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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission File Number 1-9553

VIACOM INC.
(Exact name of registrant as specified in its charter)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes ý        No o.

        Number of shares of Common Stock Outstanding at October 31, 2002:

        Class A Common Stock, par value $.01 per share—136,042,107

        Class B Common Stock, par value $.01 per share—1,625,053,863

VIACOM INC.

INDEX TO FORM 10-Q

2

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

VIACOM INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)

See notes to consolidated financial statements.

3

VIACOM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)

See notes to consolidated financial statements.

4

VIACOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)

See notes to consolidated financial statements.

5

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollars in millions, except per share amounts)

1) BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Viacom Inc. together with its subsidiaries ("Viacom" or the "Company") have been prepared pursuant to the rules of the Securities and Exchange Commission. These financial statements should be read in conjunction with the more detailed financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

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

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Net Earnings (Loss) per Common Share—Basic earnings (loss) per share ("EPS") is based upon net earnings (loss) divided by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the effect of the assumed exercise of stock options only in the periods in which such effect would have been dilutive. For the three and nine months ended September 30, 2001, incremental shares of 26.0 million and 29.8 million, respectively, for the assumed exercise of stock options were excluded from the computation of diluted EPS because their inclusion would have been anti-dilutive.

The table below presents a reconciliation of weighted average shares used in the calculations of basic and diluted EPS:

6

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

1) BASIS OF PRESENTATION (Continued)

Comprehensive Income (Loss)—Total comprehensive income (loss) for the Company includes net earnings (loss) and other comprehensive income items including unrealized gain (loss) on securities, cumulative translation adjustments and the changes in fair value of cash flow hedges.

Recent Pronouncements—Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" ("SFAS 141"), and SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires, among other things, that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and provides specific criteria for the initial recognition of intangible assets apart from goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite lives, including such assets recorded in past business combinations, no longer be amortized to earnings, but should instead be tested for impairment at least on an annual basis. Intangible assets with finite lives will continue to be amortized over their useful lives and reviewed for impairment. The Company determined that, with the exception of Blockbuster, none of the Company's reporting units had an impairment. The Company recorded in the first quarter of 2002 an impairment charge of approximately $1.5 billion related to Blockbuster's goodwill, as a cumulative effect of a change in accounting principle, net of minority interest and tax (see Note 2).

Effective January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which replaced SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 144 establishes an accounting model for long-lived assets to be disposed of by sale, including discontinued operations, and replaces the provisions of Accounting Principles Board ("APB") Opinion No. 30 for the disposal of segments of a business. Long-lived assets classified as held for disposal as a result of activities that were initiated prior to adoption of SFAS 144 shall continue to be accounted for under the provisions of SFAS 121 or APB Opinion No. 30. The adoption of SFAS 144 did not have a material effect on the Company's financial statements.

2) GOODWILL AND OTHER INTANGIBLE ASSETS

The initial adoption of SFAS 142, effective January 1, 2002, required the Company to perform a fair-value based impairment test of goodwill and intangible assets with indefinite lives. The first step of the test examines whether or not the book values of the Company's reporting units exceed their fair values. The Company's reporting units are generally consistent with or one level below the operating segments underlying the segments identified in Note 7—Reportable Segments. As a result of such impairment tests completed in the first quarter of 2002, the Company determined that goodwill related to Blockbuster was impaired. The fair value of Blockbuster's goodwill was computed principally based upon the present value of future cash flows and the resulting impairment charge was $1.8 billion in

7

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

2) GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

total or $1.5 billion, net of minority interest and tax. This methodology differs from the Company's previous policy, as permitted under accounting standards existing at that time, of using Blockbuster's undiscounted cash flows to determine if goodwill was recoverable. In accordance with the transitional guidance provided by SFAS 142, as the impairment charge was related to the implementation of SFAS 142, the charge of $1.5 billion has been recorded as a cumulative effect of a change in accounting principle, net of minority interest and tax, in the Company's consolidated statement of operations for the nine months ended September 30, 2002.

Intangible assets subject to amortization at September 30, 2002 primarily consist of franchise and subscriber agreements that are being amortized over 5 to 40 years. Amortization expense for the three and nine months ended September 30, 2002 was $25.3 million and $76.5 million, respectively. The Company expects its aggregate annual amortization expense for existing intangible assets subject to amortization to be approximately $100 million for each of the next five succeeding years. Amortization expense may vary as acquisitions and dispositions occur in the future and as purchase price allocations are finalized.

The Company's intangible assets subject to amortization and related accumulated amortization were as follows:

FCC licenses valued at approximately $11.6 billion and $11.0 billion at September 30, 2002 and December 31, 2001, respectively, were recorded as intangible assets with indefinite lives and were not subject to amortization. The increase in FCC licenses from December 31, 2001 to September 30, 2002 resulted primarily from the KCAL-TV acquisition in May 2002.

8

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

2) GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

The changes in the book value of goodwill, by segment, for the nine months ended September 30, 2002 are as follows:

(a)

Adjustments primarily relate to the Company's purchase price allocation for the acquisition of BET, foreign currency translation adjustments and tax valuation allowances that resulted from the acquisition of the minority interest of Infinity.

The following table provides a reconciliation of the reported net loss and loss per share amounts for the three and nine months ended September 30, 2001 to adjusted net earnings and per share amounts that would have been reported had SFAS 142 been adopted as of January 1, 2001.

9

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

3) INVENTORY

At September 30, 2002, theatrical inventory completed, but not released, increased by $106.7 million from December 31, 2001, principally due to the scheduled timing of the release of completed feature films. Merchandise inventory increased $222.6 million to $484.0 million at September 30, 2002 in order to support Blockbuster's initiatives to focus on the retail movie and game business.

4) RESTRUCTURING AND SPECIAL ITEM CHARGES

In the fourth quarter of 2001, MTV Networks announced a restructuring plan to reduce headcount in its domestic and foreign offices and close certain offices in Latin America, Europe and Asia. Having met the conditions required by EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity" ("EITF 94-3"), the Company recorded a restructuring charge of approximately $66.6 million in selling, general and administrative expenses in the fourth quarter of 2001. Included in the restructuring charge was severance of $58.3 million for the termination of 449 domestic staff employees, 26 information systems employees and 151 employees in Latin America, Europe and Asia across various levels and departments including sales and marketing, production, development, finance, online and creative services. The reserve also included lease termination and other occupancy costs of $8.3 million for vacated office space in New York. For the nine months ended September 30, 2002, an incremental $8.3 million was accrued as additional lease termination costs based on a revision to the initial estimate. As of September 30, 2002,

10

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

4) RESTRUCTURING AND SPECIAL ITEM CHARGES (Continued)

all employees under the plan were terminated and the Company had paid and charged $43.8 million against the severance liability of which $11.4 million was paid and charged during 2001. As of September 30, 2002, $7.4 million was paid and charged against the lease termination liability and no payments were made against the lease termination liability in 2001. The Company expects to substantially utilize these reserves by the end of 2002; however, severance and lease payments will continue into 2003 since certain employees will be paid out over the terms of their employment contracts and lease payments will continue to be paid in accordance with the terms of the lease.

In the fourth quarter of 2001, in connection with the Company's plan to integrate United Paramount Network ("UPN") with CBS Network operations and, having met the conditions required by EITF 94-3, the Company recorded a restructuring charge of $52.8 million. The restructuring charge included programming write-offs of $29.6 million and approximately $15.0 million of employee-related costs, including severance, for the termination of 38 employees across various levels and departments including corporate, finance and administration, sales and marketing and affiliate relations. The reserve also included lease termination and other costs of $8.2 million for vacated space at three of UPN's offices. The integration of UPN with CBS Network operations began in January 2002. During the third quarter of 2002, liabilities for lease termination and other costs of $5.1 million were released and an additional $5.1 million reserve was recorded for programming write-offs. As of September 30, 2002, the Company had paid and charged approximately $9.4 million against the severance liability associated with the termination of the employees and $1.2 million against lease termination and other costs. There were no payments charged against the reserve in 2001. The Company expects to substantially use these reserves by the end of 2002; however, severance payments will continue into 2003 since certain employees will be paid out over the terms of their employment contracts.

In the second quarter of 2000, the Company recorded non-recurring merger-related charges of $698.5 million ($504.5 million after-tax or $.41 per share), associated with the integration of Viacom and CBS and the acquisition of UPN. These amounts included non-cash charges of $415.5 million principally attributable to compensation for stock options and $283.0 million of cash payments and accrued liabilities for severance, transaction fees and integration costs. For the nine months ended September 30, 2002, the Company paid and charged approximately $10.1 million for severance liabilities, $14.1 million for transaction fees and $7.6 million for integration costs. For the year ended December 31, 2001, the Company paid and charged $17.0 million for severance liabilities, $.4 million for transaction fees and $63.0 million for integration costs. As of September 30, 2002, the Company had paid and charged approximately $119.1 million for severance liabilities, $41.0 million for transaction fees and $76.7 million related to integration costs. The Company expects to substantially use these reserves by the end of 2003.

11

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

4) RESTRUCTURING AND SPECIAL ITEM CHARGES (Continued)

The following table summarizes the activity for merger-related and restructuring charges discussed above:

Blockbuster 2001 Special Item Charges

During the third quarter of 2001, Blockbuster executed a strategic re-merchandising plan to allow for an expansion of store space for DVD and other strategic product offerings. In connection with its plan, Blockbuster eliminated approximately 30% of its rental VHS library in its stores, certain VHS merchandise inventory primarily located in its distribution center, and certain games from its rental library in its stores, and reorganized several of its corporate departments. The cost of the eliminated inventory, net of any estimated proceeds, resulted in primarily non-cash charges of approximately $209.8 million to operating expenses in the third quarter of 2001. During the fourth quarter of 2001, the Company recorded a reduction to operating expenses of $13.9 million relating to a change in the initial estimates. Blockbuster also recorded charges of approximately $13.2 million and $13.7 million in selling, general and administrative expenses during the third quarter and fourth quarter of 2001, respectively, primarily related to employee, labor and supply, and disposal costs to execute the plan. Additionally, $2.6 million was charged to depreciation expense for the write off of fixed assets. During the third quarter and fourth quarter of 2001, $1.1 million and $.8 million, respectively, were charged below operating income to equity in loss of affiliated companies for the adoption of a similar re-merchandising plan at one of Blockbuster's joint venture operations. The plan was completed by the end of 2001 through the destruction or sale of the identified items.

12

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

4) RESTRUCTURING AND SPECIAL ITEM CHARGES (Continued)

Also, during the third quarter of 2001, Blockbuster recorded approximately $27.6 million in selling, general and administrative expenses related to two outstanding lawsuits.

The amounts described above, and including the $102.1 million and $39.6 million recorded in the third quarter and fourth quarter of 2001, respectively, as the change in accounting estimates for rental inventory, represented the 2001 pre-tax Video charge of approximately $356.4 million as of September 30, 2001 and $396.6 million as of December 31, 2001.

5) LONG-TERM DEBT

(a)

Included in "Other liabilities" on the consolidated balance sheets.

The senior, senior subordinated, and subordinated debt of each of Viacom Inc. and its wholly owned subsidiary, Viacom International Inc. ("Viacom International"), is fully and unconditionally guaranteed by Viacom International and Viacom Inc., respectively. The senior debt and senior subordinated debt of the Company's wholly owned subsidiaries, CBS Broadcasting Inc. and Go Outdoor Systems Holdings S.A., respectively, are not guaranteed by Viacom Inc. nor Viacom International; the aggregate outstanding amount of such debt at September 30, 2002 was approximately $105 million.

The Company's long-term debt presented above includes, for the periods ending September 30, 2002 and December 31, 2001, respectively, (i) an aggregate unamortized premium of $50.2 million and $49.4 million and (ii) the change in the carrying value of the debt relating to fair value swaps of $94.6 million and $2.8 million.

As of September 30, 2002, the Company had unused revolving credit facilities of $3.96 billion in the aggregate. The primary purpose of the facilities is to support commercial paper borrowings. At September 30, 2002, the Company had borrowings of $551.3 million under its $4.75 billion commercial paper program. Borrowings under the program have maturities of less than a year.

As of September 30, 2002, the Company had classified approximately $1.2 billion of commercial paper and other debt scheduled to mature within the next twelve months as long-term debt, reflecting its intent and ability, through the existence of unused revolving credit facilities, to refinance this debt on a long-term basis.

13

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

5) LONG-TERM DEBT (Continued)

For the nine months ended September 30, 2002, the following debt issuances, maturities and redemptions occurred:

Debt Issuances

April 25, 2002, $700.0 million 5.625% senior notes due 2007; interest on notes will be paid
semi-annually
August 28, 2002, $600.0 million 5.625% senior notes due 2012; interest on notes will be paid
semi-annually

Debt Maturities

January 1, 2002, 7.625% senior notes, $143.0 million
January 15, 2002, 7.50% senior notes, $250.0 million
June 15, 2002, 8.375% senior notes, $321.8 million

Debt Redemptions

January 15, 2002, $18.7 million 11.375% subordinated exchange debentures due 2009
at 105.7% of principal
June 1, 2002, $31.1 million 8.875% senior debentures due 2022 at 104.4% of principal
June 15, 2002, $2.6 million 8.875% senior subordinated notes due 2007 at 104.4% of principal
August 1, 2002, $239.5 million 8.25% senior debentures due 2022 at 103.5% of principal

For the nine months ended September 30, 2002, the Company repurchased approximately $26 million of its senior debt.

Accounts Receivable Securitization Programs

As of September 30, 2002, the Company had an aggregate of $828.3 million outstanding under revolving receivable securitization programs. The programs result in the sale of receivables on a non-recourse basis to unrelated third parties on a one-year renewable basis, thereby reducing accounts receivable and debt on the Company's consolidated balance sheet. The Company enters into these arrangements because they provide a cost-efficient form of financing and an additional source of liquidity. Proceeds from these programs were used to reduce outstanding borrowings. The Company is required to maintain certain ratios in connection with these programs. As of September 30, 2002, the Company was in compliance with the required ratios under the receivable securitization programs.

6) SHARE PURCHASE PROGRAM

For the nine months ended September 30, 2002, on a trade date basis, the Company purchased approximately 19.7 million shares of its Class B Common Stock for approximately $813.4 million under its stock purchase program, of which $319.9 million was spent in the third quarter for 8.6 million shares. As of September 30, 2002, there was approximately $210.2 million remaining under the current $2.0 billion purchase program. On October 10, 2002, the Company's board of directors approved a new purchase program to buy back up to $3.0 billion of the Company's common stock.

14

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

7) REPORTABLE SEGMENTS

The Company operates in five segments: (i) Cable Networks, (ii) Television, (iii) Infinity, (iv) Entertainment and (v) Video. Effective January 1, 2002, the Company operates its consumer publishing business, which was previously reported as the Publishing segment, under the Entertainment segment. Prior period segment information has been reclassified to conform to the new presentation.

The following tables set forth the Company's financial performance by reportable segment. Intercompany revenues are recorded at fair market value as if the sales were to third parties and are eliminated in consolidation. Intercompany revenue eliminations for the three and nine months ended September 30, 2002 were principally associated with the Entertainment, Television and Cable segments. For the three months ended September 30, 2002, Entertainment's revenue eliminations were $108.1 million, Television's were $43.5 million and Cable Networks' were $13.8 million. For the nine months ended September 30, 2002, Entertainment's revenue eliminations were $261.2 million, Television's were $113.6 million and Cable Networks' were $41.2 million. For the 2001 periods, substantially all of the intercompany revenue eliminations were from the Entertainment segment. For the three and nine months ended September 30, 2001, Entertainment's revenue eliminations were approximately $93.7 million and $300.8 million, respectively. For all periods presented, intercompany profit eliminations are primarily comprised of television programming sales to cable networks, and the sale of feature films to cable and broadcast networks and the Video segment.

(a)

Primarily includes pension and post-retirement benefit costs for benefit plans retained by the Company for previously divested businesses.

15

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

7) REPORTABLE SEGMENTS (Continued)

The Company evaluates performance based on many factors including revenues, operating income, net earnings and EBITDA. EBITDA is defined as operating income (loss) before depreciation and amortization. The Company believes that EBITDA is an appropriate measure of evaluating the operating performance of its segments. However, EBITDA should be considered in addition to, not as a substitute for or superior to, operating income, net earnings, earnings per share, cash flows, and other measures of financial performance prepared in accordance with generally accepted accounting principles ("GAAP"). As EBITDA is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similarly titled measures employed by other companies.

(a)

Primarily includes pension and post-retirement benefit costs for benefit plans retained by the Company for previously divested businesses.

16

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

8) PROVISION FOR INCOME TAXES

The provision for income taxes represents federal, state and local and foreign income taxes on earnings before income taxes. The annual effective tax rate has decreased from 40.5% as of June 30, 2002 to 39.6% as of September 30, 2002, principally due to the release of a valuation allowance for certain tax benefits which are currently expected to be realized, and certain other changes in estimates. This reduction of the annual effective tax rate resulted in a third quarter rate of 38.2%. The annual estimated effective tax rate of 97.8% for 2001, excluding the 2001 Video charge, was adversely affected by amortization of intangibles in excess of the amount deductible for tax purposes. Excluding the non-deductible amortization of intangibles, including goodwill, the annual estimated effective tax rate would have been 41.6% for 2001.

9) COMMITMENTS AND CONTINGENCIES

The Company has long-term noncancelable operating lease commitments for retail and office space and equipment, transponders, studio facilities and vehicles. The Company has also entered into capital leases for satellite transponders and buildings.

Viacom's outdoor advertising business has franchise rights entitling it to display advertising on media such as buses, trains, bus shelters, terminals, billboards, and phone kiosks. Under most of these franchise agreements, the franchiser is entitled to receive the greater of a percentage of the relevant advertising revenues, net of advertising agency fees, or a specified guaranteed minimum annual payment.

As of September 30, 2002, other commitments of the Company not reflected on the balance sheet are estimated to aggregate approximately $15.5 billion. These commitments include approximately $9.6 billion for the acquisition of sports programming rights, approximately $4.9 billion relating to television, radio and feature film production and acquisitions and approximately $1.0 billion for talent contracts. A majority of such fees are payable over several years, as part of the normal course of business.

Guarantees

The Company owns a 50% equity interest in United Cinemas International ("UCI") which operates movie theaters in Europe, Latin America and Asia. As of September 30, 2002, the Company guaranteed approximately $256.0 million of UCI's debt obligations and $156.3 million of theater leases. The debt obligation was entered into in December 2000 and is payable in full by UCI in December 2002. The Company is obligated to pay this amount in full if UCI does not make the payment. The Company also owns a 50% interest in Grauman's Theatres LLC and guarantees certain theater leases for approximately $15.2 million. The above lease guarantees would only be triggered upon non-payment by the respective primary obligors. These guarantees are not recorded on the balance sheet as of September 30, 2002.

The Company is also subject to certain off-balance sheet lease guarantees related to the divestitures of certain businesses. The Company estimates these guarantees to be less than $100 million at September 30, 2002.

17

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

9) COMMITMENTS AND CONTINGENCIES (Continued)

Legal Matters

Antitrust.    The Company, Blockbuster and Paramount Home Entertainment and other major motion picture studios received a directed verdict in their favor at the close of the plaintiffs' evidence at trial in the lawsuit filed on July 21, 1999 in the United States District Court for the Western District of Texas by one former and three present independent video retailers. The plaintiffs alleged that the Company and the studios conspired among themselves and with Blockbuster to restrain competition in the nationwide market for distribution of videocassettes for rental to the public in violation of federal and California law. Plaintiffs sought injunctive relief under federal law as well as triple the amount of the alleged actual damages to themselves and those similarly situated under California statutes. Plaintiffs have filed an appeal to the Fifth Circuit Court of Appeals. In January 2001, plaintiffs filed a substantially similar complaint with approximately 200 additional named plaintiffs in Superior Court for the County of Los Angeles. This complaint also sought certification of a nationwide class of similarly situated plaintiffs. On January 8, 2002, the California court denied plaintiffs' motion for class certification. Plaintiffs have appealed such denial of class certification by the California court. The Company and the other defendants have filed a motion for summary judgment with the Superior Court for the County of Los Angeles. The Company believes that the plaintiffs' position in these litigations is without merit and intends to continue to defend itself vigorously in the litigations.

Asbestos and Environmental.    The Company is a defendant in lawsuits claiming various asbestos-related personal injuries, which allegedly occurred as a result of exposure caused by various products manufactured by Westinghouse, a predecessor, generally prior to the early 1970s. Westinghouse was neither a producer nor a manufacturer of asbestos. The Company is typically named as one of a large number of defendants in both state and federal cases. In the majority of lawsuits, the plaintiffs have not identified which of the Company's products is the basis of a claim. Claims against the Company in which a product has been identified principally relate to exposures allegedly caused by asbestos- containing insulating material in turbines sold for power-generation, industrial and marine use, or by asbestos-containing grades of decorative micarta, a laminate used in commercial ships.

18

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

9) COMMITMENTS AND CONTINGENCIES (Continued)

Claims typically are both filed and settled in large groups, which makes the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. As of September 30, 2002, the Company had pending approximately 125,600 asbestos claims, as compared to approximately 129,900 as of September 30, 2001 and approximately 106,000 as of December 31, 2001. Of the claims pending as of September 30, 2002, approximately 93,800 were pending in state courts, approximately 22,400 in federal court and approximately 9,400 were third party claims. During the third quarter of 2002, the Company received approximately 11,000 new claims and closed approximately 3,300 claims. The Company reports claims as closed when it becomes aware that a dismissal order has been entered by a court or when the Company has reached agreement with the claimants on the material terms of a settlement.

Settlement costs depend on the seriousness of the injuries that form the basis of the claim, the quality of evidence supporting the claims and other factors. To date, the Company has not been liable for any third-party claims. The Company's total costs in 2001 for settlement and defense of asbestos claims after insurance recoveries and net of tax benefits, were approximately $21 million. A portion of such costs relates to claims settled in prior years.

The Company believes that its reserves and insurance are adequate to cover its asbestos liabilities.

The Company from time to time receives claims from federal and state environmental regulatory agencies and other entities asserting that it is or may be liable for environmental cleanup costs and related damages principally relating to discontinued operations conducted by companies acquired by the Company.

Other.    The Company has amounts owed by an international licensee under a series of long-term licensing arrangements covering feature film and television product. The licensee is disputing its obligation to accept and to pay for a portion of this product under certain of these arrangements. The Company has brought suit to enforce its rights under those arrangements and strongly believes in the merits of its position. The licensee is attempting to reorganize under German insolvency law. As a result, the Company may be unable to recover some or all of amounts being sought in the litigation, as well as the undisputed sums owing under these arrangements. The Company however, believes that the resolution of such matters will not have a material adverse effect on the Company's consolidated results of operations.

Litigation is inherently uncertain and always difficult to predict. However, based on its understanding and evaluation of the relevant facts and circumstances, the Company believes that all of the above-described legal matters and other litigation to which it is a party are not likely, in the aggregate, to have a material adverse effect on its results of operations, financial position or cash flows.

19

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

10) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The senior, senior subordinated, and subordinated debt of each of Viacom Inc. and its wholly owned subsidiary, Viacom International, is fully and unconditionally guaranteed by Viacom International and Viacom Inc., respectively. The following condensed consolidating financial statements present the results of operations, financial position and cash flows of Viacom Inc., Viacom International, the direct and indirect Non-Guarantor Affiliates of Viacom Inc., and the eliminations necessary to arrive at the information for the Company on a consolidated basis.

20

VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

10) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Continued)