UNITED STATES
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, 2022
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ____________ to ____________
Commission File Number 001-09553
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(212 ) 258-6000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered | ||||||||||||||||||||||||
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of common stock outstanding at April 28, 2022:
Class A Common Stock, par value $.001 per share— 40,705,676
Class B Common Stock, par value $.001 per share— 608,394,842
PARAMOUNT GLOBAL
INDEX TO FORM 10-Q
| Page | ||||||||
PART I – FINANCIAL INFORMATION | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
PART I – FINANCIAL INFORMATION
| Item 1. | Financial Statements. | ||||
PARAMOUNT GLOBAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenues | $ | $ | |||||||||
| Costs and expenses: | |||||||||||
| Operating | |||||||||||
| Selling, general and administrative | |||||||||||
| Depreciation and amortization | |||||||||||
| Restructuring and other corporate matters | |||||||||||
| Total costs and expenses | |||||||||||
| Gain on sales | |||||||||||
| Operating income | |||||||||||
| Interest expense | ( | ( | |||||||||
| Interest income | |||||||||||
| Loss on extinguishment of debt | ( | ( | |||||||||
| Other items, net | ( | ||||||||||
| Earnings from continuing operations before income taxes and equity in loss of investee companies | |||||||||||
| Provision for income taxes | ( | ( | |||||||||
| Equity in loss of investee companies, net of tax | ( | ( | |||||||||
| Net earnings from continuing operations | |||||||||||
| Net earnings from discontinued operations, net of tax | |||||||||||
| Net earnings (Paramount and noncontrolling interests) | |||||||||||
| Net earnings attributable to noncontrolling interests | ( | ( | |||||||||
| Net earnings attributable to Paramount | $ | $ | |||||||||
| Amounts attributable to Paramount: | |||||||||||
| Net earnings from continuing operations | $ | $ | |||||||||
| Net earnings from discontinued operations, net of tax | |||||||||||
| Net earnings attributable to Paramount | $ | $ | |||||||||
| Basic net earnings per common share attributable to Paramount: | |||||||||||
| Net earnings from continuing operations | $ | $ | |||||||||
| Net earnings from discontinued operations | $ | $ | |||||||||
| Net earnings | $ | $ | |||||||||
| Diluted net earnings per common share attributable to Paramount: | |||||||||||
| Net earnings from continuing operations | $ | $ | |||||||||
| Net earnings from discontinued operations | $ | $ | |||||||||
| Net earnings | $ | $ | |||||||||
| Weighted average number of common shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
See notes to consolidated financial statements.
-3-
PARAMOUNT GLOBAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; in millions)
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net earnings (Paramount and noncontrolling interests) | $ | $ | |||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||
| Cumulative translation adjustments | ( | ( | |||||||||
| Recognition of net actuarial loss and prior service costs | |||||||||||
| Other comprehensive loss from continuing operations, net of tax (Paramount and noncontrolling interests) | ( | ( | |||||||||
| Other comprehensive income from discontinued operations | |||||||||||
| Comprehensive income | |||||||||||
| Less: Comprehensive income attributable to noncontrolling interests | |||||||||||
| Comprehensive income attributable to Paramount | $ | $ | |||||||||
See notes to consolidated financial statements.
-4-
PARAMOUNT GLOBAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
| At | At | ||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||
| Current Assets: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | |||||||||||||||||||||
| Receivables, net | |||||||||||||||||||||||
| Programming and other inventory | |||||||||||||||||||||||
| Prepaid expenses and other current assets | |||||||||||||||||||||||
| Current assets of discontinued operations | |||||||||||||||||||||||
| Total current assets | |||||||||||||||||||||||
| Property and equipment, net | |||||||||||||||||||||||
| Programming and other inventory | |||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||
| Intangible assets, net | |||||||||||||||||||||||
| Operating lease assets | |||||||||||||||||||||||
| Deferred income tax assets, net | |||||||||||||||||||||||
| Other assets | |||||||||||||||||||||||
| Assets held for sale | |||||||||||||||||||||||
| Assets of discontinued operations | |||||||||||||||||||||||
| Total Assets | $ | $ | |||||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||||||
| Accounts payable | $ | $ | |||||||||||||||||||||
| Accrued expenses | |||||||||||||||||||||||
| Participants’ share and royalties payable | |||||||||||||||||||||||
| Accrued programming and production costs | |||||||||||||||||||||||
| Deferred revenues | |||||||||||||||||||||||
| Debt | |||||||||||||||||||||||
| Other current liabilities | |||||||||||||||||||||||
| Current liabilities of discontinued operations | |||||||||||||||||||||||
| Total current liabilities | |||||||||||||||||||||||
| Long-term debt | |||||||||||||||||||||||
| Participants’ share and royalties payable | |||||||||||||||||||||||
| Pension and postretirement benefit obligations | |||||||||||||||||||||||
| Deferred income tax liabilities, net | |||||||||||||||||||||||
| Operating lease liabilities | |||||||||||||||||||||||
| Program rights obligations | |||||||||||||||||||||||
| Other liabilities | |||||||||||||||||||||||
| Liabilities of discontinued operations | |||||||||||||||||||||||
| Redeemable noncontrolling interest | |||||||||||||||||||||||
| Commitments and contingencies (Note 14) | |||||||||||||||||||||||
| Paramount stockholders’ equity: | |||||||||||||||||||||||
Class A Common Stock, par value $ | |||||||||||||||||||||||
Class B Common Stock, par value $ | |||||||||||||||||||||||
| Additional paid-in capital | |||||||||||||||||||||||
Treasury stock, at cost; | ( | ( | |||||||||||||||||||||
| Retained earnings | |||||||||||||||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||||||||||||||
| Total Paramount stockholders’ equity | |||||||||||||||||||||||
| Noncontrolling interests | |||||||||||||||||||||||
| Total Equity | |||||||||||||||||||||||
| Total Liabilities and Equity | $ | $ | |||||||||||||||||||||
See notes to consolidated financial statements.
-5-
PARAMOUNT GLOBAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Operating Activities: | |||||||||||
| Net earnings (Paramount and noncontrolling interests) | $ | $ | |||||||||
| Less: Net earnings from discontinued operations, net of tax | |||||||||||
| Net earnings from continuing operations | |||||||||||
| Adjustments to reconcile net earnings from continuing operations to net cash flow provided by operating activities from continuing operations: | |||||||||||
| Depreciation and amortization | |||||||||||
| Deferred tax (benefit) provision | ( | ||||||||||
| Stock-based compensation | |||||||||||
| Gain on sales | ( | ||||||||||
| Loss on extinguishment of debt | |||||||||||
| Equity in loss of investee companies, net of tax | |||||||||||
| Change in assets and liabilities | ( | ||||||||||
| Net cash flow provided by operating activities from continuing operations | |||||||||||
| Net cash flow provided by operating activities from discontinued operations | |||||||||||
| Net cash flow provided by operating activities | |||||||||||
| Investing Activities: | |||||||||||
| Investments | ( | ( | |||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from dispositions | |||||||||||
| Other investing activities | ( | ||||||||||
| Net cash flow (used for) provided by investing activities | ( | ||||||||||
| Financing Activities: | |||||||||||
| Proceeds from issuance of long-term debt | |||||||||||
| Repayment of long-term debt | ( | ( | |||||||||
| Dividends paid on preferred stock | ( | ||||||||||
| Dividends paid on common stock | ( | ( | |||||||||
| Proceeds from issuance of preferred stock | |||||||||||
| Proceeds from issuance of common stock | |||||||||||
| Payment of payroll taxes in lieu of issuing shares for stock-based compensation | ( | ( | |||||||||
| Proceeds from exercise of stock options | |||||||||||
| Payments to noncontrolling interests | ( | ( | |||||||||
| Other financing activities | ( | ( | |||||||||
| Net cash flow (used for) provided by financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ( | |||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents and restricted cash at beginning of year (includes $ | |||||||||||
Cash, cash equivalents and restricted cash at end of period (includes $ | $ | $ | |||||||||
See notes to consolidated financial statements.
-6-
PARAMOUNT GLOBAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited; in millions)
| Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Class A and B Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Paramount Stockholders’ Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Shares) | (Shares) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock dividends | — | — | — | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests | — | — | — | — | — | — | ( | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Class A and B Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Paramount Stockholders’ Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Shares) | (Shares) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2020 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation activity | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issuances | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock dividends | — | — | — | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2021 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
-7-
PARAMOUNT GLOBAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
1) BASIS OF PRESENTATION
Description of Business—Effective February 16, 2022, we changed our name from ViacomCBS Inc. to Paramount Global, and effective at the open of market trading on February 17, 2022, our Class A Common Stock, Class B Common Stock and 5.75
Beginning in 2022, primarily as a result of our increased strategic focus on our direct-to-consumer businesses, we made certain changes to how we manage our businesses and allocate resources that resulted in a change to our operating segments. Our management structure has been reorganized to focus on managing our business as the combination of three parts: a traditional media business, a portfolio of global direct-to-consumer streaming services, and a film studio. Accordingly, beginning in the first quarter of 2022 and for all periods presented we are reporting results based on the following segments:
•TV Media—Our TV Media segment consists of our domestic and international broadcast networks, including the CBS Television Network, Network 10, Channel 5, Telefe, and Chilevisión; our premium and basic cable networks, including Showtime, BET, Nickelodeon, MTV, Comedy Central, Paramount Network, Smithsonian Channel, international extensions of these brands, and CBS Sports Network; our television production operations, including CBS Studios, Paramount Television Studios and CBS Media Ventures, which primarily produces or distributes first-run syndicated programming; and our owned broadcast television stations, CBS Stations.
•Direct-to-Consumer—Our Direct-to-Consumer segment consists of our portfolio of pay, free and premium global direct-to-consumer streaming services (“DTC services”), including Paramount+, Pluto TV, Showtime Networks’ premium subscription streaming service (Showtime OTT), BET+ and Noggin.
•Filmed Entertainment—Our Filmed Entertainment segment consists of Paramount Pictures, Paramount Players, Paramount Animation, Nickelodeon Studio, and Miramax.
Basis of Presentation—The accompanying unaudited consolidated financial statements have been prepared on a basis consistent with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the more detailed financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.
In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. Certain previously reported amounts have been reclassified to conform to the current presentation.
Discontinued Operations—On November 25, 2020, we entered into an agreement to sell our publishing business, Simon & Schuster, which was previously reported as the Publishing segment, to Penguin Random House LLC (“Penguin Random House”), a wholly owned subsidiary of Bertelsmann SE & Co. KGaA, for $2.175 billion in cash. As a result, Simon & Schuster has been presented as a discontinued operation in our consolidated financial statements for all periods presented (see Note 2).
-8-
PARAMOUNT GLOBAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Excluded from the calculation of diluted EPS because their inclusion would have been antidilutive were stock options and RSUs of 6 million for the three months ended March 31, 2022 and stock options of 3 million for the three months ended March 31, 2021. Also excluded from the calculation of diluted EPS for the three months ended March 31, 2022 was the effect of the assumed conversion of 10 million shares of Mandatory Convertible Preferred Stock into shares of common stock because the impact would have been antidilutive. The table below presents a reconciliation of weighted average shares used in the calculation of basic and diluted EPS.
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| (in millions) | 2022 | 2021 | |||||||||
| Weighted average shares for basic EPS | |||||||||||
Dilutive effect of shares issuable under stock-based compensation plans | |||||||||||
| Assumed conversion of Mandatory Convertible Preferred Stock | |||||||||||
| Weighted average shares for diluted EPS | |||||||||||
-9-
PARAMOUNT GLOBAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Additionally, because the impact of the assumed conversion of the Mandatory Convertible Preferred Stock would have been antidilutive, net earnings from continuing operations and net earnings used in our diluted EPS calculations for the three months ended March 31, 2022 were adjusted to include the preferred stock dividends recorded during the period. The table below presents a reconciliation of net earnings from continuing operations and net earnings to the amounts used in the calculations of basic and diluted EPS.
| Three Months Ended | |||||||||||
| March 31, 2022 | |||||||||||
| Amounts attributable to Paramount: | |||||||||||
| Net earnings from continuing operations | $ | ||||||||||
| Preferred stock dividends | ( | ||||||||||
| Net earnings from continuing operations for basic and diluted EPS calculation | $ | ||||||||||
| Amounts attributable to Paramount: | |||||||||||
| Net earnings | $ | ||||||||||
| Preferred stock dividends | ( | ||||||||||
| Net earnings for basic and diluted EPS calculation | $ | ||||||||||
Recently Adopted Accounting Pronouncements
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
2) DISPOSITIONS
During the first quarter of 2022, we recorded gains on sales totaling $15 million, comprised of a gain from the sale of international intangible assets and a working capital adjustment to the gain from the fourth quarter 2021 sale of CBS Studio Center.
During the fourth quarter of 2020, we entered into an agreement to sell our publishing business, Simon & Schuster, to Penguin Random House for $2.175 billion in cash. Simon & Schuster is presented as a discontinued operation in our consolidated financial statements for all periods presented. On November 2, 2021, the U.S. Department of Justice filed suit to block the sale. The purchase agreement contains commitments on the part of the purchaser to take all necessary steps to obtain any required regulatory approvals and to defend any litigation that would delay or prevent consummation, and also provides for a $200 million termination fee payable to us in certain circumstances in the event the transaction does not close for regulatory reasons (see Note 14).
-10-
PARAMOUNT GLOBAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The following table sets forth details of net earnings from discontinued operations for the three months ended March 31, 2022 and 2021, which primarily reflects the results of Simon & Schuster.
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenues | $ | $ | |||||||||
| Costs and expenses: | |||||||||||
| Operating | |||||||||||
| Selling, general and administrative | |||||||||||
Total costs and expenses (a) | |||||||||||
| Operating income | |||||||||||
| Other items, net | ( | ( | |||||||||
| Earnings from discontinued operations | |||||||||||
Income tax provision (b) | ( | ( | |||||||||
| Net earnings from discontinued operations, net of tax | $ | $ | |||||||||
(a) Included in total costs and expenses for the three months ended March 31, 2022 is $5 million for the release of indemnification obligations for leases relating to a previously disposed business.
(b) The tax provision includes amounts relating to previously disposed businesses of $1 million and $7 million for the three months ended March 31, 2022 and 2021, respectively.
The following table presents the major classes of assets and liabilities of our discontinued operations.
| At | At | ||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Receivables, net | $ | $ | |||||||||||||||||||||
| Other current assets | |||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||
| Property and equipment, net | |||||||||||||||||||||||
| Operating lease assets | |||||||||||||||||||||||
| Other assets | |||||||||||||||||||||||
| Total Assets | $ | $ | |||||||||||||||||||||
| Royalties payable | $ | $ | |||||||||||||||||||||
| Other current liabilities | |||||||||||||||||||||||
| Operating lease liabilities | |||||||||||||||||||||||
| Other liabilities | |||||||||||||||||||||||
| Total Liabilities | $ | $ | |||||||||||||||||||||
-11-
PARAMOUNT GLOBAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
3) PROGRAMMING AND OTHER INVENTORY
The following table presents our programming and other inventory at March 31, 2022 and December 31, 2021, grouped by type and predominant monetization strategy. During the first quarter of 2022, in connection with our increased strategic focus on our direct-to-consumer businesses, we reassessed our predominant monetization strategy for certain of our internally-produced content, and determined that it had shifted from individual to film group as a result of expected increased monetization of the content on our DTC services.
| At | At | ||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Film Group Monetization: | |||||||||||||||||||||||
| Acquired program rights, including prepaid sports rights | $ | $ | |||||||||||||||||||||
| Internally-produced television and film programming: | |||||||||||||||||||||||
| Released | |||||||||||||||||||||||
| In process and other | |||||||||||||||||||||||
| Individual Monetization: | |||||||||||||||||||||||
| Acquired libraries | |||||||||||||||||||||||
| Film inventory: | |||||||||||||||||||||||
| Released | |||||||||||||||||||||||
| Completed, not yet released | |||||||||||||||||||||||
| In process and other | |||||||||||||||||||||||
| Internally-produced television programming: | |||||||||||||||||||||||
| Released | |||||||||||||||||||||||
| In process and other | |||||||||||||||||||||||
| Home entertainment | |||||||||||||||||||||||
| Total programming and other inventory | |||||||||||||||||||||||
| Less current portion | |||||||||||||||||||||||
| Total noncurrent programming and other inventory | $ | $ | |||||||||||||||||||||
The following table presents amortization of television and film programming and production costs, which is included within “Operating expenses” on the Consolidated Statements of Operations.
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Programming costs, acquired programming | $ | $ | |||||||||
| Production costs, internally-produced television and film programming: | |||||||||||
| Individual monetization | $ | $ | |||||||||
| Film group monetization | $ | $ | |||||||||
4) RELATED PARTIES
National Amusements, Inc.
National Amusements, Inc. (“NAI”) is the controlling stockholder of the Company. At March 31, 2022, NAI directly or indirectly owned approximately 77.4 % of our voting Class A Common Stock and approximately 9.7 % of our Class A Common Stock and non-voting Class B Common Stock on a combined basis. NAI is controlled by the Sumner M. Redstone National Amusements Part B General Trust (the “General Trust”), which owns 80 % of the voting interest of NAI and acts by majority vote of seven voting trustees (subject to certain exceptions), including with respect to the NAI shares held by the General Trust. Shari E. Redstone, Chairperson, CEO and
-12-
PARAMOUNT GLOBAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
President of NAI and non-executive Chair of our Board of Directors, is one of the seven voting trustees for the General Trust and is one of two voting trustees who are beneficiaries of the General Trust. No member of our management or other member of our Board of Directors is a trustee of the General Trust.
Other Related Parties
In the ordinary course of business, we are involved in transactions with our equity-method investees, primarily for the licensing of television and film programming. The following tables present the amounts recorded in our consolidated financial statements related to these transactions.
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenues | $ | $ | |||||||||
| Operating expenses | $ | $ | |||||||||
| At | At | ||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Accounts receivable | $ | $ | |||||||||||||||||||||
Through the normal course of business, we are involved in transactions with other related parties that have not been material in any of the periods presented.
5) REVENUES
The table below presents our revenues disaggregated into categories based on the nature of such revenues. See Note 13 for revenues by segment disaggregated into these categories.
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenues by Type: | |||||||||||
| Advertising | $ | $ | |||||||||
| Affiliate and subscription | |||||||||||
| Theatrical | |||||||||||
| Licensing and other | |||||||||||
| Total Revenues | $ | $ | |||||||||
Receivables
Reserves for accounts receivable reflect our expected credit losses based on historical experience as well as current and expected economic conditions. During the first quarter of 2022, following Russia’s invasion of Ukraine, we recorded a charge of $39 million, principally to reserve against amounts due from counterparties in Russia, Belarus and Ukraine. The charge was recorded within “Restructuring and other corporate matters” on the Consolidated Statement of Operations. At March 31, 2022 and December 31, 2021, our allowance for credit losses was $113 million and $80 million, respectively.
Included in “Other assets” on the Consolidated Balance Sheets are noncurrent receivables of $1.67 billion and $1.84 billion at March 31, 2022 and December 31, 2021, respectively. Noncurrent receivables primarily relate to revenues recognized under long-term content licensing arrangements. Revenues from the licensing of content are recognized at the beginning of the license period in which programs are made available to the licensee for exhibition, while the related cash is generally collected over the term of the license period.
-13-
PARAMOUNT GLOBAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Contract Liabilities
Contract liabilities are included within “Deferred revenues” and “Other liabilities” on the Consolidated Balance Sheets and totaled $1.15 billion and $1.20 billion at March 31, 2022 and December 31, 2021, respectively. For the three months ended March 31, 2022, we recognized revenues of $446 million that were included in deferred revenues at December 31, 2021. For the three months ended March 31, 2021, we recognized revenues of $465 million that were included in deferred revenues at December 31, 2020.
Unrecognized Revenues Under Contract
At March 31, 2022, unrecognized revenues attributable to unsatisfied performance obligations under our long-term contracts were $6.8 billion, of which $3.0 billion is expected to be recognized for the remainder of 2022, $2.1 billion in 2023, $0.9 billion in 2024, and $0.8 billion thereafter. These amounts only include contracts subject to a guaranteed fixed amount or the guaranteed minimum under variable contracts, primarily consisting of television and film licensing contracts and affiliate agreements that are subject to a fixed or guaranteed minimum fee. Such amounts change on a regular basis as we renew existing agreements or enter into new agreements. Unrecognized revenues under contracts disclosed above do not include (i) contracts with an original expected term of one year or less, mainly consisting of advertising contracts, (ii) contracts for which variable consideration is determined based on the customer’s subsequent sale or usage, mainly consisting of affiliate agreements and (iii) long-term licensing agreements for multiple programs for which variable consideration is determined based on the value of the programs delivered to the customer and our right to invoice corresponds with the value delivered.
Performance Obligations Satisfied in Previous Periods
-14-
PARAMOUNT GLOBAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
6) DEBT
Our debt consists of the following:
| At | At | ||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||
| Other bank borrowings | |||||||||||||||||||||||
| Obligations under finance leases | |||||||||||||||||||||||
Total debt (a) | |||||||||||||||||||||||
Less current portion of long-term debt | |||||||||||||||||||||||
| Total long-term debt, net of current portion | $ | $ | |||||||||||||||||||||
During the three months ended March 31, 2022, we redeemed all of our notes due in 2024, which were comprised of $492 million of 3.875 % senior notes and $600 million of 3.70 % senior notes, and also redeemed $325 million of our 3.50 % senior notes due 2025, for an aggregate redemption price of $1.48 billion. We also redeemed our $520 million of 5.875 % junior subordinated debentures due February 2057 at par. These redemptions resulted in a total pre-tax loss on extinguishment of debt of $73 million.
-15-
PARAMOUNT GLOBAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
During the three months ended March 31, 2022, we issued $1.00 billion of 6.375 % junior subordinated debentures due 2062. The interest rate on these debentures will reset on March 30, 2027, and every five years thereafter to a fixed rate equal to the 5-year Treasury Rate (as defined pursuant to the terms of the debentures) plus a spread of 3.999 % from March 30, 2027, 4.249 % from March 30, 2032 and 4.999 % from March 30, 2047. These debentures can be called by us at par plus a make whole premium any time before March 30, 2027, or at par on March 30, 2027, or at any interest payment date thereafter.
In April 2022, we redeemed the remaining $275 million of our 3.50 % senior notes due 2025, and $695 million of our 4.75 % senior notes due 2025, for an aggregate redemption price of $1.01 billion.