Viacom Reports Full Year and Fourth Quarter 2006 Results

Mar 01, 2007, 00:00 ET from Viacom

    NEW YORK, March 1 /PRNewswire-FirstCall/ -- Viacom Inc. (NYSE:   VIA and
 VIA.B) today reported financial results for the full year and fourth
 quarter ended December 31, 2006.
     Reported Results
                              Quarter Ended                  Year Ended
                               December 31,                  December 31,
     (in millions,                         2006                          2006
     except per share                       vs.                           vs.
     amounts)           2006       2005    2005        2006       2005   2005
 
     Revenues        $3,592.5   $2,723.7     32%   $11,466.5   $9,609.6    19%
     Operating
      income(1)         829.6      412.6    101      2,771.8    2,366.4    17
     Net earnings -
       continuing
        operations      480.8      129.5    271      1,570.3    1,303.9    20
 
     Net earnings       480.8      129.5    271      1,592.1    1,256.9    27
 
     Diluted EPS -
       continuing
        operations      $0.69      $0.17    306        $2.19      $1.73    27
 
     Diluted EPS        $0.69      $0.17    306%       $2.22      $1.67    33%
 
     (1) Operating income on a reported basis by segment is provided in a table
         on page 8.
 
 
 
     Adjusted Results
     This release includes adjusted financial information for 2006 and
 adjusted pro forma financial information for 2005 that is comparable to the
 Company's previously issued Business Outlook for the full year 2006 (see
 Basis of Presentation on page 5 of this release). For the full year 2006,
 adjusted operating income rose 10% to $2.86 billion from adjusted pro forma
 2005 results of $2.60 billion. Adjusted net earnings from continuing
 operations for the full year 2006 increased 10% to $1.48 billion compared
 to adjusted pro forma 2005 net earnings from continuing operations of $1.35
 billion. Adjusted net earnings per diluted share from continuing operations
 for the year was $2.07, up 16% from an adjusted pro forma 2005 of $1.79.
     Sumner M. Redstone, Executive Chairman of Viacom, said, "Viacom
 delivered solid results for 2006, guided by a new management team under the
 leadership of Philippe Dauman, who has moved quickly to put the Company
 back on a steady path of success. I have great confidence that we will
 continue to build on the momentum of the last several months both in
 expanding our digital horizons and continuing to grow in traditional
 markets."
     Philippe P. Dauman, President and Chief Executive Officer of Viacom,
 said, "We are making significant progress financially and operationally to
 ensure that we thrive in all distribution channels, including the evolving
 digital marketplace. Financially, our 2006 performance was strong, with
 double digit growth in revenues and operating income and 16% growth in
 adjusted net earnings per share.
     "During the first quarter of this year, we took decisive steps to
 deploy our capital in more productive ways, including restructuring our
 operations here and abroad. At the same time, we continued to introduce
 popular new programming on our linear channels, to expand our digital
 operations organically and to reach innovative agreements with new digital
 partners. Additionally, we continue to expand on our position as a leading
 global provider of digital wireless video, and to innovate with new online
 sites and experiences."
     Revenues
     Full Year 2006 revenues of $11.47 billion rose 19% from $9.61 billion
 in 2005, reflecting a 7% increase in Media Networks revenues to $7.24
 billion, led by an increase of 11% in affiliate revenues to $2.03 billion.
 Worldwide advertising revenues were up 6% to $4.29 billion, while ancillary
 revenues grew 2% to $916 million. In 2006, acquisitions contributed $125
 million in incremental revenues to Media Networks. The increase of 46% in
 Filmed Entertainment revenues to $4.38 billion in 2006 from $3.00 billion
 in 2005 principally reflected the acquisition of DreamWorks and
 distribution activities for DreamWorks Animation and the DreamWorks
 live-action library, which contributed $1.36 billion to 2006 revenues.
     Fourth Quarter 2006 revenues of $3.59 billion grew 32% from $2.72
 billion in 2005. Media Networks revenues rose 4% to $2.08 billion from
 $1.99 billion in 2005 led by growth in affiliate revenues which were up 14%
 to $532 million. Worldwide advertising revenues rose 6% to $1.26 billion
 from $1.19 billion in 2005. Ancillary revenues declined 15% in the quarter
 versus 2005 to $289 million, principally due to timing and mix of home
 entertainment releases. Acquisitions contributed $78 million in incremental
 revenues to Media Networks in the quarter. Filmed Entertainment revenues
 doubled to $1.57 billion, with the acquisition of DreamWorks and the
 distribution activities for DreamWorks Animation and the DreamWorks
 live-action library films contributing revenues of $560 million.
     Revenues              Quarter Ended                   Year Ended
                            December 31,                   December 31,
                                           2006                          2006
                                            vs.                           vs.
     (in millions)      2006       2005    2005       2006       2005    2005
 
     Media Networks  $2,080.2   $1,994.1      4%   $7,240.9   $6,757.8      7%
 
     Filmed
      Entertainment   1,574.5      787.6    100     4,379.2    2,995.3     46
 
     Eliminations       (62.2)     (58.0)     7      (153.6)    (143.5)     7
 
         Total       $3,592.5   $2,723.7     32%  $11,466.5   $9,609.6     19%
     Full Year 2006 adjusted operating income rose 10% to $2.86 billion
 compared to adjusted pro forma 2005 operating income of $2.60 billion.
 Incremental equity related compensation expense reduced 2006 adjusted
 operating income by $52 million ($20 million and $7 million in Media
 Networks and Filmed Entertainment segments, respectively). Media Networks
 adjusted operating income rose 10% to $2.92 billion in 2006 from adjusted
 pro forma 2005 results of $2.66 billion. Filmed Entertainment adjusted
 operating income was $137 million in 2006, up 18% from an adjusted pro
 forma 2005 operating income of $116 million. Corporate expenses reduced
 2006 adjusted operating income by $197 million in 2006 and increased $27
 million from adjusted pro forma expense in 2005.
     Fourth Quarter 2006 adjusted operating income was up 28% to $856
 million compared to adjusted pro forma 2005 results of $670 million.
 Incremental 2006 equity related compensation expense reduced adjusted
 operating income by $21 million in the quarter ($6 million and $1 million
 in Media Networks and Filmed Entertainment segments, respectively). Media
 Networks adjusted operating income was $810 million, up 6% versus adjusted
 pro forma 2005 operating income of $762 million. Filmed Entertainment
 operating income in the quarter was $86 million, or $126 million higher
 than an adjusted pro forma 2005 operating loss of $40 million. Corporate
 expenses declined slightly in the fourth quarter of 2006 resulting in a
 reduction in adjusted operating income of $43 million in both comparable
 periods.
     Adjusted Operating    Quarter Ended                   Year Ended
     Income                 December 31,                   December 31,
                                           2006                           2006
                                            vs.                            vs.
     (in millions)       2006       2005   2005        2006       2005    2005
 
     Media Networks    $809.9     $761.7    6%     $2,919.0   $2,657.9     10%
 
     Filmed
      Entertainment      86.3      (39.6)   NM        137.1      116.3     18
 
     Corporate          (42.6)     (42.8)   -        (196.6)    (169.4)    16
 
     Eliminations         2.0       (9.7)   NM          0.3       (5.3)    NM
 
         Total         $855.6     $669.6   28%     $2,859.8   $2,599.5     10%
 
     NM = not meaningful
     Full Year 2006 adjusted net earnings from continuing operations
 increased 10% to $1.48 billion compared to adjusted pro forma 2005 net
 earnings from continuing operations in line with the 10% increase in
 adjusted operating income. Pre-tax interest expense increased $209 million
 from adjusted pro forma 2005, reflecting incremental average debt
 outstanding, partially offset by lower adjusted tax expense of $78 million.
 On a diluted basis, adjusted net earnings per share from continuing
 operations for the year was $2.07, up 16% from adjusted pro forma 2005 net
 earnings from continuing operations of $1.79. The increase reflects higher
 adjusted net earnings from continuing operations and fewer weighted average
 number of common shares outstanding due to the Company's stock repurchase
 program.
     Fourth Quarter 2006 adjusted net earnings from continuing operations
 increased 62% to $456 million compared to adjusted pro forma 2005 net
 earnings from continuing operations of $282 million. The increase is
 attributable to an increase of 28% in adjusted operating income, and lower
 tax expense of $45 million, partially offset by higher interest expense of
 $51 million in 2006. On a diluted basis adjusted net earnings per share
 from continuing operations in the quarter was $0.65.
     Debt
     At December 31, 2006 total debt outstanding, including capital leases
 increased to $7.65 billion, compared with $5.76 billion at December 31,
 2005. The increase was driven by the Company's stock repurchase program and
 acquisitions, primarily DreamWorks.
     Stock Repurchase Program
     The Company has in place a $3.00 billion stock repurchase program. For
 the quarter ended December 31, 2006, 8.4 million shares were repurchased
 for an aggregate purchase price of $324 million. For the year, the Company
 repurchased 60.3 million shares for an aggregate purchase price of $2.35
 billion. Through February 21, 2007, the Company acquired 62.5 million
 shares at a weighted average price per share of $38.96.
     Special Dividend to Former Viacom
     In accordance with the terms of the Separation Agreement, on December
 29, 2005 the Company paid a preliminary special dividend to Former Viacom
 of $5.40 billion. In January 2007, a full settlement was reached with and
 paid to CBS Corporation for an additional $170 million. The settlement
 amount was accrued in the Company's balance sheet as of December 31, 2006
 with a corresponding reduction in additional paid-in capital.
     Basis of Presentation
     Operating income, net earnings and diluted net earnings per share from
 continuing operations are presented on an adjusted basis that excludes
 discrete net charges related to Viacom corporate senior management changes
 of $73 million ($11 million in the fourth quarter), international
 restructuring charges of $15 million in the Media Networks segment in the
 fourth quarter, and net discrete tax credits of $142 million ($42 million
 in the fourth quarter). Reconciliations of adjusted 2006 results to
 reported 2006 results and other non-GAAP measures are provided in tables on
 page 12 included in this release.
     Viacom completed its separation from CBS Corporation (formerly Viacom
 Inc.) on December 31, 2005. Consequently, Viacom's reported results for
 2005 are presented on a "carve-out" basis consistent with the results
 presented in its Annual Report on Form 10-K for the year ended December 31,
 2005 as filed with the Securities and Exchange Commission on March 16,
 2006. Full year and fourth quarter 2005 operating income, net earnings and
 diluted net earnings per share from continuing operations in this release
 include pro forma financial information as if the Company's separation from
 CBS Corporation had occurred at the beginning of 2005, and exclude certain
 unusual 2005 charges discussed in the reconciliation tables that follow.
     The tables on pages 10 and 11 of this release reconcile 2005 pro forma
 results for the quarter and year ended December 31, 2005 to reported
 results. The table on page 13 reconciles 2005 pro forma results to 2005
 adjusted pro forma results presented in this release. Except as otherwise
 noted, the 2005 pro forma results presented in this release do not consider
 the impact to interest expense, net and provision for income taxes of the
 Company's issuances of debt securities during 2006.
     Subsequent Events
     In February 2007, the Media Networks segment's MTV Networks commenced
 restructuring actions affecting its domestic and international operations.
 The actions are anticipated to be completed by the fourth quarter of 2007
 and result in 2007 restructuring charges, principally severance, of
 approximately $70 million, with approximately $50 million of such charges
 reflected in the first quarter of 2007.
     About Viacom
     Viacom is a leading global entertainment content company, with
 prominent and respected brands. Engaging its audiences through television,
 motion pictures and digital platforms, Viacom seeks to reach its audiences
 however they consume content. Viacom's leading brands include the
 multiplatform properties of MTV Networks, including MTV: Music Television,
 VH1, CMT: Country Music Television, Logo, Nickelodeon, Nick at Nite, COMEDY
 CENTRAL, Spike TV, TV Land, and more than 130 networks around the world, as
 well as digital assets such as MTV.com, comedycentral.com, VSPOT,
 TurboNick, Neopets, Xfire and iFilm; BET Networks; Paramount Pictures;
 DreamWorks; and Famous Music. More information about Viacom and its
 businesses is available at www.viacom.com.
     Cautionary Statement Concerning Forward-Looking Statements
     This news release contains both historical and forward-looking
 statements. All statements which are not statements of historical fact are,
 or may be deemed to be, forward-looking statements within the meaning of
 Section 27A of the Securities Act of 1933 and Section 21E of the Securities
 Exchange Act of 1934. These forward-looking statements are not based on
 historical facts, but rather reflect the Company's current expectations
 concerning future results and events. Similarly, statements that describe
 the Company's objectives, plans or goals are or may be forward-looking
 statements. These forward- looking statements involve known and unknown
 risks, uncertainties and other factors that are difficult to predict and
 which may cause the actual results, performance or achievements of the
 Company to be different from any future results, performance and
 achievements expressed or implied by these statements. These risks,
 uncertainties and other factors include, among others: advertising market
 conditions in cable programming markets worldwide and, in particular, for
 advertisements targeting demographics served by the Company's programming
 services; the public acceptance of and ratings for the Company's movies,
 cable television, digital services and other content; competition for
 advertising dollars from search and other internet and wireless-based
 services; technological developments and their effect in the Company's
 markets and in consumer behavior; the Company's ability to successfully
 launch its programming services and other content to new distribution
 platforms; changes in the Federal communications laws and regulations
 applicable to cable operations, including the possibility of mandatory a la
 carte programming; the impact of piracy on the Company's programming and
 films; the impact of increased scale in parties involved in the
 distribution of the Company's products and programming services to
 consumers; other domestic and global economic, business, competitive and/or
 regulatory factors affecting the Company's businesses generally; and other
 factors described in the Company's news releases and filings with the
 Securities and Exchange Commission, including but not limited to the
 Company's 2006 Annual Report on Form 10-K filed on March 1, 2007. The
 forward-looking statements included in this document are made only as of
 the date of this document, and, under Section 27A of the Securities Act and
 Section 21E of the Exchange Act, the Company does not have any obligation
 to publicly update any forward-looking statements to reflect subsequent
 events or circumstances.
    VIACOM INC. AND SUBSIDIARIES
    AUDITED CONSOLIDATED STATEMENTS OF EARNINGS
 
     (in millions, except
      per share amounts)               Three Months Ended       Year Ended
                                          December 31,         December 31,
                                         2006      2005       2006      2005
 
     Revenues                         $3,592.5  $2,723.7  $11,466.5  $9,609.6
 
     Expenses:
         Operating                     2,011.5   1,395.1    6,058.4   4,737.4
         Selling, general and
          administrative                 648.6     842.5    2,270.8   2,246.8
         Depreciation and
          amortization                   102.8      73.5      365.5     259.0
             Total expenses            2,762.9   2,311.1    8,694.7   7,243.2
 
     Operating income                    829.6     412.6    2,771.8   2,366.4
     Interest expense, net              (125.2)     (9.0)    (443.4)    (19.1)
     Other items, net                     (9.6)     (9.9)     (13.6)    (29.0)
     Earnings from continuing
      operations                         694.8     393.7    2,314.8   2,318.3
 
     Provision for income taxes         (208.2)   (265.6)    (737.8) (1,020.0)
         Equity in earnings of
          affiliates, net of tax           3.9       1.9        7.3       9.4
         Minority interest, net of
          tax                             (9.7)     (0.5)     (14.0)     (3.8)
     Net earnings from continuing
      operations                         480.8     129.5    1,570.3   1,303.9
 
         Discontinued operations,
          net of tax                         -         -       21.8     (47.0)
     Net earnings                       $480.8    $129.5   $1,592.1  $1,256.9
 
     Basic earnings per common share
      amounts:
         Earnings per share,
          continuing operations          $0.69     $0.17      $2.20     $1.73
         Earnings per share,
          discontinued operations        $   -     $   -      $0.03    $(0.06)
         Net earnings per share          $0.69     $0.17      $2.23     $1.67
 
     Diluted earnings per common
      share amounts:
         Earnings per share,
          continuing operations          $0.69     $0.17      $2.19     $1.73
         Earnings per share,
          discontinued operations        $   -     $   -      $0.03    $(0.06)
         Net earnings per share          $0.69     $0.17      $2.22    $ 1.67
 
     Weighted average number of
      common shares outstanding:
         Basic common shares             696.8     751.6      715.2     751.6
         Diluted common shares           697.9     751.6      716.2     751.6
 
 
 
     The following table provides the operating income on a reported basis by
     segment:
 
     Reported               (Unaudited)
      Operating            Quarter Ended                   Year Ended
     Income                 December 31,                  December 31,
                                           2006                          2006
                                            vs.                           vs.
     (in millions)      2006       2005    2005       2006       2005    2005
 
     Media Networks    $795.2     $713.8     11%   $2,904.3   $2,610.1     11%
 
     Filmed
      Entertainment      86.3      (93.7)    NM       137.1       70.1     96
 
     Corporate          (53.9)    (197.8)    NM      (269.9)    (308.5)   (13)
 
     Eliminations         2.0       (9.7)    NM         0.3       (5.3)    NM
 
         Total         $829.6     $412.6    101%   $2,771.8   $2,366.4     17%
 
 
 
     VIACOM INC. AND SUBSIDIARIES
     AUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
                                                             December 31,
     (in millions)                                     2006               2005
 
     ASSETS
 
     Current assets                                 $4,211.1           $3,512.8
     Property and equipment, net                     1,206.2            1,179.9
     Non-current inventory, including film
      library                                        3,783.8            2,973.2
     Goodwill                                       11,137.0           10,361.4
     Intangible assets                                 893.5              370.8
     Other assets                                      565.1              717.5
           Total Assets                            $21,796.7          $19,115.6
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
 
     Current liabilities                            $4,616.8           $3,268.6
     Financing obligations - non-current             7,584.0            5,702.1
     Other non-current liabilities                   2,429.7            2,357.0
     Stockholders' equity                            7,166.2            7,787.9
           Total Liabilities and Stockholders'
            Equity                                 $21,796.7          $19,115.6
 
 
 
     VIACOM INC.
     UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
     STATEMENTS OF EARNINGS QUARTER ENDED DECEMBER 31, 2005
 
     The following pro forma condensed financial information assumes that
     Viacom's December 31, 2005 separation from CBS Corporation occurred on
     January 1, 2005.
 
                                                    Quarter Ended
                                                  December 31, 2005
 
                                                       Pro forma
     (in millions, except per share      Reported     Adjustments    Pro forma
      amounts)
 
     Revenues                            $2,723.7        $    -      $2,723.7
 
     Operating income (1)                   412.6         154.9         567.5
 
       Interest expense, net (2)             (9.0)        (65.1)        (74.1)
       Other items, net                      (9.9)            -          (9.9)
 
     Earnings from continuing
      operations                            393.7          89.8         483.5
 
         Provision for income taxes (3)    (265.6)          0.7        (264.9)
         Equity in affiliates                 1.9             -           1.9
         Minority interest, net of tax       (0.5)            -          (0.5)
 
     Net earnings from continuing
      operations                            129.5          90.5         220.0
 
     Basic Earnings per Share,
      continuing operations(4)              $0.17                       $0.29
     Diluted Earnings per Share,
      continuing operations(4)              $0.17                       $0.29
 
     Weighted average number of
      common shares outstanding(4):
         Basic                              751.6             -         751.6
         Diluted                            751.6           1.1         752.7
 
 
     (1) Pro forma adjustments eliminate the impact of separation related costs
         of $163.5 million at Corporate, partially offset by pro forma
         adjustments to reflect overhead costs on a basis consistent with the
         new structure of the Company.  Costs include adjustments to the Filmed
         Entertainment segment ($6.4 million reduction of selling, general and
         administrative expenses and increase of depreciation and amortization
         of $6.5 million) and Corporate ($8.5 million increase in selling,
         general and administrative expenses).
 
     (2) Pro forma interest expense is presented as if the $5.40 billion in
         debt outstanding at December 31, 2005 had been outstanding as of the
         beginning of the period and is calculated based on the actual rates in
         effect for the period presented.  Pro forma amounts are further
         adjusted for amortization of deferred financing costs as if such costs
         were incurred on January 1, 2005.  On September 20, 2006, the Company
         commenced an offer to exchange debt securities registered with the SEC
         for unregistered debt securities it had issued during 2006.  In
         connection with the offer, the Company calculated the impact of the
         increased interest expense of the debt securities as if such
         securities were outstanding as of January 1, 2005.  Accordingly, the
         pro forma adjustment to interest expense reflecting the offerings
         would have been $344.6 million for 2005, or $86.1 million for the
         quarter ended December 31, 2005, resulting in pro forma earnings per
         share from continuing operations of $1.61 for 2005.
 
     (3) Pro forma adjustment to the provision for income taxes is calculated
         using the blended statutory rates in effect for the period presented.
 
     (4) Basic Earnings per Share ("EPS") is computed by dividing net earnings
         by the number of shares of common stock issued and outstanding at the
         date of the separation as if such shares were outstanding for the
         quarter.  Diluted EPS is computed by dividing net earnings by the
         number of shares issued and outstanding at the date of separation
         adjusted to give effect to all potentially dilutive common shares
         weighted for the quarter ended December 31, 2005.
 
 
 
     VIACOM INC.
     UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
     STATEMENTS OF EARNINGS YEAR ENDED DECEMBER 31, 2005
 
     The following pro forma condensed financial information assumes that
     Viacom's December 31, 2005 separation from CBS Corporation occurred on
     January 1, 2005.
 
                                                      Year Ended
                                                  December 31, 2005
 
                                                       Pro forma
     (in millions, except per share      Reported     Adjustments    Pro forma
      amounts)
 
     Revenues                            $9,609.6       $     -      $9,609.6
 
     Operating income (1)                 2,366.4         131.0       2,497.4
 
         Interest expense, net (2)          (19.1)       (215.4)       (234.5)
         Other items, net                   (29.0)            -         (29.0)
 
     Earnings from continuing
      operations                          2,318.3         (84.4)      2,233.9
 
         Provision for income taxes (3)  (1,020.0)         69.8        (950.2)
         Equity in affiliates                 9.4             -           9.4
         Minority interest, net of tax       (3.8)            -          (3.8)
 
     Net earnings from continuing
      operations                         $1,303.9        $(14.6)     $1,289.3
 
     Basic Earnings per Share, continuing
      operations(4)                         $1.73                       $1.71
 
     Diluted Earnings per Share,
      continuing operations(4)              $1.73                       $1.71
 
     Weighted average number of
      common shares outstanding(4):
         Basic                              751.6             -         751.6
         Diluted                            751.6           1.1         752.7
 
 
     (1) Pro forma adjustments eliminate the impact of separation related costs
         of $163.5 at Corporate, partially offset by pro forma adjustments to
         reflect overhead costs on a basis consistent with the new structure of
         the Company.  Costs include adjustments to the Filmed Entertainment
         segment ($12.9 million reduction of selling, general and
         administrative expenses and increase of depreciation and amortization
         of $20.9 million) and Corporate ($24.5 million increase in selling,
         general and administrative expenses).
 
     (2) Pro forma interest expense is presented as if the $5.40 billion in
         debt outstanding at December 31, 2005 had been outstanding as of the
         beginning of the period and is calculated based on the actual rates in
         effect for the period presented.  Pro forma amounts are further
         adjusted for amortization of deferred financing costs as if such costs
         were incurred on January 1, 2005.  On September 20, 2006, the Company
         commenced an offer to exchange debt securities registered with the SEC
         for unregistered debt securities it had issued during 2006.  In
         connection with the offer, the Company calculated the impact of the
         increased interest expense of the debt securities as if such
         securities were outstanding as of January 1, 2005.  Accordingly, the
         pro forma adjustment to interest expense reflecting the offerings
         would have been $344.6 million for 2005, or $86.1 million for the
         quarter ended December 31, 2005, resulting in pro forma earnings per
         share from continuing operations of $1.61 for 2005.
 
     (3) Pro forma adjustment to the provision for income taxes is calculated
         using the blended statutory rates in effect for the period presented.
 
     (4) Basic Earnings per Share ("EPS") is computed by dividing net earnings
         by the number of shares of common stock issued and outstanding at the
         date of the separation as if such shares were outstanding for the full
         year.  Diluted EPS is computed by dividing net earnings by the number
         of shares issued and outstanding at the date of separation adjusted to
         give effect to all potentially dilutive common shares weighted for the
         full year-ended December 31, 2005.
 
 
 
     VIACOM INC.
     SUPPLEMENTAL DISCLOSURES ON NON-GAAP FINANCIAL INFORMATION
     The following tables reconcile the Company's results for 2006 to
 adjusted results for the periods presented. The Company uses adjusted
 operating income, adjusted net earnings and adjusted diluted earnings per
 share among other things, to evaluate the Company's operating performance
 and for planning and forecasting of future periods. The Company believes
 that the segregation of charges related to Corporate management changes,
 international restructuring actions and discrete tax benefits is relevant
 and useful information for investors because it allows investors to view
 performance in a manner similar to the method used by the Company's
 management, helps improve their ability to understand the Company's
 operating performance and makes it easier to compare the Company's results
 with other companies. Since adjusted operating income, adjusted net
 earnings from continuing operations and adjusted diluted earnings per share
 are not measures of performance calculated in accordance with GAAP, they
 should not be considered in isolation of, or as a substitute for operating
 income, net earnings and diluted earnings per share as indicators of
 operating performance. Adjusted operating income, adjusted net earnings and
 adjusted diluted earnings per share as the Company calculates them, may not
 be comparable to similarly titled measures employed by other companies.
                                                        Year Ended
                                                     December 31, 2006
 
     (in millions, except per share amounts)             Continuing Operations
 
                                                                       Diluted
                                            Operating       Net        Earnings
                                               Income    Earnings(4)  per share
 
     Reported results                        $2,771.8     $1,570.3      $2.19
     Adjustments:
         Corporate senior management
          charges (1)                            73.3         45.5       0.06
         International restructuring (2)         14.7          9.1       0.01
         Discrete tax benefits (3)                  -       (141.8)     (0.19)
     Adjusted results                        $2,859.8     $1,483.1      $2.07
 
     (1) Senior management charges include the impact of the resignation of the
         President and Chief Executive Officer and the Executive Vice President
         and Chief Financial Officer ($82.7 million) partially offset by an
         adjustment to the employment agreement of the Executive Chairman of
         the Board of Directors and Founder ($9.4 million).
 
     (2) Relates to severance charges incurred in the Media Networks segment as
         a result of the restructuring of certain international operations in
         the fourth quarter of 2006.
 
     (3) During 2006, the Company reached settlements of certain tax positions
         relating to the 2000-2003 federal and state income tax returns of
         former Viacom Inc and as a result of the expiration of related
         statutes of limitations, tax reserves of $141.8 million were released
         as a component of the provision for income taxes.
 
     (4) Net earnings from continuing operations include an adjustment for the
         provision for income taxes calculated using the blended statutory
         rates in effect for the period presented.
 
 
 
                                                       Quarter Ended
                                                     December 31, 2006
 
     (in millions, except per share amounts)             Continuing Operations
 
                                                                       Diluted
                                            Operating         Net      Earnings
                                               Income    Earnings(4)  per share
 
     Reported results                          $829.6       $480.8      $0.69
     Adjustments:
         Corporate senior management
          charges (1)                            11.3          8.0       0.01
         International restructuring (2)         14.7          9.1       0.01
         Discrete tax benefits (3)                  -        (42.0)     (0.06)
     Adjusted results                          $855.6       $455.9      $0.65
 
     (1) Senior management charges reflect the impact of the resignation of the
         Executive Vice President and Chief Financial Officer.
 
     (2) Relates to severance charges incurred in the Media Networks segment as
         a result of the restructuring of certain international operations.
 
     (3) During 2006, the Company reached settlements of certain tax positions,
         relating to the 2000-2003 combined federal and state income tax
         returns of former Viacom Inc.  As a result of the expiration of
         related statutes of limitations, tax reserves of $42.0 million were
         released as a component of the provision for income taxes.
 
     (4) Net earnings from continuing operations include an adjustment for the
         provision for income taxes calculated using the blended statutory
         rates in effect for the period presented.
 
 
 
     VIACOM INC.
     SUPPLEMENTAL DISCLOSURES ON NON-GAAP FINANCIAL INFORMATION
     (continued)
     The following tables reconcile the Company's 2005 pro forma results for
 the year and quarter ended December 31, 2005 to 2005 adjusted pro forma
 results. The Company separated from CBS Corporation (formerly Viacom Inc.)
 on December 31, 2005. In conjunction with the separation, the overhead
 structures at the Media Networks and Filmed Entertainment segments were
 rationalized, with severance charges related to these rationalizations
 having been incurred in 2005. Additionally, decisions were taken in 2005 by
 Paramount's new senior leadership to abandon certain development projects
 begun by former management. As a result of these actions, unusual charges
 for severance and theatrical inventory write downs have been separately
 disclosed and noted as adjustments to the pro forma results of the periods
 presented. The Company believes that the segregation of these unusual items
 in conjunction with the pro forma adjustments is relevant and useful
 information for investors because it better allows investors to understand
 the performance of the business on a consistent basis. Since adjusted pro
 forma operating income, adjusted pro forma net earnings from continuing
 operations and adjusted pro forma diluted earnings per share are not
 measures of performance calculated in accordance with GAAP, they should not
 be considered in isolation of, or as a substitute for operating income, net
 earnings and diluted earnings per share as indicators of operating
 performance. Adjusted pro forma operating income, adjusted pro forma net
 earnings and adjusted pro forma diluted earnings per share as the Company
 calculates them, may not be comparable to similarly titled measures
 employed by other companies.
                                                        Year Ended
                                                     December 31, 2005
 
     (in millions, except per share amounts)             Continuing Operations
 
                                                                       Diluted
                                            Operating         Net      Earnings
                                               Income    Earnings(3)  per share
 
     Pro forma results                       $2,497.4     $1,289.3      $1.71
     Adjustments:
         Severance charges (1)                   70.5         42.6       0.06
         Theatrical inventory
          write-downs (2)                        31.6         19.1       0.02
     Adjusted pro forma results              $2,599.5     $1,351.0      $1.79
 
 
     (1) Reflects severance of $47.9 million for the Media Networks segment and
         $22.6 million for Filmed Entertainment segment.
 
     (2) Reflects theatrical inventory write-downs in the  Filmed Entertainment
         segment of $31.6 million.
 
     (3) Net earnings from continuing operations include an adjustment for
         provision for income taxes calculated using the blended statutory
         rates in effect for the period presented.
 
 
 
                                                       Quarter Ended
                                                     December 31, 2005
 
     (in millions, except per share amounts)             Continuing Operations
 
                                                                       Diluted
                                            Operating         Net      Earnings
                                               Income    Earnings(3)  per share
 
 
     Pro forma results                         $567.5       $220.0      $0.29
     Adjustments:
         Severance charges(1)                    70.5         42.6       0.06
         Theatrical inventory
          write-downs(2)                         31.6         19.1       0.02
     Adjusted pro forma results                $669.6       $281.7      $0.37
 
 
     (1) Reflects severance of $47.9 million for the Media Networks segment and
         $22.6 million for Filmed Entertainment segment.
 
     (2) Reflects theatrical inventory write-downs at Filmed Entertainment
         segment of $31.6 million.
 
     (3) Net earnings from continuing operations include an adjustment for
         provision for income taxes calculated using the blended statutory
         rates in effect for the period presented.
 
 

SOURCE Viacom
    NEW YORK, March 1 /PRNewswire-FirstCall/ -- Viacom Inc. (NYSE:   VIA and
 VIA.B) today reported financial results for the full year and fourth
 quarter ended December 31, 2006.
     Reported Results
                              Quarter Ended                  Year Ended
                               December 31,                  December 31,
     (in millions,                         2006                          2006
     except per share                       vs.                           vs.
     amounts)           2006       2005    2005        2006       2005   2005
 
     Revenues        $3,592.5   $2,723.7     32%   $11,466.5   $9,609.6    19%
     Operating
      income(1)         829.6      412.6    101      2,771.8    2,366.4    17
     Net earnings -
       continuing
        operations      480.8      129.5    271      1,570.3    1,303.9    20
 
     Net earnings       480.8      129.5    271      1,592.1    1,256.9    27
 
     Diluted EPS -
       continuing
        operations      $0.69      $0.17    306        $2.19      $1.73    27
 
     Diluted EPS        $0.69      $0.17    306%       $2.22      $1.67    33%
 
     (1) Operating income on a reported basis by segment is provided in a table
         on page 8.
 
 
 
     Adjusted Results
     This release includes adjusted financial information for 2006 and
 adjusted pro forma financial information for 2005 that is comparable to the
 Company's previously issued Business Outlook for the full year 2006 (see
 Basis of Presentation on page 5 of this release). For the full year 2006,
 adjusted operating income rose 10% to $2.86 billion from adjusted pro forma
 2005 results of $2.60 billion. Adjusted net earnings from continuing
 operations for the full year 2006 increased 10% to $1.48 billion compared
 to adjusted pro forma 2005 net earnings from continuing operations of $1.35
 billion. Adjusted net earnings per diluted share from continuing operations
 for the year was $2.07, up 16% from an adjusted pro forma 2005 of $1.79.
     Sumner M. Redstone, Executive Chairman of Viacom, said, "Viacom
 delivered solid results for 2006, guided by a new management team under the
 leadership of Philippe Dauman, who has moved quickly to put the Company
 back on a steady path of success. I have great confidence that we will
 continue to build on the momentum of the last several months both in
 expanding our digital horizons and continuing to grow in traditional
 markets."
     Philippe P. Dauman, President and Chief Executive Officer of Viacom,
 said, "We are making significant progress financially and operationally to
 ensure that we thrive in all distribution channels, including the evolving
 digital marketplace. Financially, our 2006 performance was strong, with
 double digit growth in revenues and operating income and 16% growth in
 adjusted net earnings per share.
     "During the first quarter of this year, we took decisive steps to
 deploy our capital in more productive ways, including restructuring our
 operations here and abroad. At the same time, we continued to introduce
 popular new programming on our linear channels, to expand our digital
 operations organically and to reach innovative agreements with new digital
 partners. Additionally, we continue to expand on our position as a leading
 global provider of digital wireless video, and to innovate with new online
 sites and experiences."
     Revenues
     Full Year 2006 revenues of $11.47 billion rose 19% from $9.61 billion
 in 2005, reflecting a 7% increase in Media Networks revenues to $7.24
 billion, led by an increase of 11% in affiliate revenues to $2.03 billion.
 Worldwide advertising revenues were up 6% to $4.29 billion, while ancillary
 revenues grew 2% to $916 million. In 2006, acquisitions contributed $125
 million in incremental revenues to Media Networks. The increase of 46% in
 Filmed Entertainment revenues to $4.38 billion in 2006 from $3.00 billion
 in 2005 principally reflected the acquisition of DreamWorks and
 distribution activities for DreamWorks Animation and the DreamWorks
 live-action library, which contributed $1.36 billion to 2006 revenues.
     Fourth Quarter 2006 revenues of $3.59 billion grew 32% from $2.72
 billion in 2005. Media Networks revenues rose 4% to $2.08 billion from
 $1.99 billion in 2005 led by growth in affiliate revenues which were up 14%
 to $532 million. Worldwide advertising revenues rose 6% to $1.26 billion
 from $1.19 billion in 2005. Ancillary revenues declined 15% in the quarter
 versus 2005 to $289 million, principally due to timing and mix of home
 entertainment releases. Acquisitions contributed $78 million in incremental
 revenues to Media Networks in the quarter. Filmed Entertainment revenues
 doubled to $1.57 billion, with the acquisition of DreamWorks and the
 distribution activities for DreamWorks Animation and the DreamWorks
 live-action library films contributing revenues of $560 million.
     Revenues              Quarter Ended                   Year Ended
                            December 31,                   December 31,
                                           2006                          2006
                                            vs.                           vs.
     (in millions)      2006       2005    2005       2006       2005    2005
 
     Media Networks  $2,080.2   $1,994.1      4%   $7,240.9   $6,757.8      7%
 
     Filmed
      Entertainment   1,574.5      787.6    100     4,379.2    2,995.3     46
 
     Eliminations       (62.2)     (58.0)     7      (153.6)    (143.5)     7
 
         Total       $3,592.5   $2,723.7     32%  $11,466.5   $9,609.6     19%
     Full Year 2006 adjusted operating income rose 10% to $2.86 billion
 compared to adjusted pro forma 2005 operating income of $2.60 billion.
 Incremental equity related compensation expense reduced 2006 adjusted
 operating income by $52 million ($20 million and $7 million in Media
 Networks and Filmed Entertainment segments, respectively). Media Networks
 adjusted operating income rose 10% to $2.92 billion in 2006 from adjusted
 pro forma 2005 results of $2.66 billion. Filmed Entertainment adjusted
 operating income was $137 million in 2006, up 18% from an adjusted pro
 forma 2005 operating income of $116 million. Corporate expenses reduced
 2006 adjusted operating income by $197 million in 2006 and increased $27
 million from adjusted pro forma expense in 2005.
     Fourth Quarter 2006 adjusted operating income was up 28% to $856
 million compared to adjusted pro forma 2005 results of $670 million.
 Incremental 2006 equity related compensation expense reduced adjusted
 operating income by $21 million in the quarter ($6 million and $1 million
 in Media Networks and Filmed Entertainment segments, respectively). Media
 Networks adjusted operating income was $810 million, up 6% versus adjusted
 pro forma 2005 operating income of $762 million. Filmed Entertainment
 operating income in the quarter was $86 million, or $126 million higher
 than an adjusted pro forma 2005 operating loss of $40 million. Corporate
 expenses declined slightly in the fourth quarter of 2006 resulting in a
 reduction in adjusted operating income of $43 million in both comparable
 periods.
     Adjusted Operating    Quarter Ended                   Year Ended
     Income                 December 31,                   December 31,
                                           2006                           2006
                                            vs.                            vs.
     (in millions)       2006       2005   2005        2006       2005    2005
 
     Media Networks    $809.9     $761.7    6%     $2,919.0   $2,657.9     10%
 
     Filmed
      Entertainment      86.3      (39.6)   NM        137.1      116.3     18
 
     Corporate          (42.6)     (42.8)   -        (196.6)    (169.4)    16
 
     Eliminations         2.0       (9.7)   NM          0.3       (5.3)    NM
 
         Total         $855.6     $669.6   28%     $2,859.8   $2,599.5     10%
 
     NM = not meaningful
     Full Year 2006 adjusted net earnings from continuing operations
 increased 10% to $1.48 billion compared to adjusted pro forma 2005 net
 earnings from continuing operations in line with the 10% increase in
 adjusted operating income. Pre-tax interest expense increased $209 million
 from adjusted pro forma 2005, reflecting incremental average debt
 outstanding, partially offset by lower adjusted tax expense of $78 million.
 On a diluted basis, adjusted net earnings per share from continuing
 operations for the year was $2.07, up 16% from adjusted pro forma 2005 net
 earnings from continuing operations of $1.79. The increase reflects higher
 adjusted net earnings from continuing operations and fewer weighted average
 number of common shares outstanding due to the Company's stock repurchase
 program.
     Fourth Quarter 2006 adjusted net earnings from continuing operations
 increased 62% to $456 million compared to adjusted pro forma 2005 net
 earnings from continuing operations of $282 million. The increase is
 attributable to an increase of 28% in adjusted operating income, and lower
 tax expense of $45 million, partially offset by higher interest expense of
 $51 million in 2006. On a diluted basis adjusted net earnings per share
 from continuing operations in the quarter was $0.65.
     Debt
     At December 31, 2006 total debt outstanding, including capital leases
 increased to $7.65 billion, compared with $5.76 billion at December 31,
 2005. The increase was driven by the Company's stock repurchase program and
 acquisitions, primarily DreamWorks.
     Stock Repurchase Program
     The Company has in place a $3.00 billion stock repurchase program. For
 the quarter ended December 31, 2006, 8.4 million shares were repurchased
 for an aggregate purchase price of $324 million. For the year, the Company
 repurchased 60.3 million shares for an aggregate purchase price of $2.35
 billion. Through February 21, 2007, the Company acquired 62.5 million
 shares at a weighted average price per share of $38.96.
     Special Dividend to Former Viacom
     In accordance with the terms of the Separation Agreement, on December
 29, 2005 the Company paid a preliminary special dividend to Former Viacom
 of $5.40 billion. In January 2007, a full settlement was reached with and
 paid to CBS Corporation for an additional $170 million. The settlement
 amount was accrued in the Company's balance sheet as of December 31, 2006
 with a corresponding reduction in additional paid-in capital.
     Basis of Presentation
     Operating income, net earnings and diluted net earnings per share from
 continuing operations are presented on an adjusted basis that excludes
 discrete net charges related to Viacom corporate senior management changes
 of $73 million ($11 million in the fourth quarter), international
 restructuring charges of $15 million in the Media Networks segment in the
 fourth quarter, and net discrete tax credits of $142 million ($42 million
 in the fourth quarter). Reconciliations of adjusted 2006 results to
 reported 2006 results and other non-GAAP measures are provided in tables on
 page 12 included in this release.
     Viacom completed its separation from CBS Corporation (formerly Viacom
 Inc.) on December 31, 2005. Consequently, Viacom's reported results for
 2005 are presented on a "carve-out" basis consistent with the results
 presented in its Annual Report on Form 10-K for the year ended December 31,
 2005 as filed with the Securities and Exchange Commission on March 16,
 2006. Full year and fourth quarter 2005 operating income, net earnings and
 diluted net earnings per share from continuing operations in this release
 include pro forma financial information as if the Company's separation from
 CBS Corporation had occurred at the beginning of 2005, and exclude certain
 unusual 2005 charges discussed in the reconciliation tables that follow.
     The tables on pages 10 and 11 of this release reconcile 2005 pro forma
 results for the quarter and year ended December 31, 2005 to reported
 results. The table on page 13 reconciles 2005 pro forma results to 2005
 adjusted pro forma results presented in this release. Except as otherwise
 noted, the 2005 pro forma results presented in this release do not consider
 the impact to interest expense, net and provision for income taxes of the
 Company's issuances of debt securities during 2006.
     Subsequent Events
     In February 2007, the Media Networks segment's MTV Networks commenced
 restructuring actions affecting its domestic and international operations.
 The actions are anticipated to be completed by the fourth quarter of 2007
 and result in 2007 restructuring charges, principally severance, of
 approximately $70 million, with approximately $50 million of such charges
 reflected in the first quarter of 2007.
     About Viacom
     Viacom is a leading global entertainment content company, with
 prominent and respected brands. Engaging its audiences through television,
 motion pictures and digital platforms, Viacom seeks to reach its audiences
 however they consume content. Viacom's leading brands include the
 multiplatform properties of MTV Networks, including MTV: Music Television,
 VH1, CMT: Country Music Television, Logo, Nickelodeon, Nick at Nite, COMEDY
 CENTRAL, Spike TV, TV Land, and more than 130 networks around the world, as
 well as digital assets such as MTV.com, comedycentral.com, VSPOT,
 TurboNick, Neopets, Xfire and iFilm; BET Networks; Paramount Pictures;
 DreamWorks; and Famous Music. More information about Viacom and its
 businesses is available at www.viacom.com.
     Cautionary Statement Concerning Forward-Looking Statements
     This news release contains both historical and forward-looking
 statements. All statements which are not statements of historical fact are,
 or may be deemed to be, forward-looking statements within the meaning of
 Section 27A of the Securities Act of 1933 and Section 21E of the Securities
 Exchange Act of 1934. These forward-looking statements are not based on
 historical facts, but rather reflect the Company's current expectations
 concerning future results and events. Similarly, statements that describe
 the Company's objectives, plans or goals are or may be forward-looking
 statements. These forward- looking statements involve known and unknown
 risks, uncertainties and other factors that are difficult to predict and
 which may cause the actual results, performance or achievements of the
 Company to be different from any future results, performance and
 achievements expressed or implied by these statements. These risks,
 uncertainties and other factors include, among others: advertising market
 conditions in cable programming markets worldwide and, in particular, for
 advertisements targeting demographics served by the Company's programming
 services; the public acceptance of and ratings for the Company's movies,
 cable television, digital services and other content; competition for
 advertising dollars from search and other internet and wireless-based
 services; technological developments and their effect in the Company's
 markets and in consumer behavior; the Company's ability to successfully
 launch its programming services and other content to new distribution
 platforms; changes in the Federal communications laws and regulations
 applicable to cable operations, including the possibility of mandatory a la
 carte programming; the impact of piracy on the Company's programming and
 films; the impact of increased scale in parties involved in the
 distribution of the Company's products and programming services to
 consumers; other domestic and global economic, business, competitive and/or
 regulatory factors affecting the Company's businesses generally; and other
 factors described in the Company's news releases and filings with the
 Securities and Exchange Commission, including but not limited to the
 Company's 2006 Annual Report on Form 10-K filed on March 1, 2007. The
 forward-looking statements included in this document are made only as of
 the date of this document, and, under Section 27A of the Securities Act and
 Section 21E of the Exchange Act, the Company does not have any obligation
 to publicly update any forward-looking statements to reflect subsequent
 events or circumstances.
    VIACOM INC. AND SUBSIDIARIES
    AUDITED CONSOLIDATED STATEMENTS OF EARNINGS
 
     (in millions, except
      per share amounts)               Three Months Ended       Year Ended
                                          December 31,         December 31,
                                         2006      2005       2006      2005
 
     Revenues                         $3,592.5  $2,723.7  $11,466.5  $9,609.6
 
     Expenses:
         Operating                     2,011.5   1,395.1    6,058.4   4,737.4
         Selling, general and
          administrative                 648.6     842.5    2,270.8   2,246.8
         Depreciation and
          amortization                   102.8      73.5      365.5     259.0
             Total expenses            2,762.9   2,311.1    8,694.7   7,243.2
 
     Operating income                    829.6     412.6    2,771.8   2,366.4
     Interest expense, net              (125.2)     (9.0)    (443.4)    (19.1)
     Other items, net                     (9.6)     (9.9)     (13.6)    (29.0)
     Earnings from continuing
      operations                         694.8     393.7    2,314.8   2,318.3
 
     Provision for income taxes         (208.2)   (265.6)    (737.8) (1,020.0)
         Equity in earnings of
          affiliates, net of tax           3.9       1.9        7.3       9.4
         Minority interest, net of
          tax                             (9.7)     (0.5)     (14.0)     (3.8)
     Net earnings from continuing
      operations                         480.8     129.5    1,570.3   1,303.9
 
         Discontinued operations,
          net of tax                         -         -       21.8     (47.0)
     Net earnings                       $480.8    $129.5   $1,592.1  $1,256.9
 
     Basic earnings per common share
      amounts:
         Earnings per share,
          continuing operations          $0.69     $0.17      $2.20     $1.73
         Earnings per share,
          discontinued operations        $   -     $   -      $0.03    $(0.06)
         Net earnings per share          $0.69     $0.17      $2.23     $1.67
 
     Diluted earnings per common
      share amounts:
         Earnings per share,
          continuing operations          $0.69     $0.17      $2.19     $1.73
         Earnings per share,
          discontinued operations        $   -     $   -      $0.03    $(0.06)
         Net earnings per share          $0.69     $0.17      $2.22    $ 1.67
 
     Weighted average number of
      common shares outstanding:
         Basic common shares             696.8     751.6      715.2     751.6
         Diluted common shares           697.9     751.6      716.2     751.6
 
 
 
     The following table provides the operating income on a reported basis by
     segment:
 
     Reported               (Unaudited)
      Operating            Quarter Ended                   Year Ended
     Income                 December 31,                  December 31,
                                           2006                          2006
                                            vs.                           vs.
     (in millions)      2006       2005    2005       2006       2005    2005
 
     Media Networks    $795.2     $713.8     11%   $2,904.3   $2,610.1     11%
 
     Filmed
      Entertainment      86.3      (93.7)    NM       137.1       70.1     96
 
     Corporate          (53.9)    (197.8)    NM      (269.9)    (308.5)   (13)
 
     Eliminations         2.0       (9.7)    NM         0.3       (5.3)    NM
 
         Total         $829.6     $412.6    101%   $2,771.8   $2,366.4     17%
 
 
 
     VIACOM INC. AND SUBSIDIARIES
     AUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
                                                             December 31,
     (in millions)                                     2006               2005
 
     ASSETS
 
     Current assets                                 $4,211.1           $3,512.8
     Property and equipment, net                     1,206.2            1,179.9
     Non-current inventory, including film
      library                                        3,783.8            2,973.2
     Goodwill                                       11,137.0           10,361.4
     Intangible assets                                 893.5              370.8
     Other assets                                      565.1              717.5
           Total Assets                            $21,796.7          $19,115.6
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
 
     Current liabilities                            $4,616.8           $3,268.6
     Financing obligations - non-current             7,584.0            5,702.1
     Other non-current liabilities                   2,429.7            2,357.0
     Stockholders' equity                            7,166.2            7,787.9
           Total Liabilities and Stockholders'
            Equity                                 $21,796.7          $19,115.6
 
 
 
     VIACOM INC.
     UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
     STATEMENTS OF EARNINGS QUARTER ENDED DECEMBER 31, 2005
 
     The following pro forma condensed financial information assumes that
     Viacom's December 31, 2005 separation from CBS Corporation occurred on
     January 1, 2005.
 
                                                    Quarter Ended
                                                  December 31, 2005
 
                                                       Pro forma
     (in millions, except per share      Reported     Adjustments    Pro forma
      amounts)
 
     Revenues                            $2,723.7        $    -      $2,723.7
 
     Operating income (1)                   412.6         154.9         567.5
 
       Interest expense, net (2)             (9.0)        (65.1)        (74.1)
       Other items, net                      (9.9)            -          (9.9)
 
     Earnings from continuing
      operations                            393.7          89.8         483.5
 
         Provision for income taxes (3)    (265.6)          0.7        (264.9)
         Equity in affiliates                 1.9             -           1.9
         Minority interest, net of tax       (0.5)            -          (0.5)
 
     Net earnings from continuing
      operations                            129.5          90.5         220.0
 
     Basic Earnings per Share,
      continuing operations(4)              $0.17                       $0.29
     Diluted Earnings per Share,
      continuing operations(4)              $0.17                       $0.29
 
     Weighted average number of
      common shares outstanding(4):
         Basic                              751.6             -         751.6
         Diluted                            751.6           1.1         752.7
 
 
     (1) Pro forma adjustments eliminate the impact of separation related costs
         of $163.5 million at Corporate, partially offset by pro forma
         adjustments to reflect overhead costs on a basis consistent with the
         new structure of the Company.  Costs include adjustments to the Filmed
         Entertainment segment ($6.4 million reduction of selling, general and
         administrative expenses and increase of depreciation and amortization
         of $6.5 million) and Corporate ($8.5 million increase in selling,
         general and administrative expenses).
 
     (2) Pro forma interest expense is presented as if the $5.40 billion in
         debt outstanding at December 31, 2005 had been outstanding as of the
         beginning of the period and is calculated based on the actual rates in
         effect for the period presented.  Pro forma amounts are further
         adjusted for amortization of deferred financing costs as if such costs
         were incurred on January 1, 2005.  On September 20, 2006, the Company
         commenced an offer to exchange debt securities registered with the SEC
         for unregistered debt securities it had issued during 2006.  In
         connection with the offer, the Company calculated the impact of the
         increased interest expense of the debt securities as if such
         securities were outstanding as of January 1, 2005.  Accordingly, the
         pro forma adjustment to interest expense reflecting the offerings
         would have been $344.6 million for 2005, or $86.1 million for the
         quarter ended December 31, 2005, resulting in pro forma earnings per
         share from continuing operations of $1.61 for 2005.
 
     (3) Pro forma adjustment to the provision for income taxes is calculated
         using the blended statutory rates in effect for the period presented.
 
     (4) Basic Earnings per Share ("EPS") is computed by dividing net earnings
         by the number of shares of common stock issued and outstanding at the
         date of the separation as if such shares were outstanding for the
         quarter.  Diluted EPS is computed by dividing net earnings by the
         number of shares issued and outstanding at the date of separation
         adjusted to give effect to all potentially dilutive common shares
         weighted for the quarter ended December 31, 2005.
 
 
 
     VIACOM INC.
     UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
     STATEMENTS OF EARNINGS YEAR ENDED DECEMBER 31, 2005
 
     The following pro forma condensed financial information assumes that
     Viacom's December 31, 2005 separation from CBS Corporation occurred on
     January 1, 2005.
 
                                                      Year Ended
                                                  December 31, 2005
 
                                                       Pro forma
     (in millions, except per share      Reported     Adjustments    Pro forma
      amounts)
 
     Revenues                            $9,609.6       $     -      $9,609.6
 
     Operating income (1)                 2,366.4         131.0       2,497.4
 
         Interest expense, net (2)          (19.1)       (215.4)       (234.5)
         Other items, net                   (29.0)            -         (29.0)
 
     Earnings from continuing
      operations                          2,318.3         (84.4)      2,233.9
 
         Provision for income taxes (3)  (1,020.0)         69.8        (950.2)
         Equity in affiliates                 9.4             -           9.4
         Minority interest, net of tax       (3.8)            -          (3.8)
 
     Net earnings from continuing
      operations                         $1,303.9        $(14.6)     $1,289.3
 
     Basic Earnings per Share, continuing
      operations(4)                         $1.73                       $1.71
 
     Diluted Earnings per Share,
      continuing operations(4)              $1.73                       $1.71
 
     Weighted average number of
      common shares outstanding(4):
         Basic                              751.6             -         751.6
         Diluted                            751.6           1.1         752.7
 
 
     (1) Pro forma adjustments eliminate the impact of separation related costs
         of $163.5 at Corporate, partially offset by pro forma adjustments to
         reflect overhead costs on a basis consistent with the new structure of
         the Company.  Costs include adjustments to the Filmed Entertainment
         segment ($12.9 million reduction of selling, general and
         administrative expenses and increase of depreciation and amortization
         of $20.9 million) and Corporate ($24.5 million increase in selling,
         general and administrative expenses).
 
     (2) Pro forma interest expense is presented as if the $5.40 billion in
         debt outstanding at December 31, 2005 had been outstanding as of the
         beginning of the period and is calculated based on the actual rates in
         effect for the period presented.  Pro forma amounts are further
         adjusted for amortization of deferred financing costs as if such costs
         were incurred on January 1, 2005.  On September 20, 2006, the Company
         commenced an offer to exchange debt securities registered with the SEC
         for unregistered debt securities it had issued during 2006.  In
         connection with the offer, the Company calculated the impact of the
         increased interest expense of the debt securities as if such
         securities were outstanding as of January 1, 2005.  Accordingly, the
         pro forma adjustment to interest expense reflecting the offerings
         would have been $344.6 million for 2005, or $86.1 million for the
         quarter ended December 31, 2005, resulting in pro forma earnings per
         share from continuing operations of $1.61 for 2005.
 
     (3) Pro forma adjustment to the provision for income taxes is calculated
         using the blended statutory rates in effect for the period presented.
 
     (4) Basic Earnings per Share ("EPS") is computed by dividing net earnings
         by the number of shares of common stock issued and outstanding at the
         date of the separation as if such shares were outstanding for the full
         year.  Diluted EPS is computed by dividing net earnings by the number
         of shares issued and outstanding at the date of separation adjusted to
         give effect to all potentially dilutive common shares weighted for the
         full year-ended December 31, 2005.
 
 
 
     VIACOM INC.
     SUPPLEMENTAL DISCLOSURES ON NON-GAAP FINANCIAL INFORMATION
     The following tables reconcile the Company's results for 2006 to
 adjusted results for the periods presented. The Company uses adjusted
 operating income, adjusted net earnings and adjusted diluted earnings per
 share among other things, to evaluate the Company's operating performance
 and for planning and forecasting of future periods. The Company believes
 that the segregation of charges related to Corporate management changes,
 international restructuring actions and discrete tax benefits is relevant
 and useful information for investors because it allows investors to view
 performance in a manner similar to the method used by the Company's
 management, helps improve their ability to understand the Company's
 operating performance and makes it easier to compare the Company's results
 with other companies. Since adjusted operating income, adjusted net
 earnings from continuing operations and adjusted diluted earnings per share
 are not measures of performance calculated in accordance with GAAP, they
 should not be considered in isolation of, or as a substitute for operating
 income, net earnings and diluted earnings per share as indicators of
 operating performance. Adjusted operating income, adjusted net earnings and
 adjusted diluted earnings per share as the Company calculates them, may not
 be comparable to similarly titled measures employed by other companies.
                                                        Year Ended
                                                     December 31, 2006
 
     (in millions, except per share amounts)             Continuing Operations
 
                                                                       Diluted
                                            Operating       Net        Earnings
                                               Income    Earnings(4)  per share
 
     Reported results                        $2,771.8     $1,570.3      $2.19
     Adjustments:
         Corporate senior management
          charges (1)                            73.3         45.5       0.06
         International restructuring (2)         14.7          9.1       0.01
         Discrete tax benefits (3)                  -       (141.8)     (0.19)
     Adjusted results                        $2,859.8     $1,483.1      $2.07
 
     (1) Senior management charges include the impact of the resignation of the
         President and Chief Executive Officer and the Executive Vice President
         and Chief Financial Officer ($82.7 million) partially offset by an
         adjustment to the employment agreement of the Executive Chairman of
         the Board of Directors and Founder ($9.4 million).
 
     (2) Relates to severance charges incurred in the Media Networks segment as
         a result of the restructuring of certain international operations in
         the fourth quarter of 2006.
 
     (3) During 2006, the Company reached settlements of certain tax positions
         relating to the 2000-2003 federal and state income tax returns of
         former Viacom Inc and as a result of the expiration of related
         statutes of limitations, tax reserves of $141.8 million were released
         as a component of the provision for income taxes.
 
     (4) Net earnings from continuing operations include an adjustment for the
         provision for income taxes calculated using the blended statutory
         rates in effect for the period presented.
 
 
 
                                                       Quarter Ended
                                                     December 31, 2006
 
     (in millions, except per share amounts)             Continuing Operations
 
                                                                       Diluted
                                            Operating         Net      Earnings
                                               Income    Earnings(4)  per share
 
     Reported results                          $829.6       $480.8      $0.69
     Adjustments:
         Corporate senior management
          charges (1)                            11.3          8.0       0.01
         International restructuring (2)         14.7          9.1       0.01
         Discrete tax benefits (3)                  -        (42.0)     (0.06)
     Adjusted results                          $855.6       $455.9      $0.65
 
     (1) Senior management charges reflect the impact of the resignation of the
         Executive Vice President and Chief Financial Officer.
 
     (2) Relates to severance charges incurred in the Media Networks segment as
         a result of the restructuring of certain international operations.
 
     (3) During 2006, the Company reached settlements of certain tax positions,
         relating to the 2000-2003 combined federal and state income tax
         returns of former Viacom Inc.  As a result of the expiration of
         related statutes of limitations, tax reserves of $42.0 million were
         released as a component of the provision for income taxes.
 
     (4) Net earnings from continuing operations include an adjustment for the
         provision for income taxes calculated using the blended statutory
         rates in effect for the period presented.
 
 
 
     VIACOM INC.
     SUPPLEMENTAL DISCLOSURES ON NON-GAAP FINANCIAL INFORMATION
     (continued)
     The following tables reconcile the Company's 2005 pro forma results for
 the year and quarter ended December 31, 2005 to 2005 adjusted pro forma
 results. The Company separated from CBS Corporation (formerly Viacom Inc.)
 on December 31, 2005. In conjunction with the separation, the overhead
 structures at the Media Networks and Filmed Entertainment segments were
 rationalized, with severance charges related to these rationalizations
 having been incurred in 2005. Additionally, decisions were taken in 2005 by
 Paramount's new senior leadership to abandon certain development projects
 begun by former management. As a result of these actions, unusual charges
 for severance and theatrical inventory write downs have been separately
 disclosed and noted as adjustments to the pro forma results of the periods
 presented. The Company believes that the segregation of these unusual items
 in conjunction with the pro forma adjustments is relevant and useful
 information for investors because it better allows investors to understand
 the performance of the business on a consistent basis. Since adjusted pro
 forma operating income, adjusted pro forma net earnings from continuing
 operations and adjusted pro forma diluted earnings per share are not
 measures of performance calculated in accordance with GAAP, they should not
 be considered in isolation of, or as a substitute for operating income, net
 earnings and diluted earnings per share as indicators of operating
 performance. Adjusted pro forma operating income, adjusted pro forma net
 earnings and adjusted pro forma diluted earnings per share as the Company
 calculates them, may not be comparable to similarly titled measures
 employed by other companies.
                                                        Year Ended
                                                     December 31, 2005
 
     (in millions, except per share amounts)             Continuing Operations
 
                                                                       Diluted
                                            Operating         Net      Earnings
                                               Income    Earnings(3)  per share
 
     Pro forma results                       $2,497.4     $1,289.3      $1.71
     Adjustments:
         Severance charges (1)                   70.5         42.6       0.06
         Theatrical inventory
          write-downs (2)                        31.6         19.1       0.02
     Adjusted pro forma results              $2,599.5     $1,351.0      $1.79
 
 
     (1) Reflects severance of $47.9 million for the Media Networks segment and
         $22.6 million for Filmed Entertainment segment.
 
     (2) Reflects theatrical inventory write-downs in the  Filmed Entertainment
         segment of $31.6 million.
 
     (3) Net earnings from continuing operations include an adjustment for
         provision for income taxes calculated using the blended statutory
         rates in effect for the period presented.
 
 
 
                                                       Quarter Ended
                                                     December 31, 2005
 
     (in millions, except per share amounts)             Continuing Operations
 
                                                                       Diluted
                                            Operating         Net      Earnings
                                               Income    Earnings(3)  per share
 
 
     Pro forma results                         $567.5       $220.0      $0.29
     Adjustments:
         Severance charges(1)                    70.5         42.6       0.06
         Theatrical inventory
          write-downs(2)                         31.6         19.1       0.02
     Adjusted pro forma results                $669.6       $281.7      $0.37
 
 
     (1) Reflects severance of $47.9 million for the Media Networks segment and
         $22.6 million for Filmed Entertainment segment.
 
     (2) Reflects theatrical inventory write-downs at Filmed Entertainment
         segment of $31.6 million.
 
     (3) Net earnings from continuing operations include an adjustment for
         provision for income taxes calculated using the blended statutory
         rates in effect for the period presented.
 
 SOURCE Viacom

RELATED LINKS

http://www.cbs.com