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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A NO. 3
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File No. 1-2931
December 31, 1994
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 September 22, 1995, was $4,286,160,242.
As of September 22, 1995, there were 64,826,138 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for Annual Meeting of Shareholders
held on May 10, 1995 (Part III).
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 3 TO REPORT
FILED PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
CBS INC.
-------------------------------------------------
(Exact name of registrant as specified in charter)
AMENDMENT NO. 3
The undersigned registrant hereby amends its 1994 Annual Report on Form 10-K as
follows.
PART I
1. Item 1. The penultimate sentence in the second paragraph under the
sub-heading "The CBS Television Stations Division..." on page 3 of the Report is
amended by adding the following language.
"...; the consideration payable in respect of such acquisition is $83 million,
subject, however, to adjustment."
2. Item 1. The first full paragraph under the sub-heading "Material Licenses and
Federal Regulation" is amended by adding to such paragraph the following four
new sentences.
"CBS currently holds broadcast licenses for 10 television stations (three of
which are operated as "satellites" of other CBS Owned television stations and
are accordingly exempt from the FCC's multiple ownership and television duopoly
rules), 13 FM radio stations and eight AM radio stations. During 1995, CBS was
required to file a license renewal application for one FM radio station. CBS
will be required to file license renewal applications for four FM and four AM
radio stations during 1996. In addition to the foregoing, CBS holds a license
for a television translator station which is in the process of being assigned to
another party, various licenses for auxiliary service stations, and various
non-broadcast licenses."
3. Item 1. The text under the sub-heading "Material Licenses and Federal
Regulation" is further amended as follows.
(a) The last sentence of the second paragraph is deleted and the following
sentence is substituted in lieu thereof.
"On May 3, 1995, the FCC denied the NAACP petition and granted the WBBM-TV
license renewal application."
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(b) The last sentence of the fifth paragraph is deleted and the following
sentence is substituted in lieu thereof.
"On June 22, 1995 the FCC denied the petition and granted the WCAU-TV license
renewal application."
(c) The seventh paragraph is deleted in its entirety and the following paragraph
is substituted in lieu of thereof.
"As noted in Item 1 of Part I of this Form 10-K (under the caption "The CBS
Television Stations Division"), CBS, on September 23, 1994, entered into an
Asset Purchase Agreement to acquire WGPR-TV, Detroit, Michigan from WGPR Inc.
("WGPR"). On October 27, 1994, CBS and WGPR filed an application with the FCC
for consent to the assignment of the broadcast license for the station to CBS.
Petitions to deny that application were separately filed on December 22, 1994 by
Spectrum Detroit Inc. ("Spectrum"), a Michigan corporation, and Alexander
Serafyn, a resident of the Detroit area. The Spectrum petition alleged that
registrant had assumed premature control of the station in violation of the
Communications Act by virtue of a local marketing agreement with the then-
licensee of WGPR-TV pursuant to which registrant was at that time programming
the station. The Serafyn petition was based on claims of intentional news
distortion in a segment of the CBS News broadcast 60 MINUTES concerning
anti-Semitism in the Republic of the Ukraine. On January 17, 1995, registrant
filed a consolidated opposition to the petitions. On July 27, 1995, the FCC
approved the assignment of the broadcast license for WGPR-TV to CBS. Both
Spectrum and Serafyn have appealed the FCC's decision to the United States Court
of Appeals for the District of Columbia Circuit (the "D.C. Circuit"). In
addition, Oleg Nikolyszyn, who opposed FCC approval of registrant's acquisition
of WPRI-TV, Providence, Rhode Island (see paragraph below), filed an appeal of
the FCC decision regarding WGPR-TV with the D.C. Circuit. Registrant has
intervened in these appeals, which have been consolidated by the Court. On
September 20, 1995, registrant's acquisition of WGPR-TV (now WWJ-TV) was
consummated."
(d) The eighth paragraph is deleted in its entirety and the following paragraph
is substituted in lieu of thereof.
"As noted in Part I of this Form 10-K (under the caption "The CBS Television
Stations Division"), CBS reported that on March 1, 1995, it had entered into an
Asset Purchase Agreement to acquire WPRI-TV, Providence, Rhode Island from
Narragansett Television L.P. An application for consent to the assignment of the
broadcast license for the station to CBS was filed with the FCC on March 16,
1995. On April 26, 1995, Oleg Nikolyszyn, a resident of the Providence area,
filed a petition to deny that application, to which CBS filed an opposition. The
petition was based on claims of intentional news distortion in a segment of the
CBS News broadcast 60 MINUTES concerning anti-Semitism in the Republic of the
Ukraine, and also
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argued that action on the application should be delayed pending the resolution
of certain issues raised in petitions to deny CBS's application to acquire
WGPR-TV, Detroit. On June 22, 1995, the FCC staff approved the assignment of the
broadcast license for WPRI-TV to CBS, subject to whatever action, if any, the
FCC might deem appropriate in light of its consideration of the issues raised in
the WGPR proceeding. On June 29, 1995, Nikolyszyn filed with the FCC staff a
petition for reconsideration and motion for stay, to which CBS filed an
opposition on July 6, 1995. Subsequently, in granting the WGPR-TV assignment
application described in the preceding paragraph, the FCC removed the condition
which it had previously placed on its grant of the WPRI-TV assignment
application. CBS's acquisition of WPRI-TV was consummated on September 10,
1995."
By reason of the foregoing Amendments 1, 2 and 3, Item 1 of Part I of the Report
is restated in its entirety to read as follows.
"Item 1. Business.
The registrant, CBS Inc. ("CBS" or "registrant")*, conducts its domestic and
international operations either directly or through subsidiaries and joint
ventures.
The operations of CBS are carried out primarily by the CBS/Broadcast Group.
Other activities of CBS include various activities not directly associated with
the Group, i.e., The CBS/FOX Company, Radford Studio Center Inc. and other
miscellaneous activities. In addition, a multi-faceted strategic partnership
between CBS and Westinghouse Broadcasting Company, Inc. ("Group W") was
announced in July 1994. (See caption "Other Activities".)
CBS/Broadcast Group
The CBS/Broadcast Group, through the CBS Television Network, distributes a
comprehensive schedule of news and public affairs broadcasts, entertainment and
sports programming and feature films to 206 independently-owned affiliated
stations and the seven CBS owned and operated television stations, which in the
aggregate serve the 50 states and the District of Columbia, and to certain
overseas affiliated stations. The CBS Operations and Administration Division
operates the technical facilities used to produce and distribute programs of the
CBS News, Sports and Entertainment Divisions. This division is also responsible
for providing facilities management, personnel services, management information
systems and administrative support services to CBS, including the CBS/Broadcast
Group, and to
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* Except as the context otherwise requires, references to CBS or registrant in
this Annual Report mean CBS Inc. and include its subsidiaries.
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unaffiliated companies for a fee. The CBS/Broadcast Group consists of seven
divisions, whose operations are briefly described below:
The CBS Entertainment Division produces and otherwise acquires entertainment
series and other programs, and acquires feature films, for distribution by the
CBS Television Network for broadcast.
The CBS Television Network Division operates the CBS Television Network and,
through its CBS Marketing and Communications and CBS Sales units, is responsible
for sales of advertising time for CBS Television Network broadcasts and related
marketing research, merchandising and sales promotion activities. Through its
CBS Affiliate Relations unit, this division is also responsible for the full
range of ongoing activities and mutual concerns between the CBS Television
Network and the 206 independently-owned affiliated stations.
The CBS Enterprises Division, operating primarily through the CBS Broadcast
International and CBS Video units, is responsible for the worldwide distribution
of CBS-owned news and public affairs broadcasts, sports and entertainment
programming and feature films to broadcast and other media (including cable,
airlines and home video, in the latter case through The CBS/Fox Company) and the
acquisition of broadcast and non-broadcast rights in independently produced
programs where permitted by law.
The CBS News Division operates a worldwide news organization which produces
regularly scheduled news and public affairs broadcasts and special reports for
the CBS Television and Radio Networks. This division also produces certain
news-oriented programming for broadcast in the early morning daypart and in
designated hours during prime time. CBS News Productions, a unit of the CBS News
Division, produces documentaries for sale to other media outlets.
The CBS Sports Division produces and otherwise acquires sports programs for
distribution by the CBS Television Network for broadcast.
The CBS Television Stations Division operates and serves as sales representative
for the seven CBS-owned television stations (serving New York, Chicago, Los
Angeles, Philadelphia, Minneapolis-St. Paul (which includes two satellite
stations), Green Bay-Appleton (which includes a satellite station) and Miami).
The division also owns and operates Midwest Sports Channel, a supplier of
regional sports programming to cable subscribers in Minnesota, North Dakota,
South Dakota, northern Iowa and western Wisconsin, and Teleport Minnesota, which
provides programming and technical services to cable operators in the upper
Midwest and operates a service enabling broadcast companies and other clients to
transmit video signals into and out of Minnesota.
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In connection with the implementation of a joint venture agreement with Group W
described below under the caption "Other Activities", it is contemplated that
the CBS-owned television station in Philadelphia and certain assets of the
CBS-owned television station in Miami will be exchanged for other television
stations and broadcast assets, and that the proceeds of this exchange (as well
as the retained assets and liabilities of the Miami station) will be contributed
to the joint venture. As more fully set forth below, this venture will be
controlled and managed by Group W. Pursuant to the advertising sales
representation joint venture agreement with Group W also described under the
caption "Other Activities", it is contemplated that the advertising sales
representation operations of the two companies will be combined in an entity
that will represent the television stations owned or controlled by CBS or Group
W. In September 1994, CBS executed Asset Purchase Agreements for the acquisition
of WGPR(TV), Detroit, and WVEU(TV), Atlanta, from WGPR, Inc. and Broadcast
Corporation of Georgia ("BCG"), respectively. Subsequent to the execution of
CBS's agreement to purchase WVEU(TV), the CBS Television Network agreed to
affiliate with another television station in the Atlanta market. Accordingly,
CBS has assigned its rights to acquire WVEU(TV) under its Asset Purchase
Agreement with BCG to WVEU Purchase Inc. CBS's contemplated acquisition of
WGPR-TV is subject to approval by the Federal Communications Commission ("FCC").
(See caption "Material Licenses and Federal Regulation" for further details.) On
March 1, 1995, CBS executed an Asset Purchase Agreement for the acquisition of
WPRI-TV, Providence, Rhode Island, from Narragansett Television L.P.; the
consideration payable in respect of such acquisition is $83 million, subject,
however, to adjustment. The transaction is subject to FCC approval. (See caption
"Material Licenses and Federal Regulation.")
The CBS Radio Division operates the eight CBS-owned AM radio stations (serving
New York, Chicago, Detroit, Los Angeles, Philadelphia, Minneapolis-St. Paul, St.
Louis and San Francisco) and the 13 CBS-owned FM radio stations (serving the
same cities named above, as well as Boston, Dallas/Fort Worth (two stations),
Houston and Washington, D.C.); serves as broadcast sales representative for the
CBS-owned radio stations, 16 independently-owned AM and 24 independently owned
FM radio stations; and operates the CBS Radio Networks, which serve
approximately 585 affiliated stations nationwide.
Other Activities
The CBS/FOX Company is a partnership in which CBS and a wholly-owned subsidiary
("Fox Video") of Twentieth Century-Fox Film Corporation each own a 50% interest.
This partnership is engaged in the acquisition from unrelated third parties of
the videocassette rights to feature films and other, non-theatrical product, and
provides marketing activities relating to the videocassette distribution (by Fox
Video) of products produced by CBS and the partnership. It also engages in
selling activities to specialized accounts of product of
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CBS and the partnership. In 1994, CBS and Fox Video agreed to extend the term of
the related partnership to February 28, 1997.
Radford Studio Center Inc., a wholly-owned subsidiary of CBS ("Radford"), owns
and operates television and film production facilities at its Studio Center
facility in Studio City, California. CBS, through Radford, became the sole owner
of the Studio Center business and facilities in 1992 when it acquired the 50
percent partnership interest of MTM Studios, Ltd. in The CBS/MTM Company.
In July 1994, CBS and Group W announced that they had agreed to a comprehensive
strategic partnership involving long-term affiliation agreements between the CBS
Television Network and television stations owned by Group W in four major
markets (Boston, Baltimore, Pittsburgh and San Francisco), and the creation of
three new joint ventures between the two companies. The new jointly-held
entities 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; CBS 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 ("fin/syn") rules of the FCC, which is expected to occur in November
1995.
In connection with the implementation of the television station joint venture
agreement between CBS and Group W, in 1994 CBS created Station Partners, a
Delaware general partnership that is at present wholly controlled by CBS, and
transferred to Station Partners CBS's interests in television stations WCAU-TV,
Philadelphia and WCIX(TV), Miami. In November 1994, Station Partners entered
into an Asset Exchange Agreement with a subsidiary of 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 million. Upon the consummation of this exchange,
which is subject to necessary regulatory approvals and other customary
conditions of closing, Station Partners will become a joint venture between CBS
and Group W, and will also own at that time the assets and liabilities of
WCIX(TV) retained by Station Partners under the Asset Exchange 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 November 1994, another subsidiary of
NBC granted to Station Partners the right to acquire
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partnership interests constituting the ownership rights to television station
KUTV(TV), Salt Lake City, Utah, 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 million. Upon the
closing of this transaction, which is subject to necessary regulatory approvals
and other customary conditions of closing, KUTV(TV) will also be owned by the
joint venture between CBS and Group W.
The television station joint venture agreement contemplates the acquisition by
the venture of two additional major market television stations. All stations
owned by the venture will be affiliated with the CBS Television Network. The
ownership structure of the joint venture is intended to result in
non-attribution of the venture-owned stations to CBS for the purposes of the
FCC's multiple ownership rules.
INDUSTRY SEGMENT INFORMATION
Since 1988, CBS has operated predominantly in a single industry -- broadcasting.
Accordingly, there is no requirement for segment reporting.
COMPETITION
The CBS Television Network and CBS-owned television stations compete for
audiences with other television networks and television stations, as well as
with other video media, including cable television, multipoint distribution
services, low power television stations, satellite television services and
videocassettes. In the sale of advertising, the CBS Television Network and the
CBS-owned television stations compete with other networks, other television
stations, cable television systems and program services, and other advertising
media. The CBS Television Network and CBS-owned television stations also compete
with other video media for distribution rights to television programming. The
CBS-owned television stations compete primarily in their individual markets.
In addition to competing television broadcast stations, cable television systems
and program services represent an especially significant source of competition
for audiences, advertising and program rights to CBS. In individual markets,
cable systems provide competition by offering audiences additional signals and
by supplying a broad array of advertiser- and subscription-supported video
programming not available on conventional stations.
Further, the CBS Television Network competes with other television networks to
secure affiliations with independently-owned television
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stations in markets across the country, which are necessary to ensure the
effective distribution of network programming to a nationwide audience. During
1994, the competition among the networks for affiliates intensified to an
unprecedented degree. In May 1994, an agreement was announced between Fox
Broadcasting Company ("Fox") and New World Communications Group Inc. ("New
World"), pursuant to which 12 television stations owned or to be acquired by New
World -- including eight CBS affiliates in large cities -- were to become
affiliated with the Fox Television Network. The Fox-New World agreement was
followed by a series of affiliation changes affecting existing station
affiliations of Capital Cities/ABC, Inc., CBS and NBC in more than 30 markets.
CBS has secured other affiliates or entered into station purchase or other
agreements to ensure the distribution of its network programming in all markets
affected by the Fox-New World agreement. In a majority of those markets, the
replacement stations are UHF (ultra high frequency) stations, which have
relatively weak signals compared to the VHF (very high frequency) stations with
which CBS was formerly affiliated. Despite the affiliation changes occasioned by
the Fox-New World agreement, the CBS Television Network is still seen on VHF
stations in more markets than any other network. There can be no assurance,
however, that the affiliation changes described above, and possible future
changes due to increased competition among networks for affiliates, may not
adversely affect the audience for CBS Television Network programs. In addition,
such increased competition has resulted in CBS's incurring higher costs for
affiliate compensation, and further increases in such costs are possible.
Current and future technological developments may affect competition within the
television field. Developments in advanced digital technology may enable
competitors to provide "high definition" pictures and sound qualitatively
superior to what television stations now provide. Development of the technology
to compress digital signals may also permit the same broadcast or cable channel
or satellite transponder to carry multiple video and data services, and could
result in an expanded field of competing services. CBS cannot predict when and
to what extent digital technology will be implemented in the various television
services, and whether and how television stations will be able to make use of
the improvements inherent in it. The FCC has initiated proceedings having the
ultimate goal of adopting a standard for the use of advanced digital technology
in terrestrial television broadcast service.
Recent statutory, judicial and regulatory actions may also affect competition.
The Cable Consumer Protection and Competition Act of 1992 ("1992 Cable Act") for
the first time required cable systems to obtain broadcast stations' consent to
retransmit the stations' signals, thereby providing television stations the
opportunity to negotiate a fee or other compensation for such retransmission.
(CBS
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has granted cable systems carrying the signals of its owned television stations
consent to continue to carry those signals, without compensation, until October
6, 1995.) As an alternative, the 1992 Cable Act allowed television stations to
require cable systems to carry their signals within their television markets
without compensation. The cable industry has brought legal challenges to the
latter provisions of the 1992 Cable Act (commonly referred to as the "must
carry" provisions), and a split lower court decision upholding them was appealed
to the United States Supreme Court, which in June 1994 remanded the case for
further fact finding.
Telephone companies represent another source of potential competition in the
television field through their efforts to provide both video services and data
transmission services directly to their subscribers' homes. While the Cable
Communications Policy Act of 1984 generally prohibits telephone companies from
providing video programming directly to subscribers' homes within their service
areas, several recent developments may affect competition. In 1992, the FCC
permitted telephone companies, without the necessity of obtaining a municipal
cable franchise, to offer "video dialtone" distribution services to programmers
on a common carrier basis. The U.S. Court of Appeals for the Fourth and Ninth
Circuits recently ruled that the above statutory restriction on telephone
company provision of video programming violates the First Amendment rights of
those companies. U.S. District Courts in four other circuits have also reached
the same conclusion. In light of these decisions, the FCC has allowed Bell
Atlantic-Virginia to offer its own programming over a video dialtone platform in
Fairfax, Virginia, and commenced a proceeding to establish general rules to
govern such offerings by telephone companies generally. Legislative proposals
that would provide a regulatory framework for telephone company entry into the
cable television business and into the provision of future broadband video
services in the companies' service areas are expected to be under active
consideration by Congress in 1995. Network regulations may also affect
competition. In 1991, the FCC modified the fin/syn rules, which had limited the
ability of television networks to acquire any financial interest or syndication
rights in television programs and prohibited the networks from themselves
syndicating television programs. CBS and other television networks appealed this
decision to the United States Court of Appeals for the Seventh Circuit,
contending that the rules should have been eliminated rather than modified. The
Court affirmed the FCC's decision to abrogate the pre-existing rules, but
vacated the FCC's modification of those rules as arbitrary and capricious and
remanded the matter to the FCC. In April 1993, the FCC announced new rules which
eliminate all restrictions on network acquisition of financial interests and
syndication rights in network programming and retain most restrictions on
syndication by the networks themselves. In July 1994, the Seventh Circuit Court
of Appeals affirmed the FCC's decision to adopt the new rules.
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The television network operations of CBS and other television networks are
subject to consent decrees entered by the United States District Court for the
Central District of California in 1980. In November 1993, the court modified the
consent decrees to eliminate restrictions parallel to the FCC's old fin/syn
rules, thereby permitting the networks to act to the extent permitted by the
FCC's 1993 rules. The FCC has provided that, unless it issues an order to the
contrary, all its fin/syn restrictions are to "sunset" two years from the date
of the November 1993 modification of the consent decrees. It has also determined
that it will review the rules six months before they are scheduled to expire and
that the burden of proof in this review will rest on those favoring retention of
the rules. The FCC's decision as to the expiration of its remaining fin/syn
rules, subject to such final review, was also affirmed in the Seventh Circuit's
July 1994 decision.
The CBS Radio Network and CBS's owned radio stations compete with other radio
networks, independent radio stations, suppliers of radio programming, and other
advertising media. Competition with CBS's owned radio stations occurs primarily
in their individual market areas, although on occasion stations outside a market
place signals within that area. While such outside stations may obtain an
audience share, they generally do not obtain any significant share of the
advertising within the market.
Developments in radio technology could affect competition in the radio field.
New radio technology, known as "digital audio broadcasting" (DAB), can provide
sound of the quality of compact discs, which is significantly higher than that
now provided by radio networks and stations using analog technology. CBS, among
others, is actively involved in the study and development of this digital
technology, but cannot predict when and to what extent existing radio networks
and stations will be in a position to utilize it. The FCC has initiated
proceedings to consider the development and implementation of DAB services. The
FCC is also currently considering several applications to establish a
nationwide, satellite-delivered DAB service, which, if approved, could
constitute an additional source of competition to conventional radio stations
and networks.
CBS cannot predict the effect on its business or earnings of possible future
competitive, economic, technological, international or industrial changes. Nor
can CBS generally predict the outcome of administrative and judicial proceedings
or whether new legislation may be enacted or new regulations adopted that might
bear on the broadcast industry or affect CBS's business.
MATERIAL LICENSES AND FEDERAL REGULATION
Except as indicated below, all of CBS's television and radio stations
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operate under currently effective licenses from the FCC, which is empowered by
the Communications Act of 1934, as amended, to, inter alia, license and regulate
television and radio broadcasting stations. The FCC has authority to grant or
renew broadcast licenses for a maximum term of five years for television and
seven years for radio if it determines that the "public convenience, interest or
necessity" will be served thereby. During a specified period after an
application for renewal of a broadcast station license has been filed, competing
applications seeking a license to broadcast on the same frequency may be filed
with the FCC, and are entitled to consideration by the FCC in a hearing to
evaluate the comparative merits of the applications. Persons objecting to the
license renewal application may also file petitions to deny during this period.
CBS currently holds broadcast licenses for 10 television stations (three of
which are operated as "satellites" of other CBS Owned television stations and
are accordingly exempt from the FCC's multiple ownership and television duopoly
rules), 13 FM radio stations and eight AM radio stations. During 1995, CBS was
required to file a license renewal application for one FM radio station. CBS
will be required to file license renewal applications for four FM and four AM
radio stations during 1996. In addition to the foregoing, CBS holds a license
for a television translator station which is in the process of being assigned to
another party, various licenses for auxiliary service stations, and various
non-broadcast licenses.
In Item 1 of CBS's Form 10-K for 1992 (under the caption "Material Licenses and
Federal Regulation"), CBS reported that, on August 3, 1992, it had filed with
the FCC a timely application to renew the television broadcast licenses for
WBBM-TV, Chicago, Illinois. CBS further reported that, on or about August 18,
1992, Edward Magnus, an individual, filed with the FCC a petition to deny the
WBBM-TV application, to which CBS responded on September 24, 1992. By letter
dated November 14, 1994, the FCC dismissed the petition to deny. CBS also
reported that a second petition to deny the WBBM-TV application was filed on or
about November 2, 1992, by the NAACP, and that on November 23, 1992, CBS filed
its opposition. On May 3, 1995, the FCC denied the NAACP petition and granted
the WBBM-TV license renewal application.
In Item 1 of Part II of CBS's Form 10-Q for the quarter ended September 30,
1993, CBS reported that, on August 2, 1993, CBS filed with the FCC a timely
application to renew the television broadcast license for KCBS-TV, Los Angeles,
California. On November 17, 1993, Mark McDermott and Americans for Responsible
Media filed with the FCC a petition to deny the KCBS-TV application, to which
CBS responded on December 14, 1993. By letter dated November 14, 1994, the FCC
dismissed the petition to deny. Thereafter, on January 11, 1995, the FCC granted
the KCBS-TV license renewal application.
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In Item 1 of CBS's Form 10-K for 1993 (under the caption "Material Licenses and
Federal Regulation"), CBS reported that, on February 1, 1994, CBS filed with the
FCC a timely application to renew the television broadcast license for WCBS-TV,
New York, New York. CBS's application to renew the WCBS-TV license was granted
by the FCC on January 10, 1995.
In Item 1 of Part II of CBS's Form 10-Q for the quarter ended March 31, 1994,
CBS reported that, on April 1, 1994, CBS filed with the FCC a timely application
to renew the television broadcast license for WCAU-TV, Philadelphia,
Pennsylvania. On July 13, 1994, the Philadelphia Lesbian and Gay Task Force and
other groups filed with the FCC a petition to deny the WCAU-TV application, to
which CBS responded on August 22, 1994. On June 22, 1995, the FCC denied the
petition and granted the WCAU-TV license renewal application.
The FCC has adopted rules prohibiting common ownership in the same market of
radio and VHF television stations and prohibiting common ownership of stations
with certain overlapping signals ("duopoly"). When those rules were adopted,
existing commonly owned stations, including television/radio combinations and a
television duopoly then owned by CBS, were "grandfathered". In addition, in
February 1992, CBS acquired from Midwest Communications, Inc., a VHF television
station and AM and FM radio stations in Minneapolis, Minnesota, pursuant to an
FCC waiver of its rules relating to television/radio combinations. As a result,
absent an FCC waiver, a transfer of CBS licenses to a third party or a change in
control of CBS could result in the loss of the license of either the television
station or the radio stations in New York, Philadelphia, Chicago, Los Angeles
and Minneapolis, and (as a result of overlapping television signals) the
television station in either New York or Philadelphia. Under the FCC's waiver
policy, however, the FCC will generally look favorably on waiver applications
relating to radio-television station combinations in the top 25 television
markets where there would be at least 30 separately owned broadcast stations
after the proposed combination.
As noted in Item 1 of Part I of this Form 10-K (under the caption "The CBS
Television Stations Division"), CBS, on September 23, 1994, entered into an
Asset Purchase Agreement to acquire WGPR-TV, Detroit, Michigan from WGPR Inc.
("WGPR"). On October 27, 1994, CBS and WGPR filed an application with the FCC
for consent to the assignment of the broadcast license for the station to CBS.
Petitions to deny that application were separately filed on December 22, 1994 by
Spectrum Detroit Inc. ("Spectrum"), a Michigan corporation, and Alexander
Serafyn, a resident of the Detroit area. The Spectrum petition alleged that
registrant had assumed premature control of the station in violation of the
Communications Act by virtue of a local marketing agreement with the then-
licensee of WGPR-TV pursuant to which registrant was at that time programming
the station. The Serafyn
- 13 -
<PAGE> 14
petition was based on claims of intentional news distortion in a segment of the
CBS News broadcast 60 MINUTES concerning anti-Semitism in the Republic of the
Ukraine. On January 17, 1995, registrant filed a consolidated opposition to the
petitions. On July 27, 1995, the FCC approved the assignment of the broadcast
license for WGPR-TV to registrant. Both Spectrum and Serafyn have appealed the
FCC's decision to the United States Court of Appeals for the District of
Columbia Circuit (the "D.C. Circuit"). In addition, Oleg Nikolyszyn, who opposed
FCC approval of registrant's acquisition of WPRI-TV, Providence, Rhode Island
(see paragraph below), filed an appeal of the FCC decision regarding WGPR-TV
with the D.C. Circuit. Registrant has intervened in these appeals, which have
been consolidated by the Court. On September 20, 1995, registrant's acquisition
of WGPR-TV (now WWJ-TV) was consummated.
As also noted in Item 1 of Part I of this Form 10-K (under the caption "The CBS
Television Stations Division"), CBS, on March 1, 1995, entered an Asset Purchase
Agreement to acquire WPRI-TV, Providence, Rhode Island from Narragansett
Television L.P. An application for consent to the assignment of the broadcast
license for the station to registrant was filed with the FCC on March 16, 1995.
On April 26, 1995, Oleg Nikolyszyn, a resident of the Providence area, filed a
petition to deny that application, to which registrant filed an opposition. The
petition was based on claims of intentional news distortion in a segment of the
CBS News broadcast 60 MINUTES concerning anti-Semitism in the Republic of the
Ukraine, and also argued that action on the application should be delayed
pending the resolution of certain issues raised in petitions to deny
registrant's application to acquire WGPR-TV, Detroit (see paragraph above). On
June 22, 1995, the FCC staff approved the assignment of the broadcast license
for WPRI-TV to registrant, subject to whatever action, if any, the FCC might
deem appropriate in light of its consideration of the issues raised in the WGPR
proceeding. On June 29, 1995, Nikolyszyn filed with the FCC staff a petition for
reconsideration and motion for stay, to which registrant filed an opposition on
July 6, 1995. Subsequently, in granting the WGPR-TV assignment application
described in the paragraph above, the FCC removed the condition which it had
previously placed on its grant of the WPRI-TV assignment application.
Registrant's acquisition of WPRI-TV was consummated on September 10, 1995.
EMPLOYEES
As of December 31, 1994, CBS had approximately 6,400 full-time employees."
PART III
4. Item 10. Item 10 of Part III of the Report is amended and restated in its
entirety to read as follows.
- 14 -
<PAGE> 15
"Item 10. Directors and Executive Officers of the Registrant.
Incorporated herein by this reference and made a part of this Item 10 are the
materials included in CBS's Proxy Statement" under the captions "Information
Concerning Nominees for Directors", "Additional Information in Respect of the
Board of Directors and its Committees", "Non-Employee Directors' Compensation
and Benefits" and "Compliance with Section 16(a) of the Securities Exchange Act
of 1934". Definitive copies of the 1995 Proxy Statement were filed with the
Commission on or about April 7, 1995.
See also, "Executive Officers of the Registrant", included in Item 1 hereof
pursuant to Instruction 3 to Item 401(b) of Regulation S-K."
MANAGEMENT'S FINANCIAL COMMENTARY
5. The first paragraph under the heading "Management's Financial Commentary"
(which commenced on page 18) is amended by adding after the last sentence in
such paragraph the following new sentence.
"Net income in 1994 declined from 1993 due mainly to a legal settlement with
Viacom, as noted above, an insurance settlement for hurricane damage to the
Company's television station in Miami, higher gains from the sale of marketable
securities and higher tax benefits - all of which benefited earnings in 1993."
6. The fourth paragraph under the sub-heading "Capital Structure and Total
Assets" (page 23) is amended by adding the following three sentences to the
beginning of such paragraph thereof.
"As of December 31, 1994, the Company had commitments to acquire program rights
of $497.3 million and $547.4 million in 1995 and 1996, respectively (note 11).
The Company anticipates funding these amounts from internally generated cash
flows. The Company anticipates investing approximately $60.0 million in 1995 in
the jointly-held entities with Group W (note 2)."
7. The fourth paragraph under the sub-heading "Capital Structure and Total
Assets" (page 23) is amended by adding after the last sentence in such paragraph
the following two new sentences.
"As part of the $500.0 million revolving credit agreement, as of December 31,
1994, the Company had borrowed $150.7 million of short-term debt (note 8) for
working capital and other corporate purposes. The remaining $349.3 million of
credit was available to the Company at an interest rate of LIBOR plus 17 basis
points, in the range of approximately 6.2 percent to 7.5 percent."
- 15 -
<PAGE> 16
8. Under the sub-heading "Income from Continuing Operations and Net Income"
(page 19), the present paragraphs two through seven become paragraphs four
through nine, respectively, and two new paragraphs (numbers two and three) are
inserted between the first and the new fourth paragraph. The text of such new
paragraphs reads in its entirety as follows.
"The Company's cost of sales as a percentage of net sales remained essentially
flat in 1994 compared with 1993, because the increase in costs related to the
broadcast of the Olympic Winter Games in 1994 was offset by the absence of Major
League Baseball and National Football League games broadcast in 1993. The cost
of sales in 1992 includes the costs to broadcast the Olympic Winter Games and
Super Bowl. The costs in 1991 and 1990 were adversely effected by the pretax
provision of $322.0 million and $282.0 million, respectively, for losses on the
Company's Major League Baseball and National Football League television
contracts. The increases in selling, general and administrative expenses in
1994, 1993 and 1992 were due primarily to higher advertising and promotional
expenses."
"Other income, net, in 1993 included a pretax gain of $29.5 million from a legal
settlement with Viacom and a pretax gain of $12.4 million from insurance
settlements for hurricane damage to the Company's television station in Miami."
9. The fifth paragraph under the sub-heading "Cash Flows from Investing
Activities" (page 22) is amended by adding the following new sentence.
"The gain on sale of marketable securities was included in Interest Income on
Investments, net, in the Consolidated Statements of Income and in note 5."
By reason of the foregoing Amendments 5, 6, 7, 8, and 9, the text and related
financial tables under the heading "Management's Financial Commentary" are
restated to read in their entirety as follows.
"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. Net income in 1994 declined from 1993 due mainly to a legal settlement
with Viacom, as noted above, an insurance settlement for hurricane damage to the
Company's television station in Miami, higher gains from the sale of
- 16 -
<PAGE> 17
marketable securities and higher tax benefits - all of 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.
- 17 -
<PAGE> 18
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.
The Company's cost of sales as a percentage of net sales remained essentially
flat in 1994 compared with 1993, because the increase in costs related to the
broadcast of the Olympic Winter Games in 1994 was offset by the absence of Major
League Baseball and National Football League games broadcast in 1993. The cost
of sales in 1992 includes the costs to broadcast the Olympic Winter Games and
Super Bowl. The costs in 1991 and 1990 were adversely effected by the pretax
provision of $322.0 million and $282.0 million, respectively, for losses on the
Company's Major League Baseball and National Football League television
contracts. The increases in selling, general and administrative expenses in
1994, 1993 and 1992 were due primarily to higher advertising and promotional
expenses.
Other income, net, in 1993 included a pretax gain of $29.5 million from a legal
settlement with Viacom and a pretax gain of $12.4 million from insurance
settlements for hurricane damage to the Company's television station in Miami.
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
- 18 (Page 1 of 3) -
<PAGE> 19
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.
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.
- 18 (Page 2 of 3) -
<PAGE> 20
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------
(In millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
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
</TABLE>
- 18 (Page 3 of 3) -
<PAGE> 21
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.
- 19 (Page 1 of 2) -
<PAGE> 22
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C> <C>
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
</TABLE>
- ---------------
* 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.
- 19 (Page 2 of 2) -
<PAGE> 23
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
- 20 (Page 1 of 3) -
<PAGE> 24
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.
- 20 (Page 2 of 3) -
<PAGE> 25
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------------------
1994 1993 1992 1991 1990
---------------------------------------------------
(In millions)
<S> <C> <C> <C> <C> <C>
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)
</TABLE>
* Excludes gain on sale of marketable securities, which was included in cash
flows from investing activities.
- 20 (Page 3 of 3) -
<PAGE> 26
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. The gain on sale of marketable securities was included
in Interest Income on Investments, net, in the Consolidated Statements of Income
and in note 5.
- 21 (Page 1 of 4) -
<PAGE> 27
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------------------
1994 1993 1992 1991 1990
-------------------------------------------------
(In millions)
<S> <C> <C> <C> <C> <C>
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
</TABLE>
- -----------
* 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.
- 21 (Page 2 of 4) -
<PAGE> 28
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.
- 21 (Page 3 of 4) -
<PAGE> 29
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------------
1994 1993 1992 1991 1990
------------------------------------------------
(In millions)
<S> <C> <C> <C> <C> <C>
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)
</TABLE>
- ---------------
* 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.
- 21 (Page 4 of 4) -
<PAGE> 30
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.
- 22 (Page 1 of 4) -
<PAGE> 31
<TABLE>
<CAPTION>
December 31
------------------------------------------------------
1994 1993 1992 1991 1990
------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C> <C>
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
</TABLE>
- ---------------
* 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).
- 22 (Page 2 of 4) -
<PAGE> 32
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.
As of December 31, 1994, the Company had commitments to acquire program rights
of $497.3 million and $547.4 million in 1995 and 1996, respectively (note 11).
The Company anticipates funding these amounts from internally generated cash
flows. The Company anticipates investing approximately $60.0 million in 1995 in
the jointly-held entities with Group W (note 2). 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. As part of the
$500.0 million revolving credit agreement, as of December 31, 1994, the Company
had borrowed $150.7 million of short-term debt (note 8) for working capital and
other corporate purposes. The remaining $349.3 million of credit was available
to the Company at an interest rate of LIBOR plus 17 basis points, in the range
of approximately 6.2 percent to 7.5 percent.
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.
- 22 (Page 3 of 4) -
<PAGE> 33
<TABLE>
<CAPTION>
December 31
------------------------------------------------------
1994 1993 1992 1991 1990
------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C> <C>
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"
</TABLE>
- 22 (Page 4 of 4) -
<PAGE> 34
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
CBS INC.
------------------------------------
(Registrant)
Dated: October 12, 1995 By /s/ Peter W. Keegan
-------------------------------------
Executive Vice President and
Chief Financial Officer
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