UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|
| | | | | | | |
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
For fiscal year ended December 31, 2019
|
| | | | | | | |
| OR |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the transition period from to |
Commission File Number 001-09553
ViacomCBS Inc.
(Exact name of registrant as specified in its charter)
|
| | | | | | | | | | | | | |
| Delaware | | 04-2949533 |
(State or other jurisdiction of
incorporation or organization)
| | (I.R.S. Employer Identification No.) |
|
| | | | | | | | | | | | | |
| 1515 Broadway | |
| New York, | New York | 10036 | |
(212) 258-6000
(Address, including zip code, and telephone numbers, including
area code, of registrant’s principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
|
| | | | | | | | | | | | | | | | | | | |
| Title of Each Class | | Trading Symbols | | | Name of Each Exchange on
Which Registered
| |
| Class A Common Stock, $0.001 par value | VIACA | VIACA | | | The Nasdaq Stock Market LLC | |
| Class B Common Stock, $0.001 par value | VIAC | VIAC | | | The Nasdaq Stock Market LLC | |
| 5.75% Series A Mandatory Convertible Preferred Stock, $0.001 par value | | VIACP | | | The Nasdaq Stock Market LLC | |
Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act of 1933). Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Large accelerated filer | ☒ | | Accelerated filer | ☐ | | Non-accelerated filer | ☐ | | Smaller reporting company | ☐ | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ☐ No ☒
As of June 28, 2019,30, 2021, which was the last business day of the registrant’s most recently completed second fiscal quarter, the market value of the shares of the registrant’s Class A Common Stock, $0.001 par value (“Class A Common Stock”), held by non-affiliates was approximately $243,415,727$446,099,935 (based upon the closing price of $50.04$48.45 per share as reported by the New YorkThe Nasdaq Stock ExchangeMarket LLC on that date) and the market value of the shares of the registrant’s Class B Common Stock, $0.001 par value (“Class B Common Stock”), held by non-affiliates was approximately $16,424,348,923$25,906,496,345 (based upon the closing price of $49.90$45.20 per share as reported by the New YorkThe Nasdaq Stock ExchangeMarket LLC on that date); and the aggregate market value of the shares of both Class A Common Stock and Class B Common Stock held by non-affiliates was $16,667,764,650.$26,352,596,280.
As of February 14, 2020, 52,268,43810, 2022, 40,707,486 shares of Class A Common Stock and 561,471,552607,877,188 shares of Class B Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of ViacomCBS Inc.’s Notice of 20202022 Annual Meeting of Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934 (Part III).
VIACOMCBS INC.
TABLE OF CONTENTS
| | | | | | | | | | | | | | |
| | | | Page |
| | | | |
| | PART I | | |
| Item 1. | | | | |
| | | | |
| Item 1A. | | | | |
| | | | |
| Item 1B. | | | | |
| | | | |
| Item 2. | | | | |
| | | | |
| Item 3. | | | | |
| | | | |
| Item 4. | | | | |
| | | | |
| | | | |
| | PART II | | |
VIACOMCBS INC.
TABLE OF CONTENTS
|
| | | | |
| Item 5. | | | | Page |
| | | | |
| | PART I | | |
Item 1. | | | | |
| | | | |
Item 1A. | | | | |
| | | | |
Item 1B. | | | | |
| | | | |
Item 2. | | | | |
| | | | |
Item 3. | | | | |
| | | | |
Item 4. | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | PART II | | |
| | | | |
Item 5. | | | | |
| | | | |
| | | | |
| | | | |
Item 6.7. | | | | |
| | | | |
Item 7. | | | | |
| | | | |
| Item 8. | | | | |
| | | | |
| Item 9. | | | | |
| | | | |
| Item 9A. | | | | |
| | | | |
| Item 9B. | | | | |
| | | | |
| Item 9C. | | PART III | | |
| | | | |
| | PART III | | |
| | | | |
| Item 10. | | | | |
| | | | |
| Item 11. | | | | |
| | | | |
| Item 12. | | | | |
| | | | |
| Item 13. | | | | |
| | | | |
| Item 14. | | | | |
| | | | |
| | PART IV | | |
| | | | |
| Item 15. | | | | |
| | | | |
| Item 16. | | | | |
| | | | |
| | | | |
| | | | |
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains both historical and forward-looking statements, including statements related to our future results and performance. All statements that are not statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements. These forward-looking statements reflect our current expectations concerning future results and events; generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “may,” “could,” “estimate” or other similar words or phrases; and involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause our actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied by these statements. These risks, uncertainties and other factors are discussed in “Item 1A. Risk Factors” below and elsewhere in this Annual Report on Form 10-K. Other risks, uncertainties or other factors, or updates to those discussed herein may be described in our other filings with the SEC, including our reports on Form 10-Q and Form 8-K, press releases, public conference calls, webcasts, our social media and blog posts and on our investor relations website at ir.ViacomCBS.com. There may be additional risks, uncertainties and other factors that we do not currently view as material or that are not necessarily known. The forward-looking statements included in this Annual Report on Form 10‑K are made only as of the date of this document, and we do not undertake any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.
PART I
OVERVIEW
ViacomCBS Inc. (“ViacomCBS”) is
We are a leading global media and entertainment company that creates premium content and experiences for audiences worldwide. We operateoffer broadcast and cable television programming, innovative streaming services and digital video products, provide powerful capabilities in production, distribution and advertising solutions, and have one of the industry’s most extensive libraries of television and film titles. Our portfolio of iconic consumer brands includes Paramount+, Pluto TV, CBS, Showtime Networks, Paramount Pictures, Nickelodeon, MTV, Comedy Central and BET. Effective February 16, 2022, we are changing our name to Paramount Global, a name that represents our rich and storied history in entertainment and embraces our transition into the future.
Our global ecosystem of pay, free and premium streaming services grew significantly in 2021. Global streaming subscribers grew to 56.1 million as of December 31, 2021, an 88% increase year-over-year. We rebranded CBS All Access as Paramount+, our subscription streaming service that combines live sports, news and entertainment content, reaching 32.8 million global subscribers as of December 31, 2021. Pluto TV, our free advertising-supported streaming television (“FAST”) service, surpassed $1 billion in revenue for the year and reached 64.4 million global monthly active users (“MAUs”) for December 2021, a 49% increase year-over-year. We are investing in and scaling our streaming ecosystem through compelling content, broad distribution and international expansion.
In 2021, we demonstrated the continued breadth and depth of our content capabilities across broadcast and cable television, streaming and film. We attracted viewers domestically with sports, news and live events, including the National Football League (the “NFL”) and Union of European Football Associations (“UEFA”) games, 60 Minutes and Adele One Night Only. Hit movies included A Quiet Place Part II, which launched in theaters and on Paramount+ following a 45-day theatrical window, and PAW Patrol: The Movie and Clifford the Big Red Dog,which in the United States (“U.S.”) were released “day and date” in theaters and on Paramount+.CBS remained the most-watched network in Daytime and Late Night, and we had more top 25 original cable series among key demographics than any other cable family. We are working to leverage our successful linear content to drive growth in streaming. 1883, Taylor Sheridan’s prequel to Yellowstone, debuted in 2021 as both the most watched
original scripted drama on Paramount+ and, as part of a special airing on Paramount Network, the highest rated cable series premiere since 2015.
From our studios to streaming, we focused on expanding our global footprint and building key partnerships in 2021. We launched Pluto TV in Italy and announced plans to launch in the Nordics in 2022. We announced a strategic partnership to launch Paramount+ on Sky platforms in certain western European countries, as well as a joint venture with Comcast to launch SkyShowtime, a new streaming service expected to be available in more than 20 European territories. We acquired a majority stake in Fox TeleColombia & Estudios TeleMexico, which, when combined with production capabilities of ViacomCBS International Studios (“VIS”) and our broadcasters Televisión Federal S.A. (“Telefe”) and Chilevisión, solidified our status as a leading global Spanish-language content creator.
Our traditionalbusiness remained strong in 2021, where affiliate revenues continued to benefit from expanded distribution and advertising revenues benefited from an improved marketplace and EyeQ, our digital advertising platform that reaches millions of full-episode monthly unique viewers in the U.S. We entered into comprehensive agreements with key distributors that included our portfolio of streaming services, in addition to continued carriage of our cable and broadcast television networks.
In 2021, we continued to execute on our commitment to divest noncore assets, including CBS’ former headquarters, commonly known as Black Rock, as well as CBS Studio Center in Los Angeles, California. And in March 2021, we completed public equity offerings in which we raised approximately $2.7 billion in net proceeds. These transactions increased our ability to invest in our strategic growth priorities, including streaming.
We continued our commitment to diversity, equity and inclusion (“DE&I”) in 2021. We hosted our third annual Global Inclusion Week, a weeklong initiative featuring conversations, panels and workshops designed to ensure our workforce and culture reflect, celebrate and elevate the diversity of our audiences and communities. We also launched Content for Change, a companywide initiative designed to use the power of our content, creative supply chain and culture to counteract the narratives that enable racism, bias, stereotypes and hate. Building on our 2020 companywide Materiality Assessment and first Environmental, Social and Governance (“ESG”) Report, in 2021 we released our second ESG Report, which included our first set of overarching goals across our three environmental, social and governance pillars. We also hosted our 25th annual Community Day, the second consecutive fully virtual event, which is a global day of community service focused on causes and issues that resonate with our employees and audiences.
In 2021, we operated through the following four segments:
| |
• | •TV Entertainment. Our TV Entertainment segment creates and acquires programming for distribution and viewing on multiple media platforms, including our broadcast network, through multichannel video programming distributors (“MVPDs”) and virtual MVPDs, and our streaming services, as well as for licensing to third parties both domestically and internationally. TV Entertainment consists of the CBS Television Network™, CBS Television Studios®, CBS Television Distribution®, CBS Interactive®, CBS Sports Network®, CBS Television Stations™ and CBS-branded streaming services CBS All Access® and CBSN®, among others. |
| |
• | Cable Networks. OurCable Networks segment creates and acquires programming for distribution and viewing on multiple media platforms, including our cable networks, through MVPDs and virtual MVPDs, and our streaming services, as well as for licensing to third parties both domestically and internationally. Cable Networks consists of our premium subscription cable networks Showtime®, The Movie Channel® and Flix®, and a subscription streaming offering of Showtime; our basic cable networks Nickelodeon®, MTV®, BET®, Comedy Central®, Paramount Network®, Nick Jr. ®, VH1®, TV Land®, CMT®, Pop TV™ and Smithsonian Channel™, among others, as well as the international extensions of these brands operated by ViacomCBS Networks International™ (“VCNI”); international broadcast networks, Network 10®, Channel 5® and Telefe®; and Pluto TV™, a leading free streaming TV platform in the United States (“U.S.”).
|
| |
• | Filmed Entertainment. Our Filmed Entertainment segment develops, produces, finances, acquires and distributes films, television programming and other entertainment content in various markets and media worldwide primarily through Paramount Pictures®, Paramount Players™, Paramount Animation® and Paramount Television Studios™.
|
| |
• | Publishing. Our Publishing segment publishes and distributes Simon & Schuster consumer books domestically and internationally and includes imprints such as Simon & Schuster®, Scribner™, Atria Books® and Gallery Books®.
|
For the year ended December 31, 2019, contributions to our consolidated revenues from our segments were as follows: TV Entertainment 43%segment consisted of the CBS Television Network, our domestic broadcast network; CBS Studios and CBS Media Ventures, the segment’s television production and syndication operations; CBS Sports Network, CBS Sports’ 24-hour cable channel; CBS Stations, our owned broadcast television stations in the U.S.; and a number of streaming services, including our direct-to-consumer subscription streaming service, Paramount+ (in the U.S.), and several CBS-branded streaming services, including CBS News Streaming and CBS Sports HQ. TV Entertainment accounted for approximately 44% of our consolidated revenues in 2021 (after the elimination of intercompany revenues).
•Cable Networks. Our Cable Networks 45%segment consisted of a portfolio of premium and basic cable networks, including SHOWTIME, BET, Nickelodeon, MTV, Comedy Central, Paramount Network and Smithsonian Channel; a number of direct-to-consumer streaming services, including Showtime Networks’ premium subscription streaming service (“SHOWTIME OTT”) and Pluto TV, our FAST service; and ViacomCBS Networks International(“VCNI”), which operates international extensions of Paramount+, Pluto TV and our Cable Networks brands and services, our international free-to-air networks and VIS, which produces content for our brands and streaming services, as well as for third parties. Cable Networks accounted for approximately 47% of our consolidated revenues in 2021 (after the elimination of intercompany revenues).
•Filmed Entertainment. Our Filmed Entertainment 10% segment consisted of Paramount Pictures, Paramount Players, Paramount Animation, Paramount Television Studios and Miramax. Filmed Entertainment accounted for approximately 9% of our consolidated revenues in 2021 (after the elimination of intercompany revenues).
During the fourth quarter of 2020, we entered into an agreement to sell Simon & Schuster, which was previously reported as our Publishing segment. Simon & Schuster is presented as a discontinued operation in our consolidated financial statements for all periods presented in this Annual Report on Form 10-K. See Notes 1 and 20 to the consolidated financial statements.
Beginning in 2022, primarily as a result of our increased strategic focus on our direct-to-consumer businesses, we made certain changes to how we manage our businesses and allocate resources that resulted in a change to our operating segments. Accordingly, beginning in the first quarter of 2022, we expect to report results based on the following segments:
•TV Media. Our TV Media segment consists of our historical TV Entertainment and PublishingCable Networks 3%segments, except that it no longer includes their corresponding direct-to-consumer streaming services (now part of our Direct-to-Consumer segment) as well as Nickelodeon Studio (now part of our Filmed Entertainment segment), and now includes Paramount Television Studios (formerly part of our historical Filmed Entertainment segment).
•Direct-to-Consumer. Our Direct-to-Consumer segment consists of our portfolio of pay, free and premium streaming services, including Paramount+, Pluto TV, SHOWTIME OTT, BET+ and Noggin.
•Filmed Entertainment. Our Filmed Entertainment segment consists of our historical Filmed Entertainment segment, except that it no longer includes Paramount Television Studios (now part of our TV Media segment) and now includes Nickelodeon Studio (formerly part of our historical Cable Networks segment).
We were organized as a Delaware corporation in 1986. In December 2019, we changed our name to ViacomCBS Inc. in connection with the merger of Viacom Inc. (“Viacom”) and CBS Corporation (“CBS”) (the “Merger”). Unless the context requires otherwise, references in this document to “ViacomCBS,” “Company,” “we,” “us” and “our” mean ViacomCBS Inc. and our consolidated subsidiaries, to “CBS” mean CBS and its consolidated subsidiaries prior to the Merger and to “Viacom” mean Viacom and its consolidated subsidiaries prior to the Merger. Effective February 16, 2022, we are changing our name to Paramount Global.
Our principal offices are located at 1515 Broadway, New York, New York 10036. Our telephone number is (212) 258-6000 and our website is www.ViacomCBS.com. Information included on or accessible through our website is not intended to be incorporated into this Annual Report on Form 10‑K.
We have two classes of common stock, Class A Common Stock and Class B Common Stock, both of which are listed on The Nasdaq Stock Market LLC. Owners of our Class A Common Stock are entitled to one vote per share. Our Class B Common Stock does not have voting rights. ViacomCBS Class A and Class B Common Stock are listed on The Nasdaq Stock Market LLC.
As of December 31, 2019,2021, National Amusements, Inc. (“NAI”), a closely held corporation that owns and operates movie screens in the U.S., the United Kingdom (“UK”U.K.”) and South America and manages additional movie screens in South America, directly or indirectly owned approximately 79.4%77.4% of our voting Class A Common Stock, and approximately 10.2%9.7% of our Class A Common Stock and Class B Common Stock on a combined basis. NAI is not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended.
We were organized as a Delaware corporation in 1986. Our principal offices are located at 1515 Broadway, New York, New York 10036. Our telephone number is (212) 258-6000 and our website is www.viacbs.com. Information included on or accessible through our website is not intended to be incorporated into this Annual Report on Form 10‑K. On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”), pursuant to an Agreement and Plan of Merger dated as of August 13, 2019, as amended on October 16, 2019 (the “Merger Agreement”). At the effective time of the Merger, we changed our
name to “ViacomCBS Inc.” Unless the context requires otherwise, references in this document to “ViacomCBS,” “Company,” “we,” “us” and “our” mean ViacomCBS Inc. and our consolidated subsidiaries, to “CBS” mean CBS Corporation and its consolidated subsidiaries prior to the Merger and to “Viacom” mean Viacom Inc. and its consolidated subsidiaries prior to the Merger.
TV ENTERTAINMENT
Overview
Our
| | | | | |
| TV Entertainment consisted of the CBS Television Network, our domestic broadcast network; CBS Studios and CBS Media Ventures, the segment’s television production and syndication operations; CBS Sports Network, CBS Sports’ 24-hour cable channel; CBS Stations, our owned broadcast television stations in the U.S.; and a number of streaming services, including our direct-to-consumer subscription streaming service, Paramount+ (in the U.S.), and several CBS-branded streaming services, including CBS News Streaming and CBS Sports HQ. |
TV EntertainmentEntertainment’s segment consists of the CBS Television Network, our domestic broadcast network; CBS Television Studios and CBS Television Distribution, our television production and syndication operations; CBS Interactive, our online content services for information and entertainment; our CBS-branded streaming services CBS All Access, CBSN, CBS Sports HQ® and ET Live®; CBS Sports Network, our cable network focused on college athletics and other sports; and CBS Television Stations, our 29 owned broadcast television stations.
Our TV Entertainment segment’s revenues arewere generated primarily from advertising sales, the licensing and distribution of its content andadvertising; affiliate revenues comprised of station affiliation fees retransmission fees and subscription fees, as further described below. In 2019, our TV Entertainment segment advertising revenues, content licensing revenues and affiliate revenues were approximately 50%, 26% and 21%, respectively, of total revenues for this segment. Our TV Entertainment segment generated 43%, 41% and 39% of our consolidated revenues in 2019, 2018 and 2017, respectively.
The CBS Television Network, through CBS Entertainment™, CBS News® and CBS Sports®, distributes a comprehensive schedule of news and public affairs broadcasts, sports and entertainment programming to more than 200 domestic television station affiliates reaching throughout the U.S., including 15 of our owned and operated television stations, and to affiliated stations in certain U.S. territories. The CBS Television Network primarily derives revenue from the sale of advertising time for its network broadcasts and affiliation feesreceived from television stations affiliated with the CBS Television Network.Network (“reverse compensation”), fees for authorizing multichannel video programming distributors’ (“MVPDs”) and third-party live television streaming services’ (“virtual MVPDs” or “vMVPDs”) carriage of our owned television stations; streaming revenues, principally comprised of advertising and subscription revenues generated by the segment’s streaming services and from digital video advertisements on our websites and in our video content on third-party platforms; and the licensing and distribution of our content and other rights. In 2021, TV Entertainment advertising, licensing and other, affiliate and streaming generated approximately 41%, 25%, 22% and 12%, respectively, of the segment’s total revenues. TV Entertainment generated approximately 44%, 41% and 43% of our consolidated revenues in 2021, 2020 and 2019, respectively (after the elimination of intercompany revenues).
Paramount+
Paramount+, our digital subscription video on-demand and live streaming service, combines live sports, news and entertainment content. Paramount+ features an expansive catalogue of original series, hit shows and popular movies across every genre from our brands and production studios, including CBS, BET, Comedy Central, MTV, Nickelodeon, Paramount Network, the Smithsonian Channel and Paramount Pictures, and from third parties.
Domestically, Paramount+ is home to livestreamed CBS Sports programming, including golf, football, auto racing and basketball. A destination for soccer fans, Paramount+ features more than 2,000 live and on-demand matches each year, including select matches from UEFA, Italy’s Serie A, and the National Women’s Soccer League (“NWSL”). Paramount+ also enables subscribers to stream local CBS Stations live across the U.S. in addition to other live channels, including CBS News Streaming for 24-hour news, CBS Sports HQ for sports news and analysis, and ET Live for entertainment coverage. Domestic highlights in 2021 include A Quiet Place Part II, Clifford the Big Red Dog, Mayor of Kingstown, Yellowstone prequel 1883, PAW Patrol,a variety of content from the Star Trek universe, a pair of original South Park movies and the NFL.
Paramount+ is available in two formats in the U.S.: Premium, an advertising-free (with the exception of livestreamed content) offering that includes all the benefits of Paramount+ for a monthly fee; and Essential, an advertising-supported offering available for a lower monthly fee that includes the NFL but does not include livestreamed local CBS Stations content.
Internationally, Paramount+ is home to hit movies, including titles from Paramount Pictures, as well as scripted dramas from SHOWTIME, Paramount Television Studios, CBS Studios and a robust offering of premium local content from VIS and third parties. International highlights in 2021 include Parot, Before I Forget, To Catch a Thief and 100 Days to Fall in Love.
CBS Television Network
The CBS Television Network (the “CBS Network”), through CBS Entertainment, CBS News and CBS Sports, distributes entertainment programming, news, public affairs broadcasts and sports. Network content also is available on the internet, including through: CBS.com, CBSSports.com and related software applications (“apps”); our streaming services, such as Paramount+, CBS News Streaming and Pluto TV; and MVPDs and vMVPDs.
CBS Entertainment is responsible for acquiringacquires or developingdevelops and schedulingschedules the entertainment programming presented on the CBS Television Network, which includes primetime comedycomedies and drama series, reality‑based programming,dramas, reality, specials, children’skids’ programs, daytime dramas, game shows and late-night programs such aslate night. The CBS Network’s top-rated series include NCIS, The Late Show with Stephen Colbert. During 2019, the CBS Television Network broadcast the Tony Awards and ®, the Kennedy Center Honors and the GrammyAwards®The Price is Right. CBS won 21 awards at the 46th Annual Daytime Emmy® Awards in May 2019.
CBS News operates a worldwide news organization, providing the CBS Television Network and CBS News Radio® with regularly scheduled news and public affairs broadcasts, including 60 Minutes, 48 Hours, CBS Evening News, CBS This MorningMornings, CBS Sunday Morning and Face the Nation as well as special reports..
CBS Sports broadcasts on the television networkCBS Network include PGA Tour golf tournaments,certain regular season games from the MastersNFL’s American Football Conference (“AFC”) and National Football Conference, as well as postseason AFC wild card playoff, AFC divisional playoff and championship games, and, on a rotating basis with other networks, the PGA Championship;Super Bowl; the NCAANational Collegiate Athletic Association’s (the “NCAA”) Division I Men’s Basketball Tournament, which we also broadcast on a rotating basis with other networks, and certainmarquee regular-season men’s college basketball games, including conference championship games from the Big Ten, Conference;Mountain West, Atlantic 10 and Missouri Valley; regular-season college football games, including games from the Southeastern Conference; andPGA Tour golf tournaments; the NFL’s American Football Conference (“AFC”) regular-season, post-season wild card playoff, divisional playoffMasters; the PGA Championship; and championship games. In 2019, the CBS Television Network broadcast certain games under our agreement withfrom the NFL to broadcastUEFA Champions League, including the AFC package through the 2022 season, which also includes the Super Bowl, which is broadcast on the CBS Television Network on a rotating basis with other networks. Our most recent Super Bowl broadcast was in February 2019semifinals and our next Super Bowl broadcast will be in February 2021.
CBS Television Network content also is exhibited via the Internet, including through CBS.com™, CBSSports.com® and related software applications (“apps”); our streaming services, such as CBSN and CBS All Access, which are further described below; and virtual MVPDs, such as AT&T TV Now, Hulu with Live TV and YouTube TV.
The CW, a broadcast network and our 50/50 joint venture with Warner Bros. Entertainment, airs programming including Charmed and The Flash.targeting younger viewers. Eight of our owned television stations are affiliates of The CW. Certain of The CW’s series are streamed on Netflix, a subscription video-on-demand service (“SVOD”), and are also available via The CW app on multiple digital platforms.
CBS TelevisionStudios
CBS Studios and CBS Television Distribution produce, acquire and/or distribute programming, includingis a leading content supplier that produces series specials, news and public affairs, and generate revenue principally from the licensing and distribution of such programming. The programming is produced primarily foracross broadcast on network television, exhibition on basic cable and premium subscription services, streaming servicesstreaming. CBS Studios maintains an extensive library of intellectual property, including the genre-defining and ever-growing Star Trek universe. CBS Studios’ broadcast television productions include Blue Bloods, CSI: Vegas and the FBI and NCIS franchises for the CBS Network. In cable, CBS Studios productions include Your Honor and The Man Who Fell to Earth for SHOWTIME. Streaming productions include the Star Trek franchise, The Good Fight, Evil, Seal Team and Why Women Kill for Paramount+; Dead to Me for Netflix; and Carpool Karaoke: The Series and Swagger for Apple TV+. CBS Studios also produces award-winning late night and daytime talk shows, such as The Late Show with Stephen Colbert, TheLate Late Show with James Corden and The Talk. CBS Studios also develops, produces and distributes local language and international content originating outside of the U.S., with series in the U.K., Europe, the Middle East, Australia and Asia.
CBS Media Ventures
CBS Media Ventures (“CMV”) produces or distribution viadistributes first-run syndication.syndicated daily and weekly programming, across various dayparts and genres, including talk shows, court shows, game shows and newsmagazines. First-run syndication is original series programming exhibitedlicensed on a market-by-market basis to television stations for exhibition on local broadcast television and streaming. Examples of CMV’s first-run programming include The Dr. Phil Show, Entertainment Tonight, Jeopardy!, Wheel of Fortune, Rachael Ray and The Drew Barrymore Show. CMV also handles the domestic distribution for exhibition on television stations without prior exhibition on a network or cable service. We subsequently distribute programmingand streaming services of content produced by CBS Studios, after its initial exhibition on a network, basic cable network or premium subscription service for domestic exhibition onbroadcast television stations, cable networks or streaming services (known as “off-network(“off-network syndicated programming”). Off-network syndicated programming and first‑runfirst-run syndicated programming distributed domestically as well as programming distributed internationally, can sometimes be sold in successive cycles of sales known as “first cycle” sales, “second cycle” sales, and so on,windows, which may occur on an exclusive or non-exclusive bases.nonexclusive basis.
Programming that our production group produced or co-producedI-5
CMV engages in national advertising and is broadcast on network television includes, among others, FBI (CBS), Evil (CBS)integrated marketing sales for the first-run and Nancy Drew (The CW). In off-network syndication, we distribute series, such as Hawaii Five-O, Criminal Minds, Blue Bloods and NCIS: New Orleansprogramming it distributes, as well as a library of older television programs. We also produce and/or distribute first-run syndicated series suchserving as Jeopardy!, Entertainment Tonight, Inside Edition, Dr. Phil and Judge Judy and produce several series the national advertising sales agent for streaming on CBS All Access, including The Good Fight, Star Trek: Discovery, Why Women Kill and Star Trek: Picard. We also distribute syndicated and other programming internationally.
CBS Interactive is one of the leading global publishers of premium content on the Internet, delivering this content via web properties, mobile properties and apps on mobile, as well as Internet-connected television and other device platform apps. CBS Interactive is ranked among the top Internet properties in the world according to comScore Media Metrix. CBS Interactive’s leading brands serve targeted audiences with text, video, audio, and mobile content spanning technology, entertainment, sports, news, business, gaming and music categories. CBS Interactive generates revenue principally from the sale of advertising and sponsorships, in addition to subscription fees, license fees and e-commerce activities.
CBS Interactive operates CBS.com, the online destination for CBS Television Network programming. Further extending the CBS.com experience, we offer a CBS app for on-demand streaming of various programs from our current network and library programming to users on multiple digital platforms. CBS Interactive operates CBSNews.com, the online destination for CBS News content, and offers an app for on-demand screening of current and library news programming and the content published on the website. CBS Interactivemajor syndicators. CMV also operates CBSSportsDigital™, the online destination for CBS Sports content, including CBSSports.com, which provides sports content, fantasy sports, and community and e-commerce features, anddistributes Dabl, a related app for on-demand viewing of certain sports events broadcast on CBS and other sports information; Max Preps; and 247Sports.
CBS Interactive also owns and operates other digital properties, including: CNET, one of the preeminent digital properties for technology and consumer electronics information;
CNET en Espanol®; TVGuide Digital™; GameSpot®; Last.fm®; and MetroLyrics.com®.
Under CBS Interactive, Viacom Digital Studios (“VDS”) and its international extension, Viacom Digital Studios International, produces original content for consumption across leading social platforms to build engagement with certain of our Cable Networks brands. VidCon®, an innovative conference and festival celebrating online video, drives additional growth at VDS and our live events business.
Our CBS-branded streaming subscription services and advertiser-supported services feature general entertainment, news, sports and/or children’s programming and generate revenue from subscription fees and the sale of advertising on such services, respectively. The services are offered to customers through mobile and connected devices and third-party platforms. The below-described services are operated under CBS Interactive in collaboration with our other businesses.
CBS All Access is a streaming subscription service, which includes a commercial-free option for on-demand content. CBS All Access offers an extensive on-demand selection of both current and library programming and original series, such as The Good Fight, Star Trek: Discovery, Star Trek: Picard, Why Women Kill and The Twilight Zone series; and CBSN’s live and original news reporting and our other streaming services, as described further below, as well as the ability to stream live programming from local CBS Television Stations and certain CBS television station affiliates. All NFL games broadcast by the CBS Television Network as well as other CBS Television Network programming are streamed on CBS All Access platforms. CBS All Access also offers children’s programming, including original series and select Nickelodeon programming. CBS All Access is available at CBS.com and on multiple digital platforms and through CBS apps in the U.S. and Canada. A version of CBS All Access has launched internationally in Canada and 10 All Access in Australia includes programming from our Network 10 channels and certain of our other programming.
CBSN is a streaming live, advertiser-supported news network available 24 hours a day, seven days a week (“24/7”). Local versions of CBSN complement CBSN and stream local news from our owned television stations in major markets, including New York, Los Angeles, Philadelphia, San Francisco, Boston and Minneapolis. CBSN is available at CBSNews.com and on multiple digital platforms through the CBS News app and through CBS Television Stations’ websites and mobile apps.
CBS Sports HQ is a streaming live, advertiser-supported sports news and highlights service available 24/7; and ET Live is a streaming advertiser-supported service based on the Entertainment Tonight brand covering entertainment stories and trends available 24/7.
Through the CBS Audience Network™, we deliver video content from our digital properties and television stations and affiliated television stations under an advertiser-supported distribution model to third-party digital properties. The growing slate of our content available online includes full episodes, clips and highlights based on our programming as well as original made-for-the-web content.
The CBS Sports Network is a 24/7CBS Sports’ 24-hour cable program servicechannel that provides a diverse slate of sports and related content, with a strong focus on college sports. CBS Sports Network derives revenue from carriage fees from MVPDs and virtual MVPDs and advertising sales.content. The network televises over 700 live professional, amateur and collegiatecollege events,
annually, highlighted by including Division I college football, basketball, hockey and basketball games, includinglacrosse, certain games from the Big East ConferenceNWSL, certain men’s and Mountain West Conference. WNBAwomen’s international soccer games, including certain FIFA 2022 World Cup Concacaf qualifiers, FIFA 2023 Women’s World Cup qualifiers, UEFA Champions League games and professional bull riding (PBR) and motor sports events.Scottish Professional Football League games. In addition, the network showcases a variety of original programming, including documentaries, features and studio shows, highlighted by NFL Monday QB, That Other Pre-Game Show (TOPS), Time to Schein and a first of its kind all-female panel sports talk show, We Need to Talk. CBS Sports Network also provides ancillary coverage for CBS Sports relating to major events, such as the NCAA Division I Men’s Basketball Tournament, the Masters and the PGA Championship, and for Showtime NetworksSHOWTIME relating to ShowtimeSHOWTIME Championship Boxing. CBS Sports Network produces weekday simulcasts of the radio shows Boomer and Gio, Tiki and Tierney and The Jim Rome Show.Boxing.
The CBS Television Stations group consists of our 29 owned broadcast television stations, all of which operate under licenses granted by the Federal Communications Commission (“FCC”) pursuant to the Communications Act of 1934, as amended (the “Communications Act”). The licenses are renewableLicensees must seek to renew each license every eight years. The CBS Television Stations Group principally derives revenue from the sale of advertising on our television stations and fees for authorizing the MVPDs’ and vMVPDs’ carriage of our television stations, which are also known as retransmission fees.
Our television stations are located in the 6six largest, and 15 of the top 20, television markets in the U.S. We own multiple television stations within the same designated market area (“DMA”) in 10 major markets. These multiple station markets, are:including New York, (market #1), Los Angeles (market #2), Philadelphia (market #4), Dallas-Fort Worth (market #5), San Francisco-Oakland-San Jose (market #6), Boston (market #9), Detroit (market #14), Miami-Ft. Lauderdale (market #16), Sacramento-Stockton-Modesto (market #20) and Pittsburgh (market #24).Philadelphia. Our television stations enable us to reach a wide audience within and across geographically diverse markets in the U.S. The stations producebroadcast news and broadcast(including station-produced news), public affairs, sports and other programming to serve their local markets and most offer CBS, The CW or MyNetworkTV (a national broadcast service that provides syndicated programming, including series from our library, during primetime to stations across the country) programming and syndicated programming.
CBS All Access offers streamed live programming from local CBS Television Stations and most CBS television station affiliates. Local versions of CBSN offer streamed local news from our owned television The stations in certain local markets. Our television stations have local websites which promote the stations’ programming. We also have agreements for the streaming of our owned television stations on virtual MVPDs. Our owned stations broadcast free, advertiser-supported, digital channels using available broadcast spectrum, including local CBSsuch as Dabl, Fave TV and syndicated programming, Start TV™, a (a national entertainment program service featuring classic television content focused on female audiences, which is an approximately 50/50our joint venture with Weigel Broadcasting, and Dabl featuring lifestyleBroadcasting). Local versions of CBS News Streaming offer local news from certain of our owned stations. Our stations have local websites that promote the stations’ programming.
Television Stations and Local Websites and CBSNVersions of CBS News Streaming Services
The following table sets forth information regarding our owned television stations and related local websites and CBSN streaming services,versions of CBS News Streaming, as of February 18, 2020,14, 2022, within U.S. television markets:
| | | | | | | | | | | | | | | | | |
| Television Market | DMA Rank(1) | Stations | Type | Network Affiliation | Local Websites and Versions of CBS News Streaming(2) |
| New York, NY | 1 | WCBS‑TV | UHF | CBS | newyork.cbslocal.com |
| | WLNY‑TV | UHF | Independent | CBS News New York Streaming |
| Los Angeles, CA | 2 | KCAL‑TV | VHF | Independent | losangeles.cbslocal.com |
| | KCBS‑TV | UHF | CBS | CBS News Los Angeles Streaming |
| Chicago, IL | 3 | WBBM‑TV | VHF | CBS | chicago.cbslocal.com |
| | | | | CBS News Chicago Streaming |
| Philadelphia, PA | 4 | KYW‑TV | UHF | CBS | philadelphia.cbslocal.com |
| | WPSG‑TV | UHF | The CW | CBS News Philly Streaming |
| Dallas‑Fort Worth, TX | 5 | KTVT‑TV | UHF | CBS | dfw.cbslocal.com |
| | KTXA‑TV | UHF | Independent | CBS News Dallas-Fort Worth Streaming |
| Atlanta, GA | 6 | WUPA-TV | UHF | The CW | atlanta.cbslocal.com |
| | | | | | | | | | | | | | | | | |
| Television Market | DMA Rank(1) | Stations | Type | Network Affiliation | Local Websites and Versions of CBS News Streaming(2) |
| San Francisco, CA | 8 | KPIX‑TV | UHF | CBS | sanfrancisco.cbslocal.com |
| | KBCW‑TV | UHF | The CW | CBS News Bay Area Streaming |
| Boston, MA | 10 | WBZ-TV | UHF | CBS | boston.cbslocal.com |
| | WSBK-TV | UHF | MyNetworkTV | CBS News Boston Streaming |
| Seattle-Tacoma, WA | 11 | KSTW-TV | VHF | The CW | seattle.cbslocal.com |
| Tampa-St. Petersburg, FL | 13 | WTOG-TV | UHF | The CW | tampa.cbslocal.com |
| Minneapolis, MN | 14 | WCCO‑TV | UHF | CBS | minnesota.cbslocal.com |
| | KCCW‑TV(3) | VHF | CBS | CBS News Minnesota Streaming |
| Detroit, MI | 15 | WWJ‑TV | UHF | CBS | detroit.cbslocal.com |
| | WKBD‑TV | UHF | The CW | |
| Denver, CO | 16 | KCNC‑TV | UHF | CBS | denver.cbslocal.com |
| | | | | CBS News Denver Streaming |
| Miami-Ft. Lauderdale, FL | 18 | WFOR‑TV | UHF | CBS | miami.cbslocal.com |
| | WBFS‑TV | UHF | MyNetworkTV | CBS News Miami Streaming |
| Sacramento, CA | 20 | KOVR-TV | UHF | CBS | sacramento.cbslocal.com |
| | KMAX-TV | UHF | The CW | CBS News Sacramento Streaming |
| Indianapolis, IN | 25 | WBXI-CA(4) | UHF | Independent | |
| Pittsburgh, PA | 26 | KDKA-TV | UHF | CBS | pittsburgh.cbslocal.com |
| | WPCW-TV | VHF | The CW | CBS News Pittsburgh Streaming |
| Baltimore, MD | 27 | WJZ‑TV | VHF | CBS | baltimore.cbslocal.com |
| | | | | CBS News Baltimore Streaming |
(1) Television market (DMA) rankings based on Nielsen Media Research Local Market Universe Estimates (September 2021).
(2) Our television stations’ websites and the local versions ofCBS New Streaming feature and promote the stations’ programming and provide news, traffic, weather, entertainment and sports information, among other services for their local communities.
(3) KCCW-TV is operated as a satellite station of WCCO-TV.
(4) WBXI-CA is a Class A low power television station. Class A low power television stations do not implicate the FCC’s ownership rules.
Cable Networks
| | | | | |
Television Market and Market Rank(1)
| | Stations | Type | Network Affiliation | Local Websites and
CBSN Streaming Services(2)
|
New York, NY (#1) | | WCBS‑TV | UHF | CBS | newyork.cbslocal.com |
| | WLNY‑TV | UHF | Independent | CBSN New York |
| | | | | |
Los Angeles, CA(#2)
| | KCAL‑TV | VHF | Independent | losangeles.cbslocal.com |
| | KCBS‑TV | UHF | CBS | CBSN Los Angeles |
| | | | | |
Chicago, IL (#3) | | WBBM‑TV | VHF | CBS | chicago.cbslocal.com |
| | | | | |
Philadelphia, PA (#4) | | KYW‑TV | UHF | CBS | philadelphia.cbslocal.com |
| | WPSG‑TV | UHF | The CW | CBSN Philly |
| | | | | |
Dallas‑Fort Worth, TX (#5) | | KTVT‑TV | UHF | CBS | dfw.cbslocal.com |
| | KTXA‑TV | UHF | Independent | |
| | | | | |
San Francisco, CA (#6) | | KPIX‑TV | UHF | CBS | sanfrancisco.cbslocal.com |
| | KBCW‑TV | UHF | The CW | CBSN Bay Area |
| | | | | |
Boston, MA (#9) | | WBZ-TV | UHF | CBS | boston.cbslocal.com |
| | WSBK-TV | UHF | MyNetworkTV | CBSN Boston |
| | | | | |
Atlanta, GA (#10) | | WUPA-TV | UHF | The CW | atlanta.cbslocal.com |
| | | | | |
Tampa-St. Petersburg, FL (#12) | | WTOG-TV | UHF | The CW | tampa.cbslocal.com |
| | | | | |
Seattle-Tacoma, WA (#13) | | KSTW-TV | VHF | The CW | seattle.cbslocal.com |
| | | | | |
Detroit, MI (#14) | | WKBD‑TV | UHF | The CW | detroit.cbslocal.com |
| | WWJ‑TV | UHF | CBS | |
| | | | | |
Minneapolis, MN (#15) | | WCCO‑TV | UHF | CBS | minnesota.cbslocal.com |
| | KCCW‑TVCable Networks (3)
| VHF | CBS | CBSN Minnesota |
| | | | | |
Miami-Ft. Lauderdale, FL (#16) | | WFOR‑TV | UHF | CBS | miami.cbslocal.com |
| | WBFS‑TV | UHF | MyNetworkTV | |
| | | | | |
Denver, CO (#17) | | KCNC‑TV | UHF | CBS | denver.cbslocal.com |
| | | | | |
Sacramento, CA (#20) | | KOVR-TV | UHF | CBS | sacramento.cbslocal.com |
| | KMAX-TV | UHF | consisted of a portfolio of premium and basic cable networks comprised of SHOWTIME, The CW | |
| | | | | |
Pittsburgh, PA (#24) | | KDKA-TV | UHF | CBS | pittsburgh.cbslocal.com |
| | WPCW-TV | VHF | The CW | |
| | | | | |
Indianapolis, IN (#25) | | WBXI-CA(4)
| UHF | Independent | |
| | | | | |
Baltimore, MD (#26) | | WJZ‑Movie Channel, Flix, BET, Nickelodeon, MTV, Comedy Central, Paramount Network, Smithsonian Channel, VH1, CMT, Pop TV, | VHF | CBS | baltimore.cbslocal.com |
| | | | | |
| |
(1) | Television market (DMA) rankings based Logo and TV Land; a number of direct-to-consumer subscription streaming services — SHOWTIME OTT, Showtime Networks’ premium streaming service, Noggin, Nickelodeon’s preschool streaming service, and BET+, a streaming service focused on Nielsen Media Research Local Market Universe Estimates, September 2019. |
| |
(2) | Our television stations’ websitesthe Black audience; and the local versions of CBSN feature and promote the stations’ programming and provide news, traffic, weather, entertainment and sports information, among other services for their local communities.Pluto TV, our FAST service.
|
| |
(3) | KCCW-TV is operated as a satellite station of WCCO-TV. |
| |
(4) | WBXI-CA is a Class A low power television station. Class A low power television stations do not implicate the FCC’s ownership rules. |
CABLE NETWORKS
Overview
Our
Cable Networks also included VCNI, which operates international extensions of Paramount+, Pluto TV and our Cable Networks segment provides entertainment content, services and related branded products for consumers in targeted demographics attractive to advertisers, content distributors and retailers. The Cable Networks segment also delivers advertising and marketing services, including those under our advanced marketing solutions portfolio, which both utilizes advanced addressable video inventory to allow dynamic ad insertion and advanced targeting, and provides our marketing partners with a variety of consulting and creative services and associated activations. The Cable Networks segment also licenses its brands and propertiesservices, our international free-to-air networks, which include Channel 5 in the U.K., Telefe in Argentina, Network 10 in Australia and Chilevisión in Chile, and VIS, which produces content for consumer products and recreation experiences, produces live events and creates original programming for third-party distributors.
Our Cable Networks segment includes our premium subscription cable networks, Showtime, The Movie Channel and Flix; our basic cable networks, including Nickelodeon, MTV, BET, Comedy Central,Paramount Network, Nick Jr., VH1, TV Land, CMT, Pop TVandSmithsonian Channel; and the international extensions of our multimedia brands and our programstreaming services, created specifically for international audiences such as public service broadcaster (“PSB”) Channel 5® and Milkshake!® in the UK, Televisión Federal S.A., or Telefe®, in Argentina, COLORS® in India, Paramount Channel™ in various countries and international broadcast network Network 10® in Australia.
Our Cable Networks segment also develops and operates an extensive portfolio of digital and mobile experiences, including our streaming subscription offering of Showtime (“Showtime OTT”), Noggin, Nickelodeon’s preschool streaming subscription service, BET+, a subscription streaming service focused on Black audiences and consumers of Black culture, and Smithsonian Channel Plus.
Our studio production business is a global network of production studios producing premium episodic and film content across both our owned and operated platforms andwell as for third parties. This business is primarily driven by Paramount Television Studios, Awesomeness, Nickelodeon, MTV and Comedy Central and utilizes our considerable intellectual property library to create long-form episodic content for third-party platforms.
Our
Cable NetworksNetworks’ segment’s revenues arewere generated primarily from affiliate revenues comprised of fees from MVPDs and virtual MVPDsvMVPDs for carriage of our cable networksnetworks; advertising; streaming revenues, principally comprised of advertising and subscription feesrevenues generated by the segment’s streaming services and from digital video advertisements on our streaming services; advertising sales;websites and in our video content on third-party platforms; and the licensing of itsour content and brands.other rights. In 2019, our2021, Cable Networks segment affiliate, revenues, advertising, revenuesstreaming and content licensing and other revenues were
generated approximately 49%39%, 41%28%, 19% and 10%14%, respectively, of the segment’s total revenues for this segment. Ourrevenues. Cable Networks segment generated 45%approximately 47%, 46%50% and 47%46% of our consolidated revenues in 2021, 2020 and 2019, 2018 and 2017, respectively.respectively (after the elimination of intercompany revenues).
Pluto TV
Pluto TV is a leading FAST service in the U.S., delivering hundreds of live linear channels and thousands of titles on-demand to 64.4 million global MAUs for December 2021. Pluto TV curates a diverse lineup of channels, in partnership with nearly 400 global media companies. Categories cover a wide array of genres, including movies, television series, including classic television, sports, news and opinion, reality, crime, comedy, home and DIY, explore, gaming, anime, music, kids and local programming. Pluto TV en español delivers over 50 Spanish-language channels reflecting the rich tapestry of the U.S. Hispanic community. Pluto TV was awarded the 2021 Corporate Leadership in Hispanic Programming award by Broadcasting & Cable, Multichannel News and Next Media. Pluto TV can be accessed and streamed across connected television devices, mobile and the internet. Pluto TV’s growing global footprint extends across three continents and 26 countries.
SHOWTIME
Our most significant Cable Networks brands are discussed below.
Our three commercial-free, premium subscription program servicescable networks in the U.S. are Showtime (including Showtime OTT),SHOWTIME, which offers original scripted and unscripted series, recently releasedmovies, documentaries and other theatrical feature films, documentaries, sports-related programming,docuseries, sports, comedy and other specials, and special events; The Movie Channel, which offers recently released and other theatrical feature filmsa variety of movies and related programming; and Flix, which primarily offers theatrical feature films primarilymovies from the last several decades.
Programming highlights SHOWTIME OTT is Showtime Networks’ premium subscription streaming service. Showtime Networks also includes SHOWTIME Sports, a premium destination for live combat sports, including championship boxing, Bellator, a leading global mixed martial arts organization, and culturally relevant sports documentaries and original series. Highlights in 2019 included Showtime original series2021 include new seasons of The Chi and Billions, the final season of Shameless, the return of Dexter in the limited series Dexter: New Blood, new dramas American Rust Ray Donovanand Yellowjackets, as well as new late-night variety series Ziwe. SHOWTIME is also home to City on a Hill, The L Word: Generation Q, Your Honor and unscripted series ShamelessDesus & Mero, limitedCouples Therapy, The Circus and the news series Vice.
BET
BET is a leading provider of premium entertainment, music, news, digital and public affairs content for Black audiences. BET linear can be seen in the U.S., Canada, Brazil, the Caribbean, the U.K., sub-Saharan Africa and France. BET is one of the most well-known Black consumer brands in the world, with multiplatform extensions, including BET Studios, a studio venture that provides equity ownership to Black creators; BET Digital, BET’s interactive arm; BET Her, a network targeting the African-American woman; BET Music Networks; BET Home Entertainment; BET Live, BET’s events and experience business; and BET International, which operates BET around the globe. In 2021, BET aired a diverse roster of social justice content, including Disrupt & Dismantle with Soledad O’ Brien, COVID-19 Vaccine and The Black Community: A Tyler Perry Special, and, as part of our Content for Change initiative, Bars and Ballads for George Floyd, Justice Now: Race & Reckoning and Justice Now: The Way Forward. Other highlights include Twenties, Twenties After Show With B. Scott, Games People Play and new seasons of Tyler Perry’s original series The Loudest VoiceOval, documentary features including Hitsville: The StorySistas, House of Payne and Assisted Living. BET’s tentpole events are the BET Awards, the BET Hip Hop Awards and the NAACP Image Awards.
BET+, our joint venture with Tyler Perry Studios, is a leading subscription streaming service for the Black community, with thousands of hours of movies, television, stand-up specials, stage plays and more. BET+ is home to exclusive originals from leading Black creators such as Tracy Oliver’s First Wives Club; Tyler Perry’s Ruthless and Bruh; Carl Weber’s The Family Business; and Will Packer’s Bigger; American Gangster: Trap Queens; All The Queen’s Men; The Ms. Pat Show; and Sacrifice.
of Motown
, documentary series includingThe Kids & Family Entertainment Group oversees our global strategy and business operations for our kids and family brands and content across linear and in streaming, through television programming, consumer products, location-based experiences, publishing and feature films. The group’s 2021 highlights on Paramount+ include The Circus: InsideSpongeBob Movie: Sponge on the Wildest Political Show on Earth,Run; the SpongeBob spinoff, Kamp Koral; the new iCarly series; and various sports-related programs and documentary series including Inside the NFL. As of December 31, 2019, subscriptions to Showtime (including Showtime OTT) totaled approximately 27 million in the U.S., certain U.S. territories and Bermuda.PAW Patrol: The Movie.
Showtime OTT allows subscribers to view on-demand programming as well as the live telecast of the east and west coast feeds of Showtime, and is available for purchase (without an MVPD video subscription) at showtime.com
™, through the Showtime app and from multiple digital platforms. Showtime Anytime®, an authenticated version of Showtime, is available onlineand, via certain Internet-connected devices, through the Showtime Anytime app, free of charge to Showtime subscribers as part of their Showtime subscription through participating distributors.
Showtime Networks also produces and/or provides special events on a pay-per-view basis available for purchase by both Showtime subscribers and non-subscribers through the Showtimeapp and third-party distributors, including the Manny Pacquiao vs. Adrien Broner boxing match in January 2019.
Nickelodeon, now in its 4042thnd year, is one of the most globally recognized and widely distributed multimedia entertainment brands for kids and family. Nickelodeon has been the number-one-rated ad-supportedadvertising-supported basic cable network for 2426 consecutive years among kids 2 to 11. Nickelodeon features leading original and licensed kids’ series for kids across animation, live-action and preschool genres, and during the evening and overnight hours, the linear cable channel airs asgenres. Nickelodeon brands include Nick Jr., Nick at Nite, and features licensed family comedies. Nick Jr. entertains and educates preschoolers, engaging them with characters they love, building their imaginations and gaining key cognitive and social-emotional skills. Other Nickelodeon brands include TeenNick, Nicktoons and Nick Music.
Programming Domestic highlights in 2019 included2021 include Ryan’s Mystery Playdate, SpongeBob SquarePants, PAW Patrol, The Loud House, The Casagrandes, Henry DangerTyler Perry’s Young Dylan, Bubble GuppiesDanger Force ,and Blue’s Clues & YouYou!. International highlights include Goldie’s Oldies, a U.K. originated live action comedy series; Sharkdog, the Nickelodeon produced Netflix original animated series; and Are You Smarter Than a 5th Grader?Spyders, Nickelodeon’s first original coproduction with John CenaAnaney Studios, our Israeli content producer and tentpole events such as Kids’ Choice Awards.subscription television provider.
Noggin, Nickelodeon’s preschool subscription streaming service, features over 1,000 library episodes, interactive videos and short-form educational content. In partnership with Paramount, Nickelodeon Movies produces branded films based on some of Nickelodeon’s most iconic franchises and characters. Nickelodeon is a key part of our global consumer products business. In 2021, we launched a licensing business,partnership with global toy brand Melissa & Doug to deliver PAW Patrol and Blue’s Clues and You! cobranded toys. Nickelodeon also licenses its brands for recreation and other location-based experiences such as hotels and theme parks, and has numerous live and location-based experiences, such as JoJo Siwa’s D.R.E.A.M. The Tour, a multi-city live concert tour, its SlimeFest music festival in Chicago, multiple PAW Patrol live tours around the world, and Kids’ Choice Awards events2021 opened Nickelodeon Hotels & Resorts Riviera Maya, in various international markets. In 2019, we acquired the entity holding global intellectual property rights to the Garfield franchise, including related to content, consumer products and location-based experiences. Noggin, Nickelodeon’s preschool subscription streaming service featuring over 1,000 full-length library episodes, interactive videos and short-form educational content, has an Amazon Prime Video Channel. In partnership with Paramount, Nickelodeon Movies™ produces branded films based on some of Nick’s most iconic franchisesKarisma Hotels & Resorts and characters.Grupo Lomas.
Awesomeness
Awesomeness creates programming for various social and SVOD platforms and produces premium original series and filmscontent focused on the global Gen Z audience through its Emmydigital publishing, film and television studio divisions. Awesomeness’ original, award-winning content includes ®-winning dedicated television and film studios. Awesomeness’ portfolio is strengthened by a branded content sales team, a creator network, a creative agency and a roster of talent relationships. Programming highlights in 2019 included PEN15To All the Boys I’ve Loved Before, which was nominated for a 2019 Emmy® for outstanding writing for a comedy series,season two of Light as a Feather on Hulu, and The Perfect DateTrinkets and TrinketsPen15 on Netflix..
MTV is the leading global youth media brand,Entertainment Group
MTV Entertainment Group connects with operations spanning cableaudiences through nine iconic brands — MTV, Comedy Central, VH1, CMT, Pop, Logo, Smithsonian, Paramount Network and mobile networks, live events, theatrical filmsTV Land — and MTV Studios.
Programming highlights in 2019 included new series launches
MTV
MTV is an iconic youth entertainment brand that is home to notable franchises such asThe Hills: New BeginningsChallenge, the Shores (Jersey Shore Family Vacation, Floribama Shore, Geordie Shore, Acapulco Shore, Rio Shore and Warsaw Shore), Teen Mom (Teen Mom OG, Teen Mom Youngand Pregnant and Double Shot at Love with DJ Pauly D and Vinny, returning favorites Teen Mom 2, MTV Floribama Shore, Ridiculousness, Wild ‘N Out, Are You The One?, Siesta Key, The Challenge franchise) and Jersey Shore: Family VacationRidiculousness (Messyness and Deliciousness). MTV Documentary Films’ 2021 slate included the Academy Award-shortlisted, Emmy and Peabody-Award winning 76 Days. The signature MTV hit Jersey Shore format has been adapted for our international audiences, with multiple versions around the world, including as Geordie Shore in the UK (now in its 20th season) and Acapulco Shore in Mexico, and some of our international programming formats have been imported to the U.S., such as Ex on the Beach,which originated in the UK and has become a global franchise with 14 local adaptations airing worldwide.
MTV’s signature programminglive event — the MTV Video Music Awards, — returned in 2019 drew 5.5 million viewers across its live linear simulcast2021 along with the MTV Europe Music Awards and 269 million video views from the launch of the VMA website through the day of the show. MTV’s annual tentpole programming events also include the MTV European Music Awards, MTV Movie and TV Awards, MTV MIAWs (celebrating the best in Latin music and the digital world of the millennial generation) and MTV Fandom Awards. In July 2019, MTV hosted its 13th annual Isle of MTVMalta concert and Malta Music Week events.Awards.
BET is a leading consumer brand in the urban marketplace, and the nation’s leading provider of entertainment, music, news and public affairs programming to African American audiences. Other BET brands include BET Her, the first network designed for black women, delivering a wide variety of culturally relevant programming, BET Gospel, featuring gospel music and spiritual programming, and BET Hip Hop, spotlighting hip hop music programming and performances.
Programming highlights in 2019 included new series launches
American Soul and Boomerang, and returning favorites such as Martin, House of Payne and Meet the Browns. BET’s tentpoles and live events in 2019 included the seventh annual BET Experience, BET’s weekend-long celebration of music, entertainment and Black culture featuring the 2019 BET Awards, which aired as the number one cable awards show for the fifth consecutive year among adults 18 to 49; Black Girls Rock; and BET Hip Hop Awards. BET’s programming received seven NAACP Image Awards nominations and two wins in 2019.
BET has a multi-year content partnership with award-winning writer, director, producer, actor and playwright Tyler Perry, that extends through 2024 and spans television, film and short-form video. In October 2019, The Oval and Sistas premiered, the first two series in the multi-year partnership. In 2019, BET and Tyler Perry launched BET+, an online SVOD service focused on Black audiences and consumers of Black culture and featuring more than 1,000 hours of advertising-free premium content, including original programming from Tyler Perry and exclusive series and other content from leading Black content creators.
Comedy Central is a leading destination for comedic talent and all things comedy — from adult animation to stand-up to topical shows — providing viewers access to a world of funny, provocative and relevant comedy, ranging from award-winning late-night, scripted and animated series, to stand-up specials, short-form and sketch.content. Highlights for 2021
Programming highlights in 2019 includedinclude the launch of South SidePark Pandemic , the network’s highest-rated series premiere since 2012 among African Americans 18 to 49; returning hitsand South ParQ Vaccination specials, The Daily Show with Trevor Noah, Drunk HistoryTha God’s Honest Truth with Charlamagne Tha God, Awkwafina is Nora From Queens, Roy Wood Jr., Imperfect Messenger and digitalthe original holiday movies Hack Into Broad City, each of which received several Emmy® nominations for outstanding series in their respective categories in 2019, South Park, which was renewed in September 2019 for three additional seasons, and the premieres of the critically-acclaimed scripted series The Other Two and sketch comedy Alternatino with Arturo Castro.
Comedy Central also produces nationwide stand-up events and festivals, operates a Grammy Award-winning record label, produces a global podcast network and operates Comedy Central Radio on SiriusXM. In May 2019, Comedy Central launched Comedy Central Productions, a new studio-production arm partnering with comedy’s best writers, producers and on-screen talent to develop and distribute compelling, premium comedy content on all platforms. In June 2019, Comedy Central hosted its third annual Clusterfest, a three-day festival in San Francisco featuring world-class standup comedy, live music and experiential activities. Internationally, Comedy Central hosted the experiential events FriendsFestA Clüsterfünke Christmas and Comedy Central FestHot Mess Holiday in a number of international markets..
Comedy Central’s strategic partnership with Trevor Noah’s production company, Day Zero Productions, gives us exclusive “first-look” rights on all projects developed by Day Zero Productions across television, feature films, digital and short-form video content.Paramount Network
Paramount Network is a premium entertainment destination targeting adults 18and home to 49 with original scripted and non-scripted series inspired by over a century of cinema, with stories that are immersive, inclusive and deeply personal. Programming highlights in 2019 included Yellowstone, starring Kevin Costner and written and directedcable’s hit co-created by critically-acclaimed screenwriterTaylor Sheridan. Yellowstone serves as the launchpad for new original series from Taylor Sheridan which in its second season was cable’s most-watched scripted cable serieson Paramount+, including Mayor of the summer. The network also featured the premiere of competition series The Last Cowboy, I Am Patrick Swayze, the most-watched episode of the network’s I Am documentary series, and new episodes of Ink Master, Bar Rescue and Bellator MMA.
VH1 is a leading pop culture brand for adults 18 to 49 with an array of digital channels and services, including the VH1 app, VH1.com and @VH1. Programming highlights in 2019 included the critically-acclaimed original series RuPaul’s Drag Race, which received 14 Emmy® nominations and won four, including outstanding competition program and outstanding host; new series Girls’ Cruise with Lil’ Kim; and returning hits Love & Hip Hop, Black Ink CrewKingstown and Basketball Wives1883., the Yellowstone prequel that premiered at the end of 2021.
TV Land features a mix
Smithsonian Channel is the home of original programming, classicpopular genres such as air and contemporary television showsspace, travel, history, science, nature and specials that appeal to adults aged 25 to 54. Programming highlights in 2019 includedpop culture. Highlights for 2021 include the sixth season of Darren Star’s hit original series Younger, which was the number one rated ad-supported cable original sitcom among female viewers 18 to 49 and 25 to 54 for the third consecutive year.
CMT is a leading country music and lifestyle destination, offering a mix of original series, music events and specials. Programming highlights in 2019 included the launch of Racing Wives; returning favorite Dallas Cowboys
Cheerleaders; and tentpole events and music programming such as the CMT Music AwardsAerial America, CMT Artists of the YearAmerica in Color, CMTAmerica’s Hidden Stories, Apollo’s Moon ShotHot 20 Countdown, The Pacific War in Color and CMT CrossroadsAir Disasters, as well as critically-acclaimed specials Black in Space: Breaking the Color Barrier and Cher & The Loneliest Elephant.
Smithsonian Channel features series
VCNI operates international extensions of Paramount+, Pluto TV and documentaries of a cultural, historical,our Cable Networks brands and scientific nature. Smithsonian Channel content is available via MVPDs and virtual MVPDs in the U.S. and versions of Smithsonian Channel are distributed in Canada, Singapore, Brazil, Latin America, Africa, Asia and the UK. The website SmithsonianChannel.com™ and various apps promote Smithsonian Channelprogramming and provide information and entertainment services. Smithsonian Channel Plus is a streaming subscription service that allows subscribers to view on-demand programming, including 4K Ultra HD series and documentaries.
Pop TV is a general entertainment basic cable service focused on producing and licensing popular culture programming, such as the Emmy®-nominated original series Schitt’s Creek and Critics Choice Award®-nominated original series One Day at a Time, and licensed CBS programming, including NCIS: New Orleans and Scorpion. Pop TV is also available via the Pop Now app.
Network 10 is one of the three majorservices, our international free-to-air commercial broadcast networks, in Australia. Network 10 includes the channels 10™, 10 Bold™and 10 Peach™,VIS, which broadcast a mix of entertainment, drama, newsproduces content for our brands and sports programming, such as Australian Survivor, Have You Been Paying Attention? and The Australian Formula 1 Grand Prix. Network 10 also includes the digital platforms 10 Play™, 10 Daily™streaming services, as well as 10 All Access, our streaming subscription service in Australia featuring Network 10 programming as well as our other programming.
Channel 5, a free-to-air PSB in the UK,for third parties. VCNI provides distribution and its affiliated channels air a broad mix of popular content, including factual programming, entertainment, reality, sports, acquiredadvertising solutions for partners on five continents and original drama, and preschool programming through its award-winning Milkshake! brand. Programming highlights in 2019 included new dramas 15 Days, Blood and Agatha and the Truth of Murder, documentaries including RTS Programme Award winner The Abused and Suicidal: In Our Own Words, and critically acclaimed factual shows such as Critical Condition and Warship: Life at Sea.
Telefe is a leading free-to-air channel and one of the biggest content producers in Argentina, with 11 studios andacross more than 3,500 hours of content produced each year. Telefe studios co-produced four films180 countries. Viacom18 is our joint venture in 2019. Programming highlights in 2019 included La Voz Argentina (a local version of The Voice), Por el Mundo, 100 Días Para Enamorarse, PH: Podemos Hablar, Pequeña Victoria and Quien Quiere Ser Millonario (local version of Who Wants to be a Millionaire).
Paramount+ is an advertising-free, premium video-on-demand service, featuring films from Paramount Pictures and hundreds of television episodes from ViacomCBS’ library. Available as an authenticated service or to customers of select subscription service providers, as of December 2019, Paramount+ was available in Sweden, Denmark, Norway, Finland, Hungary, Poland and across Latin America.
India, whose operations include COLORS, is a highly-rated Hindi-language general entertainment pay television channel, operated byand Viacom18 Studios, a filmed entertainment business.
ViacomCBS International Studios
One of the leading global producers of international content, VIS produces content for our Viacom18brands and platforms, including Paramount+, Nickelodeon, MTV, Comedy Central, Channel 5, Network 10, Telefe, Ananey, Porta Dos Fundos and Chilevisión, as well as for third parties. A leading global Spanish-language content creator, VIS’ genres include kids, young adult, live action and animation, soap operas, dramas, short- and long-form comedy, feature films, unscripted reality and social impact documentaries. In 2021, we launched VIS Social Impact as part of our Content for Change social impact initiative.
Free-to-Air Networks
VCNI operates a number of free-to-air networks around the world. joint ventureNetwork 10 is a major free-to-air broadcast network in India. COLORS is available in IndiaAustralia. Network 10’s brands include 10, 10 Bold, 10 Peach, 10 Shake and over 120 additional countries, including in the U.S. as Aapka Colors. COLORS10 Play, and its programming includes also extends to the English language through COLORS Infinity, an English general entertainment channel, six Indian regional languages and two Hindi channels, COLORS Rishtey and COLORS Cineplex in the entertainment and movie space, respectively. Programming highlights in 2019 included the first season of Dance Deewane, a dance reality show; returning seasons of Bigg BossMasterChef Australia, Fear Factor: Khatron Ke KhiladiAustralian Survivor and I’m A Celebrity…Get Me Out of Here!.Channel 5 is a free-to-air public service broadcaster (PSB) in the U.K. Channel 5’s brands include 5Star, 5USA and 5Select, My5 and Milkshake, and its programming includes All Creatures Great and Small and Our Yorkshire Farm. Telefe is a leading free-to-air broadcast network in Argentina. Telefe’s brands include Telefe, Telefe Noticias, Mi Telefe, Telefe Internacional and Telefe Channels on Pluto TV, and its programming includes Telefe Noticias, its flagship newscast, MasterChef Celebrity, NaaginBake Off, Rising StarThe Voice (India’s first-ever live singing reality show) and India’s Got Talent;top scripted and the 19th edition of the International Indian Film Academy (IIFA) Awards, Bollywood’s biggest awards extravaganza.
Viacom18 Studios, Viacom18’s filmed entertainment business, includes Viacom18 Motion Pictures, a fully-integrated motion pictures studio, and Tipping Point, a digital content unit. Viacom18 Motion Pictures also partners with Paramount to market and distribute Paramount films for theatrical exhibition in the Indian sub-continent.
Pluto TVnon-scripted content. Chilevisión is a leading free streaming TV platformfree-to-air television network in the U.S. Pluto TV is available across mobile devices, desktops, streaming players and game consoles and is integrated across a growing number of Smart TVs and other video and broadband platforms.
With more than 22 million monthly active users in the U.S., the majority of whom are on connected TVs, and over 175 content partners, Pluto TV offers over 250 live linear channels and thousands of hours of on-demand content, including movies, news, sports, general entertainment, African Americans, kids and digital series. In July 2019, Pluto
TV launched Pluto TV Latino, a suite of 22 channels streaming over 4,000 hours of programming in Spanish and Portuguese, including hit TV series and movies, sports, reality, lifestyle and more. In addition, Pluto TV is available in the UK, Germany, Austria and Switzerland, and plans to expand to Latin America and additional territories.
FILMED ENTERTAINMENT
Overview
Our Filmed EntertainmentChile. segment develops, produces, finances, acquires and distributes films, televisionChilevisión’s programming and other entertainment content in various markets and media worldwide through its Paramount Pictures, Paramount Players, Paramount Animation and Paramount Television Studios divisions. It partners on various projects with key ViacomCBS brands, including Nickelodeon Movies, MTV Filmsincludes ®¿Quién es la Máscara?, Pasapalabra, Podemos Hablar, La Divina Comida and BET Films™El Discípulo del Chef.
Films produced, acquired and/or distributed by the
Filmed Entertainment
| | | | | |
| Filmed Entertainment consisted of Paramount Pictures, Paramount Players, Paramount Animation, Paramount Television Studios and Miramax. Paramount produces franchise live-action and animated films and genre films for specific audiences and releases its films in various markets around the world theatrically, on streaming services, including Paramount+, through transactional home entertainment offerings, on television, and through various other media. |
Filmed EntertainmentEntertainment’s segment are generally first exhibited theatrically in domestic and/or international markets and then released in various markets through airlines and hotels, electronic sell-through, DVDs and Blu-ray discs, transactional video-on-demand (“TVOD”), pay television, SVOD, basic cable television, free television and free video-on-demand (“FVOD”).
Our Filmed Entertainment segment’s revenues arewere generated primarily from the release and/or distribution of films theatrically, the release and/or distribution of film and television product throughtransactional home entertainment, the licensing of film and television product to streaming services, including Paramount+, broadcast and cable television networks and other digital platformsservices, and other ancillary activities. Our theatrical revenues in 2020 and 2021 were negatively impacted by the continued closure or reduction in capacity of movie theaters as a result of COVID‑19. We delayed certain planned 2020 and 2021 theatrical releases, licensed others to Paramount+ or third-party streaming services, and released several films theatrically, including A Quiet Place Part II, Snake Eyes: G.I. Joe Origins, PAW Patrol: The Movie and Clifford the Big Red Dog. In 2019, our2021, Filmed Entertainment segment licensing revenues, home entertainment revenuesand other and theatrical revenues weregenerated approximately 57%, 21%92% and 18%8%, respectively, of the segment’s total revenues for this segment. Ourrevenues. Filmed Entertainment segment generated 10%approximately 9%, 11%9% and 12%11% of our consolidated revenues in 2021, 2020 and 2019, 2018 and 2017, respectively.respectively (after the elimination of intercompany revenues).
Paramount Pictures is a major global producer and distributor of filmed entertainment and has an extensive library consisting of approximately 1,300over 1,200 film titles produced by Paramount and has acquired rights to approximately 2,100nearly 2,900 additional films and a number of television programs. Paramount is home to a number of successful franchises such as Mission: Impossible, Transformers, Star Trek, A Quiet Place and Paranormal Activity. Paramount’s library includes many Academy Award winners, including Titanic, Braveheart, Forrest Gump, The Godfather, The Godfather Part II and Wings, which won the first ever Academy Award ever awarded for Best Picture in 1929. The Paramount library also includes other Academy Award Best Picture nominees such as Arrival, Fences, The Big Short, Selma and The Wolf of Wall Street, and classics such as The Ten Commandments, Breakfast at Tiffany’s and Sunset Boulevard, and a number of successful franchises such as Mission: Impossible, Transformers, Star Trek and Paranormal Activity. In 2019, Paramount’s 2021 theatrical releases included Terminator: Dark FateA Quiet Place Part II, RocketmanSnake Eyes: G.I. Joe Origins, Gemini ManPAW Patrol: The Movie, Pet Sematary, Crawl and Playing with FireClifford the Big Red Dog.
Paramount Players aimsis committed to expandcreating genre films from unique, contemporary voices and properties, as well as drawing from Paramount’s slaterich library of films by partnering with our Cable Networks brands to develop, produce and release distinctive feature films that showcase the network brands to movie audiences worldwide.content. Paramount Players also focusesproduces films for initial release on modest budget filmsParamount+, including Paranormal Activity: Next of specific genres for target audiences. In 2019, Paramount
Players produced Dora and the Lost City of GoldKin, a live-action adaptation of the classic Nickelodeon series Dora the Explorer,co-produced with Nickelodeon Movies.which was released in 2021.
Paramount Animation
Paramount Animation creates high-qualitydevelops and produces top-quality animated films and aims to release one to two titles per year. In 2019,films. Paramount Animation releasedcoproduced Wonder ParkThe SpongeBob Movie: Sponge on the Run, a film aboutwhich was digitally released domestically simultaneously on premium video on demand and Paramount+ in March 2021. Paramount Animation also produced Rumble, which was released on Paramount+ in the adventures of a young girlU.S. in a magical amusement park.December 2021.
Paramount Television Studios develops and finances a wide range of original, premium television content across all types of media platforms for distribution worldwide. Paramount Television Studios’ productions include American Gigolo for Showtime
Networks; Made For Love and Station Eleven for HBO Max; Shantaram, Defending Jacob and HomeBefore Dark for Apple TV+; Tom Clancy’s Jack Ryan for Amazon; 13 Reasons WhyThe Haunting of Bly Manor for Netflix; The Alienist and The Angel of Darkness for TNT; Catch-22 for Hulu;Hulu.
Miramax
Miramax, a consolidated joint venture with beIN Media Group, is a global film and television studio with an extensive library of content. We have exclusive, long-term rights to distribute Miramax’s library of more than 650 titles, which includes Defending JacobPulp Fiction, forShakespeare in Love, Good Will HuntingApple; ,Boomerang No Country for Old Men and First Wives Club Scary Moviefor BET. We also have certain rights to coproduce, co-finance and/or distribute new film and BET+, respectively; and Berlin Station forEPIX. In 2019, Paramount Television Studios’ programming received seven Emmy® nominations.television projects with Miramax.
Film Production, Distribution and Financing
Paramount producesWeproduce many of the films it releaseswe release and also acquiresacquire films for distribution from third parties. In some cases, Paramount co-financeswe co-finance and/or co-distributesco-distribute films with third parties, including other studios. Paramount Wealso entersenter into film-specific financing and slatemultipicture financing arrangements from time to time under which third parties participate in the financing of the costs of a film or group of films in exchange for an economic participation and a partial copyright interest. ParamountWe distributesdistribute films worldwide or in select territories orin various media and may engage third-party distributors for certain picturesfilms in certain territories.
Paramount has several multi-picture production, distribution and financing relationships, including its agreement with Skydance Productions (“Skydance”), under which ParamountDomestically, we generally market and Skydance producedistribute our own theatrical and finance certain films, and Paramount has a first look on Skydance-initiated projects. Paramount also has an agreement with Hasbro Inc. (“Hasbro”) involving the production, financing and distribution of live action and animated films based on Hasbro’s expansive list of properties. In December 2019, in connection with ViacomCBS’ entry into an agreement to acquire a 49% interest in Miramax, Paramount and Miramax entered into first-look, co-financing and distribution agreements under which they will collaborate on production and financing of new film and television projects, and Paramountwill distribute such new projects, as well as Miramax library content.
Domestically, Paramount generally performs marketing and distribution services for theatrical releases and sales and marketing services for its home entertainment releases. Paramount has an agreement with Universal Studios for certain back-office and distribution services for all physical DVD and Blu-ray discs released by Paramount in the U.S. and Canada. Paramount also distributes CBS’ television and other library content and Nickelodeon television shows on DVD and Blu-ray disc on a worldwide basis. Internationally, Paramount generally distributes itswe distribute theatrical releases through its ownour international affiliates or, in territories where it does notwe have anno operating presence, through United International Pictures, aour joint venture with Universal Studios. Studios, or other third-party distributors. For home entertainment releases, Paramount’s physical DVD and Blu-ray discs are distributed in certain international territoriesinternationally by Universal Pictures Home
Entertainment and in certain other territories by Paramount licensees. Paramountlocal licensees. We also distributeslicense films and television shows domestically andand/or internationally on electronic sell-through, TVOD, SVOD, FVOD and television platforms. In the first domestic pay television distribution window, Paramount’s feature films initially theatrically released in the U.S. are generally exhibited on EPIX.
Producing, marketing and distributing films and television programming can involve significant costs, and the timing of a film’s release can cause our financial results to vary. For example, marketing costs are generally incurred before and throughout the theatrical release of a film and, to a lesser extent, other distribution windows, and are expensed as incurred. As a result, we typically incur losses with respect to a particular film prior to and during the film’s theatrical exhibition, and recoupmentvariety of investment as well as profitability for the film may not be realized until well after its theatrical release. Therefore, the results of the Filmed Entertainment segment can be volatile as films work their way through the various distribution windows.platforms.
PUBLISHING
Our
Publishing segment consists of Simon & Schuster, which publishes and distributes adult and children’s consumer books in printed, digital and audio formats in the U.S. and internationally. Its digital formats include electronic books and audio books.
Simon & Schuster’s major adult imprints include Simon & Schuster, Scribner, Atria Books and Gallery Books. Simon & Schuster’s major children’s imprints include Simon & Schuster Books For Young Readers™, Aladdin® and Little Simon®. Simon & Schuster also develops special imprints and publishes titles based on the products of certain of our businesses as well as those of third parties and distributes products for other publishers. Simon & Schuster distributes its products directly and through third parties. Simon & Schusteralso delivers content and promotes its products on its own websites, social media, and general Internet sites as well as those dedicated to individual titles. International publishing includes the international distribution of English-language titles through Simon & Schuster in the UK, Canada, Australia and India and other distributors, as well as the publication of locally originated titles by its international companies.
In 2019, Simon & Schuster had 200 New York Times bestsellers in hardcover, paperback, audio and combined print and ebook formats, collectively, including 21 New York Times #1 bestsellers. Best-selling titles in 2019 included Howard Stern Comes Again by Howard Stern, The Institute by Stephen King and The Pioneers by David McCullough. Best-selling children’s titles included Dork Diaries 14: Tales from a Not-So-Best Friend Forever by Rachel Renée Russell and Red Scrolls of Magic by Cassandra Clare. Simon & Schuster Digital™, through SimonandSchuster.com, publishes original content, builds reader communities and promotes and sells Simon & Schuster’s books over the Internet.
Our Publishing segment’s revenues are generated from the publishing and distribution of consumer books in print, digital and audio formats. In 2019, the sale of digital content represented approximately 25% of Publishing’s revenues. Our Publishing segment generated 3% of our consolidated revenues in each of 2019, 2018 and 2017.
REVENUES
Our TV Entertainment, Cable Networks, Filmed Entertainment and Publishing segments generate advertising revenues, affiliate revenues, content licensing revenues, theatrical revenues and publishing revenues. For additional information regarding our sources of revenues, see “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition – Consolidated Results of Operations – 2019 vs. 2018 – Revenues” and “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements.” For information regarding seasonal factors affecting our revenues, see “Item 1A. Risk Factors – Our revenues, expenses and operating
results may vary based on the timing, mix, number and availability of our films and other programming and on seasonal factors.”
Advertising
Advertising revenues are generated primarily from the sale of advertising spots on the CBS Television Network, our basic cable networks and our television stations, as well as on our ad-supported streaming services, including CBS All Access and Pluto TV, and on our websites. Our advertising revenues include integrated marketing services, which provide unique branded content and custom sponsorship opportunities to our advertisers, as well as advanced marketing solutions, including addressable video and brand solutions.
Affiliate
Affiliate revenues are principally comprised of fees received from MVPDs and virtual MVPDs for carriage of our cable networks, fees received from television stations affiliated with the CBS Television Network, fees for authorizing the MVPDs’ and virtual MVPDs’ carriage of our owned television stations, and subscription fees for our streaming services.
Content Licensing
Content licensing revenues are principally comprised of fees from the licensing of exhibition rights for our internally-produced television and film programming to television stations, cable networks and SVOD and FVOD services; home entertainment revenues, which are derived from the sale and distribution of our content through DVDs and Blu-ray discs to wholesale and retail partners, as well as from the viewing of our content on a transactional basis through TVOD and electronic sell-through services; fees from the use of our trademarks and brands for consumer products, recreation and live events, and fees from the distribution of third-party programming.
Theatrical
Theatrical revenues are principally comprised of the worldwide theatrical distribution of films through audience ticket sales.
Publishing
Publishing revenues are principally comprised of the domestic and international publishing and distribution of consumer books in printed, digital and audio formats.
COMPETITION
All of our businesses operate in highly competitive environments, and compete for creative talent and intellectual property, as well as audiencefor audiences and distribution of our content.
Our TV Entertainment, Cable Networks and Filmed Entertainment segmentsWe compete with a variety of media, technology and entertainment companies that have substantial resources to produce, acquire and acquiredistribute content worldwide,around the world, including broadcast networks, basic and premium cable networks, streaming services, film and television studios, production groups, independent producers and syndicators, television stations and television station groups. These segmentsWe compete with other content creators for creative talent including producers, directors, actors and writers, as well as for new program ideas and intellectual property and for the acquisition of popular programming. Similarly, our
Publishing segment competes with large publishers for the rights to works by authors, and competition is particularly strong for well-known authors and public personalities.
Our businesses also face significant competition for audience shareaudiences from various sources. Our Filmed Entertainment segment competesWe compete for audiences for its theatricalour films and television content with releases byfrom other major film studios, television producers and streaming services, as well as with other forms of entertainment and consumer spending
outlets. Our TV Entertainment and Cable Networks segmentsWe also compete for audiences and advertising revenues primarily with other cablebroadcast and broadcastcable television networks; streaming services; social media platforms; websites, apps and other online experiences; radio programming; and print media. In addition, our television and basic cable networks businesses face increasing competition from technologies providing digital audio and visual content in ways that allow audiences to consume content of their choosing while avoiding traditional commercial advertising. Moreover, our businesses face competition from the many other entertainment options available to consumers including video games, sports, travel and outdoor recreation.
We also face competition for distribution of our content. Our TV Entertainment and Cable Networks segmentstelevision businesses compete for distribution of our program services (and receipt of related fees) with other broadcast networks, cable networks and programmers. The CBS Television Network also competes with other broadcast networks to secure affiliations with independently owned
television stations to ensure the effective distribution of network programming nationwide. Our TV Entertainment, Cable Networks and Filmed Entertainment segmentsin the U.S. We also compete with studios and other producers of entertainment content for distribution on third partythird-party platforms. Our Publishing segment competes with large publishers for sales to retailers, and mass merchandisers and on-line retailers have contributed to a general trend toward consolidation in the retail channel. In addition, the growth of the electronic book market has impacted print book retailers and wholesalers, and could result in a reduction of these channels for the sales and marketing of our books.
For additional information regarding competition, see “Item 1A. Risk Factors –— Our businesses operate in industries that are highly competitive and swiftly consolidating.”
ENVIRONMENTAL, SOCIAL AND GOVERNANCE STRATEGYEnvironmental, Social and Governance Strategy
ViacomCBS isWe believe the media and entertainment industry plays an important role in shaping culture and conversations. We take this role seriously and are committed to responsibleadvancing and sustainable business practices, which strengthenstrengthening our abilityapproach to innovateissues, opportunities and betterrisks related to ESG matters to help serve our stockholders, employees, partners, audiences and stockholders. the communities in which we operate, as well as to enhance our business. Our ESG strategy is centered on an understanding of our biggest opportunities and risks.
We are proactively identifying, measuringorganize our ESG work into three pillars: (1) On-Screen Content & Social Impact, (2) Workforce & Culture and mapping(3) Sustainable Production & Operations. On-Screen Content & Social Impact addresses the opportunities and responsibilities we have to represent, inform and influence through our content and brands. Workforce & Culture focuses on our efforts to recruit and retain the best employees, treat contractors and partners well, and foster an environment where people feel welcome and safe. Sustainable Production & Operations addresses the environmental social and governance (“ESG”)social impacts of our global operations and facilities, film and television productions and other activities.
Building on our 2020 companywide Materiality Assessment and first ESG Report, in 2021 we released our second ESG Report, which is available on our website, and included our first set of overarching goals for each of these pillars to help focus our efforts and assess our progress. We are workingcommitted to managecontinuing to identify, measure, map and report on various non-financialthe ESG impactsimpact of our global operations.
ESG Governance
Our ESG efforts are a companywide commitment led by a dedicated ESG team that oversees day-to-day strategy and implementation. Our ESG team works closely with our ESG Council, a cross-functional team of senior leadership and subject matter experts spanning our brands, legal, investor relations, global inclusion, human resources, finance, real estate and environmental health and safety, to guide our strategy and reporting and help spread and instill our ESG values across the Company. The ESG team works in close collaboration with our Chief Executive Officer, Chief Financial Officer, General Counsel and other senior executives who together make up our ESG Steering Committee. These leaders are actively involved in reviewing and refining our ESG strategies, programs and policies. The ESG team regularly updates the Nominating and Governance Committee of our Board of Directors, which, pursuant to its charter, oversees and monitors significant issues impacting our culture and reputation, as well as our handling of ESG issues.
Human Capital Management
We aim to build a culture that attracts and retains the best employees and a workplace where people feel welcome, safe and inspired to bring their whole self to work.
As of December 31, 2021, we employed approximately 22,965 full- and part-time employees in 37 countries worldwide and had approximately 4,300 project-based staff on our payroll. We also use temporary employees in the ordinary course of our business.
Our human capital management strategy is intended to address the areas described below, and additional information can be found in our ESG Report.
A Culture of Diversity, Equity and Inclusion
We seek to mold a companywide culture built on our core values and anchored in a dynamic and proactive approach to DE&I through a range of partnerships, collaborations, programs and initiatives, some of which are described below.
•Many of our brands maintain inclusivity councils to address their DE&I activities and the DE&I challenges in their businesses.
•We partner with hundreds of diversity-focused institutions globally that are committed to supporting women, BIPOC and LGBTQ+ individuals, veterans and/or persons with disabilities. We have placed a particular focus on organizations advancing the causes of racial justice, anti-hate and social equity.
•We sponsor internal and external professional development programs and campus-to-career initiatives aimed at underrepresented groups.
•Our job postings reach an expansive network that includes more than 60 diversity-focused job boards. We use third-party technology to identify and remove biasing language from our job descriptions.
•We sponsor eight active employee-led Employee Resource Groups (“ERGs”) with 53 chapters in 19 locations worldwide. More than half of our employees are members of these employee-led groups. Our ERGs provide support for certain business and corporate initiatives.
•Our CEO has signed onto the CEO Action for Diversity and Inclusion pledge and the Company was a founding signatory for Management Leadership for Tomorrow’s (“MLT”) Black Equity at Work Certification Program (“BEW”). The MLT BEW is a third-party validation program that aims to drive measurable progress in improving representation and racial equity in the workplace.
•Of our U.S. employees, as of December 31, 2021, approximately 49% were female and approximately 39% self-identified as part of a racial or ethnic minority group. Of our U.S. employees with Vice President titles and above, as of December 31, 2021, approximately 49% were female and approximately 28% self-identified as part of a racial or ethnic minority group.
•In 2021, we set new goals to help accelerate our performance on key DE&I objectives, including a target global hire and promotion rate for female Senior Vice Presidents and above and a target U.S. hire and promotion rate for ethnically diverse Vice Presidents and above.
Preventing Harassment and Discrimination
We remain committed to building a work environment free of harassment and discrimination so that our employees can focus on doing their best work. We have enacted policies addressing harassment, discrimination and other behaviors that could create a hostile workplace, some of which are described below.
•Our Business Conduct Statement provides employees with clear examples of harassment and discrimination and guidance on how to create a safe and inclusive environment for all. We make annual trainings on sexual harassment, discrimination and retaliation prevention available to all employees.
•We monitor employee diversity data trends — including the promotion rates of women and ethnically diverse employees compared to their male or white peers, respectively — and watch for any patterns that might suggest discrimination or unconscious bias so that we can seek to address them.
•We require that employees report any incidents of harassment and discrimination that they witness. Among other ways, employees can report incidents of harassment or discrimination using our anonymous third-party managed complaint and reporting hotline, called OPENLINE.
Employee Attraction, Retention and Training
Our training, mentoring and career mobility programs embody our culture of DE&I as we recruit, retain and engage our employees. We strive to create an inclusive culture in which our employees and talent feel supported, heard and understood and in which employees of all backgrounds feel like they belong and have the opportunity to thrive. Some of these programs are described below.
•We offer a broad spectrum of learning opportunities for our employees, including leadership-specific training for employees who are new to their positions, taking on an expanded scope of responsibilities, or otherwise seeking to expand their impact. We also offer regular manager and employee classes focused on specific skills, leader learning journeys to help people leaders implement new capabilities over several months, and team-based workshops for groups who want to learn together.
•We offer a range of financial and nonfinancial compensation and benefits, including health, life and disability insurance; matching retirement and profit-sharing contributions; flexible paid time off; paid volunteer time; financial planning assistance; multiple wellness programs; and parental, caregiving, bereavement and military leave benefits. We also offer tuition support for certain employees. In 2021, we began offering our employees access to a behavior-change app designed to help our employees manage stress, improve focus and enhance overall well-being.
•We offer flexible work hours for many of our full-time and part-time employees.
•In 2021, we launched our first global employee engagement survey, administered by an independent third party, to assess our efforts around employee engagement, inclusion and well-being. Our executive officers (and managers, on a team level) reviewed the survey results and instituted action plans to address feedback and opportunity areas. We continue to track our progress on these efforts through shorter, periodic “pulse” engagement surveys.
•As a result of our focus on employee satisfaction and inclusiveness, we have been recognized for our workplace culture, including being named a 2021 Most Loved Workplace by Newsweek, one of America’s Best Employers for Diversity by Forbes and one of the Top 100 workplaces with the Best D&I Initiatives in 2021 by Mogul.
Health, Safety and Security
The health and safety of our workers, particularly across our productions worldwide, remains a top priority. We strive to take a proactive approach to identifying and mitigating health, safety and security risks. Some of the steps we take are described below.
•In 2021, we began to centralize our nonproduction environmental health and safety (“EHS”) functions. We appointed a new Senior Vice President of EHS in an effort to transparently address themensure that these critical functions are managed consistently and reported on externally in an appropriate way.
•We have on-site health care at some office and production sites, as well as medics and medical support at many production sites.
•We perform risk assessments of daily work processes across our productions, offices and other work sites and develop hazard reduction, avoidance and mitigation plans. We also track and report safety, health and security incident data across the company.
•Our Global Security Operations Center oversees security and emergency response efforts and undertakes risk scans in an effort to identify potential security risks.
•After COVID-19 caused an initial period in which our offices closed and production ceased, we restarted productions in mid-2020 and began to manage a slow and safe return-to-office process. We have established a number of COVID-19-related safety protocols in our offices, on our productions and with stakeholders.respect to nonproduction activities. While the majority of our employees had the opportunity to work at a reduced capacity from certain offices, most of our office employees worked remotely in 2021.
As content creators, we are passionate about entertainingSocial Impact and informing the world and are committed to our legacy of creating lasting impact through our work. From groundbreaking HIV awareness initiatives to campaigns supporting education, the empowerment of women and youth, health issues and the military, veterans and their families, we have always strived to be at the forefront of championing the causes that matter to our audiences. Today, we continue toCorporate Social Responsibility
We leverage our brandsplatforms and diverse capabilities to create positive social impacts, including by exploring and raising awareness of issues that align with our global reachvalues and impact our viewers such as climate change, mental health, civic engagement and social justice. Our commitment to amplifysocial impact is not only exemplified by the content we produce, but also our community service projects, philanthropy and employee engagement efforts, of those who are working to make positive changesincluding our 25th annual Community Day, which was held virtually in their communities. Striving to be a good corporate citizen2021 and to make a positive impact in communitiesinvolved employees from 23 regions around the world across more than 100 volunteer projects.
Content for Change
Content for Change is fundamentala social justice initiative launched by BET in 2020 that is anchored in the belief that storytelling has the power to whattransform how we do every day. Below are justsee ourselves and one another. In 2021, we expanded the program across the Company with three interrelated objectives: (1) leveraging content to counteract racism, bias, stereotypes and hate; (2) striving for equity across our entire creative supply chain; and (3) creating a few examplesculture of our efforts:
We continue to usediversity, inclusion and belonging that continuously informs and enhances the immense power of our media platforms to heighten social awareness on important issuesstories we tell through our award-winning CBS Cares public service announcement (“PSA”) campaigns. In 2019, the CBS Television Network scheduled CBS Cares PSAs with an estimated value of $276 million and featuring a wide array of CBS talent on a variety of important topics such as heritage and history months, child advocacy, empowerment of women and girls, support for the military, veterans and their families, and health awareness. Examples include:
| |
• | We and Girls Inc. created a PSA that aired in-game during the CBS Television Network’s Super Bowl LIII coverage, and post-game on the CBS Sports Network. Featuring the voiceover of CBS This Morning’s Gayle King and players from the NY Giants, the PSA encourages girls to believe they can succeed at the highest levels.
|
We produce and air annual PSAs as part ofcontent. This initiative builds upon our commitment to honor the victims of the Holocaust on International Holocaust Remembrance Day.our community, as well as to DE&I and fostering an inclusive company culture.
We and the Association of National Advertisers again teamed up for a multi-pronged partnership in support of the #SeeHer initiative to accurately portray girls and women in media. Supporting PSAs ran in primetime as part of Women’s History Month and featured Norah O’Donnell, Gayle King, Tea Leoni, Carrie Ann Inaba and others.Regulation
CBS Cares tackled the issue of sexual harassment, by continuing to air PSAs featuring Bridget Moynahan, Daniela Ruah and Aisha Tyler.
PSAs featuring Shemar Moore, Aisha Tyler, Sara Gilbert and Sheryl Underwood continued to air, teaching children about the importance of other cultures, races and religions, and emphasizing that we are all enriched by our differences.
Get Schooled inspires and empowers students nationwide to thrive in high school, college and their first jobs through a unique blend of powerful digital content, gamification and personalized support. In its 10-year history, Get Schooled has partnered with over 15,000 educators and their students, and has been recognized by Fast Company as a “Most Innovative Company.”
The Save The Music Foundation helps kids, schools, and communities realize their full potential through the power of making music. Founded in 1997, Save The Music partners with school districts and raises funds to restore music programs in public schools. Since inception, we have donated over $58 million worth of new musical instruments and technology to 2,159 schools in 276 school districts around the country, impacting the lives of countless students.
Beyond the Backpack is a celebration of Nickelodeon’s curriculum-based preschool properties. The initiative champions kindergarten and pre-k readiness by providing fun, simple and unique tools to address the five areas identified as critical to educational success: Family Engagement, Health & Wellness, Literacy Skills, Social & Emotional Skills, and STEAM (Science, Technology, Engineering, Arts and Math) Skills. Beyond the Backpack reinforces the academic community’s view that parents and caregivers are their child's first teachers and that it is never too early to start getting ready. In 2019, Nickelodeon donated 75,000 printed toolkits and 2,500 backpacks full of school supplies.
Paramount has a long and proud tradition of giving back with a corporate social responsibility program focused on four key initiatives: supporting public education; protecting the environment; combating HIV/AIDS; and promoting volunteerism. By offering employee engagement opportunities, coupled with financial and in-kind contributions, Paramount supports numerous local, national, and global non-profit organizations. Kindergarten to Cap & Gown - Paramount’s signature education program - mentors students through their educational experience, targeting four partner schools in Paramount’s Los Angeles neighborhood.
In 2019, Paramount Network debuted the first installments of Take Action - a short-form digital documentary series addressing important social issues related to our content themes. We believe that stories of individual volunteers and activists have the power to connect us, inspire action and, ultimately, create real change. Each film includes a call-to-action, partnering with a nonprofit organization to give the audience the opportunity to learn more and take action themselves.
The MTV Staying Alive Foundation produces multi-award-winning, impactful behavior change campaigns to further its purpose of storytelling to save lives and enable young people to make empowered, informed choices about their health and wellbeing.
Our robust Veterans Network (“VetNet”) engages in multiple programs and supports numerous veteran-related causes. Among its activities in 2019, VetNet worked with our legal teams to provide more than 4,000 hours of critical, pro-bono legal assistance to more than 200 veterans and their families, representing approximately $1.5 million of legal fees donated; hosted a virtual career advice event for veterans in partnership with American Corporate Partners; worked with partners to provide mentorship and internships for 850 veterans; and collected more than 100,000 donations, including toys for veteran families and toiletries for the homeless.
REGULATION AND PROTECTION OF OUR INTELLECTUAL PROPERTY
We are, fundamentally, a content company, so the trademark, copyright, patent and other intellectual property laws that protect our brands and content are of paramount importance to us. Our businesses and the intellectual property they create or acquire are subject to and affected by laws and regulations of U.S. federal, state and local governmental authorities, as well as laws and regulations of countries other than the U.S. and pan-national bodies such as the European Union (“EU”E.U.”). The laws and regulations affecting our businesses are constantly subject to change, as are the protections that those laws and regulations afford us. The discussion below describes certain, but not all, present and proposed laws and regulations affecting our businesses.
FCC and Similar Regulation
General. Broadcast television and certain aspects of cable programming are subject to the jurisdiction of the FCC pursuant to the Communications Act. The Communications Act empowers the FCC, among other actions, to issue, renew, revoke and modify broadcasting licenses; penalize broadcasters for airing indecent or profane content; regulate the airing of emergency alerting and the use of emergency alerting tones by broadcasters or cable channels; require video programming to be accessible to persons with disabilities; determine stations’ frequencies, locations and operating power; and impose penalties for violation of its regulations, including monetary forfeitures, short-term renewal of licenses and, in egregious cases, license revocation or denial of license renewals.
Under the Communications Act, the FCC also regulates certain aspects of the operation of MVPDs and certain other electronic media that compete with broadcast stations and cable programming.
We provide below a brief summary of certain laws and FCC regulations under which we operate.
| | | | | |
| Cable Networks consisted of a portfolio of premium and basic cable networks comprised of SHOWTIME, The Movie Channel, Flix, BET, Nickelodeon, MTV, Comedy Central, Paramount Network, Smithsonian Channel, VH1, CMT, Pop TV, Logo and TV Land; a number of direct-to-consumer subscription streaming services — SHOWTIME OTT, Showtime Networks’ premium streaming service, Noggin, Nickelodeon’s preschool streaming service, and BET+, a streaming service focused on the Black audience; and Pluto TV, our FAST service. |
License Renewals.
Television broadcast licenses are typically granted for standard terms of eight years. The Communications Act requires the FCC to renew a broadcast license if the FCC finds that the station has served the public interest, convenience and necessity and, with respect to the station, there have been no serious violations by the licensee of either the Communications Act or the FCC’s rules and regulations and there have been no other violations by the licensee of the Communications Act or the FCC’s rules and regulations that, taken together, constitute a pattern of abuse. We have no pending renewal applications, but we will be filing renewal applications with respect to all of our stations on a staggered basis between 2020 and 2023. A station remains authorized to operate while its license renewal application is pending.
License Assignments and Transfers of Licensee Control. The Communications Act requires prior FCC approval for the assignment of a license or transfer of control of an FCC licensee. Third parties may oppose our applications to assign, acquire, or transfer control of broadcast licenses.
Ownership Regulation. The Communications Act and FCC rules and regulations limit the ability of individuals and entities to have certain official positions or ownership interests, known as “attributable” interests, above specific levels in broadcast stations. In seeking FCC approval for the acquisition of a broadcast station license, the acquiring person or entity must demonstrate that the acquisition complies with the FCC’s ownership rules or that a waiver of the rules is in the public interest.
Below are descriptions of broadcast ownership rules. The FCC is reviewing its local television ownership and dual network rules through its most recent quadrennial review that commenced in November 2018 and is separately reviewing its television national audience reach rule. The FCC had relaxed certain of these rules in 2017, but in November 2019, a federal appellate court vacated that 2017 action and ordered the FCC to conduct further proceedings.
Local Television Ownership. The FCC’s local television ownership rule limits the number of full-power television stations that may be commonly owned in the same DMA. For example, common ownership of two full-power stations in a market generally is allowed only if at least eight independently owned and operating full-power stations will remain in the market following the acquisition of the second station, and if at least one of the stations is outside of the top-four ranked stations in the market based on audience share.
Dual Network Rule. The dual network rule prohibits any of the four major networks, ABC, CBS, FOX and NBC, from combining or being under common control.
Television National Audience Reach Limitation. Under the national television ownership rule, one party may not own television stations that reach more than 39% of all U.S. television households, although under current FCC rules a UHF station is attributed with reaching only 50% of the television households in its market. In December 2017, the FCC issued a Notice of Proposed Rulemaking pursuant to which it will consider modifying, retaining or eliminating the 39% national television audience reach limitation and/or the UHF
discount. We currently own and operate television stations that reach approximately 38% or 25% of all U.S. television households on an undiscounted or discounted basis, respectively.
Cross-ownership restrictions. FCC “cross-ownership” rules reinstated as a result of a decision by a federal appellate court (a) prohibit common ownership of one or more broadcast stations (whether radio or television) and a daily newspaper in the same DMA, and (b) limit the number of radio and television broadcast stations that may be commonly owned in a given DMA. We do not currently own cognizable interests in any daily newspapers or radio broadcast stations.
Alien Ownership. In general, the Communications Act restricts foreign individuals or entities from collectively owning more than 25% of our voting power or equity. FCC approval is required to exceed the 25% threshold. The FCC has recently approved foreign ownership levels of up to 100% in certain instances, subsequent to its review and approval of specific, named foreign individuals.
Cable and Satellite CarriageNetworks also included VCNI, which operates international extensions of Television Broadcast Stations. The Communications ActParamount+, Pluto TV and FCC rules govern the retransmission of broadcast television stations by cable system operators, direct broadcast satellite operators, and other MVPDs. Pursuant to these regulations, we have elected to negotiate with MVPDs for the right to carry our broadcast television stations pursuant to retransmission consent agreements. Federal law requires that broadcasters and MVPDs negotiate in good faith for retransmission consent. Some MVPDs have sought changes to federal law that would eliminate or otherwise limit the ability of broadcasters to obtain fair compensation for the grant of retransmission consent.
National Broadband Plan/Post-Auction Repack. In 2017, the FCC concluded a series of voluntary auctions to repurpose certain spectrum then utilized by broadcast television stations for use by wireless broadband services. The FCC has mandated that certain television stations that are continuing to operate subsequent to these auctions must change their channels as the FCC “repacks” the remaining spectrum dedicated to broadcast television use. Congress provided that the FCC will assist television stations in retaining their current coverage areas and established a fund to at least partially reimburse broadcasters for reasonable relocation expenses relating to the spectrum-repacking. Certain broadcast television stations, including some of those owned by us, are in the process of undertaking this repacking process and seeking reimbursement of associated costs.
Program Regulation. The FCC’s rules prohibit the broadcast of obscene material at any time and indecent or profane material between the hours of 6 a.m. and 10 p.m. The FCC’s maximum forfeiture penalty per station for broadcasting indecent or profane programming is approximately $415,000 per indecent or profane utterance, with a maximum forfeiture exposure of approximately $3.83 million for any continuing violation arising from a single act or failure to act. FCC regulations also prohibit broadcast television stations and cable networks from transmitting or causing the transmission of Emergency Alert System (“EAS”) tones in the absence of an actual emergency, authorized test of the EAS, or a qualified public service announcement. In September 2019, the FCC issued a Notice of Apparent Liability for Forfeiture finding that a CBS Television Network program broadcast in April 2018 violated the EAS rule and imposed a forfeiture of $272,000, which we timely paid.
Broadcast Transmission Standard. In November 2017, the FCC adopted rules to permit television broadcasters to voluntarily broadcast using the “Next Generation” broadcast television transmission standard developed by the Advanced Television Systems Committee, Inc., also called “ATSC 3.0.” Those full-service television stations using the new standard are subject to certain requirements, including the obligation to continue broadcasting a generally identical program stream in the current ATSC 1.0 broadcast standard. The ATSC 3.0 standard can be used to offer better picture quality and improved mobile broadcast viewing. A television station converting to ATSC 3.0 operation will incur significant costs in equipment purchases and upgrades. In addition, consumers may be required to obtain new television sets or other equipment that are capable of receiving ATSC 3.0 broadcasts. We are participating in various ATSC 3.0 testing with other broadcasters, but it is too early to predict any impact of this technical standard on our operations.
Children’s Programming. Our business is subject to various regulations, both in the U.S. and abroad, applicable to children’s programming. Since 1990, federal legislation and rules of the FCC have limited the amount and content
of commercial matter that may be shown on broadcast television stations and cable channels during programming designed for children 12 years of age and younger, and since 2006 the FCC has limited the display of certain commercial website addresses during children’s programming. Moreover, each of our broadcast television stations is required to air, in general, three hours per week of educational and informational programming (“E/I programming”) designed for children 16 years of age and younger, with at least two of those three hours appearing on the station’s primary program stream. The FCC made certain modifications to its E/I programming rules in 2019, which provided additional flexibility to broadcasters with respect to certain aspects of these rules.
In addition, some policymakers have sought limitations on food and beverage marketing in media popular with children and teens. For example, restrictions on the television advertising of foods high in fat, salt and sugar (“HFSS”) to children aged 15 and under have been in place in the UK since 2007. The UK government is currently considering tighter controls, including a ban on all HFSS advertising before 9:00 p.m. Various laws with similar objectives have also been enacted in Ireland, Turkey, Mexico, Chile, Peru, Taiwan and South Korea, and significant pressure for similar restrictions continues to be felt globally, most acutely in Australia, Brazil, Canada, Colombia, India, Hungary, Singapore, South Africa and France. The implementation of these or similar limitations and restrictions could have a negative impact on our Cable Networks advertising revenues, particularlybrands and services, our international free-to-air networks, which include Channel 5 in the U.K., Telefe in Argentina, Network 10 in Australia and Chilevisión in Chile, and VIS, which produces content for our networks with programmingbrands and streaming services, as well as for children and teens.third parties.
Certain Other Regulations Affecting Our Business
Global Data Protection LawsCable Networks’ revenues were generated primarily from affiliate revenues comprised of fees from MVPDs and Children’s Privacy Laws.vMVPDs for carriage of our cable networks; advertising; streaming revenues, principally comprised of advertising and subscription revenues generated by the segment’s streaming services and from digital video advertisements on our websites and in our video content on third-party platforms; and the licensing of our content and other rights. In 2021, Cable Networks affiliate, advertising, streaming and licensing and other revenues
generated approximately 39%, 28%, 19% and 14%, respectively, of the segment’s total revenues. Cable Networks generated approximately 47%, 50% and 46% of our consolidated revenues in 2021, 2020 and 2019, respectively (after the elimination of intercompany revenues).
Pluto TV
Pluto TV is a leading FAST service in the U.S., delivering hundreds of live linear channels and thousands of titles on-demand to 64.4 million global MAUs for December 2021. Pluto TV curates a diverse lineup of channels, in partnership with nearly 400 global media companies. Categories cover a wide array of genres, including movies, television series, including classic television, sports, news and opinion, reality, crime, comedy, home and DIY, explore, gaming, anime, music, kids and local programming. Pluto TV en español delivers over 50 Spanish-language channels reflecting the rich tapestry of the U.S. Hispanic community. Pluto TV was awarded the 2021 Corporate Leadership in Hispanic Programming award by Broadcasting & Cable, Multichannel News and Next Media. Pluto TV can be accessed and streamed across connected television devices, mobile and the internet. Pluto TV’s growing global footprint extends across three continents and 26 countries.
SHOWTIME
Our three premium subscription cable networks in the U.S. are SHOWTIME, which offers original scripted and unscripted series, movies, documentaries and docuseries, sports, comedy and special events; The Movie Channel, which offers a variety of movies and related programming; and Flix, which primarily offers movies from the last several decades. SHOWTIME OTT is Showtime Networks’ premium subscription streaming service. Showtime Networks also includes SHOWTIME Sports, a premium destination for live combat sports, including championship boxing, Bellator, a leading global mixed martial arts organization, and culturally relevant sports documentaries and original series. Highlights in 2021 include new seasons of The Chi and Billions, the final season of Shameless, the return of Dexter in the limited series Dexter: New Blood, new dramas American Rust and Yellowjackets, as well as new late-night variety series Ziwe. SHOWTIME is also home to City on a Hill, The L Word: Generation Q, Your Honor and unscripted series Desus & Mero, Couples Therapy, The Circus and the news series Vice.
BET
BET is a leading provider of premium entertainment, music, news, digital and public affairs content for Black audiences. BET linear can be seen in the U.S., Canada, Brazil, the Caribbean, the U.K., sub-Saharan Africa and France. BET is one of the most well-known Black consumer brands in the world, with multiplatform extensions, including BET Studios, a studio venture that provides equity ownership to Black creators; BET Digital, BET’s interactive arm; BET Her, a network targeting the African-American woman; BET Music Networks; BET Home Entertainment; BET Live, BET’s events and experience business; and BET International, which operates BET around the globe. In 2021, BET aired a diverse roster of social justice content, including Disrupt & Dismantle with Soledad O’ Brien, COVID-19 Vaccine and The Black Community: A Tyler Perry Special, and, as part of our Content for Change initiative, Bars and Ballads for George Floyd, Justice Now: Race & Reckoning and Justice Now: The Way Forward. Other highlights include Twenties, Twenties After Show With B. Scott, Games People Play and new seasons of Tyler Perry’s original series The Oval, Sistas, House of Payne and Assisted Living. BET’s tentpole events are the BET Awards, the BET Hip Hop Awards and the NAACP Image Awards.
BET+, our joint venture with Tyler Perry Studios, is a leading subscription streaming service for the Black community, with thousands of hours of movies, television, stand-up specials, stage plays and more. BET+ is home to exclusive originals from leading Black creators such as Tracy Oliver’s First Wives Club; Tyler Perry’s Ruthless and Bruh; Carl Weber’s The Family Business; and Will Packer’s Bigger; American Gangster: Trap Queens; All The Queen’s Men; The Ms. Pat Show; and Sacrifice.
Kids & Family Entertainment Group
The Kids & Family Entertainment Group oversees our global strategy and business operations for our kids and family brands and content across linear and in streaming, through television programming, consumer products, location-based experiences, publishing and feature films. The group’s 2021 highlights on Paramount+ include The SpongeBob Movie: Sponge on the Run; the SpongeBob spinoff, Kamp Koral; the new iCarly series; and PAW Patrol: The Movie.
Nickelodeon
Nickelodeon, now in its 42nd year, is one of the most globally recognized and widely distributed multimedia entertainment brands for kids and family. Nickelodeon has been the number-one-rated advertising-supported basic cable network for 26 consecutive years among kids 2 to 11. Nickelodeon features leading original and licensed kids’ series across animation, live-action and preschool genres. Nickelodeon brands include Nick Jr., Nick at Nite, TeenNick, Nicktoons and Nick Music. Domestic highlights in 2021 include SpongeBob SquarePants, PAW Patrol, The Loud House, The Casagrandes, Tyler Perry’s Young Dylan, Danger Force and Blue’s Clues & You!. International highlights include Goldie’s Oldies, a U.K. originated live action comedy series; Sharkdog, the Nickelodeon produced Netflix original animated series; and Spyders, Nickelodeon’s first original coproduction with Ananey Studios, our Israeli content producer and subscription television provider.
Noggin, Nickelodeon’s preschool subscription streaming service, features over 1,000 library episodes, interactive videos and short-form educational content. In partnership with Paramount, Nickelodeon Movies produces branded films based on some of Nickelodeon’s most iconic franchises and characters. Nickelodeon is a key part of our global consumer products business. In 2021, we launched a licensing partnership with global toy brand Melissa & Doug to deliver PAW Patrol and Blue’s Clues and You! cobranded toys. Nickelodeon also licenses its brands for recreation and other location-based experiences such as hotels and theme parks, and in 2021 opened Nickelodeon Hotels & Resorts Riviera Maya, in partnership with Karisma Hotels & Resorts and Grupo Lomas.
Awesomeness
Awesomeness creates content focused on the global Gen Z audience through its digital publishing, film and television studio divisions. Awesomeness’ original, award-winning content includes To All the Boys I’ve Loved Before, Trinkets and Pen15.
MTV Entertainment Group
MTV Entertainment Group connects with audiences through nine iconic brands — MTV, Comedy Central, VH1, CMT, Pop, Logo, Smithsonian, Paramount Network and TV Land — and MTV Entertainment Studios, which produces award-winning series, movies and documentary films for Paramount+ and third-party streaming services.
MTV
MTV is an iconic youth entertainment brand that is home to notable franchises such as The Challenge, the Shores (Jersey Shore Family Vacation, Floribama Shore, Geordie Shore, Acapulco Shore, Rio Shore and Warsaw Shore), Teen Mom (Teen Mom OG, Teen Mom Youngand Pregnant and Teen Mom 2) and Ridiculousness (Messyness and Deliciousness). MTV Documentary Films’ 2021 slate included the Academy Award-shortlisted, Emmy and Peabody-Award winning 76 Days. MTV’s signature live event — the MTV Video Music Awards — returned in 2021 along with the MTV Europe Music Awards and the MTV Movie and TV Awards.
Comedy Central
Comedy Central is a leading destination for all things comedy — from adult animation to stand-up to topical shows — providing viewers access to a world of funny, provocative and relevant content. Highlights for 2021
include the South Park Pandemic and South ParQ Vaccination specials, The Daily Show with Trevor Noah, Tha God’s Honest Truth with Charlamagne Tha God, Awkwafina is Nora From Queens, Roy Wood Jr., Imperfect Messenger and the original holiday movies A numberClüsterfünke Christmas and Hot Mess Holiday.
Paramount Network
Paramount Network is a premium entertainment destination and home to Yellowstone, cable’s hit co-created by Taylor Sheridan. Yellowstone serves as the launchpad for new original series from Taylor Sheridan on Paramount+, including Mayor of data protection lawsKingstown and 1883, the Yellowstone prequel that premiered at the end of 2021.
Smithsonian Channel
Smithsonian Channel is the home of popular genres such as air and space, travel, history, science, nature and pop culture. Highlights for 2021 include the series Aerial America, America in Color, America’s Hidden Stories, Apollo’s Moon Shot, The Pacific War in Color and Air Disasters, as well as critically-acclaimed specials Black in Space: Breaking the Color Barrier and Cher & The Loneliest Elephant.
ViacomCBS Networks International
VCNI operates international extensions of Paramount+, Pluto TV and our Cable Networks brands and services, our international free-to-air broadcast networks, and VIS, which produces content for our brands and streaming services, as well as for third parties. VCNI provides distribution and advertising solutions for partners on five continents and across more than 180 countries. Viacom18 is our joint venture in India, whose operations include COLORS, a Hindi-language general entertainment pay television channel, and Viacom18 Studios, a filmed entertainment business.
ViacomCBS International Studios
One of the leading global producers of international content, VIS produces content for our brands and platforms, including Paramount+, Nickelodeon, MTV, Comedy Central, Channel 5, Network 10, Telefe, Ananey, Porta Dos Fundos and Chilevisión, as well as for third parties. A leading global Spanish-language content creator, VIS’ genres include kids, young adult, live action and animation, soap operas, dramas, short- and long-form comedy, feature films, unscripted reality and social impact or maydocumentaries. In 2021, we launched VIS Social Impact as part of our Content for Change social impact the manner in which ViacomCBS collects, processes and transfers personal data. In the EU, the General Data Protection Regulation (“GDPR”) mandates data protection compliance obligations and authorizes significant fines for noncompliance, requiring significant compliance resources and efforts on our part. Further,initiative.
Free-to-Air Networks
VCNI operates a number of other regions where we do business, includingfree-to-air networks around the U.S.world.Network 10 is a major free-to-air broadcast network in Australia. Network 10’s brands include 10, 10 Bold, 10 Peach, 10 Shake and 10 Play, and its programming includes MasterChef Australia, AsiaAustralian Survivor and Latin America, have enacted or are considering new data protection regulations that may impact our business activities that involve the processingI’m A Celebrity…Get Me Out of personal data. For example,Here!.Channel 5 is a free-to-air public service broadcaster (PSB) in the U.S.U.K. Channel 5’s brands include 5Star, 5USA and 5Select, My5 and Milkshake, and its programming includes All Creatures Great and Small and Our Yorkshire Farm. Telefe is a leading free-to-air broadcast network in Argentina. Telefe’s brands include Telefe, Telefe Noticias, Mi Telefe, Telefe Internacional and Telefe Channels on Pluto TV, and its programming includes Telefe Noticias, its flagship newscast, MasterChef Celebrity, Bake Off, The Voice and top scripted and non-scripted content. Chilevisión is a leading free-to-air television network in Chile.Chilevisión’s programming includes ¿Quién es la Máscara?, Pasapalabra, Podemos Hablar, La Divina Comida and El Discípulo del Chef.
Filmed Entertainment
| | | | | |
| Filmed Entertainment consisted of Paramount Pictures, Paramount Players, Paramount Animation, Paramount Television Studios and Miramax. Paramount produces franchise live-action and animated films and genre films for specific audiences and releases its films in various markets around the world theatrically, on streaming services, including Paramount+, through transactional home entertainment offerings, on television, and through various other media. |
Filmed Entertainment’s revenues were generated primarily from the California Consumer Privacy Act, which went into effect on January 1,release or distribution of films theatrically, transactional home entertainment, the licensing of film and television product to streaming services, including Paramount+, broadcast and cable television networks and other digital services, and other ancillary activities. Our theatrical revenues in 2020 createsand 2021 were negatively impacted by the continued closure or reduction in capacity of movie theaters as a hostresult of new obligations for businesses regarding how they handleCOVID‑19. We delayed certain planned 2020 and 2021 theatrical releases, licensed others to Paramount+ or third-party streaming services, and released several films theatrically, including A Quiet Place Part II, Snake Eyes: G.I. Joe Origins, PAW Patrol: The Movie and Clifford the personal information of California residents, including creating new data access, data deletionBig Red Dog. In 2021, Filmed Entertainment licensing and opt out rights. In addition, someother and theatrical revenues generated approximately 92% and 8%, respectively, of the mechanisms ViacomCBS relies upon forsegment’s total revenues. Filmed Entertainment generated approximately 9%, 9% and 11% of our consolidated revenues in 2021, 2020 and 2019, respectively (after the transferelimination of personal data from the EUintercompany revenues).
Paramount Pictures
Paramount Pictures is a major global producer and distributor of filmed entertainment and has an extensive library consisting of over 1,200 film titles produced by Paramount and has acquired rights to the U.S., such as utilizing standard contractual clauses approved by the European Commission (“EC”), have been subject to legal challenges,nearly 2,900 additional films and the EU-U.S. Privacy Shield framework, which permits the transfer of personal data from the EU to the U.S., is subject to review by the relevant EU and U.S. authorities. The outcomes of these proceedings are uncertain and may require changes to our international data transfer mechanisms.
In addition, we are subject to other laws and regulations intended specifically to protect the interests of children, including the privacy of minors online. The U.S. Children’s Online Privacy Protection Act (“COPPA”) limits the collection by operators of websites or online services of personal information online from children under the age of 13. In July 2019, the Federal Trade Commission initiated a review of its regulations implementing COPPA, which we anticipate will be updated to address changes in technology. In the EU, GDPR also limits our ability to process data from children under the age of 16. Such regulations also restrict the types of advertising we are able to sell on these sites and apps and impose strict liability on us for certain actions of ViacomCBS, advertisers and other third parties, which could affect advertising demand and pricing. State and federal policymakers are also considering regulatory and legislative methods to protect consumer privacy on the Internet, and these efforts have focused particular attention on children and teens.
Compliance with enhanced data protection laws, which may be inconsistent with one another, requires additional resources and efforts on our part, and noncompliance with personal data protection regulations could result in increased regulatory enforcement and significant monetary fines.
EU Commission’s Digital Single Market Strategy. The EU continues to pursue its Digital Single Market (“DSM”) Strategy, which contains a broad range of proposals designed to create a more complete EU-wide market for digital goods and services, several of which are likely to impact ViacomCBS’ businesses.
In November 2018, the EU adopted a number of reformstelevision programs. Paramount is home to the Audiovisual Media Services Directive (the “AVMSD”)a number of successful franchises such as Mission: Impossible, Transformers, Star Trek, A Quiet Place and Paranormal Activity. Paramount’s library includes Academy Award winners, including Titanic, Braveheart, Forrest Gump, The Godfather, The Godfather Part II and Wings, which sets contentwon the first ever Academy Award for Best Picture in 1929. The Paramount library also includes Academy Award nominees such as Arrival, Fences, The Big Short, Selma and advertising rulesThe Wolf of Wall Street, and classics such as The Ten Commandments, Breakfast at Tiffany’s and Sunset Boulevard. Paramount’s 2021 theatrical releases included A Quiet Place Part II, Snake Eyes: G.I. Joe Origins, PAW Patrol: The Movie and Clifford the Big Red Dog.
Paramount Players
Paramount Players is committed to creating genre films from unique, contemporary voices and properties, as well as drawing from Paramount’s rich library of content. Paramount Players also produces films for European broadcasters. initial release on Paramount+, including Paranormal Activity: Next of Kin, which was released in 2021.
Paramount Animation
Paramount Animation develops and produces top-quality animated films. Paramount Animation coproduced The AVMSD applies the country-of-origin principle to linear and non-linear TV services, enabling cross-border broadcasts from a single regulatory jurisdiction, and sets compulsory minimum pan-EU content and advertising rules that Member States may choose to exceed. These reforms include a mandatory quota for European works on on-demand audiovisual services platforms, the option for EU states to introduce leviesSpongeBob Movie: Sponge on the revenuesRun, which was digitally released domestically simultaneously on premium video on demand and Paramount+ in March 2021. Paramount Animation also produced Rumble, which was released on Paramount+ in the U.S. in December 2021.
Paramount Television Studios
Paramount Television Studios develops and finances a wide range of audiovisual media-service providers, and liberalized rules governing the scheduling of advertising on linear broadcasters. Member States have until September 2020 to transpose the reforms into national law. These changes could impact revenues for the VCNI television channels business in Europe and affiliate deals withcontent across all platforms for bothdistribution worldwide. Paramount Television Studios’ productions include American Gigolo for Showtime
Networks; Made For Love and Station Eleven for HBO Max; Shantaram, Defending Jacob and HomeBefore Dark for Apple TV+; Tom Clancy’s Jack Ryan for Amazon; The Haunting of Bly Manor for Netflix; and Catch-22 for Hulu.
Miramax
Miramax, a consolidated joint venture with beIN Media Group, is a global film and TV distribution.television studio with an extensive library of content. We have exclusive, long-term rights to distribute Miramax’s library of more than 650 titles, which includes Pulp Fiction, Shakespeare in Love, Good Will Hunting, No Country for Old Men and Scary Movie. We also have certain rights to coproduce, co-finance and/or distribute new film and television projects with Miramax.
Film Production, Distribution and Financing
Weproduce many of the films we release and also acquire films for distribution from third parties. In June 2019, two new EU directives became effectivesome cases, we co-finance and/or co-distribute films with third parties, including other studios. Wealso enter into film-specific financing and multipicture financing arrangements from time to time under which third parties participate in the financing of the costs of a film or group of films in exchange for an economic participation and a partial copyright interest. Wedistribute films worldwide or in select territories in various media and may impact the wayengage third-party distributors for certain films in certain territories.
Domestically, wegenerally market and distribute our own theatrical and home entertainment releases. Internationally, we distribute theatrical releases through our international affiliates or, in territories where we have no operating presence, through United International Pictures, our joint venture with Universal Studios, or other third-party distributors. For home entertainment releases, DVD and Blu-ray discs are distributed internationally by local licensees. We also license films and television shows domestically and/or internationally to a variety of platforms.
Competition
All of our businesses operate in highly competitive environments, and compete for creative talent and intellectual property, as well as for audiences and distribution of our content.
We compete with a variety of media, technology and entertainment companies that have substantial resources to produce, acquire and distribute content online. The Copyright Directive introduced a requirement to agree to termsaround the world, including broadcast networks, basic and premium cable networks, streaming services, film and television studios, production groups, independent producers and syndicators, television stations and television station groups. We compete with other content creators for creative talent including producers, directors, actors and writers, as well as for new program ideas and intellectual property and for the carriageacquisition of copyrightedpopular programming.
Our businesses also face significant competition for audiences from various sources. We compete for audiences for our films and television content on online platforms (or to remove content in the absence of such agreement),with releases from other film studios, television producers and also granted rights to authors and performers to “fair and proportionate” remuneration, greater transparency and a right to revoke agreements if their work is not adequately exploited. The Online Broadcasting Directive extends the system of mandatory collective exercise of cable retransmission rights tostreaming services, as well as with other forms of retransmission including Internet protocolentertainment and consumer spending outlets. We also compete for audiences and advertising revenues primarily with other broadcast and cable television and mobile, thereby potentially reducing the control that rights owners have over online distribution. EU states have until June 2021 to transpose these Directives into national law, if similar provisions do not already exist.
In 2020, the EU will evaluate the impact of the 2018 EC Geo-blocking Regulation that prohibits unjustified geo-blockingnetworks; streaming services; social media platforms; websites, apps and other formsonline experiences; radio programming; and print media. In addition, our television businesses face increasing competition from technologies providing digital audio and visual content in ways that allow audiences to consume content of discrimination based on customers’ nationality, placetheir choosing while avoiding traditional commercial advertising. Moreover, our businesses face competition from the many other entertainment options available to consumers including video games, sports, travel and outdoor recreation.
We also face competition for distribution of residence or placeour content. Our television businesses compete for distribution of establishment. As partour program services (and receipt of its evaluation, it will consider whetherrelated fees) with other broadcast networks, cable networks and programmers. The CBS Network competes with other broadcast networks to secure affiliations with independently owned
television stations to ensure the scopeeffective distribution of network programming in the regulation should be extended to services that offer audio-visualU.S. We also compete with studios and other copyrightedproducers of entertainment content for distribution on third-party platforms.
For additional information regarding competition, see “Item 1A. Risk Factors — Our businesses operate in industries that are highly competitive.”
Environmental, Social and Governance Strategy
We believe the media and entertainment industry plays an important role in shaping culture and conversations. We take this role seriously and are committed to advancing and strengthening our approach to issues, opportunities and risks related to ESG matters to help serve our stockholders, employees, partners, audiences and the communities in which may impact content owners’ abilitywe operate, as well as to distributeenhance our business. Our ESG strategy is centered on an exclusive, territorial basis withinunderstanding of our biggest opportunities and risks.
We organize our ESG work into three pillars: (1) On-Screen Content & Social Impact, (2) Workforce & Culture and (3) Sustainable Production & Operations. On-Screen Content & Social Impact addresses the EU.
Restrictionsopportunities and responsibilities we have to represent, inform and influence through our content and brands. Workforce & Culture focuses on Content Distribution. In additionour efforts to recruit and retain the EU, numerous countries aroundbest employees, treat contractors and partners well, and foster an environment where people feel welcome and safe. Sustainable Production & Operations addresses the world impose restrictions on the amountenvironmental and naturesocial impacts of content that may be distributed in that country. Such regulations in China have the greatest impact, as only 34 foreign films, as selected by relevant authorities in China, may be distributed annually on a revenue share basis based on box office performance. In addition, in September 2018, China’sour operations and facilities, film and television regulator, the National Administrationproductions and other activities.
Building on our 2020 companywide Materiality Assessment and first ESG Report, in 2021 we released our second ESG Report, which is available on our website, and included our first set of TVoverarching goals for each of these pillars to help focus our efforts and Radio, published proposed regulations that would severely limit the streamingassess our progress. We are committed to continuing to identify, measure, map and broadcasting of foreign film and television content in China, further reducing foreign access to the Chinese market.
UK Regulations Affecting Channel 5 Business. As a PSB in the UK, Channel 5 is subject to certain UK Office of Communications (“OFCOM”) broadcasting regulations that impose detailed obligations, including mandating the proportion of total programming and programming during peak hours that must be original productions, the hours devoted to news and current affairs and the proportion of commissioned programming that must be made by independent producers. Channel 5 has also undertaken to air a certain amount of UK-originated children’s programming. Like all UK broadcasters, Channel 5 must abide by the OFCOM Broadcasting Code, which contains content and scheduling regulations relating to harm and offense, protection of individuals under the age of 18, privacy, fairness and product placement, and by OFCOM’s Codereport on the SchedulingESG impact of Television Advertising, which contains regulations onour global operations.
ESG Governance
Our ESG efforts are a companywide commitment led by a dedicated ESG team that oversees day-to-day strategy and implementation. Our ESG team works closely with our ESG Council, a cross-functional team of senior leadership and subject matter experts spanning our brands, legal, investor relations, global inclusion, human resources, finance, real estate and environmental health and safety, to guide our strategy and reporting and help spread and instill our ESG values across the amount and scheduling of advertising.
ProtectingCompany. The ESG team works in close collaboration with our Content from Copyright Theft
The unauthorized reproduction, distribution, exhibition or other exploitation of copyrighted material interferes with the market for copyrighted works and disrupts our ability to distribute and monetize our content. The theft of films, television, booksChief Executive Officer, Chief Financial Officer, General Counsel and other entertainment content presents a significant challenge tosenior executives who together make up our industry, and we take a number of steps to address this concern. Where possible, we use technological protection tools, such as encryption, to protect our content. We are actively engaged in enforcement and other activities to protect our intellectual property, including: monitoring online destinations that distribute or otherwise infringe our content and sending takedown or cease and desist notices in appropriate circumstances; using filtering technologies employed by some user-generated content sites; and pursuing litigation and referrals to law enforcement with respect to websites and other online platforms that distribute or facilitate the distribution and exploitation of our content without authorization. Through
partnerships with various organizations, we alsoESG Steering Committee. These leaders are actively involved in educational outreach to the creative community, statereviewing and federal government officials and other stakeholders in an effort to marshal greater resources to combat copyright theft. Additionally, we participate in various industry-wide enforcement initiatives, public relationsrefining our ESG strategies, programs and legislative activities onpolicies. The ESG team regularly updates the Nominating and Governance Committee of our Board of Directors, which, pursuant to its charter, oversees and monitors significant issues impacting our culture and reputation, as well as our handling of ESG issues.
Human Capital Management
We aim to build a worldwide basis. We have had notable success with site-blocking efforts in parts of Europeculture that attracts and Asia, which can be effective in diverting consumers from piracy platformsretains the best employees and a workplace where people feel welcome, safe and inspired to legitimate platforms.
Notwithstanding these efforts and the many legal protections that existbring their whole self to combat piracy, the proliferation of content theft and technological tools with which to carry it out continue to be a challenge. The failure to maintain enhanced legal protections and enforcement tools and to update those tools as threats evolve could make it more difficult for us to adequately protect our intellectual property, which could negatively impact its value and further increase the costs of enforcing our rights as we continue to expend substantial resources to protect our content.
INTELLECTUAL PROPERTY
We create, own and distribute intellectual property worldwide. It is our practice to protect our films, programs, content, brands, formats, characters, games, publications and other original and acquired works, and ancillary goods and services. The following brands, logos, trade names, trademarks and related trademark families are the most significant of those strongly identified with the product lines they represent and are significant assets of the Company: ViacomCBS
™, CBS®, Viacom®, AwesomenessTV®, BET®, CBS All Access®, CBS Entertainment™, CBS Interactive®, CBS News®, CBS Sports®, CBSN®, Channel 5® (UK), CMT®, COLORS®, Comedy Central®, Flix®, MTV®, MTV Films®, Network 10®, Nickelodeon®, Nick at Nite®, Nickelodeon Movies™, Nick Jr.®, Paramount Animation®, Paramount Network®, Paramount Pictures®, Paramount Players™, Paramount Television Studios™, Pluto TV™, Pop TV™, Showtime®, Simon & Schuster®, Smithsonian Channel™, Telefe® (Argentina), The Movie Channel®, TV Land®, VH1®, VidCon®, WhoSay® and other domestic and international program services and digital properties and all the call letters for our stations.
EMPLOYEES
As of December 31, 2019,2021, we employed approximately 23,990 full-time22,965 full- and part-time employees in 37 countries worldwide and had approximately 4,580 additional4,300 project-based staff on our payroll. We also use many other temporary employees in the ordinary course of our business.
AVAILABLE INFORMATION
A Culture of Diversity, Equity and Inclusion
We file annual, quarterly and current reports, proxy and information statements and other information with the SEC. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendmentsseek to such reports filed with or furnished to the SEC pursuant to the Securities Exchange Act of 1934, as amended, will be available free of chargemold a companywide culture built on our website at www.viacbs.com (under “Investors”) as soon as reasonably practicable after the reports are filed with the SEC. These documents are also available on the SEC’s website at www.sec.gov.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including “Item 7. Management’s Discussioncore values and Analysis of Results of Operationsanchored in a dynamic and Financial Condition,” contains both historical and forward-looking statements. All statements that are not statements of historical fact are, or may be deemedproactive approach to be, forward-looking statements. Forward-looking statements reflect our current expectations concerning future results, objectives, plans and goals, and involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause future results, performance or achievements to differ. These risks, uncertainties and other factors are discussed in “Item 1A. Risk Factors” below. Other risks, or updates to the risks discussed below, may be described in our news releases and filings with the SEC, including but not limited to our reports on Form 10-Q and Form 8-K. The forward-looking statements included in this document are made only as of the date of this document, and we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.
Item 1A. Risk Factors.
A wideDE&I through a range of risks may affect our business, financial condition or results of operations, now and in the future. We consider the risks described below to be the most significant. There may be other currently unknown or unpredictable factors that could have adverse effects on our business, financial condition or results of operations.
Risks Relating to ViacomCBS’ Business and Industry
Changes in consumer behavior, as well as evolving technologies, distribution platforms and packaging, may negatively affect our business, financial condition or results of operations
The ways in which consumers view content, and technology and business models in our industry continue to evolve rapidly, and new distribution platforms, as well as increased competition from new entrants and emerging technologies, have added to the complexity of maintaining predictable revenue streams.
Technological advancements have driven changes in consumer behavior and empowered consumers to seek more control over when, where and how they consume content and have affected the options available to advertisers for reaching their target audiences. The evolution of consumer preferences towards digital services and other subscription services, and the substantial increase in availability of programming without advertising or adequate methodologies for audience measurement, may continue to have an adverse effect on our business, financial condition or results of operations. Examples of the foregoing include the convergence of television telecasts and digital delivery of programming to televisions and other devices, video-on-demand platforms, tablets, new video and electronic book formats, user-generated content sites, unauthorized digital distribution of video content including via streaming and downloading, simultaneous live streaming of telecast content which allows users to consume content on demand and in remote locations while avoiding traditional commercial advertisements or subscription payments and “cloud-based” DVR storage.
In addition, consumers are increasingly using time-shifting and advertising-blocking technologies that enable users to fast-forward or circumvent advertisements, such as DVRs, or increase the sharing of subscription content and reduce the demand for electronic sell-through, DVD and Blu-ray disc products. Substantial use of these technologies could impact the attractiveness of our programming to advertisers, adversely affecting our advertising revenue. Our business also may be adversely affected by the use of antennas (and their integration with set-top boxes or other consumer devices) to access broadcast signals to avoid subscriptions and live and stored video streaming boxes and services, which deliver unauthorized copies of copyrighted content, including those emanating from other countries in various languages.
In response to perceived consumer demand, distributors of programming and program services are continuing to develop alternative offerings for consumers, including “skinny bundles,” smaller, often customizable programming packages delivered at lower costs than traditional offerings; SVOD and other subscription services; ad-supported FVOD services developed by television manufacturers, cable providers and others; and original programming hosted on mobile and social media platforms. Also, the impact of technological changes on MVPDs may adversely affect our cable networks’ ability to grow revenue. If these alternative offerings continue to gain traction and our networks and brands are not included in those packages and services, or if consumers increasingly favor alternative offerings over traditional broadcast television and cable subscriptions, we may continue to experience a decline in viewership and ultimately demand for our programming, which could lead to lower revenues. These changing distribution models may also impact our ability to negotiate carriage deals on terms favorable to us, thereby having an adverse effect on our business, financial condition or results of operations.
In order to respond to these developments, we regularly consider and from time to time implement changes to our business models and strategies to remain competitive, and there can be no assurance that we will successfully anticipate or respond to these developments, that we will not experience disruption as we respond to such developments, or that the business models we develop will be as profitable as our current business models.
Our advertising revenues have been and may continue to be adversely impacted by changes in consumers’ content viewership, deficiencies in audience measurement and advertising market conditions
We derive substantial revenues from the sale of advertising on a variety of platforms, and a decline in advertising revenues could have a significant adverse effect on our business, financial condition or results of operations in any given period.
Consumers are increasingly turning to online sources for viewing and purchasing content, and an increasing number of companies offer SVOD services, including some that offer exclusive high-quality original video programming delivered directly to consumers over the Internet. Consumers are also using new technologies that allow customers to live stream and time shift programming, make and store digital copies and skip or fast-forward through advertisements. The increasing number of entertainment choices available to consumers has intensified audience fragmentation and reduced the viewing of content through traditional MVPDs and virtual MVPDs, which has caused, and likely will continue to cause, audience ratings declines for our cable networks and may adversely affect the pricing and volume of advertising. In addition, the pricing and volume of advertising may be affected by shifts in spending toward digital and mobile offerings, which can deliver targeted advertising promptly, from more traditional media, or toward newer ways of purchasing advertising, such as through automated purchasing, dynamic advertising insertion, third parties selling local advertising spots and advertising exchanges, some or all of which may not be as beneficial to us as traditional advertising methods.
In addition, advertising sales are largely dependent on audience measurement, and the results of audience measurement techniques can vary for a variety of reasons, including the platforms on which viewing is measured and variations in the statistical sampling methods used. The use of evolving ratings technologies and measurements, and viewership on platforms or devices, such as tablets, smart phones and other mobile devices, that are not being fully measured, could have an impact on our program ratings and advertising revenues. Also, consumer viewership of streaming services continues to grow and is under measured. Low ratings can lead to lower pricing and advertising spending. While Nielsen’s statistical sampling method is the primary measurement technique used in our television advertising sales, we measure and monetize our campaign reach and frequency on and across digital platforms based on other third-party data as well as first-party data using a variety of methods, including the number of impressions served and demographics. In addition, multi-platform campaign verification remains in its infancy, and viewership on tablets, smartphones and other mobile devices, which continues to grow rapidly, still is not measured by any one consistently applied method. These variations and changes could have a significant effect on our advertising revenues. There can be no assurance that any replacement programming on our television stations will generate the same level of revenues or profitability as previous programming.
The strength of the advertising market can fluctuate in response to the economic prospects of specific advertisers or industries, advertisers’ current spending priorities and the economy in general or the economy of any individual geographic market, particularly a major market, such as Los Angeles or New York, in which we own and operate sizeable businesses, and this may adversely affect our advertising revenues. Natural and other disasters, acts of terrorism, political uncertainty or hostilities could lead to a reduction in domestic and international advertising expenditures as a result of disrupted programming and services, uninterrupted news coverage and economic uncertainty. In addition, advertising expenditures by companies in certain sectors of the economy, including the financial, pharmaceutical and automotive segments, represent a significant portion of our advertising revenues. Any political, economic, social or technological change resulting in a reduction in these sectors’ advertising expenditures may adversely affect our revenue. Our ability to generate advertising revenue is also dependent on demand for our content, the consumers in our targeted demographics, advertising rates and results observed by advertisers. These factors could have an adverse effect on our business, financial condition or results of operations.
Our success depends on our ability to maintain attractive brands andour reputation, and to offer popular programming and other content
Our ability to maintain attractive brands and our reputation, and to create popular programming and other content, tentpole and other live events and consumer products are key to the success of our business and our ability to generate revenues. The production and distribution of television and other programming, films and other entertainment content
and the licensing of rights to the associated intellectual property is inherently risky because the revenues we derive from various sources primarily depend on our ability to satisfy consumer tastes and expectations in a consistent manner. The popularity of our content is affected by our ability to maintain or develop our strong brand awareness and reputation and to target key audiences, and by the quality and attractiveness of competing entertainment content and the availability of alternative forms of entertainment and leisure time activities, including online, mobile and other offerings. Audience tastes change frequently and it is a challenge to anticipate what offerings will be successful at any point in time. We invest substantial capital in creating and promoting our content, including in the production of original content on our networks, in our films, in our television production business and in our publications, before learning the extent to which it will garner critical success and popularity with consumers.
In our Cable Networks and TV Entertainment businesses, the popularity of our brands and programming has a significant impact on the revenues we are able to generate from advertising, affiliate fees, content licensing, consumer products and other licensing activities, and our ability to expand our presence internationally depends, in part, on our ability to successfully predict and adapt to changing consumer tastes and preferences outside the U.S. In addition, the success of our Publishing business is similarly dependent on audience acceptance of its publications. In our Filmed Entertainment business, the theatrical performance of a film affects not only the theatrical revenues we receive but also revenues from other distribution outlets, such as TVOD and SVOD, television, home entertainment and licensed consumer products. Additionally, a shortfall, now or in the future, in the expected popularity of our programming that we expect to distribute or the sports events for which we have acquired rights, could lead to decreased profitability or losses for a significant period of time. Significant negative claims or publicity regarding the Company or its operations, products, management, employees, practices, business partners and culture may damage our brands or reputation, even if such claims are untrue. A lack of popularity of our offerings or damage to our reputation could have an adverse effect on our business, financial condition or results of operations in a particular period or over a longer term.
Increased costs for programming, films and other rights, and judgments we make on the potential performance of our content, may adversely affect our business, financial condition or results of operations
In our TV Entertainment and Cable Networks segments, we produce a significant amount of original programming and other content and we invest significant resources in our brands, in part with the aim of developing higher quality and quantity of original content, and we also derive a portion of our revenue from the exploitation of our extensive library of television programming. In our Filmed Entertainment segment, we invest significant amounts in the production, marketing and distribution of films and television series. We also acquire programming, films and television series, as well as a variety of digital content and other ancillary rights such as consumer and home entertainment product offerings, and we pay license fees, royalties and/or contingent compensation in connection with these acquired rights. For example, some of CBS Television Network’s most widely viewed broadcasts, including golf’s Masters Tournament, NFL games and series such as Young Sheldon, are made available based upon programming rights of varying duration that we have negotiated with third parties. We also license various music rights from the major record companies, music publishers and performing rights organizations.
Our investments in original and acquired programming are significant and involve complex negotiations with numerous third parties, and rapid changes in consumer behavior have increased the risk associated with the success of all kinds of programming. Competition for popular content is intense, and we may have to increase the price we are willing to pay for talent and intellectual property rights, which may result in significantly increased costs. Further, increased competition in the market for development and production of original programming, such as from Amazon, Apple, Facebook, Hulu, Netflix and YouTube, and streaming services by large entertainment companies, increases our content costs as they introduce different ways of compensating talent and approaching production. We may be outbid by our competitors for the rights to new, popular programming or in connection with the renewals of popular programming that we currently license. Finally, certain of our counterparties and vendors may encounter financial and operational pressures, which could result in increased costs to us or delays in production. As such, there can be no assurance that we will recoup our investments in programming, films and other content when the content is broadcast or distributed. If our content offerings cease to be widely accepted by audiences or are not continuously replenished with popular content, our revenues could be adversely affected.
The accounting for the expenses we incur in connection with our programming and films requires that we make judgments about their potential success and useful life. We initially estimate the ultimate revenues of a television program or film and then update our estimate of ultimate revenues based on expected future and actual results, including following a television program’s initial broadcast or a film’s initial theatrical release. If our estimates prove to be incorrect or are reduced, it may result in decreased profitability as a result of the accelerated recognition of the expense and/or write-down of the value of the asset. Similarly, if we determine it is no longer advantageous for us to air a program on our broadcast or cable networks, we would accelerate our amortization of the program costs.
These factors could have an adverse effect on our business, financial condition or results of operations.
The loss of key talent could adversely affect our business, financial condition or results of operations
Our business depends upon the continued efforts, abilities and expertise of not only our corporate and divisional executive teams, but also the various creative talent and entertainment personalities with whom we work. For example, we employ or contract with several entertainment personalities with loyal audiences and we produce films with highly regarded directors, producers, writers, actors and other talent. These individuals are important to achieving the success of our programs, films and other content. There can be no assurance that these individuals will remain with us or will retain their current appeal, or that the costs associated with retaining them or new talent will be reasonable. If we fail to retain these individuals on current terms or if our entertainment personalities lose their current appeal or we fail to attract new talent, our business, financial condition or results of operations could be adversely affected.
Our businesses operate in industries that are highly competitive and swiftly consolidating
We depend on the popularity of our content and other offerings, our appeal to advertisers and widespread distribution of our content. We compete with other media companies to attract creative talent and produce high quality content, and for distribution on a variety of third-party platforms to draw large audiences. Competition for talent, content, audiences, service providers, production infrastructure, advertising and distribution is intense and comes from broadcast television stations and networks, cable television systems and networks (including our own), streaming service distributors, the Internet and social media platforms, film studios and independent film producers and distributors, consumer products companies and other entertainment outlets and platforms, as well as from search engines, program guides and “second screen” applications and non-traditional programming services, such as streaming offerings. Additionally, other television stations or cable networks may change their formats or programming, a new station or new network may adopt a format to compete directly with our stations or networks, or stations or networks might engage in aggressive promotional campaigns. Further, competition from additional entrants into the market for development and production of original programming and streaming services, such as Amazon, Apple, Facebook, Hulu, Netflix and YouTube, and major entertainment companies, continues to increase. In book publishing, competition among electronic and print book retailers could decrease the prices for new releases and the outlets available for book sales. Moreover, the growing use of self-publishing technologies by authors increases competition and could result in decreased use of traditional publishing services.
Our ability to obtain widespread distribution on favorable terms, which contributes to our ability to attract audiences and, in turn, advertisers, is adversely affected by the consolidation of advertising agencies, programmers, content providers, distributors (including telecom companies) and television service providers. This consolidation reduces the number of distributors with whom we negotiate and increases the negotiating leverage and market power of the combined companies. In addition, consolidation in the film business may adversely affect the distribution of our films on various platforms. Consolidation among book retailers and the growth of online sales and electronic books sales have resulted in increased competition for limited physical shelf space for our publications and for the attention of consumers online.
In addition, our competitors generally include market participants with interests in multiple media businesses that are often vertically integrated, whereas our Cable Networks business generally relies on distribution relationships with third parties. As more cable and satellite operators, Internet service providers, telecom companies and other content distributors, aggregators and search providers create or acquire their own content, they may have significant
competitive advantages, which could adversely affect our ability to negotiate favorable terms for distribution or otherwise compete effectively in the delivery marketplace. Our competitors could also have preferential access to important technologies, customer data or other competitive information, as well as significant financial resources.
This competition and consolidation could result in lower ratings and advertising, lower affiliate and other revenues, and increased content costs and promotional and other expenses, negatively affecting our ability to generate revenues and profitability. There can be no assurance that we will be able to compete successfully in the future against existing or new competitors, or that competition or consolidation in the marketplace will not have an adverse effect on our business, financial condition or results of operations.
Because we derive a significant portion of our revenues from a limited number of distributors, the loss of affiliation and distribution agreements, renewal on less favorable terms or adverse interpretations could have a significant adverse effect on our business, financial condition or results of operations
A significant portion of our revenues, particularly from Cable Networks and TV Entertainment, are attributable to agreements with MVPDs and virtual MVPDs, and other distributors of our programming and program services. These agreements generally have fixed terms that vary by market and distributor, and there can be no assurance that these agreements will be renewed in the future, or renewed on favorable terms, including but not limited to those related to pricing and programming tiers. We may also be unable to modify existing agreements with terms that have over time become less favorable. The loss of existing packaging, positioning, pricing or other marketing opportunities and the loss of carriage on cable and satellite programming tiers or the failure to renew our agreements with any distributor, or renew or modify them on favorable terms, could reduce the distribution of our programming and program services and decrease the potential audience for our programs, thereby negatively affecting our growth prospects and revenues from both affiliate fees and advertising.
The CBS Television Network provides its affiliates with up to approximately 98 hours of regularly scheduled programming per week. In return, the CBS Television Network’s affiliated stations broadcast network-inserted commercials during that programming and pay us station affiliation fees. Loss of station affiliation agreements of the CBS Television Network could adversely affect our results of operations by reducing the reach of our programming and therefore our attractiveness to advertisers, and renewal of these affiliation agreements on less favorable terms may also adversely affect our results of operations.
Consolidation among MVPDs and increased vertical integration of such distributors into the cable or broadcast network business have provided more leverage to these distributors and could adversely affect our ability to maintain or obtain distribution for our network programming or distribution and/or marketing of our subscription program services on favorable or commercially reasonable terms, or at all. Also, consolidation among television station group owners could increase their negotiating leverage. Moreover, competitive pressures faced by MVPDs, particularly in light of the lower retail prices of streaming services, could adversely affect the terms of our renewals with MVPDs. In addition, MVPDs and streaming services continue to develop alternative offerings for consumers, including “skinny bundles.” To the extent these packages do not include our programming and become widely accepted in lieu of traditional program packages, we could experience a decline in affiliate revenues.
Similarly, our revenues are dependent on the compliance of major distributors with the terms of our affiliation or distribution agreements. As these agreements have grown in complexity, the number of disputes regarding the interpretation, and even validity, of the agreements has grown, resulting in greater uncertainty and, from time to time, litigation with respect to our rights and obligations. For example, some of our distribution agreements contain “most favored nation” (“MFN”) clauses, which provide that if we enter into an agreement with a distributor and such agreement includes specified terms that are more favorable than those held by a distributor holding an MFN right, we must offer some of those terms to the distributor holding the MFN right. These clauses are generally complex and may lead to disagreement over their interpretation and application. Disagreements with a distributor on the interpretation or validity of an agreement could adversely impact our revenues from both affiliate fees and advertising, as well as our relationship with that distributor.
These factors could have an adverse effect on our business, financial condition or results of operations.
The integration of the CBS and Viacom businesses may not be successful or may be more difficult, time consuming or costly than expected. Synergies and other benefits may not be realized within the expected time frames, or at all.Operating costs, customer loss and business disruption may be greater than expected and revenues may be lower than expected following the Merger. Our ongoing investment in new businesses, products, services and technologies present many risks, and we may not realize the financial and strategic goals we had contemplated.
Our ability to realize the anticipated benefits of the Merger will depend, to a large extent, on our ability to integrate the businesses of the combined companies in a manner that facilitates growth opportunities and achieves the projected standalone cost savings and revenue growth trends that have been identified without adversely affecting current revenues and investments in future growth. The failure to meet the challenges involved in combining CBS’ and Viacom’s businesses following the Merger and to realize the anticipated benefits of the Merger, including expected synergies, could cause an interruption of, or a loss of momentum in, the activities of ViacomCBS and could adversely affect the results of operations of ViacomCBS. The overall combination of our businesses may also result in material unanticipated problems, expenses, liabilities, competitive responses, and loss of customer and other business relationships. The difficulties of combining the operations of the companies include, among others:
the diversion of management attention to integration matters;
difficulties in integrating operations and systems, including administrative and information technology infrastructure and financial reporting and internal control systems;
challenges in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the two companies;
difficulties in integrating employees and attracting and retaining key personnel, including talent;
challenges in retaining existing, and obtaining new customers, viewers, suppliers, distributors, licensors, employees and others, including material content providers, studios, producers, directors, actors, authors and other talent, and advertisers;
difficulties in achieving anticipated cost savings, synergies, business opportunities, financing plans and growth prospects from the combination;
difficulties in managing the expanded operations of a significantly larger and more complex company;
challenges in continuing to develop valuable and widely accepted content and technologies;
contingent liabilities that are larger than expected; and
potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with the Merger.
In addition, even if our operations are integrated successfully, the full benefits of the Merger may not be realized, including, among others, the synergies, cost savings or sales or growth opportunities that are expected. These benefits may not be achieved within the anticipated time frame or at all. Further, additional unanticipated costs may be incurred in the integration of our businesses. Many of these factors are outside of our control, and any one of them could result in lower revenues, higher costs and diversion of management time and energy, which could materially impact our business, financial condition and results of operations.
In the past, we have acquired and invested, and expect to continue to acquire and invest, in new businesses, products, services and technologies as part of our ongoing strategic initiatives. Such acquisitions and strategic initiatives may involve significant risks and uncertainties, including the types described above as well as insufficient revenues from such investments to offset any new liabilities assumed and expenses associated with the new
investments, unidentified issues not discovered in our due diligence that could cause us to fail to realize the anticipated benefits of such investments and incur unanticipated liabilities and a failure to successfully further develop an acquired business or technology. Because new investments are inherently risky, and the anticipated benefits or value of these investments may not materialize, no assurance can be given that such investments and other strategic initiatives will not adversely affect our business, financial condition or results of operations.
Service disruptions or failures of, or cybersecurity attacks upon, our or our service providers’ networks, information systems and other technologies could result in the disclosure of confidential or valuable business or personal information, disruption of our businesses, damage to our brands and reputation, legal exposure and financial losses
Networks, cloud services, information systems and other technologies, including technology systems used in connection with the production and distribution of our programming, films and other content by us or our third-party providers (“Systems”), are critical to our business activities, and shutdowns or service disruptions of, and cybersecurity attacks on, these Systems pose increasing risks. Such shutdowns, disruptions and attacks may be caused by third-party hacking of computers and Systems; dissemination of computer viruses, worms, malware, ransomware and other destructive or disruptive software; denial of service attacks and other bad acts; human error; and power outages, natural disasters, extreme weather, terrorist attacks or other similar events. Shutdowns, disruptions and attacks could have an adverse impact on us, our business partners, employees, advertisers, viewers and users of our content offerings, including degradation or disruption of service, loss of data and damage to equipment and data. Steps we take to add software and hardware, upgrade our Systems and network infrastructure, and improve the stability and efficiency of our Systems may not be sufficient to avoid shutdowns, disruptions and attacks. Significant events could result in a disruption of our operations and reduction of our revenues, the loss of or damage to the integrity of data used by management to make decisions and operate our businesses, viewer or advertiser dissatisfaction or a loss of viewers or advertisers, and damage to our reputation or brands.
We operate communications and computer hardware Systems located both in our facilities and that of third-party providers. In addition, we use third-party “cloud” computing services in connection with our business operations. We also use content delivery networks to help us stream programming, films and other content in high volume to viewers and users of our online, mobile and app offerings over the internet. Problems faced by us, our hosting providers, our third-party “cloud” computing or other network providers, including technological or business-related disruptions, as well as cybersecurity attacks and regulatory interference, could result in a disruption of our operations and reduction of our revenues, adversely impact the experience of our viewers and users, and could damage our reputation and brands.
We are subject to risks caused by the misappropriation, misuse, falsification or intentional or accidental release or loss of business or personal data or programming content maintained in our or our third-party providers’ Systems, including proprietary and personal information (of third parties, employees and users of our online, mobile and app offerings), business information including intellectual property, or other confidential information. Outside parties may attempt to penetrate our Systems or those of our third-party providers or fraudulently induce employees, business partners or users of our online, mobile and app offerings to disclose sensitive or confidential information in order to gain access to our data or our subscribers’ or users’ data, or our programming. The number and sophistication of attempted and successful information security breaches in the U.S. and elsewhere have increased in recent years, and because of our prominence, we and/or third-party providers we use may be a particularly attractive target for such attacks. Because the techniques used to obtain unauthorized access to, or disable, degrade or sabotage, these Systems change frequently and often are not recognized until launched, we may be unable to anticipate these techniques, implement adequate security measures or remediate any intrusion on a timely or effective basis. Moreover, the development and maintenance of security measures is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Despite our efforts, the possibility of these events occurring cannot be eliminated.
If a material breach of our Systems or those of our third-party providers occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose subscribers, viewers, advertisers and other
business partners, and users of our online, mobile and app offerings; and our reputation, brands and credibility could be damaged; and we could be required to expend significant amounts of money and other resources to repair or replace such Systems or to comply with regulatory requirements. We could also be subject to actions by regulatory authorities and claims asserted in private litigation. The costs relating to any data breach could be material, and we may not have adequate insurance coverage to compensate us for any losses associated with such events.
Each of these factors could have an adverse effect on our reputation, business, financial condition or results of operations.
We are subject to complex, often inconsistent and potentially costly laws, rules, regulations, industry standards and contractual obligations relating to privacy and personal data protection
We are subject to laws, rules and regulations in the U.S. and in other countries relating to privacy and the collection, use and security of personal data. In the EU, for example, the GDPR mandates data protection compliance obligations and authorizes significant fines for noncompliance, requiring significant compliance resources and efforts on our part. Further, a number of other regions where we do business have enacted or are considering new data protection regulations that may impact our business activities. In the U.S., the California Consumer Privacy Act, which went into effect on January 1, 2020, creates a host of new obligations for businesses regarding how they handle the personal information of California residents. We are also subject to laws and regulations intended specifically to protect the interests of children and the privacy of minors online, including COPPA in the U.S. and the GDPR in the EU, and we have been required to limit some functionality on our websites and apps as a result of these regulations. Such regulations also restrict the types of advertising we are able to sell on these sites and apps and impose strict liability on us for certain actions of ViacomCBS, advertisers and other third parties, which could affect advertising demand and pricing. We will continue to expend resources to comply with data protection and privacy standards imposed by law, industry standards or contractual obligations, which may be inconsistent with one another, and despite such efforts we may face regulatory and other legal actions. See “Regulation and Protection of our Intellectual Property—Certain Other Regulations Affecting Our Business—Global Data Protection Laws and Children’s Privacy Laws.”
Each of these factors could have an adverse effect on our reputation, business, financial condition or results of operations.
The failure, destruction and/or breach of satellites and facilities that we depend upon to distribute our programming could adversely affect our business, financial condition or results of operations
We use satellite systems, fiber and other methods to transmit ourpartnerships, collaborations, programs and program services to broadcast television and cable television operators and other distributors worldwide. The distribution facilities include uplinks, communications satellites and downlinks. Notwithstanding certain back-up and redundant systems, transmissions may be disrupted as a result of power outages, natural disasters, extreme weather, terrorist attacks, cyber attacks, failures or impairments of communications satellites or on-ground uplinks or downlinks used to transmit programming or other similar events. Currently, there are a limited number of communications satellites available for the transmission of programming, and if a disruption occurs, we may not be able to secure alternate distribution facilities in a timely manner. There can be no assurance that such failure or disruption would not have an adverse effect on our business, financial condition or results of operations.
Theft of our content, including digital copyright theft and other unauthorized uses of our content, reduces revenue received from legitimate distribution of our programming, films, books and other entertainment content and adversely affects our business, financial condition or results of operations
The success of our businesses depends in part on our ability to maintain and monetize our intellectual property rights. We are fundamentally a content company and theft of our content - specifically, the infringement of our films and home entertainment products, television programming, digital content, books and other intellectual property rights - affects us and the value of our content. Intellectual property theft is particularly prevalent in many parts of the world that either lack effective laws and technical protection measures similar to those existing in the U.S. and Europe or
lack effective enforcement of such measures, or both. Such foreign copyright theft often creates a supply of pirated content for major markets as well. The interpretation of copyright, trademark and other intellectual property laws as applied to our content, and our infringement-detection and enforcement efforts, remain in flux, and some methods of enforcement have encountered political opposition. The failure to appropriately enforce and/or the weakening of existing intellectual property laws could make it more difficult for us to adequately protect our intellectual property and thus negatively affect its value.
Content theft is made easier by the wide availability of higher bandwidth and reduced storage costs, as well as tools that undermine encryption and other security features and enable infringers to cloak their identities online. We and our numerous production and distribution partners operate various technology systems in connection with the production and distribution of our programming and films, and intentional or unintentional acts could result in unauthorized access to our content. The continuing proliferation of digital formats and technologies heightens this risk. The unauthorized distribution and consumption of our content through a wide array of platforms and devices remain problematic and an ever-present challenge, as Internet-connected televisions, set-top boxes and mobile devices are ubiquitous and many can support illegal re-transmission platforms, illicit video-on-demand/streaming services and pre-loaded hardware, providing more accessible, versatile and legitimate-looking environments for consuming pirated film and television content. Unauthorized access to our content could result in the premature release of films, television programs or other content as well as a reduction in legitimate audiences, which would likely have significant adverse effects on the value of the affected content and our ability to monetize our content.
Copyright theft has an adverse effect on our business because it reduces the revenue that we are able to receive from the legitimate sale and distribution of our content, undermines lawful distribution channels, reduces the public’s and some affiliate partners’ perceived value of our content and inhibits our ability to recoup or profit from the costs incurred to create such content. While legal protections exist, piracy and technological tools with which to engage in copyright theft continue to escalate, evolve and present challenges for enforcement. We are actively engaged in enforcement and other activities to protect our intellectual property, and it is likely that we will continue to expend substantial resources in connection with these efforts. Efforts to prevent the unauthorized reproduction, distribution and exhibition of our content may affect our profitability and may not be successful in preventing harm to our business and may have an adverse effect on our business, financial condition or results of operations.
Political and economic conditions in a variety of markets around the world could have an adverse effect on our business, financial condition or results of operations
Our businesses operate and have audiences, customers and partners worldwide, and we are focused on expanding our international operations in key markets,initiatives, some of which are emerging markets. Fordescribed below.
•Many of our brands maintain inclusivity councils to address their DE&I activities and the DE&I challenges in their businesses.
•We partner with hundreds of diversity-focused institutions globally that reason, economic conditionsare committed to supporting women, BIPOC and LGBTQ+ individuals, veterans and/or persons with disabilities. We have placed a particular focus on organizations advancing the causes of racial justice, anti-hate and social equity.
•We sponsor internal and external professional development programs and campus-to-career initiatives aimed at underrepresented groups.
•Our job postings reach an expansive network that includes more than 60 diversity-focused job boards. We use third-party technology to identify and remove biasing language from our job descriptions.
•We sponsor eight active employee-led Employee Resource Groups (“ERGs”) with 53 chapters in 19 locations worldwide. More than half of our employees are members of these employee-led groups. Our ERGs provide support for certain business and corporate initiatives.
•Our CEO has signed onto the CEO Action for Diversity and Inclusion pledge and the Company was a founding signatory for Management Leadership for Tomorrow’s (“MLT”) Black Equity at Work Certification Program (“BEW”). The MLT BEW is a third-party validation program that aims to drive measurable progress in improving representation and racial equity in the workplace.
•Of our U.S. employees, as of December 31, 2021, approximately 49% were female and approximately 39% self-identified as part of a racial or ethnic minority group. Of our U.S. employees with Vice President titles and above, as of December 31, 2021, approximately 49% were female and approximately 28% self-identified as part of a racial or ethnic minority group.
•In 2021, we set new goals to help accelerate our performance on key DE&I objectives, including a target global hire and promotion rate for female Senior Vice Presidents and above and a target U.S. hire and promotion rate for ethnically diverse Vice Presidents and above.
Preventing Harassment and Discrimination
We remain committed to building a work environment free of harassment and discrimination so that our employees can focus on doing their best work. We have enacted policies addressing harassment, discrimination and other behaviors that could create a hostile workplace, some of which are described below.
•Our Business Conduct Statement provides employees with clear examples of harassment and discrimination and guidance on how to create a safe and inclusive environment for all. We make annual trainings on sexual harassment, discrimination and retaliation prevention available to all employees.
•We monitor employee diversity data trends — including the promotion rates of women and ethnically diverse employees compared to their male or white peers, respectively — and watch for any patterns that might suggest discrimination or unconscious bias so that we can seek to address them.
•We require that employees report any incidents of harassment and discrimination that they witness. Among other ways, employees can report incidents of harassment or discrimination using our anonymous third-party managed complaint and reporting hotline, called OPENLINE.
Employee Attraction, Retention and Training
Our training, mentoring and career mobility programs embody our culture of DE&I as we recruit, retain and engage our employees. We strive to create an inclusive culture in which our employees and talent feel supported, heard and understood and in which employees of all backgrounds feel like they belong and have the opportunity to thrive. Some of these programs are described below.
•We offer a broad spectrum of learning opportunities for our employees, including leadership-specific training for employees who are new to their positions, taking on an expanded scope of responsibilities, or otherwise seeking to expand their impact. We also offer regular manager and employee classes focused on specific skills, leader learning journeys to help people leaders implement new capabilities over several months, and team-based workshops for groups who want to learn together.
•We offer a range of financial and nonfinancial compensation and benefits, including health, life and disability insurance; matching retirement and profit-sharing contributions; flexible paid time off; paid volunteer time; financial planning assistance; multiple wellness programs; and parental, caregiving, bereavement and military leave benefits. We also offer tuition support for certain employees. In 2021, we began offering our employees access to a behavior-change app designed to help our employees manage stress, improve focus and enhance overall well-being.
•We offer flexible work hours for many different marketsof our full-time and part-time employees.
•In 2021, we launched our first global employee engagement survey, administered by an independent third party, to assess our efforts around employee engagement, inclusion and well-being. Our executive officers (and managers, on a team level) reviewed the survey results and instituted action plans to address feedback and opportunity areas. We continue to track our progress on these efforts through shorter, periodic “pulse” engagement surveys.
•As a result of our focus on employee satisfaction and inclusiveness, we have been recognized for our workplace culture, including being named a 2021 Most Loved Workplace by Newsweek, one of America’s Best Employers for Diversity by Forbes and one of the Top 100 workplaces with the Best D&I Initiatives in 2021 by Mogul.
Health, Safety and Security
The health and safety of our workers, particularly across our productions worldwide, remains a top priority. We strive to take a proactive approach to identifying and mitigating health, safety and security risks. Some of the steps we take are described below.
•In 2021, we began to centralize our nonproduction environmental health and safety (“EHS”) functions. We appointed a new Senior Vice President of EHS in an effort to ensure that these critical functions are managed consistently and reported on externally in an appropriate way.
•We have on-site health care at some office and production sites, as well as medics and medical support at many production sites.
•We perform risk assessments of daily work processes across our productions, offices and other work sites and develop hazard reduction, avoidance and mitigation plans. We also track and report safety, health and security incident data across the company.
•Our Global Security Operations Center oversees security and emergency response efforts and undertakes risk scans in an effort to identify potential security risks.
•After COVID-19 caused an initial period in which our offices closed and production ceased, we restarted productions in mid-2020 and began to manage a slow and safe return-to-office process. We have established a number of COVID-19-related safety protocols in our offices, on our productions and with respect to nonproduction activities. While the majority of our employees had the opportunity to work at a reduced capacity from certain offices, most of our office employees worked remotely in 2021.
Social Impact and Corporate Social Responsibility
We leverage our platforms and diverse capabilities to create positive social impacts, including by exploring and raising awareness of issues that align with our values and impact our viewers such as climate change, mental health, civic engagement and social justice. Our commitment to social impact is not only exemplified by the content we produce, but also our community service projects, philanthropy and employee engagement efforts, including our 25th annual Community Day, which was held virtually in 2021 and involved employees from 23 regions around the world affectacross more than 100 volunteer projects.
Content for Change
Content for Change is a numbersocial justice initiative launched by BET in 2020 that is anchored in the belief that storytelling has the power to transform how we see ourselves and one another. In 2021, we expanded the program across the Company with three interrelated objectives: (1) leveraging content to counteract racism, bias, stereotypes and hate; (2) striving for equity across our entire creative supply chain; and (3) creating a culture of aspects ofdiversity, inclusion and belonging that continuously informs and enhances the stories we tell through our businesses, in particular revenues in both domestic and international markets derived from advertising sales, theatrical releases, home entertainment distribution, television licensing and sales of consumer products. Economic conditions in each market can also impactcontent. This initiative builds upon our audience’s discretionary spending and therefore their willingnesscommitment to access our content,community, as well as the businesses of our partners who purchase advertising on our networks, causing them to reduce their spending on advertising. We may also be subject to longer payment cycles. In addition, as we have expanded our international operations, our exposure to foreign currency fluctuations against the U.S. dollar (compared to, for example, the Argentinian peso, the British poundDE&I and the Euro, among others) has increased. Such fluctuations could havefostering an adverse effect on our business, financial condition or results of operations, and there is no assurance that downward trending currencies will rebound or that stable currencies will remain stable in any period.inclusive company culture.
Regulation
Our businesses are also exposed to certain political risks inherent in conducting a global business, including retaliatory actions by governments reacting to changes in the U.S. and other countries, including in connection with trade negotiations; issues related to the presence of corruption in certain markets and enforcement of anti-corruption laws and regulations; increased risk of political instability in some markets as well as conflict and sanctions preventing us from accessing those markets; escalating trade, immigration and nuclear disputes; wars, acts of terrorism or other hostilities; and other political, economic or other uncertainties.
The UK left the EU on January 31, 2020. It is now in a ‘transition period’ scheduled to end on December 31, 2020 that allows the negotiation of a future UK-EU trade relationship while remaining part of the EU Single Market. Depending on the ultimate terms of a trade deal, the UK could lose access to the single EU market and to the global trade deals negotiated by the EU on behalf of its members. It is possible that the UK could revert to World Trade Organization terms if no deal is reached. The effects of Brexit and the on-going trade negotiations may continue to adversely affect business activity, political stability and economic and market conditions in the UK, the Eurozone, the EU and elsewhere and contribute to instability in global financial and foreign exchange markets, including volatility in the value of the Euro and the British Pound. A new trade deal,intellectual property they create or no deal at all, could lead to additional political, legal and economic instability and uncertainty in the EU, including changes in the regulatory environment, which could impact our ability to use UK law under “country of origin” rules for programming in the EU, potential trade barriers between the UK and the EU and between the UK and other countries, and potential content production quota regulations. Given that a portion of our business is conducted in the EU, including the UK, any of these effects of Brexit and a trade deal, and others we cannot anticipate, could have an adverse effect on our business, financial condition or results of operations.
These political and economic risks could create instability in any of the markets where our businesses derive revenues, which could result in a reduction of revenue or loss of investment that adversely affects our businesses, financial condition or results of operations.
Changes in U.S. or foreign laws or regulations may have an adverse effect on our business, financial condition or results of operations
Our program services, filmed entertainment and online, mobile and app propertiesacquire are subject to a variety ofand affected by laws and regulations both in theof U.S. and/or in the foreign jurisdictions in which we or our partners operate, including relating to intellectual property, content regulation, user privacy, data protection, anti-corruption, repatriation of profits, tax regimes, quotas, tariffs or other trade barriers, currency exchange controls, operating license and permit requirements, restrictions on foreign ownership or investment, export and market access restrictions, and exceptions and limitations on copyright and censorship, among others.
The television broadcasting and distribution industries in the U.S. are highly regulated by U.S. federal laws and regulations issued and administered by various federal agencies, including the FCC. For example, we are required to obtain licenses from the FCC to operate our television stations. It cannot be assured that the FCC will approve our future renewal applications or that the renewals will be for full terms or will not include conditions or qualifications. The non-renewal, or renewal with substantial conditions or modifications, of one or more of our licenses could have a material adverse effect on our revenues. We must also comply with extensive FCC regulations and policies in the ownership and operation of our television stations and our television networks, which prohibit common ownership of two or more of the top four television networks and limit the number of television stations that a licensee can own in a market and the number of television stations that can be owned in the U.S., which could restrict our ability to consummate future transactions and in certain circumstances could require us to divest some television stations. Our programming directed towards children is subject to a number of additional regulations. For example, privacy regulations make it difficult to measure online viewership by children. The threat of regulatory action or increased scrutiny that deters certain advertisers from advertising or reaching their intended audiences could adversely affect advertising revenue.
The U.S. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations, and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation and ownership of our television properties. For example, from time to time, proposals have been advanced in the U.S. Congress and at the FCC to require television stations to provide advertising time to political candidates for free or at a reduced charge. Any restrictions on advertising may adversely affect our advertising revenues. Changes to the media ownership and other FCC rules may affect the competitive landscape in ways that could increase the competition faced by us. Proposals have also been advanced from time to time before the U.S. Congress and the FCC to extend the program access rules (currently applicable only to those cable program services which also own or are owned in whole or in part by cable distribution or telephone company systems) to all cable program services. Our ability to
obtain the most favorable terms available for our content could be adversely affected should such an extension be enacted into law. It is difficult to predict the likelihood or impact of any proposed actions by the U.S. Congress or the FCC on our television properties.
Laws in some non-U.S. jurisdictions differ in significant respects from those in the U.S., and the enforcement of such laws can be inconsistent and unpredictable, which could impact our ability to expand our operations and undertake activities that we believe are beneficial to our business. In addition, changes in or new interpretations of international laws and regulations governing the broadcast and distribution of content, competition and the Internet, including those affecting data privacy, as well as the new EU law requiring 30% local content on SVOD services and proposed amendments to the law governing territorial exclusivity of the distribution of content in Europe, may have an adverse impact on our international businesses and digital properties.
Our businesses are also subject to laws and regulations in the U.S. and internationally governing the collection, use, sharing, protection and retention of personal data, which has implications for how such data is managed. For example, GDPR expands the regulation of personal data processing throughout the EU and significantly increases penalties for non-compliance. Complying with these laws and regulations could be costly, require us to change our business practices, or limit or restrict aspects of our business in a manner adverse to our business operations. Many of these laws and regulations continue to evolve, and substantial uncertainty surrounds their scope and application. Our failure to comply could result in exposure to enforcement by U.S. or foreign governments, as well as significant negative publicity and reputational damage.
Our businesses could be adversely affected by new laws and regulations, changes in existing laws, changes in interpretations of existing laws by courts and regulators and the threat that additional laws or regulations may be forthcoming, as well as our ability to enforce our legal rights. We could be required to change or limit certain of our business practices, which could impact our ability to generate revenues. We could also incur substantial costs to comply with new and existing laws and regulations, or substantial fines and penalties or other liabilities if we fail to comply with such laws and regulations.
Vigorous enforcement or modification of FCC indecency and other program content rules against the broadcast and cable industries could have an adverse effect on our businesses and results of operations
The FCC’s rules prohibit the broadcast of obscene material at any time and indecent or profane material on television stations between the hours of 6 a.m. and 10 p.m. Broadcasters risk violating the prohibition against broadcasting indecent material because of the vagueness of the FCC’s indecency/profanity definition, coupled with the spontaneity of live programming. The FCC enforces its indecency rules against the broadcasting industry. The FCC has found on a number of occasions that the content of television broadcasts has contained indecent material. In such instances, the FCC issued fines or advisory warnings to the offending licensees. Moreover, the FCC has in some instances imposed separate fines for each allegedly indecent “utterance,” in contrast with its previous policy, which generally considered all indecent words or phrases within a given program as constituting a single violation. Broadcasting indecent material could result in fines per station of a maximum of approximately $415,000 per utterance and/or the loss of a station’s FCC license. If the FCC denied a license renewal or revoked the license for one of our television stations, we would lose our authority to operate the station. The determination of whether content is indecent is inherently subjective and, as such, it can be difficult to predict whether particular content could violate indecency standards. The difficulty in predicting whether individual programs, words or phrases may violate the FCC’s indecency rules adds significant uncertainty to our ability to comply with the rules. Violation of indecency rules could lead to sanctions which may adversely affect our businesses and results of operations. Some policymakers support the extension of the indecency rules that are applicable to over-the-air broadcasters to cover cable and satellite programming and/or attempts to increase enforcement of or otherwise expand existing laws and rules. If such an extension, attempt to increase enforcement or other expansion took place and were found to be constitutional, some of our cable content could be subject to additional regulation and might not be able to attract the same subscription and viewership levels.
We could be subject to material liabilities as a result of adoption of or changes in tax laws, regulations and administrative practices, interpretations and policies
We are subject to taxation in the U.S. and numerous international jurisdictions. Our tax rates are impacted by the tax laws, regulations and administrative practices, interpretations and policies in the federal, state and local governmental authorities, as well as laws and international territories where our businesses operate, and these rates may be subject to significant change. Our tax returns are routinely audited and litigation, adverse outcomes, or settlements may occur because tax authorities may disagree with certain positions we have taken, including our methodologies for intercompany arrangements. Additionally, shifting economic and political conditions may result in significant changes to tax policies, laws or tax rates in various jurisdictions. Such changes, litigation, adverse outcomes, or audit settlements may result in the recognitionregulations of additional charges to our income tax provision in any given period and may adversely affect our effective income tax rate or cash payments and may therefore adversely affect our business, financial condition or results of operations.
Volatility and weakness in capital markets may adversely affect our credit availability and related financing costs
Bank and capital markets can experience periods of volatility and disruption. If the disruption in these markets is prolonged, our ability to refinance, and the related cost of refinancing, some or all of our debt could be adversely affected. Although we can currently access the bank and capital markets, there is no assurance that such markets will continue to be a reliable source of financing for us. In addition, our access to and cost of borrowing can be affected by our short- and long-term debt ratings assigned by ratings agencies. In addition, the interest rates included in certain agreements that govern certain of our debt securities and/or credit facilities may be based on the London Interbank Offered Rate (“LIBOR”). In the future, use of LIBOR may be discontinued and we cannot be certain how long LIBOR will continue to be a viable benchmark interest rate. Use of alternative interest rates could result in increased borrowing costs or volatility in the markets and interest rates. These factors, including the tightening of credit markets, or a decrease in our debt ratings, could adversely affect our ability to obtain cost-effective financing.
We could be adversely affected by strikes andcountries other union activity
We and our business partners engage the services of writers, directors, actors, musicians and other talent, production crew members, trade employees, players in sports leagues and others who are subject to industry-wide or specially-negotiated collective bargaining agreements, and occasionally individual agreements. The Alliance of Motion Picture and Television Producers (AMPTP) is a multi-employer trade association that, along with and on behalf of hundreds of member companies including Paramount Pictures and CBS Studios, negotiates the industry-wide collective bargaining agreements with these parties, and we may lack practical control over the negotiations and terms of the agreements. The Writers Guild of America contract expires on May 1, 2020, and the Directors Guild of America and Screen Actors Guild-American Federation of Television and Radio Artists contracts expire on June 30, 2020. The AMPTP expects to negotiate successor deals with these guilds and unions in the coming months. Any labor disputes that arise may disrupt our operations and cause delays in the production of our programming, and we may not be able to negotiate favorable terms for a renewal, which could increase our costs. Depending on its duration, any lockout, labor dispute, strike or work stoppage could have an adverse effect on our revenues, cash flows and/or operating income and/or their timing.
Our revenues, expenses and operating results may vary based on the timing, mix, number and availability of our films and other programming and on seasonal factors
Our revenues, expenses and operating results fluctuate due to the timing, mix, number and/or availability of our theatrical films, home entertainment releases and programs for licensing. For example, our operating results may increase or decrease during a particular period relative to the corresponding period in the prior year due to differences in the number and/or mix of films released, the commencement of a license period or the timing of delivery of programming to licensees for exhibition. Our operating results also fluctuate due to the timing of the recognition of marketing expenses, which are generally incurred before and throughout the theatrical release of a film, with the recognition of related revenues through the film’s theatrical exhibition and subsequent distribution windows.
Our business also has experienced and is expected to continue to experience seasonality due to, among other things, seasonal advertising patterns and seasonal influences on audiences’ viewing, reading and attendance habits. Typically, our revenue from advertising is highest in the first and fourth quarters. In the Cable Networks segment, advertising is typically highest in the fourth quarter due to the holiday season, among other factors. In the TV Entertainment segment, advertising revenues benefit principally in the first quarter of the years in which we telecast the Super Bowl and NCAA Division I Men’s Basketball Tournament National Semifinals and Championship and in the fourth quarter due to the holiday season and, in even-numbered years, advertising placed by candidates for political offices. Revenues from the Filmed Entertainment segment’s theatrical film releases tend to be cyclical with increases during the summer. The Publishing segment is subject to increased periods of demand during the summer and year-end holiday season. The effects of these variances make it difficult to estimate future operating results based on the previous results of any specific quarter.
We could suffer losses due to asset impairment charges for goodwill, intangible assets, FCC licenses and programming
We test goodwill and indefinite-lived intangible assets, including FCC licenses, for impairment on an annual basis and between annual tests if events or circumstances require an interim impairment assessment. Certain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in advertising markets, a decrease in audience acceptance of our programming or films, a shift by advertisers to competing advertising platforms and/or changes in consumer behavior could result in a downward revision in the estimated fair value of a reporting unit or intangible assets, including FCC licenses, which could result in a non-cash impairment charge. Any such impairment charge for goodwill, intangible assets and/or programming could have a material adverse effect on our reported net earnings.
Our liabilities related to discontinued operations and former businesses could adversely impact our financial conditions
We have both recognized and potential liabilities and costs related to discontinued operations and former businesses, certain of which are unrelated to the media business, including leases, guarantees, environmental liabilities, liabilities related to the pensions and medical expenses of retirees, asbestos liabilities, contractual disputes and other pending and threatened litigation. We cannot be assured that our accruals for these matters are sufficient to cover these liabilities in their entirety or any one of these liabilities when it becomes due or at what point any of these liabilities may come due. Therefore, there can be no assurances that these liabilities will not have a material adverse effect on our financial position, operating performance or cash flow.
Risks Relating to NAI’s Voting Control of ViacomCBS and Pledged Shares
NAI, through its voting control of ViacomCBS, will be in a position to control actions that require stockholder approval
NAI, through its direct and indirect ownership of our Class A Common Stock, has voting control of ViacomCBS. At December 31, 2019, NAI directly or indirectly owned approximately 79.4% of the shares of our Class A Common Stock outstanding, and approximately 10.2% of the shares of our Class A Common Stock and our Class B Common Stock outstanding on a combined basis. Sumner M. Redstone is the beneficial owner of the controlling interest in NAI and, accordingly, beneficially owns all such shares. Mr. Redstone is the controlling stockholder, Chairman of the Board of Directors and Chief Executive Officer of NAI. Shari E. Redstone, the President and a director of NAI, serves as non-executive Chair of the ViacomCBS Board of Directors (the “ViacomCBS Board”). NAI is controlled by Mr. Redstone through the Sumner M. Redstone National Amusements Trust (the “SMR Trust”), which owns 80% of the voting interest of NAI, and such voting interest of NAI held by the SMR Trust is voted solely by Mr. Redstone until his incapacity or death. The SMR Trust provides that in the event of Mr. Redstone’s death or incapacity, voting control of the NAI voting interest held by the SMR Trust will pass to seven trustees, who will include Ms. Redstone. No member of our management is a trustee of the SMR Trust.
Subject to the terms of the Governance Agreement dated as of August 13, 2019, which is incorporated by reference as an exhibit in this Annual Report on Form 10-K, NAI is in a position to control the outcome of corporate actions that require, or may be accomplished by, stockholder approval, including amending ViacomCBS’ bylaws, the election or removal of directors and transactions involving a change of control. For example, the ViacomCBS bylaws provide that:
the affirmative vote of not less than a majority of the aggregate voting power of all outstanding shares of our capital stock then entitled to vote generally in an election of directors, voting together as a single class, is required for our stockholders to amend, alter, change, repeal or adopt any of our bylaws;
any or all of our directors may be removed from office at any time prior to the expiration of his or her term of office, with or without cause, only by the affirmative vote of the holders of record of outstanding shares representing at least a majority of all the aggregate voting power of outstanding shares of our Common Stock then entitled to vote generally in the election of directors, voting together as a single class at a special meeting of our stockholders called expressly for that purpose; provided that during the two-year period following the closing date of the ViacomCBS Merger, the removal of our Chief Executive Officer requires the approval of the ViacomCBS Board by the “Requisite Approval” (as defined in the ViacomCBS certificate of incorporation incorporated by reference as an exhibit in this Annual Report on Form 10-K); provided further, that during the two-year period following the closing date, NAI and NAI Entertainment Holdings LLC are not permitted to remove any other persons who were members of the ViacomCBS Board at the effective time of the Merger in accordance with the Merger Agreement or who otherwise become members the ViacomCBS Board (other than any of the NAI Affiliated Directors (as defined in the bylaws)) without the Requisite Approval; and
in accordance with the General Corporation Law of the State of Delaware, our stockholders may act by written consent without a meeting if such stockholders hold the number of shares representing not less than the minimum number of votes that would be necessary to authorize or take such actions at a meeting at which all shares entitled to vote thereon were present and voted.
Accordingly, ViacomCBS stockholders who may have different interests are unable to affect the outcome of any such corporate actions for so long as NAI retains voting control. For more information, see the Governance Agreement incorporated by reference as an exhibit in this Annual Report on Form 10-K.
Sales of NAI’s shares of ViacomCBS Common Stock, some of which are pledged to lenders, could adversely affect the stock price
At December 31, 2019, NAI directly or indirectly owned approximately 79.4% of the shares of our Class A Common Stock outstanding, and approximately 10.2% of the shares of our Class A Common Stock and our Class B Common Stock outstanding on a combined basis. Based on information received from NAI, NAI has pledged to its lenders a portion of shares of our Class A Common Stock and our Class B Common Stock owned directly or indirectly by NAI.
At December 31, 2019, the aggregate number of shares of our Common Stock pledged by NAI to its lenders represented approximately 4.1% of the total outstanding shares of our Class A Common Stock and our Class B Common Stock, on a combined basis. At December 31, 2019, the amount of our Class A Common Stock that NAI directly or indirectly owned and that was not pledged by NAI to its lenders represented approximately 64.0% of the total outstanding shares of our Class A Common Stock.
If there is a default on NAI’s debt obligations and the lenders foreclose on the pledged shares, the lenders may not effect a transfer, sale or disposition of any pledged shares of our Class A Common Stock, unless NAI and its affiliates beneficially own 50% or less of our Class A Common Stock then outstanding or such shares have first been converted into our Class B Common Stock. A sale of the pledged shares could adversely affect our Common Stock share price. In addition, there can be no assurance that at some future time NAI will not sell or pledge additional shares of our Common Stock, which could adversely affect our Common Stock share price.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
Our principal physical properties are described below. In addition, we own and lease office, studio, production and warehouse space and broadcast, antenna and satellite transmission facilities throughout the U.S. and aroundpan-national bodies such as the world forEuropean Union (“E.U.”). The laws and regulations affecting our businesses. We considerbusinesses are constantly subject to change, as are the protections that those laws and regulations afford us. The discussion below describes certain, but not all, present and proposed laws and regulations affecting our properties adequate for our present needs.businesses.
ViacomCBS
Our world headquarters is located at 1515 Broadway, New York, New York, where we lease approximately 1.4 million square feet for executive, administrative and business offices for the Company and certain of our operating divisions. The lease runs through 2031, with two renewal options based on market rates at the time of renewal for ten years each.
We also own a building at 51 West 52nd Street, New York, New York containing approximately 892,000 square feet of space. Of the 855,000 square feet of office space in the building, we occupy approximately 270,000 square feet and lease the balance to third parties. We have retained a real estate brokerage firm to explore a possible sale of this property.
We maintain facilities for our Global Business Services Center at our offices in Budapest, Hungary, where we lease approximately 44,000 square feet of space through 2023, and at our offices in Warsaw, Poland, where we lease approximately 50,000 square feet of space through 2025.
TV Entertainment
We own the CBS Broadcast Center complex located on approximately 3.7 acres at 524 West 57th Street, New York, New York, which consists of approximately 860,000 square feet of office and studio space.
We own studio facilities at the CBS Studio Center at 4024 Radford Avenue, Studio City, California, located on approximately 40 acres.
CBS Interactive occupies approximately 193,000 square feet of space at 235 Second Street, San Francisco, California, under a lease expiring in 2022.
We occupy approximately 106,000 square feet of office, production and technical space at Television City, 7800 Beverly Boulevard, Los Angeles, California under a lease expiring in 2024.
Cable Networks
In addition to occupying space at 1515 Broadway in New York, we occupy the following major office facilities:
Our Cable Networks business occupies approximately 277,000 square feet of office and production space at 345 Hudson Street, New York, New York, under a lease expiring in 2022.
Our Cable Networks business occupies approximately 210,000 square feet of office and production space at 1575 North Gower Street, Los Angeles, California, under a lease expiring in 2028.
Our Cable Networks’ Network Operations Center in Hauppauge, New York contains approximately 65,000 square feet of floor space on approximately nine acres of owned land.
The Nickelodeon Animation Studio at 203-231 West Olive Avenue, Burbank, California contains approximately 180,000 square feet of studio and office space, leased under two leases expiring in 2036.
Nickelodeon’s Live Action Studio contains approximately 108,000 square feet of stage and office space at Burbank Studios, 3000 West Alameda Avenue, Burbank, California, under a lease expiring in 2024.
Showtime Networks leases approximately 253,000 square feet at 1633 Broadway, New York, New York, under a lease expiring in 2026 and leases approximately 56,000 square feet at The Lot, 1041 N. Formosa Avenue, West Hollywood, California, under a lease expiring in 2028.
Telefe occupies approximately 496,000 square feet of office, studio and production space, transmission facilities and for other ancillary uses at its owned and leased facilities in Buenos Aires, Argentina.
ViacomCBS Networks International occupies approximately 140,000 square feet of space at its owned and leased Hawley Crescent facilities in London.
Network 10 leases approximately 100,000 square feet of space at 1 Saunders Street, Pyrmont, New South Wales, Australia, under a lease expiring in 2023.
Filmed Entertainment
Paramount owns the Paramount Pictures Studio situated at 5555 Melrose Avenue, Los Angeles, California, located on approximately 62 acres of land, and containing approximately 1.85 million square feet of floor space used for executive, administrative and business offices, sound stages, production facilities, theatres, equipment facilities and other ancillary uses. Paramount has embarked on a planned 25-year expansion and revitalization project for the studio.
Publishing
Simon & Schuster leases approximately 300,000 square feet of office space at 1230 Avenue of the Americas, New York, New York, under a lease expiring in 2034.
Item 3. Legal Proceedings.
The information set forth under the caption “Legal Matters” in Note 19 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements” is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
Not applicable.
OUR BOARD OF DIRECTORS
ViacomCBS’ directors as of February 18, 2020 are as follows:
|
| | | | |
Name | AgeCable Networks consisted of a portfolio of premium and basic cable networks comprised of SHOWTIME, The Movie Channel, Flix, BET, Nickelodeon, MTV, Comedy Central, Paramount Network, Smithsonian Channel, VH1, CMT, Pop TV, Logo and TV Land; a number of direct-to-consumer subscription streaming services — SHOWTIME OTT, Showtime Networks’ premium streaming service, Noggin, Nickelodeon’s preschool streaming service, and BET+, a streaming service focused on the Black audience; and Pluto TV, our FAST service. |
Cable Networks also included VCNI, which operates international extensions of Paramount+, Pluto TV and our Cable Networks brands and services, our international free-to-air networks, which include Channel 5 in the U.K., Telefe in Argentina, Network 10 in Australia and Chilevisión in Chile, and VIS, which produces content for our brands and streaming services, as well as for third parties.
Cable Networks’ revenues were generated primarily from affiliate revenues comprised of fees from MVPDs and vMVPDs for carriage of our cable networks; advertising; streaming revenues, principally comprised of advertising and subscription revenues generated by the segment’s streaming services and from digital video advertisements on our websites and in our video content on third-party platforms; and the licensing of our content and other rights. In 2021, Cable Networks affiliate, advertising, streaming and licensing and other revenues
generated approximately 39%, 28%, 19% and 14%, respectively, of the segment’s total revenues. Cable Networks generated approximately 47%, 50% and 46% of our consolidated revenues in 2021, 2020 and 2019, respectively (after the elimination of intercompany revenues).
Pluto TV
Pluto TV is a leading FAST service in the U.S., delivering hundreds of live linear channels and thousands of titles on-demand to 64.4 million global MAUs for December 2021. Pluto TV curates a diverse lineup of channels, in partnership with nearly 400 global media companies. Categories cover a wide array of genres, including movies, television series, including classic television, sports, news and opinion, reality, crime, comedy, home and DIY, explore, gaming, anime, music, kids and local programming. Pluto TV en español delivers over 50 Spanish-language channels reflecting the rich tapestry of the U.S. Hispanic community. Pluto TV was awarded the 2021 Corporate Leadership in Hispanic Programming award by Broadcasting & Cable, Multichannel News and Next Media. Pluto TV can be accessed and streamed across connected television devices, mobile and the internet. Pluto TV’s growing global footprint extends across three continents and 26 countries.
SHOWTIME
Our three premium subscription cable networks in the U.S. are SHOWTIME, which offers original scripted and unscripted series, movies, documentaries and docuseries, sports, comedy and special events; The Movie Channel, which offers a variety of movies and related programming; and Flix, which primarily offers movies from the last several decades. SHOWTIME OTT is Showtime Networks’ premium subscription streaming service. Showtime Networks also includes SHOWTIME Sports, a premium destination for live combat sports, including championship boxing, Bellator, a leading global mixed martial arts organization, and culturally relevant sports documentaries and original series. Highlights in 2021 include new seasons of The Chi and Billions, the final season of Shameless, the return of Dexter in the limited series Dexter: New Blood, new dramas American Rust and Yellowjackets, as well as new late-night variety series Ziwe. SHOWTIME is also home to City on a Hill, The L Word: Generation Q, Your Honor and unscripted series Desus & Mero, Couples Therapy, The Circus and the news series Vice.
BET
BET is a leading provider of premium entertainment, music, news, digital and public affairs content for Black audiences. BET linear can be seen in the U.S., Canada, Brazil, the Caribbean, the U.K., sub-Saharan Africa and France. BET is one of the most well-known Black consumer brands in the world, with multiplatform extensions, including BET Studios, a studio venture that provides equity ownership to Black creators; BET Digital, BET’s interactive arm; BET Her, a network targeting the African-American woman; BET Music Networks; BET Home Entertainment; BET Live, BET’s events and experience business; and BET International, which operates BET around the globe. In 2021, BET aired a diverse roster of social justice content, including Disrupt & Dismantle with Soledad O’ Brien, COVID-19 Vaccine and The Black Community: A Tyler Perry Special, and, as part of our Content for Change initiative, Bars and Ballads for George Floyd, Justice Now: Race & Reckoning and Justice Now: The Way Forward. Other highlights include Twenties, Twenties After Show With B. Scott, Games People Play and new seasons of Tyler Perry’s original series The Oval, Sistas, House of Payne and Assisted Living. BET’s tentpole events are the BET Awards, the BET Hip Hop Awards and the NAACP Image Awards.
BET+, our joint venture with Tyler Perry Studios, is a leading subscription streaming service for the Black community, with thousands of hours of movies, television, stand-up specials, stage plays and more. BET+ is home to exclusive originals from leading Black creators such as Tracy Oliver’s First Wives Club; Tyler Perry’s Ruthless and Bruh; Carl Weber’s The Family Business; and Will Packer’s Bigger; American Gangster: Trap Queens; All The Queen’s Men; The Ms. Pat Show; and Sacrifice.
Kids & Family Entertainment Group
The Kids & Family Entertainment Group oversees our global strategy and business operations for our kids and family brands and content across linear and in streaming, through television programming, consumer products, location-based experiences, publishing and feature films. The group’s 2021 highlights on Paramount+ include The SpongeBob Movie: Sponge on the Run; the SpongeBob spinoff, Kamp Koral; the new iCarly series; and PAW Patrol: The Movie.
Nickelodeon
Nickelodeon, now in its 42nd year, is one of the most globally recognized and widely distributed multimedia entertainment brands for kids and family. Nickelodeon has been the number-one-rated advertising-supported basic cable network for 26 consecutive years among kids 2 to 11. Nickelodeon features leading original and licensed kids’ series across animation, live-action and preschool genres. Nickelodeon brands include Nick Jr., Nick at Nite, TeenNick, Nicktoons and Nick Music. Domestic highlights in 2021 include SpongeBob SquarePants, PAW Patrol, The Loud House, The Casagrandes, Tyler Perry’s Young Dylan, Danger Force and Blue’s Clues & You!. International highlights include Goldie’s Oldies, a U.K. originated live action comedy series; Sharkdog, the Nickelodeon produced Netflix original animated series; and Spyders, Nickelodeon’s first original coproduction with Ananey Studios, our Israeli content producer and subscription television provider.
Noggin, Nickelodeon’s preschool subscription streaming service, features over 1,000 library episodes, interactive videos and short-form educational content. In partnership with Paramount, Nickelodeon Movies produces branded films based on some of Nickelodeon’s most iconic franchises and characters. Nickelodeon is a key part of our global consumer products business. In 2021, we launched a licensing partnership with global toy brand Melissa & Doug to deliver PAW Patrol and Blue’s Clues and You! cobranded toys. Nickelodeon also licenses its brands for recreation and other location-based experiences such as hotels and theme parks, and in 2021 opened Nickelodeon Hotels & Resorts Riviera Maya, in partnership with Karisma Hotels & Resorts and Grupo Lomas.
Awesomeness
Awesomeness creates content focused on the global Gen Z audience through its digital publishing, film and television studio divisions. Awesomeness’ original, award-winning content includes To All the Boys I’ve Loved Before, Trinkets and Pen15.
MTV Entertainment Group
MTV Entertainment Group connects with audiences through nine iconic brands — MTV, Comedy Central, VH1, CMT, Pop, Logo, Smithsonian, Paramount Network and TV Land — and MTV Entertainment Studios, which produces award-winning series, movies and documentary films for Paramount+ and third-party streaming services.
MTV
MTV is an iconic youth entertainment brand that is home to notable franchises such as The Challenge, the Shores (Jersey Shore Family Vacation, Floribama Shore, Geordie Shore, Acapulco Shore, Rio Shore and Warsaw Shore), Teen Mom (Teen Mom OG, Teen Mom Youngand Pregnant and Teen Mom 2) and Ridiculousness (Messyness and Deliciousness). MTV Documentary Films’ 2021 slate included the Academy Award-shortlisted, Emmy and Peabody-Award winning 76 Days. MTV’s signature live event — the MTV Video Music Awards — returned in 2021 along with the MTV Europe Music Awards and the MTV Movie and TV Awards.
Comedy Central
Comedy Central is a leading destination for all things comedy — from adult animation to stand-up to topical shows — providing viewers access to a world of funny, provocative and relevant content. Highlights for 2021
include the South Park Pandemic and South ParQ Vaccination specials, The Daily Show with Trevor Noah, Tha God’s Honest Truth with Charlamagne Tha God, Awkwafina is Nora From Queens, Roy Wood Jr., Imperfect Messenger and the original holiday movies A Clüsterfünke Christmas and Hot Mess Holiday.
Paramount Network
Paramount Network is a premium entertainment destination and home to Yellowstone, cable’s hit co-created by Taylor Sheridan. Yellowstone serves as the launchpad for new original series from Taylor Sheridan on Paramount+, including Mayor of Kingstown and 1883, the Yellowstone prequel that premiered at the end of 2021.
Smithsonian Channel
Smithsonian Channel is the home of popular genres such as air and space, travel, history, science, nature and pop culture. Highlights for 2021 include the series Aerial America, America in Color, America’s Hidden Stories, Apollo’s Moon Shot, The Pacific War in Color and Air Disasters, as well as critically-acclaimed specials Black in Space: Breaking the Color Barrier and Cher & The Loneliest Elephant.
ViacomCBS Networks International
VCNI operates international extensions of Paramount+, Pluto TV and our Cable Networks brands and services, our international free-to-air broadcast networks, and VIS, which produces content for our brands and streaming services, as well as for third parties. VCNI provides distribution and advertising solutions for partners on five continents and across more than 180 countries. Viacom18 is our joint venture in India, whose operations include COLORS, a Hindi-language general entertainment pay television channel, and Viacom18 Studios, a filmed entertainment business.
ViacomCBS International Studios
One of the leading global producers of international content, VIS produces content for our brands and platforms, including Paramount+, Nickelodeon, MTV, Comedy Central, Channel 5, Network 10, Telefe, Ananey, Porta Dos Fundos and Chilevisión, as well as for third parties. A leading global Spanish-language content creator, VIS’ genres include kids, young adult, live action and animation, soap operas, dramas, short- and long-form comedy, feature films, unscripted reality and social impact documentaries. In 2021, we launched VIS Social Impact as part of our Content for Change social impact initiative.
Free-to-Air Networks
VCNI operates a number of free-to-air networks around the world.Network 10 is a major free-to-air broadcast network in Australia. Network 10’s brands include 10, 10 Bold, 10 Peach, 10 Shake and 10 Play, and its programming includes MasterChef Australia, Australian Survivor and I’m A Celebrity…Get Me Out of Here!.Channel 5 is a free-to-air public service broadcaster (PSB) in the U.K. Channel 5’s brands include 5Star, 5USA and 5Select, My5 and Milkshake, and its programming includes All Creatures Great and Small and Our Yorkshire Farm. Telefe is a leading free-to-air broadcast network in Argentina. Telefe’s brands include Telefe, Telefe Noticias, Mi Telefe, Telefe Internacional and Telefe Channels on Pluto TV, and its programming includes Telefe Noticias, its flagship newscast, MasterChef Celebrity, Bake Off, The Voice and top scripted and non-scripted content. Chilevisión is a leading free-to-air television network in Chile.Chilevisión’s programming includes ¿Quién es la Máscara?, Pasapalabra, Podemos Hablar, La Divina Comida and El Discípulo del Chef.
Filmed Entertainment
| Position | | | | |
Shari E. Redstone | 65Filmed Entertainment consisted of Paramount Pictures, Paramount Players, Paramount Animation, Paramount Television Studios and Miramax. Paramount produces franchise live-action and animated films and genre films for specific audiences and releases its films in various markets around the world theatrically, on streaming services, including Paramount+, through transactional home entertainment offerings, on television, and through various other media. |
Filmed Entertainment’s revenues were generated primarily from the release or distribution of films theatrically, transactional home entertainment, the licensing of film and television product to streaming services, including Paramount+, broadcast and cable television networks and other digital services, and other ancillary activities. Our theatrical revenues in 2020 and 2021 were negatively impacted by the continued closure or reduction in capacity of movie theaters as a result of COVID‑19. We delayed certain planned 2020 and 2021 theatrical releases, licensed others to Paramount+ or third-party streaming services, and released several films theatrically, including A Quiet Place Part II, Snake Eyes: G.I. Joe Origins, PAW Patrol: The Movie and Clifford the Big Red Dog. In 2021, Filmed Entertainment licensing and other and theatrical revenues generated approximately 92% and 8%, respectively, of the segment’s total revenues. Filmed Entertainment generated approximately 9%, 9% and 11% of our consolidated revenues in 2021, 2020 and 2019, respectively (after the elimination of intercompany revenues).
Paramount Pictures
Paramount Pictures is a major global producer and distributor of filmed entertainment and has an extensive library consisting of over 1,200 film titles produced by Paramount and has acquired rights to nearly 2,900 additional films and a number of television programs. Paramount is home to a number of successful franchises such as Mission: Impossible, Transformers, Star Trek, A Quiet Place and Paranormal Activity. Paramount’s library includes Academy Award winners, including Titanic, Braveheart, Forrest Gump, The Godfather, The Godfather Part II and Wings, which won the first ever Academy Award for Best Picture in 1929. The Paramount library also includes Academy Award nominees such as Arrival, Fences, The Big Short, Selma and The Wolf of Wall Street, and classics such as The Ten Commandments, Breakfast at Tiffany’s and Sunset Boulevard. Paramount’s 2021 theatrical releases included A Quiet Place Part II, Snake Eyes: G.I. Joe Origins, PAW Patrol: The Movie and Clifford the Big Red Dog.
Paramount Players
Paramount Players is committed to creating genre films from unique, contemporary voices and properties, as well as drawing from Paramount’s rich library of content. Paramount Players also produces films for initial release on Paramount+, including Paranormal Activity: Next of Kin, which was released in 2021.
Paramount Animation
Paramount Animation develops and produces top-quality animated films. Paramount Animation coproduced The SpongeBob Movie: Sponge on the Run, which was digitally released domestically simultaneously on premium video on demand and Paramount+ in March 2021. Paramount Animation also produced Rumble, which was released on Paramount+ in the U.S. in December 2021.
Paramount Television Studios
Paramount Television Studios develops and finances a wide range of television content across all platforms for distribution worldwide. Paramount Television Studios’ productions include American Gigolo for Showtime
Networks; Made For Love and Station Eleven for HBO Max; Shantaram, Defending Jacob and HomeBefore Dark for Apple TV+; Tom Clancy’s Jack Ryan for Amazon; The Haunting of Bly Manor for Netflix; and Catch-22 for Hulu.
Miramax
Miramax, a consolidated joint venture with beIN Media Group, is a global film and television studio with an extensive library of content. We have exclusive, long-term rights to distribute Miramax’s library of more than 650 titles, which includes Pulp Fiction, Shakespeare in Love, Good Will Hunting, No Country for Old Men and Scary Movie. We also have certain rights to coproduce, co-finance and/or distribute new film and television projects with Miramax.
Film Production, Distribution and Financing
Weproduce many of the films we release and also acquire films for distribution from third parties. In some cases, we co-finance and/or co-distribute films with third parties, including other studios. Wealso enter into film-specific financing and multipicture financing arrangements from time to time under which third parties participate in the financing of the costs of a film or group of films in exchange for an economic participation and a partial copyright interest. Wedistribute films worldwide or in select territories in various media and may engage third-party distributors for certain films in certain territories.
Domestically, wegenerally market and distribute our own theatrical and home entertainment releases. Internationally, we distribute theatrical releases through our international affiliates or, in territories where we have no operating presence, through United International Pictures, our joint venture with Universal Studios, or other third-party distributors. For home entertainment releases, DVD and Blu-ray discs are distributed internationally by local licensees. We also license films and television shows domestically and/or internationally to a variety of platforms.
Competition
All of our businesses operate in highly competitive environments, and compete for creative talent and intellectual property, as well as for audiences and distribution of our content.
We compete with a variety of media, technology and entertainment companies that have substantial resources to produce, acquire and distribute content around the world, including broadcast networks, basic and premium cable networks, streaming services, film and television studios, production groups, independent producers and syndicators, television stations and television station groups. We compete with other content creators for creative talent including producers, directors, actors and writers, as well as for new program ideas and intellectual property and for the acquisition of popular programming.
Our businesses also face significant competition for audiences from various sources. We compete for audiences for our films and television content with releases from other film studios, television producers and streaming services, as well as with other forms of entertainment and consumer spending outlets. We also compete for audiences and advertising revenues primarily with other broadcast and cable television networks; streaming services; social media platforms; websites, apps and other online experiences; radio programming; and print media. In addition, our television businesses face increasing competition from technologies providing digital audio and visual content in ways that allow audiences to consume content of their choosing while avoiding traditional commercial advertising. Moreover, our businesses face competition from the many other entertainment options available to consumers including video games, sports, travel and outdoor recreation.
We also face competition for distribution of our content. Our television businesses compete for distribution of our program services (and receipt of related fees) with other broadcast networks, cable networks and programmers. The CBS Network competes with other broadcast networks to secure affiliations with independently owned
television stations to ensure the effective distribution of network programming in the U.S. We also compete with studios and other producers of entertainment content for distribution on third-party platforms.
For additional information regarding competition, see “Item 1A. Risk Factors — Our businesses operate in industries that are highly competitive.”
Environmental, Social and Governance Strategy
We believe the media and entertainment industry plays an important role in shaping culture and conversations. We take this role seriously and are committed to advancing and strengthening our approach to issues, opportunities and risks related to ESG matters to help serve our stockholders, employees, partners, audiences and the communities in which we operate, as well as to enhance our business. Our ESG strategy is centered on an understanding of our biggest opportunities and risks.
We organize our ESG work into three pillars: (1) On-Screen Content & Social Impact, (2) Workforce & Culture and (3) Sustainable Production & Operations. On-Screen Content & Social Impact addresses the opportunities and responsibilities we have to represent, inform and influence through our content and brands. Workforce & Culture focuses on our efforts to recruit and retain the best employees, treat contractors and partners well, and foster an environment where people feel welcome and safe. Sustainable Production & Operations addresses the environmental and social impacts of our operations and facilities, film and television productions and other activities.
Building on our 2020 companywide Materiality Assessment and first ESG Report, in 2021 we released our second ESG Report, which is available on our website, and included our first set of overarching goals for each of these pillars to help focus our efforts and assess our progress. We are committed to continuing to identify, measure, map and report on the ESG impact of our global operations.
ESG Governance
Our ESG efforts are a companywide commitment led by a dedicated ESG team that oversees day-to-day strategy and implementation. Our ESG team works closely with our ESG Council, a cross-functional team of senior leadership and subject matter experts spanning our brands, legal, investor relations, global inclusion, human resources, finance, real estate and environmental health and safety, to guide our strategy and reporting and help spread and instill our ESG values across the Company. The ESG team works in close collaboration with our Chief Executive Officer, Chief Financial Officer, General Counsel and other senior executives who together make up our ESG Steering Committee. These leaders are actively involved in reviewing and refining our ESG strategies, programs and policies. The ESG team regularly updates the Nominating and Governance Committee of our Board of Directors, which, pursuant to its charter, oversees and monitors significant issues impacting our culture and reputation, as well as our handling of ESG issues.
Human Capital Management
We aim to build a culture that attracts and retains the best employees and a workplace where people feel welcome, safe and inspired to bring their whole self to work.
As of December 31, 2021, we employed approximately 22,965 full- and part-time employees in 37 countries worldwide and had approximately 4,300 project-based staff on our payroll. We also use temporary employees in the ordinary course of our business.
Our human capital management strategy is intended to address the areas described below, and additional information can be found in our ESG Report.
A Culture of Diversity, Equity and Inclusion
We seek to mold a companywide culture built on our core values and anchored in a dynamic and proactive approach to DE&I through a range of partnerships, collaborations, programs and initiatives, some of which are described below.
•Many of our brands maintain inclusivity councils to address their DE&I activities and the DE&I challenges in their businesses.
•We partner with hundreds of diversity-focused institutions globally that are committed to supporting women, BIPOC and LGBTQ+ individuals, veterans and/or persons with disabilities. We have placed a particular focus on organizations advancing the causes of racial justice, anti-hate and social equity.
•We sponsor internal and external professional development programs and campus-to-career initiatives aimed at underrepresented groups.
•Our job postings reach an expansive network that includes more than 60 diversity-focused job boards. We use third-party technology to identify and remove biasing language from our job descriptions.
•We sponsor eight active employee-led Employee Resource Groups (“ERGs”) with 53 chapters in 19 locations worldwide. More than half of our employees are members of these employee-led groups. Our ERGs provide support for certain business and corporate initiatives.
•Our CEO has signed onto the CEO Action for Diversity and Inclusion pledge and the Company was a founding signatory for Management Leadership for Tomorrow’s (“MLT”) Black Equity at Work Certification Program (“BEW”). The MLT BEW is a third-party validation program that aims to drive measurable progress in improving representation and racial equity in the workplace.
•Of our U.S. employees, as of December 31, 2021, approximately 49% were female and approximately 39% self-identified as part of a racial or ethnic minority group. Of our U.S. employees with Vice President titles and above, as of December 31, 2021, approximately 49% were female and approximately 28% self-identified as part of a racial or ethnic minority group.
•In 2021, we set new goals to help accelerate our performance on key DE&I objectives, including a target global hire and promotion rate for female Senior Vice Presidents and above and a target U.S. hire and promotion rate for ethnically diverse Vice Presidents and above.
Preventing Harassment and Discrimination
We remain committed to building a work environment free of harassment and discrimination so that our employees can focus on doing their best work. We have enacted policies addressing harassment, discrimination and other behaviors that could create a hostile workplace, some of which are described below.
•Our Business Conduct Statement provides employees with clear examples of harassment and discrimination and guidance on how to create a safe and inclusive environment for all. We make annual trainings on sexual harassment, discrimination and retaliation prevention available to all employees.
•We monitor employee diversity data trends — including the promotion rates of women and ethnically diverse employees compared to their male or white peers, respectively — and watch for any patterns that might suggest discrimination or unconscious bias so that we can seek to address them.
•We require that employees report any incidents of harassment and discrimination that they witness. Among other ways, employees can report incidents of harassment or discrimination using our anonymous third-party managed complaint and reporting hotline, called OPENLINE.
Employee Attraction, Retention and Training
Our training, mentoring and career mobility programs embody our culture of DE&I as we recruit, retain and engage our employees. We strive to create an inclusive culture in which our employees and talent feel supported, heard and understood and in which employees of all backgrounds feel like they belong and have the opportunity to thrive. Some of these programs are described below.
•We offer a broad spectrum of learning opportunities for our employees, including leadership-specific training for employees who are new to their positions, taking on an expanded scope of responsibilities, or otherwise seeking to expand their impact. We also offer regular manager and employee classes focused on specific skills, leader learning journeys to help people leaders implement new capabilities over several months, and team-based workshops for groups who want to learn together.
•We offer a range of financial and nonfinancial compensation and benefits, including health, life and disability insurance; matching retirement and profit-sharing contributions; flexible paid time off; paid volunteer time; financial planning assistance; multiple wellness programs; and parental, caregiving, bereavement and military leave benefits. We also offer tuition support for certain employees. In 2021, we began offering our employees access to a behavior-change app designed to help our employees manage stress, improve focus and enhance overall well-being.
•We offer flexible work hours for many of our full-time and part-time employees.
•In 2021, we launched our first global employee engagement survey, administered by an independent third party, to assess our efforts around employee engagement, inclusion and well-being. Our executive officers (and managers, on a team level) reviewed the survey results and instituted action plans to address feedback and opportunity areas. We continue to track our progress on these efforts through shorter, periodic “pulse” engagement surveys.
•As a result of our focus on employee satisfaction and inclusiveness, we have been recognized for our workplace culture, including being named a 2021 Most Loved Workplace by Newsweek, one of America’s Best Employers for Diversity by Forbes and one of the Top 100 workplaces with the Best D&I Initiatives in 2021 by Mogul.
Health, Safety and Security
The health and safety of our workers, particularly across our productions worldwide, remains a top priority. We strive to take a proactive approach to identifying and mitigating health, safety and security risks. Some of the steps we take are described below.
•In 2021, we began to centralize our nonproduction environmental health and safety (“EHS”) functions. We appointed a new Senior Vice President of EHS in an effort to ensure that these critical functions are managed consistently and reported on externally in an appropriate way.
•We have on-site health care at some office and production sites, as well as medics and medical support at many production sites.
•We perform risk assessments of daily work processes across our productions, offices and other work sites and develop hazard reduction, avoidance and mitigation plans. We also track and report safety, health and security incident data across the company.
•Our Global Security Operations Center oversees security and emergency response efforts and undertakes risk scans in an effort to identify potential security risks.
•After COVID-19 caused an initial period in which our offices closed and production ceased, we restarted productions in mid-2020 and began to manage a slow and safe return-to-office process. We have established a number of COVID-19-related safety protocols in our offices, on our productions and with respect to nonproduction activities. While the majority of our employees had the opportunity to work at a reduced capacity from certain offices, most of our office employees worked remotely in 2021.
Social Impact and Corporate Social Responsibility
We leverage our platforms and diverse capabilities to create positive social impacts, including by exploring and raising awareness of issues that align with our values and impact our viewers such as climate change, mental health, civic engagement and social justice. Our commitment to social impact is not only exemplified by the content we produce, but also our community service projects, philanthropy and employee engagement efforts, including our 25th annual Community Day, which was held virtually in 2021 and involved employees from 23 regions around the world across more than 100 volunteer projects.
Content for Change
Content for Change is a social justice initiative launched by BET in 2020 that is anchored in the belief that storytelling has the power to transform how we see ourselves and one another. In 2021, we expanded the program across the Company with three interrelated objectives: (1) leveraging content to counteract racism, bias, stereotypes and hate; (2) striving for equity across our entire creative supply chain; and (3) creating a culture of diversity, inclusion and belonging that continuously informs and enhances the stories we tell through our content. This initiative builds upon our commitment to our community, as well as to DE&I and fostering an inclusive company culture.
Regulation
Our businesses and the intellectual property they create or acquire are subject to and affected by laws and regulations of U.S. federal, state and local governmental authorities, as well as laws and regulations of countries other than the U.S. and pan-national bodies such as the European Union (“E.U.”). The laws and regulations affecting our businesses are constantly subject to change, as are the protections that those laws and regulations afford us. The discussion below describes certain, but not all, present and proposed laws and regulations affecting our businesses.
FCC and Similar Regulation
The FCC regulates broadcast television, some aspects of cable network programming, and certain programming delivered by internet protocol in the U.S., pursuant to U.S. federal law, including the Communications Act. Violation of FCC regulations can result in substantial monetary fines, the imposition of reporting obligations, limited renewals of licenses and, in egregious cases, denial of license renewal or revocation of a license.
License Renewals and Transfers
Each of our owned television stations in the U.S. must be licensed by the FCC. Television broadcast licenses are typically granted for eight-year terms, and we must obtain renewals as they expire to continue operating our stations. The Communications Act requires the FCC to renew a broadcast license if the FCC finds that (1) the station has served the public interest, convenience and necessity; (2) with respect to the station, there have been no serious violations by the licensee of either the Communications Act or FCC regulations; and (3) there have been no other violations by the licensee of the Communications Act or FCC regulations that, taken together,
constitute a pattern of abuse. As of February 14, 2022, we had three pending renewal applications, and we will be filing applications with respect to most of our remaining stations on a staggered basis in 2022 and 2023. A station remains authorized to operate while its license renewal application is pending. In addition, the Communications Act requires prior FCC approval for the assignment of a license or transfer of control of an FCC licensee.
Broadcast Ownership Regulation
The Communications Act and FCC rules impose limits on local and national broadcast television station ownership in the U.S. The broadcast ownership rules discussed below are the most relevant to our operations in the U.S. In 2019, a federal appellate court vacated a 2017 FCC decision that had (1) repealed rules restricting common ownership of a TV station with either a daily newspaper or one or more radio stations in the same local market, and (2) loosened a rule restricting common ownership of TV stations within the same market.
Local Television Ownership
The FCC’s local television ownership rule generally limits common ownership of two full-power stations in a market unless at least one of the owned stations is not a top-four ranked station in the market based on audience share, provided that the FCC may permit such common ownership if it finds such ownership would serve the public interest, convenience and necessity.
Dual Network Rule
The dual network rule effectively prohibits any of the four major U.S. broadcast networks — ABC, CBS, FOX and NBC — from combining or being under common control.
Television National Audience Reach Limitation
Under the national television ownership rule, one party may not own television stations that reach more than 39% of all U.S. television households. However, for purposes of this rule, a UHF station is afforded a “discount” and is therefore attributed with reaching only 50% of the television households in its market. We currently own and operate television stations that reach approximately 38% of all U.S. television households, but we are attributed with reaching approximately 24% of all such households for purposes of the national ownership rule because of the discount.
Foreign Ownership
In general, the Communications Act restricts foreign individuals or entities from collectively owning more than 25% of our voting power or equity. FCC approval is required to exceed the 25% threshold. The FCC has approved foreign ownership levels of up to 100% in certain instances, subsequent to its review and approval of specific, named foreign individuals.
Cable and Satellite Carriage of Television Broadcast Stations
The Communications Act and FCC rules govern the retransmission of broadcast television stations by cable system operators, direct broadcast satellite operators, and other MVPDs in the U.S. Pursuant to these regulations, we have elected to negotiate with MVPDs for the right to carry our broadcast television stations via retransmission consent agreements. The Communications Act and FCC regulations require that broadcasters and some categories of MVPDs negotiate in good faith for retransmission consent. Some MVPDs have sought changes to federal law that would eliminate or otherwise limit the ability of broadcasters to obtain fair compensation for the grant of retransmission consent.
Program Regulation
The FCC also regulates the content of broadcast, cable network, and other video programming. The FCC prohibits broadcasters from airing obscene material at any time and indecent or profane material between 6 a.m. and 10 p.m. The FCC’s maximum forfeiture penalty per station for broadcasting indecent or profane programming is approximately $445,445 per indecent or profane utterance or image, with a maximum forfeiture exposure of approximately $4.1 million for any continuing violation arising from a single act or failure to act. The FCC also actively monitors compliance with requirements that apply to broadcasters and cable networks relating to political advertising, identification of program sponsors, and the use and integrity of the Emergency Alert System. In addition, FCC regulations require the closed captioning of almost all broadcast and cable programming, as well as certain programming in the U.S. delivered by internet protocol. Broadcast television stations in certain markets that are affiliated with one of the four major U.S. broadcast networks must also provide a certain amount of programming every quarter that includes audio description (audio-narrated description of a television program’s key visual elements that make the programming accessible to blind and low-vision viewers).
Children’s Programming
Our business is subject to various regulations in the U.S. and abroad applicable to children’s programming. U.S. federal law and FCC rules limit the amount and content of commercial matter that may be shown on broadcast television stations and cable networks during programming designed for children 12 years of age and younger, and the FCC also limits the display of certain commercial website addresses during children’s programming. Moreover, each of our broadcast television stations in the U.S. is required to air, in general, three hours per week of programming specifically designed to meet the educational and informational programming needs of children 16 years of age and younger.
In addition, some policymakers have sought limitations on food and beverage marketing in media popular with children and teens. For example, restrictions on the television advertising of foods high in fat, salt and sugar (“HFSS”) to children aged 15 and under have been in place in the U.K. since 2007. The U.K. government has announced its intention to impose a ban, effective in 2023, on all HFSS advertising before 9:00 p.m. on television and a total ban online. Various laws with similar objectives have also been enacted in Ireland, Turkey, Mexico, Chile, Argentina, Peru, Taiwan and South Korea, and significant pressure for similar restrictions continues to be felt globally, most acutely in Australia, Brazil, Canada, Colombia, India, Hungary, Singapore, South Africa and France. The implementation of these or similar limitations and restrictions could have a negative impact on our television advertising revenues, particularly for our networks with programming for children and teens.
Broadcast Transmission Standard
In 2017, the FCC adopted rules to permit television broadcasters to voluntarily broadcast using the “Next Generation” broadcast television transmission standard developed by the Advanced Television Systems Committee, Inc., also called “ATSC 3.0.” Those full-service television stations using the standard are subject to certain requirements, including the obligation to continue broadcasting a generally identical program stream in the current ATSC 1.0 broadcast standard. The ATSC 3.0 standard can be used to offer better picture quality and improved mobile broadcast viewing. A television station converting to ATSC 3.0 operation will incur significant costs in equipment purchases and upgrades. In addition, consumers may be required to obtain new television sets or other equipment that are capable of receiving ATSC 3.0 broadcasts. We are participating in ATSC 3.0 partnerships with other broadcasters and may enter into additional partnerships in the future.
Global Data Protection Laws and Children’s Privacy Laws
A number of data protection and privacy laws impact, or may impact, the manner in which we collect, process and transfer personal data. In the E.U., the General Data Protection Regulation (“GDPR”) mandates data protection compliance obligations and authorizes significant fines for noncompliance. In the U.S., the California Consumer Privacy Act (“CCPA”) went into effect in January 2020 and created a host of new obligations for businesses
regarding how they handle the personal information of California residents, including creating new data access, data deletion and opt out rights. The new California Privacy Right Act will replace the CCPA in early 2023 and creates even more onerous obligations, including the need to implement mechanisms for consumers to opt out of personal data sharing with third parties in the context of digital advertising. A number of other regions where we do business, including the U.S., Asia and Latin America, have enacted or are considering new data protection legislation and regulations that may impact our business activities that involve the processing of personal data.
In addition, some of the mechanisms we previously relied upon for the international transfer of personal data from the E.U. to other countries including the U.S., are no longer available. New legal requirements such as utilizing the new standard contractual clauses recently approved by the European Commission require significant resources going forward to perform international data transfer assessments.
We are also subject to laws and regulations intended specifically to protect the interests of children, including the privacy of minors online. The U.S. Children’s Online Privacy Protection Act (“COPPA”) limits the collection by operators of websites or online services of personal information online from children under the age of 13. The U.S. Federal Trade Commission has yet to issue a proposed new COPPA rule as part of its review of its regulations implementing COPPA begun in 2019; however, the agency as well as some state Attorneys General have continued to bring enforcement cases under the existing COPPA rule. Since the enactment of GDPR in 2018, several countries in the E.U. and U.K. have issued guidance documents or codes of conduct with respect to the online privacy of children under 18, which impact countries outside of the U.K. and E.U., including the U.S. and in Australia. Such regulations may also restrict the types of advertising we are able to sell on these online services, sites and apps and may impose strict liability on us for certain of our actions, as well as certain actions of our advertisers and other third parties, which could affect advertising demand and pricing. In the U.S., state and federal policymakers are also considering regulatory and legislative methods to protect consumer privacy on the internet, and these efforts have focused particular attention on children and teens. Congress has held several hearings on protecting children and teens online and has signaled that an update to COPPA with stronger protections for children and teens is likely.
See “Item 1A. Risk Factors — Risks Relating to Business Continuity, Cybersecurity and Privacy and Data Protection — We are subject to complex, often inconsistent and potentially costly laws, rules, regulations, industry standards and contractual obligations relating to privacy and personal data protection.”
Intellectual Property
We are fundamentally a content company, and the trademark, copyright, patent and other intellectual property laws that protect our brands and content are extremely important to us. It is our practice to protect our brands, content and related intellectual property. Unauthorized exploitation of copyrighted works interferes with the legitimate market and disrupts our ability to distribute and monetize our content. The infringement of our intellectual property rights presents a significant challenge to our industry, and we take a number of steps to address this concern. For example, where possible, we use technologies, such as encryption, watermarking, and digital rights management tools, to protect our content from piracy. We are also actively engaged in enforcement and other activities to protect our intellectual property, including: monitoring services that unlawfully distribute or otherwise infringe our content and sending takedown or cease-and-desist notices in appropriate circumstances; using filtering technologies employed by some social media companies and other platforms hosting our content; working with intermediaries and other third parties to address current infringements and prevent more in the future; and pursuing litigation and referrals to law enforcement. Through partnerships with various organizations, we also are actively involved in educational outreach to the creative community, state and federal government officials and other stakeholders in an effort to marshal greater resources to combat intellectual property infringement. Additionally, we participate in various industrywide enforcement initiatives, public relations programs and legislative activities on a worldwide basis. For example, we have had notable success with site-blocking efforts in parts of Europe, Asia, Latin America and Australia, which can be effective in steering consumers away from piracy platforms and toward legitimate platforms.
Notwithstanding these efforts and the many legal protections that exist to combat piracy, the proliferation of infringing services and the sophistication of and continued technological advancement in the tools used in infringing activities continues to be a challenge. The failure to maintain enhanced legal protections and enforcement tools and to update those tools as threats evolve could make it more difficult for us to adequately protect our intellectual property, which could negatively impact its value and further increase the costs of enforcing our rights as we continue to expend substantial resources to protect our content.
Our Executive Officers
Our executive officers as of February 14, 2022, are as follows:
| Non-Executive Chair, Director | | | | | | | |
| Name | Age | Position |
| Robert M. Bakish | 5658 | President and Chief Executive Officer, Director |
Candace K. BeineckeNaveen Chopra | 7348 | DirectorExecutive Vice President, Chief Financial Officer |
Barbara M. ByrneChrista A. D’Alimonte | 6553 | DirectorExecutive Vice President, General Counsel and Secretary |
Brian GoldnerKatherine Gill-Charest | 5657 | DirectorExecutive Vice President, Controller and Chief Accounting Officer |
LindaRichard M. GriegoJones | 7256 | DirectorExecutive Vice President, General Tax Counsel and Chief Veteran Officer |
Robert N. KliegerDoretha (DeDe) Lea | 4757 | DirectorExecutive Vice President, Global Public Policy and Government Relations |
Judith A. McHaleJulia Phelps | 7344 | DirectorExecutive Vice President, Chief Communications and Corporate Marketing Officer |
Ronald L. NelsonNancy Phillips | 6754 | Director |
Charles E. Phillips, Jr. | 60 | Director |
Susan Schuman | 60 | Director |
Nicole Seligman | 63 | Director |
Frederick O. Terrell | 65 | DirectorExecutive Vice President, Chief People Officer |
Shari E. Redstone has been a member of the ViacomCBS Board of Directors (the “Board”) since January 1994. She has served as the Non-Executive Chair of our Board since December 2019 and, prior to that, served as Non-Executive Vice Chair of the Board beginning in 2005 and as Non-Executive Vice Chair of the board of Viacom beginning in 2006. Ms. Redstone is Co-founder and Managing Partner of Advancit Capital, an investment firm launched in 2011 that focuses on early stage companies at the intersection of media, entertainment and technology, with investments in over 75 companies. Ms. Redstone has been President of NAI since 2000, and also serves as a director of NAI. Ms. Redstone brings to the Board her extensive experience in and a deep understanding of the entertainment industry, broad experience and talent managing a large business, extensive legal experience and her experience as President of NAI, including as one of its significant stockholders. Ms. Redstone is actively involved in a variety of charitable, civic, and educational organizations, including serving as a member of the board of trustees of The Paley Center for Media. She sits on the Board of Trustees of the Dana-Farber Cancer Institute. Ms. Redstone earned a BS from Tufts University and a JD and a Masters in Tax Law from Boston University. She practiced corporate law, estate planning and criminal law in the Boston area before joining NAI. Ms. Redstone is the daughter of Sumner M. Redstone.
Robert M. Bakish has been our President and Chief Executive Officer and a member of our Board since December 2019. Mr. Bakish served as President and Chief Executive Officer and a member of the board of Viacom from December 2016 to December 2019, having served as Acting President and Chief Executive Officer beginning earlier in 2016. Mr. Bakish joined Viacom’s predecessor (“Former Viacom”) in 1997 and held positions throughout the organization, including as President and Chief Executive Officer of Viacom International Media Networks and its predecessor company, MTV Networks International, (“MTVNI”), from 2007 to 2016; President of MTVNI; Executive Vice President, Operations and Viacom Enterprises; Executive Vice President and Chief Operating Officer, MTV Networks Advertising Sales; and Senior Vice President, Planning, Development and Technology. Before joining Former Viacom, Mr. Bakish was a partner with Booz Allen Hamilton in its Media and Entertainment practice. Mr. Bakish has extensive knowledge and deep understanding of the Viacom business and the entertainment industry through various leadership positions at Viacom spanning approximately 20 years and culminating with President and Chief Executive Officer, and broad expertise overseeing global operations. Mr. Bakish has served as a director of Avid Technology, Inc. since 2009.
Candace K. BeineckeNaveen Chopra has been a member of our BoardExecutive Vice President, Chief Financial Officer since September 2018. Ms. Beinecke is the Senior Partner of Hughes Hubbard & Reed LLP, a New York law firm, and is a practicing partner in Hughes Hubbard’s corporate department. In 1999, Ms. Beinecke became the first woman to Chair a major New York law firm. Ms. Beinecke also serves as the Lead Trustee of Vornado Realty Trust, the Chairperson of the Board of First Eagle Funds (a mutual fund
family), and as a board member of ALSTOM (a public French transport company). As the long-time head of a top-ranked international law firm, Ms. Beinecke is well-recognized in the legal profession for her corporate governance and mergers and acquisitions expertise and brings to the Board extensive legal, governance, business and risk management experience. Ms. Beinecke’s breadth of director experience, which includes service as a lead trustee and chairperson, as well as service on other nominating and governance committees, a remuneration committee and an executive committee, gives her a deep understanding of public company governance.
Barbara M. Byrne has been a member of our Board since September 2018. Ms. Byrne is the former Vice Chairman, Investment Banking at Barclays PLC. During her more than 35 years of financial services experience, Ms. Byrne served as team leader for some of Barclay’s most important multinational corporate clients and was the primary architect of several of Barclays’ marquee transactions. Widely recognized as a leading investment banker and strategic advisor, she is a member of various industry councils and participates as a forum leader on strategic issues and trends facing the financial services sector and global markets. With this experience, Ms. Byrne brings to the Board important business and financial expertise in its deliberations on complex transactions, risk management, strategy and other financial matters.
Brian Goldner has been a member of our Board since September 2018. Mr. Goldner has served as the Chief Executive Officer of Hasbro, Inc. since 2008, and additionally has served as its Chairman of the Board since May 2015. In addition to being Chief Executive Officer, from 2008 to 2016, Mr. Goldner was also the President of Hasbro. Besides being a member of Hasbro’s board, he also served on the boards of The Gap, Inc. from 2016 to 2019 and Molson Coors Brewing Company from 2010 to 2016. Mr. Goldner brings to the Board significant leadership, operational and brand management experience from his executive positions at one of the leading public companies in his industry, where he was instrumental in transforming a traditional toy and game company into a global play and entertainment leader. With his direct experience in executing on strategies to differentiate Hasbro in a competitive global marketplace in response to industry evolution, he is well-positioned to advise on the strategic direction of the Company’s businesses. Further, Mr. Goldner’s service on other boards and board committees gives him a deep understanding of public company governance.
Linda M. Griego has been a member of our Board since March 2007. Ms. Griego has served, since 1986, as President and Chief Executive Officer of Griego Enterprises, Inc., a business management company. For more than 20 years, she oversaw the operations of Engine Co. No. 28, a prominent restaurant in downtown Los Angeles that she founded in 1988. From 1990 to 2000, Ms. Griego held a number of government-related appointments, including Deputy Mayor of the city of Los Angeles, President and Chief Executive Officer of the Los Angeles Community Development Bank, and President and Chief Executive Officer of Rebuild LA, the agency created to jump-start inner-city economic development following the 1992 Los Angeles riots. Over the past two decades, she has also served on a number of government commissions and boards of directors of nonprofit organizations, including current service on the boards of The Ralph M. Parsons Foundation, the MLK Health and Wellness, CDC, and the Charles R. Drew University of Medicine and Science. Ms. Griego has served as a director of publicly traded and private corporations, including serving as director of AECOM and the American Funds (7 funds). With the breadth of her leadership experience as a businesswoman, in the public sector through her multiple government appointments and extensive community-based participation in Los Angeles, an area where the Company has a significant presence, and on multiple not-for-profit boards, Ms. Griego provides the Board with financial and business acumen, as well as public policy expertise as it relates to business practices. Ms. Griego is also an experienced director, including through service on other audit, compensation and organization, and nominating and governance committees, with demonstrated expertise in the application of sound corporate governance principles.
Robert N. Klieger has been a member of our Board since July 2017. Mr. Klieger is a partner in the Los Angeles law firm Hueston Hennigan LLP. Mr. Klieger’s practice focuses on complex civil litigation and counseling in the areas of entertainment and intellectual property. Mr. Klieger represents motion picture studios, broadcast and cable television networks, production companies, video game publishers and high net worth individuals in the media and entertainment space, as well as clients in other industries including apparel, aviation and venture capital. Prior to joining Hueston Hennigan, Mr. Klieger was a partner at Irell & Manella LLP and a founding partner at Kendall Brill & Klieger LLP. Before beginning his career in private practice, Mr. Klieger served as a law clerk to the Honorable
Cynthia Holcomb Hall of the United States Court of Appeals for the Ninth Circuit, and the Honorable William Matthew Byrne, Jr. of the United States District Court for the Central District of California. Mr. Klieger is recognized as one of the most prominent attorneys in the entertainment industry, with a practice focused on complex civil litigation and counseling in the areas of media, entertainment and intellectual property and clients that include leading enterprises in television, film and digital media. With his exceptional legal acumen and distinguished reputation for his trial practice and counsel, Mr. Klieger brings to the Board legal and strategic expertise in matters germane to the Company’s businesses and complex business transactions.
Judith A. McHale has been a member of our Board since December 2019 and, prior to that, served on the board of Viacom from August 2016 to December 2019. Ms. McHale is President and Chief Executive Officer of Cane Investments, LLC, a private investment company. Prior to joining Cane Investments in 2011, Ms. McHale served as the Under Secretary of State for Public Diplomacy and Public Affairs for the U.S. Department of State from 2009 to 2011. From 2004 to 2006, Ms. McHale served as the President and Chief Executive Officer of Discovery Communications, Inc., the parent company of Discovery Channel, and served as its President and Chief Operating Officer from 1995 to 2004. In 2006, Ms. McHale worked with private equity firm Global Environment Fund to launch the GEF/Africa Growth Fund, an investment vehicle focused on supplying expansion capital to small and medium-sized enterprises that provide consumer goods and services in emerging African markets. Ms. McHale has extensive experience leading a major media conglomerate with a background in operations and financial management, expertise in global affairs, experience in government affairs and extensive public company and corporate governance experience. She has served on the board of Ralph Lauren Corporation since 2011 and the board of Hilton Worldwide Holdings Inc. since 2013. She previously served on the boards of SeaWorld Entertainment, Inc., Host Hotel & Resorts, Inc., DigitalGlobe Inc., John Hancock Financial Services, Inc. and Potomac Electric Power Company.
Ronald L. Nelson has been a member of our Board since December 2019 and served on the board of Viacom from August 2016 to December 2019. Mr. Nelson served as a consultant to Avis Budget Group, Inc. until May 2019.2020. Prior to that, he served as Executive ChairmanVice President and Chief Financial Officer of the BoardAmazon Devices & Services, beginning in 2019. Prior to joining Amazon Devices & Services, Mr. Chopra served as Chief Financial Officer of Avis Budget GroupPandora Media from 20162017 to 20182019 and as its Chairman andInterim Chief Executive Officer from 2006 to 2015, and alsoduring part of this time, having previously served as Interim Chief OperatingExecutive Officer from 2010 to 2015. Prior to that, Mr. Nelson held several executive financeof TiVo Inc. in 2016 and operating roles, beginning in 2003 with Cendant Corporation, including as its Chief Financial Officer and President and a member of its board from 20032012 to 2006. From 1994 to 2003, Mr. Nelson served as Co-Chief Operating Officer of DreamWorks SKG. Prior to that, he was Executive Vice President, Chief Financial Officer and a director at Paramount Communications, Inc., formerly Gulf + Western Industries, Inc. Mr. Nelson has extensive experience as a chief executive officer, chief financial officer and chief operating officer of major global companies, significant financial expertise, international business experience, public company and corporate governance experience and a long-standing background in the media industry. Mr. Nelson has served on the board of Hanesbrands Inc. since 2008 and as its Non-Executive Chairman since 2019, and on the board of Wyndham Hotels & Resorts, Inc. since 2019. He previously served on the board of Convergys.
Charles E. Phillips, Jr. has been a member of our Board since December 2019 and served on the board of Viacom from January 2006 to December 2019 and, prior to that, on the board of Former Viacom beginning in 2004. Mr. Phillips is Chairman of Infor, Inc., a multi-billion dollar enterprise software company and served as its Chief Executive Officer from 2010 to 2019. He was a President of Oracle Corporation from 2003 to 2010 and served as a member of its Board of Directors and Executive Management Committee from 2004 to 2010. Prior to Oracle, Mr. Phillips was a managing director at Morgan Stanley in the Technology Group and served on its Board of Directors. Mr. Phillips has extensive experience as a senior executive in a large, multinational corporation, financial industry background and financial and analytical expertise, significant public company and corporate governance experience, expertise in technology issues and familiarity with issues facing media, new media and intellectual property-driven companies and a deep knowledge of the Viacom business. He is a member of the Board of Directors of the Federal Reserve Bank of New York, the Apollo Theater, Business Executives for National Security and the New York Police Foundation. He served on President Obama’s Economic Recovery Board, led by Paul Volcker, and is a member of the Council on Foreign Relations.
Susan Schumanhas been a member of our Board since September 2018. Ms. Schuman is the Chief Executive Officer and Co-Founder of SYPartners LLC, a consultancy firm that partners with chief executive officers and their
leadership teams undergoing business and cultural transformation. Over the past 20 years, Ms. Schuman has built and led SYPartners, working with executives at many high-profile companies and organizations. This experience in advising on business, organization and cultural transformation, including new value creation strategies, positions Ms. Schuman as a skilled advisor to the Board on the strategic and transformational direction of the Company.
Nicole Seligman has been a member of our Board since December 2019 and, prior to that, served on the board of Viacom from August 2016 to December 2019. Until March 2016, Ms. Seligman served as the President of Sony Entertainment, Inc. (beginning in 2014) and of Sony Corporation of America (beginning in 2012), and as Senior Legal Counsel of Sony Group (beginning in 2014). Ms. Seligman previously served as Executive Vice President and General Counsel of Sony Corporation from 2005 to 2014. She joined Sony in 2001 and served in a variety of other capacities during her tenure, including as a Corporate Executive Officer and Group Deputy General Counsel of Sony Corporation, and as General Counsel and an Executive Vice President at Sony Corporation of America, a subsidiary of Sony Corporation. Prior to joining Sony Corporation of America, Ms. Seligman was a partner in the litigation practice at Williams & Connolly LLP in Washington, D.C., where she worked on a broad range of complex civil and criminal matters and counseled a wide range of clients, including President William Jefferson Clinton and Lt. Col. Oliver North. Ms. Seligman joined Williams & Connolly in 1985. Ms. Seligman served as law clerk to Justice Thurgood Marshall on the Supreme Court of the United States from 1984 to 1985 and as law clerk to Judge Harry T. Edwards at the U.S. Court of Appeals for the District of Columbia Circuit from 1983 to 1984. Ms. Seligman has extensive media industry experience with various leadership roles at a major media conglomerate, public company and corporate governance experience, and exceptional achievements in the legal profession. Ms. Seligman has served on the board of Far Point Acquisition Corporation since 2018 and the board of MeiraGTx Holdings plc since 2019, and has been a Non-Executive Director of WPP plc since 2014 and its Senior Independent Director since 2016.
Frederick O. Terrell has been a member of our Board since December 2018. Mr. Terrell served as Executive Vice Chairman of Investment Banking and Capital Markets at Credit Suisse and later Senior Advisor from January 2018 to November 2018. From 2010 to 2017 he was Vice Chairman of Investment Banking and Capital Markets at Credit Suisse. His investment banking career began in 1983 as an Associate with The First Boston Corporation. During his accomplished career in the financial services sector spanning more than 25 years, Mr. Terrell was responsible for Credit Suisse’s global banking relationships with some of its most high-profile clients. From 2000 to 2008 he was the Managing Partner of Provender Capital Group, LLC a private equity firm focusing on investments in emerging companies. He has served as a member of the Board of Directors of the New York Life Insurance Company, Wellchoice Inc. (formerly Empire Blue Cross Blue Shield) and Carver Bancorp, Inc. His experience also includes past and present service on multiple not-for-profit boards, including the Yale School of Management, The Partnership for New York City, The Partnership Fund for New York City, Coro New York Leadership Center, Big Brothers Big Sisters of New York City and the Center for a New American Security. He is a member of the Council on Foreign Relations, The Economic Club of New York and the Investment Committee of the Rockefeller Foundation. Based on his extensive banking and corporate advisory experience, Mr. Terrell brings significant business and financial expertise to the Board in its deliberations on corporate strategy, complex transactions and other financial matters.
OUR EXECUTIVE OFFICERS
ViacomCBS’ executive officers as of February 18, 2020 are as follows:
|
| | |
Name | Age | Position |
Robert M. Bakish | 56 | President and Chief Executive Officer, Director |
Christa A. D’Alimonte | 51 | Executive Vice President, General Counsel and Secretary |
Katherine Gill-Charest | 55 | Executive Vice President, Controller and Chief Accounting Officer |
Richard M. Jones | 54 | Executive Vice President, General Tax Counsel and Chief Veteran Officer |
Doretha (DeDe) Lea | 55 | Executive Vice President, Global Public Policy and Government Relations |
Julia Phelps | 42 | Executive Vice President, Chief Communications and Corporate Marketing Officer |
Nancy Phillips | 52 | Executive Vice President, Chief People Officer |
Christina Spade | 50 | Executive Vice President, Chief Financial Officer |
See “Our Board of Directors” for Mr. Bakish’s biography.
Christa A. D’Alimonte has been our Executive Vice President, General Counsel and Secretary since December 2019. Prior to that, she served as Executive Vice President, General Counsel and Secretary of Viacom beginning in 2017, having previously served as Senior Vice President, Deputy General Counsel and Assistant Secretary of Viacom beginning in 2012. Prior to joining Viacom, Ms. D’Alimonte was a partner of Shearman & Sterling LLP, where she was Deputy Practice Group Leader of the Firm’s Global Mergers & Acquisitions group. She first joined Shearman & Sterling in 1993 and became a partner in 2001.
Katherine Gill-Charest has been our Executive Vice President, Controller and Chief Accounting Officer since December 2019. Prior to that, she served as Senior Vice President, Controller and Chief Accounting Officer of Viacom beginning in 2010, having previously served as Senior Vice President, Deputy Controller of Viacom during 2010 and Vice President, Deputy Controller beginning in 2007. Prior to that, Ms. Gill-Charest was the Chief Accounting Officer of WPP Group from 2001 to 2007 and was the Vice President and Worldwide Controller of Young & Rubicam Inc. from 1998 to 2000. Ms. Gill-Charest also held roles in financial reporting
and accounting policy at Time Warner Inc. from 1991 to 1998 and at NYNEX Corporation from 1988 to 1991 and served in the audit practice of Price Waterhouse for two years.
Richard M. Jones has been our Executive Vice President, General Tax Counsel and Chief Veteran Officer since August 2014. Prior to that, he served as Senior Vice President and General Tax Counsel of CBS Corporation beginning in 2006 and forof Former Viacom beginning in 2005. Prior to that, he served as Vice President of Tax, Assistant Treasurer and Tax Counsel for NBC Universal, Inc. beginning in 2003 and he served 13 years with Ernst & Young in its media & entertainment and transaction advisory services practices. Mr. Jones served honorably as a non-commissionednoncommissioned officer in the U.S. Army’s 75th Ranger Regiment and 10th Mountain Division.
Doretha (DeDe) Lea has been our Executive Vice President, Global Public Policy and Government Relations since December 2019. Prior to that, she served as Executive Vice President, Global Government Affairs of Viacom beginning in 2013, having previously served as Executive Vice President, Government Relations of Former Viacom beginning in 2005. Prior to that, she was Senior Vice President, Government Relations ofMs. Lea served in various government relations positions at Former Viacom beginning earlier in 2005. Prior1997, with the exception of 2004 to that,2005, when she served as Vice President of Government Affairs at Belo Corp. from 2004Prior to 2005 and asjoining Former Viacom, she was Senior Vice President of Government AffairsRelations at the National Association of Former Viacom from 1997 to 2004.Broadcasters.
Julia Phelps has been our Executive Vice President, Chief Communications and Corporate Marketing Officer since December 2019. Prior to that, she served as Executive Vice President, Communications, Culture and Marketing of Viacom beginning in 2017, having previously served as Senior Vice President, Communications and Culture of Viacom beginning earlier in 2017. Prior to that, she served as Executive Vice President of Communications for Viacom
International Media Networks beginning in 2012, after having served as Vice President of Corporate Communications for Viacom. Ms. Phelps joined Former Viacom in 2005 from DeVries Public Relations, a New York-based communications agency.
Nancy Phillips has been our Executive Vice President, Chief People Officer since December 2019. Prior to that, she served as Executive Vice President and Chief Human Resources Officer of Nielsen Holdings PLC beginning in 2017, having served as Executive Vice President and Chief Human Resources Officer of Broadcom Corporation from 2014 to 2016. From 2010 to 2014, Ms. Phillips was Senior Vice President, Human Resources for the Imaging and Printing Group at Hewlett-Packard Company, and previously served as Senior Vice President, Human Resources, Enterprise Services. From 2008 to 2010, Ms. Phillips served as Executive Vice President and Chief Human Resources Officer at Fifth Third Bancorp. Prior to that, Ms. Phillips spent 11 years at General Electric Company, holding various human resources positions. Ms. Phillips practiced law from 1993 to 1997.
Available Information
Christina Spade
We file annual, quarterly and current reports, proxy and information statements and other information with the SEC. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to such reports filed with or furnished to the SEC pursuant to the Securities Exchange Act of 1934, as amended, will be available free of charge on our website at www.ViacomCBS.com (under “Investors”) as soon as reasonably practicable after the reports are filed with the SEC. These documents are also available on the SEC’s website at www.sec.gov.
We announce material financial information through SEC filings, press releases, public conference calls and webcasts and our investor relations website at ir.ViacomCBS.com. We may use any of these channels as well as social media and blogs to communicate with investors about our Company. It is possible that the information we post on social media and blogs could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our Company to review the information we post on the social media channels and blogs listed on our investor relations website.
A wide range of risks may affect our business, financial condition or results of operations, now and in the future. We consider the risks described below to be the most significant. There may be other currently unknown or unpredictable factors that could have adverse effects on our business, financial condition or results of operations.
Risks Relating to Our Business and Industry
If our streaming initiatives are unsuccessful, our business, financial condition or results of operations could be adversely affected
Streaming is intensely competitive and cash intensive and there can be no assurance that our streaming initiatives will be profitable or otherwise successful. Our ability to attract, engage and retain subscribers to our subscription streaming services, including Paramount+, SHOWTIME OTT and BET+, and MAUs (together with subscribers, “users”) on our FAST service, Pluto TV, as well as the corresponding subscription and advertising revenues they generate, will depend on our ability to consistently provide appealing and differentiated content globally, effectively market our content and services and provide a quality experience for selecting and viewing that content. Our success will require significant investments to produce original content and acquire the rights to third-party content, including with respect to live sports, as well as the establishment and maintenance of key content and distribution partnerships.
We must continually add new users, convert promotional subscribers and meaningfully engage with existing subscribers to manage turnover, or “churn,” to grow our business. If we are unable to successfully compete with competitors in attracting, engaging with and retaining users as well as creative talent, our business, financial condition or results of operations could be adversely affected. The relative service levels, content offerings, promotions and pricing and related features of our competitors’ services may adversely impact our ability to attract, engage and retain users. If consumers do not consider our streaming services to be of value compared to our competitors’ services, including because we fail to introduce attractive new content and features, do not maintain competitive pricing, terminate or modify promotional or trial period offerings, experience technical issues, or change the mix of content in a manner that is unfavorably received, we may not be able to attract, engage and retain users. If we are not able to attract new users, or our existing users decide to not continue subscriptions on our services for any reason, including a perception that they do not use our streaming services sufficiently, the need to cut household expenses, unsatisfactory content, promotions or trial-period offers expire or are modified, competitive services or promotions provide a better value or experience or customer service or technical issues are not satisfactorily resolved, our business, financial condition or results of operations could be adversely affected.
Changes in consumer behavior, as well as evolving technologies, distribution platforms and packaging, may negatively affect our business, financial condition or results of operations
Our success depends on our ability to anticipate and adapt to shifting content consumption patterns. The ways in which viewers consume content, and technology and business models in our industry, continue to evolve rapidly, and new distribution platforms, as well as increased competition from new entrants and emerging technologies, have added to the complexity of maintaining predictable revenue streams.
Technological advancements have empowered consumers to seek more control over when, where and how they consume content and have affected the options available to advertisers for reaching target audiences. The evolution of consumer preferences toward “over-the-top” content consumption, such as streaming and other digital offerings, and the substantial increase in the availability of content without advertising or adequate methodologies for audience measurement, have had, and may continue to have, an adverse effect on our business, financial condition and results of operations. In addition, consumers are increasingly using time-shifting and advertising-blocking technologies, such as DVRs, that enable users to bypass advertisements. Substantial use of
these technologies could impact the attractiveness of our programming to advertisers, adversely affecting our advertising revenue.
In response to perceived consumer demand, distributors are continuing to develop alternative offerings, including streaming and other subscription services; advertising-supported services, including FAST; original content for mobile and social media platforms; and smaller, often customizable, packages delivered by MVPDs at lower costs than traditional offerings. If our networks and brands are not included in these offerings and services, or if consumers increasingly favor alternative offerings over traditional broadcast television and cable subscriptions, we may continue to experience viewership declines and ultimately demand for our programming, which could lead to lower revenues from traditional sources. These changing distribution models may also impact our ability to negotiate carriage deals on terms favorable to us.
To respond to these developments, we regularly adopt or develop new technologies and consider, and from time to time implement, changes to our business models and strategies to remain competitive, such as our increased investment in streaming. There can be no assurance that we will successfully anticipate or respond to these developments, that we will not experience disruption, even as we respond to such developments, or that the new technologies or business models we develop will be as successful as historic or existing ones.
Our advertising revenues have been and may continue to be adversely impacted by changes in consumer viewership, advertising market conditions and deficiencies in audience measurement
We derive substantial revenues from the sale of advertising, and a decline in advertising revenues could have a significant adverse effect on our business, financial condition or results of operations.
The evolution of consumer preferences toward over-the-top streaming and other digital services and the increasing number of entertainment choices has intensified audience fragmentation and reduced content viewership through traditional linear distribution models, which has caused and may continue to cause ratings declines for our television networks. This evolution has also given rise to new ways of purchasing advertising, as well as a general shift in total advertising expenditures toward streaming and digital, some of which may not be as beneficial to us as traditional advertising methods. Although we have increasingly focused on generating advertising revenue from our own streaming services, including Pluto TV and Paramount+ Essential, and other digital services, there can be no assurance that we can successfully navigate this shift or that the advertising revenues we generate will replace the declines in advertising revenues generated from our traditional linear business.
The strength of the advertising market can fluctuate in response to the economic prospects of specific advertisers or industries, advertisers’ current spending priorities and the economy in general or the economy of any individual geographic market, including the impact of the current inflationary environment and the global supply chain delays. These factors may adversely affect our advertising revenues. Natural and other disasters, pandemics, acts of terrorism, political uncertainty or hostilities could also lead to a reduction in domestic and international advertising expenditures as a result of disrupted programming and services, uninterrupted news coverage and economic uncertainty. Our ability to generate advertising revenue is also dependent on demand for our content, the consumers in our targeted demographics, advertising rates and results observed by advertisers.
Major sports events, such as the Super Bowl and the NCAA Division I Men’s Basketball Tournament and state, congressional and presidential elections cycles may cause our advertising revenues to vary substantially from year to year. Political advertising expenditures are impacted by the ability and willingness of candidates and political action campaigns to raise and spend funds on advertising and the competitive nature of the elections affecting viewers in markets featuring our content.
Advertising sales are also largely dependent on audience measurement and could be negatively affected if measurement methodologies do not accurately reflect actual viewership levels. Nielsen’s statistical sampling method is the primary measurement technique used in our television advertising sales; however, it does not fully
measure viewership across streaming and digital. We measure and monetize across over-the-top platforms based on census-based advertising-server data establishing the number of impressions served, combined with third-party data providing demographic composition estimates. Multiplatform campaign verification remains in its infancy and is still not measured by any one consistently applied method. While we expect innovation and standards around multiplatform measurement to benefit us as the advertising market continues to evolve, we are nevertheless partially dependent on third parties to deliver those solutions. Our ability to target and measure audiences is also limited by an increasing number of global laws and regulations relating to privacy and the collection, use and security of personal data.
Our success depends on our ability to maintain attractive brands andour reputation, and to offer popular programming and other content
Our ability to maintain attractive brands, and to create, distribute and/or license popular content are key to our success and ability to generate revenues. The revenues we generate primarily depend on our ability to consistently anticipate and satisfy consumer tastes and expectations, both in the U.S. and internationally. The popularity of our content is affected by our ability to develop and maintain strong brand awareness and a strong reputation; our ability to target key audiences; the quality and attractiveness of competing entertainment content; and the availability of alternative forms of entertainment and leisure time activities. Consumer tastes and behavior change frequently, and it is a challenge to anticipate what will be successful at any point in time. We invest substantial capital in our content, including the production of original content, before learning the extent to which it will garner critical success and popularity with consumers. A shortfall in the expected popularity of content we distribute or of sports events for which we have acquired rights, could lead to decreased profitability or losses for a significant period of time. Significant negative claims or publicity regarding the Company or its operations, content, products, management, employees, practices, business partners and culture, including individuals associated with the content we create and/or license, as well as our inability to adequately prepare for or respond to such negative claims or publicity, may damage our brands or reputation, even if such claims are untrue.
Increased costs for content and other rights may adversely affect our business, financial condition or results of operations
We invest significant resources to produce, market and distribute original content. We also acquire content and ancillary rights and pay related rights fees, license fees, royalties and/or contingent compensation. For example, some of the sports programming most viewed on CBS Sports or streamed on Paramount+, including NFL games, are made available based on rights of varying duration that we have negotiated with third parties. We also license various music rights from the major record companies, music publishers and performing rights organizations. Our investments in internally produced and acquired content are significant and involve complex negotiations with numerous third parties, and rapid changes in consumer behavior have increased the risk associated with the success of all kinds of content. Competition for popular content is intense, and we may have to increase the price we are willing to pay for talent and intellectual property rights, which may result in significantly increased costs. Further, increased competition in the market for development and production of original content, particularly from streaming services, increases our content costs. We may be outbid by our competitors for the rights to new, popular content or in connection with the renewals of popular rights we currently hold. As such, there can be no assurance that we will recoup our investments when the content is broadcast or distributed.
Our businesses operate in industries that are highly competitive
We compete with other media companies to attract creative talent and produce high-quality content, and for distribution on a variety of third-party platforms. Competition for talent, content, audiences, subscribers, service providers, production infrastructure, advertising and distribution is intense and comes from other broadcast television networks and stations, cable networks, streaming services, the internet and social media, film studios and independent film producers and distributors, consumer products companies and other entertainment outlets and platforms, as well as from “second screen” applications. Other broadcast television networks or stations or cable networks may change their formats or programming, a new network or station may adopt a format to
compete directly with our networks or stations, or networks or stations might engage in aggressive promotional campaigns. We also compete with additional entrants into the market for the production of original content and streaming services.
Our ability to obtain widespread distribution on favorable terms, which contributes to our ability to reach audiences and, in turn, attract advertisers, is adversely affected by continued industry consolidation, including distributors and television service providers. Our competitors generally include companies with interests in multiple media businesses that are often vertically integrated, whereas our cablebusiness generally relies on distribution relationships with third parties. As more companies in sectors adjacent to our own create or acquire their own content, they may have significant competitive advantages, which could adversely affect our ability to negotiate favorable terms for distribution or otherwise compete effectively. Our competitors could also have preferential access to important technologies, customer data or other competitive information, as well as significant financial resources.
This competition and consolidation could result in lower ratings and advertising, lower affiliate and other revenues, and increased content costs and promotional and other expenses, negatively affecting our ability to generate revenues and profitability. There can be no assurance that we will be able to compete successfully in the future against existing or new competitors, or that competition or consolidation in the marketplace will not have an adverse effect on our business, financial condition or results of operations.
The loss of affiliation and distribution agreements, renewal of these agreements on less favorable terms or adverse interpretations thereof could have a significant adverse effect on our business, financial condition or results of operations
A significant portion of our revenues are attributable to agreements with a limited number of distributors. These agreements generally have fixed terms that vary by market and distributor, and there can be no assurance that they will be renewed in the future, or renewed on favorable terms, including those related to pricing and programming tiers. We may also be unable to modify existing agreements with terms that have become less favorable over time. The loss of existing packaging, positioning, pricing or other marketing opportunities and the loss of carriage or the failure to renew our agreements with any distributor, or renew or modify them on favorable terms, could reduce the distribution of our programming and program services and decrease the potential audience for our programs, thereby negatively affecting our growth prospects and revenues from both affiliate fees and advertising. The CBS Network provides affiliated television stations regularly scheduled programming in return for the insertion of network commercials during that programming and the payment of reverse compensation. The loss of such station affiliation agreements could adversely affect our results of operations by reducing the reach of our programming and therefore our attractiveness to advertisers, and renewal of these affiliation agreements on less favorable terms may also adversely affect our results of operations.
Consolidation among and vertical integration of distributors in the cable or broadcast network business has provided more leverage to these distributors and could adversely affect our ability to maintain or obtain distribution for our network programming or distribution and/or marketing of our subscription services on favorable or commercially reasonable terms, or at all. Also, consolidation among television station group owners could increase their negotiating leverage. Competitive pressures faced by MVPDs, particularly in light of the lower retail prices of streaming services, could adversely affect the terms of our renewals with MVPDs. In addition, MVPDs and streaming services continue to develop alternative offerings for consumers. To the extent these offerings do not include our content and become widely accepted in lieu of traditional offerings, we could experience a decline in affiliate revenues.
Our revenues are dependent on the compliance of major distributors with the terms of our affiliation or distribution agreements. As these agreements have grown in complexity, the number of disputes regarding their interpretation and even their validity has grown, resulting in greater uncertainty and, from time to time, litigation with respect to our rights and obligations. Some of our distribution agreements contain “most favored nation” (“MFN”) clauses, which provide that if we enter into an agreement with a distributor and such agreement
includes terms that are more favorable than those held by a distributor holding an MFN right, we must offer some of those terms to the distributor holding the MFN right. Disagreements with a distributor on the interpretation or validity of an agreement could adversely impact our affiliate and advertising revenues, as well as our relationship with that distributor.
We could suffer losses due to asset impairment charges for goodwill, intangible assets, FCC licenses and programming
We test goodwill and indefinite-lived intangible assets, including FCC licenses, for impairment on an annual basis and between annual tests if events or circumstances require an interim impairment assessment. Certain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in advertising markets, a decrease in audience acceptance of our programming or films, a shift by advertisers to competing advertising platforms and/or changes in consumer behavior could result in a downward revision in the estimated fair value of a reporting unit or intangible assets, including FCC licenses, which could result in a noncash impairment charge. Any such impairment charge for goodwill, intangible assets and/or programming could have a material adverse effect on our reported net earnings.
Our ongoing investments in new businesses, products, services and technologies, through acquisitions and other strategic initiatives, present many risks, and we may not realize intended financial and strategic goals
We have invested in and may continue to invest, including through acquisitions, in new businesses, products, services and technologies as part of our ongoing strategic initiatives. These initiatives, such as the integration of the CBS and Viacom businesses following the Merger, may involve significant risks and uncertainties, including: difficulty integrating acquired businesses; failure to realize anticipated benefits; unanticipated problems, expenses and liabilities; potential disruption to our business and operations; diversion of management’s attention; difficulty managing expanded operations; the loss or inability to retain key employees, including talent; unanticipated challenges to or loss of our relationship with new or existing customers, viewers, advertisers, suppliers, distributors, licensors; insufficient revenues from such investments to offset any new liabilities assumed and expenses associated with new investments; and failure to successfully develop an acquired business or technology. Many of these factors are outside of our control, and because new investments are inherently risky, and the anticipated benefits or value of these investments may not materialize, no assurance can be given that such investments and other strategic initiatives will not adversely affect our business, financial condition or results of operations.
Risks Relating to Business Continuity, Cybersecurity and Privacy and Data Protection
Disruptions or failures of, or cybersecurity attacks on, our or our service providers’ networks, information systems and other technologies could result in the disclosure of confidential or valuable business or personal information, disruption of our businesses, damage to our brands and reputation, legal exposure and financial losses, and our business continuity plans may prove inadequate to address any such disruption, failure or attack
Cloud services, networks, software, information systems and other technologies we use or that are used by our third-party service providers and our product suppliers (“Providers”), including technology systems used by us and our Providers in connection with the production and distribution of our content and that otherwise perform important functions (“Systems”), are critical to our business activities. Shutdowns or disruptions of, and cybersecurity attacks on, our Systems pose increasing risks on our business. We also use content delivery networks to help us stream programming, films and other content in high volume to viewers and users of our online, mobile and app offerings over the internet. Shutdowns, disruptions and attacks on our or our Providers’ networks or Systems may be caused by third-party hacking; dissemination of computer viruses, worms, malware, ransomware and other destructive or disruptive software; denial-of-service attacks and other bad acts; human error; and power outages, natural disasters, extreme weather, terrorist attacks or other similar events. Shutdowns, disruptions and attacks could have an adverse impact on us, our business partners, advertisers and other Providers,
employees, viewers and users of our content, including degradation or disruption of service, loss of data and damage to equipment and data. Steps we or our Providers take to enhance, improve or upgrade networks or Systems may not be sufficient to avoid shutdowns, disruptions and attacks. Significant events could result in a disruption of our operations and reduction of our revenues, the loss of or damage to the integrity of data used by management to make decisions and operate our businesses, viewer or advertiser dissatisfaction or a loss of viewers or advertisers, and damage to our reputation or brands. In addition, our recovery and business continuity plans may prove inadequate to address any such disruption, failure or cybersecurity attack.
We are subject to risks caused by the misappropriation, misuse, falsification or intentional or accidental release or loss of business or personal data or programming content maintained in our or our Providers’ Systems, including proprietary and personal information (of third parties, employees and users of our online, mobile and app offerings), business information including intellectual property, or other confidential information. Outside parties may attempt to penetrate our or our Providers’ Systems or fraudulently induce employees, business partners or users of our online, mobile and app offerings to disclose sensitive or confidential information in order to gain access to our proprietary data or our subscribers’ or users’ data, our programming or our intellectual property. The number and sophistication of attempted and successful phishing, information security breaches or disruptive ransomware or denial-of-service attacks in the U.S. and elsewhere have increased significantly in recent years, and because of our prominence, we and/or Providers we use may be a particularly attractive target for such attacks. Because the techniques used to obtain unauthorized access to, or disable, degrade or sabotage, networks and Systems change frequently, we may be unable to anticipate these techniques, implement adequate security measures or remediate flaws or detect intrusion on a timely or effective basis. Despite our efforts, the possibility of these adverse events occurring cannot be eliminated.
If a material breach of our networks or Systems or those of our Providers occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose subscribers, viewers, revenues in the case of leaked content, advertisers and other business partners, and users of our online, mobile and app offerings; our reputation, brands and credibility could be damaged; and we could be required to expend significant amounts of money and other resources to repair, replace or recover such networks and Systems. We could also be subject to actions by regulatory authorities and claims asserted in private litigation. The costs relating to any data breach could be material, and we may not have adequate insurance coverage to compensate us for any losses associated with such events.
We are subject to complex, often inconsistent and potentially costly laws, rules, regulations, industry standards and contractual obligations relating to privacy and personal data protection
We are subject to laws, rules, regulations, industry standards and contractual obligations in the U.S. and in other countries relating to privacy and the collection, use and security of personal data. In the E.U., for example, the GDPR mandates data protection compliance obligations and authorizes significant fines for noncompliance, requiring extensive compliance resources and efforts on our part. Further, a number of other regions where we do business have enacted or are considering new data protection regulations that may impact our business activities. In the U.S., the CCPA mandates a host of new obligations for businesses regarding how they handle the personal information of California residents. We are also subject to laws and regulations intended specifically to protect the interests of children and the privacy of minors online, including COPPA in the U.S., and more generally, the GDPR in the E.U., and we have been required to limit some functionality on digital properties as a result of these regulations. Such regulations also restrict the types of advertising we are able to sell on these digital properties and impose strict liability on us for certain of our Executive Viceactions, as well as certain actions of our advertisers and other third parties, which could affect advertising demand and pricing. Recently, laws in Brazil and China that govern the processing of children’s data also went into effect. These laws will likely have similar impacts to COPPA and GDPR, especially with respect to data collected in connection with advertising. Compliance with privacy and data protection rules, regulations, industry standards and contractual obligations, which may be inconsistent with one another, and noncompliance could result in regulatory investigations and enforcement, significant monetary fines, breaches of contractual obligations and private litigation. Any actual or perceived noncompliance could also lead
to harm to our reputation and market position. See “Business — Regulation — Global Data Protection Laws and Children’s Privacy Laws.”
Risks Relating to Intellectual Property
Infringement of our content, including digital copyright piracy and other unauthorized uses of our content, reduces revenue received from legitimate distribution of our programming, films, books and other entertainment content and adversely affects our business, financial condition and results of operations
Our success depends in part on our ability to maintain and monetize our intellectual property rights. We are fundamentally a content company and infringement of our content — specifically, the infringement of our films, television programming, digital content, books and other intellectual property rights — affects the value of our content. Copyright infringement is particularly prevalent in many parts of the world that either lack effective laws and technical protection measures similar to those existing in the U.S. and Europe or lack effective enforcement of such measures, or both. Such foreign copyright infringement often creates a supply of pirated content for major markets as well. The interpretation of copyright, trademark and other intellectual property laws as applied to our content, and our infringement-detection and enforcement efforts, remain in flux, and some methods of enforcement have encountered political opposition. The failure to appropriately enforce and/or the weakening of existing intellectual property laws could make it more difficult for us to adequately protect and monetize our intellectual property and thus negatively affect its value.
Copyright piracy is made easier by the wide availability of higher bandwidth and reduced storage costs, as well as tools that undermine encryption and other security features and enable infringers to disguise their identities online. We and our numerous production and distribution partners operate various technology systems in connection with the production and distribution of our programming and films, and intentional or unintentional acts could result in unauthorized access to our content. The continuing proliferation of digital formats and technologies heightens this risk. Internet-connected televisions, set-top boxes and mobile devices are ubiquitous, and many can support illegal retransmission platforms, illicit video-on-demand or streaming services and pre-loaded hardware, providing more accessible, versatile and legitimate-looking environments for consuming unlicensed film and television content. Unauthorized access to our content could result in the premature release of films, television programs or other content as well as a reduction in demand for authorized content, which would likely have significant adverse effects on the value of the affected content and our ability to monetize our content.
Copyright infringement reduces the revenue that we are able to generate from the legitimate sale and distribution of our content, undermines lawful distribution channels, reduces the public’s and some affiliate partners’ perceived value of our content and inhibits our ability to recoup or profit from the costs incurred to create such content. We are actively engaged in enforcement and other activities to protect our intellectual property, and it is likely that we will continue to expend substantial resources in connection with these initiatives. Efforts to prevent the unauthorized reproduction, distribution and exhibition of our content may affect our profitability and may not be successful in preventing harm to our business.
Risks Relating to Macroeconomic and Political Conditions
COVID-19 and other pandemics could have a material adverse effect on our business, financial condition and results of operations.
The COVID-19 pandemic has negatively impacted, and is expected to continue to impact, the macroeconomic environment in the U.S. and globally. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted various measures, some of which have been subsequently rescinded, modified or reinstated, including travel bans, orders to close or limit access to businesses not deemed “essential,” vaccination and masking requirements, requirements to isolate residents to their homes or places of residence, and social distancing. The difficult macroeconomic environment has included increased and prolonged unemployment, a decline in consumer confidence, global supply chain issues and inflation, and prolonged declines in economic
growth, as well as changes in consumer behavior in response to the pandemic, which have had, and may continue to have, a negative impact on our business, financial condition and results of operations. Other pandemics or widespread health emergencies may have similar effects.
As a result of COVID-19, in 2020 we experienced a material negative impact on our advertising revenues as a result of weakness in the advertising market, the cancellation or postponement of sporting events, and the delay of the broadcast television season as a result of production shutdowns. While the advertising market improved in 2021, we are not able to predict the effect that COVID-19 may have on the advertising market in the future and any prolonged decline in our advertising revenues would have a negative impact on our business, financial condition and results of operations. COVID-19 had a negative effect on our licensing revenues due to production shutdowns, delays in our delivery of content to third parties, and fewer original programs and live events airing on our networks. We also experienced lower demand for the licensing of our content from advertising-supported licensees. While production has resumed, we are not able to predict whether we will encounter future production delays or shutdowns or if and to what extent content licensing revenues will continue to be negatively impacted. Our theatrical revenues have been negatively impacted by the closure or reduced capacity of movie theaters as a result of COVID-19. We are not able to predict the effect that COVID-19 may have on theatergoing in the future, including whether consumers will return at the same levels they previously did because of concerns related to COVID-19 or because of changes to viewing habits, or whether revenues from theatrical releases will be comparable to historical levels.
The magnitude of the continuing impact of COVID-19 and its variants, which could be material to our business, financial condition and results of operations, will depend on numerous evolving factors that we may not be able to accurately predict or control, including the duration and extent of the pandemic, the impact of governmental actions, consumer behavior in response to the pandemic and such governmental actions, and economic and operating conditions in the aftermath of COVID-19. Due to the evolving and uncertain nature of the pandemic, we are not able to estimate the full extent of the impact that COVID-19 will have on our business, financial condition and results of operations, and that impact could also exacerbate the other risks described herein. Even after COVID-19 has moderated and governmental restrictions have eased, we may continue to experience the same adverse effects on our business resulting from recessionary economic conditions that persist and long-term changes in the advertising and distribution markets and consumer engagement and viewing habits.
Economic and political conditions in a variety of markets around the world could have an adverse effect on our business, financial condition or results of operations
Our businesses operate and have audiences, customers and partners worldwide, and we are focused on expanding our international operations in key markets, some of which are emerging markets. For that reason, economic conditions in many different markets around the world affect a number of aspects of our businesses. Economic conditions in each market can also impact our audience’s discretionary spending (such as current inflation or global supply chain issues) and therefore their willingness to access our content, as well as the businesses of our partners who purchase advertising on our networks, causing them to reduce their spending on advertising. We may also be subject to longer payment cycles. In addition, as we have expanded our international operations, our exposure to foreign currency fluctuations against the U.S. dollar has increased, and there is no assurance that downward trending currencies will rebound or that stable currencies will remain stable in any period. Such fluctuations could have an adverse effect on our business, financial condition or results of operations. Also, volatility and weakness in the capital markets, the tightening of credit markets or a decrease in our debt ratings could adversely affect our ability to obtain cost-effective financing. Broader supply chain delays, such as those currently impacting global distribution, may impact our business.
Our businesses are also exposed to certain political risks inherent in conducting a global business, including retaliatory actions by governments reacting to changes in the U.S. and other countries, including in connection with trade negotiations; issues related to the presence of corruption in certain markets and enforcement of anticorruption laws and regulations; increased risk of political instability in some markets as well as conflict and
sanctions preventing us from accessing those markets; escalating trade, immigration and nuclear disputes; wars, acts of terrorism or other hostilities; and other political, economic or other uncertainties.
These political and economic risks could create instability in any of the markets where our businesses derive revenues, which could result in a reduction of revenue or loss of investment that adversely affects our businesses, financial condition or results of operations.
Risks Relating to Regulatory and Legal Matters
Failures to comply with or changes in U.S. or foreign laws or regulations may have an adverse effect on our business, financial condition or results of operations
We are subject to a variety of laws and regulations, both in the U.S. and/or in the foreign jurisdictions in which we or our partners operate, including laws and regulations relating to intellectual property, content regulation, user privacy, data protection, anticorruption, repatriation of profits, tax regimes, quotas, tariffs or other trade barriers, currency exchange controls, operating license and permit requirements, restrictions on foreign ownership or investment, anticompetitive conduct, export and market access restrictions, and exceptions to and limitations on copyright and censorship, among others.
The television broadcasting and cable programming industries in the U.S. are highly regulated by U.S. federal laws and regulations issued and administered by various federal agencies, including the FCC. For example, we are required to obtain licenses from the FCC to operate our television stations and periodically renew them. It cannot be assured that the FCC will approve our future renewal applications or that the renewals will be for full terms or will not include conditions or qualifications. The nonrenewal, or renewal with substantial conditions or modifications, of one or more of our licenses could have a material adverse effect on our revenues. We must also comply with extensive FCC limits on the ownership and operation of our television stations and our television networks, which could restrict our ability to consummate future transactions and in certain circumstances could require us to divest some television stations.
Our businesses could be adversely affected by new laws and regulations, changes in existing laws, changes in interpretations of existing laws by courts and regulators and the threat that additional laws or regulations may be forthcoming, as well as our ability to enforce our legal rights. We could be required to change or limit certain of our business practices, which could impact our ability to generate revenues. We could also incur substantial costs to comply with new and existing laws and regulations, or substantial fines and penalties or other liabilities if we fail to comply with such laws and regulations.
Our liabilities related to discontinued operations and former businesses could adversely impact our financial conditions
We have both recognized and potential liabilities and costs related to discontinued operations and former businesses, certain of which are unrelated to our existing business, including leases, guarantees, environmental liabilities, liabilities related to the pensions and medical expenses of retirees, asbestos liabilities, contractual disputes and other pending and threatened litigation. We cannot be assured that our accruals for these matters are sufficient to cover these liabilities in their entirety or any one of these liabilities when it becomes due or at what point any of these liabilities may come due. Therefore, there can be no assurances that these liabilities will not have a material adverse effect on our financial condition, operating performance or cash flows.
Risks Relating to Human Capital
The loss of existing or inability to hire new key employees or secure creative talent could adversely affect our business, financial condition or results of operations
Our business depends upon the continued efforts, abilities and expertise of our executives and other employees and the creative talent with whom we work. We compete for executives in highly specialized and evolving industries (including streaming) and our ability to attract, retain and engage such individuals may be impacted by our reputation, workplace culture, efforts with respect to DE&I and ESG matters, the compensation and benefits we provide, and our commitment to effectively managing executive succession. We also employ or contract with entertainment personalities with loyal audiences and produce films with highly regarded directors, producers, writers, actors and other creative talent in highly competitive markets. Our ability to attract and retain these individuals will similarly be impacted by our reputation, culture and efforts with respect to DE&I and ESG matters. These individuals are important to attracting viewers and the success of our programs, films and other content. There can be no assurance that these individuals will remain with us or will retain their current appeal, or that the costs associated with retaining them or new talent will be reasonable. If we fail to retain or attract new key employees or creative talent, our business, financial condition or results of operations could be adversely affected.
We and our business partners also engage the services of writers, directors, actors, musicians and other creative talent, production crew members, trade employees, professional athletes and others who are subject to collective bargaining agreements. Any labor disputes, including lockouts, strikes or work stoppages, may disrupt our operations and cause delays in the production of our programming, which could increase our costs and have an adverse effect on our revenues, cash flows and/or operating income.
Risks Relating to our Ownership Structure
NAI, through its voting control of the Company, is in a position to control actions that require stockholder approval
NAI, through its direct and indirect ownership of our Class A Common Stock, has voting control of the Company. As of December 31, 2021, NAI directly or indirectly owned approximately 77.4% of our voting Class A Common Stock and approximately 9.7% of our Class A Common Stock and non-voting Class B Common Stock on a combined basis. NAI is controlled by the Sumner M. Redstone National Amusements Part B General Trust (the “General Trust”), which owns 80% of the voting interest of NAI and acts by majority vote of seven voting trustees (subject to certain exceptions), including with respect to the NAI shares held by the General Trust. Shari E. Redstone, Chairperson, CEO and President Chief Financial Officer sinceof NAI and non-executive Chair of our Board of Directors, is one of the seven voting trustees for the General Trust and is one of two voting trustees who are beneficiaries of the General Trust. No member of our management or other member of our Board of Directors is a trustee of the General Trust.
NAI is in a position to control the outcome of corporate actions that require, or may be accomplished by, stockholder approval, including amending our bylaws, the election or removal of directors and transactions involving a change of control. For example, our bylaws provide that:
•the affirmative vote of not less than a majority of the aggregate voting power of all outstanding shares of our capital stock then entitled to vote generally in an election of directors, voting together as a single class, is required for our stockholders to amend, alter, change, repeal or adopt any of our bylaws;
•any or all of our directors may be removed from office at any time prior to the expiration of his or her term of office, with or without cause, only by the affirmative vote of the holders of record of outstanding shares representing at least a majority of all the aggregate voting power of outstanding shares of our Common Stock then entitled to vote generally in the election of directors, voting together as a single class at a special meeting of our stockholders called expressly for that purpose; and
•in accordance with the General Corporation Law of the State of Delaware, our stockholders may act by written consent without a meeting if such stockholders hold the number of shares representing not less than the minimum number of votes that would be necessary to authorize or take such actions at a meeting at which all shares entitled to vote thereon were present and voted.
Accordingly, our stockholders who may have different interests are unable to affect the outcome of any such corporate actions for so long as NAI retains voting control.
Sales of NAI’s shares of our Common Stock, some of which are pledged to lenders, could adversely affect the stock price
Based on information received from NAI, NAI has pledged to its lenders a portion of shares of our Class A Common Stock and our Class B Common Stock owned directly or indirectly by NAI. As of December 31, 2021, the aggregate number of shares of our Common Stock pledged by NAI to its lenders represented approximately 3.9% of the total outstanding shares of our Class A Common Stock and our Class B Common Stock on a combined basis. If there is a default on NAI’s debt obligations and the lenders foreclose on the pledged shares, the lenders may not effect a transfer, sale or disposition of any pledged shares of our Class A Common Stock unless NAI and its affiliates beneficially own 50% or less of our Class A Common Stock then outstanding or such shares have first been converted into our Class B Common Stock. A sale of the pledged shares could adversely affect our Common Stock share price. In addition, there can be no assurance that at some future time NAI will not sell or pledge additional shares of our Common Stock, which could adversely affect our Common Stock share price.
| | | | | |
| Item 1B. | Unresolved Staff Comments. |
Not applicable.
Our significant physical properties are described below. In addition, we own and lease office, studio, production and warehouse space and broadcast, antenna and satellite transmission facilities throughout the U.S. and around the world for our businesses. We consider our properties adequate for our present needs.
•Our global headquarters is located at 1515 Broadway, New York, New York, where we lease approximately 1.6 million square feet for executive, administrative and business offices, and production space for the Company and certain of our operating divisions. The lease runs through 2031, with two renewal options based on market rates at the time of renewal for ten years each.
•We occupy approximately 284,000 square feet of office and administrative space at 51 West 52nd Street, New York, New York under a lease expiring in 2023 for the majority of the space and in 2024 for the remainder of the space.
TV Entertainment
•We own the CBS Broadcast Center complex located on approximately 3.7 acres at 524 West 57th Street, New York, New York, which consists of approximately 860,000 square feet of office, studio and production space.
•At the Radford Studio Lot in Studio City, California (formerly known as the CBS Studio Center), we occupy (i) approximately 125,000 square feet of office, studio and production space for the operations of KCAL-TV, KCBS-TV and the CBS News Bureau under a lease expiring in 2031 and (ii) approximately 150,000 square feet of office and administrative space under a lease expiring in December 2022.
•We occupy approximately 330,000 square feet of office and production space at 555 West 57th Street, New York, New York, under a lease expiring in 2023.
Cable Networks
•We occupy approximately 281,000 square feet of office and production space at 345 Hudson Street, New York, New York, under a lease expiring in October 2018. Prior to that, she served as Executive Vice President, Chief Financial Officer2022.
•We occupy approximately 210,000 square feet of office and Strategy for production space at 1575 North Gower Street, Los Angeles, California, under a lease expiring in 2028.
•We own and occupy our Cloud Control Center and Network Operations Center, both located in Hauppauge, New York, containing, in the aggregate, approximately 170,000 square feet of floor space on approximately 22 acres of land.
•The Nickelodeon Animation Studio at 203-231 West Olive Avenue, Burbank, California contains approximately 180,000 square feet of studio and office space, leased under two leases expiring in 2036.
•Nickelodeon’s Live Action Studio contains approximately 108,000 square feet of stage and office space at Burbank Studios, 3000 West Alameda Avenue, Burbank, California, under a lease expiring in 2024.
•Showtime Networks Inc. (“Showtime”) beginningleases approximately 253,000 square feet of office and production space at 1633 Broadway, New York, New York, under a lease expiring in 2013. Previously, Ms. Spade served as Senior Vice President, Affiliate Finance2026 and Business Operationsleases approximately 56,000 square feet of office space at The Lot, 1041 N. Formosa Avenue, West Hollywood, California, under a lease expiring in 2028.
•Telefe occupies approximately 375,000 square feet at its owned and leased facilities in Buenos Aires, Argentina, for Showtime beginningthe purposes of office, studio and production spaces, transmission facilities and other ancillary uses.
•Chilevisión occupies approximately 187,098 square feet of leased space in 2003. Prior to joining ShowtimeSantiago, Chile, for the purposes of offices, technical areas, warehouses and other ancillary uses.
•VCNI occupies approximately 140,000 square feet of office, studio and production space at its owned and leased Hawley Crescent facilities in 1997, Ms. Spade was an Audit Manager with PricewaterhouseCoopers LLPLondon.
•Network 10 leases approximately 118,000 square feet of office, studio, production and storage space at 1 Saunders Street, Pyrmont, New South Wales, Australia, under a lease expiring in its Entertainment, Media and Communications practice.2033.
Filmed Entertainment
•Paramount owns the Paramount Pictures Studio lot situated at 5555 Melrose Avenue, Los Angeles, California, located on approximately 62 acres of land, and containing approximately 1.85 million square feet of floor space used for executive, administrative and business offices, sound stages, production facilities, theatres, equipment facilities and other ancillary uses.
| | | | | |
| Item 3. | Legal Proceedings. |
The information set forth under the caption “Legal Matters” in Note 20 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” is incorporated herein by reference.
| | | | | |
| Item 4. | Mine Safety Disclosures. |
Not applicable.
Part II
|
| | | | |
| Item 5. | Market for ViacomCBS Inc.’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities. |
Our voting Class A Common Stock and non-voting Class B Common Stock are listed and traded on theThe Nasdaq Stock Market LLC under the symbols “VIACA” and “VIAC”,“VIAC,” respectively.
We declared a quarterly cash dividend on our Class A and Class B Common Stock during each of the quarters of 2021 and 2020. During each of the years ended December 31, 2021 and 2020, we declared total per share dividends of $.96, resulting in total annual dividends of $625 million and $601 million, respectively. On December 19, 2019, we declared a quarterly cash dividend of $.24 per share on our Class A and Class B Common Stock, resulting in total dividends of $150 million, which were paid on January 10, 2020.million. Prior to the Merger,Viacom Inc. (“Viacom”) merging with and into CBS Corporation (“CBS”) (the “Merger”), Viacom and CBS each declared a quarterly cash dividend during each of the first three quarters of 2019 and during each of2019. During the fourfirst three quarters of 2018 and 2017. During 2019, CBS declared total per share dividends of $.54, resulting in total dividends of $205 million. For eachDuring the first three quarters of the years ended December 31, 2018 and 2017, CBS declared total per share dividends of $.72, resulting in total annual dividends of $274 million and $289 million, respectively. During 2019, Viacom declared total per share dividends of $.60, resulting in total dividends of $245 million. For
During each of the yearsthird and fourth quarters of 2021, we declared quarterly cash dividends of $1.4375 per share on our 5.75% Series A Mandatory Convertible Preferred Stock (“Mandatory Convertible Preferred Stock”). During the second quarter of 2021, we declared a cash dividend of $1.5493 per share on our Mandatory Convertible Preferred Stock, representing a dividend period from March 26, 2021 through July 1, 2021. Accordingly, we recorded dividends on the Mandatory Convertible Preferred Stock of $44.2 million during the year ended December 31, 2018 and 2017, Viacom declared total per share dividends of $.80, resulting in total annual dividends of $325 million and $323 million, respectively.2021.
On February 12, 2020,10, 2022, we announceddeclared a quarterly cash dividend of $.24 per share on our Class A and Class B Common Stock, payable on April 1, 2020.2022. We currently expect to continue to pay a regular cash dividend to our common stockholders. At the same time, we also declared a quarterly cash dividend of $1.4375 per share on our Mandatory Convertible Preferred Stock, payable on April 1, 2022.
In November 2010, we announced that our Board of Directors approved a program to repurchase $1.5 billion of our common stock in open market purchases or other types of transactions (including accelerated stock repurchases or privately negotiated transactions). Since then, various increases totaling $16.4 billion have been approved and announced, including most recently, an increase to the share repurchase program to a total availability of $6.0 billion on July 28, 2016. Below is a summaryDuring the fourth quarter of 2021, we did not purchase any shares of our purchasescommon stock. Our publicly announced share repurchase program had remaining authorization of our Class B Common Stock during the three months ended$2.36 billion at December 31, 2019.2021.
|
| | | | | | | | | | | | | | | | | | | |
| (in millions, except per share amounts) | Total Number of Shares Purchased | | Average Price Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Programs | | Remaining Authorization |
| October 1, 2019 - October 31, 2019 | | — |
| | | $ | — |
| | | — |
| | | | $ | 2,457 |
| |
| November 1, 2019 - November 30, 2019 | | — |
| | | $ | — |
| | | — |
| | | | $ | 2,457 |
| |
| December 1, 2019 - December 31, 2019 | | 1.2 |
| | | $ | 40.78 |
| | | 1.2 |
| | | | $ | 2,408 |
| |
| Total | | 1.2 |
| | | | | | 1.2 |
| | | | $ | 2,408 |
| |
As of February 14, 2020,10, 2022, there were approximately 2,2272,007 record holders of our Class A Common Stock and approximately 31,78428,121 record holders of our Class B Common Stock.
Performance Graph
The following graph compares the cumulative total stockholder return of our Class A and Class B Common Stock with the cumulative total return on the companies listed in the Standard & Poor’s 500 Stock Index (“S&P 500”) and a Peerthe Standard & Poor’s 500 Media and Entertainment Industry Group of companies identified below.Index (“S&P 500 Media and Entertainment Index”).
On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”). At the effective time of the Merger, the combined company changed its name to ViacomCBS Inc. Accordingly, the performance graph also includes Viacom Class B Common Stock.
The performance graph assumes $100 invested on December 31, 20142016 in each of our Class A and Class B Common Stock, Viacom’s Class B Common Stock, the S&P 500, and the Peer Group identified below,S&P 500 Media and Entertainment Index, including reinvestment of dividends, through the calendar year ended December 31, 2019.2021.
Total Cumulative Stockholder Return
For Five-Year Period Ended December 31, 20192021
| | | | | | | | | | | | | | | | | | | | |
| December 31, | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
| Class A Common Stock | $100 | $93 | $69 | $72 | $63 | $57 |
| Class B Common Stock | $100 | $94 | $70 | $69 | $64 | $53 |
| S&P 500 | $100 | $122 | $116 | $153 | $181 | $233 |
| S&P 500 Media & Entertainment Index | $100 | $107 | $95 | $127 | $167 | $211 |
|
| | | | | | |
| December 31, | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
| Class A Common Stock | $100 | $94 | $118 | $110 | $82 | $85 |
| Class B Common Stock | $100 | $86 | $118 | $110 | $83 | $81 |
Viacom Class B Common Stock (a) | $100 | $56 | $50 | $45 | $38 | $38 |
| S&P 500 | $100 | $101 | $114 | $138 | $132 | $174 |
Peer Group (b) | $100 | $98 | $99 | $108 | $123 | $154 |
(a) At the effective time of the Merger, each share of Viacom Class B Common Stock was converted into 0.59625 shares of ViacomCBS Class B Common Stock. Accordingly, the performance graph reflects the performance of Viacom Class B Common Stock through December 4, 2019, the date of the Merger, and the performance of ViacomCBS Class B Common Stock from December 4, 2019 through December 31, 2019.
(b) The Peer Group consists of the following companies: The Walt Disney Company (“Disney”), Fox Corporation and Discovery Inc. In March 2019, Disney acquired Twenty-First Century Fox (“21st Century Fox”) following the spin-off of Fox Corporation from 21st Century Fox. The performance graph reflects the performance of 21st Century Fox stock through the date of such transactions.
|
| | | | |
Item 6. | Selected Financial Data. |
VIACOMCBS INC. AND SUBSIDIARIES
(In millions, except per share amounts)
|
| | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, (a) |
| | 2019 (c) | | 2018 (d) | | 2017 (e) (h) | | 2016 (f) (h) | | 2015 (g) (h) |
| Revenues | $ | 27,812 |
| | $ | 27,250 |
| | $ | 26,535 |
| | $ | 25,685 |
| | $ | 25,559 |
|
| Operating income | $ | 4,273 |
| | $ | 5,204 |
| | $ | 5,341 |
| | $ | 5,297 |
| | $ | 5,708 |
|
Net earnings from continuing operations (ViacomCBS and noncontrolling interests) | $ | 3,301 |
| | $ | 3,460 |
| | $ | 3,320 |
| | $ | 2,970 |
| | $ | 3,506 |
|
Net earnings from continuing operations attributable to ViacomCBS | $ | 3,270 |
| | $ | 3,423 |
| | $ | 3,268 |
| | $ | 2,935 |
| | $ | 3,427 |
|
| | | | | | | | | | |
Net earnings from continuing operations per common share attributable to ViacomCBS | | | | | | | | | |
| Basic | $ | 5.32 |
| | $ | 5.55 |
| | $ | 5.11 |
| | $ | 4.32 |
| | $ | 4.75 |
|
| Diluted | $ | 5.30 |
| | $ | 5.51 |
| | $ | 5.05 |
| | $ | 4.28 |
| | $ | 4.71 |
|
| | | | | | | | | | |
| Dividends per common share: | | | | | | | | | |
| ViacomCBS Inc. (formerly CBS Corporation) | $ | .78 |
| | $ | .72 |
| | $ | .72 |
| | $ | .66 |
| | $ | .60 |
|
Viacom Inc. (b) | $ | .60 |
| | $ | .80 |
| | $ | .80 |
| | $ | 1.20 |
| | $ | 1.53 |
|
| | | | | | | | | | |
| At Year End: | | | | | | | | | |
| Total assets | $ | 49,519 |
| | $ | 44,497 |
| | $ | 43,503 |
| | $ | 47,383 |
| | $ | 45,922 |
|
| Total debt | $ | 18,719 |
| | $ | 19,113 |
| | $ | 20,351 |
| | $ | 21,675 |
| | $ | 21,015 |
|
| Total ViacomCBS stockholders’ equity | $ | 13,207 |
| | $ | 10,449 |
| | $ | 8,519 |
| | $ | 8,235 |
| | $ | 9,311 |
|
| Total equity | $ | 13,289 |
| | $ | 10,503 |
| | $ | 8,600 |
| | $ | 8,286 |
| | $ | 9,369 |
|
(a) On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”). At the effective time of the Merger, the combined company changed its name to ViacomCBS Inc. The Merger has been accounted for as a transaction between entities under common control and therefore, the net assets of Viacom were combined with those of CBS at their historical carrying amounts and the companies have been presented on a combined basis for all periods presented.
(b) Amounts reflect the historical dividends of Viacom Inc. and have not been adjusted for the conversion to ViacomCBS shares in connection with the Merger.
(c) For 2019, the following items affected the comparability of results: costs for restructuring and other corporate matters, including costs related to the Merger, of $775 million ($641 million, net of tax); programming charges of $589 million ($447 million, net of tax); a gain on sale of assets of $549 million($386 million, net of tax); and discrete tax benefits of $827 million.
(d) For 2018, the following items affected the comparability of results: costs for restructuring and other corporate matters of $490 million ($374 million, net of tax); programming charges of $162 million ($123 million, net of tax); and discrete tax benefits of $297 million.
(e) For 2017, the following items affected the comparability of results: restructuring charges of $258 million ($163 million, net of tax); programming charges of $144 million ($94 million, net of tax); a gain on sale of assets of $146 million ($130 million, net of tax); a gain on the sale of EPIX of $285 million ($189 million, net of tax); a pension settlement charge of $352 million ($237 million, net of tax); and discrete tax benefits of $321 million.
(f) Results for 2016 included costs for restructuring and other corporate matters of $286 million ($182 million, net of tax) and a pension settlement charge of $211 million ($130 million, net of tax).
(g) Results for 2015 included programming charges of $578 million ($383 million, net of tax); costs for restructuring and other corporate matters of $287 million ($186 million, net of tax); and a gain on sale of assets of $139 million ($131 million, net of tax).
(h) On November 16, 2017, we completed the disposition of CBS Radio Inc. (“CBS Radio”) through a tax-free split-off. CBS Radio has been presented as a discontinued operation in the consolidated financial statements for all periods presented.
|
| |
| Item 7. | Management’s Discussion and Analysis of Results of Operations and Financial Condition.
(Tabular dollars in millions, except per share amounts)
|
Management’s discussion and analysis of the results of operations and financial condition of ViacomCBS Inc. should be read in conjunction with the consolidated financial statements and related notes. References in this document to “ViacomCBS,” the “Company,” “we,” “us” and “our” refer to ViacomCBS Inc. and its consolidated subsidiaries, unless the context otherwise requires. Effective February 16, 2022, we are changing our name to Paramount Global.
Significant components of management’s discussion and analysis of results of operations and financial condition include:
| |
• | Overview—The overview section provides a summary•Overview—Summary of ViacomCBS and our business and operational highlights. |
| |
• | Consolidated Results of Operations—The consolidated results of operations section provides an analysis of our results on a consolidated basis for the three years ended December 31, 2019.
|
| |
• | Segment Results of Operations—The segment results of operations section provides an analysis of our results on a reportable segment basis for the three years ended December 31, 2019.
|
| |
• | Liquidity and Capital Resources—The liquidity and capital resources section provides a discussion of our cash flows for the three years ended December 31, 2019, and of our outstanding debt, commitments and contingencies existing as of December 31, 2019.
|
| |
• | Critical Accounting Policies—The critical accounting policies section provides detail with respect to accounting policies that are considered by management to require significant judgment and use of estimates and that could have a significant impact on our financial statements.
|
| |
• | Legal Matters—The legal matters section discusses our legal matters and other litigation to which we are a party.
|
| |
• | Market Risk—The market risk section discusses how we manage exposure to market and interest rate risks.
|
Overview•Consolidated Results of Operations—Analysis of our results on a consolidated basis for the years ended December 31, 2021 and 2020, including a comparison of 2021 to 2020. Analysis of our results on a consolidated basis for the year ended December 31, 2019, including a comparison of 2020 to 2019, is included in our Annual Report on Form 10-K for the year ended December 31, 2020.
ViacomCBS•Segment Results of Operations—Analysis of our results on a reportable segment basis for the years ended December 31, 2021 and 2020, including a comparison of 2021 to 2020. Analysis of our results on a reportable segment basis for the year ended December 31, 2019, including a comparison of 2020 to 2019, is included in our Annual Report on Form 10-K for the year ended December 31, 2020.
•Liquidity and Capital Resources—Discussions of our cash flows, including sources and uses of cash, for the years ended December 31, 2021 and 2020, and our outstanding debt. Discussion of our cash flows for the year ended December 31, 2019 is included in our Annual Report on Form 10-K for the year ended December 31, 2020.
•Critical Accounting Policies—Detail with respect to accounting policies that are considered by management to require significant judgment and use of estimates and that could have a leading global mediasignificant impact on our financial statements.
•Legal Matters—Discussion of legal matters to which we are involved.
•Market Risk—Discussion of how we manage exposure to market and entertainment company that creates content and experiences for audiences worldwide.interest rate risks.
Merger with Viacom Inc.
On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”). At the effective time of the Merger (the “Effective Time”), the combined company changed its name to ViacomCBS Inc. (“ViacomCBS”).
At the Effective Time, (1) each share of Viacom Class A Common Stock issued and outstanding immediately prior to the Effective Time, other than shares held directly by Viacom as treasury shares or held by CBS, was converted automatically into 0.59625 shares of ViacomCBS Class A Common Stock, and (2) each share of Viacom Class B Common Stock issued and outstanding immediately prior to the Effective Time, other than shares held directly by Viacom as treasury shares or held by CBS, was converted automatically into 0.59625 shares of ViacomCBS Class B Common Stock (together with ViacomCBS Class A Common Stock, the “ViacomCBS Common Stock”). At the Effective Time, each share of CBS Class A Common Stock and each share of CBS Class B Common Stock (together with CBS Class A Common Stock, the “CBS Common Stock”) issued and outstanding immediately prior to the Effective Time, remained an issued and outstanding share of ViacomCBS Class A Common Stock and ViacomCBS Class B Common Stock, respectively, and was not affected by the Merger.
Following the Merger, the CBS Common Stock was delisted from the New York Stock Exchange and the Viacom Common Stock ceased trading on the Nasdaq Stock Market LLC (“Nasdaq”). On December 5, 2019, ViacomCBS
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Class A Common Stock and ViacomCBS Class B Common Stock were listed on Nasdaq and began trading under the ticker symbols VIACA and VIAC, respectively.
The Merger is being accounted for as a transaction between entities under common control as National Amusements, Inc. (“NAI”) was the controlling stockholder of each of CBS and Viacom (and remains the controlling stockholder of ViacomCBS). The net assets of Viacom have been combined with those of CBS at their historical carrying amounts and the companies have been presented on a combined basis for all periods presented.
Operational Highlights 20192021 vs. 20182020
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated results of operations | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
| GAAP: | | | | | | | | |
| Revenues | $ | 28,586 | | | $ | 25,285 | | | $ | 3,301 | | | 13 | % | |
| Operating income | $ | 6,297 | | | $ | 4,139 | | | $ | 2,158 | | | 52 | % | |
Net earnings from continuing operations attributable to ViacomCBS | $ | 4,381 | | | $ | 2,305 | | | $ | 2,076 | | | 90 | % | |
Diluted EPS from continuing operations attributable to ViacomCBS | $ | 6.69 | | | $ | 3.73 | | | $ | 2.96 | | | 79 | % | |
| | | | | | | | |
Non-GAAP: (a) | | | | | | | | |
| Adjusted OIBDA | $ | 4,444 | | | $ | 5,132 | | | $ | (688) | | | (13) | % | |
Adjusted net earnings from continuing operations attributable to ViacomCBS | $ | 2,292 | | | $ | 2,595 | | | $ | (303) | | | (12) | % | |
Adjusted diluted EPS from continuing operations attributable to ViacomCBS | $ | 3.48 | | | $ | 4.20 | | | $ | (.72) | | | (17) | % | |
(a) Certain items identified as affecting comparability are excluded in non-GAAP results. See “Reconciliation of Non-GAAP Measures
|
| | | | | | | | | | | | | | | |
| Consolidated results of operations | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | 2018 | | $ | | % | |
| GAAP: | | | | | | | | |
| Revenues | $ | 27,812 |
| | $ | 27,250 |
| | $ | 562 |
| | 2 | % | |
| Operating income | $ | 4,273 |
| | $ | 5,204 |
| | $ | (931 | ) | | (18 | )% | |
Net earnings from continuing operations attributable to ViacomCBS | $ | 3,270 |
| | $ | 3,423 |
| | $ | (153 | ) |
| (4 | )% | |
Diluted EPS from continuing operations attributable to ViacomCBS | $ | 5.30 |
| | $ | 5.51 |
| | $ | (.21 | ) | | (4 | )% | |
| Net cash flow provided by operating activities | $ | 1,230 |
| | $ | 3,464 |
| | $ | (2,234 | ) | | (64 | )% | |
| | | | | | | | | |
Non-GAAP: (a) | | | | | | | | |
| Adjusted OIBDA | $ | 5,531 |
| | $ | 6,289 |
| | $ | (758 | ) | | (12 | )% | |
Adjusted net earnings from continuing operations attributable to ViacomCBS | $ | 3,090 |
| | $ | 3,646 |
| | $ | (556 | ) | | (15 | )% | |
Adjusted diluted EPS from continuing operations attributable to ViacomCBS | $ | 5.01 |
| | $ | 5.87 |
| | $ | (.86 | ) | | (15 | )% | |
| Free cash flow | $ | 877 |
| | $ | 3,111 |
| | $ | (2,234 | ) | | (72 | )% | |
(a) See pages II-6 - II-8” for details of these items and II-33 for reconciliations of adjustednon-GAAP results to the most directly comparable financial measures in accordance with accounting principles generally accepted in the United States (“GAAP”).
For 2019,2021, revenues increased 2%13% to $27.81$28.59 billion from $27.25$25.29 billion in 2018, driven2020, reflecting growth in all revenue streams. The increase was led by 64% higher streaming revenues, with growth across our streaming services, and an 11% increase in advertising revenues. The advertising revenue growth is principally the result of CBS’ broadcastbroadcasts of Super Bowl LIII in 2019, growth from our streaming services, which include CBS All Access, Pluto TVLV and the Showtime streaming subscription offering (“Showtime OTT”), and higher content licensing revenues driven by the production of programming for third parties. These increases were partially offset by lower theatrical revenues, primarily due to the difficult comparison against Mission: Impossible - FalloutNCAA Division I Men’s Basketball Championship (the “NCAA Tournament”) games, which contributed 9-percentage points of the increase and for which there were no comparable broadcasts on CBS in 2018,2020. We have the rights to broadcast the Super Bowl on a rotational basis with other networks, and lower political advertising salesthe 2020 NCAA Tournament was cancelled as a result of the midterm electionscoronavirus pandemic (“COVID-19”). Affiliate revenues grew 5%, driven by expanded distribution for our domestic cable networks and growth in 2018. Foreign exchange rate changes hadfees received from television stations affiliated with the CBS Television Network (“reverse compensation”). Licensing and other revenues also increased 5%, primarily reflecting a 1-percentage point unfavorablehigher volume of licensing, including from the timing of program availabilities, partially offset by the benefit to the prior year from the licensing of the domestic streaming rights to South Park. Theatrical revenues were up 34%, as a result of a higher number of theatrical releases in 2021, reflecting the impact on 2020 from the revenue comparison.closure or reduced capacity of movie theaters in response to COVID-19.
Operating income decreased 18%for 2021 increased 52% to $4.27$6.30 billion from $5.20$4.14 billion in 2018.2020. This comparison was impacted by items identified as affecting comparability, including gains on sales in 2021 of $2.34 billion, principally reflecting gains on real estate sales of $2.23 billion; a gain on sale of $214 million in 2020; restructuring charges in each period; and in 2020, costs related to the Merger andfor other corporate matters, programming charges and gains on the sale of assets.impairment charges. Adjusted operating income before depreciation and amortization (“Adjusted OIBDA”)OIBDA decreased 12%13%, primarily reflectingas revenue growth was more than offset by higher costs, principally from an increased investment in content, including a higher numberour streaming services, the timing of series produced for exhibition on our propertiesproduction as well as for third parties. Net earnings from continuing operations attributable to ViacomCBS for 2019 were $3.27 billion, or $5.30 per diluted share, compared with $3.42 billion, or $5.51 per diluted share, for 2018. This comparisonthe prior year was impacted by shutdowns as a result of COVID-19, and the aforementioned items as well as other items identified as affecting comparability set forthbroadcast of noncomparable sporting events in the section “2021.
Reconciliation of Non-GAAP Measures” below. Adjusted net earnings from continuing operations attributable to ViacomCBS decreased 15% and adjusted diluted earnings per share (“EPS”) from continuing operations decreased 15%to $5.01 for 2019, driven by the lower Adjusted OIBDA. Adjusted OIBDA, adjusted
For 2021, net earnings from continuing operations attributable to ViacomCBS and adjusted diluted EPS from continuing operations are non-GAAP financial measures. See pages II-6increased 90% and 79%, respectively, from 2020. These comparisons were impacted by items identified as affecting comparability, including the aforementioned items impacting operating income, and in each period, a loss on extinguishment of debt, gains from investments, and discrete tax items. Adjusted net earnings
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
- II-8 for details
Stock Offerings
On March 26, 2021, we completed offerings of the items excluded from financial results, and reconciliations20 million shares of adjusted resultsour Class B Common Stock at a price to the most directly comparable financial measures in accordance with GAAP.
We generated operating cash flowpublic of $1.23 billion in 2019 compared with $3.46 billion in 2018. Free cash flow was $877$85 per share and 10 million for 2019 compared with $3.11 billion for 2018. These decreases primarily reflected the aforementioned increased investment in content, higher payments for income taxes and paymentsshares of $132 million in 2019 for costs related5.75% Series A Mandatory Convertible Preferred Stock (“Mandatory Convertible Preferred Stock”) at a price to the Merger. In addition, operating cash flowpublic and free cash flow included paymentsliquidation preference of $100 per share. The net proceeds from the Class B Common Stock offering and the Mandatory Convertible Preferred Stock offering were approximately $1.67 billion and $983 million, respectively, in each case after deducting underwriting discounts, commissions and estimated offering expenses. We have used and intend to continue to use the net proceeds for restructuring activities of $234 milliongeneral corporate purposes, including investments in 2019 and $219 million in 2018. Free cash flow is a non-GAAP financial measure. See “streaming.
Free Cash Flow” on pages II-33 for a reconciliation of net cash flow provided by (used for) operating activities, the most directly comparable financial measure in accordance with GAAP, to free cash flow.
Reconciliation of Non-GAAP Measures
Results for the years ended December 31, 2019, 20182021 and 20172020 included certain items identified as affecting comparability. Adjusted OIBDA, adjusted earnings from continuing operations before income taxes, adjusted provision for income taxes, adjusted net earnings from continuing operations attributable to ViacomCBS, and adjusted diluted EPS from continuing operations (together, the “adjusted measures”) exclude the impact of these items and are measures of performance not calculated in accordance with GAAP. We use these measures to, among other things, evaluate our operating performance. These measures are among the primary measures used by management for planning and forecasting of future periods, and they are important indicators of our operational strength and business performance. In addition, we use Adjusted OIBDA to, among other things, value prospective acquisitions. We believe these measures are relevant and useful for investors because they allow investors to view performance in a manner similar to the method used by our management; provide a clearer perspective on our underlying performance; and make it easier for investors, analysts and peers to compare our operating performance to other companies in our industry and to compare our year-over-year results.
Because the adjusted measures are measures of performance not calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, operating income, earnings from continuing operations before income taxes, benefit (provision)provision for income taxes, net earnings from continuing operations attributable to ViacomCBS or diluted EPS from continuing operations, as applicable, as indicators of operating performance. These measures, as we calculate them, may not be comparable to similarly titled measures employed by other companies.
The following tables reconcile the adjusted measures to their most directly comparable financial measures in accordance with GAAP.
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| Operating Income (GAAP) | $ | 4,273 |
| | $ | 5,204 |
| | $ | 5,341 |
|
Depreciation and amortization (a) | 443 |
| | 433 |
| | 443 |
|
Restructuring and other corporate matters (b) | 775 |
| | 490 |
| | 258 |
|
Programming charges (b) | 589 |
| | 162 |
| | 144 |
|
Gain on sale of assets (b) | (549 | ) | | — |
| | (146 | ) |
| Adjusted OIBDA (Non-GAAP) | $ | 5,531 |
| | $ | 6,289 |
| | $ | 6,040 |
|
(a) 2019 includes an impairment charge of $20 million to reduce the carrying value of intangible assets.
(b) See notes on the following tables for additional information on items affecting comparability.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
| | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | |
| Operating income (GAAP) | $ | 6,297 | | | $ | 4,139 | | | |
Depreciation and amortization (a) | 390 | | | 430 | | | |
Restructuring and other corporate matters (b) | 100 | | | 618 | | | |
Programming charges (b) | — | | | 159 | | | |
Net gain on sales (b) | (2,343) | | | (214) | | | |
| Adjusted OIBDA (Non-GAAP) | $ | 4,444 | | | $ | 5,132 | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2019 |
| | Earnings from Continuing Operations Before Income Taxes | | Benefit (Provision) for Income Taxes | | Net Earnings from Continuing Operations Attributable to ViacomCBS | | Diluted EPS from Continuing Operations |
| Reported (GAAP) | | $ | 3,345 |
| | | | $ | 9 |
| | | | $ | 3,270 |
| | | | $ | 5.30 |
| |
| Items affecting comparability: | | | | | | | | | | | | | | | |
Restructuring and other corporate matters (a) | | 775 |
| | | | (134 | ) | | | | 641 |
| | | | 1.04 |
| |
Impairment charge (b) | | 20 |
| | | | (6 | ) | | | | 14 |
| | | | .02 |
| |
Programming charges (c) | | 589 |
| | | | (142 | ) | | | | 447 |
| | | | .73 |
| |
Gain on sale of assets (d) | | (549 | ) | | | | 163 |
| | | | (386 | ) | | | | (.63 | ) | |
Net gain from investments (e) | | (85 | ) | | | | 16 |
| | | | (69 | ) | | | | (.11 | ) | |
Discrete tax items (f) | | — |
| | | | (827 | ) | | | | (827 | ) | | | | (1.34 | ) | |
| Adjusted (Non-GAAP) | | $ | 4,095 |
| | | | $ | (921 | ) | | | | $ | 3,090 |
| | | | $ | 5.01 |
| |
(b) See notes on the following tables for additional information on items affecting comparability.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 |
| Earnings from Continuing Operations Before Income Taxes | | Provision for Income Taxes | | Net Earnings from Continuing Operations Attributable to ViacomCBS | | Diluted EPS from Continuing Operations |
| Reported (GAAP) | | $ | 5,206 | | | | | $ | (646) | | | | | $ | 4,381 | | | | | $ | 6.69 | | |
| Items affecting comparability: | | | | | | | | | | | | | | | |
Restructuring and other corporate matters (a) | | 100 | | | | | (25) | | | | | 75 | | | | | .11 | | |
Net gain on sales (b) | | (2,343) | | | | | 592 | | | | | (1,751) | | | | | (2.67) | | |
Gains from investments (c) | | (47) | | | | | 11 | | | | | (36) | | | | | (.05) | | |
| Loss on extinguishment of debt | | 128 | | | | | (30) | | | | | 98 | | | | | .15 | | |
Pension settlement charge (d) | | 10 | | | | | (2) | | | | | 8 | | | | | .01 | | |
Discrete tax items (e) | | — | | | | | (517) | | | | | (517) | | | | | (.79) | | |
Impairment of equity-method investment,
net of tax | | — | | | | | — | | | | | 34 | | | | | .05 | | |
Impact of antidilution of Mandatory Convertible Preferred Stock (f) | | — | | | | | — | | | | | — | | | | | (.02) | | |
| Adjusted (Non-GAAP) | | $ | 3,054 | | | | | $ | (617) | | | | | $ | 2,292 | | | | | $ | 3.48 | | |
| | | | | | | | | | | | | | | |
(a) Reflects severance and exit costs relating to restructuring activities and costs incurred in connection with the Merger, legal proceedings involving the Company and other corporate matters.
(b) Reflects a charge to reduce the carrying value of our international broadcast licenses in Australia to their fair value.
(c) Programming charges principally reflect accelerated amortization associated with changes in management at certain of our businesses and the expected monetizationimpairment of certain programs, and decisions to cease airing, alter future airing patterns or not renew certain programs,lease assets in connection with management changes implementedcost transformation initiatives related to the Merger.
(b) Primarily reflects gains on the sales of CBS Studio Center, 51 West 52nd Street, an office tower that was formerly the headquarters of CBS (“51 West 52nd Street”), and a noncore trademark licensing operation.
(c) Primarily reflects a gain of $37 million on the sale of an investment and a gain of $9 million from an increase in the fair value of an investment that was sold during the third quarter of 2021.
(d) Reflects the accelerated recognition of a portion of the unamortized actuarial losses due to the volume of lump sum benefit payments in one of our pension plans.
(e) Primarily reflects a benefit of $260 million to remeasure our United Kingdom (“U.K.”) net deferred income tax asset as a result of the Merger.
(d) Reflectsenactment of an increase in the U.K. corporate income tax rate from 19% to 25% beginning April 1, 2023, a gain on the sale of the CBS Television City property and sound stage operation (“CBS Television City”).
(e) Reflects a gain on marketable securities of $113 million; gains of $22 million on the sale and acquisition of joint ventures; and an impairment charge of $50 million to write-down an investment to its fair value.
(f) Primarily reflects a deferred tax benefit of $768$229 million resulting from the transferrecognition of intangible assets between our subsidiaries in connectiona capital loss associated with a reorganizationchange in the tax entity classification of our international operations;a foreign subsidiary, as well as a net tax benefits of $44 million realizedbenefit in connection with the preparationsettlement of income tax audits.
(f) The weighted average number of common shares outstanding used in the calculation of reported diluted EPS from continuing operations were 655 million and in the calculation of adjusted diluted EPS from continuing operations were 646 million. These amounts differ because adjusted diluted EPS excludes the effect of the 2018 federal tax return, based on further clarity provided byassumed conversion of our Mandatory Convertible Preferred Stock into shares of common stock since the United States government on tax positions relating to federal tax legislation enactedimpact would have been antidilutive. As a result, in the calculation of adjusted diluted EPS, the weighted average number of diluted shares outstanding does not include the assumed issuance of shares upon conversion of preferred stock, and preferred stock dividends recorded during the year ended December 2017 (the “Tax Reform Act”); and a tax benefit31, 2021 of $39$44 million triggered by the bankruptcy of an investee.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
| | | | Year Ended December 31, 2018 | | Year Ended December 31, 2020 |
| | Earnings from Continuing Operations Before Income Taxes | | Provision for Income Taxes | | Net Earnings from Continuing Operations Attributable to ViacomCBS | | Diluted EPS from Continuing Operations | | Earnings from Continuing Operations Before Income Taxes | | Provision for Income Taxes | | Net Earnings from Continuing Operations Attributable to ViacomCBS | | Diluted EPS from Continuing Operations |
| Reported (GAAP) | | $ | 4,124 |
| | $ | (617 | ) | | $ | 3,423 |
| | $ | 5.51 |
| | Reported (GAAP) | | $ | 3,147 | | | $ | (535) | | | $ | 2,305 | | | $ | 3.73 | | |
| Items affecting comparability: | | | | | | | | | | Items affecting comparability: | |
Restructuring and other corporate matters (a) | | 490 |
| | (116 | ) | | 374 |
| | .60 |
| | Restructuring and other corporate matters (a) | | 618 | | | (133) | | | 485 | | | .79 | | |
Programming charges (b) | | 162 |
| | (39 | ) | | 123 |
| | .20 |
| | |
| Gain on early extinguishment of debt | | (18 | ) | | 4 |
| | (14 | ) | | (.02 | ) | | |
Net loss from investments (c) | | 53 |
| | (16 | ) | | 37 |
| | .06 |
| | |
Discrete tax items (d) | | — |
| | (297 | ) | | (297 | ) | | (.48 | ) | | |
Impairment charge (b) | | Impairment charge (b) | | 25 | | | (6) | | | 19 | | | .03 | | |
Depreciation of abandoned technology (c) | | Depreciation of abandoned technology (c) | | 12 | | | (3) | | | 9 | | | .01 | | |
Programming charges (d) | | Programming charges (d) | | 159 | | | (39) | | | 120 | | | .20 | | |
Gain on sales (e) | | Gain on sales (e) | | (214) | | | 31 | | | (183) | | | (.30) | | |
Net gains from investments (f) | | Net gains from investments (f) | | (206) | | | 50 | | | (156) | | | (.25) | | |
| Loss on extinguishment of debt | | Loss on extinguishment of debt | | 126 | | | (29) | | | 97 | | | .16 | | |
Discrete tax items (g) | | Discrete tax items (g) | | — | | | (110) | | | (110) | | | (.18) | | |
Impairment of equity-method investment,
net of tax | | Impairment of equity-method investment,
net of tax | | — | | | — | | | 9 | | | .01 | | |
| Adjusted (Non-GAAP) | | $ | 4,811 |
| | $ | (1,081 | ) | | $ | 3,646 |
| | $ | 5.87 |
| | Adjusted (Non-GAAP) | | $ | 3,667 | | | $ | (774) | | | $ | 2,595 | | | $ | 4.20 | | |
|
(a) Primarily reflectsReflects severance, and exit costs relating to restructuring activities as well as professional feesand other costs related to legal proceedings, cost transformation initiatives, investigations at our Companythe Merger and the evaluation of potential merger activity.a charge to write down property and equipment that was classified as held for sale.
(b) Reflects programming charges resulting from changesa charge to our programming strategy, including at CBS Films and our Cable Networks segment,reduce the carrying values of FCC licenses in two markets to their fair values.
(c) Reflects accelerated depreciation for technology that was abandoned in connection with management changes.synergy plans related to the Merger.
(c)(d) Primarily related to the abandonment of certain incomplete programs resulting from production shutdowns related to COVID-19.
(e) Reflects a loss on marketable securities of $23 million; an impairment charge of $46 million to write-down an investment to its fair value; and a gain of $16 million on the sale of a 1% equity interestCNET Media Group (“CMG”).
(f) Primarily reflects an increase in Viacom18 tothe value of our joint venture partner.investment in fuboTV, Inc. (“fuboTV”), which was sold in the fourth quarter of 2020.
(d)(g) Primarily reflects a net discrete tax benefit of $80 million related tofrom the Tax Reform Act and other tax law changes; a net tax benefit of $71 million relating to a tax accounting method change granted by the Internal Revenue Service (“IRS”); and the reversal of a valuation allowance of $140 million relating to capital loss carryforwards that were utilized in connection with the sale of CBS Television City in 2019.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2017 |
| | Earnings from Continuing Operations Before Income Taxes | | Provision for Income Taxes | | Net Earnings from Continuing Operations Attributable to ViacomCBS | | Diluted EPS from Continuing Operations |
| Reported (GAAP) | | $ | 4,120 |
| | | | $ | (804 | ) | | | | $ | 3,268 |
| | | | $ | 5.05 |
| |
| Items affecting comparability: | | | | | | | | | | | | | | | |
| Restructuring charges | | 258 |
| | | | (95 | ) | | | | 163 |
| | | | .25 |
| |
Programming charges (a) | | 144 |
| | | | (50 | ) | | | | 94 |
| | | | .14 |
| |
Gain on sale of assets (b) | | (146 | ) | | | | 16 |
| | | | (130 | ) | | | | (.20 | ) | |
| Loss on early extinguishment of debt | | 38 |
| | | | (17 | ) | | | | 21 |
| | | | .03 |
| |
| Gain on sale of EPIX | | (285 | ) | | | | 96 |
| | | | (189 | ) | | | | (.29 | ) | |
| Pension settlement charge | | 352 |
| | | | (115 | ) | | | | 237 |
| | | | .37 |
| |
Impairment of investments (c) | | 18 |
| | | | (7 | ) | | | | 11 |
| | | | .02 |
| |
Discrete tax items (d) | | — |
| | | | (321 | ) | | | | (321 | ) | | | | (.50 | ) | |
| Adjusted (Non-GAAP) | | $ | 4,499 |
| | | | $ | (1,297 | ) | | | | $ | 3,154 |
| | | | $ | 4.87 |
| |
(a) Reflects programming charges associated with the execution of a strategy for certainremeasurement of our flagship brands,U.K. net deferred income tax asset as a result of an increase in the U.K. corporate income tax rate from 17% to 19% enacted during the third quarter of 2020.
Consolidated Results of Operations - 2021 vs. 2020
Revenues
Beginning in the first quarter of 2021, we changed the categories we use to disaggregate revenues to include streaming revenues in order to align with management’s increased focus on this revenue stream. Streaming revenues are comprised of streaming advertising and streaming subscription revenues. Streaming advertising revenues are earned from advertisements on our pay and free streaming services, including Paramount+ and Pluto TV, and from digital video advertisements on our websites and in our video content on third-party platforms (“other digital video platforms”). Streaming subscription revenues include fees for our pay streaming services, including Paramount+, Showtime Networks’ premium subscription streaming service (“Showtime OTT”), BET+ and Noggin, as well as strategic initiatives at Paramount.
(b) Reflects a gain of $127 million, with $11 million attributablepremium subscriptions to the noncontrolling interest,access certain video content on the sale of broadcast spectrum in connection with the FCC’s broadcast spectrum auctionour websites. Accordingly, our advertising and a net gain of $19 million relatingaffiliate revenue categories exclude revenues earned by our streaming services and on other digital video platforms. The prior year has been reclassified to the disposition of property and equipment.
(c) Reflects the write-down of certain investmentsconform to their fair value.
(d) Primarily reflects a tax benefit of $279 million reflecting the recognition of foreign tax credits on the distribution of securities to the United States (“U.S”).
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenues by Type | | | % of Total | | | | % of Total | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | Revenues | | 2020 | | Revenues | | $ | | % | |
Advertising (a) | $ | 9,267 | | | | 32 | % | | | $ | 8,333 | | | | 33 | % | | | $ | 934 | | | 11 | % | |
Affiliate (b) | 8,394 | | | | 29 | | | | 8,023 | | | | 32 | | | | 371 | | | 5 | | |
| Streaming | 4,193 | | | | 15 | | | | 2,561 | | | | 10 | | | | 1,632 | | | 64 | | |
| Theatrical | 241 | | | | 1 | | | | 180 | | | | 1 | | | | 61 | | | 34 | | |
| Licensing and other | 6,491 | | | | 23 | | | | 6,188 | | | | 24 | | | | 303 | | | 5 | | |
| Total Revenues | $ | 28,586 | | | | 100 | % | | | $ | 25,285 | | | | 100 | % | | | $ | 3,301 | | | 13 | % | |
Consolidated Results of Operations—2019 vs. 2018(a) Excludes streaming advertising revenues.
Revenues
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenues by Type | | | % of Total | | | | % of Total | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | Revenues | | 2018 | | Revenues | | $ | | % | |
| Advertising | $ | 11,074 |
| | | 40 | % | | | $ | 10,841 |
| | | 40 | % | | | $ | 233 |
| | 2 | % | |
| Affiliate | 8,602 |
| | | 31 |
| | | 8,376 |
| | | 31 |
| | | 226 |
| | 3 |
| |
| Content licensing | 6,483 |
| | | 23 |
| | | 6,163 |
| | | 22 |
| | | 320 |
| | 5 |
| |
| Theatrical | 547 |
| | | 2 |
| | | 744 |
| | | 3 |
| | | (197 | ) | | (26 | ) | |
| Publishing | 814 |
| | | 3 |
| | | 825 |
| | | 3 |
| | | (11 | ) | | (1 | ) | |
| Other | 292 |
| | | 1 |
| | | 301 |
| | | 1 |
| | | (9 | ) | | (3 | ) | |
| Total Revenues | $ | 27,812 |
| | | 100 | % | | | $ | 27,250 |
| | | 100 | % | | | $ | 562 |
| | 2 | % | |
Advertising
Advertising revenues are generated primarily from the sale of advertising spots on the CBS Television Network, our basicglobal broadcast and cable networks and our television stations, as well as on our ad-supported streaming services, including CBS All Access and Pluto TV, and on our websites. Our advertising revenues include integrated marketing services, which provide unique branded content and custom sponsorship opportunities to our advertisers, as well as advanced marketing solutions (“AMS”), including addressable video and brand solutions.stations. For 2019,2021, the 2%11% increase in advertising revenues was driven by 5% growththe benefit in domestic advertising revenues, reflecting2021 from CBS’ broadcastbroadcasts of tent-pole sporting events in 2019, mainly Super Bowl LIIILV and NCAA Tournament games for which there were no comparable broadcasts on CBS in 2020, and an improved advertising market, driven by higher pricing and demand, compared with 2020, which was negatively impacted by COVID-19. We have the rights to broadcast the Super Bowl and the national semifinals and championship game of the NCAA Division I Men’s Basketball Tournament (“NCAA Tournament”), as well as higher revenues from AMS, which includes Pluto TV. These increases were partially offset by lower political advertising sales at our owned television stations, as a result of the benefit to last year from the 2018 midterm elections. International advertising revenues decreased 14%, reflecting the unfavorable impact of foreign exchange rate changes, as well as softness in the Australian and UK markets, partially offset by increases in pricing and political advertising in Argentina. Foreign exchange rate changes had an unfavorable impact of 1-percentage point on the total advertising revenues comparison and 9-percentage points on the international advertising revenues comparison.
The Super Bowl is broadcast on the CBS Television Network on a rotating basis with other networks through the 2022 season under the current contract with the National Football League (“NFL”), and the national semifinalssemi-finals and championship games of the NCAA Tournament areon a rotational basis with other networks, including in 2021. Additionally, while we share the games in the preceding rounds of the NCAA Tournament with Turner Broadcasting System, Inc. (“Turner”) each year, COVID-19 caused the cancellation of the NCAA Tournament in 2020. These noncomparable sporting events contributed 9-percentage points of the advertising revenue increase for 2021. The above-mentioned increases were partially offset by lower linear impressions for our domestic networks; lower political advertising sales, reflecting the benefit to 2020 from the U.S. Presidential election; and the absence of CMG as a result of its sale in the fourth quarter of 2020, which negatively impacted the comparison by 1-percentage point.
In March 2021, we reached an agreement with the National Football League (“NFL”) to extend our rights to broadcast American Football Conference (AFC) regular season and post-season games, which include wildcard, divisional playoff and championship games, on the CBS Television Network every other year through 2032 under the current agreementand to stream these games live on Paramount+. The contract begins with the NCAA2023 season and Turner Broadcasting System, Inc. (“Turner”). extends through the 2033 season, and includes the rights to the Super Bowl in 2024, 2028 and 2032, as well as certain expanded rights across our networks and platforms. The NFL has a one-time right to terminate the agreement after the 2029 season.
In 2020,2022, the advertising revenue comparison will be negatively affectedimpacted by the benefit in 2019 from CBS’ broadcastsabsence of the Super Bowl and the national semifinalssemi-finals and championship gamegames of the NCAA Tournament. These eventsTournament, which will not be carried by other networks, reflecting the above-mentioned rotational nature of the rights to broadcast by CBSthese tentpole sporting events. However, comparability in 2020. Advertising revenues in 20202022 will benefit from higher political advertising sales,revenues, mainly in the second half of the year, associated with the U.S. Presidential election.driven by mid-term elections.
Affiliate
Affiliate revenues are principally comprised of fees received from multichannel video programming distributors (“MVPDs”) and third-party live television streaming services (“virtual MVPDsMVPDs” or “vMVPDs”) for carriage of our cable networks (“cable affiliate fees”), fees received from television stations affiliated with the CBS Television Network (“station affiliation fees”);reverse compensation, and fees for authorizing the MVPDs’ and virtual MVPDs’vMVPDs’ carriage of our owned television stations (“retransmission fees”); and subscription fees for our streaming services.. For 2019, the 3% increase in2021, affiliate revenues reflects 20%increased 5% as a result of growth in station affiliation feesreverse compensation and retransmission fees, driven by annual contractual increasesfee revenues; and contract renewals with MVPDs and virtual MVPDs, as well as 45% growth from our streaming services, including CBS All Accessand Showtime OTT, driven by subscriber growth. These increases were partially offset by 5% lowerhigher cable affiliate fees, mainly resulting from subscriber declines. Domestic affiliate revenues increased 4%, while international affiliate revenues decreased 6%reflecting the benefit from the priorlaunch of our basic cable networks in June 2020 and April 2021 on two vMVPDs,
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
year
Streaming
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Streaming Revenues by Type | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
| Advertising | $ | 2,145 | | | $ | 1,418 | | | $ | 727 | | | 51 | % | |
| Subscription | 2,048 | | | 1,143 | | | 905 | | | 79 | | |
| Total Streaming Revenues | $ | 4,193 | | | $ | 2,561 | | | $ | 1,632 | | | 64 | % | |
For 2021, streaming advertising revenues grew 51% driven by higher advertising on our streaming services, Pluto TV and Paramount+, as well as growth on our other digital video platforms. Global monthly active users (“MAUs”), which reflect the unfavorable impactnumber of foreign exchange rate changes. Foreign exchange rate changes had an unfavorable impactunique devices interacting with the Pluto TV service in a calendar month, increased 21.3 million to 64.4 million for December 2021 from 43.1 million for December 2020.
Streaming subscription revenues increased 79% reflecting subscriber growth, which was led by Paramount+, which benefited from film releases, including A Quiet Place Part II and PAW Patrol: The Movie; new original scripted dramas, including 1883 and Mayor of 1-percentage point onKingstown; NFL games; and launches in international markets. Revenue growth also benefited from subscriber increases for Showtime OTT and BET+. Global streaming subscribers increased 26.2 million to 56.1 million at December 31, 2021 from 29.9 million at December 31, 2020. Global streaming subscribers include customers with access to our domestic or international streaming services, either directly through our owned and operated apps and websites, or through third-party distributors. Our subscribers include paid subscriptions and those customers registered in a free trial, and subscribers are considered unique to each of our services, whether offered individually or as part of a bundle.
Theatrical
Theatrical revenues are principally earned from the total affiliateworldwide theatrical distribution of films through audience ticket sales. For 2021, the 34% increase in theatrical revenues comparisonreflects the benefit from current year releases including A Quiet Place Part II and 6-percentage points onPAW Patrol: The Movie, while the international affiliate revenues comparison.prior year was impacted by the closure or reduced capacity of movie theaters in response to COVID-19, following the release of Sonic the Hedgehog in the first quarter of 2020, and throughout the remainder of the year.
Content Licensing and Other
Content licensingLicensing and other revenues are principally comprised of fees from the licensing of exhibitionthe rights forto exhibit our internally-produced television and film programming to television stations, cable networks, and subscription video-on-demand (“SVOD”) and free video-on-demand services;on various platforms in the secondary market after its initial exhibition on our owned or third-party platforms; license fees from content produced for third parties; home entertainment revenues, which are derivedinclude revenues from the viewing of our content on a transactional basis through transactional video-on-demand (TVOD) and electronic sell-through services, and the sale and distribution of our content through DVDs and Blu-ray discs to wholesale and retail partners, as well as from the viewing of our content on a transactional basis through transactional video-on-demand (“TVOD”) and electronic sell-through services;partners; fees from the use of our trademarks and brands for consumer products, recreation and live events; and fees from the distribution of third-party programming.programming; and revenues from the rental of production facilities. For 2019, content2021, licensing and other revenues increased 5%, primarily reflecting a higher revenuesvolume of licensing, including from the domestictiming of program availabilities as a result of production shutdowns in 2020 because of COVID-19, and increased licensing of our content, driven by the production of programming for third parties and the licensing of programming to SVOD providers.consumer products. These increases were partially offset by a decline in international licensing revenues.
Revenuesthe benefit to the prior year from the licensing of exhibitionthe domestic streaming rights are recognized at the beginning of the license period in which programs are made available to the licensee for exhibition, and therefore, content licensing revenue comparisons are impacted by fluctuations resulting from the timing of the availability of our programming for multiyear licensing agreements.
Theatrical
Theatrical revenues are principally comprised of the worldwide theatrical distribution of films through audience ticket sales. For 2019, theatrical revenues decreased 26%, principally reflecting a difficult comparison against the prior year, as a result of the 2018 releases of Mission: Impossible - FalloutSouth Park and A Quiet Place. Theatrical revenues in 2019 benefited from the releases of Rocketman, Gemini Man and Dora and the Lost City of Gold, as well as the continued success of the 2018 release, Bumblebee. Domestic theatrical revenues decreased 31% and international theatrical revenues decreased 23%.
Theatrical revenues may be affected by many factors, including domestic and international audience response, the number, timing and mix of releases and competitive offerings in any given period, consumer tastes and consumption habits and overall economic conditions, including discretionary spending. Revenues from theatrical film releases tend to be cyclical with increases during the summer.
Publishing
Publishing revenues are principally comprised of the domestic and international publishing and distribution of consumer books in printed, digital and audio formats. For 2019, publishing revenues decreased 1%, driven by lower print book sales, which were partially offset by higher sales from digital audio books.
Other
Other revenues are principally comprised of revenues from the rental of production facilities and digital revenues from search and e-commerce partners. For 2019, other revenues decreased 3%, mainly reflecting lower revenues from the rental of our production facilities as a result of the sale of CBS Television City in January 2019.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Operating Expenses
| | | | | | % of | | | | % of | | | | | % of | | % of | | | |
| Operating Expenses by Type | | | Operating | | | | Operating | | Increase/(Decrease) | | Operating Expenses by Type | | Operating | | Operating | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | Expenses | | 2018 | | Expenses | | $ | | % | | Year Ended December 31, | 2021 | | Expenses | | 2020 | | Expenses | | $ | | % | |
| Production | $ | 6,797 |
| | 39 | % | | $ | 6,483 |
| | 41 | % | | $ | 314 |
| | 5 | % | | |
| Programming | 4,287 |
| | 25 |
| | 3,965 |
| | 25 |
| | 322 |
| | 8 |
| | |
Participation, distribution and royalty | 3,369 |
| | 20 |
| | 3,295 |
| | 21 |
| | 74 |
| | 2 |
| | |
| Production and programming | | Production and programming | $ | 12,672 | | | 71 | % | | $ | 10,204 | | | 68 | % | | $ | 2,468 | | | 24 | % | |
| Participations and residuals | | Participations and residuals | 2,031 | | | 12 | | | 1,729 | | | 12 | | | 302 | | | 17 | | |
| Programming charges | 589 |
| | 3 |
| | 162 |
| | 1 |
| | 427 |
| | n/m |
| | Programming charges | — | | | — | | | 159 | | | 1 | | | (159) | | | n/m | |
| Other | 2,181 |
| | 13 |
| | 2,012 |
| | 12 |
| | 169 |
| | 8 |
| | |
| Distribution and other | | Distribution and other | 3,041 | | | 17 | | | 2,900 | | | 19 | | | 141 | | | 5 | | |
| Total Operating Expenses | $ | 17,223 |
| | | 100 | % | | | $ | 15,917 |
| | 100 | % | | $ | 1,306 |
| | 8 | % | | Total Operating Expenses | $ | 17,744 | | | 100 | % | | $ | 14,992 | | | 100 | % | | $ | 2,752 | | | 18 | % | |
n/m - not meaningful
Production and Programming
Production and programming expenses reflect the amortization of direct costs of internally-produced television and theatrical film content as well ascontent; amortization of acquired program rights; and other television production costs, including on-air talent. For 2019,2021, the 5% increase in production expenses reflectedof 24% was primarily a result of an increased investment in content including a higher number of series produced for distribution on multiple platforms, including our streaming servicesservices; the timing of production, as the prior year was impacted by shutdowns as a result of COVID-19; and cable networks, as well as higher amortization of television production costs associated with the increase in content licensing revenues. These increases were partially offset by lower amortization of feature film costs, driven by costs in 2018 associated with Mission: Impossible - Fallout.
Programming
Programming expenses reflect the amortization of acquired programs exhibited on our television broadcast networks, cable networks and television stations. For 2019, the 8% increase in programming expenses was driven by higher sports programming costs, mainly from CBS’ broadcasts of principally associated with noncomparable sporting events.
Super Bowl LIII
Participations and the national semifinals and championship game of the NCAA Tournament in 2019, which were not broadcast by CBS in 2018, and programming for Pluto TV, which we acquired in March 2019. These increases were partially offset by lower amortization of acquired programming for our cable networks.
Participation Distribution and Royalty
Participation, distribution and royaltyresidual costs primarily include expenses relating to amounts owed to talent and other participants in our content pursuant to contractual and collective bargaining arrangements. For 2021, participation and residual expenses for television and film programming, royalty costs for publishing content and other distribution expenses incurred with respect to film and television content, suchincreased 17% primarily as print and advertising. For 2019, the 2%increase in participation, distribution and royalty costs was driven by higher participation costs associated witha result of the increase in content licensing revenues.revenues in 2021 as well as the mix of titles licensed in each year.
Programming Charges
During 2019, in connection with the Merger, we implemented management changes across the organization. In connection with these changes, we performed an evaluation of our programming portfolio across all of our businesses, including an assessment of the optimal use of our programming in the marketplace, which resulted in the identification of programs not aligned with management’s strategy. As a result,2020, we recorded programming charges of $589$159 million principally reflecting accelerated amortization associated with changes inprimarily related to the expected monetizationabandonment of certain incomplete programs and decisionsresulting from production shutdowns related to cease airing, alter future airing patterns or not renew certain programs.
In addition, during 2018, in connection with management changes, we recorded programming charges of $162 million relating to changes to our programming strategy, including at CBS Films, which shifted its focus from theatrical films to developing content for our streaming services, as well as at our Cable Networks segment where we ceased the use of certain programming.
Management’s DiscussionDistribution and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Other
OtherDistribution and other operating expenses primarily include compensationcosts relating to the distribution of our content, including print and advertising for theatrical releases and costs paid to third-party distributors; compensation; revenue-sharing costs to television stations affiliated with the CBS Television Network; and other ancillary and overhead costs associated with book sales, including printing and warehousing.our operations. For 2019,2021, the 8%5% increase in other operating expenses mainly reflected higher costswas a result of cost increases associated with the growth and expansion of our streaming services.
Selling, General and Administrative Expenses
| | | | | | | | Increase/(Decrease) | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | 2018 | | $ | | % | | Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
| Selling, general and administrative expenses | $ | 5,647 |
| | $ | 5,206 |
| | $ | 441 |
| | 8 | % | | Selling, general and administrative expenses | $ | 6,398 | | | $ | 5,320 | | | $ | 1,078 | | | 20 | % | |
Selling, general and administrative (“SG&A”) expenses include expenses incurred for selling and marketing costs, occupancy, professional service fees and back office support, including employee compensation. The 8%20% increase in SG&A expenses was driven by higher advertising, and marketing costs, reflecting an increase in the number of series premieres and costs associated with our streaming services, as well as the inclusion of Pluto TV and Pop TV since their acquisitions in the first quarter of 2019. These increases were partially offset by cost savings associated with restructuring activities and compensation cost savings resulting from changes in senior management at CBS in 2018.
Depreciation and Amortization
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | 2018 | | $ | | % | |
| Depreciation and amortization | $ | 443 |
| | $ | 433 |
| | $ | 10 |
| | 2 | % | |
Depreciation and amortization expense reflects depreciation of fixed assets, including amortization of transponders and equipment under finance leases, and amortization of finite-lived intangible assets. For 2019, depreciation and amortization expense also includes an impairment charge of $20 million to reduce the carrying value of broadcast licenses in Australia to their fair value.
Restructuring and Other Corporate Matters
During 2019 and 2018, we recorded costs for restructuring and other corporate matters as follows:cost increases to support the growth
|
| | | | | | | |
| Year Ended December 31, | 2019 | | 2018 |
| Severance | $ | 401 |
| | $ | 235 |
|
| Exit costs and other | 23 |
| | 75 |
|
| Restructuring charges | 424 |
| | 310 |
|
| Restructuring-related costs | — |
| | 52 |
|
| Merger-related costs | 294 |
| | — |
|
| Other corporate matters | 57 |
| | 128 |
|
| Restructuring and other corporate matters | $ | 775 |
| | $ | 490 |
|
During the year ended December 31, 2019, we recorded restructuring charges of $424 million, primarily for severance and the acceleration of stock-based compensation in connection with the Merger, as well as costs related to a restructuring plan initiated in the first quarter of 2019 under which severance payments are being provided to certain eligible employees who voluntarily elected to participate. In addition, in 2019 we incurred costs of $294 million in connection with the Merger, consisting of financial advisory, legal and other professional fees, transaction-related bonuses, and contractual executive compensation, including the accelerated vesting of stock-based compensation, that was triggered by the Merger. We also incurred costs of $40 million in connection with the settlement of a commercial dispute and $17 million associated with legal proceedings involving the Company (see Note 19) and other corporate matters.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
and expansion of our streaming services, including the launch of Paramount+. The increase also reflects higher advertising and marketing costs to promote the increased level of original programming in 2021.
Depreciation and Amortization
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
| Depreciation and amortization | $ | 390 | | | $ | 430 | | | $ | (40) | | | (9) | % | |
Depreciation and amortization expense reflects depreciation of fixed assets, including transponders and equipment under finance leases, amortization of finite-lived intangible assets, and impairment of fixed and intangible assets, when applicable. For 2020, amortization expenseincluded an impairment charge of $25 million in the TV Entertainment segment to write down the carrying values of FCC licenses in two markets to their fair values and accelerated depreciation of $12 million resulting from the abandonment of technology in connection with synergy plans related to the Merger.
Restructuring and Other Corporate Matters
During the years ended December 31, 2021 and 2020, we recorded the following costs associated with restructuring and other corporate matters.
| | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 |
| Severance | $ | 65 | | | $ | 472 | |
| Exit costs and other | 35 | | | 70 | |
| Restructuring charges | 100 | | | 542 | |
| Merger-related costs | — | | | 56 | |
| Other corporate matters | — | | | 20 | |
| Restructuring and other corporate matters | $ | 100 | | | $ | 618 | |
During the year ended December 31, 2018,2021, we recorded restructuring charges of $310$100 million. These charges include $65 million resulting from cost transformationof severance costs, including the accelerated vesting of stock-based compensation, primarily associated with changes in management at certain of our businesses. The charges also include $35 million for the impairment of lease assets that we determined we will not use and began actively marketing for sublease. This determination was made in connection with cost-transformation initiatives related to improve margins,the Merger. The impairment is the result of a decline in market conditions since inception of these leases and reflects the difference between the estimated fair values, which were determined based on the expected discounted future cash flows of the lease assets, and the carrying values.
During the year ended December 31, 2020, we recorded restructuring charges of $542 million, associated with cost-transformation initiatives in connection with the Merger in an effort to reduce redundancies across our businesses. These charges consisted of severance costs, including the accelerated vesting of stock-based compensation, as well as restructuring-related costs resulting from the termination of $52 million, comprised of third-party professional servicescontractual obligations and charges associated with such initiatives.the exit of leases. In addition, in 20182020 we recorded expensesincurred costs of $128$56 million primarilyin connection with the Merger, consisting of professional fees mainly associated with integration activities, as well as transaction-related bonuses. We also incurred costs of $5 million for professional fees related to legal proceedings, investigations at our Companyassociated with dispositions and the evaluation of potential merger activity.
Gain on Sale of Assets
In 2019, we completed the sale of CBS Television City for $750 million. We have guaranteed a specified level of cash flows to be generated by the business during the first five years following the completion of the sale. Included on the Consolidated Balance Sheet at December 31, 2019 is a liability of $124 million, reflecting the present value of the estimated amount payable under the guarantee obligation. This transaction resulted in a gain of $549 million for 2019, which includes a reduction for the guarantee obligation. We also recognized a tax benefit of $140 million in the fourth quarter of 2018 for the reversal of a valuation allowance relating to capital loss carryforwards that were utilized in connection with this sale.
Interest Expenseother corporate matters, and Interest Income
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | 2018 | | $ | | % | |
| Interest expense | $ | (962 | ) | | $ | (1,030 | ) | | $ | (68 | ) | | (7 | )% | |
| Interest income | $ | 66 |
| | $ | 79 |
| | $ | (13 | ) | | (16 | )% | |
The following table presents our outstanding debt balances, excluding finance leases, and the weighted average interest rate as of December 31, 2019 and 2018:
|
| | | | | | | | | | | | | | | | | | |
| | | | Weighted Average | | | | Weighted Average | |
| At December 31, | 2019 | | Interest Rate | | 2018 | | Interest Rate | |
| Total long-term debt | $ | 17,976 |
| | | 4.70 | % | | | $ | 18,370 |
| | | 4.64 | % | | |
| Commercial paper | $ | 699 |
| | | 2.07 | % | | | $ | 674 |
| | | 3.02 | % | | |
Gain (Loss) on Marketable Securities
For 2019 and 2018, we recorded a gaincharge of $113$15 million to write down property and a loss of $23 million, respectively, reflecting changesequipment, which was classified as held for sale in the2020, to its fair value of marketable securities.
Gain (Loss) on Early Extinguishment of Debtless costs to sell.
For 2018, we recorded a gain on early extinguishment of debt of $18 million associated with the redemption of senior notes and debentures prior to maturity totaling $1.13 billion.
Other Items, Net
The following table presents the components of Other items, net.
|
| | | | | | | |
| Year Ended December 31, | 2019 | | 2018 |
| Pension and postretirement benefit costs | $ | (105 | ) |
| $ | (68 | ) |
| Foreign exchange losses | (17 | ) |
| (18 | ) |
| Impairment of investments | (50 | ) | | (46 | ) |
| Gains from investments | 22 |
| | 16 |
|
| Other | 5 |
|
| (8 | ) |
| Other items, net | $ | (145 | ) | | $ | (124 | ) |
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Benefit (Provision)
Also in 2021, we completed the sale of CBS Studio Center to Hackman Capital Partners, LLC and Square Mile Capital Management, LLC for $1.85 billion. This transaction resulted in a pre-tax gain during the fourth quarter of 2021 of $1.70 billion.
In addition, during 2021 we recognized a pre-tax net gain of $117 million, principally relating to the sale of a noncore trademark licensing operation.
In 2020, we completed the sale of CMG to Red Ventures for $484 million. This transaction resulted in a pre-tax gain of $214 million.
Interest Expense and Interest Income
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
| Interest expense | $ | (986) | | | $ | (1,031) | | | $ | (45) | | | (4) | % | |
| Interest income | $ | 53 | | | $ | 60 | | | $ | (7) | | | (12) | % | |
The following table presents our outstanding debt balances, excluding finance leases, and the weighted average interest rate as of December 31, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Weighted Average | | | | Weighted Average | |
| At December 31, | 2021 | | Interest Rate | | 2020 | | Interest Rate | |
| Total long-term debt | $ | 17,658 | | | | 4.93 | % | | | $ | 19,612 | | | | 4.80 | % | | |
| | | | | | | | | | | | |
| Other bank borrowings | $ | 35 | | | | 3.50 | % | | | $ | 95 | | | | 3.50 | % | | |
Net Gains from Investments
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
| Net gains from investments | $ | 47 | | | $ | 206 | | | $ | (159) | | | (77) | % | |
For 2021, net gains from investments primarily include a gain of $37 million on the sale of an investment and a gain of $9 million from an increase in the fair value of a marketable security that was sold during the third quarter of 2021. For 2020, net gains from investments primarily reflect an increase of $213 million in the fair value of our investment in fuboTV, which was sold in the fourth quarter of 2020.
Loss on Extinguishment of Debt
For 2021 and 2020, we recorded losses on extinguishment of debt of $128 million and $126 million, respectively, associated with the early redemption of long-term debt of $1.99 billion for 2021 and $2.77 billion for 2020.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Other Items, Net
The following table presents the components of Other items, net.
| | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 |
| Pension and postretirement benefit costs | $ | (43) | | | $ | (69) | |
| Foreign exchange losses | (26) | | | (35) | |
Pension settlement charge (a) | (10) | | | — | |
| Other | 2 | | | 3 | |
| Other items, net | $ | (77) | | | $ | (101) | |
(a) Reflects the accelerated recognition of a portion of the unamortized actuarial losses due to the volume of lump sum benefit payments in one of our pension plans.
Provision for Income Taxes
The benefit (provision)provision for income taxes represents federal, state and local, and foreign taxes on earnings from continuing operations before income taxes and equity in loss of investee companies. For 2019,2021, we recorded a benefitprovision for income taxes of $9$646 million, reflecting an effective income tax rate of (0.3)%, which included12.4%. Included in the provision for income taxes was a discrete items such as a deferred tax benefit of $768$517 million, resultingwhich includes a benefit of $260 million to remeasure our U.K. net deferred income tax asset as a result of the enactment during the second quarter of an increase in the U.K. corporate income tax rate from 19% to 25% beginning April 1, 2023, a benefit of $229 million from the transferrecognition of intangible assets between our subsidiariesa capital loss associated with a change in the tax entity classification of a foreign subsidiary, as well as a net tax benefit in connection with the settlement of income tax audits. The discrete tax benefit of $517 million, together with a reorganizationnet tax provision of $546 million on the items identified as affecting comparability in Reconciliation of Non-GAAP Measures, which principally include net gains on sales, reduced our international operations;effective income tax benefitsrate by 7.8 percentage points.
For 2020, we recorded a provision for income taxes of $44$535 million, reflecting an effective income tax rate of 17.0%. Included in the provision for income taxes was a discrete tax benefit of $110 million, primarily consisting of a benefit of $100 million to remeasure our U.K. net deferred income tax asset as a result of an increase in the U.K. corporate income tax rate from 17% to 19% enacted during the third quarter of 2020, as well as a tax benefit of $13 million realized in connection with the preparation of the 2018 federal2019 tax return, based on further clarity provided by the United States government on tax positions relating to the Tax Reform Act; and a tax benefit of $39 million triggered by the bankruptcy of an investee. For 2018, the provision for income taxes was $617 million, reflecting an effective income tax rate of 15.0%. The provision for income taxes for 2018 included discretereturns. These items, such as the reversal of a valuation allowance of $140 million relating to capital loss carryforwards that were utilized in connectiontogether with the sale of CBS Television City in 2019; a tax benefit of $80 million relating to the Tax Reform Act and other tax law changes; and a net tax benefit of $71$129 million relating to aon the items identified as affecting comparability in Reconciliation of Non-GAAP Measures, including restructuring and other corporate matters, programming charges, loss on extinguishment of debt and net gains from investments, reduced our effective income tax accounting method change grantedrate by the Internal Revenue Service.4.1 percentage points.
Equity in Earnings (Loss)Loss of Investee Companies, Net of Tax
The following table presents equity in loss of investee companies for our equity-method investments.
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | 2018 | | $ | | % | |
| Equity in loss of investee companies | $ | (72 | ) | | $ | (62 | ) | | $ | (10 | ) | | (16 | )% | |
| Tax benefit | 19 |
| | 15 |
| | 4 |
| | 27 |
| |
| Equity in loss of investee companies, net of tax | $ | (53 | ) | | $ | (47 | ) | | $ | (6 | ) | | (13 | )% | |
Net Earnings from Continuing Operations Attributable to ViacomCBS and Diluted EPS from Continuing Operations Attributable to ViacomCBS
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | 2018 | | $ | | % | |
Net earnings from continuing operations attributable to ViacomCBS | $ | 3,270 |
| | $ | 3,423 |
| | $ | (153 | ) | | (4 | )% | |
Diluted EPS from continuing operations attributable to ViacomCBS | $ | 5.30 |
| | $ | 5.51 |
| | $ | (.21 | ) | | (4 | )% | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
| Equity in loss of investee companies | $ | (140) | | | $ | (47) | | | $ | (93) | | | (198) | % | |
| Tax benefit | 49 | | | 19 | | | 30 | | | 158 | | |
| Equity in loss of investee companies, net of tax | $ | (91) | | | $ | (28) | | | $ | (63) | | | (225) | % | |
For 2019,2021 and 2020, equity in loss of investee companies, net earnings from continuing operations attributableof tax includes impairment charges of $34 million and $9 million, respectively, relating to ViacomCBS and diluted EPS from continuing operations each decreased 4%, primarily driven by the lower operating income, mainly reflecting our increased investment in content. The lower operating income was partially offset by the aforementioned discrete tax benefits.
Net Earnings Attributable to ViacomCBS and Diluted EPS Attributable to ViacomCBS
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | 2018 | | $ | | % | |
| Net earnings attributable to ViacomCBS | $ | 3,308 |
| | $ | 3,455 |
| | $ | (147 | ) | | (4 | )% | |
| Diluted EPS attributable to ViacomCBS | $ | 5.36 |
| | $ | 5.56 |
| | $ | (.20 | ) | | (4 | )% | |
television joint ventures. Consolidated Results of Operations— 2018 vs. 2017
Revenues
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenues by Type | | | % of Total | | | | % of Total | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | Revenues | | 2017 | | Revenues | | $ | | % | |
| Advertising | $ | 10,841 |
| | | 40 | % | | | $ | 10,582 |
| | | 40 | % | | | $ | 259 |
| | 2 | % | |
| Affiliate | 8,376 |
| | | 31 |
| | | 8,153 |
| | | 31 |
| | | 223 |
| | 3 |
| |
| Content licensing | 6,163 |
| | | 22 |
| | | 5,947 |
| | | 22 |
| | | 216 |
| | 4 |
| |
| Theatrical | 744 |
| | | 3 |
| | | 716 |
| | | 3 |
| | | 28 |
| | 4 |
| |
| Publishing | 825 |
| | | 3 |
| | | 830 |
| | | 3 |
| | | (5 | ) | | (1 | ) | |
| Other | 301 |
| | | 1 |
| | | 307 |
| | | 1 |
| | | (6 | ) | | (2 | ) | |
| Total Revenues | $ | 27,250 |
| | | 100 | % | | | $ | 26,535 |
| | | 100 | % | | | $ | 715 |
| | 3 | % | |
Advertising
For 2018, the 2% increase in advertising revenues was driven by our acquisition of Network 10 in the fourth quarter of 2017; record political advertising sales in 2018 associated with the U.S. midterm elections; higher pricing at our broadcast and cable networks; and growth in revenues from AMS. Advertising revenues for 2018 also benefited from the adoption of a new revenue recognition standard in the first quarter of 2018, under which revenues for certain distribution arrangements are recognized based on the gross amount of consideration received from the customer, with an offsetting increase to operating expenses. Under previous accounting guidance, such revenues were recognized at the net amount retained by us after the payment of fees to the third party. This guidance was applied prospectively from the date of adoption, and therefore, amounts for 2017 are reported under previous accounting guidance. These increases were partially offset by lower linear impressions at our cable networks and the absence of the broadcasts of five Thursday Night Football games and the national semifinals and championship game of the NCAA Tournament, which were broadcast on the CBS Television Network in 2017. The national semifinals and championship game of the NCAA Tournament are broadcast by the CBS Television Network every other year through 2032 under the current agreements with the NCAA and Turner. Foreign exchange rate changes had an unfavorable impact of 1-percentage point on the advertising revenues comparison.
Affiliate
For 2018, the 3% increase in affiliate revenues reflects 22% growth in station affiliation and retransmission fees and 65% growth from subscription fees for our streaming services, CBS All Accessand Showtime OTT. These increases were partially offset by the unfavorable comparison against Showtime Networks’ distribution in 2017 of the Floyd Mayweather/Conor McGregor pay-per-view boxing event. Cable affiliate fees were relatively flat for 2018 compared with 2017, as contractual rate increases under carriage agreements for our cable networks and the benefit of new channel launches and acquisitions were offset by subscriber declines.
Content Licensing
For 2018, the 4%increase in content licensing revenues reflects higher revenues from the distribution of third-party content, resulting from revenues under certain distribution arrangements now being recognized at the gross amount of consideration received from the customer, with an offsetting increase to participation expense, as a result of the adoption of a new revenue recognition standard in the first quarter of 2018. Under previous guidance, such
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
| | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 |
| Net earnings attributable to noncontrolling interests | $ | (88) | | | $ | (279) | |
distribution revenues were recognized at the For 2020,net amount retained by us after the paymentearnings attributable to noncontrolling interests primarily reflects our joint venture partners’ share of fees to the third party. The increase also reflected growthprofit from domestic and international license fees, including the 2018 availability of Tom Clancy’s Jack Ryan, The Haunting of Hill House, Maniac, The Alienist and The Cloverfield Paradox, compared with 2017, which included the licensing of the domestic streaming rights to NCIS: New Orleans, Madam SecretarySouth Park and titles from the CSI franchise. These increases were partially offset by lower home entertainment revenues, primarily reflecting the number and mix of titles in release.to a streaming service.
Theatrical
For 2018, theatrical revenues increased 4%, principally reflecting the strong performance of the theatrical release of Mission: Impossible - Fallout in 2018.
Publishing
Publishing revenues for 2018 decreased 1%driven by lower sales of print and electronic books, which were partially offset by higher sales of digital audio books.
Operating Expenses
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | % of Total | | | | % of Total | | | |
| Operating Expenses by Type | | | Operating | | | | Operating | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | Expense | | 2017 | | Expense | | $ | | % | |
| Production | $ | 6,483 |
| | | 41 | % | | | $ | 5,994 |
| | | 39 | % | | | $ | 489 |
| | 8 | % | |
| Programming | 3,965 |
| | | 25 |
| | | 4,268 |
| | | 28 |
| | | (303 | ) | | (7 | ) | |
Participation, distribution and royalty | 3,295 |
| | | 21 |
| | | 3,182 |
| | | 20 |
| | | 113 |
| | 4 |
| |
| Programming charges | 162 |
| | | 1 |
| | | 144 |
| | | 1 |
| | | 18 |
| | 13 |
| |
| Other | 2,012 |
| | | 12 |
| | | 1,895 |
| | | 12 |
| | | 117 |
| | 6 |
| |
| Total Operating Expenses | $ | 15,917 |
| | | 100 | % | | | $ | 15,483 |
| | | 100 | % | | | $ | 434 |
| | 3 | % | |
Production | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
Net earnings from continuing operations attributable to
ViacomCBS | $ | 4,381 | | | $ | 2,305 | | | $ | 2,076 | | | 90 | % | |
Diluted EPS from continuing operations attributable to
ViacomCBS | $ | 6.69 | | | $ | 3.73 | | | $ | 2.96 | | | 79 | % | |
For 2018, the 8% increase in production expenses reflected an2021, net earnings from continuing operations attributable to ViacomCBS and diluted EPS from continuing operations increased investment in content, including a higher number of series produced for distribution on multiple platforms, including our owned networks90% and streaming services, and the acquisition of Network 10 in the fourth quarter of 2017.
Programming
For 2018, the 7% decrease in programming expenses was driven by lower sports programming costs, resulting from Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event in 2017 and the absence of Thursday Night Football and the national semifinals and championship game of the NCAA Tournament, which were broadcast on the CBS Television Network in 2017. These decreases were partially offset by costs for programming on Network 10, which we acquired in the fourth quarter of 2017, and an increased investment in programming for our cable networks.
Participation, Distribution and Royalty
For 2018, the 4% increase in participation, distribution and royalty costs was79%, respectively, primarily driven by the adoptionabove-mentioned gains on sales of new revenue recognition guidance$1.75 billion, net of tax, and higher discrete tax benefits in 2021. The diluted EPS comparison also includes the effect of higher weighted average shares outstanding as a result of stock issuances in the first quarter of 2018,2021, which resultednegatively impacted EPS for 2021 by $.26.
Net Earnings from Discontinued Operations, Net of Tax
During the fourth quarter of 2020, we entered into an agreement to sell our publishing business, Simon & Schuster, to Penguin Random House LLC (“Penguin Random House”), a wholly owned subsidiary of Bertelsmann SE & Co. KGaA (see Legal Matters). Simon & Schuster is presented as a discontinued operation in revenues under certain distribution arrangements being recognized based on the gross amountour consolidated financial statements for all periods presented.
The following tables set forth details of consideration receivednet earnings from the customer, with an offsetting participation expense recognizeddiscontinued operations for the fees paid to the third party. Under previous accounting guidance, such revenues were recognized at the net amount retained by us after the payment of fees to the third party. Thisyears ended December 31, 2021 and 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 | Simon & Schuster | | Other (a) | | Total |
| Revenues | | $ | 993 | | | | $ | — | | | | $ | 993 | |
| Costs and expenses: | | | | | | | | |
| Operating | | 618 | | | | (16) | | | | 602 | |
| Selling, general and administrative | | 158 | | | | — | | | | 158 | |
| Depreciation and amortization | | 3 | | | | — | | | | 3 | |
| Restructuring charges | | 1 | | | | — | | | | 1 | |
| Total costs and expenses | | 780 | | | | (16) | | | | 764 | |
| Operating income | | 213 | | | | 16 | | | | 229 | |
| Other items, net | | (10) | | | | — | | | | (10) | |
| Earnings from discontinued operations | | 203 | | | | 16 | | | | 219 | |
| Income tax provision | | (46) | | | | (11) | | | | (57) | |
| Net earnings from discontinued operations, net of tax | | $ | 157 | | | | $ | 5 | | | | $ | 162 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 | Simon & Schuster | | Other (a) | | Total |
| Revenues | | $ | 901 | | | | $ | — | | | | $ | 901 | |
| Costs and expenses: | | | | | | | | |
| Operating | | 573 | | | | (19) | | | | 554 | |
| Selling, general and administrative | | 172 | | | | — | | | | 172 | |
| Depreciation and amortization | | 5 | | | | — | | | | 5 | |
| Restructuring charges | | 10 | | | | — | | | | 10 | |
| Total costs and expenses | | 760 | | | | (19) | | | | 741 | |
| Operating income | | 141 | | | | 19 | | | | 160 | |
| Other items, net | | (5) | | | | — | | | | (5) | |
| Earnings from discontinued operations | | 136 | | | | 19 | | | | 155 | |
| Income tax provision | | (34) | | | | (4) | | | | (38) | |
| Net earnings from discontinued operations, net of tax | | $ | 102 | | | | $ | 15 | | | | $ | 117 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
change resulted in an increase(a) Primarily relates to both revenues and participation expenses of $279 millionindemnification obligations for 2018, with no impact to our operating income. The increase also reflects higher participation costsleases associated with the increase in content licensing revenues. These increasespreviously discontinued operations of Famous Players Inc.
Segments
In 2021, we operated through the following three segments:
TV ENTERTAINMENT: TV Entertainment consisted of the CBS Television Network, our domestic broadcast network; CBS Studios and CBS Media Ventures, the segment’s television production and syndication operations; CBS Sports Network, CBS Sports’ 24-hour cable channel; CBS Stations, our owned broadcast television stations; and a number of streaming services, including our direct-to-consumer streaming service, Paramount+ (in the United States) and several CBS-branded streaming services, including CBS News Streaming and CBS Sports HQ. TV Entertainment’s revenues were partially offset by lower film distribution costs, drivengenerated primarily from advertising; affiliate revenues, comprised of reverse compensation and retransmission fees; streaming revenues, principally comprised of advertising and subscription revenues generated by the numbersegment’s streaming services and mixfrom digital video advertisements on our websites and in our video content on third-party platforms; and the licensing and distribution of theatrical releases and a charge in 2017 resulting from the terminationcontent.
CABLE NETWORKS: Cable Networks consisted of a slate financing agreement.
Programming Charges
During 2018, in connection with management changes, we recorded programming chargesportfolio of $162 million relating to changes to our programming strategy,premium and basic cable networks, including at CBS Films, which shifted its focus from theatrical films to developing content for ourShowtime, BET, Nickelodeon, MTV, Comedy Central, Paramount Network, and Smithsonian Channel; a number of direct-to-consumer streaming services, as well as atincluding Pluto TV, our free advertising-supported streaming television service, Showtime OTT, Noggin, and BET+; and ViacomCBS Networks International, which operates international extensions of Paramount+, Pluto TV and our Cable Networks segment where we ceased the usebrands and services, our international free-to-air networks (including Network 10, Channel 5 and Telefe) and ViacomCBS International Studios. Cable Networks’ revenues were generated primarily from affiliate revenues, comprised of certain programming.
In addition, during 2017, we recorded programming charges of $144 million associated with management’s decision to cease use of certain originalfees from MVPDs and acquired programming, in connection with the execution of a strategyvMVPDs for certaincarriage of our flagship brandscable networks; advertising; streaming revenues, principally comprised of advertising and strategic initiatives at Paramount.
Other
For 2018,subscription revenues generated by the 6% increase in other operating expenses mainly reflected higher costs associated with growth in oursegment’s streaming services and expensesfrom digital video advertisements on our websites and in our video content on third-party platforms; and the licensing of Network 10, which we acquired in the fourth quarter of 2017.
Selling, General and Administrative Expenses
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | 2017 | | $ | | % | |
| Selling, general and administrative expenses | $ | 5,206 |
| | $ | 5,156 |
| | $ | 50 |
| | 1 | % | |
For 2018, the 1% increase in SG&A expenses reflected higher advertising and marketing costs, mainly for the launch of the Paramount Network and to support our growth initiatives. These increases were partially offset by savings from cost transformation initiatives.
Depreciation and Amortization
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | 2017 | | $ | | % | |
| Depreciation and amortization | $ | 433 |
| | $ | 443 |
| | $ | (10 | ) | | (2 | )% | |
Restructuring and Other Corporate Matters
During 2018 and 2017, we recorded costs for restructuringcontent and other corporate matters as follows:rights.
FILMED ENTERTAINMENT: Filmed Entertainment consisted of Paramount Pictures, Paramount Players, Paramount Animation, Paramount Television Studios, and Miramax. Filmed Entertainment’s revenues were generated primarily from the release or distribution of films theatrically; transactional home entertainment; the licensing of film and television product to streaming services, including Paramount+, broadcast and cable networks, and other digital services; and other ancillary activities.
|
| | | | | | | |
| Year Ended December 31, | 2018 | | 2017 |
| Severance | $ | 235 |
| | $ | 224 |
|
| Exit costs and other | 75 |
| | 12 |
|
| Asset impairment | — |
| | 22 |
|
| Restructuring charges | 310 |
| | 258 |
|
| Restructuring-related costs | 52 |
| | — |
|
| Other corporate matters | 128 |
| | — |
|
| Restructuring and other corporate matters | $ | 490 |
| | $ | 258 |
|
During the year ended December 31, 2018, we recorded restructuring charges of $310 million resulting from cost transformation initiatives to improve margins, as well as restructuring-related costs of $52 million, comprised of third-
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
party professional services associated with such initiatives. In addition, in 2018 we recorded expenses of $128 million primarily for professional fees related to legal proceedings, investigations at our Company and the evaluation of potential merger activity.
During the year ended December 31, 2017,fourth quarter of 2020, we recorded restructuring charges of $258 million, resulting fromentered into an agreement to sell Simon & Schuster, which was previously reported as the execution ofPublishing segment. Simon & Schuster is presented as a strategydiscontinued operation in our consolidated financial statements for certainall periods presented.
Beginning in 2022, primarily as a result of our flagship brands andincreased strategic initiatives at Paramount, as well as costs relatingfocus on our direct-to-consumer businesses, we made certain changes to other restructuring plans across several ofhow we manage our businesses in a continued effort to reduce our cost structure. The restructuring charges for 2017 included a non-cash impairment charge resulting from the decision to abandon an international trade name in connection with the strategic initiatives.
Gain on Sale of Assets
In 2017, we completed the sale of broadcast spectrum in connection with the FCC’s broadcast spectrum auction. The saleand allocate resources that resulted in a pre-tax gain of $127 million on the Consolidated Statement of Operations, with $11 million attributablechange to the noncontrolling interest. In addition, in 2017 we recorded a net gain of $19 million relating to the disposition of property and equipment.
Interest Expense and Interest Income
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | 2017 | | $ | | % | |
| Interest expense | $ | (1,030 | ) | | $ | (1,088 | ) | | $ | (58 | ) | | (5 | )% | |
| Interest income | $ | 79 |
| | $ | 87 |
| | $ | (8 | ) | | (9 | )% | |
The following table presents our outstanding debt balances, excluding finance leases, and the weighted average interest rate as of December 31, 2018 and 2017:
|
| | | | | | | | | | | | | | | | | | |
| | | | Weighted Average | | | | Weighted Average | |
| At December 31, | 2018 | | Interest Rate | | 2017 | | Interest Rate | |
| Total long-term debt | $ | 18,370 |
| | | 4.64 | % | | | $ | 19,466 |
| | | 4.67 | % | | |
| Commercial paper | $ | 674 |
| | | 3.02 | % | | | $ | 779 |
| | | 1.91 | % | | |
Gain (Loss) on Marketable Securities
During 2018, we recorded a loss on marketable securities of $23 million. In connection with the adoption of FASB guidance on financial instruments,operating segments. Accordingly, beginning in the first quarter of 2018, changes in the fair value of marketable securities are recognized in the Consolidated Statements of Operations.
Gain (Loss) on Early Extinguishment of Debt
For 2018, the gain on early extinguishment of debt of $18 million reflected the pre-tax gain associated with the redemption of senior notes and debentures prior to maturity totaling $1.13 billion. During 2017,2022, we redeemed, prior to maturity, senior notes totaling $4.27 billion, resulting in the recognition of a pre-tax losswill report results based on the early extinguishment of debt of $38 million.following segments:
Gain on Sale of EPIX
During 2017, we completed the saleTV MEDIA: TV Media consists of our 49.76% interest in EPIX, resulting in a pre-tax gain of $285 million.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Pension Settlement Charge
During 2017, we purchased a group annuity contract under which an insurance company permanently assumed our obligation to pay and administer pension benefits to certain pension plan participants, or their designated beneficiaries, who had been receiving pension benefits. The purchase of this group annuity contract was funded with pension plan assets. As a result, our outstanding pension benefit obligation was reduced by approximately $800 million. In connection with this transaction, we recorded a settlement charge of $352 million in 2017, reflecting the accelerated recognition of a portion of unamortized actuarial losses in the plan. Additionally, during 2017, we made discretionary contributions totaling $600 million to prefund our qualified pension plans.
Other Items, Net
The following table presents the components of Other items, net.
|
| | | | | | | |
| Year Ended December 31, | 2018 | | 2017 |
| Pension and postretirement benefit costs | $ | (68 | ) | | $ | (96 | ) |
| Foreign exchange losses | (18 | ) | | (20 | ) |
| Impairment of investments | (46 | ) | | (18 | ) |
| Gain on sale of investment | 16 |
| | — |
|
| Other | (8 | ) | | 19 |
|
| Other items, net | $ | (124 | ) | | $ | (115 | ) |
Benefit (Provision) for Income Taxes
For 2018, the provision for income taxes was $617 million, reflecting an effective income tax rate of 15.0%. The provision for income taxes for 2018 included discrete items such as the reversal of a valuation allowance of $140 million relating to capital loss carryforwards that were utilized in connection with the sale of CBS Television City in 2019; a tax benefit of $80 million relating to the Tax Reform Act and other tax law changes; and a tax benefit of $71 million relating to a tax accounting method change granted by the Internal Revenue Service. For 2017, the provision for income taxes was $804 million, reflecting an effective income tax rate of 19.5%. The provision for income taxes for 2017 included discrete items such as a tax benefit of $279 million reflecting the recognition of foreign tax credits on the distribution of securities to the U.S.
Equity in Earnings (Loss) of Investee Companies, Net of Tax
The following table presents equity in earnings (loss) of investee companies for our equity-method investments.
|
| | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | 2017 | | $ | | % | |
| Equity in earnings (loss) of investee companies | $ | (62 | ) | | $ | 14 |
| | $ | (76 | ) | | n/m | |
| Tax benefit (provision) | 15 |
| | (10 | ) | | 25 |
| | n/m | |
| Equity in earnings (loss) of investee companies, net of tax | $ | (47 | ) | | $ | 4 |
| | $ | (51 | ) | | n/m | |
n/m - not meaningful
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Net Earnings from Continuing Operations Attributable to ViacomCBS and Diluted EPS from Continuing Operations Attributable to ViacomCBS
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | 2017 | | $ | | % | |
Net earnings from continuing operations attributable to ViacomCBS | $ | 3,423 |
| | $ | 3,268 |
| | $ | 155 |
| | 5 | % | |
Diluted EPS from continuing operations attributable to ViacomCBS | $ | 5.51 |
| | $ | 5.05 |
| | $ | .46 |
| | 9 | % | |
For 2018, the 5% increase in net earnings from continuing operations attributable to ViacomCBS was driven by the lower effective income tax rate in 2018, partially offset by lower operating income. Diluted EPS from continuing operations attributable to ViacomCBS grew 9%, reflecting the higher earnings and lower weighted average shares outstanding as a result of share repurchases and the shares retired as a result of the split-off of CBS Radio Inc. (“CBS Radio) during the fourth quarter of 2017.
Net Loss from Discontinued Operations, Net of Tax
On November 16, 2017, we completed the split-off of CBS Radio through an exchange offer, in which we accepted 17.9 million shares of CBS Class B Common Stock from our stockholders in exchange for the 101.4 million shares of CBS Radio common stock that we owned. Immediately following the exchange offer, each share of CBS Radio common stock was converted into one share of Entercom Communications Corp. (“Entercom”) Class A common stock upon completion of the merger of CBS Radio and Entercom. CBS Radio has been presented as a discontinued operation in the consolidated financial statements for all periods presented.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
The following table sets forth details of net earnings (loss) from discontinued operations for the year ended December 31, 2017. Net earnings from discontinued operations for the year ended December 31, 2018 was not material to our consolidated financial statements.
|
| | | | | | | | | | | | | |
| Year Ended December 31, 2017 | CBS Radio | | Other | | Total |
| Revenues | $ | 1,018 |
| | | $ | — |
| | | $ | 1,018 |
|
| Costs and expenses: | | | | | | | |
| Operating | 364 |
| | | — |
| | | 364 |
|
| Selling, general and administrative | 444 |
| | | (8 | ) | | | 436 |
|
| Market value adjustment | 980 |
| (a) | | — |
| | | 980 |
|
| Restructuring charges | 7 |
| | | — |
| | | 7 |
|
| Total costs and expenses | 1,795 |
| | | (8 | ) | | | 1,787 |
|
| Operating income (loss) | (777 | ) | | | 8 |
| | | (769 | ) |
| Interest expense | (70 | ) | | | — |
| | | (70 | ) |
| Other items, net | (2 | ) | | | — |
| | | (2 | ) |
| Earnings (loss) from discontinued operations | (849 | ) | | | 8 |
| | | (841 | ) |
| Income tax benefit (provision) | (55 | ) | | | 43 |
| (b) | | (12 | ) |
| Earnings (loss) from discontinued operations, net of tax | (904 | ) | | | 51 |
| | | (853 | ) |
| Net gain (loss) on disposal | (109 | ) | | | 13 |
| | | (96 | ) |
| Income tax benefit (provision) | 4 |
| | | (2 | ) | | | 2 |
|
| Net gain (loss) on disposal, net of tax | (105 | ) | | | 11 |
| (c) | | (94 | ) |
| Net earnings (loss) from discontinued operations, net of tax | $ | (1,009 | ) | | | $ | 62 |
| | | $ | (947 | ) |
(a) During 2017, prior to the split-off, CBS Radio was measured each reporting period at the lower of its carrying amount or fair value less cost to sell. The value of the transaction with Entercom was determined based on Entercom’s stock price at the closing of the transaction and therefore, we recorded a market value adjustment of $980 million in 2017 to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom.
(b) Primarily reflects a tax benefit from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business that was accounted for as a discontinued operation.
(c) Reflects adjustments to the loss on disposal of our outdoor advertising businesses, primarily from a decrease to the guarantee liability associated with the 2013 disposal of our outdoor advertising business in Europe.
Net Earnings Attributable to ViacomCBS and Diluted EPS Attributable to ViacomCBS
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 |
| 2017 | | $ | | % | |
| Net earnings attributable to ViacomCBS | $ | 3,455 |
| | $ | 2,321 |
| | $ | 1,134 |
| | 49 | % | |
| Diluted EPS attributable to ViacomCBS | $ | 5.56 |
| | $ | 3.59 |
| | $ | 1.97 |
| | 55 | % | |
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Segments
We operate in the following four segments:
TV ENTERTAINMENT: Ourhistorical TV Entertainment segment creates and acquires programming for distribution and viewing on multiple media platforms, including our broadcast network, through multichannel video programming distributors (“MVPDs”) and virtual MVPDs, and ourCable Networks segments, except that it no longer includes their corresponding direct-to-consumer streaming services as well as for licensing to third parties both domestically(now part of our Direct-to-Consumer segment) and internationally.Nickelodeon Studio (now part of our Filmed Entertainment segment), and now includes Paramount Television Studios (formerly part of our historical Filmed Entertainment segment).
DIRECT-TO-CONSUMER: Direct-to-Consumer consists of our portfolio of free, premium and pay streaming services, including Paramount+, Pluto TV, Showtime OTT, BET+ and Noggin.
FILMED ENTERTAINMENT: Filmed Entertainment consists of the CBS Television Network, CBSour historical Filmed Entertainment segment, except that it no longer includes Paramount Television Studios CBS Television Distribution, CBS Interactive, CBS Sports Network, CBS Television Stations and CBS-branded streaming services CBS All Access and CBSN, among others.(now part of our TV Entertainment’sMedia revenues are generated primarily from advertising sales, the licensingsegment), and distributionnow includes Nickelodeon Studio (formerly part of its content, and affiliate revenues.
CABLE NETWORKS: Ourour historical Cable Networks segment creates and acquires programming for distribution and viewing on multiple media platforms, including our cable networks, through MVPDs and virtual MVPDs, and our streaming services, as well as for licensing to third parties both domestically and internationally. Cable Networks consists of our premium subscription cable networks Showtime, The Movie Channel and Flix, and a subscription streaming offering of Showtime; our basic cable networks Nickelodeon, MTV, BET, Comedy Central, Paramount Network, Nick Jr., VH1, TV Land, CMT, Pop TV and Smithsonian Channel, among others, as well as the international extensions of these brands operated by ViacomCBS Networks International; international broadcast networks, Network 10, Channel 5 and Telefe; and Pluto TV, a leading free streaming TV platform in the United States. Cable Networks’ revenues are generated primarily from affiliate revenues, advertising sales and the licensing of its content and brands.segment).
FILMED ENTERTAINMENT: Our
Filmed Entertainment segment develops, produces, finances, acquires and distributes films, television programming and other entertainment content in various markets and media worldwide primarily through Paramount Pictures, Paramount Players, Paramount Animation and Paramount Television Studios. Filmed Entertainment’s revenues are generated primarily from the release and/or distribution of films theatrically, the release and/or distribution of film and television product through home entertainment, the licensing of film and television product to television and digital platforms and other ancillary activities.
PUBLISHING: Our Publishing segment publishes and distributes Simon & Schuster consumer books domestically and internationally and includes imprints such as Simon & Schuster, Scribner, Atria Books and Gallery Books.Publishing generates revenues from the publishing and distribution of consumer books in print, digital and audio formats.
We present operating income (loss) excluding depreciation and amortization, stock-based compensation, costs for restructuring and other corporate matters, programming charges and net gain on sale of assets,sales, each where applicable (“Adjusted OIBDA”), as the primary measure of profit and loss for our operating segments in accordance with FASBFinancial Accounting Standards Board guidance for segment reporting. We began presenting Adjusted OIBDA as our segment profit measure in the fourth quarter of 2019 in order to align with the primary method used by our management beginning after the Merger to evaluate segment performance and to make decisions regarding the allocation of resources to our segments. We believe the presentation of Adjusted OIBDA is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by our management and enhances their ability to understand our operating performance. Stock-based compensation is excluded from our segment measure of profit and loss because it is set and approved by our Board of Directors in consultation with corporate executive management. Stock-based compensation is included as a component of our consolidated Adjusted OIBDA. The reconciliation of Adjusted OIBDA to our consolidated net earnings is presented in Note 1719 to the consolidated financial statements.
Segment Results of Operations - 2021 vs. 2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | % of Total | | | | % of Total | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | Revenues | | 2020 | | Revenues | | $ | | % | |
| Revenues: | | | | | | | | | | | | | | | | |
| TV Entertainment | $ | 12,931 | | | | 45 | % | | | $ | 10,700 | | | | 42 | % | | | $ | 2,231 | | | 21 | % | |
| Cable Networks | 14,200 | | | | 50 | | | | 12,589 | | | | 50 | | | | 1,611 | | | 13 | | |
| Filmed Entertainment | 3,070 | | | | 11 | | | | 2,562 | | | | 10 | | | | 508 | | | 20 | | |
| Eliminations | (1,615) | | | | (6) | | | | (566) | | | | (2) | | | | (1,049) | | | (185) | | |
| Total Revenues | $ | 28,586 | | | | 100 | % | | | $ | 25,285 | | | | 100 | % | | | $ | 3,301 | | | 13 | % | |
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Segment Results of Operations - 2019 vs. 2018
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | % of Total | | | | % of Total | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | Revenues | | 2018 | | Revenues | | $ | | % | |
| Revenues: | | | | | | | | | | | | | | | | |
| TV Entertainment | $ | 11,924 |
| | | 43 | % | | | $ | 11,061 |
| | | 41 | % | | | $ | 863 |
| | 8 | % | |
| Cable Networks | 12,449 |
| | | 45 |
| | | 12,683 |
| | | 46 |
| | | (234 | ) | | (2 | ) | |
| Filmed Entertainment | 2,990 |
| | | 10 |
| | | 2,956 |
| | | 11 |
| | | 34 |
| | 1 |
| |
| Publishing | 814 |
| | | 3 |
| | | 825 |
| | | 3 |
| | | (11 | ) | | (1 | ) | |
| Corporate/Eliminations | (365 | ) | | | (1 | ) | | | (275 | ) | | | (1 | ) | | | (90 | ) | | (33 | ) | |
| Total Revenues | $ | 27,812 |
| | | 100 | % | | | $ | 27,250 |
| | | 100 | % | | | $ | 562 |
| | 2 | % | |
| | | | | | | | Increase/(Decrease) | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | 2018 | | $ | | % | | Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
| Adjusted OIBDA: | | | | | | | | | Adjusted OIBDA: | |
| TV Entertainment | $ | 2,443 |
| | $ | 2,466 |
| | $ | (23 | ) | | (1 | )% | | TV Entertainment | $ | 1,083 | | | $ | 1,857 | | | $ | (774) | | | (42) | % | |
| Cable Networks | 3,515 |
| | 4,341 |
| | (826 | ) | | (19 | ) | | Cable Networks | 3,747 | | | 3,746 | | | 1 | | | — | | |
| Filmed Entertainment | 80 |
| | (33 | ) | | 113 |
| | n/m |
| | Filmed Entertainment | 368 | | | 215 | | | 153 | | | 71 | | |
| Publishing | 143 |
| | 153 |
| | (10 | ) | | (7 | ) | | |
| Corporate/Eliminations | (449 | ) | | (433 | ) | | (16 | ) | | (4 | ) | | Corporate/Eliminations | (582) | | | (500) | | | (82) | | | (16) | | |
| Stock-based compensation | (201 | ) | | (205 | ) | | 4 |
| | 2 |
| | Stock-based compensation | (172) | | | (186) | | | 14 | | | 8 | | |
| Total Adjusted OIBDA | 5,531 |
| | 6,289 |
| | (758 | ) | | (12 | ) | | Total Adjusted OIBDA | 4,444 | | | 5,132 | | | (688) | | | (13) | | |
| Depreciation and amortization | (443 | ) | | (433 | ) | | (10 | ) | | (2 | ) | | Depreciation and amortization | (390) | | | (430) | | | 40 | | | 9 | | |
| Restructuring and other corporate matters | (775 | ) | | (490 | ) | | (285 | ) | | n/m |
| | Restructuring and other corporate matters | (100) | | | (618) | | | 518 | | | 84 | | |
| Programming charges | (589 | ) | | (162 | ) | | (427 | ) | | n/m |
| | Programming charges | — | | | (159) | | | 159 | | | n/m | |
| Gain on sale of assets | 549 |
| | — |
| | 549 |
| | n/m |
| | |
| Net gain on sales | | Net gain on sales | 2,343 | | | 214 | | | 2,129 | | | n/m | |
| Total Operating Income | $ | 4,273 |
| | $ | 5,204 |
| | $ | (931 | ) | | (18 | )% | | Total Operating Income | $ | 6,297 | | | $ | 4,139 | | | $ | 2,158 | | | 52 | % | |
n/m - not meaningful
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
| Depreciation and Amortization: | | | | | | | | |
| TV Entertainment | $ | 126 | | | $ | 162 | | | $ | (36) | | | (22) | % | |
| Cable Networks | 191 | | | 205 | | | (14) | | | (7) | | |
| Filmed Entertainment | 38 | | | 36 | | | 2 | | | 6 | | |
| Corporate | 35 | | | 27 | | | 8 | | | 30 | | |
| Total Depreciation and Amortization | $ | 390 | | | $ | 430 | | | $ | (40) | | | (9) | % | |
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | 2018 | | $ | | % | |
| Depreciation and Amortization: | | | | | | | | |
| TV Entertainment | $ | 150 |
| | $ | 160 |
| | $ | (10 | ) | | (6 | )% | |
| Cable Networks | 219 |
| | 194 |
| | 25 |
| | 13 |
| |
| Filmed Entertainment | 37 |
| | 38 |
| | (1 | ) | | (3 | ) | |
| Publishing | 5 |
| | 6 |
| | (1 | ) | | (17 | ) | |
| Corporate | 32 |
| | 35 |
| | (3 | ) | | (9 | ) | |
| Total Depreciation and Amortization | $ | 443 |
| | $ | 433 |
| | $ | 10 |
| | 2 | % | |
TV Entertainment
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
Advertising (a) | $ | 5,377 | | | $ | 4,639 | | | $ | 738 | | | 16 | % | |
Affiliate (b) | 2,803 | | | 2,614 | | | 189 | | | 7 | | |
| Streaming | 1,551 | | | 911 | | | 640 | | | 70 | | |
| Licensing and other | 3,200 | | | 2,536 | | | 664 | | | 26 | | |
| Revenues | $ | 12,931 | | | $ | 10,700 | | | $ | 2,231 | | | 21 | % | |
| | | | | | | | |
| Adjusted OIBDA | $ | 1,083 | | | $ | 1,857 | | | $ | (774) | | | (42) | % | |
| | | | | | | | |
(a) Excludes streaming advertising revenues.
(b) Excludes streaming subscription revenues.
Revenues
For 2021, revenues increased(CBS Television Network, CBS Television Studios, CBS Television Distribution, CBS Interactive, CBS Sports Network, CBS Television Stations21%, reflecting growth across all revenue streams, led by increased advertising revenues, including from CBS’ broadcasts of tentpole sporting events for which there were no comparable broadcasts in 2020, higher licensing revenues and CBS-branded streaming services CBS All Accessgrowth at Paramount+.
Advertising
The 16%increase in advertising revenues was driven by CBS’ broadcasts in 2021 of sporting events for which there were no comparable broadcasts in the prior year, including Super Bowl LV and CBSN, among others)NCAA Tournament games.
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | 2018 | | $ | | % | |
| Advertising | $ | 6,008 |
| | $ | 5,751 |
| | $ | 257 |
| | 4 | % | |
| Affiliate | 2,550 |
| | 2,082 |
| | 468 |
| | 22 |
| |
| Content licensing | 3,157 |
| | 3,006 |
| | 151 |
| | 5 |
| |
| Other | 209 |
| | 222 |
| | (13 | ) | | (6 | ) | |
| Revenues | $ | 11,924 |
| | $ | 11,061 |
| | $ | 863 |
| | 8 | % | |
| | | | | | | | | |
| Adjusted OIBDA | $ | 2,443 |
| | $ | 2,466 |
| | $ | (23 | ) | | (1 | )% | |
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Revenues
For 2019,We have the8% increase in TV Entertainment revenues reflects growth across each of rights to broadcast the segment’s main revenue streams.
Advertising
The 4%increase in advertising revenues was driven by 11% growth in CBS Network advertising, principally reflecting CBS’ broadcasts of Super Bowl LIII and the national semifinals and championship game of the NCAA Tournament, partially offset by the timing of other sporting events. Taken together these items contributed 9-percentage points of the growth in network advertising. Advertising sales at our owned television stations decreased 11%, primarily reflecting record political advertising in 2018 from the midterm elections, partially offset by the benefit from CBS’ broadcast of Super Bowl LIII. The Super Bowl is broadcast on the CBS Television Network on a rotating basis with other networks through the 2022 season under the current contract with the NFL and the national semifinalssemi-finals and championship games of the NCAA Tournament areon a rotational basis with other networks, including in 2021. Additionally, while we share the games in the preceding rounds of the NCAA Tournament with Turner each year, COVID-19 caused the cancellation of the NCAA Tournament in 2020. The increase also reflects an improved advertising market, driven by higher pricing and demand, compared with 2020, which was negatively impacted by COVID-19, and a higher level of original programming broadcast onin 2021. These increases were partially offset by lower ratings for the CBS Television Network, every other year through 2032 underlower political advertising and a 2-percentage point unfavorable impact from the current agreement with the NCAA and Turner.
Affiliate
Affiliate revenues grew 22%, primarily as a resultabsence of a 20% increase in station affiliation fees and retransmission revenues as well as subscriber growth at CBS All Access.
Content Licensing
Content licensing increased 5%, driven by higheradvertising revenues from CMG, which was sold during the productionfourth quarter of programming for third parties, including 2020.
Unbelievable and Dead to Me, and higher revenues from the licensing of library programming to SVOD providers.
Adjusted OIBDA
Adjusted OIBDA decreased 1% as a result of an increased investment in content and higher costs associated withIn 2022, the growth and expansion of our streaming services, partially offset by higher revenues.
Comparability in 2020advertising revenue comparison will be negatively affectedimpacted by the benefit in 2019 from CBS’ broadcastsabsence of the Super Bowl LIIIand the national semifinalssemi-finals and championship gamegames of the NCAA Tournament. ResultsTournament, which will be carried by other networks, reflecting the above-mentioned rotational nature of the rights to broadcast tentpole sporting events. However, comparability in 20202022 will benefit from higher political advertising revenues, mainly in the second half of the year, associated withdriven by mid-term elections.
Affiliate
Affiliate revenues increased 7%, as a result of growth in reverse compensation and retransmission fee revenues.
Streaming
Streaming revenues increased 70%, primarily reflecting subscriber growth at Paramount+, as well as advertising growth from Paramount+ and other digital video platforms.
Licensing and Other
Licensing and other revenues increased 26%, driven by the U.S. Presidential election.timing of program availabilities, primarily from the impact of production shutdowns in 2020 due to COVID-19, and a higher volume of domestic licensing, including the benefit from current year licensing arrangements for NCIS, Bull and several library titles. The increase also reflects higher licensing to Cable Networks, driven by licensing to Pluto TV and to Paramount+ internationally. The increase was partially offset by the absence of ancillary revenues from CMG.
Adjusted OIBDA
Adjusted OIBDA decreased 42% primarily reflecting our increased investment in Paramount+, including higher content and marketing costs.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Cable Networks(Showtime Networks, Nickelodeon, MTV, BET, Comedy Central, Paramount Network, Nick Jr., VH1, TV Land, CMT, Pop TV, Smithsonian Networks, ViacomCBS Networks International, Network 10, Channel 5, Telefe and Pluto TV)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
Advertising (a) | $ | 3,907 | | | $ | 3,721 | | | $ | 186 | | | 5 | % | |
Affiliate (b) | 5,591 | | | 5,409 | | | 182 | | | 3 | | |
| Streaming | 2,642 | | | 1,650 | | | 992 | | | 60 | | |
| Licensing and other | 2,060 | | | 1,809 | | | 251 | | | 14 | | |
| Revenues | $ | 14,200 | | | $ | 12,589 | | | $ | 1,611 | | | 13 | % | |
| | | | | | | | |
| Adjusted OIBDA | $ | 3,747 | | | $ | 3,746 | | | $ | 1 | | | — | % | |
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 | | 2018 | | $ | | % | |
| Advertising | $ | 5,129 |
| | $ | 5,130 |
| | $ | (1 | ) | | — | % | |
| Affiliate | 6,052 |
| | 6,294 |
| | (242 | ) | | (4 | ) | |
| Content licensing | 1,268 |
| | 1,259 |
| | 9 |
| | 1 |
| |
| Revenues | $ | 12,449 |
| | $ | 12,683 |
| | $ | (234 | ) | | (2 | )% | |
| | | | | | | | | |
| Adjusted OIBDA | $ | 3,515 |
| | $ | 4,341 |
| | $ | (826 | ) | | (19 | )% | |
Revenues
For 2019, Cable Networks2021, revenues decreased 2%increased 13%, reflecting growth across all revenue streams, led by higher streaming revenues.
Advertising
The 5% increase in advertising revenues was driven by higher international advertising, reflecting an improved advertising market, which benefited from the prior year, reflecting an unfavorablecomparison against the impact in 2020 from COVID-19, the acquisition in 2021 of Chilevisión, and the impact of foreign exchange rate changes. Taken together, the acquisition and foreign exchange rate changes contributed 2-percentage points of 2-percentage points.the growth in total advertising revenue. Domestic revenues remained substantially flatadvertising also benefited from an improved advertising market, reflecting higher pricing and demand, but declined compared with the prior year as higher advertising revenues were offset by a decline in affiliate revenues. International revenues decreased 9% mainly as a result of a 7-percentage point unfavorablelower linear impressions for our cable networks.
Affiliate
The 3% growth in affiliate revenues was primarily driven by the benefit from the launch of our basic cable networks in June 2020 and April 2021 on two vMVPDs, increases in rates, and revenues from pay-per-view boxing events, partially offset by the impact of foreign exchange rate changes.from subscriber declines.
AdvertisingThe 60% increase in streaming revenues was driven by advertising revenue growth from our free streaming service, Pluto TV, and other digital video platforms, as well as growth in subscribers for our subscription streaming services. Subscriber growth was driven by Showtime OTT, BET+ and our international streaming services, including the benefit from the launch of Paramount+ in several international markets.
Advertising
Licensing and Other
The 14% increase in licensing and other revenues remained flat compared with the prior year and included an unfavorable impact of foreign exchange rate changes of 3-percentage points. Domestic advertising revenues increased 6%, reflectingwas driven by higher revenues from AMS,which comprised approximately 19%the licensing of domestic advertising revenues in 2019,programming to streaming services, primarily Paramount+, and includes Pluto TV, which was acquired in March 2019. The domestic advertising growth also reflects higher pricing and the inclusion of the results of Pop TV. We began consolidating Pop TVin March 2019 when we acquired the 50% stake we did not own, which brought our ownership to 100%. These increases werefor consumer products, partially offset by lower linear impressions. International advertising revenues decreased 13%, mainly reflecting the unfavorable impactdomestic licensing of foreign exchange rate changes of 9-percentage points, as well as softnessSouth Park in the Australian and UK markets, partially offset by increases in pricing and political advertising in Argentina.prior year.
Affiliate revenues decreased 4%, which included a 1-percentage point unfavorable impact from foreign exchange rate changes. Domestic affiliate revenues decreased 4%, primarily driven by declines in traditional MVPD subscribers at our basic and premium cable networks. These declines were partially offset by growth from Showtime OTT, the inclusion of the results of Pop TV, and contractual rate increases under carriage agreements. International affiliate revenues decreased 6%, reflecting a 6-percentage point unfavorable impact of foreign exchange rate changes. As of December 31, 2019, Showtime subscriptions, including Showtime OTT, totaled approximately 27 million.
Content Licensing
The 1% increase in content licensing revenues, which includes the unfavorable impact of foreign exchange rate changes of 1-percentage point, was the result of increased revenues from the production of programming for third parties, including The Real World and Bellator mixed martial arts events. These increases were partially offset by lower secondary market revenue, driven by the renewal of a significant domestic licensing agreement for the Showtime original series, Dexter, in 2018.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Adjusted OIBDA
Adjusted OIBDA decreased 19%, drivenremained substantially flat as growth from advertising, affiliate, and streaming revenues was offset by lower revenues as well as increased investment inhigher content and higher advertisingmarketing costs and promotion expenses.lower profits from content licensing, reflecting the mix of titles licensed in each year.
Filmed Entertainment (Paramount Pictures, Paramount Players, Paramount Animation and Paramount Television Studios)
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 |
| 2018 |
| $ | | % | |
| Theatrical | $ | 547 |
| | $ | 744 |
| | $ | (197 | ) | | (26 | )% | |
| Home Entertainment | 623 |
| | 617 |
| | 6 |
| | 1 |
| |
| Licensing | 1,709 |
| | 1,493 |
| | 216 |
| | 14 |
| |
| Other | 111 |
| | 102 |
| | 9 |
| | 9 |
| |
| Revenues | $ | 2,990 |
| | $ | 2,956 |
| | $ | 34 |
| | 1 | % | |
| | | | | | | | | |
| Adjusted OIBDA | $ | 80 |
| | $ | (33 | ) | | $ | 113 |
| | n/m |
| |
n/m - not meaningful | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2021 | | 2020 | | $ | | % | |
| Theatrical | $ | 241 | | | $ | 180 | | | $ | 61 | | | 34 | % | |
| Licensing and other | 2,829 | | | 2,382 | | | 447 | | | 19 | | |
| Revenues | $ | 3,070 | | | $ | 2,562 | | | $ | 508 | | | 20 | % | |
| | | | | | | | |
| Adjusted OIBDA | $ | 368 | | | $ | 215 | | | $ | 153 | | | 71 | % | |
Revenues
For 2019, the 1% increase in Filmed Entertainment2021, revenues reflectsincreased 20% reflecting growth in licensing revenues partially offset by lowerand theatrical revenues. Foreign exchange rate changes had a 1-percentage point unfavorable impact on the revenue comparison.
Theatrical
The 26% decrease34% increase in theatrical revenues principally reflects a difficult comparison tothe benefit from current year releases including A Quiet Place Part II and PAW Patrol: The Movie while the prior year as a resultwas impacted by the closure or reduced capacity of movie theaters in response to COVID-19, following the release of Sonic the Hedgehog in the first quarter of 2020, and throughout the remainder of the 2018 releases of year.
Mission: Impossible - Fallout
and A Quiet Place. Theatrical revenues in 2019 benefited from the releases of Rocketman, Gemini Man
Licensing and Dora and the Lost City of Gold, as well as the continued success of the 2018 release, Bumblebee. Foreign exchange rate changes had a 1-percentage point unfavorable impact on theatrical revenues.
Home EntertainmentOther
The 1%19% increase in home entertainmentlicensing and other revenues was driven by the number and mixlicensing of titles in release. Significant 2019current year releases, includedincluding Bumblebee, Rocketman, Instant Family, and Pet Sematary, while 2018 benefited from the releases of Mission: Impossible - FalloutComing 2 America, Daddy’s Home 2Tom Clancy’sWithout Remorse and Halloween Kills to third parties, and Infinite, The SpongeBob Movie: Sponge on the Run and A Quiet Place.Rumble Changesto Paramount+, while licensing in foreign exchange rates resulted in a 1-percentage point unfavorablethe prior year was impacted by the above-mentioned impact on the revenue comparison.from COVID-19.
Licensing
The 14% growth in licensing revenues was driven by increases in licensing of film catalog titles to SVOD providers and recent releases to pay television services. Foreign exchange rate changes had a 1-percentage point unfavorable impact on licensing revenues.
Other
The 9% increase in other revenues was driven by higher studio rental revenues.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Adjusted OIBDA
Adjusted OIBDA for 2019 increased to $80 million from a loss71%, primarily the result of $33 million for 2018, principally driven by higher profits fromassociated with the licensing of film library titles. This increase was partially offset by costs associated with future film releases and higher incentive compensation costs. films.
Fluctuations in results for the Filmed Entertainmentsegment may occur as a result of the timing of the recognition of distribution costs, including print and advertising, expenses, which are generally incurred before and throughout the theatrical release of a film, while the revenues for the respective film are recognized as earned through the film’s theatrical exhibition and subsequent distribution windows.to other platforms.
Liquidity and Capital Resources
Sources and Uses of Cash
We project anticipated cash requirements for our operating, investing and financing needs as well as cash flows expected to be generated and available to meet these needs. Our operating needs include, among other items, expenditures for content for our broadcast and cable networks and streaming services, including television and film programming, sports rights, and talent contracts, as well as advertising and marketing costs to promote our content and platforms; payments for leases, interest, and income taxes, and pension funding obligations. Our
Publishing (Simon & Schuster)
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2019 |
| 2018 |
| $ | | % | |
| Revenues | $ | 814 |
| | $ | 825 |
| | $ | (11 | ) | | (1 | )% | |
| | | | | | | | | |
| Adjusted OIBDA | $ | 143 |
| | $ | 153 |
| | $ | (10 | ) | | (7 | )% | |
Revenues
For 2019, the 1% decrease in revenues primarily reflects lower print book sales, partially offset by 15% growth in digital audio sales. Bestselling titles for 2019 included Howard Stern Comes Again by Howard Stern, The Institute by Stephen King and The Pioneers by David McCullough.
Adjusted OIBDA
The 7% decrease in Adjusted OIBDA primarily reflects lower revenues and higher costs from the mix of titles.
Segment Results of Operations - 2018 vs. 2017
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | % of Total | | | | % of Total | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | Revenues | | 2017 | | Revenues | | $ | | % | |
| Revenues: | | | | | | | | | | | | | | | | |
| TV Entertainment | $ | 11,061 |
| | | 41 | % | | | $ | 10,476 |
| | | 39 | % | | | $ | 585 |
| | 6 | % | |
| Cable Networks | 12,683 |
| | | 46 |
| | | 12,479 |
| | | 47 |
| | | 204 |
| | 2 |
| |
| Filmed Entertainment | 2,956 |
| | | 11 |
| | | 3,075 |
| | | 12 |
| | | (119 | ) | | (4 | ) | |
| Publishing | 825 |
| | | 3 |
| | | 830 |
| | | 3 |
| | | (5 | ) | | (1 | ) | |
| Corporate/Eliminations | (275 | ) | | | (1 | ) | | | (325 | ) | | | (1 | ) | | | 50 |
| | 15 |
| |
| Total Revenues | $ | 27,250 |
| | | 100 | % | | | $ | 26,535 |
| | | 100 | % | | | $ | 715 |
| | 3 | % | |
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | 2017 | | $ | | % | |
| Adjusted OIBDA: | | | | | | | | |
| TV Entertainment | $ | 2,466 |
| | $ | 2,301 |
| | $ | 165 |
| | 7 | % | |
| Cable Networks | 4,341 |
| | 4,442 |
| | (101 | ) | | (2 | ) | |
| Filmed Entertainment | (33 | ) | | (187 | ) | | 154 |
| | 82 |
| |
| Publishing | 153 |
| | 146 |
| | 7 |
| | 5 |
| |
| Corporate/Eliminations | (433 | ) | | (442 | ) | | 9 |
| | 2 |
| |
| Stock-based compensation | (205 | ) | | (220 | ) | | 15 |
| | 7 |
| |
| Total Adjusted OIBDA | 6,289 |
| | 6,040 |
| | 249 |
| | 4 |
| |
| Depreciation and amortization | (433 | ) | | (443 | ) | | 10 |
| | 2 |
| |
| Restructuring and other corporate matters | (490 | ) | | (258 | ) | | (232 | ) | | n/m |
| |
| Programming charges | (162 | ) | | (144 | ) | | (18 | ) | | n/m |
| |
| Gain on sale of assets | — |
| | 146 |
| | (146 | ) | | n/m |
| |
| Total Operating Income | $ | 5,204 |
| | $ | 5,341 |
| | $ | (137 | ) | | (3 | )% | |
n/m - not meaningful
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | 2017 | | $ | | % | |
| Depreciation and Amortization: | | | | | | | | |
| TV Entertainment | $ | 160 |
| | $ | 163 |
| | $ | (3 | ) | | (2 | )% | |
| Cable Networks | 194 |
| | 193 |
| | 1 |
| | 1 |
| |
| Filmed Entertainment | 38 |
| | 42 |
| | (4 | ) | | (10 | ) | |
| Publishing | 6 |
| | 6 |
| | — |
| | — |
| |
| Corporate | 35 |
| | 39 |
| | (4 | ) | | (10 | ) | |
| Total Depreciation and Amortization | $ | 433 |
| | $ | 443 |
| | $ | (10 | ) | | (2 | )% | |
investing and financing spending includes capital expenditures, investments and acquisitions, share repurchases, dividends and principal payments on our outstanding indebtedness. We believe that our operating cash flows, cash and cash equivalents, borrowing capacity under our $3.50 billion Credit Facility described below, as well as access to capital markets are sufficient to fund our operating, investing and financing requirements for the next twelve months. TV Entertainment
Our funding for short-term and long-term obligations, including our long-term debt obligations (see Note 10), as well as our long term operating commitments, including for programming and talent (see Note 20) and lease obligations (see Note 11), will come primarily from cash flows from operating activities, proceeds from non-core asset sales, including the planned sale of Simon & Schuster described below, as well as our ability to refinance our debt. We also increased our liquidity position with the proceeds from our first quarter 2021 stock offerings described below, and the fourth quarter sales of 51 West 52nd Street for $760 million, and CBS Studio Center for $1.85 billion. Any additional cash funding requirements are financed with short-term borrowings, including commercial paper, and long-term debt. To the extent that commercial paper is not available to us, the Credit Facility provides sufficient capacity to satisfy short-term borrowing needs. We routinely assess our capital structure and opportunistically enter into transactions to lower our interest expense, which could result in a charge from the early extinguishment of debt.
During 2020, we entered into an agreement to sell Simon & Schuster for $2.175 billion in cash, and expect to use proceeds from the sale to invest in our strategic growth priorities, including in streaming, as well as to fund dividends and pay down debt. On November 2, 2021, the U.S. Department of Justice filed suit to block the sale. The purchase agreement contains commitments on the part of the purchaser to take all necessary steps to obtain any required regulatory approvals and to defend any litigation that would delay or prevent consummation, and also provides for a termination fee payable to us in certain circumstances in the event the transaction does not close for regulatory reasons (see Legal Matters(CBS Television Network, CBS Television Studios, CBS Television Distribution, CBS Interactive, CBS Sports Network, CBS Television Stations).
On March 26, 2021, we completed offerings of 20 million shares of our Class B Common Stock at a price to the public of $85 per share and CBS-branded streaming services CBS All Access10 million shares of 5.75% Series A Mandatory Convertible Preferred Stock at a price to the public and CBSN, among others)liquidation preference of $100 per share. The net proceeds from the Class B Common Stock offering and the Mandatory Convertible Preferred Stock offering were approximately $1.67 billion and $983 million, respectively, in each case after deducting underwriting discounts, commissions and estimated offering expenses. We have used and intend to continue to use the net proceeds for general corporate purposes, including investments in streaming.
If declared, dividends on the Mandatory Convertible Preferred Stock are payable quarterly through April 1, 2024. Dividends on the Mandatory Convertible Preferred Stock accumulate from the most recent dividend payment date, and will be payable on a cumulative basis when, as and if declared by our Board of Directors, or an authorized committee thereof, at an annual rate of 5.75% of the liquidation preference of $100 per share, payable in cash or, subject to certain limitations, by delivery of shares of Class B Common Stock or through any combination of cash and shares of Class B Common Stock, at our election.
Our access to capital markets can be impacted by factors outside our control, including economic conditions; however, we believe that our strong cash flows and balance sheet, our credit facility and our credit rating will provide us with adequate access to funding for our expected cash needs. The cost of any new borrowings are affected by market conditions and short and long-term debt ratings assigned by independent rating agencies, and there can be no assurance that we will be able to access capital markets on terms and conditions that will be favorable to us.
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | 2017 | | $ | | % | |
| Advertising | $ | 5,751 |
| | $ | 5,696 |
| | $ | 55 |
| | 1 | % | |
| Affiliate | 2,082 |
| | 1,674 |
| | 408 |
| | 24 |
| |
| Content licensing | 3,006 |
| | 2,880 |
| | 126 |
| | 4 |
| |
| Other | 222 |
| | 226 |
| | (4 | ) | | (2 | ) | |
| Revenues | $ | 11,061 |
| | $ | 10,476 |
| | $ | 585 |
| | 6 | % | |
| | | | | | | | | |
| Adjusted OIBDA | $ | 2,466 |
| | $ | 2,301 |
| | $ | 165 |
| | 7 | % | |
Revenues
For 2018, the 6% increase in TV Entertainment revenues reflects growth across each of the segment’s main revenue streams.
Advertising
The 1% increase in advertising revenues was driven by record political advertising sales associated with the 2018 midterm elections, partially offset by the absence of
Thursday Night Football and the national semifinals and championship game of the NCAA Tournament, which were broadcast by CBS in 2017. TV Entertainment advertising revenues also benefited from the adoption of a new revenue recognition standard in the first quarter of 2018, under which revenues for certain distribution arrangements are recognized based on the gross amount of consideration
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
received from the customer, with an offsetting increase to participation expense. Under previous accounting guidance, such revenues were recognized at the net amount retained by us after the payment of fees to the third party. This guidance was applied prospectively from the date of adoption and therefore, amounts for 2017 are reported under previous accounting guidance.
Affiliate
Affiliate revenues grew 24% as a result of a 22% increase in station affiliation fees and retransmission revenues as well as subscriber growth at CBS All Access.
Content Licensing
Content licensing increased 4%, primarily reflecting higher international licensing and the impact of the aforementioned adoption of a new revenue recognition standard in 2018, which resulted in higher revenues under certain distribution arrangements, with an offsetting increase to operating expenses. These increases were partially offset by lower domestic licensing, as 2017 included the licensing of NCIS: New Orleans, Madam Secretary and titles from the CSI franchise.
Adjusted OIBDA
Adjusted OIBDA increased 7% as a result of higher revenues and lower programming costs associated with the absence of CBS’s broadcast of Thursday Night Football, partially offset by an increased investment in content and digital initiatives.
Cable Networks (Showtime Networks, Nickelodeon, MTV, BET, Comedy Central, Paramount Network, Nick Jr., VH1, TV Land, CMT, Smithsonian Networks, ViacomCBS Networks International, Network 10, Channel 5 and Telefe)
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 | | 2017 | | $ | | % | |
| Advertising | $ | 5,130 |
| | $ | 4,947 |
| | $ | 183 |
| | 4 | % | |
| Affiliate | 6,294 |
| | 6,479 |
| | (185 | ) | | (3 | ) | |
| Content licensing | 1,259 |
| | 1,053 |
| | 206 |
| | 20 |
| |
| Revenues | $ | 12,683 |
| | $ | 12,479 |
| | $ | 204 |
| | 2 | % | |
| | | | | | | | | |
| Adjusted OIBDA | $ | 4,341 |
| | $ | 4,442 |
| | $ | (101 | ) | | (2 | )% | |
Revenues
For 2018, the 2% increase in Cable Networks revenues was driven by 15% growth in international revenues, reflecting growth across each of the segment’s revenue streams. Domestic revenues decreased 2%, driven by lower affiliate revenues and advertising revenues, partially offset by increased content licensing revenues. International revenues included a 3-percentage point unfavorable impact from foreign exchange rate changes.
Advertising
Advertising revenues increased 4%, driven by 26% higher international revenues as a result of the acquisition of Network 10 in the fourth quarter of 2017, partially offset by an unfavorable impact from foreign exchange rate changes of 5-percentage points. Domestic advertising revenues decreased 4%, principally reflecting lower linear impressions, partially offset by higher pricing and growth in revenues from AMS.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Affiliate
The 3% decrease in affiliate revenues was the result of a 4% decrease in domestic revenues, reflecting the benefit to 2017 from Showtime Networks’distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event and declines in traditional MVPD subscribers at our basic cable networks. Growth from Showtime OTT and contractual rate increases partially offset the decline. As ofAt December 31, 2018, Showtimesubscriptions,2021, we had $2.36 billion of remaining availability under our share repurchase program. Any share repurchases under the program are expected to be funded by cash flows from operations and, as appropriate, with short-term borrowings, including Showtime OTT, totaled approximately 27 million. International affiliate revenues increased 6%, driven bycommercial paper, and/or the acquisitionissuance of Network 10, as well as subscriber growth and new channel launches. International affiliate revenues included a 1-percentage point unfavorable impact of foreign exchange rate changes.long-term debt.
Content Licensing
Content licensing revenues increased 20% reflecting higher revenues from the licensing of original programming from our basic cable networks and Showtime, including the renewal of Dexter, as well as the benefit to 2018 from SpongeBob SquarePants: The Broadway Musical.
Adjusted OIBDA
Adjusted OIBDA decreased 2%, driven by an increased investment in content and growth initiatives, partially offset by the revenue growth and lower expenses resulting from cost transformation initiatives.
Filmed Entertainment (Paramount Pictures, Paramount Players, Paramount Animation and Paramount Television Studios)
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 |
| 2017 |
| $ | | % | |
| Theatrical | $ | 744 |
| | $ | 716 |
| | $ | 28 |
| | 4 | % | |
| Home Entertainment | 617 |
| | 789 |
| | (172 | ) | | (22 | ) | |
| Licensing | 1,493 |
| | 1,468 |
| | 25 |
| | 2 |
| |
| Other | 102 |
| | 102 |
| | — |
| | — |
| |
| Revenues | $ | 2,956 |
| | $ | 3,075 |
| | $ | (119 | ) | | (4 | )% | |
| | | | | | | | | |
| Adjusted OIBDA | $ | (33 | ) | | $ | (187 | ) | | $ | 154 |
| | 82 | % | |
Revenues
For 2018, Filmed Entertainment revenues decreased 4% reflecting lower home entertainment revenues, partially offset by increases in theatrical and licensing revenues.
Theatrical
Theatrical revenues increased 4%, principally reflecting the 2018 release of Mission: Impossible - Fallout. Other significant 2018 releasesincluded A Quiet Place and Bumblebee. Significant releases in 2017 included Transformers: The Last Knight, xXx: Return of Xander Cage, Daddy’s Home 2 and Baywatch. Foreign exchange rate changes had a 1-percentage point unfavorable impact on theatrical revenues.
Home Entertainment
Home entertainment revenues decreased 22% in 2018, primarily reflecting the number and mix of titles in release. Significant 2018 releases included Mission: Impossible - Fallout, Daddy’s Home 2 and A Quiet Place compared to Transformers: The Last Knight, Jack Reacher: Never Go Back and Arrival in 2017.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Licensing
Licensing revenues increased 2% in 2018, driven by higher revenues from the production of programming for third parties, including Tom Clancy’s Jack Ryan, Maniac, The Haunting of Hill House and The Cloverfield Paradox.
Adjusted OIBDA
Adjusted OIBDA for Filmed Entertainment was a loss of $33 million in 2018 compared with a loss of $187 million in 2017, an improvement of 82%, reflecting lower print and advertising expenses, primarily driven by the number and mix of theatrical releases and a charge resulting from the termination of a slate financing agreement in 2017. Fluctuations in results for the Filmed Entertainment segment may occur as a result of the timing of the recognition of print and advertising expenses, which are generally incurred before and throughout the theatrical release of a film, while the revenues for the respective film are recognized as earned through the film’s theatrical exhibition and subsequent distribution windows.
Publishing (Simon & Schuster)
|
| | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
| Year Ended December 31, | 2018 |
| 2017 |
| $ | | % | |
| Revenues | $ | 825 |
| | $ | 830 |
| | $ | (5 | ) | | (1 | )% | |
| | | | | | | | | |
| Adjusted OIBDA | $ | 153 |
| | $ | 146 |
| | $ | 7 |
| | 5 | % | |
Revenues
For 2018, the 1%decrease in revenues primarily reflects lower sales of print and electronic books, partially offset by 20% growth in digital audio sales. Bestselling titles for 2018 included Fear: Trump in the White House by Bob Woodward, The Outsider by Stephen King and Whiskey in a Teacup by Reese Witherspoon.
Adjusted OIBDA
The 5% increasein Adjusted OIBDA mainly reflects lower production costs.
Cash Flows
The changes in cash, cash equivalents and restricted cash were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase/ (Decrease) | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2021 vs. 2020 | | | | |
| Net cash flow provided by operating activities from: | | | | | | | | | | | | | |
| Continuing operations | $ | 835 | | | $ | 2,215 | | | | $ | (1,380) | | | | | | | | |
| Discontinued operations | 118 | | | 79 | | | | 39 | | | | | | | | |
| Net cash flow provided by operating activities | 953 | | | 2,294 | | | | (1,341) | | | | | | | | |
| Net cash flow provided by (used for) investing activities from: | | | | | | | | | | | | | |
| Continuing operations | 2,402 | | | 63 | | | | 2,339 | | | | | | | | |
| Discontinued operations | (7) | | | (7) | | | | — | | | | | | | | |
| Net cash flow provided by investing activities | 2,395 | | | 56 | | | | 2,339 | | | | | | | | |
| Net cash flow used for financing activities | (152) | | | (90) | | | | (62) | | | | | | | | |
| Effect of exchange rate changes on cash and cash equivalents | (48) | | | 25 | | | | (73) | | | | | | | | |
| Net increase in cash, cash equivalents and restricted cash | $ | 3,148 | | | $ | 2,285 | | | | $ | 863 | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Increase/ (Decrease) | | | | Increase/ (Decrease) |
| Year Ended December 31, | 2019 |
| 2018 |
| 2019 vs. 2018 | | 2017 | | 2018 vs. 2017 |
| Cash provided by operating activities from: | | | | | | | | | | | | | |
| Continuing operations | $ | 1,230 |
| | $ | 3,463 |
| | | $ | (2,233 | ) | | | $ | 2,345 |
| | | $ | 1,118 |
| |
| Discontinued operations | — |
| | 1 |
| | | (1 | ) | | | 94 |
| | | (93 | ) | |
| Cash provided by operating activities | 1,230 |
| | 3,464 |
| | | (2,234 | ) | | | 2,439 |
| | | 1,025 |
| |
| Cash (used for) provided by investing activities from: | | | | | | | | | | | | | |
| Continuing operations | (153 | ) | | (588 | ) | | | 435 |
| | | 150 |
| | | (738 | ) | |
| Discontinued operations | (2 | ) | | (23 | ) | | | 21 |
| | | (24 | ) | | | 1 |
| |
| Cash (used for) provided by investing activities | (155 | ) | | (611 | ) | | | 456 |
| | | 126 |
| | | (737 | ) | |
| Cash used for financing activities | (1,216 | ) | | (2,531 | ) | | | 1,315 |
| | | (3,009 | ) | | | 478 |
| |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1 | ) | | (25 | ) | | | 24 |
| | | 58 |
| | | (83 | ) | |
Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (142 | ) | | $ | 297 |
| | | $ | (439 | ) | | | $ | (386 | ) | | | $ | 683 |
| |
Cash paid for income taxes from continuing operations decreased to $291 million for 2021 from $411 million for 2020 primarily due to a higher volume of production incentives received, lower adjusted earnings from continuing operations before income taxes and a higher deduction associated with the exercise and vesting of stock-based compensation, partially offset by higher tax payments associated with gains from dispositions, primarily from the sale of CBS Studio Center in 2021.
Cash flow provided by operating activities from discontinued operations reflects the operating activities of Simon & Schuster.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Operating Activities. The decrease in cash provided by operating activities from continuing operations for 2019 compared with 2018 was primarily driven by an increased investment in television and film programming, higher payments for income taxes and payments of $132 million associated with costs related to the Merger. Operating cash flow for 2019 and 2018 also included payments for restructuring activities of $234 million and $219 million, respectively.
The increase in cash provided by operating activities from continuing operations for 2018 compared with 2017 was primarily driven by lower cash payments for income taxes and growth in affiliate revenues, which were partially offset by an increased investment in television and film programming. Operating cash flow for 2017 also included discretionary pension contributions of $600 million to prefund our qualified pension plans.
Cash provided by operating activities from discontinued operations primarily reflected the operating activities of CBS Radio. Operating activities from discontinued operations also included payments and refunds for tax matters in foreign jurisdictions related to previously disposed businesses that are accounted for as discontinued operations.
The increase in cash payments for income taxes for 2019 compared to 2018 was primarily due to a payment in 2019 as a result of guidance issued by the United States government in January 2019 relating to the transition tax on cumulative foreign earnings and profits that resulted from the enactment of federal tax legislation in December 2017. In addition, cash taxes for 2018 benefited from the application of a federal income tax overpayment carryforward from 2017.
The decrease in cash payments for income taxes for 2018 compared to 2017 reflects the benefit from a federal income tax overpayment, which included the impact from the retroactive renewal of a federal tax law.
Investing Activities
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 |
| 2018 |
| 2017 |
Investments (a) | $ | (171 | ) | | $ | (161 | ) | | $ | (128 | ) |
| Capital expenditures | (353 | ) | | (352 | ) | | (356 | ) |
Acquisitions, net of cash acquired (b) | (399 | ) | | (118 | ) | | (289 | ) |
Proceeds from dispositions (c) | 756 |
| | 39 |
| | 892 |
|
| Other investing activities from continuing operations | 14 |
| | 4 |
| | 31 |
|
Cash flow (used for) provided by investing activities from continuing operations | (153 | ) | | (588 | ) | | 150 |
|
| Cash flow used for investing activities from discontinued operations | (2 | ) | | (23 | ) | | (24 | ) |
| Cash flow (used for) provided by investing activities | $ | (155 | ) | | $ | (611 | ) | | $ | 126 |
|
| | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | |
Investments (a) | $ | (193) | | | $ | (59) | | | |
Capital expenditures (b) | (354) | | | (324) | | | |
Acquisitions, net of cash acquired (c) | (54) | | | (147) | | | |
Proceeds from dispositions (d) | 3,028 | | | 593 | | | |
| Other investing activities | (25) | | | — | | | |
| Net cash flow provided by investing activities from continuing operations | 2,402 | | | 63 | | | |
| Net cash flow used for investing activities from discontinued operations | (7) | | | (7) | | | |
| Net cash flow provided by investing activities | $ | 2,395 | | | $ | 56 | | | |
(a) Primarily includes our investment in The CW.
(b) 2019Includes payments for costs to achieve synergies of $68 million and $40 million for 2021 and 2020, respectively.
(c) 2021 reflects the acquisitions of Chilevisión, a free-to-air television channel, and a controlling interest in Fox TeleColombia & Estudios TeleMexico, a Spanish language content producer. 2020 primarily reflects the acquisition of Pluto Inc.Miramax, a global film and the remaining 50% interest in Pop TV, a general entertainment cable network. 2018television studio.
(d) 2021 primarily reflects proceeds received from the acquisitions of WhoSay Inc., a leading influence marketing firm, Pop Culture Media, a digital entertainment media company, and VidCon LLC, a host of conferences dedicated to online video. 2017 primarily reflects the acquisition of Network 10, one of three major commercial broadcast networks in Australia, and the acquisition of a television library.
(c) 2019 primarily reflects the salesales of CBS Television City. 2017 primarily reflectsStudio Center and51 West 52nd Street. 2021 also includes proceeds received from the sale of our 49.76% interestinvestment in EPIXfuboTV during the fourth quarter of 2020, and proceeds received from the salesales of broadcast spectruma noncore trademark licensing operation and other investments. 2020 reflects the sales of CMG and marketable securities.
Financing Activities
| | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | |
| Repayments of short-term debt borrowings, net | $ | — | | | $ | (706) | | | |
| Proceeds from issuance of senior notes | — | | | 4,375 | | | |
| Repayment of long-term debt | (2,230) | | | (2,901) | | | |
| Dividends paid on preferred stock | (30) | | | — | | | |
| Dividends paid on common stock | (617) | | | (600) | | | |
| Proceeds from issuance of preferred stock | 983 | | | — | | | |
| Proceeds from issuance of common stock | 1,672 | | | — | | | |
| Purchase of Company common stock | — | | | (58) | | | |
| Payment of payroll taxes in lieu of issuing shares for stock-based compensation | (110) | | | (93) | | | |
| Proceeds from exercise of stock options | 408 | | | 5 | | | |
| Payments to noncontrolling interests | (235) | | | (59) | | | |
| Other financing activities | 7 | | | (53) | | | |
| Net cash flow used for financing activities | $ | (152) | | | $ | (90) | | | |
Dividends
We declared a quarterly cash dividend on our Class A and Class B Common Stock during each of the quarters of 2021 and 2020. During each of the years ended December 31, 2021 and 2020, we declared total per share dividends of $.96, resulting in connection withtotal annual dividends of $625 million and $601 million, respectively. On December 19, 2019, we declared a quarterly cash dividend of $.24 per share on our Class A and Class B Common Stock, resulting in total dividends of $150 million. Prior to the FCC’s broadcast spectrum auction.Merger, Viacom and CBS each declared a quarterly cash dividend during each of the first three quarters of 2019. During the first three quarters of 2019, CBS declared total per share dividends of $.54, resulting in total dividends of $205 million. During the first three quarters of 2019, Viacom declared total per share dividends of $.60, resulting in total dividends of $245 million.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Financing Activities
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| Proceeds from (repayments of) short-term debt borrowings, net | $ | 25 |
| | $ | (5 | ) | | $ | 229 |
|
| Proceeds from issuance of senior notes | 492 |
| | — |
| | 3,157 |
|
| Repayment of notes and debentures | (910 | ) | | (1,102 | ) | | (4,729 | ) |
| Dividends | (595 | ) | | (599 | ) | | (616 | ) |
| Repurchase of the Company’s Class B Common Stock | (57 | ) | | (586 | ) | | (1,111 | ) |
Payment of payroll taxes in lieu of issuing shares for
stock-based compensation | (56 | ) | | (67 | ) | | (103 | ) |
| Proceeds from exercise of stock options | 15 |
| | 29 |
| | 263 |
|
| Other financing activities | (130 | ) | | (201 | ) | | (99 | ) |
| Cash flow used for financing activities | $ | (1,216 | ) | | $ | (2,531 | ) | | $ | (3,009 | ) |
Free Cash Flow
FreeDuring each of the third and fourth quarters of 2021, we declared quarterly cash flow isdividends of $1.4375 per share on our Mandatory Convertible Preferred Stock. During the second quarter of 2021, we declared a non-GAAP financial measure. Free cash flow reflectsdividend of $1.5493 per share on our net cash flow provided by (used for) operating activities before operating cash flowMandatory Convertible Preferred Stock, representing a dividend period from discontinued operations, and less capital expenditures. Our calculation of free cash flow includes capital expenditures because investment in capital expenditures is a use of cash that is directly related to our operations. Our net cash flow provided by (used for) operating activities is the most directly comparable GAAP financial measure.
Management believes free cash flow provides investors with an important perspectiveMarch 26, 2021 through July 1, 2021. Accordingly, we recorded dividends on the cash available to us to service debt, make strategic acquisitions and investments, maintain our capital assets, satisfy our tax obligations, and fund ongoing operations and working capital needs. As a result, free cash flow is a significant measureMandatory Convertible Preferred Stock of our ability to generate long-term value. It is useful for investors to know whether this ability is being enhanced or degraded as a result of our operating performance. We believe$44.2 million during the presentation of free cash flow is relevant and useful for investors because it allows investors to evaluate the cash generated from our underlying operations in a manner similar to the method used by management. Free cash flow is among several components of incentive compensation targets for certain management personnel. In addition, free cash flow is a primary measure used externally by our investors, analysts and industry peers for purposes of valuation and comparison of our operating performance to other companies in our industry.year ended December 31, 2021.
As free cash flow is not a measure calculated in accordance with GAAP, free cash flow should not be considered in isolation of, or as a substitute for, either net cash flow provided by operating activities as a measure of liquidity or net earnings (loss) as a measure of operating performance. Free cash flow, as we calculate it, may not be comparable to similarly titled measures employed by other companies. In addition, free cash flow as a measure of liquidity has certain limitations, does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs.
The following table presents a reconciliation of our net cash flow provided by operating activities to free cash flow.
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| Net cash flow provided by operating activities (GAAP) | $ | 1,230 |
| | $ | 3,464 |
| | $ | 2,439 |
|
| Capital expenditures | (353 | ) | | (352 | ) | | (356 | ) |
| Less: Operating cash flow from discontinued operations | — |
| | 1 |
| | 94 |
|
| Free cash flow (Non-GAAP) | $ | 877 |
| | $ | 3,111 |
| | $ | 1,989 |
|
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Dividends
On December 19, 2019, ViacomCBSFebruary 10, 2022, we declared a quarterly cash dividend of $.24 per share on its Class A and Class B Common Stock, resulting in total dividends of $150 million, which were paid on January 10, 2020. Prior to the Merger, Viacom and CBS each declared a quarterly cash dividend during each of the first three quarters of 2019 and during each of the four quarters of 2018 and 2017. During 2019, CBS declared total per share dividends of $.54, resulting in total dividends of $205 million. For each of the years ended December 31, 2018 and 2017, CBS declared total per share dividends of $.72, resulting in total annual dividends of $274 million and $289 million, respectively. During 2019, Viacom declared total per share dividends of $.60, resulting in total dividends of $245 million. For each of the years ended December 31, 2018 and 2017, Viacom declared total per share dividends of $.80, resulting in total annual dividends of $325 million and $323 million, respectively.
On February 12, 2020, ViacomCBS declared a quarterly cash dividend of $.24 per share on itsour Class A and Class B Common Stock, payable on April 1, 2020. 2022. At the same time, we also declared a quarterly cash dividend of $1.4375 per share on our Mandatory Convertible Preferred Stock, payable on April 1, 2022.
Share Repurchase Program
During December 2019, we repurchased 1.2 million shares of ViacomCBS Class B Common Stock under our share repurchase program for $50 million, at an average cost of $40.78 per share. At December 31, 2019, $2.41 billion of authorization remained under the share repurchase program.
Capital Structure
The following table sets forth our debt.
| | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
| | | |
| Senior debt (2.250%-7.875% due 2022-2050) | $ | 16,501 | | | $ | 18,455 | |
| Junior debt (5.875% and 6.250% due 2057) | 1,157 | | | 1,157 | |
| Other bank borrowings | 35 | | | 95 | |
| Obligations under finance leases | 16 | | | 26 | |
Total debt (a) | 17,709 | | | 19,733 | |
| | | |
| Less current portion of long-term debt | 11 | | | 16 | |
| Total long-term debt, net of current portion | $ | 17,698 | | | $ | 19,717 | |
|
| | | | | | | |
| At December 31, | 2019 | | 2018 |
| Commercial paper | $ | 699 |
| | $ | 674 |
|
| Senior debt (2.30%-7.875% due 2019-2045) | 16,690 |
| | 17,086 |
|
| Junior debt (5.875%-6.250% due 2057) | 1,286 |
| | 1,284 |
|
| Obligations under finance leases | 44 |
| | 69 |
|
Total debt (a) | 18,719 |
| | 19,113 |
|
| Less commercial paper | 699 |
| | 674 |
|
| Less current portion of long-term debt | 18 |
| | 339 |
|
| Total long-term debt, net of current portion | $ | 18,002 |
| | $ | 18,100 |
|
| |
(a) | (a) At December 31, 2019 and 2018, the senior and junior subordinated debt balances included (i) a net unamortized discount of $412 million and $422 million, respectively, (ii) unamortized deferred financing costs of $92 million and $98 million, respectively, and (iii) a decrease in the carrying value of the debt relating to previously settled fair value hedges of $6 million and $5 million, respectively. The face value of our total debt was $19.23 billion at December 31, 2019 and $19.64 billion at December 31, 2018. |
During the year ended December 31, 2019, we issued $5002021 and 2020, the senior and junior subordinated debt balances included (i) a net unamortized discount of $466 million and $491 million, respectively, and (ii) unamortized deferred financing costs of 4.20% senior notes due 2029. We used the net proceeds from this issuance in the redemption$95 million and $107 million, respectively. The face value of our $600 million outstanding 2.30% senior notes due August 2019. During 2019, we also repaid the $220 million aggregate principal amount of our 5.625% senior notes due September 2019total debt was $18.27 billion at December 31, 2021 and the $90 million aggregate principal amount of our 2.75% senior notes due$20.33 billion at December 2019.31, 2020.
During the year ended December 31, 2018,2021, we redeemed $1.13 billion of senior notes and debenturestotaling $1.99 billion, prior to maturity, for aan aggregate redemption price of $1.10$2.11 billion resulting in a pre-tax gainloss on early extinguishment of debt of $18 million ($14 million, net of tax).$128 million.
During the year ended December 31, 2017,2020, we issued $3.10$4.50 billion of senior notes and junior subordinated debentures. Also during 2017, we redeemed and repaid $4.67used the net proceeds from these issuances for the redemption of long-term debt totaling $2.77 billion, of senior notes, of which $4.27 billion was
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
redeemed prior to maturity, resultingfor an aggregate redemption price of $2.88 billion, as well as for general corporate purposes. The early redemption resulted in a pre-tax loss on early extinguishment of debt for the year ended December 31, 2020 of $38 million ($21 million, net of tax).$126 million.
Our 5.875% junior subordinated debentures due February 2057 and 6.25% junior subordinated debentures due February 2057 accrue interest at the stated fixed rates until February 28, 2022 and February 28, 2027, respectively, on which dates the rates will switch to floating rates based on three-month LIBOR plus 3.895% and 3.899%, respectively, reset quarterly. These debentures can be called by us at any time after the expiration of the fixed-rate period. In January 2022, we delivered notice that we will be calling our 5.875% junior subordinated debentures due February 2057 in full on February 28, 2022.
The subordination, interest deferral option and extended term of the junior subordinated debentures provide significant credit protection measures for senior creditors and, as a result of these features, the debentures received a 50% equity credit by Standard & Poor’s Rating Services and Fitch Ratings Inc., and a 25% equity credit by Moody’s Investors Service, Inc.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
The interest rate payable on our 2.25% senior notes due February 2022 and 3.45% senior notes due October 2026, collectively the “Senior Notes”, will be subject to adjustment from time to time if Moody’s InvestorsInvestor Services, Inc. or S&P Global Ratings downgrades (or downgrades and subsequently upgrades) the credit rating assigned to the Senior Notes.these senior notes. The interest rate on these Senior Notessenior notes would increase by 0.25% upon each credit agency downgrade up to a maximum of 2.00%, and would similarly be decreased for subsequent upgrades. At December 31, 2019,2021, the outstanding principal amount of our 2.25%these senior notes due February 2022 and 3.45% senior notes due October 2026 was $50 million and $124 million, respectively.million.
Some of our outstanding notes and debentures provide for certain covenant packages typical for an investment grade company. There is an acceleration trigger for the majority of the notes and debentures in the event of a change in control under specified circumstances coupled with ratings downgrades due to the change in control, as well as certain optional redemption provisions for our junior debentures.
WeCommercial Paper
At both December 31, 2021 and 2020, we had no outstanding commercial paper borrowings under our $2.50 billion commercial paper program of $699 million and $674 million at December 31, 2019 and 2018, respectively, each with maturities of less than 90 days. The weighted average interest rate for these borrowings was 2.07% and 3.02% at December 31, 2019 and 2018, respectively.borrowings.
In January 2020, our commercial paper program was increased to $3.50 billion in conjunction with the new $3.50 billion revolving credit facility described below.
Credit Facility
At December 31, 2019,2021, we had a $2.50 billion revolving credit facility held by CBS prior to the Merger (the “CBS Credit Facility”) with a maturity in June 2021 and a $2.50 billion revolving credit facility held by Viacom prior to the Merger (the “Viacom Credit Facility”), with a maturity in February 2024. At December 31, 2019, we had no borrowings outstanding under the CBS Credit Facility or the Viacom Credit Facility and the remaining availability, net of outstanding letters of credit, was $2.50 billion for each facility.
In January 2020, the CBS Credit Facility was terminated and the Viacom Credit Facility was amended and restated to a $3.50 billion revolving credit facility with a maturity in January 2025 (the “Credit Facility”). The Credit Facility is used for general corporate purposes and to support commercial paper outstanding,borrowings, if any. We may, at our option, also borrow in certain foreign currencies up to specified limits under the Credit Facility. Borrowing rates under the Credit Facility are determined at our option at the time of each borrowing and are generally based generally on either the prime rate in the U.S. or LIBORan applicable benchmark rate plus a margin based(based on our senior unsecured debt rating.rating), depending on the type and tenor of the loans entered. During the fourth quarter of 2021, the Credit Facility was amended to replace LIBOR as the benchmark rate for loans denominated in euros, sterling and yen with EURIBOR, SONIA and TIBOR-based rates, respectively, as publication of all non-USD LIBOR tenors has been discontinued after December 31, 2021. The Credit Facility has one principal financial covenant that requires our Consolidated Total Leverage Ratio to be less than 4.5x (which we may elect to increase to 5.0x for up to four consecutive
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
quarters following a qualified acquisition) at the end of each quarter, to be applied retrospectively from December 31, 2019.quarter. The Consolidated Total Leverage Ratio reflects the ratio of our Consolidated Indebtedness at the end of a quarter, to our Consolidated EBITDA (each as defined in the amended credit agreement) for the trailing twelve-month period. We met thisthe covenant as of December 31, 2019.
Liquidity and Capital Resources
We project anticipated cash requirements for2021. On February 14, 2022, we further amended our operating, investing and financing needs as well as cash flows generated from operating activities availableCredit Facility to meet these needs. Our operating needs include, among other items, commitments for sports programming rights, television and film programming, talent contracts, leases, interest payments, income taxes payments and pension funding obligations. Our investing and financing spending includes capital expenditures, investments and acquisitions, share repurchases, dividends and principal payments on our outstanding indebtedness.
We believe that our operating cash flows,modify the definition of the Consolidated Total Leverage Ratio in the amended credit agreement to allow unrestricted cash and cash equivalents borrowing capacity under the $3.50 billion Credit Facility, and access to capital markets are sufficient to fund our operating, investing and financing requirements for the next twelve months.be netted against Consolidated Indebtedness through June 2024.
Our funding for short-term and long-term obligations will come primarily from cash flows from operating activities. Any additional cash funding requirements are financed with short-term borrowings, including commercial paper, and long-term debt. To the extent that commercial paper is not available to us, the Credit Facility provides sufficient capacity to satisfy short-term borrowing needs. We routinely assess our capital structure and opportunistically enter into transactions to lower our interest expense, which could result in a charge from the early extinguishment of debt.
Funding for our long-term debt obligations due over the next five years of $5.90 billion is expected to come from our ability to refinance our debt and cash generated from operating activities.
Our access to capital markets can be impacted by factors outside our control, including economic conditions; however, we believe that our strong cash flows and balance sheet, our credit facility and our credit rating will provide us with adequate access to funding for our expected cash needs. The cost of any new borrowings are affected by market conditions and short and long-term debt ratings assigned by independent rating agencies, and there can be no assurance that we will be able to access capital markets on terms and conditions that will be favorable to us.
At December 31, 2019,2021, we had $2.41 billion ofno borrowings outstanding under the Credit Facility and the remaining availability under our share repurchase program. Share repurchases under the program are expected to be funded by cash flows from operations and, as appropriate, with short-term borrowings, including commercial paper, and/or the issuanceCredit Facility, net of long-term debt.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Contractual Obligations
As of December 31, 2019, payments due by period under our significant contractual obligations with remaining terms in excess of one year were as follows:
|
| | | | | | | | | | | | | | | | | | | |
| Payments Due by Period |
|
|
|
|
|
|
|
| and | 2025 and |
| Total |
| 2020 |
| 2021-2022 |
| 2023-2024 |
| Thereafter |
| Off-Balance Sheet Arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and talent commitments (a) | $ | 10,355 |
|
| $ | 3,003 |
|
| $ | 5,350 |
|
| $ | 1,159 |
|
| $ | 843 |
|
Purchase obligations (b) | 1,517 |
|
| 609 |
|
| 744 |
|
| 82 |
|
| 82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| On-Balance Sheet Arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases (c) | 2,709 |
|
| 371 |
|
| 648 |
|
| 456 |
|
| 1,234 |
|
Long-term debt obligations (d) | 18,486 |
|
| — |
|
| 2,345 |
|
| 3,557 |
|
| 12,584 |
|
Interest commitments on long-term debt (e) | 13,046 |
|
| 868 |
|
| 1,627 |
|
| 1,418 |
|
| 9,133 |
|
Finance leases (including interest) (f) | 47 |
|
| 21 |
|
| 23 |
|
| 2 |
|
| 1 |
|
Other long-term contractual obligations (g) | 2,076 |
|
| — |
|
| 1,479 |
|
| 412 |
|
| 185 |
|
| Total | $ | 48,236 |
|
| $ | 4,872 |
|
| $ | 12,216 |
|
| $ | 7,086 |
|
| $ | 24,062 |
|
(a) Our programming and talent commitments include $5.39 billion for sports programming rights, $3.80 billion relating to the production and licensing of television and film programming, and $1.17 billion for talent contracts.
(b) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including open purchase orders.
(c) Consists of operating lease commitments for office space, equipment, satellite transponders and studio facilities.
(d) Long-term debt obligations are presented at face value, excluding finance leases.
(e) Future interest based on scheduled debt maturities. Interest payments on junior subordinated debentures subsequent to the expiration of their fixed-rate periods have been included based on their current fixed rates.
(f) Includes finance lease obligations for satellite transponders and equipment.
(g) Reflects long-term contractual obligations recorded on the Consolidated Balance Sheet, including program liabilities; participations due to producers; residuals; and a tax liability resulting from the enactment of the Tax Reform Act in December 2017. This tax liability reflects the remaining tax on our historical accumulated foreign earnings and profits, which is payable to the IRS in 2024 and 2025.
The table above does not include payments relating to reserves for uncertain tax positions of $384 million, and related interest and penalties, interest under our credit facility and for commercial paper borrowings, redeemable noncontrolling interest of $254 million, our guarantee liability of $124 million relating to the sale of CBS Television City; lease indemnification obligations of $86 million or potential future contributions to our qualified defined benefit pension plans. The amount and timing of payments with respect to these items are subject to a number of uncertainties such that we are unable to make sufficiently reliable estimations of future payments.
In 2020, we expect to make contributions of approximately $70 million to our non-qualified pension plans to satisfy the benefit payments due under these plans. Also in 2020, we expect to contribute approximately $43 million to our other postretirement benefit plans to satisfy our portion of benefit payments due under these plans.
Guarantees
Letters of Credit and Surety Bonds. We have indemnification obligations with respect to letters of credit and surety bonds primarily used as security against non-performance in the normal course of business. At December 31, 2019, the outstanding letters of credit, was $3.50 billion.
Other Bank Borrowings
At December 31, 2021 and surety bonds approximated $1362020, we had bank borrowings under Miramax’s $300 million credit facility, which matures in April 2023, of $35 million and were not recorded on the Consolidated Balance Sheet.$95 million, respectively, with a weighted average interest rate of 3.50%.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
CBS Television City. During 2019, we completed the sale of CBS Television City. We have guaranteed a specified level of cash flows to be generated by the business during the first five years following the completion of the sale. Included on the Consolidated Balance Sheet at December 31, 2019 is a liability of $124 million, reflecting the present value of the estimated amount payable under the guarantee obligation.
Lease Guarantees. As noted above, we have indemnification obligations of $86 million with respect to leases primarily associated with the previously discontinued operations of Famous Players Inc.
Film Financing Arrangements. From time to time we enter into film or television programming (collectively referred to as “film”) financing arrangements that involve the sale of a partial copyright interest in a film to third-party investors. Since the investors typically have the risks and rewards of ownership proportionate to their ownership in the film, we generally record the amounts received for the sale of copyright interest as a reduction of the cost of the film and related cash flows are reflected in net cash flow from operating activities. We also enter into collaborative arrangements with other studios to jointly finance and distribute films (“co-financing arrangements”), under which each partner is responsible for distribution of the film in specific territories or distribution windows. The partners’ share in the profits and losses of the films under these arrangements are included within participations expense.
In the course of our business, we both provide and receive indemnities which are intended to allocate certain risks associated with business transactions. Similarly, we may remain contingently liable for various obligations of a business that has been divested in the event that a third party does not live up to its obligations under an indemnification obligation. We record a liability for its indemnification obligations and other contingent liabilities when probable and reasonably estimable.
Critical Accounting Policies
The preparation of our financial statements in conformity with generally accepted accounting principles requires management to make estimates, judgments 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 amount of revenues and expenses during the reporting period. On an ongoing basis, we evaluate these estimates,
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions.
We consider the following accounting policies to be the most critical as they are important to our financial condition and results of operations, and require significant judgment and estimates on the part of management in their application. The risks and uncertainties involved in applying our critical accounting policies are provided below. Unless otherwise noted, we applied our critical accounting policies and estimation methods consistently in all material respects and for all periods presented, and have discussed such policies with our Audit Committee. For a summary of our significant accounting policies, see the accompanying notes to the consolidated financial statements.
Revenue Recognition
Revenue is recognized when control of a good or service is transferred to a customer in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Significant judgments used in the determination of the amount and timing of revenue recognition include the identification of distinct performance obligations in contracts containing bundled advertising sales and content licenses, and the allocation of consideration among individual performance obligations within these arrangements based on their relative standalone selling prices.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Advertising Revenues—Advertising revenues are recognized when the advertising spots are aired on television or streamed or displayed on digital platforms. If a contract includes a guarantee to deliver a targeted audience rating or number of impressions, the delivery of the advertising spots that achieve the guarantee represents the performance obligation to be satisfied over time and revenues are recognized based on the proportion of the audience rating or impressions delivered to the total guaranteed in the contract. To the extent the amounts billed exceed the amount of revenue recognized, such excess is deferred until the guaranteed audience ratings or impressions are delivered. For contracts that do not include impressions guarantees, the individual advertising spots are the performance obligation and consideration is allocated among the individual advertising spots based on relative standalone selling price.
Content Licensing Revenues—For licenses of exhibition rights for internally-produced programming, each individual episode or film delivered represents a separate performance obligation and revenues are recognized when the episode or film is made available to the licensee for exhibition and the license period has begun. For license agreements that include delivery of content on one or more dates for a fixed fee, consideration is allocated based on the relative standalone selling price of each episode or film, which is based on licenses for comparable content within the marketplace. Estimation of standalone selling prices requires judgment, which can impact the timing of recognizing revenues.
Affiliate Revenues—The performance obligation for our affiliate agreements is a license to our programming provided through the continuous delivery of live linear feeds and, for agreements with MVPDs and subscribers to our digital streaming services,vMVPDs, also includes a license to programming for video on demand viewing. Affiliate revenues are recognized over the term of the agreement as we satisfy our performance obligation by continuously providing our customer with the right to use our programming. For agreements that provide for a variable fee, revenues are determined each month based on an agreed upon contractual rate applied to the number of subscribers to our customer’s service. For agreements that provide for a fixed fee, revenues are recognized based on the relative fair value of the content provided over the term of the agreement. These agreements primarily include agreements with television stations affiliated with the CBS Television Network (“network affiliates”) for which fair value is determined based on the fair value of the network affiliate’s service and the value of our programming.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Content Licensing Revenues—For licenses of exhibition rights for internally-produced programming, each individual episode or film delivered represents a separate performance obligation and revenues are recognized when the episode or film is made available to the licensee for exhibition and the license period has begun. For license agreements that include delivery of content on one or more dates for a fixed fee, consideration is allocated based on the relative standalone selling price of each episode or film, which is based on licenses for comparable content within the marketplace. Estimation of standalone selling prices requires judgment, which can impact the timing of recognizing revenues.
Film and Television Production and Programming Costs
Costs incurred to produce television programs and feature films are capitalized when incurred and amortized over the projected life of each television program or feature film. The costs incurred to acquire television series and feature film programming rights, including advances, are capitalized when the license period has begun and the program is accepted and available for airing. The costs of programming rights licensed under multi-year sports programming agreements are capitalized if the rights payments are made before the related economic benefit has been received. Acquired programming rights, including rights for sports programming, are expensed over the shorter of the license period or the period in which an economic benefit is expected to be derived.
For internally-produced television programs and feature films that are predominantly monetized on an individual basis, we use an individual-film-forecast computation method to amortize capitalized production costs and to accrue estimated liabilities for participations and residuals over the applicable title’s life cycle based onupon the ratio of current period revenues to estimated remaining total gross revenues to be earned (“Ultimate Revenues”). for each title. Management’s judgment is required in estimating Ultimate Revenues and the costs to be incurred throughout the life of each television program or feature film. These estimates are used to determine the timing of amortization of capitalized production costs and expensing of participation costs, and any necessary impairments to capitalized productionresidual costs.
For television programming, our estimates of Ultimate Revenue are initially limited to the amount of revenue contracted for each episode in the initial market and estimates of revenue from a secondary market where we can demonstrate a history of earning such revenue in that market. Estimates for additional secondary market revenues such as domestic and foreign syndication and home entertainment are included in the estimatesestimate of Ultimate Revenues once it canincludes revenues to be demonstrated thatearned within 10 years from the delivery of the first episode, or, if still in production, five years from the delivery of the most recent episode, if later. These estimates are based on the past performance of similar television programs in a program can be successfully licensed in such secondary market. For each television program, management bases these estimates onmarket, the performance in the initial markets the existence ofand future firm commitments to sell and the past performance of similar televisionlicense programs.
For feature films, our estimate of Ultimate Revenues includes revenues from all sources that are estimated to be earned within 10 years from the date of a film’s initial theatrical release. For acquired film libraries, our estimate of Ultimate Revenues is for a period within 20 years from the date of acquisition. Prior to the release of feature films, we estimate Ultimate Revenues based on the historical performance of similar content and pre-release market research
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
(including (including test market screenings), as well as factors relating to the specific film, including the expected number of theaters and markets in which the original content will be released, the genre of the original content and the past box office performance of the lead actors and actresses. For films intended for theatrical release, we believe the performance during the theatrical exhibition is the most sensitive factor affecting our estimate of Ultimate Revenues as subsequent markets have historically exhibited a high correlation to theatrical performance. Upon a film’s initial release, we update our estimate of Ultimate Revenues based on actual and expected future performance. Our estimates of revenues from succeeding windows and markets are revised based on historical relationships to theatrical performance and an analysis of current market trends. We also review and revise estimates of Ultimate Revenue and participation costs as of each reporting date to reflect the most current available information. After their theatrical release the most sensitive factor affecting
For acquired film libraries, our estimates for feature films is the extent of home entertainment sales. In addition to theatrical performance, home entertainment sales vary based on a variety of factors including demand for our titles, the volume and quality of competing products, marketing and promotional strategies, as well as economic conditions.
Estimatesestimate of Ultimate Revenues is for internally-produced television programming are updated regularly based on information available as the television program progresses through its life cycle. If Ultimate Revenue estimates are revised, the difference between amortization expense determined using the new estimate and any amounts previously expensed during that year are reflected in our Consolidated Statement of Operations in the quarter in which the estimates are revised. Overestimating Ultimate Revenues for internally-produced programming could result in the understatement of the amortization of capitalized production costs and future net realizable value adjustments, as well as the misstatement of accruals for participation expense.
Acquired Program Rights
The costs incurred in acquiring television series and feature film programming rights, including advances, are capitalized when the program is accepted and available for airing at the commencement of the license period. The costs of programming rights licensed under multi-year sports programming agreements are capitalized if the rights payments are made before the related economic benefit has been received. These costs are expensed over the shorter of the licensea period or the period in which an economic benefit is expected to be derived. The economic benefit is determined based on management’s estimates of revenues to be derivedwithin 20 years from the programming, the expected numberdate of future airings, which may differ from the contracted number of airings, and the length of the license period. If initial airings are expected to generate higher revenues an accelerated method of amortization is used. Management’s judgment is required in determining the value of the future economic benefit and the timing of the expensing of these costs.acquisition.
The estimated economic benefit for acquired programming, including revenue projections for multi-year sports programming, are periodically reviewed and updated based on information available throughout the contractual term. A failure to adjust for a downward revision in the estimated economic benefit to be generated from acquired programming could result in the understatement of programming costs or future net realizable value adjustments.
The net realizable value of acquired programming is regularly evaluated either by title or on a daypart basis, which is defined as an aggregation of programs broadcast during a particular time of day or an aggregation of programs of a similar type based on the specific demographic targeted by each respective program or program service. Net realizable value is determined by estimating advertising revenues to be derived from the future airing of the programming within the daypart and allocating affiliate revenues to the programming, each as applicable. An impairment charge may be necessary if our estimates of future cash flows are below the carrying value of the programming or if programming is abandoned.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
For programming that is predominantly monetized as part of a film group, which includes our acquired programming rights and certain internally-produced television programs, capitalized costs are amortized based on an estimate of the timing of our usage of and benefit from such programming. Such estimates require management’s judgement and include consideration of factors such as expected revenues to be derived from the programming, the expected number of future airings, and, for acquired programming, the length of the license period. If initial airings are expected to generate higher revenues, an accelerated method of amortization is used. These estimates are periodically reviewed and updated based on information available throughout the contractual term or life of each program.
For content that is predominantly monetized on an individual basis, a television program or feature film is tested for impairment when events or circumstances indicate that its fair value may be less than its unamortized cost. If the result of the impairment test indicates that the carrying value exceeds the estimated fair value, an impairment charge will then be recorded for the amount of the difference. Content that is predominantly monetized within a film group is assessed for impairment at the film group level and would similarly be tested for impairment if circumstances indicate that the fair value of the content within the film group is less than its amortized costs. In addition, unamortized costs for internally-produced or acquired programming that have been substantively abandoned are written off.
Goodwill and Intangible Assets Impairment Test
We perform fair value-based impairment tests of goodwill and intangible assets with indefinite lives, comprised primarily of television FCC licenses, in the U.S. and broadcast licenses in Australia, on an annual basis and also between annual tests if an event occurs or if circumstances change that would more likely than not reduce the fair value of a reporting unit or an indefinite-lived intangible asset below its carrying value.
Television FCC Licenses and International Broadcast Licenses—FCC licenses are tested for impairment at the geographic market level. We consider each geographic market, which is comprised of all of our television stations within that geographic market, to be a single unit of accounting because the FCC licenses at this level represent their highest and best use. At December 31, 2019,2021, we had 14 television markets with FCC license book values. For broadcast licenses in Australia, we consider all of our broadcast licenses within the country to be a single unit of accounting because this represents their highest and best use.
For our annual impairment test, we perform qualitative assessments for each U.S. television market that we estimate has an aggregate fair value of FCC licenses that significantly exceed their respective carrying values, and for our Australian broadcast licenses when we estimate that the aggregate fair value significantly exceeds the carrying value.values. Additionally, we consider the duration of time since a quantitative test was performed. For the 20192021 annual impairment test, we performed qualitative assessments for all11 of our U.S. television markets. For each market, we weighed the relative impact of market-specific and macroeconomic factors. The market-specific factors considered include recent projections by geographic market from both independent and internal sources for revenue and operating costs, as well as average market share and capital expenditures.share. We also considered the macroeconomic impact on discount rates and growth rates, as well as the impact from tax law changes that were enacted since the most recent quantitative tests were performed on these markets.rates. Based on the qualitative assessments, considering the aggregation of the relevant factors, we concluded that it is not more likely than not that the fair values of the FCC licenses in each of these television markets are less than their respective carrying values. Therefore, performing thea quantitative impairment test on these markets was unnecessary.
AWe performed a quantitative impairment test for the FCC licenses in the remaining three markets. The impairment tests indicated that the estimated fair values of FCC licenses in two of the markets exceeded their respective carrying values by more than 20% and the fair value of the FCC license in one of the markets exceeded its carrying value of $157 million by 9%.
The quantitative impairment test of broadcastFCC licenses calculates an estimated fair value using the Greenfield Discounted Cash Flow Method, which values a hypothetical start-up station in the relevant market by adding
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
discounted cash flows over a five-year build-up period to a residual value. The assumptions for the build-up period include industry projections of overall market revenues; the start-up station’s operating costs and capital expenditures, which are based on both industry and internal data; and average market share. The discount rate is determined based on the industry and market-based risk of achieving the projected cash flows, and the residual value is calculated using a perpetual nominallong-term growth rate, which is based on projected long-range inflation and industry projections.
For 2019, we performed a quantitative impairment test for our Australian broadcast licenses. The discount rate and perpetual nominal growth rate were 11% and 0.5%, respectively. The impairment test indicated that the estimated fair value of the broadcast licenses was lower than the carrying value, which was the result of a sustained decline in the advertising marketplace in Australia. Accordingly, we recorded an impairment charge during the fourth quarter of 2019 of $20 million, which is included within “Depreciation and amortization” on the Consolidated Statements of Operations.
The estimated fair values of the FCC licenses and Australian broadcast licenses are highly dependent on the assumptions of future economic conditions in the individual geographic markets in which we own and operate television stations. Certain future events and circumstances, including deterioration of market conditions, higher cost of capital, or a decline in the local television advertising marketplace in the U.S. or further decline in the advertising marketplace in Australia could result in a downward revision to our current assumptions and judgments. Various factors may contribute to a future decline in an advertising marketplace including declines in economic conditions;
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
an other-than-temporary decrease in spending by advertisers in certain industries that have historically represented a significant portion of television advertising revenues in that market; a shift by advertisers to competing advertising platforms; changes in consumer behavior; and/or a change in population size. A downward revision to the present value of future cash flows could result in impairment and a noncash charge would be required. Such a charge could have a material effect on the Consolidated Statement of Operations and Consolidated Balance Sheet.
Goodwill—Goodwill is tested for impairment at the reporting unit level, which is an operating segment, or one level below. At December 31, 2019,2021, we had sixfour reporting units with goodwill balances, which were determined based on the post-Merger reporting structure.units. For the 20192021 annual impairment test, the reporting units tested were those in place prior to the Merger, which closed after the testing dates. Wewe tested two reporting units for impairment as of August 31 and eighttwo reporting units as of October 31. During the fourth quarter of 2021, to better align the timing of our annual impairment date with our budgeting cycle, we changed the date for the annual impairment test to October 31 for all reporting units. As a result, those two reporting units previously tested as of August 31 were also tested as of October 31 based on a qualitative assessment resulting in no changes to the conclusion below.
For our annual impairment test, we perform a qualitative assessmentassessments for each reporting unit that management estimateswe estimate has aan aggregate fair value that significantly exceedsexceed its respective carrying value.values. Additionally, we consider the duration of time since a quantitative test was performed. For the 20192021 annual impairment test, we performed qualitative assessments for alltwo of our reporting units. For each of these two reporting unit,units, we weighed the relative impact of factors that are specific to the reporting unit as well as industry and macroeconomic factors. The reporting unit specific factors that were considered included actual and expected financial performance and changes to the reporting units’ carrying amounts since the most recent impairment tests. For each industry in which the reporting units operate, we considered growth projections from independent sources and significant developments or transactions within the industry. We also determined that the impact of macroeconomic factors on the discount rates and growth rates used for the most recent impairment tests would not significantly affect the fair value of the reporting units and that the lower tax rate from a tax law changeschange enacted since the most recent quantitative tests would positively impact the fair value of the reporting units. Based on the qualitative assessments, considering the aggregation of the relevant factors, we concluded that it is not more likely than not that the fair value of each of these two reporting unitunits is lesshigher than itstheir respective carrying amountamounts and therefore performing quantitative impairment tests was unnecessary.
AsFor the 2021 annual impairment test, we elected to perform quantitative impairment tests for two reporting units: CBS Television and CBS Interactive, because of the closing dateamount of time that has elapsed since the Merger on December 4, 2019, we performed qualitative assessments on the pre-Merger reporting units that were to be combined as a result of the new reporting structure, as well as the post-Merger reporting units that resulted from this combination. Based on these assessments, we concluded that there were no changes to the conclusions reached in our annual impairment test.
Aprevious quantitative tests. The quantitative goodwill impairment test when performed, requires estimating fairevaluates whether the carrying value of a reporting unit exceeds its estimated fair value. For CBS Television, we estimated the fair value of the reporting unit based on a discountedthe present value of future cash flow analysis. A discounted cash flow analysisflows (“Discounted Cash Flow Method”) and the traded or transaction values
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
of comparable businesses (“Guideline Public Company Method”). The Discounted Cash Flow Method requires us to make various judgmental assumptions including assumptions aboutregarding the timing and amount of future cash flows, including growth rates, operating margins and capital expenditures for a projection period, plus the terminal value of the business at the end of the projection period. The assumptions about future cash flows are based on our internal forecasts of the reporting unit, which incorporates our long-term business plans and historical trends. The terminal value is estimated based on a perpetual nominal growth rate, which is based on historical and projected inflation and economic indicators, as well as industry growth projections. A discount rates. rate is determined for the reporting unit based on the risks of achieving the future cash flows, including risks applicable to the industry and market as a whole, as well as the capital structure of comparable entities. For 2021, we utilized a discount rate of 10% and a terminal growth rate of 1.5%. The Guideline Public Company Method incorporates revenue and earnings multiples from publicly traded companies with operations and other characteristics similar to each reporting unit. The selected multiples consider each reporting unit’s relative growth, profitability, size, and risk relative to the selected publicly traded companies. For CBS Interactive, we estimated the fair value of the reporting unit based on the Guideline Public Company Method. Based on the results of the 2021 quantitative impairment tests, we concluded that the estimated fair value of each of the two reporting units significantly exceeded their respective carrying values and therefore no impairment charge was required.
Certain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in the advertising market, a decrease in audience acceptance of programming, a shift by advertisers to competing advertising platforms; and/orplatforms, changes in consumer behavior and/or a decrease in audience acceptance of our content could result in changes to our assumptions and judgments used in the goodwill impairment tests. A downward revision of these assumptions could cause the fair values of the reporting units to fall below their respective carrying values and a noncash impairment charge would be required. Such a charge could have a material effect on the Consolidated Statement of Operations and Consolidated Balance Sheet.
Legal Matters
Estimates of liabilities related to legal issues and discontinued businesses, including asbestos and environmental matters, require significant judgments by management. We record an accrual for a loss contingency when it is both probable that a liability has been incurred and when the amount of the loss can be reasonably estimated. We continually evaluate these estimates based on changes in the relevant facts and circumstances and events that may impact estimates. It is difficult to predict future asbestos
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
liabilities as events and circumstances may impact the estimate of our liabilities. While we believe that our liabilitiesaccrual for matters related to our predecessor operations, including environmental and asbestos, are adequate, to cover our liabilities, there can be no assurance that circumstances will not change in future periods. It is difficult to predict future asbestos liabilities as events and circumstances may impact the estimate of our liabilities. Our liability estimate is based upon many factors, including the number of outstanding claims, estimated average cost per claim, the breakdown of claims by disease type, historic claim filings, costs per claim of resolution and the filing of new claims, as well as consultation with a third party firm on trends that may impact our future asbestos liability.
Pensions
Pension benefit obligations and net periodic pension costs are calculated using many actuarial assumptions. Two key assumptions used in accounting for pension liabilities and expenses are the discount rate and expected rate of return on plan assets. The discount rate is determined based on the yield on a portfolio of high quality bonds, constructed to provide cash flows necessary to meet our pension plans’ expected future benefit payments, as determined for the projectedaccumulated benefit obligation. The expected return on plan assets assumption is derived using the current and expected asset allocation of the pension plan assets and considering historical as well as expected returns on various classes of plan assets. As of December 31, 2019, the unrecognized2021, changes in actuarial losses includedassumptions resulted in a slight decrease to accumulated other comprehensive income increased fromloss compared with the prior year-end due primarily to a decreasean increase in
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
the discount rate, partiallywhich was mostly offset by the favorableunfavorable performance of pension plan assets. A 25 basis point change in the discount rate would result in an estimated change to the projectedaccumulated benefit obligation of approximately $137$136 million and would not have a materialan insignificant impact on 20202022 pension expense. A decrease in the expected rate of return on plan assets would increase pension expense. The estimated impact of a 25 basis point change in the expected rate of return on plan assets is a change of approximately $8 million to 20202022 pension expense.
Income Taxes
We are subject to income taxes in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes and evaluating our income tax positions. When recording an interim worldwide provision for income taxes, an estimated effective tax rate for the year is applied to interim operating results. In the event there is a significant or unusual item recognized in the quarterly operating results, the tax attributable to that item is separately calculated and recorded in the same quarter. Deferred tax assets and liabilities are recognized for the estimated future tax effects of temporary differences between the financial statement carrying amounts and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be reversed. We evaluate the realizability of deferred tax assets and establish a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized.
A number of years may elapse before a tax return containing tax matters for which a reserve has been established is audited and finally resolved. For positions taken in a previously filed tax return or expected to be taken in a future tax return, we evaluate each position to determine whether it is more likely than not that the tax position will be sustained upon examination, based on the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is subject to a measurement assessment to determine the amount of benefit to recognize in the Consolidated Statement of Operations and the appropriate reserve to establish, if any. If a tax position does not meet the more-likely-than-not recognition threshold a tax reserve is established and no benefit is recognized. We evaluate our uncertain tax positions quarterly based on many factors, including, changes in tax laws and interpretations, information received from tax authorities, and other changes in facts and circumstances. Our income tax returns are routinely audited by U.S. federal and state as well as foreign tax authorities. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that the reserve for uncertain tax positions of $384$301 million at December 31, 20192021 is properly recorded pursuant to the recognition and measurement provisions of FASB guidance for uncertainty in income taxes.recorded.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Legal Matters
General.General
On an ongoing basis, we vigorously defend ourselves in numerous lawsuits and proceedings and respond to various investigations and inquiries from federal, state, local and international authorities (collectively, “litigation’’). Litigation may be brought against us without merit, is inherently uncertain and always difficult to predict. However, based on our understanding and evaluation of the relevant facts and circumstances, we believe that the below-described legalfollowing matters and other litigation to which we are a party are not likely, in the aggregate, to haveresult in a material adverse effect on our business, financial condition and results of operations, financial position or cash flows.operations.
Litigation Relating to the Merger. On September 27, 2019, Bucks County Employees Retirement Fund (the “Bucks County Fund”), aMerger
Beginning on February 20, 2020, three purported holder of CBS Class B Common Stock, served us with a demand for inspection of books and records pursuant to 8 Del. C. § 220 in connection with the Merger (the “Demand”). On October 10, 2019, we offered to produce certain categories of documents properly within the scope of a books and records demand under § 220. The Bucks County Fund rejected our offer andstockholders filed litigationseparate derivative and/or putative class action lawsuits in the Court of Chancery of the State of Delaware on October 15, 2019, seeking to compel production of all documents requested in the Demand (the “Section 220 Complaint”). A trial on the Section 220 Complaint took place on November 22, 2019, andDelaware. On March 31, 2020, the Court ordered limited additional production on November 25, 2019.consolidated the three lawsuits and appointed Bucks County Employees’ Retirement Fund and International Union of Operating
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Engineers of Eastern Pennsylvania and Delaware as co-lead plaintiffs for the consolidated action. On December 2, 2019, we certified that we had completed production of all relevant documents. On February 20,April 14, 2020, the Bucks County Fundlead plaintiffs filed a putative derivativeVerified Consolidated Class Action and class action complaintDerivative Complaint (as used in this paragraph, the Court of Chancery of the State of Delaware“Complaint”) against Shari E. Redstone, NAI, Sumner M. Redstone National Amusements Trust, (“SMR Trust”),members of the CBS boardBoard of directorsDirectors (comprised of Candace K. Beinecke, Barbara M. Byrne, Gary L. Countryman, Brian Goldner, Linda M. Griego, Robert N. Klieger, Martha L. Minow, Susan Schuman, Frederick O. Terrell and Strauss Zelnick), former CBS President and Acting Chief Executive Officer Joseph Ianniello and ViacomCBS Inc.the Company as nominal defendant. The complaintComplaint alleges breaches of fiduciary duties to CBS stockholders and waste in connection with the negotiation and approval of the Agreement and Plan of Merger Agreement.dated as of August 13, 2019, as amended on October 16, 2019 (the “Merger Agreement”). The complaintComplaint also alleges waste and unjust enrichment in connection with Mr. Ianniello’s compensation. The Complaint seeks unspecified damages, costs and expenses, as well as other relief. On June 5, 2020, the defendants filed motions to dismiss. On January 27, 2021, the Court dismissed one disclosure claim, while allowing all other claims against the defendants to proceed. Discovery on the surviving claims is proceeding. We believe that the remaining claims are without merit and we intend to defend against them vigorously. We are currently unable to determine a range of potential liability, if any. Accordingly, no accrual for this matter has been made in our consolidated financial statements.
On January 23, 2020,Beginning on November 25, 2019, four purported Viacom stockholders filed separate putative class action lawsuits in the Court of Chancery of the State of DelawareDelaware. On January 23, 2020, the Court consolidated the four putative class action suitslawsuits. On February 6, 2020, the Court appointed California Public Employees’ Retirement System (“CalPERS”) as lead plaintiff for the consolidated action. On February 28, 2020, CalPERS, together with Park Employees’ and Retirement Board Employees’ Annuity and Benefit Fund of Chicago and Louis M. Wilen, filed by purported Viacom stockholdersa First Amended Verified Class Action Complaint (as used in this paragraph, the “Complaint”) against NAI, NAI Entertainment Holdings LLC, Shari E. Redstone, the members of the Viacom special transaction committee of the Viacom boardBoard of directorsDirectors (comprised of Thomas J. May, Judith A. McHale, Ronald L. Nelson and Nicole Seligman) and our President and Chief Executive Officer and director, Robert M. Bakish, in In re Viacom Inc. Stockholders Litigation.Bakish. The four actions allegeComplaint alleges breaches of fiduciary duties to Viacom stockholders in connection with the negotiation and approval of the Merger Agreement, and seekAgreement. The Complaint seeks unspecified damages, costs and expenses.expenses, as well as other relief. On February 6,May 22, 2020, the defendants filed motions to dismiss. On December 29, 2020, the Court appointeddismissed the California Public Employees’ Retirement System asclaims against Mr. Bakish, while allowing the lead plaintiff inclaims against the consolidated action.remaining defendants to proceed. Discovery on the surviving claims is proceeding. We believe that the remaining claims are without merit and we intend to defend against them vigorously. We are currently unable to determine a range of potential liability, if any. Accordingly, no accrual for this matter has been made in our consolidated financial statements.
Investigation-Related Matters.
As announced on August 1, 2018, the CBS Board of Directors (the “CBS Board”) retained two law firms to conduct a full investigation of the allegations in press reports about CBS’ former Chairman of the Board, President and Chief Executive Officer, Leslie Moonves, CBS News and cultural issues at CBS. On December 17, 2018, the CBS Board of Directors announced the completion of its investigation, certain findings of the investigation and the CBS Board’sBoard of Directors’ determination, discussed below, with respect to the termination of Mr. Moonves’ employment. We have received subpoenas or requests for information from the New York County District Attorney’s Office, and the New York City Commission on Human Rights, regarding the subject matter of this investigation and related matters. The New York State Attorney General’s Office and the United States Securities and Exchange Commission have also requested information about theseregarding the subject matter of this investigation and related matters, including with respect to CBS’ related public disclosures. We may continue to receive additional related regulatory and investigative inquiries from these and other entities in the future. We are cooperating with these inquiries.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
On August 27, 2018 and on October 1, 2018, each of Gene Samit and John Lantz, respectively, filed putative class action suitslawsuits in the United States District Court for the Southern District of New York, individually and on behalf of others similarly situated, for claims that are similar to those alleged in the amended complaint described below. On November 6, 2018, the Court entered an order consolidating the two actions. On November 30, 2018, the
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Court appointed Construction Laborers Pension Trust for Southern California as the lead plaintiff of the consolidated action. On February 11, 2019, the lead plaintiff filed a consolidated amended putative class action complaint against CBS, certain current and former senior executives and members of the CBS Board.Board of Directors. The consolidated action is stated to be on behalf of purchasers of CBS Class A Common Stock and Class B Common Stock between September 26, 2016 and December 4, 2018. This action seeks to recover damages arising during this time period allegedly caused by the defendants’ purported violations of the federal securities laws, including by allegedly making materially false and misleading statements or failing to disclose material information, and seeks costs and expenses as well as remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On April 12, 2019, the defendants filed motions to dismiss this action, which the Court granted in part and denied in part on January 15, 2020. With the exception of one statement made by Mr. Moonves at an industry event in November 2017, in which he allegedly was acting as the agent of CBS, all claims as to all other allegedly false and misleading statements were dismissed. We have reached an agreement in principle with the plaintiffs to settle the lawsuit. The settlement, which will include no admission of liability or wrongdoing by the Company, will be subject to court approval. All amounts payable by the Company under the settlement will be paid by the Company’s insurers.
Litigation Related to Television Station Owners
On September 9, 2019, the Company was added as a defendant in a multi-district putative class action lawsuit filed in the United States District Court for the Northern District of Illinois. The lawsuit was filed by parties that claim to have purchased broadcast television spot advertising beginning on or about January 1, 2014 on television stations owned by one or more of the defendant television station owners and alleges the sharing of allegedly competitively sensitive information among such television stations in alleged violation of the Sherman Antitrust Act. The action, which names the Company among fourteen total defendants, seeks monetary damages, attorneys’ fees, costs and interest as well as injunctions against the allegedly unlawful conduct. On October 8, 2019, the Company and other defendants filed a motion to dismiss the matter, which was denied by the court on November 6, 2020. We have reached an agreement in principle with the plaintiffs to settle the lawsuit. The settlement, which will include no admission of liability or wrongdoing by the Company, will be subject to court approval.
Litigation Related to Stock Offerings
On August 13, 2021, Camelot Event Driven Fund filed a putative securities class action lawsuit in New York Supreme Court, County of New York, and on November 5, 2021, an amended complaint was filed that, among other changes, added an additional named plaintiff (the “Complaint”). The Complaint is purportedly on behalf of investors who purchased shares of the Company’s Class B Common Stock and 5.75% Series A Mandatory Convertible Preferred Stock pursuant to public securities offerings completed in March 2021, and was filed against the Company, certain senior executives, members of our Board of Directors, and the underwriters involved in the offerings. The Complaint asserts violations of federal securities law and alleges that the offering documents contained material misstatements and omissions, including through an alleged failure to adequately disclose certain total return swap transactions involving Archegos Capital Management referenced to our securities and related alleged risks to the Company’s stock price. On December 22, 2021, the plaintiffs filed a stipulation seeking the voluntary dismissal without prejudice of the outside director defendants from the lawsuit, which the Court subsequently ordered. On the same date, the defendants filed motions to dismiss the lawsuit, which are pending. The Complaint seeks unspecified compensatory damages, as well as other relief. We believe that the remainingclaims are without merit and intend to defend against them vigorously.
Litigation Related to the Proposed Sale of Simon & Schuster
On November 2, 2021, the U.S. Department of Justice (the “DOJ”) filed suit in the United States District Court for the District of Columbia to block our sale of the Simon & Schuster business to Penguin Random House (the
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
“Transaction”) pursuant to a Share Purchase Agreement (“Purchase Agreement”), dated November 24, 2020, between the Company, certain of its subsidiaries, Penguin Random House and Bertelsmann SE & Co. KGaA. The DOJ asserts that the sale of Simon & Schuster would reduce competition for the acquisition of titles. The Purchase Agreement contains customary representations and warranties and covenants, including commitments on the part of Penguin Random House to take all necessary steps to obtain any required regulatory approvals and to defend any litigation that would delay or prevent consummation, and also provides for a termination fee payable to the Company in certain circumstances in the event the Transaction does not close for regulatory reasons. We and the other defendants believe the DOJ’s claims are without merit, and we intend to defend against them vigorously. We are currently unable to determine a range of potential liability, if any. Accordingly, no accrual for this matter has been made in our consolidated financial statements.
Separation Agreement. On September 9, 2018, CBS entered into a separation and settlement agreement and releases (the “Separation Agreement”) with Mr. Moonves, pursuant to which Mr. Moonves resigned as a director and as Chairman of the Board, President and Chief Executive Officer of CBS. In October 2018, we contributed $120 million to a grantor trust pursuant to the Separation Agreement. On December 17, 2018, the CBS Board announced that, following its consideration of the findings of the investigation referred to above, it had determined that there were grounds to terminate Mr. Moonves’ employment for cause under his employment agreement with CBS. Any dispute related to the CBS Board’s determination is subject to binding arbitration as set forth in the Separation Agreement. On January 16, 2019, Mr. Moonves commenced a binding arbitration proceeding with respect to this matter and the related CBS Board investigation, which proceeding is ongoing. The assets of the grantor trust will remain in the trust until a final determination in the arbitration. We are currently unable to determine the outcome of the arbitration and the amount, if any, that may be awarded thereunder and, accordingly, no accrual for this matter has been made in our consolidated financial statements.
Claims Related to Former Businesses: Asbestos. Asbestos
We are a defendant in lawsuits claiming various personal injuries related to asbestos and other materials, which allegedly occurred as a result of exposure caused by various products manufactured by Westinghouse, a predecessor, generally prior to the early 1970s. Westinghouse was neither a producer nor a manufacturer of asbestos. We are typically named as one of a large number of defendants in both state and federal cases. In the majority of asbestos lawsuits, the plaintiffs have not identified which of our products is the basis of a claim. Claims against us in which a product has been identified most commonly relate to allegations of exposure to asbestos-containing insulating material used in conjunction with turbines and electrical equipment.
Claims are frequently filed and/or settled in groups, which may make the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. We do not report as pending those claims on inactive, stayed, deferred or similar dockets that some jurisdictions have established for claimants who allege minimal or no impairment. As of December 31, 2019,2021, we had pending approximately 30,95027,770 asbestos claims, as compared with approximately 31,57030,710 as of December 31, 20182020 and 31,66030,950 as of December 31, 2017.2019. During 2019,2021, we received approximately 3,4603,050 new claims and closed or moved to an inactive docket approximately 4,0805,990 claims. We report claims as closed when we become aware that a dismissal order has been entered by a court or when we have reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
factors. Our total costs for the years 20192021 and 20182020 for settlement and defense of asbestos claims after insurance recoveries and net of tax were approximately $58$63 million and $45$35 million, respectively. Our costs for settlement and defense of asbestos claims may vary year to year and insurance proceeds are not always recovered in the same period as the insured portion of the expenses.
Filings include claims for individuals suffering from mesothelioma, a rare cancer, the risk of which is allegedly increased by exposure to asbestos; lung cancer, a cancer which may be caused by various factors, one of which is alleged to be asbestos exposure; other cancers, and conditions that are substantially less serious, including claims brought on behalf of individuals who are asymptomatic as to an allegedly asbestos-related disease. The predominant number of pending claims against us are non-cancer claims. It is difficult to predict future asbestos liabilities, as events and circumstances may impact the estimate of our asbestos liabilities, including, among others, the number and types of claims and average cost to resolve such claims. We record an accrual for a loss contingency when it is both probable that a liability has been incurred and when the amount of the loss can be reasonably estimated. We believe that our accrual and insurance are adequatesufficient to cover our asbestos liabilities. Our liability estimate is based upon many factors, including the number of outstanding claims, estimated average cost per claim, the breakdown of claims by disease type, historic claim filings, costs per claim of resolution and the filing of new claims, as well as consultation with a third party firm on trends that may impact our future asbestos liability.
Other.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Other
From time to time we receive claims from federal and state environmental regulatory agencies and other entities asserting that we are or may be liable for environmental cleanup costs and related damages principally relating to our historical and predecessor operations. In addition, from time to time we receive personal injury claims including toxic tort and product liability claims (other than asbestos) arising from our historical operations and predecessors.
Market Risk
We are exposed to fluctuations in foreign currency exchange rates and interest rates and use derivative financial instruments to manage this exposure. In accordance with our policy, we do not use derivative instruments unless there is an underlying exposure and, therefore, we do not hold or enter into derivative financial instruments for speculative trading purposes.
Foreign Exchange Risk
We conduct business in various countries outside the U.S., resulting in exposure to movements in foreign exchange rates when translating from the foreign local currency to the U.S. dollar. In order to hedge anticipated cash flows in currencies such as the British Pound, the Euro, the Canadian Dollar and the Australian Dollar, foreign currency forward contracts, for periods generally up to 24 months, are used. Additionally, we designate forward contracts used to hedge committed and forecasted foreign currency transactions, including future production costs and programming obligations, as cash flow hedges. Gains or losses on the effective portion of designated cash flow hedges are initially recorded in other comprehensive income (loss) and reclassified to the statement of operations when the hedged item is recognized. Additionally, we enter into non-designated forward contracts to hedge non-U.S. dollar denominated cash flows. The change in fair value of the non-designated contracts is included in “Other items, net” inon the Consolidated Statements of Operations. We manage the use of foreign exchange derivatives centrally.
At December 31, 20192021 and 2018,2020, the notional amount of all foreign currency contracts was $1.44$1.94 billion and $995 million,$1.27 billion, respectively. For 2019, $8332021, $1.38 billion related to future production costs and $564 million related to our foreign currency balances and other expected foreign currency cash flows. For 2020, $740 million related to future production costs and $606$529 million related to our foreign currency balances and other expected foreign currency cash flows. For 2018, $481 million related to future production costs and $514 million related to our foreign currency balances and other expected foreign currency cash flows.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Interest Risk
Interest on commercial paper borrowings is exposed to risk related to movements in short-term interest rates. A 100 basis point change to the weighted average interest rate on commercial paper borrowings in 2019 would increase or decrease interest expense by approximately $7 million. In addition, interest rates on future long-term debt issuances are exposed to risk related to movements in long-term interest rates. Interest rate hedges may be used to modify both of these exposuresthis exposure at our discretion. There were no interest rate hedges outstanding at December 31, 20192021 or 20182020 but in the future we may use derivatives to manage our exposure to interest rates.
At December 31, 2019,2021, the carrying value of our outstanding notes and debentures was $17.98$17.66 billion and the estimated fair value was $20.6$21.5 billion. A 1% increase or decrease in interest rates would decrease or increase the fair value of our notes and debentures by approximately $1.22$1.62 billion and $2.68$2.64 billion, respectively.
Credit Risk
We continually monitor our positions with, and credit quality of, the financial institutions that are counterparties to our financial instruments. We are exposed to credit loss in the event of nonperformance by the counterparties to the agreements. However, we do not anticipate nonperformance by the counterparties.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Our receivables do not represent significant concentrations of credit risk at December 31, 20192021 or 2018,2020, due to the wide variety of customers, markets and geographic areas to which our products and services are sold.
Related Parties
For a discussion of related parties, seeSee Note 68 to the consolidated financial statements.
Recently Adopted Accounting Pronouncements and Accounting Pronouncements Not Yet Adopted
See Note 1 to the consolidated financial statements.
|
| | | | |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Information required by this item is presented in “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition—Market Risk.”
|
| | | | |
| Item 8. | Financial Statements and Supplementary Data. |
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
The following Consolidated Financial Statements and schedule of the registrant and its subsidiaries are submitted herewith as part of this report:
| | | | | | | | | | | | | | |
| | | | Page |
| | | | Page |
| Item 15(a)(1) Financial Statements: | | |
| 1. | | | | |
| 2. | | | | |
| 3. | | | | |
| 4. | | | | |
| 5. | | | | |
| 6. | | | | |
| 7. | | | | |
| 8. | | | | |
| Item 15(a)(2) Financial Statement Schedule: | | |
| | | | |
All other Schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule.
MANAGEMENT’ S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the effectiveness of internal control over financial reporting, as such term is defined in Rule 13a-15(f) or Rule 15d-15(f) of the Exchange Act. ViacomCBS Inc. and its subsidiaries’ (the “Company”) internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of assets; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 20192021 based on the framework set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2019.2021.
The effectiveness of our internal control over financial reporting as of December 31, 20192021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
| | | | | | | | | | | |
| | VIACOMCBS INC. |
| | | |
| | VIACOMCBS INC. |
| By: | | | |
| | By: | /s/ Robert M. Bakish |
| | | Robert M. Bakish President and Chief Executive Officer |
| | | |
| | By: | /s/ Christina SpadeNaveen Chopra |
| | | Christina SpadeNaveen Chopra
Executive Vice President, Chief Financial Officer |
| | | |
�� | | By: | /s/ Katherine Gill-Charest |
| | | Katherine Gill-Charest Executive Vice President, Controller and Chief Accounting Officer |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of ViacomCBS Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of ViacomCBS Inc. and its subsidiaries (the “Company”) as of December 31, 20192021 and 2018,2020 and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity, and of cash flows for each of the three years in the period ended December 31, 2019,2021, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20192021 and 2018,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20192021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenues from contracts with customers in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit mattersmatter communicated below are mattersis a matter arising from the current period audit of the consolidated financial statements that werewas communicated or required to be communicated to the audit committee and that (i) relaterelates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing a separate opinionsopinion on the critical audit mattersmatter or on the accounts or disclosures to which they relate.
M
erger with Viacom Inc.
As described in Note 1 to the consolidated financial statements, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”) on December 4, 2019 (the “Merger”), with CBS continuing as the surviving company. At the effective time of the Merger, the combined company changed its name to ViacomCBS Inc. The Merger has been accounted for as a transaction between entities under common control as National Amusements, Inc. was the controlling stockholder of each of CBS and Viacom. Upon the closing of the Merger, the net assets of Viacom were combined with those of CBS at their historical carrying amounts and the companies have been presented on a combined basis for all periods presented in the consolidated financial statements.
The principal considerations for our determination that the Merger is a critical audit matter are significant audit effort was necessary to perform procedures and evaluate the audit evidence obtained relating to management’s accounting for the Merger due to the pervasive nature of the Merger on the composition of the Company’s consolidated financial statements and disclosures to include the entirety of the legacy Viacom businesses.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls over the accounting for the Merger, including the combination and presentation of the historical carrying amounts in the consolidated financial statements. The procedures also included evaluating management’s assessment of the accounting associated with the transaction between entities under common control and the completeness and accuracy of the consolidated financial statements, including the presentation of Viacom’s financial information given the change in Viacom’s fiscal year-end, and the retrospective combination of Viacom and CBS. Procedures were also performed to evaluate the sufficiency of the disclosures in the consolidated financial statements of the Company.
Amortization of Internally ProducedInternally-Produced Television Programming Inventory Basedthat is Predominantly Monetized on Estimated Secondary Market Revenues
As described in Notes 1 and 35 to the consolidated financial statements, the Company’s internally producedinternally-produced television programming inventory that is predominantly monetized on an individual basis was $6.3$2.4 billion as of December 31, 2019, a portion2021. For internally-produced television programs that are predominantly monetized on an individual basis, management uses an individual-film-forecast computation method to amortize capitalized production costs over the applicable title’s life cycle based upon the ratio of which relatescurrent period revenues to costs that willestimated remaining total gross revenues to be amortized based on estimated secondary market revenues. Television programming costs incurred subsequentearned (“Ultimate Revenues”) for each title. The estimate of Ultimate Revenues includes revenues to be earned within 10 years from the establishmentdelivery of the secondary marketfirst episode, or, if still in production, 5 years from the delivery of the most recent episode, if later. These estimates are initially capitalized and amortized, based on the proportion that current period revenues bear to the estimated remaining total lifetime revenues. Estimates for secondarypast performance of similar television programs in a market, revenues such as domestic and foreign syndication are included in the estimated lifetime revenues once it can be demonstrated that a program can be successfully licensed in such secondary market. Management bases these estimates on the performance in the initial markets, the existence ofand future firm commitments to sell and the past performance of similar televisionlicense programs.
TheThe principal considerations for our determination that performing procedures relating to amortization of internally producedinternally-produced television programming inventory basedthat is predominantly monetized on estimated secondary market revenuesan individual basis is a critical audit matter are there wasthe significant judgment required by management when estimating secondary market revenues. ThisUltimate Revenues; this led to a high degree of auditor judgment, effort and subjectivity in performing procedures to evaluateand evaluating management’s estimate of secondary market revenuesUltimate Revenues and the significant assumptions including considerationthat are based on the past performance of similar television programs in a market, the performance in the initial markets, and past performance of similar televisionfuture firm commitments to license programs.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to amortization of internally producedinternally-produced television programming inventory that is predominantly
monetized on an individual basis, including the controlcontrols over the estimation of secondary market revenues.Ultimate Revenues. These procedures also included, among others, (i) testing management’s process for estimating secondary market revenues, includingUltimate Revenues, and (ii) evaluating whether the significant assumptions were reasonable considering information such asrelated to the historicalpast performance of similar television programs in a market, the performance in the initial markets and past performance of televisionfuture firm commitments to license programs. Procedures were also performed to test the reliability, completeness and relevanceaccuracy of management's data used in the estimate of ultimate revenues.these estimates.
Amortization of Film Inventory
As described in Notes 1 and 3 to the consolidated financial statements, film inventory was approximately $1.6 billion as of December 31, 2019. Management uses an individual-film-forecast-computation method to amortize capitalized production costs based upon the ratio of current period revenues to estimated remaining total gross revenues to be earned (“Ultimate Revenues”) for each title. The estimate of Ultimate Revenues for feature films includes revenues from all sources that are estimated to be earned within 10 years from the date of a film’s initial theatrical release. Prior to the release of feature films, management estimates Ultimate Revenues based on the historical performance of similar content and pre-release market research (including test market screenings), as well as factors relating to the specific film, including the expected number of theaters and markets in which the original content will be released, the genre of the original content and the past box office performance of the lead actors and actresses. Upon a film’s initial release, management updates their estimate of Ultimate Revenues based on actual and expected future performance. As disclosed by management, management believes the most sensitive factor affecting the estimate of Ultimate Revenues for films intended for theatrical release is theatrical exhibition, as revenues from subsequent markets have historically exhibited a high correlation to theatrical performance.
The principal considerations for our determination that performing procedures relating to amortization of film inventory is a critical audit matter are there was significant judgment by management when estimating ultimate revenues. This in turn led to a high degree of auditor judgment, effort and subjectivity in performing procedures to evaluate management’s estimate of ultimate revenues and the significant assumptions, including the historical performance of similar films and theatrical exhibition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of
controls over management’s estimation of ultimate revenues and controls over the significant assumptions used in the ultimate revenues estimate. These procedures also included, among others, testing management’s process for estimating ultimate revenues, including evaluating whether the significant assumptions were reasonable considering information such as historical performance of similar content, market research performed, impact of competing products, marketing budget and strategy, economic conditions, and theatrical exhibition, including actual box office performance. Procedures were also performed to test the reliability, completeness and relevance of management's data used in the estimate of ultimate revenues.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 20, 202015, 2022
We have served as the Company’s or its predecessor’s auditor since 1970.
VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
| | | | Year Ended December 31, | | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 | | 2021 | | 2020 | | 2019 |
| Revenues | $ | 27,812 |
| | $ | 27,250 |
| | $ | 26,535 |
| Revenues | $ | 28,586 | | | $ | 25,285 | | | $ | 26,998 | |
| Costs and expenses: | | | | | | Costs and expenses: | |
| Operating | 17,223 |
| | 15,917 |
| | 15,483 |
| Operating | 17,744 | | | 14,992 | | | 16,713 | |
| Selling, general and administrative | 5,647 |
| | 5,206 |
| | 5,156 |
| Selling, general and administrative | 6,398 | | | 5,320 | | | 5,481 | |
| Depreciation and amortization | 443 |
| | 433 |
| | 443 |
| Depreciation and amortization | 390 | | | 430 | | | 438 | |
| Restructuring and other corporate matters | 775 |
| | 490 |
| | 258 |
| Restructuring and other corporate matters | 100 | | | 618 | | | 769 | |
| Total costs and expenses | 24,088 |
| | 22,046 |
| | 21,340 |
| Total costs and expenses | 24,632 | | | 21,360 | | | 23,401 | |
| Gain on sale of assets | 549 |
| | — |
| | 146 |
| |
| Net gain on sales | | Net gain on sales | 2,343 | | | 214 | | | 549 | |
| Operating income | 4,273 |
| | 5,204 |
| | 5,341 |
| Operating income | 6,297 | | | 4,139 | | | 4,146 | |
| Interest expense | (962 | ) | | (1,030 | ) | | (1,088 | ) | Interest expense | (986) | | | (1,031) | | | (962) | |
| Interest income | 66 |
| | 79 |
| | 87 |
| Interest income | 53 | | | 60 | | | 66 | |
| Gain (loss) on marketable securities | 113 |
| | (23 | ) | | — |
| |
| Gain (loss) on early extinguishment of debt | — |
| | 18 |
| | (38 | ) | |
| Gain on sale of EPIX | — |
| | — |
| | 285 |
| |
| Pension settlement charge | — |
| | — |
| | (352 | ) | |
| Net gains from investments | | Net gains from investments | 47 | | | 206 | | | 85 | |
| Loss on extinguishment of debt | | Loss on extinguishment of debt | (128) | | | (126) | | | — | |
| Other items, net | (145 | ) | | (124 | ) | | (115 | ) | Other items, net | (77) | | | (101) | | | (112) | |
Earnings from continuing operations before income taxes and equity in earnings (loss) of investee companies | 3,345 |
| | 4,124 |
| | 4,120 |
| |
| Benefit (provision) for income taxes | 9 |
| | (617 | ) | | (804 | ) | |
| Equity in earnings (loss) of investee companies, net of tax | (53 | ) | | (47 | ) | | 4 |
| |
Earnings from continuing operations before income taxes and equity in loss of investee companies | | Earnings from continuing operations before income taxes and equity in loss of investee companies | 5,206 | | | 3,147 | | | 3,223 | |
| (Provision) benefit for income taxes | | (Provision) benefit for income taxes | (646) | | | (535) | | | 29 | |
| Equity in loss of investee companies, net of tax | | Equity in loss of investee companies, net of tax | (91) | | | (28) | | | (53) | |
| Net earnings from continuing operations | 3,301 |
| | 3,460 |
| | 3,320 |
| Net earnings from continuing operations | 4,469 | | | 2,584 | | | 3,199 | |
| Net earnings (loss) from discontinued operations, net of tax | 38 |
| | 32 |
| | (947 | ) | |
| Net earnings from discontinued operations, net of tax | | Net earnings from discontinued operations, net of tax | 162 | | | 117 | | | 140 | |
| Net earnings (ViacomCBS and noncontrolling interests) | 3,339 |
| | 3,492 |
| | 2,373 |
| Net earnings (ViacomCBS and noncontrolling interests) | 4,631 | | | 2,701 | | | 3,339 | |
| Net earnings attributable to noncontrolling interests | (31 | ) | | (37 | ) | | (52 | ) | Net earnings attributable to noncontrolling interests | (88) | | | (279) | | | (31) | |
| Net earnings attributable to ViacomCBS | $ | 3,308 |
| | $ | 3,455 |
| | $ | 2,321 |
| Net earnings attributable to ViacomCBS | $ | 4,543 | | | $ | 2,422 | | | $ | 3,308 | |
| | | | | | | |
| Amounts attributable to ViacomCBS: | | | | | | Amounts attributable to ViacomCBS: | |
| Net earnings from continuing operations | $ | 3,270 |
| | $ | 3,423 |
| | $ | 3,268 |
| Net earnings from continuing operations | $ | 4,381 | | | $ | 2,305 | | | $ | 3,168 | |
| Net earnings (loss) from discontinued operations, net of tax | 38 |
| | 32 |
| | (947 | ) | |
| Net earnings from discontinued operations, net of tax | | Net earnings from discontinued operations, net of tax | 162 | | | 117 | | | 140 | |
| Net earnings attributable to ViacomCBS | $ | 3,308 |
| | $ | 3,455 |
| | $ | 2,321 |
| Net earnings attributable to ViacomCBS | $ | 4,543 | | | $ | 2,422 | | | $ | 3,308 | |
| | | | | | | |
| Basic net earnings (loss) per common share attributable to ViacomCBS: | | | | | | |
| Basic net earnings per common share attributable to ViacomCBS: | | Basic net earnings per common share attributable to ViacomCBS: | |
| Net earnings from continuing operations | $ | 5.32 |
| | $ | 5.55 |
| | $ | 5.11 |
| Net earnings from continuing operations | $ | 6.77 | | | $ | 3.74 | | | $ | 5.15 | |
| Net earnings (loss) from discontinued operations | $ | .06 |
| | $ | .05 |
| | $ | (1.48 | ) | |
| Net earnings from discontinued operations | | Net earnings from discontinued operations | $ | .25 | | | $ | .19 | | | $ | .23 | |
| Net earnings | $ | 5.38 |
| | $ | 5.60 |
| | $ | 3.63 |
| Net earnings | $ | 7.02 | | | $ | 3.93 | | | $ | 5.38 | |
| | | | | | | |
| Diluted net earnings (loss) per common share attributable to ViacomCBS: | | | | | | |
| Diluted net earnings per common share attributable to ViacomCBS: | | Diluted net earnings per common share attributable to ViacomCBS: | |
| Net earnings from continuing operations | $ | 5.30 |
| | $ | 5.51 |
| | $ | 5.05 |
| Net earnings from continuing operations | $ | 6.69 | | | $ | 3.73 | | | $ | 5.13 | |
| Net earnings (loss) from discontinued operations | $ | .06 |
| | $ | .05 |
| | $ | (1.46 | ) | |
| Net earnings from discontinued operations | | Net earnings from discontinued operations | $ | .25 | | | $ | .19 | | | $ | .23 | |
| Net earnings | $ | 5.36 |
| | $ | 5.56 |
| | $ | 3.59 |
| Net earnings | $ | 6.94 | | | $ | 3.92 | | | $ | 5.36 | |
| | | | | | | |
| Weighted average number of common shares outstanding: | | | | | | Weighted average number of common shares outstanding: | |
| Basic | 615 |
| | 617 |
| | 640 |
| Basic | 641 | | | 616 | | | 615 | |
| Diluted | 617 |
| | 621 |
| | 647 |
| Diluted | 655 | | | 618 | | | 617 | |
See notes to consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
| | | | Year Ended December 31, | | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 | | 2021 | | 2020 | | 2019 |
| Net earnings (ViacomCBS and noncontrolling interests) | $ | 3,339 |
| | $ | 3,492 |
| | $ | 2,373 |
| Net earnings (ViacomCBS and noncontrolling interests) | $ | 4,631 | | | $ | 2,701 | | | $ | 3,339 | |
| Other comprehensive income (loss), net of tax: | | | | | | Other comprehensive income (loss), net of tax: | |
| Cumulative translation adjustments | 15 |
| | (254 | ) | | 192 |
| Cumulative translation adjustments | (143) | | | 134 | | | 9 | |
| Net actuarial gain (loss) and prior service costs | (145 | ) | | (61 | ) | | 73 |
| Net actuarial gain (loss) and prior service costs | 75 | | | (2) | | | (145) | |
| Available-for-sale securities | — |
| | — |
| | 30 |
| |
Other comprehensive income (loss), net of tax (ViacomCBS and noncontrolling interests) | (130 | ) | | (315 | ) | | 295 |
| |
Other comprehensive income (loss) from continuing operations, net of tax (ViacomCBS and noncontrolling interests) | | Other comprehensive income (loss) from continuing operations, net of tax (ViacomCBS and noncontrolling interests) | (68) | | | 132 | | | (136) | |
| Other comprehensive income (loss) from discontinued operations | | Other comprehensive income (loss) from discontinued operations | (3) | | | 5 | | | 6 | |
| Comprehensive income | 3,209 |
| | 3,177 |
| | 2,668 |
| Comprehensive income | 4,560 | | | 2,838 | | | 3,209 | |
| Less: Comprehensive income attributable to noncontrolling interests | 33 |
| | 31 |
| | 52 |
| Less: Comprehensive income attributable to noncontrolling interests | 87 | | | 278 | | | 33 | |
| Comprehensive income attributable to ViacomCBS | $ | 3,176 |
| | $ | 3,146 |
| | $ | 2,616 |
| Comprehensive income attributable to ViacomCBS | $ | 4,473 | | | $ | 2,560 | | | $ | 3,176 | |
See notes to consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
| | | | | At December 31, | | | At December 31, | |
| | | 2019 | | 2018 | | | 2021 | | 2020 | |
| ASSETS | | | | | | ASSETS | |
| Current Assets: | | | | | | Current Assets: | |
| Cash and cash equivalents | | $ | 632 |
| | $ | 856 |
| | Cash and cash equivalents | | $ | 6,267 | | | $ | 2,984 | | |
| Receivables, net | | 7,206 |
| | 7,199 |
| | Receivables, net | | 6,984 | | | 7,017 | | |
| Programming and other inventory | | 2,876 |
| | 2,785 |
| | Programming and other inventory | | 1,504 | | | 1,757 | | |
| Prepaid expenses | | 401 |
| | 372 |
| | |
| Other current assets | | 787 |
| | 668 |
| | |
| Prepaid expenses and other current assets | | Prepaid expenses and other current assets | | 1,176 | | | 1,391 | | |
| Current assets of discontinued operations | | Current assets of discontinued operations | | 745 | | | 630 | | |
| Total current assets | | 11,902 |
| | 11,880 |
| | Total current assets | | 16,676 | | | 13,779 | | |
| Property and equipment, net | | 2,085 |
| | 2,079 |
| | Property and equipment, net | | 1,736 | | | 1,994 | | |
| Programming and other inventory | | 8,652 |
| | 7,298 |
| | Programming and other inventory | | 13,358 | | | 10,363 | | |
| Goodwill | | 16,980 |
| | 16,526 |
| | Goodwill | | 16,584 | | | 16,612 | | |
| Intangible assets, net | | 2,993 |
| | 2,943 |
| | Intangible assets, net | | 2,772 | | | 2,826 | | |
| Operating lease assets | | 1,939 |
| | — |
| | Operating lease assets | | 1,630 | | | 1,602 | | |
| Deferred income tax assets, net | | 939 |
| | 266 |
| | Deferred income tax assets, net | | 1,206 | | | 993 | | |
| Other assets | | 4,006 |
| | 3,449 |
| | Other assets | | 3,824 | | | 3,657 | | |
| Assets held for sale | | 23 |
| | 56 |
| | Assets held for sale | | 19 | | | 28 | | |
| Assets of discontinued operations | | Assets of discontinued operations | | 815 | | | 809 | | |
| Total Assets | | $ | 49,519 |
| | $ | 44,497 |
| | Total Assets | | $ | 58,620 | | | $ | 52,663 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| Current Liabilities: | | | | | | Current Liabilities: | |
| Accounts payable | | $ | 667 |
| | $ | 502 |
| | Accounts payable | | $ | 800 | | | $ | 571 | | |
| Accrued expenses | | 1,760 |
| | 1,633 |
| | Accrued expenses | | 2,323 | | | 1,714 | | |
| Participants’ share and royalties payable | | 1,977 |
| | 1,828 |
| | Participants’ share and royalties payable | | 2,159 | | | 2,005 | | |
| Accrued programming and production costs | | 1,500 |
| | 1,453 |
| | Accrued programming and production costs | | 1,342 | | | 1,141 | | |
| Deferred revenues | | 739 |
| | 643 |
| | Deferred revenues | | 1,091 | | | 978 | | |
| Debt | | 717 |
| | 1,013 |
| | Debt | | 11 | | | 16 | | |
| Other current liabilities | | 1,688 |
| | 1,249 |
| | Other current liabilities | | 1,182 | | | 1,391 | | |
| Current liabilities of discontinued operations | | Current liabilities of discontinued operations | | 571 | | | 480 | | |
| Total current liabilities | | 9,048 |
| | 8,321 |
| | Total current liabilities | | 9,479 | | | 8,296 | | |
| Long-term debt | | 18,002 |
| | 18,100 |
| | Long-term debt | | 17,698 | | | 19,717 | | |
| Participants’ share and royalties payable | | 1,546 |
| | 1,587 |
| | Participants’ share and royalties payable | | 1,244 | | | 1,317 | | |
| Pension and postretirement benefit obligations | | 2,121 |
| | 1,908 |
| | Pension and postretirement benefit obligations | | 1,946 | | | 2,098 | | |
| Deferred income tax liabilities, net | | 500 |
| | 656 |
| | Deferred income tax liabilities, net | | 1,063 | | | 778 | | |
| Operating lease liabilities | | 1,909 |
| | — |
| | Operating lease liabilities | | 1,598 | | | 1,583 | | |
| Program rights obligations | | 356 |
| | 459 |
| | Program rights obligations | | 404 | | | 243 | | |
| Other liabilities | | 2,494 |
| | 2,724 |
| | Other liabilities | | 1,898 | | | 2,158 | | |
| Liabilities of discontinued operations | | Liabilities of discontinued operations | | 213 | | | 220 | | |
| Redeemable noncontrolling interest | | 254 |
| | 239 |
| | Redeemable noncontrolling interest | | 107 | | | 197 | | |
| | | | | | | |
| Commitments and contingencies | |
|
| |
|
| | |
| Commitments and contingencies (Note 20) | | Commitments and contingencies (Note 20) | | 0 | | 0 | |
| | | | | | | |
| ViacomCBS stockholders’ equity: | | | | | | ViacomCBS stockholders’ equity: | |
Class A Common Stock, par value $.001 per share; 375 shares authorized; 52 (2019) and 64 (2018) shares issued | | — |
| | — |
| | |
Class B Common Stock, par value $.001 per share; 5,000 shares authorized; 1,064 (2019) and 1,283 (2018) shares issued | | 1 |
| | 1 |
| | |
5.75% Series A Mandatory Convertible Preferred Stock, par value $.001 per share; 25 shares authorized and 10 shares issued (2021) | | 5.75% Series A Mandatory Convertible Preferred Stock, par value $.001 per share; 25 shares authorized and 10 shares issued (2021) | | — | | | — | | |
Class A Common Stock, par value $.001 per share; 55 shares authorized; 41 (2021) and 52 (2020) shares issued | | Class A Common Stock, par value $.001 per share; 55 shares authorized; 41 (2021) and 52 (2020) shares issued | | — | | | — | | |
Class B Common Stock, par value $.001 per share; 5,000 shares authorized; 1,110 (2021) and 1,068 (2020) shares issued | | Class B Common Stock, par value $.001 per share; 5,000 shares authorized; 1,110 (2021) and 1,068 (2020) shares issued | | 1 | | | 1 | | |
| Additional paid-in capital | | 29,590 |
| | 49,907 |
| | Additional paid-in capital | | 32,918 | | | 29,785 | | |
| Treasury stock, at cost; 501 (2019) and 734 (2018) Class B Shares | | (22,908 | ) | | (43,420 | ) | | |
| Treasury stock, at cost; 503 (2021 and 2020) Class B Shares | | Treasury stock, at cost; 503 (2021 and 2020) Class B Shares | | (22,958) | | | (22,958) | | |
| Retained earnings | | 8,494 |
| | 5,569 |
| | Retained earnings | | 14,343 | | | 10,375 | | |
| Accumulated other comprehensive loss | | (1,970 | ) | | (1,608 | ) | | Accumulated other comprehensive loss | | (1,902) | | | (1,832) | | |
| Total ViacomCBS stockholders’ equity | | 13,207 |
| | 10,449 |
| | Total ViacomCBS stockholders’ equity | | 22,402 | | | 15,371 | | |
| Noncontrolling interests |
| 82 |
|
| 54 |
| | Noncontrolling interests | | 568 | | | 685 | | |
| Total Equity | | 13,289 |
| | 10,503 |
| | Total Equity | | 22,970 | | | 16,056 | | |
| Total Liabilities and Equity | | $ | 49,519 |
| | $ | 44,497 |
| | Total Liabilities and Equity | | $ | 58,620 | | | $ | 52,663 | | |
See notes to consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
| | | | | Year Ended December 31, | | Year Ended December 31, |
| | | 2019 | | 2018 | | 2017 | | 2021 | | 2020 | | 2019 |
| Operating Activities: | | | | | | | Operating Activities: | |
| Net earnings (ViacomCBS and noncontrolling interests) | | $ | 3,339 |
| | $ | 3,492 |
| | $ | 2,373 |
| Net earnings (ViacomCBS and noncontrolling interests) | | $ | 4,631 | | | $ | 2,701 | | | $ | 3,339 | |
| Less: Net earnings (loss) from discontinued operations, net of tax | | 38 |
| | 32 |
| | (947 | ) | |
| Less: Net earnings from discontinued operations, net of tax | | Less: Net earnings from discontinued operations, net of tax | | 162 | | | 117 | | | 140 | |
| Net earnings from continuing operations | | 3,301 |
| | 3,460 |
| | 3,320 |
| Net earnings from continuing operations | | 4,469 | | | 2,584 | | | 3,199 | |
Adjustments to reconcile net earnings from continuing operations to net cash flow provided by operating activities from continuing operations: | | | | | | | Adjustments to reconcile net earnings from continuing operations to net cash flow provided by operating activities from continuing operations: | |
| Depreciation and amortization | | 443 |
| | 433 |
| | 443 |
| Depreciation and amortization | | 390 | | | 430 | | | 438 | |
| Television programming and feature film cost amortization | | 12,554 |
| | 11,595 |
| | 10,911 |
| Television programming and feature film cost amortization | | 13,352 | | | 11,045 | | | 12,554 | |
| Deferred tax (benefit) provision | | (769 | ) | | 58 |
| | (367 | ) | |
| Deferred tax provision (benefit) | | Deferred tax provision (benefit) | | 90 | | | 122 | | | (765) | |
| Stock-based compensation | | 291 |
| | 191 |
| | 232 |
| Stock-based compensation | | 192 | | | 274 | | | 286 | |
| Net (gain) loss on dispositions and impairment of assets | | (498 | ) | | 38 |
| | (377 | ) | |
| (Gain) loss on marketable securities | | (113 | ) | | 23 |
| | — |
| |
| Net gain on sales | | Net gain on sales | | (2,343) | | | (214) | | | (549) | |
| Net gains from investments | | Net gains from investments | | (47) | | | (206) | | | (85) | |
| Loss on extinguishment of debt | | Loss on extinguishment of debt | | 128 | | | 126 | | | — | |
| Equity in loss of investee companies, net of tax and distributions | | 58 |
| | 54 |
| | 15 |
| Equity in loss of investee companies, net of tax and distributions | | 96 | | | 34 | | | 58 | |
| Change in assets and liabilities | | | | | | | Change in assets and liabilities | |
| Increase in receivables | | (256 | ) | | (368 | ) | | (147 | ) | |
| Decrease (increase) in receivables | | Decrease (increase) in receivables | | 179 | | | (68) | | | (247) | |
| Increase in inventory and related program and participation liabilities, net | | (14,215 | ) | | (12,185 | ) | | (11,544 | ) | Increase in inventory and related program and participation liabilities, net | | (16,584) | | | (12,170) | | | (14,215) | |
| Increase (decrease) in accounts payable and other liabilities | | 297 |
| | (158 | ) | | (248 | ) | |
| Increase (decrease) in pension and postretirement benefit obligations | | 16 |
| | (65 | ) | | (239 | ) | |
| Increase in accounts payable and other liabilities | | Increase in accounts payable and other liabilities | | 760 | | | 188 | | | 302 | |
| (Decrease) increase in pension and postretirement benefit obligations | | (Decrease) increase in pension and postretirement benefit obligations | | (61) | | | (20) | | | 16 | |
| Increase in income taxes | | 160 |
| | 398 |
| | 345 |
| Increase in income taxes | | 265 | | | 2 | | | 176 | |
| Other, net | | (39 | ) | | (11 | ) | | 1 |
| Other, net | | (51) | | | 88 | | | 3 | |
| Net cash flow provided by operating activities from continuing operations | | 1,230 |
| | 3,463 |
| | 2,345 |
| Net cash flow provided by operating activities from continuing operations | | 835 | | | 2,215 | | | 1,171 | |
| Net cash flow provided by operating activities from discontinued operations | | — |
| | 1 |
| | 94 |
| Net cash flow provided by operating activities from discontinued operations | | 118 | | | 79 | | | 59 | |
| Net cash flow provided by operating activities | | 1,230 |
| | 3,464 |
| | 2,439 |
| Net cash flow provided by operating activities | | 953 | | | 2,294 | | | 1,230 | |
| Investing Activities: | | | | | | | Investing Activities: | |
| Investments | | (171 | ) | | (161 | ) | | (128 | ) | Investments | | (193) | | | (59) | | | (171) | |
| Capital expenditures | | (353 | ) | | (352 | ) | | (356 | ) | Capital expenditures | | (354) | | | (324) | | | (345) | |
| Acquisitions, net of cash acquired | | (399 | ) | | (118 | ) | | (289 | ) | Acquisitions, net of cash acquired | | (54) | | | (147) | | | (399) | |
| Proceeds from dispositions | | 756 |
| | 39 |
| | 892 |
| Proceeds from dispositions | | 3,028 | | | 593 | | | 756 | |
| Other investing activities | | 14 |
| | 4 |
| | 31 |
| Other investing activities | | (25) | | | — | | | 14 | |
| Net cash flow (used for) provided by investing activities from continuing operations | | (153 | ) | | (588 | ) | | 150 |
| |
| Net cash flow provided by (used for) investing activities from continuing operations | | Net cash flow provided by (used for) investing activities from continuing operations | | 2,402 | | | 63 | | | (145) | |
| Net cash flow used for investing activities from discontinued operations | | (2 | ) | | (23 | ) | | (24 | ) | Net cash flow used for investing activities from discontinued operations | | (7) | | | (7) | | | (10) | |
| Net cash flow (used for) provided by investing activities | | (155 | ) | | (611 | ) | | 126 |
| |
| Net cash flow provided by (used for) investing activities | | Net cash flow provided by (used for) investing activities | | 2,395 | | | 56 | | | (155) | |
| Financing Activities: | | | | | | | Financing Activities: | |
| Proceeds from (repayments of) short-term debt borrowings, net | | 25 |
| | (5 | ) | | 229 |
| |
| (Repayments of) proceeds from short-term debt borrowings, net | | (Repayments of) proceeds from short-term debt borrowings, net | | — | | | (706) | | | 25 | |
| Proceeds from issuance of senior notes | | 492 |
| | — |
| | 3,157 |
| Proceeds from issuance of senior notes | | — | | | 4,375 | | | 492 | |
| Repayment of notes and debentures | | (910 | ) | | (1,102 | ) | | (4,729 | ) | |
| Dividends | | (595 | ) | | (599 | ) | | (616 | ) | |
| Repayment of long-term debt | | Repayment of long-term debt | | (2,230) | | | (2,901) | | | (910) | |
| Dividends paid on preferred stock | | Dividends paid on preferred stock | | (30) | | | — | | | — | |
| Dividends paid on common stock | | Dividends paid on common stock | | (617) | | | (600) | | | (595) | |
| Proceeds from issuance of preferred stock | | Proceeds from issuance of preferred stock | | 983 | | | — | | | — | |
| Proceeds from issuance of common stock | | Proceeds from issuance of common stock | | 1,672 | | | — | | | — | |
| Purchase of Company common stock | | (57 | ) | | (586 | ) | | (1,111 | ) | Purchase of Company common stock | | — | | | (58) | | | (57) | |
| Payment of payroll taxes in lieu of issuing shares for stock-based compensation | | (56 | ) | | (67 | ) | | (103 | ) | Payment of payroll taxes in lieu of issuing shares for stock-based compensation | | (110) | | | (93) | | | (56) | |
| Proceeds from exercise of stock options | | 15 |
| | 29 |
| | 263 |
| Proceeds from exercise of stock options | | 408 | | | 5 | | | 15 | |
| Payments to noncontrolling interests | | Payments to noncontrolling interests | | (235) | | | (59) | | | (91) | |
| Other financing activities | | (130 | ) | | (201 | ) | | (99 | ) | Other financing activities | | 7 | | | (53) | | | (39) | |
| Net cash flow used for financing activities | | (1,216 | ) | | (2,531 | ) | | (3,009 | ) | Net cash flow used for financing activities | | (152) | | | (90) | | | (1,216) | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | | (1 | ) | | (25 | ) | | 58 |
| |
| Net (decrease) increase in cash, cash equivalents and restricted cash | | (142 | ) | | 297 |
| | (386 | ) | |
Cash, cash equivalents and restricted cash at beginning of year (includes $120 (2019) of restricted cash and $24 (2017) of discontinued operations cash) | | 976 |
| | 679 |
| | 1,065 |
| |
Cash, cash equivalents and restricted cash at end of year (includes $202 (2019) and $120 (2018) of restricted cash) | | $ | 834 |
| | $ | 976 |
| | $ | 679 |
| |
| Effect of exchange rate changes on cash and cash equivalents | | Effect of exchange rate changes on cash and cash equivalents | | (48) | | | 25 | | | (1) | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | | Net increase (decrease) in cash, cash equivalents and restricted cash | | 3,148 | | | 2,285 | | | (142) | |
Cash, cash equivalents and restricted cash at beginning of year (includes $135 (2021) $202 (2020) and $120 (2019) of restricted cash) | | Cash, cash equivalents and restricted cash at beginning of year (includes $135 (2021) $202 (2020) and $120 (2019) of restricted cash) | | 3,119 | | | 834 | | | 976 | |
Cash, cash equivalents and restricted cash at end of year (includes $135 (2020) and $202 (2019) of restricted cash) | | Cash, cash equivalents and restricted cash at end of year (includes $135 (2020) and $202 (2019) of restricted cash) | | $ | 6,267 | | | $ | 3,119 | | | $ | 834 | |
See notes to consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | Class A and B Common Stock | | Treasury
Stock | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total ViacomCBS Stockholders’ Equity | | Non-Controlling Interests | | Total Equity |
| (Shares) | | | (Shares) | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 | — | | | $ | — | | 613 | | | $ | 1 | | | $ | (43,420) | | | $ | 49,907 | | | | | $ | 5,569 | | | | | $ | (1,608) | | | | | $ | 10,449 | | | | | $ | 54 | | | | $ | 10,503 | |
Stock-based
compensation
activity and other | — | | | — | | 3 | | | — | | | 29 | | | 226 | | | | | (4) | | | | | — | | | | | 251 | | | | | — | | | | 251 | |
Cancellation of
treasury stock in
the Merger | — | | | — | | — | | | — | | | 20,533 | | | (20,533) | | | | | — | | | | | — | | | | | — | | | | | — | | | | — | |
Class B Common
Stock purchased | — | | | — | | (1) | | | — | | | (50) | | | — | | | | | — | | | | | — | | | | | (50) | | | | | — | | | | (50) | |
Common stock
dividends | — | | | — | | — | | | — | | | — | | | — | | | | | (600) | | | | | — | | | | | (600) | | | | | — | | | | (600) | |
Noncontrolling
interests | — | | | — | | — | | | — | | | — | | | (10) | | | | | (9) | | | | | — | | | | | (19) | | | | | (5) | | | | (24) | |
| Net earnings | — | | | — | | — | | | — | | | — | | | — | | | | | 3,308 | | | | | — | | | | | 3,308 | | | | | 31 | | | | 3,339 | |
Reclassification of income tax effect of the Tax Reform Act | — | | | — | | — | | | — | | | — | | | — | | | | | 230 | | | | | (230) | | | | | — | | | | | — | | | | — | |
Other
comprehensive
income (loss) | — | | | — | | — | | | — | | | — | | | — | | | | | — | | | | | (132) | | | | | (132) | | | | | 2 | | | | (130) | |
| December 31, 2019 | — | | | — | | 615 | | | 1 | | | (22,908) | | | 29,590 | | | | | 8,494 | | | | | (1,970) | | | | | 13,207 | | | | | 82 | | | | 13,289 | |
Stock-based
compensation
activity | — | | | — | | 3 | | | — | | | — | | | 195 | | | | | — | | | | | — | | | | | 195 | | | | | — | | | | 195 | |
Class B Common
Stock purchased | — | | | — | | (1) | | | — | | | (50) | | | — | | | | | — | | | | | — | | | | | (50) | | | | | — | | | | (50) | |
Common stock
dividends | — | | | — | | — | | | — | | | — | | | — | | | | | (601) | | | | | — | | | | | (601) | | | | | — | | | | (601) | |
Noncontrolling
interests | — | | | — | | — | | | — | | | — | | | — | | | | | 60 | | | | | — | | | | | 60 | | | | | 325 | | (a) | | 385 | |
| Net earnings | — | | | — | | — | | | — | | | — | | | — | | | | | 2,422 | | | | | — | | | | | 2,422 | | | | | 279 | | | | 2,701 | |
Other
comprehensive
income (loss) | — | | | — | | — | | | — | | | — | | | — | | | | | — | | | | | 138 | | | | | 138 | | | | | (1) | | | | 137 | |
| December 31, 2020 | — | | | — | | 617 | | | 1 | | | (22,958) | | | 29,785 | | | | | 10,375 | | | | | (1,832) | | | | | 15,371 | | | | | 685 | | | | 16,056 | |
Stock-based
compensation
activity | — | | | — | | 11 | | | — | | | — | | | 493 | | | | | — | | | | | — | | | | | 493 | | | | | — | | | | 493 | |
| Stock issuances | 10 | | | — | | 20 | | | — | | | — | | | 2,655 | | | | | — | | | | | — | | | | | 2,655 | | | | | | | | 2,655 | |
Preferred stock
dividends | — | | | — | | — | | | — | | | — | | | — | | | | | (44) | | | | | — | | | | | (44) | | | | | — | | | | (44) | |
Common stock
dividends | — | | | — | | — | | | — | | | — | | | — | | | | | (625) | | | | | — | | | | | (625) | | | | | — | | | | (625) | |
Noncontrolling
interests | — | | | — | | — | | | — | | | — | | | (15) | | | | | 94 | | | | | — | | | | | 79 | | | | | (204) | | | | (125) | |
| Net earnings | — | | | — | | — | | | — | | | — | | | — | | | | | 4,543 | | | | | — | | | | | 4,543 | | | | | 88 | | | | 4,631 | |
Other
comprehensive
loss | — | | | — | | — | | | — | | | — | | | — | | | | | — | | | | | (70) | | | | | (70) | | | | | (1) | | | | (71) | |
| December 31, 2021 | 10 | | | $ | — | | 648 | | | $ | 1 | | | $ | (22,958) | | | $ | 32,918 | | | | | $ | 14,343 | | | | | $ | (1,902) | | | | | $ | 22,402 | | | | | $ | 568 | | | | $ | 22,970 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Class A and B Common Stock | | Treasury Stock | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total ViacomCBS Stockholders’ Equity | | Non-Controlling Interests | | Total Equity |
| | (Shares) | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2016 | 648 |
| | $ | 1 |
| | $ | (40,997 | ) | | $ | 50,499 |
| | | | $ | 296 |
| | | | $ | (1,564 | ) | | | | $ | 8,235 |
| | | | $ | 51 |
| | | $ | 8,286 |
|
Stock-based compensation activity | 8 |
| | — |
| | 122 |
| | 281 |
| | | | — |
| | | | — |
| | | | 403 |
| | | | — |
| | | 403 |
|
Retirement of treasury stock | — |
| | — |
| | 89 |
| | (89 | ) | | | | — |
| | | | — |
| | | | — |
| | | | — |
| | | — |
|
Class B Common Stock purchased | (16 | ) | | — |
| | (1,050 | ) | | — |
| | | | — |
| | | | — |
| | | | (1,050 | ) | | | | — |
| | | (1,050 | ) |
| CBS Radio Split-off | (18 | ) | | — |
| | (1,007 | ) | | — |
| | | | — |
| | | | — |
| | | | (1,007 | ) | | | | — |
| | | (1,007 | ) |
| Dividends | — |
| | — |
| | — |
| | (612 | ) | | | | — |
| | | | — |
| | | | (612 | ) | | | | — |
| | | (612 | ) |
| Noncontrolling interests | — |
| | — |
| | — |
| | (11 | ) | | | | (55 | ) | | | | — |
| | | | (66 | ) | | | | (22 | ) | | | (88 | ) |
| Net earnings | — |
| | — |
| | — |
| | — |
| | | | 2,321 |
| | | | — |
| | | | 2,321 |
| | | | 52 |
| | | 2,373 |
|
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | | | — |
| | | | 295 |
| | | | 295 |
| | | | — |
| | | 295 |
|
| December 31, 2017 | 622 |
| | 1 |
| | (42,843 | ) | | 50,068 |
| | | | 2,562 |
| | | | (1,269 | ) | | | | 8,519 |
| | | | 81 |
| | | 8,600 |
|
Stock-based compensation activity | 3 |
| | — |
| | (36 | ) | | 198 |
| | | | — |
| | | | — |
| | | | 162 |
| | | | — |
| | | 162 |
|
Retirement of treasury stock | — |
| | — |
| | 59 |
| | (59 | ) | | | | — |
| | | | — |
| | | | — |
| | | | — |
| | | — |
|
Class B Common Stock purchased | (12 | ) | | — |
| | (600 | ) | | — |
| | | | — |
| | | | — |
| | | | (600 | ) | | | | — |
| | | (600 | ) |
| Dividends | — |
| | — |
| | — |
| | (300 | ) | | | | (299 | ) | | | | — |
| | | | (599 | ) | | | | — |
| | | (599 | ) |
| Noncontrolling interests | — |
| | — |
| | — |
| | — |
| | | | — |
| | | | — |
| | | | — |
| | | | (58 | ) | | | (58 | ) |
| Net earnings | — |
| | — |
| | — |
| | — |
| | | | 3,455 |
| | | | — |
| | | | 3,455 |
| | | | 37 |
| | | 3,492 |
|
Adoption of accounting standards | — |
| | — |
| | — |
| | — |
| | | | (149 | ) | | | | (30 | ) | | | | (179 | ) | | | | — |
| | | (179 | ) |
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | | | — |
| | | | (309 | ) | | | | (309 | ) | | | | (6 | ) | | | (315 | ) |
| December 31, 2018 | 613 |
| | 1 |
| | (43,420 | ) | | 49,907 |
| | | | 5,569 |
| | | | (1,608 | ) | | | | 10,449 |
| | | | 54 |
| | | 10,503 |
|
Stock-based compensation activity and other | 3 |
| | — |
| | (15 | ) | | 270 |
| | | | (4 | ) | | | | — |
| | | | 251 |
| | | | — |
| | | 251 |
|
Retirement of treasury stock | — |
| | — |
| | 20,577 |
| | (20,577 | ) | | | | — |
| | | | — |
| | | | — |
| | | | — |
| | | — |
|
Class B Common Stock purchased | (1 | ) | | — |
| | (50 | ) | | — |
| | | | — |
| | | | — |
| | | | (50 | ) | | | | — |
| | | (50 | ) |
| Dividends | — |
| | — |
| | — |
| | — |
| | | | (600 | ) | | | | — |
| | | | (600 | ) | | | | — |
| | | (600 | ) |
| Noncontrolling interests | — |
| | — |
| | — |
| | (10 | ) | | | | (9 | ) | | | | — |
| | | | (19 | ) | | | | (5 | ) | | | (24 | ) |
| Net earnings | — |
| | — |
| | — |
| | — |
| | | | 3,308 |
| | | | — |
| | | | 3,308 |
| | | | 31 |
| | | 3,339 |
|
Reclassification of income tax effect of the Tax Reform Act | — |
| | — |
| | — |
| | — |
| | | | 230 |
| | | | (230 | ) | | | | — |
| | | | — |
| | | — |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | | | — |
| | | | (132 | ) | | | | (132 | ) | | | | 2 |
| | | (130 | ) |
| December 31, 2019 | 615 |
| | $ | 1 |
| | $ | (22,908 | ) | | $ | 29,590 |
| | | | $ | 8,494 |
| | | | $ | (1,970 | ) | | | | $ | 13,207 |
| | | | $ | 82 |
| | | $ | 13,289 |
|
See notes to consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business—In 2021, ViacomCBS Inc. is comprised ofoperated through the following segments: TV Entertainment( (CBS Television Network; CBS Television Network,Studios; CBS Television Studios, CBS Television Distribution, CBS Interactive,Media Ventures; CBS Sports Network,Network; CBS Television Stations, our owned broadcast television stations; and a number of streaming services, including our direct-to-consumer streaming service, Paramount+ (in the United States), and several CBS-branded streaming services),services, including CBS News Streaming and CBS Sports HQ); Cable Networks (Showtime Networks,(a portfolio of premium and basic cable networks, including Showtime, BET, Nickelodeon, MTV, BET, Comedy Central, Paramount Network, Nick Jr.and Smithsonian Channel; a number of direct-to-consumer streaming services, including Pluto TV, Showtime Networks’ premium subscription streaming service (“Showtime OTT”), VH1, TV Land, CMT, Pop TV, Smithsonian Networks,Noggin and BET+; and ViacomCBS Networks International, Network 10, Channel 5, Telefewhich operates international extensions of Paramount+ and Pluto TV),our Cable Networks brands and services, our international free-to-air networks and ViacomCBS International Studios); and Filmed Entertainment (Paramount Pictures, Paramount Players, Paramount Animation, and Paramount Television Studios);Studios and Publishing (Simon & Schuster)Miramax). References to “ViacomCBS”,“ViacomCBS,” the “Company”, “we”,“Company,” “we,” “us” and “our” refer to ViacomCBS Inc. and its consolidated subsidiaries, unless the context otherwise requires. Effective February 16, 2022, we are changing our name to Paramount Global.
Beginning in 2022, primarily as a result of our increased strategic focus on our direct-to-consumer businesses, we made certain changes to how we manage our businesses and allocate resources that resulted in a change to our operating segments. Accordingly, beginning in the first quarter of 2022, we will report results based on the following segments: TV Media(consists of our historical TV Entertainment and Cable Networks segments, except that it no longer includes their corresponding direct-to-consumer streaming services, which are now part of our Direct-to-Consumer segment, and Nickelodeon Studio, which is now a part of our Filmed Entertainment segment, and now includes Paramount Television Studios, which was formerly part of our historical Filmed Entertainment segment); Direct-to-Consumer (consists of our portfolio of free, premium and pay streaming services, including Paramount+, Pluto TV, Showtime OTT, BET+ and Noggin); andFilmed Entertainment (consists of our historical Filmed Entertainment segment, except that it no longer includes Paramount Television Studios, which is now part of our TV Media segment, and now includes Nickelodeon Studio, which was formerly a part of our historical Cable Networks segment).
Merger with Viacom Inc.—On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”). At the effective time of the Merger (the “Effective Time”), the combined company changed its name to ViacomCBS Inc. (“ViacomCBS”). At the Effective Time, (1) each share of Viacom Class A Common Stock issued and outstanding immediately prior to the Effective Time, other than shares held directly by Viacom as treasury shares or held by CBS, was converted automatically into 0.59625 shares of ViacomCBS Class A Common Stock, and (2) each share of Viacom Class B Common Stock issued and outstanding immediately prior to the Effective Time, other than shares held directly by Viacom as treasury shares or held by CBS, was converted automatically into 0.59625 shares of ViacomCBS Class B Common Stock (together with ViacomCBS Class A Common Stock, the “ViacomCBS Common Stock”). At the Effective Time, each share of CBS Class A Common Stock and each share of CBS Class B Common Stock (together with CBS Class A Common Stock, the “CBS Common Stock”) issued and outstanding immediately prior to the Effective Time, remained an issued and outstanding share of ViacomCBS Class A Common Stock and ViacomCBS Class B Common Stock, respectively, and was not affected by the Merger.
Following the Merger, the CBS Common Stock was delisted from the New York Stock Exchange and the Viacom Common Stock ceased trading on the Nasdaq Stock Market LLC (“Nasdaq”). On December 5, 2019, ViacomCBS Class A Common Stock and ViacomCBS Class B Common Stock were listed on Nasdaq and began trading under the ticker symbols VIACA and VIAC, respectively.
Change in Reporting Entity—The Merger has been accounted for as a transaction between entities under common control as National Amusements, Inc. (“NAI”) was the controlling stockholder of each of CBS and Viacom (and remains the controlling stockholder of ViacomCBS). Upon the closing of the Merger, the net assets of Viacom were combined with those of CBS at their historical carrying amounts and the companies have been presented on a combined basis for all periods presented in the consolidated financial statements. This presentation constitutes a change in reporting entity. The following table provides the impact of the change in reporting entity on our results of operations for periods prior to the Merger.
|
| | | | | | | | | | | | | |
| | Period from January 1 | | Year Ended December 31, |
| | to December 4, 2019 | | 2018 | | 2017 |
Net earnings from continuing operations attributable to ViacomCBS | | $ | 1,353 |
| | | $ | 1,463 |
| | $ | 1,959 |
|
Net earnings per common share from continuing operations attributable to ViacomCBS: | | | | | | | |
| Basic | | $ | .44 |
| | | $ | .35 |
| | $ | 1.85 |
|
| Diluted | | $ | .45 |
| | | $ | .37 |
| | $ | 1.83 |
|
| Other comprehensive income (loss) | | $ | (148 | ) | | | $ | (202 | ) | | $ | 190 |
|
Discontinued Operations—On November 16, 2017,25, 2020, we completedentered into an agreement to sell our publishing business, Simon & Schuster, which was previously reported as the dispositionPublishing segment, to Penguin Random House LLC (“Penguin Random House”), a wholly owned subsidiary of CBS Radio Inc. (“CBS Radio”) throughBertelsmann SE & Co. KGaA, for $2.175 billion in cash. As a split-off. CBS Radio has beenresult, Simon & Schuster is presented as a discontinued operation in our consolidated financial
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
statements for all periods presented (see Note 18)3). Also included in discontinued operations are liabilities associated with indemnification obligations for leases primarily associated with the previously discontinued operations of Famous Players Inc.
Principles of Consolidation—The consolidated financial statements include the accounts of ViacomCBS, its subsidiaries in which a controlling interest is maintained and variable interest entities (“VIEs”) where we are considered the primary beneficiary, after the elimination of intercompany accounts and transactions. Controlling interest is
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
determined by majority ownership interest and the absence of substantive third party participating rights. Investments over which we have a significant influence, without a controlling interest, are accounted for under the equity method. Our proportionate share of net earnings or loss of the entity is recorded in “Equity in earnings (loss)loss of investee companies, net of tax” on the Consolidated Statements of Operations.
Reclassifications—Certain amounts reported for prior years have been reclassified to conform to the current year’s presentation.
Use of Estimates—The preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amount of revenues and expenses during the periods presented. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may vary from these estimates under different assumptions or conditions.
Business Combinations—We generally account for business combinations using the acquisition method of accounting. Under the acquisition method, once control is obtained of a business, 100% of the assets, liabilities and certain contingent liabilities acquired, as well as amounts attributed to noncontrolling interests, are recorded at fair value. Any transaction costs are expensed as incurred. The Merger was accounted for as a transaction between entities under common control as NAI was the controlling stockholder of each of CBS and Viacom.
Cash and Cash Equivalents—Cash and cash equivalents consist of cash on hand and highly liquid investments with maturities of three months or less at the date of purchase, including money market funds, commercial paper and bank time deposits. At December 31, 2019 and 2018,2020, we had restricted cash of $202$135 million, and $120 million, respectively, consistingwhich consisted of amounts held in grantor trusts related to agreements with former executives. Restricted cash is included within “Other current assets” and “Other assets” on the Consolidated Balance Sheets.Sheet at December 31, 2020.
Programming Inventory—We produce and acquire rights to programming and produce programming to exhibit on our broadcast and cable networks, on our broadcast television stations, direct to consumers through our digital streaming services, on our broadcast television stations, and in theaters. We also produce programming for third parties. Costs for internally-produced and acquired programming inventory, including prepayments for such costs, are recorded within the non-current portion of “Programming and other inventory” on the Consolidated Balance Sheet. Prepayments for the rights to air sporting and other live events that are expected to be expensed over the next 12 months are classified within the current portion of “Programming and other inventory” on the Consolidated Balance Sheet.
Internally-Produced Programming—Costs incurred to produce television programs and feature films (which include direct production costs, production overhead, acquisition costs and development costs) are capitalized when incurred. Weincurred and amortized over the projected life of each television program or feature film. Costs incurred to acquire television series and feature film programming rights, including advances, are capitalized when the license period has begun and the program is accepted and available for airing and amortized over the shorter of the license period or the period in which an economic benefit is expected to be derived.
For internally-produced television programs and feature films that are predominantly monetized on an individual basis, we use an individual-film-forecast-computationindividual-film-forecast computation method to amortize capitalized production costs and to accrue estimated liabilities for residualsparticipations and participationsresiduals over the applicable title’s life cycle based upon the ratio of current period revenues to estimated remaining total gross revenues to be earned (“Ultimate Revenues”) for each title. The estimate of Ultimate Revenues impacts the timing of amortization and accrual of residuals and participations. For television programming, Ultimate Revenue estimates are initially limited to the amount of revenue contracted for each episode in the initial market and estimates of revenue from a secondary market where we can demonstrate a history of earning such revenue in that market. Television programming costs and participation costs incurred in excess of such amounts are expensed as incurred on an episode by episode basis. Estimates for additional secondary market revenues such as domestic and foreign syndication and home entertainment are included in the estimated lifetime revenues once it can be demonstrated that a program can be successfully licensed in such secondary market. For each television program, management bases these estimates on the performance in the initial markets, the existencecapitalized production
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
costs and expensing of future firm commitmentsparticipations and residual costs. For television programming, our estimate of Ultimate Revenues includes revenues to sell andbe earned within 10 years from the delivery of the first episode, or, if still in production, five years from the delivery of the most recent episode, if later. These estimates are based on the past performance of similar television programs. Television programming costs incurred subsequentprograms in a market, the performance in the initial markets and future firm commitments to the establishment of the secondary market are initially capitalized and amortized, and estimated liabilities for participations are accrued, based on the proportion that current period revenues bear to the estimated remaining total lifetime revenues.license programs.
For feature films, our estimate of Ultimate Revenues includes revenues from all sources that are estimated to be earned within 10 years from the date of a film’s initial theatrical release. Prior to the release of feature films, we estimate Ultimate Revenues based on the historical performance of similar content and pre-release market research (including test market screenings), as well as factors relating to the specific film, including the expected number of theaters and markets in which the original content will be released, the genre of the original content and the past box office performance of the lead actors and actresses. Upon a film’s initial release, we update our estimate of Ultimate Revenues based on actual and expected future performance. Our estimates of revenues from succeeding windows and markets are revised based on historical relationships to theatrical performance and an analysis of current market trends. For acquired television and film libraries, our estimate of Ultimate Revenues is for a period within 20 years from the date of acquisition.
Ultimate Revenue estimates are periodically reviewed and adjustments, if any, will result in changes to inventory amortization rates and estimated accruals for residuals and participations. An impairment charge is recorded if the fair value of a television program or feature film falls below the unamortized production costs.
Film development costs that have not been set for production are expensed within three years unless they are abandoned earlier, in which case these projects are written down to their estimated fair value in the period the decision to abandon the project is determined.
Acquired Programming Rights—Costs incurred in acquiring programFor programming that is predominantly monetized as part of a film group, which includes our acquired programming rights including advances, areand certain internally-produced television programs, capitalized when the license period has begun and the program is accepted and available for airing. These costs are amortized over the shorter of the license period or the period in which an economic benefit is expected to be derived based on an estimate of the timing of our usage of and benefit from such programming. The net realizable value of acquired programming rights is regularly evaluated by us either by title or on a daypart basis, which is defined as an aggregation of programs broadcast during a particular time of day or an aggregation of programs of a similar type based on the specific demographic targeted by each respective program or program service. Net realizable value is determined by estimating advertising revenues to be derived from the future airing of the programming and allocating affiliate revenue to the programming, each as applicable. An impairment charge is recorded if our estimates of future cash flows are below the carrying amount of the programming or if programming is abandoned.
The costs of programming rights licensed under multi-year sports programming agreements are capitalized if the rights payments are made before the related economic benefit has been received. These costs are expensedreceived and amortized over the period in which an economic benefit is expected to be derived based on the relative value of the events broadcast by us during a period. The relative value for an event is determined based on the revenues generated for that eventperiod in relation to the estimated total revenuesvalue of the events over the remaining term of the sports programming agreement.
TheFor content that is predominantly monetized on an individual basis, a television program or feature film is tested for impairment when events or circumstances indicate that its fair value may be less than its unamortized cost. If the carrying value of a film group or individual television program or feature film exceeds the estimated economic benefitfair value, an impairment charge will then be recorded in the amount of the difference. Content that is predominantly monetized within a film group is assessed for impairment at the film group level and would similarly be tested for impairment if circumstances indicate that the fair value of the content within the film group is less than its amortized costs. In addition, unamortized costs for internally-produced or acquired programming including revenue projections for multi-year sports programming,that have been substantively abandoned are periodically reviewed. Adjustments, if any, will result in changes to amortization rates and could result in future net realizable value adjustments.written off.
Television and feature film programming and production costs, including inventory amortization, development costs, residuals and participations and impairment charges, if any, are included within “Operating expenses” inon the Consolidated Statements of Operations.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Property and Equipment—Property and equipment is stated at cost. Depreciation is calculated using the straight-line method over estimated useful lives as follows:
|
| | | | |
| Buildings and building improvements | 10 to 40 years |
| Leasehold improvements | Shorter of lease term or useful life |
| Equipment and other (including finance leases) | 3 to 20 years |
Costs associated with repairs and maintenance of property and equipment are expensed as incurred.
Impairment of Long-Lived Assets—The Company assesses long-lived assets and intangible assets, other than goodwill and intangible assets with indefinite lives, for impairment whenever there is an indication that the carrying amount of the asset group may not be recoverable. Recoverability of these assetsasset groups is determined by comparing the forecasted undiscounted cash flows expected to be generated by these assetsasset groups to their net carrying value. If the carrying value is not recoverable, the amount of impairment charge, if any, is measured by the difference between the net carrying value and the estimated fair value of the asset.assets.
Investments—Investments over which we have a significant influence, without a controlling interest, are accounted for under the equity method. InvestmentsEquity investments for which we have no significant influence are measured at fair value where a readily determinable fair value exists. InvestmentsEquity investments that do not have a readily determinable fair value are measured at cost less impairment, if any, and adjusted for observable price changes. Gains and losses resulting from changes in the fair value of equity investments are recorded in “Net gains from investments” on the Consolidated Statements of Operations. Prior to the adoption of new Financial Accounting Standards Board (“FASB”) guidance in 2018, we recorded unrealized gains and losses on publicly traded equity investments in other comprehensive income. We monitor our investments for impairment and reduce the carrying value of the investment if we determine that an impairment charge is required based on qualitative and quantitative information. Our investments are included in “Other assets” on the Consolidated Balance Sheets.
Goodwill and Intangible Assets—Goodwill is allocated to various reporting units, which are at or one level below our operating segments. Intangible assets with finite lives, which primarily consist of trade names, licenses, and customer agreements are generally amortized using the straight-line method over their estimated useful lives, which range from 4 to 40 years. Goodwill and other intangible assets with indefinite lives, which consist primarily of FCC licenses, in the U.S. and broadcast licenses in Australia, are not amortized but are tested for impairment on an annual basis and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value below its carrying amount. If the carrying value of goodwill or the indefinite-lived intangible asset exceeds its fair value, an impairment charge is recognized (see Note 4)6).
Guarantees—At the inception of a guarantee, we recognize a liability for the fair value of an obligation assumed by issuing the guarantee. The related liability is subsequently reduced as utilized or extinguished and increased if there is a probable loss associated with the guarantee which exceeds the value of the recorded liability.
Treasury Stock—Treasury stock is accounted for using the cost method. Retirements of treasury stock are reflected as a reduction to additional paid-in capital.
Fair Value Measurements—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The framework for measuring fair value provides a hierarchy that prioritizes the inputs to valuation techniques used in measuring fair value. Level 1 is based on publicly quoted prices for the asset or liability in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset or liability in inactive markets or quoted prices for similar assets or liabilities. Level 3 is based on unobservable inputs reflecting our own assumptions about the assumptions that market participants would use in pricing the asset or
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
about the assumptions that market participants would use in pricing the asset or liability. Certain assets and liabilities, including foreign currency hedges and deferred compensation liabilities, are measured and recorded at fair value on a recurring basis. FilmOther assets and liabilities, including television and film production costs, goodwill, intangible assets, and equity methodequity-method investments are recorded at fair value only if an impairment charge is recognized. Impairment charges, if applicable, are generally determined using discounted cash flows, which is a Level 3 valuation technique.
Derivative Financial Instruments—Derivative financial instruments are recorded on the Consolidated Balance Sheets as assets or liabilities and measured at fair value. For derivatives designated as hedges of the fair value of assets or liabilities, the changes in fair value of both the derivatives and the hedged items are recorded in “Other items, net” inon the Consolidated Statements of Operations. For derivatives designated as cash flow hedges, the effective portion of the changes in fair value of the derivatives is recorded in “Accumulated other comprehensive loss” on the Consolidated Balance Sheets and subsequently recognized in net earnings.earnings when the hedged items are recognized.
Pension and Postretirement Benefits—The service cost component of net benefit cost for our pension and postretirement benefits is recorded on the same line items inon the Consolidated Statements of Operations as other compensation costs of the related employees. All of the other components of net benefit cost are presented separately from the service cost component and below the subtotal of operating income in “Other items, net” or “Pension settlement charge” inon the Consolidated Statements of Operations.
Other Liabilities—Other liabilities consist primarily of the noncurrent portion of residual liabilities of previously disposed businesses, long-term income tax liabilities, deferred compensation and other employee benefit accruals.
Revenues
Revenue is recognized when control of a good or service is transferred to a customer. Control is considered to be transferred when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of that good or service.
Advertising Revenues—Advertising revenues are recognized when the advertising spots are aired on television or streamed or displayed on digital platforms. Advertising spots are typically sold as part of advertising campaigns consisting of multiple commercial units. If a contract includes a guarantee to deliver a targeted audience rating or number of impressions, the delivery of the advertising spots that achieve the guarantee represents the performance obligation to be satisfied over time and revenues are recognized based on the proportion of the audience rating or impressions delivered to the total guaranteed in the contract. Audience ratings and impressions are determined based on data provided by independent third-party companies. To the extent the amounts billed exceed the amount of revenue recognized, such excess is deferred until the guaranteed audience ratings or impressions are delivered. For contracts that do not include impressions guarantees, the individual advertising spots are the performance obligation and consideration is allocated among the individual advertising spots based on relative standalone selling price. Advertising contracts, which are generally short-term, are billed monthly, with payments due shortly after the invoice date.
Advertising revenues are generated by the TV Entertainment and Cable Networks segments.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Affiliate Revenues—Affiliate revenues primarily consist of fees received from multichannel video programming distributors (“MVPDs”) and third-party live television digital streaming offeringsservices (“virtual MVPDs”, or “vMVPDs”) for carriage of our cable networks (“cable affiliate fees”) and television stations (“retransmission fees”); and fees from television stations affiliated with the CBS Television Network (“station affiliation fees”reverse compensation”); and subscription fees for our digital streaming subscription offerings, including CBS All Access, the Showtime streaming subscription offering (“Showtime OTT”) andBET+. Costs incurred for advertising, marketing and other services provided to us by cable, satellite and other distributors that are in exchange for a distinct service are recorded as expenses. If a distinct service is not received, such costs are recorded as a reduction to revenues.
The performance obligation for our affiliate agreements is a license to our programming provided through the continuous delivery of live linear feeds and, for agreements with MVPDs and subscribers to our digital streaming services,vMVPDs, also includes a license to programming for video-on-demand viewing. Affiliate revenues are recognized over the term of the agreement as we satisfy our performance obligation by continuously providing our customer with the right to use our programming. For agreements that provide for a variable fee, revenues are determined each month based on an agreed upon contractual rate applied to the number of subscribers to our customer’s service. For agreements that provide for a fixed fee, revenues are recognized based on the relative fair value of the content provided over the term of the agreement. These agreements primarily include agreements with television stations affiliated with the CBS Television Network (“network affiliates”) for which fair value is determined based on the fair value of the network affiliate’s service and the value of our programming. For affiliate revenues, payments are generally due monthly.
AffiliateLicensing and Other Revenues—Licensing and other revenues are generated by the TV Entertainment and Cable Networks segments.
Content Licensing Revenues—Content licensing revenues are generatedprincipally comprised of fees from the licensing of exhibitionthe rights forto exhibit our internally-produced television and film programming to television stations, cable networks and subscription streaming services; licensingon various platforms in the secondary market after its initial exhibition on our owned or third party platforms; license fees from content produced for third parties; home entertainment revenues, which include revenues from the viewing of our content for distribution on a transactional basis through transactional video-on-demand services;(TVOD) and electronic sell-through services, and the sale and distribution of our content through DVDDVDs and Blu-ray disc salesdiscs to wholesale and retail partners; fees from the use of our trademarks and brands for consumer products, recreation and live events; and fees from the distribution of third-party programming.programming; and revenues from the rental of production facilities.
For licenses of exhibition rights for internally-produced programming, each individual episode or film delivered represents a separate performance obligation and revenues are recognized when the episode or film is made available to the licensee for exhibition and the license period has begun. For license agreements that include delivery of content on one or more dates for a fixed fee, consideration is allocated based on the relative standalone selling price of each episode or film. Estimation of standalone selling prices requires judgment, which can impact the timing of recognizing revenues. Agreements to license programming are often long term, with collection terms ranging from one to five years.
When payment is due from a customer more than one year before or after revenue is recognized, we consider the contract to contain a significant financing component and the transaction price is adjusted for the effects of the time value of money. We do not adjust the transaction price for the time value of money if payment is expected within one year of recognizing revenues.
We also license our programming to distributors of transactional video-on-demand and similar services. Under these arrangements, our performance obligation is the delivery of our content to such distributors who then license our content to the end customer. Our revenues are determined each month based on a contractual rate applied to the number of licenses to the distributors’ end customers. Similarly, revenues earned from electronic sell-through services are recognized as each program is downloaded by the end customer.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Revenues associated with the licensing of our brands for consumer products, recreation and live events are generally determined based on contractual royalty rates applied to sales reported by the licensees. For consumer products and recreation arrangements that include minimum guaranteed consideration, revenue is recognized as sales occur by the licensee, if the sales-based consideration is expected to exceed the minimum guarantee, or ratably if it is not expected to exceed the minimum guarantee. For live events, we recognize revenue when the event is held.
Revenues from the sales of DVDs and Blu-ray discs to wholesalers and retailers are recognized upon the later of the physical delivery to the customer or the date that any sales restrictions on the retailers are lifted.
We earn revenues from the distribution of content on behalf of third parties. We also have arrangements for the distribution or sale of our content by third parties. Under such arrangements, we determine whether revenues should be recognized based on the gross amount of consideration received from the customer or the net amount of revenue we retain after payment to the third party producer or distributor, based on an assessment of which party controls the good or service being transferred.
Content licensing revenues are generated by the TV Entertainment, Cable Networks and Filmed Entertainment segments.
Theatrical Revenues—Theatrical revenue is earned from the theatrical distribution of our films during the exhibition period. Under these arrangements, revenues are recognized based on sales to the end customer. Theatrical revenues are generated by the Filmed Entertainment segment.
Publishing—Publishing revenues are recognized when merchandise is shipped or electronically delivered to the consumer. Payments for publishing revenues are due shortly after shipment or electronic delivery.
Revenue Allowances—Print books, DVDs and Blu-ray discs are generally sold with a right of return. We record a provision for sales returns and allowances at the time of sale based upon an estimate of future returns, rebates and other incentives. In determining this provision, we consider sources of qualitative and quantitative evidence including forecast sales data, customers’ rights of return, sales levels for units already shipped, historical return rates for similar products, current economic trends, the competitive environment, promotions and our sales strategies. Reserves for sales returns and allowances of $153$36 million and $186$64 million at December 31, 20192021 and 2018,2020, respectively, are recorded in “Other current liabilities” on the Consolidated Balance Sheets.
Reserves for accounts receivable reflect our expected credit losses, which are estimated based on historical bad debt experience, the aging of accounts receivable, industry trends and economic indicators, as well as recent payment history for specific customers.current and expected economic conditions and industry trends. Our allowance for doubtful accounts was $86$80 million and $85 million at both December 31, 20192021 and 2018.2020, respectively. The provision for doubtful accounts charged to expense was $26$8 million in each of the years 2019 and 2018, and $312021, $32 million in 2017.
Noncurrent Accounts Receivables
—Included in “Other assets” on the Consolidated Balance Sheets are noncurrent accounts receivables of $2.11 billion and $1.84 billion at December 31, 2019 and 2018, respectively. Noncurrent accounts receivables primarily relate to revenues recognized under long-term television licensing arrangements. Television license fee revenues are recognized at the beginning of the license period in which programs are made available to the licensee for exhibition, while the related cash is generally collected over the term of the license period.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Contract Liabilities—A contract liability is recorded when consideration is received from a customer prior to fully satisfying a performance obligation in a contract. Our contract liabilities primarily consist of cash received related to advertising arrangements for which the required audience rating or impressions have not been delivered; consumer products arrangements with minimum guarantees; and televisioncontent licensing arrangements under which the content has not yet been made available to the customer. These contract liabilities will be recognized as revenues when control of the related product or service is transferred to the customer.
Contract liabilities are included inwithin “Deferred revenues” and “Other liabilities” on the Consolidated Balance Sheets and were $910 million and $745 million at December 31, 2019 and December 31, 2018, respectively. The change in contract liabilities for the year ended December 31, 2019 primarily reflects cash payments received during the period for which the performance obligation was not satisfied prior to the end of the period partially offset by $501 million of revenues recognized that were included in deferred revenues at December 31, 2018. For the year ended December 31, 2018, we recognized revenues of $560 million that were included in deferred revenues at December 31, 2017.
Unrecognized Revenues Under Contract—As of December 31, 2019, unrecognized revenues attributable to unsatisfied performance obligations under our long-term contracts was $7.72 billion, of which $4.27 billion is expected to be recognized in 2020, $1.93 billion in 2021, $1.04 billion in 2022, and $478 million thereafter. These amounts only include contracts subject to a guaranteed fixed amount or the guaranteed minimum under variable contracts, primarily consisting of television and film licensing contracts and affiliate arrangements that are subject to a fixed or guaranteed minimum fee. Such amounts change on a regular basis as we renew existing agreements or enter into new agreements. Unrecognized revenues under contract disclosed above do not include (i) contracts with an original expected term of one year or less, mainly consisting of our advertising contracts (ii) contracts for which variable consideration is determined based on the customer’s subsequent sale or usage, mainly consisting of affiliate agreements and (iii) long-term licensing agreements for multiple programs for which our right to invoice corresponds with the value of the programs provided to the customer.Sheets.
Performance Obligations Satisfied in Previous Periods—Under certain licensing arrangements, the amount and timing of our revenue recognition is determined based on our licensees’ subsequent sale to its end customers. As a result, under such arrangements, which primarily include licensing of our content to distributors of transactional video-on-demand and electronic sell-through services, we often satisfy our performance obligation of delivery of our content in advance of revenue recognition. During the years ended December 31, 2019 and 2018, we recognized revenues of approximately $235 million and $172 million, respectively in our Filmed Entertainment segment for such performance obligations satisfied, or partially satisfied, in a prior period.
Collaborative Arrangements—Collaborative arrangements primarily consist of joint efforts with third parties to produce and distribute programming such as television series and live sporting events, including the agreement between us and Turner Broadcasting System, Inc. to telecast the NCAA Division I Men’s Basketball Championship (“NCAA(the “NCAA Tournament”), which runs through 2032. In connection with this agreement for the NCAA Tournament, advertisements aired on the CBS Television Network are recorded as revenues and our share of the program rights fees and other operating costs are recorded as operating expenses.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
We also enter into collaborative arrangements with other studios to jointly finance and distribute film and television programming, under which each partner is responsible for distribution of the program in specific territories or distribution windows. Under these arrangements, co-production costs are initially capitalized as programming inventory and amortized over the estimated economic life of the program. In such arrangements where we have distribution rights, all proceeds generated from such distribution are recorded as revenues and any participation profits due to third party collaborators are recorded as participation expenses. In co-production arrangements where third party collaborators have distribution rights, our net participating profits are recorded as revenues.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Amounts attributable to transactions arising from collaborative arrangements between participants were not material to the consolidated financial statements for any period presented.
Adoption of Revenue Recognition Standard
— On January 1, 2018, we adopted FASB guidance on the recognition of revenues, which provides a single, comprehensive revenue recognition model for all contracts with customers and supersedes most existing revenue recognition guidance. The primary impact to our revenue recognition policies resulting from this standard relates to the timing of revenue recognition for the renewal of an existing licensing agreement, which under the new standard is recognized as revenue when the renewal term begins. Under previous guidance, these revenues were recognized upon the execution of such renewal. In addition, under the new standard, revenues for certain distribution arrangements are recognized based on the gross amount of consideration received from the customer, with an offsetting increase to operating expenses. Under previous accounting guidance, such revenues were recognized at the net amount retained by us after the payment of fees to the third party. Results for reporting periods beginning after January 1, 2018 are presented under the new standard while prior periods have not been adjusted. We applied the modified retrospective method of adoption with the cumulative effect of the initial adoption of $350 million reflected as an adjustment to the opening balance of retained earnings as of January 1, 2018.
Leases—We have operating leases primarily for office space, equipment, satellite transponders and studio facilities and finance leases for satellite transponders and equipment. We determine that a contract contains a lease if we obtain substantially all of the economic benefits of, and the right to direct the use of, an asset identified in the contract. For leases with terms greater than 12 months, we record a right-of-use asset and a lease liability representing the present value of future lease payments. The discount rate used to measure the lease asset and liability is determined at the beginning of the lease term using the rate implicit in the lease, if readily determinable, or our collateralized incremental borrowing rate. For those contracts that include fixed rental payments for both the use of the asset (“lease costs”) as well as for other occupancy or service costs relating to the asset (“non-lease costs”), we generally include both the lease costs and non-lease costs in the measurement of the lease asset and liability. We also own buildings and production facilities where we lease space to lessees.
Our leases generally have remaining terms ranging from one to 1715 years and often contain renewal options to extend the lease for periods of generally up to ten10 years. For leases that contain renewal options, we include the renewal period in the lease term if it is reasonably certain that the option will be exercised. Lease expense and income for our operating leases are recognized on a straight-line basis over the lease term, with the exception of variable lease costs, which are expensed as incurred, and leases of assets used in the production of programming, which are capitalized in programming assets and amortized over the projected useful life of the related programming. For finance leases, amortization of the right-of-use asset is recognized in amortization expense on a straight-line basis over the lease term and interest expense is accreted on the lease liability using the effective interest method. This results in an accelerated recognition of cost over the lease term.
Advertising—Advertising costs are expensed as incurred. We incurred total advertising expenses of $1.70$2.14 billion in 2019, $1.412021, $1.31 billion in 20182020 and $1.58$1.67 billion in 2017.2019.
Interest—Costs associated with the refinancing or issuance of debt, as well as debt discounts or premiums, are recorded as interest over the term of the related debt. We may enter into interest rate exchange agreements; the amount to be paid or received under such agreements is accrued and recognized over the life of the agreement as an adjustment to interest expense.
Income Taxes—The provision for income taxes includes federal, state, local, and foreign taxes. We recognize the tax on global intangible low-taxed income, a U.S. tax on certain income earned by our foreign subsidiaries, as a period cost when incurred within the provision for income taxes.Deferred tax assets and liabilities are recognized for the estimated future tax effects of temporary differences between the financial statement carrying amounts and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be reversed.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
We evaluate the realizability of deferred tax assets and establish a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. Deferred tax assets and deferred tax liabilities are classified as noncurrent on the Consolidated Balance Sheets.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
For tax positions taken in a previously filed tax return or expected to be taken in a future tax return, we evaluate each position to determine whether it is more likely than not that the tax position will be sustained upon examination, based on the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is subject to a measurement assessment to determine the amount of benefit to be recognized in the Consolidated Statement of Operations and the appropriate reserve to establish, if any. If a tax position does not meet the more-likely-than-not recognition threshold, a tax reserve is established and no benefit is recognized. A number of years may elapse before a tax return containing tax matters for which a reserve has been established is audited and finally resolved. We recognize interest and penalty charges related to the reserve for uncertain tax positions as income tax expense.
Foreign Currency Translation and Transactions—Assets and liabilities of subsidiaries with a functional currency other than the United States (“U.S.”) Dollar are translated into U.S. Dollars at foreign exchange rates in effect at the balance sheet date, while results of operations are translated at average foreign exchange rates for the respective periods. The resulting translation gains and losses are included as a separate component of stockholders’ equity in accumulated other comprehensive income (loss) inloss on the Consolidated Balance Sheet. Effective July 1, 2018,Sheets. Argentina has been designated as a highly inflationary economy.economy during all periods presented. Transactions denominated in currencies other than the functional currency will result in remeasurement gains and losses, which are included in “Other items, net” inon the Consolidated Statements of Operations.
Net Earnings (Loss) per Common Share—Basic net earnings (loss) per share (“EPS”) is based upon net earnings (loss)available to common stockholders divided by the weighted average number of common shares outstanding during the period. DilutedNet earnings available to common stockholders is calculated as net earnings from continuing operations or net earnings, as applicable, adjusted to include preferred stock dividends recorded during the period. During the year ended December 31, 2021, we recorded dividends of $44.2 million on the 5.75% Series A Mandatory Convertible Preferred Stock (“Mandatory Convertible Preferred Stock”) that was issued during the first quarter of 2021 (see Note 14).
Weighted average shares for diluted EPS reflects the effect of the assumed exercise of stock options and vesting of restricted stock units (“RSUs”) or performance stock units (“PSUs”) only in the periods in which such effect would have been dilutive. Diluted EPS also reflects the effect of the assumed conversion of preferred stock, if dilutive, which includes the issuance of common shares in the weighted average number of shares and excludes the above-mentioned preferred stock dividend adjustment to net earnings available to common stockholders. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive,antidilutive, were 19 million stock options and RSUs of 6 million, 22 million and 19 million for each of the years ended December 31, 2021, 2020 and 2019, and 2018 and 14 million stock options and RSUs for the year ended December 31, 2017.respectively.
The table below presents a reconciliation of weighted average shares used in the calculation of basic and diluted EPS.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| (in millions) | | | | | |
| Weighted average shares for basic EPS | 641 | | | 616 | | | 615 | |
| Dilutive effect of shares issuable under stock-based compensation plans | 5 | | | 2 | | | 2 | |
| Conversion of Mandatory Convertible Preferred Stock | 9 | | | — | | | — | |
| Weighted average shares for diluted EPS | 655 | | | 618 | | | 617 | |
|
| | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| (in millions) | | | | | |
| Weighted average shares for basic EPS | 615 |
| | 617 |
| | 640 |
|
| Dilutive effect of shares issuable under stock-based compensation plans | 2 |
| | 4 |
| | 7 |
|
| Weighted average shares for diluted EPS | 617 |
| | 621 |
| | 647 |
|
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Stock-based Compensation—We measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The cost is recognized over the vesting period during which an employee is required to provide service in exchange for the award.
Recently Adopted Accounting Pronouncements
LeasesSimplifying the Accounting for Income Taxes
During the first quarter of 2019,On January 1, 2021, we adopted FASBFinancial Accounting Standards Board (“FASB”) guidance on the accounting for leases, which supersedes previous lease guidance. Under thisincome taxes that, among other provisions, eliminates certain exceptions to existing guidance related to the approach for all leases with termsintraperiod tax allocation, the methodology for calculating income taxes in excess of one year, we recognize on our
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
balance sheet a lease liability and a right-of-use asset representing our right to use the underlying asset for the lease term. The new guidance retains a distinction between finance leases and operating leasesan interim period and the classification criteria is substantially similarrecognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to previous guidance. Additionally,reflect the recognition, measurement, and presentationeffect of expenses and cash flows arising from a lease by a lessee have not significantly changed. We appliedan enacted change in tax laws or rates in its effective income tax rate in the modified retrospective methodinterim period that includes the enactment date. The adoption of adoption and therefore, results for reporting periods beginning after January 1, 2019 are presented under the new guidance while prior periods have not been adjusted. Thisthis guidance did not have ana material impact on our consolidated financial statements.
Reference Rate Reform
In March 2020, the Consolidated StatementFASB issued guidance providing optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of Operations. See Note 9the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The one-week and two-month USD LIBOR tenors and all non-USD LIBOR tenors have been discontinued after December 31, 2021, with the remaining USD LIBOR tenors ceasing after June 30, 2023. The guidance is effective immediately upon issuance and an entity may elect to apply it to contract modifications or hedging relationships entered into on or before December 31, 2022, with a few exceptions for certain hedging relationships existing as of December 31, 2022. This guidance, which primarily affects certain of our debt and hedging arrangements, is being applied as modifications of contracts that include LIBOR occur. During the impactfourth quarter of 2021, we amended our $3.50 billion revolving credit facility (the “Credit Facility”) to replace LIBOR as the benchmark rate for loans denominated in euros, sterling and yen with EURIBOR, SONIA and TIBOR-based rates, respectively. The application of this guidance did not have and is not expected to have a material impact on the Consolidated Balance Sheet and additional information.our consolidated financial statements.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
During the first quarter of 2019, we adopted FASB guidance that permits an entity to reclassify certain income tax effects of federal tax legislation enacted in December 2017 (the “Tax Reform Act”) on items within accumulated other comprehensive income (“AOCI”) to retained earnings. As a result of the Tax Reform Act, in 2017, we remeasured our deferred income tax assets and liabilities to reflect the reduction in the federal income tax rate from 35% to 21%. The remeasurement was recognized in net earnings and as a result, the income tax effects of the Tax Reform Act on items within AOCI remained at historical rates (“stranded tax effects”). During the first quarter of 2019, as a result of the adoption of this guidance, we elected to reclassify the stranded tax effects of $230 million relating to our pension and postretirement benefit obligations from AOCI to retained earnings. This guidance also requires entities to disclose their accounting policy for releasing stranded tax effects unrelated to the Tax Reform Act from AOCI. For pension and postretirement benefit plans, we release stranded tax effects from AOCI when the pension and postretirement plans are terminated.
Accounting Pronouncements Not Yet Adopted
Simplifying the Accounting for Income TaxesConvertible Instruments and Contracts in an Entity’s Own Equity
In December 2019,On August 5, 2020, the FASB issued amended guidance onto reduce complexity associated with the accounting for income taxes that, among other provisions, eliminates certain exceptionsconvertible instruments with characteristics of liabilities and equity. Under this guidance, embedded conversion features associated with convertible instruments no longer need to existing guidance relatedbe separated from the host contracts unless they are required to the approachbe accounted for intraperiod tax allocation, the methodology for calculating income taxesas derivatives or have been issued at a substantial premium. For contracts in an interim period andentity’s own equity, this guidance removes certain settlement conditions that are required for equity contracts to qualify for the recognition of deferred tax liabilities for outside basis differences.derivative scope exceptions. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assetsamends certain EPS guidance for convertible instruments and liabilities. Under existingexpands disclosure requirements. This guidance an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. We are currently evaluating the impact of this guidance, which is effective for interim and annual periodsfiscal years beginning after December 15, 2020,2021, with early adoption permitted.permitted, and is not expected to have a material impact on our consolidated financial statements.
Improvements to Accounting2) ACQUISITIONS
During 2021, we made payments totaling $54 million, net of cash acquired, for Coststhe acquisition of FilmsChilevisión, a free-to-air television channel, and License Agreements for Program Materials
In March 2019, the FASB issued guidance on the accounting for costs of films and episodic television series, which aligns the accounting for capitalizing production costs of episodic television series with the guidance for films. As a result, the capitalization of costs incurred to produce episodic television series will no longer be limited to the amount of revenue contractedcontrolling interest in the initial market until persuasive evidence ofFox TeleColombia & Estudios TeleMexico, a secondary market exists. In addition, this guidance requires an entity to test for impairment of films or television series on a title-by-title basis or together with other films and series as part of a group, based on the predominant monetization strategy of the film or series. Further, this guidance requires that an entity reassess estimates of the use of a film or series in a film group and account for changes, if any, prospectively. In addition, this guidance eliminates existing balance sheet classification guidance and adds new disclosure requirements relating to costs for acquired and produced television series. We are currentlySpanish
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
evaluating
During 2020, we acquired a 49% interest in Miramax, a global film and television studio, for $375 million, which included a cash payment at closing of approximately $150 million along with a commitment to invest $45 million annually, beginning on the impactfirst anniversary of the closing and continuing through 2025, to be used for new film and television productions and working capital. In conjunction with this guidance,acquisition, we entered into commercial agreements with Miramax under which we have exclusive, long-term distribution rights to Miramax’s catalog, which added more than 700 titles to our existing library. We also have certain rights to co-produce, co-finance and/or distribute new film and television projects. The investment is accounted for as a consolidated VIE. We are the primary beneficiary of the VIE due to our power to direct the distribution of Miramax’s films and television series, which is effectiveconsidered the most significant activity of the VIE. The results of Miramax are included in the Filmed Entertainment segment from the date of acquisition.
During 2019, we acquired Pluto Inc., the provider of Pluto TV, a leading free streaming television service in the U.S., for interim and annual periods beginning after December 15, 2019.
Collaborative Arrangements: Clarifying the Interaction with the New Revenue Standard
In November 2018, the FASB issued guidance to clarify that certain transactions between parties to collaborative arrangements should be accounted for in accordance with FASB revenue guidance when the counterparty is a customer. This guidance also prohibits the presentation$324 million, net of collaborative arrangements as revenues from contracts with customers if the counterparty is not a customer. This guidance, which is required to be applied retrospectively and is effective for interim and annual periods beginning after December 15, 2019, is not expected to have a material impact on the consolidated financial statements.
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract
In August 2018, the FASB issued guidance on the accounting for implementation costs of a cloud computing arrangement that is considered to be a service contract. This guidance requires companies to follow the guidance for capitalizing costs associated with internal-use software to determine which costs to capitalize in a cloud computing arrangement that is a service contract. The guidance also specifies the financial statement presentation for capitalized implementation costs and the related amortization,cash acquired, as well as requiredthe remaining 50% interest in Pop TV, a general entertainment cable network, for $39 million, net of cash acquired, which brought our ownership to 100%. The results of Pluto TV and Pop TV are included in the Cable Networks segment from the date of acquisition.
The operating results of these acquisitions were not material to our consolidated financial statement disclosures. We are currently evaluatingstatements in the impactyear of this guidance, whichacquisition.
3) DISPOSITIONS
During October 2021, we completed the sale of 51 West 52nd Street, an office tower that was formerly the headquarters of CBS, to Harbor Group International, LLC, for $760 million. At closing, we executed an agreement to lease back the space we occupy for terms ranging from two to three years. This transaction resulted in a pre-tax gain of $523 million.
In December 2021, we completed the sale of CBS Studio Center to a partnership formed by Hackman Capital Partners, LLC and Square Mile Capital Management, LLC for $1.85 billion. At closing, we executed a 10-year lease-back of the portion of a building on the property that is effective for interimused by our Los Angeles television stations. The lease-back began at the time of the sale and annual periodsincludes an option to terminate one floor without penalty beginning after December 15, 2019.on the fifth anniversary. The sale resulted in a pre-tax gain of $1.70 billion.
ChangesIn addition, during 2021 we recognized a pre-tax net gain of $117 million, principally relating to the Disclosure Requirementssale of a noncore trademark licensing operation.
On November 25, 2020, we entered into an agreement to sell our publishing business, Simon & Schuster, to Penguin Random House for Defined Benefit Plans
In August 2018,$2.175 billion in cash. Simon & Schuster is presented as a discontinued operation in our consolidated financial statements for all periods presented. On November 2, 2021, the FASB issued amended guidance that eliminates, adds and clarifies certain disclosure requirements for defined benefit pension or other postretirement plans. We are currently evaluatingU.S. Department of Justice filed suit to block the impact of this guidance, which is required to be applied retrospectively and is effective for annual periods ending after December 15, 2020.
Financial Instruments
In June 2016, the FASB issued amended guidancesale. The purchase agreement contains commitments on the accountingpart of the purchaser to take all necessary steps to obtain any required regulatory approvals and to defend any litigation that would delay or prevent consummation, and also provides for credit losses on financial instruments. Among other provisions, this guidance introduces a new impairment model for most financial assets andtermination fee payable to us in certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a forward-looking “expected loss” model that will replace the current “incurred loss” model that will generally resultcircumstances in the earlier recognition of allowancesevent the transaction does not close for losses. This guidance is effective for interim and annual periods beginning after December 15, 2019. We are currently evaluating the impact of this guidance.regulatory reasons (see Note 20).
2) PROPERTY AND EQUIPMENT
|
| | | | | | | |
| At December 31, | 2019 | | 2018 |
| Land | $ | 439 |
| | $ | 439 |
|
| Buildings | 1,263 |
| | 1,242 |
|
Finance leases (a) | 195 |
| | 335 |
|
| Equipment and other | 4,096 |
| | 3,899 |
|
| | 5,993 |
| | 5,915 |
|
| Less accumulated depreciation and amortization | 3,908 |
| | 3,836 |
|
| Net property and equipment | $ | 2,085 |
| | $ | 2,079 |
|
(a) Accumulated amortization of finance leases was $160 million and $279 million at December 31, 2019 and 2018, respectively.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 | Simon & Schuster | | Other (a) | | Total |
| Revenues | | $ | 993 | | | | $ | — | | | | $ | 993 | |
| Costs and expenses: | | | | | | | | |
| Operating | | 618 | | | | (16) | | | | 602 | |
| Selling, general and administrative | | 158 | | | | — | | | | 158 | |
| Depreciation and amortization | | 3 | | | | — | | | | 3 | |
| Restructuring charges | | 1 | | | | — | | | | 1 | |
| Total costs and expenses | | 780 | | | | (16) | | | | 764 | |
| Operating income | | 213 | | | | 16 | | | | 229 | |
| Other items, net | | (10) | | | | — | | | | (10) | |
| Earnings from discontinued operations | | 203 | | | | 16 | | | | 219 | |
| Income tax provision | | (46) | | | | (11) | | | | (57) | |
| Net earnings from discontinued operations, net of tax | | $ | 157 | | | | $ | 5 | | | | $ | 162 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 | Simon & Schuster | | Other (a) | | Total |
| Revenues | | $ | 901 | | | | $ | — | | | | $ | 901 | |
| Costs and expenses: | | | | | | | | |
| Operating | | 573 | | | | (19) | | | | 554 | |
| Selling, general and administrative | | 172 | | | | — | | | | 172 | |
| Depreciation and amortization | | 5 | | | | — | | | | 5 | |
| Restructuring charges | | 10 | | | | — | | | | 10 | |
| Total costs and expenses | | 760 | | | | (19) | | | | 741 | |
| Operating income | | 141 | | | | 19 | | | | 160 | |
| Other items, net | | (5) | | | | — | | | | (5) | |
| Earnings from discontinued operations | | 136 | | | | 19 | | | | 155 | |
| Income tax provision | | (34) | | | | (4) | | | | (38) | |
| Net earnings from discontinued operations, net of tax | | $ | 102 | | | | $ | 15 | | | | $ | 117 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 | Simon & Schuster | | Other (a) | | Total |
| Revenues | | $ | 814 | | | | $ | — | | | | $ | 814 | |
| Costs and expenses: | | | | | | | | |
| Operating | | 510 | | | | (50) | | | | 460 | |
| Selling, general and administrative | | 166 | | | | — | | | | 166 | |
| Depreciation and amortization | | 5 | | | | — | | | | 5 | |
| Restructuring charges | | 6 | | | | — | | | | 6 | |
| Total costs and expenses | | 687 | | | | (50) | | | | 637 | |
| Operating income | | 127 | | | | 50 | | | | 177 | |
| Other items, net | | (5) | | | | — | | | | (5) | |
| Earnings from discontinued operations | | 122 | | | | 50 | | | | 172 | |
| Income tax provision | | (20) | | | | (12) | | | | (32) | |
| Net earnings from discontinued operations, net of tax | | $ | 102 | | | | $ | 38 | | | | $ | 140 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(a) Primarily relates to indemnification obligations for leases associated with the previously discontinued operations of Famous Players Inc. (“Famous Players”).
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
Depreciation expense, including amortization of finance leases (a) | $ | 366 |
| | $ | 382 |
| | $ | 395 |
|
| | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
| Receivables, net | $ | 536 | | | $ | 447 | |
| Other current assets | 209 | | | 183 | |
| Goodwill | 435 | | | 435 | |
| Property and equipment, net | 46 | | | 42 | |
| Operating lease assets | 203 | | | 191 | |
| Other assets | 131 | | | 141 | |
| Total Assets | $ | 1,560 | | | $ | 1,439 | |
| Royalties payable | $ | 155 | | | $ | 131 | |
| Other current liabilities | 416 | | | 349 | |
| Operating lease liabilities | 194 | | | 194 | |
| Other liabilities | 19 | | | 26 | |
| Total Liabilities | $ | 784 | | | $ | 700 | |
On October 30, 2020, we completed the sale of CNET Media Group (“CMG”) to Red Ventures for $484 million.This transaction resulted in a pre-tax gain of $214 million.
During 2019, we completed the sale of CBS Television City for $750 million. This transaction resulted in a pre-tax gain of $549 million, which included a reduction for the present value of the estimated amount payable under a guarantee obligation (see Note 20).
4) PROPERTY AND EQUIPMENT
| | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
| Land | $ | 372 | | | $ | 437 | |
| Buildings | 842 | | | 1,253 | |
Finance leases (a) | 160 | | | 159 | |
| Equipment and other | 4,112 | | | 4,151 | |
| 5,486 | | | 6,000 | |
| Less accumulated depreciation and amortization | 3,750 | | | 4,006 | |
| Net property and equipment | $ | 1,736 | | | $ | 1,994 | |
(a) Accumulated amortization of finance leases was $143 million and $140 million at December 31, 2021 and 2020, respectively.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
Depreciation expense, including amortization of finance leases (a) (b) | $ | 344 | | | $ | 345 | | | $ | 362 | |
(a) Amortization expense related to finance leases was $19 million, $18 million and $23 million $28in 2021, 2020 and 2019, respectively.
(b) Included in depreciation expense for 2020 is $12 million of accelerated depreciation resulting from the abandonment of technology in connection with synergy plans related to the Merger.
5) PROGRAMMING AND OTHER INVENTORY
The following table presents our programming and other inventory at December 31, 2021 and 2020, grouped by type and predominant monetization strategy.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
| | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
| Film Group Monetization: | | | |
| Acquired program rights, including prepaid sports rights | $ | 3,432 | | | $ | 3,413 | |
| Internally-produced television and film programming: | | | |
| Released | 3,808 | | | 2,558 | |
| In process and other | 2,609 | | | 1,682 | |
| | | |
| Individual Monetization: | | | |
| Acquired libraries | 441 | | | 483 | |
| Film inventory: | | | |
| Released | 606 | | | 374 | |
| Completed, not yet released | 253 | | 543 | |
| In process and other | 1,303 | | | 816 | |
| Internally-produced television programming: | | | |
| Released | 1,604 | | | 1,206 | |
| In process and other | 769 | | | 1,013 | |
| Home entertainment | 37 | | | 32 | |
| Total programming and other inventory | 14,862 | | | 12,120 | |
| Less current portion | 1,504 | | | 1,757 | |
| Total noncurrent programming and other inventory | $ | 13,358 | | | $ | 10,363 | |
The following table presents amortization of television and film programming and production costs.
| | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 |
| Programming costs, acquired programming | $ | 5,143 | | | $ | 3,779 | |
| | | |
| Production costs, internally-produced television and film programming: | | | |
| Individual monetization | $ | 3,245 | | | $ | 2,669 | |
| Film group monetization | $ | 3,248 | | | $ | 3,133 | |
Programming Charges
Included in the table above for the year ended December 31, 2020, are programming charges of $159 million primarily related to the abandonment of certain incomplete programs resulting from production shutdowns related to the coronavirus pandemic (“COVID-19”). Programming charges of $101 million, $53 million and $32$5 million in 2019, 2018are included within the TV Entertainment,Cable Networks and 2017,Filmed Entertainment segments, respectively.
During 2019, in connection with the Merger, we completedimplemented management changes across the saleorganization. In connection with these changes, we performed an evaluation of our CBS Television City property and sound stage operation (“CBS Television City”) for $750 million. We have guaranteed a specified levelprogramming portfolio across all of cash flows to be generated by the business during the first five years following the completionour businesses, including an assessment of the sale. Includedoptimal use of our programming in the marketplace, which resulted in the identification of programs not aligned with management’s strategy. As a result, we recorded programming charges of $589 million principally reflecting accelerated amortization associated with changes in the expected monetization of certain programs, and decisions to cease airing, alter future airing patterns or not renew certain programs.
The programming charges for 2020 and 2019 were included within “Operating expenses” on the Consolidated Statements of Operations.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The following table presents the expected amortization over each of the next three years of released programming inventory on the Consolidated Balance Sheet at December 31, 2019 is a liability of $124 million, reflecting the present value of the estimated amount payable under the guarantee obligation. This transaction resulted in a gain of $549 million ($386 million, net of tax), which included a reduction for the guarantee obligation. CBS Television City was classified as held for sale on the Consolidated Balance Sheet at December 31, 2018.2021.
| | | | | | | | | | | | | | | | | |
| 2022 | | 2023 | | 2024 |
| Programming costs, acquired programming | $ | 2,391 | | | $ | 592 | | | $ | 223 | |
| | | | | |
| Production costs, internally-produced television and film programming: | | | | | |
| Individual monetization | $ | 1,514 | | | $ | 323 | | | $ | 241 | |
| Film group monetization | $ | 1,526 | | | $ | 987 | | | $ | 631 | |
In 2017, we recorded a net gain of $19 million relating to the disposition of property and equipment, which is included within “Gain on sale of assets” on the Consolidated Statement of Operations.
3) PROGRAMMING AND OTHER INVENTORY
|
| | | | | | | |
| At December 31, | 2019 | | 2018 |
| Acquired television program rights | $ | 3,477 |
|
| $ | 3,655 |
|
| Acquired television library | 99 |
|
| 99 |
|
| Internally produced television programming: | | | |
| Released | 3,627 |
|
| 2,986 |
|
| In process and other | 2,626 |
|
| 1,917 |
|
| Film inventory: | | | |
| Released | 502 |
|
| 619 |
|
| Completed, not yet released | 55 |
|
| 31 |
|
| In process and other | 1,037 |
|
| 674 |
|
| Home entertainment and Publishing (primarily finished goods) | 105 |
|
| 102 |
|
| Total programming and other inventory | 11,528 |
| | 10,083 |
|
| Less current portion | 2,876 |
| | 2,785 |
|
| Total noncurrent programming and other inventory | $ | 8,652 |
| | $ | 7,298 |
|
We expect to amortize approximately $2.95 billion of our internally produced television and film programming inventory, including released and completed, not yet released, duringDuring the year ended December 31, 2020. In addition, while it is difficult2022, we expect to determine the precise timingamortize approximately $216 million of the amortization of the remaining internally produced programming, we estimate that substantially all of theour completed, not yet released internally produced television programming and 85% of the film inventory, at December 31, 2019 will be amortized over the next three years.which is monetized on an individual basis.
During 2019, we recorded programming charges of $589 million. See Note 5 for additional information.
4)6) GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and Intangible Assets Impairment Test
We perform a fair value-based impairment testtests of goodwill and intangible assets with indefinite lives, comprised primarily of television FCC licenses, in the U.S. and broadcast licenses in Australia, on an annual basis, and also between annual tests if an event occurs or if circumstances change that would more likely than not reduce the fair value of a reporting unit or an indefinite-lived intangible asset below its carrying value.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
At December 31, 2021, we had 4 reporting units. FCC licenses are tested for impairment at the geographic market level. We consider each geographic market, which is comprised of all of our television stations within that geographic market, to be a single unit of accounting because the FCC licenses at this level represent their highest and best use. At December 31, 2019,2021, we had 14 television markets with FCC license book values. For broadcast licenses in Australia, we consider all of our licenses within the country to be a single unit of accounting because this represents their highest and best use.
Goodwill is tested for impairment at the reporting unit level, which is an operating segment, or one level below. At December 31, 2019, we had 6 reporting units with goodwill balances, which were determined based on the post-Merger reporting structure.
For our annual impairment test, we perform qualitative assessments for the reporting units U.S.and television markets with FCC licenses and Australian broadcast licenses that management estimateswe estimate have fair values that significantly exceed their respective carrying values. In making this determination, we also consider the duration of time since a quantitative test was performed. For the 20192021 annual impairment test, we performed qualitative assessments for all11 of our U.S. television markets and all2 of our reporting units. As of the date of our annual impairment tests, which were performed prior to the Merger, we had 10 reporting units. For each reporting unit, we weighed the relative impact of factors that are specific to the reporting unit as well as industry and macroeconomic factors. For each television market, we weighed the relative impact of market-specific and macroeconomic factors. Based on the qualitative assessments, considering the aggregation of the relevant factors, we concluded that it is not more likely than not that the fair values of these reporting units and the fair value of FCC licenses within each marketof these markets are less than their respective carrying values. Therefore, performing thea quantitative impairment test was unnecessary.
As ofFor the closing date of the Merger on December 4, 2019,2021 annual test for FCC licenses, we performed qualitative assessments ona quantitative impairment test for the pre-Merger reporting units that were to be combined as a result of the new reporting structure, as well as the post-Merger reporting units that resulted from this combination. Based on these assessments, we concluded that there were no changes to the conclusions reached in our annual impairment test.
Aremaining 3 markets. The quantitative impairment test of broadcastFCC licenses calculates an estimated fair value using the Greenfield Discounted Cash Flow Method, which values a hypothetical start-up station in the relevant market by adding discounted cash flows over a five-year build-up period to a residual value. The assumptions for the build-up period include industry projections of overall market revenues; the start-up station’s operating costs and capital expenditures, which are based on both industry and internal data; and average market share. The discount rate is determined based on the industry and market-based risk of achieving the projected cash flows, and the residual value is calculated using a perpetual nominallong-term growth rate, which is based on projected long-range inflation and industry projections.
For 2019, we performed a quantitative impairment test for our Australian broadcast licenses. The discount rate and perpetual nominal growth rate were 11% and 0.5%, respectively. The impairment testtests indicated that the estimated fair values of FCC licenses in two of the markets exceeded their respective carrying values by more than 20% and the fair value of the broadcast licenses was lower thanFCC license in one of the markets exceeded its carrying value which was the result of a sustained decline in the advertising marketplace in Australia. Accordingly, we recorded an impairment charge during the fourth quarter of 2019 of $20$157 million which is included within “Depreciation and amortization” on the Consolidated Statements of Operations, and recorded in our Cable Networks segment.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
For the 2021 annual test for goodwill, we elected to perform quantitative impairment tests for 2 reporting units, CBS Television and CBS Interactive, because of the amount of time that has elapsed since the previous quantitative tests. For CBS Television, we estimated the fair value of the reporting unit based on the present value of future cash flows (“Discounted Cash Flow Method”) and the traded or transaction values of comparable businesses (“Guideline Public Company Method”). The Discounted Cash Flow Method requires us to make various assumptions regarding the timing and amount of future cash flows, including growth rates, operating margins and capital expenditures for a projection period, plus the terminal value of the business at the end of the projection period. The assumptions about future cash flows are based on our internal forecasts of the reporting unit, which incorporates our long-term business plans and historical trends. The terminal value is estimated based on a perpetual nominal growth rate, which is based on historical and projected inflation and economic indicators, as well as industry growth projections. A discount rate is determined for the reporting unit based on the risks of achieving the future cash flows, including risks applicable to the industry and market as a whole, as well as the capital structure of comparable entities. The Guideline Public Company Method incorporates revenue and earnings multiples from publicly traded companies with operations and other characteristics similar to each reporting unit. For CBS Interactive, we estimated the fair value of the reporting unit based on the Guideline Public Company Method. Based on the results of the 2021 quantitative impairment tests, we concluded that the estimated fair value of each of the two reporting units exceeded their respective carrying values and therefore no impairment charge was required.
For the 2021 annual goodwill impairment test, we tested two reporting units as of August 31 and two reporting units as of October 31. During the fourth quarter of 2021, to better align the timing of our annual impairment date with our budgeting cycle, we changed the date for the annual impairment test to October 31 for all reporting units. As a result, those two reporting units previously tested as of August 31 were also tested as of October 31 based on a qualitative assessment resulting in no changes to the conclusion above.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The following tables present the changes in the book value of goodwill by segment for the years ended December 31, 20192021 and 2018.2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at | | Acquisitions / | | | Foreign | | Balance at |
| | December 31, 2020 | | (Dispositions) | | | Currency | | December 31, 2021 |
| TV Entertainment: | | | | | | | | | | | | | |
| Goodwill | | | $ | 17,502 | | | | $ | — | | | | $ | — | | | | $ | 17,502 | | |
| Accumulated impairment losses | | | (13,354) | | | | — | | | | — | | | | (13,354) | | |
| Goodwill, net of impairment | | | 4,148 | | | | — | | | | — | | | | 4,148 | | |
| Cable Networks: | | | | | | | | | | | | | |
| Goodwill | | | 10,772 | | | | 16 | |
| | (44) | | | | 10,744 | | |
| Accumulated impairment losses | | | — | | | | — | | | | — | | | | — | | |
| Goodwill, net of impairment | | | 10,772 | | | | 16 | | | | (44) | | | | 10,744 | | |
| Filmed Entertainment: | | | | | | | | | | | | | |
| Goodwill | | | 1,692 | | | | — | | | | — | | | | 1,692 | | |
| Accumulated impairment losses | | | — | | | | — | | | | — | | | | — | | |
| Goodwill, net of impairment | | | 1,692 | | | | — | | | | — | | | | 1,692 | | |
| Total: | | | | | | | | | | | | | |
| Goodwill | | | 29,966 | | | | 16 | | | | (44) | | | | 29,938 | | |
| Accumulated impairment losses | | | (13,354) | | | | — | | | | — | | | | (13,354) | | |
| Goodwill, net of impairment | | | $ | 16,612 | | | | $ | 16 | | | | $ | (44) | | | | $ | 16,584 | | |
| | | | | Balance at | | Acquisitions / | | Foreign | | Balance at | | Balance at | | Acquisitions / | | Foreign | | Balance at |
| | | December 31, 2018 | | (Dispositions) | | Currency | | December 31, 2019 | | December 31, 2019 | | (Dispositions) | | Currency | | December 31, 2020 |
| TV Entertainment: | | | | | | | | | | TV Entertainment: | |
| Goodwill | | $ | 17,618 |
| | $ | (3 | ) | | $ | — |
| | $ | 17,615 |
| | Goodwill | | $ | 17,615 | | | $ | (113) | | (a) | | $ | — | | | $ | 17,502 | | |
| Accumulated impairment losses | | (13,354 | ) | | — |
| | — |
| | (13,354 | ) | | Accumulated impairment losses | | (13,354) | | | — | | | — | | | (13,354) | | |
| Goodwill, net of impairment | | 4,264 |
| | (3 | ) | | — |
| | 4,261 |
| | Goodwill, net of impairment | | 4,261 | | | (113) | | | — | | | 4,148 | | |
| Cable Networks: | | | | | | | | | | Cable Networks: | |
| Goodwill | | 10,234 |
| | 451 |
| (a) | | 6 |
| | 10,691 |
| | Goodwill | | 10,691 | | | 28 | | | 53 | | | 10,772 | | |
| Accumulated impairment losses | | — |
| | — |
| | — |
| | — |
| | Accumulated impairment losses | | — | | | — | | | — | | | — | | |
| Goodwill, net of impairment | | 10,234 |
| | 451 |
| | 6 |
| | 10,691 |
| | Goodwill, net of impairment | | 10,691 | | | 28 | | | 53 | | | 10,772 | | |
| Filmed Entertainment: | | | | | | | | | | Filmed Entertainment: | |
| Goodwill | | 1,593 |
| | — |
| | — |
| | 1,593 |
| | Goodwill | | 1,593 | | | 99 | | (b) | | — | | | 1,692 | | |
| Accumulated impairment losses | | — |
| | — |
| | — |
| | — |
| | Accumulated impairment losses | | — | | | — | | | — | | | — | | |
| Goodwill, net of impairment | | 1,593 |
| | — |
| | — |
| | 1,593 |
| | Goodwill, net of impairment | | 1,593 | | | 99 | | | — | | | 1,692 | | |
| Publishing: | | | | | | | | | | |
| Goodwill | | 435 |
| | — |
| | — |
| | 435 |
| | |
| Accumulated impairment losses | | — |
| | — |
| | — |
| | — |
| | |
| Goodwill, net of impairment | | 435 |
| | — |
| | — |
| | 435 |
| | |
| Total: | | | | | | | | | | Total: | |
| Goodwill | | 29,880 |
| | 448 |
| | 6 |
| | 30,334 |
| | Goodwill | | 29,899 | | | 14 | | | 53 | | | 29,966 | | |
| Accumulated impairment losses | | (13,354 | ) | | — |
| | — |
| | (13,354 | ) | | Accumulated impairment losses | | (13,354) | | | — | | | — | | | (13,354) | | |
| Goodwill, net of impairment | | $ | 16,526 |
| | $ | 448 |
| | $ | 6 |
| | $ | 16,980 |
| | Goodwill, net of impairment | | $ | 16,545 | | | $ | 14 | | | $ | 53 | | | $ | 16,612 | | |
(a) PrimarilyAmount reflects the acquisitionsdisposition of Pluto Inc. and Pop TV.CMG.
(b) Amount relates to the acquisition of Miramax.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
| | | | | | | | | | | | | | | | | | | | | |
| | | Balance at | | | | | Foreign | | Balance at |
| | | December 31, 2017 | | Acquisitions | | | Currency | | December 31, 2018 |
| TV Entertainment: | | | | | | | | | | | | | |
| Goodwill | | | $ | 17,591 |
| | | $ | 27 |
| | | $ | — |
| | | $ | 17,618 |
| |
| Accumulated impairment losses | | | (13,354 | ) | | | — |
| | | — |
| | | (13,354 | ) | |
| Goodwill, net of impairment | | | 4,237 |
| | | 27 |
| | | — |
| | | 4,264 |
| |
| Cable Networks: | | | | | | | | | | | | | |
| Goodwill | | | 10,286 |
| | | 64 |
| | | (116 | ) | | | 10,234 |
| |
| Accumulated impairment losses | | | — |
| | | — |
| | | — |
| | | — |
| |
| Goodwill, net of impairment | | | 10,286 |
| | | 64 |
| | | (116 | ) | | | 10,234 |
| |
| Filmed Entertainment: | | | | | | | | | | | | | |
| Goodwill | | | 1,593 |
| | | — |
| | | — |
| | | 1,593 |
| |
| Accumulated impairment losses | | | — |
| | | — |
| | | — |
| | | — |
| |
| Goodwill, net of impairment | | | 1,593 |
| | | — |
| | | — |
| | | 1,593 |
| |
| Publishing: | | | | | | | | | | | | | |
| Goodwill | | | 435 |
| | |
| | | — |
| | | 435 |
| |
| Accumulated impairment losses | | | — |
| | | — |
| | | — |
| | | — |
| |
| Goodwill, net of impairment | | | 435 |
| | | — |
| | | — |
| | | 435 |
| |
| Total: | | | | | | | | | | | | | |
| Goodwill | | | 29,905 |
| | | 91 |
| | | (116 | ) | | | 29,880 |
| |
| Accumulated impairment losses | | | (13,354 | ) | | | — |
| | | — |
| | | (13,354 | ) | |
| Goodwill, net of impairment | | | $ | 16,551 |
| | | $ | 91 |
| | | $ | (116 | ) | | | $ | 16,526 |
| |
Our intangible assets were as follows:
| | | | | | | | | | | | | | | | | |
| | | Accumulated | | |
| At December 31, 2021 | Gross | | Amortization | | Net |
| Intangible assets subject to amortization: | | | | | |
| Trade names | $ | 257 | | | $ | (140) | | | $ | 117 | |
| Licenses | 140 | | | (53) | | | 87 | |
| Customer agreements | 124 | | | (98) | | | 26 | |
| Other intangible assets | 237 | | | (170) | | | 67 | |
| Total intangible assets subject to amortization | 758 | | | (461) | | | 297 | |
| FCC licenses | 2,416 | | | — | | | 2,416 | |
| International broadcast licenses | 25 | | | — | | | 25 | |
| Other intangible assets | 34 | | | — | | | 34 | |
| Total intangible assets | $ | 3,233 | | | $ | (461) | | | $ | 2,772 | |
| | | | | | | | | | | | | | Accumulated | |
| | | | Accumulated | | | |
| At December 31, 2019 | Gross | | Amortization | | Net | |
| At December 31, 2020 | | At December 31, 2020 | Gross | | Amortization | | Net |
| Intangible assets subject to amortization: | | | | | | Intangible assets subject to amortization: | |
| Trade names | $ | 404 |
| | $ | (171 | ) | | $ | 233 |
| Trade names | $ | 249 | | | $ | (123) | | | $ | 126 | |
| Licenses | 159 |
| | (38 | ) | | 121 |
| Licenses | 168 | | | (50) | | | 118 | |
| Customer agreements | 119 |
| | (92 | ) | | 27 |
| Customer agreements | 120 | | | (97) | | | 23 | |
| Other intangible assets | 263 |
| | (151 | ) | | 112 |
| Other intangible assets | 251 | | | (169) | | | 82 | |
| Total intangible assets subject to amortization | 945 |
| | (452 | ) | | 493 |
| Total intangible assets subject to amortization | 788 | | | (439) | | | 349 | |
| FCC licenses | 2,441 |
| | — |
| | 2,441 |
| FCC licenses | 2,416 | | | — | | | 2,416 | |
| International broadcast licenses | 25 |
| | — |
| | 25 |
| International broadcast licenses | 27 | | | — | | | 27 | |
| Other intangible assets | 34 |
| | | | 34 |
| Other intangible assets | 34 | | | — | | | 34 | |
| Total intangible assets | $ | 3,445 |
| | $ | (452 | ) | | $ | 2,993 |
| Total intangible assets | $ | 3,265 | | | $ | (439) | | | $ | 2,826 | |
Amortization expense was as follows:
|
| | | | | | | | | | | |
| | | | Accumulated | | |
| At December 31, 2018 | Gross | | Amortization | | Net |
| Intangible assets subject to amortization: | | | | | |
| Trade names | $ | 384 |
| | $ | (148 | ) | | $ | 236 |
|
| Licenses | 145 |
| | (29 | ) | | 116 |
|
| Customer agreements | 92 |
| | (88 | ) | | 4 |
|
| Other intangible assets | 195 |
| | (128 | ) | | 67 |
|
| Total intangible assets subject to amortization | 816 |
| | (393 | ) | | 423 |
|
| FCC licenses | 2,441 |
| | — |
| | 2,441 |
|
| International broadcast licenses | 45 |
| | — |
| | 45 |
|
| Other intangible assets | 34 |
| | — |
| | 34 |
|
| Total intangible assets | $ | 3,336 |
| | $ | (393 | ) | | $ | 2,943 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
Amortization expense (a) | | $ | 46 | | | | | $ | 85 | | | | | $ | 76 | | |
(a) For 2020, amortization expense includes an impairment charge of $25 million to write down the carrying value of FCC licenses, which was recorded within the TV Entertainment segment. For 2019, amortization expense includes an impairment charge of $20 million, to reduce the carrying value of broadcast licenses in Australia to their fair value, which was recorded within the Cable Networks segment.
We expect our aggregate annual amortization expense for existing intangible assets subject to amortization for each of the years, 2022 through 2026, to be as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | 2023 | | 2024 | | 2025 | | 2026 |
| Future amortization expense | | $ | 41 | | | | | $ | 39 | | | | | $ | 31 | | | | | $ | 27 | | | | | $ | 26 | | |
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Amortization expense was as follows:
|
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
Amortization expense (a) | | $ | 77 |
| | | | $ | 51 |
| | | | $ | 48 |
| |
(a) For 2019, amortization expense includes an impairment charge of $20 million, which reduced the carrying value of broadcast licenses in Australia to their fair value.
We expect our aggregate annual amortization expense for existing intangible assets subject to amortization for each of the years, 2020 through 2024, to be as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2021 | | 2022 | | 2023 | | 2024 |
| Future amortization expense | | $ | 64 |
| | | | $ | 55 |
| | | | $ | 52 |
| | | | $ | 47 |
| | | | $ | 39 |
| |
5) 7) RESTRUCTURING PROGRAMMING CHARGES AND OTHER CORPORATE MATTERS
During the years ended December 31, 2021, 2020 and 2019, 2018we recorded the following costs associated with restructuring and 2017,other corporate matters.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Severance | $ | 65 | | | $ | 472 | | | $ | 395 | |
| Exit costs and other | 35 | | | 70 | | | 23 | |
| Restructuring charges | 100 | | | 542 | | | 418 | |
| Merger-related costs | — | | | 56 | | | 294 | |
| Other corporate matters | — | | | 20 | | | 57 | |
| Restructuring and other corporate matters | $ | 100 | | | $ | 618 | | | $ | 769 | |
Restructuring Charges
During the year ended December 31, 2021, we recorded restructuring charges merger-relatedof $100 million. These charges include $65 million of severance costs, programmingincluding the accelerated vesting of stock-based compensation, primarily associated with changes in management at certain of our businesses. The charges also include $35 million for the impairment of lease assets that we determined we will not use and costsbegan actively marketing for other corporate matters as follows:sublease. This determination was made in connection with cost-transformation initiatives related to the Merger. The impairment is the result of a decline in market conditions since inception of these leases and reflects the difference between the estimated fair values, which were determined based on the expected discounted future cash flows of the lease assets, and the carrying values.
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| Severance | $ | 401 |
| | $ | 235 |
| | $ | 224 |
|
| Exit costs and other | 23 |
| | 75 |
| | 12 |
|
| Asset impairment | — |
| | — |
| | 22 |
|
| Restructuring charges | 424 |
| | 310 |
| | 258 |
|
| Restructuring-related costs | — |
| | 52 |
| | — |
|
| Merger-related costs | 294 |
| | — |
| | — |
|
| Other corporate matters | 57 |
| | 128 |
| | — |
|
| Restructuring and other corporate matters | $ | 775 |
| | $ | 490 |
| | $ | 258 |
|
| | | | | | |
| Programming charges | $ | 589 |
| | $ | 162 |
| | $ | 144 |
|
Restructuring Charges and Related Costs
During the year ended December 31, 2019, we recorded restructuring charges of $424$418 million, primarily for severance andcosts, including the accelerationaccelerated vesting of stock-based compensation, in connection with the Merger;Merger, as well as costs related to a restructuring plan initiated in the first quarter of 2019 under which severance payments are beingwere provided to certain eligible employees who voluntarily elected to participate.
During These charges also included costs related to the year ended December 31, 2018, we recorded restructuringtermination of contractual obligations and charges of $310 million resulting from cost transformation initiatives to improve margins. In addition, in 2018 we recorded restructuring-related costs of $52 million, comprised of third-party professional services associated with such initiatives.the exit of leases.
During the year ended December 31, 2017, we recorded restructuring charges of $258 million, resulting from the execution of a strategy for certain of our flagship brands and strategic initiatives at Paramount, as well as costs relating to other restructuring plans across several of our businesses in a continued effort to reduce our cost structure. The restructuring charges for 2017 included a non-cash impairment charge resulting from the decision to abandon an international trade name in connection with the strategic initiatives.
The following is a rollforward of our restructuring liability, which is recorded in “Other current liabilities” and “Other liabilities” inon the Consolidated Balance Sheets. The remainingmajority of the restructuring liability at December 31, 2019,2021, which primarily relates to severance payments, is expected to be substantially paid by the end of 2021.2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at | | 2021 Activity | | Balance at |
| December 31, 2020 | | Charges (a) | | Payments | | Other | | December 31, 2021 |
| TV Entertainment | | $ | 112 | | | | $ | 10 | | | | $ | (58) | | | | $ | (10) | | | | $ | 54 | | |
| Cable Networks | | 144 | | | | 11 | | | | (82) | | | | (5) | | | | 68 | | |
| Filmed Entertainment | | 30 | | | | 23 | | | | (14) | | | | (5) | | | | 34 | | |
| Corporate | | 86 | | | | 1 | | | | (50) | | | | (3) | | | | 34 | | |
| Total | | $ | 372 | | | | $ | 45 | | | | $ | (204) | | | | $ | (23) | | | | $ | 190 | | |
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at | | 2019 Activity | | Balance at |
| | December 31, 2018 | | Charges (a) | | Payments | | Other | | December 31, 2019 |
| TV Entertainment | | $ | 54 |
| | | $ | 93 |
|
| | $ | (82 | ) | | | $ | (1 | ) | | | $ | 64 |
| |
| Cable Networks | | 151 |
| | | 93 |
| | | (104 | ) | | | (7 | ) | | | 133 |
| |
| Filmed Entertainment | | 22 |
| | | 8 |
| | | (12 | ) | | | (1 | ) | | | 17 |
| |
| Publishing | | 2 |
| | | 6 |
|
| | (4 | ) | | | — |
| | | 4 |
| |
| Corporate | | 57 |
| | | 157 |
|
| | (32 | ) | | | — |
| | | 182 |
| |
| Total | | $ | 286 |
| | | $ | 357 |
| | | $ | (234 | ) | | | $ | (9 | ) | | | $ | 400 |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at | | 2018 Activity | | Balance at |
| | December 31, 2017 | | Charges (a) | | Payments | | Other | | December 31, 2018 |
| TV Entertainment | | $ | 50 |
| | | $ | 45 |
| | | $ | (40 | ) | | | $ | (1 | ) | | | $ | 54 |
| |
| Cable Networks | | 91 |
| | | 185 |
| | | (117 | ) | | | (8 | ) | | | 151 |
| |
| Filmed Entertainment | | 32 |
| | | 18 |
| | | (28 | ) | | | — |
| | | 22 |
| |
| Publishing | | 3 |
| | | 1 |
| | | (2 | ) | | | — |
| | | 2 |
| |
| Corporate | | 37 |
| | | 53 |
| | | (32 | ) | | | (1 | ) | | | 57 |
| |
| Total | | $ | 213 |
| | | $ | 302 |
| |
| $ | (219 | ) | | | $ | (10 | ) | | | $ | 286 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at | | 2020 Activity | | Balance at |
| December 31, 2019 | | Charges (a) | | Payments | | Other | | December 31, 2020 |
| TV Entertainment | | $ | 99 | | | | $ | 137 | | | | $ | (111) | | | | $ | (13) | | | | $ | 112 | | |
| Cable Networks | | 137 | | | | 179 | | | | (158) | | | | (14) | | | | 144 | | |
| Filmed Entertainment | | 17 | | | | 25 | | | | (12) | | | | — | | | | 30 | | |
| Corporate | | 143 | | | | 71 | | | | (117) | | | | (11) | | | | 86 | | |
| Total | | $ | 396 | | | | $ | 412 | | | | $ | (398) | | | | $ | (38) | | | | $ | 372 | | |
(a)Excludes For the years ended December 31, 2021 and 2020, excludes stock-based compensation expense of $67$20 million and $8$88 million, in 2019respectively, and 2018,lease asset impairments of $35 million (recorded within the TV Entertainment segment) and $42 million (recorded across our segments and Corporate), respectively.
Merger-related Costs and Other Corporate Matters
In 2020, in addition to the above-mentioned restructuring charges, we incurred costs of $56 million in connection with the Merger, consisting of professional fees mainly associated with integration activities, as well as transaction-related bonuses. We also incurred costs of $5 million for professional fees associated with dispositions and other corporate matters, and we recorded a charge of $15 million to write down property and equipment, which was classified as held for sale in 2020, to its fair value less costs to sell.
In 2019, in addition to the above-mentioned restructuring charges, and related costs, we incurred costs of $294 million in connection with the Merger, consisting of financial advisory, legal and other professional fees, transaction-related bonuses, and contractual executive compensation, including the accelerated vesting of stock-based compensation, that was triggered by the Merger. We also incurred costs of $40 million in connection with the settlement of a commercial dispute and $17 million associated with legal proceedings involving the Company (see Note 19)20) and other corporate matters.
In 2018, we recorded expenses of $128 million primarily for professional fees related to legal proceedings, investigations at our Company and the evaluation of potential merger activity.
Programming Charges
During 2019, in connection with the Merger, we implemented management changes across the organization. In connection with these changes, we performed an evaluation of our programming portfolio across all of our businesses, including an assessment of the optimal use of our programming in the marketplace, which resulted in the identification of programs not aligned with management’s strategy. As a result, we recorded programming charges of $589 million principally reflecting accelerated amortization associated with changes in the expected monetization of certain programs, and decisions to cease airing, alter future airing patterns or not renew certain programs.
During 2018, in connection with management changes, we recorded programming charges of $162 million, relating to changes to our programming strategy, including at CBS Films, which shifted its focus from theatrical films to developing content for our digital streaming services, as well as at our Cable Networks segment where we ceased the use of certain programming.
During 2017, we recorded programming charges of $144 million associated with management’s decision to cease use of certain original and acquired programming, in connection with the execution of a strategy for certain of our flagship brands and strategic initiatives at Paramount.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The programming charges for 2019, 2018, and 2017 were included within “Operating expenses” in the Consolidated Statements of Operations.
6)8) RELATED PARTIES
National Amusements, Inc. NAI
National Amusements, Inc. (“NAI”) is the controlling stockholder of ViacomCBS and was the controlling stockholder of each of CBS and Viacom prior to the Merger. Sumner M. Redstone is the controlling stockholder, Chairman of the Board of Directors and Chief Executive Officer of NAI. Shari E. Redstone, Mr. Redstone’s daughter, is the President and a director of NAI. She is the non-executive Chair of our Board of Directors and was the non-executive Vice Chair of the Board of Directors of each of CBS and Viacom prior to the Merger.Company. At December 31, 2019,2021, NAI directly or indirectly owned approximately 79.4%77.4% of our voting Class A Common Stock and 10.2%approximately 9.7% of our Class A Common Stock and non-voting Class B Common Stock on a combined basis. NAI is controlled by Mr. Redstone through the Sumner M. Redstone National Amusements Part B General Trust (the “SMR“General Trust”), which owns 80% of the voting interest of NAI and suchacts by majority vote of 7 voting interest oftrustees (subject to certain exceptions), including with respect to the NAI shares held by the SMR TrustGeneral Trust. Shari E. Redstone, Chairperson, CEO and President of NAI and non-executive Chair of our Board of Directors, is voted solely by Mr. Redstone until his incapacity or death. The SMR Trust provides that in the event of Mr. Redstone’s death or incapacity, voting controlone of the NAI7 voting interest held bytrustees for the SMRGeneral Trust will pass to 7and is one of 2 voting trustees who will include Ms. Redstone.are beneficiaries of the General Trust. No member of our management or other member of our Board of Directors is a trustee of the SMRGeneral Trust. Pursuant to a settlement and release agreement entered into by us, NAI and others, with respect to legal proceedings involving these parties, we paid $30 million for professional fees incurred by NAI during 2018 relating to these legal proceedings, which are included in “Restructuring and other corporate matters” on the Consolidated Statement of Operations for the year ended December 31, 2018.
Other Related Parties.Parties
In the ordinary course of business, we are involved in transactions with our equity-method investees, primarily for the licensing of television and film programming. The following table presentstables present the amounts recorded in our consolidated financial statements related to these transactions.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Revenues | $ | 237 | | | $ | 106 | | | $ | 179 | |
| Operating expenses | $ | 21 | | | $ | 13 | | | $ | 14 | |
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 |
| 2018 | | 2017 |
| Revenues | $ | 179 |
| | $ | 170 |
| | $ | 183 |
|
| Operating expenses | $ | 14 |
| | $ | 22 |
| | $ | 41 |
|
|
| | | | | | | |
| At December 31, | 2019 |
| 2018 |
| Amounts due to/from other related parties | | | |
| Accounts receivable | $ | 45 |
| | $ | 83 |
|
| Accounts payable | $ | 3 |
| | $ | 9 |
|
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
| | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
| | | |
| Accounts receivable | $ | 50 | | | $ | 69 | |
| | | |
| | | |
| | | |
Through the normal course of business, we are involved in transactions with other related parties that have not been material in any of the periods presented.
7) ACQUISITIONS AND INVESTMENTS9) REVENUES
The table below presents our revenues disaggregated into categories based on the nature of such revenues. Beginning in the first quarter of 2021, and for all comparable prior-year periods, these categories include streaming revenues, which aligns with management’s increased focus on this revenue stream. Streaming revenues are comprised of streaming advertising and streaming subscription revenues. Streaming advertising revenues are earned from advertisements on our pay and free streaming services, including Paramount+ and Pluto TV, Acquisitionand from digital video advertisements on our websites and in our video content on third-party platforms (“other digital video platforms”). Streaming subscription revenues include fees for our pay streaming services, including Paramount+, Showtime OTT, BET+ and Noggin, as well as premium subscriptions to access certain video content on our websites. Accordingly, our advertising and affiliate revenue categories exclude revenues earned by our streaming services and on other digital video platforms.
On March 1, | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Revenues by Type: | | | | | |
Advertising (a) | $ | 9,267 | | | $ | 8,333 | | | $ | 10,069 | |
Affiliate (b) | 8,394 | | | 8,023 | | | 7,893 | |
| Streaming | 4,193 | | | 2,561 | | | 1,714 | |
| Theatrical | 241 | | | 180 | | | 547 | |
| Licensing and other | 6,491 | | | 6,188 | | | 6,775 | |
| Total Revenues | $ | 28,586 | | | $ | 25,285 | | | $ | 26,998 | |
(a) Excludes streaming advertising revenues.
(b) Excludes streaming subscription revenues.
Receivables
Included in “Other assets” on the Consolidated Balance Sheets are noncurrent receivables of $1.84 billion and $2.02 billion atDecember 31, 2021 and 2020, respectively. Noncurrent receivables primarily relate to revenues recognized under long-term content licensing arrangements. Revenues from the licensing of content are recognized at the beginning of the license period in which programs are made available to the licensee for exhibition, while the related cash is generally collected over the term of the license period.
Our receivables do not represent significant concentrations of credit risk at December 31, 2021 or 2020, due to the wide variety of customers, markets and geographic areas to which our products and services are sold.
Contract Liabilities
Contract liabilities are included within “Deferred revenues” and “Other liabilities” on the Consolidated Balance Sheets and were $1.20 billion, $1.12 billion and $908 million at December 31, 2021, 2020 and 2019, respectively. For the years ended December 31, 2021, 2020 and 2019, we acquired Pluto Inc., the providerrecognized revenues of Pluto TV, a leading free streaming television service$877 million, $591 million, and $498 million, respectively, that were included in the U.S.,opening balance of deferred revenues for $324 million, net of cash acquired. The purchase price excludes $18 million of post-combination expenses that are subject to continuous employment and will be recognized over the required service period in the Consolidated Statements of Operations within “Selling, general and administrative expenses”. Pluto TV expands our presence across next-generation distribution platforms and accelerates the growth of our advanced marketing solutions business. Pluto TV is available across mobile devices, desktops, streaming players and game consoles and is integrated across a growing number of Smart TVs and other video and broadband platforms.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The following table summarizesAt December 31, 2021, unrecognized revenues attributable to unsatisfied performance obligations under our allocationlong-term contracts were $6.3 billion, of which $3.8 billion is expected to be recognized in 2022, $1.4 billion in 2023, $0.7 billion in 2024, and $0.4 billion thereafter. These amounts only include contracts subject to a guaranteed fixed amount or the guaranteed minimum under variable contracts, primarily consisting of television and film licensing contracts and affiliate agreements that are subject to a fixed or guaranteed minimum fee. Such amounts change on a regular basis as we renew existing agreements or enter into new agreements. Unrecognized revenues under contracts disclosed above do not include (i) contracts with an original expected term of one year or less, mainly consisting of advertising contracts (ii) contracts for which variable consideration is determined based on the customer’s subsequent sale or usage, mainly consisting of affiliate agreements and (iii) long-term licensing agreements for multiple programs for which variable consideration is determined based on the value of the purchase price as ofprograms delivered to the acquisition date for Pluto TV.customer and our right to invoice corresponds with the value delivered.
|
| | | | | |
| | Year Ended |
| | December 31, 2019 |
| Assets | | | |
| Receivables | | $ | 31 |
| |
| Prepaid expenses and other current assets | | 3 |
| |
| Goodwill | | 277 |
| |
| Intangible assets | | 41 |
| |
| Other assets (noncurrent) | | 8 |
| |
| Assets acquired | | $ | 360 |
| |
| | | | |
| Liabilities | | | |
| Accounts payable | | $ | 27 |
| |
| Accrued expenses | | 4 |
| |
| Other liabilities | | 5 |
| |
| Liabilities assumed | | $ | 36 |
| |
| Total purchase price | | $ | 324 |
| |
The goodwill, whichPerformance Obligations Satisfied in Previous Periods
Under certain licensing arrangements, the amount and timing of our revenue recognition is not deductible for tax purposes, reflectsdetermined based on our licensees’ subsequent sale to its end customers. As a result, under such arrangements, we often satisfy our performance obligation of delivery of our content in advance of revenue recognition. For the Company-specific synergies arising from the acquisition and is included in the Cable Networks segment. Intangible assets consist of distribution relationships, developed technology and trade names, all with useful lives of five years.
The operating results of Pluto TV from the date of acquisition throughyears ended December 31, 2019 were not material to our consolidated financial statements.
Other Acquisitions
In2021, 2020 and 2019, we acquired the remaining 50% interest in Pop TV, a general entertainment cable network,recognized revenues of $424 million, $383 million, and $294 million, respectively, for $39 million, netlicensing to distributors of cash acquired, bringing our ownership to 100%. The assets acquired primarily consist of goodwilltransactional video-on-demand and electronic sell-through services and other identifiable intangible assets. The resultsarrangements for licensing of Pop TV are includedour content for which our performance obligation was satisfied in the a prior period.
Cable Networks segment from the date of acquisition.
In 2018, we made payments totaling $118 million, which were net of cash acquired, for acquisitions that included WhoSay Inc., a leading influence marketing firm; Pop Culture Media, a digital entertainment media company; VidCon LLC, a host of conferences dedicated to online video; and Awesomeness TV Holdings, LLC, a multi-platform media company serving global Gen-Z audiences as a digital-first destination for original programming.
In 2017, we acquired Ten Network Holdings Limited (“Network 10”) for approximately $124 million, net of cash acquired. Included in this acquisition was Network 10, one of three major commercial broadcast networks in Australia, as well as two multi-channel networks, channels One and Eleven. The assets acquired primarily consist of broadcast licenses, net operating loss carryforwards and working capital.
The operating results of these acquisitions were not material to our consolidated financial statements.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Miramax AcquisitionOur debt consists of the following:
In December 2019, we entered into a definitive agreement with beIN Media Group to acquire a 49% stake in Miramax, a global film and television studio, for $375 million, which includes an upfront cash payment of approximately $150 million, along with a commitment to invest $45 million annually over the next five years, or $225 million, to be used for new film and television productions and working capital. In conjunction with this agreement, we entered into a series of commercial agreements with Miramax under which we will have exclusive, long-term distribution rights to Miramax’s catalog adding more than 700 titles to our existing library. In addition to maximizing library content, the agreement will enable us to co-produce, co-finance and distribute new film and television projects under the Miramax banner. The investment will be accounted for as a consolidated variable interest entity. The transaction is subject to customary closing conditions and is expected to close in the first quarter of 2020. | | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
| | | |
| 2.250% Senior Notes due 2022 | $ | — | | | $ | 35 | |
| 3.375% Senior Notes due 2022 | — | | | 415 | |
| 3.125% Senior Notes due 2022 | — | | | 117 | |
| 2.50% Senior Notes due 2023 | — | | | 196 | |
| 3.25% Senior Notes due 2023 | — | | | 141 | |
| 2.90% Senior Notes due 2023 | — | | | 242 | |
| 4.25% Senior Notes due 2023 | — | | | 837 | |
| 7.875% Debentures due 2023 | 139 | | | 139 | |
| 7.125% Senior Notes due 2023 | 35 | | | 35 | |
| 3.875% Senior Notes due 2024 | 490 | | | 490 | |
| 3.70% Senior Notes due 2024 | 599 | | | 598 | |
| 3.50% Senior Notes due 2025 | 597 | | | 596 | |
| 4.75% Senior Notes due 2025 | 1,242 | | | 1,239 | |
| 4.0% Senior Notes due 2026 | 793 | | | 791 | |
| 3.45% Senior Notes due 2026 | 123 | | | 123 | |
| 2.90% Senior Notes due 2027 | 692 | | | 691 | |
| 3.375% Senior Notes due 2028 | 496 | | | 495 | |
| 3.70% Senior Notes due 2028 | 493 | | | 492 | |
| 4.20% Senior Notes due 2029 | 494 | | | 493 | |
| 7.875% Senior Debentures due 2030 | 830 | | | 831 | |
| 4.95% Senior Notes due 2031 | 1,223 | | | 1,220 | |
| 4.20% Senior Notes due 2032 | 972 | | | 969 | |
| 5.50% Senior Debentures due 2033 | 427 | | | 427 | |
| 4.85% Senior Debentures due 2034 | 87 | | | 87 | |
| 6.875% Senior Debentures due 2036 | 1,070 | | | 1,069 | |
| 6.75% Senior Debentures due 2037 | 75 | | | 75 | |
| 5.90% Senior Notes due 2040 | 298 | | | 298 | |
| 4.50% Senior Debentures due 2042 | 45 | | | 45 | |
| 4.85% Senior Notes due 2042 | 488 | | | 487 | |
| 4.375% Senior Debentures due 2043 | 1,123 | | | 1,116 | |
| 4.875% Senior Debentures due 2043 | 18 | | | 18 | |
| 5.85% Senior Debentures due 2043 | 1,233 | | | 1,232 | |
| 5.25% Senior Debentures due 2044 | 345 | | | 345 | |
| 4.90% Senior Notes due 2044 | 540 | | | 540 | |
| 4.60% Senior Notes due 2045 | 590 | | | 589 | |
| 4.95% Senior Notes due 2050 | 944 | | | 942 | |
| 5.875% Junior Subordinated Debentures due 2057 | 514 | | | 514 | |
| 6.25% Junior Subordinated Debentures due 2057 | 643 | | | 643 | |
| Other bank borrowings | 35 | | | 95 | |
| Obligations under finance leases | 16 | | | 26 | |
Total debt (a) | 17,709 | | | 19,733 | |
| | | |
| Less current portion of long-term debt | 11 | | | 16 | |
| Total long-term debt, net of current portion | $ | 17,698 | | | $ | 19,717 | |
Investments
(a) At December 31, 20192021 and 2018, we had investments2020, the senior and junior subordinated debt balances included (i) a net unamortized discount of $753$466 million and $719$491 million, respectively, consistingand (ii) unamortized deferred financing costs of marketable securities, non-marketable equity investments and equity-method investments. Our investments are included in “Other assets” on the Consolidated Balance Sheets.
Investments over which we have significant influence, without a controlling interest, are accounted for under the equity method. Such investments include our 50% interest in the broadcast network, The CW, as well as interests in several international television joint ventures including a 49% interest in a joint venture with a subsidiary of AMC Networks Inc., which owns and operates channels in the United Kingdom and Ireland, including CBS branded channels; a 30% interest in a joint venture with another subsidiary of AMC Networks Inc., which owns and operates cable and satellite channels in Europe, the Middle East and Africa; and a 49% interest in Viacom18, a joint venture in India which owns and operates COLORS pay television channel, a digital advertising platform and a filmed entertainment business. At December 31, 2019 and 2018, respectively, we had $494$95 million and $573$107 million, of equity-method investments.
Investments without a readily determinable fair value for which we have no significant influence are measured at cost less impairment, if any, and adjusted for any observable price changes. At December 31, 2019 and 2018, respectively, we had $113 million and $112 million of such investments.
respectively. The fairface value of our marketable securitiestotal debt was $146 million and $34 million as of$18.27 billion at December 31, 20192021 and 2018, respectively, as determined based on quoted market prices in active markets (Level 1 in the fair value hierarchy). $20.33 billion at December 31, 2020.
During the yearsyear ended December 31, 2019 and 2018,2021, we recordedredeemed senior notes totaling $1.99 billion, prior to maturity, for an unrealized gainaggregate redemption price of $113 million and an unrealized loss of $23 million, respectively, resulting from changes in the fair value of our marketable securities. Beginning in the first quarter of 2018, in connection with the adoption of FASB guidance on financial instruments, changes in the fair value of marketable securities are recognized in the Consolidated Statements of Operations. Prior to the adoption of this guidance, we recorded unrealized gains and losses on marketable securities in other comprehensive income.
We invested $171 million, $161 million and $128 million into our investments during the years ended December 31, 2019, 2018 and 2017, respectively.
In 2019, we completed the sale of an international joint venture$2.11 billion resulting in a gainpre-tax loss on extinguishment of $10 million. In 2018, we completed the saledebt of a 1% equity interest in Viacom18 to our joint venture partner for $20 million, resulting in a gain of $16 million. These gains have been included in “Other items, net” in the Consolidated Statements of Operations.
During 2017, we completed the sale of our 49.76% interest in EPIX, a premium entertainment network, for $593 million, net of transaction costs of $4 million, resulting in a gain of $285 million. In addition, prior to the closing of the sale, EPIX paid a dividend, of which our pro rata share was $37$128 million.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
For 2019, 2018,During the year ended December 31, 2020, we issued $4.50 billion of senior notes and 2017, included in “Other items, net” onused the Consolidated Statements of Operations was $50 million, $46 million and$18 million, respectively,net proceeds from these issuances for the impairmentredemption of investments without readily determinable fair values.
Variable Interest Entities
In the normal courselong-term debt totaling $2.77 billion, prior to maturity, for an aggregate redemption price of business, we enter into joint ventures or make investments with business partners that support our underlying business strategy and provide us the ability to enter new markets to expand the reach of our brands, develop new programming and/or distribute our existing content. In certain instances, an entity in which we make an investment may qualify$2.88 billion, as a VIE. In determining whether we are the primary beneficiary of a VIE, we assess whether we have the power to direct matters that most significantly impact the activities of the VIE and have the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
well as for general corporate purposes. The Consolidated Balance Sheets include assets and liabilities related to consolidated VIEs totaling $141 million and $22 million, respectively, as of December 31, 2019, and $63 million and $4 million, respectively, as of December 31, 2018. In 2017, a consolidated VIE completed the sale of broadcast spectrum in connection with the FCC’s broadcast spectrum auction for $147 million, a portion of which was used to repay outstanding debt, resultingearly redemption resulted in a pre-tax gainloss on extinguishment of $127 million, with $11 million attributable todebt for the noncontrolling interest. Other than this gain, the consolidated VIEs’ revenues, expenses and operating income were not significant for all periods presented.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
8) year ended December 31, 2020DEBTof $126 million.
Our debt consists of the following
:
|
| | | | | | | |
| At December 31, | 2019 | | 2018 |
| Commercial paper | $ | 699 |
| | $ | 674 |
|
| 2.30% Senior Notes due 2019 | — |
| | 601 |
|
| 5.625% Senior Notes due 2019 | — |
| | 221 |
|
| 2.750% Senior Notes due 2019 | — |
| | 90 |
|
| 4.30% Senior Notes due 2021 | 300 |
| | 300 |
|
| 4.50% Senior Notes due 2021 | 499 |
| | 498 |
|
| 3.875% Senior Notes due 2021 | 597 |
| | 596 |
|
| 2.250% Senior Notes due 2022 | 49 |
| | 49 |
|
| 3.375% Senior Notes due 2022 | 698 |
| | 697 |
|
| 3.125% Senior Notes due 2022 | 194 |
| | 194 |
|
| 2.50% Senior Notes due 2023 | 398 |
| | 397 |
|
| 3.25% Senior Notes due 2023 | 181 |
| | 181 |
|
| 2.90% Senior Notes due 2023 | 396 |
| | 396 |
|
| 4.25% Senior Notes due 2023 | 1,242 |
| | 1,240 |
|
| 7.875% Debentures due 2023 | 187 |
| | 187 |
|
| 7.125% Senior Notes due 2023 | 46 |
| | 46 |
|
| 3.875% Senior Notes due 2024 | 489 |
| | 489 |
|
| 3.70% Senior Notes due 2024 | 598 |
| | 597 |
|
| 3.50% Senior Notes due 2025 | 592 |
| | 590 |
|
| 4.00% Senior Notes due 2026 | 789 |
| | 787 |
|
| 3.45% Senior Notes due 2026 | 123 |
| | 123 |
|
| 2.90% Senior Notes due 2027 | 688 |
| | 686 |
|
| 3.375% Senior Notes due 2028 | 494 |
| | 493 |
|
| 3.70% Senior Notes due 2028 | 491 |
| | 490 |
|
| 4.20% Senior Notes due 2029 | 493 |
| | — |
|
| 7.875% Senior Debentures due 2030 | 831 |
| | 832 |
|
| 5.50% Senior Debentures due 2033 | 426 |
| | 426 |
|
| 4.85% Senior Debentures due 2034 | 87 |
| | 86 |
|
| 6.875% Senior Debentures due 2036 | 1,068 |
| | 1,068 |
|
| 6.75% Senior Debentures due 2037 | 75 |
| | 75 |
|
| 5.90% Senior Notes due 2040 | 297 |
| | 297 |
|
| 4.50% Senior Debentures due 2042 | 45 |
| | 45 |
|
| 4.85% Senior Notes due 2042 | 486 |
| | 486 |
|
| 4.375% Senior Debentures due 2043 | 1,109 |
| | 1,103 |
|
| 4.875% Senior Debentures due 2043 | 18 |
| | 18 |
|
| 5.850% Senior Debentures due 2043 | 1,231 |
| | 1,230 |
|
| 5.25% Senior Debentures due 2044 | 345 |
| | 345 |
|
| 4.90% Senior Notes due 2044 | 539 |
| | 539 |
|
| 4.60% Senior Notes due 2045 | 589 |
| | 588 |
|
| 5.875% Junior Subordinated Debentures due 2057 | 643 |
| | 642 |
|
| 6.25% Junior Subordinated Debentures due 2057 | 643 |
| | 642 |
|
| Obligations under finance leases | 44 |
|
| 69 |
|
Total debt (a) | 18,719 |
| | 19,113 |
|
| Less commercial paper | 699 |
| | 674 |
|
| Less current portion | 18 |
| | 339 |
|
| Total long-term debt, net of current portion | $ | 18,002 |
| | $ | 18,100 |
|
(a) At December 31, 2019 and 2018, the senior and junior subordinated debt balances included (i) a net unamortized discount of $412 million and $422 million, respectively, (ii) unamortized deferred financing costs of $92 million and $98 million, respectively, and (iii) a decrease in the carrying value of the debt relating to previously settled fair value hedges of $6 million and $5 million, respectively. The face value of our total debt was $19.23 billion at December 31, 2019 and $19.64 billion at December 31, 2018.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
During the year ended December 31, 2019, we issued $500 million of 4.20% senior notes due 2029. We used the net proceeds from this issuance in the redemption of our $600 million outstanding 2.30% senior notes due August 2019. During 2019, we also repaid the $220 million aggregate principal amount of our 5.625% senior notes due September 2019 and the $90 million aggregate principal amount of our 2.75% senior notes due December 2019.
During the year ended December 31, 2018, we redeemed $1.13 billion of senior notes and debentures for a redemption price of $1.10 billion, resulting in a pre-tax gain on early extinguishment of debt of $18 million ($14 million, net of tax).
During the year ended December 31, 2017, we issued $3.10 billion of senior notes and junior subordinated debentures. Also during 2017, we redeemed and repaid $4.67 billion of senior notes, of which $4.27 billion was redeemed prior to maturity, resulting in a pre-tax loss on early extinguishment of debt of $38 million ($21 million, net of tax).
Our 5.875% junior subordinated debentures due February 2057 and 6.25% junior subordinated debentures due February 2057 accrue interest at the stated fixed rates until February 28, 2022 and February 28, 2027,, respectively, on which dates the rates will switch to floating rates based on three-month LIBOR plus 3.895% and 3.899%, respectively, reset quarterly. These debentures can be called by us at any time after the expiration of the fixed-rate period. In January 2022, we delivered notice that we will be calling our 5.875% junior subordinated debentures due February 2057 in full on February 28, 2022.
The interest rate payable on our 2.25% senior notes due February 2022 and 3.45% senior notes due October 2026, collectively the “Senior Notes”, will be subject to adjustment from time to time if Moody’s Investor Services, Inc. or S&P Global Ratings downgrades (or downgrades and subsequently upgrades) the credit rating assigned to the Senior Notes.these senior notes. The interest rate on these Senior Notessenior notes would increase by 0.25% upon each credit agency downgrade up to a maximum of 2.00%, and would similarly be decreased for subsequent upgrades. At December 31, 2019,2021, the outstanding principal amount of our 2.25%these senior notes due February 2022 and 3.45% senior notes due October 2026 was $50 million and $124 million, respectively.million.
Some of our outstanding notes and debentures provide for certain covenant packages typical for an investment grade company. There is an acceleration trigger for the majority of the notes and debentures in the event of a change in control under specified circumstances coupled with ratings downgrades due to the change in control, as well as certain optional redemption provisions for our junior debentures.
At December 31, 2019,2021, our scheduled maturities of long-term debt at face value, excluding finance leases, and the related interest payments were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | 2025 and |
| | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter |
| Long-term debt | | $ | — |
| | | $ | 1,400 |
| | | $ | 945 |
| | | $ | 2,465 |
| | | $ | 1,092 |
| | $ | 12,584 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2027 and |
| 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter |
| Long-term debt | | $ | — | | | | $ | 209 | | | | $ | 1,092 | | | | $ | 1,850 | | | | $ | 924 | | | $ | 14,179 | |
Commercial Paper
WeAt both December 31, 2021 and 2020, we had no outstanding commercial paper borrowings under our $2.50 billion commercial paper program of $699 million and $674 million at December 31, 2019 and 2018, respectively, each with maturities of less than 90 days. The weighted average interest rate for these borrowings was 2.07% and 3.02% at December 31, 2019 and 2018, respectively.borrowings.
In January 2020, our commercial paper program was increased to $3.50 billion in conjunction with the new $3.50 billion revolving credit facility described below.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Credit Facility
At December 31, 2019,2021, we had a $2.50 billion revolving credit facility held by CBS prior to the Merger (the “CBS Credit Facility”) with a maturity in June 2021 and a $2.50 billion revolving credit facility held by Viacom prior to the Merger (the “Viacom Credit Facility”), with a maturity in February 2024. At December 31, 2019, we had no borrowings outstanding under the CBS Credit Facility or the Viacom Credit Facility and the remaining availability, net of outstanding letters of credit, was $2.50 billion for each facility.
In January 2020, the CBS Credit Facility was terminated and the Viacom Credit Facility was amended and restated to a $3.50 billion revolving credit facility with a maturity in January 2025 (the “Credit Facility”). The credit facilityCredit Facility is used for general corporate purposes and to support commercial paper outstanding,borrowings, if any. We may, at our option, also borrow in certain foreign currencies up to specified limits under the Credit Facility. Borrowing rates under the Credit Facility are determined at our option at the time of each borrowing and are generally based generally on either the prime rate in the U.S. or LIBORan applicable benchmark rate plus a margin based(based on our senior unsecured debt rating.rating), depending on the type and tenor of the loans entered. During the fourth quarter of 2021, the Credit Facility was amended to replace LIBOR as the benchmark rate for loans denominated in euros, sterling and yen with EURIBOR, SONIA and TIBOR-based rates, respectively, as publication of all non-USD
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
LIBOR tenors has been discontinued after December 31, 2021. The Credit Facility has one principal financial covenant that requires our Consolidated Total Leverage Ratio to be less than 4.5x (which we may elect to increase to 5.0x for up to four consecutive quarters following a qualified acquisition) at the end of each quarter, to be applied retrospectively from December 31, 2019.quarter. The Consolidated Total Leverage Ratio reflects the ratio of our Consolidated Indebtedness at the end of a quarter, to our Consolidated EBITDA (each as defined in the amended credit agreement) for the trailing twelve-month period. We met the covenant as of December 31, 2019.
9) LEASES
2021. On January 1, 2019,February 14, 2022, we adopted FASB guidance onfurther amended our Credit Facility to modify the accounting for leases. We applieddefinition of the modified retrospective method of adoption and therefore, results for reporting periods beginning after January 1, 2019 are presented under the new guidance while prior periods have not been adjusted.
The adoption of this guidance resultedConsolidated Total Leverage Ratio in the recognition on theamended credit agreement to allow unrestricted cash and cash equivalents to be netted against Consolidated Balance Sheet of right-of-use assets and lease liabilities representing the present value of future lease payments of all leases with terms in excess of one year. Indebtedness through June 2024.
At December 31, 2019,2021, we had no borrowings outstanding under the Credit Facility and the remaining availability under the Credit Facility, net of outstanding letters of credit, was $3.50 billion.
Other Bank Borrowings
At December 31, 2021 and 2020, we had bank borrowings under Miramax’s $300 million credit facility, which matures in April 2023, of $35 million and $95 million, respectively, with a weighted average interest rate of 3.50%.
11) LEASES
At December 31, 2021 and 2020, the following amounts were recorded on the Consolidated Balance SheetSheets relating to our leases.
| | | | | | | | | | | | | | | | | | | | | | | |
| Operating | | Finance |
| 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | |
| Right-of-Use Assets | | | | | | | |
| Operating lease assets | $ | 1,630 | | | $ | 1,602 | | | $ | — | | | $ | — | |
| Property and equipment, net | $ | — | | | $ | — | | | $ | 17 | | | $ | 19 | |
| | | | | | | |
| Lease Liabilities | | | | | | | |
| Other current liabilities | $ | 325 | | | $ | 306 | | | $ | — | | | $ | — | |
| Debt | — | | | — | | | 11 | | | 16 | |
| Operating lease liabilities | 1,598 | | | 1,583 | | | — | | | — | |
| Long-term debt | — | | | — | | | 5 | | | 10 | |
| Total lease liabilities | $ | 1,923 | | | $ | 1,889 | | | $ | 16 | | | $ | 26 | |
|
| | | | | | | |
| | Leases |
| | Operating | | Finance |
| Right-of-Use Assets | | | |
| Operating lease assets | $ | 1,939 |
| | $ | — |
|
| Property and equipment, net | $ | — |
| | $ | 35 |
|
| | | | |
| Lease Liabilities | | | |
| Other current liabilities | $ | 292 |
| | $ | — |
|
| Debt | — |
| | 19 |
|
| Operating lease liabilities | 1,909 |
| | — |
|
| Long-term debt | — |
| | 25 |
|
| Total lease liabilities | $ | 2,201 |
| | $ | 44 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Operating | | Finance |
| 2021 | | 2020 | | 2021 | | 2020 |
| Weighted average remaining lease term | 8 years | | 8 years | | 2 years | | 2 years |
| | | | | | | |
| Weighted average discount rate | 3.4 | % | | 4.0 | % | | 1.5 | % | | 4.2 | % |
|
| | | | | |
| | Leases |
| | Operating | | Finance |
| Weighted average remaining lease term | 9 years |
| | 3 years |
|
| | | | |
| Weighted average discount rate | 4.1 | % | | 4.5 | % |
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
For existing leases at the time of adoption, we elected to not reassess (i) whether each contract is or contains a lease, (ii) the classification of leases as operating or finance leases, and (iii) initial direct costs for existing leases.
Lessee Contracts
We have operating leases primarily for office space, equipment, satellite transponders and studio facilities. We also have finance leases for satellite transponders and equipment. Lease costs are generally fixed, with certain contracts containing variable payments for non-lease costs based on usage and escalations in the lessors’ annual costs.
The following table presents our lease cost.
| | | | Year Ended | |
| | December 31, 2019 | |
| Year Ended December 31, | | Year Ended December 31, | 2021 | | 2020 | | 2019 |
Operating lease cost (a) (b) | | $ | 406 |
| | Operating lease cost (a) (b) | $ | 374 | | | $ | 379 | | | $ | 382 | |
| Finance lease cost: | | | | Finance lease cost: | |
| Amortization of right-of-use assets | | 23 |
| | Amortization of right-of-use assets | 19 | | | 18 | | | 23 | |
| Interest expense on lease liabilities | | 3 |
| | Interest expense on lease liabilities | 1 | | | 2 | | | 3 | |
Short-term lease cost (b) (c) | | 242 |
| | Short-term lease cost (b) (c) | 283 | | | 162 | | | 242 | |
Variable lease cost (d) | | 80 |
| | Variable lease cost (d) | 62 | | | 58 | | | 80 | |
| Sublease income | | (31 | ) | | Sublease income | (20) | | | (24) | | | (31) | |
| Total lease cost | | $ | 723 |
| | Total lease cost | $ | 719 | | | $ | 595 | | | $ | 699 | |
(a) Includes fixed lease costs and non-lease costs (consisting of other occupancy and service costs relating to the use of an asset) associated with long-term operating leases.
(b) Includes costs capitalized in programming assets during the period for leased assets used in the production of programming.
(c) Short-term leases, which are not recorded in right-of-use assets and lease liabilities on the Consolidated Balance Sheets, have a term of 12 months or less and exclude month-to-month leases. Short-term leases are not recorded on the Consolidated Balance Sheet.
(d) Primarily includes non-lease costs (consisting of other occupancy and service costs relating to the use of an asset) and costs for equipment leases that vary based on usage.
The following table presents supplemental cash flow information related to our leases.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Cash paid for amounts included in lease liabilities | | | | | |
| Operating lease payments, included in operating cash flows | $ | 399 | | | $ | 385 | | | $ | 324 | |
| Finance lease payments, included in financing cash flows | $ | 25 | | | $ | 21 | | | $ | 27 | |
| | | | | |
| Noncash additions to operating lease assets | $ | 377 | | | $ | 221 | | | $ | 387 | |
|
| | | | | |
| | Year Ended |
| | December 31, 2019 |
| Cash paid for amounts included in lease liabilities | | | |
| Operating lease payments, included in operating cash flows | | $ | 341 |
| |
| Finance lease payments, included in financing cash flows | | $ | 27 |
| |
| | | | |
| Noncash additions to operating lease assets | | $ | 389 |
| |
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The expected future payments relating to our operating and finance lease liabilities at December 31, 20192021 are as follows:
|
| | | | | | | |
| | Leases |
| | Operating | | Finance |
| 2020 | $ | 371 |
| | $ | 21 |
|
| 2021 | 352 |
| | 16 |
|
| 2022 | 296 |
| | 7 |
|
| 2023 | 251 |
| | 1 |
|
| 2024 | 205 |
| | 1 |
|
| 2025 and thereafter | 1,234 |
| | 1 |
|
| Total minimum payments | 2,709 |
| | 47 |
|
| Less amounts representing interest | 508 |
| | 3 |
|
| Present value of minimum payments | $ | 2,201 |
| | $ | 44 |
|
The following table presents the future payments under our operating and finance leases as of December 31, 2018 based on lease guidance in effect prior to the adoption of new FASB lease guidance on January 1, 2019.
|
| | | | | | | |
| | Leases |
| | Operating (a) | | Finance |
| 2019 | $ | 305 |
| | $ | 29 |
|
| 2020 | 309 |
| | 20 |
|
| 2021 | 282 |
| | 15 |
|
| 2022 | 247 |
| | 7 |
|
| 2023 | 211 |
| | 2 |
|
| 2024 and thereafter | 1,228 |
| | 2 |
|
| Total minimum payments | $ | 2,582 |
| | $ | 75 |
|
| Less amounts representing interest |
|
| | 6 |
|
| Present value of minimum payments |
|
| | $ | 69 |
|
(a) Future minimum operating lease payments have been reduced by future minimum sublease income of $57 million. Rent expense based on lease guidance in effect prior to January 1, 2019 was $474 million in 2018 and $449 million in 2017. Included in net earnings (loss) from discontinued operations was rent expense of $32 million in 2017. | | | | | | | | | | | |
| Leases |
| Operating | | Finance |
| 2022 | $ | 388 | | | $ | 11 | |
| 2023 | 326 | | | 5 | |
| 2024 | 260 | | | — | |
| 2025 | 243 | | | — | |
| 2026 | 208 | | | — | |
| 2027 and thereafter | 807 | | | — | |
| Total minimum payments | 2,232 | | | 16 | |
| Less amounts representing interest | 309 | | | — | |
| Present value of minimum payments | $ | 1,923 | | | $ | 16 | |
As of December 31, 2019,2021, we had signed additional operatingno material leases with lease terms ranging from two to 11 years that havewere executed but not yet commenced. The total future undiscounted lease payments under these leases are
$98 million, which were not recorded on the Consolidated Balance Sheet at December 31, 2019.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Lessor Contracts
We enter intoFor the years ended December 31, 2021, 2020 and 2019, we recorded total lease income of $145 million, $133 million and $148 million, respectively, which relates to operating leases for the use of our owned production facilities and office buildings. Lease payments received under these agreements consistconsisted of fixed payments for the rental of space and certain building operating costs, as well as variable payments based on usage of production facilities and services, and escalating costs of building operations. We recorded total lease incomeDuring the fourth quarter of $149 million, including both fixed2021, we completed the sales of a production facility and variable amounts, for the year ended December 31, 2019.
At December 31, 2019,an office building, and as a result our future expected fixed lease income under noncancellable operating leases is as follows:not material (see Note 3).
|
| | | |
| 2020 | $ | 68 |
|
| 2021 | 52 |
|
| 2022 | 45 |
|
| 2023 | 44 |
|
| 2024 | 36 |
|
| 2025 and thereafter | 57 |
|
| Total | $ | 302 |
|
10)12) FINANCIAL INSTRUMENTS
The carrying value of our financial instruments approximates fair value, except for notes and debentures, which are not recorded at fair value.debentures. At December 31, 20192021 and 2018,2020, the carrying value of our outstanding notes and debentures was $17.98$17.66 billion and $18.37$19.61 billion, respectively, and the fair value, which is determined based on quoted prices in active markets (Level 1 in the fair value hierarchy) was $20.6$21.5 billion and $18.4$24.5 billion, respectively.
Investments
At December 31, 2021 and 2020, we had investments of $627 million and $601 million, respectively, consisting of equity-method investments and equity investments without a readily determinable fair value. These investments are included in “Other assets” on the Consolidated Balance Sheets. We contributed $193 million, $59 million and $171 million to our investments during the years ended December 31, 2021, 2020 and 2019, respectively.
Our equity-method investments include a 50% interest in the broadcast network, The CW, as well as interests in several international television joint ventures including a 49% interest in Viacom18, a joint venture in India which owns and operates COLORS pay television channel. At December 31, 2021 and 2020, respectively, we had $568 million and $536 million of equity-method investments. For the years ended December 31, 2021 and 2020, “Equity in loss of investee companies, net of tax” on the Consolidated Statements of Operations includes impairment charges of $34 million and $9 million, respectively, relating to television joint ventures.
The carrying value of our investments without a readily determinable fair value for which we have no significant
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
influence was $59 million and $65 million at December 31, 2021 and 2020, respectively.
For 2021, “Net gains from investments” of $47 million on the Consolidated Statement of Operations primarily includes a gain of $37 million on the sale of an investment without a readily determinable fair value and a gain of $9 million from an increase in the fair value of a marketable security, which was sold during the third quarter. For 2020, “Net gains from investments” of $206 million reflects a gain of $213 million related to an increase in the value of our investment in fuboTV, which was sold in the fourth quarter of 2020, partially offset by an impairment of investments without a readily determinable fair value of $7 million. For 2019, “Net gains from investments” of $85 million reflects an unrealized gain of $113 million resulting from increases in the fair value of marketable securities, which were sold in 2020, and gains of $22 million on the sale and acquisition of joint ventures, partially offset by an impairment charge of $50 million to write down an investment to its fair value.
In February 2022, we closed on an agreement with Comcast to form a joint venture to launch SkyShowtime, a new subscription streaming service that is expected to be available in more than 20 European territories and will include premium and original content from both parent companies. The partnership, which is owned and controlled equally by us and Comcast, is accounted for under the equity method.
Foreign Exchange Contracts
We use derivative financial instruments primarily to manage our exposure to market risks from fluctuations in foreign currency exchange rates. We do not use derivative instruments unless there is an underlying exposure and, therefore, we do not hold or enter into derivative financial instruments for speculative trading purposes.
Foreign Exchange Contracts
Foreign exchange forward contracts have principally been used to hedge projected cash flows in currencies such as the British Pound, the Euro, the Canadian Dollar and the Australian Dollar, generally for periods up to 24 months. We designate foreign exchange forward contracts used to hedge committed and forecasted foreign currency transactions as cash flow hedges. Gains or losses on the effective portion of designated cash flow hedges are initially recorded in other comprehensive income (loss) and reclassified to the statement of operations when the hedged item is recognized. Additionally, we enter into non-designated forward contracts to hedge non-U.S. dollar denominated cash flows.
At December 31, 20192021 and 2018,2020, the notional amount of all foreign currency contracts was $1.44$1.94 billion and $995 million,$1.27 billion, respectively. For 2019, $833 million2021, $1.38 billion related to future production costs and $606$564 million related to our foreign currency balances and other expected foreign currency cash flows. For 2018, $4812020, $740 million related to future production costs and $514$529 million related to our foreign currency balances and other expected foreign currency cash flows.
Gains (losses) recognized on derivative financial instruments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | Financial Statement Account |
| Non-designated foreign exchange contracts | | $ | 14 | | | | | $ | (20) | | | | Other items, net |
| | | | | | | | | |
| | | | | | | | | |
|
| | | | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | Financial Statement Account |
| Non-designated foreign exchange contracts | | $ | (4 | ) | | | | $ | 25 |
| | | Other items, net |
The fair value of our derivative instruments was not material to the Consolidated Balance Sheets for any of the periods presented.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
We continually monitor our positionpositions with, and credit quality of, the financial institutions that are counterparties to our financial instruments. We are exposed to credit loss in the event of nonperformance by the counterparties to the agreements. However, we do not anticipate nonperformance by the counterparties.
Our receivables do not represent significant concentrations of credit risk at December 31, 2019 and 2018, due to the wide variety of customers, markets and geographic areas to which our products and services are sold.
VIACOMCBS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
11)
13) FAIR VALUE MEASUREMENTS
Certain of our assets and liabilities are measured at fair value on a recurring basis. The following tables set forthtable below presents our assets and liabilities measured at fair value on a recurring basis at December 31, 20192021 and 2018.2020. These assets and liabilities have been categorized according to the three-level fair value hierarchy established by the FASB, which prioritizes the inputs used in measuring fair value. Level 1 is based on publicly quoted prices for the asset or liability in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset or liability in inactive markets or quoted prices for similar assets or liabilities. Level 3 is based on unobservable inputs reflecting our own assumptions about the assumptions that market participants would use in pricing the asset or liability.
|
| | | | | | | | | | | | | | | |
| At December 31, 2019 | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Marketable securities | $ | 146 |
| | $ | — |
| | $ | — |
| | $ | 146 |
|
| Foreign currency hedges | — |
| | 13 |
| | — |
| | 13 |
|
| Total Assets | $ | 146 |
|
| $ | 13 |
|
| $ | — |
|
| $ | 159 |
|
| Liabilities: | | | | | | | $ | — |
|
| Deferred compensation | $ | — |
| | $ | 490 |
| | $ | — |
| | $ | 490 |
|
| Foreign currency hedges | — |
| | 14 |
| | — |
| | 14 |
|
| Total Liabilities | $ | — |
|
| $ | 504 |
|
| $ | — |
| | $ | 504 |
|
|
| | | | | | | | | | | | | | | |
| At December 31, 2018 | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Marketable securities | $ | 34 |
| | $ | — |
| | $ | — |
| | $ | 34 |
|
| Foreign currency hedges | — |
| | 21 |
| | — |
| | 21 |
|
| Total Assets | $ | 34 |
| | $ | 21 |
| | $ | — |
| | $ | 55 |
|
| Liabilities: | | | | | | | $ | — |
|
| Deferred compensation | $ | — |
| | $ | 501 |
| | $ | — |
| | $ | 501 |
|
| Foreign currency hedges | — |
| | 18 |
| | — |
| | 18 |
|
| Total Liabilities | $ | — |
| | $ | 519 |
| | $ | — |
| | $ | 519 |
|
The All of our assets and liabilities that are measured at fair value of marketable securities is determined based on quoted market prices in active markets.a recurring basis use level 2 inputs. The fair value of foreign currency hedges is determined based on the present value of future cash flows using observable inputs including foreign currency exchange rates. The fair value of deferred compensation liabilities is determined based on the fair value of the investments elected by employees.
| | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
| Assets: | | | |
| Foreign currency hedges | $ | 23 | | | $ | 20 | |
| Total Assets | $ | 23 | | | $ | 20 | |
| Liabilities: | | | |
| Deferred compensation | $ | 435 | | | $ | 529 | |
| Foreign currency hedges | 29 | | | 39 | |
| Total Liabilities | $ | 464 | | | $ | 568 | |
12)
14) STOCKHOLDERS’ EQUITY
In general, ViacomCBSthe Company’s Class A Common Stock and ViacomCBS Class B Common Stock have the same economic rights; however, holders of ViacomCBSthe Company’s Class B Common Stock do not have any voting rights, except as required by law. Holders of ViacomCBSthe Company’s Class A Common Stock are entitled to one vote per share with respect to all matters on which the holders of ViacomCBSthe Company’s Common Stock are entitled to vote.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Merger with Viacom—
At the Effective Time of the Merger, (1) each share of Viacom Class A Common Stock issued and outstanding immediately prior to the Effective Time, other than shares held directly by Viacom as treasury shares or held by CBS, was converted automatically into 0.59625 shares of ViacomCBSour Class A Common Stock, and (2) each share of Viacom Class B Common Stock issued and outstanding immediately prior to the Effective Time, other than shares held directly by Viacom as treasury shares or held by CBS, was converted automatically into 0.59625 shares of ViacomCBSour Class B Common Stock, resulting in the issuance of 29 million shares of ViacomCBSour Class A Common Stock and 211 million shares of ViacomCBSour Class B Common Stock. At the Effective Time, each share of CBS Class A Common Stock and each share of CBS Class B Common Stock issued and outstanding immediately prior to the Effective Time, remained an issued and outstanding share of ViacomCBSour Class A Common Stock and ViacomCBSour Class B Common Stock, respectively, and was not affected by the Merger.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Stock Offerings
On March 26, 2021, we completed offerings of 20 million shares of our Class B Common Stock at a price to the public of $85 per share and 10 million shares of 5.75% Series A Mandatory Convertible Preferred Stock at a price to the public and liquidation preference of $100 per share, resulting in an aggregate liquidation preference of $1 billion. The net proceeds from the Class B Common Stock offering and the Mandatory Convertible Preferred Stock offering were approximately $1.67 billion and $983 million, respectively, in each case after deducting underwriting discounts, commissions and estimated offering expenses. We have used and intend to continue to use the net proceeds for general corporate purposes, including investments in streaming.
Mandatory Convertible Preferred Stock
Unless earlier converted, each share of Mandatory Convertible Preferred Stock will automatically and mandatorily convert on the mandatory conversion date, expected to be April 1, 2024, into between 1.0013 and 1.1765 shares of our Class B Common Stock, subject to customary anti-dilution adjustments. The number of shares of Class B Common Stock issuable upon conversion will be determined based on the average of the volume-weighted average price per share of our Class B Common Stock over the 20 consecutive trading day period commencing on, and including, the 21st scheduled trading day immediately preceding April 1, 2024. Holders of the Mandatory Convertible Preferred Stock (“Holders”) have the right to convert all or any portion of their shares of Mandatory Convertible Preferred Stock at any time prior to April 1, 2024 at the minimum conversion rate of 1.0013 shares of our Class B Common Stock. In addition, the conversion rate applicable to such an early conversion may, in certain circumstances, be increased to compensate Holders for certain unpaid accumulated dividends. However, if a fundamental change (as defined in the Certificate of Designations governing the Mandatory Convertible Preferred Stock) occurs on or prior to April 1, 2024, then Holders will, in certain circumstances, be entitled to convert all or a portion of their shares of Mandatory Convertible Preferred Stock at an increased conversion rate for a specified period of time and receive an amount to compensate them for unpaid accumulated dividends and any remaining future scheduled dividend payments.
The Mandatory Convertible Preferred Stock is not redeemable. However, at our option, we may purchase or otherwise acquire (including in an exchange transaction) the Mandatory Convertible Preferred Stock from time to time in the open market, by tender or exchange offer or otherwise, without the consent of, or notice to, Holders. Holders have no voting rights, with certain exceptions.
If declared, dividends on the Mandatory Convertible Preferred Stock are payable quarterly through April 1, 2024. Dividends on the Mandatory Convertible Preferred Stock accumulate from the most recent dividend payment date, and will be payable on a cumulative basis when, as and if declared by our Board of Directors, or an authorized committee thereof, at an annual rate of 5.75% of the liquidation preference of $100 per share, payable in cash or, subject to certain limitations, by delivery of shares of Class B Common Stock or through any combination of cash and shares of Class B Common Stock, at our election. If we have not declared any portion of the accumulated and unpaid dividends by April 1, 2024, the conversion rate will be adjusted so that Holders receive an additional number of shares of our Class B Common Stock, with certain limitations.
—
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Dividends
We declared a quarterly cash dividend on our Class A and Class B Common Stock during each of the quarters of 2021 and 2020. During each of the years ended December 31, 2021 and 2020, we declared total per share dividends of $.96, resulting in total annual dividends of $625 million and $601 million, respectively. On December 19, 2019, ViacomCBSwe declared a quarterly cash dividend of $.24 per share on itsour Class A and Class B Common Stock, resulting in total dividends of $150 million, which were paid on January 10, 2020.million. Prior to the Merger, Viacom and CBS each declared a quarterly cash dividend during each of the first three quarters of 2019 and during each of2019. During the fourfirst three quarters of 2018 and 2017. During 2019, CBS declared total per share dividends of $.54, resulting in total dividends of $205 million. For eachDuring the first three quarters of the years ended December 31, 2018 and 2017, CBS declared total per share dividends of $.72, resulting in total annual dividends of $274 million and $289 million, respectively. During 2019, Viacom declared total per share dividends of $.60, resulting in total dividends of $245 million. For
During each of the yearsthird and fourth quarters of 2021, we declared quarterly cash dividends of $1.4375 per share on our Mandatory Convertible Preferred Stock. During the second quarter of 2021, we declared a cash dividend of $1.5493 per share on our Mandatory Convertible Preferred Stock, representing a dividend period from March 26, 2021 through July 1, 2021. Accordingly, we recorded dividends on the Mandatory Convertible Preferred Stock of $44.2 million during the year ended December 31, 2018 and 2017, Viacom declared total per share dividends of $.80, resulting in total annual dividends of $325 million and $323 million, respectively. For 2017, dividends were recorded as a reduction to additional paid-in capital as2021.
Treasury Stock
At December 31, 2021, we had $2.36 billion of authorization remaining under our share repurchase program. During 2021, we did not repurchase any shares of our common stock. During 2020, we repurchased 1.3 million shares of our Class B Common Stock under our share repurchase program for $50 million, at an accumulated deficit balance.average cost of $38.63 per share. During 2018, our retained earnings became positive and as a result, dividends for 2018 were recorded as a reduction to additional paid-in-capital until such time as retained earnings became positive. For the remainder of 2018 and for 2019, dividends have been recorded to retained earnings.
Treasury Stock—During December 2019, we repurchased 1.2 million shares of ViacomCBSour Class B Common Stock under our share repurchase program for $50 million, at an average cost of $40.78 per share. At December 31, 2019, $2.41 billion of authorization remained under the share repurchase program.
In the Merger, all shares of Viacom Class B Common Stock held by Viacom as treasury stock were canceled and recorded to additional paid-in-capital.
Conversion Rights—
Holders of Class A Common Stock have the right to convert their shares to Class B Common Stock as long as there are at least 5,000 shares of Class A Common Stock outstanding. Conversions of Class A Common Stock into Class B Common Stock were 11.6 million for 2021 and 12.2 million for 2019 and 2.5 million for 2018. Conversions2019. For 2020, conversions of Class A Common Stock into Class B Common Stock for 2017 were minimal.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Accumulated Other Comprehensive Income (Loss)—
The following table presents the changes in the components of accumulated other comprehensive income (loss).
| | | | | | | | | | | | | | | | | | | | | | | | | | Continuing Operations | | Discontinued Operations | |
| | | | | Net Actuarial | | | | Accumulated | | | Net Actuarial | | | | | Accumulated |
| | Cumulative | | Loss and | | | | Other | | Cumulative | | Loss and | | Other | | Other |
| | Translation | | Prior | | Available-For-Sale | | Comprehensive | | Translation | | Prior | | Comprehensive | | Comprehensive |
| | Adjustments | | Service Cost | | Securities | | Loss | | Adjustments | | Service Cost | | Income (Loss) (a) | | Loss |
| At December 31, 2016 | | $ | (420 | ) | | $ | (1,144 | ) | | $ | — |
| | | $ | (1,564 | ) | | |
| Other comprehensive income (loss) before reclassifications | | 190 |
| | (201 | ) | | 30 |
| | | 19 |
| | |
| Reclassifications to net earnings | | 2 |
| | 274 |
| (a) | | — |
| | 276 |
| | |
| Other comprehensive income | | 192 |
| | | 73 |
| | | 30 |
| | | 295 |
| | |
| At December 31, 2017 | | (228 | ) | | | (1,071 | ) | | | 30 |
| | | (1,269 | ) | | |
| Other comprehensive loss before reclassifications | | (248 | ) | | (123 | ) | | — |
| | (371 | ) | | |
| Reclassifications to net earnings | | — |
| | 62 |
| (a) | | — |
| | 62 |
| | |
| Other comprehensive loss | | (248 | ) | | (61 | ) | | — |
| | (309 | ) | | |
| Adoption of accounting standard | | — |
| | | — |
| | (30 | ) | | | (30 | ) | | |
| At December 31, 2018 | | (476 | ) | | | (1,132 | ) | | — |
| | | (1,608 | ) | | At December 31, 2018 | | $ | (445) | | | $ | (1,132) | | | $ | (31) | | | $ | (1,608) | | |
| Other comprehensive income (loss) before reclassifications | | 13 |
| | (205 | ) | | — |
| | (192 | ) | | Other comprehensive income (loss) before reclassifications | | 7 | | | (205) | | | 6 | | | (192) | | |
| Reclassifications to net earnings | | — |
| | 60 |
| (a) | | — |
| | 60 |
| | Reclassifications to net earnings | | — | | | 60 | | (b) | | — | | | 60 | | |
| Other comprehensive income (loss) | | 13 |
| | (145 | ) | | — |
| | (132 | ) | | Other comprehensive income (loss) | | 7 | | | (145) | | | 6 | | | (132) | | |
| Tax effects reclassified to retained earnings | | — |
| | (230 | ) | (b) | | — |
| | (230 | ) | | Tax effects reclassified to retained earnings | | — | | | (230) | | (c) | | — | | | (230) | | |
| At December 31, 2019 | | $ | (463 | ) | | | $ | (1,507 | ) | | | $ | — |
| | | $ | (1,970 | ) | | At December 31, 2019 | | (438) | | | (1,507) | | | (25) | | | (1,970) | | |
| Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | | 135 | | | (74) | | | 5 | | | 66 | | |
| Reclassifications to net earnings | | Reclassifications to net earnings | | — | | | 72 | | (b) | | — | | | 72 | | |
| Other comprehensive income (loss) | | Other comprehensive income (loss) | | 135 | | | (2) | | | 5 | | | 138 | | |
| At December 31, 2020 | | At December 31, 2020 | | (303) | | | (1,509) | | | (20) | | | (1,832) | | |
| Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | | (142) | | | 5 | | | (3) | | | (140) | | |
| Reclassifications to net earnings | | Reclassifications to net earnings | | — | | | 70 | | (b) | | — | | | 70 | | |
| Other comprehensive income (loss) | | Other comprehensive income (loss) | | (142) | | | 75 | | | (3) | | | (70) | | |
| At December 31, 2021 | | At December 31, 2021 | | $ | (445) | | | $ | (1,434) | | | $ | (23) | | | $ | (1,902) | | |
(a) Reflects cumulative translation adjustments.
(b) Reflects amortization of net actuarial losses, which for the year ended December 31, 20172021 includes the accelerated recognition of a portion of the unamortized actuarial losses as a resultdue to the volume of lump sum benefit payments in one of our pension settlementsplans (see Note 15).17), and amortization of prior service cost.
(b)(c) Reflects the reclassification of certain income tax effects of the Taxfederal tax legislation enacted in December 2017 (the “Tax Reform ActAct”) on items within accumulated other comprehensive loss to retained earnings upon the adoption of new FASB guidance (see Note 1).guidance.
The net actuarial loss and prior service cost related to pension and other postretirement benefit plans included in other comprehensive income (loss) is net of a tax benefit (provision) for the years ended December 31, 2021, 2020 and 2019 2018of $25 million, $1 million and 2017 of $44 million, $23 million and $(90) million, respectively. The unrealized gain on available-for-sale securities included in other comprehensive income for 2017 is net of a tax provision of $18 million.
13) 15) STOCK-BASED COMPENSATION
We have equity incentive plans (the “Plans”) under which stock options, RSUs and RSUsmarket-based performance share units (“PSUs”) are issued. The purpose of the Plans is to benefit and advance the interests of our company by attracting, retaining and motivating participants and to compensate participants for their contributions to the financial success of our company. The Plans provide for awards of stock options, stock appreciation rights, restricted and unrestricted shares, RSUs, dividend equivalents, performance awards and other equity-related awards. Upon exercise of stock options or vesting of RSUs, we issue new shares from our existing authorization. At December 31, 2019, there were 48 million shares available for future grant under the Plans. Prior to the Merger, stock-based compensation awards were also granted under Viacom’s equity incentive plans. Upon exercise of stock options or vesting of RSUs under Viacom’s equity incentive plans, shares were either issued from Viacom’s existing authorization or from treasury stock.
At the Effective Time, each RSU for Viacom Class B common stock was converted into 0.59625 RSUs for ViacomCBS Class B Common Stock and each outstanding stock option for Viacom Class B common stock was converted into 0.59625 options for ViacomCBS Class B common stock. The exercise price of stock options was
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
adjusted by dividing the exercise price of the Viacom stock options by 0.59625. RSU and stock option information is presented herein as if Viacom and CBS had been combined for all periods presented, unless otherwise noted.
The following table summarizes stock-based compensation expense for the years ended December 31, 2019, 2018 and 2017.
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 |
| 2018 |
| 2017 |
| RSUs and PSUs | $ | 173 |
| | $ | 170 |
| | $ | 181 |
|
| Stock options | 28 |
| | 35 |
| | 39 |
|
| Compensation cost included in operating and SG&A expense | 201 |
| | 205 |
| | 220 |
|
Compensation cost included in restructuring and other corporate matters (a) | 90 |
| | (14 | ) | | 12 |
|
| Stock-based compensation expense, before income taxes | 291 |
| | 191 |
| | 232 |
|
| Related tax benefit | (59 | ) | | (45 | ) | | (84 | ) |
| Stock-based compensation expense, net of tax benefit | $ | 232 |
| | $ | 146 |
| | $ | 148 |
|
(a) 2019 primarily reflects accelerations triggered by the Merger and other restructuring activities. 2018 includes forfeitures of $28 million and accelerations of $14 million related to changes in senior management and other restructuring activities. 2017 reflects accelerations related to restructuring activities.
RSUs and PSUs
Compensation expense for RSUs is determined based upon the market price of the shares underlying the awards on the date of grant and expensed over the vesting period, which is generally a one- to four-year service period. Certain RSU awards are also subject to satisfying internal performance conditions. Compensation expense is recorded based on the probable outcome of the internal performance conditions. Forfeitures for RSUs are estimated on the date of grant based on historical forfeiture rates. We adjust the compensation expense based on actual forfeitures and on an annual basis we revise the forfeiture rate as necessary. RSUs accrue dividends each time we declare a quarterly cash dividend, which are paid upon vesting when the shares are delivered and are forfeited if the award does not vest.
The weighted average grant date fair value Upon exercise of stock options or vesting of RSUs and PSUs, we issue new shares from our existing authorization. At December 31, 2021, there were 38 million shares available for future grant under the Plans. Stock-based compensation awards were also granted was $41.71, $53.90 and $64.26 in 2019, 2018, and 2017, respectively. The total market valueunder Viacom’s equity incentive plans until December 31, 2020. Upon exercise of outstanding stock options or vesting of RSUs that vested during 2019, 2018, and 2017 was $159 million, $158 million and $228 million, respectively. Total unrecognized compensation cost related to non-vested RSUs at December 31, 2019 was $445 million which is expected to be recognized over a weighted average period of 3.0 years.
During 2018 and 2017, we alsoPSUs previously granted PSU awards. The number ofunder Viacom’s equity incentive plans, shares tomay be issued upon vestingfrom Viacom’s previous authorization or from treasury stock.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
At the Effective Time of the PSUsMerger, each RSU for Viacom Class B common stock was based onconverted into 0.59625 RSUs for the stock price performance of CBSCompany’s Class B Common Stock or the total shareholder return ofand each outstanding stock option for Viacom Class B Common Stock measured againstcommon stock was converted into 0.59625 options for the companies comprisingCompany’s Class B common stock. The exercise price of stock options was adjusted by dividing the S&P 500 Index, as applicable, over a designated measurement period, as well as the achievement of established operating goals. The fair value of PSU awards is determined using a Monte Carlo simulation model. Compensation expense for PSUs is expensed over the required employee service period. The fair valueexercise price of the PSU awards granted duringViacom stock options by 0.59625. At the years ended December 31, 2018 and 2017 was $35 million and $32 million, respectively. There were no PSU awards granted in 2019. As a resultEffective Time of the Merger, all outstanding PSU awards for which the performance period had not been completed were converted into time-based RSUs based on the target number of shares included in the terms of the original PSU award. RSU and stock option information is presented herein as if Viacom and CBS had been combined for or all periods presented, unless otherwise noted.
The following table summarizes stock-based compensation expense for the years ended December 31, 2021, 2020 and 2019.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| RSUs and PSUs | $ | 163 | | | $ | 167 | | | $ | 169 | |
| Stock options | 9 | | | 19 | | | 27 | |
| Compensation cost included in operating and SG&A expense | 172 | | | 186 | | | 196 | |
Compensation cost included in restructuring and other corporate matters (a) | 20 | | | 88 | | | 90 | |
| Stock-based compensation expense, before income taxes | 192 | | | 274 | | | 286 | |
| Related tax benefit | (41) | | | (54) | | | (58) | |
| Stock-based compensation expense, net of tax benefit | $ | 151 | | | $ | 220 | | | $ | 228 | |
(a) Reflects accelerations as a result of restructuring activities, as well as accelerations triggered by the Merger in 2019.
Included in net earnings from discontinued operations was stock-based compensation expense of $3 million, $10 million, and $5 million for the years 2021, 2020, and 2019, respectively.
RSUs and PSUs
Compensation expense for RSUs is determined based upon the market price of the shares underlying the awards on the date of grant and expensed over the vesting period, which is generally a one- to four-year service period. Certain RSU awards are also subject to satisfying internal performance conditions. Compensation expense is recorded based on the probable outcome of the internal performance conditions and subsequently adjusted to the actual outcome of the performance condition. Forfeitures for RSUs are estimated on the date of grant based on historical forfeiture rates. We adjust compensation expense based on actual forfeitures and on an annual basis we revise the forfeiture rate as necessary.
During 2021 and 2020, we also granted PSU awards. The number of shares to be issued upon vesting of these PSUs is based on the total shareholder return of the Company’s Class B Common Stock measured against the companies comprising the S&P 500 Index over a designated measurement period, and for certain 2021 awards is also based on the achievement of established operating goals. The fair value of PSU awards with a market condition is determined using a Monte Carlo simulation model. Compensation expense for PSUs is expensed over the required employee service period. The fair value of the PSU awards granted during the years ended December 31, 2021 and 2020 was $3 million and $34 million, respectively. There were no PSU awards granted in 2019.
The weighted average grant date fair value of RSUs and PSUs granted was $35.80, $32.35 and $41.71 in 2021, 2020, and 2019, respectively. The total market value of RSUs and PSUs that vested during 2021, 2020, and 2019 was $260 million, $222 million and $159 million, respectively. Total unrecognized compensation cost related to non-vested RSUs and PSUs at December 31, 2021 was $199 million, which is expected to be recognized over a weighted average period of 2.3 years.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The following table summarizes our RSU and PSU share activity:
| | | | | | | | | | | | | | | | | | | | |
| | Weighted Average |
| Shares | Grant Date Fair Value |
| Non-vested at December 31, 2020 | | 14,000,630 | | | | $ | 38.91 | | |
| Granted | | 486,315 | | | | $ | 35.80 | | |
| Vested | | (6,238,540) | | | | $ | 40.94 | | |
| Forfeited | | (517,741) | | | | $ | 37.91 | | |
| Non-vested at December 31, 2021 | | 7,730,664 | | | | $ | 37.14 | | |
|
| | | | | | | | | |
| | | Weighted Average |
| | Shares | Grant Date Fair Value |
| Non-vested at December 31, 2018 | | 8,011,104 |
| | | $ | 55.96 |
| |
| Granted | | 10,620,187 |
| | | $ | 41.71 |
| |
| Vested | | (3,374,331 | ) | | | $ | 55.90 |
| |
| Forfeited | | (767,231 | ) | | | $ | 53.89 |
| |
| Non-vested at December 31, 2019 | | 14,489,729 |
| | | $ | 45.64 |
| |
Stock Options
Compensation expense for stock options is determined based on the grant date fair value of the award calculated using the Black-Scholes options-pricing model. Stock options generally vest over a three-three- to four-year service period and expire eight years from the date of grant. Forfeitures are estimated on the date of grant based on historical forfeiture rates. We adjust the compensation expense based on actual forfeitures.
The weighted average fair value of stock options granted for CBS Class B Common Stock as of the grant date was $14.48 and $17.50 in 2018 and 2017, respectively. CBS did not have anyThere were no stock option grants induring 2021, 2020, and 2019. The fair value of each
Total unrecognized compensation cost related to non-vested stock option grantawards at December 31, 2021 was estimated on the date of grant using the Black-Scholes option-pricing model with the following$3 million, which is expected to be recognized over a weighted average assumptions:period of 0.8 years.
|
| | | | | |
| | 2018 |
| 2017 |
| Expected dividend yield | 1.33 | % | | 1.09 | % |
| Expected stock price volatility | 29.52 | % | | 29.89 | % |
| Risk-free interest rate | 2.73 | % | | 2.00 | % |
| Expected term of options (years) | 5.00 |
| | 5.00 |
|
The weighted average fair value offollowing table summarizes our stock option activity under the Plans.
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Weighted Average |
| Stock Options | | Exercise Price |
| Outstanding at December 31, 2020 | | 14,140,724 | | | | | $ | 60.72 | | |
| Exercised | | (7,532,834) | | | | | $ | 55.19 | | |
| Forfeited or expired | | (405,315) | | | | | $ | 115.51 | | |
| Outstanding at December 31, 2021 | | 6,202,575 | | | | | $ | 63.85 | | |
| Exercisable at December 31, 2021 | | 5,700,778 | | | | | $ | 64.78 | | |
The following table summarizes other information relating to stock option exercises during the years ended December 31, 2021, 2020 and 2019.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Cash received from stock option exercises | $ | 408 | | | $ | 5 | | | $ | 15 | |
| Tax benefit of stock option exercises | $ | 29 | | | $ | 1 | | | $ | 4 | |
| Intrinsic value of stock option exercises | $ | 128 | | | $ | 2 | | | $ | 15 | |
At December 31, 2021, stock options granted for Viacom Class B Common Stock as of the grant date, adjusted by the conversion ratio of 0.59625, was $13.77outstanding and $12.08 in 2018 and 2017, respectively. Viacom did notexercisable have any stock option grants in 2019. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions in effect for Viacom at the time of grant:
|
| | | | | |
| | 2018 | | 2017 |
| Expected dividend yield | 2.52 | % | | 2.48 | % |
| Expected stock price volatility | 32.60 | % | | 29.83 | % |
| Risk-free interest rate | 2.81 | % | | 1.96 | % |
| Expected term of options (years) | 5.12 |
| | 4.94 |
|
The expected stock price volatility for stock options for CBS Class B Common Stock was determined using a weighted average remaining contractual life of historical volatility2.60 years and 2.40 years, respectively. There was no intrinsic value for CBS Class B Common Stockoptions outstanding and implied volatility of publicly traded options to purchase CBS Class B Common Stock. The expectedexercisable, based on our closing stock price volatility for stock options for Viacom Class B Common Stock was principally determined based on the implied volatility of publicly traded options to purchase Viacom Class B Common Stock. Given the existence of an actively traded market for CBS and Viacom options prior to the closing of the Merger, we were able to derive implied volatility using publicly traded options that were trading near the grant date of the employee stock options$30.18 at a similar exercise price and a remaining term of greater than one year.
The risk-free interest rate is based on a U.S. Treasury rate in effect on the date of grant with a term equal to the expected term. The expected term is determined based on historical employee exercise and post-vesting terminationDecember 31, 2021.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
behavior. The expected dividend yield represents our future expectation of the annual dividend yield based on the dividend rate on the grant date and historical patterns of dividend changes.
Total unrecognized compensation cost related to non-vested stock option awards at December 31, 2019 was $37 million, which is expected to be recognized over a weighted average period of 2.1 years.
The following table summarizes our stock option activity under the Plans.
|
| | | | | | | | | | |
| | | | | | Weighted Average |
| | Stock Options | | Exercise Price |
| Outstanding at December 31, 2018 | | 21,725,132 |
| | | | $ | 65.52 |
| |
| Granted | | — |
| | | | $ | — |
| |
| Exercised | | (605,867 | ) | | | | $ | 24.72 |
| |
| Forfeited or expired | | (4,827,556 | ) | | | | $ | 92.70 |
| |
| Outstanding at December 31, 2019 | | 16,291,709 |
| | | | $ | 58.98 |
| |
| Exercisable at December 31, 2019 | | 11,458,112 |
| | | | $ | 60.65 |
| |
The following table summarizes other information relating to stock option exercises during the years ended December 31, 2019, 2018 and 2017.
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| Cash received from stock option exercises | $ | 15 |
| | $ | 29 |
| | $ | 263 |
|
| Tax benefit of stock option exercises | $ | 4 |
| | $ | 4 |
| | $ | 52 |
|
| Intrinsic value of stock option exercises | $ | 15 |
| | $ | 16 |
| | $ | 138 |
|
At December 31, 2019, stock options outstanding have a weighted average remaining contractual life of 3.78 years and the total intrinsic value for “in-the-money” options, based on our closing stock price of $41.97, was $11 million. At December 31, 2019 stock options exercisable have a weighted average remaining contractual life of 2.93 years and the total intrinsic value for “in-the-money” exercisable options was $11 million.
14)16) INCOME TAXES
The U.S. and foreign components of earnings from continuing operations before income taxes and equity in earnings (loss)loss of investee companies were as follows:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| United States | $ | 4,106 | | | $ | 2,353 | | | $ | 2,225 | |
| Foreign | 1,100 | | | 794 | | | 998 | |
| Total | $ | 5,206 | | | $ | 3,147 | | | $ | 3,223 | |
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 |
| 2018 |
| 2017 |
| United States | $ | 2,337 |
| | $ | 3,044 |
| | $ | 3,006 |
|
| Foreign | 1,008 |
| | 1,080 |
| | 1,114 |
|
| Total | $ | 3,345 |
| | $ | 4,124 |
| | $ | 4,120 |
|
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Current: | | | | | |
| Federal | $ | 179 | | | $ | 160 | | | $ | 370 | |
| State and local | 138 | | | 73 | | | 164 | |
| Foreign | 239 | | | 180 | | | 202 | |
| Total current | 556 | | | 413 | | | 736 | |
| Deferred: | | | | | |
| Federal | 249 | | | 146 | | | (67) | |
| State and local | 49 | | | 42 | | | (43) | |
| Foreign | (208) | | | (66) | | | (655) | |
| Total deferred | 90 | | | 122 | | | (765) | |
| Provision (benefit) for income taxes | $ | 646 | | | $ | 535 | | | $ | (29) | |
In addition, included in net earnings from discontinued operations was an income tax provision of $57 million, $38 million and $32 million for 2021, 2020, and 2019, respectively.
The equity in loss of investee companies is shown net of tax on the Consolidated Statements of Operations. The tax benefit relating to losses from equity investments was $49 million in 2021 and $19 million in both 2020 and 2019, which represented an effective tax rate of 35.0%, 40.4% and 26.4% for 2021, 2020, and 2019, respectively.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The components of the (benefit) provision for income taxes were as follows:
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| Current: | | | | | |
| Federal | $ | 389 |
| | $ | 296 |
| | $ | 883 |
|
| State and local | 167 |
| | 97 |
| | 93 |
|
| Foreign | 204 |
| | 166 |
| | 195 |
|
| Total current | 760 |
| | 559 |
| | 1,171 |
|
| Deferred: | | | | | |
| Federal | (66 | ) | | 25 |
| | (388 | ) |
| State and local | (48 | ) | | 22 |
| | 10 |
|
| Foreign | (655 | ) | | 11 |
| | 11 |
|
| Total deferred | (769 | ) | | 58 |
| | (367 | ) |
| (Benefit) provision for income taxes | $ | (9 | ) | | $ | 617 |
| | $ | 804 |
|
In addition, included in net loss from discontinued operations was an income tax provision of $12 million for 2019 and $10 million for each of 2018 and 2017.
The equity in earnings (loss) of investee companies is shown net of tax on the Consolidated Statements of Operations. The tax (provisions) benefits relating to earnings and losses from equity investments in 2019, 2018, and 2017 were $19 million, $15 million, and $(10) million, respectively, which represented an effective tax rate of 26.5%, 24.2% and 71.4% for 2019, 2018, and 2017, respectively.
The difference between income taxes expected at the U.S. federal statutory income tax rate (21% in 2019 and 2018 and 35% in 2017)of 21% and the provision (benefit) provision for income taxes is summarized as follows:
| | | Year Ended December 31, | 2019 | | 2018 | | 2017 | Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Taxes on income at U.S. federal statutory rate | $ | 702 |
| | $ | 865 |
| | $ | 1,451 |
| Taxes on income at U.S. federal statutory rate | $ | 1,093 | | | $ | 661 | | | $ | 676 | |
| State and local taxes, net of federal tax benefit | 114 |
| | 114 |
| | 78 |
| State and local taxes, net of federal tax benefit | 190 | | | 116 | | | 116 | |
| Effect of foreign operations | (50 | ) | | (105 | ) | | (294 | ) | Effect of foreign operations | (141) | | | (98) | | | (49) | |
| Noncontrolling interests | | Noncontrolling interests | (13) | | | (52) | | | (2) | |
| U.K. statutory rate change | | U.K. statutory rate change | (260) | | | (100) | | | — | |
Reorganization of foreign operations (a) | (768 | ) | | — |
| | — |
| Reorganization of foreign operations (a) | (229) | | | — | | | (768) | |
| Bankruptcy of an investee | (39 | ) | | — |
| | — |
| Bankruptcy of an investee | — | | | — | | | (39) | |
| Foreign tax credits on distribution of securities | — |
| | — |
| | (279 | ) | |
| Impact of tax law changes | — |
| | (80 | ) | | 8 |
| |
Tax benefits from positions relating to the Tax Reform Act (b) | (44 | ) | | — |
| | — |
| Tax benefits from positions relating to the Tax Reform Act (b) | — | | | — | | | (44) | |
| Merger related costs | 41 |
| | — |
| | — |
| |
Establishment (reversal) of valuation allowance (c) | 1 |
| | (153 | ) | | (25 | ) | |
| Excess tax benefits from stock-based compensation | 20 |
| | 8 |
| | (26 | ) | |
| Domestic production deduction | (1 | ) | | 24 |
| | (100 | ) | |
| Tax accounting method change | — |
| | (78 | ) | | — |
| |
| Merger-related costs | | Merger-related costs | — | | | — | | | 41 | |
Excess tax (benefit) deficiency from stock-based
compensation | | Excess tax (benefit) deficiency from stock-based
compensation | (8) | | | 29 | | | 20 | |
Other, net | 15 |
| | 22 |
| | (9 | ) | Other, net | 14 | | | (21) | | | 20 | |
| (Benefit) provision for income taxes | $ | (9 | ) | | $ | 617 |
| | $ | 804 |
| |
| Provision (benefit) for income taxes | | Provision (benefit) for income taxes | $ | 646 | | | $ | 535 | | | $ | (29) | |
(a) ReflectsFor 2021, reflects a tax benefit from the recognition of a capital loss associated with a change in the tax entity classification of a foreign subsidiary. For 2019, reflects a deferred tax benefit resulting from the transfer of intangible assets between our subsidiaries in connection with a reorganization of our international operations. The related deferred tax asset is primarily expected to be realized over the next 25 years.a 25-year period.
(b) Reflects tax benefits realized in connection with the preparation of the 2018 federal tax return, based on further clarity provided by the United States government on tax positions relating to the Tax Reform Act.
(c) 2018 includesThe following table summarizes the reversalcomponents of a valuation allowancedeferred income tax assets and liabilities.
| | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
| Deferred income tax assets: | | | |
| Reserves and other accrued liabilities | $ | 369 | | | $ | 476 | |
| Pension, postretirement and other employee benefits | 679 | | | 772 | |
| Lease liability | 465 | | | 466 | |
| Tax credit and loss carryforwards | 428 | | | 448 | |
| Other | 23 | | | 56 | |
| Total deferred income tax assets | 1,964 | | | 2,218 | |
| Valuation allowance | (581) | | | (593) | |
| Deferred income tax assets, net | 1,383 | | | 1,625 | |
| Deferred income tax liabilities: | | | |
| Intangible assets | (523) | | | (460) | |
| Unbilled licensing receivables | (76) | | | (237) | |
| Lease asset | (391) | | | (400) | |
| Property, equipment and other assets | (171) | | | (198) | |
| Financing obligations | (65) | | | (71) | |
| Other | (14) | | | (44) | |
| Total deferred income tax liabilities | (1,240) | | | (1,410) | |
| Deferred income tax assets, net | $ | 143 | | | $ | 215 | |
In addition to the amounts reflected in the table above, included in “Assets of $140discontinued operations” on the Consolidated Balance Sheets are net deferred income tax assets of $80 million relating to capital loss carryforwards that were utilized in connection with the sale of CBS Television City in 2019.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The following table summarizes the components ofAt December 31, 2021, we had deferred income tax assets and liabilities.
|
| | | | | | | |
| At December 31, | 2019 | | 2018 |
| Deferred income tax assets: | | | |
| Reserves and other accrued liabilities | $ | 540 |
| | $ | 566 |
|
| Pension, postretirement and other employee benefits | 761 |
| | 741 |
|
| Lease liability | 531 |
| | — |
|
| Tax credit and loss carryforwards | 394 |
| | 849 |
|
| Other | 85 |
| | 41 |
|
| Total deferred income tax assets | 2,311 |
| | 2,197 |
|
| Valuation allowance | (550 | ) | | (841 | ) |
| Deferred income tax assets, net | 1,761 |
| | 1,356 |
|
| Deferred income tax liabilities: | | | |
| Intangible assets | (241 | ) | | (1,090 | ) |
| Unbilled licensing receivables | (390 | ) | | (420 | ) |
| Lease asset | (467 | ) | | — |
|
| Property, equipment and other assets | (152 | ) | | (166 | ) |
| Financing obligations | (72 | ) | | (70 | ) |
| Total deferred income tax liabilities | (1,322 | ) | | (1,746 | ) |
| Deferred income tax assets (liabilities), net | $ | 439 |
| | $ | (390 | ) |
In addition to the deferred income taxes reflected in the table above, included in “Other liabilities” on the Consolidated Balance Sheets are net deferred income tax assets of $10 million and $12 million at December 31, 2019 and 2018, respectively, relating to discontinued operations.
At December 31, 2019, we hadfor federal foreign tax credit carryforwards of $6$40 million and net operating loss carryforwards for federal, state and local, and foreign jurisdictions of approximately $1.73 billion,$282 million, the majority of which expire in various years from 20202022 through 2039.
The 20192021 and 20182020 deferred income tax assets were reduced by a valuation allowance of $550$581 million and $841$593 million, respectively, principally relating to income tax benefits from capital losses and net operating losses in foreign jurisdictions which are not expected to be realized.
In December 2017, the U.S. government enacted the Tax Reform Act which contained significant changes to U.S. federal tax law, including a reduction in the federal corporate tax rate from 35% to 21% and a one-time transition tax on cumulative foreign earnings and profits. For the year ended December 31, 2017, we recorded a net provisional charge of $28 million, reflecting the estimated transition tax of $455 million on cumulative foreign earnings and profits, offset by an estimated benefit of $427 million to adjust our deferred income tax balances as a result of the reduced corporate income tax rate. During 2018, we completed our analysis of these provisional amounts and recorded a charge of $48 million to adjust the provisional amount of transition tax on cumulative foreign earnings and profits. In January 2019, the U.S. government issued guidance relating to the transition tax, which resulted in a decrease of $146 million to our reserve for uncertain tax positions during 2019 for amounts paid as a result of this guidance; however, it did not have a material impact on the Consolidated Statements of Operations.
The Tax Reform Act includes a deduction for foreign derived intangible income and a tax on global intangible low-taxed income (“GILTI”), which imposes a U.S. tax on certain income earned by our foreign subsidiaries. We elected to treat the tax on GILTI as a period cost when incurred and therefore, the tax on GILTI is included in our tax provision for the years ended December 31, 2019 and 2018.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Generally, the future remittance of foreign undistributed earnings will not be subject to U.S. federal income taxes under the provisions of the Tax Reform Act and as a result, for substantially all of our foreign subsidiaries, we do not intend to assert indefinite reinvestment of both cash held outside of the U.S. and future cash earnings. However, a future repatriation of cash could be subject to state and local income taxes, foreign income taxes, and withholding taxes. Accordingly, we recorded deferred income tax liabilities associated with future repatriations, which were not material to the consolidated financial statements. Additional income taxes have not been provided for outside basis differences inherent in these entities, which could be recognized upon sale or other transaction, as these amounts continue to be indefinitely invested in foreign operations. The determination of the U.S. federal deferred income tax liability for such outside basis difference is not practicable.
The following table sets forth the change in the reserve for uncertain tax positions, excluding related accrued interest and penalties.
|
| | | |
| At January 1, 2017 | $ | 268 |
|
| Additions for current year tax positions | 86 |
|
| Additions for prior year tax positions | 45 |
|
| Reductions for prior year tax positions | (56 | ) |
| Cash settlements | (13 | ) |
| Statute of limitations lapses | (30 | ) |
| At December 31, 2017 | 300 |
|
| Additions for current year tax positions | 27 |
|
| Additions for prior year tax positions | 204 |
|
| Reductions for prior year tax positions | (60 | ) |
| Cash settlements | (19 | ) |
| Statute of limitations lapses | (6 | ) |
| At December 31, 2018 | 446 |
|
| Additions for current year tax positions | 49 |
|
| Additions for prior year tax positions | 67 |
|
| Reductions for prior year tax positions | (26 | ) |
| Cash settlements | (149 | ) |
| Statute of limitations lapses | (3 | ) |
| At December 31, 2019 | $ | 384 |
|
| | | | | |
| At January 1, 2019 | $ | 446 | |
| Additions for current year tax positions | 49 | |
| Additions for prior year tax positions | 67 | |
| Reductions for prior year tax positions | (26) | |
| Cash settlements | (149) | |
| Statute of limitations lapses | (3) | |
| At December 31, 2019 | 384 | |
| Additions for current year tax positions | 15 | |
| Additions for prior year tax positions | 18 | |
| Reductions for prior year tax positions | (34) | |
| Cash settlements | (2) | |
| Statute of limitations lapses | (9) | |
| Reclassification to deferred income tax liability | (64) | |
| At December 31, 2020 | 308 | |
| Additions for current year tax positions | 23 | |
| Additions for prior year tax positions | 32 | |
| Reductions for prior year tax positions | (45) | |
| Cash settlements | (6) | |
| Statute of limitations lapses | (11) | |
| At December 31, 2021 | $ | 301 | |
The reserve for uncertain tax positions of $384$301 million at December 31, 20192021 includes $295$271 million which would affect our effective income tax rate, including discontinued operations, if and when recognized in future years.
We recognize interest and penalty charges related to the reserve for uncertain tax positions as income tax expense. We recognized interest and penalties of $14 million, $16 million and $24 million for each of the years ended December 31, 2021, 2020 and 2019, and 2018 and $16 million for the year ended December 31, 2017,respectively, in the Consolidated Statements of Operations. As of December 31, 20192021 and 2018,2020, we have recorded liabilities for accrued interest and penalties of $51$56 million and $47$57 million, respectively, on the Consolidated Balance Sheets.
ViacomCBSVIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The Company and its subsidiaries file income tax returns with the Internal Revenue Service (“IRS”) and various state and internationallocal and foreign jurisdictions. For periods prior to the Merger, Viacom and CBS filed separate tax returns. For CBS, we are currently under examination by the U.S. federal statute of limitationsIRS for the 20152017 and 2018 tax year expired in September 2019. Duringyears. For Viacom, the third quarter of 2019, CBSCompany and the IRS settled the income tax audit for the year 2016, which did not have a material effect on2014 and 2015 tax years during the consolidated financial statements.second quarter of 2021. The IRS commenced its examination of the 2017 tax year during the fourth quarter ofViacom’s 2016 through 2019 and commenced its examination of the 2018 tax year in February 2020. For Viacom, the IRS began its examination of the 2014 and 2015 tax years in April 2017.November 2021. Various tax years are also currently under examination by state and local and foreign tax authorities. With respect to open tax years in all jurisdictions, we currently do not believe that it is reasonably possible that the reserve for uncertain tax positions may decrease by $125 millionwill significantly change within the next 12
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
months primarily related to potential resolutions of matters involving multiple tax periods and jurisdictions; months; however, it is difficult to predict the final outcome or timing of resolution of any particular tax matter and events could cause our current expectation to change in the future.
15)17) PENSION AND OTHER POSTRETIREMENT BENEFITS
ViacomCBSThe Company and certain of its subsidiaries sponsor qualified and non-qualified defined benefit pension plans, principally non-contributory, covering eligible employees. Our pension plans consist of both funded and unfunded plans. The majority of participants in these plans are retired employees or former employees of previously divested businesses. Most ofIn November 2020, our remaining defined benefit pension plans are closedsubject to new entrants and pension plansbenefit accruals, which were sponsored by ViacomCBS prior to the Merger, are frozenwere amended to freeze future benefit accruals. Theaccruals and benefits were enhanced under defined contribution plans that were previously sponsored by CBS, both of which are effective January 1, 2021. As a result of the pension plan amendments, a curtailment gain of $79 million associated with the elimination of benefit accruals for some plansfuture services of the impacted employees was reflected in unrecognized actuarial loss included within “Accumulated other comprehensive loss” on the Consolidated Balance Sheet for the year ended December 31, 2020. Plan benefits are based primarily on an employee’s years of service and average pay near retirement. Benefits under other plans are based primarily on an employee’s pay for each year that the employee participated in the plan. Participating employees are vested in the plans after five years of service. We fund our pension plans in accordance with the Employee Retirement Income Security Act of 1974 (“ERISA”), the Pension Protection Act of 2006, the Internal Revenue Code of 1986 and other applicable law, rules and regulations. Plan assets consist principally of corporate bonds, equity securities, common collective trust funds, and U.S. government securities. At December 31, 2019, ViacomCBSsecurities and short-term investments. The Company’s Common Stock represented approximately 2.1% of the fair value of plan assets. At December 31, 2018, 2.4%1.5% and 1.8% of the fair value of plan assets was invested in CBS Common Stock or Viacom Common Stock.at December 31, 2021 and 2020, respectively.
During 2017, we purchased a group annuity contract under which an insurance company permanently assumed our obligation to pay and administer pension benefits to certain pension plan participants, or their designated beneficiaries, who had been receiving pension benefits. The purchase of this group annuity contract was funded with pension plan assets. As a result, our outstanding pension benefit obligation was reduced by approximately $800 million. In connection with this transaction, we recorded a settlement charge of $352 million in 2017, reflecting the accelerated recognition of a portion of unamortized actuarial losses in the plan. Additionally, during 2017, we made discretionary contributions totaling $600 million to prefund our qualified pension plans.
In addition, ViacomCBSthe Company sponsors health and welfare plans that provide postretirement health care and life insurance benefits to eligible retired employees and their covered dependents. Eligibility is based in part on certain age and service requirements at the time of their retirement. Most of the plans are contributory and contain cost-sharing features such as deductibles and coinsurance which are adjusted annually, as well as caps on the annual dollar amount we will contribute toward the cost of coverage. Claims and premiums for which we are responsible are paid with our own funds.
The pension plan disclosures herein include information related to our domestic pension and postretirement benefit plans only, unless otherwise noted. At December 31, 20192021 and 2018,2020, the Consolidated Balance Sheets also include a liability of $80$53 million and $67$77 million, respectively, in “Pension and postretirement benefit obligations” relating to our non-U.S. pension plans and certain other retirement severance plans.
We use a December 31 measurement date for all pension and other postretirement benefit plans.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The following table sets forth the change in benefit obligation for our pension and postretirement benefit plans.
| | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Postretirement Benefits |
| 2021 | | 2020 | | 2021 | | 2020 |
| Change in benefit obligation: | | | | | | | |
| Benefit obligation, beginning of year | $ | 5,162 | | | $ | 4,963 | | | $ | 322 | | | $ | 360 | |
| Service cost | — | | | 30 | | | 1 | | | 2 | |
| Interest cost | 145 | | | 164 | | | 8 | | | 11 | |
| Actuarial (gain) loss | (45) | | | 408 | | | (18) | | | (8) | |
| Curtailment gain | — | | | (79) | | | — | | | — | |
| Benefits paid | (320) | | | (324) | | | (46) | | | (58) | |
| Settlements paid | (33) | | | — | | | — | | | — | |
| Participants’ contributions | — | | | — | | | 5 | | | 12 | |
| Retiree Medicare drug subsidy | — | | | — | | | 4 | | | 3 | |
| Benefit obligation, end of year | $ | 4,909 | | | $ | 5,162 | | | $ | 276 | | | $ | 322 | |
|
| | | | | | | | | | | | | | | |
| | Pension Benefits | | Postretirement Benefits |
| | 2019 | | 2018 | | 2019 | | 2018 |
| Change in benefit obligation: | | | | | | | |
| Benefit obligation, beginning of year | $ | 4,511 |
| | $ | 4,877 |
| | $ | 376 |
| | $ | 456 |
|
| Service cost | 28 |
| | 30 |
| | 1 |
| | 1 |
|
| Interest cost | 191 |
| | 180 |
| | 16 |
| | 17 |
|
| Actuarial loss (gain) | 593 |
| | (240 | ) | | 8 |
| | (8 | ) |
| Benefits paid | (360 | ) | | (336 | ) | | (59 | ) | | (106 | ) |
| Participants’ contributions | — |
| | — |
| | 13 |
| | 12 |
|
| Retiree Medicare drug subsidy | — |
| | — |
| | 5 |
| | 4 |
|
| Benefit obligation, end of year | $ | 4,963 |
| | $ | 4,511 |
| | $ | 360 |
| | $ | 376 |
|
The following table sets forth the change in plan assets for our pension and postretirement benefit plans.
|
| | | | | | | | | | | | | | | |
| | Pension Benefits | | Postretirement Benefits |
| | 2019 | | 2018 | | 2019 | | 2018 |
| Change in plan assets: | | | | | | | |
| Fair value of plan assets, beginning of year | $ | 2,932 |
| | $ | 3,412 |
| | $ | 1 |
| | $ | — |
|
| Actual return on plan assets | 530 |
| | (205 | ) | | (1 | ) | | — |
|
| Employer contributions | 74 |
| | 61 |
| | 41 |
| | 91 |
|
| Benefits paid | (360 | ) | | (336 | ) | | (59 | ) | | (106 | ) |
| Participants’ contributions | — |
| | — |
| | 13 |
| | 12 |
|
| Retiree Medicare drug subsidy | — |
| | — |
| | 5 |
| | 4 |
|
| Fair value of plan assets, end of year | $ | 3,176 |
| | $ | 2,932 |
| | $ | — |
| | $ | 1 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Postretirement Benefits |
| 2021 | | 2020 | | 2021 | | 2020 |
| Change in plan assets: | | | | | | | |
| Fair value of plan assets, beginning of year | $ | 3,347 | | | $ | 3,176 | | | $ | — | | | $ | — | |
| Actual return on plan assets | 116 | | | 429 | | | — | | | — | |
| Employer contributions | 81 | | | 66 | | | 37 | | | 43 | |
| Benefits paid | (320) | | | (324) | | | (46) | | | (58) | |
| Settlements paid | (33) | | | — | | | — | | | — | |
| Participants’ contributions | — | | | — | | | 5 | | | 12 | |
| Retiree Medicare drug subsidy | — | | | — | | | 4 | | | 3 | |
| Fair value of plan assets, end of year | $ | 3,191 | | | $ | 3,347 | | | $ | — | | | $ | — | |
The funded status of pension and postretirement benefit obligations and the related amounts recognized on the Consolidated Balance Sheets were as follows:
|
| | | | | | | | | | | | | | | |
| | Pension Benefits | | Postretirement Benefits |
| At December 31, | 2019 | | 2018 | | 2019 | | 2018 |
| Funded status at end of year | $ | (1,787 | ) | | $ | (1,579 | ) | | $ | (360 | ) | | $ | (375 | ) |
| Amounts recognized on the Consolidated Balance Sheets: | | | | | | | |
| Other assets | $ | 5 |
| | $ | 5 |
| | $ | — |
| | $ | — |
|
| Current liabilities | (69 | ) | | (70 | ) | | (42 | ) | | (48 | ) |
| Noncurrent liabilities | (1,723 | ) | | (1,514 | ) | | (318 | ) | | (327 | ) |
| Net amounts recognized | $ | (1,787 | ) | | $ | (1,579 | ) | | $ | (360 | ) | | $ | (375 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Postretirement Benefits |
| At December 31, | 2021 | | 2020 | | 2021 | | 2020 |
| Funded status at end of year | $ | (1,718) | | | $ | (1,815) | | | $ | (276) | | | $ | (322) | |
| Amounts recognized on the Consolidated Balance Sheets: | | | | | | | |
| Other assets | $ | 7 | | | $ | 7 | | | $ | — | | | $ | — | |
| Current liabilities | (73) | | | (85) | | | (35) | | | (38) | |
| Noncurrent liabilities | (1,652) | | | (1,737) | | | (241) | | | (284) | |
| Net amounts recognized | $ | (1,718) | | | $ | (1,815) | | | $ | (276) | | | $ | (322) | |
Our qualified pension plans were underfunded by $734$655 million and $623$712 million at December 31, 20192021 and 2018,2020, respectively.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
The following amounts were recognized in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets.
|
| | | | | | | | | | | | | | | |
| | Pension Benefits | | Postretirement Benefits |
| At December 31, | 2019 | | 2018 | | 2019 | | 2018 |
| Net actuarial (loss) gain | $ | (2,153 | ) | | $ | (2,001 | ) | | $ | 147 |
| | $ | 174 |
|
| Net prior service cost | (3 | ) | | (5 | ) | | (1 | ) | | (2 | ) |
| Share of equity investee | (2 | ) | | (1 | ) | | — |
| | — |
|
| | (2,158 | ) | | (2,007 | ) | | 146 |
| | 172 |
|
Deferred income taxes (a) | 563 |
| | 756 |
| | (14 | ) | | (19 | ) |
Net amount recognized in accumulated other comprehensive income (loss) | $ | (1,595 | ) | | $ | (1,251 | ) | | $ | 132 |
| | $ | 153 |
|
(a) The decrease in 2019 primarily reflects the reclassification of certain income tax effects of the Tax Reform Act on items within accumulated other comprehensive loss to retained earnings upon the adoption of new FASB guidance (see Note 1). | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Postretirement Benefits |
| At December 31, | 2021 | | 2020 | | 2021 | | 2020 |
| Net actuarial (loss) gain | $ | (2,068) | | | $ | (2,144) | | | $ | 143 | | | $ | 140 | |
| Net prior service cost | (1) | | | (1) | | | — | | | — | |
| Share of equity investee | (1) | | | (2) | | | — | | | — | |
| (2,070) | | | (2,147) | | | 143 | | | 140 | |
| Deferred income taxes | 541 | | | 560 | | | (14) | | | (13) | |
Net amount recognized in accumulated other comprehensive income (loss) | $ | (1,529) | | | $ | (1,587) | | | $ | 129 | | | $ | 127 | |
The accumulated benefit obligation for all defined benefit pension plans was $4.87$4.91 billion and $4.43$5.16 billion at December 31, 20192021 and 2018,2020, respectively.
Information for the pension plans with an accumulated benefit obligation in excess of plan assets is set forth below.
|
| | | | | | | |
| At December 31, | 2019 | | 2018 |
| Projected benefit obligation | $ | 4,962 |
| | $ | 4,511 |
|
| Accumulated benefit obligation | $ | 4,873 |
| | $ | 4,427 |
|
| Fair value of plan assets | $ | 3,170 |
| | $ | 2,926 |
|
| | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
| Projected benefit obligation | $ | 4,908 | | | $ | 5,161 | |
| Accumulated benefit obligation | $ | 4,908 | | | $ | 5,161 | |
| Fair value of plan assets | $ | 3,184 | | | $ | 3,340 | |
The following tables present the components of net periodic benefit cost and amounts recognized in other comprehensive income (loss).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Postretirement Benefits |
| Year Ended December 31, | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
| Components of net periodic cost: | | | | | | | | | | | |
| Service cost | $ | — | | | $ | 30 | | | $ | 28 | | | $ | 1 | | | $ | 2 | | | $ | 1 | |
| Interest cost | 145 | | | 164 | | | 191 | | | 8 | | | 11 | | | 16 | |
| Expected return on plan assets | (188) | | | (194) | | | (183) | | | — | | | — | | | — | |
| Amortization of actuarial losses (gains) | 93 | | | 103 | | | 94 | | | (15) | | | (15) | | | (18) | |
| Amortization of prior service cost | — | | | 2 | | | 1 | | | — | | | 1 | | | 1 | |
Settlements (a) | 10 | | | — | | | — | | | — | | | — | | | — | |
Net periodic cost (b) | $ | 60 | | | $ | 105 | | | $ | 131 | | | $ | (6) | | | $ | (1) | | | $ | — | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Pension Benefits | | Postretirement Benefits |
| Year Ended December 31, | 2019 |
| 2018 |
| 2017 |
| 2019 |
| 2018 |
| 2017 |
| Components of net periodic cost: | | | | | | | | | | | |
| Service cost | $ | 28 |
| | $ | 30 |
| | $ | 28 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
|
| Interest cost | 191 |
| | 180 |
| | 219 |
| | 16 |
| | 17 |
| | 19 |
|
| Expected return on plan assets | (183 | ) | | (214 | ) | | (230 | ) | | — |
| | — |
| | — |
|
| Amortization of actuarial losses (gains) | 94 |
| | 87 |
| | 105 |
| | (18 | ) | | (18 | ) | | (22 | ) |
| Amortization of prior service cost | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
| Settlements | — |
| | — |
| | 352 |
| | — |
| | — |
| | — |
|
| Net periodic cost | $ | 131 |
| | $ | 84 |
| | $ | 475 |
| | $ | — |
| | $ | 1 |
| | $ | (1 | ) |
The service cost component of net periodic cost is presented on the Consolidated Statements of Operations within operating income. All other components of net periodic cost are presented below operating income, in “Other items, net” and “Pension settlement charge.net.” Included in net loss from discontinued operations was net periodic cost of $3 million in 2017.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
| | | | Pension Benefits | | Postretirement Benefits | | Pension Benefits | | Postretirement Benefits |
| Year Ended December 31, | 2019 | | 2018 | | 2017 | | 2019 | | 2018 | | 2017 | Year Ended December 31, | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
| Other comprehensive income (loss): | | -200 | | | | 45 | | | | | | Other comprehensive income (loss): | |
| Actuarial (loss) gain | $ | (246 | ) | | $ | (179 | ) | | $ | (269 | ) | | $ | (9 | ) | | $ | 8 |
| | $ | (20 | ) | Actuarial (loss) gain | $ | (27) | | | $ | (173) | | | $ | (246) | | | $ | 18 | | | $ | 8 | | | $ | (9) | |
Amortization of actuarial losses (gains) (a) | 94 |
| | 87 |
| | 105 |
| | (18 | ) | | (18 | ) | | (22 | ) | |
Amortization of prior service cost (a) | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
| |
Settlements (a) | — |
| | — |
| | 352 |
| | — |
| | — |
| | — |
| |
| Share of equity investee | | Share of equity investee | 1 | | | — | | | — | | | — | | | — | | | — | |
| Curtailment gain | | Curtailment gain | — | | | 79 | | | — | | | — | | | — | | | — | |
| Settlements | | Settlements | 10 | | | — | | | — | | | — | | | — | | | — | |
| Amortization of actuarial losses (gains) | | Amortization of actuarial losses (gains) | 93 | | | 103 | | | 94 | | | (15) | | | (15) | | | (18) | |
| Amortization of prior service cost | | Amortization of prior service cost | — | | | 2 | | | 1 | | | — | | | 1 | | | 1 | |
| | (151 | ) | | (91 | ) | | 189 |
| | (26 | ) | | (9 | ) | | (41 | ) | | 77 | | | 11 | | | (151) | | | 3 | | | (6) | | | (26) | |
| Deferred income taxes | 37 |
| | 25 |
| | (94 | ) | | 5 |
| | 2 |
| | 13 |
| Deferred income taxes | (19) | | | (3) | | | 37 | | | (1) | | | 1 | | | 5 | |
Recognized in other comprehensive income (loss), net of tax | $ | (114 | ) | | $ | (66 | ) | | $ | 95 |
| | $ | (21 | ) | | $ | (7 | ) | | $ | (28 | ) | Recognized in other comprehensive income
(loss), net of tax | $ | 58 | | | $ | 8 | | | $ | (114) | | | $ | 2 | | | $ | (5) | | | $ | (21) | |
(a)Reflects amounts reclassified from accumulated other comprehensive income (loss) to net earnings.
Estimated net actuarial losses and prior service costs related to the defined benefit pension plans of approximately $103 million and $1 million, respectively, will be amortized from accumulated other comprehensive loss into net periodic benefit costs in 2020.
Estimated net actuarial gains related to the other postretirement benefit plans of approximately $15 million will be amortized from accumulated other comprehensive loss into net periodic benefit costs in 2020.
| | | | Pension Benefits | | Postretirement Benefits | | Pension Benefits | | Postretirement Benefits |
| | 2019 | | 2018 | | 2017 | | 2019 | | 2018 | | 2017 | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
| Weighted average assumptions used to determine benefit obligations at December 31: | | | | | | | | | | | | Weighted average assumptions used to determine benefit obligations at December 31: | |
| Discount rate | 3.5 | % | | 4.5 | % | | 3.9 | % | | 3.3 | % | | 4.4 | % | | 3.9 | % | Discount rate | 3.2 | % | | 2.9 | % | | 3.5 | % | | 3.0 | % | | 2.6 | % | | 3.3 | % |
| Rate of compensation increase | 3.0 | % | | 3.0 | % | | 3.0 | % | | N/A |
| | N/A |
| | N/A |
| Rate of compensation increase | — | % | | — | % | | 3.0 | % | | N/A | | N/A | | N/A |
| Weighted average assumptions used to determine net periodic costs for the year ended December 31: | | | | | | | | | | | | Weighted average assumptions used to determine net periodic costs for the year ended December 31: | |
| Discount rate | 4.5 | % | | 3.8 | % | | 4.2 | % | | 4.4 | % | | 3.9 | % | | 4.1 | % | Discount rate | 2.9 | % | | 3.4 | % | | 4.5 | % | | 2.6 | % | | 3.3 | % | | 4.4 | % |
| Expected long-term return on plan assets | 6.6 | % | | 6.6 | % | | 6.6 | % | | N/A |
| | N/A |
| | 2.0 | % | Expected long-term return on plan assets | 5.9 | % | | 6.4 | % | | 6.6 | % | | N/A | | N/A | | N/A |
| Cash balance interest crediting rate | | Cash balance interest crediting rate | 5.0 | % | | 5.0 | % | | 5.0 | % | | N/A | | N/A | | N/A |
| Rate of compensation increase | 3.0 | % | | 3.0 | % | | 3.0 | % | | N/A |
| | N/A |
| | N/A |
| Rate of compensation increase | — | % | | 3.0 | % | | 3.0 | % | | N/A | | N/A | | N/A |
N/A - not applicable
The discount rates are determined primarily based on the yield of a portfolio of high quality bonds, providing cash flows necessary to meet the pension plans’ expected future benefit payments, as determined for the projected benefit obligations. The expected return on plan assets assumption is derived using the current and expected asset allocation of the pension plan assets and considering historical as well as expected returns on various classes of plan assets.
The following additional assumptions were used in accounting for postretirement benefits.
| | | | | | | | | | | |
| 2021 | | 2020 |
| Projected health care cost trend rate (pre-65) | 7.0 | % | | 6.6 | % |
| Projected health care cost trend rate (post-65) | 7.0 | % | | 6.6 | % |
| Ultimate trend rate | 5.0 | % | | 5.0 | % |
| Year ultimate trend rate is achieved | 2030 | | 2025 |
|
| | | | | | | | | | | |
| | CBS | | Viacom |
| | 2019 | | 2018 | | 2019 | | 2018 |
| Projected health care cost trend rate (pre-65) | 7.0 | % | | 6.6 | % | | 6.3 | % | | 6.7 | % |
| Projected health care cost trend rate (post-65) | 7.0 | % | | 6.6 | % | | 5.7 | % | | 5.9 | % |
| Ultimate trend rate | 5.0 | % | | 5.0 | % | | 4.5 | % | | 4.5 | % |
| Year ultimate trend rate is achieved | 2025 |
| | 2023 |
| | 2026 |
| | 2026 |
|
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
A one percentage point change in assumed health care cost trend rates would have the following effects:
|
| | | | | | | | | | | |
| | One Percentage | | One Percentage |
| | Point Increase | | Point Decrease |
| Effect on total service and interest cost components | | $ | — |
| | | | $ | — |
| |
| Effect on the accumulated postretirement benefit obligation | | $ | 5 |
| | | | $ | (5 | ) | |
Plan Assets
Prior toThe ViacomCBS Investments Committee (the “Committee”) determines the Merger, the investments committees of Viacom and CBS determined the strategiesstrategy for the investment of pension plan assets. These committees establishedThe Committee establishes target asset allocations for our pension plan trusts based upon an analysis of the timing and amount of projected benefit payments, projected company contributions, the expected returns and risk of the asset classes and the correlation of those returns. The target asset allocation for CBS’sthe Company’s domestic pension plans is to invest between 70%60% - 80%68% in long duration fixed income investments, 16%liability hedging assets, 22% - 28%30% in equity securities, 3% - 10% in real estate and the remainder in cash and other investments. At December 31, 2019, this trust was invested approximately 73% in long duration fixed income securities, 24% in equity investments,real assets and the remainder in cash, cash equivalents and other investments. Long duration fixed income investmentsAt December 31, 2021, the trusts were invested approximately 60% in liability hedging assets, 29% in equity securities, 7% in real estate and real assets, and the remainder in cash, cash equivalents and other investments. Liability hedging assets consist of a diversified portfolio of fixed income instruments that are substantially investment grade, with a duration that approximates the duration of the liabilities covered by the trust. All equity portfolios are diversified between U.S. and non-U.S. equities and include large and small capitalization equities. The asset allocations are reviewed regularly.
The target asset allocation for Viacom’s domestic pension plans is to invest 70% - 90% in return-seeking investments, 10% - 30% in liability hedging and 0% - 10% in cash and cash equivalents. Return-seeking investments consist of diversified equity and credit funds and liability hedging investments consist of U.S. treasury rate funds. At December 31, 2019, the Viacom Pension Plan was invested 76% in return seeking, 18% in liability hedging and 6% in cash and cash equivalents.
The following tables set forth our pension plan assets measured at fair value on a recurring basis at December 31, 20192021 and 2018.2020. These assets have been categorized according to the three-level fair value hierarchy established by the FASB which prioritizes the inputs used in measuring fair value. See Note 13 for a description of the levels within this hierarchy. There are no investments categorized as Level 1 is based on quoted prices for the asset in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset in inactive markets or quoted prices for similar assets. Level 3 is based on unobservable inputs that market participants would use in pricing the asset.3.
| | | | | | | | | | | | | | | | | | | |
| At December 31, 2021 | Level 1 | | Level 2 | | | | Total |
Cash and cash equivalents (a) (b) | $ | 83 | | | $ | 5 | | | | | $ | 88 | |
| Fixed income securities: | | | | | | | |
| U.S. treasury securities | 164 | | | — | | | | | 164 | |
| Government-related securities | — | | | 175 | | | | | 175 | |
Corporate bonds (c) | — | | | 1,448 | | | | | 1,448 | |
| Mortgage-backed and asset-backed securities | — | | | 76 | | | | | 76 | |
| Equity securities: | | | | | | | |
| U.S. large capitalization | 72 | | | — | | | | | 72 | |
| U.S. small capitalization | 81 | | | — | | | | | 81 | |
| Other | — | | | 14 | | | | | 14 | |
| Total assets in fair value hierarchy | $ | 400 | | | $ | 1,718 | | | | | $ | 2,118 | |
Common collective funds measured at net asset value (d) (e) | | | | | | | 1,013 | |
Limited partnerships measured at net asset value (d) | | | | | | | 18 | |
Mutual funds measured at net asset value (d) | | | | | | | 42 | |
| Investments, at fair value | | | | | | | $ | 3,191 | |
|
| | | | | | | | | | | | | | | |
| At December 31, 2019 | Level 1 | | Level 2 | | Level 3 | | Total |
Cash and cash equivalents (a) | $ | 1 |
| | $ | 34 |
| | $ | — |
| | $ | 35 |
|
| Fixed income securities: | | | | | | |
|
|
| U.S. treasury securities | 83 |
| | — |
| | — |
| | 83 |
|
| Government-related securities | — |
| | 171 |
| | — |
| | 171 |
|
Corporate bonds (b) | — |
| | 1,562 |
| | — |
| | 1,562 |
|
| Mortgage-backed and asset-backed securities | — |
| | 98 |
| | — |
| | 98 |
|
| Equity securities: | | | | | | |
|
|
| U.S. large capitalization | 113 |
| | — |
| | — |
| | 113 |
|
| U.S. small capitalization | 40 |
| | — |
| | — |
| | 40 |
|
| Other | — |
| | 25 |
| | — |
| | 25 |
|
| Total assets in fair value hierarchy | $ | 237 |
| | $ | 1,890 |
| | $ | — |
| | $ | 2,127 |
|
Common collective funds measured at net asset value (c) (d) | | | | | | | 978 |
|
Limited partnerships measured at net asset value (c) | | | | | | | 23 |
|
Mutual funds measured at net asset value (c) | | | | | | | 48 |
|
| Investments, at fair value | | | | | | | $ | 3,176 |
|
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
| | | At December 31, 2018 | Level 1 | | Level 2 | | Level 3 | | Total | |
| At December 31, 2020 | | At December 31, 2020 | Level 1 | | Level 2 | | | Total |
Cash and cash equivalents (a) | $ | 4 |
| | $ | 7 |
| | $ | — |
| | $ | 11 |
| Cash and cash equivalents (a) | $ | 8 | | | $ | — | | | | $ | 8 | |
| Fixed income securities: | | | | | | | | Fixed income securities: | | | |
| U.S. treasury securities | 85 |
| | 31 |
| | — |
| | 116 |
| U.S. treasury securities | 78 | | | — | | | | 78 | |
| Government-related securities | — |
| | 169 |
| | — |
| | 169 |
| Government-related securities | — | | | 167 | | | | 167 | |
Corporate bonds (b) | — |
| | 1,529 |
| | — |
| | 1,529 |
| |
Corporate bonds (c) | | Corporate bonds (c) | — | | | 1,634 | | | | 1,634 | |
| Mortgage-backed and asset-backed securities | — |
| | 120 |
| | — |
| | 120 |
| Mortgage-backed and asset-backed securities | — | | | 56 | | | | 56 | |
| Equity securities: | | | | | | |
|
| Equity securities: | | | |
| U.S. large capitalization | 150 |
| | — |
| | — |
| | 150 |
| U.S. large capitalization | 82 | | | — | | | | 82 | |
| U.S. small capitalization | 35 |
| | — |
| | — |
| | 35 |
| U.S. small capitalization | 79 | | | — | | | | 79 | |
| Other | 1 |
| | 18 |
| | — |
| | 19 |
| Other | — | | | 30 | | | | 30 | |
| Total assets in fair value hierarchy | $ | 275 |
| | $ | 1,874 |
| | $ | — |
| | $ | 2,149 |
| Total assets in fair value hierarchy | $ | 247 | | | $ | 1,887 | | | | $ | 2,134 | |
Common collective funds measured at net asset value (c) (d) | | | | | | | 688 |
| |
Limited partnerships measured at net asset value (c) | | | | | | | 63 |
| |
Mutual funds measured at net asset value (c) | | | | | | | 32 |
| |
Common collective funds measured at net asset value (d) (e) | | Common collective funds measured at net asset value (d) (e) | | | 1,149 | |
Limited partnerships measured at net asset value (d) | | Limited partnerships measured at net asset value (d) | | | 18 | |
Mutual funds measured at net asset value (d) | | Mutual funds measured at net asset value (d) | | | 46 | |
| Investments, at fair value | | | | | | | $ | 2,932 |
| Investments, at fair value | | | $ | 3,347 | |
(a) Assets categorized as Level 2 reflect investments in money market funds.
(b) On January 3, 2022, the trust that held the assets of the Viacom pension plan was merged into the trust that holds the assets of the remainder of ViacomCBS' domestic plans. As part of this merger, certain of the transferred assets were liquidated, which resulted in a higher level of cash and cash equivalents at December 31, 2021.
(c) Securities of diverse sectors and industries, substantially all investment grade.
(c)(d) In accordance with FASB guidance investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.
(d)(e) Underlying investments consist mainly of U.S. large capitalization and international equity securities.
Money market investments are carried at amortized cost which approximates fair value due to the short-term maturity of these investments. Investments in equity securities are reported at fair value based on quoted market prices on national security exchanges. The fair value of investments in common collective funds and mutual funds areis determined using the net asset value (“NAV”) provided by the administrator of the fund as a practical expedient. The NAV is determined by each fund’s trustee based upon the fair value of the underlying assets owned by the fund, less liabilities, divided by the number of outstanding units. The fair value of U.S. treasury securities is determined based on quoted market prices in active markets. The fair value of government related securities and corporate bonds is determined based on quoted market prices on national security exchanges, when available, or using valuation models which incorporate certain other observable inputs including recent trading activity for comparable securities and broker quoted prices. The fair value of mortgage-backed and asset-backed securities is based upon valuation models which incorporate available dealer quotes, projected cash flows and market information. The fair value of limited partnerships has been estimated using the NAV of the ownership interest. The NAV is determined using quarterly financial statements issued by the partnership which determine the value based on the fair value of the underlying investments.
Future Benefit Payments
Estimated future benefit payments are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | 2027-2031 |
| Pension | $ | 322 | | | $ | 317 | | | $ | 315 | | | $ | 314 | | | $ | 312 | | | $ | 1,455 | |
| Postretirement | $ | 40 | | | $ | 37 | | | $ | 34 | | | $ | 31 | | | $ | 29 | | | $ | 108 | |
| Retiree Medicare drug subsidy | $ | 5 | | | $ | 4 | | | $ | 4 | | | $ | 4 | | | $ | 4 | | | $ | 18 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | 2025-2029 |
| Pension | $ | 357 |
| | $ | 304 |
| | $ | 305 |
| | $ | 307 |
| | $ | 304 |
| | $ | 1,487 |
|
| Postretirement | $ | 48 |
| | $ | 45 |
| | $ | 42 |
| | $ | 40 |
| | $ | 37 |
| | $ | 144 |
|
| Retiree Medicare drug subsidy | $ | 5 |
| | $ | 5 |
| | $ | 5 |
| | $ | 5 |
| | $ | 4 |
| | $ | 20 |
|
In 2020, we expect to make contributions of approximately $70 million to our non-qualified pension plans to satisfy the benefit payments due under these plans. Also in 2020, we expect to contribute approximately $43 million to our other postretirement benefit plans to satisfy our portion of benefit payments due under these plans.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
In 2022, we expect to make no contributions to our qualified pension plans for minimum funding requirements under ERISA and $74 million to our non-qualified pension plans to satisfy benefit payments due under these plans. Also in 2022, we expect to contribute approximately $40 million to our other postretirement benefit plans to satisfy our portion of benefit payments due under these plans.
Multiemployer Pension and Postretirement Benefit Plans
We contribute to a number of multiemployer defined benefit pension plans under the terms of collective bargaining agreements that cover our union-represented employees including talent, writers, directors, producers and other employees, primarily in the entertainment industry. The other employers participating in these multiemployer plans are primarily in the entertainment and other related industries. The risks of participating in multiemployer plans are different from single-employer plans as assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers and if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. In addition, if we choose to stop participating in some of its multiemployer plans we may be required to pay those plans a withdrawal liability based on the underfunded status of the plan.
The financial health of a multiemployer plan is indicated by the zone status, as defined by the Pension Protection Act of 2006. Plans in the red zone are in critical status; those in the yellow zone are in endangered status; and those in the green zone are neither critical nor endangered.
The table below presents information concerning our participation in multiemployer defined benefit pension plans.
| | | | | Employer Identification Number/Pension Plan Number | | Pension Protection Act | | Company Contributions | | Expiration Date of Collective Bargaining Agreement | | Employer Identification Number/Pension Plan Number | | Pension
Protection Act | | Company Contributions | | Expiration Date of Collective Bargaining Agreement |
| | | Zone Status (a) | | | Zone Status (a) | |
| Pension Plan | | 2019 | 2018 | | 2019 | | 2018 | | 2017 | | Pension Plan | | 2021 | 2020 | | 2021 | | 2020 | | 2019 | |
AFTRA Retirement Plan (b) | | 13-6414972-001 | | Green | | $ | 12 |
| | $ | 11 |
| | $ | 12 |
| | (c) | AFTRA Retirement Plan (b) | | 13-6414972-001 | | Green | | $ | 17 | | | $ | 13 | | | $ | 12 | | | 6/30/2023 |
Directors Guild of America - Producer (d) | | 95-2892780-001 | | Green | | 19 |
| | 15 |
| | 15 |
| | 6/30/2020 | |
| Directors Guild of America - Producer | | Directors Guild of America - Producer | | 95-2892780-001 | | Green | | 23 | | | 16 | | | 19 | | | 6/30/2023 |
| Producer-Writers Guild of America | | 95-2216351-001 | | Green | | 26 |
| | 25 |
| | 22 |
| | 5/1/2020 | Producer-Writers Guild of America | | 95-2216351-001 | | Green | | 26 | | | 22 | | | 26 | | | 5/1/2023 |
| Screen Actors Guild - Producers | | 95-2110997-001 | | Green | | 43 |
| | 36 |
| | 29 |
| | 6/30/2020 | Screen Actors Guild - Producers | | 95-2110997-001 | | Green | | 45 | | | 24 | | | 43 | | | 6/30/2023 |
| Motion Picture Industry | | 95-1810805-001 | | Green | | 43 |
| | 42 |
| | 40 |
| | (e) | Motion Picture Industry | | 95-1810805-001 | | Green | | 66 | | | 35 | | | 43 | | | (c) |
I.A.T.S.E. Local No. 33 Pension Trust Fund (f) | | 95-6377503-001 | | Green | | 5 |
| | 10 |
| | 9 |
| | 12/31/2019 | |
| I.A.T.S.E. Local No. 33 Pension Trust Fund | | I.A.T.S.E. Local No. 33 Pension Trust Fund | | 95-6377503-001 | | Green | | 10 | | | 3 | | | 5 | | | 12/31/2022 |
| Other Plans | | 16 |
| | 12 |
| | 10 |
| | Other Plans | | 16 | | | 7 | | | 16 | | |
| | | Total contributions | | $ | 164 |
| | $ | 151 |
| | $ | 137 |
| | | Total contributions | | $ | 203 | | | $ | 120 | | | $ | 164 | | |
(a) The Zonezone status for each individual plan listed was certified by each plan’s actuary as of the beginning of the plan years for 20192021 and 2018.2020. The plan year is the twelve months ending December 31 for each plan listed above except AFTRA Retirement Plan which has a plan year ending November 30.
(b) The Company was listed in AFTRA Retirement Plan’s Form 5500 as providing more than 5% of total contributions for the plan year ended November 30, 2018.2020.
(c) The expiration dates range from June 30, 2020 through June 30, 2021.
(d) The Company was listed in Directors Guild of America - Producer Pension Plan’s Form 5500 as providing more than 5% of total contributions for the plan year ended December 2018.
(e) The expiration dates range from May 15, 2021 through March 2, 2022.2022.
(f) The Company was listed in I.A.T.S.E. Local No. 33 Pension Trust Fund’s Form 5500 as providing more than 5% of total contributions for the plan year ended December 31, 2018.
As a result of the above noted zone status there were no funding improvements or rehabilitation plans implemented, as defined by ERISA, nor any surcharges imposed for any of the individual plans listed.
We also contribute to multiemployer plans that provide postretirement healthcare and other benefits to certain employees under collective bargaining agreements. The contributions to these plans were $89$184 million, $74$95 million and $74$89 million for the years ended December 31, 2021, 2020 and 2019, 2018 and 2017, respectively.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
We recognize the net periodic cost for multiemployer pension and postretirement benefit plans based on the required contributions to the plans.
Defined Contribution Plans
We sponsor defined contribution plans for the benefit of substantially all employees meeting eligibility requirements. Employer contributions to such plans were $95$106 million, $87$91 million and $94$95 million for the years ended December 31, 2019, 20182021, 2020 and 2017,2019, respectively.
16) 18) REDEEMABLE NONCONTROLLING INTEREST
We are subject to a redeemable put option, payable in a foreign currency, with respect to an international subsidiary. The put option expires in December 2022 and is classified as “Redeemable noncontrolling interest” inon the Consolidated Balance Sheets. The activity reflected within redeemable noncontrolling interest for the years ended December 31, 2019, 20182021, 2020 and 20172019 is presented below.
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| Beginning balance | $ | 239 |
| | $ | 249 |
| | $ | 200 |
|
| Net earnings | 14 |
| | 18 |
| | 17 |
|
| Distributions | (16 | ) | | (15 | ) | | (16 | ) |
| Translation adjustment | 8 |
| | (14 | ) | | 21 |
|
| Redemption value adjustment | 9 |
| | 1 |
| | 27 |
|
| Ending balance | $ | 254 |
| | $ | 239 |
| | $ | 249 |
|
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Beginning balance | $ | 197 | | | $ | 254 | | | $ | 239 | |
| Net earnings | 14 | | | 11 | | | 14 | |
| Distributions | (5) | | | (15) | | | (16) | |
| Translation adjustment | (5) | | | 7 | | | 8 | |
| Redemption value adjustment | (94) | | | (60) | | | 9 | |
| Ending balance | $ | 107 | | | $ | 197 | | | $ | 254 | |
17) 19) SEGMENT AND REVENUE INFORMATION
The following tables set forth our financial performance by reportable segment. Our operating segments, which are the same as our reportable segments, have been determined in accordance with our internal management structure, which is organized based upon products and services. Beginning in 2022, primarily as a result of our increased strategic focus on our direct-to-consumer businesses, we made certain changes to how we manage our businesses and allocate resources that resulted in a change to our operating segments (see Note 1).
In the first quarter of 2021, we began separately presenting streaming revenues in the categories we use to disaggregate our revenues (see Note 9).
| | | Year Ended December 31, | 2019 |
| 2018 |
| 2017 | Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Revenues: | | | | | | Revenues: | |
| Advertising | $ | 6,008 |
| | $ | 5,751 |
| | $ | 5,696 |
| Advertising | $ | 5,377 | | | $ | 4,639 | | | $ | 5,649 | |
| Affiliate | 2,550 |
| | 2,082 |
| | 1,674 |
| Affiliate | 2,803 | | | 2,614 | | | 2,208 | |
| Content licensing | 3,157 |
| | 3,006 |
| | 2,880 |
| |
| Other | 209 |
| | 222 |
| | 226 |
| |
| Streaming | | Streaming | 1,551 | | | 911 | | | 701 | |
| Licensing and other | | Licensing and other | 3,200 | | | 2,536 | | | 3,366 | |
| TV Entertainment | 11,924 |
| | 11,061 |
| | 10,476 |
| TV Entertainment | 12,931 | | | 10,700 | | | 11,924 | |
| Advertising | 5,129 |
| | 5,130 |
| | 4,947 |
| Advertising | 3,907 | | | 3,721 | | | 4,483 | |
| Affiliate | 6,052 |
| | 6,294 |
| | 6,479 |
| Affiliate | 5,591 | | | 5,409 | | | 5,685 | |
| Content licensing | 1,268 |
| | 1,259 |
| | 1,053 |
| |
| Streaming | | Streaming | 2,642 | | | 1,650 | | | 1,013 | |
| Licensing and other | | Licensing and other | 2,060 | | | 1,809 | | | 1,268 | |
| Cable Networks | 12,449 |
| | 12,683 |
| | 12,479 |
| Cable Networks | 14,200 | | | 12,589 | | | 12,449 | |
| Theatrical | 547 |
| | 744 |
| | 716 |
| Theatrical | 241 | | | 180 | | | 547 | |
| Home Entertainment | 623 |
| | 617 |
| | 789 |
| |
| Licensing | 1,709 |
| | 1,493 |
| | 1,468 |
| |
| Other | 111 |
| | 102 |
| | 102 |
| |
| Licensing and other | | Licensing and other | 2,829 | | | 2,382 | | | 2,443 | |
| Filmed Entertainment | 2,990 |
| | 2,956 |
| | 3,075 |
| Filmed Entertainment | 3,070 | | | 2,562 | | | 2,990 | |
| Publishing | 814 |
| | 825 |
| | 830 |
| |
| Corporate/Eliminations | (365 | ) | | (275 | ) | | (325 | ) | |
Eliminations/Corporate (a) | | Eliminations/Corporate (a) | (1,615) | | | (566) | | | (365) | |
| Total Revenues | $ | 27,812 |
| | $ | 27,250 |
| | $ | 26,535 |
| Total Revenues | $ | 28,586 | | | $ | 25,285 | | | $ | 26,998 | |
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Revenues generated between segments primarily reflect advertisingare principally from the licensing of Filmed Entertainment and Cable Networkscontent to Paramount+ and licensing sales.of Filmed Entertainment and TV Entertainment content to Cable Networks. These transactions are recorded at market value as if the sales were to third parties and are eliminated in consolidation. Revenues earned from the licensing of content within segments, including licensing to Paramount+ within the TV Entertainment segment, are eliminated within the segment. Intercompany revenues associated with the licensing of programming to Paramount+ after the initial exhibition on our broadcast or cable networks are recorded on a straight-line basis over the term of the agreement and eliminated in consolidation.
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 |
| 2018 |
| 2017 |
| Intercompany Revenues: | | | | | |
| TV Entertainment | $ | 226 |
| | $ | 164 |
| | $ | 189 |
|
| Cable Networks | 53 |
| | 47 |
| | 70 |
|
| Filmed Entertainment | 117 |
| | 95 |
| | 89 |
|
| Total Intercompany Revenues | $ | 396 |
| | $ | 306 |
| | $ | 348 |
|
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Intercompany Revenues: | | | | | |
| TV Entertainment | $ | 348 | | | $ | 285 | | | $ | 226 | |
| Cable Networks | 625 | | | 79 | | | 53 | |
| Filmed Entertainment | 642 | | | 202 | | | 117 | |
| Total Intercompany Revenues | $ | 1,615 | | | $ | 566 | | | $ | 396 | |
We present operating income (loss) excluding depreciation and amortization, stock-based compensation, costs for restructuring and other corporate matters, programming charges and net gain on sale of assets,sales, each where applicable (“Adjusted OIBDA”), as the primary measure of profit and loss for our operating segments in accordance with FASB guidance for segment reporting. We began presenting Adjusted OIBDA as our segment profit measure in the fourth quarter of 2019 in order to align withreporting since it is the primary method used by our management beginning after the Merger to evaluate segment performance and to make decisions regarding the allocation of resources to our segments. We believe the presentation of Adjusted OIBDA is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by our management and enhances their ability to understand our operating performance.management. Stock-based compensation is excluded from our segment measure of profit and loss because it is set and approved by our Board of Directors in consultation with corporate executive management.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Adjusted OIBDA: | | | | | |
| TV Entertainment | $ | 1,083 | | | $ | 1,857 | | | $ | 2,443 | |
| Cable Networks | 3,747 | | | 3,746 | | | 3,515 | |
| Filmed Entertainment | 368 | | | 215 | | | 80 | |
| Corporate/Eliminations | (582) | | | (500) | | | (449) | |
| Stock-based compensation | (172) | | | (186) | | | (196) | |
| Depreciation and amortization | (390) | | | (430) | | | (438) | |
| Restructuring and other corporate matters | (100) | | | (618) | | | (769) | |
| Programming charges | — | | | (159) | | | (589) | |
| Net gain on sales | 2,343 | | | 214 | | | 549 | |
| Operating income | 6,297 | | | 4,139 | | | 4,146 | |
| Interest expense | (986) | | | (1,031) | | | (962) | |
| Interest income | 53 | | | 60 | | | 66 | |
| Net gains from investments | 47 | | | 206 | | | 85 | |
| Loss on extinguishment of debt | (128) | | | (126) | | | — | |
| Other items, net | (77) | | | (101) | | | (112) | |
Earnings from continuing operations before income taxes and equity in loss of investee companies | 5,206 | | | 3,147 | | | 3,223 | |
| (Provision) benefit for income taxes | (646) | | | (535) | | | 29 | |
| Equity in loss of investee companies, net of tax | (91) | | | (28) | | | (53) | |
| Net earnings from continuing operations | 4,469 | | | 2,584 | | | 3,199 | |
| Net earnings from discontinued operations, net of tax | 162 | | | 117 | | | 140 | |
| Net earnings (ViacomCBS and noncontrolling interests) | 4,631 | | | 2,701 | | | 3,339 | |
| Net earnings attributable to noncontrolling interests | (88) | | | (279) | | | (31) | |
| Net earnings attributable to ViacomCBS | $ | 4,543 | | | $ | 2,422 | | | $ | 3,308 | |
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| Adjusted OIBDA: | | | | | |
| TV Entertainment | $ | 2,443 |
| | $ | 2,466 |
| | $ | 2,301 |
|
| Cable Networks | 3,515 |
| | 4,341 |
| | 4,442 |
|
| Filmed Entertainment | 80 |
| | (33 | ) | | (187 | ) |
| Publishing | 143 |
| | 153 |
| | 146 |
|
| Corporate/Eliminations | (449 | ) | | (433 | ) | | (442 | ) |
| Stock-based compensation | (201 | ) | | (205 | ) | | (220 | ) |
| Depreciation and amortization | (443 | ) | | (433 | ) | | (443 | ) |
| Restructuring and other corporate matters | (775 | ) | | (490 | ) | | (258 | ) |
| Programming charges | (589 | ) | | (162 | ) | | (144 | ) |
| Gain on sale of assets | 549 |
| | — |
| | 146 |
|
| Operating income | 4,273 |
| | 5,204 |
| | 5,341 |
|
| Interest expense | (962 | ) | | (1,030 | ) | | (1,088 | ) |
| Interest income | 66 |
| | 79 |
| | 87 |
|
| Gain (loss) on marketable securities | 113 |
| | (23 | ) | | — |
|
| Gain (loss) on early extinguishment of debt | — |
| | 18 |
| | (38 | ) |
| Gain on sale of EPIX | — |
| | — |
| | 285 |
|
| Pension settlement charge | — |
| | — |
| | (352 | ) |
| Other items, net | (145 | ) | | (124 | ) | | (115 | ) |
Earnings from continuing operations before income taxes and equity in earnings (loss) of investee companies | 3,345 |
| | 4,124 |
| | 4,120 |
|
| Benefit (provision) for income taxes | 9 |
| | (617 | ) | | (804 | ) |
| Equity in earnings (loss) of investee companies, net of tax | (53 | ) | | (47 | ) | | 4 |
|
| Net earnings from continuing operations | 3,301 |
| | 3,460 |
| | 3,320 |
|
| Net earnings (loss) from discontinued operations, net of tax | 38 |
| | 32 |
| | (947 | ) |
| Net earnings (ViacomCBS and noncontrolling interests) | 3,339 |
| | 3,492 |
| | 2,373 |
|
| Net earnings attributable to noncontrolling interests | (31 | ) | | (37 | ) | | (52 | ) |
| Net earnings attributable to ViacomCBS | $ | 3,308 |
| | $ | 3,455 |
| | $ | 2,321 |
|
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| Depreciation and Amortization: |
|
| |
|
| |
|
|
| TV Entertainment | $ | 150 |
| | $ | 160 |
| | $ | 163 |
|
| Cable Networks | 219 |
| | 194 |
| | 193 |
|
| Filmed Entertainment | 37 |
| | 38 |
| | 42 |
|
| Publishing | 5 |
| | 6 |
| | 6 |
|
| Corporate | 32 |
| | 35 |
| | 39 |
|
| Total Depreciation and Amortization | $ | 443 |
| | $ | 433 |
| | $ | 443 |
|
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| Capital Expenditures: | | | | | |
| TV Entertainment | $ | 113 |
| | $ | 112 |
| | $ | 134 |
|
| Cable Networks | 166 |
| | 156 |
| | 156 |
|
| Filmed Entertainment | 43 |
| | 52 |
| | 27 |
|
| Publishing | 8 |
| | 7 |
| | 5 |
|
| Corporate | 23 |
| | 25 |
| | 34 |
|
| Total Capital Expenditures | $ | 353 |
| | $ | 352 |
| | $ | 356 |
|
|
| | | | | | | |
| At December 31, | 2019 | | 2018 |
| Assets: | | | |
TV Entertainment (a) | $ | 19,689 |
| | $ | 17,378 |
|
Cable Networks (b) | 22,109 |
| | 20,334 |
|
| Filmed Entertainment | 5,477 |
| | 5,393 |
|
| Publishing | 1,262 |
| | 1,054 |
|
| Corporate/Eliminations | 967 |
| | 326 |
|
| Discontinued Operations | 15 |
| | 12 |
|
| Total Assets | $ | 49,519 |
| | $ | 44,497 |
|
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Depreciation and Amortization: | | | | | |
| TV Entertainment | $ | 126 | | | $ | 162 | | | $ | 150 | |
| Cable Networks | 191 | | | 205 | | | 219 | |
| Filmed Entertainment | 38 | | | 36 | | | 37 | |
| Corporate | 35 | | | 27 | | | 32 | |
| Total Depreciation and Amortization | $ | 390 | | | $ | 430 | | | $ | 438 | |
(a) Includes assets held for sale of $33 million at December 31, 2018. | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Capital Expenditures: | | | | | |
| TV Entertainment | $ | 98 | | | $ | 112 | | | $ | 113 | |
| Cable Networks | 138 | | | 110 | | | 166 | |
| Filmed Entertainment | 34 | | | 37 | | | 43 | |
| Corporate | 84 | | | 65 | | | 23 | |
| Total Capital Expenditures | $ | 354 | | | $ | 324 | | | $ | 345 | |
(b) Includes assets held for sale of $23 million at December 31, 2019 and 2018. | | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
| Assets: | | | |
| TV Entertainment | $ | 20,719 | | | $ | 19,443 | |
| Cable Networks | 24,515 | | | 23,139 | |
| Filmed Entertainment | 6,942 | | | 6,440 | |
| Corporate/Eliminations | 4,884 | | | 2,202 | |
| Discontinued Operations | 1,560 | | | 1,439 | |
| Total Assets | $ | 58,620 | | | $ | 52,663 | |
The following table presents our revenues disaggregated into categories based on the nature of such revenues.
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 |
| 2018 |
| 2017 |
| Revenues by Type: | | | | | |
| Advertising | $ | 11,074 |
| | $ | 10,841 |
| | $ | 10,582 |
|
| Affiliate | 8,602 |
| | 8,376 |
| | 8,153 |
|
| Content licensing | 6,483 |
| | 6,163 |
| | 5,947 |
|
| Theatrical | 547 |
| | 744 |
| | 716 |
|
| Publishing | 814 |
| | 825 |
| | 830 |
|
| Other | 292 |
| | 301 |
| | 307 |
|
| Total Revenues | $ | 27,812 |
| | $ | 27,250 |
| | $ | 26,535 |
|
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
Revenues: (a) | | | | | |
| United States | $ | 22,160 |
| | $ | 21,160 |
| | $ | 20,652 |
|
| International | 5,652 |
| | 6,090 |
| | 5,883 |
|
| Total Revenues | $ | 27,812 |
| | $ | 27,250 |
| | $ | 26,535 |
|
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
Revenues: (a) | | | | | |
| United States | $ | 23,320 | | | $ | 20,690 | | | $ | 21,449 | |
| International | 5,266 | | | 4,595 | | | 5,549 | |
| Total Revenues | $ | 28,586 | | | $ | 25,285 | | | $ | 26,998 | |
(a) Revenue classifications are based on customers’ locations.
| | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
Long-lived Assets: (a) | | | |
| United States | $ | 16,075 | | | $ | 13,435 | |
| International | 897 | | | 785 | |
| Total Long-lived Assets | $ | 16,972 | | | $ | 14,220 | |
(a) Reflects total assets less current assets, investments, goodwill, intangible assets, noncurrent receivables and noncurrent deferred tax assets.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
| | | | | | | |
| At December 31, | 2019 |
| 2018 |
Long-lived Assets: (a) | | | |
| United States | $ | 12,417 |
| | $ | 9,322 |
|
| International | 498 |
| | 300 |
|
| Total Long-lived Assets | $ | 12,915 |
| | $ | 9,622 |
|
(a) Reflects total assets less current assets, investments, goodwill, intangible assets, noncurrent receivables and noncurrent deferred tax assets.
Transactions within the Company between the United States and international regions were not significant.
18) DISCONTINUED OPERATIONS
On November 16, 2017, we completed the split-off of CBS Radio through an exchange offer, in which we accepted 17.9 million shares of CBS Class B Common Stock from CBS stockholders in exchange for the 101.4 million shares of CBS Radio common stock that we owned. Immediately following the exchange offer, each share of CBS Radio common stock was converted into one share of Entercom Communications Corp. (“Entercom”) Class A common stock upon completion of the merger of CBS Radio and Entercom. CBS Radio has been presented as a discontinued operation in the consolidated financial statements for all periods presented.
The following table sets forth details of net earnings (loss) from discontinued operations for the year ended December 31, 2017. Net earnings from discontinued operations for the years ended December 31, 2019 and 2018 were not material to our consolidated financial statements.
|
| | | | | | | | | | | | | |
| Year Ended December 31, 2017 | CBS Radio | | Other | | Total |
| Revenues | $ | 1,018 |
| |
| $ | — |
| | | $ | 1,018 |
|
| Costs and expenses: | | | | | | | |
| Operating | 364 |
| |
| — |
| | | 364 |
|
| Selling, general and administrative | 444 |
| |
| (8 | ) | | | 436 |
|
| Market value adjustment | 980 |
| (a) | | — |
| | | 980 |
|
| Restructuring charges | 7 |
| |
| — |
| | | 7 |
|
| Total costs and expenses | 1,795 |
| | | (8 | ) | | | 1,787 |
|
| Operating income (loss) | (777 | ) | | | 8 |
| | | (769 | ) |
| Interest expense | (70 | ) | |
| — |
| | | (70 | ) |
| Other items, net | (2 | ) | | | — |
| | | (2 | ) |
| Earnings (loss) from discontinued operations | (849 | ) | | | 8 |
| | | (841 | ) |
| Income tax benefit (provision) | (55 | ) | |
| 43 |
| (b) | | (12 | ) |
| Earnings (loss) from discontinued operations, net of tax | (904 | ) | | | 51 |
| | | (853 | ) |
| Net gain (loss) on disposal | (109 | ) | | | 13 |
| | | (96 | ) |
| Income tax benefit (provision) | 4 |
| | | (2 | ) | | | 2 |
|
| Net gain (loss) on disposal, net of tax | (105 | ) | | | 11 |
| (c) | | (94 | ) |
| Net earnings (loss) from discontinued operations, net of tax | $ | (1,009 | ) | | | $ | 62 |
| | | $ | (947 | ) |
(a) During 2017, prior to the split-off, CBS Radio was measured each reporting period at the lower of its carrying amount or fair value less cost to sell. The value of the transaction with Entercom was determined based on Entercom’s stock price at the closing of the transaction and therefore, we recorded a market value adjustment of $980 million in 2017 to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom.
(b) Primarily reflects a tax benefit from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business that was accounted for as a discontinued operation.
(c) Reflects adjustments to the loss on disposal of our outdoor advertising businesses, primarily from a decrease to the guarantee liability associated with the 2013 disposal of our outdoor advertising business in Europe.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
19) 20) COMMITMENTS AND CONTINGENCIES
Commitments
Our commitments not recorded on the balance sheet primarily consist of programming and talent commitments and purchase obligations for goods and services resulting from our normal course of business.
Our programming and talent commitments, estimated to aggregate $10.36$32.63 billion as of December 31, 2019,2021, include $5.39$28.40 billion for sports programming rights $3.80and $4.23 billion relating to the production and licensing of television and film programming, and $1.17 billion forincluding talent contracts. We also have committed purchase obligations which include agreements to purchase goods or services in the future that totaled $1.52$1.38 billion as of December 31, 2019.2021.
Other long-term contractual obligations recorded on the Consolidated Balance Sheet include program liabilities, participations, due to producers, residuals, and a tax liability resulting from the enactment of the Tax Reform Act in December 2017. This tax liability reflects the remaining tax on the Company’s historical accumulated foreign earnings and profits, which is payable to the IRS in 2024 and 2025.
At December 31, 2019,2021, commitments for programming and talent and purchase obligations not recorded on the balance sheet, and other long-term contractual obligations recorded on the balance sheet were payable as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payments Due by Period |
| | | | | | | | | | | | | | 2025 and |
| | Total | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter |
| Off-Balance Sheet Arrangements | | | | | | | | | | | | | |
| Programming and talent commitments | $ | 10,355 |
| | $ | 3,003 |
| | $ | 2,980 |
| | $ | 2,370 |
| | $ | 744 |
| | $ | 415 |
| | $ | 843 |
|
| Purchase obligations | $ | 1,517 |
| | $ | 609 |
| | $ | 558 |
| | $ | 186 |
| | $ | 45 |
| | $ | 37 |
| | $ | 82 |
|
| | | | | | | | | | | | | | |
| On-Balance Sheet Arrangements | | | | | | | | | | | | | |
| Other long-term contractual obligations | $ | 2,076 |
| | $ | — |
| | $ | 988 |
| | $ | 491 |
| | $ | 232 |
| | $ | 180 |
| | $ | 185 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments Due by Period |
| | | | | | | | | | | | | 2027 and |
| Total | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter |
| Off-Balance Sheet Arrangements | | | | | | | | | | | | | |
| Programming and talent commitments | $ | 32,634 | | | $ | 3,032 | | | $ | 3,442 | | | $ | 3,094 | | | $ | 2,498 | | | $ | 2,429 | | | $ | 18,139 | |
| Purchase obligations | $ | 1,384 | | | $ | 468 | | | $ | 453 | | | $ | 253 | | | $ | 129 | | | $ | 19 | | | $ | 62 | |
| | | | | | | | | | | | | |
| On-Balance Sheet Arrangements | | | | | | | | | | | | | |
| Other long-term contractual obligations | $ | 1,823 | | | $ | — | | | $ | 867 | | | $ | 478 | | | $ | 354 | | | $ | 117 | | | $ | 7 | |
We also have long-term operating and finance lease commitments for office space, equipment, transponders and studio facilities, which are recorded on the Consolidated Balance Sheet at December 31, 2019.2021. See Note 911 for detaildetails of our operating and finance lease commitments.
Guarantees
Letters of Credit and Surety Bonds. We have indemnification obligations with respect to letters of credit and surety bonds primarily used as security against non-performance in the normal course of business. At December 31, 2019,2021, the outstanding letters of credit and surety bonds approximated $136$176 million and were not recorded on the Consolidated Balance Sheet.
CBS Television City. During 2019, we completedIn connection with the sale of CBS Television City. We haveCity in 2019, we guaranteed a specified level of cash flows to be generated by the business during the first five years following the completion of the sale. Included in “Other current liabilities” and “Other liabilities” on the Consolidated Balance Sheet at December 31, 20192021 is a liability of $124$76 million, reflecting the present value of the remaining estimated amount payable under the guarantee obligation.
Lease Guarantees. We have certain indemnification obligations with respect to leases primarily associated with the previously discontinued operations of Famous Players Inc. (“Famous Players”).Players. These lease commitments amounted to $86$50 million as of December 31, 2019,2021, and are presented within “Other liabilities” on the Consolidated Balance Sheets within “Other liabilities”.Sheet. The amount of lease commitments varies over time depending on expiration or termination of
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
amount of lease commitments varies over time depending on the expiration or termination of individual underlying leases, or the related indemnification obligation, and foreign exchange rates, among other things. We may also have exposure for certain other expenses related to the leases, such as property taxes and common area maintenance. We believe our accrual is sufficient to meet any future obligations based on our consideration of available financial information, the lessees’ historical performance in meeting their lease obligations and the underlying economic factors impacting the lessees’ business models.
In the course of our business, we both provide and receive indemnities which are intended to allocate certain risks associated with business transactions. Similarly, we may remain contingently liable for various obligations of a business that has been divested in the event that a third party does not live up to its obligations under an indemnification obligation. We record a liability for our indemnification obligations and other contingent liabilities when probable and reasonably estimable.
Legal Matters
General.General
On an ongoing basis, we vigorously defend ourselves in numerous lawsuits and proceedings and respond to various investigations and inquiries from federal, state, local and international authorities (collectively, “litigation’’). Litigation may be brought against us without merit, is inherently uncertain and always difficult to predict. However, based on our understanding and evaluation of the relevant facts and circumstances, we believe that the below-described legalfollowing matters and other litigation to which we are a party are not likely, in the aggregate, to haveresult in a material adverse effect on our business, financial condition and results of operations, financial position or cash flows.operations.
Litigation Relating to the Merger. On September 27, 2019, Bucks County Employees Retirement Fund (the “Bucks County Fund”), aMerger
Beginning on February 20, 2020, three purported holder of CBS Class B Common Stock, served us with a demand for inspection of books and records pursuant to 8 Del. C. § 220 in connection with the Merger (the “Demand”). On October 10, 2019, we offered to produce certain categories of documents properly within the scope of a books and records demand under § 220. The Bucks County Fund rejected our offer andstockholders filed litigationseparate derivative and/or putative class action lawsuits in the Court of Chancery of the State of Delaware on October 15, 2019, seeking to compel production of all documents requested in the Demand (the “Section 220 Complaint”). A trial on the Section 220 Complaint took place on November 22, 2019, andDelaware. On March 31, 2020, the Court ordered limited additional production on November 25, 2019.consolidated the 3 lawsuits and appointed Bucks County Employees’ Retirement Fund and International Union of Operating Engineers of Eastern Pennsylvania and Delaware as co-lead plaintiffs for the consolidated action. On December 2, 2019, we certified that we had completed production of all relevant documents. On February 20,April 14, 2020, the Bucks County Fundlead plaintiffs filed a putative derivativeVerified Consolidated Class Action and class action complaintDerivative Complaint (as used in this paragraph, the Court of Chancery of the State of Delaware“Complaint”) against Shari E. Redstone, NAI, Sumner M. Redstone National Amusements Trust, (“SMR Trust”),members of the CBS boardBoard of directorsDirectors (comprised of Candace K. Beinecke, Barbara M. Byrne, Gary L. Countryman, Brian Goldner, Linda M. Griego, Robert N. Klieger, Martha L. Minow, Susan Schuman, Frederick O. Terrell and Strauss Zelnick), former CBS President and Acting Chief Executive Officer Joseph Ianniello and ViacomCBS Inc.the Company as nominal defendant. The complaintComplaint alleges breaches of fiduciary duties to CBS stockholders and waste in connection with the negotiation and approval of the Agreement and Plan of Merger Agreement.dated as of August 13, 2019, as amended on October 16, 2019 (the “Merger Agreement”). The complaintComplaint also alleges waste and unjust enrichment in connection with Mr. Ianniello’s compensation. The Complaint seeks unspecified damages, costs and expenses, as well as other relief. On June 5, 2020, the defendants filed motions to dismiss. On January 27, 2021, the Court dismissed one disclosure claim, while allowing all other claims against the defendants to proceed. Discovery on the surviving claims is proceeding. We believe that the remaining claims are without merit and we intend to defend against them vigorously. We are currently unable to determine a range of potential liability, if any. Accordingly, no accrual for this matter has been made in our consolidated financial statements.
On January 23, 2020,Beginning on November 25, 2019, four purported Viacom stockholders filed separate putative class action lawsuits in the Court of Chancery of the State of DelawareDelaware. On January 23, 2020, the Court consolidated the 4 putative class action suitslawsuits. On February 6, 2020, the Court appointed California Public Employees’ Retirement System (“CalPERS”) as lead plaintiff for the consolidated action. On February 28, 2020, CalPERS, together with Park Employees’ and Retirement Board Employees’ Annuity and Benefit Fund of Chicago and Louis M. Wilen, filed by purported Viacom stockholdersa First Amended Verified Class Action Complaint (as used in this paragraph, the “Complaint”) against NAI, NAI
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
Entertainment Holdings LLC, Shari E. Redstone, the members of the Viacom special transaction committee of the Viacom boardBoard of directorsDirectors (comprised of Thomas J. May, Judith A. McHale, Ronald L. Nelson and Nicole Seligman) and our President and Chief Executive Officer and director, Robert M. Bakish, in In re Viacom Inc. Stockholders Litigation.Bakish. The four actions allegeComplaint alleges breaches of fiduciary duties to Viacom stockholders in connection with the negotiation and approval of the Merger Agreement, and seekAgreement. The Complaint seeks unspecified damages, costs and expenses.expenses, as well as other relief. On February 6,May 22, 2020, the defendants filed motions to dismiss. On December 29, 2020, the Court appointeddismissed the California Public Employees’ Retirement System asclaims against Mr. Bakish, while allowing the lead plaintiff inclaims against the consolidated action.remaining defendants to proceed. Discovery on the surviving claims is proceeding. We believe that the remaining claims are without merit and we intend to
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
defend against them vigorously. We are currently unable to determine a range of potential liability, if any. Accordingly, no accrual for this matter has been made in our consolidated financial statements.
Investigation-Related Matters.
As announced on August 1, 2018, the CBS Board of Directors (the “CBS Board”) retained two2 law firms to conduct a full investigation of the allegations in press reports about CBS’ former Chairman of the Board, President and Chief Executive Officer, Leslie Moonves, CBS News and cultural issues at CBS. On December 17, 2018, the CBS Board of Directors announced the completion of its investigation, certain findings of the investigation and the CBS Board’sBoard of Directors’ determination, discussed below, with respect to the termination of Mr. Moonves’ employment. We have received subpoenas or requests for information from the New York County District Attorney’s Office, and the New York City Commission on Human Rights, regarding the subject matter of this investigation and related matters. The New York State Attorney General’s Office and the United States Securities and Exchange Commission have also requested information about theseregarding the subject matter of this investigation and related matters, including with respect to CBS’ related public disclosures. We may continue to receive additional related regulatory and investigative inquiries from these and other entities in the future. We are cooperating with these inquiries.
On August 27, 2018 and on October 1, 2018, each of Gene Samit and John Lantz, respectively, filed putative class action suitslawsuits in the United States District Court for the Southern District of New York, individually and on behalf of others similarly situated, for claims that are similar to those alleged in the amended complaint described below. On November 6, 2018, the Court entered an order consolidating the two actions. On November 30, 2018, the Court appointed Construction Laborers Pension Trust for Southern California as the lead plaintiff of the consolidated action. On February 11, 2019, the lead plaintiff filed a consolidated amended putative class action complaint against CBS, certain current and former senior executives and members of the CBS Board.Board of Directors. The consolidated action is stated to be on behalf of purchasers of CBS Class A Common Stock and Class B Common Stock between September 26, 2016 and December 4, 2018. This action seeks to recover damages arising during this time period allegedly caused by the defendants’ purported violations of the federal securities laws, including by allegedly making materially false and misleading statements or failing to disclose material information, and seeks costs and expenses as well as remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On April 12, 2019, the defendants filed motions to dismiss this action, which the Court granted in part and denied in part on January 15, 2020. With the exception of one statement made by Mr. Moonves at an industry event in November 2017, in which he allegedly was acting as the agent of CBS, all claims as to all other allegedly false and misleading statements were dismissed. We have reached an agreement in principle with the plaintiffs to settle the lawsuit. The settlement, which will include no admission of liability or wrongdoing by the Company, will be subject to court approval. All amounts payable by the Company under the settlement will be paid by the Company’s insurers.
Litigation Related to Television Station Owners
On September 9, 2019, the Company was added as a defendant in a multi-district putative class action lawsuit filed in the United States District Court for the Northern District of Illinois. The lawsuit was filed by parties that claim to have purchased broadcast television spot advertising beginning on or about January 1, 2014 on television stations owned by one or more of the defendant television station owners and alleges the sharing of allegedly
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
competitively sensitive information among such television stations in alleged violation of the Sherman Antitrust Act. The action, which names the Company among 14 total defendants, seeks monetary damages, attorneys’ fees, costs and interest as well as injunctions against the allegedly unlawful conduct. On October 8, 2019, the Company and other defendants filed a motion to dismiss the matter, which was denied by the court on November 6, 2020. We have reached an agreement in principle with the plaintiffs to settle the lawsuit. The settlement, which will include no admission of liability or wrongdoing by the Company, will be subject to court approval.
Litigation Related to Stock Offerings
On August 13, 2021, Camelot Event Driven Fund filed a putative securities class action lawsuit in New York Supreme Court, County of New York, and on November 5, 2021, an amended complaint was filed that, among other changes, added an additional named plaintiff (the “Complaint”). The Complaint is purportedly on behalf of investors who purchased shares of the Company’s Class B Common Stock and 5.75% Series A Mandatory Convertible Preferred Stock pursuant to public securities offerings completed in March 2021, and was filed against the Company, certain senior executives, members of our Board of Directors, and the underwriters involved in the offerings. The Complaint asserts violations of federal securities law and alleges that the offering documents contained material misstatements and omissions, including through an alleged failure to adequately disclose certain total return swap transactions involving Archegos Capital Management referenced to our securities and related alleged risks to the Company’s stock price. On December 22, 2021, the plaintiffs filed a stipulation seeking the voluntary dismissal without prejudice of the outside director defendants from the lawsuit, which the Court subsequently ordered. On the same date, the defendants filed motions to dismiss the lawsuit, which are pending. The Complaint seeks unspecified compensatory damages, as well as other relief. We believe that the remainingclaims are without merit and intend to defend against them vigorously.
Litigation Related to the Proposed Sale of Simon & Schuster
On November 2, 2021, the U.S. Department of Justice (the “DOJ”) filed suit in the United States District Court for the District of Columbia to block our sale of the Simon & Schuster business to Penguin Random House (the “Transaction”) pursuant to a Share Purchase Agreement (“Purchase Agreement”), dated November 24, 2020, between the Company, certain of its subsidiaries, Penguin Random House and Bertelsmann SE & Co. KGaA. The DOJ asserts that the sale of Simon & Schuster would reduce competition for the acquisition of titles. The Purchase Agreement contains customary representations and warranties and covenants, including commitments on the part of Penguin Random House to take all necessary steps to obtain any required regulatory approvals and to defend any litigation that would delay or prevent consummation, and also provides for a termination fee payable to the Company in certain circumstances in the event the Transaction does not close for regulatory reasons. We and the other defendants believe the DOJ’s claims are without merit, and we intend to defend against them vigorously. We are currently unable to determine a range of potential liability, if any. Accordingly, no accrual for this matter has been made in our consolidated financial statements.
Separation Agreement. On September 9, 2018, CBS entered into a separation and settlement agreement and releases (the “Separation Agreement”) with Mr. Moonves, pursuant to which Mr. Moonves resigned as a director and as Chairman of the Board, President and Chief Executive Officer of CBS. In October 2018, we contributed $120 million to a grantor trust pursuant to the Separation Agreement. On December 17, 2018, the CBS Board announced that, following its consideration of the findings of the investigation referred to above, it had determined that there were grounds to terminate Mr. Moonves’ employment for cause under his employment agreement with CBS. Any dispute related to the CBS Board’s determination is subject to binding arbitration as set forth in the Separation Agreement. On January 16, 2019, Mr. Moonves commenced a binding arbitration proceeding with respect to this matter and the related CBS Board investigation, which proceeding is ongoing. The assets of the grantor trust will remain in the trust until a final determination in the arbitration. We are currently unable to determine the outcome of the arbitration and the amount, if any, that may be awarded thereunder and, accordingly, no accrual for this matter has been made in our consolidated financial statements.
Claims Related to Former Businesses: Asbestos. Asbestos
We are a defendant in lawsuits claiming various personal injuries related to asbestos and other materials, which allegedly occurred as a result of exposure caused by various products manufactured by Westinghouse, a predecessor, generally prior to the early 1970s. Westinghouse was neither a producer
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
nor a manufacturer of asbestos. We are typically named as one of a large number of defendants in both state and federal cases. In the majority of asbestos lawsuits, the plaintiffs have not identified which of our products is the basis of a claim. Claims against us in which a product has been identified most commonly relate to allegations of exposure to asbestos-containing insulating material used in conjunction with turbines and electrical equipment.
Claims are frequently filed and/or settled in groups, which may make the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. We do not report as
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
pending those claims on inactive, stayed, deferred or similar dockets that some jurisdictions have established for claimants who allege minimal or no impairment. As of December 31, 2019,2021, we had pending approximately 30,95027,770 asbestos claims, as compared with approximately 31,57030,710 as of December 31, 20182020 and 31,66030,950 as of December 31, 2017.2019. During 2019,2021, we received approximately 3,4603,050 new claims and closed or moved to an inactive docket approximately 4,0805,990 claims. We report claims as closed when we become aware that a dismissal order has been entered by a court or when we have reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other factors. Our total costs for the years 20192021 and 20182020 for settlement and defense of asbestos claims after insurance recoveries and net of tax were approximately $58$63 million and $45$35 million, respectively. Our costs for settlement and defense of asbestos claims may vary year to year and insurance proceeds are not always recovered in the same period as the insured portion of the expenses.
Filings include claims for individuals suffering from mesothelioma, a rare cancer, the risk of which is allegedly increased by exposure to asbestos; lung cancer, a cancer which may be caused by various factors, one of which is alleged to be asbestos exposure; other cancers, and conditions that are substantially less serious, including claims brought on behalf of individuals who are asymptomatic as to an allegedly asbestos-related disease. The predominant number of pending claims against us are non-cancer claims. It is difficult to predict future asbestos liabilities, as events and circumstances may impact the estimate of our asbestos liabilities, including, among others, the number and types of claims and average cost to resolve such claims. We record an accrual for a loss contingency when it is both probable that a liability has been incurred and when the amount of the loss can be reasonably estimated. We believe that our accrual and insurance are adequatesufficient to cover our asbestos liabilities. Our liability estimate is based upon many factors, including the number of outstanding claims, estimated average cost per claim, the breakdown of claims by disease type, historic claim filings, costs per claim of resolution and the filing of new claims, as well as consultation with a third party firm on trends that may impact our future asbestos liability.
Other.Other
From time to time we receive claims from federal and state environmental regulatory agencies and other entities asserting that we are or may be liable for environmental cleanup costs and related damages principally relating to our historical and predecessor operations. In addition, from time to time we receive personal injury claims including toxic tort and product liability claims (other than asbestos) arising from our historical operations and predecessors.
21) SUPPLEMENTAL FINANCIAL INFORMATION
The following table presents the components of Other items, net on the Consolidated Statements of Operations.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Pension and postretirement benefit costs | $ | (43) | | | $ | (69) | | | $ | (99) | |
| Foreign exchange losses | (26) | | | (35) | | | (18) | |
Pension settlement charge (a) | (10) | | | — | | | — | |
| Other | 2 | | | 3 | | | 5 | |
| Other items, net | $ | (77) | | | $ | (101) | | | $ | (112) | |
(a) Reflects the accelerated recognition of a portion of the unamortized actuarial losses due to the volume of lump sum benefit payments in one of our pension plans.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
20) SUPPLEMENTAL FINANCIAL INFORMATION
The following table presents the components of Other items, net on the Consolidated Statements of Operations.
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 | | 2018 | | 2017 |
| Pension and postretirement benefit costs | $ | (105 | ) | | $ | (68 | ) | | $ | (96 | ) |
| Foreign exchange losses | (17 | ) | | (18 | ) | | (20 | ) |
| Impairment of investments | (50 | ) | | (46 | ) | | (18 | ) |
| Gains from investments | 22 |
| | 16 |
| | — |
|
| Other | 5 |
| | (8 | ) | | 19 |
|
| Other items, net | $ | (145 | ) | | $ | (124 | ) | | $ | (115 | ) |
Supplemental Cash Flow Information
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 | | 2019 |
| Cash paid for interest | $ | 970 | | | $ | 965 | | | $ | 922 | |
| | | | | |
| Cash paid for income taxes: | | | | | |
| Continuing operations | $ | 291 | | | $ | 411 | | | $ | 560 | |
| Discontinued operations | 43 | | | 55 | | | 38 | |
| Total cash paid for income taxes | $ | 334 | | | $ | 466 | | | $ | 598 | |
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 |
| 2018 |
| 2017 |
| Cash paid for interest: | | | | | |
| Continuing operations | $ | 922 |
| | $ | 1,012 |
| | $ | 1,056 |
|
| Discontinued operations | — |
| | — |
| | 70 |
|
| Total | $ | 922 |
| | $ | 1,012 |
| | $ | 1,126 |
|
|
| | | | | | | | | | | |
| Year Ended December 31, | 2019 |
| 2018 |
| 2017 |
| Cash paid (refunded) for income taxes: | | | | | |
| Continuing operations | $ | 598 |
|
| $ | 161 |
|
| $ | 827 |
|
| Discontinued operations | — |
| | (4 | ) | | 26 |
|
| Total | $ | 598 |
| | $ | 157 |
| | $ | 853 |
|
In addition, during 2017the normal course of business, we received sharesenter into joint ventures or make investments with business partners that support our underlying business strategy and provide us the ability to enter new markets to expand the reach of our brands, develop new programming and/or distribute our existing content. In certain instances, an entity in which we make an investment may qualify as a total valueVIE. In determining whether we are the primary beneficiary of $1.01 billion upona VIE, we assess whether we have the split-offpower to direct matters that most significantly impact the activities of CBS Radiothe VIE and have the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The following tables present the amounts recorded in a noncash disposition (see Note 18).our consolidated financial statements related to our consolidated VIEs.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
| | | | | | | | | | | |
| At December 31, | 2021 | | 2020 |
| Total assets | $ | 1,578 | | | $ | 1,385 | |
| | | |
| Total liabilities | $ | 184 | | | $ | 197 | |
21) QUARTERLY FINANCIAL DATA (unaudited):
| | | | | | | | | | | |
| Year Ended December 31, | 2021 | | 2020 (b) |
Revenues (a) | $ | 576 | | | $ | 705 | |
| | | |
Operating income (a) | $ | 43 | | | $ | 498 | |
(a) Revenues and operating income from our consolidated VIEs were not significant for 2019.
(b) The revenue and operating income include the licensing of the streaming rights to South Park by a consolidated 51%-owned VIE in 2020.
|
| | | | | | | | | | | | | | | | | | | |
| | First | | Second | | Third | | Fourth | | |
2019 (a) (b) | Quarter (c) | | Quarter | | Quarter | | Quarter (d) | | Total Year |
| Revenues | $ | 7,100 |
| | $ | 7,143 |
| | $ | 6,698 |
| | $ | 6,871 |
| | $ | 27,812 |
|
| Operating income (loss) | $ | 1,804 |
| | $ | 1,446 |
| | $ | 1,036 |
| | $ | (13 | ) | | $ | 4,273 |
|
Net earnings (loss) from continuing operations (ViacomCBS and noncontrolling interests) | $ | 1,951 |
| | $ | 977 |
| | $ | 642 |
| | $ | (269 | ) | | $ | 3,301 |
|
Net earnings (loss) (ViacomCBS and noncontrolling interests) | $ | 1,964 |
| | $ | 983 |
| | $ | 646 |
| | $ | (254 | ) | | $ | 3,339 |
|
Net earnings (loss) from continuing operations attributable to ViacomCBS | $ | 1,946 |
| | $ | 971 |
| | $ | 626 |
| | $ | (273 | ) | | $ | 3,270 |
|
| Net earnings (loss) attributable to ViacomCBS | $ | 1,959 |
| | $ | 977 |
| | $ | 630 |
| | $ | (258 | ) | | $ | 3,308 |
|
| | | | | | | | | | |
| Basic net earnings (loss) per common share: | | | | | | | | | |
Net earnings (loss) from continuing operations attributable to ViacomCBS | $ | 3.17 |
| | $ | 1.58 |
| | $ | 1.02 |
| | $ | (.44 | ) | | $ | 5.32 |
|
| Net earnings (loss) attributable to ViacomCBS | $ | 3.20 |
| | $ | 1.59 |
| | $ | 1.02 |
| | $ | (.42 | ) | | $ | 5.38 |
|
| | | | | | | | | | |
| Diluted net earnings (loss) per common share: | | | | | | | | | |
Net earnings (loss) from continuing operations attributable to ViacomCBS | $ | 3.15 |
| | $ | 1.57 |
| | $ | 1.01 |
| | $ | (.44 | ) | | $ | 5.30 |
|
| Net earnings (loss) attributable to ViacomCBS | $ | 3.18 |
| | $ | 1.58 |
| | $ | 1.02 |
| | $ | (.42 | ) | | $ | 5.36 |
|
| | | | | | | | | | |
| Weighted average number of common shares | | | | | | | | | |
| outstanding: | | | | | | | | | |
| Basic | 613 |
| | 615 |
| | 615 |
| | 615 |
| | 615 |
|
| Diluted | 617 |
| | 617 |
| | 617 |
| | 615 |
| | 617 |
|
(a) On December 4, 2019, Viacom merged with and into CBS, with CBS continuing as the surviving company. At the effective time of the Merger, the combined company changed its name to ViacomCBS Inc. The Merger has been accounted for as a transaction between entities under common control and therefore, the net assets of Viacom were combined with those of CBS at their historical carrying amounts and the companies have been presented on a combined basis for all periods presented.
(b) Includes costs for restructuring and other corporate matters of $178 million in the first quarter, $7 million in the second quarter, $122 million in the third quarter and $468 million in the fourth quarter.
(c) The first quarter includes a gain of $549 million ($386 million, net of tax) on the sale of CBS Television City and a discrete tax benefit of $768 million resulting from the transfer of intangible assets between our subsidiaries in connection with a reorganization of our international operations.
(d) The fourth quarter includes programming charges of $589 million.
VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)
|
| | | | | | | | | | | | | | | | | | | | | |
| | First | | Second | | Third | | Fourth | | |
2018 (a) (b) | Quarter | | Quarter | | Quarter | | Quarter (c) | | Total Year |
| Revenues | $ | 6,825 |
| | $ | 6,703 |
| | $ | 6,630 |
| | | $ | 7,092 |
| | | $ | 27,250 |
|
| Operating income | $ | 1,190 |
| | $ | 1,448 |
| | $ | 1,307 |
| | | $ | 1,259 |
| | | $ | 5,204 |
|
Net earnings from continuing operations (ViacomCBS and noncontrolling interests) | $ | 726 |
| | $ | 946 |
| | $ | 891 |
| | | $ | 897 |
| | | $ | 3,460 |
|
Net earnings (ViacomCBS and noncontrolling interests) | $ | 736 |
| | $ | 957 |
| | $ | 899 |
| | | $ | 900 |
| | | $ | 3,492 |
|
Net earnings from continuing operations attributable to ViacomCBS | $ | 718 |
| | $ | 943 |
| | $ | 878 |
| | | $ | 884 |
| | | $ | 3,423 |
|
| Net earnings attributable to ViacomCBS | $ | 728 |
| | $ | 954 |
| | $ | 886 |
| | | $ | 887 |
| | | $ | 3,455 |
|
| | | | | | | | | | | | |
| Basic net earnings per common share: | | | | | | | | | | | |
Net earnings from continuing operations attributable to ViacomCBS | $ | 1.15 |
| | $ | 1.53 |
| | $ | 1.43 |
| | | $ | 1.44 |
| | | $ | 5.55 |
|
| Net earnings attributable to ViacomCBS | $ | 1.17 |
| | $ | 1.54 |
| | $ | 1.44 |
| | | $ | 1.44 |
| | | $ | 5.60 |
|
| | | | | | | | | | | | |
| Diluted net earnings per common share: | | | | | | | | | | | |
Net earnings from continuing operations attributable to ViacomCBS | $ | 1.15 |
| | $ | 1.52 |
| | $ | 1.42 |
| | | $ | 1.43 |
| | | $ | 5.51 |
|
| Net earnings attributable to ViacomCBS | $ | 1.16 |
| | $ | 1.54 |
| | $ | 1.43 |
| | | $ | 1.44 |
| | | $ | 5.56 |
|
| | | | | | | | | | | | |
| Weighted average number of common shares | | | | | | | | | | | |
| outstanding: | | | | | | | | | | | |
| Basic | 622 |
| | 618 |
| | 615 |
| | | 614 |
| | | 617 |
|
| Diluted | 626 |
| | 621 |
| | 619 |
| | | 618 |
| | | 621 |
|
(a) On December 4, 2019, Viacom merged with and into CBS, with CBS continuing as the surviving company. At the effective time of the Merger, the combined company changed its name to ViacomCBS Inc. The Merger has been accounted for as a transaction between entities under common control and therefore, the net assets of Viacom were combined with those of CBS at their historical carrying amounts and the companies have been presented on a combined basis for all periods presented.
(b) Includes costs for restructuring and other corporate matters of $194 million in the first quarter, $50 million in the second quarter, $70 million in the third quarter and $176 million in the fourth quarter.
(c) The fourth quarter includes programming charges of $162 million and the reversal of a valuation allowance of $140 million relating to capital loss carryforwards that were utilized in connection with the sale of CBS Television City in 2019.
|
| | | | |
| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. |
|
| | | | |
| Item 9A. | Controls and Procedures. |
Our chief executive officer and chief financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) were effective, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Exchange Act. No change in our internal control over financial reporting occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s report on internal control over financial reporting and the report of our independent registered public accounting firm thereon are set forth in Item 8, on pages II-49II-38 and II-50,II-39, of this report. |
| | | | |
| Item 9B. | Other Information. |
None.On February 14, 2022, we entered into an amendment to our amended credit agreement to modify the definition of consolidated total leverage ratio therein to allow unrestricted cash and cash equivalents to be netted against consolidated indebtedness through June 2024.
For more information on the amendment, see the full text of the amendment, a copy of which is attached as Exhibit 10(hh) to this Annual Report on Form 10-K and is incorporated herein by reference.
| | | | | |
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. |
Not applicable.
PART III
|
| | | | |
| Item 10. | Directors, Executive Officers and Corporate Governance. |
The information required by this item with respect to the Company’s directors (i) is contained in Part I of this Form 10-K under the caption “Our Board of Directors” and (ii) will be contained in the ViacomCBS Inc. Proxy Statement for the Company’s 20202022 Annual Meeting of Stockholders (the “Proxy Statement”) under the headings “ViacomCBS“Our Board of Directors” and “Item 1-Election1 — Election of Directors,” which information is incorporated herein by reference.
The information required by this item with respect to the Company’s executive officers (i) is contained in Part I of this Form 10-K under the caption “Information About Our“Our Executive Officers” and (ii) will be contained in the Proxy Statement under the heading “Corporate Governance,Officers.” which information is incorporated herein by reference.
|
| | | | |
| Item 11. | Executive Compensation. |
The information required by this item will be contained in the Proxy Statement under the headings “ViacomCBS’“Our Board of Directors,” “Director Compensation,” “Executive Compensation,” “Compensation Discussion and Analysis” and “Compensation Committee Report,” which information is incorporated herein by reference.
|
| | | | |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
The information required by this item will be contained in the Proxy Statement under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information,” which information is incorporated herein by reference.
|
| | | | |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
The information required by this item will be contained in the Proxy Statement under the headings “Related Person Transactions” and “ViacomCBS’“Our Board of Directors,” which information is incorporated herein by reference.
|
| | | | |
| Item 14. | Principal Accounting Fees and Services. |
The information required by this item will be contained in the Proxy Statement under the heading “Fees for Services Provided by the Independent Registered Public Accounting Firm,” which information is incorporated herein by reference.
PART IV
|
| | | | |
| Item 15. | Exhibits, Financial Statement Schedules. |
(a)
1. Financial Statements.
The financial statements of ViacomCBS filed as part of this report on Form 10-K are listed on the Index on page II-50.II-37.
2. Financial Statement Schedules.
The financial statement schedule required to be filed by Item 8 of this Form 10-K is listed on the Index on page II-50II-37.
3. Exhibits.
The exhibits listed in Item 15(b) of this Part IV are filed or incorporated by reference as part of this Form 10-K. The Index to Exhibits begins on page E-1.
(b)Exhibits.
The exhibits listed in Item 15(b) of this Part IV are filed or incorporated by reference as part of this Form 10-K. The Index to Exhibits begins on page E-1.
|
| | | | |
Item 16.16 | Form 10-K Summary. |
None.
VIACOMCBS INC. AND SUBSIDIARIES
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(Tabular dollars in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Col. A | | Col. B | | Col. C | | Col. D | | Col. E |
| Description | | Balance at Beginning of Period | | Charged to Expenses and Other Accounts | | Deductions | | Balance at End of Period |
| Allowance for doubtful accounts: | | | | | | | | | | | | | | | | |
| Year ended December 31, 2021 | | | $ | 85 | | | | | $ | 8 | | | | | $ | 13 | | | | | $ | 80 | | |
| Year ended December 31, 2020 | | | $ | 80 | | | | | $ | 32 | | | | | $ | 27 | | | | | $ | 85 | | |
| Year ended December 31, 2019 | | | $ | 81 | | | | | $ | 25 | | | | | $ | 26 | | | | | $ | 80 | | |
| | | | | | | | | | | | | | | | |
| Valuation allowance on deferred tax assets: | | | | | | | | | | | | | | | | |
| Year ended December 31, 2021 | | | $ | 593 | | | | | $ | 63 | | | | | $ | 75 | | | | | $ | 581 | | |
| Year ended December 31, 2020 | | | $ | 547 | | | | | $ | 67 | | | | | $ | 21 | | | | | $ | 593 | | |
| Year ended December 31, 2019 | | | $ | 838 | | | | | $ | 76 | | | | | $ | 367 | | | | | $ | 547 | | |
| | | | | | | | | | | | | | | | |
| Reserves for inventory obsolescence: | | | | | | | | | | | | | | | | |
| Year ended December 31, 2021 | | | $ | 58 | | | | | $ | — | | | | | $ | 11 | | | | | $ | 47 | | |
| Year ended December 31, 2020 | | | $ | 57 | | | | | $ | 3 | | | | | $ | 2 | | | | | $ | 58 | | |
| Year ended December 31, 2019 | | | $ | 54 | | | | | $ | 5 | | | | | $ | 2 | | | | | $ | 57 | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Col. A | | Col. B | | Col. C | | Col. D | | Col. E |
| Description | | Balance at Beginning of Period | | Balance Acquired through Acquisitions | | Charged to Expenses and Other Accounts | | Deductions | | Balance at End of Period |
| Allowance for doubtful accounts: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2019 | | | $ | 86 |
| | | | $ | — |
| | | | $ | 26 |
| | | | $ | 26 |
| | | | $ | 86 |
| |
| Year ended December 31, 2018 | | | $ | 101 |
| | | | $ | — |
| | | | $ | 26 |
| | | | $ | 41 |
| | | | $ | 86 |
| |
| Year ended December 31, 2017 | | | $ | 105 |
| | | | $ | — |
| | | | $ | 31 |
| | | | $ | 35 |
| | | | $ | 101 |
| |
| | | | | | | | | | | | | | | | | | | |
|
| |
| Valuation allowance on deferred tax assets: | | | | | | | | | | | | | | | | | | |
|
| |
| Year ended December 31, 2019 | | | $ | 841 |
| | | | $ | — |
| | | | $ | 76 |
| | | | $ | 366 |
| | | | $ | 551 |
| |
| Year ended December 31, 2018 | | | $ | 1,120 |
| | | | $ | — |
| | | | $ | 37 |
| | | | $ | 316 |
| | | | $ | 841 |
| |
| Year ended December 31, 2017 | | | $ | 1,108 |
| | | | $ | 218 |
| | | | $ | 157 |
| | | | $ | 363 |
| | | | $ | 1,120 |
| |
| | | | | | | | | | | | | | | | | | | |
|
| |
| Reserves for inventory obsolescence: | | | | | | | | | | | | | | | | | | |
|
| |
| Year ended December 31, 2019 | | | $ | 56 |
| | | | $ | — |
| | | | $ | 11 |
| | | | $ | 6 |
| | | | $ | 61 |
| |
| Year ended December 31, 2018 | | | $ | 67 |
| | | | $ | — |
| | | | $ | 5 |
| | | | $ | 16 |
| | | | $ | 56 |
| |
| Year ended December 31, 2017 | | | $ | 59 |
| | | | $ | — |
| | | | $ | 26 |
| | | | $ | 18 |
| | | | $ | 67 |
| |
INDEX TO EXHIBITS
ITEM 15(b)
Effective December 31, 2005, Former Viacom was renamed CBS Corporation. Effective December 4, 2019, Viacom Inc. merged with and into CBS Corporation with CBS Corporation continuing as the surviving company and the combined company changed its name to “ViacomCBS Inc.”
|
| | | | | | | | | | |
| Exhibit No. | Description of Document |
| (2) | | Plan of acquisition, reorganization, arrangement, liquidation or succession |
| (a) | Agreement and Plan of Merger, dated as of August 13, 2019, by and between CBS Corporation and Viacom Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of CBS Corporation filed August 19, 2019) (File No. 001-09553). |
| (b) | Amendment No. 1 to the Agreement and Plan of Merger, dated as of October 16, 2019, by and between CBS Corporation and Viacom Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of CBS Corporation, filed October 17, 2019) (File No. 001-09553). |
| (3) | | Articles of Incorporation and Bylaws |
| (a) | Amended and Restated Certificate of Incorporation of ViacomCBS Inc., effective December 4, 2019 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8‑K of CBS Corporation filed December 4, 2019) (File No. 001‑09553). |
| (b) | Amended and Restated Bylaws of ViacomCBS Inc., effective as of December 4, 2019February 22, 2021 (incorporated by reference to Exhibit 3.23(b) to the Annual Report on Form 10-K of ViacomCBS Inc. for the fiscal year ended December 31, 2020) (File No. 001-09553). |
| (c) | Certificate of Designations of the 5.75% Mandatory Convertible Preferred Stock, Series A (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of CBS CorporationViacomCBS Inc. filed December 4, 2019)March 26, 2021) (File No. 001-09553). |
| (4) | | Instruments defining the rights of security holders, including indentures |
| (a) | Specimen Certificate of the Mandatory Convertible Preferred Stock (included in Exhibit 3(c) above). |
| (b) | Description of Class A Common Stock and Class B Common Stockthe Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed herewith). |
| (b)(c) | Amended and Restated Senior Indenture dated as of November 3, 2008 (“2008 Indenture”) among CBS Corporation, CBS Operations Inc., and The Bank of New York Mellon, as senior trustee (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S‑3 of CBS Corporation filed November 3, 20082008) (Registration No. 333‑154962) (File No. 001‑09553). |
| (c)(d) | First Supplemental Indenture to 2008 Indenture dated as of April 5, 2010 among CBS Corporation, CBS Operations Inc., and Deutsche Bank Trust Company Americas, as senior trustee (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8‑K of CBS Corporation filed April 5, 20102010) (File No. 001‑09553). |
| (d)(e) | Indenture, dated as of April 12, 2006, between Viacom Inc. and The Bank of New York (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Viacom Inc. filed April 17, 2006) (File No. 001-32686). |
| (e)(f) | Twenty-First Supplemental Indenture, dated as of December 4, 2019, by and among CBS Corporation, Viacom Inc. and The Bank of New York Mellon, a New York banking corporation, as trustee (in such capacity, the “Trustee”), to the Indenture, dated as of April 12, 2006, between Viacom Inc. and the Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of ViacomCBS Inc. filed December 4, 2019) (File No. 001-09553). |
| (g) | Indenture, dated as of March 27, 2020, between ViacomCBS Inc. and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-3 of ViacomCBS Inc. filed March 27, 2020) (File No. 001‑09553). |
| | The other instruments defining the rights of holders of the long‑term debt securities of ViacomCBS Inc. and its subsidiaries are omitted pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S‑K. ViacomCBS Inc. hereby agrees to furnish copies of these instruments to the Securities and Exchange Commission upon request. |
| (10) | | Material Contracts |
| (a) | CBS Corporation 2009 Long‑Term Incentive Plan (as amended and restated December 11, 2018) (incorporated by reference to Exhibit 10(a) to the Annual Report on Form 10-K of CBS Corporation for the fiscal year ended December 31, 2018) (File No. 001-09553).* |
| (b) | Forms of Certificate and Terms and Conditions for equity awards for:under CBS Corporation 2009 Long‑Term Incentive Plan: |
*Management contract or compensatory plan required to be filed as an exhibit to this form pursuant to Item 15(b).
E-1
| | | | | | | | | | | |
| Exhibit No. | Description of Document |
| | (i) | Stock Options (incorporated by reference to Exhibit 10(c)(ii) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2011) (File No. 001‑09553).* |
| | (ii) | Performance‑Based Restricted Share Units with Time Vesting and Performance Vesting (incorporated by reference to Exhibit 10(c)(v) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2011) (File No. 001‑09553).* |
*Management contract or compensatory plan required to be filed as an exhibit to this form pursuant to Item 15(b).
|
| | | |
Exhibit No. | Description of Document |
| | (iii) | Restricted Share Units with Time Vesting (incorporated by reference to Exhibit 10(c)(vii) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2011) (File No. 001‑09553).* |
| (c) | (iii) | CBS Corporation Senior Executive Short‑Term Incentive Plan (as amended and restated as of December 31, 2005)Restricted Share Units with Time Vesting (incorporated by reference to Exhibit 10(f)10(c)(vii) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2005)2011) (File No. 001‑09553) (as amended by the First Amendment to the CBS Corporation Senior Executive Short‑Term Incentive Plan effective January 1, 2009).* |
| | (iv) | Performance Share Units (incorporated by reference to Exhibit 10(d)10(b)(iv) to the Annual Report on Form 10‑K of CBS CorporationViacomCBS Inc. for the fiscal year ended December 31, 2008)2020) (File No. 001‑09553)001-09553).* |
| (d) | (v) | Restricted Share Units (incorporated by reference to Exhibit 10(b)(v) to the Annual Report on Form 10-K of ViacomCBS Inc. for the fiscal year ended December 31, 2020) (File No. 001-09553).* |
| (c) | CBS Retirement Excess Pension Plan (as amended and restated as of December 31, 2005) (incorporated by reference to Exhibit 10(o) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2005) (File No. 001‑09553) (as Part A was amended by Amendment No. 1 as of January 1, 2009) (incorporated by reference to Exhibit 10(g) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2010) (File No. 001‑09553) (as amended by Part B, effective as of January 1, 2009, as amended and restated as of January 1, 2012) (incorporated by reference to Exhibit 10(e) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2012) (File No. 001‑09553).* |
| (e) | CBS Excess 401(k) Plan for Designated Senior Executives (as amended and restated as of December 31, 2005) (incorporated by reference to Exhibit 10(p) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2005) (File No. 001‑09553) (as amended by Part B as of January 1, 2009) (incorporated by reference to Exhibit 10(f) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2008) (File No. 001‑09553) (as Part B was amended by Amendment No. 1, effective as of January 1, 2009)December 31, 2020) (incorporated by reference toExhibit 10(b)10(c) to the Quarterly Report on Form 10‑Q of CBS Corporation for the quarter ended March 31, 2010) (File No. 001‑09553) (as Part B was amended by Amendment No. 2 as of January 1, 2009) (incorporated by reference to Exhibit 10(h) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2010 (File No. 001‑09553) (as Part A was amended by Amendment No. 1 as of January 1, 2014) (incorporated by reference to Exhibit 10(f) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2013) (File No. 001‑09553) (as Part B was amended by Amendment No. 3 as of January 1, 2014) (incorporated by reference to Exhibit 10(f) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2013) (File No. 001‑09553) (as Part A was amended by Amendment No. 2 as of February 1, 2015) (incorporated by reference to Exhibit 10(f) to the Annual Report on Form 10-K of CBS CorporationViacomCBS Inc. for the fiscal year ended December 31, 2014) (File No. 001-09553), (as Part B was amended by Amendment No. 4 as of February 1, 2015) (incorporated by reference to Exhibit 10(f) to the Annual Report on Form 10-K of CBS Corporation for the year ended December 31, 2014) (File No. 001-09553) (as Part A was amended by Amendment No. 3 as of January 1, 2015) (incorporated by reference to Exhibit 10(f) to the Annual Report on Form 10-K of CBS Corporation for the year ended December 31, 2014) (File No. 001-09553) (as Part B was amended by Amendment No. 5 as of January 1, 2015) (incorporated by reference to Exhibit 10(f) to the Annual Report on Form 10-K of CBS Corporation for the year ended December 31, 2014) (File No. 001-09553) (as Part A was amended by Amendment No. 4 as of October 2, 2017) (incorporated by reference to Exhibit 10(e) to the Annual Report on Form 10-K of CBS Corporation for the year ended December 31, 2017) (File No. 001-09553) (as Part B was amended by Amendment No. 6 as of October 2, 2017) (incorporated by reference to Exhibit 10(e) to the Annual Report on Form 10-K of CBS Corporation for the year ended December 31, 2017) (File No. 001-09553) (as Part A was amended by Amendment No. 5 as of July 1, 2019) (incorporated by reference to Exhibit 10(a) for the Quarterly Report on Form 10-Q of CBS Corporation for the quarter ended March 31, 2019) (as Part B was amended by Amendment No. 7 as of July 1, 2019) (incorporated by reference to Exhibit 10(a) for the Quarterly Report on Form 10-Q of CBS Corporation for the quarter ended March 31, 2019)2020) (File No. 001-09553).* |
| (f)(d) | CBS Bonus DeferralViacomCBS Excess 401(k) Plan for Designated Senior Executives - Part A (as amended and restated as of December 31, 2005)October 1, 2021) (incorporated by reference to Exhibit 10(q) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2005) (File No. 001‑09553) (as amended by Part B as of January 1, 2009) (incorporated by reference to Exhibit 10(g) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2008) (File No. 001‑09553) (as Part B was amended by Amendment No. 1 as of January 1, 2009) (incorporated by reference to Exhibit 10(c) to the Quarterly Report on Form 10‑Q of CBS Corporation for the quarter ended March 31, 2010) (File No. 001‑09553) (as Part B was amended by Amendment No. 2 as of January 1, 2009) (incorporated by reference to Exhibit 10(i) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2010) (File No. 001‑09553) (as Part A was amended by Amendment No. 1 as of January 1, 2014) (incorporated by reference to Exhibit 10(g) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2013) (File No. 001‑09553) (as Part B was amended by Amendment No. 3 as of January 1, 2014) (incorporated by reference to Exhibit 10(g) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2013) (File No. 001‑09553) (as |
*Management contract or compensatory plan required to be filed as an exhibit to this form pursuant to Item 15(b).
|
| | | |
Exhibit No. | Description of Document |
| | Part A was amended by Amendment No. 2 as of January 1, 2015) (incorporated by reference to Exhibit 10(g) to the Annual Report on Form 10-K of CBS Corporation for the fiscal year ended December 31, 2014) (File No. 001-09553) (as Part B was amended by Amendment No. 4 as of January 1, 2015) (incorporated by reference to Exhibit 10(g) to the Annual Report on Form 10-K of CBS Corporation for the fiscal year ended December 31, 2014) (File No. 001-09553) (as Part A was amended by Amendment No. 3 as of October 2, 2017) (incorporated by reference to Exhibit 10(f) of the Annual Report on Form 10-K of CBS Corporation for the year ended December 31, 2017) (File No. 001-09553) (as Part B was amended by Amendment No. 5 as of October 2, 2017) (incorporated by reference to Exhibit 10(f) to the Annual Report on Form 10-K of CBS Corporation for the year ended December 31, 2017) (File No. 001-09553) (as Part A was amended by Amendment No. 4 as of July 1, 2019) (incorporated by reference to Exhibit 10(b) to the Quarterly Report on Form 10-Q of CBS CorporationViacomCBS Inc. for the quarter ended March 31, 2019) (asSeptember 30, 2021) (File No. 001‑09553).* |
| (e) | ViacomCBS Excess 401(k) Plan for Designated Senior Executives - Part B was(as amended by Amendment No. 6and restated as of JulyOctober 1, 2019)2021) (incorporated by reference to Exhibit 10(b)10(c) to the Quarterly Report on Form 10-Q of CBS CorporationViacomCBS Inc. for the quarter ended March 31, 2019)September 30, 2021) (File No. 001-09553)001‑09553).* |
| (f) | ViacomCBS Bonus Deferral Plan for Designated Senior Executives - Part A (as amended and restated as of October 1, 2021) (incorporated by reference to Exhibit 10(e) to the Quarterly Report on Form 10-Q of ViacomCBS Inc. for the quarter ended September 30, 2021) (File No. 001‑09553).* |
| (g) | ViacomCBS Bonus Deferral Plan for Designated Senior Executives - Part B (as amended and restated as of October 1, 2021) (incorporated by reference to Exhibit 10(f) to the Quarterly Report on Form 10-Q of ViacomCBS Inc. for the quarter ended September 30, 2021) (File No. 001‑09553).* |
| (h) | Viacom Inc. 2016 Long-Term Management Incentive Plan (incorporated by reference to Exhibit A to the Definitive Proxy Statement of Viacom Inc. filed January 23, 2015) (File No. 001-32686).* |
| (h)(i) | Forms of Terms and Conditions to the Certificates for equity awards for:under the Viacom Inc. 2016 Long-Term Management Incentive Plan: |
| | (i) | Stock Options (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended June 30, 2016) (File No. 001-32686).* |
| | (ii) | Restricted Share Units (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended June 30, 2016) (File No. 001-32686).* |
| | (iii) | Performance Share Units (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended December 31, 2017) (File No. 001-32686).* |
| | (iv) | Performance Share Units (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended December 31, 2018) (File No. 001-32686).* |
| (i) | (iv) | Performance Share Units (incorporated by reference to Exhibit 10(g)(iv) to the Annual Report on Form 10‑K of ViacomCBS Inc. for the fiscal year ended December 31, 2020) (File No. 001-09553).* |
| | (v) | Restricted Share Units (incorporated by reference to Exhibit 10(g)(v) to the Annual Report on Form 10-K of ViacomCBS Inc. for the fiscal year ended December 31, 2020) (File No. 001-09553).* |
| (j) | Viacom Excess Pension Plan, as amended and restated January 1, 2009 (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K of Viacom Inc. for the fiscal year ended December 31, 2008) (File No. 001-32686), andas amended by Amendment, effective as of March 31, 2009 to Viacom Excess Pension Plan, as amended and restated January 1, 2009 (incorporated by reference to Exhibit 10.13 to the Transition Report on Form 10-K of Viacom Inc. for the nine-month transition period ended September 30, 2010) (File No. 001-32686).* |
| (j)(k) | Viacom Excess 401(k) Plan for Designated Senior Executives, as amended and restated Januaryas of October 1, 2009 (incorporated2021 (incorporated by reference to Exhibit 10.1410(a) to the AnnualQuarterly Report on Form 10-K10-Q of ViacomViacomCBS Inc. for the fiscal year ended December 31, 2008) (File No. 001-32686), and Amendments, effective as of April 1, 2009 and December 31, 2009, to Viacom Excess 401(k) Plan for Designated Senior Executives, as amended and restated January 1, 2009 (incorporated by reference to Exhibit 10.15 to the Transition Report on Form 10-K of Viacom Inc. for the nine-month transition periodquarter ended September 30, 2010)2021) (File No. 001-32686)001‑09553).* |
*Management contract or compensatory plan required to be filed as an exhibit to this form pursuant to Item 15(b).
E-2
| (k) | | | | | | | | | | |
| Exhibit No. | Description of Document |
| (l) | Viacom Bonus Deferral Plan for Designated Senior Executives, as amended and restated Januaryas of October 1, 2009 (incorporated2021 (incorporated by reference to Exhibit 10.1510(d) to the AnnualQuarterly Report on Form 10-K10-Q of ViacomViacomCBS Inc. for the fiscal year ended December 31, 2008) (File No. 001-32686), and Amendment, effective as of December 31, 2009, to Viacom Bonus Deferral Plan for Designated Senior Executives, as amended and restated January 1, 2009 (incorporated by reference to Exhibit 10.17 to the Transition Report on Form 10-K of Viacom Inc. for the nine-month transition periodquarter ended September 30, 2010)2021) (File No. 001-32686)001‑09553).* |
| (l)(m) | Summary of CBS CorporationViacomCBS Inc. Compensation for Outside Directors (as of January 31, 2019) (incorporated by reference to Exhibit 10(g) to the Annual Report on Form 10-K of CBS Corporation for the fiscal year ended December 31, 2018) (File No. 001-09553).* |
| (m)(n) | Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10 to the Current Report on Form 8‑K of CBS Corporation filed September 18, 2009) (File No. 001‑09553).* |
| (n)(o) | CBS Corporation Deferred Compensation Plan for Outside Directors (as amended and restated as of January 29, 2015) (incorporated by reference to Exhibit 10(k) to the Annual Report on Form 10-K of CBS Corporation for the fiscal year ended December 31, 2014) (File No. 001-09553).* |
| (o)(p) | CBS Corporation 2005 RSU Plan for Outside Directors (as amended and restated through January 29, 2015) (incorporated by reference to Exhibit 10(m) to the Annual Report on Form 10-K of CBS Corporation for the fiscal year ended December 31, 2014) (File No. 001-09553).* |
| (p)(q) | CBS Corporation 2015 Equity Plan for Outside Directors (effective May 21, 2015) (incorporated by reference to Exhibit 10(a) to the Quarterly Report on Form 10-Q of CBS Corporation for the quarter ended June 30, 2015) (File No. 001-09553).* |
*Management contract or compensatory plan required to be filed as an exhibit to this form pursuant to Item 15(b).
|
| | | |
Exhibit No. | Description of Document |
| (q)(r) | Viacom Inc. 2011 RSU Plan for Outside Directors, as amended and restated as of January 1, 2016 (incorporated by reference to Exhibit B to the Definitive Proxy Statement of Viacom Inc. filed January 23, 2015) (File No. 001-32686), as further amended and restated as of May 18, 2016 (incorporated by reference to Exhibit 10.2 to the Quarterly Report of Viacom Inc. for the quarter ended June 30, 2016) (File No. 001-32686).* |
| (r)(s) | CBS Corporation Senior Executive Retention Plan, including the form of Letter to Participants (incorporated by reference to Exhibit 10.17 to the Registration Statement on Form S-4 of CBS Corporation filed October 17, 2019 (Registration No. 333-234238) (File No. 001-09553).* |
| (s)(t) | Viacom Inc. Executive Retention Plan for Section 16 Officers (incorporated by reference to Exhibit 10.15 to CBS Corporation’s Registration Statement No. 333-234238 on Form S-4 filed October 17, 2019) (File No. 333-234238).* |
| (t)(u) | Employment Agreement, dated as of August 13, 2019, between Viacom Inc. and Robert M. Bakish (incorporated by reference to Exhibit 10.4 to CBS Corporation’s Registration Statement No. 333-234238 on Form S-4 filed October 17, 2019) (File No. 333-234238).* |
| (u)(v) | Letter Agreement, dated as of August 13, 2019, between Viacom Inc. and Robert M. Bakish (incorporated by reference to Exhibit 10.5 to CBS Corporation’s Registration Statement No. 333-234238 on Form S-4 filed October 17, 2019) (File No. 333-234238).* |
| (v) | Employment Agreement dated October 18, 2018 between CBS Corporation and Christina Spade (incorporated by reference to (w)Exhibit 10 to the Current Report on Form 8-K of CBS Corporation filed October 19, 2018) (File No. 001-09553).* |
| (w) | Employment Agreement, dated as of August 13, 2019,June 30, 2020, between CBS CorporationViacom Inc. and Christina SpadeNaveen Chopra (incorporated by reference to Exhibit 10.710(a) to the Registration StatementQuarterly Report on Form S-410-Q of CBS Corporation filed October 17, 2019) (Registration No. 333-234238)ViacomCBS Inc. for the quarter ended June 30, 2020) (File No. 001-09553)333-234238).* |
| (x) | Letter Agreement, dated as of June 30, 2020, between ViacomCBS Inc. and Naveen Chopra (incorporated by reference to Exhibit 10(b) to the Quarterly Report on Form 10-Q of ViacomCBS Inc. for the quarter ended June 30, 2020) (File No. 333-234238).* |
| (y) | Employment Agreement, dated as of August 13, 2019, between Viacom Inc. and Christa A. D’Alimonte (incorporated by reference to Exhibit 10.9 to CBS Corporation’s Registration Statement No. 333-234238 on Form S-4 filed October 17, 2019) (File No. 333-234238).* |
| (y)(z) | Letter Agreement, dated as of August 13, 2019, between Viacom Inc. and Christa A. D’Alimonte (incorporated by reference to Exhibit 10.10 to CBS Corporation’s Registration Statement No. 333-234238 on Form S-4 filed October 17, 2019) (File No. 333-234238).* |
| (z)(aa) | Employment Agreement, dated as of January 1,October 2, 2019, between CBS CorporationViacom Inc. and Richard M. JonesDeDe Lea (incorporated by reference to Exhibit 10(r)10.13 to the Annual ReportCBS Corporation’s Registration Statement No. 333-234238 on Form 10-K of CBS Corporation for the fiscal year ended December 31, 2018)S-4 filed October 17, 2019) (File No. 001-09553)333-234238).* |
| (aa) | Employment Agreement, dated as of November 19, 2019, between CBS Corporation and Richard M. Jones (incorporated by reference to (bb)Exhibit 10.1 to the Current Report on Form 8-K of CBS Corporation filed November 22, 2019) (File No. 001-09553).* |
| (bb) | Employment Agreement, dated as of December 2, 2019, between Viacom Inc. and Nancy Phillips ((incorporated by reference to Exhibit 10(bb)filed herewith) to the Annual Report on Form 10-K of ViacomCBS Inc. for the fiscal year ended December 31, 2019) (File No. 001-09553).* |
| (cc) | Letter Agreement, dated as of December 2, 2019, between Viacom Inc. and Nancy Phillips (filed herewith).* |
| (dd) | Employment Agreement dated as of July 1, 2017 between CBS Corporation and Joseph R. Ianniello (incorporated by reference to Exhibit 10(a)10(cc) to the QuarterlyAnnual Report on Form 10-Q10-K of CBS CorporationViacomCBS Inc. for the quarterfiscal year ended September 30, 2017) (File No. 001-09553), as amended by Letter Agreement dated as of September 9, 2018 (incorporated by reference to Exhibit 10(a) to the Current Report on Form 8-K of CBS Corporation filed September 27, 2018) (File No. 001-09553).* |
| (ee) | Letter Agreement dated as of April 23, 2019 between CBS Corporation and Joseph R. Ianniello (incorporated by reference to Exhibit 10 to the Current Report on Form 8-K of CBS Corporation filed April 26,December 31, 2019) (File No. 001-09553).* |
| (ff) | Letter Agreement, dated as of August 13, 2019, between CBS Corporation and Joseph R. Ianniello (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-4 of CBS Corporation filed October 17, 2019 (Registration No. 333-234238) (File No. 001-09553)).* |
| (gg) | Employment Agreement, dated as of December 4, 2019, between ViacomCBS Inc. and Joseph R. Ianniello (filed herewith).* |
| (hh) | Letter Agreement, dated as of January 31, 2020, between ViacomCBS Inc. and Joseph R. Ianniello (filed herewith).* |
*Management contract or compensatory plan required to be filed as an exhibit to this form pursuant to Item 15(b).
E-3
|
| | | | | | | | | | |
| Exhibit No. | Description of Document |
| (ii)(dd) | Employment Agreement, dated as of August 13, 2019, between CBS Corporation and Laura Franco (incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-4 of CBS Corporation filed October 17, 2019) (Registration No. 333-234238) (File No. 001-09553).* |
| (jj) | Employment Agreement dated as of December 10, 2019 between CBS Corporation and Jonathan H. Anschell (filed herewith).* |
| (kk) | Employment Agreement dated as of June 1, 2017 between CBS Corporation and Lawrence P. Tu (incorporated by reference to Exhibit 10(b) to the Quarterly Report on Form 10-Q of CBS Corporation for the quarter ended September 30, 2017) (File No. 001-09553), as amended by Letter Agreement dated April 25, 2018 (incorporated by reference to Exhibit 10(a) to the Quarterly Report on Form 10-Q of CBS Corporation for the quarter ended March 31, 2018) (File No. 001-09553).* |
| (ll) | Separation Agreement dated February 22, 2019 between CBS Corporation and Lawrence P. Tu (incorporated by reference to Exhibit 10 to the Current Report on Form 8-K of CBS Corporation filed February 27, 2019) (File No. 001-09553).* |
| (mm) | Plans assumed by Former Viacom after the merger with former CBS Corporation in May 2000, consisting of the following: |
| | (i) | CBS Supplemental Executive Retirement Plan (as amended as of April 1, 1999) (incorporated by reference to Exhibit 10(h) to the Quarterly Report on Form 10‑Q of CBS for the quarter ended September 30, 1999) (File No. 001‑00977) (as amended by Part B, effective as of January 1, 2009, as amended and restated as of January 1, 2012) (incorporated by reference to Exhibit 10(t)(i) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2012) (incorporated by reference to Exhibit 10(kk)(i) to the Annual Report on Form 10-K of ViacomCBS Inc. for the fiscal year ended December 31, 2020) (File No. 001‑09553).* |
| | (ii) | CBS Bonus Supplemental Executive Retirement Plan (as amended as of April 1, 1999) (incorporated by reference to Exhibit 10(i) to the Quarterly Report on Form 10‑Q of CBS for the quarter ended September 30, 1999) (File No. 001‑00977) (as amended by Part B, effective as of January 1, 2009, as amended and restated as of January 1, 2012) (incorporated by reference to Exhibit 10(t)(ii) to the Annual Report on Form 10‑K of CBS Corporation for the fiscal year ended December 31, 2012) (as Part B was amended, effective as of December 31, 2020) (incorporated by reference to Exhibit 10(kk)(ii) to the Annual Report on Form 10-K of ViacomCBS Inc. for the fiscal year ended December 31, 2020) (File No. 001‑09553).* |
| | (iii) | CBS Supplemental Employee Investment Fund (as amended as of January 1, 1998) (incorporated by reference to Exhibit 10(j) to the Quarterly Report on Form 10‑Q of CBS for the quarter ended September 30, 1999) (File No. 001‑00977).* |
| (nn)(ee) | Matching Gifts Program for Directors (incorporated by reference to Exhibit 10(aa) to the Annual Report on Form 10-K of CBS Corporation for the fiscal year ended December 31, 2018) (File No. 001-09553).* |
| (oo)(ff) | Amended and Restated $3.5 Billion Credit Agreement, dated as of January 23, 2020 (the “Credit Agreement”), among ViacomCBS Inc.; the Subsidiary Borrowers party thereto; the Lenders named therein; JPMorgan Chase Bank, N.A., as Administrative Agent; Citibank, N.A., Bank of America, N.A. and Wells Fargo Bank, National Association, as Syndication Agents; and Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Mizuho Bank, Ltd. and Morgan Stanley MUFG Loan Partners, LLC, as Documentation Agents (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of ViacomCBS Inc. filed January 23, 2020) (File No. 001-09553). |
| (pp)(gg) | Amendment No. 1 to the Credit Agreement, dated as of December 9, 2021, by and among the parties listed therein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of ViacomCBS Inc. filed December 14, 2021) (File No. 001-09553). |
| (hh) | Amendment No. 2 to the Credit Agreement, dated as of February 14, 2022, by and among the parties listed therein (filed herewith). |
| (ii) | Settlement and Release Agreement effective as of September 9, 2018 (incorporated by reference to Exhibit 10(a) to the Current Report on Form 8-K of CBS Corporation filed September 10, 2018) (File No. 001-09553). |
| (qq)(jj) | Amendment No. 1 to the Settlement and Release Agreement, dated as of August 13, 2019, by and among the parties listed therein (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of CBS Corporation filed August 19, 2019) (File No. 001-09553). |
| (rr)(kk) | Support Agreement, dated as of August 13, 2019, by and among the parties listed therein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of CBS Corporation filed August 19, 2019) (File No. 001-09553). |
| (ss)(ll) | Governance Agreement, dated as of August 13, 2019, by and among the parties listed therein (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of CBS Corporation filed August 19, 2019) (File No. 001-09553). |
*Management contract or compensatory plan required to be filed as an exhibit to this form pursuant to Item 15(b).
|
| (21) | | | |
Exhibit No. | Description of Document |
(21) | | |
| (23) | | Consents of Experts and Counsel |
| (a) | |
| (24) | | |
| (31) | | Rule 13a‑14(a)/15d‑14(a) Certifications |
| (a) | Certification of the Chief Executive Officer of ViacomCBS Inc. pursuant to Rule 13a‑14(a) or 15d‑14(a), as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002 (filed herewith). |
| (b) | Certification of the Chief Financial Officer of ViacomCBS Inc. pursuant to Rule 13a‑14(a) or 15d‑14(a), as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002 (filed herewith). |
(32) | | | |
| | | |
| | | |
*Management contract or compensatory plan required to be filed as an exhibit to this form pursuant to Item 15(b).
E-4
| | | | | | | | | | | |
| Exhibit No. | Description of Document |
| (32) | | Section 1350 Certifications |
| (a) | Certification of the Chief Executive Officer of ViacomCBS Inc. furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002 (furnished herewith). |
| (b) | Certification of the Chief Financial Officer of ViacomCBS Inc. furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002 (furnished herewith). |
| (101) | | Interactive Data File |
| | 101. INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101. SCH XBRL Taxonomy Extension Schema.
101. CAL XBRL Taxonomy Extension Calculation Linkbase.
101. DEF XBRL Taxonomy Extension Definition Linkbase.
101. LAB XBRL Taxonomy Extension Label Linkbase.
101. PRE XBRL Taxonomy Extension Presentation Linkbase.
|
| (104) | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
*Management contract or compensatory plan required to be filed as an exhibit to this form pursuant to Item 15(b).
E-5
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ViacomCBS Inc. has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
| | | | | | | | | | | |
| | VIACOMCBS INC. |
| | | |
| | VIACOMCBS INC. |
| By: | | | |
| | By: | /s/ Robert M. Bakish |
| | | Robert M. Bakish President and Chief Executive Officer |
Date: February 20, 202015, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of ViacomCBS Inc. and in the capacities and on the dates indicated:
| | | | | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | | |
| /s/ Robert M. Bakish | | President and Chief
Executive Officer; Director
(Principal Executive Officer) | | February 15, 2022 |
| Robert M. Bakish | | |
| | | | | |
Signature | | Title | | Date |
| | | | | |
/s/ Robert M. BakishNaveen Chopra | | President and Chief
Executive Officer; Director
(Principal Executive Officer)
| | February 20, 2020 |
Robert M. Bakish | | |
| | | | | |
/s/ Christina Spade | | Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
| | February 20, 202015, 2022 |
Christina SpadeNaveen Chopra | | |
| | | | | |
/s/ Katherine Gill-Charest | | Executive Vice President,
Controller and
Chief Accounting Officer
(Principal Accounting Officer)
| | February 20, 2020 |
Katherine Gill-Charest | | |
| | | | | |
* | | Director | | February 20, 2020 |
Candace K. Beinecke | | |
| | | | | |
* | | Director | | February 20, 2020 |
Barbara M. Byrne | | |
| | | | | |
* | | Director | | February 20, 2020 |
Brian Goldner | | |
| | | | | |
* | | Director | | February 20, 2020 |
Linda M. Griego | | |
| | | | | |
|
| | | | | |
| /s/ Katherine Gill-Charest | | Executive Vice President,
Controller and
Chief Accounting Officer
(Principal Accounting Officer) | | | February 15, 2022 |
SignatureKatherine Gill-Charest | | Title | | Date |
| | | | | |
| * | | Director | | February 20, 202015, 2022 |
| Candace K. Beinecke | | |
| | | | | |
| * | | Director | | February 15, 2022 |
| Barbara M. Byrne | | |
| | | | | |
| * | | Director | | February 15, 2022 |
| Linda M. Griego | | |
| | | | | |
| * | | Director | | February 15, 2022 |
| Robert N. Klieger | | |
| | | | | |
| | | | | | | | | | | | | | | | | |
* | | Director | | February 20, 2020 | |
| Signature | | Title | | Date |
| | | | | |
| * | | Director | | February 15, 2022 |
| Judith A. McHale | | |
| | | | | |
| * | | Director | | February 20, 202015, 2022 |
| Ronald L. Nelson | | |
| | | | | |
| * | | Director | | February 20, 202015, 2022 |
| Charles E. Phillips, Jr. | | |
| | | | | |
| * | | Chair | | February 20, 202015, 2022 |
Shari E. Redstone | | |
| | | | | |
| * | | Director | | February 20, 202015, 2022 |
| Susan Schuman | | |
| | | | | |
| * | | Director
| | February 20, 202015, 2022 |
| Nicole Seligman | | |
| | | | | |
| * | | Director
| | February 20, 202015, 2022 |
| Frederick O. Terrell | | |
| | | | | |
| | | | |
| | |
| | | | | |
| *By: | /s/ Christa A. D’Alimonte | | | | February 20, 202015, 2022 |
| Christa A. D’Alimonte Attorney-in-Fact for Directors | | |
