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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
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
(Address of principal executive offices)
 
(Zip Code)
(212) 258-6000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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
 
 
 
The Nasdaq Stock Market LLC
 
Class B Common Stock, $0.001 par value
 
 
VIAC
 
 
 
The Nasdaq Stock Market LLC
 
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 the 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 Exchange Act.
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes     No 
Number of shares of common stock outstanding at May 4, 2020:
Class A Common Stock, par value $.001 per share— 52,267,640
Class B Common Stock, par value $.001 per share— 563,105,684
 




VIACOMCBS INC.
INDEX TO FORM 10-Q
 
 
Page
 
PART I – FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
 
 
 

- 2-



PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements.
VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
 
Three Months Ended
 
March 31,
 
2020

2019
Revenues
$
6,669


$
7,100

Costs and expenses:





Operating
4,065


4,248

Selling, general and administrative
1,341


1,313

Depreciation and amortization
113


106

Restructuring and other corporate matters
233


178

Total costs and expenses
5,752

 
5,845

Gain on sale of assets


549

Operating income
917

 
1,804

Interest expense
(241
)

(240
)
Interest income
14


19

Gain on marketable securities


38

Other items, net
(33
)

(28
)
Earnings from continuing operations before income taxes and equity in loss of
investee companies
657

 
1,593

(Provision) benefit for income taxes
(137
)

376

Equity in loss of investee companies, net of tax
(9
)

(18
)
Net earnings from continuing operations
511

 
1,951

Net earnings from discontinued operations, net of tax
8


13

Net earnings (ViacomCBS and noncontrolling interests)
519

 
1,964

Net earnings attributable to noncontrolling interests
(3
)

(5
)
Net earnings attributable to ViacomCBS
$
516

 
$
1,959

 
 
 
 
Amounts attributable to ViacomCBS:
 
 
 
Net earnings from continuing operations
$
508


$
1,946

Net earnings from discontinued operations, net of tax
8


13

Net earnings attributable to ViacomCBS
$
516

 
$
1,959

 
 
 
 
Basic net earnings per common share attributable to ViacomCBS:
 
 
 
Net earnings from continuing operations
$
.83


$
3.17

Net earnings from discontinued operations
$
.01


$
.02

Net earnings
$
.84


$
3.20

 





Diluted net earnings per common share attributable to ViacomCBS:





Net earnings from continuing operations
$
.82


$
3.15

Net earnings from discontinued operations
$
.01


$
.02

Net earnings
$
.84


$
3.18

 





Weighted average number of common shares outstanding:





Basic
614


613

Diluted
616


617

See notes to consolidated financial statements.

-3-



VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited; in millions)
 
Three Months Ended

March 31,
 
2020
 
2019
Net earnings (ViacomCBS and noncontrolling interests)
$
519

 
$
1,964

Other comprehensive income (loss), net of tax:
 
 
 
Cumulative translation adjustments
(104
)
 
16

Net actuarial loss and prior service costs
17

 
14

Other comprehensive income (loss), net of tax (ViacomCBS and noncontrolling interests)
(87
)
 
30

Comprehensive income
432

 
1,994

Less: Comprehensive income attributable to noncontrolling interests

 
8

Comprehensive income attributable to ViacomCBS
$
432

 
$
1,986

See notes to consolidated financial statements.

-4-



VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
 
At
 
At
 
March 31, 2020
 
December 31, 2019
ASSETS
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
589

 
 
 
$
632

 
Receivables, net
 
7,199

 
 
 
7,206

 
Programming and other inventory
 
1,431

 
 
 
2,876

 
Prepaid and other current assets
 
1,187

 
 
 
1,188

 
Total current assets
 
10,406

 
 
 
11,902

 
Property and equipment, net
 
2,028

 
 
 
2,085

 
Programming and other inventory
 
9,983

 
 
 
8,652

 
Goodwill
 
16,950

 
 
 
16,980

 
Intangible assets, net
 
2,968

 
 
 
2,993

 
Operating lease assets
 
1,874

 
 
 
1,939

 
Deferred income tax assets, net
 
931

 
 
 
939

 
Other assets
 
3,882

 
 
 
4,006

 
Assets held for sale
 
23

 
 
 
23

 
Total Assets
 
$
49,045




$
49,519

 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS EQUITY
 


 
 
 


 
Current Liabilities:
 


 
 
 


 
Accounts payable
 
$
673

 
 
 
$
667

 
Accrued expenses
 
1,401

 
 
 
1,760

 
Participants’ share and royalties payable
 
2,086

 
 
 
1,977

 
Accrued programming and production costs
 
1,493

 
 
 
1,500

 
Deferred revenues
 
691

 
 
 
739

 
Debt
 
532

 
 
 
717

 
Other current liabilities
 
1,655

 
 
 
1,688

 
Total current liabilities
 
8,531

 
 
 
9,048

 
Long-term debt
 
18,005

 
 
 
18,002

 
Participants’ share and royalties payable
 
1,556

 
 
 
1,546

 
Pension and postretirement benefit obligations
 
2,092

 
 
 
2,121

 
Deferred income tax liabilities, net
 
639

 
 
 
500

 
Operating lease liabilities
 
1,841

 
 
 
1,909

 
Program rights obligations
 
316

 
 
 
356

 
Other liabilities
 
2,274

 
 
 
2,494

 
Redeemable noncontrolling interest
 
270

 
 
 
254

 
 
 


 
 
 


 
Commitments and contingencies
 


 
 
 


 
 
 


 
 
 


 
ViacomCBS stockholders equity:
 


 
 
 


 
Class A Common Stock, par value $.001 per share; 55 shares authorized;
52 (2020 and 2019) shares issued
 





 
Class B Common Stock, par value $.001 per share; 5,000 shares authorized;
1,065 (2020) and 1,064 (2019) shares issued
 
1




1

 
Additional paid-in capital
 
29,633




29,590

 
Treasury stock, at cost; 502 (2020) and 501 (2019) Class B shares
 
(22,958
)



(22,908
)
 
Retained earnings
 
8,827




8,494

 
Accumulated other comprehensive loss
 
(2,054
)



(1,970
)
 
Total ViacomCBS stockholders’ equity
 
13,449

 
 
 
13,207

 
Noncontrolling interests
 
72




82

 
Total Equity
 
13,521

 
 
 
13,289

 
Total Liabilities and Equity
 
$
49,045

 
 
 
$
49,519

 
See notes to consolidated financial statements.

-5-


VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
 
Three Months Ended
 
March 31,
 
2020

2019
Operating Activities:
 
 
 
Net earnings (ViacomCBS and noncontrolling interests)
$
519


$
1,964

Less: Net earnings from discontinued operations, net of tax
8


13

Net earnings from continuing operations
511


1,951

Adjustments to reconcile net earnings from continuing operations to net cash flow provided
by operating activities:





Depreciation and amortization
113


106

Deferred tax provision (benefit)
149


(571
)
Stock-based compensation
88


56

Gain on sale of assets


(549
)
Gain on marketable securities


(38
)
Equity in loss of investee companies, net of tax and distributions
9


17

Change in assets and liabilities
(514
)

(43
)
Net cash flow provided by operating activities
356


929

Investing Activities:





Investments
(46
)

(99
)
Capital expenditures
(51
)

(67
)
Acquisitions, net of cash acquired


(359
)
Proceeds from dispositions
146


741

Other investing activities


3

Net cash flow provided by investing activities
49


219

Financing Activities:





Repayments of short-term debt borrowings, net
(186
)

(674
)
Proceeds from issuance of senior notes


493

Repayment of notes and debentures


(600
)
Dividends
(152
)

(150
)
Purchase of Company common stock
(58
)

(14
)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation
(50
)

(41
)
Other financing activities
(33
)

(32
)
Net cash flow used for financing activities
(479
)

(1,018
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(29
)

1

Net (decrease) increase in cash, cash equivalents and restricted cash
(103
)

131

Cash, cash equivalents and restricted cash at beginning of period
(includes $202 (2020) and $120 (2019) of restricted cash)
834


976

Cash, cash equivalents and restricted cash at end of period
(includes $142 (2020) and $121 (2019) of restricted cash)
$
731


$
1,107

See notes to consolidated financial statements.

-6-


VIACOMCBS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited; in millions)
 
Three Months Ended March 31, 2020
 
Class A and B Common Stock
Additional Paid-In Capital
Treasury
Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total ViacomCBS Stockholders’ Equity
 
Non-Controlling Interests
 
Total Equity
 
(Shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
615

 
$
1

 
$
29,590

 
$
(22,908
)
 
 
$
8,494

 
 
 
$
(1,970
)
 
 
 
$
13,207

 
 
 
$
82

 
 
$
13,289

Stock-based compensation
activity and other
1

 

 
43

 

 
 

 
 
 

 
 
 
43

 
 
 

 
 
43

Class B Common Stock
purchased
(1
)
 

 

 
(50
)
 
 

 
 
 

 
 
 
(50
)
 
 
 

 
 
(50
)
Dividends

 

 

 

 
 
(150
)
 
 
 

 
 
 
(150
)
 
 
 

 
 
(150
)
Noncontrolling interests

 

 
 
 

 
 
(33
)
 
 
 

 
 
 
(33
)
 
 
 
(10
)
 
 
(43
)
Net earnings

 

 

 

 
 
516

 
 
 

 
 
 
516

 
 
 
3

 
 
519

Other comprehensive
loss

 

 

 

 
 

 
 
 
(84
)
 
 
 
(84
)
 
 
 
(3
)
 
 
(87
)
March 31, 2020
615

 
$
1

 
$
29,633

 
$
(22,958
)
 
 
$
8,827

 
 
 
$
(2,054
)
 
 
 
$
13,449

 
 
 
$
72

 
 
$
13,521

 
Three Months Ended March 31, 2019
 
Class A and B Common Stock
Additional Paid-In Capital
Treasury
Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total ViacomCBS Stockholders’ Equity
 
Non-Controlling Interests
 
Total Equity
 
(Shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
613

 
$
1

 
$
49,907

 
$
(43,420
)
 
 
$
5,569

 
 
 
$
(1,608
)
 
 
 
$
10,449

 
 
 
$
54

 
 
$
10,503

Stock-based compensation
activity and other
2

 

 
20

 
8

 
 
(4
)
 
 
 

 
 
 
24

 
 
 

 
 
24

Dividends

 

 

 

 
 
(150
)
 
 
 

 
 
 
(150
)
 
 
 

 
 
(150
)
Noncontrolling interests

 

 

 

 
 
(10
)
 
 
 

 
 
 
(10
)
 
 
 
(13
)
 
 
(23
)
Net earnings

 

 

 

 
 
1,959

 
 
 

 
 
 
1,959

 
 
 
5

 
 
1,964

Reclassification of income
tax effect of the Tax
Reform Act

 

 

 

 
 
230

 
 
 
(230
)
 
 
 

 
 
 

 
 

Other comprehensive
income

 

 

 

 
 

 
 
 
27

 
 
 
27

 
 
 
3

 
 
30

March 31, 2019
615

 
$
1

 
$
49,927

 
$
(43,412
)
 
 
$
7,594

 
 
 
$
(1,811
)
 
 
 
$
12,299

 
 
 
$
49

 
 
$
12,348

See notes to consolidated financial statements.


-7-



VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)

1) BASIS OF PRESENTATION
Description of Business-ViacomCBS Inc. is comprised of the following segments: TV Entertainment (CBS Television Network, CBS Television Studios, CBS Television Distribution, CBS Interactive, CBS Sports Network, CBS Television Stations and CBS-branded streaming services), 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), Filmed Entertainment (Paramount Pictures, Paramount Players, Paramount Animation and Paramount Television Studios) and Publishing (Simon & Schuster). References to “ViacomCBS”, the “Company”, “we”, “us” and “our” refer to ViacomCBS Inc. and its consolidated subsidiaries, unless the context otherwise requires.

Basis of Presentation-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. (“ViacomCBS”). 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.

The accompanying unaudited consolidated financial statements have been prepared on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the more detailed financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

In the opinion of management, the accompanying unaudited financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. Certain previously reported amounts have been reclassified to conform to the current presentation.

Use of Estimates-The preparation of our financial statements in conformity with 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 at the date of the financial statements and the reported amounts 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.

The coronavirus disease (“COVID-19”) pandemic has negatively impacted, and may continue to negatively impact, the macroeconomic environment in the United States and globally, including our business, financial condition and results of operations. Due to the evolving and uncertain nature of COVID-19, it is reasonably possible that it could materially impact our estimates, particularly those that require consideration of forecasted financial information, in the near to medium term. These estimates relate to certain accounts including, but not limited to, receivables, programming and other inventory, deferred income tax assets, finite and indefinite lived intangible assets, including goodwill and FCC licenses, and other long-lived assets. The magnitude of the impact will depend on numerous evolving factors that we may not be able to accurately predict, including the duration and extent of the pandemic, the impact of federal, state, local and foreign governmental actions, consumer behavior in

-8-


VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

response to the pandemic and such governmental actions, and the economic and operating conditions that we may face in the aftermath of COVID-19.
Net Earnings per Common Share-Basic net earnings per share (“EPS”) is based upon net earnings divided by the weighted average number of common shares outstanding during the period. 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. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, were 26 million and 22 million stock options and RSUs for the three months ended March 31, 2020 and 2019, respectively.

The table below presents a reconciliation of weighted average shares used in the calculation of basic and diluted EPS.
 
Three Months Ended
 
March 31,
(in millions)
2020
 
2019
Weighted average shares for basic EPS
614

 
613

Dilutive effect of shares issuable under stock-based
compensation plans
2

 
4

Weighted average shares for diluted EPS
616

 
617


Recently Adopted Accounting Pronouncements
Improvements to Accounting for Costs of Films and License Agreements for Program Materials
On January 1, 2020, we adopted Financial Accounting Standards Board (“FASB”) 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 of the adoption of this guidance, the capitalization of costs incurred to produce episodic television series is no longer limited to the amount of revenue contracted in the initial market until persuasive evidence of a secondary market exists. In addition, under this guidance our film and television programming is tested for impairment individually on a title-by-title basis, or together with other films and television programming as part of a group, based on the predominant monetization strategy of the film or television programming. Further, for programming monetized in a film group, this guidance requires any changes to the estimated use of the film or television series to be accounted for prospectively. This guidance also eliminates existing balance sheet classification guidance and adds new disclosure requirements relating to costs for acquired and internally-produced programming. As a result of this guidance, beginning in the first quarter of 2020, all of our programming inventory, other than prepayments for the rights to air sporting and other live events, is now classified as noncurrent on the Consolidated Balance Sheet. Therefore, $1.17 billion of programing inventory that was classified in current assets at December 31, 2019 was reclassified to noncurrent assets on January 1, 2020. This guidance did not have a material impact on the Consolidated Statement of Operations. See Note 2 for additional disclosures relating to the adoption of this guidance.

Collaborative Arrangements: Clarifying the Interaction with the New Revenue Standard
On January 1, 2020, we adopted FASB guidance on the accounting for collaborative arrangements, which clarifies that certain transactions between parties to collaborative arrangements should be accounted for in accordance with FASB revenue guidance when the counterparty is a customer. The adoption of this guidance did not have a material impact on our consolidated financial statements.


-9-


VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract
On January 1, 2020, we adopted FASB 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. Under this guidance, such implementation costs will be capitalized in “Other assets” on the Consolidated Balance Sheet, with the related amortization presented in “Selling, general and administrative expenses” on the Consolidated Statement of Operations. This guidance was applied prospectively to implementation costs incurred after January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Financial Instruments
On January 1, 2020, we adopted FASB guidance on the accounting for credit losses on financial instruments. Among other provisions, this guidance introduces a new impairment model for most financial assets and certain other instruments. The guidance applies primarily to our trade and other receivables, and requires the use of a forward-looking “expected loss” model instead of the “incurred loss” model that was used under previous FASB guidance for determining an allowance for credit losses. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Not Yet Adopted
Reference Rate Reform
In March 2020, the FASB issued guidance providing optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact of the changes in reference rates and the exemptions and exceptions in this guidance on our consolidated financial statements.

Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued guidance on the accounting for income taxes that, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. 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 assets and liabilities. Under existing 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 periods beginning after December 15, 2020, with early adoption permitted.


-10-


VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued amended guidance that eliminates, adds and clarifies certain disclosure requirements for defined benefit pension or other postretirement plans. The amendments affect annual disclosures only and are effective for our fiscal year ending on December 31, 2020. The amendments are required to be applied retrospectively. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.
2) PROGRAMMING AND OTHER INVENTORY
We 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, and in theaters. We also produce programming for third parties. Programming inventory costs for both acquired and internally-produced content are recorded within the noncurrent 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. For television programs that are predominantly monetized as part of a film group, capitalized production costs are amortized based on an estimate of the timing of our usage of and benefit from such programming. For 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 upon the ratio of current period revenues to estimated remaining total gross revenues to be earned (“Ultimate Revenues”) for each title.

Acquired Programming Rights
Our acquired programming rights are predominantly monetized in film groups together with certain internally-produced programming and other acquired programming rights. Costs incurred in acquiring program rights, including advances, are 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 the timing of our usage of and benefit from such programming.

We test a film group or individual television program or feature film for impairment when events or circumstances indicate that its fair value may be less than its unamortized cost. An impairment charge will then be recorded for any difference between the carrying value and estimated fair value of the film group or individual television program or feature film. In addition, unamortized costs for internally-produced or acquired programming that have been substantively abandoned are written off.

-11-


VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

The following tables present our programming and other inventory by type at March 31, 2020 and December 31, 2019. Programming inventory at March 31, 2020 has been grouped according to the predominant monetization strategy in accordance with new FASB guidance adopted in the first quarter of 2020 (see Note 1).
 
At
 
March 31, 2020
Film Group Monetization:
 
 
 
Acquired television program rights, including prepaid sports rights
 
$
3,110

 
Internally produced television programming:
 
 
 
Released
 
2,702

 
In process and other
 
1,464

 
 
 
 
 
Individual Monetization:
 
 
 
Acquired television library
 
99

 
Film inventory:
 
 
 
Released
 
487

 
Completed, not yet released
 
73

 
In process and other
 
1,070

 
Internally produced television programming:
 
 
 
Released
 
1,273

 
In process and other
 
1,033

 
Home entertainment and Publishing, primarily finished goods
 
103

 
Total programming and other inventory
 
11,414

 
Less current portion
 
1,431

 
Total noncurrent programming and other inventory
 
$
9,983

 

 
At
 
December 31, 2019
Acquired television program rights, including prepaid sports rights
 
$
3,477

 
Acquired television library
 
99

 
Internally produced television programming:
 
 
 
Released
 
3,627

 
In process and other
 
2,626

 
Film inventory:
 
 
 
Released
 
502

 
Completed, not yet released
 
55

 
In process and other
 
1,037

 
Home entertainment and Publishing, primarily finished goods
 
105

 
Total programming and other inventory
 
11,528

 
Less current portion
 
2,876

 
Total noncurrent programming and other inventory
 
$
8,652

 

During the three months ended March 31, 2020, we amortized programming costs of $973 million for acquired programming, production costs of $770 million for internally-produced television and film programming monetized individually and production costs of $689 million for internally-produced television and film programming monetized as part of a film group, which are included within “Operating expenses” in the Consolidated Statement of Operations.

-12-


VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

3) RESTRUCTURING CHARGES AND OTHER CORPORATE MATTERS
During the three months ended March 31, 2020 and 2019, we recorded restructuring charges, merger-related costs, and costs for other corporate matters as follows:


Three Months Ended

March 31,

2020

2019
Severance
$
176

 
$
98

Exit costs
26

 
30

Restructuring charges
202

 
128

Merger-related costs
31

 

Other corporate matters

 
50

Restructuring and other corporate matters
$
233

 
$
178

 
 
 
 
Depreciation of abandoned technology
$
12

 
$


Restructuring Charges
During the three months ended March 31, 2020, we recorded restructuring charges of $202 million associated with cost-transformation initiatives in connection with the Merger in an effort to reduce redundancies across our businesses. These charges primarily include severance costs and the acceleration of stock-based compensation. During the three months ended March 31, 2019, we recorded restructuring charges of $128 million, primarily for severance costs associated with 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. Restructuring charges for the three months ended March 31, 2020 and 2019 also included exit costs resulting from the termination of contractual obligations.

The following is a rollforward of our restructuring liability, which is recorded in “Other current liabilities” and “Other liabilities” on the Consolidated Balance Sheets. The remaining restructuring liability at March 31, 2020, which primarily relates to severance payments, is expected to be substantially paid by the end of 2021.
 
Balance at
 
2020 Activity
 
Balance at
 
December 31, 2019
 
Charges (a)
 
Payments
 
Other
 
March 31, 2020
TV Entertainment
 
$
99

 
 
$
28


 
$
(21
)
 

$
(1
)
 
 
$
105

 
Cable Networks
 
137

 
 
96


 
(16
)
 

(1
)
 
 
216

 
Filmed Entertainment
 
17

 
 
1


 
(3
)
 

1

 
 
16

 
Publishing
 
4

 
 
1


 
(1
)
 


 
 
4

 
Corporate
 
143

 
 
42


 
(58
)
 

(3
)
 
 
124

 
Total
 
$
400

 
 
$
168

 
 
$
(99
)
 

$
(4
)
 
 
$
465

 

(a) Excludes stock-based compensation expense of $34 million.
Merger-related Costs and Other Corporate Matters
For the three months ended March 31, 2020, in addition to the above-mentioned restructuring charges, we incurred merger-related costs of $31 million, consisting of transaction-related bonuses and professional fees mainly associated with integration activities. During the three months ended March 31, 2019, we incurred costs of $50 million, primarily in connection with the settlement of a commercial dispute and other legal proceedings involving the Company.

-13-


VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

In addition, during the three months ended March 31, 2020, we recorded accelerated depreciation expense of $12 million resulting from the abandonment of technology in connection with synergy plans related to the Merger, which is recorded in “Depreciation and amortization” in the Consolidated Statement of Operations.
4) RELATED PARTIES
National Amusements, Inc. NAI is the controlling stockholder of ViacomCBS. 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 and the non-executive Chair of our Board of Directors. At March 31, 2020, NAI directly or indirectly owned approximately 79.4% of our voting Class A Common Stock and 10.2% 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 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.

Other Related 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 presents the amounts recorded in our consolidated financial statements related to these transactions.
 
Three Months Ended
 
March 31,
 
2020
 
2019
Revenues
$
52

 
$
55

Operating expenses
$
2

 
$
1

 
At
 
At
 
March 31, 2020
 
December 31, 2019
Amounts due to/from other related parties
 
 
 
 
 
 
 
Accounts receivable
 
$
39

 
 
 
$
45

 
Accounts payable
 
$
1

 
 
 
$
3

 


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.
5) REVENUES
The following table presents our revenues disaggregated into categories based on the nature of such revenues.
 
Three Months Ended
 
March 31,
 
2020
 
2019
Revenues by Type:
 
 
 
Advertising
$
2,484

 
$
3,066

Affiliate
2,197

 
2,165

Content licensing
1,594

 
1,465

Theatrical
167

 
172

Publishing
170

 
164

Other
57

 
68

Total Revenues
$
6,669

 
$
7,100



-14-


VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

Receivables
Reserves for accounts receivable reflect our expected credit losses based on historical experience as well as current and expected economic conditions. Our allowance for credit losses was $86 million at both March 31, 2020 and December 31, 2019.

Included in “Other Assets” on the Consolidated Balance Sheets are noncurrent receivables of $2.00 billion and $2.15 billion at March 31, 2020 and December 31, 2019, respectively. Noncurrent 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 collected over the term of the license period. The year of origination for these receivables at March 31, 2020 was $197 million in 2020, $1.02 billion in 2019, $491 million in 2018, $218 million in 2017, $41 million in 2016 and $24 million prior to 2016.

Contract Liabilities
Contract liabilities are included within “Deferred revenues” and “Other liabilities” on the Consolidated Balance Sheets and were $856 million and $910 million at March 31, 2020 and December 31, 2019, respectively. The change in contract liabilities for the three months ended March 31, 2020 primarily reflects $277 million of revenues recognized that were included in deferred revenues at December 31, 2019 offset by cash payments received during the period for which the performance obligation was not satisfied prior to the end of the period. For the three months ended March 31, 2019, we recognized revenues of $214 million that were included in deferred revenues at December 31, 2018.

Unrecognized Revenues Under Contract
As of March 31, 2020, unrecognized revenues attributable to unsatisfied performance obligations under our long-term contracts was $7.81 billion, of which $3.52 billion is expected to be recognized for the remainder of 2020, $2.43 billion in 2021, $1.26 billion in 2022, and $598 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 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 contract 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 our right to invoice corresponds with the value of the programs provided to the customer.

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 three months ended March 31, 2020 and 2019, we recognized revenues of approximately $74 million and $121 million, respectively, in our Filmed Entertainment segment for performance obligations satisfied, or partially satisfied, in a prior period.

-15-


VIACOMCBS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share amounts)

6) DEBT
Our debt consists of the following:

At
 
At

March 31, 2020
 
December 31, 2019
Commercial paper

$
312

 
 
 
$
699


Short-term bank borrowings
 
200





 
4.30% Senior Notes due 2021
 
300

 
 
 
300

 
4.50% Senior Notes due 2021
 
499

 
 
 
499

 
3.875% Senior Notes due 2021
 
598

 
 
 
597

 
2.250% Senior Notes due 2022
 
49

 
 
 
49

 
3.375% Senior Notes due 2022
 
698

 
 
 
698

 
3.125% Senior Notes due 2022
 
194

 
 
 
194

 
2.50% Senior Notes due 2023
 
398

 
 
 
398

 
3.25% Senior Notes due 2023
 
181

 
 
 
181

 
2.90% Senior Notes due 2023
 
397

 
 
 
396

 
4.25% Senior Notes due 2023
 
1,242

 
 
 
1,242

 
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

 
 
 
598

 
3.50% Senior Notes due 2025
 
592

 
 
 
592

 
4.00% Senior Notes due 2026
 
789

 
 
 
789

 
3.45% Senior Notes due 2026
 
123

 
 
 
123

 
2.90% Senior Notes due 2027
 
688

 
 
 
688

 
3.375% Senior Notes due 2028
 
494

 
 
 
494

 
3.70% Senior Notes due 2028
 
491

 
 
 
491

 
4.20% Senior Notes due 2029
 
493

 
 
 
493

 
7.875% Senior Debentures due 2030
 
831

 
 
 
831

 
5.50% Senior Debentures due 2033
 
426

 
 
 
426

 
4.85% Senior Debentures due 2034
 
87

 
 
 
87

 
6.875% Senior Debentures due 2036