Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
FORM 10-Q
 
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    
For the quarterly period ended December 31, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    
For the transition period from                      to                     
Commission File Number 001-32686
 
 
 
 
VIACOM INC.
(Exact name of registrant as specified in its charter)
DELAWARE
20-3515052
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
 
 
 
 
1515 Broadway
New York, NY 10036
(212) 258-6000
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
 
 
 
 
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 x    No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).  Yes x    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x    Accelerated filer ¨    Non-accelerated filer ¨ (Do not check if a smaller reporting company)    Smaller reporting company ¨    Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨    No x
Class of Stock
 
Shares Outstanding
as of January 31, 2018
Class A common stock, par value $0.001 per share
 
49,431,181

Class B common stock, par value $0.001 per share
 
352,910,924

 


Table of Contents

VIACOM INC.
INDEX TO FORM 10-Q
 
 
 
Page
 
 
 
Consolidated Statements of Earnings for the quarters ended December 31, 2017 and 2016
 
 
Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017
 
Consolidated Statements of Cash Flows for the quarters ended December 31, 2017 and 2016
 
 
 
 


Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
VIACOM INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
  
Quarter Ended  
 December 31,
(in millions, except per share amounts)
2017
 
2016
Revenues
$
3,073

 
$
3,324

Expenses:
 
 
 
Operating
1,563

 
1,819

Selling, general and administrative
740

 
701

Depreciation and amortization
53

 
56

Restructuring

 
42

Total expenses
2,356

 
2,618

Operating income
717

 
706

Interest expense, net
(147
)
 
(156
)
Equity in net earnings of investee companies
1

 
13

Gain/(loss) on extinguishment of debt
25

 
(6
)
Other items, net
(3
)
 
9

Earnings from continuing operations before provision for income taxes
593

 
566

Provision for income taxes
(42
)
 
(158
)
Net earnings from continuing operations
551

 
408

Discontinued operations, net of tax
2

 

Net earnings (Viacom and noncontrolling interests)
553

 
408

Net earnings attributable to noncontrolling interests
(16
)
 
(12
)
Net earnings attributable to Viacom
$
537

 
$
396

Amounts attributable to Viacom:
 
 
 
Net earnings from continuing operations
$
535

 
$
396

Discontinued operations, net of tax
2

 

Net earnings attributable to Viacom
$
537

 
$
396

Basic earnings per share attributable to Viacom:
 
 
 
Continuing operations
$
1.33

 
$
1.00

Discontinued operations

 

Net earnings
$
1.33

 
$
1.00

Diluted earnings per share attributable to Viacom:
 
 
 
Continuing operations
$
1.33

 
$
1.00

Discontinued operations

 

Net earnings
$
1.33

 
$
1.00

Weighted average number of common shares outstanding:
 
 
 
Basic
402.5

 
397.0

Diluted
402.6

 
397.9

Dividends declared per share of Class A and Class B common stock
$
0.20

 
$
0.20

 
 
 
 
 See accompanying notes to Consolidated Financial Statements

1

Table of Contents

VIACOM INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
  
Quarter Ended  
 December 31,
(in millions)
2017
 
2016
Net earnings (Viacom and noncontrolling interests)
$
553

 
$
408

Other comprehensive income/(loss), net of tax:
 
 
 
Foreign currency translation adjustments
9

 
(138
)
Defined benefit pension plans
2

 
2

Cash flow hedges
1

 

Available for sale securities
30

 

Other comprehensive income/(loss) (Viacom and noncontrolling interests)
42

 
(136
)
Comprehensive income
595

 
272

Less: Comprehensive income attributable to noncontrolling interest
16

 
11

Comprehensive income attributable to Viacom
$
579

 
$
261

 
 
 
 
 See accompanying notes to Consolidated Financial Statements

2

Table of Contents

VIACOM INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions, except par value)
December 31,
2017
 
September 30,
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
394

 
$
1,389

Receivables, net
3,125

 
2,970

Inventory, net
959

 
919

Prepaid and other assets
527

 
523

Total current assets
5,005

 
5,801

Property and equipment, net
936

 
978

Inventory, net
3,978

 
3,982

Goodwill
11,660

 
11,665

Intangibles, net
305

 
313

Other assets
947

 
959

Total assets
$
22,831

 
$
23,698

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
351

 
$
431

Accrued expenses
654

 
869

Participants’ share and residuals
800

 
825

Program obligations
698

 
712

Deferred revenue
421

 
463

Current portion of debt
120

 
19

Other liabilities
494

 
434

Total current liabilities
3,538

 
3,753

Noncurrent portion of debt
10,069

 
11,100

Participants’ share and residuals
339

 
384

Program obligations
485

 
477

Deferred tax liabilities, net
235

 
294

Other liabilities
1,285

 
1,323

Redeemable noncontrolling interest
249

 
248

Commitments and contingencies (Note 6)


 


Viacom stockholders’ equity:
 
 
 
Class A common stock, par value $0.001, 375.0 authorized; 49.4 and 49.4 outstanding, respectively

 

Class B common stock, par value $0.001, 5,000.0 authorized; 353.1 and 353.0 outstanding, respectively

 

Additional paid-in capital
10,129

 
10,119

Treasury stock, 393.7 and 393.8 common shares held in treasury, respectively
(20,585
)
 
(20,590
)
Retained earnings
17,582

 
17,124

Accumulated other comprehensive loss
(576
)
 
(618
)
Total Viacom stockholders’ equity
6,550

 
6,035

Noncontrolling interests
81

 
84

Total equity
6,631

 
6,119

Total liabilities and equity
$
22,831

 
$
23,698

 
 
 
 
 See accompanying notes to Consolidated Financial Statements

3

Table of Contents

VIACOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

  
Quarter Ended 
 December 31,
(in millions)
2017
 
2016
OPERATING ACTIVITIES
 
 
 
Net earnings (Viacom and noncontrolling interests)
$
553

 
$
408

Discontinued operations, net of tax
(2
)
 

Net earnings from continuing operations
551

 
408

Reconciling items:
 
 
 
Depreciation and amortization
53

 
56

Feature film and program amortization
1,047

 
1,089

Equity-based compensation
14

 
23

Equity in net earnings and distributions from investee companies
4

 
13

Deferred income taxes
(91
)
 
(63
)
Operating assets and liabilities, net of acquisitions:
 
 
 
Receivables
(93
)
 
(323
)
Production and programming
(1,191
)
 
(1,020
)
Accounts payable and other current liabilities
(232
)
 
(45
)
Other, net
(50
)
 
21

Net cash provided by operating activities
12

 
159

 
 
 
 
INVESTING ACTIVITIES
 
 
 
Acquisitions and investments, net
(2
)
 
(343
)
Capital expenditures
(28
)
 
(52
)
Proceeds received from asset sales
23

 

Proceeds received from grantor trusts
2

 
46

Net cash used in investing activities
(5
)
 
(349
)
 
 
 
 
FINANCING ACTIVITIES
 
 
 
Borrowings

 
1,285

Debt repayments
(1,000
)
 
(900
)
Commercial paper
100

 

Dividends paid
(80
)
 
(79
)
Other, net
(22
)
 
(14
)
Net cash provided by/(used in) financing activities
(1,002
)
 
292

Effect of exchange rate changes on cash and cash equivalents

 
(38
)
Net change in cash and cash equivalents
(995
)
 
64

Cash and cash equivalents at beginning of period
1,389

 
379

Cash and cash equivalents at end of period
$
394

 
$
443

 
 
 
 
 See accompanying notes to Consolidated Financial Statements

4

Table of Contents
VIACOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 1. BASIS OF PRESENTATION
Description of Business
Viacom is home to premier global media brands that create compelling entertainment content - including television programs, motion pictures, short-form content, games, consumer products, podcasts, live events and social media experiences - for audiences in 183 countries on various platforms and devices. Viacom operates through two reportable segments: Media Networks and Filmed Entertainment. The Media Networks segment provides entertainment content, services and related branded products for consumers in targeted demographics attractive to advertisers, content distributors and retailers through three brand groups: the Global Entertainment Group, the Nickelodeon Group and BET Networks. The Filmed Entertainment segment develops, produces, finances, acquires and distributes motion pictures, television programming and other entertainment content under the Paramount Pictures, Paramount Players, Paramount Animation and Paramount Television divisions, in various markets and media worldwide, for itself and for third parties. It partners on various projects with key Viacom franchises, including Nickelodeon Movies and MTV Films. References in this document to “Viacom,” “Company,” “we,” “us” and “our” mean Viacom Inc. and our consolidated subsidiaries, unless the context requires otherwise.
Unaudited Interim Financial Statements
The accompanying unaudited consolidated quarterly financial statements have been prepared on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited financial statements reflect all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of our results of operations, financial position and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results expected for the fiscal year ending September 30, 2018 (“fiscal 2018”) or any future period. These financial statements should be read in conjunction with our Form 10-K for the year ended September 30, 2017, as filed with the SEC on November 16, 2017 (the “2017 Form 10-K”).
Use of Estimates
Preparing financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the dates presented and the reported amounts of revenues and expenses during the periods presented. Significant estimates inherent in the preparation of the accompanying Consolidated Financial Statements include estimates of film ultimate revenues, product returns, potential outcome of uncertain tax positions, fair value of acquired assets and liabilities, fair value of equity-based compensation and pension benefit assumptions. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results may differ from these estimates.
Recent Accounting Pronouncements
Equity-Based Compensation
On October 1, 2017, we adopted Accounting Standards Update (“ASU”) 2016-09 - Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for and presentation of share-based payments in the financial statements. The new guidance requires all excess tax benefits and tax deficiencies arising from share-based payment activity to be (i) recognized within Provision for income taxes in the Consolidated Statements of Earnings in the period in which the awards vest or are exercised or canceled, and (ii) reported as operating activities in the Consolidated Statements of Cash Flows.
Derivatives and Hedging
In August 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-12 - Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. Among other provisions, ASU 2017-12 expands the eligibility of hedging strategies that qualify for hedge accounting, changes the assessment of hedge effectiveness and modifies the presentation and disclosure of hedging activities. The guidance will be effective for the first interim period of our 2020 fiscal year, with early adoption permitted. We are currently evaluating the impact of the new standard on our consolidated financial statements.
Income Taxes
In October 2016, the FASB issued ASU 2016-16 - Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. ASU 2016-16 will require the tax effects of intercompany transactions, other than sales of inventory, to be recognized currently, eliminating an exception under current GAAP in which the tax effects of intra-entity asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The guidance will be effective for the first interim period of our 2019 fiscal year, with early adoption permitted. As of December 31, 2017, the Company had approximately $200 million of unrecorded net deferred tax assets, primarily related to an intra-entity transfer of assets. Once recorded, the deferred tax assets will be amortized over the next 12 years.

5

Table of Contents
VIACOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Statement of Cash Flows
In August 2016, the FASB issued ASU 2016-15 - Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance will be effective for the first interim period of our 2019 fiscal year, with early adoption permitted. The new standard will impact our statement of cash flows by increasing cash flow from operating activities and decreasing cash flow from financing activities in periods when debt prepayment or debt extinguishment costs are paid.
Financial Instruments
In connection with its financial instruments project, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments in June 2016 and ASU 2016-01 - Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities in January 2016.
ASU 2016-13 introduces a new impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a forward-looking “expected loss” model that will replace the current “incurred loss” model and generally will result in earlier recognition of allowances for losses. The guidance will be effective for the first interim period of our 2021 fiscal year, with early adoption in fiscal year 2020 permitted.
ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Among other provisions, the new guidance requires the fair value measurement of investments in certain equity securities. For investments without readily determinable fair values, entities have the option to either measure these investments at fair value or at cost adjusted for changes in observable prices minus impairment. All changes in measurement will be recognized in net income. The guidance will be effective for the first interim period of our 2019 fiscal year. Early adoption is not permitted, except for certain provisions relating to financial liabilities.
We are currently evaluating the impact of the new standards.
Leases
In February 2016, the FASB issued ASU 2016-02 - Leases. ASU 2016-02 requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for most leases. For income statement purposes, leases will be classified as either operating or finance, generally resulting in straight-line expense recognition for operating leases (similar to current operating leases) and accelerated expense recognition for financing leases (similar to current capital leases). The guidance will be effective for the first interim period of our 2020 fiscal year, with early adoption permitted. The guidance is required to be adopted retrospectively. We are still evaluating the impact of the new guidance on our consolidated financial statements.
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09 - Revenue from Contracts with Customers, a comprehensive revenue recognition model that supersedes the current revenue recognition requirements and most industry-specific guidance. Subsequent accounting standard updates have also been issued which amend and/or clarify the application of ASU 2014-09. The guidance provides a five-step framework to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. The guidance will be effective for the first interim period of our 2019 fiscal year, and allows adoption either under a full retrospective or a modified retrospective approach.
We are assessing the potential impact of adopting this guidance and finalizing our implementation plan. Our assessment includes designing appropriate changes to our processes, systems and controls to support the recognition and disclosure requirements under the new guidance. We expect that the new standard will impact the timing of revenue recognition for renewals or extensions of existing licensing agreements for intellectual property, which upon adoption will be recognized as revenue when the renewal term begins rather than when the agreement is extended or renewed under guidance currently in effect. We have not identified any other significant impacts to our consolidated financial statements based on our assessment to date. Our continued evaluation of the expected impact of the new guidance or the issuance of additional interpretations, if any, could result in an impact that is different from our preliminary conclusions. We will determine the method of transition to adopt the new standard as we move closer to finalizing our implementation plan.

6

Table of Contents
VIACOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 2. INVENTORY
Our total inventory consists of the following:
Inventory
(in millions)
December 31,
2017
 
September 30,
2017
Film inventory:
 
 
 
Released, net of amortization
$
569

 
$
534

Completed, not yet released
1

 
85

In process and other
671

 
686

 
1,241

 
1,305

Television productions:
 
 
 
Released, net of amortization
19

 
15

In process and other
279

 
237

 
298

 
252

Original programming:
 
 
 
Released, net of amortization
1,094

 
1,146

In process and other
716

 
673

 
1,810

 
1,819

Acquired program rights, net of amortization
1,503

 
1,435

Home entertainment inventory
85

 
90

Total inventory, net
4,937

 
4,901

Less current portion
959

 
919

Noncurrent portion
$
3,978

 
$
3,982

 
 
 
 

7

Table of Contents
VIACOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 3. DEBT
Our total debt consists of the following:
Debt
(in millions)
December 31,
2017
 
September 30,
2017
Senior Notes and Debentures:
 
 
 
Senior notes due September 2019, 5.625%
$
550

 
$
550

Senior notes due December 2019, 2.750%
252

 
252

Senior notes due March 2021, 4.500%
496

 
496

Senior notes due December 2021, 3.875%
595

 
595

Senior notes due February 2022, 2.250%
102

 
188

Senior notes due June 2022, 3.125%
194

 
297

Senior notes due March 2023, 3.250%
180

 
298

Senior notes due September 2023, 4.250%
1,238

 
1,237

Senior notes due April 2024, 3.875%
488

 
545

Senior notes due October 2026, 3.450%
474

 
587

Senior debentures due December 2034, 4.850%
281

 
585

Senior debentures due April 2036, 6.875%
1,067

 
1,067

Senior debentures due October 2037, 6.750%
75

 
75

Senior debentures due February 2042, 4.500%
61

 
102

Senior debentures due March 2043, 4.375%
1,097

 
1,096

Senior debentures due June 2043, 4.875%
32

 
37

Senior debentures due September 2043, 5.850%
1,230

 
1,229

Senior debentures due April 2044, 5.250%
344

 
545

Junior Debentures:
 
 
 
Junior subordinated debentures due February 2057, 5.875%
642

 
642

Junior subordinated debentures due February 2057, 6.250%
642

 
642

Commercial paper
100

 

Capital lease and other obligations
49

 
54

Total debt
10,189

 
11,119

Less current portion
120

 
19

Noncurrent portion
$
10,069

 
$
11,100

 
 
 
 
In the quarter ended December 31, 2017, we redeemed $1.039 billion of senior notes and debentures for a redemption price of $1.000 billion. As a result, we recognized a net pre-tax extinguishment gain of $25 million, net of $14 million of unamortized debt costs and transaction fees.
Our 5.875% junior subordinated debentures accrue interest at a fixed rate of 5.875% until February 28, 2022, on which date the rate will switch to a floating rate based on three-month LIBOR plus 3.895%, reset quarterly. Our 6.250% junior subordinated debentures accrue interest at a fixed rate of 6.250% until February 28, 2027, on which date the rate will switch to a floating rate based on three-month LIBOR plus 3.899%, reset quarterly. The junior subordinated debentures can be called by us at any time after the expiration of the fixed-rate period.
The total unamortized discount and issuance fees and expenses related to our notes and debentures outstanding was $442 million and $457 million as of December 31, 2017 and September 30, 2017, respectively. The fair value of our notes and debentures outstanding was approximately $10.5 billion as of December 31, 2017. The valuation of our publicly traded debt is based on quoted prices in active markets (Level 1 in the fair value hierarchy).
Credit Facility
At December 31, 2017, there were no amounts outstanding under our $2.5 billion revolving credit facility due November 2019. The credit facility is used for general corporate purposes and to support commercial paper outstanding. The amount of unused capacity under the credit facility, after deducting commercial paper outstanding of $100 million with a weighted average maturity of 5 days and weighted average interest rate of 2.11%, was $2.4 billion as of December 31, 2017. The credit facility has one principal financial covenant that requires our interest coverage for the most recent four consecutive fiscal quarters to be at least 3.0x, which we met as of December 31, 2017.

8

Table of Contents
VIACOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 4. PENSION BENEFITS
The components of net periodic benefit cost for our defined benefit pension plans, which are currently frozen to future benefit accruals, are set forth below.
Net Periodic Benefit Cost
(in millions)
Quarter Ended  
 December 31,
2017
 
2016
Interest cost
$
9

 
$
8

Expected return on plan assets
(10
)
 
(9
)
Recognized actuarial loss
2

 
2

Net periodic benefit cost
$
1

 
$
1

 
 
 
 
NOTE 5. REDEEMABLE NONCONTROLLING INTEREST
We are subject to a redeemable put option, payable in a foreign currency, with respect to an international subsidiary. The put option expires in December 2022 and is classified as Redeemable noncontrolling interest in the Consolidated Balance Sheets.

The activity reflected within redeemable noncontrolling interest is as follows:
Redeemable Noncontrolling Interest
(in millions)
Quarter Ended 
 December 31,
2017
 
2016
Beginning balance
$
248

 
$
211

Net earnings
7

 
7

Distributions
(6
)
 
(6
)
Translation adjustment
2

 
(12
)
Redemption value adjustment
(2
)
 

Ending Balance
$
249

 
$
200

 
 
 
 
NOTE 6. COMMITMENTS AND CONTINGENCIES
Commitments
As more fully described in Note 11 of the 2017 Form 10-K, our commitments primarily consist of programming and talent commitments, operating and capital lease arrangements, and purchase obligations for goods and services. These arrangements result from our normal course of business and represent obligations that may be payable over several years.
Contingencies
We have certain indemnification obligations with respect to leases primarily associated with the previously discontinued operations of Famous Players Inc. (“Famous Players”). In addition, we have certain indemnities provided by the acquirer of Famous Players. These lease commitments amounted to approximately $180 million, and are recorded as a liability as of December 31, 2017. The amount of lease commitments varies over time depending on expiration or termination of individual underlying leases, or of the related indemnification obligation, and foreign exchange rates, among other things. We may also have exposure for certain other expenses related to the leases, such as property taxes and common area maintenance. We believe our accrual is sufficient to meet any future obligations based on our consideration of available financial information, the lessees’ historical performance in meeting their lease obligations and the underlying economic factors impacting the lessees’ business models.
Legal Matters
Litigation is inherently uncertain and always difficult to predict. However, based on our understanding and evaluation of the relevant facts and circumstances, we believe that the legal matter described below and other litigation to which we are a party are not likely, in the aggregate, to have a material adverse effect on our results of operations, financial position or operating cash flows.
Purported Derivative Action
In July 2016, a purported derivative action was commenced in the Delaware Chancery Court by a purported Viacom stockholder against Viacom and its directors. The complaint alleged that Viacom’s directors breached their fiduciary duties to

9

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VIACOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Viacom in connection with compensation paid to Mr. Redstone and that these breaches permitted a waste of corporate assets and the unjust enrichment of Mr. Redstone. In October 2017, the Court granted Viacom’s motion to dismiss the action. In November 2017, the plaintiff filed a notice of appeal, and in January 2018, the plaintiff filed its opening appeal brief.
NOTE 7. STOCKHOLDERS’ EQUITY
The components of stockholders’ equity are as follows:
  
Quarter Ended  
 December 31, 2017
 
Quarter Ended  
 December 31, 2016
Stockholders’ Equity
(in millions)
Total Viacom Stockholders’ Equity
 
Noncontrolling Interests
 
Total Equity
 
Total Viacom Stockholders’ Equity
 
Noncontrolling Interests
 
Total Equity
Beginning Balance
$
6,035

 
$
84

 
$
6,119

 
$
4,277

 
$
53

 
$
4,330

Net earnings
537

 
16

 
553

 
396

 
12

 
408

Other comprehensive income/(loss) (1)
42

 

 
42

 
(135
)
 
(1
)
 
(136
)
Noncontrolling interests
2

 
(19
)
 
(17
)
 

 
(13
)
 
(13
)
Dividends declared
(81
)
 

 
(81
)
 
(79
)
 

 
(79
)
Equity-based compensation and other
15

 

 
15

 
(1
)
 

 
(1
)
Ending Balance
$
6,550

 
$
81

 
$
6,631

 
$
4,458

 
$
51

 
$
4,509

 
 
 
 
 
 
 
 
 
 
 
 
(1) The components of other comprehensive income/(loss) are net of tax expense of $18 million and $1 million for the quarters ended December 31, 2017 and 2016, respectively.
NOTE 8. RESTRUCTURING
Our severance liability by reportable segment is as follows:
 
 
 
 
 
 
 
 
Severance Liability
(in millions)
Media Networks
 
Filmed Entertainment
 
Corporate
 
Total
September 30, 2017
$
119

 
$
45

 
$
44

 
$
208

Severance payments
(28
)
 
(13
)
 
(9
)
 
(50
)
December 31, 2017
$
91

 
$
32

 
$
35

 
$
158

 
 
 
 
 
 
 
 
As of December 31, 2017, of the remaining $158 million liability, $121 million is classified as a current liability in the Consolidated Balance Sheet, with the remaining $37 million classified as a noncurrent liability. Amounts classified as noncurrent are expected to be paid through 2020, in accordance with applicable contractual terms.
NOTE 9. EARNINGS PER SHARE
Basic earnings per common share is computed by dividing Net earnings attributable to Viacom by the weighted average number of common shares outstanding during the period. The determination of diluted earnings per common share includes the weighted average number of common shares plus the dilutive effect of equity awards based upon the application of the treasury stock method. Anti-dilutive common shares were excluded from the calculation of diluted earnings per common share.
The following table sets forth the weighted average number of common shares outstanding used in determining basic and diluted earnings per common share and anti-dilutive common shares:
Weighted Average Number of Common Shares Outstanding and Anti-dilutive Common Shares
(in millions)
Quarter Ended  
 December 31,
2017
 
2016
Weighted average number of common shares outstanding, basic
402.5

 
397.0

        Dilutive effect of equity awards
0.1

 
0.9

Weighted average number of common shares outstanding, diluted
402.6

 
397.9

 
 
 
 
Anti-dilutive common shares
19.1

 
15.6

 
 
 
 
 

10

Table of Contents
VIACOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 10. SUPPLEMENTAL CASH FLOW AND OTHER INFORMATION
Our supplemental cash flow information is as follows:
Supplemental Cash Flow Information
(in millions)
Quarter Ended 
 December 31,
2017

2016
Cash paid for interest
$
123

 
$
150

Cash paid for income taxes
$
24

 
$
38

Accounts Receivable
We had $430 million and $486 million of noncurrent trade receivables as of December 31, 2017 and September 30, 2017, respectively. Accounts receivables are principally related to long-term television license arrangements at Filmed Entertainment and subscription video-on-demand and other over-the-top arrangements at Media Networks. These amounts are included within Other assets - noncurrent in our Consolidated Balance Sheets. Such amounts are due in accordance with the underlying terms of the respective agreements with companies that are investment grade or with which we have historically done business under similar terms. We have determined that credit loss allowances are generally not considered necessary for these amounts.
Assets Held for Sale
Certain Media Networks assets included within Property and equipment, net in our Consolidated Balance Sheets, with a carrying value of approximately $30 million, are held for sale as of December 31, 2017. We expect the sales of these assets to be completed in fiscal 2018 and plan to use the proceeds for the repayment of outstanding debt.
Variable Interest Entities
In the normal course of business, we enter into joint ventures or make investments with business partners that support our underlying business strategy and provide us the ability to enter new markets to expand the reach of our brands, develop new programming and/or distribute our existing content. In certain instances, an entity in which we make an investment may qualify as a variable interest entity (“VIE”). In determining whether we are the primary beneficiary of a VIE, we assess whether we have the power to direct matters that most significantly impact the activities of the VIE and have the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

Our Consolidated Balance Sheets include amounts related to consolidated VIEs totaling $162 million in assets and $5 million in liabilities as of December 31, 2017, and $159 million in assets and $8 million in liabilities as of September 30, 2017. The consolidated VIEs’ revenues, expenses and operating income were not significant for all periods presented.
NOTE 11. INCOME TAXES
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act will lower the federal corporate income tax rate, modernize United States (“U.S.”) international tax rules and provide the most significant overhaul of the U.S. tax code in more than 30 years. The currently relevant provisions of the Act provide for a reduction of the federal corporate income tax rate from 35% to 21% and a “transition tax” to be levied on the deemed repatriation of indefinitely reinvested earnings of international subsidiaries. As a result of these factors, as well as our fiscal year-end, the federal statutory tax rate will decrease from 35% to a prorated rate of 24.5% for fiscal 2018. While the Act includes many provisions, those applicable to Viacom will phase-in and will not be fully effective until fiscal 2019.
As a result of the December 22, 2017 legislation, provisional amounts have been recorded in accordance with SEC guidance provided in Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, for the remeasurement of deferred tax assets and liabilities and the transition tax. We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future and recorded a provisional net discrete tax benefit of $149 million. In addition, a provisional expense of $48 million has been recorded on a net basis for the one-time transition tax on the deemed repatriation of indefinitely reinvested earnings of our international subsidiaries. These amounts are provisional because certain aspects were based on estimates and assumptions where guidance has yet to be provided. As guidance is received from federal and state authorities, the outcome of these provisional amounts could change.
No additional income taxes have been provided for any remaining undistributed international cash not subject to the transition tax or any additional outside basis differences as these amounts continue to be indefinitely reinvested outside the U.S. These

11

Table of Contents
VIACOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

amounts could be subject to approximately $100 million to $150 million of U.S. tax to the extent they are repatriated in the future.
Our effective income tax rate was 7.1% in the quarter ended December 31, 2017, which included a net discrete tax benefit of $103 million, consisting of $101 million related to the U.S.’ enactment of the Act and $2 million of other net discrete tax items. When taken together with the discrete tax impact of the gain on debt extinguishment, the effective income tax rate was reduced by 17.4 percentage points.
Our effective income tax rate was 27.9% in the quarter ended December 31, 2016, which included a net discrete tax benefit of $15 million that, when taken together with the tax impact of the restructuring charge and debt extinguishment loss, reduced the effective income tax rate by 2.9 percentage points. The net discrete tax benefit was principally related to the reversal of a valuation allowance on net operating losses upon receipt of a favorable tax authority ruling.
NOTE 12. FAIR VALUE MEASUREMENTS
During the quarter ended December 31, 2017, an investment previously accounted for using the cost method was listed on a public exchange. As a result, we have reclassified our investment as available-for-sale. The fair value of our available-for-sale securities was $56 million as of December 31, 2017, which is included within Other assets, noncurrent in our Consolidated Balance Sheet, as determined utilizing a market approach based on quoted market prices in active markets at period end (Level 1 in the fair value hierarchy).
The fair value of our foreign exchange contracts was an asset of $9 million and $7 million as of December 31, 2017 and September 30, 2017, respectively, as determined utilizing a market-based approach (Level 2 in the fair value hierarchy). The notional value of all foreign exchange contracts was $1.274 billion and $869 million as of December 31, 2017 and September 30, 2017, respectively. At December 31, 2017, $717 million related to our foreign currency balances and $557 million related to future production costs. At September 30, 2017, $287 million related to our foreign currency balances and $582 million related to future production costs.
NOTE 13. REPORTABLE SEGMENTS
The following tables set forth our financial performance by reportable segment. Our reportable segments have been determined in accordance with our internal management structure. We manage our operations through two reportable segments: (i) Media Networks and (ii) Filmed Entertainment. Typical intersegment transactions include the purchase of advertising by the Filmed Entertainment segment on Media Networks’ properties and the licensing of Filmed Entertainment’s feature film and television content by Media Networks. The elimination of such intercompany transactions in the Consolidated Financial Statements is included within eliminations in the tables below.
 
Our measure of segment performance is adjusted operating income. Adjusted operating income is defined as operating income, before equity-based compensation and certain other items identified as affecting comparability, when applicable.
Revenues by Segment
(in millions)
Quarter Ended  
 December 31,
2017
 
2016
Media Networks
$
2,560

 
$
2,589

Filmed Entertainment
544

 
758

Eliminations
(31
)
 
(23
)
Total revenues
$
3,073

 
$
3,324

 
 
 
 
 

12

Table of Contents
VIACOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Adjusted Operating Income/(Loss)
(in millions)
Quarter Ended  
 December 31,
2017
 
2016
Media Networks
$
913

 
$
987

Filmed Entertainment
(130
)
 
(180
)
Corporate expenses
(55
)
 
(50
)
Eliminations
3

 
7

Equity-based compensation
(14
)
 
(16
)
Restructuring (1)

 
(42
)
Operating income
717

 
706

Interest expense, net
(147
)
 
(156
)
Equity in net earnings of investee companies
1

 
13

Gain/(loss) on extinguishment of debt
25

 
(6
)
Other items, net
(3
)
 
9

Earnings from continuing operations before provision for income taxes
$
593

 
$
566

 
 
 
 
(1) The restructuring charge in the quarter ended December 31, 2016 includes $7 million of equity-based compensation expense.
Total Assets
(in millions)
December 31,
2017
 
September 30,
2017
 
Media Networks
$
17,635

 
$
17,984

Filmed Entertainment
6,226

 
6,188

Corporate/Eliminations
(1,030
)
 
(474
)
Total assets
$
22,831

 
$
23,698

 
 
 
 

Revenues by Component
(in millions)
Quarter Ended  
 December 31,
2017
 
2016
Advertising
$
1,308

 
$
1,294

Affiliate
1,094

 
1,144

Feature film
496

 
680

Ancillary
206

 
229

Eliminations
(31
)
 
(23
)
Total revenues
$
3,073

 
$
3,324

 
 
 
 
NOTE 14. RELATED PARTY TRANSACTIONS
National Amusements, Inc. (“National Amusements”), directly and indirectly, is the controlling stockholder of both Viacom and CBS Corporation (“CBS”). National Amusements owns shares in Viacom representing approximately 79.8% of the voting interest in Viacom and approximately 10% of Viacom’s combined common stock. National Amusements is controlled by Sumner M. Redstone, our Chairman Emeritus, who is the Chairman and Chief Executive Officer of National Amusements, through the Sumner M. Redstone National Amusements Trust (the “SMR Trust”), which owns shares in National Amusements representing 80% of the voting interest of National Amusements. The shares representing the other 20% of the voting interest of National Amusements are held through a trust controlled by Shari E. Redstone, who is Mr. Redstone’s daughter and the non-executive Vice Chair of Viacom’s Board of Directors and the President and a member of the Board of Directors of National Amusements. The shares of National Amusements held by the SMR Trust are voted solely by Mr. Redstone until such time as his incapacity or death. Upon Mr. Redstone’s incapacity or death, (1) Ms. Redstone will also become a trustee of the SMR Trust and (2) the shares of National Amusements held by the SMR Trust will be voted by the trustees of the SMR Trust. The current trustees include Mr. Redstone and David R. Andelman, a member of the boards of directors of National Amusements and CBS. The current Board of Directors of National Amusements includes Mr. Redstone, Ms. Redstone and Mr. Andelman. In addition, Mr. Redstone serves as Chairman Emeritus of CBS and Ms. Redstone serves as non-executive Vice Chair of CBS.
Transactions between Viacom and related parties are overseen by our Governance and Nominating Committee.

13

Table of Contents
VIACOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

On February 1, 2018, we announced that our Board of Directors has established a special committee of independent directors to evaluate a potential combination with CBS, and that the Committee has retained independent legal counsel and is retaining independent financial advisors in connection with the evaluation.
Viacom and National Amusements Related Party Transactions
National Amusements licenses films in the ordinary course of business for its motion picture theaters from all major studios, including Paramount. During the quarters ended December 31, 2017 and 2016, Paramount earned revenues from National Amusements in connection with these licenses in the aggregate amounts of approximately $1 million and $2 million, respectively.
Viacom and CBS Corporation Related Party Transactions
In the ordinary course of business, we are involved in transactions with CBS and its various businesses that result in the recognition of revenues and expenses by us. Transactions with CBS are settled in cash.
Our Filmed Entertainment segment earns revenues and recognizes expenses associated with its distribution of certain television products into the home entertainment market on behalf of CBS. Pursuant to its agreement with CBS, Paramount distributes CBS’s library of television and other content on DVD and Blu-ray disc on a worldwide basis. Under the terms of the agreement, Paramount is entitled to retain a fee based on a percentage of gross receipts and is generally responsible for all out-of-pocket costs, which are recoupable together with any advance amounts paid. Paramount made advance payments of $25 million to CBS during the current fiscal year. Paramount also earns revenues from CBS through leasing of studio space and licensing of certain film products.
Our Media Networks segment recognizes advertising revenues and purchases television programming from CBS. The cost of the programming purchases is initially recorded as acquired program rights inventory and amortized over the estimated period that revenues will be generated.
Both of our segments recognize advertising expenses related to the placement of advertisements with CBS.
The following table summarizes the transactions with CBS as included in our Consolidated Financial Statements:
CBS Related Party Transactions
(in millions)
Quarter Ended 
 December 31,
2017
 
2016
Consolidated Statements of Earnings
 
 
 
Revenues
$
44

 
$
44

Operating expenses
$
52

 
$
50

 
 
 
 
  
December 31,
2017
 
September 30,
2017
Consolidated Balance Sheets
 
 
 
Accounts receivable
$
1

 
$
5

 
 
 
 
Participants’ share and residuals, current
$
69

 
$
69

Program obligations, current
50

 
54

Program obligations, noncurrent
44

 
49

Other liabilities
2

 
1

Total due to CBS
$
165

 
$
173

 
 
 
 


14

Table of Contents
VIACOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

Other Related Party Transactions
In the ordinary course of business, we are involved in related party transactions with equity investees. These related party transactions primarily relate to the provision of advertising services, licensing of film and programming content, distribution of films and provision of certain administrative support services, for which the impact on our Consolidated Financial Statements is as follows:
Other Related Party Transactions
(in millions)
Quarter Ended 
 December 31,
2017
 
2016
Consolidated Statements of Earnings
 
 
 
Revenues
$
4

 
$
51

Operating expenses
$
2

 
$
32

Selling, general and administrative
$

 
$
(3
)
 
 
 
 
  
December 31,
2017
 
September 30,
2017
Consolidated Balance Sheets
 
 
 
Accounts receivable
$
50

 
$
49

Other assets
5

 
5

Total due from other related parties
$
55

 
$
54

 
 
 
 
Accounts payable
$
11

 
$
8

Other liabilities

 

Total due to other related parties
$
11

 
$
8

 
 
 
 
All other related party transactions are not material in the periods presented.

15


Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition.
Management’s discussion and analysis of results of operations and financial condition is provided as a supplement to and should be read in conjunction with the unaudited consolidated financial statements and related notes to enhance the understanding of our results of operations, financial condition and cash flows. Additional context can also be found in our Form 10-K for the fiscal year ended September 30, 2017, as filed with the Securities and Exchange Commission (“SEC”) on November 16, 2017 (the “2017 Form 10-K”). References in this document to “Viacom,” “Company,” “we,” “us” and “our” mean Viacom Inc. and our consolidated subsidiaries, unless the context requires otherwise.
Significant components of management’s discussion and analysis of results of operations and financial condition include:
Overview: The overview section provides a summary of our business.
Results of Operations: The results of operations section provides an analysis of our results on a consolidated and reportable segment basis for the quarter ended December 31, 2017, compared with the quarter ended December 31, 2016. In addition, we provide a discussion of items that affect the comparability of our results of operations.
Liquidity and Capital Resources: The liquidity and capital resources section provides a discussion of our cash flows for the quarter ended December 31, 2017, compared with the quarter ended December 31, 2016, and of our outstanding debt, commitments and contingencies existing as of December 31, 2017.
OVERVIEW
Summary
We are home to premier global media brands that create compelling entertainment content - including television programs, motion pictures, short-form content, games, consumer products, podcasts, live events and social media experiences - for audiences in 183 countries on various platforms and devices.
We operate through two reportable segments: Media Networks and Filmed Entertainment. Our measure of segment performance is adjusted operating income. We define adjusted operating income for our segments as operating income, before equity-based compensation and certain other items identified as affecting comparability, when applicable. Equity-based compensation is excluded from our segment measure of performance since it is set and approved by the Compensation Committee of Viacom’s Board of Directors in consultation with corporate executive management, and is included as a component of consolidated adjusted operating income.
Our Media Networks segment provides high-quality entertainment content, services and related branded products for consumers in targeted demographics attractive to advertisers, content distributors and retailers. We create, acquire and distribute programming and other content for our audiences worldwide, distributed through cable, satellite and broadband services, on linear, streaming and on-demand bases, via a variety of owned and third party platforms, including televisions, branded apps and sites, for viewing on a wide range of devices such as connected televisions, PCs, tablets, smartphones and other connected devices. The Media Networks segment also licenses its brands for consumer products and recreational opportunities, and produces live events.
Our Media Networks segment operates globally as Viacom Media Networks through three brand groups, our Global Entertainment Group, the Nickelodeon Group and BET Networks. Globally, our program services reach approximately 4.3 billion cumulative television subscribers in 183 countries and 43 languages, via 300 locally programmed and operated television channels, including Nickelodeon®, Nick Jr.®, MTV®, BET®, Comedy Central®, Paramount Network™ (formerly Spike® in the United States (“U.S.”)), VH1®, TV Land®, CMT®, Logo® and our program services created specifically for international audiences, such as British public service broadcaster Channel 5® (in the United Kingdom), Telefe® (in Argentina), Colors® (in India) and Paramount Channel™ (in a variety of territories). “Cumulative television subscribers” is an aggregation of the total subscribers to each Viacom owned and operated, joint venture and licensee channel.
Our Filmed Entertainment segment develops, produces, finances, acquires and distributes motion pictures, television programming and other entertainment content under the Paramount Pictures®, Paramount Players™, Paramount Animation® and Paramount Television™ divisions, in various markets and media worldwide, for itself and for third parties. It partners on various projects with key Viacom franchises, including Nickelodeon Movies and MTV Films.
Media Networks
Our Media Networks segment generates revenues in three categories: (i) the sale of advertising and marketing services, (ii) affiliate fees from distributors of our programming and program services and (iii) ancillary activities such as consumer products.

16

Table of Contents
Management’s Discussion and Analysis
of Results of Operations and Financial Condition
(continued)


Media Networks segment expenses consist of operating expenses, selling, general and administrative (“SG&A”) expenses and depreciation and amortization. Operating expenses are comprised of costs related to original and acquired programming, including programming amortization, expenses associated with the distribution of home entertainment products and consumer products licensing, participations and residuals, royalties, integrated marketing expenses and other costs of sales. SG&A expenses consist primarily of employee compensation, marketing, research and professional service fees and facility and occupancy costs. Depreciation and amortization expenses reflect depreciation of fixed assets, including transponders financed under capital leases, and amortization of finite-lived intangible assets.
Filmed Entertainment
Our Filmed Entertainment segment generates revenues in four categories: (i) the release and/or distribution of motion pictures theatrically, (ii) the release and/or distribution of film and television product through home entertainment, (iii) the licensing of film and television product to television and digital platforms and (iv) other ancillary activities.
Filmed Entertainment segment expenses consist of operating expenses, SG&A expenses and depreciation and amortization. Operating expenses principally include the amortization of costs of our released feature films and television programming (including participations and residuals), print and advertising expenses and other distribution costs. SG&A expenses include employee compensation, facility and occupancy costs, professional service fees and other overhead costs. Depreciation and amortization expense principally consists of depreciation of fixed assets. 
RESULTS OF OPERATIONS
Consolidated Results of Operations
Our summary consolidated results of operations are presented below for the quarters ended December 31, 2017 and 2016.
  
Quarter Ended  
 December 31,
 
Better/(Worse)
(in millions, except per share amounts)
2017
 
2016
 
$
 
%
GAAP
 
 
 
 
 
 
 
Revenues
$
3,073

 
$
3,324

 
$
(251
)
 
(8
)%
Operating income
717

 
706

 
11

 
2

Net earnings from continuing operations attributable to Viacom
535

 
396

 
139

 
35

Diluted earnings per share from continuing operations
1.33

 
1.00

 
0.33

 
33

 
 
 
 
 
 
 
 
Non-GAAP*
 
 
 
 
 
 
 
Adjusted operating income
$
717

 
$
748

 
$
(31
)
 
(4
)%
Adjusted net earnings from continuing operations attributable to Viacom
413

 
413

 

 

Adjusted diluted earnings per share from continuing operations
1.03

 
1.04

 
(0.01
)
 
(1
)
 
 
 
 
 
 
 
 
* See “Factors Affecting Comparability” section below for a reconciliation of our reported results to our adjusted results, which are calculated on a non-GAAP basis.
Factors Affecting Comparability
The Consolidated Financial Statements reflect our results of operations, financial position and cash flows reported in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Our results have been affected by certain items identified as affecting comparability. Accordingly, when applicable, we use non-GAAP measures such as consolidated adjusted operating income, adjusted earnings from continuing operations before provision for income taxes, adjusted provision for income taxes, adjusted net earnings from continuing operations attributable to Viacom and adjusted diluted earnings per share (“EPS”) from continuing operations, among other measures, to evaluate our actual operating performance and for planning and forecasting of future periods. We believe that the adjusted results provide relevant and useful information for investors because they clarify our actual operating performance, make it easier to compare our results with those of other companies and allow investors to review performance in the same way as our management. Since these 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, earnings from continuing operations before provision for income taxes, provision for income taxes, net earnings from continuing operations attributable to Viacom and diluted EPS from continuing operations as indicators of operating performance and they may not be comparable to similarly titled measures employed by other companies.

17

Table of Contents
Management’s Discussion and Analysis
of Results of Operations and Financial Condition
(continued)


The following tables reconcile our reported results (GAAP) to our adjusted results (non-GAAP) for the quarters ended December 31, 2017 and 2016. The tax impacts included in the tables below have been calculated using the rates applicable to the adjustments presented.
(in millions, except per share amounts)
 
Quarter Ended  
 December 31, 2017
 
Operating Income
 
Earnings from Continuing Operations Before Provision for Income Taxes
 
Provision for Income Taxes
 
Net Earnings from Continuing Operations Attributable to Viacom
 
Diluted EPS from Continuing Operations
Reported results (GAAP)
$
717

 
$
593

 
$
42

 
$
535

 
$
1.33

Factors Affecting Comparability:
 
 
 
 
 
 
 
 
 
Gain on extinguishment of debt

 
(25
)
 
(6
)
 
(19
)
 
(0.05
)
Discrete tax benefit

 

 
103

 
(103
)
 
(0.25
)
Adjusted results (Non-GAAP)
$
717


$
568


$
139


$
413


$
1.03

 
 
 
 
 
 
 
 
 
 
(in millions, except per share amounts)
 
Quarter Ended  
 December 31, 2016
 
Operating Income
 
Earnings from Continuing Operations Before Provision for Income Taxes
 
Provision for Income Taxes
 
Net Earnings from Continuing Operations Attributable to Viacom
 
Diluted EPS from Continuing Operations
Reported results (GAAP)
$
706

 
$
566

 
$
158

 
$
396

 
$
1.00

Factors Affecting Comparability:
 
 
 
 
 
 
 
 
 
Restructuring
42

 
42

 
14

 
28

 
0.07

Loss on extinguishment of debt

 
6

 
2

 
4

 
0.01

Discrete tax benefit

 

 
15

 
(15
)
 
(0.04
)
Adjusted results (Non-GAAP)
$
748

 
$
614

 
$
189

 
$
413

 
$
1.04

 
 
 
 
 
 
 
 
 
 
Gain/loss on extinguishment of debt: We redeemed senior notes and debentures totaling $1.039 billion in the quarter ended December 31, 2017. As a result, we recognized a pre-tax extinguishment gain of $25 million.
We redeemed senior notes totaling $900 million in the quarter ended December 31, 2016. As a result, we recognized a pre-tax extinguishment loss of $6 million.
Restructuring charge: We recognized a pre-tax restructuring charge of $42 million in the quarter ended December 31, 2016 for severance associated with management changes.
As we continue to implement our strategic initiatives, we may incur restructuring charges in the second fiscal quarter.
Discrete taxes: The net discrete tax benefit in the quarter ended December 31, 2017 was principally related to the U.S.’ enactment of the Tax Cuts and Jobs Act.
The net discrete tax benefit in the quarter ended December 31, 2016 was principally related to the reversal of a valuation allowance on net operating losses upon receipt of a favorable tax authority ruling.
Revenues
Worldwide revenues decreased $251 million, or 8%, to $3.073 billion in the quarter ended December 31, 2017. Filmed Entertainment revenues decreased $214 million, or 28%, and Media Networks revenues decreased $29 million, or 1%.
Expenses
Total expenses decreased $262 million, or 10%, to $2.356 billion in the quarter ended December 31, 2017, primarily reflecting lower Filmed Entertainment expenses and the impact of the restructuring charge in the prior year quarter, partially offset by an increase in Media Networks expenses. Filmed Entertainment expenses decreased $264 million, or 28%, primarily driven by lower operating expenses. Media Networks expenses increased $45 million, or 3%, principally driven by the acquisition of Televisión Federal S.A. (“Telefe”), which we acquired on November 15, 2016.

18

Table of Contents
Management’s Discussion and Analysis
of Results of Operations and Financial Condition
(continued)


Operating
Operating expenses decreased $256 million, or 14%, to $1.563 billion in the quarter. Filmed Entertainment operating expenses decreased $264 million, or 31%, and Media Networks operating expenses increased $11 million, or 1%.
Selling, General and Administrative
SG&A expenses increased $39 million, or 6%, to $740 million in the quarter. Media Networks SG&A expenses increased $36 million, or 6%, and Filmed Entertainment SG&A expenses increased $2 million, or 3%.
Restructuring
As discussed in “Factors Affecting Comparability”, a restructuring charge of $42 million was recognized in the quarter ended December 31, 2016.
Operating Income
Operating income increased $11 million, or 2%, to $717 million in the quarter ended December 31, 2017, reflecting the operating results discussed above. Excluding the items discussed in “Factors Affecting Comparability”, adjusted operating income decreased $31 million, or 4%, to $717 million. Media Networks adjusted operating income decreased $74 million, or 7%, while Filmed Entertainment adjusted operating results improved by $50 million, or 28%. Corporate expenses increased $5 million, or 10%, due to an increase in third-party professional services.
Income Taxes
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act will lower the federal corporate income tax rate, modernize U.S. international tax rules and provide the most significant overhaul of the U.S. tax code in more than 30 years. The currently relevant provisions of the Act provide for a reduction of the federal corporate income tax rate from 35% to 21% and a “transition tax” to be levied on the deemed repatriation of indefinitely reinvested earnings of international subsidiaries. As a result of these factors, as well as our fiscal year-end, the federal statutory tax rate will decrease from 35% to a prorated rate of 24.5% for fiscal 2018. While the Act includes many provisions, those applicable to Viacom will phase-in and will not be fully effective until fiscal 2019.
Our effective income tax rate was 7.1% in the quarter ended December 31, 2017. A net discrete tax benefit of $103 million, taken together with the discrete tax impact of the other factors affecting comparability discussed above, reduced the effective income tax rate by 17.4 percentage points. Excluding the impact of these items, our adjusted effective income tax rate was 24.5%, a decline of 6.3 percentage points from the prior year quarter, principally related to the U.S.’ enactment of the Act.
Our effective income tax rate was 27.9% in the quarter ended December 31, 2016. A net discrete tax benefit of $15 million, taken together with the discrete tax impact of the other factors affecting comparability discussed above, reduced the effective income tax rate by 2.9 percentage points. Excluding the impact of these items, our adjusted effective income tax rate was 30.8%.
Net Earnings from Continuing Operations Attributable to Viacom
Net earnings from continuing operations attributable to Viacom increased $139 million, or 35%, to $535 million in the quarter, principally due to the impact of the Act on our income tax provision. Excluding the items discussed in “Factors Affecting Comparability”, adjusted net earnings from continuing operations attributable to Viacom remained flat at $413 million in the quarter, with the decrease in tax-effected adjusted operating income described above substantially offset by the benefit from the decrease in adjusted effective tax rate.
Diluted Earnings Per Share from Continuing Operations
Diluted EPS from continuing operations increased $0.33 per diluted share to $1.33 in the quarter, reflecting the impact of net earnings. Excluding the items discussed in “Factors Affecting Comparability”, adjusted diluted EPS from continuing operations decreased $0.01 per diluted share to $1.03 in the quarter.
Segment Results of Operations
Transactions between reportable segments are accounted for as third-party arrangements for the purposes of presenting segment results of operations. Typical intersegment transactions include the purchase of advertising by the Filmed Entertainment segment on Media Networks’ properties and the licensing of Filmed Entertainment’s feature film and television content by Media Networks.

19

Table of Contents
Management’s Discussion and Analysis
of Results of Operations and Financial Condition
(continued)


Media Networks
  
Quarter Ended  
 December 31,
 
Better/(Worse)  
(in millions)
2017
 
2016
 
$
 
%
Revenues by Component
 
 
 
 
 
 
 
Advertising
$
1,308

 
$
1,294

 
$
14

 
1
 %
Affiliate
1,094

 
1,144

 
(50
)
 
(4
)
Ancillary
158

 
151

 
7

 
5

Total revenues by component
$
2,560

 
$
2,589


$
(29
)
 
(1
)%
Expenses
 
 
 
 
 
 
 
Operating
$
1,013

 
$
1,002

 
$
(11
)
 
(1
)%
Selling, general and administrative
593

 
557

 
(36
)
 
(6
)
Depreciation and amortization
41

 
43

 
2

 
5

Total expenses
$
1,647

 
$
1,602


$
(45
)
 
(3
)%
Adjusted Operating Income
$
913

 
$
987


$
(74
)
 
(7
)%
 
 
 
 
 
 
 
 
Revenues
Worldwide revenues decreased $29 million, or 1%, to $2.560 billion in the quarter ended December 31, 2017. Domestic revenues decreased $126 million, or 6%, to $1.929 billion and international revenues increased $97 million, or 18%, to $631 million. Excluding a 5-percentage point favorable impact from foreign exchange, international revenues increased 13%, primarily driven by a 6-percentage point favorable impact from the acquisition of Telefe, as well as growth in Europe.
Advertising
Worldwide advertising revenues increased $14 million, or 1%, to $1.308 billion in the quarter. Worldwide advertising revenues include a 3-percentage point favorable impact from the acquisition of Telefe. Domestic advertising revenues decreased $54 million, or 5%, to $937 million, reflecting lower linear impressions partially offset by higher pricing, as well as growth in digital advertising revenue. International advertising revenues increased $68 million, or 22%, to $371 million. Excluding a 5-percentage point favorable impact from foreign exchange, international advertising revenues increased 17%, primarily driven by a 10-percentage point favorable impact from the acquisition of Telefe, as well as growth in Europe.
Affiliate
Worldwide affiliate revenues decreased $50 million, or 4%, to $1.094 billion in the quarter. Domestic affiliate revenues decreased $78 million, or 8%, to $907 million, principally due to subscriber declines and lower subscription video-on-demand (“SVOD”) and other over-the-top (“OTT”) revenues, partially offset by contractual rate increases. Rate increases were negatively impacted by renewal rate resets with certain distributors. International affiliate revenues increased $28 million, or 18%, to $187 million. Excluding a 5-percentage point favorable impact from foreign exchange, international affiliate revenues increased 13%, which includes a 2-percentage point favorable impact from the acquisition of Telefe.
Ancillary
Worldwide ancillary revenues increased $7 million, or 5%, to $158 million in the quarter. Worldwide ancillary revenues include a 2-percentage point favorable impact from foreign exchange. Domestic ancillary revenues increased $6 million, or 8%, to $85 million, and international ancillary revenues increased $1 million, or 1%, to $73 million.
Expenses
Media Networks segment expenses increased $45 million, or 3%, to $1.647 billion in the quarter ended December 31, 2017. Worldwide expenses include an unfavorable 2-percentage point impact from the acquisition of Telefe.
Operating
Operating expenses increased $11 million, or 1%, to $1.013 billion in the quarter. Programming costs increased $6 million, or 1%, primarily due to the acquisition of Telefe. Programming costs include a 2-percentage point benefit in the quarter attributable to management’s decision to cease use of certain original and acquired programming in connection with the execution of our flagship brand strategy. Distribution and other expenses increased $5 million, or 5%. Excluding a 3-percentage point unfavorable impact from foreign exchange, distribution and other expenses increased 2%.

20

Table of Contents
Management’s Discussion and Analysis
of Results of Operations and Financial Condition
(continued)


Selling, General and Administrative
SG&A expenses increased $36 million, or 6%, to $593 million in the quarter, driven by higher advertising and promotion costs as well as the acquisition of Telefe. SG&A costs include a 3-percentage point benefit of cost savings from our recent restructuring activities.
Adjusted Operating Income
Adjusted operating income decreased $74 million, or 7%, to $913 million in the quarter ended December 31, 2017, reflecting the operating results discussed above.
Filmed Entertainment
 
Quarter Ended  
 December 31,
 
Better/(Worse)
(in millions)
2017
 
2016
 
$        
 
%    
Revenues by Component
 
 
 
 
 
 
 
Theatrical
$
100

 
$
192

 
$
(92
)
 
(48
)%
Home entertainment
183

 
243

 
(60
)
 
(25
)
Licensing
213

 
245

 
(32
)
 
(13
)
Ancillary
48

 
78

 
(30
)
 
(38
)
Total revenues by component
$
544

 
$
758

 
$
(214
)
 
(28
)%
Expenses
 
 
 
 
 
 
 
Operating
$
583

 
$
847

 
$
264

 
31
 %
Selling, general and administrative
81

 
79

 
(2
)
 
(3
)
Depreciation and amortization
10

 
12

 
2

 
17

Total expenses
$
674

 
$
938

 
$
264

 
28
 %
Adjusted Operating Loss
$
(130
)
 
$
(180
)
 
$
50

 
28
 %
 
 
 
 
 
 
 
 
Revenues
Worldwide revenues decreased $214 million, or 28%, to $544 million in the quarter ended December 31, 2017. Worldwide revenues include a 2-percentage point favorable impact from foreign exchange. Domestic revenues decreased 42% to $270 million and international revenues decreased 6% to $274 million. Foreign exchange had a 4-percentage point favorable impact on international revenues.
Theatrical
Worldwide theatrical revenues decreased $92 million, or 48%, to $100 million in the quarter due to the number and mix of current quarter releases. Significant current quarter releases were Daddy’s Home 2 and Downsizing, compared with Jack Reacher: Never Go Back, Arrival, Allied, Office Christmas Party and Fences in the prior year quarter. Domestic theatrical revenues decreased 49% and international theatrical revenues decreased 46%. Foreign exchange had a 3-percentage point favorable impact on international theatrical revenues.
Home Entertainment
Worldwide home entertainment revenues decreased $60 million, or 25%, to $183 million in the quarter, primarily due to the comparison against the release of Star Trek Beyond in the prior year quarter. Worldwide home entertainment revenues include a 2-percentage point favorable impact from foreign exchange. Domestic home entertainment revenues decreased 38% due to the strong domestic performance of Star Trek Beyond in the prior year quarter, while international home entertainment revenues increased 1%. Foreign exchange had a 6-percentage point favorable impact on international home entertainment revenues.
Licensing
Licensing revenues decreased $32 million, or 13%, to $213 million in the quarter. Domestic licensing revenues decreased 36% and international licensing revenues increased 8%, primarily driven by the mix of titles available in each market. Foreign exchange had a 3-percentage point favorable impact on international licensing revenues.
Ancillary
Ancillary revenues decreased $30 million, or 38%, to $48 million in the quarter, primarily driven by a sale in the prior year quarter of a partial copyright interest in certain films in connection with an agreement then in place. Domestic ancillary revenues decreased 49% and international ancillary revenues increased 27%.

21

Table of Contents
Management’s Discussion and Analysis
of Results of Operations and Financial Condition
(continued)


Expenses
Total expenses decreased $264 million, or 28%, to $674 million in the quarter ended December 31, 2017, driven by lower operating expenses.
Operating
Operating expenses decreased $264 million, or 31%, to $583 million in the quarter. Distribution and other costs, principally print and advertising expenses, decreased $210 million, or 45%, primarily driven by lower marketing costs for our current year slate. Film costs decreased $54 million, or 14%.
Selling, General and Administrative
SG&A expenses increased $2 million, or 3%, to $81 million in the quarter.
Adjusted Operating Loss
Adjusted operating loss was $130 million in the quarter ended December 31, 2017 compared with $180 million for the prior year quarter, an improvement of $50 million, or 28%, reflecting the operating results discussed above. Operating losses reflect the recognition of print and advertising expenses incurred in the period, generally before and throughout the theatrical release of a film, while revenues for the respective film are recognized as earned through its theatrical exhibition and subsequent distribution windows.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Sources and Uses of Cash
Our primary source of liquidity is cash provided through the operations of our businesses. We have access to external financing sources such as our revolving credit facility and the capital markets. Our principal uses of cash from operations include the creation of new programming and film content, acquisitions of third-party content, and interest and income tax payments. We also use cash for the repayment of debt, quarterly cash dividends, capital expenditures and acquisitions of businesses.
As a result of the enactment of the Act on December 22, 2017, the Company has recorded a $48 million provisional transition tax on $946 million of these indefinitely reinvested foreign earnings. We are in the process of repatriating the related amounts of these funds to the U.S. We do not currently have plans to repatriate any remaining undistributed international cash not subject to the transition tax. Should we require additional capital in the U.S., we could elect to repatriate these additional funds or access external financing, but repatriating these funds could result in approximately $100 million to $150 million of U.S. tax. Cash from earnings of our international subsidiaries generated after December 31, 2017 can be repatriated to the U.S. without incremental U.S. federal tax under the Act.
We believe that our cash flows from operating activities together with our credit facility provide us with adequate resources to fund our anticipated ongoing cash requirements. We anticipate that future debt maturities will be funded with cash and cash equivalents, cash flows from operating activities and future access to capital markets, including our credit facility.
We may continue to access external financing from time to time depending on our cash requirements, assessments of current and anticipated market conditions and after-tax cost of capital. Our access to capital markets can be impacted by factors outside our control, including economic conditions; however, we believe that our strong cash flows and balance sheet, our credit facility and our credit rating will provide us with adequate access to funding given our expected cash needs. Any new borrowing cost would be affected by market conditions and short and long-term debt ratings assigned by independent rating agencies, and there can be no assurance that we will be able to access capital markets on terms and conditions that will be favorable to us.

22

Table of Contents
Management’s Discussion and Analysis
of Results of Operations and Financial Condition
(continued)


Cash Flows
Cash and cash equivalents were $394 million as of December 31, 2017, a decrease of $995 million compared with September 30, 2017. The following tables include information driving the change in cash and cash equivalents and a reconciliation of net cash provided by operating activities (GAAP) to free cash flow and operating free cash flow (non-GAAP). We define free cash flow as net cash provided by operating activities minus capital expenditures, as applicable. We define operating free cash flow as free cash flow, excluding the impact of the cash premium on the extinguishment of debt, as applicable. Free cash flow and operating free cash flow are non-GAAP measures. Management believes the use of these measures provide investors with an important perspective on, in the case of free cash flow, our liquidity, including our ability to service debt and make investments in our businesses, and, in the case of operating free cash flow, our liquidity from ongoing activities.
Change in cash and cash equivalents
(in millions)
Quarter Ended 
 December 31,
 
Better/(Worse)
2017
 
2016
 
$
Net cash provided by operating activities
$
12

 
$
159

 
$
(147
)
Net cash used in investing activities
(5
)
 
(349
)
 
344

Net cash provided by/(used in) financing activities
(1,002
)
 
292

 
(1,294
)
Effect of exchange rate changes on cash and cash equivalents

 
(38
)
 
38

Increase/(decrease) in cash and cash equivalents
$
(995
)
 
$
64

 
$
(1,059
)
Reconciliation of net cash provided by operating activities
to free cash flow and operating free cash flow
 
 
 
 
 
Net cash provided by operating activities (GAAP)
$
12

 
$
159

 
$
(147
)
Capital expenditures
(28
)
 
(52
)
 
24

Free cash flow (Non-GAAP)
(16
)
 
107

 
(123
)
Debt retirement premium

 
6

 
(6
)
Operating free cash flow (Non-GAAP)
$
(16
)
 
$
113

 
$
(129
)
 
 
 
 
 
 
Operating Activities
Cash provided by operating activities declined $147 million for the quarter ended December 31, 2017, primarily reflecting the timing of film and programming spend.
Investing Activities
Cash used in investing activities declined $344 million, principally reflecting the acquisition of Telefe for $336 million, net of cash acquired, in the prior year quarter, lower capital expenditures and net proceeds of $23 million from asset sales in the current year, partially offset by a decrease in proceeds from our grantor trust.
Financing Activities
Cash used in financing activities was $1.002 billion for the quarter ended December 31, 2017, compared with cash provided by financing activities of $292 million in the prior year. The change of $1.294 billion principally reflects the impact of debt transactions.
Capital Resources
Capital Structure and Debt
Total debt was $10.189 billion as of December 31, 2017, a decrease of $930 million from $11.119 billion at September 30, 2017.
In the quarter ended December 31, 2017, we redeemed $1.039 billion of senior notes and debentures for a redemption price of $1.000 billion. As a result, we recognized a net pre-tax extinguishment gain of $25 million, which included $14 million of unamortized debt costs and transaction fees.
Our 5.875% junior subordinated debentures accrue interest at a fixed rate of 5.875% until February 28, 2022, on which date the rate will switch to a floating rate based on three-month LIBOR plus 3.895%, reset quarterly. Our 6.250% junior subordinated debentures accrue interest at a fixed rate of 6.250% until February 28, 2027, on which date the rate will switch to a floating rate based on three-month LIBOR plus 3.899%, reset quarterly. The junior subordinated debentures can be called by us at any time after the expiration of the fixed-rate period.

23

Table of Contents
Management’s Discussion and Analysis
of Results of Operations and Financial Condition
(continued)


The junior debentures’ subordination, interest deferral option and extended term provide significant credit protection measures for senior creditors and as a result of these features, the debentures were awarded a 50% equity credit by S&P and Fitch, and a 25% equity credit by Moody’s.
Credit Facility
At December 31, 2017, there were no amounts outstanding under our $2.5 billion revolving credit facility due November 2019. The credit facility is used for general corporate purposes and to support commercial paper outstanding. The amount of unused capacity under the credit facility, after deducting commercial paper outstanding of $100 million with a weighted average maturity of 5 days and weighted average interest rate of 2.11%, was $2.4 billion as of December 31, 2017. The credit facility has one principal financial covenant that requires our interest coverage for the most recent four consecutive fiscal quarters to be at least 3.0x, which we met as of December 31, 2017.
Commitments and Contingencies
See Note 6 to the Consolidated Financial Statements for information regarding our commitments and contingencies, including legal matters.
OTHER MATTERS
Related Parties
In the ordinary course of business, we enter into transactions with related parties, including National Amusements, Inc., CBS Corporation, their respective subsidiaries and affiliates, and companies that we account for under the equity method of accounting. For additional information, see Note 14 to the Consolidated Financial Statements.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q, including “Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition,” contains both historical and forward-looking statements. All statements that are not statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements reflect our current expectations concerning future results, objectives, plans and goals, and involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause future results, performance or achievements to differ. These risks, uncertainties and other factors include, among others: the public acceptance of our brands, programs, motion pictures and other entertainment content on the various platforms on which they are distributed; technological developments, alternative content offerings and their effects in our markets and on consumer behavior; the potential for loss of carriage or other reduction in the distribution of our content; significant changes in our senior leadership and the ability of our strategic initiatives to achieve their operating objectives; various uncertainties and risks related to a potential combination with CBS Corporation, including that an agreement may or may not be reached or may take an uncertain amount of time, and that the effect of any potential transaction on Viacom and our business cannot be ascertained at this time; economic fluctuations in advertising and retail markets, and economic conditions generally; evolving cybersecurity and similar risks; the impact of piracy; increased costs for programming, motion pictures and other rights; the loss of key talent; competition for content, audiences, advertising and distribution; fluctuations in our results due to the timing, mix, number and availability of our motion pictures and other programming; other domestic and global economic, political, business, competitive and/or regulatory factors affecting our businesses generally; changes in the Federal communications or other laws and regulations; and other factors described in our news releases and filings with the Securities and Exchange Commission, including but not limited to our 2017 Form 10-K and reports on Form 10-Q and Form 8-K. The forward-looking statements included in this document are made only as of the date of this document, and we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are exposed to the impact of interest rate changes, foreign currency fluctuations and changes in the market value of investments. In the ordinary course of business, we may employ established and prudent policies and procedures to manage our exposure principally to changes in interest rates and foreign exchange risks. The objective of such policies and procedures is to manage exposure to market risks in order to minimize the impact on earnings and cash flows. We do not hold or enter into financial instruments for speculative trading purposes.

24

Table of Contents

Item 4. Controls and Procedures.
Our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) were effective, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Exchange Act.
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


25

Table of Contents

PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
Since our 2017 Form 10-K, there have been no material developments in the material legal proceedings in which we are involved, except as set forth in Note 6 to the Consolidated Financial Statements.
Item 1A. Risk Factors.
A wide range of risks may affect our business and financial results, now and in the future. We consider the risks described in our 2017 Form 10-K to be the most significant. There may be other currently unknown or unpredictable economic, business, competitive, regulatory or other factors that could have material adverse effects on our future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.

26

Table of Contents

Item 6. Exhibits.
Exhibit No.
 
Description of Exhibit
 
 
 
10.1*
 
 
 
 
10.2*
 
 
 
 
10.3*
 
 
 
 
31.1*
 
 
 
 
31.2*
 
 
 
 
32.1*
 
 
 
 
32.2*
 
 
 
 
101.INS*
 
XBRL Instance Document.
 
 
 
101.SCH*
 
XBRL Taxonomy Extension Schema Document.
 
 
 
101.CAL*
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
101.DEF*
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
101.LAB*
 
XBRL Taxonomy Extension Label Linkbase Document.
 
 
 
101.PRE*
 
XBRL Taxonomy Extension Presentation Linkbase Document.
 
 
 
 
*
Filed herewith
**
Represents a management contract or compensatory plan or arrangement required to be filed as an exhibit.



27

Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
VIACOM INC.
 
 
 
 
Date: February 8, 2018
By:
 
/s/    WADE DAVIS
 
 
 
Wade Davis
 
 
 
Executive Vice President, Chief Financial Officer
 
 
 
 
Date: February 8, 2018
By:
 
/s/    KATHERINE GILL-CHAREST
 
 
 
Katherine Gill-Charest
 
 
 
Senior Vice President, Controller
(Chief Accounting Officer)

28
Exhibit


Exhibit 10.1
Viacom Inc.
2016 Long-Term Management Incentive Plan
2018 Terms and Conditions to the Performance Share Units Certificate
ARTICLE I
TERMS OF PERFORMANCE SHARE UNITS
Section 1.1    Grant of Performance Share Units. The Performance Share Units (the “Performance Share Units” or “PSUs”) awarded to a Participant are subject to (i) the Performance Share Units Certificate (the “Certificate”), (ii) the terms and conditions contained herein and (iii) the 2016 Long-Term Management Incentive Plan (the “Plan”), the provisions of which are hereby incorporated by reference. A copy of the Plan and the Prospectus dated November 20, 2017 are being provided simultaneously on-line or attached hereto. Capitalized terms that are not otherwise defined herein have the meanings assigned to them in the Certificate or the Plan. Performance Share Units are notional units of measurement and represent the right to receive a number of shares of Class B Common Stock depending on the Company’s performance against specific pre-determined goals. The number of PSUs issued to a Participant will be determined as follows: (a) twenty-five percent (25%) of the value of the award set forth in the Certificate will be issued in PSUs subject to the TSR performance of the Class B Common Stock in comparison to the TSR performance of the common stock of companies comprising the Reference Group, with the target number of PSUs subject to TSR performance determined by dividing such portion of the value by the Date of Grant fair value determined by FAS 123 Solutions using a Monte Carlo valuation model (“Target TSR Shares”), and (b) seventy-five percent (75%) of the value of the award set forth in the Certificate will be issued in PSUs subject to the Company’s Fully Diluted Adjusted EPS from Continuing Operations against target, with the target number of PSUs subject to such Fully Diluted Adjusted EPS from Continuing Operations performance determined by dividing such portion of the value by the closing price of a share of Class B Common Stock on the Date of Grant (“Target EPS Shares”), each as set forth in the Certificate.
Section 1.2    Terms of Performance Share Units.
(a)    Valuation.
(1)    TSR Shares. As of the Determination Date, the TSR of the Class B Common Stock over the relevant Measurement Period will be measured against the TSR of the common stock of the companies comprising the Reference Group over the relevant Measurement Period. The percentile ranking of the TSR of the Class B Common Stock as compared to the TSR of the common stock of the companies comprising the Reference Group will be used to calculate the number of shares of Class B Common Stock that the Participant will receive pursuant to this Section 1.2(a)(1), in accordance with the following schedule:
Schedule
• If the Company achieves less than the 25th percentile TSR, the Target TSR Shares will be






 forfeited pursuant to this Section 1.2(a)(1)
• If the Company achieves the 25th percentile TSR, a number of shares of Class B Common Stock equal to 25% of the target number of Target TSR Shares will be delivered pursuant to this Section 1.2(a)(1)
• If the Company achieves the 50th percentile TSR, a number of shares of Class B Common Stock equal to 100% of the Target TSR Shares will be delivered pursuant to this Section 1.2(a)(1)
• If the Company achieves the 100th percentile TSR (that is, if it is the first ranked company in the Reference Group for TSR), a number of shares of Class B Common Stock equal to 200% of the Target TSR Shares will be delivered pursuant to this Section 1.2(a)(1)
For Company achievement at an intermediate point between the 25th and 50th percentile, or between the 50th percentile and the 100th percentile, the percentage of the Target TSR Shares to be delivered will be interpolated between the respective percentages at such percentiles. For example, if the Company were to achieve the 70th percentile TSR, 140% of the Target TSR Shares would be delivered pursuant to this Section 1.2(a)(1).
(2)    EPS Shares.
(A)    As of the Determination Date, the Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period will be measured against the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period, which will be used to calculate the number of shares of Class B Common Stock that the Participant will receive pursuant to this Section 1.2(a)(2)(A), in accordance with the following schedule:
Schedule
• If the Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period is less than 80% of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period, one-third (33.33%) of the Target EPS Shares will be forfeited pursuant to this Section 1.2(a)(2)(A)
• If the Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period is 80% of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period, a number of shares of Class B Common Stock equal to 50% of one-third of the Target EPS Shares will be delivered under the award pursuant to this Section 1.2(a)(2)(A)
• If the Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period is 100% of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period, a number of shares of Class B Common Stock equal to 100% of one-third of the Target EPS Shares will be delivered under the award pursuant to this Section 1.2(a)(2)(A)
• If the Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period is 120% or more of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period, a number of shares of Class B Common Stock equal to 200% of one-third of the target number of EPS Shares will be delivered under the award pursuant to this Section 1.2(a)(2)(A)
For Company achievement at an intermediate point between 80% and 100% of the Target Fully Diluted Adjusted EPS from Continuing Operations for

2




the FY18 Period, or between 100% and 120% of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period, the percentage of one-third of the Target EPS Shares to be delivered pursuant to this Section 1.2(a)(2)(A) will be interpolated between the respective percentages at such percentiles. For example, if the Company were to achieve 90% of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period, a number of shares of Class B Common Stock equal to 75% of one-third of the Target EPS Shares would be delivered under the award pursuant to this Section 1.2(a)(2)(A).
(B)    As of the Determination Date, the Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period will be measured against the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period, which will be used to calculate the number of shares of Class B Common Stock that the Participant will receive pursuant to this Section 1.2(a)(2)(B), in accordance with the following schedule:
Schedule
• If the Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period is less than 80% of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period, two-thirds (66.67%) of the Target EPS Shares will be forfeited pursuant to this Section 1.2(a)(2)(B)
• If the Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period is 80% of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period, a number of shares of Class B Common Stock equal to 50% of two-thirds of the Target EPS Shares will be delivered under the award pursuant to this Section 1.2(a)(2)(B)
• If the Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period is 100% of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period, a number of shares of Class B Common Stock equal to 100% of two-thirds of the Target EPS Shares will be delivered under the award pursuant to this Section 1.2(a)(2)(B)
• If the Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period is 120% or more of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period, a number of shares of Class B Common Stock equal to 200% of two-thirds of the Target EPS Shares will be delivered under the award pursuant to this Section 1.2(a)(2)(B)
For Company achievement at an intermediate point between 80% and 100% of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period, or between 100% and 120% of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period, the percentage of two-thirds of the Target EPS Shares to be delivered pursuant to this Section 1.2(a)(2)(B) will be interpolated between the respective percentage at such percentiles. For example, if the Company were to achieve 90% of the Target Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period, a number of shares of Class B Common Stock equal to 75% of two-thirds of the Target EPS Shares would be delivered under the award pursuant to this Section 1.2(a)(2)(B).

3




(b)    Settlement and Delivery of Shares. Shares delivered in settlement of the Performance Share Units will be delivered, net of any shares withheld for Taxes pursuant to Section 4.3, no later than four (4) weeks following the Determination Date; provided, however, in the event that the Participant would be subject to federal income tax on the shares of Class B Common Stock payable under the valuation criteria under Section 1.2(a)(2)(A) before the Determination Date, then to the extent permissible under Section 409A, such shares of Class B Common Stock, net of any Shares withheld for Taxes pursuant to Section 4.3, and as adjusted pursuant to Section 1.2(d) if applicable, shall be delivered in settlement of that portion of the Performance Share Units no later than four (4) weeks following the date on which the Participant became subject to federal income tax on the shares of Class B Common Stock payable under the valuation criteria under Section 1.2(a)(2)(A).
(c)    Transfer Restriction on Delivered Shares. Shares delivered in settlement of the Performance Share Units, net of any shares withheld for Taxes pursuant to Section 4.3, shall not be transferable by the Participant, except by will, the laws of descent and distribution or beneficiary designation for a 6-month period beginning on the Determination Date; provided that the Committee may permit other transferability, subject to any conditions and limitations that it may, in its sole discretion, impose.
(d)    Termination of Employment.
(1)    In the event the Participant’s employment with the Company or a Subsidiary terminates in a Qualifying Termination prior to September 30, 2020, the number of shares of Class B Common Stock that the Participant will receive for the applicable Measurement Period will be determined by multiplying the shares of Class B Common Stock determined under the valuation criteria under Section 1.2(a) as of the Determination Date by a fraction, the numerator of which is the number of days starting with and inclusive of October 1, 2017 and ending on the last day of the Measurement Period and the denominator of which is the number of days starting with and inclusive of October 1, 2017 and ending on the Determination Date.
(2)    In the event the Participant’s employment with the Company or a Subsidiary terminates for any reason other than a Qualifying Termination, the Participant shall forfeit all unvested Performance Share Units as of the date of such event.
ARTICLE II
EFFECT OF CERTAIN CORPORATE CHANGES
In the event of a merger, consolidation, stock split, reverse stock split, dividend, distribution, combination, reclassification, reorganization, split-up, spin-off or recapitalization that changes the character or amount of the Class B Common Stock or any other changes in the corporate structure, equity securities or capital structure of the Company, the Committee shall make such adjustments, if any, to the number and kind of securities subject to the Performance Share Units, as it deems appropriate. The Committee may, in its sole discretion, also make such other adjustments as it deems appropriate in

4




order to preserve the benefits or potential benefits intended to be made available hereunder. Such determinations by the Committee shall be conclusive and binding on all persons for all purposes.
ARTICLE III
DEFINITIONS
As used herein, the following terms shall have the following meanings:
(a)    Board” shall mean the Board of Directors of the Company.
(b)    Cause” shall (i) have the meaning provided in a Company or a Subsidiary employment agreement that is in effect and applicable to the Participant, or (ii) mean, if there is no such employment agreement or if such employment agreement contains no such term, unless the Committee determines otherwise, (A) conduct constituting embezzlement, material misappropriation or fraud, whether or not related to the Participant’s employment with the Company or a Subsidiary; (B) conduct constituting a felony, whether or not related to the Participant’s employment with the Company or a Subsidiary; (C) conduct constituting a financial crime, material act of dishonesty or material unethical business conduct, involving the Company or a Subsidiary; (D) willful unauthorized disclosure or use of Company or Subsidiary confidential information; (E) the failure to substantially obey a material lawful directive that is appropriate to the Participant’s position from a superior in his or her reporting line or the Board; (F) the failure or refusal to substantially perform the Participant’s material employment obligations (other than any such failure or refusal resulting from the Participant’s disability); (G) the willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, whether or not related to employment with the Company or a Subsidiary, after being instructed by the Company or a Subsidiary to cooperate; (H) the willful destruction of or failure to preserve documents or other material known to be relevant to any investigation referred to in subparagraph (G) above; or (I) the willful inducement of others to engage in the conduct described in subparagraphs (A) – (H).
(c)    Certificate” shall mean the meaning set forth in Section 1.1 hereof.
(d)    Class B Common Stock” shall mean shares of Class B Common Stock, par value $0.001 per share, of the Company.
(e)    Code” shall mean the U.S. Internal Revenue Code of 1986, as amended, including any successor law thereto and the rules, regulations and guidance promulgated thereunder.
(f)    Committee” shall mean the Compensation Committee of the Board (or such other Committee(s) as may be appointed or designated by the Board to administer the Plan).
(g)    Company” shall mean Viacom Inc., a Delaware corporation.
(h)    Date of Grant” shall be the date set forth on the Certificate.

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(i)    Determination Date” means September 30, 2020.
(j)    EPS” means earnings per share.
(k)    EPS Shares” means the number of Performance Share Units subject to Section 1.2(a)(2) hereof.
(l)    Fair Market Value” of a share of Class B Common Stock on a given date shall be the 4:00 p.m. (New York time) closing price on such date on the NASDAQ Stock Exchange or other principal stock exchange on which the Class B Common Stock is then listed.
(m)    Fully Diluted Adjusted EPS from Continuing Operations” for a given fiscal year means the diluted EPS from continuing operations, as reportable by the Company on Form 10-K, subject to adjustment by the Committee for any recapitalization, reorganization, merger, acquisition, divestiture, consolidation, spin-off, combination, liquidation, dissolution, sale of assets, or other similar corporate transaction or event or any other extraordinary event occurs, or any other event or circumstance occurs which has the effect, as determined by the Committee, of distorting the applicable diluted EPS from continuing operations, including, without limitation, changes in accounting standards, to the extent necessary to prevent reduction or enlargement of the Participants’ EPS Shares attributable to such transaction, circumstance or event. Fully Diluted Adjusted EPS from Continuing Operations for a period of more than one fiscal year, shall mean the Fully Diluted Adjusted EPS from Continuing Operations for each fiscal year (or portion thereof) in such period on a cumulative basis.
(n)    FY18 Period” means the Company’s 2018 fiscal year.
(o)    FY19-FY20 Period” means the period consisting of the Company’s 2019 fiscal year and 2020 fiscal year.
(p)    Good Reason” has the meaning assigned to such term in the Participant’s employment agreement with the Company or a Subsidiary.
(q)    Measurement Period” means the period beginning on October 1, 2017 and ending September 30, 2020; provided, however, that if the Participant’s employment with the Company terminates in a Qualifying Termination, the Measurement Period will be the period beginning October 1, 2017 and ending on the effective date of the Participant’s termination of employment.
(r)    Participant” shall mean the employee named on the Certificate.
(s)    Performance Share Units” shall mean notional units of measurement representing the contractual right granted to the Participant to receive shares of Class B Common Stock and consisting of the Target TSR Shares and the Target EPS Shares set forth in Section 1.2(a) hereof.
(t)    Permanent Disability” shall have the same meaning as such term or a similar term has in the long-term disability policy maintained by the Company or a

6




Subsidiary thereof for the Participant and that is in effect on the date of the onset of the Participant’s Permanent Disability unless the Committee determines otherwise.
(u)    Plan” shall mean the Viacom Inc. 2016 Long-Term Management Incentive Plan, and as may be amended from time to time.
(v)    Qualifying Termination” means (i) the termination of the Participant’s employment by the Company or a Subsidiary other than in a termination of employment for Cause; (ii) in the event the Participant has an employment agreement with the Company or a Subsidiary that contains a Good Reason provision, such Participant’s resignation of employment for Good Reason; (iii) the termination of the Participant’s employment with the Company or a Subsidiary by reason of the Participant’s death or Permanent Disability; or (iv) in the event the Participant has an employment agreement with the Company or a Subsidiary, the non-renewal of such employment agreement at the Company’s or Subsidiary’s election followed by termination of the Participant’s employment with the Company and any Subsidiary within six months of such contract expiration for any reason other than for Cause.
(w)    Reference Group” means all companies whose common stock is included in the S&P 500 at the start of the Measurement Period (other than (i) companies that cease to be included in the S&P 500 during the Measurement Period solely due to merger, acquisition, liquidation or similar events fundamentally changing the identity and nature of the company and (ii) companies that cease to be included in the S&P 500 other than on account of events described in the preceding clause (i) and which also cease to have common stock publicly traded on an exchange or on a recognized market system or the over-the-counter market).
(x)    S&P 500” means the Standard & Poor’s 500 Composite Index.
(y)    Section 409A” shall mean Section 409A of the Code and the rules, regulations and guidance promulgated thereunder from time to time.
(z)    Target EPS Shares” means the number of EPS Shares determined in Section 1.1 hereof and indicated on the Participant’s PSUs Certificate.
(aa)    Target TSR Shares” means the number of TSR Shares determined in Section 1.1 hereof and indicated on the Participant’s PSUs Certificate.
(bb)    Target Fully Diluted Adjusted EPS from Continuing Operations for the FY18 Period” means the target diluted EPS from continuing operations for the Company’s 2018 fiscal year, as set forth in the Company’s budget for its 2018 fiscal year.
(cc)    Target Fully Diluted Adjusted EPS from Continuing Operations for the FY19-FY20 Period” means the sum of the target diluted EPS from continuing operations for the Company’s 2019 fiscal year and 2020 fiscal year, as determined by the Committee on or before the one-year anniversary of the Date of Grant.
(dd)    Subsidiary” shall mean a corporation (or a partnership or other enterprise) in which the Company owns or controls, directly or indirectly, 50% or more of the

7




outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power).
(ee)    TSR” means for the Class B Common Stock and for the common stock of each company in the Reference Group, the percentage change in value (positive or negative) over the Measurement Period as measured by dividing (i) the sum of (A) each company’s cumulative value of dividends and other distributions in respect of its common stock for the Measurement Period, assuming dividend reinvestment, and (B) the difference (positive or negative) between each company’s common stock price on the first and last day of the Measurement Period, calculated based on the average closing prices over the 20-day trading period immediately prior to the first day of the Measurement Period and the average closing prices over the 20-day trading period immediately prior to the last day of the Measurement Period, in each case, as reported by Bloomberg L.P. (or such other reporting service that the Committee may designate from time to time); by (ii) the common stock price on the first day of the Measurement Period, calculated on the basis described above. TSR shall reflect (i) reinvestment of dividends and other distributions and (ii) appropriate and equitable treatment of any reorganizations affecting the corporate structure of the companies in the reference group, in addition to the adjustments for stock splits and reverse stock splits. TSR will be determined by the Committee in a manner consistent with this definition. For purposes of computing TSR, if a company has more than one class of common stock outstanding then only the class that is included in the S&P 500 shall be taken into account, and if there is more than one such class the company’s TSR shall be computed using the aggregate values of and distributions on all such classes.
(ff)    TSR Shares” means the number of Performance Share Units subject to Section 1.2(a)(1) hereof.
ARTICLE IV
MISCELLANEOUS
Section 4.1    No Rights to Awards or Continued Employment. Neither the Certificate, the Plan nor any action taken in accordance with such documents shall confer upon the Participant any right to be employed by or to continue in the employment of the Company or any Subsidiary, nor to be entitled to any remuneration or benefits not set forth in the Plan or the Certificate, including the right to receive any future awards under the Plan or any other plan of the Company or any Subsidiary or interfere with or limit the right of the Company or any Subsidiary to modify the terms of or terminate the Participant’s employment at any time for any reason.
Section 4.2    Restriction on Transfer. The rights of the Participant with respect to the Performance Share Units shall not be transferable by the Participant, except by will, the laws of descent and distribution or beneficiary designation; provided that the Committee may permit other transferability, subject to any conditions and limitations that it may, in its sole discretion, impose.
Section 4.3    Taxes. The Company or a Subsidiary, as appropriate, shall be entitled to withhold from any payment made to the Participant, a Participant’s estate or any

8




permitted transferee or beneficiary an amount sufficient to satisfy any federal, state, local and/or other tax withholding requirement or satisfy required tax withholding in respect of the delivery of shares of Class B Common Stock upon settlement of Performance Shares Units by having the Company withhold from such delivery shares of Class B Common Stock having a Fair Market Value equal to the amount of such required withholding.
Section 4.4    Stockholder Rights. The grant of Performance Share Units under the Certificate shall not entitle the Participant or a Participant’s estate, any permitted transferee or beneficiary to any rights of a holder of shares of Class B Common Stock, other than when and until the Participant, the Participant’s estate, the permitted transferee or beneficiary is registered on the books and records of the Company as a stockholder and shares are delivered to such party upon settlement of the Performance Share Units. Unless otherwise determined by the Committee in its discretion, no adjustment shall be made for dividends or distributions or other rights in respect of any shares of Class B Common Stock for which the record date is prior to the date on which the Participant, a Participant’s estate or any permitted transferee shall become the holder of such shares of Class B Common Stock.
Section 4.5    No Restriction on Right of Company to Effect Corporate Changes. Neither the Plan nor the Certificate shall affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Class B Common Stock or the rights thereof or which are convertible into or exchangeable for Class B Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
Section 4.6    Section 409A. If any provision of the Certificate contravenes any regulations or Treasury guidance promulgated under Section 409A or could cause the Participant to be required to recognize income for United States federal income tax purposes with respect to any Performance Share Units before such Performance Share Units are settled or to be subject to any additional tax or interest under Section 409A, such provision of the Certificate may be modified to maintain, to the maximum extent practicable, the original intent of the applicable provision without the imposition of any additional tax or interest under Section 409A. Moreover, any discretionary authority that the Board or the Committee may have pursuant to the Certificate shall not be applicable to Performance Share Units that are subject to Section 409A to the extent such discretionary authority will contravene Section 409A.
Section 4.7    Amendment. The Committee shall have broad authority to amend the Certificate without approval of the Participant to the extent necessary or desirable (i) to comply with, or take into account changes in, applicable tax laws, securities laws, accounting rules and other applicable laws, rules and regulations or (ii) to ensure that the Participant is not required to recognize income for United States federal income tax purposes with respect to any Performance Share Units before such Performance Share

9




Units are settled and is not subject to additional tax and interest under Section 409A with respect to any Performance Share Units.
Section 4.8    Interpretation. In the event of any conflict between the provisions of the Certificate (including the definitions set forth herein) and those of the Plan, the provisions of the Plan will control. Additionally, in the event of a conflict or ambiguity between the provisions of the Certificate or the Plan and the provisions of any employment agreement that is in effect and applicable to the Participant with respect to the Performance Share Units, the provisions of such employment agreement shall be deemed controlling to the extent such provisions are consistent with the provisions of the Plan and are more favorable to the Participant than the provisions of the Certificate.
Section 4.9    Breach of Covenants. In the event that the Committee makes a good faith determination that the Participant committed a material breach of the restrictive covenants relating to non-competition, non-solicitation, confidential information or proprietary property in any employment or other agreement applicable to the Participant during the Participant’s employment or the one year period after termination of the Participant’s employment with the Company or a Subsidiary for any reason, (i) the Participant shall be required to return the shares of Class B Common Stock received by him or her in settlement of the Performance Share Units during the one year period prior to such breach or any time after such breach occurs, or, if the shares of Class B Common Stock received in settlement of the Performance Share Units within the one year period prior to such breach were sold by the Participant, return any proceeds realized on the sale of such shares of Class B Common Stock prior to such breach or any time after such breach occurs and (ii) any unvested Performance Share Units shall be forfeited.
Section 4.10    Governmental Regulations. The Performance Share Units shall be subject to all applicable rules and regulations of governmental or other authorities.
Section 4.11    Headings. The headings of articles and sections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of the Certificate.
Section 4.12    Governing Law. The Certificate and all rights hereunder shall be construed in accordance with and governed by the laws of the State of Delaware.

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Exhibit

Exhibit 10.2
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12032369&doc=17
March 9, 2017
Christa D’Alimonte
c/o Viacom Inc.
1515 Broadway
New York, NY 10036
Dear Ms. D’Alimonte:
Viacom Inc. (the “Company”), with an address at 1515 Broadway, New York, New York 10036, agrees to employ you, and you accept such employment, on the terms and conditions set forth in this letter agreement (“Agreement”). For purposes of this Agreement, “Viacom” shall mean Viacom Inc. and its subsidiaries.
1.    Contract Period. The term of your employment under this Agreement shall begin on April 15, 2017 (the “Effective Date”) and, unless terminated earlier as set forth herein, shall continue through and including April 14, 2020. The period from the Effective Date through April 14, 2020 is referred to as the “Contract Period”, even if your employment terminates earlier for any reason.
2.    Duties. You shall devote your entire business time, attention and energies to the business of the Company during your employment with the Company. You shall be Executive Vice President, General Counsel and Secretary of the Company, and you shall perform all duties reasonable and consistent with such office as may be assigned to you from time to time by the Company’s Executive Vice President, Chief Administrative Officer and President and Chief Executive Officer, or other individual designated by the Company’s President and Chief Executive Officer.
3.     Compensation.
(a)    Salary. The Company shall pay you base salary (as may be increased, “Salary”) at a rate of One Million Dollars ($1,000,000) per year for all of your services as an employee. Your Salary shall be subject to merit reviews, on or about an annual basis, while actively employed during the Contract Period and may, at that time, be increased but not decreased. Your Salary, less deductions and income and payroll tax withholding as may be required under applicable law, shall be payable in accordance with the Company’s ordinary payroll policy, but no less frequently than monthly.
(b)    Bonus. You also shall be eligible to earn a bonus (“Bonus”) or a Pro-Rated Bonus (as defined in paragraph 19(e)(ii)), as applicable, determined as set forth below and in paragraph 19(e)(ii).
(i)
Your Bonus for each Company fiscal year, regardless of whether such fiscal year is a 12-month period or a shorter period of time, shall be determined in accordance with the Viacom Inc. Senior Executive Short-Term Incentive Plan, as it may be amended from time to time (the “STIP”).
(ii)
Your target Bonus for each Company fiscal year during the Contract Period shall be 100% of your Salary (your “Target Bonus”) and shall be adjusted based on the Company’s performance (the “Company Performance Factor”) and your individual performance (the “Individual Performance Factor”), in each case as determined by the Company and as further provided in the STIP.

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12032369&doc=15

Christa D’Alimonte
March 9, 2017
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(c)    Long-Term Incentive Compensation. During your employment under this Agreement, you shall be eligible to receive annual grants of long-term compensation under the Viacom Inc. 2016 Long-Term Management Incentive Plan, or any successor plan, at a level appropriate to your position and individual performance as determined by the Viacom Inc. Board of Directors (the “Board”) or a committee of the Board, in its discretion, with an expected target value of Eight Hundred Thousand Dollars ($800,000), reasonably determined by the Chief Executive Officer of Viacom Inc. and, if required, the Board or a committee of the Board.    
(d)    Compensation During Short-Term Disability. Your compensation for any period that you are absent due to a short-term disability (“STD”) and are receiving compensation under a Viacom STD plan shall be determined in accordance with the terms of such STD plan. The compensation provided to you under the applicable STD plan shall be in lieu of the Salary provided under this Agreement. Your participation in any other Viacom benefit plans or programs shall be governed by the terms of the applicable plan or program documents, award agreements and certificates.
4.    Benefits. During your employment under this Agreement, you shall be eligible to participate in any vacation programs, medical and dental plans and life insurance plans, STD and long-term disability (“LTD”) plans, retirement and other employee benefit plans the Company may have, establish or maintain from time to time and for which you qualify pursuant to the terms of the applicable plan.
5.    Business Expenses. During your employment under this Agreement, the Company shall reimburse you for such reasonable travel and other expenses, incurred in the performance of your duties in accordance with the Company’s policies, as are customarily reimbursed to Company executives at comparable levels.
6.    Non-Competition and Non-Solicitation.
(a)    Non-Competition.
(i)
Your employment with the Company is on an exclusive and full-time basis, and while you are employed by the Company, you shall not engage in any other business activity which is in conflict with your duties and obligations (including your commitment of time) to the Company. During the Non-Competition Period, you shall not directly or indirectly engage in or participate as an owner, partner, holder or beneficiary of stock, stock options or other equity interest, officer, employee, director, manager, partner or agent of, or consultant for, any business competitive with any business of Viacom without the prior written consent of the Company. This provision shall not limit your right to own and have options or other rights to purchase not more than one percent (1%) of any of the debt or equity securities of any business organization that is then filing reports with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, unless such ownership constitutes a significant portion of your net worth.



Christa D’Alimonte
March 9, 2017
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(ii)
The “Non-Competition Period” begins on the Effective Date and ends on the last day of the Contract Period, provided that:
1.
If the Company terminates your employment without Cause or if you validly resign for Good Reason before the end of the Contract Period, then the Non-Competition Period shall end on the earlier of (i) the end of the period in which you are receiving payments pursuant to paragraph 11(c)(i) or (ii) the effective date of your waiver in writing of any right to receive or continue to receive compensation and benefits under paragraph 11. You shall be deemed to have irrevocably provided such waiver if you accept competing employment.
2.
If the Company terminates your employment for Cause or you resign other than for Good Reason, the Non-Competition Period shall end on the earlier of (i) the last day of the Contract Period or (ii) eighteen (18) months after such termination or resignation.
(b)    Non-Solicitation.
(i)
During the Non-Solicitation Period, you shall not directly or indirectly engage or attempt to engage in any of the following acts:
1.
Employ or solicit the employment of any person who is then, or has been within six (6) months prior thereto, an employee of Viacom; or
2.
Interfere with, disturb or interrupt the relationships (whether or not such relationships have been reduced to formal contracts) of Viacom with any customer, supplier, independent contractor, consultant, joint venture or other business partner (to the extent each of the limitations in this paragraph 6(b)(i)(2) is permitted by applicable law).
(ii)
The “Non-Solicitation Period” begins on the Effective Date and ends on the last day of the Contract Period, or, if longer, eighteen (18) months after the Company terminates your employment for Cause or you resign other than for Good Reason.
(c)    Severability. If any court determines that any portion of this Section 6 is invalid or unenforceable, the remainder of this Section 6 shall not thereby be affected and shall be given full effect without regard to the invalid provisions. If any court construes any of the provisions of this Section 6, or any part thereof, to be unreasonable because of the duration or scope of such provision, such court shall have the power to reduce the duration or scope of such provision and to enforce such provision as so reduced.
7.     Confidentiality and Other Obligations.
(a)    Confidential Information. You shall not use for any purpose or disclose to any third party any information relating to Viacom, Viacom’s clients or other parties with which Viacom has a relationship, or that may provide Viacom with a competitive advantage (“Confidential Information”), other than (i) in the performance of your duties under this Agreement consistent with the Company’s or



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March 9, 2017
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Viacom's policies or (ii) as may otherwise be required by law or legal process; provided, however, that nothing in the foregoing prohibits you from reporting what you in good faith believe to be violations of federal law to any governmental agency you in good faith believe to have responsibility for enforcement of such law or from making any other disclosure that is protected under the whistleblower protections of federal law. Confidential Information shall include, without limitation, trade secrets; inventions (whether or not patentable); technology and business processes; business, product or marketing plans; negotiating strategies; sales and other forecasts; financial information; client lists or other intellectual property; information relating to compensation and benefits; public information that becomes proprietary as a result of Viacom’s compilation of that information for use in its business; documents (including any electronic record, videotapes or audiotapes) and oral communications incorporating Confidential Information. You shall also comply with any and all confidentiality obligations of Viacom to a third party of which you are aware, whether arising under a written agreement or otherwise. Information shall not be deemed Confidential Information if it is or becomes generally available to the public other than as a result of an unauthorized disclosure or action by you or at your direction.
(b)    Interviews, Speeches or Writings About Viacom. Except in the performance of your duties under this Agreement consistent with Viacom’s policies, you shall obtain the express authorization of the Company before (i) giving any speeches or interviews or (ii) preparing or assisting any person or entity in the preparation of any books, articles, radio broadcasts, electronic communications, television or motion picture productions or other creations, in either case concerning Viacom or any of its respective businesses, officers, directors, agents, employees, suppliers or customers.
(c)    Non-Disparagement. You shall not, directly or indirectly, in any communications with any reporter, author, producer or any similar person or entity, the press or other media, or any customer, client or supplier of Viacom, criticize, ridicule or make any statement which is negative, disparages or is derogatory of Viacom or any of its directors or senior officers.
(d)    Scope and Duration. The provisions of paragraph 7(a) shall be in effect during the Contract Period and at all times thereafter. The provisions of paragraphs 7(b) and 7(c) shall be in effect during the Contract Period and for one (1) year thereafter and such provisions shall apply to all formats and platforms now known or hereafter developed, whether written, printed, oral or electronic, including without limitation e-mails, “blogs”, internet sites, chat or news rooms, podcasts or any online forum.
8.     Viacom Property.
(a)    Viacom Ownership.
(i)
The results and proceeds of your services to the Company, whether or not created during the Contract Period, including, without limitation, any works of authorship resulting from your services and any works in progress resulting from such services, shall be works-made-for-hire and Viacom shall be deemed the sole owner throughout the universe of any and all rights of every nature in such works, with the right to use, license or dispose of the works in perpetuity in any manner Viacom determines in its sole discretion without any further payment to you, whether such rights and means of use are now known or hereafter defined or discovered.
(ii)
If, for any reason, any of the results and proceeds of your services to the Company are not legally deemed a work-made-for-hire and/or there are any



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March 9, 2017
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rights in such results and proceeds which do not accrue to Viacom under this paragraph 8(a), then you hereby irrevocably assign any and all of your right, title and interest thereto, including, without limitation, any and all copyrights, patents, trade secrets, trademarks and/or other rights of every nature in the work, and Viacom shall have the sole right to use, license or dispose of the work in perpetuity throughout the universe in any manner Viacom determines in its sole discretion without any further payment to you, whether such rights and means of use are now known or hereafter defined or discovered.
(iii)
Upon request by the Company, whether or not during the Contract Period, you shall do any and all things which the Company may deem useful or desirable to establish or document Viacom’s rights in the results and proceeds of your services to the Company, including, without limitation, the execution of appropriate copyright, trademark and/or patent applications, assignments or similar documents. You hereby irrevocably designate the General Counsel, Secretary or any Assistant Secretary of Viacom Inc. as your attorney-in-fact with the power to take such action and execute such documents on your behalf. To the extent you have any rights in such results and proceeds that cannot be assigned as described above, you unconditionally and irrevocably waive the enforcement of such rights.
(iv)
The provisions of this paragraph 8(a) do not limit, restrict, or constitute a waiver by Viacom of any ownership rights to which Viacom may be entitled by operation of law by virtue of being your employer.
(v)
You and the Company acknowledge and understand that the provisions of this paragraph 8 requiring assignment of inventions to Viacom do not apply to any invention which qualifies fully under the provisions of California Labor Code Section 2870, to the extent that such provision applies to you. You agree to advise the Company promptly in writing of any inventions that you believe meet the criteria in California Labor Code Section 2870.
(b)    Return of Property. All documents, data, recordings, or other property, whether tangible or intangible, including all information stored in electronic form, obtained or prepared by or for you and utilized by you in the course of your employment with the Company shall remain the exclusive property of Viacom and shall remain in Viacom’s exclusive possession at the conclusion of your employment.
9.     Legal Matters.
(a)    Communication. Except as required by law or legal process or at the request of the Company, you shall not communicate with anyone (other than your attorneys who agree to keep such matters confidential), except to the extent necessary in the performance of your duties under this Agreement in accordance with Viacom Inc.’s policies, with respect to the facts or subject matter of any claim, litigation, regulatory or administrative proceeding directly or indirectly involving Viacom (“Viacom Legal Matter”) without obtaining the prior consent of Viacom Inc. or its counsel; provided, however, that nothing in the foregoing prohibits you from reporting what you in good faith believe to be violations of federal law to any governmental agency you in good faith believe to have responsibility for enforcement of such law or from making any other disclosure that is protected under the whistleblower protections of federal law.



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(b)    Cooperation. You agree to cooperate with Viacom and its attorneys in connection with any Viacom Legal Matter or Company investigation. Your cooperation shall include, without limitation, providing assistance to and meeting with Viacom’s counsel, experts or consultants, and providing truthful testimony in pretrial and trial or hearing proceedings. In the event that your cooperation is requested after the termination of your employment, Viacom shall (i) seek to minimize interruptions to your schedule to the extent consistent with its interests in the matter; and (ii) reimburse you for all reasonable and appropriate out-of-pocket expenses actually incurred by you in connection with such cooperation upon reasonable substantiation of such expenses.
(c)    Testimony. Except as required by law or legal process or at the request of Viacom Inc., you shall not testify in any lawsuit or other proceeding which directly or indirectly involves Viacom, or which is reasonably likely to create the impression that such testimony is endorsed or approved by Viacom.
(d)    Notice to Viacom. If you are requested or if you receive legal process requiring you to provide testimony, information or documents (including electronic documents) in any Viacom Legal Matter or that otherwise relates, directly or indirectly, to Viacom or any of its officers, directors, employees or affiliates, you shall give prompt notice of such event to Viacom Inc.’s General Counsel and you shall follow any lawful direction of Viacom Inc.’s General Counsel or his/her designee with respect to your response to such request or legal process.
(e)    Adverse Party. The provisions of this paragraph 9 shall not apply to any litigation or other proceeding in which you are a party adverse to Viacom; provided, however, that Viacom expressly reserves its rights under paragraph 7 and its attorney-client and other privileges and immunities, including, without limitation, with respect to its documents and Confidential Information, except if expressly waived in writing by Viacom Inc.’s General Counsel or his/her designee.
(f)    Duration. The provisions of this paragraph 9 shall apply during the Contract Period and at all times thereafter, and shall survive the termination of your employment with the Company, with respect to any Viacom Legal Matter arising out of or relating to the business in which you were engaged during your employment with the Company. As to all other Viacom Legal Matters, the provisions of this paragraph 9 shall apply during the Contract Period and for one year thereafter or, if longer, during the pendency of any Viacom Legal Matter which was commenced, or which Viacom received notice of, during such period.
10.    Termination for Cause.
(a)    Termination Payments. The Company may terminate your employment under this Agreement for Cause and thereafter shall have no further obligations to you under this Agreement or otherwise, except for any earned but unpaid Salary through and including the date of termination of employment and any other amounts or benefits required to be paid or provided by law or under any plan of the Company (the “Accrued Compensation and Benefits”). Without limiting the generality of the preceding sentence, upon termination of your employment for Cause, you shall have no further right to any Bonus or to exercise or redeem any stock options or other equity compensation.
(b)    Cause Definition. “Cause” shall mean: (i) conduct constituting embezzlement, material misappropriation or fraud, whether or not related to your employment with the Company; (ii) conduct constituting a felony, whether or not related to your employment with the Company; (iii) conduct constituting a financial crime, material act of dishonesty or material unethical business conduct, involving



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Viacom; (iv) willful unauthorized disclosure or use of Confidential Information; (v) the failure to substantially obey a material lawful directive that is appropriate to your position from a superior in your reporting line or the Board; (vi) your material breach of any material obligation under this Agreement; (vii) the failure or refusal to substantially perform your material obligations under this Agreement (other than any such failure or refusal resulting from your STD or LTD); (viii) the willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, whether or not related to employment with the Company, after being instructed by Viacom to cooperate; (ix) the willful destruction of or willful failure to preserve documents or other material known to be relevant to any investigation referred to in subparagraph (viii) above; or (x) the willful inducement of others to engage in the conduct described in subparagraphs (i) – (ix), including, without limitation, with regard to subparagraph (vi), obligations of others to Viacom.
(c)    Notice/Cure. The Company shall give you written notice prior to terminating your employment for Cause or, if no cure period is applicable, contemporaneous with termination of your employment for Cause, setting forth in reasonable detail the nature of any alleged failure, breach or refusal in reasonable detail and the conduct required to cure such breach, failure or refusal. Except for a failure, breach or refusal which, by its nature, cannot reasonably be expected to be cured, you shall have ten (10) business days from the giving of such notice within which to cure; provided, however, that, if the Company reasonably expects irreparable injury from a delay of ten (10) business days, the Company may give you notice of such shorter period within which to cure as is reasonable under the circumstances, which may include the termination of your employment without notice and with immediate effect.
11.    Resignation for Good Reason and Termination Without Cause.
(a)    Resignation for Good Reason.
(i)
You may resign for Good Reason at any time that you are actively employed during the Contract Period by written notice to the Company no more than thirty (30) days after the occurrence of the event constituting Good Reason. Such notice shall state the grounds for such Good Reason resignation and an effective date no earlier than thirty (30) business days after the date it is given. The Company shall have thirty (30) business days from the giving of such notice within which to cure and, in the event of such cure, your notice shall be of no further force or effect.
(ii)
Good Reason” shall mean without your consent (other than in connection with the termination or suspension of your employment or duties for Cause or in connection with your death or LTD): (i) the assignment to you of duties or responsibilities substantially inconsistent with your position(s) or duties; (ii) the withdrawal of material portions of your duties; or (iii) the material breach by the Company of any material obligation under this Agreement.



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(b)    Termination Without Cause. The Company may terminate your employment under this Agreement without Cause at any time during the Contract Period by written notice to you.
(c)    Termination Payments/Benefits. In the event that your employment terminates under paragraph 11(a) or (b), you shall thereafter receive the compensation and benefits described below and the following shall apply:
(i)
The Company shall continue to pay your Salary (at the rate in effect on the date of termination) at the same time and in the same manner as if you had not terminated employment for the longer of twelve (12) months or until the end of the Contract Period;
(ii)
You shall be eligible to receive a Bonus or Pro-Rated Bonus, as applicable, for each Company fiscal year or portion thereof during the Contract Period, calculated as provided in paragraph 19(e)(iii), provided that the total severance payment you receive pursuant to paragraphs 11(c)(i) and (ii) shall in no event exceed two times the sum of your Salary and Target Bonus in the fiscal year in which such termination occurs;
(iii)
Provided you validly elect continuation of your medical and dental coverage under Section 4980B(f) of the Internal Revenue Code of 1986 (the “Code”) (relating to coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”)), your coverage and participation under the Company’s medical and dental benefit plans and programs in which you were participating immediately prior to your termination of employment pursuant to this paragraph 11, shall continue at no cost to you (except as set forth below) until the earlier of (i) the end of the Contract Period, but in no event less than twelve (12) months after the termination of your employment, or (ii) the date on which you become eligible for medical and/or dental coverage from another employer; provided, that, during the period that the Company provides you with this coverage, an amount equal to the total applicable COBRA cost (or such other amounts as may be required by law) will be included in your income for tax purposes and the Company may withhold taxes from your termination payments for this purpose; and provided, further, that you may elect to continue your medical and dental coverage under COBRA at your own expense for the balance, if any, of the period required by law;
(iv)
The Company shall continue to provide you with life insurance coverage, at no premium cost to you (unless you had no coverage at the time of termination), until the end of the Contract Period or, if longer, the end of the period in which you are receiving payments pursuant to paragraph 11(c)(i), in accordance with the Company’s then-current policy, as may be amended from time to time, and in the amount then furnished at no cost to other Company executives at comparable levels. Such coverage shall end in the event you are eligible to obtain life insurance coverage from another employer;
(v)
With respect to any stock options granted to you under any Viacom Inc. long-term incentive plan:



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(x)    all stock options that have not vested as of the termination of your employment (your “Separation Date”), but that would have vested on or before the end of the Contract Period, shall become fully vested on the later of your Separation Date or upon receipt of a Release executed by you, and such stock options shall remain exercisable for six (6) months after your Separation Date (or if longer, such period provided under the terms of the applicable long-term incentive plan), but in no event later than the expiration date of such options; and
(y)    all outstanding stock options that have vested on or prior to your Separation Date shall remain exercisable for six (6) months after such date (or if longer, such period provided under the terms of the applicable long-term incentive plan), but in no event later than the expiration date of such options.
(vi)
All restricted share units or restricted shares granted to you under any Viacom Inc. long-term incentive plan that have not vested as of your Separation Date, but that would have vested on or before the end of the Contract Period, shall become fully vested on the later of your Separation Date or upon receipt of a Release executed by you. There shall be no acceleration of the vesting of any equity or long-term incentive awards granted to you under any Viacom Inc. long-term plan, unless otherwise provided herein or under the terms of the applicable long-term incentive plan; and
(vi)
The Company shall pay or continue to provide, as applicable, the Accrued Compensation and Benefits.
(d)    Release. Your entitlement to the payments and benefits described in this paragraph 11 is conditioned on your execution and delivery to the Company, within sixty (60) days after your termination of employment (the “Release Deadline”), of a release in substantially the form appended hereto as Appendix A that remains in effect and becomes irrevocable after the expiration of any statutory period in which you are permitted to revoke a release (the “Release”). If you fail to execute and deliver the Release by the Release Deadline, or if you thereafter effectively revoke the Release, the Company shall be under no obligation to make any further payments or provide any further benefits to you and any payments and benefits previously provided to you pursuant to this paragraph 11 shall not have been earned. In such event, you shall promptly repay the Company any payments made and the Company’s direct cost for any benefits provided to you pursuant to this paragraph 11. The limitations of this paragraph shall not apply to the Accrued Compensation and Benefits.
(e)    Offset. The amount of payments provided in paragraph 11 in respect of the period that begins twelve (12) months after the termination of your employment shall be reduced by any compensation for services earned by you (including as an independent consultant or independent contractor) from any source (including any compensation earned from the Company or its affiliates) in respect of the period that begins twelve (12) months after the termination of your employment and ends when the Company is no longer required to make payments pursuant to paragraph 11 (the “Offset Period”), including, without limitation, salary, sign-on or annual bonus (regardless of when paid), consulting fees, commission payments and any amounts the payment of which is deferred at your election, or with your consent, until after the expiration of the Offset Period; provided that, if the Company in its reasonable discretion determines that any grant of long-term compensation is made in substitution of the aforementioned payments, such payments shall be further reduced by the value on the date of grant, as reasonably determined by the Company, of such long-term compensation you receive.



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You agree to promptly notify the Company of any arrangements during the Offset Period in which you earn compensation for services and to cooperate fully with the Company in determining the amount of any such reduction.
12.    Resignation in Breach of the Agreement. If you resign prior to the expiration of the Contract Period other than for Good Reason, such resignation is a material breach of this Agreement and, without limitation of other rights or remedies available to the Company, the Company shall have no further obligations to you under this Agreement or otherwise, except to make termination payments provided in paragraph 10(a).
13.    Termination Due to Death.
(a)    Death While Employed. In the event of your death prior to the end of the Contract Period while actively employed with the Company, this Agreement shall automatically terminate. Thereafter, your designated beneficiary (or, if there is no such beneficiary, your estate) shall receive (i) any Accrued Compensation and Benefits as of the date of your death and (ii) for the year in which death occurs, any Bonus or Pro-Rated Bonus, as applicable, which you would have been eligible to receive, calculated in accordance with paragraph 19(e)(iii). In no event shall a distribution be made pursuant to clause (i) in the preceding sentence later than the 60th day following your death and a distribution pursuant to clause (ii) in the preceding sentence shall be made at the same time and in the same manner as if you were still actively employed with the Company.
(b)    Death After the End of Employment. In the event of your death while you are entitled to receive compensation or benefits under paragraphs 11 or 15, in lieu of such payments your designated beneficiary (or, if there is no such beneficiary, your estate) shall receive, to the extent not previously paid to you, (i) continuation of Salary pursuant to the applicable paragraph through the date of death; (ii) if you were entitled to receive compensation or benefits under paragraph 11, for the year in which death occurs, any Bonus or Pro-Rated Bonus, as applicable, for the year in which death occurs, payable under such paragraph, calculated in accordance with paragraph 19(e)(iii); and (iii) any Accrued Compensation and Benefits. In no event shall a distribution be made pursuant to clauses (i) and (iii) in the preceding sentence later than the 60th day following your death and a distribution pursuant to clause (ii) in the preceding sentence shall be made at the same time and in the same manner as if you were still actively employed with the Company.
14.    Long-Term Disability. In the event you are absent due to a LTD and you are receiving compensation under a Viacom LTD plan, then, effective on the date you begin receiving compensation under such plan, (i) this Agreement shall terminate without any further action required by the Company, (ii) you shall be considered an “at-will” employee of the Company, and (iii) you shall have no guarantee of specific future employment nor continuing employment generally when your receipt of compensation under a Viacom LTD plan ends, except as required by applicable law . In the event of such termination of this Agreement, you shall receive (i) any Accrued Compensation and Benefits and (ii) for the year in which such termination occurs, any Bonus or Pro-Rated Bonus, as applicable, which you would have been entitled to receive, calculated in accordance with paragraph 19(e)(iii). Except as set forth in the previous sentence, the compensation provided to you under the applicable LTD plan shall be in lieu of any compensation from the Company (including, but not limited to, the Salary provided under this Agreement or otherwise). Your participation in any other Viacom benefit plans or programs shall be governed by the terms of the applicable plan or program documents, award agreements and certificates.



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