|
|
|
|
|
|
Item 1.
|
Financial Statements.
|
VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Revenues
|
|
|
|
|
$
|
7,412
|
|
|
$
|
6,499
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
4,363
|
|
|
3,956
|
|
Selling, general and administrative
|
|
|
|
|
1,422
|
|
|
1,298
|
|
Depreciation and amortization
|
|
|
|
|
99
|
|
|
112
|
|
Restructuring and other corporate matters
|
|
|
|
|
—
|
|
|
231
|
|
Total costs and expenses
|
|
|
|
|
5,884
|
|
|
5,597
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
1,528
|
|
|
902
|
|
Interest expense
|
|
|
|
|
(259)
|
|
|
(241)
|
|
Interest income
|
|
|
|
|
13
|
|
|
14
|
|
Loss on extinguishment of debt
|
|
|
|
|
(128)
|
|
|
—
|
|
Other items, net
|
|
|
|
|
1
|
|
|
(28)
|
|
Earnings from continuing operations before income taxes and equity in loss of
investee companies
|
|
|
|
|
1,155
|
|
|
647
|
|
Provision for income taxes
|
|
|
|
|
(226)
|
|
|
(134)
|
|
Equity in loss of investee companies, net of tax
|
|
|
|
|
(18)
|
|
|
(9)
|
|
Net earnings from continuing operations
|
|
|
|
|
911
|
|
|
504
|
|
Net earnings from discontinued operations, net of tax
|
|
|
|
|
12
|
|
|
15
|
|
Net earnings (ViacomCBS and noncontrolling interests)
|
|
|
|
|
923
|
|
|
519
|
|
Net earnings attributable to noncontrolling interests
|
|
|
|
|
(12)
|
|
|
(3)
|
|
Net earnings attributable to ViacomCBS
|
|
|
|
|
$
|
911
|
|
|
$
|
516
|
|
|
|
|
|
|
|
|
|
Amounts attributable to ViacomCBS:
|
|
|
|
|
|
|
|
Net earnings from continuing operations
|
|
|
|
|
$
|
899
|
|
|
$
|
501
|
|
Net earnings from discontinued operations, net of tax
|
|
|
|
|
12
|
|
|
15
|
|
Net earnings attributable to ViacomCBS
|
|
|
|
|
$
|
911
|
|
|
$
|
516
|
|
|
|
|
|
|
|
|
|
Basic net earnings per common share attributable to ViacomCBS:
|
|
|
|
|
|
|
|
Net earnings from continuing operations
|
|
|
|
|
$
|
1.44
|
|
|
$
|
.82
|
|
Net earnings from discontinued operations
|
|
|
|
|
$
|
.02
|
|
|
$
|
.02
|
|
Net earnings
|
|
|
|
|
$
|
1.46
|
|
|
$
|
.84
|
|
|
|
|
|
|
|
|
|
Diluted net earnings per common share attributable to ViacomCBS:
|
|
|
|
|
|
|
|
Net earnings from continuing operations
|
|
|
|
|
$
|
1.42
|
|
|
$
|
.81
|
|
Net earnings from discontinued operations
|
|
|
|
|
$
|
.02
|
|
|
$
|
.02
|
|
Net earnings
|
|
|
|
|
$
|
1.44
|
|
|
$
|
.84
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
622
|
|
|
614
|
|
Diluted
|
|
|
|
|
631
|
|
|
616
|
|
See notes to consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited; in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Net earnings (ViacomCBS and noncontrolling interests)
|
|
|
|
|
$
|
923
|
|
|
$
|
519
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
Cumulative translation adjustments
|
|
|
|
|
(66)
|
|
|
(90)
|
|
Net actuarial loss and prior service costs
|
|
|
|
|
13
|
|
|
17
|
|
Other comprehensive loss from continuing operations, net of tax
(ViacomCBS and noncontrolling interests)
|
|
|
|
|
(53)
|
|
|
(73)
|
|
Other comprehensive income (loss) from discontinued operations
|
|
|
|
|
2
|
|
|
(14)
|
|
Comprehensive income
|
|
|
|
|
872
|
|
|
432
|
|
Less: Comprehensive income attributable to noncontrolling interests
|
|
|
|
|
11
|
|
|
—
|
|
Comprehensive income attributable to ViacomCBS
|
|
|
|
|
$
|
861
|
|
|
$
|
432
|
|
See notes to consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
March 31, 2021
|
|
December 31, 2020
|
ASSETS
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,499
|
|
|
|
|
$
|
2,984
|
|
|
Receivables, net
|
|
7,310
|
|
|
|
|
7,017
|
|
|
Programming and other inventory
|
|
1,137
|
|
|
|
|
1,757
|
|
|
Prepaid and other current assets
|
|
1,027
|
|
|
|
|
1,391
|
|
|
Current assets of discontinued operations
|
|
514
|
|
|
|
|
630
|
|
|
Total current assets
|
|
15,487
|
|
|
|
|
13,779
|
|
|
Property and equipment, net
|
|
1,994
|
|
|
|
|
1,994
|
|
|
Programming and other inventory
|
|
10,755
|
|
|
|
|
10,363
|
|
|
Goodwill
|
|
16,591
|
|
|
|
|
16,612
|
|
|
Intangible assets, net
|
|
2,815
|
|
|
|
|
2,826
|
|
|
Operating lease assets
|
|
1,527
|
|
|
|
|
1,602
|
|
|
Deferred income tax assets, net
|
|
981
|
|
|
|
|
993
|
|
|
Other assets
|
|
3,785
|
|
|
|
|
3,657
|
|
|
Assets held for sale
|
|
27
|
|
|
|
|
28
|
|
|
Assets of discontinued operations
|
|
811
|
|
|
|
|
809
|
|
|
Total Assets
|
|
$
|
54,773
|
|
|
|
|
$
|
52,663
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
612
|
|
|
|
|
$
|
571
|
|
|
Accrued expenses
|
|
1,663
|
|
|
|
|
1,714
|
|
|
Participants’ share and royalties payable
|
|
2,070
|
|
|
|
|
2,005
|
|
|
Accrued programming and production costs
|
|
1,392
|
|
|
|
|
1,141
|
|
|
Deferred revenues
|
|
1,010
|
|
|
|
|
978
|
|
|
Debt
|
|
19
|
|
|
|
|
16
|
|
|
Other current liabilities
|
|
1,512
|
|
|
|
|
1,391
|
|
|
Current liabilities of discontinued operations
|
|
423
|
|
|
|
|
480
|
|
|
Total current liabilities
|
|
8,701
|
|
|
|
|
8,296
|
|
|
Long-term debt
|
|
17,768
|
|
|
|
|
19,717
|
|
|
Participants’ share and royalties payable
|
|
1,351
|
|
|
|
|
1,317
|
|
|
Pension and postretirement benefit obligations
|
|
2,070
|
|
|
|
|
2,098
|
|
|
Deferred income tax liabilities, net
|
|
852
|
|
|
|
|
778
|
|
|
Operating lease liabilities
|
|
1,517
|
|
|
|
|
1,583
|
|
|
Program rights obligations
|
|
212
|
|
|
|
|
243
|
|
|
Other liabilities
|
|
2,058
|
|
|
|
|
2,158
|
|
|
Liabilities of discontinued operations
|
|
212
|
|
|
|
|
220
|
|
|
Redeemable noncontrolling interest
|
|
189
|
|
|
|
|
197
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ViacomCBS stockholders’ equity:
|
|
|
|
|
|
|
|
5.75% Series A Mandatory Convertible Preferred Stock, par value $.001 per share;
25 shares authorized and 10 shares issued (2021)
|
|
—
|
|
|
|
|
—
|
|
|
Class A Common Stock, par value $.001 per share; 55 shares authorized;
41 (2021) and 52 (2020) shares issued
|
|
—
|
|
|
|
|
—
|
|
|
Class B Common Stock, par value $.001 per share; 5,000 shares authorized;
1,108 (2021) and 1,068 (2020) shares issued
|
|
1
|
|
|
|
|
1
|
|
|
Additional paid-in capital
|
|
32,866
|
|
|
|
|
29,785
|
|
|
Treasury stock, at cost; 503 (2021 and 2020) Class B shares
|
|
(22,958)
|
|
|
|
|
(22,958)
|
|
|
Retained earnings
|
|
11,144
|
|
|
|
|
10,375
|
|
|
Accumulated other comprehensive loss
|
|
(1,882)
|
|
|
|
|
(1,832)
|
|
|
Total ViacomCBS stockholders’ equity
|
|
19,171
|
|
|
|
|
15,371
|
|
|
Noncontrolling interests
|
|
672
|
|
|
|
|
685
|
|
|
Total Equity
|
|
19,843
|
|
|
|
|
16,056
|
|
|
Total Liabilities and Equity
|
|
$
|
54,773
|
|
|
|
|
$
|
52,663
|
|
|
See notes to consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
|
2021
|
|
2020
|
Operating Activities:
|
|
|
|
Net earnings (ViacomCBS and noncontrolling interests)
|
$
|
923
|
|
|
$
|
519
|
|
Less: Net earnings from discontinued operations, net of tax
|
12
|
|
|
15
|
|
Net earnings from continuing operations
|
911
|
|
|
504
|
|
Adjustments to reconcile net earnings from continuing operations to net cash flow provided
by operating activities:
|
|
|
|
Depreciation and amortization
|
99
|
|
|
112
|
|
Deferred tax provision
|
95
|
|
|
153
|
|
Stock-based compensation
|
52
|
|
|
87
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
128
|
|
|
—
|
|
Equity in loss of investee companies, net of tax and distributions
|
18
|
|
|
9
|
|
Change in assets and liabilities
|
348
|
|
|
(508)
|
|
|
|
|
|
Net cash flow provided by operating activities from continuing operations
|
1,651
|
|
|
357
|
|
Net cash flow provided by (used for) operating activities from discontinued operations
|
72
|
|
|
(1)
|
|
Net cash flow provided by operating activities
|
1,723
|
|
|
356
|
|
Investing Activities:
|
|
|
|
Investments
|
(40)
|
|
|
(46)
|
|
Capital expenditures
|
(62)
|
|
|
(51)
|
|
|
|
|
|
Proceeds from sale of investments
|
213
|
|
|
146
|
|
Other investing activities
|
(25)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Net cash flow provided by investing activities
|
86
|
|
|
49
|
|
Financing Activities:
|
|
|
|
Repayments of short-term debt borrowings, net
|
—
|
|
|
(186)
|
|
|
|
|
|
Repayment of long-term debt
|
(2,117)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Dividends paid on common stock
|
(151)
|
|
|
(152)
|
|
Proceeds from issuance of preferred stock
|
983
|
|
|
—
|
|
Proceeds from issuance of common stock
|
1,672
|
|
|
—
|
|
Purchase of Company common stock
|
—
|
|
|
(58)
|
|
Payment of payroll taxes in lieu of issuing shares for stock-based compensation
|
(35)
|
|
|
(50)
|
|
Proceeds from exercise of stock options
|
408
|
|
|
5
|
|
Other financing activities
|
(37)
|
|
|
(38)
|
|
Net cash flow provided by (used for) financing activities
|
723
|
|
|
(479)
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(19)
|
|
|
(29)
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
2,513
|
|
|
(103)
|
|
Cash, cash equivalents and restricted cash at beginning of period
(includes $135 (2021) and $202 (2020) of restricted cash)
|
3,119
|
|
|
834
|
|
Cash, cash equivalents and restricted cash at end of period
(includes $133 (2021) and $142 (2020) of restricted cash)
|
$
|
5,632
|
|
|
$
|
731
|
|
|
|
|
|
See notes to consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited; in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 ViacomCBS 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
|
|
|
—
|
|
|
426
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
426
|
|
|
|
|
—
|
|
|
|
426
|
|
Stock issuances
|
10
|
|
|
—
|
|
20
|
|
|
—
|
|
|
2,655
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
2,655
|
|
|
|
|
—
|
|
|
|
2,655
|
|
Preferred stock
dividends
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(1)
|
|
|
|
|
—
|
|
|
|
|
(1)
|
|
|
|
|
—
|
|
|
|
(1)
|
|
Common stock
dividends
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(152)
|
|
|
|
|
—
|
|
|
|
|
(152)
|
|
|
|
|
—
|
|
|
|
(152)
|
|
Noncontrolling
interests
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
11
|
|
|
|
|
—
|
|
|
|
|
11
|
|
|
|
|
(24)
|
|
|
|
(13)
|
|
Net earnings
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
911
|
|
|
|
|
—
|
|
|
|
|
911
|
|
|
|
|
12
|
|
|
|
923
|
|
Other comprehensive
loss
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(50)
|
|
|
|
|
(50)
|
|
|
|
|
(1)
|
|
|
|
(51)
|
|
March 31, 2021
|
10
|
|
|
$
|
—
|
|
646
|
|
|
$
|
1
|
|
|
$
|
32,866
|
|
|
$
|
(22,958)
|
|
|
|
$
|
11,144
|
|
|
|
|
$
|
(1,882)
|
|
|
|
|
$
|
19,171
|
|
|
|
|
$
|
672
|
|
|
|
$
|
19,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
Class A and B Common Stock
|
Additional Paid-In Capital
|
Treasury
Stock
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Total ViacomCBS Stockholders’ Equity
|
|
Noncontrolling Interests
|
|
Total Equity
|
|
(Shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
615
|
|
|
$
|
1
|
|
|
$
|
29,590
|
|
|
$
|
(22,908)
|
|
|
|
$
|
8,494
|
|
|
|
|
$
|
(1,970)
|
|
|
|
|
$
|
13,207
|
|
|
|
|
$
|
82
|
|
|
|
$
|
13,289
|
|
Stock-based compensation
activity
|
1
|
|
|
—
|
|
|
43
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
43
|
|
|
|
|
—
|
|
|
|
43
|
|
Class B Common Stock
purchased
|
(1)
|
|
|
—
|
|
|
—
|
|
|
(50)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(50)
|
|
|
|
|
—
|
|
|
|
(50)
|
|
Common stock
dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(150)
|
|
|
|
|
—
|
|
|
|
|
(150)
|
|
|
|
|
—
|
|
|
|
(150)
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(33)
|
|
|
|
|
—
|
|
|
|
|
(33)
|
|
|
|
|
(10)
|
|
|
|
(43)
|
|
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
516
|
|
|
|
|
—
|
|
|
|
|
516
|
|
|
|
|
3
|
|
|
|
519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(84)
|
|
|
|
|
(84)
|
|
|
|
|
(3)
|
|
|
|
(87)
|
|
March 31, 2020
|
615
|
|
|
$
|
1
|
|
|
$
|
29,633
|
|
|
$
|
(22,958)
|
|
|
|
$
|
8,827
|
|
|
|
|
$
|
(2,054)
|
|
|
|
|
$
|
13,449
|
|
|
|
|
$
|
72
|
|
|
|
$
|
13,521
|
|
See notes to consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
1) BASIS OF PRESENTATION
Description of Business—ViacomCBS Inc. is comprised of the following segments: TV Entertainment (CBS Television Network; CBS Studios; CBS Media Ventures; streaming services, including Paramount+ and CBSN; CBS Sports Network and CBS Television Stations), Cable Networks (premium and basic cable networks, including Showtime, BET, Nickelodeon, MTV, Comedy Central, Paramount Network, and Smithsonian channel; streaming services, including Pluto TV and Showtime Networks’ premium subscription streaming service (“Showtime OTT”); and ViacomCBS Networks International, including Channel 5, Telefe and Network 10) and Filmed Entertainment (Paramount Pictures, Paramount Players, Paramount Animation, Paramount Television Studios and Miramax). References to “ViacomCBS,” the “Company,” “we,” “us” and “our” refer to ViacomCBS Inc. and its consolidated subsidiaries, unless the context otherwise requires.
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 of America (“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, 2020.
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, 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).
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 at 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 preferred stock dividends accumulated during the period. During the three months ended March 31, 2021, we accumulated dividends of $1 million on the 5.75% Series A Mandatory Convertible Preferred Stock (“Mandatory Convertible Preferred Stock”) that was issued during the first quarter of 2021 (see Note 9).
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-
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
mentioned accumulated preferred stock dividend adjustment to net earnings available to common stockholders. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, were stock options of 3 million for the three months ended March 31, 2021 and stock options and RSUs of 26 million for the three months ended March 31, 2020.
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)
|
|
|
|
|
2021
|
|
2020
|
Weighted average shares for basic EPS
|
|
|
|
|
622
|
|
|
614
|
|
Dilutive effect of shares issuable under stock-based
compensation plans
|
|
|
|
|
8
|
|
|
2
|
|
Dilutive effect of Mandatory Convertible Preferred Stock
|
|
|
|
|
1
|
|
|
—
|
|
Weighted average shares for diluted EPS
|
|
|
|
|
631
|
|
|
616
|
|
Recently Adopted Accounting Pronouncements
Simplifying the Accounting for Income Taxes
On January 1, 2021, we adopted Financial Accounting Standards Board (“FASB”) guidance on the accounting for income taxes that, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the interim period that includes the enactment date. The adoption of this guidance did not have a material impact on our consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
Reference Rate Reform
In March 2020, the FASB issued guidance providing optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The guidance is effective immediately upon issuance and an entity may elect to apply it to contract modifications or hedging relationships entered into on or before December 31, 2022, with a few exceptions for certain hedging relationships existing as of December 31, 2022. We intend to apply this guidance when modifications of contracts that include LIBOR occur, which is not expected to have a material impact on our consolidated financial statements.
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
On August 5, 2020, the FASB issued amended guidance to reduce complexity associated with the accounting for convertible instruments with characteristics of liabilities and equity. Under this guidance, embedded conversion features associated with convertible instruments no longer need to be separated from the host contracts unless they are required to be accounted for as derivatives or have been issued at a substantial premium. For contracts in an entity’s own equity, this guidance removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exceptions. This guidance also amends certain EPS guidance for convertible instruments and expands disclosure requirements. This guidance is effective for fiscal years beginning after
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
December 15, 2021, with early adoption permitted, and is not expected to have a material impact on our consolidated financial statements.
2) DISCONTINUED OPERATIONS
During the fourth quarter of 2020, we entered into an agreement to sell our publishing business, Simon & Schuster, for $2.175 billion in cash. The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in 2021. Simon & Schuster has been presented as a discontinued operation in our consolidated financial statements for all periods presented.
The following table sets forth details of net earnings from discontinued operations for the three months ended March 31, 2021 and 2020, which primarily reflects the results of Simon & Schuster.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
|
2021
|
|
2020
|
Revenues
|
$
|
185
|
|
|
$
|
170
|
|
Costs and expenses:
|
|
|
|
Operating
|
120
|
|
|
99
|
|
Selling, general and administrative
|
38
|
|
|
43
|
|
Depreciation and amortization
|
—
|
|
|
1
|
|
Restructuring charges
|
—
|
|
|
2
|
|
Total costs and expenses (a)
|
158
|
|
|
145
|
|
Operating income
|
27
|
|
|
25
|
|
Other items, net
|
(2)
|
|
|
(5)
|
|
Earnings from discontinued operations
|
25
|
|
|
20
|
|
Income tax provision (b)
|
(13)
|
|
|
(5)
|
|
Net earnings from discontinued operations, net of tax
|
$
|
12
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The three months ended March 31, 2020 includes $10 million for the release of indemnification obligations for leases relating to a previously disposed business.
(b) The three months ended March 31, 2021 and 2020 include tax provisions of $7 million and $2 million, respectively, related to previously disposed businesses.
The following table presents the major classes of assets and liabilities of our discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
|
At
|
|
|
March 31, 2021
|
December 31, 2020
|
Receivables, net
|
|
$
|
322
|
|
|
|
$
|
447
|
|
|
Other current assets
|
|
192
|
|
|
|
183
|
|
|
Goodwill
|
|
435
|
|
|
|
435
|
|
|
Property and equipment, net
|
|
42
|
|
|
|
42
|
|
|
Operating lease assets
|
|
191
|
|
|
|
191
|
|
|
Other assets
|
|
143
|
|
|
|
141
|
|
|
Total Assets
|
|
$
|
1,325
|
|
|
|
$
|
1,439
|
|
|
Royalties payable
|
|
$
|
112
|
|
|
|
$
|
131
|
|
|
Other current liabilities
|
|
311
|
|
|
|
349
|
|
|
Operating lease liabilities
|
|
191
|
|
|
|
194
|
|
|
Other liabilities
|
|
21
|
|
|
|
26
|
|
|
Total Liabilities
|
|
$
|
635
|
|
|
|
$
|
700
|
|
|
VIACOMCBS INC. 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, 2021 and December 31, 2020, grouped by type and predominant monetization strategy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
March 31, 2021
|
|
December 31, 2020
|
Film Group Monetization:
|
|
|
|
|
|
|
|
Acquired program rights, including prepaid sports rights
|
|
$
|
2,688
|
|
|
|
|
$
|
3,413
|
|
|
Internally-produced television programming:
|
|
|
|
|
|
|
|
Released
|
|
2,526
|
|
|
|
|
2,558
|
|
|
In process and other
|
|
1,976
|
|
|
|
|
1,682
|
|
|
|
|
|
|
|
|
|
|
Individual Monetization:
|
|
|
|
|
|
|
|
Acquired libraries
|
|
475
|
|
|
|
|
483
|
|
|
Film inventory:
|
|
|
|
|
|
|
|
Released
|
|
417
|
|
|
|
|
374
|
|
|
Completed, not yet released
|
|
414
|
|
|
|
|
543
|
|
|
In process and other
|
|
991
|
|
|
|
|
816
|
|
|
Internally-produced television programming
|
|
|
|
|
|
|
|
Released
|
|
1,338
|
|
|
|
|
1,206
|
|
|
In process and other
|
|
1,033
|
|
|
|
|
1,013
|
|
|
|
|
|
|
|
|
|
|
Home entertainment
|
|
34
|
|
|
|
|
32
|
|
|
Total programming and other inventory
|
|
11,892
|
|
|
|
|
12,120
|
|
|
Less current portion
|
|
1,137
|
|
|
|
|
1,757
|
|
|
Total noncurrent programming and other inventory
|
|
$
|
10,755
|
|
|
|
|
$
|
10,363
|
|
|
The following table presents amortization of television and film programming and production costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Programming costs, acquired programming
|
|
|
|
|
$
|
1,502
|
|
|
$
|
973
|
|
|
|
|
|
|
|
|
|
Production costs, internally-produced television and film programming:
|
|
|
|
|
|
|
|
Individual monetization
|
|
|
|
|
$
|
760
|
|
|
$
|
770
|
|
Film group monetization
|
|
|
|
|
$
|
650
|
|
|
$
|
689
|
|
4) RESTRUCTURING AND OTHER CORPORATE MATTERS
Restructuring Charges
During the three months ended March 31, 2020, we recorded restructuring charges of $200 million associated with cost-transformation initiatives in connection with the merger of Viacom Inc. with and into CBS Corporation (the “Merger”) in an effort to reduce redundancies across our businesses. These charges consisted of $174 million of severance costs, including the accelerated vesting of stock-based compensation, and $26 million of exit costs resulting from the termination of contractual obligations.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The following table presents a rollforward of our restructuring liability, which is recorded in “Other current liabilities” and “Other liabilities” on the Consolidated Balance Sheets. The majority of the restructuring liability at March 31, 2021, which primarily relates to severance payments, is expected to be paid by the end of 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
2021 Activity
|
|
Balance at
|
|
December 31, 2020
|
|
|
|
Payments
|
|
Other
|
|
March 31, 2021
|
TV Entertainment
|
|
$
|
112
|
|
|
|
|
|
|
$
|
(13)
|
|
|
|
$
|
(2)
|
|
|
|
$
|
97
|
|
|
Cable Networks
|
|
144
|
|
|
|
|
|
|
(33)
|
|
|
|
(2)
|
|
|
|
109
|
|
|
Filmed Entertainment
|
|
30
|
|
|
|
|
|
|
(5)
|
|
|
|
(4)
|
|
|
|
21
|
|
|
Corporate
|
|
86
|
|
|
|
|
|
|
(33)
|
|
|
|
(2)
|
|
|
|
51
|
|
|
Total
|
|
$
|
372
|
|
|
|
|
|
|
$
|
(84)
|
|
|
|
$
|
(10)
|
|
|
|
$
|
278
|
|
|
Merger-related Costs and Other Corporate Matters
During the three months ended March 31, 2020, in addition to the above-mentioned restructuring charges, we incurred $31 million of merger-related costs, consisting of transaction-related bonuses and professional fees mainly associated with integration activities.
In addition, during the three months ended March 31, 2020, we recorded accelerated depreciation expense of $12 million resulting from the abandonment of technology in connection with synergy plans related to the Merger, which is recorded in “Depreciation and amortization” in the Consolidated Statement of Operations.
5) RELATED PARTIES
National Amusements, Inc.
National Amusements, Inc. (“NAI”) is the controlling stockholder of ViacomCBS. At March 31, 2021, NAI directly or indirectly owned approximately 77.4% of our voting Class A Common Stock and 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. The 80% voting interest of NAI held by the General Trust was previously held by it and another trust; each trust held 40% of the voting interest and shared the same seven voting trustees who were required to cause each of the two trusts to vote the NAI shares in the same manner. Shari E. Redstone, Chairperson, CEO and 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,
|
|
|
|
|
|
2021
|
|
2020
|
Revenues
|
|
|
|
|
$
|
65
|
|
|
$
|
52
|
|
Operating expenses
|
|
|
|
|
$
|
4
|
|
|
$
|
2
|
|
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
49
|
|
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
6) REVENUES
The table below presents our revenues disaggregated into categories based on the nature of such revenues. Beginning in the first quarter of 2021, and for all comparable prior-year periods, these categories include streaming revenues, which aligns with management’s increased focus on this revenue stream. Streaming revenues are comprised of streaming advertising and streaming subscription revenues. Streaming advertising revenues are earned from advertisements on our pay and free streaming services, including Paramount+ and Pluto TV, and from digital video advertisements on our websites and in our video content on third-party platforms (“other digital video platforms”). Streaming subscription revenues include fees for our pay streaming services, including Paramount+, Showtime OTT, BET+ and Noggin, as well as premium subscriptions to access certain video content on our websites. Accordingly, our advertising and affiliate revenue categories exclude revenues earned by our streaming services and on other digital video platforms.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Revenues by Type:
|
|
|
|
|
|
|
|
Advertising (a)
|
|
|
|
|
$
|
2,681
|
|
|
$
|
2,219
|
|
Affiliate (b)
|
|
|
|
|
2,075
|
|
|
1,968
|
|
Streaming
|
|
|
|
|
816
|
|
|
494
|
|
Theatrical
|
|
|
|
|
1
|
|
|
167
|
|
Licensing and other
|
|
|
|
|
1,839
|
|
|
1,651
|
|
Total Revenues
|
|
|
|
|
$
|
7,412
|
|
|
$
|
6,499
|
|
(a) Excludes streaming advertising revenues.
(b) Excludes streaming subscription revenues.
Receivables
Reserves for accounts receivable reflect our expected credit losses based on historical experience as well as current and expected economic conditions. Our allowance for credit losses was $83 million and $85 million at March 31, 2021 and December 31, 2020, respectively.
Included in “Other assets” on the Consolidated Balance Sheets are noncurrent receivables of $1.97 billion and $2.02 billion at March 31, 2021 and December 31, 2020, respectively. Noncurrent receivables primarily relate to revenues recognized under long-term television licensing arrangements. Television license fee revenues 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 collected over the term of the license period.
VIACOMCBS INC. 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 were $1.17 billion and $1.12 billion at March 31, 2021 and December 31, 2020, respectively. For the three months ended March 31, 2021, we recognized revenues of $465 million that were included in deferred revenues at December 31, 2020. For the three months ended March 31, 2020, we recognized revenues of $276 million that were included in deferred revenues at December 31, 2019.
Unrecognized Revenues Under Contract
At March 31, 2021, unrecognized revenues attributable to unsatisfied performance obligations under our long-term contracts was $6.48 billion, of which $2.91 billion is expected to be recognized for the remainder of 2021, $2.39 billion in 2022, $778 million in 2023, and $399 million 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
Under certain licensing arrangements, the amount and timing of our revenue recognition is determined based on our licensees’ subsequent sale to its end customers. As a result, under such arrangements, which primarily include licensing of our content to distributors of transactional video-on-demand and electronic sell-through services, we often satisfy our performance obligation of delivery of our content in advance of revenue recognition. During the three months ended March 31, 2021 and 2020, we recognized revenues of $80 million and $74 million, respectively, in our Filmed Entertainment segment for performance obligations satisfied, or partially satisfied, in a prior period.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
7) DEBT
Our debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
2.250% Senior Notes due 2022
|
|
$
|
—
|
|
|
|
|
$
|
35
|
|
|
3.375% Senior Notes due 2022
|
|
—
|
|
|
|
|
415
|
|
|
3.125% Senior Notes due 2022
|
|
—
|
|
|
|
|
117
|
|
|
2.50% Senior Notes due 2023
|
|
—
|
|
|
|
|
196
|
|
|
3.25% Senior Notes due 2023
|
|
—
|
|
|
|
|
141
|
|
|
2.90% Senior Notes due 2023
|
|
—
|
|
|
|
|
242
|
|
|
4.25% Senior Notes due 2023
|
|
—
|
|
|
|
|
837
|
|
|
7.875% Debentures due 2023
|
|
139
|
|
|
|
|
139
|
|
|
7.125% Senior Notes due 2023
|
|
35
|
|
|
|
|
35
|
|
|
3.875% Senior Notes due 2024
|
|
490
|
|
|
|
|
490
|
|
|
3.70% Senior Notes due 2024
|
|
598
|
|
|
|
|
598
|
|
|
3.50% Senior Notes due 2025
|
|
597
|
|
|
|
|
596
|
|
|
4.75% Senior Notes due 2025
|
|
1,240
|
|
|
|
|
1,239
|
|
|
4.0% Senior Notes due 2026
|
|
791
|
|
|
|
|
791
|
|
|
3.45% Senior Notes due 2026
|
|
123
|
|
|
|
|
123
|
|
|
2.90% Senior Notes due 2027
|
|
691
|
|
|
|
|
691
|
|
|
3.375% Senior Notes due 2028
|
|
495
|
|
|
|
|
495
|
|
|
3.70% Senior Notes due 2028
|
|
492
|
|
|
|
|
492
|
|
|
4.20% Senior Notes due 2029
|
|
494
|
|
|
|
|
493
|
|
|
7.875% Senior Debentures due 2030
|
|
831
|
|
|
|
|
831
|
|
|
4.95% Senior Notes due 2031
|
|
1,221
|
|
|
|
|
1,220
|
|
|
4.20% Senior Notes due 2032
|
|
970
|
|
|
|
|
969
|
|
|
5.50% Senior Debentures due 2033
|
|
427
|
|
|
|
|
427
|
|
|
4.85% Senior Debentures due 2034
|
|
87
|
|
|
|
|
87
|
|
|
6.875% Senior Debentures due 2036
|
|
1,069
|
|
|
|
|
1,069
|
|
|
6.75% Senior Debentures due 2037
|
|
75
|
|
|
|
|
75
|
|
|
5.90% Senior Notes due 2040
|
|
298
|
|
|
|
|
298
|
|
|
4.50% Senior Debentures due 2042
|
|
45
|
|
|
|
|
45
|
|
|
4.85% Senior Notes due 2042
|
|
487
|
|
|
|
|
487
|
|
|
4.375% Senior Debentures due 2043
|
|
1,117
|
|
|
|
|
1,116
|
|
|
4.875% Senior Debentures due 2043
|
|
18
|
|
|
|
|
18
|
|
|
5.85% Senior Debentures due 2043
|
|
1,232
|
|
|
|
|
1,232
|
|
|
5.25% Senior Debentures due 2044
|
|
345
|
|
|
|
|
345
|
|
|
4.90% Senior Notes due 2044
|
|
540
|
|
|
|
|
540
|
|
|
4.60% Senior Notes due 2045
|
|
589
|
|
|
|
|
589
|
|
|
4.95% Senior Notes due 2050
|
|
943
|
|
|
|
|
942
|
|
|
5.875% Junior Subordinated Debentures due 2057
|
|
514
|
|
|
|
|
514
|
|
|
6.25% Junior Subordinated Debentures due 2057
|
|
643
|
|
|
|
|
643
|
|
|
Other bank borrowings
|
|
115
|
|
|
|
|
95
|
|
|
Obligations under finance leases
|
|
36
|
|
|
|
|
26
|
|
|
Total debt (a)
|
|
17,787
|
|
|
|
|
19,733
|
|
|
|
|
|
|
|
|
|
|
Less current portion of long-term debt
|
|
19
|
|
|
|
|
16
|
|
|
Total long-term debt, net of current portion
|
|
$
|
17,768
|
|
|
|
|
$
|
19,717
|
|
|
(a) At March 31, 2021 and December 31, 2020, the senior and junior subordinated debt balances included (i) a net unamortized discount of $481 million and $491 million, respectively, and (ii) unamortized deferred financing costs of $102 million and $107 million, respectively. The face value of our total debt was $18.37 billion and $20.33 billion at March 31, 2021 and December 31, 2020, respectively.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
During the three months ended March 31, 2021, we redeemed senior notes totaling $1.99 billion, prior to maturity, for an aggregate redemption price of $2.11 billion resulting in a pre-tax loss on extinguishment of debt of $128 million.
Our 5.875% junior subordinated debentures due February 2057 and 6.25% junior subordinated debentures due February 2057 accrue interest at the stated fixed rates until February 28, 2022 and February 28, 2027, respectively, on which dates the rates will switch to floating rates based on three-month LIBOR plus 3.895% and 3.899%, respectively, reset quarterly. These debentures can be called by us at any time after the expiration of the fixed-rate period.
Commercial Paper
At both March 31, 2021 and December 31, 2020, we had no outstanding commercial paper borrowings under our commercial paper program.
Credit Facility
At March 31, 2021, we had a $3.50 billion revolving credit facility with a maturity in January 2025 (the “Credit Facility”). The Credit Facility is used for general corporate purposes and to support commercial paper borrowings, if any. We may, at our option, also borrow in certain foreign currencies up to specified limits under the Credit Facility. Borrowing rates under the Credit Facility are determined at the time of each borrowing and are generally based on either the prime rate in the U.S. or LIBOR plus a margin based on our senior unsecured debt rating, depending on the type and tenor of the loans entered. The Credit Facility has one principal financial covenant that requires our Consolidated Total Leverage Ratio to be less than 4.5x (which we may elect to increase to 5.0x for up to four consecutive quarters following a qualified acquisition) at the end of each quarter. The Consolidated Total Leverage Ratio reflects the ratio of our Consolidated Indebtedness at the end of a quarter, to our Consolidated EBITDA (each as defined in the amended credit agreement) for the trailing twelve-month period. We met the covenant as of March 31, 2021.
At March 31, 2021, we had no borrowings outstanding under the Credit Facility and the remaining availability under the Credit Facility, net of outstanding letters of credit, was $3.50 billion.
Other Bank Borrowings
At March 31, 2021 and December 31, 2020, we had bank borrowings under Miramax’s $300 million credit facility, which matures in April 2023, of $115 million and $95 million, respectively, with a weighted average interest rate of 3.50%.
8) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
The carrying value of our financial instruments approximates fair value, except for notes and debentures. At March 31, 2021 and December 31, 2020, the carrying value of our notes and debentures was $17.64 billion and $19.61 billion, respectively, and the fair value, which is determined based on quoted prices in active markets (Level 1 in the fair value hierarchy) was $21.2 billion and $24.5 billion, respectively.
Investments
The fair value of our marketable securities was $20 million at March 31, 2021 which is included within “Other assets” on the Consolidated Balance Sheet.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The carrying value of our investments without a readily determinable fair value for which we have no significant influence was $65 million at both March 31, 2021 and December 31, 2020. These investments are included in “Other assets” on the Consolidated Balance Sheets.
Foreign Exchange Contracts
We use derivative financial instruments primarily to modify our exposure to market risks from fluctuations in foreign currency exchange rates. We do not use derivative instruments unless there is an underlying exposure and therefore we do not hold or enter into derivative financial instruments for speculative trading purposes. Foreign exchange forward contracts have principally been used to hedge projected cash flows, in currencies such as the British Pound, the Euro, the Canadian Dollar and the Australian Dollar, generally for periods up to 24 months. We designate foreign exchange forward contracts used to hedge committed and forecasted foreign currency transactions as cash flow hedges. Additionally, we enter into non-designated forward contracts to hedge non-U.S. dollar denominated cash flows.
At March 31, 2021 and December 31, 2020, the notional amount of all foreign exchange contracts was $1.48 billion and $1.27 billion, respectively. At March 31, 2021, $948 million related to future production costs and $535 million related to our foreign currency balances and other expected foreign currency cash flows. At December 31, 2020, $740 million related to future production costs and $529 million related to our foreign currency balances and other expected foreign currency cash flows.
Gains recognized on derivative financial instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
Financial Statement Account
|
Non-designated foreign exchange contracts
|
|
|
|
|
$
|
1
|
|
|
$
|
29
|
|
Other items, net
|
The fair value of our derivative instruments was not material to the Consolidated Balance Sheets for any of the periods presented.
Fair Value Measurements
The following tables set forth our assets and liabilities measured at fair value on a recurring basis at March 31, 2021 and December 31, 2020. These assets and liabilities have been categorized according to the three-level fair value hierarchy established by the FASB, which prioritizes the inputs used in measuring fair value. Level 1 is based on publicly quoted prices for the asset or liability in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset or liability in inactive markets or quoted prices for similar assets or liabilities. Level 3 is based on unobservable inputs reflecting our own assumptions about the assumptions that market participants would use in pricing the asset or liability. We do not have any assets or liabilities that are measured at fair value on a recurring basis using level 3 inputs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2021
|
Level 1
|
|
Level 2
|
|
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
Marketable securities
|
$
|
20
|
|
|
$
|
—
|
|
|
|
|
$
|
20
|
|
Foreign currency hedges
|
—
|
|
|
15
|
|
|
|
|
15
|
|
Total Assets
|
$
|
20
|
|
|
$
|
15
|
|
|
|
|
$
|
35
|
|
Liabilities:
|
|
|
|
|
|
|
|
Deferred compensation
|
$
|
—
|
|
|
$
|
413
|
|
|
|
|
$
|
413
|
|
Foreign currency hedges
|
—
|
|
|
25
|
|
|
|
|
25
|
|
Total Liabilities
|
$
|
—
|
|
|
$
|
438
|
|
|
|
|
$
|
438
|
|
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2020
|
Level 1
|
|
Level 2
|
|
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
Foreign currency hedges
|
$
|
—
|
|
|
$
|
20
|
|
|
|
|
$
|
20
|
|
Total Assets
|
$
|
—
|
|
|
$
|
20
|
|
|
|
|
$
|
20
|
|
Liabilities:
|
|
|
|
|
|
|
|
Deferred compensation
|
$
|
—
|
|
|
$
|
529
|
|
|
|
|
$
|
529
|
|
Foreign currency hedges
|
—
|
|
|
39
|
|
|
|
|
39
|
|
Total Liabilities
|
$
|
—
|
|
|
$
|
568
|
|
|
|
|
$
|
568
|
|
The fair value of foreign currency hedges is determined based on the present value of future cash flows using observable inputs including foreign currency exchange rates. The fair value of deferred compensation liabilities is determined based on the fair value of the investments elected by employees. The fair value of marketable securities at March 31, 2021 was determined based on quoted market prices in active markets.
9) STOCKHOLDERS’ EQUITY
Stock Offerings
On March 26, 2021, we completed offerings of 20 million shares of our Class B Common Stock at a price to the public of $85 per share and 10 million shares of 5.75% Series A Mandatory Convertible Preferred Stock at a price to the public and liquidation preference of $100 per share. The net proceeds from the Class B Common Stock offering and the Mandatory Convertible Preferred Stock offering were approximately $1.67 billion and $983 million, respectively, in each case after deducting underwriting discounts, commissions and estimated offering expenses. We intend to use these net proceeds for general corporate purposes, including investments in streaming.
Mandatory Convertible Preferred Stock
Unless earlier converted, each share of Mandatory Convertible Preferred Stock will automatically and mandatorily convert on the mandatory conversion date, expected to be April 1, 2024, into between 1.0013 and 1.1765 shares of our Class B Common Stock, subject to customary anti-dilution adjustments. The number of shares of Class B Common Stock issuable upon conversion will be determined based on the average of the volume-weighted average price per share of our Class B Common Stock over the 20 consecutive trading day period commencing on, and including, the 21st scheduled trading day immediately preceding April 1, 2024. Holders of the Mandatory Convertible Preferred Stock (“Holders”) have the right to convert all or any portion of their shares of Mandatory Convertible Preferred Stock at any time prior to April 1, 2024 at the minimum conversion rate of 1.0013 shares of our Class B Common Stock. In addition, the conversion rate applicable to such an early conversion may, in certain circumstances, be increased to compensate Holders for certain unpaid accumulated dividends. However, if a fundamental change (as defined in the Certificate of Designations governing the Mandatory Convertible Preferred Stock) occurs on or prior to April 1, 2024, then Holders will, in certain circumstances, be entitled to convert all or a portion of their shares of Mandatory Convertible Preferred Stock at an increased conversion rate for a specified period of time and receive an amount to compensate them for unpaid accumulated dividends and any remaining future scheduled dividend payments.
The Mandatory Convertible Preferred Stock is not redeemable. However, at our option, we may purchase or otherwise acquire (including in an exchange transaction) the Mandatory Convertible Preferred Stock from time to time in the open market, by tender or exchange offer or otherwise, without the consent of, or notice to, Holders. Holders have no voting rights, with certain exceptions.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Dividends on Mandatory Convertible Preferred Stock accumulate from the most recent dividend payment date, or if no dividends have been paid, the original issue date, and will be payable on a cumulative basis when, as and if declared by our Board of Directors, or an authorized committee thereof, at an annual rate of 5.75% of the liquidation preference of $100 per share, payable in cash or, subject to certain limitations, by delivery of shares of Class B Common Stock or through any combination of cash and shares of Class B Common Stock, at our election. If declared, dividends on the Mandatory Convertible Preferred Stock are payable quarterly commencing on July 1, 2021, and continuing to, and including, April 1, 2024. If we have not declared all or any portion of the accumulated and unpaid dividends by April 1, 2024, the conversion rate will be adjusted so that Holders receive an additional number of shares of our Class B Common Stock, with certain limitations. The dividend payable on the first dividend payment date is expected to be $1.5493 per share of Mandatory Convertible Preferred Stock, and each subsequent quarterly dividend is expected to be $1.4375 per share. We accumulated dividends on the Mandatory Convertible Preferred Stock of $1 million during the three months ended March 31, 2021.
Common Stock Dividends
We declared cash dividends of $.24 per share on our Class A and Class B Common Stock, during the three months ended March 31, 2021 and 2020, resulting in total dividends of $152 million and $150 million, respectively.
Accumulated Other Comprehensive Income (Loss)
The following tables summarize the changes in the components of accumulated other comprehensive loss.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
Discontinued Operations
|
|
|
|
|
|
Cumulative
Translation
Adjustments
|
|
Net Actuarial
Loss and Prior
Service Cost
|
|
Other Comprehensive Income (Loss) (a)
|
|
Accumulated
Other
Comprehensive Loss
|
At December 31, 2020
|
|
$
|
(303)
|
|
|
|
|
$
|
(1,509)
|
|
|
|
|
$
|
(20)
|
|
|
|
|
$
|
(1,832)
|
|
|
Other comprehensive income (loss)
before reclassifications
|
|
(65)
|
|
|
|
|
—
|
|
|
|
|
2
|
|
|
|
|
(63)
|
|
|
Reclassifications to net earnings
|
|
—
|
|
|
|
|
13
|
|
(b)
|
|
|
—
|
|
|
|
|
13
|
|
|
Other comprehensive income (loss)
|
|
(65)
|
|
|
|
|
13
|
|
|
|
|
2
|
|
|
|
|
(50)
|
|
|
At March 31, 2021
|
|
$
|
(368)
|
|
|
|
|
$
|
(1,496)
|
|
|
|
|
$
|
(18)
|
|
|
|
|
$
|
(1,882)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
Discontinued Operations
|
|
|
|
|
|
Cumulative
Translation
Adjustments
|
|
Net Actuarial
Loss and Prior
Service Cost
|
|
Other Comprehensive Income (Loss) (a)
|
|
Accumulated
Other
Comprehensive Loss
|
At December 31, 2019
|
|
$
|
(438)
|
|
|
|
|
$
|
(1,507)
|
|
|
|
|
$
|
(25)
|
|
|
|
|
$
|
(1,970)
|
|
|
Other comprehensive loss before
reclassifications
|
|
(87)
|
|
|
|
|
—
|
|
|
|
|
(14)
|
|
|
|
|
(101)
|
|
|
Reclassifications to net earnings
|
|
—
|
|
|
|
|
17
|
|
(b)
|
|
|
—
|
|
|
|
|
17
|
|
|
Other comprehensive income (loss)
|
|
(87)
|
|
|
|
|
17
|
|
|
|
|
(14)
|
|
|
|
|
(84)
|
|
|
At March 31, 2020
|
|
$
|
(525)
|
|
|
|
|
$
|
(1,490)
|
|
|
|
|
$
|
(39)
|
|
|
|
|
$
|
(2,054)
|
|
|
(a)Reflects cumulative translation adjustments.
(b)Reflects amortization of net actuarial losses (see Note 12). Amounts for the three months ended March 31, 2021 and 2020 are each net of a tax benefit of $5 million.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
10) STOCK-BASED COMPENSATION
The following table summarizes our stock-based compensation expense for the three months ended March 31, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
2021
|
|
2020
|
RSUs and PSUs
|
|
|
|
|
$
|
49
|
|
|
$
|
47
|
|
Stock options
|
|
|
|
|
3
|
|
|
6
|
|
Compensation cost included in operating and SG&A expense
|
|
|
|
|
52
|
|
|
53
|
|
Compensation cost included in restructuring and other
corporate matters (a)
|
|
|
|
|
—
|
|
|
34
|
|
Stock-based compensation expense, before income taxes
|
|
|
|
|
52
|
|
|
87
|
|
Related tax benefit
|
|
|
|
|
(11)
|
|
|
(15)
|
|
Stock-based compensation expense, net of tax benefit
|
|
|
|
|
$
|
41
|
|
|
$
|
72
|
|
(a) Reflects accelerations as a result of restructuring activities.
Included in net earnings from discontinued operations was stock-based compensation expense of $1 million for each of the three-month periods ended March 31, 2021 and 2020.
11) INCOME TAXES
The provision for income taxes represents federal, state and local, and foreign taxes on earnings from continuing operations before income taxes and equity in loss of investee companies. For the three months ended March 31, 2021, we recorded a provision for income taxes of $226 million, reflecting an effective income tax rate of 19.6%. Included in the provision for income taxes is a discrete tax benefit of $21 million, primarily consisting of tax benefits from the resolution of certain state income tax matters and excess tax benefits from the vesting or exercise of stock-based compensation awards. These items, together with a net tax benefit of $25 million for the tax impact of the loss on extinguishment of debt and gain on marketable securities, impacted the effective income tax rate by 1.9 percentage points for the three months ended March 31, 2021.
For the three months ended March 31, 2020, we recorded a provision for income taxes of $134 million, reflecting an effective income tax rate of 20.7%. Included in the provision for income taxes is a net tax benefit of $54 million for the tax impact of restructuring and other corporate matters, depreciation on abandoned technology, and other discrete tax items, which had a minimal effect on the effective income tax rate for the three months ended March 31, 2020.
ViacomCBS and its subsidiaries file income tax returns with the Internal Revenue Service (“IRS”) and various state and international jurisdictions. For periods prior to the Merger, Viacom and CBS filed separate tax returns. For CBS, the IRS commenced its examination of the 2017 tax year during the fourth quarter of 2019 and commenced its examination of the 2018 tax year in February 2020. For Viacom, the IRS began its examination of the 2014 and 2015 tax years in April 2017. Various tax years are also currently under examination by state and local and foreign tax authorities. With respect to open tax years in all jurisdictions, we currently believe that it is reasonably possible that the reserve for uncertain tax positions may decrease by approximately $50 million within the next 12 months primarily related to potential resolutions of matters involving multiple tax periods and jurisdictions; however, as it is difficult to predict the final outcome or timing of resolution of any particular tax matter, events could cause our current expectation to change in the future.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
12) PENSION AND OTHER POSTRETIREMENT BENEFITS
The following table presents the components of net periodic cost for our pension and postretirement benefit plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
Three Months Ended March 31,
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Components of net periodic cost (a):
|
|
|
|
|
|
|
|
Service cost
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Interest cost
|
36
|
|
|
41
|
|
|
2
|
|
|
3
|
|
Expected return on plan assets
|
(47)
|
|
|
(48)
|
|
|
—
|
|
|
—
|
|
Amortization of actuarial loss (gain) (b)
|
24
|
|
|
26
|
|
|
(3)
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
$
|
13
|
|
|
$
|
26
|
|
|
$
|
(1)
|
|
|
$
|
—
|
|
(a) Amounts reflect our domestic plans only.
(b) Reflects amounts reclassified from accumulated other comprehensive loss to net earnings.
The service cost component of net periodic cost is presented in the Consolidated Statements of Operations within operating income and all other components of net periodic cost are presented within “Other items, net.”
13) REDEEMABLE NONCONTROLLING INTERESTS
We are subject to a redeemable put option, payable in a foreign currency, with respect to an international subsidiary. The put option expires in December 2022 and is classified as “Redeemable noncontrolling interest” on the Consolidated Balance Sheets. The activity reflected within redeemable noncontrolling interest for the three months ended March 31, 2021 and 2020 is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
|
2021
|
|
2020
|
Beginning balance
|
$
|
197
|
|
|
$
|
254
|
|
Net earnings
|
2
|
|
|
1
|
|
Distributions
|
(1)
|
|
|
(4)
|
|
Translation adjustment
|
2
|
|
|
(14)
|
|
Redemption value adjustment
|
(11)
|
|
|
33
|
|
Ending balance
|
$
|
189
|
|
|
$
|
270
|
|
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
14) REPORTABLE SEGMENTS
The following tables set forth our financial information by reportable segment. Our operating segments, which are the same as our reportable segments, have been determined in accordance with our internal management structure, which is organized based upon products and services.
In the first quarter of 2021, we began separately presenting streaming revenues in the categories we use to disaggregate our revenues (see Note 6).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Revenues:
|
|
|
|
|
|
|
|
Advertising
|
|
|
|
|
$
|
1,807
|
|
|
$
|
1,288
|
|
Affiliate
|
|
|
|
|
693
|
|
|
623
|
|
Streaming
|
|
|
|
|
322
|
|
|
204
|
|
Licensing and other
|
|
|
|
|
689
|
|
|
832
|
|
TV Entertainment
|
|
|
|
|
3,511
|
|
|
2,947
|
|
Advertising
|
|
|
|
|
878
|
|
|
945
|
|
Affiliate
|
|
|
|
|
1,382
|
|
|
1,345
|
|
Streaming
|
|
|
|
|
494
|
|
|
290
|
|
Licensing and other
|
|
|
|
|
505
|
|
|
278
|
|
Cable Networks
|
|
|
|
|
3,259
|
|
|
2,858
|
|
Theatrical
|
|
|
|
|
1
|
|
|
167
|
|
Licensing and other
|
|
|
|
|
996
|
|
|
644
|
|
Filmed Entertainment
|
|
|
|
|
997
|
|
|
811
|
|
Corporate/Eliminations
|
|
|
|
|
(355)
|
|
|
(117)
|
|
Total Revenues
|
|
|
|
|
$
|
7,412
|
|
|
$
|
6,499
|
|
Revenues generated between segments are principally from the licensing of Filmed Entertainment and Cable Networks content to Paramount+ and licensing of Filmed Entertainment and TV Entertainment content to our cable networks. These transactions are recorded at market value as if the sales were to third parties and are eliminated in consolidation. Revenues earned from the licensing of content within segments, including licensing to Paramount+ within the TV Entertainment segment, are eliminated within the segment. Intercompany revenues associated with the licensing of programming to Paramount+ after the initial exhibition on our broadcast or cable networks are recorded on a straight-line basis over the term of the agreement and eliminated in consolidation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Intercompany Revenues:
|
|
|
|
|
|
|
|
TV Entertainment
|
|
|
|
|
$
|
72
|
|
|
$
|
75
|
|
Cable Networks
|
|
|
|
|
78
|
|
|
16
|
|
Filmed Entertainment
|
|
|
|
|
205
|
|
|
26
|
|
Total Intercompany Revenues
|
|
|
|
|
$
|
355
|
|
|
$
|
117
|
|
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
We present operating income (loss) excluding depreciation and amortization, stock-based compensation and costs for restructuring and other corporate matters, each where applicable (“Adjusted OIBDA”), as the primary measure of profit and loss for our operating segments in accordance with FASB guidance for segment reporting since it is the primary method used by our management. Stock-based compensation is excluded from our segment measure of profit and loss because it is set and approved by our Board of Directors in consultation with corporate executive management.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Adjusted OIBDA:
|
|
|
|
|
|
|
|
TV Entertainment
|
|
|
|
|
$
|
449
|
|
|
$
|
573
|
|
Cable Networks
|
|
|
|
|
1,184
|
|
|
794
|
|
Filmed Entertainment
|
|
|
|
|
204
|
|
|
27
|
|
Corporate/Eliminations
|
|
|
|
|
(158)
|
|
|
(96)
|
|
Stock-based compensation
|
|
|
|
|
(52)
|
|
|
(53)
|
|
Depreciation and amortization
|
|
|
|
|
(99)
|
|
|
(112)
|
|
Restructuring and other corporate matters
|
|
|
|
|
—
|
|
|
(231)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
1,528
|
|
|
902
|
|
Interest expense
|
|
|
|
|
(259)
|
|
|
(241)
|
|
Interest income
|
|
|
|
|
13
|
|
|
14
|
|
Loss on extinguishment of debt
|
|
|
|
|
(128)
|
|
|
—
|
|
Other items, net
|
|
|
|
|
1
|
|
|
(28)
|
|
Earnings from continuing operations before income taxes and
equity in loss of investee companies
|
|
|
|
|
1,155
|
|
|
647
|
|
Provision for income taxes
|
|
|
|
|
(226)
|
|
|
(134)
|
|
Equity in loss of investee companies, net of tax
|
|
|
|
|
(18)
|
|
|
(9)
|
|
Net earnings from continuing operations
|
|
|
|
|
911
|
|
|
504
|
|
Net earnings from discontinued operations, net of tax
|
|
|
|
|
12
|
|
|
15
|
|
Net earnings (ViacomCBS and noncontrolling interests)
|
|
|
|
|
923
|
|
|
519
|
|
Net earnings attributable to noncontrolling interests
|
|
|
|
|
(12)
|
|
|
(3)
|
|
Net earnings attributable to ViacomCBS
|
|
|
|
|
$
|
911
|
|
|
$
|
516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
March 31, 2021
|
|
December 31, 2020
|
Assets:
|
|
|
|
|
|
|
|
TV Entertainment
|
|
$
|
19,014
|
|
|
|
|
$
|
19,443
|
|
|
Cable Networks
|
|
23,149
|
|
|
|
|
23,139
|
|
|
Filmed Entertainment
|
|
6,298
|
|
|
|
|
6,440
|
|
|
Corporate/Eliminations
|
|
4,987
|
|
|
|
|
2,202
|
|
|
Discontinued Operations
|
|
1,325
|
|
|
|
|
1,439
|
|
|
Total Assets
|
|
$
|
54,773
|
|
|
|
|
$
|
52,663
|
|
|
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
15) COMMITMENTS AND CONTINGENCIES
Guarantees
Letters of Credit and Surety Bonds
We have indemnification obligations with respect to letters of credit and surety bonds primarily used as security against non-performance in the normal course of business. At March 31, 2021, the outstanding letters of credit and surety bonds approximated $142 million and were not recorded on the Consolidated Balance Sheet.
CBS Television City
In connection with the sale of the CBS Television City property and sound stage operation (“CBS Television City”) in 2019, we guaranteed a specified level of cash flows to be generated by the business during the first five years following the completion of the sale. Included in “Other current liabilities” and “Other liabilities” on the Consolidated Balance Sheet at March 31, 2021 is a liability of $75 million, reflecting the present value of the estimated amount payable under the guarantee obligation.
Lease Guarantees
We have certain indemnification obligations with respect to leases primarily associated with the previously discontinued operations of Famous Players Inc. These lease commitments were $67 million as of March 31, 2021 and are presented within “Other liabilities” on the Consolidated Balance Sheet. The amount of lease commitments varies over time depending on the expiration or termination of individual underlying leases, or the related indemnification obligation, and foreign exchange rates, among other things. We may also have exposure for certain other expenses related to the leases, such as property taxes and common area maintenance. We believe our accrual is sufficient to meet any future obligations based on our consideration of available financial information, the lessees’ historical performance in meeting their lease obligations and the underlying economic factors impacting the lessees’ business models.
In the course of our business, we both provide and receive indemnities which are intended to allocate certain risks associated with business transactions. Similarly, we may remain contingently liable for various obligations of a business that has been divested in the event that a third party does not live up to its obligations under an indemnification obligation. We record a liability for our indemnification obligations and other contingent liabilities when probable and reasonably estimable.
Legal Matters
General
On an ongoing basis, we vigorously defend ourselves in numerous lawsuits and proceedings and respond to various investigations and inquiries from federal, state, local and international authorities (collectively, “litigation”). Litigation may be brought against us without merit, is inherently uncertain and always difficult to predict. However, based on our understanding and evaluation of the relevant facts and circumstances, we believe that the following matters are not likely, in the aggregate, to result in a material adverse effect on our business, financial condition and results of operations.
Litigation Relating to the Merger
Beginning on February 20, 2020, three purported CBS stockholders filed separate derivative and/or putative class action lawsuits in the Court of Chancery of the State of Delaware. On March 31, 2020, the Court consolidated the
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
three lawsuits and appointed Bucks County Employees’ Retirement Fund and International Union of Operating Engineers of Eastern Pennsylvania and Delaware as co-lead plaintiffs for the consolidated action. On April 14, 2020, the lead plaintiffs filed a Verified Consolidated Class Action and Derivative Complaint (as used in this paragraph, the “Complaint”) against Shari E. Redstone, NAI, Sumner M. Redstone National Amusements Trust, members of the CBS Board of Directors (comprised of Candace K. Beinecke, Barbara M. Byrne, Gary L. Countryman, Brian Goldner, Linda M. Griego, Robert N. Klieger, Martha L. Minow, Susan Schuman, Frederick O. Terrell and Strauss Zelnick), former CBS President and Acting Chief Executive Officer Joseph Ianniello and nominal defendant ViacomCBS Inc. The Complaint alleges breaches of fiduciary duties to CBS stockholders in connection with the negotiation and approval of the Agreement and Plan of Merger dated as of August 13, 2019, as amended on October 16, 2019 (the “Merger Agreement”). The Complaint also alleges waste and unjust enrichment in connection with Mr. Ianniello’s compensation. The Complaint seeks unspecified damages, costs and expenses, as well as other relief. On June 5, 2020, the defendants filed motions to dismiss. On January 27, 2021, the Court dismissed one disclosure claim, while allowing all other claims against the defendants to proceed. Discovery on the surviving claims is proceeding. We believe that the remaining claims are without merit and we intend to defend against them vigorously. We are currently unable to determine a range of potential liability, if any. Accordingly, no accrual for this matter has been made in our consolidated financial statements.
Beginning on November 25, 2019, four purported Viacom stockholders filed separate putative class action lawsuits in the Court of Chancery of the State of Delaware. On January 23, 2020, the Court consolidated the four lawsuits. On February 6, 2020, the Court appointed California Public Employees’ Retirement System (“CalPERS”) as lead plaintiff for the consolidated action. On February 28, 2020, CalPERS, together with Park Employees’ and Retirement Board Employees’ Annuity and Benefit Fund of Chicago and Louis M. Wilen, filed a First Amended Verified Class Action Complaint (as used in this paragraph, the “Complaint”) against NAI, NAI Entertainment Holdings LLC, Shari E. Redstone, the members of the Viacom special transaction committee of the Viacom Board of Directors (comprised of Thomas J. May, Judith A. McHale, Ronald L. Nelson and Nicole Seligman) and our President and Chief Executive Officer and director, Robert M. Bakish. The Complaint alleges breaches of fiduciary duties to Viacom stockholders in connection with the negotiation and approval of the Merger Agreement. The Complaint seeks unspecified damages, costs and expenses, as well as other relief. On May 22, 2020, the defendants filed motions to dismiss. On December 29, 2020, the Court dismissed the claims against Mr. Bakish, while allowing the claims against the remaining defendants to proceed. Discovery on the surviving claims is proceeding. We believe that the remaining claims are without merit and we intend to defend against them vigorously. We are currently unable to determine a range of potential liability, if any. Accordingly, no accrual for this matter has been made in our consolidated financial statements.
Investigation-Related Matters
As announced on August 1, 2018, the CBS Board of Directors retained two law firms to conduct a full investigation of the allegations in press reports about CBS’ former Chairman of the Board, President and Chief Executive Officer, Leslie Moonves, CBS News and cultural issues at CBS. On December 17, 2018, the CBS Board of Directors announced the completion of its investigation, certain findings of the investigation and the CBS Board of Directors’ determination, discussed below, with respect to the termination of Mr. Moonves’ employment. We have received subpoenas or requests for information from the New York County District Attorney’s Office, the New York City Commission on Human Rights, the New York State Attorney General’s Office and the United States Securities and Exchange Commission regarding the subject matter of this investigation and related matters, including with respect to CBS’ related public disclosures. We may continue to receive additional related regulatory and investigative inquiries from these and other entities in the future. We are cooperating with these inquiries.
On August 27, 2018 and on October 1, 2018, Gene Samit and John Lantz, respectively, filed putative class action lawsuits in the United States District Court for the Southern District of New York, individually and on behalf of
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
others similarly situated, for claims that are similar to those alleged in the amended complaint described below. On November 6, 2018, the Court entered an order consolidating the two actions. On November 30, 2018, the Court appointed Construction Laborers Pension Trust for Southern California as the lead plaintiff of the consolidated action. On February 11, 2019, the lead plaintiff filed a consolidated amended putative class action complaint against CBS, certain current and former senior executives and members of the CBS Board of Directors. The consolidated action is stated to be on behalf of purchasers of CBS Class A Common Stock and Class B Common Stock between September 26, 2016 and December 4, 2018. This action seeks to recover damages arising during this time period allegedly caused by the defendants’ purported violations of the federal securities laws, including by allegedly making materially false and misleading statements or failing to disclose material information, and seeks costs and expenses as well as remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On April 12, 2019, the defendants filed motions to dismiss this action, which the Court granted in part and denied in part on January 15, 2020. With the exception of one statement made by Mr. Moonves at an industry event in November 2017, in which he allegedly was acting as the agent of CBS, all claims as to all other allegedly false and misleading statements were dismissed. We believe that the remaining claims are without merit and we intend to defend against them vigorously. We are currently unable to determine a range of potential liability, if any. Accordingly, no accrual for this matter has been made in our consolidated financial statements.
Separation Agreement
On September 9, 2018, CBS entered into a separation and settlement agreement and releases (the “Separation Agreement”) with Mr. Moonves, pursuant to which Mr. Moonves resigned as a director and as Chairman of the Board, President and Chief Executive Officer of CBS. In October 2018, we contributed $120 million to a grantor trust pursuant to the Separation Agreement. On December 17, 2018, the CBS Board of Directors announced that, following its consideration of the findings of the investigation referred to above, it had determined that there were grounds to terminate Mr. Moonves’ employment for cause under his employment agreement with CBS. Any dispute related to the CBS Board of Directors’ determination is subject to binding arbitration as set forth in the Separation Agreement. On January 16, 2019, Mr. Moonves commenced a binding arbitration proceeding with respect to this matter and the related CBS Board of Directors investigation, which proceeding is ongoing. The assets of the grantor trust will remain in the trust until a final determination in the arbitration. We are currently unable to determine the outcome of the arbitration and the amount, if any, that may be awarded thereunder. Accordingly, no accrual for this matter has been made in our consolidated financial statements.
Litigation Related to Television Station Owners
On September 9, 2019, the Company was added as a defendant in a multi-district putative class action lawsuit filed in the United States District Court for the Northern District of Illinois. The lawsuit was filed by parties that claim to have purchased broadcast television spot advertising beginning on or about January 1, 2014 on television stations owned by one or more of the defendant television station owners and alleges the sharing of allegedly competitively sensitive information among such television stations in alleged violation of the Sherman Antitrust Act. The action, which names the Company among fourteen total defendants, seeks monetary damages, attorneys’ fees, costs and interest as well as injunctions against the allegedly unlawful conduct. On October 8, 2019, the Company and other defendants filed a motion to dismiss the matter, which was denied by the court on November 6, 2020. We believe that the claims are without merit and we intend to defend against them vigorously. We are currently unable to determine a range of potential liability, if any. Accordingly, no accrual for this matter has been made in our consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Claims Related to Former Businesses: Asbestos
We are a defendant in lawsuits claiming various personal injuries related to asbestos and other materials, which allegedly occurred as a result of exposure caused by various products manufactured by Westinghouse, a predecessor, generally prior to the early 1970s. Westinghouse was neither a producer nor a manufacturer of asbestos. We are typically named as one of a large number of defendants in both state and federal cases. In the majority of asbestos lawsuits, the plaintiffs have not identified which of our products is the basis of a claim. Claims against us in which a product has been identified most commonly relate to allegations of exposure to asbestos-containing insulating material used in conjunction with turbines and electrical equipment.
Claims are frequently filed and/or settled in groups, which may make the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. We do not report as pending those claims on inactive, stayed, deferred or similar dockets that some jurisdictions have established for claimants who allege minimal or no impairment. As of March 31, 2021, we had pending approximately 30,480 asbestos claims, as compared with approximately 30,710 as of December 31, 2020. During the first quarter of 2021, we received approximately 780 new claims and closed or moved to an inactive docket approximately 1,010 claims. We report claims as closed when we become aware that a dismissal order has been entered by a court or when we have reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other factors. Our total costs for the years 2020 and 2019 for settlement and defense of asbestos claims after insurance recoveries and net of tax were approximately $35 million and $58 million, respectively. Our costs for settlement and defense of asbestos claims may vary year to year and insurance proceeds are not always recovered in the same period as the insured portion of the expenses.
Filings include claims for individuals suffering from mesothelioma, a rare cancer, the risk of which is allegedly increased by exposure to asbestos; lung cancer, a cancer which may be caused by various factors, one of which is alleged to be asbestos exposure; other cancers, and conditions that are substantially less serious, including claims brought on behalf of individuals who are asymptomatic as to an allegedly asbestos-related disease. The predominant number of pending claims against us are non-cancer claims. It is difficult to predict future asbestos liabilities, as events and circumstances may impact the estimate of our asbestos liabilities, including, among others, the number and types of claims and average cost to resolve such claims. We record an accrual for a loss contingency when it is both probable that a liability has been incurred and when the amount of the loss can be reasonably estimated. We believe that our accrual and insurance are sufficient to cover our asbestos liabilities. Our liability estimate is based upon many factors, including the number of outstanding claims, estimated average cost per claim, the breakdown of claims by disease type, historic claim filings, costs per claim of resolution and the filing of new claims, as well as consultation with a third party firm on trends that may impact our future asbestos liability.
Other
From time to time we receive claims from federal and state environmental regulatory agencies and other entities asserting that we are or may be liable for environmental cleanup costs and related damages principally relating to our historical and predecessor operations. In addition, from time to time we receive personal injury claims including toxic tort and product liability claims (other than asbestos) arising from our historical operations and predecessors.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
16) SUPPLEMENTAL FINANCIAL INFORMATION
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
|
2021
|
|
2020
|
Cash paid for interest
|
$
|
316
|
|
|
$
|
322
|
|
|
|
|
|
Cash paid (received) for income taxes:
|
|
|
|
Continuing operations
|
$
|
(23)
|
|
|
$
|
54
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
1
|
|
|
|
|
|
Noncash additions to operating lease assets
|
$
|
5
|
|
|
$
|
55
|
|
Variable Interest Entities
In the normal course of business, we enter into joint ventures or make investments with business partners that support our underlying business strategy and provide us the ability to enter new markets to expand the reach of our brands, develop new programming and/or distribute our existing content. In certain instances, an entity in which we make an investment may qualify as a variable interest entity (“VIE”). In determining whether we are the primary beneficiary of a VIE, we assess whether we have the power to direct matters that most significantly impact the activities of the VIE and have the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The following tables present the amounts recorded in our consolidated financial statements related to our consolidated VIEs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
|
|
At
|
|
|
March 31, 2021
|
|
December 31, 2020
|
Total assets
|
|
$
|
1,435
|
|
|
|
|
$
|
1,385
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
233
|
|
|
|
|
$
|
197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Revenues
|
|
|
|
|
$
|
71
|
|
|
$
|
18
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
|
$
|
5
|
|
|
$
|
(2)
|
|
Lease Income
We enter into operating leases for the use of our owned production facilities and office buildings. Lease payments received under these agreements consist of fixed payments for the rental of space and certain building operating costs, as well as variable payments based on usage of production facilities and services, and escalating costs of building operations. We recorded total lease income, including both fixed and variable amounts, of $36 million and $34 million for the three months ended March 31, 2021 and 2020, respectively.