PARAMOUNT GLOBAL EffectiveFebruary 16, 2022 , we changed our name fromViacomCBS Inc. toParamount Global . Management's discussion and analysis of the results of operations and financial condition ofParamount Global should be read in conjunction with the consolidated financial statements and related notes in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , which was filed prior to our name change. References in this document to "Paramount ," the "Company," "we," "us" and "our" refer toParamount Global .
Significant components of management's discussion and analysis of results of operations and financial condition include:
•Overview-Summary of our business and operational highlights.
•Consolidated Results of Operations-Analysis of our results on a consolidated basis for the three and six months endedJune 30, 2022 compared with the three and six months endedJune 30, 2021 . •Segment Results of Operations-Analysis of our results on a reportable segment basis for the three and six months endedJune 30, 2022 compared with the three and six months endedJune 30, 2021 . •Liquidity and Capital Resources-Discussion of our cash flows, including sources and uses of cash, for the six months endedJune 30, 2022 andJune 30, 2021 ; and our outstanding debt as ofJune 30, 2022 .
•Legal Matters-Discussion of legal matters in which we are involved.
-33-
--------------------------------------------------------------------------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Overview
Operational Highlights - Three Months Ended
Consolidated results of operations Increase/(Decrease) Three Months Ended June 30, 2022 2021 $ % GAAP: Revenues$ 7,779 $ 6,564 $ 1,215 19 % Operating income$ 819 $ 1,226 $ (407) (33) %
Net earnings from continuing operations
attributable to Paramount$ 358 $ 995 $ (637) (64) %
Diluted EPS from continuing operations
attributable to Paramount$ .53 $ 1.50 $ (.97) (65) % Non-GAAP: (a) Adjusted OIBDA$ 963 $ 1,240 $ (277) (22) % Adjusted net earnings from continuing operations attributable to Paramount$ 429 $ 640 $ (211) (33) %
Adjusted diluted EPS from continuing operations
attributable to Paramount$ .64 $ .97 $ (.33) (34) % (a) Certain items identified as affecting comparability are excluded in non-GAAP results. See "Reconciliation of Non-GAAP Measures" for details of these items and reconciliations of non-GAAP results to the most directly comparable financial measures in accordance with accounting principles generally accepted inthe United States ("GAAP"). For the three months endedJune 30, 2022 , revenues increased 19% to$7.78 billion , driven by the box office success of our second quarter theatrical releases, Top Gun: Maverick and Sonic the Hedgehog 2; significant increases in revenues from our direct-to-consumer streaming services ("DTC services"), led by Paramount+; and higher content licensing, mainly reflecting an increase in programming produced for third parties, the monetization of recent theatrical releases, and increased international licensing. These increases were partially offset by a decline in advertising revenues for our broadcast and cable networks. Operating income for the three months endedJune 30, 2022 decreased 33% from the same prior-year period. This comparison was impacted by a net gain on sales of$116 million in 2021, principally from the sale of a noncore trademark licensing operation. Adjusted operating income before depreciation and amortization ("Adjusted OIBDA"), which excludes this gain, as well as charges for restructuring and other corporate matters, decreased 22%, mainly as a result of an increased investment in our DTC services. For the three months endedJune 30, 2022 , net earnings from continuing operations attributable toParamount and diluted earnings per share ("EPS") from continuing operations decreased 64% and 65%, respectively, from the same prior-year period as a result of the decline in operating income and a higher effective tax rate in 2022. The effective tax rate was higher in 2022 because of a discrete tax benefit of$260 million recorded in the 2021 period to remeasure ourUK net deferred income tax asset as a result of the enactment of an increase in theUK corporate income tax rate. Adjusted net earnings from continuing operations attributable toParamount and adjusted diluted EPS, which exclude discrete tax benefits in each period, a loss on extinguishment of debt in the current-year period, and net gains from investments in the prior-year period, as well as the items impacting the comparability of operating income listed above, decreased 33% and 34%, respectively, primarily reflecting the lower Adjusted OIBDA. -34- -------------------------------------------------------------------------------- Management's Discussion and Analysis of Results of Operations and Financial Condition (Continued) (Tabular dollars in millions, except per share amounts)
Operational Highlights - Six Months Ended
Consolidated results of operations Increase/(Decrease) Six Months Ended June 30, 2022 2021 $ % GAAP: Revenues$ 15,107 $ 13,976 $ 1,131 8 % Operating income$ 1,594 $ 2,754 $ (1,160) (42) % Net earnings from continuing operations attributable to Paramount$ 749 $ 1,894 $ (1,145) (60) % Diluted EPS from continuing operations attributable to Paramount$ 1.11 $ 2.93 $ (1.82) (62) % Non-GAAP: (a) Adjusted OIBDA$ 1,876 $ 2,867 $ (991) (35) % Adjusted net earnings from continuing operations attributable to Paramount$ 832 $ 1,601 $ (769) (48) % Adjusted diluted EPS from continuing operations attributable to Paramount$ 1.24 $ 2.47 $ (1.23) (50) % (a) Certain items identified as affecting comparability are excluded in non-GAAP results. See "Reconciliation of Non-GAAP Measures" for details of these items and reconciliations of non-GAAP results to the most directly comparable financial measures in accordance with GAAP. For the six months endedJune 30, 2022 , revenues increased 8% to$15.11 billion , driven by significant growth in revenues from our DTC services, including Paramount+ and Pluto TV, and the success of our current year theatrical releases. These increases were partially offset by lower advertising revenues for our broadcast and cable networks, driven by the benefit in 2021 fromCBS' broadcast of theSuper Bowl , reflecting the rotational nature of the rights to air this event. The absence of theSuper Bowl negatively impacted the total revenue comparison by 4-percentage points. Operating income for the six months endedJune 30, 2022 decreased 42% from the same prior-year period. The operating income comparison was impacted by higher charges in 2022 for restructuring and other corporate matters, as well as the net gain on sales in 2021 discussed above. Adjusted OIBDA, which excludes these items, decreased 35%, driven by increased investment in our DTC services, the benefit to the 2021 period from the broadcast of theSuper Bowl , higher costs from the mix of programming on our linear networks, and lower profits from the licensing of films. For the six months endedJune 30, 2022 , net earnings from continuing operations attributable toParamount and diluted EPS from continuing operations decreased 60% and 62%, respectively, from the same prior-year period as a result of the decline in operating income, as well as a higher effective tax rate in 2022. The higher effective tax rate was the result of lower discrete tax benefits in the current year, which included a net benefit of$81 million compared with$289 million for the prior-year period. Adjusted net earnings from continuing operations attributable toParamount and adjusted diluted EPS, which exclude discrete tax benefits and a loss on extinguishment of debt in each period, net gains from investments in 2021, and the items impacting the comparability of operating income noted above, decreased 48% and 50%, respectively, primarily reflecting the lower Adjusted OIBDA. -35- --------------------------------------------------------------------------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Reconciliation of Non-GAAP Measures
Results for the three and six months endedJune 30, 2022 and 2021 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 toParamount , 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, provision/benefit for income taxes, net earnings from continuing operations attributable toParamount 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.
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Operating income (GAAP) $ 819 $ 1,226 $ 1,594 $ 2,754
Depreciation and amortization 94 95 190 194
Restructuring and other corporate matters (a) 50 35 107 35
Net gain on sales (a) - (116) (15) (116)
Adjusted OIBDA (Non-GAAP) $ 963 $ 1,240 $ 1,876 $ 2,867 (a) See notes on the following tables for additional information on items affecting comparability.
-36-
--------------------------------------------------------------------------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Three Months Ended June 30, 2022
Earnings from Continuing Net Earnings from
Operations Before Income Provision for Income Continuing Operations Diluted EPS from
Taxes Taxes Attributable to Paramount Continuing Operations
Reported (GAAP) $ 519 $ (129) $ 358 $ .53
Items affecting comparability:
Restructuring and other corporate
matters (a) 50 (12) 38 .06
Loss on extinguishment of debt 47 (11) 36 .05
Discrete tax items - (3) (3) -
Adjusted (Non-GAAP) $ 616 $ (155) $ 429 $ .64
(a) Reflects restructuring charges of $10 million consisting of severance costs
primarily associated with changes in management related to the realignment of
our operating segments, as well as a charge of $40 million associated with
litigation described under Legal Matters-Stockholder Matters.
Three Months Ended June 30, 2021
Earnings from Continuing Net Earnings from
Operations Before Income (Provision) Benefit for Continuing Operations Diluted EPS from
Taxes Income Taxes Attributable to Paramount Continuing Operations
Reported (GAAP) $ 1,018 $ 34 $ 995 $ 1.50
Items affecting comparability:
Restructuring and other corporate
matters (a) 35 (8) 27 .04
Net gain on sales (b) (116) 27 (89) (.13)
Net gains from investments (c) (32) 7 (25) (.04)
Discrete tax items (d) - (268) (268) (.40)
Adjusted (Non-GAAP) $ 905 $ (208) $ 640 $ .97 (a) Reflects the impairment of lease assets in connection with cost
transformation initiatives related to the merger of Viacom Inc. ("Viacom") with
and into
(b) Primarily reflects a gain on the sale of a noncore trademark licensing operation.
(c) Reflects a gain of
(d) Primarily reflects a benefit of$260 million to remeasure ourUK net deferred income tax asset as a result of the enactment inJune 2021 of an increase in theUK corporate income tax rate from 19% to 25% beginningApril 1, 2023 , as well as a net tax benefit in connection with the settlement of income tax audits. -37- -------------------------------------------------------------------------------- Management's Discussion and Analysis of Results of Operations and Financial Condition (Continued) (Tabular dollars in millions, except per share amounts) Six Months Ended June 30, 2022 Earnings from Continuing Net Earnings from Operations Before Income Provision for Income Continuing Operations Diluted EPS from Taxes Taxes Attributable to Paramount Continuing Operations Reported (GAAP)$ 989 $ (163) $ 749 $ 1.11 Items affecting comparability: Restructuring and other corporate matters (a) 107 (24) 83 .13 Net gain on sales (b) (15) 4 (11) (.02) Loss on extinguishment of debt 120 (28) 92 .14 Discrete tax items (c) - (81) (81) (.12) Adjusted (Non-GAAP)$ 1,201 $ (292) $ 832 $ 1.24 (a) Comprised of charges of$28 million for restructuring, consisting of severance costs;$39 million recorded followingRussia's invasion ofUkraine , principally to reserve against amounts due from counterparties inRussia ,Belarus andUkraine ; and$40 million associated with litigation described under Legal Matters-Stockholder Matters.
(b) Reflects a gain from the sale of international intangible assets and a working capital adjustment to the gain from the fourth quarter 2021 sale of CBS Studio Center.
(c) Primarily reflects a deferred tax benefit resulting from the transfer of
intangible assets between our subsidiaries in connection with a reorganization
of our international operations.
Six Months Ended June 30, 2021
Earnings from Continuing Net Earnings from
Operations Before Income Provision for Income Continuing Operations Diluted EPS from
Taxes Taxes Attributable to Paramount Continuing Operations
Reported (GAAP) $ 2,173 $ (192) $ 1,894 $ 2.93
Items affecting comparability:
Restructuring and other corporate
matters (a) 35 (8) 27 .04
Net gain on sales (b) (116) 27 (89) (.14)
Loss on extinguishment of debt 128 (30) 98 .15
Net gains from investments (c) (52) 12 (40) (.06)
Discrete tax items (d) - (289) (289) (.45)
Adjusted (Non-GAAP) $ 2,168 $ (480) $ 1,601 $ 2.47 (a) Reflects the impairment of lease assets in connection with cost transformation initiatives related to the Merger.
(b) Primarily reflects a gain on the sale of a noncore trademark licensing operation.
(c) Reflects a gain of $37 million on the sale of an investment and an increase
in the fair value of a marketable security of
(d) Primarily reflects a benefit of$260 million to remeasure ourUK net deferred income tax asset as a result of the enactment inJune 2021 of an increase in theUK corporate income tax rate from 19% to 25% beginningApril 1, 2023 , as well as a net tax benefit in connection with the settlement of income tax audits. -38-
--------------------------------------------------------------------------------
© Edgar Online, source
