00
WCC Soledad I, Inc. Delaware 100.00
WCC Soledad II, Inc. Delaware 100.00
W-F Productions, Inc. Delaware 100.00
Wesdyne International, Inc. Delaware 100.00
West Valley Nuclear Service Company, Inc. Delaware 100.00
Westinghouse (New Zealand) Ltd. New Zealand 100.00
Westinghouse Canada Holdings L.L.C Delaware 100.00
CBS Canada Co. Nova Scotia 100.00
Westinghouse Electric Corporation Pennsylvania 100.00
Westinghouse Energy Systems - Japan, Inc. Delaware 100.00
Westinghouse Energy Systems, Inc. Delaware 100.00
Westinghouse Sistemas Energeticos Espana, Inc. Delaware 100.00
Westinghouse Government and Environmental Service Company, Inc. Delaware 100.00
Bettis Laboratory Inc. Delaware 100.00
Westinghouse Hanford Company Delaware 100.00
Westinghouse Holdings Corporation (2) Delaware 100.00
Westinghouse Electric S.A. Switzerland 100.00
Westinghouse Electric Europe Coordination Center, S.A. Belgium 99.92
Westinghouse Electric GmbH, Birsfelden Switzerland 100.00
Westinghouse Electric (Asia-Pacific) Holdings, Ltd. Singapore 100.00
Group W Yarra Broadcast Pte, Ltd. Singapore 51.00
Westinghouse Electric Limited England 100.00
PWR Power Projects, Ltd. England 50.00
Westinghouse Decomissioning Ltd. England 100.00
Westinghouse Energy Systems Europe S.A Belgium 90.00
WESTRON Ukraine 60.00
Westinghouse International Technology Corporation Delaware 100.00
Westinghouse Investment Corporation Delaware 100.00
Westinghouse World Investment Corporation Delaware 100.00
Westinghouse Foreign Sales Corporation Barbados 100.00
Westinghouse Industry Products International Company, Inc. Delaware 100.00
Westinghouse International Projects Company Delaware 100.00
Westinghouse LMB, Inc. Delaware 100.00
Westinghouse Nuclear Services Canada, Inc. Ontario 100.00
Westinghouse Pictures, Inc. Delaware 100.00
Westinghouse Savannah River Company, Inc. Delaware 100.00
Westinghouse Safety Management Solutions, Inc. Delaware 100.00
Westinghouse Staffing Services, Inc. Delaware 100.00
Westinghouse Technology Services S.A Spain 100.00
WPIC Corporation Delaware 100.00
York Resource Energy Systems, Inc. Delaware 100.00
Westinghouse CBS Holding Company, Inc. Delaware 100.00
CBS Broadcasting Inc. (3) New York 100.00
Bala Cynwyd Associates Pennsylvania 50.00
CBS Pageants, Inc. Delaware 100.00
Miss Universe LP, LLLP 50.00
Meadowlands Parkway Associates New Jersey 50.00
The CBS/FOX Company New York 50.00
Infinity Broadcasting Corporation Delaware 82.00
Infinity Media Corporation (4) Delaware 100.00
</TABLE>
CBS CORPORATION 59
<PAGE> 3
<TABLE>
<CAPTION>
INCORPORATED OWNED BY
UNDER IMMEDIATE
NAME LAWS OF PARENT
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
TDI Worldwide, Inc. (5) Delaware 100.00
TDI Metro, Ltd Ireland 51.00
Metro Poster Advertising Ltd Ireland 100.00
Roadshow Advertising Ltd Ireland 100.00
TDI Holdings Limited (6) United Kingdom 100.00
LDI Limited United Kingdom 100.00
TDI Advertising Limited (7) United Kingdom 100.00
TDI Mail Holdings Limited (8) Northern Ireland 75.00
UCGI, Inc. Delaware 100.00
TMRG, Inc. Delaware 100.00
CBS Radio, Inc. (9) Delaware 100.00
Radio Data Group, Inc. Virginia 50.00
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Network Enterprises, Inc. is also the parent company of 9 wholly-owned
subsidiaries, incorporated in the United States for the purpose of operating
cable stations and producing, marketing, and broadcasting related cable
programming.
(2) Westinghouse Holdings Corporation is also the parent company of 8
wholly-owned subsidiaries which consist primarily of domestic and international
electric power and energy operations, of which 1 is incorporated in the United
States and 7 are incorporated in foreign countries.
(3) CBS Broadcasting Inc. is also the parent company of 25 wholly-owned
subsidiaries which produce, market, and broadcast various network programming,
of which 22 are incorporated in the United States and 3 are incorporated in
foreign countries.
(4) Infinity Media Corporation is also the parent company of 50 wholly-owned
subsidiaries which consist primarily of radio station operations, all of which
are incorporated in the United States.
(5) TDI Worldwide, Inc. is also the parent company of 6 wholly-owned outdoor and
transit advertising companies and franchises, all of which are incorporated in
the United States.
(6) TDI Holdings Limited is also the parent company of 5 wholly-owned
subsidiaries which consist primarily of outdoor and transit advertising
operations, all of which are incorporated in the Netherlands.
(7) TDI Advertising Limited is also the parent company of 6 wholly-owned outdoor
and transit advertising companies and franchises, all of which are incorporated
in the United Kingdom.
(8) TDI Mail Holdings Limited is the parent company of 3 wholly-owned outdoor
and transit advertising companies, all of which are incorporated in foreign
countries.
(9) CBS Radio, Inc. is also the parent company of 14 wholly-owned subsidiaries
which consist of primarily radio station operations, all of which are
incorporated in the United States.
Companies not shown by name, if considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary.
60 CBS CORPORATION
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in each prospectus constituting
part of the Registration Statements on Form S-3 (No. 33-41475), and on Form S-8
(Nos. 2-92085, 33-44044, 33-45365, 33-46779, 33-51445, 33-51579, 33-53815,
33-53819, 33-62043, 33-62045, 333-12583, 333-12589, 333-12591, 333-13219,
333-30127, 333-23661, 333-23663, and 333-37497) of CBS Corporation of our report
dated January 27, 1999 appearing on page 23 of this Form 10-K. We also consent
to the incorporation by reference of our report on the financial statement
schedule, which appears on page 55 of this Form 10-K.
/s/ KPMG LLP
- -----------------------
KPMG LLP
New York, New York
March 24, 1999
CBS CORPORATION 61
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