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, 1999
Commission file number 1-9553
VIACOM INC.
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(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, 1999:
Class A Common Stock, par value $.01 per share - 140,236,542
Class B Common Stock, par value $.01 per share - 550,165,838
<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,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues ...................................................... $2,951.1 $2,685.6
Expenses:
Operating ................................................... 1,952.1 1,804.2
Selling, general and administrative ......................... 524.4 421.2
Depreciation and amortization ............................... 197.1 186.8
-------- --------
Total expenses .......................................... 2,673.6 2,412.2
-------- --------
Operating income .............................................. 277.5 273.4
Other income (expense):
Interest expense, net ..................................... (94.3) (154.1)
Other items, net .......................................... (1.3) 3.6
-------- --------
Earnings from continuing operations before income taxes ....... 181.9 122.9
Provision for income taxes ................................ (97.3) (67.8)
Equity in loss of affiliated companies, net of tax ........ (16.1) (7.7)
Minority interest ......................................... (0.1) 0.2
-------- --------
Earnings from continuing operations ........................... 68.4 47.6
Loss from discontinued operations, net of tax (Note 5) ........ -- (46.2)
-------- --------
Net earnings before extraordinary loss ........................ 68.4 1.4
Extraordinary loss, net of tax ............................ (23.5) --
-------- --------
Net earnings .................................................. 44.9 1.4
Cumulative convertible preferred stock dividend requirement (0.4) (15.0)
Premium on repurchase of preferred stock .................. (12.0) --
-------- --------
Net earnings (loss) attributable to common stock .............. $ 32.5 $ (13.6)
======== ========
Basic and diluted earnings (loss) per common share:
Net earnings from continuing operations ................... $ 0.08 $ 0.05
Net earnings (loss) ....................................... $ 0.05 $ (0.02)
Weighted average number of common shares:
Basic ..................................................... 696.1 710.5
Diluted ................................................... 711.1 718.0
</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,
1999 1998
--------- ---------
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents ....................................... $ 382.7 $ 767.3
Receivables, less allowances of $104.6 (1999) and
$98.7 (1998) .................................................. 1,444.3 1,759.1
Inventory (Note 6) .............................................. 1,696.0 1,805.5
Other current assets ............................................ 871.7 732.6
--------- ---------
Total current assets ........................................ 4,394.7 5,064.5
--------- ---------
Property and equipment, at cost ..................................... 4,679.1 4,537.0
Less accumulated depreciation ................................... 1,560.8 1,457.5
--------- ---------
Net property and equipment .................................. 3,118.3 3,079.5
--------- ---------
Inventory (Note 6) .................................................. 2,595.9 2,470.8
Intangibles, at amortized cost ...................................... 11,433.9 11,557.3
Other assets ........................................................ 1,510.6 1,441.0
--------- ---------
$23,053.4 $23,613.1
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable ................................................ 464.9 499.2
Accrued compensation ............................................ 264.5 410.3
Participants' share, residuals and royalties payable ............ 1,059.4 1,227.5
Income tax payable .............................................. 155.0 526.5
Current portion of long-term debt (Note 7) ...................... 132.2 377.2
Accrued expenses and other ...................................... 1,790.4 2,591.9
--------- ---------
Total current liabilities ................................... 3,866.4 5,632.6
--------- ---------
Long-term debt (Note 7) ............................................. 5,612.9 3,813.4
Other liabilities ................................................... 2,090.8 2,117.5
Commitments and contingencies (Note 8)
Shareholders' Equity:
Convertible Preferred Stock, par value $.01 per share; 200.0 shares
authorized; 12.0 (1998) shares issued and outstanding ........... -- 600.0
Class A Common Stock, par value $.01 per share; 200.0 shares
authorized; 141.6 (1999) and 141.6 (1998) shares issued 1.4 1.4
Class B Common Stock, par value $.01 per share; 1,000.0 shares
authorized; 592.9 (1999) and 591.9 (1998) shares issued ......... 5.9 5.9
Additional paid-in capital ........................................ 10,594.4 10,574.7
Retained earnings ................................................. 1,958.9 1,932.9
Accumulated other comprehensive loss .............................. (45.3) (67.1)
--------- ---------
12,515.3 13,047.8
Less treasury stock, at cost; 39.1 (1999) and 38.5 shares (1998) .. 1,032.0 998.2
--------- ---------
Total shareholders' equity .................................. 11,483.3 12,049.6
--------- ---------
$23,053.4 $23,613.1
========= =========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Net cash from operating activities:
Net earnings .................................................................... $ 44.9 $ 1.4
Adjustments to reconcile net earnings to net cash flow from operating activities:
Depreciation and amortization ................................................. 197.1 229.3
Change in operating assets and liabilities:
Decrease in receivables ..................................................... 314.8 436.4
Increase in inventory and related programming liabilities, net .............. (115.2) (19.6)
Increase in prepaid expenses and other current assets ....................... (132.3) (42.1)
Decrease in unbilled receivables ............................................ 13.6 25.8
Decrease in accounts payable and accrued expenses ........................... (974.9) (444.9)
Decrease in income taxes payable and deferred income taxes, net ............. (214.6) (514.1)
Increase (decrease) in deferred income ...................................... 24.4 (3.0)
Other, net .................................................................. (82.9) 64.8
-------- -------
Net cash flow from operating activities ........................................... (925.1) (266.0)
-------- -------
Investing Activities:
Capital expenditures .......................................................... (145.2) (116.6)
Acquisitions, net of cash acquired ............................................ (100.9) (61.5)
Investments in and advances to affiliated companies ........................... (40.7) (28.1)
Purchases of short-term investments ........................................... (129.6) (17.7)
Proceeds from sales of short-term investments ................................. 123.5 18.8
Other, net .................................................................... -- 15.9
-------- -------
Net cash flow from investing activities ........................................... (292.9) (189.2)
-------- -------
Financing Activities:
Net borrowings from banks ..................................................... 1,819.0 779.1
Repurchase of Preferred Stock ................................................. (612.0) --
Repayment of notes and debentures ............................................. (323.1) (300.0)
Purchase of treasury stock and warrants ....................................... (49.5) --
Payment of capital lease obligations .......................................... (20.4) (18.8)
Proceeds from exercise of stock options and warrants .......................... 27.2 40.2
Other, net .................................................................... (7.8) (16.5)
-------- -------
Net cash flow from financing activities ........................................... 833.4 484.0
-------- -------
Net increase (decrease) in cash and cash equivalents .......................... (384.6) 28.8
Cash and cash equivalents at beginning of the period .......................... 767.3 292.3
-------- -------
Cash and cash equivalents at end of period ........................................ $ 382.7 $ 321.1
======== =======
Supplemental cash flow information:
Cash payments for interest, net of amounts capitalized .......................... $ 117.1 $ 188.6
Cash payments for income taxes .................................................. $ 483.3 $ 537.2
Non cash investing and financing:
Property and equipment acquired under capitalized leases ........................ $ 51.3 $ 3.1
</TABLE>
See notes to consolidated financial statements.
-4-
<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 company with
operations in six segments: (i) Networks, (ii) Entertainment, (iii) Video, (iv)
Parks, (v) Publishing and (vi) Online. See Note 5 regarding the presentation of
discontinued operations.
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.
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.
Use of Estimates -- 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 (Loss) per Common Share -- Basic earnings per share ("EPS") is
computed by dividing the net earnings applicable to common shares by the
weighted average of common shares outstanding during the period. Diluted EPS
adjusts the basic weighted average of common shares outstanding by the assumed
conversion of convertible securities and exercise of stock options only in the
periods in which such effect would have been dilutive. Prior period amounts have
been adjusted to reflect the effect of the 2-for-1 stock split (see Note 3). The
table below presents a reconciliation of weighted average shares used in the
calculation of basic and diluted EPS:
Three months ended
March 31,
---------------
1999 1998
---- ----
Weighted average shares for basic EPS....................... 696.1 710.5
Plus incremental shares for stock options & warrants ....... 15.0 7.5
----- -----
Weighted average shares for diluted EPS..................... 711.1 718.0
===== =====
Comprehensive Income (Loss) -- Total comprehensive income (loss) for the Company
includes net income and other comprehensive income items including unrealized
gain (loss) on securities, cumulative translation adjustments and minimum
pension liability adjustments. Total comprehensive income for the three months
ended March 31, 1999 and 1998 was $66.7 million and $20.0 million, respectively.
-5-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
2) PENDING TRANSACTIONS
On May 6, 1999, Blockbuster Inc., a wholly owned subsidiary of the Company,
filed a registration statement on Form S-1 with the Securities and Exchange
Commission for a proposed initial public offering of its Class A common stock.
On May 17, 1999, the Company and Spelling Entertainment Group Inc. ("Spelling")
announced that they have entered into a definitive merger agreement for the
Company's purchase of the shares of Spelling's common stock that it does not
already own, approximately 20%, for $9.75 per share in cash. The Spelling Board
of Directors approved the merger agreement after approval by a special committee
of independent directors, which was advised by separate legal and financial
advisors. The merger agreement provides for the commencement of a tender offer
by the Company by Friday, May 21, 1999. Under the terms of the merger agreement,
each Spelling share that is not purchased in the offer will be acquired by
merger as soon as practical thereafter in a second step merger, also for $9.75
per share.
3) STOCK TRANSACTIONS
On March 24, 1999, the Company initiated a repurchase program which was
subsequently expanded, to acquire up to $600 million of the Company's common
stock and warrants. As of March 31, 1999, the Company had repurchased 1,113,600
shares of Class B Common Stock for approximately $46.5 million. As of May 13,
1999, the Company had repurchased 25,000 shares of Class A Common Stock,
6,837,300 shares of Class B Common Stock and 508,400 Viacom Five-Year Warrants,
expiring July 7, 1999, for approximately $304.6 million in the aggregate.
At May 13, 1999 and March 31, 1999, respectively, there were 5,507,274 and
6,032,637 outstanding Viacom Five-Year Warrants, expiring July 7, 1999.
The Board of Directors of the Company declared a 2-for-1 common stock split in
the form of a dividend. The additional shares were issued on March 31, 1999 to
shareholders of record on March 15, 1999. All common share and per share amounts
have been adjusted to reflect the stock split for all periods presented.
On January 5, 1999, the Company repurchased the remaining outstanding shares of
its convertible preferred stock from Bell Atlantic Corporation for $612 million
in cash.
4) RECEIVABLES
As of March 31, 1999, the Company had an aggregate of $378.5 million outstanding
under revolving receivable securitization programs. Proceeds from the sale of
these receivables were used to reduce outstanding borrowings. The resulting loss
on the sale of receivables was not material to the Company's financial position
and results of operations.
-6-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
5) DISCONTINUED OPERATIONS
In accordance with Accounting Principles Board Opinion 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 its educational, professional and
reference publishing businesses ("Non-Consumer Publishing") and its music retail
stores ("Music") as discontinued operations, as these businesses were sold on
November 27, 1998 and October 26, 1998, respectively. Summarized financial
results of discontinued operations for the three months ended March 31, 1998 is
presented below:
Non-Consumer
Publishing Music Total
---------- ----- -----
Revenues ..................................... $ 268.6 $ 133.3 $ 401.9
Loss from operations before income taxes ..... (91.5) (9.5) (101.0)
Benefit for income taxes ..................... 51.2 3.6 54.8
Net loss ..................................... (40.3) (5.9) (46.2)
6) INVENTORIES
March 31, 1999 December 31, 1998
-------------- -----------------
Merchandise inventory, including sell-through
videocassettes .............................. $ 343.3 $ 381.9
Videocassette rental inventory ................ 453.9 404.1
Publishing:
Finished goods .............................. 67.5 59.7
Work in process ............................. 6.9 6.9
Material and supplies ....................... 4.2 2.5
Other ......................................... 24.9 17.7
--------- ---------
900.7 872.8
Less current portion ........................ 446.8 468.7
--------- ---------
$ 453.9 $ 404.1
--------- ---------
Theatrical and television inventory:
Theatrical and television productions:
Released ............................ $ 1,791.0 $ 1,800.4
Completed, not released ............. 10.6 35.9
In process and other ................ 348.8 321.0
Program rights .............................. 1,240.8 1,246.2
--------- ---------
3,391.2 3,403.5
Less current portion ........................ 1,249.2 1,336.8
--------- ---------
$ 2,142.0 $ 2,066.7
--------- ---------
Total Current Inventory ....................... $ 1,696.0 $ 1,805.5
========= =========
Total Non-Current Inventory ................... $ 2,595.9 $ 2,470.8
========= =========
-7-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
7) LONG-TERM DEBT
The following table sets forth the Company's long-term debt, net of current
portion:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Notes payable to banks ............................................. $ 2,646.1 $ 848.3
5.875% Senior Notes due 2000, net of unamortized discount
of $.1 (1999) and $.2 (1998) ................................... 149.9 149.8
7.5% Senior Notes due 2002, net of unamortized discount
of $1.2 (1999) and $1.3 (1998) ................................. 248.8 248.7
6.75% Senior Notes due 2003, net of unamortized discount
of $.2 (1999 and 1998) ......................................... 349.8 349.8
7.75% Senior Notes due 2005, net of unamortized discount
of $5.7 (1999) and $5.9 (1998) ................................. 965.3 965.0
7.625% Senior Debentures due 2016, net of unamortized discount
of $1.2 (1999 and 1998) ........................................ 198.8 198.7
8.25% Senior Debentures due 2022, net of unamortized discount
of $2.6 (1999 and 1998) ........................................ 247.5 247.4
7.5% Senior Debentures due 2023, net of unamortized discount of $.5
(1999 and 1998) ................................................ 149.5 149.5
10.25% Senior Subordinated Notes due 2001 .......................... 35.3 36.3
8.0% Merger Debentures due 2006, net of unamortized discount
of $15.5 (1999) and $44.1 (1998) ............................... 193.6 475.2
Other Notes ........................................................ 41.3 20.5
Obligations under capital leases ................................... 519.2 501.4
--------- ---------
5,745.1 4,190.6
Less current portion .............................................. 132.2 377.2
--------- ---------
$ 5,612.9 $ 3,813.4
========= =========
</TABLE>
During December 1998, the Company commenced an unconditional tender offer to
purchase for cash, all of its outstanding 8.0% Merger Debentures due 2006 at a
purchase price of 104% of the principal amount. This offer expired January 4,
1999. Through December 31, 1998, $533.8 million of the 8.0% Merger Debentures
were tendered, and in 1999, $307.5 million were tendered for a total principal
amount of $841.3 million of notes tendered.
On May 6, 1999, the 364-day film financing credit agreement, guaranteed by
Viacom International Inc. and the Company, was paid in full and on May 7, 1999,
the credit agreement terminated.
-8-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
As of March 31, 1999, the Company's scheduled maturities of indebtedness through
December 31, 2003, assuming full utilization of the March 1997 Credit
Agreements, as amended, are $952 million (1999), $1.7 billion (2000), $1.8
billion (2001), $2.0 billion (2002) and $350 million (2003). The Company's
maturities of long-term debt outstanding at March 31, 1999, excluding capital
leases, are $529 million (1999), $381 million (2000), $305 million (2001), $519
million (2002) and $350 million (2003). 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.
8) COMMITMENTS AND CONTINGENCIES
The commitments of the Company for program license fees, which are not reflected
in the balance sheet as of March 31, 1999 and are estimated to aggregate
approximately $1.3 billion, principally reflect Showtime Networks Inc.'s
("SNI's") commitments of approximately $1.0 billion for the acquisition of
programming rights and the production of original programming, and exclude
intersegment commitments between the Networks and Entertainment segments of
approximately $790 million. The 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 to acquire programming rights
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.
9) PROVISION FOR INCOME TAXES
The provision for income taxes represents federal, state and foreign income
taxes on earnings before income taxes. The estimated effective tax rates of
53.5% for 1999 and 55.2% for 1998 were both adversely affected by amortization
of intangibles in excess of the amounts deductible for tax purposes. Excluding
the non-deductible amortization of intangibles, the estimated effective tax
rates would have been 37.0% for 1999 and 34.4% for 1998.
-9-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
10) OPERATING SEGMENTS
The following table sets forth the Company's financial performance by operating
segment. Prior period results have been reclassified to conform to the new
presentation. Intersegment revenues, recorded at fair market value, of the
Entertainment segment for the three months ended March 31, 1999 and 1998 were
$49.6 million and $30.3 million, respectively. All other intersegment revenues
were immaterial for each of the periods presented.
Three months ended
March 31,
---------------------
1999 1998
-------- --------
Revenues:
Networks ......................................... $ 663.8 $ 544.7
Entertainment .................................... 1,092.3 1,118.9
Video ............................................ 1,113.0 931.2
Parks ............................................ 10.5 12.8
Publishing ....................................... 122.7 108.4
Online ........................................... 4.7 2.2
Intercompany ..................................... (55.9) (32.6)
-------- --------
Total Revenues ............................... $2,951.1 $2,685.6
======== ========
EBITDA:
Networks ......................................... $ 201.5 $ 150.3
Entertainment .................................... 162.8 173.8
Video ............................................ 145.1 167.2
Parks ............................................ (2.7) (2.1)
Publishing ....................................... 5.7 4.4
Online ........................................... (1.0) 0.5
-------- --------
Total segment EBITDA ....................... 511.4 494.1
Reconciliation to operating income:
Corporate expenses ............................... (36.8) (33.9)
Depreciation and amortization .................... (197.1) (186.8)
-------- --------
Total operating income ..................... $ 277.5 $ 273.4
======== ========
-10-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
11) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Viacom International Inc. ("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. Certain prior
year equity eliminations have been reclassified to conform with the current
period presentation.
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
---------------------------------------------------------------
Non- Viacom
Viacom Viacom Guarantor Inc.
Inc. International Affiliates Eliminations Consolidated
------ ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ...................................... $ 9.1 $ 452.3 $2,498.1 $ (8.4) $2,951.1
Expenses:
Operating ................................. 9.5 148.3 1,802.7 (8.4) 1,952.1
Selling, general and administrative ....... 0.8 168.9 354.7 -- 524.4
Depreciation and amortization ............. 0.9 22.4 173.8 -- 197.1
------ ------- -------- ------- --------
Total expenses ........................ 11.2 339.6 2,331.2 (8.4) 2,673.6
------ ------- -------- ------- --------
Operating income (loss) ....................... (2.1) 112.7 166.9 -- 277.5
Other income (expense):
Interest expense, net ..................... (81.3) 22.9 (35.9) -- (94.3)
Other items, net .......................... (5.4) (0.6) 4.7 -- (1.3)
------ ------- -------- ------- --------
Earnings (loss) from continuing operations
before income taxes ....................... (88.8) 135.0 135.7 -- 181.9
Benefit (provision) for income taxes ...... 36.4 (55.3) (78.4) -- (97.3)
Equity in earnings (loss) of affiliated
companies, net of tax ................... 120.5 41.1 (19.9) (157.8) (16.1)
Minority interest ......................... -- -- (0.1) -- (0.1)
------ ------- -------- ------- --------
Net earnings (loss) before extraordinary loss . 68.1 120.8 37.3 (157.8) 68.4
Extraordinary loss ........................ (23.2) (0.3) -- -- (23.5)
------ ------- -------- ------- --------
Net earnings (loss) ........................... 44.9 120.5 37.3 (157.8) 44.9
Cumulative convertible preferred
stock dividend requirement .............. (0.4) -- -- -- (0.4)
Premium on repurchase of preferred stock .. (12.0) -- -- -- (12.0)
------ ------- -------- ------- --------
Net earnings (loss) attributable to
common stock ........................... $ 32.5 $ 120.5 $ 37.3 $(157.8) $ 32.5
====== ======= ======== ======= ========
</TABLE>
-11-
<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, 1998
---------------------------------------------------------------
Non- Viacom
Viacom Viacom Guarantor Inc.
Inc. International Affiliates Eliminations Consolidated
------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues .................................. $ 10.1 $ 345.9 $2,335.6 $ (6.0) $2,685.6
Expenses:
Operating ............................. 10.2 125.0 1,675.0 (6.0) 1,804.2
Selling, general and administrative ... 1.0 118.7 301.5 -- 421.2
Depreciation and amortization ......... .6 18.4 167.8 -- 186.8
------- ------- -------- ------- --------
Total expenses .................... 11.8 262.1 2,144.3 (6.0) 2,412.2
------- ------- -------- ------- --------
Operating income (loss) ................... (1.7) 83.8 191.3 -- 273.4
Other income (expense):
Interest expense, net ................. (127.5) (11.9) (14.7) -- (154.1)
Other items, net ...................... (2.6) 8.8 (2.6) -- 3.6
------- ------- -------- ------- --------
Earnings (loss) from continuing operations
before income taxes ................... (131.8) 80.7 174.0 -- 122.9
Benefit (provision) for income taxes .. 55.3 (33.9) (89.2) -- (67.8)
Equity in earnings (loss) of affiliated
companies, net of tax ............... 77.9 29.9 (11.0) (104.5) (7.7)
Minority interest ..................... -- 1.2 (1.0) -- .2
------- ------- -------- ------- --------
Net earnings (loss) from continuing
operations ............................ 1.4 77.9 72.8 (104.5) 47.6
Loss from discontinued operations ......... -- -- (46.2) -- (46.2)
------- ------- -------- ------- --------
Net earnings (loss) ...................... 1.4 77.9 26.6 (104.5) 1.4
Cumulative convertible preferred
stock dividend requirement .......... (15.0) -- -- -- (15.0)
------- ------- -------- ------- --------
Net earnings (loss) attributable to
common stock .......................... $ (13.6) $ 77.9 $ 26.6 $(104.5) $ (13.6)
======= ======= ======== ======= ========
</TABLE>
-12-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
March 31, 1999
-------------------------------------------------------------------
Non-
Viacom Viacom Guarantor Viacom Inc.
Inc. International Affiliates Eliminations Consolidated
----- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ....................... $ 13.7 $ 250.9 $ 118.1 $ -- $ 382.7
Receivables, net ................................ 8.4 266.5 1,224.9 (55.5) 1,444.3
Inventory ....................................... 13.1 133.9 1,549.0 -- 1,696.0
Other current assets ............................ 1.2 163.5 707.0 -- 871.7
---------- --------- --------- ---------- ---------
Total current assets ......................... 36.4 814.8 3,599.0 (55.5) 4,394.7
Property and equipment, at cost ..................... 14.3 624.6 4,040.2 -- 4,679.1
Less accumulated depreciation ................... 3.4 203.3 1,354.1 -- 1,560.8
---------- --------- --------- ---------- ---------
Net property and equipment ................... 10.9 421.3 2,686.1 -- 3,118.3
Inventory ........................................... -- 429.1 2,166.8 -- 2,595.9
Intangibles, at amortized cost ...................... 108.6 526.8 10,798.5 -- 11,433.9
Investments in consolidated subsidiaries ............ 5,916.8 15,378.0 -- (21,294.8) --
Other assets ........................................ 50.5 1,630.8 1,275.2 (1,445.9) 1,510.6
---------- --------- --------- ---------- ---------
$ 6,123.2 $19,200.8 $20,525.6 $(22,796.2) $23,053.4
========== ========= ========= ========== =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable ................................ $ -- $ 75.8 $ 419.1 $ (30.0) $ 464.9
Accrued compensation ............................ -- 81.6 182.9 -- 264.5
Participants' share, residuals and
royalties payable ........................... -- -- 1,059.4 -- 1,059.4
Income tax payable .............................. (16.1) 754.7 (42.2) (541.4) 155.0
Current portion of long-term debt ............... -- 18.3 113.9 -- 132.2
Accrued expenses and other ...................... 87.4 553.1 1,282.8 (132.9) 1,790.4
---------- --------- --------- ---------- ---------
Total current liabilities ..................... 71.3 1,483.5 3,015.9 (704.3) 3,866.4
Long-term debt ...................................... 3,661.6 1,408.8 542.5 -- 5,612.9
Other liabilities ................................... (13,229.5) 3,670.7 8,895.1 2,754.5 2,090.8
Shareholders' equity:
Convertible Preferred Stock ..................... $ -- $ 104.1 $ 20.4 $ (124.5) $ --
Common Stock .................................... 7.3 230.4 1,985.3 (2,215.7) 7.3
Additional paid-in capital ...................... 10,594.4 7,341.3 6,192.8 (13,534.1) 10,594.4
Retained earnings ............................... 6,050.1 4,942.4 (61.5) (8,972.1) 1,958.9
Accumulated other comprehensive
income (loss) ............................... -- 19.6 (64.9) -- (45.3)
---------- --------- --------- ---------- ---------
16,651.8 12,637.8 8,072.1 (24,846.4) 12,515.3
Less treasury stock, at cost .................... 1,032.0 -- -- -- 1,032.0
---------- --------- --------- ---------- ---------
Total shareholders' equity .............. 15,619.8 12,637.8 8,072.1 (24,846.4) 11,483.3
---------- --------- --------- ---------- ---------
$ 6,123.2 $19,200.8 $20,525.6 $(22,796.2) $23,053.4
========== ========= ========= ========== =========
</TABLE>
-13-
<PAGE>
VIACOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Tabular dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------------------------------------
Non-
Viacom Viacom Guarantor Viacom Inc.
Inc. International Affiliates Eliminations Consolidated
------ ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ........................... $ 406.4 $ 189.5 $ 171.4 $ -- $ 767.3
Receivables, net .................................... 9.5 319.5 1,458.0 (27.9) 1,759.1
Inventory ........................................... 11.5 131.9 1,662.1 -- 1,805.5
Other current assets ................................ .9 160.9 570.8 -- 732.6
---------- ---------- ---------- ---------- ----------
Total current assets ............................ 428.3 801.8 3,862.3 (27.9) 5,064.5
Property and equipment .................................. 13.6 602.3 3,921.1 -- 4,537.0
Less accumulated depreciation ....................... 3.0 188.6 1,265.9 -- 1,457.5
---------- ---------- ---------- ---------- ----------
Net property and equipment ...................... 10.6 413.7 2,655.2 -- 3,079.5
Inventory ............................................... -- 400.1 2,070.7 -- 2,470.8
Intangibles, at amortized cost .......................... 109.4 530.9 10,917.0 -- 11,557.3
Investments in consolidated subsidiaries ................ 5,796.0 15,701.9 -- (21,497.9) --
Other assets ............................................ 83.4 1,541.4 1,795.3 (1,979.1) 1,441.0
---------- ---------- ---------- ---------- ----------
$ 6,427.7 $ 19,389.8 $ 21,300.5 ($23,504.9) $ 23,613.1
========== ========== ========== ========== ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable .................................... $ -- $ 68.0 $ 474.4 $ (43.2) $ 499.2
Accrued compensation ................................ -- 144.4 265.9 -- 410.3
Participants' share, residuals and
royalties payable ................................. -- -- 1,227.5 -- 1,227.5
Income taxes payable ................................ -- 1,257.5 (139.7) (591.3) 526.5
Current portion of long-term debt ................... 282.4 13.5 81.3 -- 377.2
Accrued expenses and other .......................... 612.7 663.6 1,351.5 (35.9) 2,591.9
---------- ---------- ---------- ---------- ----------
Total current liabilities ......................... 895.1 2,147.0 3,260.9 (670.4) 5,632.6
---------- ---------- ---------- ---------- ----------
Long-term debt .......................................... 2,214.6 1,050.4 548.4 -- 3,813.4
Other liabilities ....................................... (12,834.8) 3,458.2 9,008.6 2,485.5 2,117.5
Shareholders' equity:
Convertible Preferred Stock ......................... 600.0 104.1 20.4 (124.5) 600.0
Common Stock ........................................ 7.3 228.7 1,985.3 (2,214.0) 7.3
Additional paid-in capital .......................... 10,519.6 7,545.4 6,676.9 (14,167.2) 10,574.7
Retained earnings ................................... 6,024.1 4,821.9 (98.8) (8,814.3) 1,932.9
Accumulated other comprehensive
income (loss) ..................................... -- 34.1 (101.2) -- (67.1)
---------- ---------- ---------- ---------- ----------
17,151.0 12,734.2 8,482.6 (25,320.0) 13,047.8
Less treasury stock, at cost ........................ 998.2 -- -- -- 998.2
---------- ---------- ---------- ---------- ----------
Total shareholders' equity .................... 16,152.8 12,734.2 8,482.6 (25,320.0) 12,049.6
---------- ---------- ---------- ---------- ----------
$ 6,427.7 $ 19,389.8 $ 21,300.5 ($23,504.9) $ 23.613.1
========== ========== ========== ========== ==========
</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, 1999
---------------------------------------------------------------
Non-
Viacom Viacom Guarantor Viacom Inc.
Inc. International Affiliates Eliminations Consolidated
------ ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash flow from operating activities ....... $ (351.6) $(514.3) $ (15.8) $ (43.4) $ (925.1)
-------- ------- ------- ------ --------
Investing Activities:
Capital expenditures ........................ -- (20.3) (124.9) -- (145.2)
Acquisitions, net of cash acquired .......... -- (.4) (100.5) -- (100.9)
Investments in and advances to
affiliated companies ...................... (5.7) (35.0) (40.7)
Purchases of short-term investments ......... -- (129.6) -- -- (129.6)
Proceeds from sales of short-term investments -- 123.5 -- -- 123.5
-------- ------- ------- ------ --------
Net cash flow from investing activities ....... -- (32.5) (260.4) -- (292.9)
-------- ------- ------- ------ --------
Financing Activities:
Net borrowings from banks ................... 1,437.1 361.0 20.9 -- 1,819.0
Repurchase of Preferred Stock ............... (612.0) -- -- -- (612.0)
Repayment of notes and debentures ........... (321.6) (1.5) -- -- (323.1)
Purchase of treasury stock and warrants ..... (49.5) -- -- -- (49.5)
Payment of capital lease obligations ........ -- (7.1) (13.3) -- (20.4)
Increase (decrease) in intercompany
payables .................................. (514.8) 256.1 215.3 43.4 --
Proceeds from exercise of stock options
and warrants .............................. 27.2 -- -- -- 27.2
Other, net .................................. (7.5) (.3) -- -- (7.8)
-------- ------- ------- ------ --------
Net cash flow from financing activities ....... (41.1) 608.2 222.9 43.4 833.4
-------- ------- ------- ------ --------
Net increase (decrease) in cash and
cash equivalents .......................... (392.7) 61.4 (53.3) -- (384.6)
Cash and cash equivalents at beginning
of period ................................. 406.4 189.5 171.4 -- 767.3
-------- ------- ------- ------ --------
Cash and cash equivalents at end of period .... $ 13.7 $ 250.9 $ 118.1 $ -- $ 382.7
======== ======= ======= ====== ========
</TABLE>
-15-
<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, 1998
--------------------------------------------------------------
Non-
Viacom Viacom Guarantor Viacom Inc.
Inc. International Affiliates Eliminations Consolidated
------ ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash flow from operating activities.......... $ 52.8 $(563.1) $ 244.3 $ -- $ (266.0)
------- -------- ------- ------ --------
Investing Activities:
Capital expenditures.......................... -- (18.8) (97.8) -- (116.6)
Acquisitions, net of cash acquired............ (11.1) -- (50.4) -- (61.5)
Investments in and advances to
affiliated companies........................ -- -- (28.1) -- (28.1)
Purchases of short-term investments........... -- (17.7) -- -- (17.7)
Proceeds from sales of short-term investments. -- 18.8 -- -- 18.8
Other, net.................................... -- 15.9 -- -- 15.9
------- ------ ------- ------ ---------
Net cash flow from investing activities.......... (11.1) (1.8) (176.3) -- (189.2)
-------- ------- ------- ------ ---------
Financing Activities:
Net borrowings from banks..................... 778.3 -- .8 -- 779.1
Repayment of notes and debentures ............ (150.0) (150.0) -- -- (300.0)
Payment of capital lease obligations.......... -- (4.8) (14.0) -- (18.8)
Increase (decrease) in intercompany
payables ................................... (396.4) 727.3 (330.9) -- --
Proceeds from exercise of stock options
and warrants ............................... 40.2 -- -- -- 40.2
Other, net.................................... (14.9) -- (1.6) -- (16.5)
-------- ------- ------- ------ --------
Net cash flow from financing activities.......... 257.2 572.5 (345.7) -- 484.0
-------- ------ ------- ------ --------
Net increase (decrease) in cash and
cash equivalents............................ 298.9 7.6 (277.7) -- 28.8
Cash and cash equivalents at beginning
of period................................... .1 91.5 200.7 -- 292.3
------- ------ ------- ------ --------
Cash and cash equivalents at end of period....... $ 299.0 $ 99.1 $ (77.0) $ -- $ 321.1
======= ====== ======= ====== ========
</TABLE>
-16-
<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, 1999 and 1998. Results for each
period presented exclude contributions from the Company's educational,
professional and reference publishing businesses ("Non-Consumer Publishing") and
music retail stores ("Music") which were sold on November 27, 1998 and October
26, 1998, respectively. (See Note 5 of Notes to Consolidated Financial
Statements).
Three months ended Percent
March 31, B/(W)
------------------- -----
1999 1998
---- ----
(In millions)
Revenues:
Networks .................................. $ 663.8 $ 544.7 22%
Entertainment.............................. 1,092.3 1,118.9 (2)
Video .................................... 1,113.0 931.2 20
Parks ..................................... 10.5 12.8 (18)
Publishing................................. 122.7 108.4 13
Online..................................... 4.7 2.2 114
Intercompany............................... (55.9) (32.6) (71)
--------- ---------
Total revenues.................... $ 2,951.1 $ 2,685.6 10
========= =========
Operating income (loss): (a)
Networks $ 172.7 $ 127.2 36%
Entertainment.............................. 113.1 127.6 (11)
Video...................................... 50.3 72.4 (31)
Parks...................................... (16.0) (15.1) (6)
Publishing................................. 1.3 0.1 NM
Online..................................... (1.0) 0.5 NM
--------- --------
Segment total ......................... 320.4 312.7 2
Corporate.................................. (42.9) (39.3) (9)
--------- ---------
Total operating income............ $ 277.5 $ 273.4 1
========= =========
(a) Operating income (loss) is defined as net earnings (loss) before
extraordinary loss (net of tax), loss from discontinued operations (net of
tax), minority interest, equity in loss of affiliated companies (net of
tax), provision for income taxes, other items (net) and interest expense
(net).
-17-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
EBITDA
The following table sets forth EBITDA (defined as operating income (loss) before
depreciation and amortization) for the three months ended March 31, 1999 and
1998. EBITDA does not reflect the effect of significant amounts of amortization
of goodwill related to business combinations accounted for under the purchase
method.
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)
------------------ -------
1999 1998
---- ----
(In millions)
EBITDA:
Networks .............................. $ 201.5 $ 150.3 34%
Entertainment.......................... 162.8 173.8 (6)
Video.................................. 145.1 167.2 (13)
Parks.................................. (2.7) (2.1) (29)
Publishing............................. 5.7 4.4 30
Online................................. (1.0) 0.5 NM
------- -------
Segment total...................... 511.4 494.1 4
Corporate.............................. (36.8) (33.9) (9)
------- -------
Total EBITDA................... $ 474.6 $ 460.2 3
======= =======
Results of Operations
Revenues increased 10% to $3.0 billion for the first quarter of 1999 from $2.7
billion for the first quarter of 1998, led primarily by double digit gains at
MTV Networks due to higher advertising and affiliate fees. Blockbuster Video
also recorded revenue increases of 20%, driven by strong consumer traffic and
the increase in the number of Company-owned video stores in operation in 1999.
Total expenses increased 11% to $2.7 billion for the first quarter of 1999 from
$2.4 billion for the first quarter of 1998 principally reflecting normal
increases associated with revenue growth as well increased advertising expenses
at Blockbuster.
EBITDA increased 3% to $474.6 million for the first quarter of 1999 from $460.2
million for the first quarter of 1998. Operating income increased 1% over the
prior year's first quarter to $277.5 million for the first quarter of 1999.
-18-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Segment Results of Operations
Networks (Basic Cable and Premium Subscription Television Program Services)
Three months ended Percent
March 31, B/(W)
------------------- --------
1999 1998
---- ----
(In millions)
Revenues...................... $ 663.8 $ 544.7 22%
Operating Income.............. $ 172.7 $ 127.2 36
EBITDA........................ $ 201.5 $ 150.3 34
The Networks segment is comprised of MTV Networks ("MTVN"), basic cable
television program services and Showtime Networks Inc. ("SNI"), premium
subscription television program services.
For the first quarter of 1999, MTVN revenues of $469.0 million, EBITDA of $172.0
million and operating income of $149.4 million increased 31%, 29% and 29%,
respectively. The increase in MTVN's revenues principally reflects double digit
advertising sales gains and affiliate fees at each of the domestic networks and
double digit advertising sales gains at MTVN International as well as the
continued success of MTVN's licensing programs, including Rugrats. Advertising
revenues were primarily driven by rate increases at Nickelodeon and higher unit
volume at MTV. MTVN's EBITDA and operating income gains were driven by the
increased revenues partially offset by increased programming, production and
marketing expenses.
SNI's revenues, EBITDA and operating income increased 5%, 44% and 58%,
respectively. The revenue increase was principally due to an increase of
approximately 2.7 million subscriptions over the prior year to 21.2 million
subscriptions at March 31, 1999. Operating results reflect revenue increases
attributable to the continued growth of direct broadcast satellite subscriptions
and lower marketing costs in the first quarter of 1999.
-19-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Entertainment (Motion Pictures, Television Programming, Television Stations,
International Channels, Movie Theaters and Music Publishing)
Three months ended Percent
March 31, B/(W)
--------------------- --------
1999 1998
---- ----
(In millions)
Revenues ................. $ 1,092.3 $ 1,118.9 (2)%
Operating Income ......... $ 113.1 $ 127.6 (11)
EBITDA ................... $ 162.8 $ 173.8 (6)
The Entertainment segment is comprised of Paramount Pictures, Paramount
Television, Spelling Entertainment Group Inc. ("Spelling"), the Paramount
Stations Group ("PSG"), Paramount's movie theaters, music publishing and
international channels.
For the first quarter of 1999, Entertainment revenues primarily reflect the
strong performance of Paramount Features, led by the domestic theatrical release
of VARSITY BLUES and PAYBACK, the foreign theatrical release of STAR TREK:
INSURRECTION, higher domestic home video revenues led by contributions from
SNAKE EYES and THE TRUMAN SHOW, higher television revenues from the recognition
of a license of pay television rights for library products and the renewal of a
film processing agreement. These contributions did not match the extraordinary
box office success of TITANIC in the first quarter of 1998. Paramount Features'
operating income and EBITDA increased reflecting the revenue items noted above.
Paramount's television programming operating income and EBITDA decreased
principally due to higher production deficits resulting from more network shows
and also lower syndication revenues.
Spelling's revenues of $185.0 million increased 11% and EBITDA of $18.8 million
increased 69% over the prior year's quarter, principally due to Spelling's focus
on its core business of television production and distribution, resulting in
higher per episode network license fees for continuing series, increased hours
of programming delivered to the networks and improved performance of its
first-run syndication products, including JUDGE JUDY.
PSG's revenues of $96.3 million remained constant, and EBITDA and operating
income increased 15% and 25%, respectively, primarily reflecting lower operating
expenses.
-20-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Video (Home Video and Game rental and retail)
Three months ended Percent
March 31, B/(W)
-------------------- -------
1999 1998
---- ----
(In millions)
Revenues .................. $1,113.0 $ 931.2 20%
Operating Income .......... $ 50.3 $ 72.4 (31)
EBITDA .................... $ 145.1 $ 167.2 (13)
The Video segment is comprised of Blockbuster Video, operating in the home video
and video game rental and retailing business.
Video revenues increased 20% driven by strong consumer traffic and the increased
number of Company-owned video stores in operation in 1999 as compared to 1998.
Domestic same store rental revenues, including sales of previously viewed tapes
and games ("PVT"), rose 23%. Without the inclusion of PVT revenues, domestic
same store rental revenues increased 17% in the first quarter of 1999. Worldwide
same store sales, which include retail and rental product, increased 17%, paced
by 20% higher domestic same store sales. The decreases in operating income and
EBITDA reflected increased advertising expenses and increased cost of sales.
Cost of sales for the first quarter of 1998 did not reflect the change in
accounting methodology, adopted in the second quarter of 1998, associated with
the new revenue sharing model. Blockbuster increased advertising expenses in the
first quarter as it continued to emphasize tape copy depth, promote its new
loyalty program designed to reward customer frequency and enhance its market
share. Video's gross margin percentage decreased to 60.3% for the first quarter
of 1999 from 64.9% for the first quarter of 1998 due to the impact of revenue
sharing agreements which were not fully established in the prior year's quarter
and increased promotional activity. Blockbuster Video ended the first quarter
with 6,499 stores, a net increase of 481 stores over the first quarter of 1998.
-21-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Parks (Theme Parks)
Three months ended Percent
March 31, B/(W)
-------------------- -------
1999 1998
---- ----
(In millions)
Revenues ................... $ 10.5 $ 12.8 (18)%
Operating Loss ............. $(16.0) $ (15.1) (6)
EBITDA ..................... $ (2.7) $ (2.1) (29)
The Parks segment is comprised of five regional theme parks and a themed
attraction in the U.S. and Canada.
The Parks begin full time operations during the second quarter and therefore,
record the majority of revenues, EBITDA and operating income during the second
and third quarters.
Publishing (Consumer Publishing)
Three months ended Percent
March 31, B/(W)
------------------- -------
1999 1998
---- ----
(In millions)
Revenues ................ $ 122.7 $ 108.4 13%
Operating Income ........ $ 1.3 $ 0.1 NM
EBITDA .................. $ 5.7 $ 4.4 30
The Publishing segment is comprised of Simon & Schuster which includes imprints
such as Pocket Books, Scribner and The Free Press.
For the quarter ended March 31, 1999, the improved revenues and operating
results are due principally to increased sales in the Pocket Books and
Children's divisions. The Consumer Group's best selling titles in the first
quarter of 1999 included JEWEL by Bret Lott, OLIVIA by V.C. Andrews, and
YESTERDAY I CRIED by Iyanla Vanzant. Publishing typically has seasonally
stronger operating results in the second half of the year.
-22-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Online (Interactive Online Services)
Three months ended Percent
March 31, B/(W)
------------------- -------
1999 1998
---- ----
(In millions)
Revenues .................. $ 4.7 $ 2.2 114%
Operating Income (loss) ... $ (1.0) $ 0.5 NM
EBITDA .................... $ (1.0) $ 0.5 NM
The Online segment is comprised of online music and children destinations
featuring entertainment, information, community tools and e-commerce.
Revenues increased 114% to $4.7 million for the first quarter of 1999 from $2.2
million for the prior year period reflecting increased license fees and higher
advertising revenues. The operating loss of $1.0 million in the first quarter of
1999, as compared with operating income of $0.5 million in the prior year
period, reflects the increased investment in the Company's online services.
In February 1999, the Company acquired Imagine Radio, an Internet radio company
transmitting original radio stations offering listeners various customization
features from a wide range of formats. The Company also owns Nvolve, Inc., a Web
site developer and Red Rocket, an online education toy retailer.
Other Income and Expense Information
Corporate expenses
Corporate expenses including depreciation and amortization expense increased 9%
to $42.9 million for the first quarter of 1999 from $39.3 million for 1998
reflecting a slight increase in Year 2000 expenses for the period.
Interest expense, net
Net interest expense decreased 39% to $94.3 million for the first quarter of
1999 from $154.1 million for the first quarter of 1998. The Company had
approximately $5.7 billion and $8.3 billion principal amount of debt outstanding
(including current maturities) as of March 31, 1999 and March 31, 1998,
respectively, at weighted average interest rates of 6.7% and 7.5%, respectively.
Provision for income taxes
The provision for income taxes represents federal, state and foreign income
taxes on earnings before income taxes. The estimated effective tax rates of
53.5% for 1999 and 55.2% for 1998 were both adversely affected by amortization
of intangibles in excess of amounts which are deductible for tax purposes.
Excluding the non-deductible amortization of intangibles, the estimated
effective tax rates would have been 37.0% for 1999 and 34.4% for 1998.
-23-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Equity in loss of affiliates
"Equity in loss of affiliated companies, net of tax" was $16.1 million for the
first quarter of 1999 as compared to $7.7 million for the first quarter of 1998,
principally reflecting increased losses of United Paramount Network partially
offset by the improved performance of Comedy Central.
Minority interest
Minority interest primarily represents the minority ownership of Spelling common
stock.
Discontinued operations
For the three months ended March 31, 1998, discontinued operations reflect the
net losses of Non-Consumer Publishing and Music which were sold on November 27,
1998 and October 26, 1998, respectively.
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 and interest on its outstanding
indebtedness) with internally generated funds, in addition to various external
sources of funds. The external sources of funds may include the Company's
existing Credit Agreements and amendments thereto, co-financing arrangements by
the Company's various divisions relating to the production of entertainment
products and/or additional financings.
At March 31, 1999, 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 1999.
The Company's scheduled maturities of indebtedness through December 31, 2003,
assuming full utilization of the March 1997 Credit Agreements, as amended, are
$952 million (1999), $1.7 billion (2000), $1.8 billion (2001), $2.0 billion
(2002) and $350 million (2003). The Company's maturities of long-term debt
outstanding at March 31, 1999, excluding capital leases, are $529 million
(1999), $381 million (2000), $305 million (2001), $519 million (2002) and $350
million (2003). As of March 31, 1999, 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, 1999 and are estimated to aggregate
approximately $1.3 billion, principally reflect SNI's commitments of
approximately $1.0 billion for the acquisition of programming rights and the
production of original programming and exclude intersegment commitments between
the Networks and Entertainment segments of approximately $790 million. The
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 to acquire programming rights are contingent
-24-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
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 decreased to $4.4 billion as of March 31, 1999 from $5.1 billion
as of December 31, 1998, primarily reflecting the use of cash to repurchase
convertible preferred stock and normal seasonal reductions in receivables. The
allowance for doubtful accounts as a percentage of receivables increased to 7%
as of March 31, 1999 from 5% as of December 31, 1998. The change in property and
equipment principally reflects capital expenditures of $145.2 million related to
capital additions for new and existing video stores, construction of new movie
theaters and additional construction and equipment upgrades for the Parks offset
by depreciation expense of $114.2 million. Current liabilities decreased
approximately 31% to $3.9 billion as of March 31, 1999 from $5.6 billion as of
December 31, 1998, reflecting the payment of taxes associated with the sale of
Non-Consumer Publishing, payment of accrued expenses and settlement of the 8.0%
Merger Debentures. Long-term debt, including current maturities, increased $1.5
billion to $5.7 billion as of March 31, 1999 from $4.2 billion as of December
31, 1998 primarily reflecting the tax payments discussed above and the continued
investment in and seasonality of the Company's businesses.
The Company expects to record the majority of its operating cash flows during
the second half of the year due to the positive effect of the holiday season on
advertising revenues and video store revenues, the summer operation of its parks
and the seasonality of the consumer publishing business. Net cash flow from
operating activities of negative $925.1 million for the three months ended March
31, 1999 principally reflects the first quarter 1999 tax payment related to the
sale of Non-Consumer Publishing and the settlement of the 8.0% Merger
Debentures. First quarter 1998 net operating cash flow of negative $266.0
million reflects the reduction in accounts receivable due principally to the
asset securitization program and improved operating performance including the
impact of Titanic, offset by the tax payment related to the sale of USA Networks
and payment of accrued expenses. Net cash expenditures for investing activities
of $292.9 million for the three months ended March 31, 1999 principally reflects
capital expenditures and acquisitions of video stores and a television station.
Net cash expenditures for investing activities of $189.2 million, for the three
months ended March 31 1998, principally reflect capital expenditures. Financing
activities principally reflect borrowings and repayments of debt during each
period presented. Financing activities for the first quarter of 1999 also
reflect the repurchase of convertible preferred stock.
-25-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Capital Structure
The following table sets forth the Company's long-term debt, net of current
portion:
At March 31, 1999 At December 31, 1998
----------------- --------------------
(In millions)
Notes payable to banks................. $ 2,646.1 $ 848.3
Senior debt............................ 2,309.6 2,308.9
Senior subordinated debt............... 35.3 36.3
Subordinated debt...................... 193.6 475.2
Obligations under capital leases....... 519.2 501.4
Other.................................. 41.3 20.5
--------- ---------
5,745.1 4,190.6
Less current portion................... 132.2 377.2
--------- ---------
$ 5,612.9 $ 3,813.4
========= =========
The notes and debentures are presented net of an aggregate unamortized discount
of $27.0 million as of March 31, 1999 and $56.0 million as of December 31, 1998.
On May 6, 1999, the 364-day film financing credit agreement, guaranteed by
Viacom International Inc. and the Company, was paid in full and on May 7, 1999,
the credit agreement terminated.
Debt, including the current portion, as a percentage of total capitalization of
the Company was 33% at March 31, 1999 and 26% at December 31, 1998.
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. The foreign exchange contracts have principally been used to hedge
the British Pound, the Australian Dollar, the Japanese Yen, the Canadian Dollar,
the Singapore Dollar, the European Union's common currency (the "Euro") and the
European Currency Unit/British Pound relationship. These derivatives, which are
over-the-counter instruments, are non-leveraged. Realized gains and losses on
contracts that hedge anticipated future cash flows are recognized in "other
items, net" and were not material in the periods presented.
The Company filed a shelf registration statement with the Securities and
Exchange Commission registering debt securities, preferred stock and contingent
value rights of the Company 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 the Company 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 $1.55 billion of notes and debentures and has $1.45 billion
remaining availability under the shelf registration statement.
-26-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Other Matters
On May 6, 1999, Blockbuster Inc., a wholly owned subsidiary of the Company,
filed a registration statement on Form S-1 with the Securities and Exchange
Commission for a proposed initial public offering of its Class A common stock.
On March 24, 1999, the Company initiated a repurchase program which was
subsequently expanded, to acquire up to $600 million of the Company's common
stock and warrants. As of March 31, 1999, the Company had repurchased 1,113,600
shares of Class B Common Stock for approximately $46.5 million. As of May 13,
1999, the Company had repurchased 25,000 shares of Class A Common Stock,
6,837,300 shares of Class B Common Stock and 508,400 Viacom Five-Year Warrants,
expiring July 7, 1999, for approximately $304.6 million in the aggregate.
At May 13, 1999 and March 31, 1999, respectively, there were 5,507,274 and
6,032,637 outstanding Viacom Five-Year Warrants, expiring July 7, 1999.
On May 17, 1999, the Company and Spelling Entertainment Group Inc. ("Spelling")
announced that they have entered into a definitive merger agreement for the
Company's purchase of the shares of Spelling's common stock that it does not
already own, approximately 20%, for $9.75 per share in cash. The Spelling Board
of Directors approved the merger agreement after approval by a special committee
of independent directors, which was advised by separate legal and financial
advisors. The merger agreement provides for the commencement of a tender offer
by the Company by Friday, May 21, 1999. Under the terms of the merger agreement,
each Spelling share that is not purchased in the offer will be acquired by
merger as soon as practical thereafter in a second step merger, also for $9.75
per share.
The Board of Directors of the Company declared a 2-for-1 common stock split in
the form of a dividend. The additional shares were issued on March 31, 1999 to
shareholders of record on March 15, 1999. All common share and per share amounts
have been adjusted to reflect the stock split for all periods presented.
On January 5, 1999, the Company repurchased the remaining outstanding shares of
its convertible preferred stock from Bell Atlantic Corporation for $612 million
in cash.
Year 2000
Overview
The widespread use of computer programs that rely on two-digit dates to perform
computations and decision making functions may cause computer systems to
malfunction prior to or in the year 2000 ("Y2K") and lead to significant
business delays and disruptions in the U.S. and internationally. In December
1997, the Company formalized its Y2K initiative to optimize the divisional Y2K
efforts that had already begun, by developing a Company wide program to identify
and mitigate Y2K risks. Pursuant to this program, each of the Company's
principal business units developed programs to address Y2K exposures. In
addition, under the direction of its Board of Directors, the Company has
designated a committee of senior officers to oversee these programs and has
engaged an independent
-27-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
consulting firm to assist in the review and oversight. At present the Company
anticipates completing its program to have substantially all critical and
non-critical systems compliant prior to the end of the third quarter of 1999.
The Company is reviewing its Y2K issues based upon three areas: applications,
infrastructure and business partners.
o Applications cover the software systems resident on mainframe, mid-range,
network and personal computers. The Company defines an application as one
or a collection of programs directly related to a common system. For
example, a financial application may include all the general ledger and
accounts receivable software code used to process information throughout
an operating segment. In addition, the Company's applications have been
segregated into critical and non-critical applications. Critical
applications are software systems which, if not operational, could have a
material impact on business operations.
o Infrastructure includes computers, data and voice communications networks,
and other equipment which use embedded chip processors (e.g., inventory
movement systems, tape duplication equipment, telephone systems etc.).
o Business partners include third party vendors, customers and other
entities whose systems may interface with the Company or whose own
operations are important to the Company's daily operations.
These three areas have been addressed using a five phase program: inventory,
assessment, remediation, testing and contingency planning.
o Phase 1 inventories the respective applications, hardware and business
partners.
o Phase 2 assesses the possible impact of a Y2K error on the continuing
operation of each identified application, hardware systems or business
partner relationship; and subsequently determines the risk to operations
and assigns priorities.
o Phase 3 establishes and implements specific plans for the remediation of
applications and hardware systems and for the determination of business
partners' compliance.
o Phase 4 tests each application and hardware system and reviews business
partners' compliance under the plans established in phase 3, to ensure
that Y2K issues no longer exist.
o Phase 5 establishes and implements contingency plans in the event internal
or external systems are not compliant.
Changes may occur to the Company's operations during the implementation of its
Y2K program or subsequent to the completion of each phase, therefore, management
may periodically revise its plans. The Company continues to review and test
systems for Y2K compliance as changes occur.
-28-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
State of Readiness
The Company's Y2K progress as of April 30, 1999 is as follows:
Applications
The inventory and assessment phases for the Company have been completed.
Applications status of each operating segment is discussed below.
Networks, Corporate, Online - We have identified 15 critical domestic and 29
critical international applications which primarily relate to program
scheduling, finance/payroll and network transmission. The majority of critical
domestic applications have been remediated and tested and the remaining systems
are scheduled for completion during the second quarter of 1999. International's
critical applications are currently being remediated and testing is scheduled
for completion in the second and third quarters of 1999. A significant number of
domestic and international non-critical applications have been remediated and
tested and the remaining applications are scheduled for completion in the second
quarter of 1999.
Entertainment - We have identified 71 critical domestic and 50 critical
international applications which primarily relate to theatrical and video
distribution, TV syndication, theater point-of-sale and finance/payroll. A
significant number of critical and non-critical worldwide applications have been
remediated and tested and substantially all of the remaining systems are
scheduled for completion during the second and third quarters of 1999.
Video - We have identified 16 critical domestic and 6 critical international
applications which primarily relate to point-of-sale, warehousing and
distribution and finance/payroll. A significant number of critical and
non-critical worldwide applications have been remediated and tested and the
remaining applications are scheduled for completion during the second and third
quarters of 1999.
Publishing - We have identified 13 critical domestic applications which
primarily relate to order processing, warehousing and billing. The majority of
critical domestic applications have been remediated and tested and the remaining
systems are scheduled for completion in the second and third quarters of 1999. A
significant number of non-critical applications have been remediated and tested
and the remaining systems are scheduled for completion in the second and third
quarters of 1999.
Parks - We have identified 20 critical domestic and 4 critical international
applications which primarily relate to point-of-sale, ticketing and
finance/payroll. All critical worldwide applications have been remediated and
tested. A significant number of non-critical applications have been remediated
and tested and the remaining systems are scheduled to be completed in the second
quarter of 1999.
-29-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Infrastructure
Infrastructure status of each operating segment is discussed below.
Networks, Corporate, Online - The inventory and assessment phases for domestic
and international operations have been completed. The majority of the
remediation and testing of domestic and international hardware systems have been
completed. The remaining infrastructure systems will be completed by the third
quarter of 1999.
Entertainment - The inventory and assessment phases for domestic computer
systems have been completed. The inventory and assessment of the remaining
non-computer domestic systems (e.g., studio production facilities and equipment)
will be completed by the second quarter of 1999. International's inventory and
assessment phases are substantially complete; the remainder will be completed by
the second quarter of 1999. Worldwide remediation and testing of infrastructure
systems will be completed in the second and third quarters of 1999.
Video - Domestic and international inventory and assessment phases have been
completed. The majority of the systems with embedded processors have completed
remediation and testing. The remaining hardware systems will be completed during
the second and third quarters of 1999.
Publishing - The inventory and assessment phases have been completed. A
substantial number of hardware systems have been remediated and tested; the
remaining systems are scheduled for completion during the second and third
quarters of 1999.
Parks - The inventory and assessment phases have been completed. Substantially
all systems with embedded processors have been remediated and tested. The
remainder are scheduled for remediation and testing during the second quarter of
1999.
Business Partners
During the course of business operations, the Company relies on third party
business partners to provide raw materials and services and to distribute and
sell products. These business partners include financial institutions,
governmental agencies and utilities. The disruption of the ability to receive
raw materials or services or to distribute or sell the Company's products could
adversely affect the financial condition of the Company. Although the Company
has little or no control over the remediation and testing of these third party
systems, the Company is taking appropriate action to determine the level of Y2K
compliance at each third party. These actions include, but are not limited to,
requesting written confirmation of a business or business system's Y2K
compliance; directly meeting with business management; and, performing
additional independent tests.
The Company has substantially completed the inventory phase and is in the
assessment phase of business partners and expects this phase to be completed by
the second quarter of 1999. The determination of third party Y2K compliance will
continue through the end of the year.
-30-
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Contingency Plans and Risks
As the remediation, testing and review of each application, infrastructure item
and business partners occur, the Company is determining the need for contingency
plans. Where appropriate, plans addressing both operational and technical
alternatives are being developed. This phase has begun and will continue through
the end of 1999.
The Company's goal is to achieve timely and substantial Y2K compliance, with
remediation work assigned based upon how critical each system is to the
Company's business. Due to the general uncertainty inherent in the Y2K problem
resulting in part from the uncertainty of compliance by the Company's principal
business partners and third party providers, the Company is unable to determine
at this time what the consequences of Y2K may be. Also, the Company's
international operations may be adversely affected by failures of businesses in
other parts of the world to take adequate steps to address the Y2K problem. The
Company will continue to devote the necessary resources to complete its Y2K
program and contingency plans and believes that the completion of its Y2K
program and contingency plans will significantly mitigate operational and
financial risks.
Costs
Y2K costs have been expensed as incurred, except those costs directly related to
the replacement of systems requiring upgrades in the ordinary course of business
which have been capitalized. As of April 30, 1999, the Company had incurred
costs of approximately $37.1 million, of which $8.9 million has been
capitalized. The estimated additional costs to complete the Y2K program are
currently expected to approximate $20.1 million, of which approximately $4.9
million are expected to be capitalized. Based on these amounts, the Company does
not expect the costs of the Y2K program to have a material effect on its results
of operations, financial position or liquidity.
-31-
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11 Statement re Computation of Net Earnings Per Share
27 Financial Data Schedule.
(b) Reports on Form 8-K for Viacom Inc.
None.
-32-
<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 17, 1999 /s/ Sumner M. Redstone
-------------------------- -----------------------------------
Sumner M. Redstone
Chairman of the Board of Directors,
Chief Executive Officer
Date May 17, 1999 /s/ George S. Smith, Jr.
-------------------------- -----------------------------------
George S. Smith, Jr.
Senior Vice President,
Chief Financial Officer
-33-
<PAGE>
Exhibit Index
11 Statement re Computation of Net Earnings Per Share
27 Financial Data Schedule
-35-
Exhibit 11
Viacom Inc. and Subsidiaries
Computation of Net Earnings (Loss) Per Share
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1999 1998
---- ----
(In millions, except per share amounts)
<S> <C> <C>
Earnings (loss):
Earnings from continuing operations.......................... $ 68.4 $ 47.6
Cumulative convertible preferred stock dividend
requirement................................................ (0.4) (15.0)
Premium on redemption of preferred stock..................... (12.0) --
------ ------
Earnings from continuing operations attributable to common
stock .................................................... 56.0 32.6
Loss from discontinued operations, net of tax................ -- (46.2)
Extraordinary loss, net of tax............................... (23.5) --
------ ------
Net earnings (loss) attributable to common stock............. $ 32.5 $(13.6)
====== ======
Basic computation:
Shares:
Weighted average number of common shares..................... 696.1 710.5
====== ======
Net earnings (loss) per common share:
Earnings from continuing operations.......................... $ 0.08 $ 0.05
Loss from discontinued operations, net of tax................ -- (0.07)
Extraordinary loss, net of tax............................... (0.03) --
------ ------
Net earnings (loss).......................................... $ 0.05 $(0.02)
====== ======
Diluted computation:
Shares:
Weighted average number of common shares (basic)............. 696.1 710.5
Common shares potentially issuable in connection with
stock options and warrants:............................. 15.0 7.5
------ ------
Weighted average number of common shares (diluted)........... 711.1 718.0
====== ======
Net earnings (loss) per common share:
Earnings from continuing operations.......................... $ 0.08 $ 0.05
Loss from discontinued operations, net of tax................ -- (0.07)
Extraordinary loss, net of tax............................... (0.03) --
------ ------
Net earnings (loss).......................................... $ 0.05 $(0.02)
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF VIACOM INC. FOR THE THREE MONTHS ENDED MARCH
31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS. EARNINGS PER SHARE ARE PRESENTED IN ACCORDANCE WITH SFAS 128.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 383
<SECURITIES> 0
<RECEIVABLES> 1,549
<ALLOWANCES> 105
<INVENTORY> 1,696
<CURRENT-ASSETS> 4,395
<PP&E> 4,679
<DEPRECIATION> 1,561
<TOTAL-ASSETS> 23,053
<CURRENT-LIABILITIES> 3,866
<BONDS> 5,613
0
0
<COMMON> 7
<OTHER-SE> 11,476
<TOTAL-LIABILITY-AND-EQUITY> 23,053
<SALES> 2,951
<TOTAL-REVENUES> 2,951
<CGS> 1,952
<TOTAL-COSTS> 2,674
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> 182
<INCOME-TAX> 97
<INCOME-CONTINUING> 68
<DISCONTINUED> 0
<EXTRAORDINARY> (24)
<CHANGES> 0
<NET-INCOME> 45
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
