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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission File Number 001-09553

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

Indicate by check mark whether the registrant is an accelerated filer (as defined Rule 12b-2 of the Securities Exchange Act of 1934). Yes ý    No o

Number of shares of common stock outstanding at October 29, 2004:

Class A Common Stock, par value $.01 per share — 131,502,655

Class B Common Stock, par value $.01 per share — 1,573,527,235

VIACOM INC.
INDEX TO FORM 10-Q

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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.

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

See notes to consolidated financial statements.

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VIACOM INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)

See notes to consolidated financial statements.

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollars in millions, except per share amounts)

1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation—The consolidated financial statements include the accounts of Viacom Inc. and investments of more than 50% in subsidiaries and other entities for which the company, directly or indirectly, has a controlling financial interest ("Viacom" or the "Company"). Investments in affiliated companies over which the Company has a significant influence or ownership of at least 20% but less than or equal to 50% are accounted for under the equity method. Investments of less than 20% are accounted for under the cost method. All significant intercompany transactions have been eliminated.

The accompanying unaudited consolidated financial statements of 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 fiscal year ended December 31, 2003.

As a result of the completion of the exchange offer for the split-off of Blockbuster Inc., the consolidated statements of results of operations, financial position and cash flows of the Company present Blockbuster Inc. as a discontinued operation.

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, results of operations and cash flows of the Company for the periods presented. 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.

Subsidiary Stock Transactions—Viacom Investments Inc., a wholly-owned subsidiary of CBS Broadcasting Inc., owned 414.4 million shares of Viacom Class B Common Stock. These shares were originally issued to CBS Broadcasting Inc. in February 2001 as a result of the acquisition by Viacom of the publicly-traded minority equity interest in Infinity Broadcasting Corporation. CBS Broadcasting Inc. contributed all 414.4 million shares to Viacom Investments Inc. in December 2003. In August 2004, the 414.4 million Viacom Class B shares were exchanged for 4,144,000 shares of Viacom Series D Fully Participating Preferred Stock. These shares are eliminated in consolidation.

Net Earnings (Loss) per Common Share—Basic earnings (loss) per share ("EPS") is based upon net earnings divided by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the effect of the assumed exercise of stock options only in the periods in which such effect would have been dilutive. For the three and nine months ended September 30, 2004, respectively, stock options to purchase 113.2 million and 107.0 million shares of Class B Common Stock at weighted average prices of $45.32 and $45.88 were outstanding but excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive. For the three and nine months ended September 30, 2003, respectively, stock options to purchase 47.2 million and 59.8 million shares of Class B Common Stock at weighted average prices of $53.74 and $51.30 were outstanding but excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive.

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

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

Comprehensive Income (Loss)—Total comprehensive income (loss) for the Company includes net earnings (loss) and other comprehensive income (loss) items listed in the table below.

Stock-Based Compensation—The Company follows the disclosure-only provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). The Company applies APB Opinion No. 25 "Accounting for Stock Issued to Employees" and, accordingly, does not recognize compensation expense for stock option grants because the Company does not issue options at exercise prices below market value at date of grant.

The following table reflects the effect on net earnings and earnings per share from continuing operations if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation. These pro forma effects may not be representative of future amounts since the estimated fair value of stock options on the date of grant is amortized to expense over the vesting period and the number of options granted in future years may change.

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

Goodwill and Intangible Assets—The Company's intangible assets are allocated to various reporting units, which are generally consistent with or one level below the Company's reportable segments. Intangible assets with finite lives, which primarily consist of franchise and subscriber agreements, are generally amortized by the straight-line method over their estimated useful lives, which range from 5 to 40 years and are periodically reviewed for impairment. Intangible assets with indefinite lives, which consist primarily of FCC licenses and goodwill, are no longer amortized but are tested for impairment on an annual basis and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value below its carrying amount. If the carrying amount of goodwill or the intangible asset exceeds its fair value, an impairment loss is recognized as a non-cash charge. Such a charge could have a significant effect on reported net earnings.

Changes in Accounting Principle—Effective January 1, 2003, the Company adopted SFAS No. 143 "Accounting for Asset Retirement Obligations" ("SFAS 143"). SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. SFAS 143 requires the capitalization of asset retirement costs as part of the total cost of the related long-lived asset and the depreciation of this cost over the corresponding asset's useful life. SFAS 143 primarily applies to billboard advertising locations, where the Company is legally obligated to remove leasehold improvements to restore the property to its original condition. The asset retirement obligation was $44.5 million and $43.0 million at September 30, 2004 and December 31, 2003, respectively. As a result of the adoption of this standard, the Company recorded in the first quarter of 2003 a charge of $18.5 million, or $.01 per share, reflected as a cumulative effect of change in accounting principle, net of minority interest and tax.

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

Recent Pronouncements—In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46") which was replaced in December 2003 by the issuance of FIN 46R ("FIN 46R"). FIN 46R explains how to identify variable interest entities ("VIEs") and how a company should assess its interests in a variable interest entity to decide whether to consolidate that entity. FIN 46R requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. The provisions of FIN 46R were effective for special purpose entities (SPEs) as of December 31, 2003. The remaining provisions were effective as of January 1, 2004. The adoption of FIN 46R did not have a significant impact on the Company's consolidated financial position, results of operations or cash flows.

During the third quarter of 2004, the Company adopted FASB Staff Position FAS 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act")" ("FSP 106-2") for employers that sponsor postretirement health care plans that provide prescription drug benefits, and requires certain disclosures regarding the effect of the federal subsidy provided by the Act. Based on proposed Centers for Medicare & Medicaid Services regulations issued to date, the Company is unable to conclude whether benefits provided by the Plan are at least actuarially equivalent to benefits available though Medicare Part D. Therefore, the measure of the accumulated postretirement benefit obligation and net periodic postretirement expense disclosed (see Note 10) do not reflect any amount associated with potential subsidies under the Act. The Company expects to be able to determine the actuarial equivalency of benefits provided by the Plan when additional guidance and final regulations are issued and does not expect it will have a significant impact on the Company's consolidated financial position, results of operation or cash flow.

On September 30, 2004, the Emerging Issue Task Force ("EITF") of FASB issued Topic No. D-108 "Use of the Residual Method to Value Acquired Assets Other than Goodwill" ("D-108"). D-108 requires the direct value method be used to value intangible assets other than goodwill for such assets acquired in business combinations completed after September 29, 2004. D-108 also requires that registrants who have applied the residual method to the valuation of intangible assets for purposes of impairment testing shall perform an impairment test using the direct value method on all intangible assets no later than the beginning of fiscal years beginning after December 15, 2004 though early adoption is permissible. Impairments resulting from the application of the direct value method and the related tax effects should be reported as a cumulative effect of a change in accounting principle. The Company is in the process of evaluating the impact the adoption of D-108 will have on the Company's financial position and statement of operations.

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

2) SUBSEQUENT EVENTS

On October 28, 2004, the Company announced that its Board of Directors has approved a stock purchase program under which the Company is authorized to acquire from time to time up to $8.0 billion in Viacom Class A Common Stock and non-voting Class B Common Stock. The program succeeds and replaces the Company's $3.0 billion stock purchase program announced in 2002, under which 40.7 million shares of Class B Common Stock have been purchased for $1.7 billion. The Company will finance the purchase program using a combination of cash and investments, future cash flows and borrowing capacity consistent with the Company's current credit profile. NAIRI, Inc., and National Amusements, Inc., each closely held corporations controlled by Sumner M. Redstone, Chairman of the Board of Directors and Chief Executive Officer of the Company, have entered into an agreement with the Company to participate in the program on a pro-rata basis. The agreement, which has been approved by an independent committee of Viacom directors, will prevent the buyback from increasing NAIRI, Inc.'s economic interest in Viacom. National Amusements, Inc., through its wholly owned subsidiary, NAIRI, Inc., owns Viacom's Class A Common Stock representing approximately 71% of the voting power of all classes of the Company's Common Stock and approximately 11% of Viacom's Class A and Class B Common Stock on a combined basis at September 30, 2004.

In addition, the Company announced an increase in the quarterly cash dividend on Viacom Class A and Class B Common Stock to $.07 per share from $.06 per share. The increased dividend is payable on January 1, 2005 to stockholders of record at the close of business on November 30, 2004.

3) DISCONTINUED OPERATIONS

On October 13, 2004, the Company announced the completion of the exchange offer for the split-off of Blockbuster Inc. (NYSE: BBI and BBI.B). Under the terms of the offer, Viacom accepted 27,961,165 shares of Viacom common stock in exchange for the 144 million common shares of Blockbuster that Viacom owned. Each share of Viacom Class A or Class B Common Stock accepted for exchange by Viacom was exchanged for 5.15 shares of Blockbuster common stock, consisting of 2.575 shares of Blockbuster class A common stock and 2.575 shares of Blockbuster class B common stock.

The following table sets forth the Company's net earnings (loss) attributable to Blockbuster Inc., which is presented as a discontinued operation:

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

The loss from discontinued operations for the three and nine months ended September 30, 2004 primarily reflects a non-cash impairment charge of $1.5 billion ($1.2 billion net of minority interest and tax) recorded in the third quarter of 2004 for the impairment of goodwill and other long-lived assets in accordance with SFAS 142 "Goodwill and Other Intangible Assets" and SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets."

The difference between the fair market value of Blockbuster and its net book value at the time of the split-off will be recognized as a gain or loss for accounting purposes in the fourth quarter of 2004.

The following table presents the major classes of assets and liabilities of the Company's discontinued operations, including Blockbuster Inc. and businesses that have been previously disposed of by the Company prior to January 1, 2002 (accounted for as discontinued operations in accordance with Accounting Principles Board Opinion No. 30):

4) ACQUISITIONS

In August 2004, the Company acquired 75.8% of VIVA Media AG for $306.9 million. Pursuant to a tender offer, the Company subsequently purchased additional shares of VIVA Media AG in September for $45.4 million and in October 2004 for $38.4 million, raising the Company's total ownership to 97.8% for a total purchase price of $390.7 million. VIVA's results have been included as part of Cable Networks since the date of acquisition. The final allocation of the purchase price will be based on final evaluation of the fair value of VIVA's assets acquired and liabilities assumed.

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

5) GOODWILL AND INTANGIBLE ASSETS

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

Amortization expense was $25.6 million and $74.1 million, respectively, for the three and nine months ended September 30, 2004 and $24.9 million and $75.9 million, respectively, for the three and nine months ended September 30, 2003. The Company expects its annual amortization expense for each of the next five years for existing intangible assets subject to amortization to be as follows:

FCC licenses, valued at approximately $11.7 billion at September 30, 2004 and December 31, 2003, are recorded as intangible assets with indefinite lives and are not subject to amortization.

The changes in the book value of goodwill, by segment, for the nine months ended September 30, 2004 were as follows:

(a)

Adjustments primarily relate to purchase price allocations for Comedy Central, foreign currency translation adjustments and the reversal of tax liabilities established in purchase price accounting that are no longer expected to be incurred.

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

6) INVENTORY

7) BANK FINANCING AND DEBT

The following table sets forth the Company's long-term debt:

The Company's total debt presented above includes (i) an aggregate unamortized premium of $35.8 million and $41.4 million and (ii) the change in the carrying value of the debt, since inception,

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

relating to fair value swaps of $31.0 million and $48.2 million for the periods ending September 30, 2004 and December 31, 2003, respectively.

The senior debt of Viacom Inc. is fully and unconditionally guaranteed by its wholly owned subsidiary, Viacom International Inc. ("Viacom International"). Senior debt in the amount of $52.2 million of the Company's wholly owned subsidiary, CBS Broadcasting Inc., is not guaranteed.

On July 15, 2004, the Company redeemed all of the outstanding Go Outdoor Systems Holdings S.A. 10.5% senior subordinated notes due 2009, at a redemption price equal to 105.25% of the principal amount.

During the third quarter of 2004, the Company entered into $50 million notional amount of swap agreements, which converted fixed rate debt obligations into variable rate debt obligations. The swaps mature in January 2006 and the Company receives an interest rate of approximately 2.9%, while paying three-month London Interbank Offer Rate ("LIBOR").

During the second quarter of 2004, the Company entered into $300 million notional amount of swap agreements, which converted fixed rate debt obligations into variable rate debt obligations. The swaps mature on January 2006 and the Company receives an interest rate of approximately 2.7%, while paying three-month LIBOR on $150 million and receives an interest rate of approximately 3.6%, while paying six-month LIBOR on $150 million.

Viacom Credit Agreement

As of December 31, 2003, the Company's credit facilities, totaled $4.65 billion comprised of a $1.7 billion 364-day revolving facility due February 2004, a $1.45 billion revolving facility due May 2005 and a $1.5 billion revolving facility due March 2006. In February 2004, the Company entered into a $3.0 billion 5-year credit facility which replaced the $1.7 billion and the $1.45 billion facilities. The terms and conditions of the $3.0 billion facility are substantially similar to the $1.5 billion facility. The Company, at its option, may also borrow in certain foreign currencies up to specified limits under the $3.0 billion and $1.5 billion facilities (collectively, the "Credit Facilities"). Borrowing rates under the facilities are determined at the Company's option at the time of each borrowing and are based generally on the prime rate in the United States or the LIBOR plus a margin based on the Company's senior unsecured debt rating. The Company pays a facility fee based on the total amount of the commitments. As of September 30, 2004, the Company had unused revolving Credit Facilities of $4.27 billion.

The facilities contain covenants, which among other things, require that the Company maintain a minimum interest coverage ratio. At September 30, 2004, the Company was in compliance with all covenants under the Credit Facilities.

The primary purpose of the Credit Facilities is to support commercial paper borrowings. At September 30, 2004, the Company had no borrowings under its $4.5 billion commercial paper program.

Accounts Receivable Securitization Programs

As of September 30, 2004, the Company had an aggregate of $1.0 billion 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 on the Company's Consolidated Balance Sheets. The Company enters into these arrangements because they provide an additional source of liquidity. Proceeds from these programs were used to reduce

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

outstanding borrowings. The terms of the revolving securitization arrangements require that the receivable pools subject to the programs meet certain performance ratios. As of September 30, 2004, the Company was in compliance with the required ratios under the receivable securitization programs, except for one performance ratio under one program, for which a waiver has been received, due to the write-off of a receivable from a third party.

8) SEVERANCE AND RESTRUCTURING CHARGES

In the second quarter of 2004, the Company recorded severance charges of $56.2 million, $33.8 million net of tax, or $.02 per diluted share, due to management changes. The severance charges were recorded in selling, general and administrative expenses in the segments as follows: Television $10.4 million, Entertainment $10.4 million and Corporate $35.4 million.

During the third quarter of 2004, Cable Networks recorded a decrease of $9.7 million to restructuring reserves due to a change in estimate for a 2001 charge at MTV Networks ("MTVN"). Additionally, during the nine months ended September 30, 2004 MTVN revised its initial estimate of severance liabilities for the acquisition of Comedy Central by $1.6 million. The initial charge for Comedy Central was recorded in the second quarter of 2003. Severance payments will continue through 2005 since certain employees will be paid out over the terms of their employment contracts.

The following table summarizes activity for the nine months ended September 30, 2004 for the Cable Networks restructuring charges:

9) SHARE PURCHASE PROGRAM AND CASH DIVIDENDS

For the nine months ended September 30, 2004, on a trade date basis, the Company purchased approximately 13.8 million shares of its Class B Common Stock for $565.8 million under its $3.0 billion stock purchase program. For the nine months ended September 30, 2003, the Company purchased approximately 10.3 million shares of its Class B Common Stock for $436.1 million. Since inception of this program in October 2002, a total of 40.7 million shares of Class B Common Stock have been purchased through September 30, 2004, for $1.7 billion.

On July 21, 2004, Viacom's Board of Directors declared a quarterly cash dividend of $.06 per share on Viacom Class A and Class B Common Stock. The dividend was paid October 1, 2004 to stockholders of record at the close of business on August 31, 2004. Year-to-date through October 1, 2004, the Company has paid dividends of $415.2 million to stockholders.

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

10) PENSION AND OTHER POSTRETIREMENT BENEFITS

The components of net periodic cost for the Company's pension and postretirement benefit plans were as follows:

11) PROVISION FOR INCOME TAXES

For the three months ended September 30, 2004, the Company's effective income tax rate decreased to 36.6% from 40.2% in the third quarter of 2003. For the nine months ended September 30, 2004, the Company's effective income tax rate decreased to 36.1% from 40.5% for the same period last year. The decrease in the effective income tax rates for both periods was principally due to the recognition of a tax benefit from the resolution of certain income tax audits. Excluding this tax benefit, the effective tax rate was 39.9% for the three months and 40.6% for the nine months ended September 30, 2004.

12) COMMITMENTS AND CONTINGENCIES

Guarantees

As of September 30, 2004, the Company owned a 50% equity interest in United Cinemas International ("UCI"), which operates movie theaters in Europe, Latin America and Asia and guaranteed approximately $307.8 million of UCI's debt obligations under a revolving credit facility, which expires in December 2004, and $164.0 million of UCI's theater leases. The Company also owns a 50% interest in WF Cinema Holdings, L.P., and Grauman's Theatres LLC and guarantees certain theater leases for approximately $13.8 million. The debt and lease guarantees would only be triggered upon non-payment

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

by the respective primary obligors. These guarantees are not recorded on the balance sheet as of September 30, 2004 as they were provided by the Company prior to the adoption of FASB interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45").

Additionally, the Company has indemnification obligations with respect to letters of credit and surety bonds primarily used as security against non-performance in the normal course of business. The outstanding letters of credit and surety bonds approximated $336.6 million at September 30, 2004 and are not recorded on the balance sheet as of September 30, 2004.

In the course of its business, the Company both provides and receives the benefit of indemnities which are intended to allocate certain risks associated with business transactions. Similarly, the Company may remain contingently liable for various obligations of a business that has been divested in the event that a third party does not live up to its obligations under an indemnification obligation. The Company records a liability for its indemnification obligations and other contingent liabilities when probable under generally accepted accounting principles.

Legal Matters

Asbestos and Environmental.    The Company is a defendant in lawsuits claiming various personal injuries related to asbestos and other materials, which allegedly occurred principally 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 asbestos 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.

Claims are frequently filed and/or settled in large groups, which may make the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. The Company does not report as pending those claims on inactive, stayed, deferred or similar dockets which some jurisdictions have established for claimants who allege minimal or no impairment. As of September 30, 2004, the Company had pending approximately 112,200 asbestos claims, as compared with approximately 112,280 as of December 31, 2003 and approximately 124,300 as of September 30, 2003. Of the claims pending as of September 30, 2004, approximately 82,430 were pending in state courts, 27,210 in federal courts and approximately 2,560 were third party claims. During the third quarter of 2004, the Company received approximately 3,470 new claims and closed or moved to an inactive docket approximately 7,450 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 (recovery) for the years 2003 and 2002 for settlement and defense of asbestos claims after insurance recoveries and net of tax benefits were approximately $(8.7) million and $28.0 million, respectively. A portion of such costs relates to claims settled in prior years. If proceeds received in 2003 from commuted insurance policies were excluded from the Company's total

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

costs in 2003, the Company's total costs after insurance recoveries and net of tax benefits would have been $56.6 million.

The Company believes that its reserves and insurance are adequate to cover its asbestos liabilities and that these asbestos liabilities are not likely to have a material adverse effect on its results of operations, financial position or cash flows.

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. In addition, the Company from time to time receives personal injury claims including toxic tort and product liability claims arising from historical operations of the Company and its predecessors.

Antitrust.    In July 2002, judgment was entered in favor of the Company, Blockbuster, Paramount Home Entertainment and other major motion picture studios and their home video subsidiaries with respect to a complaint filed in the United States District Court for the Western District of Texas. The complaint included federal antitrust and California state law claims. In August 2003, the Fifth Circuit Court of Appeals affirmed the federal court judgment. The Supreme Court of the United States refused plaintiffs' petition for writ of certiorari in March 2004. In February 2003, a similar complaint that had been filed in a Los Angeles County Superior Court was also dismissed with prejudice. The plaintiffs have appealed the California state court dismissal, as well as a prior denial of class certification. The Company believes that the plaintiffs' positions in these litigations are without merit and intends to continue to vigorously defend itself in the litigations.

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.

13) REPORTABLE SEGMENTS

The following tables set forth the Company's financial performance by reportable operating segment. The Company's reportable operating segments have been determined in accordance with the Company's internal management structure, which is organized based upon products and services. Effective September 30, 2004, Blockbuster Inc. is accounted for as a discontinued operation and results from the Video segment for all prior periods have been reclassified to conform to the current period's

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VIACOM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular dollars in millions, except per share amounts)

presentation. The Company operates five segments: (i) Cable Networks, (ii) Television, (iii) Radio, (iv) Outdoor and (v) Entertainment.