Good day, everyone and welcome to the CBS Corporation third quarter 2006 earnings release teleconference. Today's call is being recorded. At this time I would like to turn the call over to the Senior Vice President of Investor Relations, Mr. Marty Shea.

Good morning, everyone and thank you for taking the time to join us for our third quarter 2006 earnings call. Joining me for today's discussion are Sumner Redstone, our Executive Chairman; Leslie Moonves, our President and CEO; and Fred Reynolds, Executive Vice President and CFO. Sumner will have some opening remarks, and then we will turn the call over to Les and Fred for strategic and financial issues. We will then open up the call for questions. Let me note that statements on this conference call relating to matters which are not historical facts are forward-looking statements which involve risks and uncertainties that could cause actual results to differ. Risks and uncertainties are disclosed in CBS's Corporation's news releases and security filings. A summary of CBS Corporation's third quarter 2006 results should have been sent to all of you. If you did not receive the results, please contact Punam Visay at 212-975-3667 and she will get it to you. A webcast of the call, the earnings release, and any other information related to this presentation can be found on CBS Corporation's corporate website at the address of cbscorporation.com. Now, let me turn the call over to Sumner.

Thanks, Marty and good morning, everyone and thank you for joining us. We now have three quarters on the books and I couldn’t be more pleased with everything that Les and his team have achieved. Over the past ten months, we have delivered on the promises CBS made at the beginning of the year. We have driven growth in every important measure: revenue, profits, free cash flow, and of great importance to our shareholders, dividends. By the way, think about it -- free cash flow up 65%. Our core businesses continue to be among the strongest in the industry and at the same time, Les and his team are executing our strategy of bringing our world-class content to emerging digital platforms. I must tell you, I am more enthusiastic than ever about what Les and his team are doing at CBS and everything the future holds for this great Company, and by the way, for this great executive. I have said it before, I want to say it to you again: in Les we have the best executive in the media industry. To tell you more about it, here is our great executive, Les.

Thank you, Sumner. I'm overwhelmed by your comments; I really am. I appreciate it. Good morning, everyone. Thank you for joining us. I am very happy to be here to talk about the CBS Corporation's third quarter results. It continues to be a very exciting time at CBS. We are pleased with the performance of our core businesses. Many of the digital opportunities we have seen on the horizon are now becoming reality. This morning, I will give you an overview of our third quarter results, along with some key operational highlights. After that, our CFO Fred Reynolds will provide a more detailed look at our financial position, and then we will open up the call for your questions. We started the third quarter by raising the dividend 11% from $0.18 to $0.20 per share. It was the third time we increased the dividend since the start of the year, adding up to a total increase of 43%. Once again, these increases demonstrate that we are confident in where we are and where we are headed and importantly, we are committed to delivering on our promise to continually return value to you, our shareholders. Now, let's take a look at our other third quarter financial highlights. Revenues of $3.4 billion were very slightly ahead of the same quarter last year. OIBDA was up 3% to $756 million. Operating income rose 4% to $646 million. However, excluding stock-based compensation and adjusting for the separation, OIBDA for the third quarter was up 6% and operating income was up 7%. Meanwhile, net earnings from continuing operations were up 26% to $324 million. Diluted EPS was up 27% to $0.42 per diluted share. Free cash flow, which reflects net cash flow from continuing operations minus capital expenditures, was up 65% to $432 million. Looking…

Thanks, Leslie and good morning. Leslie just provided you with the highlights to the third quarter 2006. Let me now provide you with additional information on our third quarter operating performance, cash flow and balance sheet, and our full-year outlook. Revenues for the third quarter of 2006 of about $3.4 billion were up slightly over the third quarter of '05. Two items in the third quarter reduced our revenue growth when compared to the third quarter last year. The first item, as Leslie mentioned, was revenues from our DVD sales. which were considerably lower again this quarter versus year ago, as we are required to record DVD revenues on a net versus gross basis this year. Also, our broadcast network revenues were lower due to the shutdown of the UPN Network in mid-September. These two items combined to reduce our revenues for the total company in the third quarter of '06 as compared to last year's third quarter by approximately $50 million. These two items lowered our revenue growth in the third quarter by 1.5 percentage points. Also, our revenue growth in the third quarter of '06 continued to be slowed by our radio segment sales decline versus last year. TV stations, outdoor, and Showtime all had solid revenue increases in the third quarter of '06 versus '05. Operating profit before depreciation and amortization for the third quarter was $756 million, up 3.4% over last year's third quarter. Excluding stock-based compensation expense from both years, OIBDA would have increased 6.3%. Our OIBDA margins for the third quarter of '06 were 22.4%, up from 21.7% in the third quarter last year. Operating income for the third quarter totaled $646 million, up 4% from year ago. Again, excluding the stock-based compensation expense, operating income would have increased by 7.3%. Our television and…

Your first question comes from Jessica Reif Cohen - Merrill Lynch.

Thank you. Just to go back to the balance sheet, I know you talked a lot about it. But what is your comfort level with leverage? Given the more than $3 billion of cash on the balance sheet, you can fund all three goals that Les went through: the pension liabilities, dividends, and buybacks. So could you discuss acquisitions, maybe in a little bit more detail? What type of acquisitions, what size? How much of cash, or how much are you willing to leverage up? How much will you spend on development, on midseason, and into the '07/ '08 season?

Let me deal with a little bit of it, and then I will turn it over to Fred. In terms of acquisitions, Jessica, obviously new media. There are a lot of new media assets that are out there that may potentially fit with the businesses we are currently in; and we are exploring those. But once again there is not going to be any major acquisitions. We're happy with the hand that we are dealt. We do want to expand new media. We're having success in that area with the amount of revenue that is starting to come in there. We want those platforms. You know, as we have said before, we're not going to buy YouTube, but it is not a bad idea to buy the next YouTube. We are looking at that and we're doing a lot of exploration in that area. In terms of midseason, in terms of what we are doing, the good news for us is 21 out of 22 hours of our schedule is working. We only had to cancel one show, and we're putting a new show in, in a couple of weeks. The rest of our schedule is unbelievably solid. Night after night we are performing extremely well, and I am very happy with how we are performing. The CBS network, once again, there are very few highs but there are never any lows. So as a result, you can bet on us this year. You can bet on us last year. And you can bet on us next year. In terms of development costs, once again, we are going to develop like we always do, but there is not going to be any major expenditure nor is there any desperation on the part of this network because as we look forward to next May, there is going to be very little we're going to need. So I am very confident of where we are in the schedule.

Jessica, our current leverage ratio, using the rating agencies' method, is about 2.3X. So yes, we have capacity. Where we have focused, as you know, is expanding outdoor because that has a pretty high return. We have a lot of opportunities to do tuck-in acquisitions, and that is what where you will continue to see us add acquisitions in addition to on the content side that Leslie just talked about. I would also emphasize again that we have about $625 million a year that we will spend currently at the dividend rate we have today. That is a huge commitment. I always have to make sure that we have enough fuel in the tank to take us where Leslie and Sumner want us to go. So I like where the balance sheet is today. I think we can return a lot of value to the shareholders. I think we continue to grow these businesses and do the right tuck-in acquisitions and add to our content and outdoor.

Thank you.

Your next question comes from Doug Mitchelson - Deutsche Bank.

Thanks. For Leslie, I know this is always a question that is difficult to answer, but you never know, so here goes. You have got, in my mind, the best radio station group pound for pound, given its large market concentration; the best management team in radio running at Clear Channel. Now with private bids for radio assets that are likely to come in much higher than where CBS is trading. You have got the best outdoor plan in the U.S.; and Lamar is out there trading at 16X EBITDA, which if I'm doing the math right is a little bit above where you are trading. Have the recent events in these sectors, radio and outdoor, caused you to rethink at all the strategic rationale of keeping all these different media under one roof? Thank you very much.

Well, we like all the businesses we're in. I mean, when we did the split from Viacom, we felt that the assets that we have would cause us to be able to focus on these assets. I agree with you, we have world-class assets in television, in radio, in outdoor, and publishing. The great news is right now we are able to focus on all four of them extremely well. So once again, we have trimmed down radio, we are building outdoor and we like where we are.

Okay, thanks.

Your next question comes from William Drewry - Credit Suisse.

Thank you. I just wonder if you could give, Les, maybe a little bit more color on the scatter market trends. Just wondering if you think, given how the upfront was a bit weak but the scatter markets broadly seemed to be stronger, if there is a decisive move by advertisers to shift their spending patterns? If you think that is the case, what that might mean for us as we go into 2007?

It's a very good question. Yes, scatter is stronger than the upfront was. We're pleased with what we were seeing. It is still rather early, we're only a few weeks into the season. But we like what we're seeing. Johnson & Johnson clearly was a major advertiser that stayed out of the upfront market and is now jumping back in, in a rather large way in the scatter market. We like what we are seeing there. Frankly, we are ready to go either way. The solidarity of our schedule enables us, and we have played this game for five years now. We're not going to sell below the prices we want to get in the upfront. That is not to say we won't deal with the irregularities of what the upfront market is. But having said that, we are always confident that our network is going to perform as we have proven time and time again. So whenever there is a scatter, we are always there in a very, very big way. So the improvements we are seeing in scatter are proving very beneficial for the year. We are, right now, right on track or beyond where we want to be for the fourth quarter in terms of scatter market and dollars. We are ready to go either way. I don't necessarily see a larger trend in the upfront being reduced and scatter growing. But if that happens, it is fine for us.

Thank you.

Your next question comes from Victor Miller - Bear Stearns.

Thank you for taking the questions and thanks for all of the comments on the use of cash. First of all, may I ask --

Can you talk a little louder, please?

Sure. Can I ask you to give us what you think the impact will be on two Nielsen changes: one, obviously the commercial ratings which are happening this month; and then apparently the college viewing that they will measure in January?

Sure, we are viewing both these things as very positive for us. Number one, in the commercial ratings, if you have noticed cable has vehemently opposed this. That is because our studies show that broadcast commercials are watched with a lot more attention than perhaps cable is. So we think the more people are aware of what the ratings are in the commercials on our television shows, the better off we are going to be. We like ratings, we like precise ratings because we feel like our product is very strong and it will continue to be very strong. In terms of the colleges, when you think about our long-term goal, our long-term deal with the NCA Basketball Tournament and the fact that we have not gotten credit for one single viewer on a college campus all this time, says to us that when they start getting college numbers we are going to be way up. Same for Letterman. We are going to get a lot more dollars out of that marketplace. So the more and more Nielsen grows, the better it is for us, and we are encouraged by both these things.

Thank you.

Your next question comes from Kathy Styponias - Prudential.

Hi, thanks. Two questions. Les, it sounds like the schedule for CBS has done extremely well. But I was wondering if you can give us a little bit of color of what you have promised in terms of upfront with respect to ratings in general, overall on the schedule? Then the second question was regarding a comment you made about DVR and getting paid for it next year. Could you clarify what you mean by that? Thanks.

You know, in terms of schedule, we are fine. That is all I want to tell you. We don't tell you what we have sold to the advertisers. But we're not in the make-goods business, put that way. Let me leave it as simple as that, and we're very pleased with that. In terms of DVR we think it is inevitable that they are going to have to start counting DVR usage as part of ratings. I think everybody in the world, even the advertising community, is acknowledging that. This year they were able to exclude it; but next year there is no way that that is going to happen. So once again, we think as technology advances, as Nielsen advances, as recordings advances, these strong broadcast networks are going to be even stronger.

Thank you.

Your next question comes from Anthony DiClemente - Lehman Brothers.

Two quick questions for Fred. Fred, at year-to-date $1.6 billion of free cash flow, most analysts are looking for $1.4 billion for the full year. So that would imply fourth quarter $200 million free cash flow loss. Is that possible? I understand it is not linear and you have not been in production the first part of the year. But with the production costs in the 4Q, is it possible that it would lead to a $200 million loss? The second question is, if you would help me quantify in the quarter how much dollars revenue, EBITDA, whatever you can give us on a CSI syndication sales and/or CS Television impact in the quarter. Thanks, Fred.

Okay, Anthony. As you know, we don't give forward-looking guidance on cash flow. So I won't be specific. But clearly, we tend to have good cash flow in the fourth quarter, particularly this year with so much political coming in, that is cash on delivery. We actually have no receivables. So I am not going to opine about whether people are $1.4 billion or whatever they are going to be, or negative. But that is not our history if you look back over time. You will see that most times the fourth quarter does deliver. We don't breakout CSI. We got a really good deal, it went to A&E, so we had a really good price on CSI Miami for going to A&E with a number of episodes. So that did help in the third quarter. However, I would tell you last year in the quarter, we had a lot of library sales. As good as CSI is, library product that is 30 and 40 years old and has like a 95% gross margin. So we did well. But the gross margin on library tends to be much higher. But we are really pleased with the CSI sales to A&E.

But we love that $2 million from McHale's Navy for those of you old enough to remember that show.

Thanks. Any color on the CSTV? Anything you can give us to quantify that in the quarter?

I'm sorry, I apologize. CSTV continues. We are in about 14 million households on the cable side. They're continuing to do really well with the online business, particularly at the college level with the ecommerce they have there. We're looking for more carriage. We continue to have opportunity to expand carriage. Brian Bedol and the team are in the process of doing that. But we think they have got a great product. The combination with our sports, the NCAA, and CSTV, and also with SportsLine is really why Leslie and the guys all fell in love with this company. CSTV is going to do well for us.

Thank you very much.

Your next question comes from John Blackledge – JP Morgan. John Blackledge – JP Morgan: Thanks for taking the question. As you talked about in the past, most of your output deals for Showtime are up at the end of '07, I believe. You talked about investing a couple hundred million in feature film production with films going to Showtime in the premium window. We have estimated that return on assets for the major film studios over the past few years averaged about 7% to 8%. What type of returns would CBS be targeting? Also just wondering where you are at in the process. Have you hired anyone? Have you guys looked at scripts? I know that it is kind of early.

Fair enough. Right now, the CBS film studio is me. So I have hired no one. By the way, we never stated that we would spend $200 million; let me clarify on that. We talked about that we would start, and our output deals are up in the near future with our three output deals. That does not mean we aren’t considering some sort of deals with them. We're still putting together our fact-finding sheet regarding a film company which we want to start in a small way. But I would doubt we would spend the kind of money you are talking about. It is still very, very preliminary. John Blackledge – JP Morgan: Thank you.

Your next question comes from Andrew Baker - Cathay Financial. Andrew Baker - Cathay Financial : Thank you very much. A question to try to clarify the two explanations of your TV business. Leslie, you keep talking about how strong things are, how viewers are up here and there. Then we hear time sales are down. So I guess the question is, is the industry so weak that even your strong performance has a hard time overcoming that? Then a second question for Fred. Are there limitations on pre-funding the pension? It seems to me if you can get that kind of return and you've got the cash, you could possibly go even bigger. So I was wondering if you could just flesh that out for us a little bit.

By the way, time sales are not down. You know, I don't know where that came from. Look, the upfront was not quite as strong as anybody would have liked. We would have liked them to be up 3% or 4% and they weren’t, by and large. But I think once again, if you look at the ratings overall for network television, it is up. It is solid. CPMs are doing extremely well, and we are very pleased with them.

Leslie, let me just add. On the time period sales that I referred to was in the third quarter as I mentioned, in July and August, which was the old season. I think that had a lot to do with it, and the fact that you get probably four times the amount per spot on the Emmys as you would on a rerun in July and August. So I think what Leslie is saying is right. As we are going forward, time period sales are up, but in that last quarter of the broadcast year you get a little softness as you have reruns, particularly you are running over Emmys from a year ago. Andrew, on your comment about pre-funding, yes, there are limits that you can pre-fund by the IRS rules, where you would not get a tax deduction above that. We are well within that limit. I would also say that we have to look at what is the true under-funding. Because I don't look at when interest rates or discount rates are at 0.5% and 0.75% it seems like a little bit low, and so that drives the obligation up. So I think we take an economic view to it and we also take the tax view on it. That is why we are comfortable for the year we will have pre-funded the first $50 million and anywhere from $150 million to another $200 million we think is appropriate at this time. But we will always relook at it. Andrew Baker - Cathay Financial : Thanks a lot, and thanks for clarifying the time sales.

Your next question comes from Anthony Noto - Goldman Sachs. Anthony Noto - Goldman Sachs : Thank you very much. Given all the debate on the CBS broadcast network, I was wondering if you could clarify for us what the year-over-year growth or decline in September may have been? As we look at season to-date ratings, adults 18 to 49 during primetime are down about 6.9% and adults 25 to 54, using the same measurement a year ago, are down about 4.7%. So it would lead me to believe that September, backing out any other factors, was down on a year-over-year basis.

Anthony, those numbers are not correct since the season began. 25 to 54 we are flat.

Anthony, this is Fred. As you know, September has two-and-a-half weeks of reruns. The new season starts the third week of the year. So I am not sure that is a good comparison. Anthony Noto - Goldman Sachs : Yes, we are just quoting Nielsen.

Quoting Nielsen but not since the beginning of the season. I have these numbers in front of me, Anthony, I study them daily. We are down a little bit in 18 to 49 and we are flat in 25 to 54. Anthony Noto - Goldman Sachs : Okay, so what are the year-over-year sales for CBS broadcast network in September? Are they up or down is the real question I am asking?

We don't really break that out.

They are probably down because last September we had the Emmy Awards.

Again, but I would also say you're not looking at broadcast seasons. You're splitting them. You're looking at the last two-and-a-half weeks of the old season and one-and-a-half weeks of the new season. Anthony Noto - Goldman Sachs : Which was the same a year ago, so it's not like the time period has changed on a year-over-year basis. There would have been the same comparison.

But the counts --. Anthony Noto - Goldman Sachs : I understand the point on the Emmys. I guess the second question would be, if you look at your growth rate on a year-to-date basis, adding back the impairment charge in '05 of $19 million, and then backing out the radio sale this year in this quarter, it would look like your fourth quarter would have to grow 12% to 13% in EBIT, based on your definitions, to get to your guidance for EBIT for the full year. Is that something that you're still comfortable with?

Well, as I said at the outset, that we are comfortable with our guidance on operating income of mid single-digits. I think your numbers are off. What we need to grow in the fourth quarter is not that high. But I would tell you that we are very comfortable. We are now in November 2. We have a lot a good visibility through most of this quarter and we are comfortable with the guidance that we said at the outset and what is in the earnings release. Anthony Noto - Goldman Sachs : What would the number have to be then, based on your definition? I want to make sure we know what we are getting wrong.

I'm not sure I understand your question. What would what have to be? Anthony Noto - Goldman Sachs : You said that 12% to 13% is too high for the fourth quarter. I'm using the definitions that you provided in your press release.

Operating income, it would have to be up in the high single-digits. As you know, operating income excludes stock-based compensation and in the third quarter grew 7.3%. We will be several ticks above that in the fourth quarter on the outlook that we have today on operating income, again excluding stock-based compensation and all the one-times that you reiterated. So again, I don’t understand your math. But I think we laid out pretty well in the back of the earnings release, if you have a chance to look at it. It is on the last two pages. Anthony Noto - Goldman Sachs : Right, we will have to talk about it off-line. Thank you.

Your next question comes from Michael Nathanson - Bernstein. Michael Nathanson – Bernstein: Thanks. I have two, they are both for Fred. One is on outdoor. When I looked at outdoor this quarter and I back out the hurricane charges from last year, it looks like outdoor posted very little operating leverage. For the most part of this year you have great leverage in outdoor. So I wondered what happened in the quarter? Was there any cost assisted with the new contract wins? Did some markets show margin declines? Then I have one on TV.

Okay, so on outdoor, yes, we did have some of the hurricane items from last year. But again I think the issues were more of we are not going to always be able to go up four and five times leverage. But we do believe outdoor will grow. If the revenue grows X, we should be able to get more than 2X in profit growth. I think the third quarter sort of indicates that, or better. But earlier in the year, because we had so many rolling over money-losing contracts from prior years, we were getting an exponential increase in that. But I don't think that is the normal route. Our fixed costs are fairly fixed. A lot of our costs in outdoor are variable as you know. So therefore, I would say for every percentage increase in revenue we ought to get 2X that in operating income. Michael Nathanson – Bernstein: There is no near-term startup costs that would hurt that the next couple quarters in New York or London?

No. Well, London will have higher fees, but we also have more inventory. So you know, I think, overall, our expectation for the outdoor business is to grow, as I said. If we get revenue growth, we will get more than that, and we will continue to have margin. Michael Nathanson – Bernstein: Okay, then following on TV, following on Anthony's question, I just wanted to just clarify. You said you were down $30 million in the quarter. What would that be on a percentage basis at CBS? If you were down $30 million, was that 2% to 3%?

Yes, because it was all CBS. We broke out separately the time period sales related to UPN as that separate item that I mentioned. Michael Nathanson – Bernstein: This is the second quarter in a row that the network was down in revenues. I wondered, given how strong you believe the schedule is and how good the market is, should we expect fourth quarter revenues to start turning positive at the CBS line?

I think there is no question about it. Look, most of the last two quarters involved summer programming. Post-summer programming. Somehow or another we look at the seasons, they begin September 21. We don't combine the first two weeks in September with the last nine days in September. It starts then and we are looking forward to revenue growth in the fourth quarter. Michael Nathanson – Bernstein: At CBS?

Yes. Michael Nathanson – Bernstein: Thanks.

Your final question comes from David Miller - Sanders Morris Harris. David Miller - Sanders Morris Harris : Hi, thanks for taking the question. Les, just a brief question on the network television business. Correct me if I am wrong: you guys had four new shows on the air this year; one has been canceled; the other three I don't believe are top five shows as measured by Nielsen. I think the top five new shows are all on ABC or NBC with Heroes. What is your sort of patience quotient with the new shows? Do you believe that is just simply too early? Do you believe that the new shows still just need to find an audience? Or are you quick to cancel these series the way NewsCorp does if they just fall below their ratings guarantee? Thank you very much.

Well, in 18 to 49 we do have one of the top five new shows in Jericho. In total viewers, we have the number one or number two new show in Shark. I have two shows that I am extremely pleased with. Jericho has improved the time period, Wednesday at 8:00, by about 27%. Now to me that is a pretty good number. In addition, Shark is doing extremely well Thursday night at 10. So those two are absolute keepers. The Class, which is our other new show, is a show 8:30 on Monday that is finding itself; and we are not sure of what the eventual fate is of that show. We canceled Smith after three weeks. So as I said, as far as I'm concerned, I have 21 out of 22 hours working. Maybe 20.5 if you say Class is on the fence. I feel we are as solid as any other network. There may be a couple more home runs, but in terms of what the world considers, there are two hits of Heroes and Ugly Betty, and right below that is Jericho. So we are very pleased with how we started the new season.

Okay, great. Thanks very much.

Thank you very much, and we will talk to you all later.

That does conclude today's conference call.