SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number 1-9553
VIACOM INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-2949533
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
1515 Broadway, New York, New York 10036
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 258-6000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|.
Number of shares of Common Stock Outstanding at April 30, 1997:
Class A Common Stock, par value $.01 per share - 69,478,573
Class B Common Stock, par value $.01 per share - 283,095,257
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
VIACOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
1997 1996
--------- ---------
<S> <C> <C>
Revenues .............................................................. $ 2,917.7 $ 2,623.4
Expenses:
Operating ....................................................... 1,967.7 1,642.1
Selling, general and administrative ............................. 558.0 533.1
Depreciation and amortization ................................... 218.2 192.5
--------- ---------
Total expenses ............................................ 2,743.9 2,367.7
--------- ---------
Operating income ..................................................... 173.8 255.7
Other income (expense):
Interest expense, net ........................................... (196.8) (202.1)
Other items, net ................................................ .3 (.5)
--------- ---------
Earnings (loss) from continuing operations before income taxes ....... (22.7) 53.1
Benefit (provision) for income taxes ............................ 14.0 (34.6)
Equity in earnings (loss) of affiliated companies, net of tax ... (15.2) 1.3
Minority interest ............................................... .1 (.4)
--------- ---------
Earnings (loss) from continuing operations ........................... (23.8) 19.4
Earnings from discontinued operations, net of tax (Note 2) ...... 5.1 8.4
--------- ---------
Net earnings (loss) .................................................. (18.7) 27.8
Cumulative convertible preferred stock dividend requirement ..... (15.0) (15.0)
--------- ---------
Net earnings (loss) attributable to common stock ..................... $ (33.7) $ 12.8
========= =========
Weighted average number of common shares and common share equivalents:
Primary ......................................................... 352.5 374.7
Fully diluted ................................................... 352.5 375.0
Primary and fully diluted earnings (loss) per common share:
Earnings (loss) from continuing operations ...................... $ (.11) $ .01
Net earnings (loss) ............................................. $ (.10) $ .03
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
VIACOM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ..................................... $ 261.0 $ 209.0
Receivables, less allowances of $103.6 (1997) and $101.3 (1996) 1,984.0 2,153.1
Inventory (Note 4) ............................................ 2,454.8 2,342.4
Other current assets .......................................... 905.0 723.8
Net assets of discontinued operations (Note 2) ................ 276.5 289.4
--------- ---------
Total current assets ................................... 5,881.3 5,717.7
--------- ---------
Property and equipment, at cost ................................... 4,039.0 3,889.7
Less accumulated depreciation ................................. 873.2 733.9
--------- ---------
Net property and equipment ............................. 3,165.8 3,155.8
--------- ---------
Inventory (Note 4) ................................................ 2,596.0 2,619.4
Intangibles, at amortized cost .................................... 14,786.9 14,894.2
Other assets ...................................................... 2,649.1 2,446.9
--------- ---------
$29,079.1 $28,834.0
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable .............................................. $ 619.0 $ 808.8
Accrued compensation .......................................... 280.5 425.7
Participants' share, residuals and royalties payable .......... 837.5 856.6
Current portion of long-term debt ............................. 64.8 62.6
Accrued expenses and other .................................... 1,926.3 2,115.0
--------- ---------
Total current liabilities .............................. 3,728.1 4,268.7
--------- ---------
Long-term debt .................................................... 10,753.2 9,855.7
Other liabilities ................................................. 2,047.4 2,115.2
Commitments and contingencies (Note 6)
Shareholders' Equity:
Convertible Preferred Stock, par value $.01 per share; 200.0
shares authorized; 24.0 shares issued and outstanding ..... 1,200.0 1,200.0
Class A Common Stock, par value $.01 per share;
200.0 shares authorized; 69.5 (1997) and 69.4 (1996)
shares issued and outstanding ............................. .7 .7
Class B Common Stock, par value $.01 per share;
1,000.0 shares authorized; 283.3 (1997) and 282.6 (1996)
shares issued and outstanding ............................. 2.9 2.9
Additional paid-in capital .................................... 10,260.8 10,242.1
Retained earnings ............................................. 1,327.4 1,361.0
Cumulative translation adjustment ............................. (17.8) 11.3
--------- ---------
12,774.0 12,818.0
Less treasury stock, at cost; 6.3 shares ...................... 223.6 223.6
--------- ---------
Total shareholders' equity ............................. 12,550.4 12,594.4
--------- ---------
$29,079.1 $28,834.0
========= =========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
VIACOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Net cash from operating activities:
Net earnings (loss) .................................................................... $ (18.7) $ 27.8
Adjustments to reconcile net earnings (loss) to net cash flow from operating activities:
Depreciation and amortization ...................................................... 218.2 220.0
Distribution from affiliated companies ............................................. 1.7 12.7
Change in operating assets and liabilities:
(Increase) decrease in receivables .......................................... 166.1 (16.3)
Increase in inventory and related programming liabilities, net .............. (193.1) (160.9)
Increase in pre-publication costs, net ...................................... (16.8) (19.3)
Increase in prepaid expenses and other current assets ....................... (180.8) (76.7)
(Increase) decrease in unbilled receivables ................................. 8.6 (55.8)
Decrease in accounts payable and accrued expenses ........................... (369.6) (515.7)
Increase in income taxes payable and deferred income taxes, net ............. -- 9.8
Decrease in deferred income ................................................. (87.7) (29.9)
Other, net .................................................................. (20.7) 63.7
------- -------
Net cash flow from operating activities ................................................ (492.8) (540.6)
------- -------
Investing Activities:
Capital expenditures ............................................................... (129.9) (148.0)
Investment in United Paramount Network ............................................. (186.9) --
Acquisitions, net of cash acquired ................................................. (19.6) (52.0)
Investments in and advances to affiliated companies ................................ (13.7) (47.6)
Proceeds from sales of short-term investments ...................................... 10.5 31.7
Purchases of short-term investments ................................................ (11.0) (37.4)
Other, net ......................................................................... 12.6 (9.1)
------- -------
Net cash flow from investing activities ................................................ (338.0) (262.4)
------- -------
Financing Activities:
Short-term borrowings from banks, net .............................................. 911.9 707.5
Proceeds from exercise of stock options and warrants ............................... 19.3 57.3
Repayment of other notes ........................................................... -- (50.8)
Payment of capital lease obligations ............................................... (17.7) (11.6)
Payment of Preferred Stock dividends ............................................... (15.0) (15.0)
Other, net ......................................................................... (15.7) 2.3
------- -------
Net cash flow from financing activities ................................................ 882.8 689.7
------- -------
Net increase (decrease) in cash and cash equivalents ............................... 52.0 (113.3)
Cash and cash equivalents at beginning of the period ............................... 209.0 464.1
------- -------
Cash and cash equivalents at end of period ............................................. $ 261.0 $ 350.8
======= =======
Supplemental cash flow information:
Cash payments for interest, net of amounts capitalized ............................. $ 283.3 $ 236.5
Cash payments for income taxes ..................................................... 17.5 23.1
Non cash investing and financing:
Property and equipment acquired under capitalized leases ........................... 7.2 44.9
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
1) BASIS OF PRESENTATION
Viacom Inc. (the "Company") is a diversified entertainment and publishing
company with operations in four segments: (i) Networks and Broadcasting, (ii)
Entertainment, (iii) Video and Music/Theme Parks and (iv) Publishing. In
accordance with Accounting Principles Board Opinion ("APB") 30 "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions", the Company has presented the following lines of businesses as
discontinued operations: Viacom Radio Stations, which the Company has agreed to
sell to Evergreen Media Corporation for $1.075 billion in cash during the summer
of 1997; its interactive game operations including Virgin Interactive
Entertainment Limited ("Virgin"), a unit of Spelling Entertainment Group Inc.
("Spelling"), for which the Company has adopted a plan of disposal by the end of
1997; and Viacom Cable, which was split-off from the Company on July 31, 1996.
(See Note 2).
The accompanying unaudited consolidated financial statements of the Company have
been prepared pursuant to the rules of the Securities and Exchange Commission.
These financial statements should be read in conjunction with the more detailed
financial statements and notes thereto included in the Company's most recent
annual report on Form 10-K. The Statement of Operations for the first quarter of
1996 has been reclassified to conform with the current year discontinued
operations presentation.
In the opinion of management, the accompanying financial statements reflect all
adjustments, consisting of only normal and recurring adjustments, necessary for
a fair presentation of the financial position and results of operations and cash
flows of the Company for the periods presented. Certain previously reported
amounts have been reclassified to conform with the current presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Net earnings per common share -- Primary net earnings per common share is
calculated based on the weighted average number of common shares outstanding
during each period, and, if dilutive, the effects of common shares potentially
issuable in connection with stock options and warrants. For each of the periods
presented, the effect of the assumed conversion of the Preferred Stock is
antidilutive and, therefore, is not reflected in fully diluted net earnings per
common share.
During February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards 128, "Earnings per Share," which is effective
for financial statements for both interim and annual periods ending after
December 15, 1997. The Company does not expect this statement to have a material
impact on its earnings per share.
-5-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
2) DISPOSITIONS
On February 19, 1997, the Board of Directors of Spelling, a majority owned
subsidiary of the Company, approved a formal plan to sell Virgin through a
public offering. On the same date, the Company adopted a plan to dispose of its
interactive game businesses, including Viacom New Media which is operated by
Virgin under a services agreement entered into during September 1996. The
disposition is expected to be completed by the end of 1997. Accordingly, such
interactive game operations have been accounted for as discontinued operations
and for the year ended December 31, 1996, the Company recorded a loss on the
disposal of $159.3 million, which included estimated losses through the expected
date of disposition of $58.0 million. For the first quarter of 1997, revenues
and net operating losses of the interactive game businesses were $46.6 million
and $12.6 million, respectively, and the losses were provided for in the
estimated loss on disposal as of December 31, 1996.
On February 16, 1997, the Company entered into an agreement to sell the Viacom
Radio Stations to Evergreen Media Corporation for $1.075 billion in cash. The
transaction is expected to result in a gain and be completed during the summer
of 1997, and accordingly, the operating results of the Viacom Radio Stations are
reflected as earnings from discontinued operations, net of tax for the three
months ended March 31, 1997.
On July 31, 1996, the Company completed the split-off of its Cable segment
pursuant to an exchange offer and related transactions. As a result, the Company
realized a gain of $1.317 billion, reduced its debt and retired approximately
4.1% of the total outstanding common shares. National Amusements, Inc. ("NAI"),
which owns approximately 28% of Viacom Inc. Class A and Class B Common Stock on
a combined basis, did not participate in the exchange offer.
Summarized financial data of discontinued operations are as follows:
Results of discontinued operations:
Interactive Radio Cable Total
----------- ----- ----- -----
For the three months ended March 31, 1997
Revenues ................................... $ -- $ 25.1 $ -- $ 25.1
Earnings from operations before income
taxes ................................... -- 9.0 -- 9.0
Provision for income taxes ................. -- (3.9) -- (3.9)
Net earnings ............................... -- 5.1 -- 5.1
For the three months ended March 31, 1996
Revenues ................................... $ 39.1 $ 24.2 $116.8 $180.1
Earnings (loss) from operations before
income taxes ............................ (13.7) 4.7 23.9 14.9
Benefit (provision) for income taxes ....... 8.2 (2.8) (12.9) (7.5)
Net earnings (loss) ........................ (4.0) 1.9 10.5 8.4
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<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Financial position (1): At March 31, 1997 At December 31, 1996
----------------- --------------------
<S> <C> <C>
Current assets ............................................ $130.4 $ 217.8
Net property and equipment ................................ 30.2 30.6
Other assets .............................................. 406.1 526.3
Total liabilities ......................................... (290.2) (485.3)
------ -------
Net assets of discontinued operations ..................... $276.5 $ 289.4
====== =======
</TABLE>
(1) Financial position data reflects Radio and Interactive at March 31,
1997 and at December 31, 1996.
3) RESTRUCTURING CHARGE
In 1996, following a strategic analysis, Blockbuster adopted a plan to abandon
certain Music stores, relocate its headquarters and eliminate third party
distributors domestically. As a result of such plan, Blockbuster recognized
during the fourth quarter of 1996 a restructuring charge of approximately $88.9
million principally reflecting costs associated with the closing of
approximately 10% or 50 of its Music retail stores and costs associated with
relocating Blockbuster's headquarters from Fort Lauderdale to Dallas. As a
result of the Music store closings, Blockbuster recognized lease termination
costs of $28.3 million and accrued shut-down and other costs of $14.6 million as
part of the restructuring charge. Through March 31, 1997, the Company paid and
charged approximately $3.0 million against these liabilities. The Company
expects to substantially complete the activities related to the Music store
closings by the end of 1998.
In the fourth quarter of 1996, Blockbuster recognized $25 million of estimated
severance benefits payable to approximately 650 of its Fort Lauderdale
headquarters employees who have chosen not to relocate. Blockbuster, through the
restructuring charge, also recognized $21.0 million of other costs of exiting
Fort Lauderdale and eliminating third party distributors. Through March 31,
1997, the Company paid and charged against the severance liability approximately
$1.9 million.
The Blockbuster headquarters relocation to Dallas is expected to be completed in
the second quarter of 1997. The Company expects to complete construction of the
distribution center by the end of 1997.
-7-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
4) INVENTORIES
March 31, 1997 December 31, 1996
-------------- -----------------
Prerecorded music and videocassettes ......... $ 695.1 $ 564.2
Videocassette rental inventory ............... 652.5 668.2
Publishing:
Finished goods ......................... 326.8 298.4
Work in process ........................ 40.3 33.9
Material and supplies .................. 13.5 14.5
Other ........................................ 17.3 12.3
-------- --------
1,745.5 1,591.5
Less current portion ................... 1,093.1 923.3
-------- --------
$ 652.4 $ 668.2
======== ========
Theatrical and television inventory:
Theatrical and television productions:
Released .......................... $1,773.2 $1,811.3
Completed, not released ........... 54.1 32.6
In process and other .............. 343.7 352.6
Program rights ......................... 1,134.3 1,173.8
-------- --------
3,305.3 3,370.3
Less current portion ................... 1,361.7 1,419.1
-------- --------
$1,943.6 $1,951.2
======== ========
Total non-current inventory .................. $2,596.0 $2,619.4
======== ========
5) LONG-TERM DEBT
Effective March 26, 1997, the Company and Viacom International entered into
amended and restated credit agreements of $6.4 billion (the "Viacom Credit
Agreement") and $100 million (the "Viacom International Credit Agreement,"
together with the Viacom Credit Agreement, collectively the "Credit
Agreements").
As of March 31, 1997, the Company's scheduled maturities of indebtedness through
December 31, 2001, assuming full utilization of the Credit Agreements are $85.0
million (1997), $1.1 billion (1998), $1.2 billion (1999), $1.7 billion (2000)
and $2.1 billion (2001). The Company has classified certain short-term
indebtedness as long-term debt based upon its intent and ability to refinance
such indebtedness on a long-term basis.
On May 9, 1997, a subsidiary of the Company amended the 364-day film financing
credit agreement, guaranteed by Viacom International Inc. and the Company, which
extended the expiration date for one year, reduced pricing and decreased the
amount to $470 million.
-8-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
6) COMMITMENTS AND CONTINGENCIES
The commitments of the Company for program license fees which are not reflected
in the balance sheet as of March 31, 1997 estimated to aggregate approximately
$1.9 billion, principally reflect commitments of approximately $1.7 billion
under Showtime Networks Inc.'s ("SNI's") exclusive arrangements with several
motion picture companies. This estimate is based upon a number of factors. A
majority of such fees are payable over several years, as part of normal
programming expenditures of SNI. These commitments are contingent upon delivery
of motion pictures, which are not yet available for premium television
exhibition and, in many cases, have not yet been produced.
7) PROVISION FOR INCOME TAXES
The provision for income taxes represents federal, state and foreign income
taxes on earnings before income taxes. The estimated annual effective tax rates
of 61.5% for 1997 and 65.3% for 1996 were both adversely affected by
amortization of intangibles in excess of the amounts deductible for tax
purposes.
8) TREASURY STOCK
On September 5, 1996 the Company, together with NAI, initiated a joint purchase
program for each to acquire up to $250 million, or $500 million in total, of the
Company's Class A Common Stock, Class B Common Stock, and, as to the Company,
Viacom Warrants. As of March 31, 1997, the Company repurchased 658,200 shares of
Class A Common Stock, 5,594,600 shares of Class B Common Stock and 6,824,590
Viacom Five-Year Warrants, expiring on July 7, 1999, for approximately $244.1
million in the aggregate. The cost of the acquired treasury stock has been
reflected separately as a reduction to shareholders' equity. The cost of the
warrants has been reflected as a reduction to additional paid-in-capital. As of
March 31, 1997, NAI has separately acquired 1,282,200 shares of Class A Common
Stock and 5,602,000 shares of Class B Common Stock pursuant to the joint
purchase program for approximately $249.6 million, raising its ownership to
approximately 67% of Class A Common Stock and approximately 28% of Class A and
Class B Common Stock on a combined basis.
At March 31, 1997 and December 31, 1996, respectively, there were 30,584,062 and
30,576,562 outstanding Viacom Three-Year Warrants, expiring July 7, 1997 and
there were 11,519,616 and 12,889,316 outstanding Viacom Five-Year Warrants,
expiring July 7, 1999. The decrease in the outstanding Viacom Five-Year Warrants
is attributable to the stock repurchase program.
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<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
9) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Viacom International is a wholly owned subsidiary of the Company. The Company
has fully and unconditionally guaranteed Viacom International debt securities.
The Company has determined that separate financial statements and other
disclosures concerning Viacom International are not material to investors. The
following condensed consolidating financial statements present the results of
operations, financial position and cash flows of the Company, Viacom
International (in each case, carrying investments in Non-Guarantor Affiliates
under the equity method), the direct and indirect Non-Guarantor Affiliates of
the Company, and the eliminations necessary to arrive at the information for the
Company on a consolidated basis.
<TABLE>
<CAPTION>
Three Months Ended March 31, 1997
------------------------------------------------------------------------
Non- Viacom
Viacom Viacom Guarantor Inc.
Inc. International Affiliates Eliminations Consolidated
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues .................................. $ -- $ 291.2 $ 2,631.5 $ (5.0) $ 2,917.7
Expenses:
Operating ............................. -- 99.7 1,873.0 (5.0) 1,967.7
Selling, general and administrative ... .2 107.9 449.9 -- 558.0
Depreciation and amortization ......... -- 15.5 202.7 -- 218.2
------------ ------------ ------------ ------------ ------------
Total expenses ..................... .2 223.1 2,525.6 (5.0) 2,743.9
------------ ------------ ------------ ------------ ------------
Operating income .......................... (.2) 68.1 105.9 -- 173.8
Other income (expense):
Interest expense, net ................. (160.3) (17.3) (19.2) -- (196.8)
Other items, net ...................... -- (.6) .9 -- .3
------------ ------------ ------------ ------------ ------------
Earnings (loss) from continuing operations
before income taxes ................... (160.5) 50.2 87.6 -- (22.7)
Benefit (provision) for income taxes .. 61.0 (21.0) (26.0) -- 14.0
Equity in earnings (loss) of affiliated
companies, net of tax ............... 80.5 50.6 (5.2) (141.1) (15.2)
Minority interest ..................... -- (.3) .4 -- .1
------------ ------------ ------------ ------------ ------------
Earnings (loss) from continuing operations (19.0) 79.5 56.8 (141.1) (23.8)
Earnings from discontinued operations,
net of tax .......................... .3 1.1 3.7 -- 5.1
------------ ------------ ------------ ------------ ------------
Net Earnings (loss) ....................... (18.7) 80.6 60.5 (141.1) (18.7)
Cumulative convertible preferred
stock dividend requirement .......... (15.0) -- -- -- (15.0)
------------ ------------ ------------ ------------ ------------
Net earnings (loss) attributable to
common stock .......................... $ (33.7) $ 80.6 $ 60.5 $ (141.1) $ (33.7)
============ ============ ============ ============ ============
</TABLE>
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<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996
------------------------------------------------------------------------
Non- Viacom
Viacom Viacom Guarantor Inc.
Inc. International Affiliates Eliminations Consolidated
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ................................. $ -- $ 245.8 $ 2,380.4 $ (2.8) $ 2,623.4
Expenses:
Operating ............................ -- 85.3 1,559.6 (2.8) 1,642.1
Selling, general and administrative .. (.8) 111.6 422.3 -- 533.1
Depreciation and amortization ........ -- 12.8 179.7 -- 192.5
------------ ------------ ------------ ------------ ------------
Total expenses .................. (.8) 209.7 2,161.6 (2.8) 2,367.7
------------ ------------ ------------ ------------ ------------
Operating income ......................... .8 36.1 218.8 -- 255.7
Other income (expense):
Interest expense, net ................ (157.0) (30.5) (14.6) -- (202.1)
Other items, net ..................... -- (.1) (.4) -- (.5)
------------ ------------ ------------ ------------ ------------
Earnings (loss) from continuing operations
before income taxes .................. (156.2) 5.5 203.8 -- 53.1
Benefit (provision) for income taxes . 64.0 (2.5) (96.1) -- (34.6)
Equity in earnings of affiliated
companies, net of tax .............. 119.6 22.9 5.7 (146.9) 1.3
Minority interest .................... -- (.3) (.1) -- (.4)
------------ ------------ ------------ ------------ ------------
Earnings from continuing operations ...... 27.4 25.6 113.3 (146.9) 19.4
Earnings (loss) from discontinued
operations, net of tax ............. .4 (1.5) 9.5 -- 8.4
------------ ------------ ------------ ------------ ------------
Net earnings ............................. 27.8 24.1 122.8 (146.9) 27.8
Cumulative convertible preferred
stock dividend requirement ......... (15.0) -- -- -- (15.0)
------------ ------------ ------------ ------------ ------------
Net earnings attributable to common stock $ 12.8 $ 24.1 $ 122.8 $ (146.9) $ 12.8
============ ============ ============ ============ ============
</TABLE>
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<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
March 31, 1997
------------------------------------------------------------------------
Non- Viacom
Viacom Viacom Guarantor Inc.
Inc. International Affiliates Elimination Consolidated
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ........ $ 34.1 $ 76.3 $ 142.8 $ 7.8 $ 261.0
Receivables, net ................. -- 242.6 1,775.0 (33.6) 1,984.0
Inventory ........................ -- 147.4 2,307.4 -- 2,454.8
Other current assets ............. -- 103.8 721.7 79.5 905.0
Net assets of discontinued
operations .................... 47.5 47.0 182.0 -- 276.5
------------ ------------ ------------ ------------ ------------
Total current assets .......... 81.6 617.1 5,128.9 53.7 5,881.3
Property and equipment ................. -- 477.0 3,562.0 -- 4,039.0
Less accumulated depreciation .... -- 106.3 766.9 -- 873.2
------------ ------------ ------------ ------------ ------------
Net property and equipment ..... -- 370.7 2,795.1 -- 3,165.8
Inventory .............................. -- 228.4 2,367.6 -- 2,596.0
Intangibles, at amortized cost ......... -- 544.3 14,242.6 -- 14,786.9
Investments in consolidated subsidiaries 7,639.6 10,412.7 (48.0) (18,004.3) --
Other assets ........................... 76.7 285.4 2,439.7 (152.7) 2,649.1
------------ ------------ ------------ ------------ ------------
$ 7,797.9 $ 12,458.6 $ 26,925.9 $ (18,103.3) $ 29,079.1
============ ============ ============ ============ ============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable .................. $ -- $ 19.1 $ 615.5 $ (15.6) $ 619.0
Accrued compensation .............. -- 58.3 235.1 (12.9) 280.5
Participants' share, residuals and
royalties payable ............. -- -- 837.5 -- 837.5
Current portion of long-term debt . -- 8.4 56.4 -- 64.8
Accrued expenses and other ........ 157.2 1,259.7 984.7 (475.3) 1,926.3
------------ ------------ ------------ ------------ ------------
Total current liabilities ....... 157.2 1,345.5 2,729.2 (503.8) 3,728.1
------------ ------------ ------------ ------------ ------------
Long-term debt ......................... 7,729.9 2,158.6 964.7 (100.0) 10,753.2
Other liabilities ...................... (13,267.5) (4,277.9) 22,279.1 (2,686.3) 2,047.4
Shareholders' equity:
Convertible Preferred Stock ....... 1,200.0 -- -- -- 1,200.0
Common Stock ...................... 3.6 231.5 770.0 (1,001.5) 3.6
Additional paid-in capital ........ 10,260.8 8,947.5 1,046.1 (9,993.6) 10,260.8
Retained earnings ................. 1,937.5 4,020.5 (812.5) (3,818.1) 1,327.4
Cumulative translation adjustment . -- 32.9 (50.7) -- (17.8)
------------ ------------ ------------ ------------ ------------
13,401.9 13,232.4 952.9 (14,813.2) 12,774.0
Less treasury stock, at cost ...... 223.6 -- -- -- 223.6
------------ ------------ ------------ ------------ ------------
Total shareholders' equity 13,178.3 13,232.4 952.9 (14,813.2) 12,550.4
------------ ------------ ------------ ------------ ------------
$ 7,797.9 $ 12,458.6 $ 26,925.9 $ (18,103.3) $ 29,079.1
============ ============ ============ ============ ============
</TABLE>
-12-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------------------------------------
Non- Viacom
Viacom Viacom Guarantor Inc.
Inc. International Affiliates Elimination Consolidated
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ........ $ 19.0 $ 61.2 $ 128.8 $ -- $ 209.0
Receivables, net ................. -- 308.6 1,878.1 (33.6) 2,153.1
Inventory ........................ -- 135.5 2,206.9 -- 2,342.4
Other current assets ............. -- 117.2 580.3 26.3 723.8
Net assets of discontinued
operations .................... 47.3 41.3 200.8 -- 289.4
------------ ------------ ------------ ------------ ------------
Total current assets .......... 66.3 663.8 4,994.9 (7.3) 5,717.7
------------ ------------ ------------ ------------ ------------
Property and equipment ................. -- 458.1 3,431.6 -- 3,889.7
Less accumulated depreciation .... -- 96.6 637.3 -- 733.9
------------ ------------ ------------ ------------ ------------
Net property and equipment ..... -- 361.5 2,794.3 -- 3,155.8
------------ ------------ ------------ ------------ ------------
Inventory .............................. -- 233.8 2,385.6 -- 2,619.4
Intangibles, at amortized cost ......... -- 550.0 14,344.2 -- 14,894.2
Investments in consolidated subsidiaries 7,536.8 10,773.2 -- (18,310.0) --
Other assets ........................... 74.2 313.3 2,107.6 (48.2) 2,446.9
------------ ------------ ------------ ------------ ------------
$ 7,677.3 $ 12,895.6 $ 26,626.6 $ (18,365.5) $ 28,834.0
============ ============ ============ ============ ============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable .................. $ -- $ 40.3 $ 785.1 $ (16.6) $ 808.8
Accrued compensation .............. -- 118.8 308.4 (1.5) 425.7
Participants share, residuals and
royalties payable .............. -- -- 856.6 -- 856.6
Current portion of long-term debt . -- 7.3 55.3 -- 62.6
Accrued expenses and other ........ 282.2 1,227.3 1,174.3 (568.8) 2,115.0
------------ ------------ ------------ ------------ ------------
Total current liabilities ....... 282.2 1,393.7 3,179.7 (586.9) 4,268.7
------------ ------------ ------------ ------------ ------------
Long-term debt ......................... 6,844.0 2,159.0 952.7 (100.0) 9,855.7
Other liabilities ...................... (12,665.3) (3,711.5) 21,178.3 (2,686.3) 2,115.2
Shareholders' equity:
Convertible Preferred Stock ....... 1,200.0 -- -- -- 1,200.0
Common Stock ...................... 3.5 157.6 770.1 (927.6) 3.6
Additional paid-in capital ........ 10,226.9 8,944.0 1,056.7 (9,985.5) 10,242.1
Retained earnings ................. 2,009.6 3,917.5 (486.9) (4,079.2) 1,361.0
Cumulative translation adjustment . -- 35.3 (24.0) -- 11.3
------------ ------------ ------------ ------------ ------------
13,440.0 13,054.4 1,315.9 (14,992.3) 12,818.0
Less treasury stock, at cost ...... 223.6 -- -- -- 223.6
------------ ------------ ------------ ------------ ------------
Total shareholders' equity 13,216.4 13,054.4 1,315.9 (14,992.3) 12,594.4
------------ ------------ ------------ ------------ ------------
$ 7,677.3 $ 12,895.6 $ 26,626.6 $ (18,365.5) $ 28,834.0
============ ============ ============ ============ ============
</TABLE>
-13-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1997
-----------------------------------------------------------------------
Non- Viacom
Viacom Viacom Guarantor Inc.
Inc. International Affiliates Elimination Consolidated
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash flow from operating activities ....... $ (67.2) $ 127.3 $ (560.7) $ 7.8 $ (492.8)
------------ ------------ ------------ ------------ ------------
Investing Activities:
Capital expenditures ....................... -- (6.7) (123.2) -- (129.9)
Investment in United Paramount Network ..... -- -- (186.9) -- (186.9)
Acquisitions, net of cash acquired ......... -- -- (19.6) -- (19.6)
Investments in and advances to
affiliated companies .................... -- (8.2) (5.5) -- (13.7)
Proceeds from sale of short-term investments -- 10.5 -- -- 10.5
Payments for purchase of short-term
investments ............................. -- (11.0) -- -- (11.0)
Other, net ................................. -- -- 12.6 -- 12.6
------------ ------------ ------------ ------------ ------------
Net cash flow from investing activities ....... -- (15.4) (322.6) -- (338.0)
------------ ------------ ------------ ------------ ------------
Financing Activities:
Short-term borrowings from banks, net ...... 999.7 (118.2) 30.4 -- 911.9
Increase (decrease) in intercompany
payables ................................. (912.2) 21.4 890.8 -- --
Proceeds from exercise of stock options
and warrants ............................. 19.3 -- -- -- 19.3
Payment of capital lease obligations ....... -- -- (17.7) -- (17.7)
Payment of Preferred Stock dividends ....... (15.0) -- -- -- (15.0)
Other, net ................................. (9.5) -- (6.2) -- (15.7)
------------ ------------ ------------ ------------ ------------
Net cash flow from financing activities ....... 82.3 (96.8) 897.3 -- 882.8
------------ ------------ ------------ ------------ ------------
Net increase in cash and cash equivalents .. 15.1 15.1 14.0 7.8 52.0
Cash and cash equivalents at beginning
of period ................................ 19.0 61.2 128.8 -- 209.0
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period .... $ 34.1 $ 76.3 $ 142.8 $ 7.8 $ 261.0
============ ============ ============ ============ ============
</TABLE>
-14-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996
-----------------------------------------------------------------------
Non- Viacom
Viacom Viacom Guarantor Inc.
Inc. International Affiliates Elimination Consolidated
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash flow from operating activities ........ $ (8.8) $ (55.8) $ (476.0) $ -- $ (540.6)
------------ ------------ ------------ ------------ ------------
Investing Activities:
Capital expenditures ....................... -- (16.4) (131.6) -- (148.0)
Acquisitions, net of cash acquired ......... -- -- (52.0) -- (52.0)
Investments in and advances to
affiliated companies ..................... -- (28.4) (19.2) -- (47.6)
Proceeds from sale of short-term investments -- 31.7 -- -- 31.7
Payments for purchase of short-term
investments .............................. -- (37.4) -- -- (37.4)
Other, net ................................. -- (9.1) -- -- (9.1)
------------ ------------ ------------ ------------ ------------
Net cash flow from investing activities ........ -- (59.6) (202.8) -- (262.4)
------------ ------------ ------------ ------------ ------------
Financing Activities:
Short-term borrowings from (repayments)
to banks, net ............................ 680.0 -- 27.5 -- 707.5
Increase (decrease) in intercompany
payables ................................. (709.5) 72.6 636.9 -- --
Proceeds from exercise of stock options
and warrants ............................. 57.3 -- -- -- 57.3
Repayment of other notes ................... -- (12.0) (38.8) -- (50.8)
Payment of capital lease obligations ....... -- -- (11.6) -- (11.6)
Payment of Preferred Stock dividends ....... (15.0) -- -- -- (15.0)
Other, net ................................. 2.3 (.4) .4 -- 2.3
------------ ------------ ------------ ------------ ------------
Net cash flow from financing activities ........ 15.1 60.2 614.4 -- 689.7
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents ......................... 6.3 (55.2) (64.4) -- (113.3)
Cash and cash equivalents at beginning
of period ................................ 47.4 223.3 193.4 -- 464.1
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period ..... $ 53.7 $ 168.1 $ 129.0 $ -- $ 350.8
============ ============ ============ ============ ============
</TABLE>
-15-
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Management's discussion and analysis of the combined results of operations and
financial condition should be read in conjunction with the Consolidated
Financial Statements and related Notes.
The following tables set forth revenues and operating income by business
segment, for the three months ended March 31, 1997 and 1996. Results for each
period presented exclude contributions from Viacom Radio Stations, with its
expected sale to Evergreen Media Corporation to be completed during the summer
of 1997; the interactive game operations to be disposed of by the end of 1997;
and the Cable segment, which was split-off from the Company on July 31, 1996
(See Note 2 of Notes to Consolidated Financial Statements).
Three months ended Percent
March 31, B/(W)
------------------- -------
1997 1996
---- ----
(In millions)
Revenues:
Networks and Broadcasting .......... $ 576.8 $ 518.0 11%
Entertainment ...................... 1,000.9 880.8 14
Video and Music/Theme Parks ........ 973.2 846.8 15
Publishing ......................... 398.7 389.0 2
Eliminations ....................... (31.9) (11.2) (185)
-------- --------
Total ..................... $2,917.7 $2,623.4 11
======== ========
Operating income (loss): (a)
Networks and Broadcasting .......... $ 122.3 $ 109.0 12%
Entertainment ...................... 94.9 144.1 (34)
Video and Music/Theme Parks ........ 55.0 96.8 (43)
Publishing ......................... (57.8) (46.6) (24)
Corporate .......................... (40.6) (47.6) 15
-------- --------
Total ..................... $ 173.8 $ 255.7 (32)
======== ========
(a) Operating income (loss) is defined as net earnings (loss) before
discontinued operations, minority interest, equity in earnings (loss) of
affiliated companies (net of tax), provision for income taxes, other items
(net), and interest expense, net.
EBITDA
The following table sets forth EBITDA (defined as operating income (loss) before
depreciation and amortization) for the three months ended March 31, 1997 and
1996. EBITDA does not reflect the effect of significant amounts of amortization
of goodwill related to business combinations accounted for under the purchase
method.
-16-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
While many in the financial community consider EBITDA to be an important measure
of comparative operating performance, it should be considered in addition to,
but not as a substitute for or superior to operating income, net earnings, cash
flow and other measures of financial performance prepared in accordance with
generally accepted accounting principles.
Three months ended Percent
March 31, B/(W)
------------------ -------
1997 1996
---- ----
(In millions)
EBITDA:
Networks and Broadcasting ................ $160.0 $137.3 17%
Entertainment ............................ 127.2 175.6 (28)
Video and Music/Theme Parks .............. 160.3 189.3 (15)
Publishing ............................... (19.0) (9.1) (109)
Corporate ................................ (36.5) (44.9) 19
------ ------
Total ........................... $392.0 $448.2 (13)
====== ======
RESULTS OF OPERATIONS
Revenues increased 11% to $2.9 billion for the first quarter of 1997 from $2.6
billion for the first quarter of 1996. Revenue increases were driven primarily
by the Entertainment, Video and Music/Theme Parks, and Networks and Broadcasting
segments, which reported increased worldwide theatrical and television
programming revenues, continued expansion of Video stores and increased
advertising revenues. EBITDA decreased 13% to $392.0 million for the first
quarter of 1997 from $448.2 million for the first quarter of 1996. Operating
income decreased 32% to $173.8 million for the first quarter of 1997 from $255.7
million for the first quarter of 1996. Operating results comparisons reflect
$100 million of EBITDA in the first quarter of 1996 from programming licenses
related to Paramount's agreement with KirchGroup, which more than offset $29
million of EBITDA in the first quarter of 1997 from programming licenses with
Television Par Satellite. Operating results of the Video and Music/Theme Parks
segment were adversely impacted by weaker video product and increased rental
tape expense. The Networks and Broadcasting and Video and Music/Theme Parks
segments contributed 70% and 32%, respectively, of consolidated operating income
for 1997 versus 43% and 38%, respectively, for 1996.
Segment Results of Operations
Networks and Broadcasting (Basic Cable and Premium Subscription Television
Program Services, and Television Stations)
Three months ended Percent
March 31, B/(W)
------------------ -------
1997 1996
---- ----
(In millions)
Revenues $576.8 $518.0 11%
Operating Income $122.3 $109.0 12
EBITDA $160.0 $137.3 17
-17-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
The Networks and Broadcasting segment is comprised of MTV Networks ("MTVN"),
basic cable television program services; Showtime Networks Inc. ("SNI"), premium
subscription television program services and television stations.
For the first quarter of 1997, MTVN revenues of $304.7 million, EBITDA of $114.5
million and operating income of $98.5 million increased 15%, 23% and 24%,
respectively. The increase in MTVN's revenues principally reflects higher
advertising and affiliate revenues at each of the domestic networks. Advertising
revenues were driven by rate increases at Nickelodeon. MTVN's EBITDA and
operating income gains were driven by the increased revenues partially offset by
start-up costs of Nick at Nite's TV Land, Nick Latin America and M2, and higher
programming expenses.
SNI's revenues increased 7%, while EBITDA and operating income decreased 10% and
59%, respectively. The revenue increase was principally due to an increase of
approximately 1.3 million subscribers, reflecting the continued growth of direct
broadcasting satellite subscribers. SNI served a total of 16.4 million
subscribers at March 31, 1997. Operating results were impacted by higher
programming, operating and selling expenses over the same prior year period. The
increase in operating expenses reflects certain expenses associated with exiting
Showtime Satellite Networks' retail operation.
The television stations revenues increased 6%, EBITDA increased 11% and
operating income increased 17% primarily reflecting increased advertising
revenues and the change in mix to television stations in larger markets during
the prior year.
Entertainment (Motion Pictures and Television Programming, Movie Theaters and
Music Publishing)
Three months ended Percent
March 31, B/(W)
------------------ -------
1997 1996
---- ----
(In millions)
Revenues $1,000.9 $880.8 14%
Operating Income $ 94.9 $144.1 (34)
EBITDA $ 127.2 $175.6 (28)
The Entertainment segment is principally comprised of Paramount Pictures,
Paramount Television and Spelling Entertainment Group Inc. ("Spelling"). For the
first quarter of 1997, revenue contributions from Paramount Pictures' The First
Wives Club in the foreign theatrical and home video market, and the worldwide
theatrical performance of Private Parts and Star Trek: First Contact exceeded
the domestic theatrical performance of Paramount Pictures' Sabrina, Black Sheep
and Eye for an Eye in the first quarter of 1996. The quarter also benefited from
$29 million of income attributable to Paramount's long-term licensing agreement
with Television Par Satellite and affiliates as well as double digit increases
in television programming revenues from both Paramount and Spelling. Paramount's
Television programming revenues increased principally due to the addition of new
first run shows such as Viper and Real TV, as well as higher license fees and
increased volume of network production. Entertainment's 1996 operating results
reflect approximately $100.0 million of EBITDA and operating income attributable
to Paramount's Kirch Group licensing agreement. Spelling's revenues of $166.5
million increased 29% and EBITDA of $11.5 million increased 180%, principally
reflecting higher per episode network
-18-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
license fees for continuing series and increased hours of programming delivered
to the networks including Sunset Beach.
Video and Music/Theme Parks (Home Video and Music Retailing/Theme Parks)
Three months ended Percent
March 31, B/(W)
------------------ -------
1997 1996
---- ----
(In millions)
Revenues $973.2 $846.8 15%
Operating Income $ 55.0 $ 96.8 (43)
EBITDA $160.3 $189.3 (15)
The Video and Music/Theme Parks segment is comprised principally of Blockbuster
Video and Music, and Paramount Parks. The revenue increase reflects the
increased number of Company-owned video stores in operation in 1997 as compared
to 1996, partially offset by a slight decrease in worldwide same-store sales.
The decreases in EBITDA and operating income for the first quarter of 1997
reflect weaker video product and increased rental tape expense. International
Video revenues, EBITDA and operating income increased 55%, 57% and 84%,
respectively. Total Video revenues of $823.0 million increased 17%, while EBITDA
of $187.3 million and operating income of $103.4 million decreased 13% and 27%,
respectively. Blockbuster Video ended the first quarter with 5,688 stores, a net
increase of 1,069 stores over the first quarter of 1996. Music stores recorded
revenues of $143.1 million, EBITDA of $0.4 million and operating losses of $5.6
million for the three months ended March 31, 1997 and revenues of $132.9
million, operating losses before depreciation and amortization of $2.1 million
and operating losses of $7.9 million for the three months ended March 31, 1996.
The Theme Parks begin full time operations during the second and third quarters
and therefore, record the majority of revenues, EBITDA and operating income
during those periods. The Theme Parks recorded slight losses for the first
quarter of 1997 and 1996.
Publishing (Education; Consumer; Business and Professional; Reference; and
International Groups)
Three months ended Percent
March 31, B/(W)
------------------ -------
1997 1996
---- ----
(In millions)
Revenues $398.7 $389.0 2%
Operating Income $(57.8) $(46.6) (24)
EBITDA $(19.0) $ (9.1) (109)
Publishing is comprised of Simon & Schuster which includes imprints such as
Simon & Schuster, Pocket Books, Prentice Hall and Macmillan Computer Publishing.
Publishing typically has seasonally stronger operating results in the second
half of the year. The revenue increase primarily reflects strong international
sales particularly in Asia and Latin America. Publishing's increases in losses
from operations before depreciation and amortization and operating losses from
the comparable period primarily reflects increased operating expenses to support
anticipated sales growth in the Higher Education, Elementary and High School
markets.
-19-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Other Income and Expense Information
Corporate expenses
Corporate expenses including depreciation and amortization expense decreased 15%
to $40.6 million for the first quarter of 1997 from $47.6 million, principally
reflecting the impact of executive severance expense recognized in the first
quarter of 1996.
Interest expense, net
Net interest expense decreased 3% to $196.8 million for the first quarter of
1997 from $202.1 million for the first quarter of 1996. The Company had
approximately $10.8 billion and $11.4 billion principal amount of debt
outstanding (including current maturities) as of March 31, 1997, and March 31,
1996, respectively, at weighted average interest rates of 7.3% and 7.1%,
respectively.
Provision for income taxes
The provision for income taxes represents federal, state and foreign income
taxes on earnings before income taxes. The estimated annual effective tax rate
of 61.5% for 1997 and 65.3% for 1996 were both adversely affected by
amortization of intangibles in excess of amounts which are deductible for tax
purposes.
Equity in (loss) earnings of affiliates
"Equity in (loss) earnings of affiliated companies, net of tax" was a loss of
$15.2 million for the first quarter of 1997 as compared to earnings of $1.3
million for the first quarter of 1996, primarily reflecting the net operating
losses for United Paramount Network ("UPN") and lower operating results for USA
Networks, primarily due to increased investment in original programming, offset
by improved operating results of Comedy Central. The Company acquired a 50%
interest in UPN on January 15, 1997.
Minority interest
Minority interest primarily represents the minority ownership of Spelling common
stock.
Discontinued operations
For the three months ended March 31, 1997, discontinued operations reflect the
results of operations, net of tax, of the Viacom Radio Stations. For the three
months ended March 31, 1996, discontinued operations reflect the results of
operations, net of tax, of the Cable segment, the interactive game operations,
including Virgin, and the Viacom Radio Stations. The sale of the Viacom Radio
Stations is expected to result in a gain which will be recognized upon
completion of the transaction. For the year ended December 31, 1996, the Company
provided for an estimated loss on disposal of its interactive game operations
for $159.3 million, which included estimated losses through the expected date of
disposition of $58.0 million. The net operating losses of the interactive game
businesses for the first quarter of 1997 were provided for in the estimated loss
on disposal as of December 31, 1996. (See Note 2 of Notes to Consolidated
Financial Statements).
-20-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Restructuring Charge
In 1996, following a strategic analysis, Blockbuster adopted a plan to abandon
certain Music stores, relocate its headquarters and eliminate third party
distributors domestically. As a result of such plan, Blockbuster recognized
during the fourth quarter of 1996 a restructuring charge of approximately $88.9
million principally reflecting costs associated with the closing of
approximately 10% or 50 of its Music retail stores and costs associated with
relocating Blockbuster's headquarters from Fort Lauderdale to Dallas. As a
result of the Music store closings, Blockbuster recognized lease termination
costs of $28.3 million and accrued shut-down and other costs of $14.6 million as
part of the restructuring charge. Through March 31, 1997, the Company paid and
charged approximately $3.0 million against these liabilities. The Company
expects to substantially complete the activities related to the Music store
closings by the end of 1998.
In the fourth quarter of 1996, Blockbuster recognized $25 million of estimated
severance benefits payable to approximately 650 of its Fort Lauderdale
headquarters employees who have chosen not to relocate. Blockbuster, through the
restructuring charge, also recognized $21.0 million of other costs of exiting
Fort Lauderdale and eliminating third party distributors. Through March 31,
1997, the Company paid and charged against the severance liability approximately
$1.9 million.
The Blockbuster headquarters relocation to Dallas is expected to be completed in
the second quarter of 1997. The Company expects to complete construction of the
distribution center by the end of 1997.
Liquidity and Capital Resources
The Company expects to fund its anticipated cash requirements (including the
anticipated cash requirements of its capital expenditures, joint ventures,
commitments and payments of principal, interest and dividends on its outstanding
indebtedness and preferred stock) with internally generated funds and from
various external sources, which may include the Company's existing credit
agreements and amendments thereto, co-financing arrangements by the Company's
various divisions, additional financings and the sale of non-strategic assets as
opportunities may arise. On March 26, 1997 the Company amended and restated the
Credit Agreements. (See Note 5 of Notes to Consolidated Financial Statements).
At March 31, 1997, the Company was in compliance with all debt covenants and had
satisfied all financial ratios and tests under the credit agreements. The
Company expects to be in compliance and satisfy all such covenants and ratios as
may be applicable from time to time during 1997.
The Company's scheduled maturities of indebtedness through December 31, 2001,
assuming full utilization of the Credit Agreements are $85.0 million (1997),
$1.1 billion (1998), $1.2 billion (1999), $1.7 billion (2000) and $2.1 billion
(2001). As of March 31, 1997, the Company has classified certain short-term
indebtedness as long-term debt based upon its intent and ability to refinance
such indebtedness on a long-term basis.
The commitments of the Company for program license fees which are not reflected
in the balance sheet as of March 31, 1997, estimated to aggregate approximately
$1.9 billion, principally reflect commitments of approximately $1.7 billion
under SNI's exclusive arrangements with several motion picture companies. This
estimate is based upon a number of factors. A majority of such fees are payable
over several years, as part of normal programming expenditures of SNI. These
commitments are contingent upon delivery of motion pictures, which are not yet
available for premium television exhibition and, in many cases, have not yet
been produced.
Current assets increased to $5.9 billion as of March 31, 1997 from $5.7 billion
as of December 31, 1996, primarily reflecting normal operating activity. The
allowance for doubtful accounts as a percentage of receivables was 5% as of
March 31, 1997 and December 31, 1996. The change in property and equipment
principally reflects capital expenditures of $129.9 million related to capital
additions for new and existing video stores and additional construction and
equipment upgrades for theme parks offset by depreciation expense of $112.2
million. Current liabilities decreased approximately 13% to $3.7 billion as of
March 31, 1997 from $4.3 billion as of December 31, 1996, reflecting the payment
of accrued expenses and other normal reductions in accounts payable. Long-term
debt, including current maturities, increased 9% to $10.8 billion as of March
31, 1997 from $9.9 billion as of December 31, 1996 primarily reflecting the
continued investment in and seasonality of the Company's businesses.
-21-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
The Company expects to record the majority of its operating cash flows during
the second half of the year due to the seasonality of the educational publishing
business, the typical timing of major motion picture releases, the summer
operation of its theme parks, the positive effect of the holiday season on
advertising revenues and video store revenues, and the impact of the beginning
of the broadcast television season on television production. Net cash flow from
operating activities was negative $492.8 million for the three months ended
March 31, 1997, versus negative $540.6 million for the three months ended March
31, 1996. Operating cash flows in both years reflect the payment for a
seasonally high level of Blockbuster videocassette purchases made in the prior
quarters. Net cash expenditures for investing activities of $338.0 million for
the three months ended March 31, 1997, principally reflect capital expenditures
and the Company's purchase of a 50% interest in UPN. Net cash flows from
investing activities of $262.4 million for the three months ended March 31,
1996, principally reflect capital expenditures, investments in international
equity ventures and other acquisitions. Financing activities principally reflect
borrowings and repayments of debt under the credit agreements during each period
presented.
On April 18, 1997, the Company announced its intention to acquire additional
shares of Spelling's outstanding common stock and increase its ownership to
approximately 80%. The purchase of additional shares is intended to permit the
consolidation of Spelling's results for tax purposes and the Company has no
plans to increase its ownership beyond approximately 80%.
Capital Structure
The following table sets forth the Company's long-term debt, net of current
portion as of March 31, 1997 and December 31, 1996:
March 31, 1997 December 31, 1996
-------------- -----------------
(In millions)
Notes payable to banks.................. $ 6,165.0 $ 5,253.0
Senior debt............................. 2,485.0 2,484.4
Senior subordinated debt................ 642.0 641.0
Subordinated debt....................... 963.0 960.0
Obligations under capital leases........ 554.4 571.2
Other notes............................. 8.6 8.7
------------ -------------
10,818.0 9,918.3
Less current portion.................... 64.8 62.6
------------ -------------
$ 10,753.2 $ 9,855.7
============ =============
The notes and debentures are presented net of an aggregate unamortized discount
of $162.1 million as of March 31, 1997 and $166.3 million as of December 31,
1996.
On March 26, 1997, the Company amended and restated the Credit Agreements. (See
Note 5 of Notes to Consolidated Financial Statements).
On May 9, 1997, a subsidiary of the Company amended the 364-day film financing
credit agreement, guaranteed by Viacom International Inc. and the Company, which
extended the expiration date for one year, reduced pricing and decreased the
amount to $470 million.
Debt, including the current portion, as a percentage of total capitalization of
the Company was 46% at March 31, 1997 and 44% at December 31, 1996.
-22-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
The Company uses derivative financial instruments to reduce its exposure to
market risks from changes in foreign exchange rates and interest rates. The
Company does not hold or issue financial instruments for speculative trading
purposes. The derivative instruments used are foreign exchange forward contracts
and options, and interest rate swap agreements. The foreign exchange contracts
have principally been used to hedge the British Pound, the Australian Dollar,
the Japanese Yen, the Canadian Dollar, the French Franc, the Singapore Dollar,
the German Deutschemark and the European Currency Unit/British Pound
relationship. These derivatives, which are over-the-counter instruments, are
non-leveraged.
The Company filed a shelf registration statement with the Securities and
Exchange Commission registering debt securities, preferred stock and contingent
value rights of Viacom and guarantees of such debt securities by Viacom
International which may be issued for aggregate gross proceeds of $3.0 billion.
The registration statement was declared effective on May 10, 1995. The net
proceeds from the sale of the offered securities may be used by Viacom to repay,
redeem, repurchase or satisfy its obligations in respect of its outstanding
indebtedness or other securities; to make loans to its subsidiaries; for general
corporate purposes; or for such other purposes as may be specified in the
applicable Prospectus Supplement. The Company filed a post-effective amendment
to this registration statement on November 19, 1996. To date, the Company issued
$1.6 billion of notes and debentures and has $1.4 billion remaining availability
under the shelf registration statement.
-23-
<PAGE>
PART II - - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Amendment No. 1, dated as of May 9, 1997, to the Film Finance
Credit Agreement, dated as of May 10, 1996, among Viacom Film
Funding Company Inc., as Borrower; Viacom Inc. and Viacom
International Inc., as Guarantors; the Bank parties thereto;
The Bank of New York, as a Managing Agent and as the
Documentation Agent; Citibank, N.A., as a Managing Agent and
as the Administrative Agent; Morgan Guaranty Trusty Company of
New York, as a Managing Agent; JP Morgan Securities Inc., as
the Syndication Agent; Bank of America NT&SA, as a Managing
Agent, and the Agents named therein.
11 Statement re Computation of Net Earnings Per Share
27 Financial Data Schedule.
(b) Reports on Form 8-K for Viacom Inc.
Current Report on Form 8-K of Viacom Inc. filed on February 18, 1997
relating to the announcement of an agreement to sell Viacom Inc.'s ten radio
stations to Evergreen Media Corporation of Los Angeles for $1.075 billion in
cash, pursuant to a stock purchase agreement dated February 16, 1997.
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIACOM INC.
-----------------------------------
(Registrant)
Date May 15, 1997 /s/ Sumner M. Redstone
---------------------- -----------------------------------
Sumner M. Redstone
Chairman of the Board of Directors,
Chief Executive Officer
Date May 15, 1997 /s/ George S. Smith, Jr.
---------------------- -----------------------------------
George S. Smith, Jr.
Senior Vice President,
Chief Financial Officer
-25-
<PAGE>
Exhibit Index
10.1 Amendment No. 1, dated as of May 9, 1997, to the Film Finance Credit
Agreement, dated as of May 10, 1996, among Viacom Film Funding Company
Inc., as Borrower; Viacom Inc. and Viacom International Inc., as
Guarantors; the Bank parties thereto; The Bank of New York, as a
Managing Agent and as the Documentation Agent; Citibank, N.A., as a
Managing Agent and as the Administrative Agent; Morgan Guaranty Trusty
Company of New York, as a Managing Agent; JP Morgan Securities Inc., as
the Syndication Agent; Bank of America NT&SA, as a Managing Agent, and
the Agents named therein.
11 Statement re Computation of Net Earnings Per Share
27 Financial Data Schedule
-26-
CONFORMED COPY
AMENDMENT NO. 1, dated as of May 9, 1997 (the "Amendment") to the
FILM FINANCE CREDIT AGREEMENT, dated as of May 10, 1996, as amended, (the
"Credit Agreement") among VIACOM FILM FUNDING COMPANY INC., a Delaware
corporation (the "Borrower"), VIACOM Inc., a Delaware corporation and VIACOM
INTERNATIONAL INC., a Delaware corporation (the "Guarantors"), each of the
several Banks, THE BANK OF NEW YORK, as a Managing Agent and as the
Documentation Agent, CITIBANK, N.A., as a Managing Agent and as the
Administrative Agent, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Managing
Agent, JP MORGAN SECURITIES INC., as the Syndication Agent, BANK OF AMERICA
NT&SA, as a Managing Agent, and the Banks identified as Agents on the signature
pages thereof, as Agents.
WITNESSETH:
WHEREAS, the parties who have heretofore entered into the Credit
Agreement now desire to amend certain provisions of such agreement to provide
for a change in the Commitment Termination Date and the Commitments identified
on Schedule II to the Credit Agreement, and for certain
other related matters.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. Amendments.
(a) The definition of Commitment Termination Date in section
1.1 of the Credit Agreement is hereby amended by deleting the reference therein
to "May 9, 1997" and substituting in lieu thereof "May 8, 1998".
(b) The definition of Applicable Eurodollar Rate Margin in
Section 1.1 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
""Applicable Eurodollar Rate Margin" shall mean on any date the
percentage set forth below opposite the Credit Rating applicable on such date:
CREDIT RATING MARGIN
------------- ------
BBB-/Baa3 or better .375%
BB+/Bal or lower .525%"
(c) The following defined terms in Section 1.1 of the Credit
Agreement are hereby deleted in their entirety: "Amendment", "Blockbuster",
"Cable Transaction", "Cable Transaction Effective Date", "Franchise", "Merger",
"Non-Cable Business", "September Agreement", "Transaction Documents", and "VII
Services".
<PAGE>
(d) The definition of "July Agreements" is hereby amended by
deleting the reference therein to the "Credit Agreement, dated as of July 1,
1994" and substituting in lieu thereof "Amended and Restated Credit Agreement,
dated as of March 26, 1997".
(e) The definition of "EBIT" in Section 1.1 of the Credit
Agreement is hereby amended and restated in its entirety as follows:
""EBIDT" means, at any time, the Earnings from Operations of the
Borrower and its Subsidiaries on a consolidated basis as set forth in the
statement of operations of the Borrower and its Subsidiaries for the immediately
preceding four Fiscal Quarters for which financial statements have been
delivered to the Banks pursuant to Section 8.8 of this Agreement (adjusted to
account for material dispositions during such four Fiscal Quarters), plus (to
the extent previously deducted) (a) the sum of the following expenses of the
Borrower and its Subsidiaries for such period: (i) depreciation expense; (ii)
amortization expense (including all amortization expenses recognized in
accordance with APB 16 and 17 but excluding (A) all other amortization of
programming, production and pre-publication costs and (B) amortization of
videocassettes); (iii) expenses accrued under the Incentive Plans for such
period; (iv) in the event that, during such period, the Borrower or any of its
Subsidiaries acquires all or substantially all of the assets or Equity of any
other Person or any Equity in any other Person that is reported on an equity
basis, the EBIDT of such Person, as determined in accordance with the terms of
this definition, shall be included in the EBIDT of the Borrower for all Fiscal
Quarters during such period; and (v) all other non-cash charges; less (b) the
proportional EBIDT of the interests held by any other Person in entities fully
consolidated with the Borrower and its Subsidiaries, as determined in accordance
with the terms of this definition. In calculating EBIDT, any losses of United
Paramount Network prior to December 31, 1996 shall be disregarded. In addition,
for the purposes of Section 7.2 only, EBIDT shall be calculated on an actual
historical basis without taking into account acquisitions or dispositions during
any relevant calculation period."
(f) The definition of "Subsidiary Facility" in Section 1.1 of
the Credit Agreement is hereby amended and restated in its entirety as follows:
-2-
<PAGE>
"Subsidiary Facility" means the "Subsidiary Facility" as defined in
the agreement described in clause (i) of the definition of "July Agreements".
(g) Schedule I which is attached to the Credit Agreement is
hereby amended and restated in its entirety by substituting Schedule I to this
Amendment No. 1 for such earlier schedule in its entirety.
(h) Schedule II which is attached to the Credit Agreement is
hereby amended and restated in its entirety by substituting Schedule II to this
Amendment No. 1 for such earlier schedule in its entirety.
(i) Schedule 1.1 of the Credit Agreement is hereby amended and
restated in its entirety by substituting Schedule 1.1 to this Amendment No. 1
for such earlier schedule in its entirety.
(j) Section 6.4 of the Credit Agreement is hereby amended by
deleting the references therein to "December 31, 1995" and substituting in lieu
thereof "December 31, 1996".
(k) Section 6.14 of the Credit Agreement is hereby amended by
(A) deleting the fifth sentence therein, and (B) deleting the reference to "or
any Franchise" in the last sentence therein.
(l) Section 7.1 of the Credit Agreement is hereby amended by
replacing the table therein with the following table:
Date Ratio
---- -----
Through December 31, 1997 5.25x
March 31, 1998 and thereafter 4.50x
(m) Section 7.3 of the Credit Agreement is hereby amended by
deleting the words "commencing September 30, 1994" and by deleting the remainder
of the sentence following the second reference to "Subsidiaries" therein, and
replacing the deleted text with "as of September 30, 1994".
(n) Section 8.1 of the Credit Agreement is hereby amended by
deleting the reference to "and Franchises" therein.
(o) Section 9.1(iii) of the Credit Agreement is hereby amended
by deleting the reference therein to the
-3-
<PAGE>
"Initial Funding Date" and substituting in lieu thereof "Original Funding Date
(as defined in the July Agreements)".
(p) Sections 9.6 and 9.7 of the Credit Agreement are each
hereby amended by replacing every reference therein to "$300 million" with a
reference to "$500 million".
SECTION 2. Effectiveness This Amendment will be effective as of the
date hereof and satisfaction of the following conditions precedent:
(a) The execution of counterparts hereof by each of the Borrower,
the Guarantors, and each of the Banks, Facility Agents, Managing Agents and
Agents.
(b) Delivery to the Documentation Agent of (i) satisfactory written
evidence that this Amendment and the Credit Agreement have been duly authorized,
executed and delivered by the Borrower and the Guarantors, and (ii) a favorable
written opinion of Michael D. Fricklas, Deputy General Counsel to the Loan
Parties, in substantially the form of Exhibit A hereto.
(c) The Borrower shall have paid all costs, accrued and unpaid fees
and expenses (including, without limitation, the legal fees and expenses), in
each case to the extent then due and payable under the Credit Agreement.
SECTION 3. Representations and Warranties. Each of the Borrower and
the Guarantors hereby represents and warrants that as of the date hereof, after
giving effect to this Amendment that (i) the representations and warranties
contained in Article VI of the Credit Agreement (other than those stated to be
made as of a particular date) are true and correct in all material respects on
and as of the date hereof as though made on the date hereof, and (ii) no Default
or Event of Default shall exist or be continuing under the Credit Agreement.
SECTION 4. Funding Adjustments. As of the effectiveness of this
Amendment (and after giving effect to any adjustments of Commitments effected by
the amendment of Schedule II to the Credit Agreement), if the aggregate
outstanding Loans of any Bank are less than or exceed such Bank's Ratable
Portion of all outstanding Loans, such Bank shall forthwith on such date make an
additional Loan hereunder (in the case of a deficiency), or, the Borrower shall
repay such Bank's Loans (in the case of an excess) in such amount as shall be
necessary to cause such Bank's Loans
-4-
<PAGE>
thereafter to equal its Ratable Portion of all outstanding Loans on the date
hereof.
SECTION 5. Miscellaneous. (a) Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Credit
Agreement.
(b) Except as amended hereby, all of the terms of the Credit
Agreement shall remain and continue in full force and effect and are hereby
confirmed in all respects.
(c) This Amendment shall be a Loan Document for the purposes
of the Credit Agreement.
(d) This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto were upon the same instrument. Delivery of an executed
counterpart of a signature page of this Amendment by telecopier shall be
effective as delivery of a manually executed counterpart of this Amendment.
(e) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
-5-
<PAGE>
SECTION 6. Guarantor Confirmation. By signing below, each Guarantor
hereby agrees to the terms of the foregoing Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
VIACOM FILM FUNDING COMPANY INC.,
as Borrower
By: /s/ Vaughn A. Clark
-----------------------------------------
Name: Vaughn A. Clark
Title: Executive Vice President,
Treasurer
VIACOM INC.,
as a Guarantor
By: /s/ Vaughn A. Clark
-----------------------------------------
Name: Vaughn A. Clark
Title: Senior Vice President,
Treasurer
VIACOM INTERNATIONAL INC., as a
Guarantor
By: /s/ Vaughn A. Clark
-----------------------------------------
Name: Vaughn A. Clark
Title: Senior Vice President,
Treasurer
Managing Agents
THE BANK OF NEW YORK, as Managing
Agent, the Documentation Agent and
a Bank
By: /s/ Geoffrey C. Brooks
-----------------------------------------
Name: Geoffrey C. Brooks
Title: Vice President
-6-
<PAGE>
CITIBANK, N.A., as Managing Agent,
the Administrative Agent and a Bank
By: /s/ Robert H. Johnson, Jr.
-----------------------------------------
Name: Robert H. Johnson, Jr.
Title: Attorney-in-Fact
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Managing Agent and a
Bank
By: /s/ George J. Stapleton
-----------------------------------------
Name: George J. Stapleton
Title: Vice President
BANK OF AMERICA NT&SA, as Managing
Agent and a Bank
By: /s/ Russell D. Solomon
-----------------------------------------
Name: Russell D. Solomon
Title: Vice President
Syndication Agent
JP MORGAN SECURITIES INC., as the
Syndication Agent
By: /s/ Stephan J. Kenneally
-----------------------------------------
Name: Stephan J. Kenneally
Title: Vice President
-7-
<PAGE>
Agents
BANKBOSTON, N.A., as Agent and a
Bank
By: /s/ Jennifer R. Buras
-----------------------------------------
Name: Jennifer R. Buras
Title: Director
BANK OF MONTREAL, CHICAGO
BRANCH, as Agent and a Bank
By: /s/ Karen Klapper
-----------------------------------------
Name: Karen Klapper
Title: Director
THE BANK OF NOVA SCOTIA, as Agent
and a Bank
By: /s/ Terry K. Fryett
-----------------------------------------
Name: Terry K. Fryett
Title: Authorized Signatory
THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION), as Agent and a Bank
By: /s/ John P. Haltmaier
-----------------------------------------
Name: John P. Haltmaier
Title: Vice President
CANADIAN IMPERIAL BANK OF COMMERCE,
as Agent and a Bank
By: /s/ Deborah D. Strek
-----------------------------------------
Name: Deborah D. Strek
Title: Managing Director
-8-
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH, as
Agent and a Bank
By: /s/ Mark D. Thorsheim
-----------------------------------------
Name: Mark Thorsheim
Title: Vice President
CREDIT SUISSE FIRST BOSTON, as
Agent and a Bank
By: /s/ Joseph A. Coneeny
-----------------------------------------
Name: Joseph A. Coneeny
Title: Managing Director
By: /s/ Todd C. Morgan
-----------------------------------------
Name: Todd C. Morgan
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK
BRANCH, as Agent and a Bank
By: /s/ Teiji Teramoto
-----------------------------------------
Name: Teiji Teramoto
Title: Vice President and
Manager
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, as Agent and a Bank
By: /s/ William Kennedy
-----------------------------------------
Name: William Kennedy
Title: Vice President
-9-
<PAGE>
LLOYDS BANK PLC, as Agent
and a Bank
By: /s/ Paul D. Briamonte
-----------------------------------------
Name: Paul D. Briamonte
Title: Vice President
By: /s/ Stephen J. Attree
-----------------------------------------
Name: Stephen J. Attree
Title: Assistant Vice
President
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, as Agent and a Bank
By: /s/ Shuichi Tajima
-----------------------------------------
Name: Shuichi Tajima
Title: Deputy General Manager
MELLON BANK, N.A., as Agent and a
Bank
By: /s/ G. Louis Ashley
-----------------------------------------
Name: G. Louis Ashley
Title: First Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION, as Agent and a Bank
By: /s/ Patricia Loret de Mola
-----------------------------------------
Name: Patricia Loret de Mola
Title: Senior Vice President
-10-
<PAGE>
THE NIPPON CREDIT BANK, LTD., LOS
ANGELES AGENCY, as Agent and a Bank
By: /s/ Jay Schwartz
-----------------------------------------
Name: Jay Schwartz
Title: Vice President and
Manager
ROYAL BANK OF CANADA, as Agent and a
Bank
By: /s/ Cynthia K. Wong
-----------------------------------------
Name: Cynthia K. Wong
Title: Manager
THE SAKURA BANK, LIMITED, as Agent
and a Bank
By: /s/ Yoshikazu Nagura
-----------------------------------------
Name: Yoshikazu Nagura
Title: Vice President
THE SANWA BANK, LIMITED., NEW YORK
BRANCH, as Agent and a Bank
By: /s/ Dominic J. Sorresso
-----------------------------------------
Name: Dominic J. Sorresso
Title: Vice President
SOCIETE GENERALE, as Agent and a Bank
By: /s/ Elaine Khalil
-----------------------------------------
Name: Elaine Khalil
Title: Vice President
-11-
<PAGE>
THE SUMITOMO BANK, LIMITED, NEW YORK
BRANCH, as Agent and a Bank
By: /s/ John C. Kissinger
-----------------------------------------
Name: John C. Kissinger
Title: Joint General Manager
TORONTO DOMINION (NEW YORK), INC.,
as Agent and a Bank
By: /s/ Debbie A. Greene
-----------------------------------------
Name: Debbie A. Greene
Title: Vice President
-12-
Viacom Inc. and Subsidiaries
Computation of Net Earnings Per Share
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
---- ----
(In millions, except per share amounts)
<S> <C> <C>
Earnings:
Earnings (loss) from continuing operations ...................... $ (23.8) $ 19.4
Cumulative convertible preferred stock dividend requirement ..... 15.0 15.0
------- -------
Earnings (loss) from continuing operations attributable to
common stock .............................................. (38.8) 4.4
Earnings from discontinued operations, net of tax ............... 5.1 8.4
------- -------
Net earnings (loss) ............................................. $ (33.7) $ 12.8
======= =======
Primary Computation:
Shares:
Weighted average number of common shares outstanding ....... 352.5 370.0
Common shares potentially issuable in connection with:
Stock options and warrants (a) ......................... -- 4.7
Preferred Stock (b) .................................... -- --
------- -------
Weighted average common shares and common share
equivalents ............................................ 352.5 374.7
======= =======
Net earnings per common share:
Earnings (loss) from continuing operations ................ $ (0.11) $ 0.01
Earnings from discontinued operations, net of tax ......... 0.01 0.02
------- -------
Net earnings (loss) ....................................... $ (0.10) $ 0.03
======= =======
Fully Diluted Computation:
Shares:
Weighted average number of common shares outstanding ....... 352.5 370.0
Common shares potentially issuable in connection with:
Stock options and warrants (a) ......................... -- 5.0
Preferred Stock (b) .................................... -- --
------- -------
Weighted average common shares and common share
equivalents ....................................... 352.5 375.0
======= =======
Net earnings per common share:
Earnings (loss) from continuing operations ................. $ (0.11) $ 0.01
Earnings from discontinued operations, net of tax .......... 0.01 0.02
------- -------
Net earnings (loss) ........................................ $ (0.10) $ 0.03
======= =======
</TABLE>
(a) Common share equivalents had a dilutive effect on net earnings from
continuing operations per share for the first quarter ended March 31, 1996 and
therefore were included in the primary and fully diluted earnings per share
computation. Common share equivalents had an anti-dilutive effect on net
loss from continuing operations per share for the first quarter ended March
31, 1997, and therefore were not included in the primary and fully diluted
earnings per share computation.
(b) For the first quarters ended March 31, 1996 and 1997, the assumed conversion
of Preferred Stock had an anti-dilutive effect on earnings per share, and
therefore was excluded from the fully diluted earnings per share computation.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 261
<SECURITIES> 0
<RECEIVABLES> 2,088
<ALLOWANCES> 104
<INVENTORY> 2,455
<CURRENT-ASSETS> 5,881
<PP&E> 4,039
<DEPRECIATION> 873
<TOTAL-ASSETS> 29,079
<CURRENT-LIABILITIES> 3,728
<BONDS> 10,753
0
1,200
<COMMON> 4
<OTHER-SE> 11,347
<TOTAL-LIABILITY-AND-EQUITY> 29,079
<SALES> 2,918
<TOTAL-REVENUES> 2,918
<CGS> 1,968
<TOTAL-COSTS> 2,744
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 197
<INCOME-PRETAX> (23)
<INCOME-TAX> 14
<INCOME-CONTINUING> (24)
<DISCONTINUED> 5
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
