Viacom Reports Full Year and Fourth Quarter 2006 Results

Viacom Reports Full Year and Fourth Quarter 2006 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.

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.

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