VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
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.
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|
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|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Revenues
|
$
|
73
|
|
|
$
|
24
|
|
|
$
|
138
|
|
|
$
|
76
|
|
|
Operating expenses
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
8
|
|
|
$
|
5
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|
|
|
|
|
|
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|
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|
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|
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|
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|
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At
|
|
At
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
43
|
|
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Revenues by Type:
|
|
|
|
|
|
|
|
|
Advertising (a)
|
$
|
2,097
|
|
|
$
|
1,686
|
|
|
$
|
4,778
|
|
|
$
|
3,905
|
|
|
Affiliate (b)
|
2,107
|
|
|
1,929
|
|
|
4,182
|
|
|
3,897
|
|
|
Streaming
|
983
|
|
|
513
|
|
|
1,799
|
|
|
1,007
|
|
|
Theatrical
|
134
|
|
|
3
|
|
|
135
|
|
|
170
|
|
|
Licensing and other
|
1,243
|
|
|
1,944
|
|
|
3,082
|
|
|
3,595
|
|
|
Total Revenues
|
$
|
6,564
|
|
|
$
|
6,075
|
|
|
$
|
13,976
|
|
|
$
|
12,574
|
|
(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 $84 million and $85 million at June 30, 2021 and December 31, 2020, respectively.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Included in “Other assets” on the Consolidated Balance Sheets are noncurrent receivables of $1.83 billion and $2.02 billion at June 30, 2021 and December 31, 2020, respectively. Noncurrent receivables primarily relate to revenues recognized under long-term content licensing arrangements. Revenues from the licensing of content are recognized at the beginning of the license period in which programs are made available to the licensee for exhibition, while the related cash is generally collected over the term of the license period.
Contract Liabilities
Contract liabilities are included within “Deferred revenues” and “Other liabilities” on the Consolidated Balance Sheets and were $1.21 billion and $1.12 billion at June 30, 2021 and December 31, 2020, respectively. For the six months ended June 30, 2021, we recognized revenues of $627 million that were included in deferred revenues at December 31, 2020. For the six months ended June 30, 2020, we recognized revenues of $405 million that were included in deferred revenues at December 31, 2019.
Unrecognized Revenues Under Contract
At June 30, 2021, unrecognized revenues attributable to unsatisfied performance obligations under our long-term contracts were $6.3 billion, of which $2.3 billion is expected to be recognized for the remainder of 2021, $2.5 billion in 2022, $1.1 billion in 2023, and $0.5 billion thereafter. These amounts only include contracts subject to a guaranteed fixed amount or the guaranteed minimum under variable contracts, primarily consisting of television and film licensing contracts and affiliate agreements that are subject to a fixed or guaranteed minimum fee. Such amounts change on a regular basis as we renew existing agreements or enter into new agreements. Unrecognized revenues under contracts disclosed above do not include (i) contracts with an original expected term of one year or less, mainly consisting of advertising contracts, (ii) contracts for which variable consideration is determined based on the customer’s subsequent sale or usage, mainly consisting of affiliate agreements and (iii) long-term licensing agreements for multiple programs for which variable consideration is determined based on the value of the programs delivered to the customer and our right to invoice corresponds with the value delivered.
Performance Obligations Satisfied in Previous Periods
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. Revenues recognized in our Filmed Entertainment segment for performance obligations satisfied or partially satisfied in a prior period were $75 million and $119 million for the three months ended June 30, 2021 and 2020, respectively, and $145 million and $141 million for the six months ended June 30, 2021 and 2020, respectively.
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:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
|
June 30, 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
|
|
599
|
|
|
|
|
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
|
|
792
|
|
|
|
|
791
|
|
|
|
3.45% Senior Notes due 2026
|
|
123
|
|
|
|
|
123
|
|
|
|
2.90% Senior Notes due 2027
|
|
692
|
|
|
|
|
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
|
|
971
|
|
|
|
|
969
|
|
|
|
5.50% Senior Debentures due 2033
|
|
427
|
|
|
|
|
427
|
|
|
|
4.85% Senior Debentures due 2034
|
|
87
|
|
|
|
|
87
|
|
|
|
6.875% Senior Debentures due 2036
|
|
1,070
|
|
|
|
|
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
|
|
488
|
|
|
|
|
487
|
|
|
|
4.375% Senior Debentures due 2043
|
|
1,119
|
|
|
|
|
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
|
|
45
|
|
|
|
|
95
|
|
|
|
Obligations under finance leases
|
|
31
|
|
|
|
|
26
|
|
|
|
Total debt (a)
|
|
17,720
|
|
|
|
|
19,733
|
|
|
|
|
|
|
|
|
|
|
|
|
Less current portion of long-term debt
|
|
17
|
|
|
|
|
16
|
|
|
|
Total long-term debt, net of current portion
|
|
$
|
17,703
|
|
|
|
|
$
|
19,717
|
|
|
(a) At June 30, 2021 and December 31, 2020, the senior and junior subordinated debt balances included (i) a net unamortized discount of $476 million and $491 million, respectively, and (ii) unamortized deferred financing costs of $99 million and $107 million, respectively. The face value of our total debt was $18.30 billion and $20.33 billion at June 30, 2021 and December 31, 2020, respectively.
During the six months ended June 30, 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.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
During the second quarter of 2020, we issued $4.50 billion of senior notes and used the net proceeds from these issuances for the redemption, prior to maturity, of long-term debt totaling $2.43 billion for a redemption price of $2.52 billion, as well as for general corporate purposes. As a result, we recognized a pre-tax loss on extinguishment of debt of $103 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 June 30, 2021 and December 31, 2020, we had no outstanding commercial paper borrowings under our commercial paper program.
Credit Facility
At June 30, 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 June 30, 2021.
At June 30, 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 June 30, 2021 and December 31, 2020, we had bank borrowings under Miramax’s $300 million credit facility, which matures in April 2023, of $45 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 June 30, 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 $21.9 billion and $24.5 billion, respectively.
Investments
The fair value of our marketable securities was $15 million at June 30, 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)
During the three and six months ended June 30, 2021, we recorded an unrealized loss of $5 million and an unrealized gain of $15 million, respectively, resulting from changes in the fair value of our marketable securities.
The carrying value of our investments without a readily determinable fair value for which we have no significant influence was $58 million and $65 million at June 30, 2021 and December 31, 2020, respectively. These investments are included in “Other assets” on the Consolidated Balance Sheets. During the second quarter of 2021, we sold an investment for proceeds of $43 million and recognized a gain of $37 million. During the second quarter of 2020, we recorded an unrealized gain of $32 million for a change in the fair value of an investment as indicated by the market price of a similar investment.
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 June 30, 2021 and December 31, 2020, the notional amount of all foreign exchange contracts was $1.68 billion and $1.27 billion, respectively. At June 30, 2021, $1.16 billion related to future production costs and $521 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 (losses) recognized on derivative financial instruments were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Financial Statement Account
|
|
Non-designated foreign exchange contracts
|
$
|
(2)
|
|
|
$
|
(11)
|
|
|
$
|
(1)
|
|
|
$
|
18
|
|
Other items, net
|
The fair value of our derivative instruments was not material to the Consolidated Balance Sheets for any of the periods presented.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Fair Value Measurements
The following tables set forth our assets and liabilities measured at fair value on a recurring basis at June 30, 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 June 30, 2021
|
Level 1
|
|
Level 2
|
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities
|
$
|
15
|
|
|
$
|
—
|
|
|
|
|
$
|
15
|
|
|
Foreign currency hedges
|
—
|
|
|
16
|
|
|
|
|
16
|
|
|
Total Assets
|
$
|
15
|
|
|
$
|
16
|
|
|
|
|
$
|
31
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Deferred compensation
|
$
|
—
|
|
|
$
|
429
|
|
|
|
|
$
|
429
|
|
|
Foreign currency hedges
|
—
|
|
|
24
|
|
|
|
|
24
|
|
|
Total Liabilities
|
$
|
—
|
|
|
$
|
453
|
|
|
|
|
$
|
453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 June 30, 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 have used and intend to continue to use the 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
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
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.
If declared, dividends on the Mandatory Convertible Preferred Stock are payable quarterly through April 1, 2024. Dividends on the Mandatory Convertible Preferred Stock accumulate from the most recent dividend payment 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 we have not declared 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.
Dividends
We declared cash dividends of $.24 per share on our Class A and Class B Common Stock during each of the three months ended June 30, 2021 and 2020, resulting in total dividends of $158 million and $150 million, respectively. We declared cash dividends of $.48 per share on our Class A and Class B Common Stock, during each of the six months ended June 30, 2021 and 2020, resulting in total dividends of $310 million and $300 million, respectively.
Additionally, during the second quarter of 2021 we declared a cash dividend of $1.5493 per share on our Mandatory Convertible Preferred Stock, representing a dividend period from March 26, 2021 through July 1, 2021. Accordingly, we accumulated dividends on the Mandatory Convertible Preferred Stock of $14 million and $15 million during the three and six months ended June 30, 2021, respectively. For each subsequent quarter, we expect to declare a dividend of $1.4375 per share.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
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
|
|
(55)
|
|
|
|
|
—
|
|
|
|
|
5
|
|
|
|
|
(50)
|
|
|
|
Reclassifications to net earnings
|
|
—
|
|
|
|
|
29
|
|
(b)
|
|
|
—
|
|
|
|
|
29
|
|
|
|
Other comprehensive income (loss)
|
|
(55)
|
|
|
|
|
29
|
|
|
|
|
5
|
|
|
|
|
(21)
|
|
|
|
At June 30, 2021
|
|
$
|
(358)
|
|
|
|
|
$
|
(1,480)
|
|
|
|
|
$
|
(15)
|
|
|
|
|
$
|
(1,853)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
(56)
|
|
|
|
|
—
|
|
|
|
|
(8)
|
|
|
|
|
(64)
|
|
|
|
Reclassifications to net earnings
|
|
—
|
|
|
|
|
35
|
|
(b)
|
|
|
—
|
|
|
|
|
35
|
|
|
|
Other comprehensive income (loss)
|
|
(56)
|
|
|
|
|
35
|
|
|
|
|
(8)
|
|
|
|
|
(29)
|
|
|
|
At June 30, 2020
|
|
$
|
(494)
|
|
|
|
|
$
|
(1,472)
|
|
|
|
|
$
|
(33)
|
|
|
|
|
$
|
(1,999)
|
|
|
(a) Reflects cumulative translation adjustments.
(b) Reflects amortization of net actuarial losses (see Note 12). Amounts are net of tax benefits of $10 million and $11 million for the six months ended June 30, 2021 and 2020, respectively.
10) STOCK-BASED COMPENSATION
The following table summarizes our stock-based compensation expense for the three and six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
RSUs and PSUs
|
$
|
46
|
|
|
$
|
39
|
|
|
$
|
95
|
|
|
$
|
86
|
|
|
Stock options
|
3
|
|
|
5
|
|
|
6
|
|
|
11
|
|
|
Compensation cost included in operating and SG&A expense
|
49
|
|
|
44
|
|
|
101
|
|
|
97
|
|
|
Compensation cost included in restructuring and other
corporate matters (a)
|
—
|
|
|
12
|
|
|
—
|
|
|
46
|
|
|
Stock-based compensation expense, before income taxes
|
49
|
|
|
56
|
|
|
101
|
|
|
143
|
|
|
Related tax benefit
|
(10)
|
|
|
(11)
|
|
|
(21)
|
|
|
(26)
|
|
|
Stock-based compensation expense, net of tax benefit
|
$
|
39
|
|
|
$
|
45
|
|
|
$
|
80
|
|
|
$
|
117
|
|
(a) Reflects accelerations as a result of restructuring activities.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Included in net earnings from discontinued operations was stock-based compensation expense of $1 million for each of the three-month periods ended June 30, 2021 and 2020, and $2 million for each of the six-month periods ended June 30, 2021 and 2020.
11) INCOME TAXES
The provision/benefit 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 June 30, 2021, we recorded a benefit for income taxes of $34 million, reflecting a negative effective income tax rate of 3.3%, and for the six months ended June 30, 2021, we recorded a provision for income taxes of $192 million, reflecting an effective income tax rate of 8.8%. Included in income taxes for the three and six months ended June 30, 2021 are discrete tax benefits of $268 million and $289 million, respectively, primarily consisting of a benefit of $260 million to remeasure our UK net deferred income tax asset as a result of the enactment during the second quarter of an increase in the UK corporate income tax rate from 19% to 25% beginning April 1, 2023, as well as a net tax benefit in connection with the settlement of income tax audits. For the three months ended June 30, 2021, these items, together with a net tax provision of $26 million, relating to net gains from sales and investments and restructuring charges during the period, decreased our effective income tax rate by 26.3 percentage points. For the six months ended June 30, 2021, the aforementioned discrete tax benefits of $289 million decreased our effective income tax rate by 13.3 percentage points.
For the three and six months ended June 30, 2020, we recorded a provision for income taxes of $192 million and $326 million, respectively, reflecting effective income tax rates of 21.3% and 21.0%, respectively.
ViacomCBS and its subsidiaries file income tax returns with the Internal Revenue Service (“IRS”) and various state and local and foreign jurisdictions. For periods prior to the Merger, Viacom and CBS filed separate tax returns. For CBS, we are currently under examination by the IRS for the 2017 and 2018 tax years. For Viacom, the Company and the IRS settled the income tax audit for the 2014 and 2015 tax years during the second quarter of 2021. We anticipate that the IRS will commence its examination of Viacom’s 2016 through 2019 tax years in the latter part of 2021. 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 do not believe that it is reasonably possible that the reserve for uncertain tax positions will significantly change within the next 12 months; however, it is difficult to predict the final outcome or timing of resolution of any particular tax matter and 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 tables present the components of net periodic cost for our pension and postretirement benefit plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
|
Three Months Ended June 30,
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Components of net periodic cost (a):
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest cost
|
36
|
|
|
41
|
|
|
2
|
|
|
3
|
|
|
Expected return on plan assets
|
(47)
|
|
|
(49)
|
|
|
—
|
|
|
—
|
|
|
Amortization of actuarial loss (gain) (b)
|
23
|
|
|
26
|
|
|
(4)
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
$
|
12
|
|
|
$
|
26
|
|
|
$
|
(2)
|
|
|
$
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
|
Six Months Ended June 30,
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Components of net periodic cost (a):
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
Interest cost
|
72
|
|
|
82
|
|
|
4
|
|
|
6
|
|
|
Expected return on plan assets
|
(94)
|
|
|
(97)
|
|
|
—
|
|
|
—
|
|
|
Amortization of actuarial loss (gain) (b)
|
47
|
|
|
52
|
|
|
(7)
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
$
|
25
|
|
|
$
|
52
|
|
|
$
|
(3)
|
|
|
$
|
(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 six months ended June 30, 2021 and 2020 is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
Beginning balance
|
$
|
197
|
|
|
$
|
254
|
|
|
Net earnings
|
4
|
|
|
3
|
|
|
Distributions
|
(2)
|
|
|
(7)
|
|
|
Translation adjustment
|
1
|
|
|
(17)
|
|
|
Redemption value adjustment
|
(10)
|
|
|
41
|
|
|
Ending balance
|
$
|
190
|
|
|
$
|
274
|
|
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.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
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
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Advertising
|
$
|
1,088
|
|
|
$
|
880
|
|
|
$
|
2,895
|
|
|
$
|
2,168
|
|
|
Affiliate
|
691
|
|
|
629
|
|
|
1,384
|
|
|
1,252
|
|
|
Streaming
|
350
|
|
|
193
|
|
|
672
|
|
|
397
|
|
|
Licensing and other
|
680
|
|
|
585
|
|
|
1,369
|
|
|
1,417
|
|
|
TV Entertainment
|
2,809
|
|
|
2,287
|
|
|
6,320
|
|
|
5,234
|
|
|
Advertising
|
1,011
|
|
|
815
|
|
|
1,889
|
|
|
1,760
|
|
|
Affiliate
|
1,416
|
|
|
1,300
|
|
|
2,798
|
|
|
2,645
|
|
|
Streaming
|
633
|
|
|
320
|
|
|
1,127
|
|
|
610
|
|
|
Licensing and other
|
415
|
|
|
797
|
|
|
920
|
|
|
1,075
|
|
|
Cable Networks
|
3,475
|
|
|
3,232
|
|
|
6,734
|
|
|
6,090
|
|
|
Theatrical
|
134
|
|
|
3
|
|
|
135
|
|
|
170
|
|
|
Licensing and other
|
533
|
|
|
644
|
|
|
1,529
|
|
|
1,288
|
|
|
Filmed Entertainment
|
667
|
|
|
647
|
|
|
1,664
|
|
|
1,458
|
|
|
Corporate/Eliminations
|
(387)
|
|
|
(91)
|
|
|
(742)
|
|
|
(208)
|
|
|
Total Revenues
|
$
|
6,564
|
|
|
$
|
6,075
|
|
|
$
|
13,976
|
|
|
$
|
12,574
|
|
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 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
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Intercompany Revenues:
|
|
|
|
|
|
|
|
|
TV Entertainment
|
$
|
67
|
|
|
$
|
43
|
|
|
$
|
139
|
|
|
$
|
118
|
|
|
Cable Networks
|
153
|
|
|
2
|
|
|
231
|
|
|
18
|
|
|
Filmed Entertainment
|
167
|
|
|
46
|
|
|
372
|
|
|
72
|
|
|
Total Intercompany Revenues
|
$
|
387
|
|
|
$
|
91
|
|
|
$
|
742
|
|
|
$
|
208
|
|
We present operating income excluding depreciation and amortization, stock-based compensation, costs for restructuring and other corporate matters, programming charges and net gain on sales, 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.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Adjusted OIBDA:
|
|
|
|
|
|
|
|
|
TV Entertainment
|
$
|
216
|
|
|
$
|
392
|
|
|
$
|
665
|
|
|
$
|
965
|
|
|
Cable Networks
|
1,125
|
|
|
1,285
|
|
|
2,309
|
|
|
2,079
|
|
|
Filmed Entertainment
|
72
|
|
|
116
|
|
|
276
|
|
|
143
|
|
|
Corporate/Eliminations
|
(124)
|
|
|
(97)
|
|
|
(282)
|
|
|
(193)
|
|
|
Stock-based compensation
|
(49)
|
|
|
(44)
|
|
|
(101)
|
|
|
(97)
|
|
|
Depreciation and amortization
|
(95)
|
|
|
(122)
|
|
|
(194)
|
|
|
(234)
|
|
|
Restructuring and other corporate matters
|
(35)
|
|
|
(158)
|
|
|
(35)
|
|
|
(389)
|
|
|
Programming charges
|
—
|
|
|
(121)
|
|
|
—
|
|
|
(121)
|
|
|
Net gain on sales
|
116
|
|
|
—
|
|
|
116
|
|
|
—
|
|
|
Operating income
|
1,226
|
|
|
1,251
|
|
|
2,754
|
|
|
2,153
|
|
|
Interest expense
|
(243)
|
|
|
(263)
|
|
|
(502)
|
|
|
(504)
|
|
|
Interest income
|
13
|
|
|
11
|
|
|
26
|
|
|
25
|
|
|
Net gains from investments
|
32
|
|
|
32
|
|
|
52
|
|
|
32
|
|
|
Loss on extinguishment of debt
|
—
|
|
|
(103)
|
|
|
(128)
|
|
|
(103)
|
|
|
Other items, net
|
(10)
|
|
|
(26)
|
|
|
(29)
|
|
|
(54)
|
|
Earnings from continuing operations before income taxes and
equity in loss of investee companies
|
1,018
|
|
|
902
|
|
|
2,173
|
|
|
1,549
|
|
|
(Provision) benefit for income taxes
|
34
|
|
|
(192)
|
|
|
(192)
|
|
|
(326)
|
|
|
Equity in loss of investee companies, net of tax
|
(44)
|
|
|
(12)
|
|
|
(62)
|
|
|
(21)
|
|
|
Net earnings from continuing operations
|
1,008
|
|
|
698
|
|
|
1,919
|
|
|
1,202
|
|
|
Net earnings from discontinued operations, net of tax
|
41
|
|
|
28
|
|
|
53
|
|
|
43
|
|
|
Net earnings (ViacomCBS and noncontrolling interests)
|
1,049
|
|
|
726
|
|
|
1,972
|
|
|
1,245
|
|
|
Net earnings attributable to noncontrolling interests
|
(13)
|
|
|
(245)
|
|
|
(25)
|
|
|
(248)
|
|
|
Net earnings attributable to ViacomCBS
|
$
|
1,036
|
|
|
$
|
481
|
|
|
$
|
1,947
|
|
|
$
|
997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Assets:
|
|
|
|
|
|
|
|
|
TV Entertainment
|
|
$
|
19,176
|
|
|
|
|
$
|
19,443
|
|
|
|
Cable Networks
|
|
23,666
|
|
|
|
|
23,139
|
|
|
|
Filmed Entertainment
|
|
6,621
|
|
|
|
|
6,440
|
|
|
|
Corporate/Eliminations
|
|
4,383
|
|
|
|
|
2,202
|
|
|
|
Discontinued Operations
|
|
1,358
|
|
|
|
|
1,439
|
|
|
|
Total Assets
|
|
$
|
55,204
|
|
|
|
|
$
|
52,663
|
|
|
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 June 30, 2021, the outstanding letters of credit and surety bonds approximated $157 million and were not recorded on the Consolidated Balance Sheet.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
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 June 30, 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 $65 million at June 30, 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 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
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
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.
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.
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 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
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
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.
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 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 was 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. The disputes between Mr. Moonves and CBS have been resolved, and on May 14, 2021, the parties dismissed the arbitration proceeding. The assets of the grantor trust reverted to the Company in their entirety.
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 have reached an agreement in principle with the plaintiffs to settle the lawsuit. The settlement, which will include no admission of liability or wrongdoing by the Company, will be subject to court approval.
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 June 30, 2021, we had pending approximately 29,720 asbestos claims, as compared with approximately 30,710 as of December 31, 2020. During the second quarter of 2021, we received approximately 740 new claims and closed or moved to an inactive docket approximately 1,500 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
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
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.
16) SUPPLEMENTAL FINANCIAL INFORMATION
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
Cash paid for interest
|
$
|
506
|
|
|
$
|
470
|
|
|
|
|
|
|
|
Cash paid for income taxes:
|
|
|
|
|
Continuing operations
|
$
|
144
|
|
|
$
|
98
|
|
|
Discontinued operations
|
$
|
38
|
|
|
$
|
2
|
|
|
|
|
|
|
|
Noncash additions to operating lease assets
|
$
|
28
|
|
|
$
|
89
|
|
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
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
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Total assets
|
|
$
|
1,476
|
|
|
|
|
$
|
1,385
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
171
|
|
|
|
|
$
|
197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2021
|
|
2020 (a)
|
|
2021
|
|
2020 (a)
|
|
Revenues
|
$
|
92
|
|
|
$
|
538
|
|
|
$
|
163
|
|
|
$
|
556
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
$
|
3
|
|
|
$
|
500
|
|
|
$
|
8
|
|
|
$
|
498
|
|
(a) The revenue and operating income for the three and six months ended June 30, 2020 include the licensing of the streaming rights to South Park by a consolidated 51%-owned VIE.
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 $35 million and $71 million for the three and six months ended June 30, 2021, respectively, and $18 million and $52 million for the three and six months ended June 30, 2020, respectively.