SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (date of earliest event reported): November 27, 1998
VIACOM INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-9553 04-2949533
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
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
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 27, 1998, Viacom Inc. ("Viacom") completed the sale of
its educational, professional and reference publishing businesses to Pearson
plc for $4.62 billion plus approximately $92 million related to changes in
net assets which is subject to change based upon final determination of net
assets. Viacom is retaining its consumer publishing operations, including the
Simon & Schuster name.
Filed as part of this Current Report on Form 8-K and incorporated by
reference herein are pro forma financial statements of Viacom reflecting the
disposition of such businesses, which should be read in conjunction with the
historical financial statements of Viacom.
A copy of the press release by Viacom, dated November 27, 1998,
relating to the above-described transaction is attached hereto as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information
Unaudited pro forma condensed consolidated balance sheet as of
September 30, 1998 and unaudited pro forma condensed consolidated statements
of operations for the nine months ended September 30, 1998 and 1997 and years
ended December 31, 1997, 1996 and 1995.
(c) Exhibits:
99.1 Press Release issued by Viacom Inc. dated November 27, 1998.
2
VIACOM INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
On November 27, 1998, Viacom Inc. ("Viacom") completed the sale of its
educational, professional and reference publishing businesses ("Non-Consumer
Publishing") to Pearson plc for $4.62 billion plus approximately $92 million
related to changes in net assets which is subject to change based upon final
determination of net assets (the "Disposition"). Viacom is retaining its
consumer publishing operations, including the Simon & Schuster name. Proceeds
from the sale were used to repay debt, preferred stock and for general
corporate purposes.
The following unaudited pro forma condensed consolidated statements of
operations of Viacom for the nine months ended September 30, 1998 and 1997 and
for the twelve months ended December 31, 1997 give effect to the Disposition and
assumed interest and dividend savings resulting from the assumed use of sale
proceeds to repay debt and preferred stock as if such events occurred as of
January 1, 1997. The unaudited pro forma condensed consolidated statements of
operations of Viacom are based upon the statements of operations of Viacom and
Non-Consumer Publishing. The unaudited pro forma condensed consolidated balance
sheet is based upon the balance sheets of Viacom and Non-Consumer Publishing as
of September 30, 1998 and gives effect to the Disposition and related debt
reduction as if they had occurred on September 30, 1998.
The following pro forma condensed consolidated statements of operations of
Viacom for the years ended December 31, 1996 and 1995 reflect Blockbuster Music
("Music") which was sold in October 1998 and Non-Consumer Publishing as
discontinued operations. Pro forma results of operations for these periods do
not reflect the assumed interest savings described above as the sale proceeds
are assumed to be received as of January 1, 1997.
On December 1, 1998, Viacom announced the unconditional tender offers to
purchase all of its outstanding 8% Subordinated Debentures due 2006 and all of
Viacom International Inc.'s outstanding 10.25% Senior Subordinated Notes due
2001. Viacom also announced the redemption of all of Viacom International Inc.'s
outstanding 7% Series A and Series B Senior Subordinated Debentures due 2003. On
December 2, 1998, Viacom redeemed $600.0 million of its Series B Convertible
Preferred Stock. The pro forma assumptions assume full redemption of the
announced debt transactions. The remaining proceeds are assumed to be used to
reduce Viacom's variable bank debt.
These unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the audited historical financial statements of Viacom
contained in Viacom's Annual Report on Form 10-K dated March 31, 1998 and the
unaudited interim financial statements, including the notes thereto, contained
in Viacom's report on Form 10-Q dated November 16, 1998. The unaudited pro forma
data are not necessarily indicative of the results of operations or financial
position of Viacom that would have occurred if the pro forma events had been in
effect at the beginning of the earliest period presented, nor are they
necessarily indicative of future results of operations or financial position.
The pro forma adjustments are based upon available information and certain
assumptions set forth herein, included in the notes to the unaudited pro forma
condensed consolidated financial statements.
3
VIACOM INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN MILLIONS)
SEPTEMBER 30, 1998
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LESS:
HISTORICAL NON-CONSUMER PRO FORMA PRO FORMA
VIACOM INC. PUBLISHING ADJUSTMENTS VIACOM INC.
---------- ----------- ---------- -----------
ASSETS
Cash and cash equivalents..................... $ 312.9 $ 34.0 $ 4,711.8 (2) $ 278.9
(4,711.8)(4)
Other current assets.......................... 5,496.9 1,098.3 -- 4,398.6
---------- ----------- ---------- -----------
Total current assets................. 5,809.8 1,132.3 -- 4,677.5
Property and equipment, net................... 3,107.0 165.1 -- 2,941.9
Intangibles, at amortized cost................ 14,486.2 2,865.5 -- 11,620.7
Other assets.................................. 4,412.1 438.0 -- 3,974.1
---------- ----------- ---------- -----------
Total assets......................... $ 27,815.1 $ 4,600.9 $ -- $ 23,214.2
========== =========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Net liabilities of discontinued operations.... $ 69.2 $ -- $ -- $ 69.2
Other current liabilities..................... 4,363.0 557.7 862.1(2)(3) 4,667.4
---------- ----------- ---------- -----------
Total current liabilities............ 4,432.2 557.7 862.1 4,736.6
Long-term debt................................ 8,270.3 23.7 (4,147.8)(4) 4,098.8
Other liabilities............................. 2,107.0 42.8 (18.9)(2) 2,045.3
Shareholders' equity.......................... 13,005.6 3,976.7 3,868.6 (2) 12,333.5
36.0 (4)
(600.0)(4)
---------- ----------- ---------- -----------
Total liabilities and shareholders'
equity............................ $ 27,815.1 $ 4,600.9 $ -- $ 23,214.2
========== =========== ========== ===========
See notes to unaudited pro forma condensed consolidated financial statements.
4
VIACOM INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED SEPTEMBER 30, 1998
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LESS:
HISTORICAL NON-CONSUMER PRO FORMA PRO FORMA
VIACOM INC. PUBLISHING ADJUSTMENTS VIACOM INC.
---------- ----------- ---------- -----------
Revenues................................... $ 10,174.6 $ 1,420.9 $ -- $ 8,753.7
Expenses:
Operating............................. 6,849.7 590.7 6,259.0
Selling, general and administrative... 2,124.3 656.1 1,468.2
Depreciation and amortization......... 688.0 116.8 -- 571.2
--------- ----------- ---------- -----------
Total expenses.................... 9,662.0 1,363.6 -- 8,298.4
--------- ----------- ---------- -----------
Operating income........................... 512.6 57.3 455.3
Other income (expense):
Interest income (expense), net........ (468.2) 0.9 233.1(5) (236.0)
Other items, net...................... (24.7) (10.7) -- (14.0)
---------- ----------- ---------- -----------
Earnings from continuing operations
before income taxes................... 19.7 47.5 233.1 205.3
Provision for income taxes................. (112.0) (26.6) (93.2)(7) (178.6)
Equity in loss of affiliated companies,
net of tax............................ (21.2) -- -- (21.2)
Minority interest.......................... 1.1 -- -- 1.1
--------- ----------- ---------- -----------
Earnings (loss) from continuing
operations............................ (112.4) 20.9 139.9 6.6
Cumulative convertible preferred stock
dividend requirement.................. (45.0) -- 22.5(6) (22.5)
--------- ----------- ---------- -----------
Net earnings (loss) attributable to common
stock before discontinued operations.. $ (157.4) $ 20.9 $ 162.4 $ (15.9)
========= =========== ========== ===========
Basic:
Loss from continuing operations
per common share.................... $ (.44) $ (.04)
Weighted average number of shares..... 356.4 356.4
Diluted:
Loss from continuing operations
per common share.................... $ (.44) $ (.04)
Weighted average number of shares..... 356.4 361.1
See notes to unaudited pro forma condensed consolidated financial statements.
5
VIACOM INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED SEPTEMBER 30, 1997
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LESS:
HISTORICAL NON-CONSUMER PRO FORMA PRO FORMA
VIACOM INC. PUBLISHING ADJUSTMENTS VIACOM INC.
---------- ----------- ---------- -----------
Revenues............................... $ 9,177.8 $ 1,399.6 $ -- $ 7,778.2
Expenses:
Operating........................... 6,035.1 552.0 5,483.1
Selling, general and administrative. 1,873.0 629.8 1,243.2
Depreciation and amortization....... 688.4 104.5 -- 583.9
---------- ----------- ---------- -----------
Total expenses.................. 8,596.5 1,286.3 -- 7,310.2
---------- ----------- ---------- -----------
Operating income......................... 581.3 113.3 468.0
Other income (expense):
Interest income (expense), net...... (588.1) (4.3) 232.3(5) (351.5)
Other items, net.................... 62.7 (4.2) -- 66.9
---------- ----------- ---------- -----------
Earnings from continuing operations
before income taxes................. 55.9 104.8 232.3 183.4
Provision for income taxes............... (142.5) (58.6) (92.9)(7) (176.8)
Equity in loss of affiliated companies,
net of tax.......................... (73.0) .1 -- (73.1)
Minority interest........................ 4.5 -- -- 4.5
---------- ----------- ---------- -----------
Earnings (loss) from continuing
operations.......................... (155.1) 46.3 139.4 (62.0)
Cumulative convertible preferred stock
dividend requirement................ (45.0) -- 22.5(6) (22.5)
---------- ----------- ---------- -----------
Net earnings (loss) attributable to
common stock before discontinued operations $ (200.1) $ 46.3 $ 161.9 $ (84.5)
========== =========== ========== ===========
Basic:
Loss from continuing operations
per common share.................. $ (.57) $ (.24)
Weighted average number of shares... 352.7 352.7
Diluted:
Loss from continuing operations
per common share.................. $ (.57) $ (.24)
Weighted average number of shares... 352.7 352.7
See notes to unaudited pro forma condensed consolidated financial
statements.
6
VIACOM INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1997
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LESS:
HISTORICAL DISCONTINUED PRO FORMA PRO FORMA
VIACOM INC. OPERATIONS(1) ADJUSTMENTS VIACOM INC.
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Revenues............................. $ 13,206.1 $ 2,521.2 $ -- $ 10,684.9
Expenses:
Operating........................ 8,863.3 1,387.0 -- 7,476.3
Selling, general and
administrative.................. 2,646.7 896.1 -- 1,750.6
Depreciation and amortization.... 943.3 170.7 -- 772.6
------------ ---------- --------- -----------
Total expenses............... 12,453.3 2,453.8 -- 9,999.5
------------ ---------- --------- -----------
Operating income...................... 752.8 67.4 -- 685.4
Other income (expense):
Interest expense, net............ (763.0) (12.1) 313.1(5) (437.8)
Other items, net................. 1,232.9 (11.1) -- 1,244.0
------------ ----------- --------- -----------
Earnings from continuing operations
before income taxes.............. 1,222.7 44.2 313.1 1,491.6
Provision for income taxes............ (689.6) (43.2) (125.2)(7) (771.6)
Equity in loss of affiliated
companies, net of tax.............. (163.3) -- -- (163.3)
Minority interest..................... 4.7 -- -- 4.7
------------ ---------- --------- -----------
Earnings from continuing operations... 374.5 1.0 187.9 561.4
Cumulative convertible preferred stock
dividend requirements.............. (60.0) -- 30.0(6) (30.0)
------------- ---------- --------- ------------
Net earnings attributable to common stock
before discontinued operations..... $ 314.5 $ 1.0 $ 217.9 $ 531.4
============ ========== ========= ===========
Basic:
Earnings from continuing
operations per common share... $ .89 $ 1.51
Weighted average number of shares 352.9 352.9
Diluted:
Earnings from continuing
operations per common share... $ .89 $ 1.50
Weighted average number of shares 354.3 354.3
See notes to unaudited pro forma condensed consolidated financial statements.
7
VIACOM INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1996
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LESS:
HISTORICAL DISCONTINUED RESTATED
VIACOM INC. OPERATIONS(1) VIACOM INC.
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Revenues........................................ $ 12,084.2 $ 2,400.3 $ 9,683.9
Expenses:
Operating.................................... 7,605.3 1,265.1 6,340.2
Selling, general and administrative.......... 2,298.1 856.1 1,442.0
Restructuring charges........................ 88.9 42.9 46.0
Depreciation and amortization................ 817.6 163.3 654.3
------------ --------- ---------
Total expenses........................... 10,809.9 2,327.4 8,482.5
------------ --------- ---------
Operating income.................................. 1,274.3 72.9 1,201.4
Other income (expense):
Interest expense, net........................ (798.0) (12.5) (785.5)
Other items, net............................. 4.2 5.8 (1.6)
------------ --------- ---------
Earnings from continuing operations
before income taxes.......................... 480.5 66.2 414.3
Provision for income taxes........................ (295.5) (50.6) (244.9)
Equity in earnings (loss) of affiliated
companies, net of tax........................ (13.0) .3 (13.3)
Minority interest................................. (1.3) -- (1.3)
------------ --------- ---------
Earnings from continuing operations............... 170.7 15.9 154.8
Cumulative convertible preferred stock
dividend requirement......................... (60.0) -- (60.0)
------------ --------- ---------
Net earnings attributable to common
stock before discontinued operations......... $ 110.7 $ 15.9 $ 94.8
============ ========= =========
Basic:
Earnings from continuing operations
per common share.......................... $ .30 $ .26
Weighted average number of shares............ 364.0 364.0
Diluted:
Earnings from continuing operations
per common share.......................... $ .30 $ .26
Weighted average number of shares............ 367.4 367.4
See notes to unaudited pro forma condensed consolidated financial statements.
8
VIACOM INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1995
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LESS:
HISTORICAL DISCONTINUED RESTATED
VIACOM INC. OPERATIONS(1) VIACOM INC.
------------ ------------- -----------
Revenues.......................................... $ 10,915.9 $ 2,215.8 $ 8,700.1
Expenses:
Operating...................................... 6,689.5 1,088.7 5,600.8
Selling, general and administrative............ 2,111.0 819.0 1,292.0
Depreciation and amortization.................. 716.7 156.6 560.1
----------- ------------ -----------
Total expenses............................. 9,517.2 2,064.3 7,452.9
----------- ------------ -----------
Operating income.................................... 1,398.7 151.5 1,247.2
Other income (expense):
Interest expense, net.......................... (809.3) (13.1) (796.2)
Other items, net............................... (9.6) (1.3) (8.3)
----------- ------------ -----------
Earnings from continuing operations
before income taxes............................ 579.8 137.1 442.7
Provision for income taxes.......................... (367.1) (75.1) (292.0)
Equity in earnings (loss) of affiliated
companies, net of tax.......................... (52.9) .5 (53.4)
Minority interest................................... (9.3) -- (9.3)
----------- ------------ -----------
Earnings from continuing operations................. 150.5 62.5 88.0
Cumulative convertible preferred stock
dividend requirement........................... (60.0) -- (60.0)
----------- ------------ -----------
Net earnings attributable to common
stock before discontinued operations........... $ 90.5 $ 62.5 $ 28.0
=========== ============ ===========
Basic:
Earnings from continuing operations
per common share............................ $ .25 $ .08
Weighted average number of shares.............. 362.5 362.5
Diluted:
Earnings from continuing operations
per common share............................ $ .24 $ .07
Weighted average number of shares.............. 375.1 375.1
See notes to unaudited pro forma condensed consolidated financial statements.
9
VIACOM INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Reflects the historical results of Non-Consumer Publishing and Music for
the years ended December 31, 1997, 1996 and 1995:
(a) The table below summarizes Non-Consumer Publishing results for the
following periods:
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
---------- ---------- ----------
Revenues...................................... $ 1,915.5 $ 1,784.1 $ 1,630.6
Earnings from continuing operations
before income taxes....................... $ 144.5 $ 157.8 $ 131.0
Earnings from continuing
operations................................ $ 63.7 $ 73.1 $ 59.0
(b) The table below summarizes Music results for the following periods:
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
---------- ---------- ----------
Revenues...................................... $ 605.7 $ 616.2 $ 585.2
Earnings (loss) from continuing operations
before income taxes....................... $ (100.3) $ (91.6) $ 6.1
Earnings (loss) from continuing
operations................................ $ (62.7) $ (57.2) $ 3.5
2. Reflects the sale proceeds received by Viacom, which are subject to
adjustment based upon final determination of net assets, and the disposal
of the related assets and liabilities as a result of the sale of
Non-Consumer Publishing, resulting in a preliminary gain of approximately
$60 million.
3. Reflects principally income taxes payable and transaction fees and other
incremental costs directly attributable to the sale of Non-Consumer
Publishing. These obligations may be satisfied with borrowings under bank
debt.
4. Reflects the assumed use of $4.1 billion of sale proceeds to redeem
debentures, repay bank debt and redeem $600.0 million of Viacom's
Convertible Preferred Stock at a discount of $36 million.
5. Reflects the assumed reduction in interest expense of $233.1 million and
$232.3 million for the nine months ended September 30, 1998 and 1997,
respectively, and $313.1 million for the year ended December 31, 1997
resulting from the decrease in borrowings described in Note 4. The assumed
reduction in interest expense has been based upon Viacom's historical
weighted average interest rates of 7.49% and 7.47% for the nine months
ended September 30, 1998 and 1997, respectively, and 7.55% for the year
ended December 31, 1997. The historical weighted average interest rates
were calculated based upon the assumed redemption of debentures and
repayment of bank debt. A movement in the variable rate component of the
weighted average interest rate by 1/8% would have a $2.4 million impact on
interest expense for the nine months ended September 30, 1998 and 1997,
respectively, and $3.2 million impact for the year ended December 31, 1997.
10
VIACOM INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Reflects the reduction in the Cumulative Convertible Preferred Stock
Dividend requirement of $22.5 million for the nine months ended
September 30, 1998 and 1997, respectively, and $30.0 million for the year
ended December 31, 1997, resulting from the redemption of Viacom's
Convertible Preferred Stock described in Note 4.
7. Reflects the income tax effect resulting from the pro forma adjustments
for interest expense calculated at the 40% statutory tax rate.
11
SIGNATURE
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 hereunto duly authorized.
VIACOM INC.
Date: December 14, 1998 By: /s/ Michael D. Fricklas
---------------------------------
Michael D. Fricklas
Senior Vice President,
General Counsel and Secretary
12
EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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99.1 Press Release issued by Viacom Inc. dated
November 27, 1998.
13
Exhibit 99.1
VIACOM COMPLETES SALE OF
NON-CONSUMER PUBLISHING OPERATIONS
New York, New York, November 27, 1998 - Viacom Inc. (Amex: VIA and VIAB)
announced today the completion of the sale of its educational, professional
and reference publishing businesses to Pearson Plc. for $4.6 billion. Net
proceeds from the transaction will be used to repay debt.
Viacom is retaining its consumer publishing operations, including the Simon &
Schuster name.
Viacom Inc. is one of the world's largest entertainment and publishing
companies and is a leading force in nearly every segment of the international
media marketplace. The operations of Viacom include Blockbuster, MTV
Networks, Paramount Pictures, Paramount Television, Paramount Parks, Showtime
Networks, Simon & Schuster, 18 television stations, and movie screens in 12
countries. Viacom also owns approximately 80 percent of Spelling
Entertainment Group, as well as a half-interest in Comedy Central, UPN and
UCI. National Amusements, Inc., a closely held corporation which operates
approximately 1,200 screens in the U.S., the U.K. and South America, is the
parent company of Viacom. More information about Viacom is available at the
Company's Web site located at http://www.viacom.com.
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CONTACT:
Carl Folta
212-258-6352
Susan Duffy
212-258-6347
