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, 1995
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 27, 1995
Common Stock $2.50 par value 61,373,290
<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
1995 1994 1994
CURRENT ASSETS:
Cash and cash equivalents $ 3.3 $ 15.3 $ 374.0
Marketable securities (note 2) 68.6 86.9 425.4
Accounts receivable, less allowances: 542.3 423.0 546.7
$13.6 - March 1995
$12.8 - December 1994
$8.3 - March 1994
Program rights 412.9 404.4 395.8
Other 19.1 18.3 20.9
TOTAL CURRENT ASSETS 1,046.2 947.9 1,762.8
MARKETABLE SECURITIES (note 2) 259.7 272.6 797.4
PROPERTY, PLANT AND EQUIPMENT:
Land 81.9 81.9 81.4
Buildings, improvements and equipment 929.0 923.5 903.0
1,010.9 1,005.4 984.4
Less accumulated depreciation 498.8 485.6 472.3
NET PROPERTY, PLANT AND EQUIPMENT 512.1 519.8 512.1
OTHER ASSETS:
Program rights 118.3 111.1 104.0
Goodwill, net of amortization 262.5 264.3 278.7
Other 45.7 44.4 24.3
TOTAL OTHER ASSETS 426.5 419.8 407.0
TOTAL ASSETS $2,244.5 $2,160.1 $3,479.3
See accompanying notes to consolidated condensed financial statements.
-2-<PAGE>
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
1995 1994 1994
CURRENT LIABILITIES:
Accounts payable $ 33.0 $ 37.9 $ 36.5
Accrued salaries, wages and benefits 62.7 77.6 58.0
Liabilities for talent and program rights 362.2 245.2 373.9
Liabilities for securities sold under
repurchase agreements 51.3 72.8 354.6
Debt 146.7 151.5 .8
Income taxes 10.2 3.9 15.9
Other 203.5 204.1 177.9
TOTAL CURRENT LIABILITIES 869.6 793.0 1,017.6
LONG-TERM DEBT 507.2 507.3 590.2
OTHER LIABILITIES 390.4 408.5 417.3
DEFERRED INCOME TAXES 88.3 84.3 127.2
PREFERENCE STOCK, SERIES B, PAR VALUE
$1.00 PER SHARE, SUBJECT TO REDEMPTION 90.0 89.9 117.8
SHAREHOLDERS' EQUITY:
Common stock, par value $2.50 per share: 197.1 197.0 62.1
authorized: 100,000,000 shares
issued: 78,854,020 shares - March 1995
Additional paid-in capital 50.4 49.9 319.0
Unrealized holding (losses) gains (note 2) (1.8) (8.7) 10.4
Retained earnings 1,191.1 1,177.7 2,499.7
1,436.8 1,415.9 2,891.2
Less shares of common stock in treasury,
at cost: 17,485,230 shares - March 1995 1,137.8 1,138.8 1,682.0
_______ _______ _______
TOTAL SHAREHOLDERS' EQUITY 299.0 277.1 1,209.2
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,244.5 $2,160.1 $3,479.3
See accompanying notes to consolidated condensed financial statements.
-3-<PAGE>
CBS Inc. and subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts)
Three months ended
March 31
1995 1994
Net sales $ 897.1 $1,246.9
Cost of sales (736.8) (1,024.4)
Selling, general and
administrative expenses (120.6) (121.4)
Other income, net 1.0 1.2
Operating income 40.7 102.3
Interest income on investments,
net (note 2) 6.7 23.3
Interest expense on debt, net (12.7) (11.2)
Interest, net (6.0) 12.1
Income before income taxes 34.7 114.4
Income taxes (note 3) (12.9) (45.1)
Net income $ 21.8 $ 69.3
Earnings per common share $ .32 $ .85
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
1995 1994
Operating activities:
Net income $21.8 $ 69.3
Adjustments:
Depreciation and amortization 19.7 19.0
Gain on sale of marketable securities, net (1.0) (6.7)
Changes in assets and liabilities*:
Accounts receivable (119.3) (92.2)
Program rights, net 91.5 233.7
Other, net (25.2) (24.6)
(12.5) 198.5
Investing activities:
Marketable securities:
Gross sales 155.8 570.7
Gross purchases (112.1) (522.7)
Liabilities for securities sold under
repurchase agreements (21.5) (20.1)
Capital expenditures (10.1) (10.2)
12.1 17.7
Financing activities:
Issuance of debt 19.2 -
Extinguishment of debt (24.0) -
Dividends to shareholders (8.4) (10.7)
Other, net 1.6 (4.9)
(11.6) (15.6)
Net (decrease) increase in cash and cash equivalents (12.0) 200.6
Cash and cash equivalents at beginning of period 15.3 173.4
Cash and cash equivalents at end of period $ 3.3 $374.0
See accompanying notes to consolidated condensed financial statements.
*Excludes effect of items included in Adjustments.
-5-<PAGE>
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. 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. Investment income from marketable securities classified as interest
income on investments, net, consisted of the following (in millions):
Three months ended March 31
1995 1994
Interest income $ 5.2 $18.0
Dividend income 1.6 1.8
Interest expense on repurchase agreements (1.1) (3.2)
Gross realized gains 1.5 10.1
Gross realized losses (.5) (3.4)
$ 6.7 $23.3
The cost of marketable securities sold was determined by specific
identification.
During the first quarter of 1995 there were no trading securities or
securities held-to-maturity. The marketable securities as of March 31, 1995
consisted of the following (in millions):
Fair Unrealized Holding
Value Gains Losses
U.S. Government and its Agencies $138.0 $1.7 $1.1
Corporate securities:
Equity 92.9 5.7 3.7
Debt 64.2 5.9
Other Securities 33.2 .7 .4
$328.3 $8.1 $11.1
The above unrealized holding gains and losses, net of income tax benefits of
$1.2 million, are reflected as "Unrealized holding losses" in shareholders'
equity.
-6-<PAGE>
CBS Inc. and subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 3. Total tax expense on income before income taxes for the three months
ended March 31, 1995 amounted to $12.9 million (an effective rate of 37.2%)
compared with $45.1 million (an effective rate of 39.4%) for the comparable
period in 1994. 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:
Three months ended March 31
1995 1994
Statutory Federal income tax rate 35.1% 35.1%
Income from tax preference securities (2.1) (1.8)
State and local taxes 5.7 5.3
Other, net (1.5) .8
Effective income tax rate 37.2% 39.4%
-7-<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operations
The Company's net sales and net income declined in the first quarter of 1995
to $897.1 million and $21.8 million, respectively, from $1,246.9 million and
$69.3 million, respectively, of the comparable quarter of 1994. The decrease
in net sales was due primarily to the absence of the Television Network's
broadcast of the Olympic Winter Games and the National Football League post-
season games which were aired in the first quarter of 1994. In addition, the
Television Network's share of primetime audience has declined significantly
affecting sales and profits adversely.
The Company recorded pretax operating income of $40.7 million in the first
quarter of 1995 compared with $102.3 million in the first quarter of 1994.
This decrease in operating income was attributable largely to the Television
Network's decline in primetime and daytime audience delivery. In addition,
the Network's profits were reduced by an increase in compensation paid to its
affiliated television stations. However, earnings derived from program
syndication increased reflecting a stepped-up level of internal program
production. Sales and profits for the Television Stations Division decreased
as a result of the absence of the Network's coverage of the Olympic Winter
Games. Apart from the absence of the Olympic Winter Games, the Television
Stations Division benefited from continuing strength in local television
advertising. Operating profits at the Radio Division increased principally
as a result of sales gains at the Division's FM Group of Stations and
improved results at the Radio Networks.
Interest, net, was an expense of $6.0 million in the first quarter of 1995 as
opposed to income of $12.1 million in the first quarter of 1994. Interest
income declined because of the Company's repurchase of its common stock for
$1.1 billion in cash in the third quarter of 1994.
Net income for the first quarter of 1995 was reduced by 69 percent compared
with the quarter a year earlier. However, earnings per share was reduced
only by 62 percent due to lower weighted average shares outstanding in 1995,
which resulted from the Company's repurchase of 17.5 million shares of its
common stock in September 1994.
Comparison of the results of the first quarter of 1995 to the fourth 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 three months ended March 31, 1995, cash and cash equivalents
decreased by $12.0 million and marketable securities, net of repurchase
agreements, decreased by $9.7 million for a net decrease in liquid assets of
$21.7 million. This decrease resulted primarily from negative cash flows
from operating activities.
Year-to-date cash flows for 1995 and 1994 varied as follows:
Operating activities:
The $211.0 million lower cash flows in 1995 compared with the same
period in 1994 were due primarily to the broadcasts of the Olympic
Winter Games and National Football League games in 1994 (for which
payments were made in prior periods) as well as lower earnings in 1995.
Investing and financing activities:
The variances in cash flows from investing and financing activities from
1995 to 1994 were not significant. In 1995, the decreased activity in
sales and purchases of marketable securities (reflected in investing
activities) was due to the lower amount of marketable securities in 1995
which resulted mainly from the Company's repurchase of its common stock
for $1.1 billion in the third quarter of 1994.
The Company's liquid assets include the following (in millions):
As of
March 31 December 31 March 31
1995 1994 1994
Cash and cash equivalents $ 3.3 $ 15.3 $ 374.0
Marketable securities:
Current 68.6 86.9 425.4
Noncurrent 259.7 272.6 797.4
Liabilities for securities sold
under repurchase agreements (51.3) (72.8) (354.6)
$280.3 $302.0 $1,242.2
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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 Part I of Registrant's Form 10-K for 1994 (under the caption "Material
Licenses and Federal Regulation"), of its application to renew the television
broadcast license for WBBM-TV, Chicago.
b. In Item 1 of Part I of Registrant's Form 10-K for 1994 (under the caption
"Material Licenses and Federal Regulation"), Registrant reported that it had
entered into an Asset Purchase Agreement to acquire WGPR-TV, Detroit,
Michigan from WGPR Inc. ("WGPR"). On October 27, 1994, Registrant and WGPR
filed an application with the FCC for consent to the assignment of the
broadcast license for the station to Registrant. Petitions to deny that
application were separately filed on December 22, 1994 by Spectrum Detroit
("Spectrum"), a Michigan corporation, and Alexander Serafyn, a resident of
the Detroit area. On January 17, 1995, Registrant filed a consolidated
opposition to the petitions. By letter dated February 13, 1995, the FCC
staff requested Registrant and WGPR to provide additional information
regarding certain issues raised in the Spectrum petition. Registrant and
WGPR filed responses to this letter on February 23, 1995. Additional
pleadings were filed by Registrant on March 8, 1995 and by Spectrum and
Serafyn on March 20, 1995.
c. In Item 1 of Part I of Registrant's Form 10-K for 1994, Registrant
reported that it had entered into an Asset Purchase Agreement to acquire
WPRI-TV, Providence, Rhode Island from Narragansett Television L.P. An
application for consent to the assignment of the broadcast license for the
station to Registrant was filed with the FCC on March 16, 1995. On April 26,
1995, Oleg Nikolyszyn, a resident of the Providence area, filed a petition to
deny that application, to which Registrant will shortly respond.
d. 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.
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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: May 1, 1995 By: S/Peter W. Keegan
Peter W. Keegan
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
-11-<PAGE>
CBS INC. and subsidiaries
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE (Unaudited)
(In millions, except per share amounts)
PRIMARY FULLY DILUTED
Three months Three months
ended March 31 ended March 31
1995 1994 1995 1994
Earnings:
Net Income $21.8 $69.3 $21.8 $69.3
Dividends on Series B preference
stock (2.3) (3.7) - -
Net income applicable to common shares $19.5 $65.6 $21.8 $69.3
Shares:
Weighted average number of common
shares outstanding 61.3 77.5 61.3 77.5
Assumed conversion of Series B
preference stock - - 3.3 4.2
Common stock equivalents - - .6 .6
Adjusted shares 61.3 77.5 65.2 82.3
Earnings per common share $ .32 $ .85 $ .34(a)$ .84(b)
(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.
(b) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is not required by APB Opinion No. 15 because it
results in dilution of less than 3%.
-12-<PAGE>
EXHIBIT 12
CBS Inc.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Three Months
Ended
March 31 YEAR ENDED DECEMBER 31,
1995** 1994(1) 1993 1992 1991 1990(3)
Income (loss) from
Continuing Operations
before Income Taxes $34.7 $437.0 $479.3 $227.0 ($178.6)$101.3
Add:
Fixed charges 17.2 64.7 65.6 89.8 78.3 88.2
Amortization of
Capitalized Interest 1.2 6.4 4.3 3.4 3.7 4.3
Less:
Capitalized Interest (.9) (3.6) (6.4) (10.2) (8.4) (8.3)
Adjusted Earnings $52.2 $504.5 $542.8 $310.0 ($105.0)$185.5
Interest Cost (2) $13.6 $50.6 $48.8 $71.9 $58.8 $68.5
Interest Factor
Portion of Rentals 3.6 14.1 16.8 17.9 19.5 19.7
Fixed Charges $17.2 $64.7 $65.6 $89.8 $78.3 $88.2
Ratio of Earnings
to Fixed Charges 3.03:1 7.80:1 8.27:1 3.45:1 * 2.10:1
(1) In connection with its $1.1 billion common stock repurchase, consummated
in September 1994, the Company included unaudited pro forma net income
and earnings per share of common stock for the year ended December 31,
1994, in footnote 12 of its 1994 Annual Report. The Ratio of Earnings to
Fixed Charges for this pro forma information was 6.92 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 in
February 1991, the Company included a 1990 Unaudited Pro Forma
Consolidated Condensed Income Statement in footnote 15 of its 1990 Annual
Report. The Ratio of Earnings to Fixed Charges for this income statement
was .34 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.
** Unaudited
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