SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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Commission file number 1-9553
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VIACOM INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-2949533
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
1515 Broadway, New York, New York 10036
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 258-6000
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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, 2000:
Class A Common Stock, par value $.01 per share - 137,545,959
Class B Common Stock, par value $.01 per share - 542,895,813
VIACOM INC.
INDEX TO FORM 10-Q
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations (Unaudited) for the Three Months
ended March 31, 2000 and March 31, 1999 3
Consolidated Balance Sheets at March 31, 2000 (Unaudited) and
December 31, 1999 4
Consolidated Statements of Cash Flow (Unaudited) for the Three Months
ended March 31, 2000 and March 31, 1999 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 29
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 30
-2-
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
VIACOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------
(Unaudited; in millions, except per share amounts)
Three months ended
March 31,
----------------------------
2000 1999
-------- --------
Revenues............................................................... $3,025.8 $2,951.1
Expenses:
Operating............................................................ 1,980.5 1,952.1
Selling, general and administrative.................................. 561.1 524.4
Depreciation and amortization........................................ 229.2 197.1
-------- --------
Total expenses................................................... 2,770.8 2,673.6
-------- --------
Operating income....................................................... 255.0 277.5
Interest expense....................................................... (122.5) (98.5)
Interest income........................................................ 9.5 4.2
Other items, net....................................................... 1.7 (1.3)
-------- --------
Earnings before income taxes........................................... 143.7 181.9
Provision for income taxes........................................... (64.7) (97.3)
Equity in loss of affiliated companies, net of tax................... (6.1) (16.1)
Minority interest.................................................... 3.1 (0.1)
-------- --------
Net earnings before extraordinary loss................................. 76.0 68.4
Extraordinary loss, net of tax....................................... -- (23.5)
-------- --------
Net earnings........................................................... 76.0 44.9
Cumulative convertible preferred stock dividend requirement.......... -- (0.4)
Premium on repurchase of preferred stock............................. -- (12.0)
-------- --------
Net earnings attributable to common stock.............................. $ 76.0 $ 32.5
======== ========
Basic and diluted earnings per common share:
Net earnings before extraordinary loss............................... $ 0.11 $ 0.08
Net earnings......................................................... $ 0.11 $ 0.05
Weighted average number of common shares:
Basic................................................................ 694.8 696.1
Diluted.............................................................. 711.5 711.1
See notes to consolidated financial statements.
-3-
VIACOM INC. AND SUBSIDIARIES
Consolidated Balance Sheets
- ---------------------------
(Unaudited; in millions, except per share amounts)
March 31, December 31,
2000 1999
--------- ---------
Assets
Current Assets:
Cash and cash equivalents............................................... $ 697.5 $ 680.8
Receivables, less allowances of $143.5 (2000)
and $109.5 (1999)...................................................... 1,530.0 1,697.4
Inventory (Note 6)...................................................... 1,806.2 1,959.5
Other current assets.................................................... 917.9 860.7
--------- ---------
Total current assets................................................ 4,951.6 5,198.4
--------- ---------
Property and equipment.................................................... 5,378.2 5,255.9
Less accumulated depreciation and amortization.......................... 1,978.3 1,830.6
--------- ---------
Net property and equipment.......................................... 3,399.9 3,425.3
--------- ---------
Inventory (Note 6)........................................................ 2,985.3 2,829.5
Intangibles, at amortized cost............................................ 11,410.9 11,478.9
Other assets.............................................................. 1,575.8 1,554.3
--------- ---------
$24,323.5 $24,486.4
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable........................................................ $ 559.0 $ 544.4
Accrued compensation.................................................... 290.5 473.3
Participants' share, residuals and royalties payable.................... 1,044.6 1,087.2
Income tax payable...................................................... 3.1 1.0
Current portion of long-term debt (Note 7).............................. 281.3 294.3
Accrued expenses and other.............................................. 1,809.0 1,999.5
--------- ---------
Total current liabilities............................................... 3,987.5 4,399.7
--------- ---------
Long-term debt (Note 7)................................................... 6,546.9 5,697.7
Other liabilities......................................................... 3,355.8 3,257.0
Commitments and contingencies (Note 8)
Shareholders' Equity:
Class A Common Stock, par value $.01 per share; 500.0 shares
authorized; 139.2 (2000) and 139.7 (1999) shares issued............. 1.4 1.4
Class B Common Stock, par value $.01 per share; 3,000.0 shares
authorized; 608.0 (2000) and 606.6 (1999) shares issued............. 6.1 6.1
Additional paid-in capital.............................................. 10,353.1 10,338.5
Retained earnings....................................................... 2,323.9 2,247.9
Accumulated other comprehensive loss.................................... (37.0) (30.2)
--------- ---------
12,647.5 12,563.7
Less treasury stock, at cost; 1.4 (2000 and 1999) Class A shares and
61.3 (2000) and 47.1 (1999) Class B shares.............................. 2,214.2 1,431.7
--------- ---------
Total shareholders' equity.......................................... 10,433.3 11,132.0
--------- ---------
$24,323.5 $24,486.4
========= =========
See notes to consolidated financial statements.
-4-
VIACOM INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
- -------------------------------------
(Unaudited; in millions)
Three months ended March 31,
----------------------------
2000 1999
---- ----
Net cash from operating activities:
Net earnings.......................................................................... $ 76.0 $ 44.9
Adjustments to reconcile net earnings to net cash flow from operating activities:
Depreciation and amortization....................................................... 229.2 197.1
Equity in loss of affiliated companies.............................................. 6.1 16.1
Distribution from affiliated companies.............................................. 12.0 6.1
Change in operating assets and liabilities:
Decrease in receivables........................................................... 192.2 314.8
Increase in inventory and related programming liabilities, net.................... (81.8) (115.2)
Increase in prepaid expenses and other current assets............................. (36.3) (132.3)
Decrease (increase) in unbilled receivables....................................... (84.9) 13.6
Decrease in accounts payable and accrued expenses................................. (341.4) (441.1)
Increase (decrease) in income taxes payable and deferred income taxes, net........ 42.6 (214.6)
Increase in deferred income....................................................... 20.9 24.4
Other, net........................................................................ 74.0 (105.1)
------- --------
Net cash flow provided by (used for) operating activities.............................. 108.6 (391.3)
------- --------
Investing Activities:
Capital expenditures................................................................ (105.7) (145.2)
Acquisitions, net of cash acquired.................................................. (1.9) (100.9)
Investments in and advances to affiliated companies................................. (64.6) (40.7)
Purchases of short-term investments................................................. (34.8) (129.6)
Proceeds from sales of short-term investments....................................... 20.4 123.5
Other, net.......................................................................... (7.1) --
------- --------
Net cash flow used for investing activities............................................ (193.7) (292.9)
------- --------
Financing Activities:
Net borrowings from banks........................................................... 868.4 1,819.0
Purchase of treasury stock and warrants............................................. (745.8) (49.5)
Repurchase of Preferred Stock....................................................... -- (612.0)
Repayment of notes and debentures................................................... -- (856.9)
Payment of capital lease obligations................................................ (35.2) (20.4)
Proceeds from exercise of stock options and warrants................................ 14.3 27.2
Other, net.......................................................................... 0.1 (7.8)
------- --------
Net cash flow provided by financing activities......................................... 101.8 299.6
------- --------
Net increase (decrease) in cash and cash equivalents................................ 16.7 (384.6)
Cash and cash equivalents at beginning of the period................................ 680.8 767.3
------- --------
Cash and cash equivalents at end of period............................................. $ 697.5 $ 382.7
======= ========
Supplemental cash flow information:
Cash payments for interest, net of amounts capitalized................................ $ 137.8 $ 117.1
Cash payments for income taxes........................................................ $ 8.1 $ 483.3
Noncash investing and financing:
Property and equipment acquired under capitalized leases.............................. $ 11.8 $ 51.3
See notes to consolidated financial statements.
-5-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
1) BASIS OF PRESENTATION
Viacom Inc. (the "Company") is a diversified entertainment company with
operations in six segments: (i) Networks (ii) Entertainment, (iii) Video, (iv)
Parks, (v) Publishing and (vi) Online.
The accompanying unaudited consolidated financial statements of the Company have
been prepared pursuant to the rules of the Securities and Exchange Commission.
These financial statements should be read in conjunction with the more detailed
financial statements and notes thereto included in the Company's most recent
annual report on Form 10-K.
In the opinion of management, the accompanying financial statements reflect all
adjustments, consisting of only normal and recurring adjustments, necessary for
a fair presentation of the financial position and results of operations and cash
flows of the Company for the periods presented. Certain previously reported
amounts have been reclassified to conform with the current presentation.
Use of 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,
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.
Net Earnings (Loss) per Common Share - Basic earnings per share ("EPS") is
computed by dividing the net earnings applicable to common shares by the
weighted average number of common shares outstanding during the period. Diluted
EPS adjusts the weighted average number of common shares outstanding by the
assumed conversion of convertible securities and exercise of stock options only
in the periods in which such effect would have been dilutive. The table below
presents a reconciliation of the weighted average number of shares used in the
calculation of basic and diluted EPS:
Three months ended
March 31,
---------------------------
2000 1999
----- -----
Weighted average shares for basic EPS.................. 694.8 696.1
Plus incremental shares for stock options & warrants... 16.7 15.0
----- -----
Weighted average shares for diluted EPS................ 711.5 711.1
===== =====
Comprehensive Income (Loss) -- Total comprehensive income (loss) for the Company
includes net income and other comprehensive income items including unrealized
gain (loss) on securities, cumulative translation adjustments and minimum
pension liability adjustments. Total comprehensive income for the three months
ended March 31, 2000 and 1999 was $69.2 million and $66.7 million, respectively.
-6-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
2) SUBSEQUENT EVENTS
On May 4, 2000, the Company completed its merger with CBS Corporation ("CBS").
Under the terms of the transaction, each share of CBS common stock has been
converted into the right to receive 1.085 shares of the Company's Class B Common
Stock and each share of CBS Series B preferred stock has been converted into the
right to receive 1.085 shares of the Company's Series C Preferred Stock. CBS
shareholders will receive a cash payment in lieu of any fractional shares.
On April 28, 2000, the Company received a favorable supplemental private letter
ruling from the Internal Revenue Service. The Company had previously announced
that, subject to the approval of the Company's Board of Directors, which will be
based on an assessment of market conditions, and the receipt of such
supplemental private letter ruling, it intends to split-off Blockbuster by
offering to exchange all of its shares of Blockbuster for shares of the
Company's common stock. However, the Company has said that it does not intend
to commence the offer unless the Blockbuster Class A common stock improves to a
price range exceeding $20 per share. The Company has no obligation to effect
the split-off.
On March 31, 2000, the Company acquired the remaining 50% interest in United
Paramount Network ("UPN") that it did not already own for $5 million.
Commencing in the second quarter of 2000, the Company will consolidate UPN's
results of operations.
3) STOCK REPURCHASE
On February 16, 2000, the Company initiated a repurchase program to acquire up
to $1.0 billion of its common stock. As of March 31, 2000, the Company had
repurchased 10,000 shares of its Class A Common Stock and 14,157,900 shares of
its Class B Common Stock for approximately $782.5 million. As of April 27, 2000
the $1.0 billion repurchase program was completed, and the Company has
repurchased in total 10,000 shares of its Class A Common Stock and 18,264,500
shares of its Class B Common Stock.
4) SPELLING TRANSACTION AND RESTRUCTURING CHARGE
In the third quarter of 1999, the Company recorded a charge of approximately
$81.1 million, of which $70.3 million was recorded as a restructuring charge and
$10.8 million was recorded as part of depreciation expense. The restructuring
charge of $70.3 million was primarily associated with the integration of the
operations of Spelling Entertainment Group Inc. into Paramount Television,
resulting in the elimination of duplicative sales forces and certain other back
office functions. Included in this total is severance and employee related
costs of $48.1 million, lease termination and other occupancy costs of $17.7
million and other exit costs of $4.5 million. As of March 31, 2000, the Company
had paid and charged approximately $24.6 million against the severance
liability; $6.0 million against lease termination and other occupancy costs, and
$1.0 million against the other exit costs. The Company expects to complete the
exit activities by the end of the year 2000.
-7-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
5) RECEIVABLES
As of March 31, 2000, the Company had an aggregate of $429.5 million outstanding
under revolving receivable securitization programs. Proceeds from the sale of
these receivables were used to reduce outstanding borrowings.
6) INVENTORY
March 31, 2000 December 31, 1999
-------------- -----------------
Theatrical and television inventory:
Theatrical and television productions:
Released............................................... $2,010.4 $1,944.3
Completed, not released................................ 0.4 0.8
In process and other................................... 475.0 411.6
Program rights.............................................. 1,351.8 1,434.4
-------- --------
3,837.6 3,791.1
Less current portion........................................ 1,403.6 1,531.1
-------- --------
2,434.0 2,260.0
-------- --------
Merchandise inventory, including sell-through
videocassettes.............................................. 301.0 338.0
Videocassette rental inventory............................... 551.3 569.5
Publishing:
Finished goods.............................................. 66.0 60.0
Work in process............................................. 7.7 6.1
Raw materials............................................... 3.6 4.3
Other........................................................ 24.3 20.0
-------- --------
953.9 997.9
Less current portion........................................ 402.6 428.4
-------- --------
551.3 569.5
-------- --------
Total Current Inventory...................................... $1,806.2 $1,959.5
======== ========
Total Non-Current Inventory.................................. $2,985.3 $2,829.5
======== ========
-8-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
7) LONG-TERM DEBT
The following table sets forth the Company's long-term debt, net of current
portion:
March 31, 2000 December 31, 1999
-------------- -----------------
Notes payable to banks............................................. $3,922.5 $3,054.2
5.875% Senior Notes due 2000, net of unamortized discount
of $.1 (2000 and 1999)........................................... 149.9 149.9
7.5% Senior Notes due 2002, net of unamortized discount
of $.8 (2000) and $.9 (1999)..................................... 249.2 249.1
6.75% Senior Notes due 2003, net of unamortized discount
of $.1 (2000 and 1999)........................................... 349.9 349.9
7.75% Senior Notes due 2005, net of unamortized discount
of $4.8 (2000) and $5.0 (1999)................................... 966.2 966.0
7.625% Senior Debentures due 2016, net of unamortized
discount of $1.1(2000 and 1999).................................. 198.9 198.9
8.25% Senior Debentures due 2022, net of unamortized
discount of $2.5 (2000 and 1999)................................. 247.5 247.5
7.5% Senior Debentures due 2023, net of unamortized
discount of $.4 (2000 and 1999).................................. 149.6 149.6
10.25% Senior Subordinated Notes due 2001.......................... 35.3 35.3
Obligations under capital leases................................... 559.2 591.6
-------- --------
6,828.2 5,992.0
Less current portion............................................... 281.3 294.3
-------- --------
$6,546.9 $5,697.7
======== ========
The Viacom Credit Agreements, as amended, are comprised of (i) a $3.7 billion
senior unsecured reducing revolver maturing July 1, 2002 and a $571 million term
loan maturing April 1, 2002 and (ii) a $100 million term loan for Viacom
International Inc. maturing July 1, 2002. Of these amounts, $2.2 billion and
$1.8 billion were outstanding as of March 31, 2000 and December 31, 1999,
respectively.
On March 28, 2000, the Company amended the Viacom Credit Agreements to allow for
the merger of CBS with and into the Company.
On June 21, 1999, Blockbuster entered into a $1.9 billion unsecured credit
agreement (the "Blockbuster Credit Agreement") with a syndicate of banks. The
Blockbuster Credit Agreement is comprised of a $700 million revolver due July 1,
2004, a $600 million term loan due in quarterly installments beginning April 1,
2002 and ending July 1, 2004, and a $600 million revolver due June 19, 2000,
which was subsequently reduced with proceeds from the initial public
-9-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
offering. Interest rates are based on the prime rate or LIBOR at Blockbuster's
option at the time of borrowing.
The Company's maturities of long-term debt outstanding at March 31, 2000,
excluding capital leases, are $451.9 million (2000), $835.9 million (2001), $2.2
billion (2002), $625.0 million (2003) and $645.0 million (2004). The Company
has classified certain short-term indebtedness as long-term debt based upon its
intent and ability to refinance such indebtedness on a long-term basis.
8) COMMITMENTS AND CONTINGENCIES
The commitments of the Company for program license fees, which are not reflected
in the balance sheet as of March 31, 2000 and are estimated to aggregate
approximately $1.6 billion, principally reflect Showtime Networks Inc.'s
("SNI's") commitments of approximately $1.3 billion for the acquisition of
programming rights and the production of original programming, and exclude
intersegment commitments between the Networks and Entertainment segments of
approximately $794 million. The estimate is based upon a number of factors. A
majority of such fees are payable over several years, as part of normal
programming expenditures of SNI. These commitments to acquire programming
rights 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.
9) PROVISION FOR INCOME TAXES
The provision for income taxes represents federal, state and foreign income
taxes on earnings before income taxes. The estimated effective tax rates of
45.0% for 2000 and 53.5% for 1999 were both adversely affected by amortization
of intangibles in excess of the amounts deductible for tax purposes. Excluding
the non-deductible amortization of intangibles, the estimated effective tax
rates would have been 31.0% for 2000 and 37.0% for 1999.
-10-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
10) OPERATING SEGMENTS
The following table sets forth the Company's financial performance by operating
segment. Intersegment revenues, recorded at fair market value, of the
Entertainment segment for the three months ended March 31, 2000 and 1999 were
$111.4 million and $49.6 million, respectively. All other intersegment revenues
were immaterial for each of the periods presented.
Three months ended
March 31,
--------------------------
2000 1999
-------- --------
Revenues:
Networks.................................................. $ 759.5 $ 663.8
Entertainment............................................. 1,055.7 1,092.3
Video..................................................... 1,211.1 1,113.0
Parks..................................................... 7.8 10.5
Publishing................................................ 112.8 122.7
Online.................................................... 11.6 4.7
Intercompany.............................................. (132.7) (55.9)
-------- --------
Total revenues........................................... $3,025.8 $2,951.1
======== ========
EBITDA:
Networks.................................................. $ 258.7 $ 201.5
Entertainment............................................. 171.7 162.8
Video..................................................... 150.3 145.1
Parks..................................................... (1.9) (2.7)
Publishing................................................ (1.7) 5.7
Online.................................................... (23.2) (1.0)
-------- --------
Segment total.......................................... 553.9 511.4
Reconciliation to operating income:
Corporate/Eliminations.................................... (69.7) (36.8)
Depreciation and amortization............................. (229.2) (197.1)
-------- --------
Total operating income................................. $ 255.0 $ 277.5
======== ========
-11-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
11) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Viacom International Inc. ("Viacom International") is a wholly owned subsidiary
of the Company. The Company has fully and unconditionally guaranteed Viacom
International debt securities. The Company has determined that separate
financial statements and other disclosures concerning Viacom International are
not material to investors. The following condensed consolidating financial
statements present the results of operations, financial position and cash flows
of the Company, Viacom International (in each case, carrying investments in Non-
Guarantor Affiliates under the equity method), the direct and indirect Non-
Guarantor Affiliates of the Company, and the eliminations necessary to arrive at
the information for the Company on a consolidated basis. Certain prior year
amounts have been reclassified to conform with the current period presentation.
Three Months Ended March 31, 2000
-------------------------------------------------------------------
Non- Viacom
Viacom Viacom Guarantor Inc.
Inc. International Affiliates Eliminations Consolidated
-------- -------------- ----------- ------------- -------------
Revenues........................................ $ 9.6 $533.1 $2,536.1 $ (53.0) $3,025.8
Expenses:
Operating...................................... 10.0 181.9 1,808.8 (20.2) 1,980.5
Selling, general and administrative............ 0.3 189.8 371.0 -- 561.1
Depreciation and amortization.................. 0.7 35.4 193.1 -- 229.2
------- ------ -------- ------- --------
Total expenses............................... 11.0 407.1 2,372.9 (20.2) 2,770.8
------- ------ -------- ------- --------
Operating income (loss)......................... (1.4) 126.0 163.2 (32.8) 255.0
Interest expense............................... (65.2) (20.4) (36.9) -- (122.5)
Interest income................................ 0.3 6.6 2.6 -- 9.5
Intercompany interest.......................... (29.7) 26.9 2.8 -- --
Other items, net............................... (8.1) 5.9 3.9 -- 1.7
------- ------ -------- ------- --------
Earnings (loss) before income taxes............. (104.1) 145.0 135.6 (32.8) 143.7
Benefit (provision) for income taxes........... 42.7 (59.5) (47.9) -- (64.7)
Equity in earnings (loss) of affiliated
companies, net of tax........................ 137.4 49.9 (14.2) (179.2) (6.1)
Minority interest.............................. -- 2.0 1.1 -- 3.1
------- ------ -------- ------- --------
Net earnings.................................... $ 76.0 $137.4 $ 74.6 $(212.0) $ 76.0
======= ====== ======== ======= ========
-12-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
Three Months Ended March 31, 1999
------------------------------------------------------------------
Non- Viacom
Viacom Viacom Guarantor Inc.
Inc. International Affiliates Eliminations Consolidated
------- -------------- ----------- ------------- -------------
Revenues........................................ $ 9.1 $452.3 $2,498.1 $ (8.4) $2,951.1
Expenses:
Operating...................................... 9.5 148.3 1,802.7 (8.4) 1,952.1
Selling, general and administrative............ 0.8 168.9 354.7 -- 524.4
Depreciation and amortization.................. 0.9 22.4 173.8 -- 197.1
------ ------ -------- ------- --------
Total expenses............................... 11.2 339.6 2,331.2 (8.4) 2,673.6
------ ------ -------- ------- --------
Operating income (loss)......................... (2.1) 112.7 166.9 -- 277.5
Interest expense............................... (61.9) (25.7) (10.9) -- (98.5)
Interest income................................ 0.6 2.4 1.2 -- 4.2
Intercompany interest.......................... (20.0) 46.2 (26.2) -- --
Other items, net............................... (5.4) (0.6) 4.7 -- (1.3)
------ ------ -------- ------- --------
Earnings (loss) before income taxes............. (88.8) 135.0 135.7 -- 181.9
Benefit (provision) for income taxes........... 36.4 (55.3) (78.4) -- (97.3)
Equity in earnings (loss) of affiliated
companies, net of tax........................ 120.5 41.1 (19.9) (157.8) (16.1)
Minority interest.............................. -- -- (0.1) -- (0.1)
------ ------ -------- ------- --------
Net earnings before extraordinary loss.......... 68.1 120.8 37.3 (157.8) 68.4
Extraordinary loss.............................. (23.2) (0.3) -- -- (23.5)
------ ------ -------- ------- --------
Net earnings.................................... 44.9 120.5 37.3 (157.8) 44.9
Cumulative convertible preferred
stock dividend requirement................... (0.4) -- -- -- (0.4)
Premium on repurchase of preferred stock....... (12.0) -- -- -- (12.0)
------ ------ -------- ------- --------
Net earnings attributable to common stock....... $ 32.5 $120.5 $ 37.3 $(157.8) $ 32.5
====== ====== ======== ======= ========
-13-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
March 31, 2000
---------------------------------------------------------------------
Non-
Viacom Viacom Guarantor Viacom Inc.
Inc. International Affiliates Eliminations Consolidated
----------- ------------- ----------- ------------- -------------
Assets
Current Assets:
Cash and cash equivalents................... $ 15.2 $ 497.2 $ 185.1 $ -- $ 697.5
Receivables, net............................ 8.8 275.0 1,392.7 (146.5) 1,530.0
Inventory................................... 8.1 221.8 1,576.3 -- 1,806.2
Other current assets........................ 1.1 189.5 727.3 -- 917.9
---------- --------- --------- ---------- ---------
Total current assets...................... 33.2 1,183.5 3,881.4 (146.5) 4,951.6
---------- --------- --------- ---------- ---------
Property and equipment......................... 13.5 704.5 4,660.2 -- 5,378.2
Less accumulated depreciation and
amortization.............................. 4.2 260.2 1,713.9 -- 1,978.3
---------- --------- --------- ---------- ---------
Net property and equipment................. 9.3 444.3 2,946.3 -- 3,399.9
---------- --------- --------- ---------- ---------
Inventory...................................... -- 450.3 2,557.1 (22.1) 2,985.3
Intangibles, at amortized cost................. 105.6 660.5 10,644.8 -- 11,410.9
Investments in consolidated subsidiaries....... 6,966.6 14,945.4 -- (21,912.0) --
Other assets................................... 53.4 200.1 1,462.3 (140.0) 1,575.8
---------- --------- --------- ---------- ---------
$ 7,168.1 $17,884.1 $21,491.9 $(22,220.6) $24,323.5
========== ========= ========= ========== =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable............................. $ -- $ 62.9 $ 539.6 $ (43.5) $ 559.0
Accrued compensation......................... -- 73.8 216.7 -- 290.5
Participants' share, residuals and
royalties payable......................... -- -- 1,053.3 (8.7) 1,044.6
Income tax payable........................... (84.8) 963.7 (339.7) (536.1) 3.1
Current portion of long-term debt............ -- 19.0 262.3 -- 281.3
Accrued expenses and other................... 111.8 476.3 1,412.4 (191.5) 1,809.0
---------- --------- --------- ---------- ---------
Total current liabilities................... 27.0 1,595.7 3,144.6 (779.8) 3,987.5
---------- --------- --------- ---------- ---------
Long-term debt................................. 4,097.9 1,028.1 1,420.9 -- 6,546.9
Other liabilities.............................. (11,518.3) 2,050.2 8,597.3 4,226.6 3,355.8
Shareholders' Equity:
Preferred Stock.............................. -- 104.1 20.4 (124.5) --
Common Stock................................. 7.5 185.7 495.4 (681.1) 7.5
Additional paid-in capital................... 10,353.1 7,333.0 7,752.0 (15,085.0) 10,353.1
Retained earnings............................ 6,415.1 5,560.1 125.5 (9,776.8) 2,323.9
Accumulated other comprehensive
income (loss)............................. -- 27.2 (64.2) -- (37.0)
---------- --------- --------- ---------- ---------
16,775.7 13,210.1 8,329.1 (25,667.4) 12,647.5
Less treasury stock, at cost................. 2,214.2 -- -- -- 2,214.2
---------- --------- --------- ---------- ---------
Total shareholders' equity.............. 14,561.5 13,210.1 8,329.1 (25,667.4) 10,433.3
---------- --------- --------- ---------- ---------
$ 7,168.1 $17,884.1 $21,491.9 $(22,220.6) $24,323.5
========== ========= ========= ========== =========
-14-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
December 31, 1999
---------------------------------------------------------------------
Non-
Viacom Viacom Guarantor Viacom Inc.
Inc. International Affiliates Eliminations Consolidated
----------- ------------- ----------- ------------- -------------
Assets
Current Assets:
Cash and cash equivalents................. $ 81.6 $ 486.0 $ 113.2 $ -- $ 680.8
Receivables, net.......................... 10.9 340.4 1,441.7 (95.6) 1,697.4
Inventory................................. 10.9 250.4 1,698.2 -- 1,959.5
Other current assets...................... 2.8 172.6 685.3 -- 860.7
---------- --------- --------- ---------- ---------
Total current assets.................... 106.2 1,249.4 3,938.4 (95.6) 5,198.4
---------- --------- --------- ---------- ---------
Property and equipment....................... 13.4 684.5 4,558.0 -- 5,255.9
Less accumulated depreciation and
amortization............................ 3.8 242.6 1,584.2 -- 1,830.6
---------- --------- --------- ---------- ---------
Net property and equipment............... 9.6 441.9 2,973.8 -- 3,425.3
---------- --------- --------- ---------- ---------
Inventory.................................... -- 365.2 2,464.3 -- 2,829.5
Intangibles, at amortized cost............... 106.4 647.1 10,725.4 -- 11,478.9
Investments in consolidated subsidiaries..... 6,829.2 14,891.0 -- (21,720.2) --
Other assets................................. 58.0 204.7 1,411.0 (119.4) 1,554.3
---------- --------- --------- ---------- ---------
$ 7,109.4 $17,799.3 $21,512.9 $(21,935.2) $24,486.4
========== ========= ========= ========== =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable........................... $ 0.1 $ 9.0 $ 578.6 $ (43.3) $ 544.4
Accrued compensation....................... -- 170.6 302.7 -- 473.3
Participants' share, residuals and
royalties payable......................... -- -- 1,109.1 (21.9) 1,087.2
Income taxes payable....................... (84.8) 949.2 (327.3) (536.1) 1.0
Current portion of long-term debt.......... -- 17.7 276.6 -- 294.3
Accrued expenses and other................. 100.1 517.5 1,466.2 (84.3) 1,999.5
---------- --------- --------- ---------- ---------
Total current liabilities................. 15.4 1,664.0 3,405.9 (685.6) 4,399.7
---------- --------- --------- ---------- ---------
Long-term debt............................... 3,262.1 1,013.4 1,422.2 -- 5,697.7
Other liabilities............................ (11,421.6) 2,034.0 8,442.0 4,202.6 3,257.0
Shareholders' Equity:
Preferred Stock............................ -- 104.1 20.4 (124.5) --
Common Stock............................... 7.5 185.7 495.4 (681.1) 7.5
Additional paid-in capital................. 10,338.5 7,342.3 7,739.4 (15,081.7) 10,338.5
Retained earnings.......................... 6,339.2 5,422.7 50.9 (9,564.9) 2,247.9
Accumulated other comprehensive
income (loss)............................ -- 33.1 (63.3) -- (30.2)
---------- --------- --------- ---------- ---------
16,685.2 13,087.9 8,242.8 (25,452.2) 12,563.7
Less treasury stock, at cost............... 1,431.7 -- -- -- 1,431.7
---------- --------- --------- ---------- ---------
Total shareholders' equity................ 15,253.5 13,087.9 8,242.8 (25,452.2) 11,132.0
---------- --------- --------- ---------- ---------
$ 7,109.4 $17,799.3 $21,512.9 $(21,935.2) $24,486.4
========== ========= ========= ========== =========
-15-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
Three Months Ended March 31, 2000
--------------------------------------------------------------------
Non-
Viacom Viacom Guarantor Viacom Inc.
Inc. International Affiliates Eliminations Consolidated
--------- -------------- ----------- ------------- -------------
Net cash flow from operating activities........... $ 145.3 $ 48.8 $ (85.5) $ -- $ 108.6
-------- ------- ------- ------------ --------
Investing Activities:
Capital expenditures........................... -- (25.8) (79.9) -- (105.7)
Acquisitions, net of cash acquired............. -- -- (1.9) -- (1.9)
Investments in and advances to
affiliated companies......................... -- (1.6) (63.0) -- (64.6)
Purchases of short-term investments............ -- (34.8) -- -- (34.8)
Proceeds from sales of short-term investments.. -- 20.4 -- -- 20.4
Other.......................................... -- (7.1) -- -- (7.1)
-------- ------- ------- ------------ --------
Net cash flow from investing activities........... -- (48.9) (144.8) -- (193.7)
-------- ------- ------- ------------ --------
Financing Activities:
Net borrowings from banks...................... 835.6 -- 32.8 -- 868.4
Purchase of treasury stock..................... (745.8) -- -- -- (745.8)
Payment of capital lease obligations........... -- (12.7) (22.5) -- (35.2)
Increase (decrease) in intercompany
payables........................................ (315.8) 24.0 291.8 -- --
Proceeds from exercise of stock options.......... 14.3 -- -- -- 14.3
Other, net..................................... -- -- 0.1 -- 0.1
-------- ------- ------- ------------ --------
Net cash flow from financing activities........... (211.7) 11.3 302.2 -- 101.8
-------- ------- ------- ------------ --------
Net increase (decrease) in cash and
cash equivalents................................ (66.4) 11.2 71.9 -- 16.7
Cash and cash equivalents at beginning
of period....................................... 81.6 486.0 113.2 -- 680.8
-------- ------- ------- ------------ --------
Cash and cash equivalents at end of period........ $ 15.2 $ 497.2 $ 185.1 $ -- $ 697.5
======== ======= ======= ============ ========
-16-
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
Three Months Ended March 31, 1999
--------------------------------------------------------------------
Non-
Viacom Viacom Guarantor Viacom Inc.
Inc. International Affiliates Eliminations Consolidated
-------- ------------- ---------- ------------ ------------
Net cash flow from operating activities........... $ (351.6) $ 19.5 $ (15.8) $(43.4) $ (391.3)
-------- ------- ------- ------------ --------
Investing Activities:
Capital expenditures........................... -- (20.3) (124.9) -- (145.2)
Acquisitions, net of cash acquired............... -- (0.4) (100.5) -- (100.9)
Investments in and advances to
affiliated companies........................... -- (5.7) (35.0) -- (40.7)
Purchases of short-term investments.............. -- (129.6) -- -- (129.6)
Proceeds from sales of short-term investments.. -- 123.5 -- -- 123.5
-------- ------- ------- ------------ --------
Net cash flow from investing activities........... -- (32.5) (260.4) -- (292.9)
-------- ------- ------- ------------ --------
Financing Activities:
Net borrowings from banks...................... 1,437.1 361.0 20.9 -- 1,819.0
Repurchase of Preferred Stock.................. (612.0) -- -- -- (612.0)
Repayment of notes and debentures................ (321.6) (535.3) -- -- (856.9)
Purchase of treasury stock and warrants........ (49.5) -- -- -- (49.5)
Payment of capital lease obligations........... -- (7.1) (13.3) -- (20.4)
Increase (decrease) in intercompany
payables...................................... (514.8) 256.1 215.3 43.4 --
Proceeds from exercise of stock options
and warrants.................................. 27.2 -- -- -- 27.2
Other, net..................................... (7.5) (0.3) -- -- (7.8)
-------- ------- ------- ------------ --------
Net cash flow from financing activities........... (41.1) 74.4 222.9 43.4 299.6
-------- ------- ------- ------------ --------
Net increase (decrease) in cash and
cash equivalents................................ (392.7) 61.4 (53.3) -- (384.6)
Cash and cash equivalents at beginning
of period....................................... 406.4 189.5 171.4 -- 767.3
-------- ------- ------- ------------ --------
Cash and cash equivalents at end of period........ $ 13.7 $ 250.9 $ 118.1 $ -- $ 382.7
======== ======= ======= ============ ========
-17-
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
(Tabular dollars in millions)
Management's discussion and analysis of the combined results of operations and
financial condition should be read in conjunction with the Consolidated
Financial Statements and related Notes.
The following tables set forth revenues and operating income by business
segment, for the three months ended March 31, 2000 and 1999.
Three months ended Percent
March 31, Better/(Worse)
----------------------------- --------------
2000 1999
---- ----
Revenues:
Networks............................................. $ 759.5 $ 663.8 14%
Entertainment........................................ 1,055.7 1,092.3 (3)
Video................................................ 1,211.1 1,113.0 9
Parks................................................ 7.8 10.5 (26)
Publishing........................................... 112.8 122.7 (8)
Online............................................... 11.6 4.7 147
Intercompany......................................... (132.7) (55.9) (137)
-------- --------
Total revenues.................................. $3,025.8 $2,951.1 3
======== ========
Operating income (loss):
Networks............................................. $ 228.1 $ 172.7 32%
Entertainment........................................ 116.8 113.1 3
Video................................................ 44.7 50.3 (11)
Parks................................................ (16.1) (16.0) (1)
Publishing........................................... (7.0) 1.3 NM
Online............................................... (37.1) (1.0) NM
-------- --------
Segment total...................................... 329.4 320.4 3
Corporate/ Eliminations.............................. (74.4) (42.9) (73)
-------- --------
Total operating income(a)....................... $ 255.0 $ 277.5 (8)
======== ========
(a) Operating income is defined as net earnings before extraordinary loss (net
of tax), minority interest, equity in loss of affiliated companies (net of
tax), provision for income taxes, other items, net, interest expense, and
interest income.
-18-
Management's Discussion and Analysis of
Results of Operations and Financial Condition
EBITDA
- ------
The following table sets forth EBITDA (defined as operating income (loss) before
depreciation and amortization) for the three months ended March 31, 2000 and
1999. EBITDA does not reflect the effect of significant amounts of amortization
of goodwill related to business combinations accounted for under the purchase
method.
While many in the financial community consider EBITDA to be an important measure
of comparative operating performance, it should be considered in addition to,
but not as a substitute for or superior to operating income, net earnings, cash
flow and other measures of financial performance prepared in accordance with
generally accepted accounting principles.
Three months ended Percent
March 31, Better/(Worse)
--------------------------- --------------
2000 1999
---- ----
EBITDA:
Networks................................................... $258.7 $201.5 28%
Entertainment.............................................. 171.7 162.8 5
Video...................................................... 150.3 145.1 4
Parks...................................................... (1.9) (2.7) 30
Publishing................................................. (1.7) 5.7 (130)
Online..................................................... (23.2) (1.0) NM
------ ------
Segment total........................................... 553.9 511.4 8
Corporate/Eliminations..................................... (69.7) (36.8) (89)
------ ------
Total EBITDA.......................................... $484.2 $474.6 2
====== ======
Results of Operations
- ---------------------
Revenues increased 3% to $3.03 billion for the first quarter of 2000 from $2.95
billion for the first quarter of 1999, led primarily by double digit gains at
MTV Networks due to higher advertising and affiliate fees. Blockbuster Video
also recorded revenue increases of 9% over the prior-year period, driven by the
increase in the number of Company-operated video stores.
Total expenses increased 4% to $2.77 billion for the first quarter of 2000 from
$2.67 billion for the first quarter of 1999 principally reflecting normal
increases associated with revenue growth.
EBITDA increased 2% to $484.2 million for the first quarter of 2000 from $474.6
million for the first quarter of 1999. Operating income decreased 8% over the
prior year's first quarter to $255.0 million for the first quarter of 2000.
-19-
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Segment Results of Operations
- -----------------------------
Networks (Basic Cable and Premium Subscription Television Program Services)
Three months ended Percent
March 31, Better/(Worse)
-------------------------- --------------
2000 1999
---- ----
Revenues........................ $759.5 $663.8 14%
Operating Income................ $228.1 $172.7 32
EBITDA.......................... $258.7 $201.5 28
The Networks segment is comprised of MTV Networks ("MTVN"), basic cable
television program services and Showtime Networks Inc. ("SNI"), premium
subscription television program services.
For the first quarter of 2000, MTVN revenues of $550.5 million, EBITDA of $221.9
million and operating income of $196.6 million increased 17%, 29% and 32%,
respectively, over the prior-year period. The increase in MTVN's revenues
principally reflects 20% higher worldwide advertising revenues and 13% higher
affiliate fees. MTVN continues to benefit from its consumer products licensing
programs, including Rugrats, as ancillary revenues are up 14% for the quarter.
Advertising revenues were primarily driven by rate increases at MTV and VH1. The
increased revenues drove MTVN's EBITDA and operating income gains.
SNI's revenues, EBITDA and operating income increased 7%, 25% and 36%,
respectively, over the prior-year period. The revenue increase was principally
due to an increase of approximately 2.2 million subscriptions, up 10% over the
prior year to 23.4 million subscriptions at March 31, 2000. Operating results
reflect revenue increases attributable to the continued growth of direct
broadcast satellite subscriptions.
-20-
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Entertainment (Production and Distribution of Motion Pictures and Television
Programming as well as the operation of Television Stations, International
Television Program Services, Movie Theaters and Music Publishing)
Three months ended Percent
March 31, Better/(Worse)
--------------------------------- --------------
2000 1999
---- ----
Revenues........................... $1,055.7 $1,092.3 (3)%
Operating Income................... $ 116.8 $ 113.1 3
EBITDA............................. $ 171.7 $ 162.8 5
The Entertainment segment is comprised of Paramount Pictures and Paramount
Television (the "Paramount Studio"), the Paramount Stations Group, Movie
Theaters, Music Publishing and International Television Program Services.
For the first quarter of 2000, Entertainment revenues of $1.1 billion decreased
3%, as Paramount Studio revenues decreased 7% to $871.5 million from $933.1
million in the prior-year period. Paramount Studio revenues included theatrical
contributions from SNOW DAY, THE TALENTED MR. RIPLEY and SLEEPY HOLLOW but did
not match last year's box office performance of PAYBACK and VARSITY BLUES. Home
video revenues were higher led by contributions from RUNAWAY BRIDE and DOUBLE
JEOPARDY. Television programming revenues reflect higher syndication revenues
from JUDGE JUDY, JUDGE JOE BROWN, ENTERTAINMENT TONIGHT and domestic library
products but were more than offset by lower network revenues due to cancelled
series including MELROSE PLACE and SUNSET BEACH. The Paramount Studio's first
quarter 1999 revenues also included the recognition of a license for pay
television rights for library products and the renewal of a film processing
agreement. Theaters' revenues were higher primarily as a result of the new
multiplex theaters opened since the end of the same prior-year period.
Paramount Studio's EBITDA and operating income increased 3% to $143.4 million
and 5% to $114.4 million, respectively, over the prior-year period, principally
due to higher television profits which were partially offset by lower features
profits. Television profits were higher primarily due to increased syndication
revenues for JUDGE JUDY and JUDGE JOE BROWN and a change in the mix of domestic
television library product revenues. Features profits were lower due to the
revenue items noted above. The same prior-year period also benefited from the
recognition of a pay television license for library products and the renewal of
a film processing agreement. Theaters posted lower results for the quarter
primarily due to higher operating costs and depreciation expense associated with
additional multiplexes.
Paramount Stations Group's EBITDA and operating income increased 12% and 21%,
respectively, primarily driven by a 9% increase in advertising revenues and
lower operating expenses.
-21-
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Video (Home Video and Game rental and retail through traditional stores and the
Internet)
Three months ended Percent
March 31, Better/(Worse)
----------------------------- --------------
2000 1999
---- ----
Revenues........................... $1,211.1 $1,113.0 9%
Operating Income................... $ 44.7 $ 50.3 (11)
EBITDA............................. $ 150.3 $ 145.1 4
The Video segment is comprised of Blockbuster's operations, operating in the
home video, DVD and video game rental and retailing business through traditional
stores and the Internet.
Video revenues increased 9% driven by the increased number of Company-operated
stores in operation in 2000 over the prior-year period. Worldwide same store
sales, which include retail and rental product, increased 3.1%, paced by 2.1%
higher domestic same store sales. Operating results were impacted by
Blockbuster's investment in its online operations, which began in the fourth
quarter of 1999 and resulted in reductions to EBITDA and operating income of
$11.4 million and $14.0 million, respectively, for the first quarter of 2000.
Excluding the amounts attributable to its online operations, Video's EBITDA and
operating income increased 11% and 17%, respectively, over the prior-year
period. Video's gross margin percentage decreased to 59.0% for the first quarter
of 2000 from 60.3% for the first quarter of 1999 principally due to the increase
in merchandise sales, as a percentage of total revenues, as merchandise sales
have lower gross margins than rental revenues. Blockbuster Video ended the first
quarter with 7,248 company-operated and franchised stores, a net increase of 749
stores over the first quarter of 1999.
Parks (Theme Parks)
Three months ended Percent
March 31, Better/(Worse)
--------------------------- ---------------
2000 1999
---- ----
Revenues................................. $ 7.8 $ 10.5 (26%)
Operating Loss........................... $(16.1) $(16.0) (1)
EBITDA................................... $ (1.9) $ (2.7) 30
The Parks segment is comprised of five regional theme parks and a themed
attraction in the U.S. and Canada.
The Parks begin full time operations during the second quarter and therefore,
record the majority of revenues, EBITDA and operating income during the second
and third quarters.
-22-
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Publishing (Consumer Publishing)
Three months ended Percent
March 31, Better/(Worse)
---------------------------- --------------
2000 1999
---- ----
Revenues................................ $112.8 $122.7 (8)%
Operating Income (loss)................. $ (7.0) $ 1.3 NM
EBITDA.................................. $ (1.7) $ 5.7 (130)
The Publishing segment is comprised of Simon & Schuster Inc., which also
includes other flagship imprints such as Pocket Books, Scribner and The Free
Press.
For the quarter ended March 31, 2000, lower revenues are principally due to
decreased sales in the Pocket Books division, which included comparisons with an
"Oprah Book Club" selection in the prior-year period. Publishing's best selling
titles in the first quarter included THE GIRL WHO LOVED TOM GORDON by Stephen
King, RAIN by V.C. Andrews, THE SEAT OF THE SOUL by Gary Zukav and A
HEARTBREAKING WORK OF STAGGERING GENIUS by Dave Eggers. Publishing typically
has seasonally stronger operating results in the second half of the year.
Online (Interactive Online Services)
Three months ended Percent
March 31, Better/(Worse)
---------------------------- --------------
2000 1999
---- ----
Revenues................................. $ 11.6 $ 4.7 147%
Operating Loss........................... $(37.1) $(1.0) NM
EBITDA................................... $(23.2) $(1.0) NM
The Online segment is comprised of online music and children destinations
featuring entertainment, information, community tools and e-commerce.
Revenues increased 147% to $11.6 million for the first quarter of 2000 from $4.7
million for the prior year period reflecting increased license fees and higher
advertising revenues. The operating loss of $37.1 million in the first quarter
of 2000, as compared with an operating loss of $1 million in the prior year
period, reflects the increased investment in the Company's online initiatives.
-23-
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Other Income and Expense Information
- ------------------------------------
Corporate Expenses/Eliminations
Corporate Expenses/Eliminations, including depreciation and amortization
expense, increased 73% to $74.4 million for the first quarter of 2000 from $42.9
million for the first quarter of 1999 principally due to a $36 million increase
in intersegment profit eliminations. Corporate expenses of $36.9 million for
the first quarter of 2000 decreased 11% from $41.5 million for the same prior-
year period.
Interest Expense
Interest expense increased 24% to $122.5 million for the first quarter of 2000
from $98.5 million for the first quarter of 1999. The Company had approximately
$6.8 billion and $6.0 billion principal amount of debt outstanding (including
current maturities) as of March 31, 2000 and 1999, respectively, at weighted
average interest rates of 7.3% and 6.7%, respectively.
Interest Income
Interest income increased 126% to $9.5 million for the first quarter of 2000
from $4.2 million for the first quarter of 1999.
Other Items, Net
"Other items, net" reflects $1.7 million of income for the first quarter of 2000
compared to a loss of $1.3 million for the first quarter of 1999. The increase
of $3.0 million principally reflects an increase of $13.6 million related to
foreign exchange gains in the first quarter of 2000 partially offset by
decreased gains of $10.7 million from the sale of assets .
Provision for Income Taxes
The provision for income taxes represents federal, state and foreign income
taxes on earnings before income taxes. The estimated effective tax rates of
45.0% for 2000 and 53.5% for 1999 were both adversely affected by amortization
of intangibles in excess of amounts, which are deductible for tax purposes.
Excluding the non-deductible amortization of intangibles, the estimated
effective tax rates would have been 31.0% for 2000 and 37.0% for 1999.
Equity in Loss of Affiliated Companies, Net of Tax
"Equity in loss of affiliated companies, net of tax" was $6.1 million for the
first quarter of 2000 as compared to $16.1 million for the first quarter of
1999, principally reflecting improved results of United Paramount Network and
the continuing improved performance of Comedy Central.
Minority Interest
Minority interest primarily represents the minority ownership of Blockbuster
common stock.
Extraordinary Loss
For the first quarter ended March 31, 1999, the Company recognized an after-tax
extraordinary loss of $23.5 million on the early extinguishment of its 8.0%
Merger Debentures for approximately $308 million.
-24-
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Net Earnings
For the reasons described above, the Company reported net earnings of $76.0
million for the first quarter of 2000 as compared to net earnings of $44.9
million for the first quarter of 1999.
Liquidity and Capital Resources
- -------------------------------
The Company expects to fund its anticipated cash requirements (including the
anticipated cash requirements of its capital expenditures, share repurchase
programs, joint ventures, commitments and payments of principal and interest on
its outstanding indebtedness) with internally generated funds, in addition to
various external sources of funds. The external sources of funds may include
the Company's existing credit agreements and amendments thereto, co-financing
arrangements by the Company's various divisions relating to the production of
entertainment products, and/or additional financings.
Subsequent to its initial public offering, Blockbuster no longer participates in
the Company's centralized cash management system. Cash generated by
Blockbuster's operations is expected to be retained by Blockbuster to fund its
anticipated cash requirements.
As of March 31, 2000, the Company had $1.45 billion available under its shelf
registration statement as filed with the Securities and Exchange Commission in
1995. The net proceeds from the sale of the offered securities may be used by
the Company to repay, redeem, repurchase or satisfy its obligations in respect
of its outstanding indebtedness or other securities; to make loans to its
subsidiaries; for general corporate purposes; or for such other purposes as may
be specified in the applicable Prospectus Supplement.
Share Repurchase Program
On February 16, 2000, the Company initiated a repurchase program to acquire up
to $1.0 billion of its common stock. As of March 31, 2000, the Company had
repurchased 10,000 shares of its Class A Common Stock and 14,157,900 shares of
its Class B Common Stock for approximately $782.5 million. As of April 27, 2000
the $1.0 billion repurchase program was completed, and the Company has
repurchased in total 10,000 shares of its Class A Common Stock and 18,264,500
shares of its Class B Common Stock.
Financial Position
Current assets decreased to $5.0 billion as of March 31, 2000 from $5.2 billion
as of December 31, 1999, due to reductions in receivables and inventory,
partially offset by an increase in other current assets. The allowance for
doubtful accounts as a percentage of receivables increased to 9% as of March 31,
2000 from 6% as of December 31, 1999. The change in property and equipment
principally reflects capital expenditures of $105.7 million related to capital
additions for new and existing video stores and additional construction and
equipment upgrades for the park attractions offset by depreciation expense of
$134.0 million. Current liabilities decreased approximately 9% to $4.0 billion
as of March 31, 2000 from $4.4 billion as of December 31, 1999, reflecting the
payment of normal operating expenses. Long-term debt, including current
maturities, increased $0.8 billion to $6.8 billion as of March 31, 2000 from
$6.0 billion as of December 31, 1999 primarily reflecting the continued
investment in and seasonality of the Company's businesses.
-25-
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Cash Flows
The Company expects to record the majority of its operating cash flows during
the second half of the year due to the positive effect of the holiday season on
advertising revenues and video store revenues, the summer operation of its parks
and the seasonality of the consumer publishing business. Net cash flow from
operating activities of $108.6 million for the three months ended March 31, 2000
principally reflects net earnings of $76.0 million, depreciation and
amortization of $229.2 and a decrease in receivables of $192.2 million,
partially offset by a decrease in accounts payable and accrued expenses. First
quarter 1999 net operating cash flow of negative $391.3 million principally
reflects the first quarter tax payment related to the sale of Non-Consumer
Publishing. Net cash expenditures for investing activities of $193.7 million
for the three months ended March 31, 2000 principally reflect capital
expenditures of $105.7 million and investments in and advances to affiliated
companies of $64.6 million. Net cash expenditures for investing activities of
$292.9 million for the three months ended March 31, 1999 principally reflect
capital expenditures and acquisitions of video stores and a television station.
Financing activities for the three months ended March 31, 2000 principally
reflect net borrowings from banks, offset by the purchase of treasury stock.
Financing activities for the first quarter of 1999 reflect net borrowings from
banks partially offset by the repurchase of Preferrred Stock and repayment of
notes and debentures.
Commitments and Contingencies
The commitments of the Company for program license fees, which are not reflected
in the balance sheet as of March 31, 2000 and are estimated to aggregate
approximately $1.6 billion, principally reflect SNI's commitments of
approximately $1.3 billion for the acquisition of programming rights and the
production of original programming and exclude intersegment commitments between
the Networks and Entertainment segments of approximately $794 million. The
estimate is based upon a number of factors. A majority of such fees are payable
over several years, as part of normal programming expenditures of SNI. These
commitments to acquire programming rights 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.
Capital Structure
The following table sets forth the Company's long-term debt, net of current
portion:
At March 31, 2000 At December 31, 1999
----------------- --------------------
Notes payable to banks........................ $3,922.5 $3,054.2
Senior debt................................... 2,311.2 2,310.9
Senior subordinated debt...................... 35.3 35.3
Obligations under capital leases.............. 559.2 591.6
-------- --------
6,828.2 5,992.0
Less current portion.......................... 281.3 294.3
-------- --------
$6,546.9 $5,697.7
======== ========
The notes and debentures are presented net of an aggregate unamortized discount
of $9.8 million as of March 31, 2000 and $10.1 million as of December 31, 1999.
-26-
Management's Discussion and Analysis of
Results of Operations and Financial Condition
On March 28, 2000, the Company amended the Viacom Credit Agreements to allow for
the merger of CBS with and into the Company.
Debt, including the current portion, as a percentage of total capitalization of
the Company was 40% at March 31, 2000 and 35% at December 31, 1999.
At March 31, 2000, the Company was in compliance with all debt covenants and had
satisfied all financial ratios and tests under the credit agreements. The
Company expects to be in compliance and satisfy all such covenants and ratios as
may be applicable from time to time during 2000.
The Company's maturities of long-term debt outstanding at March 31, 2000,
excluding capital leases, are $451.9 million (2000), $835.9 million (2001), $2.2
billion (2002), $625.0 million (2003) and $645.0 million (2004). As of March
31, 2000, the Company has classified certain short-term indebtedness as long-
term debt based upon its intent and ability to refinance such indebtedness on a
long-term basis.
Restructuring Charge
In the third quarter of 1999, the Company recorded a charge of approximately
$81.1 million, of which $70.3 million was recorded as a restructuring charge and
$10.8 million was recorded as part of depreciation expense. The restructuring
charge of $70.3 million was primarily associated with the integration of the
operations of Spelling Entertainment Group Inc. into Paramount Television,
resulting in the elimination of duplicative sales forces and certain other back
office functions. Included in this total is severance and employee related
costs of $48.1 million, lease termination and other occupancy costs of $17.7
million and other exit costs of $4.5 million. As of March 31, 2000, the Company
had paid and charged approximately $24.6 million against the severance
liability, $6.0 million against lease termination and other occupancy costs, and
$1.0 million against the other exit costs. The Company expects to complete the
exit activities by the end of the year 2000.
Market Risk
The Company uses derivative financial instruments to reduce its exposure to
market risks from changes in foreign exchange rates and interest rates. The
Company does not hold or issue financial instruments for speculative trading
purposes. The derivative instruments used are foreign exchange forward
contracts, spots and options. The foreign exchange contracts have principally
been used to hedge the British Pound, the Australian Dollar, the Japanese Yen,
the Canadian Dollar, the Singapore Dollar and the European Union's common
currency (the "Euro"). These derivatives, which are over-the-counter
instruments, are non-leveraged. Realized gains and losses on contracts that
hedge anticipated future cash flows are recognized in "other items, net" and
were not material in the periods presented. The Company is primarily vulnerable
to changes in LIBOR which is the rate currently used in existing agreements;
however, the Company does not believe this exposure to be material.
Other Matters
On May 4, 2000, the Company completed its merger with CBS Corporation ("CBS").
Under the terms of the transaction, each share of CBS common stock has been
converted into the right to receive 1.085 shares of the Company's Class B Common
Stock and each share of CBS Series B
-27-
Management's Discussion and Analysis of
Results of Operations and Financial Condition
preferred stock has been converted into the right to receive 1.085 shares of the
Company's Series C Preferred Stock. CBS shareholders will receive a cash payment
in lieu of any fractional shares. The combined companies will incur
integration-related expenses as a result of the elimination of duplicate
facilities and functions, operational realignment and related workforce
reductions. Such CBS costs will be recognized as a liability assumed as of the
merger date resulting in additional goodwill and the Company's related costs
will be recognized as an expense in the second quarter results of operations.
On April 28, 2000, the Company received a favorable supplemental private letter
ruling from the Internal Revenue Service. The Company had previously announced
that, subject to the approval of the Company's Board of Directors, which will be
based on an assessment of market conditions, and the receipt of such
supplemental private letter ruling, it intends to split-off Blockbuster by
offering to exchange all of its shares of Blockbuster for shares of the
Company's common stock. However, the Company has said that it does not intend
to commence the offer unless the Blockbuster Class A common stock improves to a
price range exceeding $20 per share. The Company has no obligation to effect
the split-off.
The aggregate market value of the shares of Blockbuster common stock based on
the April 30, 2000 closing price of $10.375 per share of Blockbuster common
stock was approximately $1.8 billion. The net book value of Viacom's investment
in Blockbuster at March 31, 2000, after giving effect to the initial public
offering, was approximately $5.1 billion. If the Company determines to engage
in the split-off, any difference between the fair market value and net book
value at the time of the split-off will be recognized as a gain or loss for
accounting purposes. Based on the April 30, 2000 closing stock price of
Blockbuster, a split-off would have resulted in a pre-tax loss on discontinued
operations of approximately $3.6 billion. The actual amount of the gain or loss
will depend upon the fair market value and net book value of Blockbuster at the
time of the split-off as well as the exchange ratio used in the split-off. The
Company cannot give any assurance as to whether or not or when the split-off
will occur or as to the terms of the split-off if it does occur, or whether or
not the split-off, if it does occur, will be tax-free.
On March 31, 2000, the Company acquired the remaining 50% interest in United
Paramount Network ("UPN") that it did not already own for $5 million.
Commencing in the second quarter of 2000, the Company will consolidate UPN's
results of operations.
Cautionary Statement Concerning Forward-looking Statements
This quarterly report on Form 10-Q, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations," contains both
historical and forward-looking statements. All statements other than statements
of historical fact are, or may be deemed to be, forward-looking statements
within the meaning of section 27A of the Securities Act of 1933 and section 21E
of the Securities Exchange Act of 1934, as amended. These forward-looking
statements are not based on historical facts, but rather reflect the Company's
current expectations concerning future results and events. Similarly,
statements that describe our objectives, plans or goals are or may be forward-
looking statements. These forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be
-28-
Management's Discussion and Analysis of
Results of Operations and Financial Condition
different from any future results, performance and achievements expressed or
implied by these statements. The following important factors, among others,
could affect future results, causing these results to differ materially from
those expressed in our forward-looking statements: changes in advertising
market conditions; changes in the public acceptance of the Company's
programming; changes in technology and its effect on competition in the
Company's markets; changes in the Federal Communications Laws and Regulations;
the risk that the Company's and CBS Corporation's businesses will not be
integrated successfully or that the Company's new corporate governance model
will not be successful; and other economic, business, competitive and/or
regulatory factors affecting the Company's businesses generally. The
forward-looking statements included in this document are made only as of the
date of this document and under section 27A of the Securities Act and section
21E of the Exchange Act, we do not have any obligation to publicly update any
forward-looking statements to reflect subsequent events or circumstances.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Response to this is included in "Item 2 - Management's Discussion and
Analysis of Results of Operations and Financial Condition - Market Risk."
-29-
PART II - - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Amendment No. 5, dated as of March 28, 2000, to the Amended and
Restated Credit Agreement, dated as of March 26, 1997, as amended,
among Viacom Inc., the Bank parties thereto from time to time, The
Bank of New York, as a Managing Agent and as the Documentation
Agent, Citibank, N.A., as a Managing Agent and as the Administrative
Agent, Morgan Guaranty Trust Company of New York, as a Managing
Agent, Bank of America, N.A. (formerly known as Bank of America
NT&SA), as a Managing Agent, The Chase Manhattan Bank, as a Managing
Agent, JP Morgan Securities Inc., as a Syndication Agent, Banc of
America Securities, LLC (formerly known as Bank of America NT&SA),
as Syndication Agent, the Banks identified as Agents on the
signature pages thereof, as Agents, and the Banks identified as
Co-Agents on the signature pages thereof, as Co-Agents.
10.2 Amendment No. 2, dated as of March 28, 2000, to the Amended and
Restated VII Credit Agreement, dated as of March 26, 1997, among
Viacom International Inc., the Bank parties thereto from time to
time, The Bank of New York, as a Managing Agent and as the
Documentation Agent, Citibank, N.A., as a Managing Agent and as the
Administrative Agent, Morgan Guaranty Trust Company of New York, as
a Managing Agent, Bank of America N.A. (formerly known as Bank of
America NT&SA), as a Managing Agent, The Chase Manhattan Bank, as a
Managing Agent, JP Morgan Securities Inc., as a Syndication Agent,
Bank of America Securities, LLC (formerly known as Bank of America
NT&SA), as Syndication Agent, the Banks identified as Agents on the
signature pages thereof, as Agents, and the Banks identified as
Co-Agents on the signature pages thereof, as Co-Agents.
10.3 Amendment, dated April 28, 2000, to the Agreement, dated as of
September 6, 1999, between Viacom Inc. and Philippe P. Dauman.
10.4 Amendment, dated April 28, 2000, to the Agreement, dated as of
September 6, 1999, between Viacom Inc. and Thomas E. Dooley.
10.5 Letter Agreement, dated May 3, 2000, between Viacom Inc. and George
S. Smith, Jr.
11 Statement re Computation of Net Earnings Per Share
27 Financial Data Schedule.
(b) Reports on Form 8-K for Viacom Inc.
None.
-30-
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 12, 2000 /s/ Sumner M. Redstone
------------ --------------------------------
Sumner M. Redstone
Chairman of the Board of Directors,
Chief Executive Officer
Date May 12, 2000 /s/ Susan C. Gordon
------------ --------------------------------
Susan C. Gordon
Vice President, Controller,
Chief Accounting Officer
-31-
Exhibit Index
-------------
10.1 Amendment No. 5, dated as of March 28, 2000, to the Amended and
Restated Credit Agreement, dated as of March 26, 1997, as amended,
among Viacom Inc., the Bank parties thereto from time to time, The
Bank of New York, as a Managing Agent and as the Documentation
Agent, Citibank, N.A., as a Managing Agent and as the Administrative
Agent, Morgan Guaranty Trust Company of New York, as a Managing
Agent, Bank of America, N.A. (formerly known as Bank of America
NT&SA), as a Managing Agent, The Chase Manhattan Bank, as a Managing
Agent, JP Morgan Securities Inc., as a Syndication Agent, Banc of
America Securities, LLC (formerly known as Bank of America NT&SA),
as Syndication Agent, the Banks identified as Agents on the
signature pages thereof, as Agents, and the Banks identified as
Co-Agents on the signature pages thereof, as Co-Agents.
10.2 Amendment No. 2, dated as of March 28, 2000, to the Amended and
Restated VII Credit Agreement, dated as of March 26, 1997, among
Viacom International Inc., the Bank parties thereto from time to
time, The Bank of New York, as a Managing Agent and as the
Documentation Agent, Citibank, N.A., as a Managing Agent and as the
Administrative Agent, Morgan Guaranty Trust Company of New York, as
a Managing Agent, Bank of America N.A. (formerly known as Bank of
America NT&SA), as a Managing Agent, The Chase Manhattan Bank, as a
Managing Agent, JP Morgan Securities Inc., as a Syndication Agent,
Bank of America Securities, LLC (formerly known as Bank of America
NT&SA), as Syndication Agent, the Banks identified as Agents on the
signature pages thereof, as Agents, and the Banks identified as
Co-Agents on the signature pages thereof, as Co-Agents.
10.3 Amendment, dated April 28, 2000, to the Agreement, dated as of
September 6, 1999, between Viacom Inc. and Philippe P. Dauman.
10.4 Amendment, dated April 28, 2000, to the Agreement, dated as of
September 6, 1999, between Viacom Inc. and Thomas E. Dooley.
10.5 Letter Agreement, dated May 3, 2000, between Viacom Inc. and George
S. Smith, Jr.
11 Statement re Computation of Net Earnings Per Share.
27 Financial Data Schedule.
-32-
EXHIBIT 10.1
AMENDMENT NO. 5, dated as of March 28, 2000 (the "Amendment") to the
AMENDED AND RESTATED CREDIT AGREEMENT (the "Credit Agreement"), dated as of
March 26, 1997, as amended, among VIACOM INC., a Delaware corporation (the
"Borrower"), the Bank parties thereto from time to time, THE BANK OF NEW YORK,
as a Managing Agent and as the Documentation Agent, CITIBANK, N.A., as a
Managing Agent and as the Administrative Agent, MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as a Managing Agent, BANK OF AMERICA, N.A. (formerly known as BANK OF
AMERICA NT&SA), as a Managing Agent, THE CHASE MANHATTAN BANK, as a Managing
Agent, JP MORGAN SECURITIES INC., as a Syndication Agent, BANC of AMERICA
SECURITIES, LLC (formerly known as BANK OF AMERICA NT&SA), as Syndication Agent,
the Banks identified as Agents on the signature pages thereof, as Agents, and
the Banks identified as Co-Agents on the signature pages thereof, as Co-Agents.
WITNESSETH:
WHEREAS, the parties who have heretofore entered into the Credit
Agreement now desire to amend certain provisions thereof to provide for changes
in the covenants in the Credit Agreement, and for certain other matters.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. Amendments.
----------
(a) Section 1.1 of the Credit Agreement is hereby amended by
inserting the following:
"'CBS' shall mean CBS Corporation, a Pennsylvania corporation."
---
"'Discontinued Operations' shall mean the operations classified as
-----------------------
"discontinued operations" pursuant to Accounting Principles Board Opinion
No. 30 as presented in the quarterly report of CBS on Form 10-Q for the
quarter ended September 30, 1997 and filed with the SEC on December 14,
1997."
"'Disposition' shall mean, with respect to any Property, any sale,
-----------
lease, assignment, conveyance, transfer or other disposition thereof; and
the terms
"Dispose" and "Disposed of" shall have correlative meanings."
"'Excluded Indebtedness' shall mean Indebtedness of any Person which
---------------------
is or was acquired by CBS, the Borrower or any of their Subsidiaries after
August 29, 1996, which Indebtedness was outstanding prior to the date of
acquisition of such Person and was not created in anticipation thereof."
"'Infinity' shall mean Infinity Broadcasting Corporation, a Delaware
--------
corporation."
"'Infinity Credit Agreement' shall mean the Credit Agreement, dated as
-------------------------
of December 10, 1999, among Infinity, the Subsidiary Borrowers (as defined
therein) parties thereto, the lenders named therein, Bank of America, N.A.
and Toronto Dominion Bank, as syndication agents, The Chase Manhattan Bank,
as documentation agent and Morgan Guaranty and Trust Company of New York,
as administrative agent, as amended, supplemented or otherwise modified
from time to time."
"'Material Acquisition' shall mean any acquisition of Property or
--------------------
series of related acquisitions of Property (including by way of merger)
which (a) constitutes assets comprising all or substantially all of an
operating unit of a business or constitutes all or substantially all of the
common stock of a Person and (b) involves the payment of consideration by
the Borrower and its Subsidiaries (valued at the initial principal amount
thereof in the case of non-cash consideration consisting of notes or other
debt securities and valued at fair market value in the case of other non-
cash consideration) in excess of $50,000,000."
"'Material Disposition' shall mean any Disposition of Property or
--------------------
series of related Dispositions of Property which yields gross proceeds to
the Borrower or any of its Subsidiaries (valued at the initial principal
amount thereof in the case of non-cash proceeds consisting of notes or
other debt securities and valued at fair market value in the case of other
non-cash consideration) in excess of $50,000,000."
"'New Infinity Credit Agreement' shall mean the 364-Day Credit
-----------------------------
Agreement and the Five-Year Credit Agreement among Infinity, the Subsidiary
Borrowers (as
-2-
defined therein) parties thereto, the lenders named therein, Bank of
America, N.A. and FleetBoston, as syndication agents, Bank of New York, as
documentation agent and The Chase Manhattan Bank, as administrative agent,
as amended, supplemented or otherwise modified from time to time."
(b) Section 1.1 of the Credit Agreement is hereby amended by amending
the definition of "EBIDT" to read as follows:
-----
"'EBIDT' shall mean, at any time, with respect to the Borrower and its
-----
consolidated Subsidiaries for any period, operating profit (loss)
(excluding that related to Discontinued Operations) for the immediately
preceding four Fiscal Quarters, plus other income (loss) for such period,
plus interest income for such period, plus depreciation and amortization
(excluding amortization related to programming rights, pre-publication
costs and videocassettes) for such period, excluding (a) gains (losses) on
sales of assets during such period (except (I) gains (losses) on sales of
inventory sold in the ordinary course of business and (II) gains (losses)
on sales of other assets if such gains (losses) are less than $10,000,000
individually and less than $50,000,000 in the aggregate during such
period), (b) other non-cash items for such period (including (i) provisions
for losses and additions to valuation allowances, (ii) provisions for
restructuring, litigation and environmental reserves and losses on the
Disposition of businesses and (iii) pension settlement charges), and (c)
nonrecurring expenses incurred during such period in connection with the
merger of CBS and the Borrower pursuant to the Agreement and Plan of Merger
entered into by CBS, the Borrower and Viacom/CBS LLC dated as of September
6, 1999, as amended and restated as of October 8, 1999 and as of November
23, 1999, minus cash payments made during such period in respect of non-
cash charges taken during any previous period (excluding cash payments in
respect of non-cash charges taken prior to December 31, 1998)."
(c) Section 1.1 of the Credit Agreement is hereby amended by amending
the definition "Indebtedness" by inserting the following between the words
------------
"include" and "obligations" in the proviso at the end thereof:
-3-
"(a) obligations of the Borrower and its Subsidiaries in connection
with Discontinued Operations and (b)"
(d) Section 1.1 of the Credit Agreement is hereby amended by amending
the definition of "Total Cash Interest and Preferred Dividends" to read as
-------------------------------------------
follows:
"'Total Cash Interest and Preferred Dividends' means, for any period,
-------------------------------------------
the sum of the following amounts: (i) the cash interest expense incurred
by the Borrower and its Subsidiaries during the preceding four Fiscal
Quarters with respect to the aggregate amount of all Indebtedness
outstanding during such period plus (ii) the cash dividends paid by the
----
Borrower and its Subsidiaries to Persons other than the Borrower and its
wholly owned Subsidiaries during such four Fiscal Quarters with respect to
preferred stock but excluding (iii) the gross cash interest expense of the
-------------
Discontinued Operations for such period."
(e) Section 1.1 of the Credit Agreement is hereby amended by amending
the definition of "Total Debt" to read as follows:
----------
"'Total Debt' of the Borrower and its Subsidiaries means, on any date,
----------
the total outstanding Indebtedness of the Borrower and its Subsidiaries on
a consolidated basis."
(f) Section 1.1 of the Credit Agreement is hereby amended by deleting
the definition of "Earnings from Operations" and the definition of "Net Worth".
------------------------ ---------
(g) Section 1.3 of the Credit Agreement is hereby amended by
inserting an (a) prior to the existing text and inserting new subsections (b)
and (c) as follows:
"(b) For the purposes of calculating EBIDT and Total Cash Interest
Expense and Preferred Dividends for any period (a "Test Period"),
(i) if at any time from the period (a "Pro Forma Period")
commencing on the second day of such Test Period and ending on the
date which is ten days prior to the date of delivery of a compliance
certificate in respect of such Test Period (or, in the case of any pro
forma
-4-
calculation made pursuant hereto in respect of a particular
transaction, ending on the date such transaction is consummated after
giving effect thereto), the Borrower or any Subsidiary shall have made
any Material Disposition, the EBIDT for such Test Period shall be
reduced by an amount equal to the EBIDT (if positive) attributable to
the Property which is the subject of such Material Disposition for
such Test Period or increased by an amount equal to the EBIDT (if
negative) attributable thereto for such Test Period, and Total Cash
Interest Expense and Preferred Dividends for such Test Period shall be
reduced by an amount equal to the Total Cash Interest Expense and
Preferred Dividends for such Test Period attributable to any
Indebtedness of the Borrower or any Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Borrower and its
Subsidiaries in connection with such Material Disposition (or, if the
capital stock of any Subsidiary is sold, the Total Cash Interest
Expense and Preferred Dividends for such Test Period directly
attributable to the Indebtedness of such Subsidiary to the extent the
Borrower and its continuing Subsidiaries are no longer liable for such
Indebtedness after such disposition);
(ii) if during such Pro Forma Period the Borrower or any
Subsidiary shall have made a Material Acquisition, EBIDT and Total
Cash Interest Expense and Preferred Dividends for such Test Period
shall be calculated after giving pro forma effect thereto (including
the incurrence or assumption of any Indebtedness in connection
therewith) as if such Material Acquisition (and the incurrence or
assumption of any such Indebtedness) occurred on the first day of such
Test Period;
(iii) if during such Pro Forma Period any Person that
subsequently became a Subsidiary or was merged with or into the
Borrower or any Subsidiary since the beginning of such Pro Forma
Period shall have entered into any disposition or acquisition
transaction that would have required an adjustment pursuant to clause
(i) or (ii) above if made by the Borrower or a Subsidiary during such
Pro Forma Period, EBIDT and Total Cash
-5-
Interest Expense and Preferred Dividends for such Test Period shall be
calculated after giving pro forma effect thereto as if such
transaction occurred on the first day of such Test Period; and
(iv) the financial results and effects of the operations of the
Eye on People and TeleNoticias businesses shall be entirely excluded
from EBIDT.
For the purposes of this paragraph, whenever pro forma effect is to be
given to a Material Disposition or Material Acquisition, the amount of
income or earnings relating thereto and the amount of Total Cash Interest
Expense and Preferred Dividends associated with any Indebtedness discharged
or incurred in connection therewith, the pro forma calculations shall be
determined in good faith by a Financial Officer of the Borrower. If any
Indebtedness bears a floating rate of interest and the incurrence or
assumption thereof is being given pro forma effect, the interest expense on
such Indebtedness shall be calculated as if the rate in effect on the last
day of the relevant Pro Forma Period had been the applicable rate for the
entire relevant Test Period (taking into account any interest rate
protection agreement applicable to such Indebtedness if such interest rate
protection agreement has a remaining term in excess of 12 months).
(c) For the purposes of the financial covenants, (i) the Discontinued
Operations shall be disregarded and (ii) the businesses classified as
Discontinued Operations shall be limited to those businesses treated as
such in the financial statements of the Borrower referred to in the
definition of "Discontinued Operations" and the accounting treatment of
Discontinued Operations shall be consistent with the accounting treatment
thereof in such financial statements."
(h) Section 7.3 of the Credit Agreement is hereby deleted in its
entirety.
(i) Section 8.8 (a) of the Credit Agreement is hereby amended by
deleting the following therefrom.
"and (ii) a report certified by such Responsible Financial Officer of
all commitments for program license fees that are not reflected on the
balance
-6-
sheets referred to above in excess of Fifty Million Dollars ($50,000,000)
for any one such commitment or series of related commitments incurred by
the Borrower or any Subsidiary during such Fiscal Quarter, together with a
statement of all such obligations outstanding at the end of such Fiscal
Quarter"
(j) Section 8.8(b) of the Credit Agreement is hereby amended by
deleting the following text:
", and (B) a report certified by a Responsible Financial Officer of
all commitments for program license fees that are not reflected on the
balance sheets referred to above in excess of Fifty Million Dollars
($50,000,000) for any one such commitment or series of related commitments
incurred by the Borrower or any Subsidiary during the last Fiscal Quarter
of such Fiscal Year, together with a statement of all such obligations
outstanding at the end of such Fiscal Year"
(k) Section 9.6 of the Credit Agreement is hereby amended to read as
follows:
"SECTION 9.6. Limitation on Subsidiary Indebtedness. The Borrower
will not permit any of its Subsidiaries, other than the Guarantor
Subsidiary, to create, incur, assume or suffer to exist any Indebtedness
for borrowed money (which includes, for the purposes of this Section 9.6,
any preferred stock), except (i) Indebtedness for borrowed money of CBS
Broadcasting Inc. outstanding on August 29, 1996 (but not any refinancing,
refunding or other replacement thereof), (ii) Excluded Indebtedness, (iii)
Indebtedness for borrowed money incurred on any date when, after giving
effect thereto, the aggregate principal amount of Indebtedness for borrowed
money incurred pursuant to this clause (iii) that is outstanding on such
date (it being understood that, for the purposes of this clause (iii), the
term "Indebtedness" does not include borrowings under this Agreement or
Excluded Indebtedness) does not exceed the EBIDT of Infinity and its
consolidated Subsidiaries (determined in a manner comparable to that set
forth in the definition of 'EBIDT') for the most recent period of four
consecutive fiscal quarters for which the relevant financial information is
available less, in the case of any such Indebtedness for borrowed money
incurred by Infinity or any of its consolidated
-7-
Subsidiaries, the then actual aggregate outstanding balances of
Indebtedness for borrowed money incurred pursuant to this clause (iii) by
Subsidiaries other than Infinity and its consolidated Subsidiaries,
provided that the aggregate outstanding principal amount of Indebtedness
for borrowed money incurred pursuant to this clause (iii) by Subsidiaries
other than Infinity and its consolidated Subsidiaries shall not exceed
$800,000,000 at any time, (iv) Indebtedness for borrowed money of Infinity
and its Subsidiaries under the Infinity Credit Agreement up to an aggregate
principal amount of $1,500,000,000 and the New Infinity Credit Agreement up
to an aggregate principal amount of $2,000,000,000 and (v) unsecured
Indebtedness for borrowed money incurred by Blockbuster Inc.."
(l) Section 9.7 of the Credit Agreement is hereby deleted in its
entirety.
(m) Section 10.1(d) of the Credit Agreement is hereby amended to read
as follows:
"(d) The Borrower or any of its Subsidiaries shall fail to pay any
principal of, or premium or interest on, any Indebtedness in an aggregate
principal amount of $50,000,000 or more (excluding Indebtedness hereunder)
of the Borrower or such Subsidiary, when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand
or otherwise); or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Indebtedness, if the
effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness or to terminate any
commitment to lend; or any such Indebtedness shall be declared to be due
and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof and, with
respect to all of the foregoing, after the expiration of any applicable
grace period or the giving of any required notice or both; provided,
--------
however, that (i) no extension of any grace period applicable to any such
-------
Indebtedness shall be taken into account for the purposes of this
subsection (d) and (ii) this subclause (d) shall not apply to any provision
that permits the holders, or a trustee on their behalf, to cause
Indebtedness to become due prior to its stated maturity because of the
failure to
-8-
deliver to such holders or such trustee financial statements or
certificates for any Subsidiary that is not required by law or regulation
to file financial statements with the SEC, unless such Indebtedness has
become due prior to its stated maturity as a result of such failure); or"
SECTION 2. Effectiveness. This Amendment will be effective upon (1)
-------------
the execution of counterparts hereof by the Borrower and each of the Facility
Agents and Managing Agents on their own behalf and on behalf of the Banks
consenting to the execution of this Amendment, and the execution of written
consents by the Majority Banks and (2) the consummation of the merger of the CBS
with the Borrower.
SECTION 3. Representations and Warranties. The Borrower hereby
------------------------------
represents and warrants that as of the date hereof (i) the representations and
warranties contained in Article VI of the Credit Agreement (other than those
stated to be made as of a particular date) are true and correct in all material
respects on and as of the date hereof as though made on the date hereof, and
(ii) no Default or Event of Default shall exist or be continuing under the
Credit Agreement.
SECTION 4. Miscellaneous. (a) Capitalized terms used herein and not
-------------
otherwise defined herein shall have the meanings ascribed to them in the Credit
Agreement.
(b) Except as amended hereby, all of the terms of the Credit
Agreement shall remain and continue in full force and effect and are hereby
confirmed in all respects.
(c) This Amendment shall be a Loan Document for the purposes of the
Credit Agreement.
(d) This Amendment may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
were upon the same instrument. Delivery of an executed counterpart of a
signature page of this Amendment by telecopier shall be effective as delivery of
a manually executed counterpart of this Amendment.
(e) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
-9-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
VIACOM INC., as Borrower
By: /s/ George S. Smith, Jr.
------------------------------
Name: George S. Smith, Jr.
Title: Senior Vice President
Chief Financial Officer
Managing Agents
---------------
THE BANK OF NEW YORK, as Managing
Agent, the Documentation Agent and
a Bank
By: /s/ Geoffrey C. Brooks
-----------------------------
Name: Geoffrey C. Brooks
Title: Vice President
CITIBANK, N.A., as Managing Agent,
the Administrative Agent and a Bank
By: /s/ R. Parr
------------------------------
Title: M.D.
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Managing Agent and a
Bank
By: /s/ Dennis Wilczek
------------------------------
Name: Dennis Wilczek
Title: Associate
-10-
BANK OF AMERICA, N.A. (formerly
known as BANK OF AMERICA NT&SA), as
Managing Agent and a Bank
By: /s/ James T. Gilland
------------------------------
Name: James T. Gilland
Title: Managing Director
THE CHASE MANHATTAN BANK, as
Managing Agent and a Bank
By: /s/ Bruce Langenkamp
------------------------------
Title: VP
Syndication Agents
------------------
JP MORGAN SECURITIES INC., as
Syndication Agent
By: /s/ Anne M. Kelly
--------------------------------
Name: Anne Kelly
Title: Vice President
BANC OF AMERICA SECURITIES, LLC
(formerly known as THE BANK OF
AMERICA NT&SA), as Syndication
Agent
By: /s/ James T. Gilland
------------------------------
Name: James T. Gilland
Title: Managing Director
-11-
EXHIBIT 10.2
AMENDMENT NO. 2, dated as of March 28, 2000 (the "Amendment") to the
AMENDED AND RESTATED VII CREDIT AGREEMENT (the "Credit Agreement"), dated as of
March 26, 1997, among VIACOM INTERNATIONAL INC., a Delaware corporation (the
"Subsidiary Borrower"), the Bank parties thereto from time to time, THE BANK OF
NEW YORK, as a Managing Agent and as the Documentation Agent, CITIBANK, N.A., as
a Managing Agent and as the Administrative Agent, MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as a Managing Agent, BANK OF AMERICA, N.A. (formerly known as BANK
OF AMERICA NT&SA), as a Managing Agent, THE CHASE MANHATTAN BANK, as a Managing
Agent, JP MORGAN SECURITIES INC., as a Syndication Agent, BANK OF AMERICA
SECURITIES, LLC (formerly known as BANK OF AMERICA NT&SA), as Syndication Agent,
the Banks identified as Agents on the signature pages thereof, as Agents, and
the Banks identified as Co-Agents on the signature pages thereof, as Co-Agents.
WITNESSETH:
WHEREAS, the parties who have heretofore entered into the Credit
Agreement now desire to amend certain provisions thereof to provide for changes
in the covenants in the Credit Agreement, and for certain other matters.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. Amendments.
----------
(a) Section 1.1 of the Credit Agreement is hereby amended by
inserting the following:
"'CBS' shall mean CBS Corporation, a Pennsylvania corporation."
---
"'Discontinued Operations' shall mean the operations classified as
-----------------------
"discontinued operations" pursuant to Accounting Principles Board Opinion
No. 30 as presented in the quarterly report of CBS on Form 10-Q for the
quarter ended September 30, 1997 and filed with the SEC on December 14,
1997."
(b) Section 1.1 of the Credit Agreement is hereby amended by amending
the definition "Indebtedness" by
------------
inserting the following between the words "include" and "obligations" in the
proviso at the end thereof:
"(a) obligations of the Borrower and its Subsidiaries in connection
with Discontinued Operations and (b)"
(c) Section 7.5 of the Credit Agreement is hereby deleted in its
entirety.
(d) Section 8.1(d) of the Credit Agreement is hereby amended to read
as follows:
"(d) Any Loan Party or any of its Subsidiaries shall fail to pay any
principal of, or premium or interest on, any Indebtedness in an aggregate
principal amount of $50,000,000 or more (excluding Indebtedness hereunder)
taken together with all other Indebtedness of Viacom or any of its
Subsidiaries (including the Subsidiary Borrower or any of its
Subsidiaries), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such Indebtedness, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness or to terminate any commitment to lend; or
any such Indebtedness shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required prepayment),
prior to the stated maturity thereof and, with respect to all of the
foregoing, after the expiration of any applicable grace period or the
giving of any required notice or both; provided, however, that (i) no
-------- -------
extension of any grace period applicable to any such Indebtedness shall be
taken into account for the purposes of this subsection (d) and (ii) this
subclause (d) shall not apply to any provision that permits the holders, or
a trustee on their behalf, to cause Indebtedness to become due prior to its
stated maturity because of the failure to deliver to such holders or such
trustee financial statements or certificates for any Subsidiary that is not
required by law or regulation to file financial statements with the SEC,
unless such Indebtedness has become due prior to its stated maturity as a
result of such failure); or"
-2-
SECTION 2. Effectiveness. This Amendment will be effective upon (1)
-------------
the execution of counterparts hereof by the Subsidiary Borrower and each of the
Facility Agents and Managing Agents on their own behalf and on behalf of the
Banks consenting to the execution of this Amendment, and the execution of
written consents by the Majority Banks and (2) the consummation of the merger of
CBS with Viacom, Inc.
SECTION 3. Representations and Warranties. The Subsidiary Borrower
------------------------------
hereby represents and warrants that as of the date hereof (i) the
representations and warranties contained in Article V of the Credit Agreement
(other than those stated to be made as of a particular date) are true and
correct in all material respects on and as of the date hereof as though made on
the date hereof, and (ii) no Default or Event of Default shall exist or be
continuing under the Credit Agreement.
SECTION 4. Miscellaneous. (a) Capitalized terms used herein and not
-------------
otherwise defined herein shall have the meanings ascribed to them in the Credit
Agreement.
(b) Except as amended hereby, all of the terms of the Credit
Agreement shall remain and continue in full force and effect and are hereby
confirmed in all respects.
(c) This Amendment shall be a Loan Document for the purposes of the
Credit Agreement.
(d) This Amendment may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
were upon the same instrument. Delivery of an executed counterpart of a
signature page of this Amendment by telecopier shall be effective as delivery of
a manually executed counterpart of this Amendment.
(e) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
-3-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
VIACOM INTERNATIONAL INC.,
as Subsidiary Borrower
By: /s/ George S. Smith, Jr.
------------------------------
Name: George S. Smith, Jr.
Title: Senior Vice President
Chief Financial Officer
Managing Agents
---------------
THE BANK OF NEW YORK, as Managing
Agent, the Documentation Agent and
a Bank
By: /s/ Geoffrey C. Brooks
-----------------------------
Name: Geoffrey C. Brooks
Title: Vice President
CITIBANK, N.A., as Managing Agent,
the Administrative Agent and a Bank
By: /s/ R. Parr
-------------------------------
M.D.
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Managing Agent and a
Bank
By: /s/ Dennis Wilczek
------------------------------
Name: Dennis Wilczek
Title: Associate
-4-
BANK OF AMERICA NT&SA, as Managing
Agent and a Bank
By: /s/ James T. Gilland
------------------------------
Name: James T. Gilland
Title: Managing Director
THE CHASE MANHATTAN BANK, as
Managing Agent and a Bank
By: /s/ Bruce Langenkamp
------------------------------
Title: VP
Syndication Agents
------------------
JP MORGAN SECURITIES INC., as
Syndication Agent
By: /s/ Anne M. Kelly
------------------------------
Name: Anne Kelly
Title: Vice President
BANCAMERICA SECURITIES, INC.
(formerly known as THE BANK OF
AMERICA NT&SA), as Syndication Agent
By: /s/ James T. Gilland
------------------------------
Name: James T. Gilland
Title: Managing Director
-5-
EXHIBIT 10.3
April 28, 2000
Philippe P. Dauman
Deputy Chairman
Viacom Inc.
1515 Broadway
New York, New York 10036
Dear Philippe:
This letter is intended to confirm certain of our
understandings relating to the Agreement between you and Viacom Inc. (the
"Company"), dated as of September 6, 1999 (the "Agreement").
You have agreed to resign your employment as an employee of
the Company and any of the Company's direct or indirect subsidiaries and your
position as an officer of the Company as Deputy Chairman and Executive Vice
President. You further have agreed to resign as an officer and member of the
boards of directors of the Company's direct and indirect subsidiaries (except as
noted in the following sentence). It is our mutual intention that you shall
continue as a member of the boards of directors of the Company, Blockbuster Inc.
and The MTVi Group, Inc. for the remainder of your current term. All
resignations shall be effective as of the day immediately prior to the Effective
Time of the closing of the transactions contemplated by the Agreement and Plan
of Merger between CBS Corporation and the Company, dated as of September 6,
1999. The Company acknowledges that such resignation is at the request, and for
the benefit, of the Company, shall be deemed to constitute termination of your
employment for "Good Reason" (and for this purpose the Company waives any
written notice from you or any period within which to cure) and the Resignation
Date for purposes of the Agreement shall be deemed to include the date of such
resignation thereby qualifying you for all the payments and benefits attendant
to a resignation for Good Reason or a resignation on the Resignation Date, under
the Agreement, and the Restricted Period for purposes of Section 4.1 of the
Agreement shall commence on such Resignation Date.
Please acknowledge your assent to the foregoing by executing
the attached copy of this letter agreement where indicated and returning it to
the Company.
Very truly yours,
/s/ Michael D. Fricklas
ACCEPTED AND AGREED:
/s/ Philippe P. Dauman
- -----------------------------
Philippe P. Dauman
EXHIBIT 10.4
April 28, 2000
Thomas E. Dooley
Deputy Chairman
Viacom Inc.
1515 Broadway
New York, New York 10036
Dear Tom:
This letter is intended to confirm certain of our
understandings relating to the Agreement between you and Viacom Inc. (the
"Company"), dated as of September 6, 1999 (the "Agreement").
You have agreed to resign your employment as an employee of
the Company and any of the Company's direct or indirect subsidiaries and your
position as an officer of the Company as Deputy Chairman and Executive Vice
President. You further have agreed to resign as an officer and member of the
boards of directors of the Company's direct and indirect subsidiaries (except as
noted in the following sentence). It is our mutual intention that you shall
continue as a member of the boards of directors of the Company, Blockbuster Inc.
and The MTVi Group, Inc. for the remainder of your current term. All
resignations shall be effective as of the day immediately prior to the Effective
Time of the closing of the transactions contemplated by the Agreement and Plan
of Merger between CBS Corporation and the Company, dated as of September 6,
1999. The Company acknowledges that such resignation is at the request, and for
the benefit, of the Company, shall be deemed to constitute termination of your
employment for "Good Reason" (and for this purpose the Company waives any
written notice from you or any period within which to cure) and the Resignation
Date for purposes of the Agreement shall be deemed to include the date of such
resignation thereby qualifying you for all the payments and benefits attendant
to a resignation for Good Reason or a resignation on the Resignation Date, under
the Agreement, and the Restricted Period for purposes of Section 4.1 of the
Agreement shall commence on such Resignation Date.
Please acknowledge your assent to the foregoing by executing
the attached copy of this letter agreement where indicated and returning it to
the Company.
Very truly yours,
/s/ Michael D. Fricklas
ACCEPTED AND AGREED:
/s/ Thomas E. Dooley
- --------------------------------
Thomas E. Dooley
Exhibit 10.5
May 3, 2000
Mr. George S. Smith, Jr.
Senior Vice President
Chief Financial Officer
Viacom Inc.
1515 Broadway
New York, NY 10003
Dear George:
This will confirm our understanding that, upon the completion of the
merger between Viacom and CBS, you will resign your position as Senior
Vice President, Chief Financial Officer and all related positions.
From that point through December 15, 2000, you shall continue as an
employee in the position of Financial Consultant at a salary of $2,000
per month. Effective December 15, 2000, you shall resign your position
as Financial Consultant and you (or your estate) shall receive the
severance package for Senior Vice Presidents terminated as a result of
the merger, a copy of the plan is attached. For each day during your
exclusive employment as a Financial Consultant that you are asked to
travel to our offices, you shall receive a per diem payment of $1,500,
plus reimbursement of expenses.
Very truly yours,
/s/ William A. Roskin
William A. Roskin
AGREED AND ACCEPTED
/s/ George S. Smith, Jr.
--------------------------
George S. Smith, Jr.
Dated: 5/4/00
-------------------
(attachment)
Exhibit 11
Viacom Inc. and Subsidiaries
Computation of Net Earnings (Loss) Per Share
Three months ended March 31,
----------------------------
2000 1999
---- ----
(In millions, except per share amounts)
Earnings (loss):
Earnings from continuing operations................................ $ 76.0 $ 68.4
Cumulative convertible preferred stock dividend
requirement..................................................... -- (0.4)
Premium on redemption of preferred stock........................... -- (12.0)
-------------- -----------
Earnings from continuing operations attributable to common
stock .......................................................... 76.0 56.0
Extraordinary loss, net of tax..................................... -- (23.5)
-------------- -----------
Net earnings attributable to common stock.......................... $ 76.0 $ 32.5
============= ============
Basic computation:
Shares:
Weighted average number of common shares........................... 694.8 696.1
============= ============
Net earnings (loss) per common share:
Earnings from continuing operations................................ $ 0.11 $ 0.08
Extraordinary loss, net of tax..................................... -- (0.03)
-------------- -----------
Net earnings ...................................................... $ 0.11 $ 0.05
============= ============
Diluted computation:
Shares:
Weighted average number of common shares (basic)................... 694.8 696.1
Common shares potentially issuable in connection with
stock options and warrants................................... 16.7 . 15.0
-------------- -----------
Weighted average number of common shares (diluted)................. 711.5 711.1
============= ============
Net earnings (loss) per common share:
Earnings from continuing operations................................ $ 0.11 $ 0.08
Extraordinary loss, net of tax..................................... -- (0.03)
-------------- -----------
Net earnings ...................................................... $ 0.11 $ 0.05
============= ============
5
1,000,000
3-MOS
DEC-31-2000
MAR-31-2000
698
0
1,674
144
1,806
4,952
5,378
1,978
24,324
3,988
6,547
0
0
8
10,425
24,324
3,026
3,026
1,981
2,771
0
0
123
144
65
76
0
0
0
76
.11
.11
