SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission File No. 1-2931
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
CBS INC.
A NEW YORK CORPORATION I.R.S. EMPLOYER NO. 13-0590730
51 West 52 Street, New York, NY 10019
Telephone Number (212) 975-4321
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common stock, $2.50 par value New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part II of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 1995 was $3,253,849,686.
As of February 28, 1995 there were 61,352,900 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for Annual Meeting of
Shareholders to be held May 10, 1995 (Part III).
<PAGE>
MANAGEMENT'S FINANCIAL COMMENTARY
In 1994, the Company's operating results improved compared with the prior year,
reflecting strengthened demand for national and local television advertising.
The increase in operating results would have been higher but for a legal
settlement with Viacom International Inc. ("Viacom"), which benefited
earnings in 1993.
The operating results of the Company in the future primarily depend on
the success of its programs, demand for television advertising and
competitive changes in media businesses.
In 1994, the Company and Westinghouse Broadcasting Company, Inc.,
("Group W") announced that they had agreed to extended station affiliation
agreements, and to the formation of three new jointly-held entities which will
acquire and operate additional television stations, produce and distribute
programming, and combine the companies' existing advertising sales
representation businesses. In addition, the Company, on behalf of the
televison station joint venture, agreed to exchange with the National
Broadcasting Company ("NBC") certain broadcast stations and
assets in Denver, Miami, Philadelphia and Salt Lake City (note 2).
In October 1994, the Company effected a 5-for-1 split of its common stock
(note 12). The adjusted weighted average number of shares outstanding, per
share amounts, and Stock Rights Plan data have been adjusted for the common
stock split for all periods presented in this report.
The Company continually updates its evaluations of environmental
liabilities and the adequacy of the provisions made in prior years to cover
asserted and unasserted environmental claims arising from the operations of its
discontinued businesses. (There are no significant environmental claims known
to the Company arising from its continuing operations.) In the Company's
opinion, any additional liabilities that may result from such claims are
not reasonably likely to have a material adverse effect on its consolidated
financial position, results of operations, or liquidity.
The impact of inflation on the Company's financial statements in 1994 was
not considered sufficient to warrant the inclusion of any additional current
cost disclosures in these statements.
This Financial Commentary should be read in conjunction with the
consolidated financial statements and notes to these financial statements.
In addition, although the Commentary's Liquidity and Capital Resources
section is based upon the Consolidated Statements of Cash Flows, certain data
have been rearranged for purposes of clarification and, therefore, it should
be read in conjunction with the Consolidated Statements of Cash Flows.
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<PAGE>
RESULTS OF OPERATIONS
Income from Continuing Operations and Net Income
The Company's sales increased in 1994 due primarily to the Television Network's
broadcast of the Olympic Winter Games, increased revenues in the late-night time
period and strengthened demand for national and local television advertising. In
1993, the sales increase was due to the Television Network's strong household
ratings and better unit prices from its regularly scheduled programming, which
largely compensated for the absence of sales generated from the broadcasts of
the Olympic Winter Games and Super Bowl in 1992. Sales improved significantly
in 1992 because of the Television Network's stronger primetime program schedule
and the broadcasts of the Olympic Winter Games and the Super Bowl. In 1991,
sales decreased as a result of the absence of the Super Bowl and NBA
post-season games which were broadcast in 1990.
In 1994, operating income increased modestly over 1993. Operating income
decreased at the Television Network due to weakness in primetime and daytime
broadcast dayparts as well as the absence of a 1993 pretax gain of $29.5 million
from a legal settlement with Viacom. However, operating income increased in the
late-night time period due to higher sales, as noted above. The Television
Stations Division recorded higher operating income at all stations aided by
increased demand for local television advertising. The Radio Division
experienced a significant improvement in earnings attributable largely to the
FM Stations Group and the Radio Networks. In 1993, at the Television Network
Division, the increase in operating income reflected strong household
ratings, better unit prices, and a legal settlement with Viacom. The
Company's operating income improved significantly in 1992 as a result of the
Television Network's stronger primetime program schedule. In 1991 and 1990,
the Company recorded operating losses due mainly to the provisions for losses
on its baseball and football television contracts.
Interest, net, decreased significantly in 1994 compared with 1993 due to
the Company's $1.1 billion common stock repurchase (note 12), as well as a
decrease of $38.9 million in gains from the sale of marketable securities. The
increase in interest, net, in 1993 resulted mainly from the conversion of the 5%
convertible debt into common stock in that year. In the preceding two years,
interest, net, declined largely as a result of the sale of marketable securities
to fund the Company's $2 billion repurchase of its common stock in
February 1991.
In 1994, the effective income tax expense rate increased from the prior
year due to higher tax benefits in 1993. In 1994, income tax expense was
reduced by state and local tax audit settlements of $18.2 million; in 1993,
income tax expense was reduced by $34.2 million as a result of deferred tax
benefits and a favorable Federal tax audit settlement for the years 1988-1990.
The 1992 effective income tax expense rate was reduced by a favorable Federal
tax audit settlement of $17.9 million for the years 1985-1987.
In 1992, the Company adopted certain accounting standards (note 1) that
resulted in a one-time charge to net income, shown as cumulative effects of
changes in accounting principles.
Net income and earnings per share in 1994 declined due mainly to a legal
settlement with Viacom, an insurance settlement for hurricane damage to the
Company's television station in Miami, gains from the sale of marketable
securities, and higher tax benefits - all of which benefited earnings in 1993.
Absent the impact of these items, net income and earnings per share would have
increased in 1994 over 1993 by $19.7 million and $.25 per share, respectively.
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The decreases in adjusted weighted average shares outstanding in 1994 and
1991 were related to the Company's repurchase of 17.5 million and 52.5 million
shares of its common stock (shares reflected on an after-split basis),
respectively (note 12). In connection with the share repurchase in 1991, the
Company reduced its quarterly dividend per share in the first quarter of 1991
from $.22 to $.05. Based on the Company's improved financial condition, it
raised its quarterly dividend per share to $.10 in the fourth quarter of 1993.
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<PAGE>
Year ended December 31
1994 1993 1992 1991 1990
(In millions, except per share amounts)
Net sales . . . . . . . . . $3,711.9 $3,510.1 $3,503.0 $3,035.0 $3,261.2
Cost of sales . . . . . . . (2,823.2) (2,688.8) (2,906.5) (2,938.0) (2,925.6)
Selling, general and
administrative expenses. . (475.8) (461.3) (422.9) (384.6) (409.3)
Other income, net . . . . . 13.3 51.2 6.5 16.3 22.8
Operating income (loss) . . 426.2 411.2 180.1 (271.3) (50.9)
Interest income on
investments, net . . . . . 57.8 110.4 107.6 140.1 210.1
Interest expense on
debt, net. . . . . . . . . (47.0) (42.3) (60.7) (47.4) (57.9)
Interest, net.. . . . . . . 10.8 68.1 46.9 92.7 152.2
Income (loss) from
continuing operations
before income taxes . . . 437.0 479.3 227.0 (178.6) 101.3
Income tax (expense)
benefit . . . . . . . . . (155.4) (153.1) (64.5) 79.9 (10.5)
Income (loss) from
continuing operations. . . 281.6 326.2 162.5 (98.7) 90.8
Discontinued operations . . 12.9 20.0
Cumulative effects of
changes in accounting
principles . . . . . . . (81.5)
Net income (loss) . . . . . $281.6 $326.2 $81.0 $(85.8) $110.8
Per share of common stock:
Continuing operations . . $3.74 $4.08 $2.10 $(1.22) $ .70
Discontinued operations . .16 .16
Cumulative effects of
changes in accounting
principles . . . . . . (1.05)
Net income (loss) . . . . $3.74 $4.08 $1.05 $(1.06) $ .86
Dividends per common share. $ .40 $ .25 $ .20 $ .20 $ .88
Adjusted weighted average
shares outstanding. . . . 72.2 77.7 77.1 81.0 128.7
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The Company's liquid assets include its cash and cash equivalents and readily
marketable securities held in its short-term and long-term portfolios. In
1994, the decrease in liquid assets of $743.4 million was attributable
primarily to the Company's repurchase of 17.5 million shares of its common
stock for $1.1 billion (note 12), partially offset by positive cash flows
from operating activities.
In 1993, the increase in liquid assets of $123.8 million was due mainly
to cash flows from operating activities, gain on sale of marketable
securities and the issuance of $100.0 million of debt, partially offset by
capital expenditures. The increase in 1992 of $46.7 million reflected the
cash flows from operating activities, partially offset by capital
expenditures. The issuance of $150.0 million of debt in 1992 was primarily
used to fund the acquisition of Midwest Communications, Inc. ("Midwest")
(note 2). In 1991, the decrease in liquid assets was related principally to
the Company's $2 billion repurchase of its common stock. In 1990, the
combination of capital expenditures, retirement of debt and the payment of
dividends to shareholders moderately exceeded the Company's cash flows from
operating activities.
Additional details on specific cash flows are provided in
subsequent sections of this Commentary.
Year ended December 31
1994 1993 1992 1991 1990
(In millions)
Cash flows:
Operating activities . . . . $444.2 $117.6 $144.2 $97.8 $217.7
Investing activities . . . . 498.7 (163.0) (374.1) 1,484.3 103.5
Financing activities . . . . (1,101.0) 73.4 105.3 (2,033.2) (198.6)
Net change in cash and
cash equivalents. . . . . . (158.1) 28.0 (124.6) (451.1) 122.6
Remove net investment in
marketable securities
included above*. . . . . . (570.8) 95.8 171.3 (1,456.2) (147.6)
Cash flows before
investment in
marketable securities. . . (728.9) 123.8 46.7 (1,907.3) (25.0)
Unrealized pretax holding
losses, net, on marketable
securities at end of year. (14.5)
(Decrease) increase in
cash and marketable
securities . . . . . . . . (743.4) 123.8 46.7 (1,907.3) (25.0)
Cash and marketable
securities at beginning
of year**. . . . . . . . . 1,045.4 921.6 874.9 2,782.2 2,807.2
Cash and marketable
securities at end
of year**. . . . . . . . . $302.0 $1,045.4 $921.6 $874.9 $2,782.2
*Includes liabilities for securities sold subject to repurchase agreements
(note 1).
**Includes cash and cash equivalents and readily marketable securites held in
the Company's short-term and long-term portfolios as well as liabilities
for securities sold under repurchase agreements.
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Cash Flows from Operating Activities
In accordance with Statement of Financial Accounting Standards (SFAS) No.
95,"Statement of Cash Flows," all cash flows not classified as investing or
financing activities, and all interest and income taxes, including those
related to investing and financing activities, are classified as operating
activities.
In 1994, cash flows from operating activities were higher than in 1993
due largely to the broadcasts of baseball and football programs in 1993 (the
cash payments for these programs far exceeded their related revenues and,
therefore, had a significantly negative impact on 1993 cash flows) and the
prepayment of the rights fee made in prior years for the broadcast of the
1994 Olympic Winter Games.
In 1993, cash flows were lower than in 1992. This was primarily caused
by the higher rights fee paid for the football television contract, and a
higher level of year-end accounts receivable, due to increased sales in the
fourth quarter, partially offset by increased income.
In 1992, cash flows increased over the preceding year due to higher
operating income which resulted from the improved primetime ratings and unit
pricing.
In 1991, cash flows declined from 1990's level, principally as a result
of a decline in sales which more than offset cost reductions, and also
because of reduced interest income resulting from the sale of marketable
securities in February 1991 to fund the Company's $2 billion repurchase of
its common stock.
Interest, net, decreased in 1994 due to the cash outlay of $1.1 billion
for the repurchase of 17.5 million shares of the Company's common stock (note
12). Interest, net, increased in 1993, mainly because of the conversion of
the 5% convertible debt into common stock in that year. In 1992 and 1991,
interest, net, had declined, due principally to the sale of securities in
February 1991 to fund the Company's $2 billion repurchase of its common
stock.
The significant taxes paid in 1994 and 1993 related primarily to the
Company's improved operating results. The small positive cash flows from
taxes in 1992 and 1991 were attributable largely to refunds related to prior
years, offsetting those years' tax payments which were small due to tax
deductions for timing items. These timing items arose mainly from baseball
and football losses (note 3), which were accrued in 1990 and 1991, but which
were deducted for tax purposes in 1991, 1992 and 1993.
From an overall standpoint, the fluctuations in cash flows from
operating activities, over the period covered by the table, were due mainly
to changes in operating income (exclusive of noncash items) and investments
in program rights. Additionally, there were period-to-period changes in
year-end levels of accounts receivable and various other assets and
liabilities, due mainly to the timing of transactions.
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<PAGE>
Year ended December 31
1994 1993 1992 1991 1990
(In millions)
Net income (loss). . . . . . $281.6 $326.2 $81.0 $(85.8) $110.8
Adjustments:
Depreciation and amortization 76.2 71.0 66.7 59.9 58.7
Gain on sale of marketable
securities, net. . . . . . (.7) (39.6) (28.9) (38.1) (12.4)
Cumulative effects of changes in
accounting principles. . . 81.5
Gain on discontinued operations (21.2) (33.0)
Changes in assets and liabilities:
Accounts receivable. . . . . 31.5 (37.1) 7.8 (2.7) 32.4
Program rights, net. . . . . 73.8 (26.0) 23.3 .9 8.1
Accounts payable . . . . . . 4.5 (2.3) (18.1) 4.7 (5.0)
Accrual on baseball and football
television contracts. . . (21.0) (242.0) (160.0) 233.0 190.0
Income taxes . . . . . . . . 2.0 60.5 69.8 (64.5) (114.7)
Other, net . . . . . . . . . (3.7) 6.9 21.1 11.6 (17.2)
Cash flows from operating
activities . . . . . . . . $444.2 $117.6 $144.2 $97.8 $217.7
Cash flows from interest and
income taxes included above:
Interest, net* . . . . . . . $10.1 $28.5 $18.0 $54.6 $139.8
Income taxes . . . . . . . . (155.0) (94.2) 2.6 2.4 (143.4)
*Excludes gain on sale of marketable securities, which was included in cash
flows from investing activities.
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<PAGE>
Cash Flows from Investing Activities
The cash flows from marketable securities in 1994 and 1991 were used mainly
to fund the Company's repurchase of 17.5 million shares of its common stock
for $1.1 billion (note 12) and 52.5 million shares of its common stock for $2
billion, respectively. Other changes in net investment in marketable
securities were due essentially to the cash requirements of the Company. In
addition, the increases and decreases in the sales and purchases of these
securities, as presented in the Statements of Cash Flows, reflected activity
stimulated by financial market conditions.
In 1992, the Company acquired Midwest and the remaining 50 percent
interest in television and film production facilities in Los Angeles (note 2).
The Company's principal capital expenditures in 1994, as in previous
years, were for broadcasting assets. In 1993, they also included the
acquisition and renovation of the Ed Sullivan Theater in New York City from
which the LATE SHOW with DAVID LETTERMAN is broadcast.
The asset dispositions in 1991 represent the cash receipt of the final
settlement of all disputed items in arbitration related to the 1988 sale of
the Company's Records Group.
Interest income on investments, net, excluding gain on sale of
marketable securities, was included in operating activities and is presented
for informational purposes.
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<PAGE>
Year ended December 31
1994 1993 1992 1991 1990
(In millions)
Marketable securities:
Gain on sale. . . . . . . $ .7 $ 39.6 $ 28.9 $38.1 $12.4
Net investment. . . . . . 570.8 (95.8) (171.3) 1,456.2 147.6
Cash flows from
marketable securities* . 571.5 (56.2) (142.4) 1,494.3 160.0
Major acquisitions** . . . . (160.2)
Capital expenditures . . . . (72.8) (106.8) (71.5) (64.2) (60.4)
Asset dispositions . . . . . 54.2 3.9
Cash flows from investing
activities***. . . . . . . $498.7 $(163.0) $(374.1) $1,484.3 $103.5
Interest income on investments,
net (not included above). $57.1 $ 70.8 $ 78.7 $102.0 $197.7
*Includes liabilities for securities sold subject to repurchase
agreements (note 1).
**The table excludes the noncash items indicated in the footnotes to the
Statements of Cash Flows.
***Cash flows related to interest (excluding gain on sale of marketable
securities) and taxes are included in operating activities in accordance
with SFAS No. 95.
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<PAGE>
Cash Flows from Financing Activities
In September 1994, the Company repurchased 17.5 million shares of its common
stock at a cost of $1.1 billion (note 12). Also in 1994, the Company entered
into a $500.0 million revolving credit agreement. As of December 31, 1994,
pursuant to this credit agreement, the Company had borrowed $150.7 million of
short-term debt for working capital and other corporate purposes. In
addition, in 1994, the Company commenced a $50.0 million debt repurchase
program (note 8). Under this program,$36.1 million of debt was repurchased
during the year.
In 1993, the Company issued $100.0 million of senior notes.The proceeds
from the issuance of these debt securities were used to purchase New York
City Industrial Development Agency (IDA) bonds, which were issued by the IDA
to establish a trust fund to implement the Company's agreement with the IDA.
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.
In 1992, the Company issued $150.0 million of senior notes in connection
with the acquisition of Midwest. In addition, it issued $125.0 million of
senior notes and $125.0 million of senior debentures to refinance $263.0
million of senior notes due 1995. During 1990 and 1991, the Company retired
debt of $91.1 million.
In 1991, the Company repurchased 52.5 million shares of its common stock
at a cost of approximately $2 billion. In connection with this repurchase of
shares, the Company reduced its quarterly dividend per share in the first
quarter of 1991 from $.22 to $.05. In the fourth quarter of 1993, based on
its improved financial condition, the Company increased its quarterly
dividend per share to $.10.
Interest expense on debt, net, was included in operating activities and
is presented for informational purposes.
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<PAGE>
Year ended December 31
1994 1993 1992 1991 1990
(In millions)
7 1/8% senior notes due 2023. . . . $(2.7) $100.0
7 5/8% senior notes due 2002. . . . $150.0
7 3/4% senior notes due 1999. . . . 125.0
8 7/8% senior debentures due 2022 . (33.4) 125.0
10 7/8% senior notes due 1995 . . . (263.0) $(3.0) $(7.7)
11 3/8% notes due 1992. . . . . . . (75.6)
Other long-term debt. . . . . . . . (46.5) (.9) (2.5) (2.5) (2.3)
Short-term debt . . . . . . . . . . 150.7
Debt issued (retired)*. . . . . . . 68.1 99.1 134.5 (5.5) (85.6)
Repurchases of common stock . . . . (1,138.8) (3.0) (2,005.1)
Dividends to shareholders . . . . . (38.1) (31.3) (25.9) (25.7) (116.6)
Other, net. . . . . . . . . . . . . 7.8 5.6 (.3) 3.1 3.6
Cash flows from financing
activities**. . . . . . . . . . .$(1,101.0) $73.4 $105.3 $(2,033.2) (198.6)
Interest expense on debt, net (not
included above) . . . . . . . . . $(47.0)$(42.3) $(60.7) $(47.4) $(57.9)
*The table excludes the noncash items indicated in the footnotes to the
Statements of Cash Flows.
**Cash flows related to interest and taxes are included in operating
activities in accordance with SFAS No. 95.
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<PAGE>
Working Capital
In 1994, the decrease in working capital was attributable largely to the use
of cash and marketable securities to partially fund the Company's repurchase
of shares of its common stock. In addition, the working capital was affected
negatively by the increase in current debt, and a decrease in program rights
due mainly to the 1994 broadcasts of the Olympic Winter Games and National
Football League games for which the rights fee was paid in prior years.
In 1993, the increase in working capital reflected the decrease in other
current liabilities caused by the reversal of accrued losses recorded in
prior years related to the baseball and football television contracts (note
3), partially offset by the realization of tax benefits related to these
losses. The increase in accounts receivable, due to increased sales in the
fourth quarter, and the increase in net program rights, due principally to
the 1994 Olympic Winter Games, also contributed to the increase in working
capital.
In 1992, the decrease in working capital was due primarily to the
reclassification of certain marketable securities to the Company's long-term
portfolio, and to a reclassification from long-term to other current
liabilities of the accrued losses related to the baseball and football
television contracts.
The main reason for the decrease in working capital in 1991 was related
to the Company's cash outlay for its $2 billion common stock repurchase. In
addition, the increase in other current liabilities was due mainly to accrued
losses on the baseball and football television contracts.
In 1990, working capital reflected the reclassification of marketable
securities from long-term to short-term in anticipation of their sale to fund
the $2 billion common stock repurchase.
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<PAGE>
December 31
1994 1993 1992 1991 1990
(In millions)
Current assets:
Cash and marketable
securities*. . . . . . . . $29.4 $219.4 $169.0 $272.5 $2,318.8
Accounts receivable. . . . . 423.0 454.5 417.4 420.3 417.6
Program rights . . . . . . . 404.4 581.9 447.4 505.5 403.3
Recoverable income taxes** . 28.8 117.1 90.2 87.6
Other. . . . . . . . . . . . 18.3 18.2 20.9 18.2 17.8
Total current assets . . . . 875.1 1,302.8 1,171.8 1,306.7 3,245.1
Current liabilities:
Accounts payable . . . . . . 37.9 33.4 35.7 48.1 43.4
Liabilities for talent
and program rights. . . . . 245.2 317.4 245.5 276.3 236.4
Debt . . . . . . . . . . . . 151.5 .9 13.0 3.5 3.4
Other. . . . . . . . . . . . 285.6 312.5 514.4 410.0 251.7
Total current liabilities. . 720.2 664.2 808.6 737.9 534.9
Working capital. . . . . . . $154.9 $638.6 $363.2 $568.8 $2,710.2
Ratio of current assets to
current liabilities . . . 1.22:1 1.96:1 1.45:1 1.77:1 6.07:1
*Includes cash and cash equivalents and liabilities related to securities
sold subject to repurchase agreements (note 1).
**Primarily related to temporary differences attributable to the Major League
Baseball and National Football League television contracts (note 3).
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Capital Structure and Total Assets
In 1994, the Company's total debt as a percentage of total capitalization
rose primarily as a result of the Company's repurchase of 17.5 million shares
of its common stock which reduced shareholders' equity by $1.1 billion.
In 1993, the Company's total debt as a percentage of total
capitalization improved mainly because of the conversion of the 5%
convertible debentures into common stock, and a significant increase in net
income. The percentage remained essentially unchanged in 1992 compared with
1991 due largely to the higher level of debt offset by the increase in
shareholders' equity. The percentage rose in 1991, primarily as a result of
the Company's repurchase of common stock which reduced shareholders' equity
by $2 billion.
The higher level of debt in 1992 was because of the issuance of $150.0
million of senior notes in connection with the acquisition of Midwest (note
2). Also in 1992, the Company retired its 10 7/8% senior notes due 1995 by
refinancing debt with lower interest rates and lengthened maturities.
The Company believes that, with an ample amount of highly liquid assets
and a revolving credit agreement of $500.0 million (note 8), it remains fully
capable of funding its current operations and sufficiently flexible with
respect to the acquisition of additional media properties should suitable
opportunities arise.
The principal changes in total assets over the five-year period were
related to the Company's $1.1 billion common stock repurchase in 1994;
increased investment in marketable securities from the issuance of debt and
increased program rights in 1993; the acquisitions of Midwest and television
and film production facilities in 1992; and the $2 billion common stock
repurchase in 1991.
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December 31
1994 1993 1992 1991 1990
(In millions)
Current debt . . . . . . . . $151.5 $ .9 $13.0 $3.5 $3.4
Long-term debt . . . . . . . 507.3 590.3 870.0 696.5 712.4
Total debt . . . . . . . . . 658.8 591.2 883.0 700.0 715.8
Common stock subject
to redemption. . . . . . . 65.2
Preference stock subject
to redemption. . . . . . . 89.9 124.7 124.5 124.4 124.2
Shareholders' equity . . . . 277.1 1,138.0 446.8 354.8 2,392.7
Total capitalization . . . . $1,025.8 $1,853.9 $1,454.3 $1,179.2 $3,297.9
Total debt as a percentage of
total capitalization. . . 64.2% 31.9% 60.7% 59.4% 21.7%
Total assets . . . . . . . . $2,160.1 $3,418.7 $3,175.0 $2,798.6 $4,691.8
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FINANCIAL STATEMENTS
Management's Responsibility
for Financial Statements
The consolidated financial statements presented on the following pages have been
prepared by management in conformity with generally accepted accounting prin-
ciples. The reliability of the financial information, which includes amounts
based on judgment, is the responsibility of management.
The Company uses systems and procedures for handling routine business activities
which seek to prevent or detect unauthorized transactions. The Company's
internal control system envisages a segregation of duties among the Company's
personnel, a wide dissemination to these personnel of the Company's written
policies and procedures, the use of formal approval authorities and the
selection and training of qualified people. The design of internal control
systems involves a balancing of estimated benefits against estimated costs. The
system is monitored by an internal audit program. The scope and results of the
internal audit function and the adequacy of the system of internal accounting
controls are reviewed regularly by the Audit Committee of the Board of
Directors.
Management believes that the Company's system provides reasonable assurance that
assets are safeguarded against material loss and that the Company's financial
records permit the preparation of financial statements that are fairly presented
in accordance with generally accepted accounting principles.
-24-<PAGE>
Report of Independent Certified Public Accountants
To the Shareholders of CBS Inc.:
We have audited the consolidated financial statements of CBS Inc. and
subsidiaries listed in the index on page 17 of this Form 10-K. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CBS Inc. and
subsidiaries as of December 31, 1994, 1993 and 1992, and the consolidated
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
As discussed in note 5 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for certain investments in debt and
equity securities.
COOPERS & LYBRAND L.L.P.
New York, New York
February 8, 1995
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of CBS Inc. and subsidiaries on Form S-8 (File Nos. 2-87270, 2-58540, and 2-
33-2098) and the registration statement of CBS Inc. on Form S-3 (File No. 33-
59462) of our report dated February 8, 1995, on our audits of the
consolidated financial statements of CBS Inc. and subsidiaries for the years
ended December 31, 1994, 1993 and 1992, which report appears above.
COOPERS & LYBRAND L.L.P.
New York, New York
March 10, 1995
-25- <PAGE>
CONSOLIDATED STATEMENTS OF INCOME
CBS Inc. and subsidiaries
(Dollars in millions, except per share amounts)
Year ended December 31
1994 1993 1992
Net sales. . . . . . . . . . . . . . . . . . . $3,711.9 $3,510.1 $3,503.0
Cost of sales. . . . . . . . . . . . . . . . . (2,823.2) (2,688.8) (2,906.5)
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . (475.8) (461.3) (422.9)
Other income, net (note 4) . . . . . . . . . . 13.3 51.2 6.5
Operating income . . . . . . . . . . . . . . . 426.2 411.2 180.1
Interest income on investments, net (note 5) . 57.8 110.4 107.6
Interest expense on debt, net (note 4) . . . . (47.0) (42.3) (60.7)
Interest, net . . . . . . . . . . . . . . . . 10.8 68.1 46.9
Income before income taxes . . . . . . . . . . 437.0 479.3 227.0
Income taxes (note 6). . . . . . . . . . . . . (155.4) (153.1) (64.5)
Income before cumulative effects of
changes in accounting principles . . . . . . 281.6 326.2 162.5
Cumulative effects of changes in
accounting principles (note 1) . . . . . . . (81.5)
Net income . . . . . . . . . . . . . . . . . . $ 281.6 $ 326.2 $ 81.0
Per share of common stock (note 7):
Income before cumulative effects of
changes in accounting principles . . . . . $ 3.74 $ 4.08 $ 2.10
Cumulative effects of changes in
accounting principles (note 1) . . . . . . (1.05)
Net income . . . . . . . . . . . . . . . . . $ 3.74 $ 4.08 $ 1.05
See notes to consolidated financial statements.
-26- <PAGE>
CONSOLIDATED BALANCE SHEETS
CBS Inc. and subsidiaries
(Dollars in millions, except per share amounts)
ASSETS
December 31
1994 1993 1992
Current assets:
Cash and cash equivalents (note 1). . . . . . . $ 15.3 $ 173.4 $ 145.4
Marketable securities (notes 1 and 5) . . . . . 86.9 420.7 332.3
Accounts receivable, less allowance for doubtful
accounts: 1994, $12.8; 1993, $9.1; 1992, $9.7. 423.0 454.5 417.4
Program rights. . . . . . . . . . . . . . . . . 404.4 581.9 447.4
Recoverable income taxes (note 6) . . . . . . . 28.8 117.1
Other . . . . . . . . . . . . . . . . . . . . . 18.3 18.2 20.9
Total current assets. . . . . . . . . . . . . . 947.9 1,677.5 1,480.5
Marketable securities (notes 1 and 5) . . . . . 272.6 826.0 752.6
Property, plant and equipment:
Land. . . . . . . . . . . . . . . . . . . . . . 81.9 81.4 76.8
Buildings . . . . . . . . . . . . . . . . . . . 328.5 319.0 297.2
Machinery and equipment . . . . . . . . . . . . 578.8 556.9 542.0
Leasehold improvements. . . . . . . . . . . . . 16.2 20.8 21.3
1,005.4 978.1 937.3
Less accumulated depreciation . . . . . . . . . 485.6 459.0 451.9
Net property, plant and equipment . . . . . . . 519.8 519.1 485.4
Other assets:
Program rights. . . . . . . . . . . . . . . . . 111.1 90.9 154.1
Goodwill, less accumulated amortization (note 1):
1994, $40.6; 1993, $33.0; 1992, $28.0. . . . . 264.3 280.6 283.8
Other . . . . . . . . . . . . . . . . . . . . . 44.4 24.6 18.6
Total other assets. . . . . . . . . . . . . . . 419.8 396.1 456.5
$2,160.1 $3,418.7 $3,175.0
-27 (Page 1 of 2)-
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31
1994 1993 1992
Current liabilities:
Accounts payable. . . . . . . . . . . . . . $ 37.9 $ 33.4 $ 35.7
Accrued salaries, wages and benefits. . . . 77.6 72.6 61.4
Liabilities for talent and program rights . 245.2 317.4 245.5
Liabilities for securities sold under
repurchase agreements (notes 1 and 5). . . 72.8 374.7 308.7
Debt (note 8) . . . . . . . . . . . . . . . 151.5 .9 13.0
Income taxes (note 6) . . . . . . . . . . . 3.9
Other (note 3). . . . . . . . . . . . . . . 204.1 239.9 453.0
Total current liabilities . . . . . . . . . 793.0 1,038.9 1,117.3
Long-term debt (note 8) . . . . . . . . . . 507.3 590.3 870.0
Other liabilities (notes 9 and 10). . . . . 408.5 406.0 467.8
Deferred income taxes (note 6). . . . . . . 84.3 120.8 148.6
Commitments and contingent liabilities
(notes 11 and 15). . . . . . . . . . . . .
Preference stock, Series B, par value $1.00 per
share, subject to redemption (note 13) . . 89.9 124.7 124.5
Shareholders' equity (notes 12, 13 and 14):
Common stock, par value $2.50 per share;
authorized 100,000,000 shares; issued
78,807,095 shares in 1994. . . . . . . . . 197.0 62.0 61.8
Additional paid-in capital. . . . . . . . . 49.9 318.6 274.7
Unrealized holding losses (note 5). . . . . (8.7)
Retained earnings . . . . . . . . . . . . . 1,177.7 2,441.9 2,147.2
1,415.9 2,822.5 2,483.7
Less shares of common stock in treasury,
at cost: 17,500,000 in 1994 . . . . . . . 1,138.8 1,684.5 2,036.9
Total shareholders' equity. . . . . . . . . 277.1 1,138.0 446.8
$2,160.1 $3,418.7 $3,175.0
See notes to consolidated financial statements.
-27 (Page 2 of 2)-
<PAGE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
AND ADDITIONAL PAID-IN CAPITAL
CBS Inc. and subsidiaries
(Dollars in millions, except per share amounts)
Year ended December 31
1994 1993 1992
RETAINED EARNINGS
Balance at beginning of year. . . . . . . $2,441.9 $2,147.2 $2,092.3
Net income . . . . . . . . . . . . . . . 281.6 326.2 81.0
Cash dividends:
Common stock (per share - 1994, $.40;
1993, $.25; 1992, $.20) . . . . . . . (27.8) (18.8) (13.4)
Preference stock, Series B
($10.00 per share) . . . . . . . . . . (10.3) (12.5) (12.5)
Retirement of common stock (note 12). . . (1,506.5)
Accretion of preference stock,
Series B, and other items . . . . . . . (1.2) (.2) (.2)
Balance at end of year. . . . . . . . . . $1,177.7 $2,441.9 $2,147.2
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year. . . . . . . $ 318.6 $ 274.7 $ 277.7
Retirement of common stock (note 12). . . (117.8)
Capitalization of par value of shares issued
to effect the stock split (note 12). . (157.6)
Conversion of convertible debentures (note 8) 31.4
Exercise of stock options and other items 6.7 12.5 (3.0)
Balance at end of year. . . . . . . . . . $ 49.9 $ 318.6 $ 274.7
See notes to consolidated financial statements.
-28-<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
CBS Inc. and subsidiaries
(Dollars in millions)
Year ended December 31
1994 1993 1992
Operating activities:
Net income. . . . . . . . . . . . . . . . . . $ 281.6 $ 326.2 $ 81.0
Adjustments:
Depreciation and amortization . . . . . . . 76.2 71.0 66.7
Gain on sale of marketable securities, net. (.7) (39.6) (28.9)
Cumulative effects of changes in
accounting principles. . . . . . . . . . . 81.5
Changes in assets and liabilities*:
Accounts receivable . . . . . . . . . . . . 31.5 (37.1) 7.8
Program rights, net . . . . . . . . . . . . 73.8 (26.0) 23.3
Accounts payable. . . . . . . . . . . . . . 4.5 (2.3) (18.1)
Accrual on baseball and football
television contracts. . . . . . . . . . . (21.0) (242.0) (160.0)
Income taxes. . . . . . . . . . . . . . . . 2.0 60.5 69.8
Other, net. . . . . . . . . . . . . . . . . (3.7) 6.9 21.1
444.2 117.6 144.2
Investing activities:
Marketable securities:
Gross sales. . . . . . . . . . . . . . . . . 1,915.7 2,521.3 1,495.0
Gross purchases. . . . . . . . . . . . . . . (1,042.3) (2,643.5) (1,732.9)
Liabilities for securities sold under
repurchase agreements . . . . . . . . . . . (301.9) 66.0 95.5
Capital expenditures. . . . . . . . . . . . . (72.8) (106.8) (71.5)
Major acquisitions. . . . . . . . . . . . . . (160.2)
498.7 (163.0) (374.1)
Financing activities:
Repurchases of common stock . . . . . . . . . (1,138.8) (3.0)
Issuance of debt. . . . . . . . . . . . . . . 150.7 124.0 422.5
Extinguishment of debt. . . . . . . . . . . . (82.6) (24.9) (288.0)
Dividends to shareholders . . . . . . . . . . (38.1) (31.3) (25.9)
Other, net. . . . . . . . . . . . . . . . . . 7.8 5.6 (.3)
(1,101.0) 73.4 105.3
Net (decrease) increase in cash and
cash equivalents . . . . . . . . . . . . . . . . (158.1) 28.0 (124.6)
Cash and cash equivalents at beginning of year. . 173.4 145.4 270.0
Cash and cash equivalents at end of year. . . . . $ 15.3 $ 173.4 $ 145.4
See notes to consolidated financial statements.
*Excludes effect of items included in Adjustments and major acquisitions.
The statements of cash flows exclude the following noncash items:
a) In 1994, the conversion of 300,000 shares of the Company's Series B
Preference Stock into common stock (note 13), and the 5-for-1 split of
the Company's common stock (note 12).
b) In 1993, the conversion of $389.6 of the Company's 5% convertible
debentures into common stock (note 8).
c) In 1992, the issuance of $36.8 of the Company's common stock
re: Midwest, and the consolidation of a mortgage obligation
of $51.0 re: CBS/MTM Partnership (note 2).
-29- <PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Statement of Significant Accounting Policies (Dollars in millions, except
per share amounts)
Basis of presentation. The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
transactions and balances have been excluded from the consolidated financial
statements. All notes relate to continuing operations unless otherwise
indicated.
Revenue recognition. The Company's practice is to record revenues from
services when performed.
Income taxes. The Company provides deferred income taxes for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities.
Cash equivalents and marketable securities. The Company considers all highly
liquid debt instruments purchased with a maturity of three months or less,
including accrued interest thereon, to be cash equivalents. Marketable
securities include U.S. Treasury notes, money market instruments, tax-exempt
securities and corporate securities (note 5). The Company also enters into
agreements to sell and repurchase certain of these 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.
In the third quarter of 1994, the Company repurchased shares of its
common stock for $1,138.8 (note 12) and funded this repurchase from available
cash and the sale of marketable securities. Along with the sale of these
marketable securities, the related liabilities for securities sold under
repurchase agreements were extinguished.
Marketable securities managed for long-term yield are classified as
long-term investments, and other marketable securities are classified as
current assets. Marketable securities, in current assets, also included
accrued interest on both short-term and long-term marketable securities at
December 31, 1994, 1993 and 1992 of $4.1, $20.4 and $20.1, respectively. At
December 31, 1994, long-term investments included $67.6 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.
Program rights. Costs incurred in connection with the production of, or the
purchase of rights to, programs to be broadcast within one year are
classified as current assets while costs of those programs to be broadcast
subsequently are considered noncurrent. Program costs are charged to expense
as the respective programs are broadcast.
-30 (Page 1 of 2)- <PAGE>
1. Statement of Significant Accounting Policies (continued)
Property, plant and equipment. Land, buildings, machinery and equipment are
stated at cost. Major improvements to existing property, plant and equipment
are capitalized. Expenditures for maintenance and repairs which do not
extend the life of the assets are charged to expense as incurred. The cost
of properties retired or otherwise disposed of and any related accumulated
depreciation are generally removed from the accounts and the resulting gain
or loss is reflected in income currently. Depreciation is computed using
principally the straight-line method over the estimated useful lives of the
assets. Depreciation expense for 1994, 1993 and 1992 was $68.4, $63.1 and
$58.9, respectively.
Goodwill. The goodwill at the date of acquisition of net assets of
businesses acquired is being amortized over 40 years on a straight-line
basis. As of December 31, 1994, based on the evaluation of the underlying
assets related to goodwill the Company has determined that there was no
diminution in the value of those assets.
-30 (Page 2 of 2)- <PAGE>
1. Statement of Significant Accounting Policies (continued)
Other. In 1994, the Company effected a 5-for-1 split of its common stock
which was consummated on October 18, 1994 (note 12). Accordingly, adjusted
weighted average number of shares outstanding (note 7), per share amounts,
and Stock Rights Plan data (note 14) have been adjusted to reflect the stock
split, for all periods presented in this report.
In 1992, the Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (note 10); SFAS No. 109,
"Accounting for Income Taxes"; and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits."
These adoptions resulted in a one-time post-tax charge to net income as
follows:
Per Share
Postretirement benefits other than pensions. . $(76.1) $ (.98)
Postemployment benefits. . . . . . . . . . . . (6.1) (.08)
Income taxes . . . . . . . . . . . . . . . . . .7 .01
$(81.5) $(1.05)
The ongoing costs related to these adoptions do not have a material effect on
continuing operations.
-31 (Page 1 of 2)- <PAGE>
2. Business Acquisitions (Dollars in millions)
In 1994, the Company and Westinghouse Broadcasting Company, Inc. ("Group W")
announced that they had agreed to a comprehensive strategic partnership
involving extended affiliation agreements between the Company's Television
Network and television stations owned by Group W in four major markets, and
the creation of three new jointly-held entities which will be established,
respectively, to acquire and operate television stations in major markets; to
combine the two companies' current advertising sales representation
businesses; and to produce and distribute television programming. The
television station and sales representation business joint ventures will be
controlled and managed by Group W, which will own a majority voting interest
in each of these entities; the Company and Group W will share equally in the
profits and losses of these ventures. The entity involved in the production
and distribution of programming will become an equal partnership between the
two companies upon the termination of the existing Financial Interest and
Syndication regulations of the Federal Communications Commission.
In connection with the implementation of the television station joint
venture agreement between the Company and Group W, the Company in 1994
created Station Partners, a Delaware general partnership that is at present
wholly controlled by the Company, and transferred to Station Partners the
Company's interests in television stations WCAU-TV, Philadelphia and WCIX
(TV), Miami. Also in 1994, Station Partners entered into an agreement with
the National Broadcasting Company, Inc. ("NBC"), pursuant to which Station
Partners will exchange WCAU-TV, and the principal FCC licenses, broadcasting
tower and certain related assets of WCIX (TV), for NBC's owned television
station KCNC-TV, Denver; the principal FCC licenses, broadcasting tower and
certain related assets of NBC's owned station WTVJ (TV), Miami; and $30.0.
Upon the consummation of this exchange, which is subject to the necessary
regulatory approvals and other customary conditions of closing, Station
Partners will become a joint venture between the Company and Group W, and
will also own at that time the assets and liabilities of WCIX (TV) retained
by Station Partners under the agreement with NBC, as well as television
station KYW-TV, which is currently Group W's owned station in Philadelphia.
In a separate agreement also executed in 1994, NBC granted to Station
Partners the right to acquire partnership interests constituting the
ownership rights to television station KUTV (TV), Salt Lake City, and rights
to the construction permit for KUSG (TV), St. George, Utah, following NBC's
acquisition of those rights from KUTV (TV)'s existing operators pursuant to
a pending agreement. The consideration for this acquisition will consist of
cash and the assumption of certain obligations collectively representing a
total value of $124.0. Upon the closing of this transaction, which is
subject to necessary regulatory approvals and other customary conditions of
closing, KUTV (TV) will be owned by the joint venture between the Company and
Group W.
-31 (Page 2 of 2)
<PAGE>
2. Business Acquisitions (continued)
In 1994, the Company announced that it had entered into agreements to
acquire two television stations located in Detroit, Michigan (WGPR-TV) and
Atlanta, Georgia (WVEU-TV), for the respective prices of $24.0 and $22.0 in
cash. In view of the subsequent affiliation by the Company's Television
Network with another television station in the Atlanta market, the Company
plans to assign its rights to acquire the Atlanta television station to a
third party. The station acquisition in Detroit is subject to necessary
regulatory approvals and other customary conditions of closing.
In 1992, the Company acquired substantially all of the assets of Midwest
Communications, Inc. ("Midwest"), including a television station (with two
satellite stations) located in Minneapolis, Minnesota (WCCO-TV); a television
station (with one satellite station) located in Green Bay, Wisconsin (WFRV-
TV); two radio stations located in Minneapolis, Minnesota (WCCO-AM and WLTE-
FM); and Midwest Cable & Satellite, which operates Midwest Sports Channel, a
supplier of regional sports programming. This transaction was consummated at
a price of $177.0 through the issuance of $36.8 of the Company's common stock
and the assumption and immediate pay-down of $140.2 of Midwest's debt and
other liabilities.
In 1992, the Company acquired for $27.0 the 50 percent interest of MTM
Studios, Ltd. in the CBS/MTM Partnership, which operated television and film
production facilities in Los Angeles, California. The acquisition of this
interest also included the assumption of MTM's partnership mortgage
indebtedness. As a result of the acquisition of this interest, the Company
is the sole owner of these television and film production facilities and is
obligated for the entire mortgage indebtedness (note 8).
The 1992 acquisitions were accounted for by the purchase method and the
results of their operations from the respective dates of acquisition are
included in the accompanying financial statements. Had these acquisitions
occurred on January 1, 1992, consolidated results of operations for 1992
would not have been materially different.
-32 (Page 1 of 3)- <PAGE>
3. Major League Baseball and National Football League Television Contracts
(Dollars in millions)
In 1991, the Company recorded a $322.0 pretax provision for losses over the
remaining lives of its Major League Baseball and National Football League
television contracts. This provision reflected the severely depressed
condition of the television sports marketplace. The remaining balances of
the loss accruals, recorded to reduce these contracts to their net realizable
value, were as follows:
December 31
1993 1992
Included in:
Other current liabilities. . . . . . . . $ 21.0 $242.0
Other liabilities. . . . . . . . . . . . 21.0
$ 21.0 $263.0
-32 (Page 2 of 3)- <PAGE>
4. Interest Expense on Debt, net, and Other Income, net (Dollars in millions)
Interest expense on debt, net, was net of amounts capitalized in 1994, 1993
and 1992 of $3.7, $6.4 and $10.2, respectively, as part of the cost of
investments in property, plant and equipment; made-for-television movies; and
mini-series. Interest paid on debt in 1994, 1993 and 1992 was $51.1, $59.6 and
$76.3, respectively.
Other income, net, in 1993, included a pretax gain of $29.5 from a legal
settlement with Viacom International Inc., a portion of which constituted
payment for rights granted to Viacom to distribute in the United States and
abroad certain television programs owned by the Company, and a pretax gain of
$12.4 from insurance settlements for hurricane damage to the Company's
television station in Miami. It also included other miscellaneous items of
income and expense.
-32 (Page 3 of 3)- <PAGE>
5. Marketable Securities (Dollars in millions)
On January 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." It 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.
During 1994, there were no trading securities or securities held-to-maturity.
The marketable securities, both current and noncurrent, as of December 31, 1994
consisted of the following:
Fair Unrealized Holding
Value Gains Losses
U.S. Government and its Agencies. . . $171.4 $ .4 $ 4.7
Corporate securities:
Equity. . . . . . . . . . . . . . . 86.9 4.9 5.7
Debt . . . . . . . . . . . . . . . 58.8 8.8
Other securities. . . . . . . . . . . 42.4 .2 .8
$359.5 $5.5 $20.0
The above unrealized holding gains and losses, net of income taxes of
$5.8, are reflected as "Unrealized holding losses" in shareholders' equity.
The maturities of the Company's investment in debt securities, at fair value, as
of December 31, 1994 were as follows:
Within 1 year. . . . . . . . . . $ 10.3
After 1 year through 5 years . . 95.0
After 5 years through 10 years . 143.6
After 10 years . . . . . . . . . 23.7
$272.6
Prior to the implementation of SFAS No. 115, noncurrent marketable securities
were carried at cost and current marketable securities were carried at the
aggregate of the lower of cost or market value. The market values of current
and noncurrent marketable securities were $405.0 and $878.5, respectively, as
of December 31, 1993, and $317.4 and $811.2, respectively, as of December 31,
1992.
Investment income from marketable securities classified as interest income on
investments, net, consisted of the following:
Year ended December 31
1994 1993 1992
Interest income . . . . . . . . . . . . . . . $ 60.3 $ 75.6 $ 82.1
Dividend income . . . . . . . . . . . . . . . 6.6 6.6 8.7
Interest expense on repurchase agreements . . (9.8) (11.4) (12.1)
Gross realized gains. . . . . . . . . . . . . 25.1 43.3 30.6
Gross realized losses . . . . . . . . . . . . (24.4) (3.7) (1.7)
$57.8 $110.4 $107.6
The cost of marketable securities sold was determined by specific
identification.
-33- <PAGE>
6. Income Taxes (Dollars in millions)
Income tax expense consisted of the following:
Year ended December 31
1994 1993 1992
Federal:
Current. . . . . . . . . . . . . . . . . $124.0 $ 60.0 $ 5.2
Deferred*. . . . . . . . . . . . . . . . (4.2) 54.3 40.4
Other:
Current. . . . . . . . . . . . . . . . . 22.3 9.3 1.8
Deferred*. . . . . . . . . . . . . . . . 13.3 29.5 17.1
$155.4 $153.1 $64.5
*Deferred taxes:
Accrual on baseball and football
television contracts . . . . . . . . . $ 9.3 $ 97.3 $62.9
State and local tax audit settlement . . (18.2)
Federal tax audit settlement . . . . . . (23.0) (17.9)
Federal tax law changes. . . . . . . . . (11.2)
Write-down of marketable securities. . . 2.2 6.6 11.9
Amortization of intangibles. . . . . . . 8.5 (1.3) 13.9
Other state and local taxes. . . . . . . 7.5 7.9 11.9
Other, net . . . . . . . . . . . . . . . (.2) 7.5 (25.2)
$ 9.1 $ 83.8 $57.5
Income taxes of $155.0 and $94.2 were paid in 1994 and 1993, respectively. In
1992, there was a net income tax refund of $2.6.
Reconciliations between the statutory Federal income tax rate and the
Company's effective income tax rate as a percentage of income before income
taxes were as follows:
Year ended December 31
1994 1993 1992
Statutory Federal income tax rate . . . . . 35.1% 35.1% 34.1%
State and local tax audit settlement . . (4.2)
Federal tax audit settlement . . . . . . (4.8) (7.9)
Federal tax law changes. . . . . . . . . (2.3)
Income from tax preference securities. . (1.4) (1.9) (4.2)
State and local taxes. . . . . . . . . . 5.3 5.2 5.3
Other, net . . . . . . . . . . . . . . . .8 .6 1.1
Effective income tax rate . . . . . . . . . 35.6% 31.9% 28.4%
-34 (Page 1 of 2)-<PAGE>
6. Income Taxes (continued)
Deferred tax assets and liabilities consisted of the following*:
December 31
1994 1993 1992
Deferred tax assets:
Accrual on baseball and football
television contracts . . . . . . . . . . . . $ .4 $ 9.0 $110.2
Postretirement benefits other than pensions . 70.4 67.5 65.0
Employee benefits . . . . . . . . . . . . . . 23.1 21.6 19.6
Other . . . . . . . . . . . . . . . . . . . . 60.7 76.3 50.7
$154.6 $174.4 $245.5
Deferred tax liabilities:
Property, plant and equipment . . . . . . . . $ 86.4 $ 89.6 $ 90.0
Safe harbor leases. . . . . . . . . . . . . . 95.4 97.6 96.5
Other . . . . . . . . . . . . . . . . . . . . 61.0 79.2 90.5
$242.8 $266.4 $277.0
*Recoverable income taxes, reflected in the balance sheet at December 31, 1993
and 1992, include current deferred tax assets of $41.2 and $147.1, respectively,
reduced by current deferred tax liabilities of $12.4 and $30.0, respectively.
The remaining deferred tax liabilities, net of deferred tax assets, were
reflected in the balance sheet as deferred income taxes.
-34 (Page 2 of 2)- <PAGE>
7. Earnings Per Share Data (In thousands)
The data used in the computation of net income per share were as follows:
Year ended December 31
1994 1993 1992
Earnings:
Net income. . . . . . . . . . . . . . . $281,558 $326,188 $ 81,007
Add post-tax interest on convertible
debentures* . . . . . . . . . . . . . 3,288 12,259
Less dividends on preference stock. . . (11,416) (12,688) (12,688)
Net income applicable to common shares. $270,142 $316,788 $ 80,578
Shares:
Weighted average shares outstanding . . 72,210 73,985 67,115
Add common stock equivalents:
Convertible debentures* . . . . . . . 3,245 9,765
Other . . . . . . . . . . . . . . . . 460 200
Adjusted weighted average
shares outstanding . . . . . . . . . . 72,210 77,690 77,080
*The debentures were converted in May 1993. Conversion was assumed for
all prior periods.
In 1994 and 1993, fully diluted earnings per share were considered equal
to primary earnings per share because the addition of potentially dilutive
securities that were not common stock equivalents would have resulted
in immaterial dilution. In 1992, the fully diluted earnings per share
calculation produced an antidilutive effect.
-35 (Page 1 of 2)- <PAGE>
8. Long-Term Debt (Dollars in millions)
Long-term debt consisted of the following:
December 31
1994 1993 1992
7 5/8% senior notes due 2002. . . . . . . . $150.0 $150.0 $150.0
7 3/4% senior notes due 1999. . . . . . . . 125.0 125.0 125.0
8 7/8% senior debentures due 2022 . . . . . 91.6 125.0 125.0
7 1/8% senior notes due 2023. . . . . . . . 97.3 100.0
9.03% mortgage due 1998 . . . . . . . . . . 27.0 27.0 51.0
5% convertible debentures due 2002. . . . . 390.5
Capital lease obligations and other debt. . 17.2 64.2 41.5
Reclassified to current debt. . . . . . . . (.8) (.9) (13.0)
$507.3 $590.3 $870.0
During 1994, 1993 and 1992, debt was repurchased, redeemed or converted as
follows:
Year ended December 31
1994 1993 1992
8 7/8% senior debentures due 2022 . . . . . $33.4
7 1/8% senior notes due 2023. . . . . . . . 2.7
5% convertible debentures due 2002. . . . . $390.5
9.03% mortgage due 1998 . . . . . . . . . . 24.0
10 7/8% senior notes due 1995 . . . . . . . $263.0
7.85% debentures due 2001 . . . . . . . . . 25.0
Other debt. . . . . . . . . . . . . . . . . 46.5
$82.6 $414.5 $288.0
-35 (Page 2 of 2)- <PAGE>
8. Long-Term Debt (continued)
In August 1994, the Company entered into a $500.0 revolving credit
agreement, with a syndicate of commercial banks, which expires in August
1999. The purpose for this credit facility is to provide funds for the
Company's working capital requirements subsequent to its common stock
repurchase in 1994 (note 12) and for other corporate purposes. As of
December 31, 1994, pursuant to the revolving credit agreement, the Company
had incurred $150.7 of debt, which included commercial paper obligations
of $61.7, and was reflected in current liabilities in the balance sheet.
The weighted average interest rate on this debt was 5.9%.
In 1994, the Company commenced a $50.0 debt repurchase program to
repurchase from time to time one or more series of its long-term debt, at
such prices as the Company considers advisable. Through December 31,
1994, the Company repurchased long-term debt of $36.1.
In 1993, the Company converted $389.6 of its 5% convertible
debentures into shares of its common stock, issued from its treasury
shares (note 12). The difference between the amount of debt converted,
net of unamortized issue costs, and the average cost of the treasury
shares issued was credited to additional paid-in capital. The remaining
debentures of $.9 were redeemed.
The principal terms of the various long-term issues are as follows:
The 7 5/8% senior notes, issued in connection with the acquisition of
Midwest (note 2), are due January 1, 2002 and may not be redeemed prior to
maturity.
-36 (Page 1 of 3)- <PAGE>
8. Long-Term Debt (continued)
The 7 3/4% senior notes are due June 1, 1999 and may not be redeemed prior
to maturity.
The 8 7/8% senior debentures are due June 1, 2022 and may not be redeemed
prior to June 1, 2002. On and after that date they may be redeemed, at the
option of the Company, as a whole at any time, or in part from time to time, at
specified redemption prices.
The net proceeds from the issuance of the 7 3/4% senior notes due
June 1, 1999 and the 8 7/8% senior debentures due June 1, 2022 were used to
retire the 10 7/8% senior notes due August 1, 1995.
The 7 1/8% senior notes are due November 1, 2023 and may not be redeemed
prior to maturity. The proceeds from the issuance of these debt securities were
used to purchase New York City Industrial Development Agency (IDA) bonds, which
were issued by the IDA to establish a trust fund to implement the Company's
agreement with the IDA. 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.
The 9.03% mortgage, which was recorded as a result of the Company's
acquisition of the remaining 50 percent interest in the CBS/MTM Partnership
(note 2), is due $12.0 on July 15, 1996 and $15.0 on July 15, 1998.
The aggregate amounts of maturities of the Company's long-term debt for
each of the five years subsequent to December 31, 1994 are as follows:
1995. . . . . . . . . . . . . . . . . . $ .8
1996. . . . . . . . . . . . . . . . . . 12.7
1997. . . . . . . . . . . . . . . . . . .8
1998. . . . . . . . . . . . . . . . . . 16.2
1999. . . . . . . . . . . . . . . . . . 126.5
To meet the disclosure requirements of SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments," the Company estimated that, based primarily on
quoted market prices for its traded issues, the book value of its long-term
debt at December 31, 1994 exceeded its fair value by approximately $39.1.
-36 (Page 2 of 3)- <PAGE>
9. Environmental Liabilities
The Company continually evaluates its environmental liabilities and has
determined that, as of December 31, 1994, 1993, and 1992, its recorded
liabilities were adequate to cover asserted and unasserted claims arising from
the operations of its discontinued businesses. These liabilities were not
reduced by any potential recoveries from insurance companies or others.
There are no significant environmental claims known to the Company arising
from its continuing operations.
-36 (Page 3 of 3)- <PAGE>
10. Retirement Plans (Dollars in millions)
The Company has pension plans covering substantially all of its employees.
Benefits are based on formulas that consider years of service and average
compensation. The Company's general policy is to fund pension costs accrued
over the lives of the plans to the extent the contributions will be tax-
deductible. At December 31, 1994, the aggregate market value of all plan
assets exceeded the projected benefit obligations of all plans by $29.7.
This net amount consisted of $85.6 related to plans whose assets exceeded
their projected benefit obligations and $55.9 related to plans whose
projected benefit obligations exceeded their assets. Those plans whose
projected benefit obligations exceeded their assets are excluded from
coverage under Section 4021(b) of the Employee Retirement Income Security Act
of 1974 (ERISA). The assets of the funded plans consisted primarily of
interest-bearing securities.
The net pension costs for 1994, 1993 and 1992 were as follows:
Year ended December 31
1994 1993 1992
Service cost. . . . . . . . . . $ 18.6 $16.8 $ 15.9
Interest cost . . . . . . . . . 43.3 41.6 39.3
Net amortization and deferral . (73.8) (2.6) (25.1)
(11.9) 55.8 30.1
Less return on plan assets. . . (12.6) 55.5 33.8
Net pension cost (credit) . . . $ .7 $ .3 $ (3.7)
Reconciliations of the funded status of these plans were as follows:
December 31
1994 1993 1992
Plans whose assets exceed accumulated
benefits
Accumulated pension benefit obligation:
Vested . . . . . . . . . . . . . . . $406.0 $391.7 $352.5
Nonvested. . . . . . . . . . . . . . 21.5 20.4 18.0
$427.5 $412.1 $370.5
Market value of plan assets. . . . . . $612.7 $669.1 $637.4
Less projected pension benefit
obligation. . . . . . . . . . . . . . 527.1 523.3 473.2
Assets exceed projected benefit
obligation. . . . . . . . . . . . . . 85.6 145.8 164.2
Less items not yet recognized in net
periodic pension cost:
Unrecognized net asset . . . . . . . 73.7 84.3 94.6
Unrecognized net (loss) gain . . . . (26.4) 31.1 55.6
Unrecognized prior service cost. . . 1.3 1.1 (10.0)
Pension asset excluding unrecognized
items* . . . . . . . . . . . . . . . $ 37.0 $ 29.3 $ 24.0
* Amounts recognized in the Consolidated Balance Sheets. Unrecognized items,
in the aggregate, will be recognized in future years as a net reduction in
pension expense and pension liability under the provisions of SFAS No. 87,
"Employers' Accounting for Pensions."
-37- <PAGE>
10. Retirement Plans (continued)
December 31
1994 1993 1992
Plans whose accumulated benefits exceed assets
Accumulated pension benefit obligation:
Vested . . . . . . . . . . . . . . . $ 28.7 $ 26.3 $ 20.0
Nonvested. . . . . . . . . . . . . . 3.4 2.9 2.3
$ 32.1 $ 29.2 $ 22.3
Market value of plan assets . . . . . . $ - $ - $ -
Less projected pension benefit
obligation . . . . . . . . . . . . . . 55.9 54.5 34.4
Assets (are less than) projected benefit
obligation . . . . . . . . . . . . . (55.9) (54.5) (34.4)
Additional minimum (liability). . . . . (.9) (.6) (.6)
(56.8) (55.1) (35.0)
Less items not yet recognized in net
periodic pension cost:
Unrecognized net (liability). . . . (4.4) (5.1) (5.7)
Unrecognized net (loss) . . . . . . (4.9) (8.7) (1.9)
Unrecognized prior service cost . . (9.1) (10.0) (.3)
Pension (liability) excluding
unrecognized items* . . . . . . . . . $(38.4) $(31.3) $(27.1)
*Amounts recognized in the Consolidated Balance Sheets. Unrecognized items, in
the aggregate, will be recognized in future years as a net increase in pension
expense and pension liability under the provisions of SFAS No. 87, "Employers'
Accounting for Pensions."
The Company also participates in various multi-employer union-administered
defined benefit pension plans that cover certain broadcast employees.
Pension expense under these plans for 1994, 1993 and 1992 was $9.0, $10.2 and
$9.2, respectively.
In addition to providing pension benefits, the Company provides medical and
life insurance benefits for its retired employees. Substantially all of the
Company's nonunion employees may become eligible for these benefits when they
retire from the Company. Also included are those union employees covered by a
collective bargaining agreement that provides for such benefits. During 1991,
the Company made certain revisions to its retiree medical insurance program.
Effective January 1, 1992, most current retirees and all future retirees were
required to contribute to the cost of this coverage, and a maximum outlay by the
Company for this cost was established. In addition, all retirees whose
employment started after March 31, 1991 may maintain their coverage only if
they pay its full cost.
In 1992, the Company implemented, on the immediate recognition basis, SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," and recorded a transition obligation that resulted in a charge to net
income of $76.1, net of an income tax benefit of $49.3.
-38 (Page 1 of 2)- <PAGE>
10. Retirement Plans (continued)
Under the new guidelines, the costs of the benefits are accrued over a period
ending with the date that the qualified employees became eligible to retire, and
future inflation of medical costs is considered in the determination of these
costs. As a result, the costs of providing these benefits were as follows:
Year ended December 31
1994 1993 1992
Service cost . . . . . . . . . . . . . . . $ 2.1 $ 1.9 $ 1.9
Interest cost. . . . . . . . . . . . . . . 13.1 14.1 14.6
Net amortization and deferral. . . . . . . (7.0) 1.9
8.2 17.9 16.5
Less return on plan assets . . . . . . . . (2.5) 5.5 3.4
Net periodic postretirement benefit cost . $10.7 $12.4 $13.1
-38 (Page 2 of 2)- <PAGE>
10. Retirement Plans (continued)
The Company's general policy is to fund accrued postretirement medical and
life insurance costs to the extent the contributions will be tax-deductible.
The funded assets consisted primarily of interest-bearing securities. The
funded status of the postretirement medical and life insurance plans was as
follows:
December 31
1994 1993 1992
Accumulated postretirement benefit
obligation (APBO):
Retirees. . . . . . . . . . . . . . . . . $134.8 $141.1 $152.6
Fully eligible active plan participants . 15.9 17.1 16.0
Other active plan participants. . . . . . 35.2 34.1 30.2
185.9 192.3 198.8
Less market value of plan assets . . . . . 47.0 52.0 46.4
Assets are less than accumulated
postretirement benefit obligation . . . . 138.9 140.3 152.4
Add unrecognized net gain. . . . . . . . . 24.2 16.9
Postretirement benefit liability recognized
in the balance sheet. . . . . . . . . . . $163.1 $157.2 $152.4
The calculations for the postretirement medical and life insurance plans were
based on an actuarial assumption of a medical inflation rate of 13.0 percent in
1994, grading down to 7.0 percent in the year 2000. The effect of a one-
percentage-point annual increase in the assumed medical inflation rates would
increase the APBO by approximately $1.7; the annual service cost would not be
materially affected.
The actuarial assumptions used in computing the funded status of the
pension plans and the postretirement medical and life insurance plans were as
follows:
1994 1993 1992
Weighted average discount rate . . 8.0% 7.5% 8.0%
Rate of compensation increase. . . 6.0% 6.0% 6.5%
Weighted average long-term rate
of return on plan assets . . . . 8.0% 8.0% 8.0%
All costs in this note relate to the covered employees of both the
continuing and discontinued operations of the Company.
-39 (Page 1 of 2)- <PAGE>
11. Commitments and Contingent Liabilities (Dollars in millions)
The Company routinely enters into commitments to purchase the rights to
broadcast programs, including feature films and sports events. These contracts
permit the broadcast of such properties for various periods ending no later than
April 2002. As of December 31, 1994, the Company was committed to make payments
of $3,533.7 under such broadcasting contracts.
Rent expense, excluding payments of real estate taxes, insurance and other
expenses required under some leases, amounted to $42.3, $50.3 and $53.6 in 1994,
1993 and 1992, respectively. At December 31, 1994, minimum future rental
payments and receipts under noncancelable leases (including capital leases and
subleases, which were not significant) were as follows:
Payments Receipts
1995. . . . . . . . . . . . . . $20.3 $10.1
1996. . . . . . . . . . . . . . 16.6 9.8
1997. . . . . . . . . . . . . . 12.1 9.6
1998. . . . . . . . . . . . . . 8.8 9.6
1999. . . . . . . . . . . . . . 6.9 7.6
2000 and thereafter . . . . . . 26.2 51.8
$90.9 $98.5
The Company did not have any significant concentrations of credit risk at
December 31, 1994.
-39 (Page 2 of 2)- <PAGE>
12. Common Stock (Dollars in millions, except per share amounts)
In July 1994, the Company commenced a tender offer to purchase for cash
3.5 million shares of its common stock at $325 per share. The offer concluded
in August 1994 at which time approximately 12.4 million shares had been
tendered. Simultaneously with the conclusion of the offer, 9.1 million shares
of common stock previously held in treasury were retired and restored to the
status of authorized but unissued shares. The Company purchased 3.5 million of
the tendered shares in September 1994 and funded the purchase from available
cash and the sale of marketable securities. These shares so acquired are held
in treasury, which upon consummation of the stock split in October 1994, as
noted below, amounted to 17.5 million shares.
Had the tender offer been consummated as of January 1, 1994, the unaudited
pro forma net income and earnings per share of common stock would have been
$247.7 and $3.90 per share, respectively, for the year ended December 31, 1994.
These pro forma amounts do not purport to be indicative of a) the results that
actually would have been achieved if the offer had been completed as of
January 1, 1994 or b) future results of operations.
As a result of the retirement of the 9.1 million shares of common stock
held in treasury, as noted above, the pro-rata share of the individual
components of shareholders' equity related to these shares has been removed from
shareholders' equity as follows:
Common stock . . . . . . . . $ 22.8
Additional paid-in capital . 117.8
Retained earnings. . . . . . 1,506.5
$1,647.1
In October 1994, the Company effected a 5-for-1 split of its common stock by
paying to shareholders of record on October 3, 1994, a stock dividend of four
shares (par value $2.50 per share) on each share of common stock issued. As a
result of this distribution, 63.0 million additional shares were issued, which
also included the issuance of 14.0 million shares for the 3.5 million shares
repurchased in September 1994 and held in treasury. The common stock of the
Company was increased in October 1994 by $157.6 with a corresponding decrease in
additional paid-in capital for the capitalization of the par value of these
additional shares issued. The stock split had no effect on the Company's
retained earnings.
In 1993, the Company converted $389.6 of its 5% convertible debentures into
shares of its common stock, issued from its treasury shares (note 8).
-40 (Page 1 of 2)- <PAGE>
12. Common Stock (continued)
Changes in common stock during 1992, 1993 and 1994 were as follows:
Issued Treasury
Shares Amount Shares Amount
(Shares in thousands)
Balance - December 31, 1991 . . . . . . . . 24,722 $61.8 11,504 $2,077.0
Conversions of preference stock . . . . . (7) (1.3)
Issuances under employee benefit plans. . 17 (4) (.2)
Repurchases of common stock . . . . . . . 22 3.0
Acquisition of Midwest. . . . . . . . . . (230) (41.6)
Balance - December 31, 1992 . . . . . . . . 24,739 61.8 11,285 2,036.9
Issuances under employee benefit plans. . 78 .2 (4) (.2)
Conversions of 5% convertible debentures. (1,948) (352.2)
Balance - December 31, 1993 . . . . . . . . 24,817 62.0 9,333 1,684.5
Conversions of preference stock . . . . . (207) (37.4)
Issuances under employee benefit plans. . 69 .2 (3)
Retirement of treasury shares . . . . . . (9,123) (22.8) (9,123) (1,647.1)
Repurchases of common stock . . . . . . . 3,500 1,138.8
Issuances to effect stock split . . . . . 63,044 157.6 14,000
Balance - December 31, 1994 . . . . . . . . 78,807 $197.0 17,500 $1,138.8
See notes 8, 13 and 14 for additional information about the Company's common
stock.
-40 (Page 2 of 2)- <PAGE>
13. Preference Stock
The Company's certificate of incorporation provides authority for the
issuance of 6.0 million shares of preference stock, $1 par value. In 1985,
the Company issued 1.25 million shares of preference stock, specifically
authorized and designated as $10 Convertible Series B Preference Stock. The
net proceeds of the issuance was $123.1 million. The issue has an aggregate
liquidation preference of $125.0 million. The difference between the
redemption value and the net proceeds from the issue is being amortized to
retained earnings over 10 years. Each share is entitled to receive
cumulative cash dividends at the rate of $10 per year, payable in equal
quarterly installments; is subject to mandatory redemption on August 1, 1995;
and is convertible, at the option of the holder, into 3.4575 shares of common
stock, which was adjusted from .6915 of a share due to the 5-for-1 split of
common stock (note 12).
In 1994, the Company issued common stock from its treasury shares for
the conversion of 300,000 shares of Series B Preference Stock (note 12). In
addition, in 1994, the Company purchased the rights to receive the principal
and dividends on 50,000 shares of the Company's Series B Preference Stock,
which was accounted for as a redemption of these shares. However, the right
of conversion related to these shares is held by outside investors and if
that right is exercised the Company will receive $5.0 million and issue
172,875 shares of its common stock. At December 31, 1994, there were
3,284,625 common shares reserved for issuance upon conversion of the
outstanding shares of Series B Preference Stock. Upon redemption, or in the
event of voluntary or involuntary liquidation, each shareholder will be
entitled to $l00 per share plus any accrued or unpaid dividends.
The terms of the Series B Preference Stock provide that the Company may
not take any action that would result in the Company's ratio of total debt to
total capitalization exceeding .75 to 1. As of December 31, 1994, this ratio
was .64 to 1.
-41 (Page 1 of 2)- <PAGE>
14. Stock Rights Plan
The Company's 1983 Stock Rights Plan (as amended) (the "Plan") has been
approved by the Company's shareholders. It is administered by the
Compensation Committee of the Board of Directors (the "Committee"),
consisting entirely of outside directors. Under the terms of the Plan,
certain key employees (including officers, who may also be directors) of the
Company may be granted nonqualified stock options at an exercise price equal
to the closing market price of a share of common stock on the date of the
grant. These are ten-year options that become exercisable in installments of
25 percent per year, with the first installment becoming exercisable on the
first anniversary of the date of grant.
Prior to May 7, 1991, options granted to officers subject to the "short
swing" profit provisions of Section 16 of the Securities and Exchange Act of
1934, as amended (the "Act") were coupled with alternative stock appreciation
rights (SAR's) which enabled such holder to receive in cash or shares the
spread between the common stock price on the date of exercise and the option
price. Due to the manner in which option grants to those subject to the
provisions of Section 16 are now treated under the Act, the Committee has
taken action to provide that options granted after May 7, 1991 are not
coupled with SAR's.
In November 1985, the Plan was amended to provide that then outstanding
options not coupled with SAR's would be subject to limited SAR's. (Such
limited SAR's provide for treatment of the spread similar to that of
alternative SAR's and become exercisable only if certain defined changes in
control or concentration of equity ownership of the Company occurs.) The
limited SAR feature was not extended to any option grants subsequent to 1986,
and subsequently granted SAR's did not provide for immediate exercisability
in the event of a change in control.
The Plan provides that the Committee can authorize dividend share
credits on outstanding options and on previously issued dividend share
credits. Such credits are recorded in shares of common stock based on cash
dividends paid to holders of common stock. In 1986, the Committee
permanently suspended granting dividend share credits.
As adjusted for the Company's 5-for-1 common stock split, effective
October 18, 1994 (note 12), the Plan now provides that a maximum of 7.5
million shares in the aggregate are available for option grants and dividend
share credits. At December 31, 1994, options to purchase 865,594 shares of
common stock were exercisable and the remaining outstanding options to
purchase 973,781 shares were not exercisable. The number of shares available
for option grants (and dividend share credits should the Committee choose to
reintroduce the granting of such credits) was 1,964,514 shares, 1,846,000
shares and 2,753,725 shares at December 31, 1994, 1993 and 1992,
respectively. To record the estimated cost of the Plan, in 1994, $.3 million
was credited to income (to adjust prior accruals) and, in 1993 and 1992, $6.1
million and $.7 million, respectively, were charged to income.
-41 (Page 2 of 2)- <PAGE>
14. Stock Rights Plan (continued)
As adjusted for the common stock split, the Plan also provides that,
absent shareholder approval, options may not be granted after 2001; options
for more than 75,000 underlying shares may not be granted to any one
participant in any calendar year; and options for an aggregate in excess of
7.5 million underlying shares may not be granted.
The following table summarizes the activity under the Plan during the years
ended December 31, 1992, 1993 and 1994:
Options
With
Stock Appreciation
Rights Other*
Dividend
Common Common Share
Shares Exercise Price Shares Exercise Price Credits
Outstanding -
December 31, 1991 314,250 $14.40 - $38.30 1,279,935 $11.25 - $38.30 7,615
Granted. . . 458,000 38.30
Exercised. . (10,000) 23.75 - 32.73 (83,810) 11.25 - 38.30 (1,625)
Cancelled. . ______ (42,000) 31.98 - 38.30
Outstanding -
December 31, 1992 304,250 14.40 - 38.30 1,612,125 11.25 - 38.30 5,990
Granted. . . 465,000 47.43
Exercised. . (102,500) 14.40 - 38.30 (387,750) 11.25 - 38.30 (4,413)
Cancelled. . ______ (28,750) 31.98 - 47.43 _____
Outstanding -
December 31, 1993 201,750 32.73 - 38.30 1,660,625 15.35 - 47.43 1,577
Granted. . . 454,500 55.80
Exercised. . (54,500) 32.73 - 38.30 (317,500) 15.35 - 47.43 (1,227)
Cancelled. . (2,750) 36.48 (102,750) 27.33 - 55.80 (20)
Outstanding -
December 31, 1994 144,500 $32.73 - $38.30 1,694,875 $23.75 - $55.80 330
*All grants outstanding which were issued prior to January 1, 1987 contain
limited stock appreciation rights as explained above. At December 31, 1994,
there were 19,500 options of this type outstanding with an exercise price
of $23.75.
-42 (Page 1 of 2)- <PAGE>
15. Litigation
Various 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. The Company believes that the liabilities, if
any, which may result from such litigation, proceedings or claims are not
reasonably likely to have a material adverse effect on its consolidated
financial position, results of operations, or liquidity.
-42 (Page 2 of 2)- <PAGE>
OTHER FINANCIAL INFORMATION
QUARTERLY RESULTS OF OPERATIONS (Unaudited)
(Dollars in millions, except per share amounts)
The quarterly results of operations for the years ended December 31, 1994 and
1993 were as follows:
1994 1993 1994 1993
Net Sales Operating Income
1st Quarter . . . . . . . . . $1,246.9 $ 878.7 $102.3 $ 62.5
2nd Quarter . . . . . . . . . 882.7 835.7 174.5 153.2
3rd Quarter . . . . . . . . . 727.1 752.9 83.9 132.8
4th Quarter . . . . . . . . . 855.2 1,042.8 65.5 62.7
$3,711.9 $3,510.1 $426.2 $411.2
Net Income
Net Income Per Common Share*
1st Quarter . . . . . . . . . $ 69.3 $ 54.2 $ .85 $ .70
2nd Quarter . . . . . . . . . 109.3 107.4 1.36 1.35
3rd Quarter . . . . . . . . . 58.5 118.2 .77 1.48
4th Quarter . . . . . . . . . 44.5 46.4 .69 .55
$ 281.6 $ 326.2 $3.74 $ 4.08
*Quarterly and full year earnings per share amounts were calculated
independently based on the adjusted weighted average number of outstanding
common shares, on an after stock split basis (note 12), applicable to each
period. Because of the repurchase of shares in 1994, the sum of the four
quarters of 1994 does not equal the calculation for the full year.
-43- <PAGE>
SHAREHOLDER REFERENCE INFORMATION
Stock Data
The principal market for CBS common stock is the New York Stock Exchange. It is
also traded on the Pacific Stock Exchange. There were 10,517 holders of record
of CBS common stock as of December 31, 1994. The following table indicates the
quarterly high, low and close prices for CBS common stock as reported in the
quotations of consolidated trading for issues on the New York Stock Exchange
during the past two years (these amounts have been adjusted to reflect the stock
split):
1994 1993
High Low Close High Low Close
1st Quarter . . . . $64 3/4 $55 $61 1/4 $43 1/2 $37 1/4 $43 1/4
2nd Quarter . . . . 64 1/4 50 5/8 62 5/8 50 1/8 42 3/4 46 3/4
3rd Quarter . . . . 72 1/8 57 7/8 64 1/8 55 5/8 45 5/8 53 7/8
4th Quarter . . . . 68 3/4 50 55 1/4 65 1/4 53 3/4 57 3/4
Dividends
Dividends on CBS common stock were paid quarterly at $.10 per share in 1994 and
for the fourth quarter of 1993, and at $.05 per share for the first three
quarters of 1993. (These amounts were adjusted to reflect the stock split.)
In 1994 and 1993, dividends were paid quarterly at $2.50 per share on CBS
Series B preference stock.
Transfer Agent and Registrar Independent Certified Public Accountants
First Chicago Trust Company Coopers & Lybrand L.L.P.
of New York 1301 Avenue of the Americas
P.O. Box 2500 New York, New York 10019-6013
Jersey City, New Jersey 07303-2500
Annual Meeting
The 1995 annual meeting of shareholders of CBS Inc. will be held at 11 A.M.,
Wednesday, May 10, 1995, at The Museum of Modern Art, 11 West 53 Street, New
York, New York.
Form 10-K Annual Report
The Form 10-K Annual Report for the Company's 1994 fiscal year, filed with the
Securities and Exchange Commission (SEC), contains certain financial information
and, when appropriate, other matters concerning the Company which are required
to be reported to the SEC. Shareholders who wish a copy of this report may
obtain one, without charge, upon request to the CBS Shareholder Relations
Department, 51 West 52 Street, New York, New York 10019.
-44- <PAGE>
INDEX TO EXHIBITS
Number Description
2-A Summary of Business Terms of Proposed Television Station Joint
Venture ("Joint Venture Summary") between registrant and
Westinghouse Broadcasting Company, Inc., dated as of October 21,
1994, is filed herewith. [Registrant has requested the Securities
and Exchange Commission to grant confidential treatment to portions
of this exhibit.]
2-B Asset Exchange Agreement and Purchase Agreement, each dated
November 21, 1994, between Station Partners [an affiliated entity
of registrant which will ultimately become a CBS-Group W joint
venture] and subsidiaries of National Broadcasting Co., Inc., are
filed herewith.
2-C Pursuant to Regulation S-K Item 601(b)(2), registrant agrees to
furnish supplementally to the Securities and Exchange Commission,
upon request, (a) a copy of the schedules and exhibits to said
Joint Venture Summary consisting of a diagram and summary of the
ownership structure of the proposed partnership (Schedule A) and
the form of Venture Affiliation Agreement (Schedule B); and (b) a
copy of any schedule or exhibit to said Asset Exchange Agreement
and said Purchase Agreement, a list of such schedules and exhibits
being included in or attached to each such agreement.
3-A Restated Certificate of Incorporation of registrant, as amended May
13, 1988 and filed as Exhibit 3 to Form 10-Q for the quarter ended
June 30, 1988.*
3-B By-Laws of registrant, as amended to March 11, 1994, is filed as
Exhibit 3-B to Form 10-K for 1993.*
4-A See Article 3 of Restated Certificate of Incorporation, as amended,
filed as Exhibit 3 to Form 10-Q for the quarter ended June 30,
1988.*
4-B(i) Indenture, dated as of January 2, 1992, between registrant and The
Chase Manhattan Bank (National Association), as Trustee, filed as
Exhibit 4-F(i) to Form 10-K for 1991.*
(ii) Specimen Form of 7-5/8% Senior Note Due 2002, filed as Exhibit
4-F(ii) to Form 10-K for 1991.*
(iii) Specimen Form of 8-7/8% Senior Debenture Due 2022, issued May 21,
1992, filed as Exhibit 4-D(iii) to Form 10-K for 1992.*
(iv) Specimen Form of 7-3/4% Senior Note Due 1999, issued May 21, 1992,
filed as Exhibit 4-D(iv) to Form 10-K for 1992.*
* Previously filed as indicated and incorporated herein by reference.
- 45 -<PAGE>
(v) Specimen Form of 7-1/8% Senior Note Due 2023, issued October 28,
1993, filed as Exhibit 4-B(v) to Form 10-K for 1993.*
(vi) Credit Agreement, dated as of August 26, 1994 between registrant
and The Chase Manhattan Bank (National Association), as Agent, is
filed herewith.
4-C Pursuant to Regulation S-K Item 601(b)(4), registrant agrees to
furnish to the Securities and Exchange Commission, upon request, a
copy of other instruments defining the rights of holders of
long-term debt of registrant.
10-A CBS Additional Compensation Plan, filed as Exhibit 10-A to Form
10-K for 1980.*
10-B CBS Stock Rights Plan, as amended effective March 13, 1991, filed
as Exhibit 10-B to Form 10-K for 1991.*
10-C CBS Pension Plan, as amended and restated through January 1, 1995,
is filed herewith.
10-D(i) CBS Supplemental Executive Retirement Plan, as amended October 14,
1987, filed as Exhibit 10-C to Registrant's Form 10-K for 1987.*
(ii) CBS Supplemental Executive Retirement Plan #2, dated as of January
1, 1989, as amended January 1, 1993, filed as Exhibit 10-D(ii) to
Form 10-K for 1992.*
10-E CBS Excess Benefit Plan, dated as of March 9, 1976, effective
January 1, 1976, filed as Exhibit 10-E to Form 10-K for 1992.*
10-F Senior Executive Life Insurance Plan, dated July 9, 1990, filed as
Exhibit 10-D to Registrant's Form 10-K for 1990.*
10-G CBS Deferred Compensation Plan for Non-Employee Directors, dated as
of November 2, 1981, filed as Exhibit 10-G to Form 10-K for 1992.*
10-H CBS Employee Investment Fund, as amended and restated through
January 1, 1995, is filed herewith.
10-I CBS Retirement Plan for Outside Directors, as amended May 9,1990,
filed as Exhibit 10-E to Registrant's Form 10-K for 1990.*
10-J Restricted Stock Plan for Eligible Directors, filed as Exhibit 10-J
to Form 10-K for 1993.*
10-K Tisch Deferred Compensation Plan, dated as of January 1, 1995, and
related trust agreement are filed herewith.
10-L CBS Supplemental Employee Investment Fund, effective January 1,
1995, and related trust agreement are filed herewith.
* Previously filed as indicated and incorporated herein by reference.
- 46 -<PAGE>
10-M Employment Agreement between CBS Inc. and Edward Grebow, dated as
of November 8, 1993, filed as Exhibit 10-L to Form 10-K for 1993.*
10-N Employment Agreement between CBS Inc. and Eric W. Ober, dated as of
January 1, 1995, is filed herewith.
10-O Employment Agreement between CBS Inc. and James A. Warner, dated
April 18, 1994, is filed herewith.
10-P Employment Agreement between CBS Inc. and Johnathan Rodgers, dated
as of June 1994, is filed herewith.
10-Q Employment Agreement between CBS Inc. and David Kenin, dated as of
April 15, 1994, is filed herewith.
10-R Employment Agreement between CBS Inc. and Peter Tortorici, dated as
of April 1, 1994, is filed herewith.
10-S Employment Agreement between CBS Inc. and Nancy C. Widmann, dated
as of June 1994, is filed herewith.
10-T Employment Agreement between CBS Inc. and Ellen Oran Kaden, dated
as of June 27, 1994, is filed herewith.
10-U Employment Agreement between CBS Inc. and Peter W. Keegan, dated as
of June 27, 1994, is filed herewith.
10-V Employment Agreement between CBS Inc. and Peter A. Lund, dated as
of February 23, 1995, is filed herewith.
11 Computation of per share income is filed herewith.
12 Computation of ratios is filed herewith.
13 Registrant's 1995 Notice of Annual Meeting and Proxy Statement (to
be filed on or about April 7, 1995) which, except for those
portions thereof expressly incorporated by reference elsewhere in
this Form 10-K, is furnished for the information of the Securities
and Exchange Commission and is not to be deemed "filed" as part of
the filing.
21 List of registrant's subsidiaries is filed herewith.
23 Consent of Independent Accountants is filed herewith (p. 25).
99 Form S-8 Undertakings pursuant to Item 512 of Regulation S-K is
filed herewith.
* Previously filed as indicated and incorporated herein by reference.
- 47 - <PAGE>
NOTE
Copies of the Exhibits filed may be inspected at the Library of the New
York Stock Exchange, 11 Wall Street, New York, NY 10005; at the Pacific
Stock Exchange, 301 Pine Street, San Francisco, CA 94104; or at the Public
Reference Room of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549.
- 48 - <PAGE>
