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The Company also announced that its Board of Directors has authorized the Company to pursue the divestiture of Viacom's approximately 81% interest in Blockbuster, based on the conclusion that Blockbuster would be better positioned as a company completely independent of Viacom. The Company anticipates that the divestiture would be achieved through a tax-free split-off, but will also continue to consider other alternatives. The transaction is subject to further approval of the Viacom Board and an assessment of market conditions. The split-off, which would result in a reduction of Viacom's outstanding shares, is expected to be completed by mid-2004.

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Viacom reported operating income of $3.6 billion for the full year 2003 versus $4.6 billion in the prior year. Viacom's 2003 full year and fourth quarter results included a non-cash charge of $1.3 billion related to a reduction in Blockbuster's goodwill and other long-lived assets resulting from the application of SFAS No. 142, "Goodwill and Other Intangible Assets" and SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Viacom reported full year 2003 net earnings (before cumulative effect of change in accounting principle) of $1.4 billion or $0.82 per diluted share, compared with $2.2 billion or $1.24 per diluted share, for 2002. The impact of the charge on full year 2003 diluted earnings per share was $0.58.

For the fourth quarter, Viacom revenues increased 11% to a record $7.5 billion from $6.8 billion for the same period last year, led by double-digit increases in the Cable Networks and Entertainment segments. Fourth quarter 2003 operating loss was $56 million and included the aforementioned charge. Viacom reported a fourth quarter net loss (before cumulative effect of change in accounting principle) of $385 million or a loss of $0.22 per diluted share, compared with net earnings of $652 million or $0.37 per diluted share in the same period last year.

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Sumner M. Redstone, Chairman and Chief Executive Officer of Viacom, said, "Viacom turned in another year of significant milestones in 2003, both operationally and strategically. We added $2 billion in new revenues, ending the year with a record total of $26.6 billion. We also added significantly to the bottom line, highlighting our ability to turn our top line growth into greater value for shareholders. Equally significant, we reached a decision to part ways with Blockbuster, which will allow each company to focus exclusively on its core businesses. Blockbuster can maximize its growth opportunities and Viacom can focus on the many opportunities we see ahead. Our strategic focus on exploiting all of our core strengths and the building vigor in the advertising market point to significant growth for Viacom in 2004 and even greater opportunities in the years beyond."

Mel Karmazin, President and Chief Operating Officer of Viacom, said, "Record revenues for the year were driven by strong growth in our national television advertising business, particularly at our Cable Networks, which delivered outstanding 26% gains, as well as growth in nearly every segment of the Company. Overall, our advertising revenues grew 8% for the full year, a big contributor to the bottom line. We also generated $3 billion in free cash flow in 2003, an extraordinary amount and a 15% increase over the prior year. We achieved this growth while continuing to make significant investments in programming and international expansion. In 2004, we are off to a strong start with record ratings across our television properties, the highest audience numbers and ad rates in the history of the Super Bowl, the continuing benefit of the quadrennial effect on the advertising market and the full-year impact of our Comedy Central acquisition. These factors, along with our announced separation from Blockbuster and our strong balance sheet, put Viacom in a great position to expand both internally and through acquisitions in core areas."
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