SILVER SPRING,
Md., Nov. 7, 2019 /PRNewswire/
-- Discovery, Inc. ("Discovery" or the "Company") (NASDAQ:
DISCA, DISCB, DISCK) today reported financial results for the
quarter ended September 30, 2019.
David
Zaslav, President and Chief Executive
Officer of Discovery said, "Discovery once again delivered strong
financial results across our portfolio, generating healthy revenue
growth in the U.S. and internationally, and significant operational
efficiencies from our ongoing transformation efforts. We also made
progress in the buildout of our digital ecosystems that leverage
our owned programming and brand strength. With a solid financial
profile and strong balance sheet, we are able to invest
meaningfully in our business and create additional value for
shareholders."
Third Quarter 2019 Financial Highlights
- Total Company revenues increased 3% to $2,678 million or increased 5%
ex-FX(1).
-
- U.S. advertising revenues increased 3% and distribution
increased 6%; and
- International advertising revenues increased 10% and
distribution increased 8%, ex-FX.
- Net income increased to $262
million and diluted EPS increased to $0.35 per share.
- Adjusted OIBDA(2) increased 6% to $1,126 million or increased 9% ex-FX.
- Adjusted EPS(3) was $0.87 per diluted share, excluding certain
items.
- Free cash flow(4) decreased 3% to $884 million.
- The Company repurchased nearly 12 million shares for
$300 million, at an average price of
$25.93 per share.
Dollars in millions, except
|
|
Three Months Ended September
30,
|
|
Nine Months Ended September 30,
|
per share amounts
|
|
2019
|
|
2018
|
|
Change
|
|
Ex-FX(1)
|
|
2019
|
|
2018
|
|
Change(5)
|
|
Ex-FX(1,5)
|
Total Revenues
|
|
$
|
2,678
|
|
|
$
|
2,592
|
|
|
3
|
%
|
|
5
|
%
|
|
$
|
8,270
|
|
|
$
|
7,744
|
|
|
7
|
%
|
|
9
|
%
|
Net Income
|
|
$
|
262
|
|
|
$
|
117
|
|
|
NM
|
|
|
|
$
|
1,593
|
|
|
$
|
325
|
|
|
NM
|
|
|
U.S.
Networks
|
|
1,005
|
|
|
901
|
|
|
12
|
%
|
|
|
|
3,192
|
|
|
2,536
|
|
|
26
|
%
|
|
|
International
Networks
|
|
237
|
|
|
254
|
|
|
(7)
|
%
|
|
5
|
%
|
|
742
|
|
|
727
|
|
|
2
|
%
|
|
13
|
%
|
Total Adjusted
OIBDA(6)
|
|
$
|
1,126
|
|
|
$
|
1,060
|
|
|
6
|
%
|
|
9
|
%
|
|
$
|
3,566
|
|
|
$
|
2,991
|
|
|
19
|
%
|
|
22
|
%
|
Diluted
EPS
|
|
$
|
0.35
|
|
|
$
|
0.16
|
|
|
NM
|
|
|
|
$
|
2.21
|
|
|
$
|
0.47
|
|
|
NM
|
|
|
Adjusted
EPS
|
|
$
|
0.87
|
|
|
$
|
0.79
|
|
|
10
|
%
|
|
|
|
$
|
2.70
|
|
|
$
|
2.10
|
|
|
29
|
%
|
|
|
Free Cash
Flow
|
|
$
|
884
|
|
|
$
|
907
|
|
|
(3)
|
%
|
|
|
|
$
|
1,978
|
|
|
$
|
1,541
|
|
|
28
|
%
|
|
|
NM: Not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational Highlights
- Food Network Kitchen, a first-of-its-kind direct to
consumer product with live, interactive cooking instruction, and a
collaboration with Amazon, launched in the U.S.
- Discovery was the No. 1 most-watched TV portfolio in the
U.S. among women 25-54 for the last six
months(7).
- TLC delivered another record-breaking quarter as the No.
1 ad-supported cable network in primetime among women 25-54 and
women 18-49, with delivery up 16% and 10%,
respectively(8).
- Share of viewing in the top-10 international markets
increased 3% on average in the third
quarter(9).
Third Quarter 2019 Consolidated Results
- Revenues increased 3% to $2,678
million, or increased 5% excluding the impact of foreign
currency fluctuations ("ex-FX")(1), compared with the
prior year's quarter.
- Net income increased to $262
million, or $0.35 per diluted
share, primarily due to higher operating results, lower
restructuring and other charges and to a lesser extent, lower
interest expense, partially offset by the impact from a non-cash
goodwill impairment charge in our Asia-Pacific region.
- Adjusted Operating Income Before Depreciation and
Amortization ("Adjusted OIBDA")(2) increased 6% to
$1,126 million, as a 12% increase in
U.S. Networks Adjusted OIBDA was partially offset by a 7% decrease
in International Networks Adjusted OIBDA. Ex-FX, total Adjusted
AOIBDA increased 9% and International Networks Adjusted OIBDA
increased 5%.
- Adjusted Earnings Per Diluted Share ("Adjusted
EPS")(3) was $0.87.
Adjusted EPS excludes the per share impact from amortization of
acquisition-related intangible assets, net of tax of $0.29, an after-tax, non-cash impairment on
goodwill of $0.21, and restructuring
and other charges, net of tax, of $0.02.
- Free cash flow(4) decreased 3% to $884 million due to an increase in digital
investments and capital expenditures, partially offset by lower
restructuring and other charges. Cash provided by operating
activities increased 2% to $951
million reflecting an increase in net income due to higher
operating results and lower restructuring and other charges.
Capital expenditures increased $43
million to $67 million due to
transformation projects related to technology infrastructure and
software development, as well as expenses related to real estate
consolidation.
Third Quarter 2019 Segment Results
U.S. Networks
Dollars in millions
|
|
Three Months Ended September
30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change(5)
|
Advertising
|
|
$
|
1,019
|
|
|
$
|
991
|
|
|
3
|
%
|
|
$
|
3,194
|
|
|
$
|
2,708
|
|
|
18
|
%
|
Distribution
|
|
681
|
|
|
644
|
|
|
6
|
%
|
|
2,066
|
|
|
1,812
|
|
|
14
|
%
|
Other
|
|
25
|
|
|
39
|
|
|
(36)
|
%
|
|
80
|
|
|
108
|
|
|
(26)
|
%
|
Total
Revenues
|
|
$
|
1,725
|
|
|
$
|
1,674
|
|
|
3
|
%
|
|
$
|
5,340
|
|
|
$
|
4,628
|
|
|
15
|
%
|
Costs of Revenues,
Excluding Depreciation & Amortization
|
|
434
|
|
|
486
|
|
|
(11)
|
%
|
|
1,297
|
|
|
1,297
|
|
|
—
|
%
|
Selling, General
& Administrative
|
|
286
|
|
|
287
|
|
|
—
|
%
|
|
851
|
|
|
795
|
|
|
7
|
%
|
Adjusted
OIBDA
|
|
$
|
1,005
|
|
|
$
|
901
|
|
|
12
|
%
|
|
$
|
3,192
|
|
|
$
|
2,536
|
|
|
26
|
%
|
- Revenues increased 3% to $1,725
million.
-
- Growth in advertising was primarily driven by increases
in pricing and to a lesser extent, the continued monetization of
digital content offerings and inventory, and partially offset by
lower overall ratings and the impact of audience declines on the
linear networks.
- Growth in distribution was primarily driven by increases
in contractual affiliate rates and additional carriage on streaming
platforms, partially offset by the impact from a decline in overall
subscribers.
- Total portfolio subscribers for September 2019 were 4% lower than September 2018, while subscribers to the fully
distributed networks were 1% lower.
- Operating expenses decreased 7% to $720 million.
-
- Costs of revenues decreased primarily due to content
synergies related to the integration of Scripps
Networks.
- SG&A was flat as reductions in technology,
professional services fees and personnel costs due to restructuring
and the integration of Scripps Networks were offset by higher
marketing expenses.
- Adjusted OIBDA increased 12% to $1,005 million.
International Networks
Dollars in millions
|
|
Three Months Ended September
30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
Change
|
|
Ex-FX(1)
|
|
2019
|
|
2018
|
|
Change(4)
|
|
Ex-FX(1,5)
|
Advertising
|
|
$
|
394
|
|
|
$
|
374
|
|
|
5
|
%
|
|
10
|
%
|
|
$
|
1,253
|
|
|
$
|
1,232
|
|
|
2
|
%
|
|
9
|
%
|
Distribution
|
|
520
|
|
|
508
|
|
|
2
|
%
|
|
8
|
%
|
|
1,565
|
|
|
1,577
|
|
|
(1)
|
%
|
|
5
|
%
|
Other
|
|
36
|
|
|
34
|
|
|
6
|
%
|
|
12
|
%
|
|
104
|
|
|
256
|
|
|
(59)
|
%
|
|
(56)
|
%
|
Total
Revenues
|
|
$
|
950
|
|
|
$
|
916
|
|
|
4
|
%
|
|
9
|
%
|
|
$
|
2,922
|
|
|
$
|
3,065
|
|
|
(5)
|
%
|
|
2
|
%
|
Costs of Revenues,
Excluding Depreciation & Amortization
|
|
479
|
|
|
449
|
|
|
7
|
%
|
|
8
|
%
|
|
1,483
|
|
|
1,675
|
|
|
(11)
|
%
|
|
(7)
|
%
|
Selling, General
& Administrative
|
|
234
|
|
|
213
|
|
|
10
|
%
|
|
15
|
%
|
|
697
|
|
|
663
|
|
|
5
|
%
|
|
12
|
%
|
Adjusted
OIBDA
|
|
$
|
237
|
|
|
$
|
254
|
|
|
(7)
|
%
|
|
5
|
%
|
|
$
|
742
|
|
|
$
|
727
|
|
|
2
|
%
|
|
13
|
%
|
- Revenues increased 4% to $950
million. Ex-FX, revenues increased 9%.
-
- Ex-FX, growth in advertising was primarily driven by the
consolidation of the UKTV Lifestyle Business, expansion of digital
content offerings and to a lesser extent, higher pricing in certain
markets in Europe.
- Ex-FX, growth in distribution was driven by certain
content licensing arrangements, contractual price increases and new
channel launches in our Latin
America region, increases in digital licensing revenues and
growth in Europe related to
increases in pricing and monetization of digital content
offerings.
- Operating expenses increased 8% to $713 million. Ex-FX, operating expenses increased
10%.
-
- Ex-FX, costs of revenues increased primarily due to
higher expenses associated with expanded digital content offerings
and to a lesser extent, consolidation of the UKTV Lifestyle
Business.
- Ex-FX, SG&A increased primarily due to higher
technology and personnel costs as a result of expanded digital
content offerings and higher marketing related
expenses.
- Adjusted OIBDA decreased 7% to $237 million. Ex-FX, Adjusted OIBDA increased
5%.
Other
The Other segment's revenues
of $3 million and Adjusted
OIBDA of $1 million were consistent
with the prior year's quarter.
Corporate and Inter-Segment
Eliminations
Corporate Adjusted OIBDA for the
third quarter of 2019 decreased 23% compared with the prior year's
quarter, primarily due to expenses associated with transformation
projects related to technology infrastructure and software
development, as well as facilities-related expenses due to real
estate consolidation.
Other Items
Share
Buyback
In April
2019, the Company's Board of Directors authorized additional
common stock repurchases of up to $1
billion. Under the stock repurchase authorization,
management is authorized to purchase shares from time to time
through open market purchases at prevailing prices or privately
negotiated purchases subject to market conditions and other
factors. During the quarter, the Company, pursuant to its existing
stock repurchase authorization, repurchased nearly 12 million
shares of its Series C common stock for a total of $300
million, at an average price of $25.93 per share.
Full Year 2019
Outlook(10)
Discovery
will provide forward-looking guidance in connection with this
quarterly earnings announcement on its quarterly earnings
conference call. Details on how to access the call and webcast are
included below.
Conference Call
Information
Discovery will host a conference
call today, November 7, 2019 at 8:30
a.m. ET to discuss its third quarter results. To listen to
the call, visit https://corporate.discovery.com or dial
1-844-452-2811 inside the U.S. and 1-574-990-9832 outside of the
U.S., using conference passcode: DISCA.
Cautionary Statement Concerning Forward-Looking
Statements
This press release contains certain
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are based on current expectations, forecasts and
assumptions that involve risks and uncertainties and on information
available to the Company as of the date hereof. The Company's
actual results could differ materially from those stated or
implied, due to risks and uncertainties associated with its
business, which include the risk factors disclosed in its Annual
Report on Form 10-K filed with the SEC on March 1, 2019 and Quarterly Report on Form 10-Q
for the quarter ended September 30, 2019, expected to be filed
today.
Forward-looking statements include statements regarding
the Company's expectations, beliefs, intentions or strategies
regarding the future, and can be identified by forward-looking
words such as "anticipate," "believe," "could," "continue,"
"estimate," "expect," "intend," "may," "should," "will" and "would"
or similar words. Forward-looking statements in this release
include, without limitation, statements regarding investing in the
Company's programming, strategic growth initiatives, and the
effects of the Scripps Networks acquisition and related
transactions. The Company expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in
the Company's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
About Discovery, Inc.
Discovery,
Inc. (Nasdaq: DISCA, DISCB, DISCK) is a global leader in real life
entertainment, serving a passionate audience of superfans around
the world with content that inspires, informs and entertains.
Discovery delivers over 8,000 hours of original programming each
year and has category leadership across deeply loved content genres
around the world. Available in 220 countries and territories and in
nearly 50 languages, Discovery is a platform innovator, reaching
viewers on all screens, including TV Everywhere products such as
the GO portfolio of apps; direct-to-consumer streaming services
such as Eurosport Player and MotorTrend OnDemand; digital-first and
social content from Group Nine Media; a landmark natural history
and factual content partnership with the BBC; and a strategic
alliance with PGA TOUR to create the international home of golf.
Discovery's portfolio of premium brands includes Discovery Channel,
HGTV, Food Network, TLC, Investigation Discovery, Travel Channel,
MotorTrend, Animal Planet, and Science Channel, as well as OWN:
Oprah Winfrey Network in the U.S., Discovery Kids in Latin America, and Eurosport, the leading
provider of locally relevant, premium sports and Home of the
Olympic Games across Europe. For
more information, please visit https://corporate.discovery.com and
follow @DiscoveryIncTV across social platforms.
DISCOVERY,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(unaudited; in
millions, except per share amounts)
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
|
Advertising
|
|
$
|
1,413
|
|
|
$
|
1,365
|
|
|
$
|
4,447
|
|
|
$
|
3,940
|
|
Distribution
|
|
1,201
|
|
|
1,152
|
|
|
3,631
|
|
|
3,389
|
|
Other
|
|
64
|
|
|
75
|
|
|
192
|
|
|
415
|
|
Total
revenues
|
|
2,678
|
|
|
2,592
|
|
|
8,270
|
|
|
7,744
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
Costs of revenues,
excluding depreciation and amortization
|
|
914
|
|
|
934
|
|
|
2,782
|
|
|
2,989
|
|
Selling, general and
administrative
|
|
660
|
|
|
667
|
|
|
1,995
|
|
|
1,963
|
|
Depreciation and
amortization
|
|
322
|
|
|
398
|
|
|
1,014
|
|
|
1,001
|
|
Impairment of
goodwill
|
|
155
|
|
|
—
|
|
|
155
|
|
|
—
|
|
Restructuring and
other charges
|
|
8
|
|
|
224
|
|
|
20
|
|
|
652
|
|
Gain on
disposition
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(84)
|
|
Total costs and
expenses
|
|
2,059
|
|
|
2,223
|
|
|
5,966
|
|
|
6,521
|
|
Operating
income
|
|
619
|
|
|
369
|
|
|
2,304
|
|
|
1,223
|
|
Interest expense,
net
|
|
(163)
|
|
|
(185)
|
|
|
(515)
|
|
|
(558)
|
|
Loss on
extinguishment of debt
|
|
—
|
|
|
—
|
|
|
(28)
|
|
|
—
|
|
(Loss) income from
equity investees, net
|
|
(11)
|
|
|
9
|
|
|
(20)
|
|
|
(53)
|
|
Other expense,
net
|
|
(1)
|
|
|
(15)
|
|
|
(10)
|
|
|
(84)
|
|
Income before income
taxes
|
|
444
|
|
|
178
|
|
|
1,731
|
|
|
528
|
|
Income tax
expense
|
|
(147)
|
|
|
(43)
|
|
|
(29)
|
|
|
(146)
|
|
Net income
|
|
297
|
|
|
135
|
|
|
1,702
|
|
|
382
|
|
Net income
attributable to noncontrolling interests
|
|
(29)
|
|
|
(13)
|
|
|
(94)
|
|
|
(41)
|
|
Net income
attributable to redeemable noncontrolling interests
|
|
(6)
|
|
|
(5)
|
|
|
(15)
|
|
|
(16)
|
|
Net income available
to Discovery, Inc.
|
|
$
|
262
|
|
|
$
|
117
|
|
|
$
|
1,593
|
|
|
$
|
325
|
|
Net income per share
allocated to Discovery, Inc. Series A, B and C
common stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.35
|
|
|
$
|
0.16
|
|
|
$
|
2.22
|
|
|
$
|
0.47
|
|
Diluted
|
|
$
|
0.35
|
|
|
$
|
0.16
|
|
|
$
|
2.21
|
|
|
$
|
0.47
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
535
|
|
|
523
|
|
|
529
|
|
|
490
|
|
Diluted
|
|
713
|
|
|
713
|
|
|
714
|
|
|
679
|
|
DISCOVERY,
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(unaudited; in
millions, except par value)
|
|
|
September 30, 2019
|
|
December 31, 2018
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
813
|
|
|
$
|
986
|
|
Receivables,
net
|
2,695
|
|
|
2,620
|
|
Content rights,
net
|
442
|
|
|
313
|
|
Prepaid expenses and
other current assets
|
363
|
|
|
312
|
|
Total current
assets
|
4,313
|
|
|
4,231
|
|
Noncurrent content
rights, net
|
3,095
|
|
|
3,069
|
|
Property and
equipment, net
|
856
|
|
|
800
|
|
Goodwill,
net
|
12,977
|
|
|
13,006
|
|
Intangible assets,
net
|
8,880
|
|
|
9,674
|
|
Equity method
investments, including note receivable
|
529
|
|
|
935
|
|
Other noncurrent
assets
|
2,175
|
|
|
835
|
|
Total
assets
|
$
|
32,825
|
|
|
$
|
32,550
|
|
LIABILITIES AND EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
380
|
|
|
$
|
325
|
|
Accrued
liabilities
|
1,462
|
|
|
1,604
|
|
Deferred
revenues
|
384
|
|
|
249
|
|
Current portion of
debt
|
611
|
|
|
1,819
|
|
Total current
liabilities
|
2,837
|
|
|
3,997
|
|
Noncurrent portion of
debt
|
14,757
|
|
|
14,974
|
|
Deferred income
taxes
|
1,624
|
|
|
1,811
|
|
Other noncurrent
liabilities
|
2,028
|
|
|
1,251
|
|
Total
liabilities
|
21,246
|
|
|
22,033
|
|
Commitments and
contingencies
|
|
|
|
Redeemable
noncontrolling interests
|
446
|
|
|
415
|
|
Equity:
|
|
|
|
Discovery, Inc.
stockholders' equity:
|
|
|
|
Series A-1
convertible preferred stock: $0.01 par value; 8 shares authorized,
issued and
outstanding
|
—
|
|
|
—
|
|
Series C-1
convertible preferred stock: $0.01 par value; 6 shares authorized;
5 and 6
shares issued; and 5 and 6 shares outstanding
|
—
|
|
|
—
|
|
Series A common
stock: $0.01 par value; 1,700 shares authorized; 161 and 160
shares
issued; and 158 and 157 shares outstanding
|
2
|
|
|
2
|
|
Series B
convertible common stock: $0.01 par value; 100 shares authorized; 7
shares
issued and outstanding
|
—
|
|
|
—
|
|
Series C common
stock: $0.01 par value; 2,000 shares authorized; 537 and 524
shares
issued; and 362 and 360 shares outstanding
|
5
|
|
|
5
|
|
Additional paid-in
capital
|
10,718
|
|
|
10,647
|
|
Treasury stock, at
cost: 178 and 167 shares
|
(7,037)
|
|
|
(6,737)
|
|
Retained
earnings
|
6,859
|
|
|
5,254
|
|
Accumulated other
comprehensive loss
|
(1,029)
|
|
|
(785)
|
|
Total Discovery, Inc.
stockholders' equity
|
9,518
|
|
|
8,386
|
|
Noncontrolling
interests
|
1,615
|
|
|
1,716
|
|
Total
equity
|
11,133
|
|
|
10,102
|
|
Total liabilities and
equity
|
$
|
32,825
|
|
|
$
|
32,550
|
|
DISCOVERY,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(unaudited; in
millions)
|
|
|
Nine Months Ended September 30,
|
|
2019
|
|
2018
|
Operating Activities
|
|
|
|
Net income
|
$
|
1,702
|
|
|
$
|
382
|
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
Content rights
amortization and impairment
|
2,078
|
|
|
2,523
|
|
Depreciation and
amortization
|
1,014
|
|
|
1,001
|
|
Deferred income
taxes
|
(572)
|
|
|
(140)
|
|
Impairment of
goodwill
|
155
|
|
|
—
|
|
Share-based
compensation expense
|
82
|
|
|
92
|
|
Equity in losses of
equity method investee companies, net of cash
distributions
|
61
|
|
|
106
|
|
Unrealized loss
(gain) from derivative instruments, net
|
53
|
|
|
(2)
|
|
Loss on
extinguishment of debt
|
28
|
|
|
—
|
|
Remeasurement gain on
previously held equity interest
|
(14)
|
|
|
—
|
|
Realized gain from
derivative instruments, net
|
(12)
|
|
|
—
|
|
Gain on
disposition
|
—
|
|
|
(84)
|
|
Other, net
|
47
|
|
|
56
|
|
Changes in operating
assets and liabilities, net of acquisitions and
dispositions:
|
|
|
|
Receivables,
net
|
(84)
|
|
|
(19)
|
|
Content rights and
payables, net
|
(2,332)
|
|
|
(2,222)
|
|
Accounts payable and
accrued liabilities
|
(21)
|
|
|
(123)
|
|
Prepaid income taxes
and income taxes receivable
|
43
|
|
|
(53)
|
|
Foreign currency and
other, net
|
(61)
|
|
|
130
|
|
Cash provided by
operating activities
|
2,167
|
|
|
1,647
|
|
Investing Activities
|
|
|
|
Business
acquisitions, net of cash acquired
|
(60)
|
|
|
(8,565)
|
|
Investments in and
advances to equity investments
|
(215)
|
|
|
(56)
|
|
Purchases of property
and equipment
|
(189)
|
|
|
(106)
|
|
Proceeds from
dissolution of joint venture and sale of investments
|
117
|
|
|
—
|
|
Proceeds from
(payments for) derivative instruments, net
|
52
|
|
|
(3)
|
|
Proceeds from
dispositions, net of cash disposed
|
—
|
|
|
107
|
|
Proceeds from sale of
assets
|
—
|
|
|
68
|
|
Other investing
activities, net
|
4
|
|
|
6
|
|
Cash used in
investing activities
|
(291)
|
|
|
(8,549)
|
|
Financing Activities
|
|
|
|
Principal repayments
of debt, including discount payment
|
(2,652)
|
|
|
—
|
|
Borrowings from debt,
net of discount and issuance costs
|
1,479
|
|
|
—
|
|
Repurchases of
stock
|
(300)
|
|
|
—
|
|
Distributions to
noncontrolling interests and redeemable noncontrolling
interests
|
(227)
|
|
|
(59)
|
|
Principal repayments
of revolving credit facility
|
(225)
|
|
|
(100)
|
|
Principal repayments
of finance lease obligations
|
(35)
|
|
|
(37)
|
|
Payments for hedging
instruments
|
(18)
|
|
|
—
|
|
Share-based plan
(payments) proceeds, net
|
(9)
|
|
|
44
|
|
(Repayments)
borrowings under program financing line of credit, net
|
(8)
|
|
|
23
|
|
Borrowings under term
loan facilities
|
—
|
|
|
2,000
|
|
Principal repayments
of term loans
|
—
|
|
|
(2,000)
|
|
Commercial paper
borrowings, net
|
—
|
|
|
293
|
|
Other financing
activities, net
|
3
|
|
|
(16)
|
|
Cash (used in)
provided by financing activities
|
(1,992)
|
|
|
148
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(57)
|
|
|
(24)
|
|
Net change in cash
and cash equivalents
|
(173)
|
|
|
(6,778)
|
|
Cash and cash
equivalents, beginning of period
|
986
|
|
|
7,309
|
|
Cash and cash
equivalents, end of period
|
$
|
813
|
|
|
$
|
531
|
|
DISCOVERY,
INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
RECONCILIATION OF
NET INCOME TO
|
ADJUSTED OPERATING
INCOME BEFORE DEPRECIATION AND AMORTIZATION
|
(unaudited; in
millions)
|
|
|
Three Months Ended September 30,
2019
|
|
U.S.
Networks
|
|
International
Networks
|
|
Other
|
|
Corporate
and Inter-
Segment
Eliminations
|
|
Total
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
|
|
$
|
262
|
|
Net income
attributable to redeemable noncontrolling
interests
|
|
|
|
|
|
|
|
|
6
|
|
Net income
attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
29
|
|
Income tax
expense
|
|
|
|
|
|
|
|
|
147
|
|
Other expense,
net
|
|
|
|
|
|
|
|
|
1
|
|
Loss from equity
investees, net
|
|
|
|
|
|
|
|
|
11
|
|
Interest expense,
net
|
|
|
|
|
|
|
|
|
163
|
|
Operating income
(loss)
|
$
|
771
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
(155)
|
|
|
$
|
619
|
|
Restructuring and
other charges
|
4
|
|
|
5
|
|
|
—
|
|
|
(1)
|
|
|
8
|
|
Impairment of
goodwill
|
—
|
|
|
155
|
|
|
—
|
|
|
—
|
|
|
155
|
|
Depreciation and
amortization
|
228
|
|
|
77
|
|
|
—
|
|
|
17
|
|
|
322
|
|
Employee share-based
compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
Transaction and
integration costs
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
Inter-segment eliminations
|
2
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
Total Adjusted
OIBDA
|
$
|
1,005
|
|
|
$
|
237
|
|
|
$
|
1
|
|
|
$
|
(117)
|
|
|
$
|
1,126
|
|
|
Three Months Ended September 30,
2018
|
|
U.S.
Networks
|
|
International
Networks
|
|
Other
|
|
Corporate
and Inter-
Segment
Eliminations
|
|
Total
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
|
|
$
|
117
|
|
Net income
attributable to redeemable noncontrolling
interests
|
|
|
|
|
|
|
|
|
5
|
|
Net income
attributable to noncontrolling
interests
|
|
|
|
|
|
|
|
|
13
|
|
Income tax
expense
|
|
|
|
|
|
|
|
|
43
|
|
Other expense,
net
|
|
|
|
|
|
|
|
|
15
|
|
(Income) from equity
investees, net
|
|
|
|
|
|
|
|
|
(9)
|
|
Interest expense,
net
|
|
|
|
|
|
|
|
|
185
|
|
Operating income
(loss)
|
$
|
399
|
|
|
$
|
146
|
|
|
$
|
1
|
|
|
$
|
(177)
|
|
|
$
|
369
|
|
Restructuring and
other charges
|
206
|
|
|
16
|
|
|
—
|
|
|
2
|
|
|
224
|
|
Depreciation and
amortization
|
296
|
|
|
82
|
|
|
—
|
|
|
20
|
|
|
398
|
|
Employee share-based
compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
43
|
|
|
43
|
|
Transaction and
integration costs
|
3
|
|
|
3
|
|
|
—
|
|
|
20
|
|
|
26
|
|
Inter-segment eliminations
|
(3)
|
|
|
7
|
|
|
(1)
|
|
|
(3)
|
|
|
—
|
|
Total Adjusted
OIBDA
|
$
|
901
|
|
|
$
|
254
|
|
|
$
|
—
|
|
|
$
|
(95)
|
|
|
$
|
1,060
|
|
DISCOVERY,
INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
RECONCILIATION OF
NET INCOME TO
|
ADJUSTED OPERATING
INCOME BEFORE DEPRECIATION AND AMORTIZATION
|
(unaudited; in
millions)
|
|
|
Nine Months Ended September 30,
2019
|
|
U.S.
Networks
|
|
International
Networks
|
|
Other
|
|
Corporate
and Inter-
Segment
Eliminations
|
|
Total
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
|
|
$
|
1,593
|
|
Net income
attributable to redeemable noncontrolling
interests
|
|
|
|
|
|
|
|
|
15
|
|
Net income
attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
94
|
|
Income tax
expense
|
|
|
|
|
|
|
|
|
29
|
|
Other expense,
net
|
|
|
|
|
|
|
|
|
10
|
|
Loss from equity
investees, net
|
|
|
|
|
|
|
|
|
20
|
|
Loss on
extinguishment of debt
|
|
|
|
|
|
|
|
|
28
|
|
Interest expense,
net
|
|
|
|
|
|
|
|
|
515
|
|
Operating income
(loss)
|
$
|
2,456
|
|
|
$
|
339
|
|
|
$
|
11
|
|
|
$
|
(502)
|
|
|
$
|
2,304
|
|
Restructuring and
other charges
|
11
|
|
|
15
|
|
|
—
|
|
|
(6)
|
|
|
20
|
|
Impairment of
goodwill
|
—
|
|
|
155
|
|
|
—
|
|
|
—
|
|
|
155
|
|
Depreciation and
amortization
|
723
|
|
|
241
|
|
|
—
|
|
|
50
|
|
|
1,014
|
|
Employee share-based
compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
80
|
|
|
80
|
|
Transaction and
integration costs
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
22
|
|
Settlement of a
withholding tax claim
|
—
|
|
|
(29)
|
|
|
—
|
|
|
—
|
|
|
(29)
|
|
Inter-segment
eliminations
|
2
|
|
|
21
|
|
|
(8)
|
|
|
(15)
|
|
|
—
|
|
Total Adjusted
OIBDA
|
$
|
3,192
|
|
|
$
|
742
|
|
|
$
|
3
|
|
|
$
|
(371)
|
|
|
$
|
3,566
|
|
|
Nine Months Ended September 30,
2018
|
|
U.S.
Networks
|
|
International
Networks
|
|
Other
|
|
Corporate
and Inter-
Segment
Eliminations
|
|
Total
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
|
|
$
|
325
|
|
Net income
attributable to redeemable noncontrolling
interests
|
|
|
|
|
|
|
|
|
16
|
|
Net income
attributable to noncontrolling
interests
|
|
|
|
|
|
|
|
|
41
|
|
Income tax
expense
|
|
|
|
|
|
|
|
|
146
|
|
Other expense,
net
|
|
|
|
|
|
|
|
|
84
|
|
Loss from equity
investees, net
|
|
|
|
|
|
|
|
|
53
|
|
Interest expense,
net
|
|
|
|
|
|
|
|
|
558
|
|
Operating income
(loss)
|
$
|
1,581
|
|
|
$
|
217
|
|
|
$
|
91
|
|
|
$
|
(666)
|
|
|
$
|
1,223
|
|
Gain on
disposition
|
—
|
|
|
—
|
|
|
(84)
|
|
|
—
|
|
|
(84)
|
|
Restructuring and
other charges
|
259
|
|
|
262
|
|
|
1
|
|
|
130
|
|
|
652
|
|
Depreciation and
amortization
|
691
|
|
|
232
|
|
|
3
|
|
|
75
|
|
|
1,001
|
|
Employee share-based
compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|
92
|
|
Transaction and
integration costs
|
7
|
|
|
3
|
|
|
—
|
|
|
97
|
|
|
107
|
|
Inter-segment
eliminations
|
(2)
|
|
|
13
|
|
|
(8)
|
|
|
(3)
|
|
|
—
|
|
Total Adjusted
OIBDA
|
$
|
2,536
|
|
|
$
|
727
|
|
|
$
|
3
|
|
|
$
|
(275)
|
|
|
$
|
2,991
|
|
DISCOVERY,
INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
SELECTED FINANCIAL
DETAIL
|
(unaudited; in
millions, except per share amounts)
|
|
CALCULATION OF
ADJUSTED EARNINGS PER DILUTED SHARE
|
|
|
|
Three Months Ended September
30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
Diluted net income
per share allocated to
Discovery, Inc. Series A, B and C common
stockholders:
|
|
$
|
0.35
|
|
|
$
|
0.16
|
|
|
$
|
0.19
|
|
|
$
|
2.21
|
|
|
$
|
0.47
|
|
|
$
|
1.74
|
|
Per share impacts,
net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquisition-related
intangible assets
|
|
0.29
|
|
|
0.36
|
|
|
(0.07)
|
|
|
0.91
|
|
|
0.89
|
|
|
0.02
|
|
Impairment of
goodwill
|
|
0.21
|
|
|
—
|
|
|
0.21
|
|
|
0.21
|
|
|
—
|
|
|
0.21
|
|
Restructuring and
other charges
|
|
0.02
|
|
|
0.27
|
|
|
(0.25)
|
|
|
0.04
|
|
|
0.83
|
|
|
(0.79)
|
|
Legal entity
restructuring, deferred tax
impact
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.64)
|
|
|
—
|
|
|
(0.64)
|
|
Settlement of a
withholding tax claim
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.03)
|
|
|
—
|
|
|
(0.03)
|
|
Gain on sale of
Education business
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.09)
|
|
|
0.09
|
|
Adjusted earnings per
diluted share
|
|
$
|
0.87
|
|
|
$
|
0.79
|
|
|
$
|
0.08
|
|
|
$
|
2.70
|
|
|
$
|
2.10
|
|
|
$
|
0.60
|
|
CALCULATION OF
FREE CASH FLOW
|
|
|
|
Three Months Ended September
30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
Change
|
|
% Change
|
|
2019
|
|
2018
|
|
Change
|
|
% Change
|
Cash provided by
operating activities
|
|
$
|
951
|
|
|
$
|
931
|
|
|
$
|
20
|
|
|
2
|
%
|
|
$
|
2,167
|
|
|
$
|
1,647
|
|
|
$
|
520
|
|
|
32
|
%
|
Purchases of property
and
equipment
|
|
(67)
|
|
|
(24)
|
|
|
(43)
|
|
|
NM
|
|
(189)
|
|
|
(106)
|
|
|
(83)
|
|
|
(78)
|
%
|
Free cash
flow
|
|
$
|
884
|
|
|
$
|
907
|
|
|
$
|
(23)
|
|
|
(3)
|
%
|
|
$
|
1,978
|
|
|
$
|
1,541
|
|
|
$
|
437
|
|
|
28
|
%
|
Non-GAAP Financial Measures
In
addition to the results prepared in accordance with U.S. generally
accepted accounting principles ("GAAP") provided in this release,
the Company has presented Adjusted OIBDA, Adjusted EPS and free
cash flow. These non-GAAP measures should be considered in addition
to, but not as a substitute for, operating income, net income,
earnings per diluted share and other measures of financial
performance reported in accordance with GAAP. Please review
the supplemental financial schedules for reconciliations to the
most comparable GAAP measures.
Definitions and
Sources
(1)
Methodology for Calculating Growth Rates Excluding
the Impact of Currency Effects: The impact
of exchange rates on our business is an important factor in
understanding period-to-period comparisons of our results. For
example, our international revenues are favorably impacted as the
U.S. dollar weakens relative to other foreign currencies, and
unfavorably impacted as the U.S. dollar strengthens relative to
other foreign currencies. We believe the presentation of results on
a constant currency basis ("ex-FX"), in addition to results
reported in accordance with GAAP, provides useful information about
our operating performance because the presentation ex-FX excludes
the effects of foreign currency volatility and highlights our core
operating results. The presentation of results on a constant
currency basis should be considered in addition to, but not a
substitute for, measures of financial performance reported in
accordance with GAAP.
The ex-FX change represents the percentage change on a
period-over-period basis adjusted for foreign currency impacts. The
ex-FX change is calculated as the difference between the current
year amounts translated at a baseline rate, which is a spot rate
for each of our currencies determined early in the fiscal year as
part of our forecasting process (the "2019 Baseline Rate"), and the
prior year amounts translated at the same 2019 Baseline
Rate.
In addition, consistent with the assumption of a constant
currency environment, our ex-FX results exclude the impact of our
foreign currency hedging activities, as well as realized and
unrealized foreign currency transaction gains and losses. Results
on a constant currency basis, as we present them, may not be
comparable to similarly titled measures used by other
companies.
(2) Adjusted OIBDA
and Adjusted OIBDA Excluding the Impact of Currency
Effects: The Company evaluates the
operating performance of its segments based on financial measures
such as revenues and Adjusted OIBDA. Adjusted OIBDA is defined as
operating income excluding: (i) employee share-based compensation,
(ii) depreciation and amortization, (iii) restructuring and other
charges, (iv) certain impairment charges, (v) gains and losses on
business and asset dispositions, (vi) certain inter-segment
eliminations related to production studios, (vii) third-party
transaction costs directly related to the acquisition and
integration of Scripps Networks and other transactions, and (viii)
other items impacting comparability.
The Company uses this measure to assess the operating
results and performance of its segments, perform analytical
comparisons, identify strategies to improve performance and
allocate resources to each segment. The Company believes Adjusted
OIBDA is relevant to investors because it allows them to analyze
the operating performance of each segment using the same metric
management uses.
The Company excludes share-based compensation,
restructuring and other charges, certain impairment charges, gains
and losses on business and asset dispositions and the Scripps
Networks transaction and integration costs from selling, general
and administrative expenses for the calculation of Adjusted OIBDA
due to their impact on comparability between periods. The Company
also excludes depreciation of fixed assets and amortization of
intangible assets, as these amounts do not represent cash payments
in the current reporting period. Certain corporate expenses are
excluded from segment results to enable executive management to
evaluate segment performance based upon the decisions of segment
executives. Adjusted OIBDA should be considered in addition to, but
not a substitute for, operating income, net income and other
measures of financial performance reported in accordance with GAAP.
Refer to the comments above for the methodology to calculate growth
rates excluding foreign currency effects.
Effective January 1, 2019,
our definition of Adjusted OIBDA was modified to exclude all
employee share-based compensation, whereas only mark-to-market
share-based compensation was excluded previously. Over time, the
Company has moved to a higher percentage of equity-classified
awards (in lieu of liability-classified awards, which require
mark-to-market accounting) under its stock incentive plans and
expects to continue this action in future periods. Since most
equity classified awards are non-cash expenses not entirely under
management control, the Company has elected to exclude all
share-based compensation from Adjusted OIBDA beginning in 2019. The
revised definition of Adjusted OIBDA will be used by our chief
operating decision maker in evaluating segment performance in 2019.
Accordingly, prior period amounts have been recast to reflect the
current definition.
(3) Adjusted
EPS: The Company defines Adjusted EPS as
earnings excluding the impact of amortization of
acquisition-related intangible assets and meaningful one-time
items, per diluted share. The Company believes Adjusted EPS is
relevant to investors because this metric allows them to evaluate
the performance of the Company's operations exclusive of the
non-cash amortization of acquisition-related intangible assets and
meaningful one-time items that impact the comparability of results
from period to period.
(4) Free Cash
Flow: The Company defines free cash flow as
cash flow from operations less acquisitions of property and
equipment. The Company uses free cash flow as it believes it is an
important indicator for management and investors of the Company's
liquidity, including its ability to reduce debt, make strategic
investments and return capital to stockholders.
(5) Year to Date
Comparability: The Company acquired Scripps
Networks on March 6, 2018, resulting
in material comparability differences for the nine months ended
periods.
(6) Financial
Highlights Table: This table presents a
selection of the Company's financial results. Because the table
excludes the "Other" and "Corporate and Inter-Segment Eliminations"
business segments, total Adjusted OIBDA will not foot as
presented.
(7)
Source: Nielsen,
4/1/19 - 9/29/19, Total Day (Mon-Sun
6a-6a), Women 25-54, Live+7-day, Duration-Weighted Delivery: "Most
Watched", among total TV portfolios.
(8)
Source: Nielsen,
7/1/19 - 9/29/19, Primetime (Mon-Sun
8p-11p), Women 25-54 and Women 18-49, Live+3-day.
(9)
Source: Total Audience
Measurement among all individuals for the top-ten markets as ranked
by advertising revenues. Share percent is defined as the share of
viewing to all TV channels in a market, unless Nordics region, then
share of viewing for commercial channels only.
(10)
Outlook: Discovery does not
expect to be able to provide a reconciliation of the non-GAAP
forward-looking guidance to comparable GAAP measures as, at this
time, the Company cannot determine the occurrence or impact of the
adjustments, such as the effect of future changes in foreign
currency exchange rates or future acquisitions or divestitures that
would be excluded from such GAAP measures.
View original
content:http://www.prnewswire.com/news-releases/discovery-inc-reports-third-quarter-2019-results-300953794.html
SOURCE Discovery, Inc.