SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1994
Commission file number 1-2931
CBS Inc.
(Exact name of registrant as specified in its charter)
New York 13-0590730
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
51 West 52 Street, New York, N.Y. 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 975-4321
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 26, 1994
Common Stock $2.50 par value 15,540,947
Page 1 of 13 pages<PAGE>
PART I. FINANCIAL INFORMATION
CBS Inc. and subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in millions, except per share amounts)
ASSETS
March 31 December 31 March 31
1994 1993 1993
CURRENT ASSETS:
Cash and cash equivalents $ 374.0 $ 173.4 $ 347.6
Marketable securities (note 2) 425.4 420.7 326.7
Accounts receivable, less allowances: 546.7 454.5 457.1
$8.3 - March 1994
$9.1 - December 1993
$9.5 - March 1993
Program rights 395.8 581.9 438.4
Recoverable income taxes 28.8 99.3
Other 20.9 18.2 19.9
TOTAL CURRENT ASSETS 1,762.8 1,677.5 1,689.0
MARKETABLE SECURITIES (note 2) 797.4 826.0 731.4
PROPERTY, PLANT AND EQUIPMENT:
Land 81.4 81.4 76.8
Buildings, improvements and equipment 903.0 896.7 877.9
984.4 978.1 954.7
Less accumulated depreciation 472.3 459.0 463.5
NET PROPERTY, PLANT AND EQUIPMENT 512.1 519.1 491.2
OTHER ASSETS:
Program rights 104.0 90.9 74.9
Goodwill, net of amortization 278.7 280.6 281.4
Other 24.3 24.6 19.0
TOTAL OTHER ASSETS 407.0 396.1 375.3
TOTAL ASSETS $3,479.3 $3,418.7 $3,286.9
See accompanying notes to consolidated condensed financial statements.
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CBS Inc. and subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in millions, except per share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31 December 31 March 31
1994 1993 1993
CURRENT LIABILITIES:
Accounts payable $ 36.5 $ 33.4 $ 40.1
Accrued salaries, wages and benefits 58.0 72.6 52.8
Liabilities for talent and program rights 373.9 317.4 371.3
Liabilities for securities sold under
repurchase agreements (note 2) 354.6 374.7 312.4
Debt .8 .9 403.5
Income taxes 15.9
Other 177.9 239.9 426.6
TOTAL CURRENT LIABILITIES 1,017.6 1,038.9 1,606.7
LONG-TERM DEBT (note 4) 590.2 590.3 479.2
OTHER LIABILITIES 417.3 406.0 431.9
DEFERRED INCOME TAXES 127.2 120.8 148.2
PREFERENCE STOCK, SERIES B, PAR VALUE $1.00
PER SHARE, SUBJECT TO REDEMPTION (note 5) 117.8 124.7 124.6
SHAREHOLDERS' EQUITY:
Common stock, par value $2.50 per share: 62.1 62.0 61.9
authorized: 100,000,000 shares
issued: 24,822,345 shares - March 1994
24,816,623 shares - December 1993
24,750,292 shares - March 1993
Additional paid-in capital 319.0 318.6 276.4
Unrealized holding gains (note 2) 10.4
Retained earnings 2,499.7 2,441.9 2,194.8
2,891.2 2,822.5 2,533.1
Less shares of common stock in treasury,
at cost: 1,682.0 1,684.5 2,036.8
9,315,973 shares - March 1994
9,332,916 shares - December 1993
11,280,144 shares - March 1993 _______ _______ _______
TOTAL SHAREHOLDERS' EQUITY 1,209.2 1,138.0 496.3
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,479.3 $3,418.7 $3,286.9
See accompanying notes to consolidated condensed financial statements.
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CBS Inc. and subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts)
Three months ended
March 31
1994 1993
Net sales $1,246.9 $878.7
Cost of sales (1,024.4) (712.9)
Selling, general and
administrative expenses (121.4) (105.1)
Other income, net 1.2 1.8
Operating income 102.3 62.5
Interest income on investments,
net (note 2) 23.3 36.9
Interest expense on debt, net (11.2) (13.6)
Interest, net 12.1 23.3
Income from operations
before income taxes 114.4 85.8
Income taxes (note 3) (45.1) (31.6)
Net income $ 69.3 $ 54.2
Per share of common stock:
Net income $ 4.23 $ 3.50
See accompanying notes to consolidated condensed financial statements.
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CBS Inc. and subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
Three months ended
March 31
1994 1993
Operating activities:
Net income $ 69.3 $ 54.2
Adjustments:
Depreciation and amortization 19.0 16.2
Gain on sale of marketable securities, net (6.7) (19.2)
Changes in assets and liabilities*:
Accounts receivable (92.2) (39.7)
Program rights, net 233.7 188.0
Other, net (24.6) (21.6)
198.5 177.9
Investing activities:
Marketable securities
Gross sales 570.7 679.2
Gross purchases (522.7) (633.2)
Liabilities for securities sold under
repurchase agreements (20.1) 3.7
Capital expenditures (10.2) (20.5)
17.7 29.2
Financing activities:
Dividends to shareholders (10.7) (6.5)
Other, net (4.9) 1.6
(15.6) (4.9)
Net increase in cash and cash equivalents 200.6 202.2
Cash and cash equivalents at beginning of period 173.4 145.4
Cash and cash equivalents at end of period $374.0 $347.6
See accompanying notes to consolidated condensed financial statements.
*Excludes effect of items included in Adjustments.
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CBS Inc. and subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
Note 1. The accompanying unaudited consolidated condensed financial
statements have been prepared by the Company pursuant to the rules of the
Securities and Exchange Commission (SEC) and, in the opinion of the Company,
include all adjustments necessary for a fair presentation of financial
position, results of operations and cash flows. There are no material
adjustments other than those that are normal and recurring, except for the
adoption of Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" as
discussed in note 2. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such SEC rules. The Company believes that the disclosures made are adequate
to make the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's latest Annual Report on Form 10-K.
Note 2. On January 1, 1994 the Company adopted SFAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities." As of that date, the
Company classified its marketable securities as available-for-sale and
recorded an unrealized post-tax holding gain of $34.2, net of a tax effect of
$23.0, in a separate component of shareholders' equity. There was no effect
on net income as a result of this adoption.
Income from these investments, classified as interest income on
investments, net, consisted of the following:
Three months ended March 31
1994 1993
Interest income $18.0 $18.3
Dividend income 1.8 2.0
Interest expense on repurchase agreements (3.2) (2.6)
Gross realized gains 10.1 19.8
Gross realized losses (3.4) (.6)
$23.3 $36.9
The cost of marketable securities sold was determined by specific
identification.
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CBS Inc. and subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
During the first quarter 1994 there were no trading securities or securities
held-to-maturity. The marketable securities as of March 31, 1994 consisted
of the following:
Fair Unrealized Holding
Value Gains Losses
U.S. Government and its Agencies $ 429.3 $12.1 $ 2.3
States and their Agencies 61.0 .6 .9
Political Subdivisions of States,
and their agencies 258.4 5.2 5.3
Corporate securities:
Equity 108.4 13.2 1.8
Debt 365.7 1.2 4.6
$1,222.8 $32.3 $14.9
The above unrealized holding gains and losses, net of income taxes of $7.0,
are reflected as "Unrealized holding gains" in shareholders' equity.
The maturities of the Company's investment in debt securities, at fair value,
as of March 31, 1994 were as follows:
Within 1 year $ 106.3
After 1 year through 5 years 442.0
After 5 years through 10 years 300.7
After 10 years 265.4
$1,114.4
The Company routinely enters into agreements to sell and repurchase certain
marketable securities. Due to the agreements to repurchase, the sales of
these securities are not recorded. Instead, the liabilities to repurchase
securities sold under these agreements are reported as current liabilities
and the investments acquired with the funds received are included in cash
equivalents and/or short-term marketable securities. As of March 31, 1994,
securities sold and the corresponding liabilities (both including accrued
interest) under such repurchase agreements were as follows:
Fair Repurchase
Securities Value Liabilities
U.S. Treasury notes
Maturity Term:
up to 30 days $136.1 $137.1
30-90 days 66.7 67.0
over 90 days 84.2 83.3
U.S. Government agency notes
Maturity Term:
up to 30 days 56.8 57.3
over 90 days 10.1 9.9
$353.9 $354.6
The loan rates on the repurchase liabilities varied between 3.40% and 4.00%
for U.S. Treasury notes and between 3.45% and 4.05% for U.S. Government
agency notes.
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CBS Inc. and subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
Note 3. Total tax expense on income from operations before income taxes for
the three months ended March 31, 1994 amounted to $45.1 million (an effective
rate of 39.4%) compared to $31.6 million (an effective rate of 36.8%) for the
comparable period in 1993. A reconciliation between the statutory Federal
income tax rate and the Company's effective income tax rate as a percentage
of income from operations before income taxes is as follows:
Three months ended March 31
1994 1993
Statutory Federal income tax rate 35.1% 34.1%
Income from tax preference securities (1.8) (2.7)
State and local taxes 5.3 5.2
Other, net .8 .2
Effective income tax rate 39.4% 36.8%
Note 4. As required by SFAS No. 107, "Disclosure about Fair Value of
Financial Instruments," the Company estimated that, based primarily on quoted
market prices for its traded issues, the fair value of its long-term debt at
March 31, 1994 exceeded its book value by approximately $7.4. It is
anticipated, however, that this debt ultimately will be redeemed at amounts
approximating its book value.
Note 5. In the first quarter of 1994, the Company purchased 50,000 of
certain custody receipts, which are derived securities of the Company's
Series B Preference Stock, for $5.5 which included a premium of $.5. These
securities have the right to receive future dividends and the redemption
price, but do not have the right of conversion. The purchase of these
securities was accounted for as a redemption of 50,000 shares of Series B
Preference Stock. (If the conversion feature related to these securities is
exercised, the Company will receive $5.0 towards the exercise price and will
issue 34,575 shares of its common stock.) In a separate transaction the
Company made an inducement payment of $.1 for the conversion of 20,000 shares
of its Series B Preference Stock. The above premium and the inducement
payment were subtracted from net income to arrive at net income applicable to
common shares in the calculation of Earnings Per Share.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operations
During the first quarter of 1994, the Company's net income increased to $69.3
million from $54.2 million in the first quarter of 1993 and net sales
increased to $1,246.9 million from $878.7 million. The increase in net sales
was primarily due to the Television Network Division's broadcast of the
Lillehammer Olympic Winter Games.
The Company recorded a pretax operating income of $102.3 million in the first
quarter of 1994 compared with $62.5 million in the first quarter of 1993,
largely attributable to a strong programming schedule, strengthened demand
for advertising and active cost control. Operating profits also benefited
from the Company's coverage of the Olympic Winter Games. Operating income at
the Television Network Division essentially remained the same from the
comparable period of 1993. Earnings in the late-night, daytime and sports
were higher than in the first quarter of 1993, due primarily to higher unit
pricing. The earnings in primetime entertainment declined due to program
preemptions for coverage of the Olympic Winter Games. Sales and profits for
the Television Stations Division significantly increased as a result of the
Television Network's coverage of the Olympic Winter Games as well as to
increased demand for local television advertising in each of the seven
markets of the Division. Operating profits at the Radio Division increased
principally as a result of sales gains at the Division's AM Group of
Stations.
Interest, net, declined to $12.1 million in the first quarter of 1994 from
$23.3 million in the first quarter of 1993. Interest income in the first
quarter of 1994 included gains from the sale of securities of $6.7 million
compared with $19.2 million in the 1993 quarter.
The effective tax rate for the first quarter of 1994 increased over the
comparable quarter in 1993, due primarily to the reduced proportion of income
from tax preference securities and to the higher statutory Federal income tax
rate.
Comparison of the results of the first quarter of 1994 to the fourth quarter
of 1993 is not meaningful because of the seasonal nature of the Company's
business.
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Liquidity and capital resources:
During the three months ended March 31, 1994, cash and cash equivalents
increased by $200.6 million and marketable securities, net of repurchase
agreements, decreased by $3.8 million for a net increase in liquid assets of
$196.8 million. This increase resulted primarily from positive cash flows
from operating activities.
Year-to-date cash flows for 1994 and 1993 varied as follows:
Operating activities:
The $20.6 million higher cash flows in 1994, compared with the same
period in 1993 were due primarily to the increase in cash flows from
operating income, offset by decreased interest income and by
fluctuations in various asset and liability accounts resulting from the
timing of transactions.
Investing and financing activities:
The variance in cash flows from investing activities was primarily due
to increased investments in marketable securities, offset by a decrease
in capital expenditures. The decreased activity in sales and purchases
of marketable securities for 1994, compared with the same period in
1993, was primarily due to market conditions.
The variance in cash flows from financing activities was primarily due
to an increase in dividends paid to shareholders as a result of the
Company's increased cash dividend on its common stock in 1994 compared
with the same period in 1993 and to the redemption of 50,000 shares of
the Company's Preference Stock (note 5).
The Company's liquid assets include the following (in millions):
As of
March 31 December 31 March 31
1994 1993 1993
Cash and cash equivalents $ 374.0 $ 173.4 $ 347.6
Marketable securities:
Current 425.4 420.7 326.7
Noncurrent 797.4 826.0 731.4
Liabilities for securities sold
under repurchase agreements (354.6) (374.7) (312.4)
$1,242.2 $1,045.4 $1,093.3
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PART II
Item 1. Legal Proceedings.
a. There has been no change in the status, most recently reported in Item 1
of Registrant's Form 10-K for 1993 (under the caption "Material Licenses and
Federal Regulation"), of its application to renew the television broadcast
license for WBBM-TV, Chicago.
b. There has been no change in the status, most recently reported in Item 1
of Registrant's Form 10-K for 1993 (under the caption "Material Licenses and
Federal Regulation"), of its application to renew the television broadcast
license for KCBS-TV, Los Angeles.
c. There has been no change in the status, most recently reported in Item 1
of Registrant's Form 10-K for 1993 (under the caption "Material Licenses and
Federal Regulation"), of its application to renew the television broadcast
license for WCBS-TV, New York, New York.
d. On April 1, 1994, Registrant filed with the Federal Communications
Commission a timely application to renew the television license for WCAU-TV,
Philadelphia. The date by which oppositions or competing applications may be
filed is July 1, 1994.
e. Various other legal actions, governmental proceedings and other claims
(including those relating to environmental investigations and remediation
resulting from the operations of discontinued businesses) are pending or,
with respect to certain claims, unasserted.
Item 6. Exhibits and Reports on Form 8-K
a. Filed herewith as Exhibit 11 is a statement regarding the computation of
earnings per common share and as Exhibit 12 is a computation of
consolidated ratio of earnings to fixed charges.
b. No reports on Form 8-K have been filed during the relevant period.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CBS Inc.
(Registrant)
Date: April 29, 1994 By: S/Peter W. Keegan
Peter W. Keegan
Senior Vice President, Finance
-and-
Principal Financial and
Accounting Officer
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CBS INC. and subsidiaries
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE
(In millions, except per share amounts)
PRIMARY FULLY DILUTED
Three months Three months
ended March 31 ended March 31
1994 1993 1994 1993
Earnings:
Net Income $69.3 $54.2 $69.3 $54.2
Post-tax interest on convertible
debentures (assumes conversion of debt)* - 3.1 - 3.1
Dividends on Series B preference
stock (note 5) (3.7) (3.2) - -
Net income applicable to common shares $65.6 $54.1 $69.3 $57.3
Shares:
Weighted average number of common
shares outstanding 15.5 13.4 15.5 13.4
Common stock equivalents - 2.0 - 2.0
Assumed conversion of Series B
preference stock - - .9 .9
Adjusted shares 15.5 15.4 16.4 16.3
Per share:
Net income $4.23 $3.50 $4.24(a)$3.51(a)
*The debentures were converted in May 1993. Conversion was assumed for
all prior periods.
(a) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to APB Opinion No. 15 because it
produces an anti-dilutive effect.
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EXHIBIT 12
CBS Inc.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Three Months
Ended
March 31 YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990(1) 1989
Income from Continuing
Operations before
Income Taxes $114.4 $479.3 $227.0 ($178.6) $102.4 $455.7
Add:
Fixed charges 15.9 65.6 89.8 78.3 88.2 90.9
Amortization of
Capitalized Interest 1.5 4.3 3.4 3.7 4.3 6.1
Less:
Capitalized Interest (0.8) (6.4) (10.2) (8.4) (8.3) (5.6)
Adjusted Earnings $131.0 $542.8 $310.0 ($105.0) $186.6 $547.1
Interest Cost (2) $12.0 $48.8 $71.9 $58.8 $68.5 $72.6
Interest Factor
Portion of Rentals 3.9 16.8 17.9 19.5 19.7 18.3
Fixed Charges $15.9 $65.6 $89.8 $78.3 $88.2 $90.9
Ratio of Earnings
to Fixed Charges 8.24:1 8.27:1 3.45:1 * 2.12:1 6.02:1
(1) In connection with its $2 billion common stock repurchase, consummated on
February 4, 1991, the Company included a 1990 Unaudited Pro Forma
Condensed Consolidated Income Statement in footnote 15 to its 1990 Annual
Report. The Ratio of Earnings to Fixed Charges for this income statement
was .35 to 1.
(2) Includes amortization of debt discount and amortization of debt issue
expenses.
(*) The ratio of earnings to fixed charges is less than a one-to-one coverage
and the earnings are inadequate to cover fixed charges. The amount of
coverage deficiency is $183.3.
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