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 June 30, 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 August 10, 1994
Common Stock $2.50 par value 15,734,029
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PART I. FINANCIAL INFORMATION
CBS Inc. and subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS (note 6)
(Dollars in millions, except per share amounts)
ASSETS
June 30 December 31 June 30
1994 1993 1993
CURRENT ASSETS:
Cash and cash equivalents $ 340.2 $ 173.4 $ 423.6
Marketable securities (note 2) 386.0 420.7 360.1
Accounts receivable, less allowances: 417.3 454.5 373.3
$9.7 - June 1994
$9.1 - December 1993
$10.0 - June 1993
Program rights 338.1 581.9 385.4
Recoverable income taxes 28.8 50.3
Other 24.0 18.2 16.3
TOTAL CURRENT ASSETS 1,505.6 1,677.5 1,609.0
MARKETABLE SECURITIES (note 2) 962.5 826.0 807.1
PROPERTY, PLANT AND EQUIPMENT:
Land 81.4 81.4 81.4
Buildings, improvements and equipment 920.2 896.7 879.5
1,001.6 978.1 960.9
Less accumulated depreciation 487.3 459.0 467.7
NET PROPERTY, PLANT AND EQUIPMENT 514.3 519.1 493.2
OTHER ASSETS:
Program rights 161.8 90.9 79.5
Goodwill, net of amortization 268.5 280.6 279.5
Other 23.1 24.6 14.8
TOTAL OTHER ASSETS 453.4 396.1 373.8
TOTAL ASSETS $3,435.8 $3,418.7 $3,283.1
See accompanying notes to consolidated condensed financial statements.
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CBS Inc. and subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS (note 6)
(Dollars in millions, except per share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30 December 31 June 30
1994 1993 1993
CURRENT LIABILITIES:
Accounts payable $ 35.2 $ 33.4 $ 29.3
Accrued salaries, wages and benefits 66.0 72.6 61.7
Liabilities for talent and program rights 227.5 317.4 266.9
Liabilities for securities sold under
repurchase agreements (note 2) 364.6 374.7 338.2
Debt .7 .9 12.9
Income taxes 44.2
Other 177.0 239.9 415.7
TOTAL CURRENT LIABILITIES 915.2 1,038.9 1,124.7
LONG-TERM DEBT 590.1 590.3 479.1
OTHER LIABILITIES 410.4 406.0 430.3
DEFERRED INCOME TAXES 108.8 120.8 140.3
PREFERENCE STOCK, SERIES B, PAR VALUE $1.00
PER SHARE, SUBJECT TO REDEMPTION (note 5) 112.8 124.7 124.6
SHAREHOLDERS' EQUITY:
Common stock, par value $2.50 per share: 62.1 62.0 61.9
authorized: 100,000,000 shares
issued: 24,831,120 shares - June 1994
24,816,623 shares - December 1993
24,775,748 shares - June 1993
Additional paid-in capital 319.4 318.6 311.4
Unrealized holding losses (note 2) (5.3)
Retained earnings 2,598.1 2,441.9 2,295.3
2,974.3 2,822.5 2,668.6
Less shares of common stock in treasury,
at cost: 1,675.8 1,684.5 1,684.5
9,281,398 shares - June 1994
9,332,916 shares - December 1993
9,332,969 shares - June 1993 _______ _______ _______
TOTAL SHAREHOLDERS' EQUITY 1,298.5 1,138.0 984.1
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,435.8 $3,418.7 $3,283.1
See accompanying notes to consolidated condensed financial statements.
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CBS Inc. and subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (note 6)
(Dollars in millions, except per share amounts)
Three months ended Six months ended
June 30 June 30
1994 1993 1994 1993
Net sales $882.7 $835.7 $2,129.6 $1,714.4
Cost of sales (591.6) (579.9) (1,616.0) (1,292.8)
Selling, general and
administrative expenses (118.5) (115.0) (239.9) (220.1)
Other income, net (note 4) 1.9 12.4 3.1 14.2
Operating income 174.5 153.2 276.8 215.7
Interest income on investments,
net (note 2) 19.0 32.0 42.3 68.9
Interest expense on debt, net (11.0) (9.2) (22.2) (22.8)
Interest, net 8.0 22.8 20.1 46.1
Income before income taxes 182.5 176.0 296.9 261.8
Income taxes (note 3) (73.2) (68.6) (118.3) (100.2)
Net income $109.3 $107.4 $ 178.6 $ 161.6
Per share of common stock:
Net income $ 6.84 $ 6.73 $ 11.07 $ 10.23
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)
Six months ended
June 30
1994 1993
Operating activities:
Net income $178.6 $ 161.6
Adjustments:
Depreciation and amortization 38.4 33.3
Gain on sale of marketable securities, net (6.7) (33.4)
Changes in assets and liabilities*:
Accounts receivable 37.2 44.1
Program rights, net 78.7 130.9
Other, net 9.9 23.4
336.1 359.9
Investing activities:
Marketable securities
Gross sales 782.5 1,184.8
Gross purchases (886.5) (1,233.7)
Liabilities for securities sold under
repurchase agreements (10.1) 29.5
Capital expenditures (30.1) (47.1)
(144.2) (66.5)
Financing activities**:
Dividends to shareholders (21.3) (13.5)
Other, net (3.8) (1.7)
(25.1) (15.2)
Net increase in cash and cash equivalents 166.8 278.2
Cash and cash equivalents at beginning of period 173.4 145.4
Cash and cash equivalents at end of period $340.2 $ 423.6
See accompanying notes to consolidated condensed financial statements.
*Excludes effect of items included in Adjustments.
**Excludes noncash item in 1993 for the conversion of $389.6 of the
Company's 5% convertible debentures into common stock.
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CBS Inc. and subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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 1993 Annual Report on Form 10-K and
subsequent quarterly filing.
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 million, net of a tax
effect of $23.0 million, 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 (in millions):
Three months Six months
ended June 30 ended June 30
1994 1993 1994 1993
Interest income $20.4 $18.8 $38.4 $37.1
Dividend income 1.9 1.7 3.7 3.7
Interest expense on repurchase agreements (3.3) (2.7) (6.5) (5.3)
Gross realized gains 3.1 15.0 13.2 34.8
Gross realized losses (3.1) (.8) (6.5) (1.4)
$19.0 $32.0 $42.3 $68.9
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
During the first six months 1994 there were no trading securities or
securities held-to-maturity. The marketable securities as of June 30, 1994
consisted of the following (in millions):
Fair Unrealized Holding
Value Gains Losses
U.S. Government and its Agencies $ 451.1 $ 4.9 $ 5.5
States and their Agencies 80.7 .2 1.6
Political Subdivisions of States,
and their agencies 275.0 3.1 6.2
Corporate securities:
Equity 144.8 12.3 3.0
Debt 396.9 .3 13.4
$1,348.5 $20.8 $29.7
The above unrealized holding gains and losses, net of income taxes of $3.6
million, are reflected as "Unrealized holding losses" in shareholders'
equity.
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 June 30,
1994, securities sold and the corresponding liabilities (both including
accrued interest) under such repurchase agreements were as follows (in
millions):
Fair Repurchase
Securities Value Liabilities
U.S. Treasury notes
Maturity Term:
up to 30 days $ 98.2 $ 98.5
30-90 days 173.4 172.7
over 90 days 52.9 52.2
U.S. Government agency notes
Maturity Term:
up to 30 days 19.1 18.8
30-90 days 15.6 15.9
over 90 days 6.2 6.5
$365.4 $364.6
The loan rates on the repurchase liabilities varied between 2.50% and 5.00%
for U.S. Treasury notes and between 4.05% and 8.70% for U.S. Government
agency notes.
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CBS Inc. and subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 3. Total tax expense on income before income taxes for the six months
ended June 30, 1994 amounted to $118.3 million (an effective rate of 39.8%)
compared to $100.2 million (an effective rate of 38.3%) 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
before income taxes is as follows:
Six months ended June 30
1994 1993
Statutory Federal income tax rate 35.1% 34.1%
Income from tax preference securities (1.4) (1.7)
State and local taxes 5.2 5.3
Other, net .9 .6
Effective income tax rate 39.8% 38.3%
Note 4. In the second quarter of 1993, the Company recorded a pretax gain of
$10.7 million related to insurance settlements for hurricane damage to its
television station in Miami.
Note 5. In the second quarter and first quarter of 1994, the Company made
inducement payments of $.3 million and $.1 million, respectively, for the
conversion of 50,000 shares and 20,000 shares, respectively, of its Series B
Preference Stock. In addition, as mentioned in the Company's 1994 first
quarter Form 10-Q, the Company purchased 50,000 of certain custody receipts
which are derived securities of the Company's Series B Preference Stock. The
purchase of these securities was accounted for as a redemption of 50,000
shares of Series B Preference Stock.
Note 6. Subsequent event.
On July 25, 1994, the Company commenced a tender offer to purchase for cash
3,500,000 shares (the Shares) of its common stock at a price of $325 per
share upon the terms and subject to the conditions set forth in the Offer to
Purchase and in the related Letter of Transmittal (which together constitute
the "Offer"). (The form of Offer is included in Schedule 13E-4 filed July
25, 1994 with the Securities and Exchange Commission pursuant to Section
13(e)(1) of the Securities Exchange Act of 1934.) The Company intends to
fund the purchase of the Shares pursuant to the Offer from available cash and
the sale of marketable securities.
Set forth below is certain unaudited pro forma consolidated
condensed financial information of the Company, based upon its 1994 second
quarter financial statements adjusted to reflect the expected results of the
Offer. In accordance with the Securities and Exchange Commission's
regulations, the pro forma income statement assumes that the Offer has been
completed as of January 1, 1994 while the pro forma balance sheet assumes
that the Offer was completed as at June 30, 1994. The pro forma financial
information is based on certain assumptions and estimates and, therefore,
does not purport to be indicative of (a) the results that actually would have
been achieved, or the balance sheet as it actually would have been, if the
purchase of the Shares pursuant to the Offer had been completed as of such
dates or (b) future results of operations and financial condition.
The Unaudited Pro Forma Consolidated Condensed Financial Statements
below should be read in conjunction with the Company's 1994 second quarter
financial statements and other notes included in this 10-Q as well as with
the following assumptions and estimates:
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CBS Inc. and subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(a) Assumes the purchase pursuant to the Offer of 3,500,000 shares at a price
of $325 per share, but does not adjust for transaction costs and expenses
which are not considered significant.
(b) All of the Company's long-term investment portfolio of marketable
securities has been reclassified to current assets except for $84.1 million
as of June 30, 1994, related to marketable securities invested in a trust
fund to implement the Company's agreement with the New York City Industrial
Development Agency. (Under this agreement, the Company is required to invest
in production facilities and develop new broadcasting and production
technologies in New York City in return for certain tax incentives and low-
cost energy.)
(c) It is assumed that $356.0 million of liabilities for securities sold
under repurchase agreements, included in current liabilities, are
extinguished as the investments related to these liabilities are liquidated
for the purchase of the Shares pursuant to the Offer.
(d) An assumed rate of interest of 7.5% pre-tax was used to calculate the
reduction in interest income attributable to cash outlays from the Company's
portfolios.
(e) For computing the pro forma earnings per share of common stock for the
six months ended June 30, 1994, the common shares expected to be purchased
under the Offer of 3,500,000 were subtracted from the weighted average shares
outstanding of 15,514,000 to arrive at the pro forma adjusted weighted
average shares outstanding. The fully diluted earnings per share of common
stock was considered equal to the earnings per common share computed based
upon the adjusted weighted average shares outstanding, because the addition
of common stock equivalents and other potentially dilutive securities would
have resulted in immaterial dilution.
(f) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before provisions for
income taxes and fixed charges. Fixed charges consist of interest on debt,
amortization of debt discount and debt issue expenses and the portion of
rentals deemed representative of the interest factor. For the computation of
the pro forma ratio of earnings to fixed charges for the six months ended
June 30, 1994, earnings was reduced by $42.5 million of pretax loss of
interest income attributed to cash outlays for the purchase of the Shares.
The unaudited Pro Forma Consolidated Condensed Income Statement for the six
months ended June 30, 1994 is as follows (dollars in million, except per
share amounts):
As Reported Adjustments Pro Forma
Net sales $2,129.6 $2,129.6
Net income $ 178.6 $(25.4)(d) $ 153.2
Per share of common stock:
Net income $ 11.07 $ 1.12 (e) $ 12.19
Ratio of earnings to
fixed charges 10.35:1 9.02:1(f)
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CBS Inc. and subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The unaudited Pro Forma Consolidated Condensed Balance Sheet as of June 30,
1994 is as follows (dollars in millions):
As Reported Adjustments Pro Forma
Cash and cash equivalents, and
marketable securities $ 726.2 $(1,137.5)(a) $ 111.1
878.4 (b)
(356.0)(c)
Other current assets 779.4 ________ 779.4
Total current assets 1,505.6 (615.1) 890.5
Marketable securities 962.5 (878.4)(b) 84.1
Net property, plant and equipment 514.3 514.3
Goodwill, net of amortization 268.5 268.5
Other assets 184.9 184.9
$3,435.8 $(1,493.5) $1,942.3
Current liabilities $ 915.2 $ (356.0)(c) $ 559.2
Long-term debt 590.1 590.1
Other liabilities 410.4 410.4
Deferred income taxes 108.8 108.8
Preference stock subject to redemption 112.8 112.8
Shareholders' equity 1,298.5 (1,137.5)(a) 161.0
$3,435.8 $(1,493.5) $1,942.3
The Company announced that following the consummation of the Offer it intends
to effect a 5 for 1 share split to be effected in the form of a stock
dividend of four new shares on each outstanding common share.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operations
The Company's net sales increased 6 percent in the second quarter compared with
the 1993 second quarter, due primarily to higher sales at the Television
Network. The Network's improvement was mainly a result of increased revenues
in the late-night time period as well as strong scatter pricing in the
primetime, daytime, and news dayparts. In addition, the increase in net sales
for the first six months of 1994 compared with the same period in 1993 was
mainly caused by the Television Network Division's broadcast of the Lillehammer
Olympic Winter Games which aired in the first quarter of 1994.
In the second quarter, pretax operating income increased 14 percent over 1993.
The Television Network reported a significant increase in income due largely to
higher sales, as explained above. During the second quarter of 1993, the
Television Stations Division recorded a pretax gain of $10.7 million related to
insurance settlements for hurricane damage to its television station in Miami.
Absent the impact of this gain from insurance proceeds, operating income for the
Television Stations Division increased over the comparable period of 1993.
Operating income at the Radio Division increased principally as a result of
sales gains at the Radio Networks and the Division's FM Group of Stations.
For the first six months of 1994, pretax operating income increased 28 percent
over 1993, due principally 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 increased at the Television Network mainly as a result of increased sales
in the late-night time period. 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
income at the Radio Division increased principally as a result of sales gains at
the Radio Networks and at the Division's AM and FM Groups of Stations.
The decrease in interest, net, in the second quarter of 1994 and the six months
ended June 30, 1994, compared with the prior-year periods, reflected decreases
in gains from the sale of marketable securities of $14.2 million, and $26.7
million for those respective periods.
The effective income tax rates for the second quarter and six months ended June
30, 1994 were higher than the comparable periods in 1993 due primarily to the
higher statutory Federal income tax rate in 1994.
In the second quarter of 1994, the Company recorded net income of $109.3
million, or a second-quarter record of $6.84 per share, compared with $107.4
million, or $6.73 per share, for the second quarter of 1993. The 1993 second
quarter included two non-recurring items of $.96 per share -- an insurance
settlement and gains from the sale of marketable securities, as were mentioned
above. In addition, in the first quarter of 1993 and 1994, the Company also
recorded gains from the sale of marketable securities, on a pretax basis, of
$19.2 million and $6.7 million, respectively. Absent the impact of the gains
from the sale of marketable securities and the insurance settlement, net income
per share registered an increase of 19 percent and 27 percent for the second
quarter and for the six months ended June 30, 1994, respectively.
Comparison of the second quarter of 1994 with the first quarter of 1994 is not
meaningful because of the seasonal nature of the Company's business.
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Liquidity and capital resources:
During the six months ended June 30, 1994, cash and cash equivalents increased
by $166.8 million and marketable securities, net of repurchase agreements,
increased by $111.9 million for a net increase in liquid assets of $278.7
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 $23.8 million lower positive cash flows in 1994, compared with the
same period in 1993 were due primarily to a scheduled payment made in
1994 as part of the acquisition of rights to the 1998 Olympic Winter
Games, fluctuations in various asset and liability accounts resulting
from the timing of transactions, and decreased interest income partially
offset by increased operating income.
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 because of additional expenditures in 1993
related largely to the acquisition and renovation of the Ed Sullivan
Theater in New York City. The decreased activity in sales and purchases
of marketable securities for 1994, compared to 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.
The Company's liquid assets include the following (in millions):
As of
June 30 December 31 June 30
1994 1993 1993
Cash and cash equivalents $ 340.2 $ 173.4 $ 423.6
Marketable securities:
Current 386.0 420.7 360.1
Noncurrent 962.5 826.0 807.1
Liabilities for securities sold
under repurchase agreements (364.6) (374.7) (338.2)
$1,324.1* $1,045.4 $1,252.6
*On July 25, 1994, the Company commenced the Offer to purchase for cash
3,500,000 shares of the Company's common stock at $325 per share. The Company
intends to finance the purchase of these shares from available cash and the sale
of marketable securities. As a result of the purchase of the Shares pursuant
to the Offer, the balance in liquid assets as of June 30, 1994, on a pro forma
basis, will be reduced by $1,137.5 million. For pro forma information see
note 6. Following consummation of the Offer, the Company believes that it will
retain sufficient financial flexibility to invest in television programming as
well as in strategic acquisitions and joint ventures in media businesses.
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PART II
Item 1. Legal Proceedings.
a. As previously reported in Item 1 of Registrant's 10-Q for the quarter ended
March 31, 1994, Registrant filed with the Federal Communications Commission
(the "FCC") on April 1, 1994 a timely application to renew the television
license for WCAU-TV, Philadelphia. On July 13, 1994, the Philadelphia
Lesbian and Gay Task Force and other groups filed with the FCC a petition
to deny the WCAU-TV application, to which CBS will respond. CBS believes
the station has been operated in accordance with all applicable
requirements.
b. In connection with discussions relating to the proposed merger with QVC,
Inc. ("QVC"), more fully described in paragraph a of Item 5 hereof,
Registrant and its Chief Executive Officer, Laurence A. Tisch, were named
defendants in certain shareholder law suits. Such suits are described in
Registrant's July 25, 1994 Offer to Purchase for Cash by CBS Inc. 3,500,000
Shares of Its Common Stock at $325 Net Per Share (the "Offer"), which is
included in Schedule 13E-4 filed July 25, 1994 with the Securities and
Exchange Commission pursuant to Section 13(e)(1) of the Securities Exchange
Act of 1934. The text at pages 4-5 of the Offer which appears under the
caption "CBS-QVC Shareholder Suits", which is set forth as one of several
captions under the heading "Recent Developments", is incorporated herein by
reference in its entirety. (The Offer is more fully discussed and described
in Item 2, and in paragraphs b and c of Item 5, of Part II of this Report.)
c. 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 2. Changes in Securities.
Consummation of the Offer will result in substantially reduced cash balances,
working capital and shareholders' equity. With respect to possible effect on
the payment of dividends, that portion of the text of the Offer under the
caption "Financial Impact of Offer", which appears on page 5 under the heading
"Recent Developments", is incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders.
a. Registrant's Annual Meeting of Shareholders (the "Meeting") was held on
May 11, 1994.
b. At the Meeting, the following director-nominees were elected to the Board
of Directors: Laurence A. Tisch, Michel C. Bergerac, Harold Brown,
Ellen V. Futter, Henry A. Kissinger, Henry B. Schacht, Edson W. Spencer,
Franklin A. Thomas, Preston R. Tisch, James D. Wolfensohn and Daniel
Yankelovich.
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c. (1) The election of directors was the first matter voted upon at the
Meeting. Directors so elected will hold office for one year and until
their successors shall be elected and shall qualify. The voting results
with respect to such matter were:
Director-Nominee Votes For Votes Withheld
Laurence A. Tisch 12,400,982 70,797
Michel C. Bergerac 12,400,250 71,529
Harold Brown 12,400,520 71,259
Ellen V. Futter 12,403,544 68,235
Henry A. Kissinger 12,395,276 76,503
Henry B. Schacht 12,404,104 67,675
Edson W. Spencer 12,404,094 67,685
Franklin A. Thomas 12,337,338 134,441
Preston R. Tisch 12,398,839 72,940
James D. Wolfensohn 12,360,997 110,782
Daniel Yankelovich 12,406,414 65,365
(2) The second matter voted upon was the election of Coopers & Lybrand to
serve as auditors until the next Annual Meeting of Shareholders. The voting
results with respect to such matter were: Votes For - 12,395,920; Votes
Against - 48,184; Abstentions - 27,675.
(3) The third matter voted upon was a shareholder proposal to establish a
limit on terms for directors. The voting results with respect to such
matter were: Votes For - 461,195; Votes Against - 11,178,647;
Abstentions - 92,962; Broker Non-Votes - 738,975.
(4) The fourth matter voted upon was a shareholder proposal that
Registrant permit television cameras, other than those under its own
control, to be admitted to future annual meetings. The voting results
with respect to such matter were: Votes For - 390,338; Votes Against
- 10,665,994; Abstentions - 676,472; Broker Non-Votes - 738,975.
(5) The fifth and final matter voted upon was a shareholder proposal that
Registrant refrain from making recommendations on the proxy card as to how
shareholders should vote matters to be brought before the annual meeting.
The voting results with respect to such matter were: Votes For -
269,922; Votes Against - 10,924,612; Abstentions - 538,270; Broker
Non-Votes - 738,975.
d. Not applicable.
Item 5. Other Information
a. On June 30, 1994, Registrant and QVC, Inc. ("QVC") announced that they were
in discussions regarding a possible business combination whereby QVC would
be merged into Registrant, which would be the surviving corporation in such
a transaction. The proposed transaction is described in Registrant's press
release, dated and disseminated on June 30, 1994, a copy of which is filed
as Exhibit 99.a to this Report and is incorporated herein by reference.
Also incorporated herein by reference in respect of the proposed QVC
transaction is that portion of the text of the Offer under the caption
"QVC; Announcement of the Offer and Stock Split", which appears on page 4
under the heading "Recent Developments". On July 13, 1994, Registrant
announced it would not pursue its acquisition of QVC, and issued a press
release to such effect, a copy of which is filed as Exhibit 99.b to this
Report and is incorporated herein by reference.
-14-<PAGE>
b. On July 13, 1994, Registrant announced a proposed self tender offer to
purchase up to 3,500,000 Shares of its Common Stock. (See a copy of the
press release which is filed as Exhibit 99.b to this Report.) On July 25,
Registrant's Schedule 13 E-4 was filed with the Securities Exchange
Commission, and the Offer, included therein, was mailed to all of
Registrant's shareholders. The Offer is incorporated herein by reference
in its entirety. For pro forma financial information in respect of the
Offer see (A) Note 6 of Notes to Consolidated Condensed Financial Statements
included in Part I of this Report, (B) Management's Discussion and Analysis
of Financial Condition and Results of Operations under the caption
"Liquidity and capital resources" included in Part I of this Report and (C)
Item 2 of Part II of this Report.
c. On July 14, 1994, Registrant announced an agreement with Westinghouse
Broadcasting Company, Inc. ("Group W") whereby Registrant and Group W will
form a comprehensive strategic partnership establishing long-term station
affiliations between the Group W owned stations and the CBS Television
Network, and new, jointly-held entities involved in various activities
relating to television broadcasting. A copy of the press release, dated
July 14, 1994, issued in respect of such agreement, is filed as Exhibit 99.c
to this Report and is incorporated herein by reference. Also incorporated
herein by reference in respect of the CBS-Group W agreement is the text of
the Offer under the caption "Group W Announcement", which appears on pages
3 and 4 under the heading "Recent Developments". In connection with the
CBS Television Network's negotiation of new, long-term affiliation
agreements with Group W, it is expected that the aggregate level of
compensation paid to affiliated stations will increase.
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. See also Exhibit Index on
page 16.
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: August 11, 1994 By: S/Peter W. Keegan
Peter W. Keegan
Executive Vice President, Finance
-and-
Principal Financial and
Accounting Officer
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EXHIBIT INDEX
Exhibit Description
11 Computation of Earnings Per Common Share
12 Consolidated Ratio of Earnings to Fixed Charges
99.a Press Release dated June 30, 1994
99.b Press Release dated July 13, 1994
99.c Press Release dated July 14, 1994
99.d Offer to Purchase for Cash by CBS Inc. 3,500,000 Shares of Its
Common Stock at $325 Net Per Share, filed July 25, 1994 as
Exhibit (a)(1) to Schedule 13E-4, incorporated herein by reference
-16-<PAGE>
CBS INC. and subsidiaries
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE
(In millions, except per share amounts)
PRIMARY
Three months Six months
ended June 30 ended June 30
1994 1993 1994 1993
Earnings:
Net Income $109.3 $107.4 $178.6 $161.6
Post-tax interest on convertible
debentures (assumes conversion of debt)* - .3 - 3.3
Dividends on Series B preference
stock (note 5) (3.1) (3.2) (6.8) (6.3)
Net income applicable to common shares $106.2 $104.5 $171.8 $158.6
Shares:
Weighted average number of common
shares outstanding 15.5 14.8 15.5 14.1
Common stock equivalents - .7 - 1.4
Adjusted shares 15.5 15.5 15.5 15.5
Per share:
Net income $6.84 $6.73 $11.07 $10.23
*The debentures were converted in May 1993. Conversion was assumed for
all prior periods.
-1-<PAGE>
CBS INC. and subsidiaries
EXHIBIT 11 (continued) - COMPUTATION OF EARNINGS PER COMMON SHARE
(In millions, except per share amounts)
FULLY DILUTED
Three months Six months
ended June 30 ended June 30
1994 1993 1994 1993
Earnings:
Net Income $109.3 $107.4 $178.6 $161.6
Post-tax interest on convertible
debentures (assumes conversion of debt)* - .3 - 3.3
Net income applicable to common shares $109.3 $107.7 $178.6 $164.9
Shares:
Weighted average number of common
shares outstanding 15.5 14.8 15.5 14.1
Common stock equivalents .1 .7 .1 1.4
Assumed conversion of Series B
preference stock .8 .9 .8 .9
Adjusted shares 16.4 16.4 16.4 16.4
Per share:
Net income $6.64 $6.57 $10.86 $10.07
*The debentures were converted in May 1993. Conversion was assumed for
all prior periods.
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EXHIBIT 12
CBS Inc.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Six Months
Ended
June 30 YEAR ENDED DECEMBER 31,
1994(1) 1993 1992 1991 1990(3) 1989
Income from Continuing
Operations before
Income Taxes $296.9 $479.3 $227.0 ($178.6) $102.4 $455.7
Add:
Fixed charges 31.9 65.6 89.8 78.3 88.2 90.9
Amortization of
Capitalized Interest 3.0 4.3 3.4 3.7 4.3 6.1
Less:
Capitalized Interest (1.7) (6.4) (10.2) (8.4) (8.3) (5.6)
Adjusted Earnings $330.1 $542.8 $310.0 ($105.0) $186.6 $547.1
Interest Cost (2) $23.8 $48.8 $71.9 $58.8 $68.5 $72.6
Interest Factor
Portion of Rentals 8.1 16.8 17.9 19.5 19.7 18.3
Fixed Charges $31.9 $65.6 $89.8 $78.3 $88.2 $90.9
Ratio of Earnings
to Fixed Charges 10.35:1 8.27:1 3.45:1 * 2.12:1 6.02:1
(1) In connection with the Offer commenced on July 25, 1994, the Company
included an Unaudited Pro Forma Consolidated Condensed Income Statement
for the six months ended June 30, 1994, in note 6 of this Form 10-Q. The
ratio of earnings to fixed charges for this income statement was 9.02
to 1.
(2) Includes amortization of debt discount and amortization of debt issue
expenses.
(3) In connection with its $2 billion common stock repurchase, consummated on
February 4, 1991, the Company included a 1990 Unaudited Pro Forma
Consolidated Condensed 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.
(*) 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.
<PAGE>
Exhibit 99.a
FOR IMMEDIATE RELEASE:
June 30, 1994 -- Laurence A. Tisch, Chairman, President and
Chief Executive Officer of CBS Inc., and Barry Diller, Chairman
and Chief Executive Officer of QVC, Inc. responded to press
inquiries by saying that the two companies are in discussions
regarding a possible business combination and are close to
reaching agreement. In the business combination QVC would merge
into CBS, and each share of QVC common stock would be converted
into a combination of .0486 of a share of CBS Common Stock and
.1931 of a share of a new series of CBS non-voting Convertible
Exchangeable Preferred Stock, with the result that QVC
stockholders would own approximately 46.4 percent of CBS on a
fully diluted basis. Each share of CBS Common Stock would be
converted into $175 in cash and .4009 of a share of CBS Common
Stock, such that CBS stockholders would own approximately 53.6
percent of CBS on a fully diluted basis. The Preferred Stock
would have a $100 face amount and would be convertible into .3229
of a share of CBS Common Stock. The Preferred Stock would have a
coupon of 4 percent, would be non-callable for 10 years and could
be exchangeable into subordinated debt after 5 years at the
option of CBS. It is anticipated that CBS would continue its
current dividend.
Laurence Tisch would remain Chairman of CBS and Barry Diller
would become its President, Chief Executive Officer and Chairman
- 1 -<PAGE>
of the Executive Committee. QVC would designate five of the
twelve members of the CBS Board of Directors, including Barry
Diller.
The transaction is subject to the approval of each company's
Board of Directors at meetings expected to be held in mid-July
and the signing of a merger agreement, and thereafter to the
approval of the shareholders of each company and other customary
approvals and conditions.
Laurence A. Tisch, Chairman, President and CEO of CBS said:
"The alliance of CBS and QVC combines two of the leading
franchises in television. CBS is America's most watched
television network, with leading program brands in daytime,
primetime and late night television. QVC is the nation's
largest retailing television network, guiding the global
revolution in the way consumer products are marketed and
sold. Together, the foundation of this enterprise will
remain devoted to the creation of first-rate original
programming to attract viewers and consumers, while
providing exciting new opportunities for advertisers,
marketers, affiliated stations and cable operators. CBS is
extremely fortunate to have Barry Diller become its Chief
Executive Officer. Barry Diller's experience and track
record in the entertainment and communications businesses
have repeatedly proved him to be a brilliant and imaginative
manager of creative artists and innovative technologies."
Barry Diller, Chairman and CEO of QVC said:
"What you say to a group that has just completed such a
winning season in primetime, late night, and daytime is
'Thank you, how can I support you and how can I help
maintain CBS's preeminence.' And I would say to everyone
else that they should honor Larry Tisch because he has never
received the praise he truly deserves for taking the
leadership of a company eight years ago that was deep with
dissension and failure, and by concentrating ferociously on
its core business, brought it back to the place of
leadership it had historically enjoyed. And as for the
future, I don't think there is a more interesting time to
- 2 -<PAGE>
work in telecommunications. To be able to help draw the
architectural lines for the future is great good luck."
Contact: Ann Morfogen Donald A. Van de Mark
Vice President Director
Media Relations Corporate Communications
CBS Broadcast Group QVC, Inc.
212-975-8088 (610) 429-5666
(212) 371-5999
Keith Fawcett William F. Costello
Assistant Treasurer EVP and CFO
Investment Relations QVC, Inc.
CBS Inc. (610) 430-8938
212-975-6824
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Exhibit 99.b
CBS Inc.
51 West 52 Street
New York, New York 10019
(212) 975-4321
July 13, 1994
CBS INC. WILL NOT PURSUE QVC INC.
CBS ANNOUNCES SELF-TENDER FOR 3.5 MILLION SHARES
AT $325 PER SHARE AND WILL SPLIT ITS COMMON STOCK 5 FOR 1
CBS Inc. announced today that it will not pursue its
acquisition of QVC Inc. in light of the offer for QVC made by
Comcast Corporation. CBS announced that it will commence a cash
tender offer for up to 3.5 million common shares at a price of
$325 per share, or approximately $1.1 billion in the aggregate.
CBS expects to commence the Offer by July 25 and to close the
Offer on or about August 22.
CBS also announced that immediately following the Offer it
intends to effect a 5 for 1 share split, paying a stock dividend
of four new shares on each outstanding common share. The Company
also intends to continue its regular cash dividend of $2 per
common share annually, or 40 cents per share on the split shares.
Laurence A. Tisch, Chairman, President and Chief Executive
Officer of CBS, commented that, "While we believe the QVC merger
represented an opportunity, we have every confidence that CBS
will remain aggressive, future-oriented and highly competitive.
We have demonstrated our appetite for new directions and will
continue to pursue new business opportunities as appropriate."
Loews Corporation has advised CBS of its intention to tender
all the shares of CBS held by it. Loews owns approximately 3
million shares of CBS Common Stock.
The Offer is not conditioned upon any minimum number of
shares being tendered. If more than 3.5 million shares are
properly tendered and not withdrawn, shares tendered will be
subject to proration. The Offer, proration period and withdrawal
rights will expire at 5:00 p.m., EDT, on or about August 22,
unless the Offer is extended. The exact expiration date will be
announced when the Offer is commenced. Salomon Brothers Inc is
acting as financial advisor to the Company in connection with the
Offer.
Contact: Ann Morfogen
Media Relations
(212)975-8088
Keith Fawcett
Investor Relations
(212)975-6824
Exhibit 99.c
CBS Inc.
51 West 52 Street
New York, New York 10019
(212) 975-4321
July 14, 1994
CBS INC. AND GROUP W REACH COMPREHENSIVE AGREEMENT
Establish Long-Term Affiliations Between CBS and the
Group W Stations; Create New Television Distribution,
Programming and Ad Sales Entities
CBS Inc. and Westinghouse Broadcasting Company (Group W)
today announced an agreement by which the companies will join in
a comprehensive strategic partnership establishing long-term
station affiliations between CBS and all the Group W television
stations and creating new, jointly-held entities that will expand
both companies' distribution and programming capabilities
nationwide.
The agreement was announced by Bill Korn, President and
Chief Executive Officer of Group W, and Laurence A. Tisch,
Chairman, President and Chief Executive Officer of CBS Inc. The
companies announced that, under the terms of the letter of
agreement signed today by Group W and CBS:
Group W will sign 10-year affiliation agreements with CBS
for each of its major-market VHF television stations, which
include: KPIX-TV San Francisco (the no. 5 ranked market)
and KDKA-TV Pittsburgh (no. 17), both already CBS
affiliates; WBZ-TV Boston (no. 6) and KYW-TV Philadelphia
(no. 4), NBC affiliates, and WJZ-TV Baltimore (no. 22), an
ABC affiliate. Together, the five markets account for 9.7
percent of the country's television households.
At the same time, the two companies announced their
intention to form a joint venture to acquire additional
major-market television stations over the next several
years. Group W will own a majority interest in the venture
and exercise full operational control of the newly acquired
stations. In Philadelphia, where both companies own
television stations, KYW-TV, formerly an NBC affiliate, will
become part of the new station ownership joint venture.
WCAU-TV, the CBS Owned station, will be divested, and the
outcome of that sale or trade will be implemented to build
the portfolio of the joint venture. Jonathan Klein,
President of Group W Television, will be president of the
new joint venture.
- 1 -<PAGE>
The two companies further announced their intention to
create an equal partnership to produce programming for both
Group W's and CBS's Owned television stations and for
distribution to other stations. This partnership will
become effective upon termination of existing Financial
Interest and Syndication regulations, which is expected to
occur in November 1995. Until that time, Group W will
undertake the production of programming for distribution on
the CBS and Westinghouse stations, as well as those of other
broadcasters.
Group W and CBS further announced their intention to merge
their advertising sales representation operations. The
resulting entity would be responsible for the sale of time
on both the Group W and CBS stations. Group W will own a
majority interest in the new rep firm and would exercise
full operational control of the venture.
"We are delighted to create this alignment with CBS, which
will help both organizations accomplish important long-term
strategic goals," said Group W President and Chief Executive
Officer Bill Korn. "In addition to building on our long and
valuable association with the Network, we will grow and expand
both our television distribution systems, as well as create a
dynamic new programming company that will capitalize on our
mutual history of success, creativity and innovation. This new
programming partnership will dramatically expand our activities
and make us a major industry supplier in the growing multi-
channel universe."
"For over two months we and Group W have been in intense and
constructive discussions regarding this alliance. The result is
this very exciting agreement, which further demonstrates our
commitment to the network/affiliate system and our firm belief on
the future of broadcasting," said Laurence A. Tisch, Chairman,
President and Chief Executive Officer of CBS Inc. "Both we at
CBS and our new partners at Group W share the same fundamental
traditions and the same vision for our business. This
association will only serve to enhance our collective efforts and
provide us with tremendous new business and programming
opportunities in the future."
"We are very pleased to join with CBS in these long-term
agreements," said Michael Jordan, Chairman and Chief Executive
Officer of Westinghouse Electric Corporation, Group W's parent
corporation. "This agreement underscores the underlying health
of the network-affiliated broadcasting business and the inherent
value of broadcasting properties, which continue to retain their
importance to the public in this competitive media environment.
today's actions also provide further justification, if any were
needed, for our stated decision to invest and grow our
- 2 -<PAGE>
broadcasting company under the excellent management team that we
have in place."
"It is a pleasure to be joining in this far reaching
agreement with Group W and its senior management," said Peter A.
Lund, President, CBS Television Network and Executive Vice
President, CBS/Broadcast Group. "This is a tremendous
opportunity for us both to maximize the value and expertise of
our various enterprises and to creatively and aggressively
embrace new strategic opportunities."
CBS currently owns television stations in seven markets,
which account for 21.8 percent of the country's television
households: WCBS-TV New York (the no. 1 ranked market), KCBS-TV
Los Angeles (no. 2), WBBM-TV Chicago (no. 3), WCAU-TV
Philadelphia (no. 4), WCCO-TV Minneapolis (no. 14), WCIX-TV Miami
(no. 16) and WFRV-TV Green Bay (no. 65).
Westinghouse Broadcasting Company, Inc. (Group W) is a
wholly owned subsidiary of Westinghouse Electric Corporation,
with interests in television and radio, program production and
distribution, syndication and cable.
The agreement is subject to the execution of definitive
documentation.
Contact: Gil Schwartz, Group W Ann Morfogen, CBS
212/307-3441 212/975-8088
* * *
- 3 -
