SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
Commission file number 1-9553
VIACOM INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2949533
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification)
200 Elm Street, Dedham, MA 02026
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (617) 461-1600
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No _____.
Number of shares of Common Stock Outstanding at April 30, 1994:
Class A Common Stock, par value $.01 per share - 53,449,525
Class B Common Stock, par value $.01 per share - 90,083,203
-1-
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
VIACOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; all amounts, except per share amounts, are in millions)
Three months ended
March 31,
---------------------------------
1994 1993
---- ----
Revenues ................................................................ $878.4 $470.7
Expenses:
Operating ........................................................... 820.3 219.1
Selling, general and administrative ................................. 298.5 123.6
Depreciation and amortization ....................................... 59.8 37.8
-------- -------------
Total expenses ................................................ 1,178.6 380.5
--------- -------------
Earnings (loss) from operations ......................................... (300.2) 90.2
Other income (expense):
Interest expense, net ............................................... (47.3) (41.0)
Other items, net (See Note 8) ....................................... (4.8) 52.9
-------- -------------
Earnings (loss) before income taxes ..................................... (352.3) 102.1
Provision for income taxes .......................................... (95.1) (31.8)
Equity in earnings of affiliated companies,
net of tax .................................................... 3.5 .3
Minority interest ................................................... 12.3 --
------- --------------
Net earnings (loss) before cumulative effect of
change in accounting principle ...................................... (431.6) 70.6
Cumulative effect of change in accounting
principle ..................................................... -- 10.4
-------- -------------
Net earnings(loss) ...................................................... (431.6) 81.0
Cumulative convertible preferred stock
dividend requirement .......................................... 22.5 --
------- --------------
Net earnings (loss) attributable to
common stock .................................................. $(454.1) $81.0
======== =============
Weighted average number of common shares ................................ 126.4 120.5
Net earnings (loss) per common share:
Net earnings (loss) before cumulative effect
of change in accounting principle ................................. $(3.59) $ .59
Cumulative effect of change in accounting
principle ......................................................... -- .08
-------- -------------
Net earnings (loss) ................................................. $(3.59) $ .67
======== =============
See notes to consolidated financial statements.
-2-
VIACOM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts are in millions)
March 31, December 31,
1994 1993
(Unaudited)
----------- -----------
Assets
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $446.2 $1,882.4
Receivables, less allowances of
$48.2 (1994) and $33.9 (1993) . . . . . . . . . . . . . . . . . 1,216.3 351.8
Inventory (See Note 4) . . . . . . . . . . . . . . . . . . . . . . 331.0 --
Theatrical and television inventory
(See Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . 809.4 356.5
Other current assets . . . . . . . . . . . . . . . . . . . . . . . 890.3 95.7
--------- -------
Total current assets . . . . . . . . . . . . . . . . . . . . . 3,693.2 2,686.4
--------- -------
Property and equipment, at cost . . . . . . . . . . . . . . . . . . . 2,175.4 901.4
Less accumulated depreciation . . . . . . . . . . . . . . . . . . 373.6 347.2
--------- -------
Net property and equipment . . . . . . . . . . . . . . . . . . 1,801.8 554.2
--------- -------
Theatrical and television inventory
(See Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,426.9 789.5
Intangibles, at amortized cost . . . . . . . . . . . . . . . . . . . 8,057.8 2,180.6
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,356.5 206.2
--------- --------
$16,336.2 $6,416.9
========= ========
See notes to consolidated financial statements.
-3-
VIACOM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts, except share and per share amounts, are in millions)
March 31, December 31,
1994 1993
(Unaudited)
----------- -----------
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 274.2 $ 96.6
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45.1 20.7
Deferred income, current . . . . . . . . . . . . . . . . . . . . . . . . . . . 205.4 50.9
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,386.2 261.3
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571.5 140.5
Participants share, residuals and royalties
payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 636.6 139.1
Program rights, current . . . . . . . . . . . . . . . . . . . . . . . . . . . 187.4 198.0
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . 39.1 58.5
--------- -------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 3,345.5 965.6
--------- -------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,228.0 2,440.0
Program rights, non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . 121.5 86.9
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 845.6 206.3
Minority interest in consolidated
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,285.2 --
Commitments and contingencies (See Note 6 )
Shareholders' Equity of Viacom Inc.:
Preferred Stock, par value $.01 per share;
100,000,000 shares authorized; 48,000,000
shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . 1,800.0 1,800.0
Class A Common Stock, par value $.01 per share;
100,000,000 shares authorized; 53,449,525
(1994) and 53,449,325 (1993) shares issued
and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 .5
Class B Common Stock, par value $.01 per share;
150,000,000 shares authorized; 90,078,203
(1994) and 67,347,131 (1993) shares issued
and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 .7
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 2,170.7 920.9
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (458.1) (4.0)
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . (3.6) --
---------- ------------
3,510.4 2,718.1
--------- --------
$16,336.2 $6,416.9
========= ========
See notes to consolidated financial statements.
-4-
VIACOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; all amounts are in millions)
Three months ended March 31,
----------------------------
1994 1993
---- ----
Net cash flow from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(431.6) $81.0
Adjustment to reconcile net earnings to net
cash flow from operating activities:
Merger-related charges . . . . . . . . . . . . . . . . . . . . . . . 332.1 --
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 59.8 37.8
Gain on the sale of the Wisconsin cable system,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (45.8)
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . (12.3) --
Cumulative effect of change in accounting principle . . . . . . . . . -- (10.4)
Decrease in receivables . . . . . . . . . . . . . . . . . . . . . . . 69.5 17.1
Decrease in accounts payable and accrued expenses . . . . . . . . . . (98.7) (81.5)
Increase in inventory and related liabilities, net . . . . . . . . . (62.1) (57.2)
Increase in income taxes payable and deferred
income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . 73.9 20.8
Increase in pre-publication costs, net . . . . . . . . . . . . . . . (10.2) --
Increase in prepaid expenses . . . . . . . . . . . . . . . . . . . . (42.6) --
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (11.6)
---- ------
Net cash flow from operating activities . . . . . . . . . . . . . (122.2) (49.8)
------- ------
Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . (48.4) (28.5)
Investments in and advances to affiliated companies . . . . . . . . . . (15.5) (12.3)
Proceeds from sale of the Wisconsin cable system . . . . . . . . . . . . -- 73.7
Acquisition of Paramount, net of cash acquired . . . . . . . . . . . . . (6,291.0) --
Decrease in short-term and other investments . . . . . . . . . . . . . . 47.1 --
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3 (4.3)
-------- ------
Net cash flow from investing activities . . . . . . . . . . . . . (6,298.5) 28.6
--------- -----
Financing Activities:
Short-term borrowings (repayments) from banks, net . . . . . . . . . . . 3,773.7 (30.4)
Borrowings (repayment) of Debt . . . . . . . . . . . . . . . . . . . . . (13.9) 42.2
Proceeds from issuance of Class B Common Stock . . . . . . . . . . . . . 1,250.0 --
Payment of Preferred Stock dividends . . . . . . . . . . . . . . . . . . (12.8) --
Payment of deferred financing costs . . . . . . . . . . . . . . . . . . (9.4) (.6)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.1) 1.2
-------- ------
Net cash flow from financing activities . . . . . . . . . . . . . 4,984.5 12.4
------- -----
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . (1,436.2) (8.8)
Cash and cash equivalents at beginning of the period . . . . . . . . . . 1,882.4 48.4
-------- -------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . $ 446.2 $ 39.6
======== =======
See notes to consolidated financial statements.
-5-
Viacom Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In the opinion of management, the unaudited information for the
interim periods presented includes all adjustments, which are of a
normal recurring nature, except for the merger-related charges
associated with the merger of Paramount Communications Inc.
("Paramount") (see Notes 2 and 3), necessary for a fair statement of
the interim financial information. Interim results are not
necessarily indicative of the results to be expected for the full
year. The consolidated balance sheet at December 31, 1993 was
derived from Viacom Inc.'s Annual Report on Form 10-K/A.
1) BASIS OF PRESENTATION
Viacom Inc. is a holding company whose principal asset is the
common stock of Viacom International Inc.("Viacom International")
and its majority ownership of Paramount. Paramount's results of
operations for the month of March are included in Viacom Inc.'s
consolidated results of operations. Viacom Inc. is a diversified
entertainment company with operations in four principal
segments;(i)Networks, (ii) Entertainment, (iii) Cable Television
and Broadcasting and (iv) Publishing.
Net earnings (loss) per common share - Net earnings (loss) per
common share is calculated based on the weighted average number
of Viacom Inc. common shares outstanding during each period
presented. For 1994, the effect on net loss per share resulting
from the assumed exercise of stock options and assumed
conversion of the Preferred Stock would have an antidilutive
effect on earnings per common share. For 1993, the effect on
net earnings per share resulting from the assumed exercise of
outstanding stock options is not material. Therefore, the
effects of such assumptions are not reflected in net earnings
(loss) per common share.
Certain amounts on the 1993 balance sheet and statement of cash
flows have been reclassified to conform with the current year
presentation.
2) PARAMOUNT MERGER, BLOCKBUSTER MERGER AND RELATED TRANSACTIONS
On March 11, 1994, Viacom Inc. acquired, pursuant to a tender
offer (the "Paramount Offer"), 61,657,432 shares of Paramount
Common Stock, constituting a majority of the shares outstanding,
at a price of $107 per share in cash. The Paramount Offer was
made pursuant to the Amended and Restated Agreement and Plan of
Merger dated as of February 4, 1994 (the "Paramount Merger
Agreement") between Viacom Inc. and Paramount. Subject to certain
conditions, Paramount will become a wholly owned subsidiary of
Viacom Inc. (the "Paramount Merger") at the effective time of a
merger between Paramount and a subsidiary of Viacom Inc. which is
expected to occur promptly as practicable following completion of
review by the Securities and Exchange Commission (the "SEC").
Pursuant to the Paramount Merger Agreement, each share of
Paramount common stock outstanding at the
-6-
Viacom Inc. and Subsidiaries
Notes to Consolidated Financial Statements
time of such merger (other than shares held in the treasury of
Paramount or owned by Viacom Inc. and other than shares held by
any stockholders who shall have demanded and perfected appraisal
rights) will be converted into the right to receive (i) 0.93065 of a share of
Class B Common Stock, (ii) $17.50 principal amount of 8%
exchangeable subordinated debentures ("8% Debentures") of Viacom
Inc., (iii) 0.93065 of a contingent value right ("CVR"), (iv) 0.5
of a warrant to purchase one share of Class B Common Stock at any
time prior to the third anniversary of the Paramount Merger at a
price of $60 per share, and (v) 0.3 of a warrant to purchase one
share of Class B Common Stock at any time prior to the fifth
anniversary of the Paramount Merger at a price of $70 per share.
If the Blockbuster Merger (as defined below) is not consummated
prior to January 1, 1995, then the 8% Debentures will be
exchangeable, at Viacom's option, into 5% cumulative preferred
stock of Viacom and the dividend payable on such Preferred Stock
will be deemed to have accrued from the effective time of the
Paramount Merger and there will be no obligation to make payments
of interest on the 8% Debentures.
The Paramount Merger has been accounted for under the purchase
method of accounting. The unaudited condensed pro forma results of
operations data presented below assumes the Paramount Merger and
related transactions and the sale of the one-third partnership
interest in Lifetime Television ("Lifetime") (see Note 10) occurred
at the beginning of each period presented. The unaudited condensed
pro forma results of operations data was prepared based upon the
historical consolidated statements of operations of Viacom Inc. for
the three months ended March 31, 1994 and 1993 and of Paramount for
the two months ended February 28, 1994 and three months ended April
30, 1993, respectively, adjusted to exclude non-recurring merger-
related charges of $332.1 million. Financial information for
Paramount subsequent to the date of acquisition is included in the
Viacom Inc. historical information. Intangible assets are being
amortized principally over 40 years on a straight-line basis. The
unaudited pro forma information is not necessarily indicative of the
combined results of operations of Viacom Inc. and Paramount that
would have occurred if the transaction had occurred on the dates
previously indicated nor are they necessarily indicative of future
operating results of the combined company.
-7-
Viacom Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31,
----------------------------
1994 1993
---- ----
(Millions of dollars)
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,580.7 $ 1,474.7
Earnings (loss) from operations . . . . . . . . . . . . . . . . . . $ (9.5) $ 24.7
Net loss before cumulative effect of . . . . . . . . . . . . . . .
change in accounting principle and . . . . . . . . . . . . . . . .
preferred stock dividends . . . . . . . . . . . . . . . . . . . . . $ (310.4) $ (29.7)
Net loss attributable to common stock . . . . . . . . . . . . . .
before cumulative effect of change in . . . . . . . . . . . . . .
accounting principle . . . . . . . . . . . . . . . . . . . . . . . $ (332.9) $ (52.2)
Loss per common share before cumulative . . . . . . . . . . . . .
effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1.67) $ (.26)
On January 7, 1994, Viacom Inc. and Blockbuster Entertainment
Corporation ("Blockbuster") entered into an agreement and plan of
merger (the "Blockbuster Merger Agreement") pursuant to which
Blockbuster will be merged with and into Viacom Inc. (the
"Blockbuster Merger") subject to stockholder approval and certain
conditions. At the effective time of the Blockbuster Merger, each
share of Blockbuster common stock outstanding at the time of the
Blockbuster Merger (other than shares held in the treasury of
Blockbuster or owned by Viacom Inc. and other than shares held by
any stockholders who shall have demanded and perfected appraisal
rights, if available) will be converted into the right to receive
(i) 0.08 of a share of Class A Common Stock, (ii) 0.60615 of a share
of Class B Common Stock, and (iii) one variable common right.
The Paramount Merger and the Blockbuster Merger (collectively, the
"Mergers") have been unanimously approved by the Boards of Directors
of each of the respective companies. The obligations of Viacom
Inc., Blockbuster and Paramount to consummate the mergers are
subject to various conditions, including obtaining requisite
stockholder approvals. Viacom Inc. intends to vote its shares of
Paramount in favor of the merger and National Amusements, Inc.
("NAI") has agreed to vote its shares of Viacom Inc. in favor of the
Mergers; therefore, stockholder approval of the Paramount Merger is
assured, and approval by Viacom Inc. of the Blockbuster Merger is
also assured.
In a letter to stockholders dated May 4, 1994, H. Wayne Huizenga,
the Chairman of the Board of Blockbuster, stated that, although
the Blockbuster Board continues to believe that the combination of
Blockbuster with Viacom Inc. and Paramount represents an excellent
strategic opportunity, given the stock prices as of the date of
his letter, there could be no assurance that the Blockbuster Board
would be able to recommend the Blockbuster Merger Agreement to the
Blockbuster shareholders at the time of any shareholder meeting
called to vote on the Blockbuster Merger. Mr. Huizenga also
stated, among other things, that Blockbuster was unable to say
whether or not the Blockbuster Merger would go forward or whether
or not any special meeting of Blockbuster shareholders would be
called to vote
-8-
Viacom Inc. and Subsidiaries
Notes to Consolidated Financial Statements
on the Blockbuster Merger.
The closing prices reported by the New York Stock Exchange of
Blockbuster's Common Stock and the American Stock Exchange of Class
A and Class B Common Stock as of the close of business on January 6,
1994, the date prior to the announcement of the Blockbuster Merger,
were $29 7/8 per share, $47 per share and $42 3/4 per share,
respectively. Such prices as of May 3, 1994, the day prior to the
stockholders letter, were $26 3/4 per share, $26 per share and $24
1/4 per share, respectively. Such prices were $26 1/2 per share,
$29 3/4 per share, and $28 1/8 per share, respectively, as of the
close of business on May 19, 1994.
3) PARAMOUNT MERGER-RELATED CHARGES
Included in earnings (loss) from operations are certain merger-
related charges to Viacom's pre-merger businesses, reflecting the
integration of these businesses with similar Paramount units, and
related management and strategic changes principally related to the
merger with Paramount as follows:
Viacom Viacom Merger-
Pre- Paramount Paramount Related Total
Merger Results Combined Charges As Reported
------ ------- -------- ------- -----------
(Millions of dollars)
Networks ........................... $66.4 $ 3.7 $ 70.1 $ (73.4) $ (3.3)
Entertainment ...................... 1.9 (35.0) (33.1) (224.0) (257.1)
Cable Television and
Broadcasting ..................... 29.6 4.8 34.4 (17.3) 17.1
Publishing ......................... -- (14.6) (14.6) -- (14.6)
----- ------ ------ ----------- ------
Segment earnings (loss)
from operations ................. 97.9 (41.1) 56.8 (314.7) (257.9)
Corporate .......................... (15.2) (9.7) (24.9) (17.4) (42.3)
----- ------- ----- -------- --------
Total ................ $82.7 $(50.8) $31.9 $(332.1) $(300.2)
===== ======= ===== ======== ========
Merger-related charges principally relate to adjustments of programming
assets based upon new management strategies and additional programming
sources resulting from the merger with Paramount. In addition, a
merger-related charge included in Corporate expenses reflects the
combination of the Viacom Inc. and Paramount staffs.
-9-
Viacom Inc. and Subsidiaries
Notes to Consolidated Financial Statements
4) INVENTORIES
Inventories are stated as follows:
March 31, December 31,
1994 1993
----- ----
Current: (Millions of dollars)
Publishing and other:
Lower of cost or net realizable value:
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . $ 19.2
Work in process . . . . . . . . . . . . . . . . . . . . . . . 280.1
Materials and supplies . . . . . . . . . . . . . . . . . . . . 31.7
-------
$ 331.0
=======
Theatrical and television productions:
Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 412.1 $ 73.7
Completed, not released . . . . . . . . . . . . . . . . . . . . . 29.2 --
In process and other. . . . . . . . . . . . . . . . . . . . . . . 46.3 --
Program rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 321.8 282.8
-------- ------
$ 809.4 $356.5
======== ======
Non-current:
Theatrical and television productions:
Released. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 431.4 $ 93.0
In process and other. . . . . . . . . . . . . . . . . . . . . . . 223.4
Program rights. . . . . . . . . . . . . . . . . . . . . . . . . . 772.1 696.5
-------- -------
$1,426.9 $789.5
======== ======
-10-
Viacom Inc. and Subsidiaries
Notes to Consolidated Financial Statements
5) BANK FINANCING AND DEBT
Total debt, which includes short-term and long-term debt, consists of the
following:
March 31, December 31,
1994 1993
------ -----------
(Millions of dollars)
Viacom Inc.:
Notes payable to banks (a) . . . . . . . . . . . . . . . . . . . . . . $3,778.2 $ 68.1
Viacom International:
Notes payable to banks. . . . . . . . . . . . . . . . . . . . . . . . . 1,939.8 1,915.1
9.125% Senior Subordinated Notes due 1999 . . . . . . . . . . . . . . . 150.0 150.0
8.75% Senior Subordinated Reset Notes due
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 100.0
10.25% Senior Subordinated Notes due 2001. . . . . . . . . . . . . . . . 200.0 200.0
Obligations under capital leases. . . . . . . . . . . . . . . . . . . . 65.1 65.3
Paramount:
Notes payable to banks. . . . . . . . . . . . . . . . . . . . . . . . . 25.0 --
5.875% Senior Notes due 2000. . . . . . . . . . . . . . . . . . . . . . 149.4 --
7.5% Senior Notes due 2002. . . . . . . . . . . . . . . . . . . . . . . 246.6 --
8.25% Senior Debentures due 2022. . . . . . . . . . . . . . . . . . . . 246.9 --
7.5% Senior Debentures due 2023 . . . . . . . . . . . . . . . . . . . . 149.5 --
7% Subordinated Debentures due 2003 . . . . . . . . . . . . . . . . . . 180.6 --
Other notes due 1994 to 1996. . . . . . . . . . . . . . . . . . . . . . 12.1 --
Obligations under capital leases. . . . . . . . . . . . . . . . . . . . 23.9 --
-------- -----------------
7,267.1 2,498.5
Less current portion. . . . . . . . . . . . . . . . . . . . . . . . . . . 39.1 58.5
-------- ----------------
$7,228.0 $2,440.0
======== ================
(a) On March 11, 1994, in order to pay for the Paramount Offer and
related expenses, Viacom Inc. borrowed $3.7 billion under a
credit agreement dated as of November 19, 1993, as amended on
January 5, 1994 and February 15, 1994, (the "Merger Credit
Agreement") among Viacom Inc., the banks named therein, and The
Bank of New York, Citibank, N.A. and Morgan Guaranty Trust
Company of New York, as Managing Agents. All amounts
outstanding under the Merger Credit Agreement may be repaid and
reborrowed until November 18, 1994, at which time all amounts
outstanding will become due and payable.
During May 1994, Viacom Inc. received commitments in the aggregate
amount of $3.0 billion from Bank of America NT&SA, Citibank, N.A.,
Morgan Guaranty Trust Company of New York and The Bank of New York,
managing agents under a proposed long-term $6.8 billion credit
facility, subject to receiving commitments for the remainder of the
facility. The new facility is expected to have scheduled
maturities commencing December 1996 and a final maturity of July
2002. This new facility will refinance existing bank indebtedness
at Viacom Inc., Viacom International and Paramount, and will be
available for general corporate purposes. Viacom Inc. expects,
during the second quarter of 1994 to receive commitments for the
remainder of the facility from a
-11-
Viacom Inc. and Subsidiaries
Notes to Consolidated Financial Statements
syndicate of financial institutions. Based on these factors,
substantially all borrowings (approximately $4.0 billion) outstanding
under short-term credit facilities at March 31, 1994 have been classified
as long-term debt due to management's ability and intent to refinance
these facilities on a long-term basis.
6) COMMITMENTS AND CONTINGENCIES
Those commitments of Viacom Inc. for program license fees which are
not reflected in the balance sheet as of March 31, 1994, which are
estimated to aggregate approximately $2.5 billion, principally
reflect commitments under Showtime Networks Inc.'s ("SNI's")
exclusive arrangements with several motion picture companies and
Madison Square Garden Network's agreement to televise the New York
Yankees baseball games through the year 2000. This estimate is
based upon a number of factors. A majority of such fees pertain to
SNI and are payable within the next seven years, as part of normal
programming expenditures. These commitments of SNI are contingent
upon delivery of motion pictures, which are not yet available for
premium television exhibition and, in many cases, have not yet been
produced.
7) PROVISION FOR INCOME TAXES
The provision for income taxes represents federal, state and
foreign income taxes on earnings before income taxes.
The annual effective tax rates of 48% for 1993 and negative 28% for
1994 continue to be affected by amortization of acquisition costs
which are not deductible for tax purposes.
Due to the unusual and non-recurring nature of the gain on the sale
of the Wisconsin cable system, its full income tax effect is
reflected in the first quarter 1993 tax provision and is excluded
from the estimated annual effective tax rate.
During the first quarter of 1993, Viacom International adopted
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" on a prospective basis and recognized a cumulative
benefit from a change in accounting principle of $10.4 million.
8) OTHER ITEMS, NET
As part of the settlement of the Time Warner antitrust lawsuit,
Viacom International sold the stock of Viacom Cablevision of
Wisconsin, Inc. to Warner Communications Inc. ("Warner"). This
transaction was effective on January 1, 1993. As consideration for
the stock, Warner paid the sum of $46 million, $20 million of which
was received during 1992, plus repayment of debt in the amount of
$49 million, resulting in a pre-tax gain of approximately $55
million reflected in "Other items, net." Also reflected in this
line item is an adjustment to
-12-
Viacom Inc. and Subsidiaries
Notes to Consolidated Financial Statements
previously established non-operating litigation reserves and the net gain
on the sale of a portion of an investment held at cost.
9) SUPPLEMENTAL CASH FLOW INFORMATION
Three months ended
March 31,
----------------------------
1994 1993
------ ----
(Millions of dollars)
Cash payments for interest, net of amounts capitalized . . . . . . . . . . $50.2 $59.9
Cash payments for income taxes . . . . . . . . . . . . . . . . . . . . . . $17.3 $ 2.0
10) SUBSEQUENT EVENT
On April 4, 1994, Viacom International sold its one-third
partnership interest in Lifetime for approximately $317.6 million,
which will result in a pre-tax gain of approximately $267 million in
the second quarter of 1994. Proceeds from the sale were used to
reduce outstanding debt of Viacom International.
-13-
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Management's discussion and analysis of the combined results of
operations and financial condition of Viacom Inc., Viacom
International and Paramount should be read in conjunction with the
Consolidated Financial Statements and related Notes.
On March 11, 1994, Viacom Inc. acquired a majority interest in
Paramount pursuant to the terms of its tender offer. Paramount will
become a wholly owned subsidiary of Viacom Inc. upon the closing of
the merger pursuant to the Paramount Merger Agreement.
The following tables set forth revenues, depreciation and
amortization, earnings (loss) from operations, equity in pre-tax
earning of affiliated companies and earnings from operations plus
equity in pre-tax earnings by business segment for the three months
ended March 31, 1994 and March 31, 1993:
Equity in
Earnings pre-tax
Depreciation from earnings of Operations
& Operations affiliated plus
1994 Revenues amortization (as reported) companies equity earnings
-------- ------------ ------------- --------- ---------------
(Millions of dollars)
Networks. . . . . . . $325.1 $12.2 $ (3.3) $0.9 $ (2.4)
Entertainment 267.2 12.6 (257.1) 5.5 (251.6)
Cable &
Broadcasting . . . . 164.4 26.5 17.1 -- 17.1
Publishing. . . . . . 130.1 7.5 (14.6) -- (14.6)
Corporate . . . . . . -- 1.0 (42.3) -- (42.3)
Intercompany. . . . . (8.4) -- -- -- --
------- ------ ------ ------- ------
Totals. . . . . . . . $878.4 $59.8 $ (300.2) $6.4 $(293.8)
====== ====== ========== ======= ========
Equity in
Earnings pre-tax Operations
Depreciation from earnings of plus
& Operations affiliated equity
1993 Revenues amortization (as reported) companies earnings
-------- ------------ ------------- --------- ---------------
(Millions of dollars)
Networks. . . . . . . $269.1 $10.6 $56.5 $0.5 $57.0
Entertainment . . . . 64.5 2.3 13.1 -- 13.1
Cable &
Broadcasting . . . . 142.8 24.0 35.8 -- 35.8
Publishing. . . . . . -- 0.0 -- -- --
Corporate . . . . . . -- 0.9 (15.2) -- (15.2)
Intercompany. . . . . (5.7) -- -- -- --
------ ------ ------- ----- -----
Totals. . . . . . . . $470.7 $37.8 $90.2 $0.5 $90.7
====== ====== ====== ===== ========
-14-
Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Results of Operations
First quarter 1994 vs. First quarter 1993
- - -----------------------------------------
Revenues increased 87%, or $407.7 million, to $878.4 million for
the first quarter of 1994. Earnings (loss) from operations
decreased $390.4 million to a loss of $300.2 (loss) million for the
first quarter of 1994. The foregoing results were principally
affected by the consolidation of one month of Paramount operations.
The net loss attributable to common stock of $454.1 million, or
$3.59 per share, for the first quarter of 1994, reflects net
interest expense of $47.3 million, a provision for income taxes of
$95.1 million, and minority interest in losses of $12.3 million.
Net earnings of $81.0 million, or $.67 per share, for the first
quarter of 1993, reflect net interest expense of $41.0 million, a
pre-tax gain of $55 million from the sale of the Wisconsin cable
television system, a provision for income taxes of $31.8 million,
and the cumulative benefit from a change in accounting for income
taxes of $10.4 million.
The Viacom Inc. consolidated financial segments reflect four
operating segments:
Networks - MTV Networks, Showtime Networks Inc. and Madison Square
Garden Network.
Entertainment - Paramount Pictures, Paramount Television, Viacom
Productions, Viacom Enterprises, Viacom New Media, Paramount Technology
Group, Motion Picture Theaters, Madison Square Garden and Paramount Parks.
Cable Television and Broadcasting - Viacom Radio, Viacom Television,
Paramount Stations Group and Viacom Cable
Publishing - Simon & Schuster.
Exclusive of certain "push down" purchase accounting adjustments,
Paramount reported revenues of $375.8 million and a segment loss
from operations of $30.7 million for the month of March 1994
included in the Viacom Inc. consolidated segments as follows:
Earings
(loss) from
Revenues operations
-------- -----------
(Millions of Dollars)
Networks $ 10.2 $ 3.7
Entertainment $217.1 $(29.6)
Broadcasting $ 21.3 $ 4.8
Publishing $130.1 $ (9.5)
-15-
Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Inclusive of certain "push down" purchase accounting adjustments,
Paramount Entertainment's loss from operations of $35 million
principally reflects lower than expected domestic theatrical rentals
for recently released feature films. Simon & Schuster's loss from
operations of $14.6 million reflects normal seasonal fluctuations.
Educational publishing, which normally contributes the majority of
annual publishing revenues, records most of its sales and operating
income in the second half of the year, corresponding to the typical
school-year buying cycle.
Included in earnings (loss) from operations are certain merger-
related charges to Viacom's pre-merger businesses reflecting the
integration of these business units with similar Paramount units
and related management and strategic changes principally related to
the merger with Paramount as follows:
Viacom Merger
Viacom Inc. Paramount Paramount Related Total As
Pre-Merger Results Combined Charges Reported
---------- --------- --------- ------- --------
Networks . . . . . . . . . . $66.4 $ 3.7 $ 70.1 $ (73.4) $ (3.3)
Entertainment . . . . . . . . 1.9 (35.0) (33.1) (224.0) (257.1)
Cable Television and
Broadcasting . . . . . . . 29.6 4.8 34.4 (17.3) 17.1
Publishing . . . . . . . . . -- (14.6) (14.6) -- (14.6)
These merger-related charges principally relate to adjustments of
programming assets based upon new management strategies and additional
programming sources resulting from the merger with Paramount. In
addition, a merger-related charge of $17.4 million has been taken in
Corporate expenses reflecting the combination of the Viacom Inc. and
Paramount staffs.
Exclusive of these merger-related charges and of the Paramount
results described above, segment results of Viacom pre-merger
operations for the three months ended March 31, 1994 were as
follows:
Networks (Basic cable and premium television networks)
MTV Networks ("MTVN") revenues increased 30% to $173.7 million for
the quarter ended March 31, 1994 from $133.5 million for the
quarter ended March 31, 1993: 66% of this increase was attributable
to increased advertising sales at each of the services; 17% to
increased affiliate fees at each of the services; and 17% to other
revenue sources. The increase in advertising sales and affiliate
fees are principally due to rate increases. The increases in other
revenue sources are principally due to revenues from new business
ventures, including licensing and merchandising. Earnings from
operations of MTVN increased 21% to $55.2 million for the quarter
ended March 31, 1994 from $45.7 million for the quarter ended March
31, 1993, reflecting the increased revenues, partially offset by
increased costs of operating the networks, including start-up
losses of MTV Latino and Nickelodeon Magazine aggregating $2.5
million.
-16-
Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Revenues of Showtime Networks Inc. ("SNI") increased 4% to $141.3
million for the quarter ended March 31, 1994 from $135.5 million
for the quarter ended March 31, 1993 due to: 1) an increase of $5.5
million in revenues of Showtime Satellite Networks, Inc. ("SSN"),
primarily due to a 38% increase in SSN's subscriber base,
principally attributable to the use of upgraded scrambling
technology, partially offset by a 4% decrease in average rates; 2)
an increase of $3.8 million in revenues of Showtime Entertainment
Group from the sale of foreign rights of original motion pictures;
and 3) a decrease of $3.3 million in revenues from sales of
Showtime and The Movie Channel from other than SSN, reflecting a 4%
increase in the combined subscriber base, while the average
affiliate rates decreased by 7%. SNI's premium movie services,
Showtime, The Movie Channel and FLIX, served approximately 12.3
million subscribers as of March 31, 1994 and approximately 10.9
million subscribers as of March 31, 1993. SNI's earnings from
operations increased 4% to $11.3 million for the quarter ended
March 31, 1994 from $10.9 million for the quarter ended March 31,
1993, reflecting the increased revenues and a change in estimate of
the cost of movie rights for previously exhibited programming of
$13.7 million, partially offset by overall increased costs.
Entertainment (Television production and distribution
and New Media)
Viacom Entertainment revenues decreased 22% to $50.1 million for
the quarter ended March 31, 1994 from $64.5 million for the quarter
ended March 31, 1993. The revenue variance is principally due to
decreased syndication revenues. Lower sales to the broadcast,
cable and other markets reflect lower syndication revenues for The
Cosby Show. Earnings from operations decreased 85% to $1.9 million
for the quarter ended March 31, 1994 from $13.1 million for the
quarter ended March 31, 1993, primarily reflecting the decreased
revenues and $2.3 million of start-up losses associated with Viacom
New Media.
-17-
Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Cable Television and Broadcasting (Cable television systems and
Television and Radio stations)
Cable Television revenues decreased 4% to $100.7 million for the
quarter ended March 31, 1994 from $104.5 million for the quarter
ended March 31, 1993 due to: 1) a decrease of $5.9 million in basic
revenue, primarily due to a 10% decrease in rates for basic
services, partially offset by a 3% increase in basic customers; 2)
a decrease of $1.7 million in premium revenue, primarily due to
decreased rates; 3) an increase of $1.7 million in equipment
charges; and 4) an increase of $2.1 million in other revenue
sources. Total revenue per basic customer per month decreased 6%
to $30.48 in 1994 from $32.44 in 1993. The revenue variances
reflect the effect of the 1992 Cable Act rate regulations, released
by the FCC, which became effective on September 1, 1993. Earnings
from operations decreased 31% to $21.2 million for the quarter
ended March 31, 1994 from $30.6 million for the quarter ended March
31, 1993, reflecting the decreased revenues and increased
operating, general and administrative expenses, which include non-
recurring costs associated with the implementation of FCC rate
regulations.
The FCC released additional rate regulations on March 30, 1994
which became effective May 15, 1994. Viacom Inc. is evaluating the
effect of these new rate regulations which require a reduction of
rates in addition to that which the company has already taken.
Viacom Cable served approximately 1,111,000 basic customers
subscribing to approximately 734,000 premium units as of March 31,
1994. Basic customers and premium units increased 3% and 1%,
respectively, since March 31, 1993.
Television revenues increased 10% to $21.7 million for the quarter
ended March 31, 1994 from $19.7 million for the quarter ended March
31, 1993, reflecting increased local and national advertising
revenues for the Viacom stations. Earnings from operations
increased 62% to $4.2 million for the quarter ended March 31, 1994
from $2.6 million for the quarter ended March 31, 1993, reflecting
increased revenues.
Radio revenues increased 12% to $20.8 million for the quarter ended
March 31, 1994 from $18.6 million for the quarter ended March 31,
1993, reflecting increased local advertising revenues. Earnings
from operations increased 58% to $5.5 million for the quarter ended
March 31, 1994 from $3.5 million for the quarter ended March 31,
1993, primarily reflecting the increased revenues.
-18-
Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Corporate
Corporate expenses remained constant at $15.3 million for the
quarters March 31, 1994 and March 31, 1993.
Other income and expense information
Net interest expense increased 15% to $47.3 million for the
quarter ended March 31, 1994 from $41.0 million for the quarter
ended March 31, 1993, reflecting interest on Paramount debt and
increased bank borrowings (See "Capital Structure.")
For the quarter ended March 31, 1993, "Other items, net," reflects
the pre-tax gain of approximately $55 million on the sale of the
stock of the Wisconsin cable system, an adjustment to previously
established non-operating litigation reserves and the net gain on
the sale of a portion of an investment held at cost.
The provision for income taxes represents federal, state and
foreign income taxes on earnings before income taxes.
The annual effective tax rates of 48% for 1993 and negative 28% for
1994 continue to be affected by amortization of acquisition costs
which are not deductible for tax purposes.
Due to the unusual and non-recurring nature of the gain on the sale
of the Wisconsin cable system, its full income tax effect is
reflected in the first quarter 1993 tax provision and is excluded
from the estimated annual effective tax rate.
During the first quarter of 1993, Viacom International adopted
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," on a prospective basis and recognized a
cumulative benefit from a change in accounting principle of $10.4
million.
"Equity in earnings of affiliated companies, net of tax" was $3.5
million for the quarter ended March 31, 1994 compared with $.3
million for the quarter ended March 31, 1993, primarily reflecting
the inclusion of Paramount's earnings of affiliated companies for
the one month ended March 31, 1994, and improved operating results
at Lifetime and Comedy Central. During April 1994, Viacom
International sold its equity investment in Lifetime (See
"Subsequent Events.").
Effective January 1, 1994, Viacom International adopted Financial
Accounting Standards No. 112, "Employers Accounting for
Postemployment Benefits," which did not have a material effect on
the Company's financial position or results of operations.
-19-
Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Liquidity and Capital Resources
On March 11, 1994, Viacom Inc. acquired, pursuant to a tender offer
(the "Paramount Offer"), 61,657,432 shares of Paramount Common
Stock, constituting a majority of the shares outstanding, at a price
of $107 per share in cash. (See Note 2 of Notes to Consolidated
Financial Statements.)
Based on indebtedness as of March 31, 1994, Viacom Inc. anticipates
that, following the Paramount Merger, Viacom Inc. and Paramount on
a pro forma combined basis (the "Combined Company") will have
outstanding total indebtedness of approximately $8.3 billion ($10.3
billion if the Blockbuster Merger is consummated) and 5% preferred
stock with a liquidation preference of $1.8 billion ($1.2 billion
if the Blockbuster Merger is consummated). Of such $8.3 billion,
$3.7 billion was borrowed under the Merger Credit Agreement and
must be repaid by November 18, 1994. The Merger Credit Agreement,
together with other current maturities, may require Viacom to
refinance up to $3.9 billion ($5.8 billion if the Blockbuster
Merger is consummated) on various dates over a period ended
November 18, 1994. Viacom Inc. also intends to refinance
substantially all bank indebtedness of Viacom International (as
described below).
During May 1994, Viacom Inc. received commitments in the aggregate
amount of $3.0 billion from Bank of America NT&SA, Citibank, N.A.,
Morgan Guaranty Trust Company of New York and The Bank of New York,
managing agents under a proposed long-term $6.8 billion credit
facility, subject to receiving commitments for the remainder of the
facility. The new facility is expected to have scheduled maturities
commencing December 1996 and a final maturity of July 2002. This
new facility will refinance existing bank indebtedness at Viacom
International and Paramount and will be available for general
corporate purposes. Viacom Inc. expects, during the second quarter
of 1994, to receive commitments for the remainder of the facility
from a syndicate of financial institutions.
On May 5, 1994, Viacom Inc., Viacom International and Paramount
filed a shelf registration statement with the Securities and
Exchange Commission ("SEC") registering $3 billion of debt
securities and Preferred Stock, guaranteed by Viacom International
and Paramount. Some or all of the securities may be issued in one
or more offerings.
-20-
Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Although Viacom expects that it will be able to refinance its
indebtedness and meet its obligations without the need to sell any
assets, Viacom is continuing to review opportunities for the sale
of non-strategic assets as such opportunities may arise, including
the exploration of the sale of the operations of Madison Square
Garden and certain non-core publishing assets.
Viacom Inc. has substantially no source of funds other than
dividends paid by Viacom International and, upon completion of the
Paramount Merger, by Paramount on their respective stocks. The $1.9
billion credit facility of Viacom International (the "Viacom
International Credit Agreement"), with certain exceptions,
prohibits Viacom International from paying any dividends on its
stock to Viacom Inc. This prohibition will not apply under the new
Viacom Inc. facility described above.
Viacom Inc.'s scheduled maturities of debt under its credit
facilities are $3.7 billion (1994) and $28.3 million (1995). Viacom
International's scheduled maturities of long-term debt through
December 31, 1998 under its credit facilities are $150 million
(1994), $358 million (1995), $358 million (1996) $358 million
(1997) and $358 million (1998).
Viacom Inc. and Viacom International were each in compliance with
all covenants and had satisfied all financial ratios and tests as
of March 31, 1994 under their Merger Credit Agreement (See "Capital
Structure") and Viacom International Credit Agreement,
respectively. Viacom Inc. and Viacom International expect to
remain in compliance with such ratios as may be applicable from
time to time during 1994.
Debt, including the current portion, as a percentage of total
capitalization of Viacom Inc. was 67% at March 31, 1994 and 48% at
December 31, 1993. The increase in debt as a percentage of total
capitalization, results principally from bank financing related to
the acquisition of the majority of Paramount Common Stock,
partially offset by the issuance of Viacom Inc. Class B Common
Stock to Blockbuster.
The indebtedness under Viacom Inc.'s and Viacom International's
credit facilities bear interest at floating rates, causing Viacom
International to be sensitive to changes in prevailing interest
rates. As of March 31, 1994, Viacom International and Viacom Inc.
had obtained interest rate protection agreements with respect to
approximately $1.823 billion of indebtedness under the Viacom
International and Viacom Inc. credit facilities. The interest rate
protection agreements will mature during the period from 1994
through 1997. Viacom International expects to maintain interest
rate protection agreements sufficient to meet requirements of the
Viacom International Credit Agreement.
-21-
Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Those commitments of Viacom Inc. for program license fees which are
not reflected in the balance sheet as of March 31, 1994, which are
estimated to aggregate approximately $2.5 billion, principally
reflect commitments under Showtime Networks Inc.'s ("SNI's")
exclusive arrangements with several motion picture companies and
Madison Square Garden Network's agreement to televise the New York
Yankees baseball games through the year 2000. This estimate is
based upon a number of factors. A majority of such fees pertain to
SNI and are payable within the next seven years, as part of normal
programming expenditures. These commitments of SNI are contingent
upon delivery of motion pictures, which are not yet available for
premium television exhibition and, in many cases, have not yet been
produced.
Net cash flow from operating activities was negative $122.2 million
for the three months ended March 31, 1994 versus negative $49.8
million for the three months ended March 31, 1993 due to decreased
earnings from operations of Viacom International prior to merger-
related charges and the loss from operations of Paramount for the
month of March 1994. Net cash expenditures for investing activities
of $6.3 billion for the three months ended March 31, 1994,
principally reflects the acquisition of the majority of the shares
outstanding of Paramount and capital expenditures. Net cash flows
from investing activities of $28.6 million for the three months
ended March 31, 1993, principally reflects proceeds from the sale of
the Wisconsin cable system and an investment held at cost partially
offset by capital expenditures, the acquisition of ICOM Simulations,
Inc., the additional investment in StarSight Telecast, Inc. and
advances to Comedy Central. Financing activities principally
reflect borrowings and repayments of debt under the credit
facilities during each period presented, and in 1994, the borrowings
under the Merger Credit Agreement and the sale of Class B Common
Stock to Blockbuster.
Subsequent Event
On April 4, 1994, Viacom International sold its one-third
partnership interest in Lifetime for approximately $317.6 million,
which will result in a pre-tax gain of approximately $267 million in
the second quarter of 1994. Proceeds from the sale were used to
reduce outstanding debt of Viacom International.
-22-
Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Capital Structure
The following table sets forth the capitalization of Viacom Inc. and
subsidiaries as of March 31, 1994 and December 31, 1993:
March 31, December 31,
1994 1993
------- ----------
(Millions of dollars)
Current portion of long-term debt $ 39.1 $ 58.5
======== ========
Long-term debt:
Viacom Inc.:
Notes payable to banks (a) . . . . . . . . . . . . . . . . . . . . $3,778.2 $ 28.2
Viacom International:
Notes payable to banks . . . . . . . . . . . . . . . . . . . . . . 1,939.8 1,900.0
9.125% Senior Subordinated Notes due 1999 150.0 150.0
8.75% Senior Subordinated Reset Notes
due 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 100.0
10.25% Senior Subordinated Notes due 2001 . . . . . . . . . . . . . 200.0 200.0
Obligations under capital leases . . . . . . . . . . . . . . . . . 61.6 61.8
Paramount:
5.875% Senior Notes due 2000 . . . . . . . . . . . . . . . . . . . 149.4 --
7.5% Senior Notes due 2002 . . . . . . . . . . . . . . . . . . . . 246.6 --
8.25% Senior Notes due 2022 . . . . . . . . . . . . . . . . . . . 246.9 --
7.5% Senior Notes due 2023 . . . . . . . . . . . . . . . . . . . . 149.5 --
7% Subordinated Debentures due 2002 . . . . . . . . . . . . . . . 180.6 --
Other notes due 1994 to 1996 . . . . . . . . . . . . . . . . . . . 11.3 --
Obligations under capital leases . . . . . . . . . . . . . . . . . 14.1 --
-------- -------
Total long-term debt . . . . . . . . . . . . . . . . . . $7,228.0 $2,440.0
========= ========
Shareholders' equity of Viacom Inc.:
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . $1,800.0 $1,800.0
Common stock and additional paid-in
capital (b) . . . . . . . . . . . . . . . . . . . . . . . . . 2,172.1 922.1
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . (458.1) (4.0)
Cumulative translation adjustment . . . . . . . . . . . . . . . . . (3.6) --
--------- ---------
Total shareholders' equity . . . . . . . . $3,510.4 $2,718.1
========= =========
______________
a) On March 11, 1994, Viacom Inc. borrowed $3.7 billion under
a credit agreement dated as of November 19, 1993, as amended on
January 5, 1994 and February 15, 1994 (the "Merger Credit
Agreement"), among Viacom Inc., the banks named therein, and The
Bank of New York, Citibank, N.A. and Morgan Guaranty Trust Company
of New York, as Managing Agents.
b) On March 31, 1994, there were 53,449,525 outstanding
shares of Class A Common Stock (100,000,000 shares authorized) and
90,078,203 outstanding shares of Class B Common Stock (150,000,000
shares authorized); there were approximately 223,460 unissued
shares of Class A Common Stock and 29,408,859 unissued shares of
Class B Common Stock reserved principally for stock options granted
under the Long-Term Incentive Plan.
-23-
Management's Discussion and Analysis of Results of
Operations and Financial Condition.
National Amusements Inc. ("NAI") held approximately 64.2% of
outstanding Viacom Inc. Common Stock as of March 31, 1994, which
consisted of 85.2% of then outstanding Class A Common Stock and
51.7% of then outstanding Class B Common Stock. Pursuant to a
purchase program initiated in August 1987, NAI announced its intent
to buy, from time to time, up to an additional 3,000,000 shares of
Class A Common Stock and 2,423,700 shares of Class B Common Stock.
As of March 31, 1994, NAI had acquired an aggregate of 3,374,300
shares of Common Stock, consisting of 1,466,200 shares of Class A
Common Stock and 1,908,100 shares of Class B Common Stock pursuant
to this buying program. On August 20, 1993, NAI ceased making
purchases of Common Stock.
_____________
Viacom International and Viacom Inc. filed a shelf registration
statement with the SEC registering $800 million of debt securities
(or, if such debt securities are issued at an original issue
discount, such greater principal amount as shall result in an
aggregate offering price equal to $800 million) guaranteed by
Viacom Inc. The registration statement was declared effective by
the SEC on March 11, 1993. Some or all of the debt securities may
be issued by Viacom International in one or more offerings.
-24-
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
12.1 Computation of Ratio of Earnings to Fixed Charges of
Viacom International.
12.2 Computation of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends of Viacom Inc.
(b) Reports on Form 8-K for Viacom Inc.
Current Reports on Form 8-K of Viacom Inc. with a report date of
January 12, 1994 relating to the execution of an Agreement and Plan of
Merger dated as of January 7, 1994 by and between Blockbuster
Entertainment Corporation and Viacom Inc.
Current Reports on Form 8-K of Viacom Inc. with a report date of
March 10, 1994 relating to the issuance and sale by Viacom Inc. to
Blockbuster Entertainment Corporation of 22,727,273 shares of Class B
Common Stock of Viacom Inc.
Current Reports on Form 8-K of Viacom Inc. with a report date of
March 11, 1994 relating to the completion of Viacom Inc.'s tender
offer for a majority of the outstanding common stock of Paramount
Communications Inc. and he filing of certain historical and pro forma
financial data.
SIGNATURES
Pursuant to the requirements 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.
VIACOM INC.
(Registrant)
Date May 19, 1994 /s/ Frank J. Biondi, Jr.
Frank J. Biondi, Jr.
President,
Chief Executive Officer
Date May 19, 1994 /s/ George S. Smith
George S. Smith, Jr.
Senior Vice President,
Chief Financial Officer
Exhibit Index
Page
12.1 Computation of Ratio of Earnings to Fixed
Charges of Viacom International
12.2 Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred Stock
Dividends of Viacom Inc.
EXHIBIT 12.1
VIACOM INTERNATIONAL INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions except ratios)
Three Months Ended
March 31, Year Ended December 31,
1994 1993 1993 1992 1991 1990 1989
------------------- --------------------------------------------------
Earnings (loss) before income
taxes $(260.2) $103.8 $303.7 $164.6 $66.3 $(16.0) $266.1
Add:
Distributed income of
affiliated companies 5.0 .6 13.5 9.5 5.6 2.8 4.5
Interest expense, net of
capitalized interest 34.9 40.4 150.7 195.2 252.9 243.3 258.0
Capitalized interest 2.0 .6 2.1 2.4 2.3 2.2 2.3
amortized
1/3 of rental expense 6.3 6.3 24.7 22.6 21.5 18.8 15.5
------- ------ ------ ------ ------ ------ ------
Earnings (loss) $(212.0) $151.7 $494.7 $394.3 $348.6 $251.1 $546.4
======= ====== ====== ====== ====== ====== ======
Fixed charges:
Interest costs on all
indebtedness $ 35.0 $ 40.5 $151.1 $195.8 $253.5 $244.1 $313.8
1/3 of rental expense 6.3 6.3 24.7 22.6 21.5 18.8 15.5
------- ------ ------ ------ ------ ------ ------
Total fixed charges $ 41.3 $ 46.8 $175.8 $218.4 $275.0 $262.9 $329.3
======= ====== ====== ====== ====== ====== ======
Ratio of earnings to
fixed charges Note (a) 3.2X 2.8X 1.8X 1.3X Note (a) 1.7X
======= ====== ====== ====== ====== ======= ======
(a) Earnings were inadequate to cover fixed charges; the additional amount
of earnings required to cover fixed charges for the three months
ended March 31, 1994 and the year ended December 31, 1990, would have
been $253.3 million and $11.8 million, respectively.
EXHIBIT 12.2
VIACOM INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNING TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(In millions, except ratios)
Three Months Ended
March 31, Year Ended December 31,
1994 1993 1993 1992 1991 1990 1989
------------------- -----------------------------------------------
Earnings (loss) before
income taxes $(352.3) $102.1 $301.8 $155.6 $ 8.2 $(70.4) $144.9
Add:
Distributed income of
affiliated companies 7.8 .6 13.4 9.5 5.6 2.8 4.5
Interest expense, net of
capitalized interest 61.4 41.2 154.1 195.2 298.1 295.3 313.1
Capitalized interest 1.9 .6 2.1 2.4 2.3 2.3 2.3
amortized
1/3 of rental expense 8.7 6.3 24.8 22.6 21.5 18.8 15.5
------- ------ ------ ------ ------ ------- ------
Earnings (Loss) $(272.5) $150.8 $496.2 $385.3 $335.7 $ 248.8 $480.3
======= ====== ====== ====== ====== ======= ======
Fixed charges:
Interest costs on all
indebtedness $ 62.4 $ 41.3 $154.5 $195.7 $298.6 $296.1 $313.8
1/3 of rental expense 8.7 6.3 24.8 22.6 21.5 18.8 15.5
------- ------ ------ ------ ------ ------- ------
Total fixed charges $ 71.1 $ 47.6 $179.3 $218.3 $320.1 $314.9 $329.3
======= ====== ====== ====== ====== ======= ======
Ratio of earnings to
fixed charges Note (a) 3.2X 2.8X 1.8X 1.0X Note (a) 1.5X
======= ====== ====== ====== ====== ======= ======
Ratio of earnings to combined
fixed charges and preferred
stock dividends Note (b) -- -- -- -- -- 1.3X
======= ====== ====== ====== ====== ======= ======
(a) Earnings were inadequate to cover fixed charges; the additional amount of
earnings required to cover fixed charges for the three months ended March
31, 1994, and the year ended December 31, 1990, would have been $343.6
million and $66.2 million, respectively.
(b) Earnings were inadequate to cover combined fixed charges and preferred
stock dividends; the additional amount of earnings required to cover
combined fixed charges and preferred stock dividends for the three
months ended March 31, 1994, would have been $361.2 million.
