SEC Filing - Paramount

View:

para-20220930

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 September 30, 2022


☐			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

Paramount Global

(Exact name of registrant as specified in its charter)

Delaware

04-2949533

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

1515 Broadway

New York,

New York

10036

(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

Class A Common Stock, $0.001 par value

PARAA

The Nasdaq Stock Market LLC

Class B Common Stock, $0.001 par value

PARA

The Nasdaq Stock Market LLC

5.75% Series A Mandatory Convertible Preferred Stock, $0.001 par value

PARAP

The Nasdaq Stock Market LLC

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.


Large accelerated filer	☒	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 October 28, 2022:

Class A Common Stock, par value $.001 per share— 40,704,664

Class B Common Stock, par value $.001 per share— 608,469,747

PARAMOUNT GLOBAL

INDEX TO FORM 10-Q


		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2022 and September 30, 2021	3

	Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2022 and September 30, 2021	4

	Consolidated Balance Sheets (Unaudited) at September 30, 2022 and December 31, 2021	5

	Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2022 and September 30, 2021	6

	Consolidated Statements of Stockholders ’ Equity (Unaudited) for the Three and Nine Months Ended September 30, 2022 and September 30, 2021	7

	Notes to Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition.	34

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	65

Item 4.	Controls and Procedures.	65

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	66

Item 1A.	Risk Factors.	66

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	66

Item 6.	Exhibits.	67

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				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Revenues	$	6,916	$	6,610	$	22,023	$	20,586
Costs and expenses:
Operating	4,460		4,064		14,362		12,292
Selling, general and administrative	1,670		1,526		4,999		4,407
Depreciation and amortization	92		95		282		289
Restructuring and other corporate matters	169		46		276		81
Total costs and expenses	6,391		5,731		19,919		17,069
Net gain on dispositions	41		—		56		116
Operating income	566		879		2,160		3,633
Interest expense	(231)		(243)		(701)		(745)
Interest income	33		11		73		37
Net gains (losses) from investments	(9)		(5)		(9)		47
Loss on extinguishment of debt	—		—		(120)		(128)
Other items, net	(36)		(26)		(91)		(55)
Earnings from continuing operations before income taxes and equity in loss of investee companies	323		616		1,312		2,789
Provision for income taxes	(101)		(120)		(264)		(312)
Equity in loss of investee companies, net of tax	(58)		(18)		(124)		(80)
Net earnings from continuing operations	164		478		924		2,397
Net earnings from discontinued operations, net of tax	78		73		181		126
Net earnings (Paramount and noncontrolling interests)	242		551		1,105		2,523
Net earnings attributable to noncontrolling interests	(11)		(13)		(22)		(38)
Net earnings attributable to Paramount	$	231	$	538	$	1,083	$	2,485

Amounts attributable to Paramount:
Net earnings from continuing operations	$	153	$	465	$	902	$	2,359
Net earnings from discontinued operations, net of tax	78		73		181		126
Net earnings attributable to Paramount	$	231	$	538	$	1,083	$	2,485

Basic net earnings per common share attributable to Paramount:
Net earnings from continuing operations	$	.21	$	.70	$	1.32	$	3.65
Net earnings from discontinued operations	$	.12	$	.11	$	.28	$	.20
Net earnings	$	.33	$	.81	$	1.60	$	3.85

Diluted net earnings per common share attributable to Paramount:
Net earnings from continuing operations	$	.21	$	.69	$	1.32	$	3.62
Net earnings from discontinued operations	$	.12	$	.11	$	.28	$	.20
Net earnings	$	.33	$	.80	$	1.60	$	3.81

Weighted average number of common shares outstanding:
Basic	649		646		649		638
Diluted	650		651		650		644

See notes to consolidated financial statements.

-3-

PARAMOUNT GLOBAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited; in millions)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net earnings (Paramount and noncontrolling interests)	$	242	$	551	$	1,105	$	2,523
Other comprehensive income (loss), net of tax:
Cumulative translation adjustments	(248)		(59)		(457)		(114)
Decrease to net actuarial loss and prior service costs	16		33		49		62
Other comprehensive loss from continuing operations, net of tax (Paramount and noncontrolling interests)	(232)		(26)		(408)		(52)
Other comprehensive loss from discontinued operations	(8)		(5)		(14)		—
Comprehensive income	2		520		683		2,471
Less: Comprehensive income attributable to noncontrolling interests	10		12		17		37
Comprehensive income (loss) attributable to Paramount	$	(8)	$	508	$	666	$	2,434

See notes to consolidated financial statements.

-4-

PARAMOUNT GLOBAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except per share amounts)


	At			At
	September 30, 2022			December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents		$	3,383		$	6,267
Receivables, net		6,588			6,984
Programming and other inventory		1,492			1,504
Prepaid expenses and other current assets		1,263			1,176
Current assets of discontinued operations		798			745
Total current assets		13,524			16,676
Property and equipment, net		1,700			1,736
Programming and other inventory		15,449			13,358
Goodwill		16,426			16,584
Intangible assets, net		2,716			2,772
Operating lease assets		1,482			1,630
Deferred income tax assets, net		1,254			1,206
Other assets		3,929			3,824
Assets held for sale		—			19
Assets of discontinued operations		807			815
Total Assets		$	57,287		$	58,620
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	943		$	800
Accrued expenses		2,071			2,323
Participants’ share and royalties payable		2,618			2,159
Accrued programming and production costs		1,837			1,342
Deferred revenues		796			1,091
Debt		196			11
Other current liabilities		1,331			1,182
Current liabilities of discontinued operations		534			571
Total current liabilities		10,326			9,479
Long-term debt		15,638			17,698
Participants’ share and royalties payable		1,436			1,244
Pension and postretirement benefit obligations		1,844			1,946
Deferred income tax liabilities, net		1,037			1,063
Operating lease liabilities		1,468			1,598
Program rights obligations		375			404
Other liabilities		1,727			1,898
Liabilities of discontinued operations		203			213
Redeemable noncontrolling interest		94			107

Commitments and contingencies (Note 14)

Paramount stockholders’ equity:
5.75% Series A Mandatory Convertible Preferred Stock, par value $.001 per share; 25 shares authorized and 10 shares issued (2022 and 2021)		—			—
Class A Common Stock, par value $.001 per share; 55 shares authorized; 41 shares issued (2022 and 2021)		—			—
Class B Common Stock, par value $.001 per share; 5,000 shares authorized; 1,111 (2022) and 1,110 (2021) shares issued		1			1
Additional paid-in capital		33,034			32,918
Treasury stock, at cost; 503 (2022 and 2021) Class B shares		(22,958)			(22,958)
Retained earnings		14,889			14,343
Accumulated other comprehensive loss		(2,319)			(1,902)
Total Paramount stockholders’ equity		22,647			22,402
Noncontrolling interests		492			568
Total Equity		23,139			22,970
Total Liabilities and Equity		$	57,287		$	58,620

See notes to consolidated financial statements.

-5-

PARAMOUNT GLOBAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)


	Nine Months Ended
	September 30,
	2022		2021
Operating Activities:
Net earnings (Paramount and noncontrolling interests)	$	1,105	$	2,523
Less: Net earnings from discontinued operations, net of tax	181		126
Net earnings from continuing operations	924		2,397
Adjustments to reconcile net earnings from continuing operations to net cash flow provided by operating activities from continuing operations:
Depreciation and amortization	282		289
Deferred tax benefit	(42)		(21)
Stock-based compensation	127		154
Net gain on dispositions	(56)		(116)
(Gains) losses from investments	9		(47)
Loss on extinguishment of debt	120		128
Equity in loss of investee companies, net of tax	124		80
Change in assets and liabilities	(1,269)		(1,336)

Net cash flow provided by operating activities from continuing operations	219		1,528
Net cash flow provided by operating activities from discontinued operations	107		124
Net cash flow provided by operating activities	326		1,652
Investing Activities:
Investments	(189)		(147)
Capital expenditures	(228)		(231)
Acquisitions, net of cash acquired	—		(27)
Proceeds from dispositions	38		418
Other investing activities	(1)		(26)
Net cash flow used for investing activities from continuing operations	(380)		(13)
Net cash flow used for investing activities from discontinued operations	(3)		(3)
Net cash flow used for investing activities	(383)		(16)
Financing Activities:

Proceeds from issuance of debt	1,114		48
Repayment of debt	(3,123)		(2,220)


Dividends paid on preferred stock	(43)		(15)
Dividends paid on common stock	(471)		(458)
Proceeds from issuance of preferred stock	—		983
Proceeds from issuance of common stock	—		1,672

Payment of payroll taxes in lieu of issuing shares for stock-based compensation	(14)		(55)
Proceeds from exercise of stock options	—		408
Payments to noncontrolling interests	(106)		(215)
Other financing activities	(38)		(47)
Net cash flow (used for) provided by financing activities	(2,681)		101
Effect of exchange rate changes on cash and cash equivalents	(146)		(30)
Net (decrease) increase in cash, cash equivalents and restricted cash	(2,884)		1,707
Cash, cash equivalents and restricted cash at beginning of year (includes $135 (2021) of restricted cash)	6,267		3,119
Cash, cash equivalents and restricted cash at end of period (includes $3 (2021) of restricted cash)	$	3,383	$	4,826

See notes to consolidated financial statements.

-6-

PARAMOUNT GLOBAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited; in millions)


	Three Months Ended September 30, 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)
June 30, 2022	10	$	—	649	$	1		$	32,984	$	(22,958)		$	14,829		$	(2,080)		$	22,776		$	504	$	23,280
Stock-based compensation activity	—	—		—	—			50		—			—			—			50			—		50
Preferred stock dividends	—	—		—	—			—		—			(14)			—			(14)			—		(14)
Common stock dividends	—	—		—	—			—		—			(159)			—			(159)			—		(159)
Noncontrolling interests	—	—		—	—			—		—			2			—			2			(22)		(20)
Net earnings	—	—		—	—			—		—			231			—			231			11		242
Other comprehensive loss	—	—		—	—			—		—			—			(239)			(239)			(1)		(240)
September 30, 2022	10	$	—	649	$	1		$	33,034	$	(22,958)		$	14,889		$	(2,319)		$	22,647		$	492	$	23,139


	Nine Months Ended September 30, 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	10	$	—	648	$	1		$	32,918	$	(22,958)		$	14,343		$	(1,902)		$	22,402		$	568	$	22,970
Stock-based compensation activity	—	—		1	—			116		—			—			—			116			—		116
Preferred stock dividends	—	—		—	—			—		—			(43)			—			(43)			—		(43)
Common stock dividends	—	—		—	—			—		—			(477)			—			(477)			—		(477)
Noncontrolling interests	—	—		—	—			—		—			(17)			—			(17)			(93)		(110)
Net earnings	—	—		—	—			—		—			1,083			—			1,083			22		1,105
Other comprehensive loss	—	—		—	—			—		—			—			(417)			(417)			(5)		(422)
September 30, 2022	10	$	—	649	$	1		$	33,034	$	(22,958)		$	14,889		$	(2,319)		$	22,647		$	492	$	23,139

See notes to consolidated financial statements.

-7-

PARAMOUNT GLOBAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(Unaudited; in millions)


	Three Months Ended September 30, 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)
June 30, 2021	10	$	—	646	$	1		$	32,901	$	(22,958)		$	12,007		$	(1,853)		$	20,098		$	558	$	20,656
Stock-based compensation activity	—	—		—	—			42		—			—			—			42			—		42
Preferred stock dividends	—	—		—	—			—		—			(14)			—			(14)			—		(14)
Common stock dividends	—	—		—	—			—		—			(159)			—			(159)			—		(159)
Noncontrolling interests	—	—		—	—			—		—			84			—			84			(60)		24
Net earnings	—	—		—	—			—		—			538			—			538			13		551
Other comprehensive loss	—	—		—	—			—		—			—			(30)			(30)			(1)		(31)
September 30, 2021	10	$	—	646	$	1		$	32,943	$	(22,958)		$	12,456		$	(1,883)		$	20,559		$	510	$	21,069


	Nine Months Ended September 30, 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	—	$	—	617	$	1		$	29,785	$	(22,958)		$	10,375		$	(1,832)		$	15,371		$	685	$	16,056
Stock-based compensation activity	—	—		9	—			503		—			—			—			503			—		503
Stock issuances	10	—		20	—			2,655		—			—			—			2,655			—		2,655
Preferred stock dividends	—	—		—	—			—		—			(30)			—			(30)			—		(30)
Common stock dividends	—	—		—	—			—		—			(468)			—			(468)			—		(468)
Noncontrolling interests	—	—		—	—			—		—			94			—			94			(212)		(118)
Net earnings	—	—		—	—			—		—			2,485			—			2,485			38		2,523
Other comprehensive loss	—	—		—	—			—		—			—			(51)			(51)			(1)		(52)
September 30, 2021	10	$	—	646	$	1		$	32,943	$	(22,958)		$	12,456		$	(1,883)		$	20,559		$	510	$	21,069

See notes to consolidated financial statements.

-8-

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% Series A Mandatory Convertible Preferred Stock (“Mandatory Convertible Preferred Stock”) ceased trading under the ticker symbols “VIACA,” “VIAC” and “VIACP” and began trading under the ticker symbols “PARAA,” “PARA” and “PARAP,” respectively, on The Nasdaq Stock Market LLC. References to “Paramount,” the “Company,” “we,” “us” and “our” refer to Paramount Global and its consolidated subsidiaries, unless the context otherwise requires.

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 (“Bertelsmann”), 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).

-9-

PARAMOUNT GLOBAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Use of Estimates—The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may vary from these estimates under different assumptions or conditions.

Net Earnings per Common Share—Basic net earnings per share (“EPS”) is based upon net earnings available to common stockholders divided by the weighted average number of common shares outstanding during the period. Net earnings available to common stockholders is calculated as net earnings from continuing operations or net earnings, as applicable, adjusted to include dividends on our Mandatory Convertible Preferred Stock.

Weighted average shares for diluted EPS reflects the effect of the assumed exercise of stock options and vesting of restricted stock units (“RSUs”) or performance stock units (“PSUs”) only in the periods in which such effect would have been dilutive. Diluted EPS also reflects the effect of the assumed conversion of preferred stock, if dilutive, which includes the issuance of common shares in the weighted average number of shares and excludes the above-mentioned preferred stock dividend adjustment to net earnings available to common stockholders.

Excluded from the calculation of diluted EPS, because their inclusion would have been antidilutive, were stock options and RSUs of 14 million and 10 million for the three and nine months ended September 30, 2022, respectively, and stock options and RSUs of 6 million and 5 million for the three and nine months ended September 30, 2021, respectively. Also excluded from the calculation of diluted EPS for the three and nine months ended September 30, 2022 and 2021 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		Nine Months Ended
	September 30,		September 30,
(in millions)	2022	2021	2022	2021
Weighted average shares for basic EPS	649	646	649	638
Dilutive effect of shares issuable under stock-based compensation plans	1	5	1	6

Weighted average shares for diluted EPS	650	651	650	644

-10-

PARAMOUNT GLOBAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)