SILVER SPRING, Md.,
Feb. 27, 2020 /PRNewswire/ --
Discovery, Inc. ("Discovery" or the "Company") (NASDAQ: DISCA,
DISCB, DISCK) today reported financial results for the quarter and
full year ended December 31, 2019.
David
Zaslav, President and Chief Executive Officer of
Discovery said, "2019 was a year of promises made and promises
delivered. We achieved more than $3
billion of free cash flow and brought leverage down to the
low end of our target range of 3-3.5x net debt to Adjusted OIBDA.
Our differentiated local content strategy and global scale, coupled
with our unique free cash flow conversion profile, provide distinct
financial flexibility that allows us to adapt to changing media
consumption habits. Our Board's confidence in our strategic
direction is highlighted by the recent authorization to repurchase
up to an additional $2 billion of our
shares."
Financial Highlights
Fourth Quarter 2019
- Total revenues increased 2% to $2,874
million, or increased 4% ex-FX(1).
-
- U.S. advertising and distribution revenues increased 1% and 5%,
respectively; and
- International advertising and distribution revenues increased
5% and 10%, respectively, ex-FX.
- Net income available to Discovery, Inc. increased to
$476 million and diluted EPS
increased to $0.67 per share.
- Adjusted OIBDA(2) decreased 8% to $1,105 million, or decreased 6% ex-FX.
- Adjusted EPS(3) increased to $0.98 per diluted share.
- Free cash flow(4) increased 27% to $1,132 million.
- The Company repurchased 12 million Series C shares for
$337 million, at an average price of
$29.04 per share.
Full Year 2019
- Total revenues increased 6% to $11,144
million, or increased 2% on a pro forma
combined(5) ex-FX basis.
- Net income available to Discovery, Inc. increased to
$2,069 million and diluted EPS
increased to $2.88 per share.
- Adjusted OIBDA increased 12% to $4,671
million, or increased 7% on a pro forma combined ex-FX
basis.
- Adjusted EPS increased to $3.69
per diluted share.
- Free cash flow increased 28% to $3,110
million.
- The Company repurchased 23 million Series C shares for
$637 million, at an average price of
$27.49 per share.
Dollars in
millions, except
per share amounts
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
2019
|
|
2018
|
|
%
Change
|
Ex-FX
|
|
2019
|
|
2018
|
|
%
Change
|
Ex-FX
|
Pro Forma
Combined
Change
Ex-FX
|
Total
Revenues
|
|
$
|
2,874
|
|
|
$
|
2,809
|
|
|
2
|
%
|
4
|
%
|
|
$
|
11,144
|
|
|
$
|
10,553
|
|
|
6
|
%
|
8
|
%
|
2
|
%
|
Net income
available to
Discovery, Inc.
|
|
$
|
476
|
|
|
$
|
269
|
|
|
77
|
%
|
|
|
$
|
2,069
|
|
|
$
|
594
|
|
|
NM
|
|
|
U.S.
Networks
|
|
925
|
|
|
964
|
|
|
(4)
|
%
|
|
|
4,117
|
|
|
3,500
|
|
|
18
|
%
|
|
10
|
%
|
International
Networks
|
|
315
|
|
|
350
|
|
|
(10)
|
%
|
(4)
|
%
|
|
1,057
|
|
|
1,077
|
|
|
(2)
|
%
|
8
|
%
|
5
|
%
|
Total Adjusted
OIBDA(6)
|
|
$
|
1,105
|
|
|
$
|
1,197
|
|
|
(8)
|
%
|
(6)
|
%
|
|
$
|
4,671
|
|
|
$
|
4,188
|
|
|
12
|
%
|
14
|
%
|
7
|
%
|
Diluted
EPS
|
|
$
|
0.67
|
|
|
$
|
0.38
|
|
|
NM
|
|
|
$
|
2.88
|
|
|
$
|
0.86
|
|
|
NM
|
|
|
Adjusted
EPS
|
|
$
|
0.98
|
|
|
$
|
0.82
|
|
|
20
|
%
|
|
|
$
|
3.69
|
|
|
$
|
2.91
|
|
|
27
|
%
|
|
|
Free Cash
Flow
|
|
$
|
1,132
|
|
|
$
|
888
|
|
|
27
|
%
|
|
|
$
|
3,110
|
|
|
$
|
2,429
|
|
|
28
|
%
|
|
|
NM: Not
meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational Highlights
- In 2019, HGTV and Food Network launched in more than 30 new
countries and territories combined as the Company continued to
execute on its strategy to grow the global reach of the Scripps
Networks.
- Total share of viewing in 2019 for our top 10 international
markets increased 2%, on average(7).
- Established strong foothold across existing and new
direct-to-consumer platforms in Europe, including Dplay in 10
markets(8), TVN Player in Poland, and Joyn(9) in Germany.
- Discovery was the No. 1 most-watched pay TV portfolio in the
U.S. among women 25-54 and 18+ for both primetime and total day in
2019(10).
- TLC delivered its best year ever globally, improving both
international share and viewership by 8%, and in the U.S., TLC was
the fastest growing ad-supported cable network among women 25-54
and 18-49, with its best primetime performance in 16
years(11).
Segment Results
U.S. Networks
Dollars in
millions
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
|
2019
|
|
2018
|
|
%
Change
|
|
2019
|
|
2018
|
|
%
Change
|
Pro forma
Combined
Change
|
Advertising
|
|
$
|
1,051
|
|
|
$
|
1,041
|
|
|
1
|
%
|
|
$
|
4,245
|
|
|
$
|
3,749
|
|
|
13
|
%
|
3
|
%
|
Distribution
|
|
673
|
|
|
644
|
|
|
5
|
%
|
|
2,739
|
|
|
2,456
|
|
|
12
|
%
|
5
|
%
|
Other
|
|
28
|
|
|
37
|
|
|
(24)
|
%
|
|
108
|
|
|
145
|
|
|
(26)
|
%
|
(29)
|
%
|
Total
Revenues
|
|
$
|
1,752
|
|
|
$
|
1,722
|
|
|
2
|
%
|
|
$
|
7,092
|
|
|
$
|
6,350
|
|
|
12
|
%
|
3
|
%
|
Costs of Revenues,
Excluding
Depreciation & Amortization
|
|
503
|
|
|
451
|
|
|
12
|
%
|
|
1,800
|
|
|
1,748
|
|
|
3
|
%
|
(5)
|
%
|
Selling, General
&
Administrative
|
|
324
|
|
|
307
|
|
|
6
|
%
|
|
1,175
|
|
|
1,102
|
|
|
7
|
%
|
(3)
|
%
|
Adjusted
OIBDA
|
|
$
|
925
|
|
|
$
|
964
|
|
|
(4)
|
%
|
|
$
|
4,117
|
|
|
$
|
3,500
|
|
|
18
|
%
|
10
|
%
|
Fourth Quarter 2019
- Revenues increased 2% to $1,752
million compared with the prior year's quarter.
-
- Advertising revenue growth of 1% was primarily driven by
increases in pricing and, to a lesser extent, the continued
monetization of our digital content offerings and inventory,
partially offset by lower overall ratings and secular declines in
the pay TV ecosystem.
- Distribution revenue growth of 5% was primarily driven by
increases in contractual affiliate rates and additional carriage on
virtual MVPD platforms, partially offset by a decline in linear
subscribers.
- Total portfolio subscribers for December
2019 were 5% lower than December
2018, while subscribers to the fully distributed networks
were 3% lower.
- Operating expenses increased 9% to $827
million.
-
- Costs of revenues increased 12% primarily due to higher content
spend.
- SG&A expenses increased 6% primarily due to higher
marketing and personnel expenses to support our direct-to-consumer
initiatives.
- Adjusted OIBDA decreased 4% to $925
million.
Full Year 2019
- Revenues increased 12% to $7,092
million compared with the prior year. On a pro forma
combined basis, revenues increased 3%.
-
- Pro forma combined advertising revenue growth of 3% was
primarily driven by increases in pricing and, to a lesser extent,
the continued monetization of our digital content offerings and
inventory, partially offset by lower overall ratings and secular
declines in the pay TV ecosystem.
- Pro forma combined distribution growth of 5% was primarily
driven by increases in contractual affiliate rates and additional
carriage on virtual MVPD platforms, partially offset by a decline
in linear subscribers.
- Operating expenses increased 4% to $2,975 million. On a pro forma combined basis,
operating expenses decreased 4%.
-
- Pro forma combined costs of revenues decreased 5% primarily due
to content synergies realized from the integration of Scripps
Networks.
- Pro forma combined SG&A expenses decreased 3% primarily due
to cost reductions in personnel, technology, and professional
services fees, partially offset by higher marketing expenses to
support our direct-to-consumer initiatives.
- Adjusted OIBDA increased 18% to $4,117
million, or increased 10% on a pro forma combined
basis.
International Networks
Dollars in
millions
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
|
2019
|
|
2018
|
|
%
Change
|
Ex-FX
|
|
2019
|
|
2018
|
|
%
Change
|
Ex-FX
|
Pro
Forma
Combined
Change
Ex-FX
|
Advertising
|
|
$
|
546
|
|
|
$
|
533
|
|
|
2
|
%
|
5
|
%
|
|
$
|
1,799
|
|
|
$
|
1,765
|
|
|
2
|
%
|
8
|
%
|
4
|
%
|
Distribution
|
|
531
|
|
|
505
|
|
|
5
|
%
|
10
|
%
|
|
2,096
|
|
|
2,082
|
|
|
1
|
%
|
7
|
%
|
5
|
%
|
Other
|
|
42
|
|
|
46
|
|
|
(9)
|
%
|
(8)
|
%
|
|
146
|
|
|
302
|
|
|
(52)
|
%
|
(48)
|
%
|
(50)
|
%
|
Total
Revenues
|
|
$
|
1,119
|
|
|
$
|
1,084
|
|
|
3
|
%
|
7
|
%
|
|
$
|
4,041
|
|
|
$
|
4,149
|
|
|
(3)
|
%
|
3
|
%
|
—
|
%
|
Costs of Revenues,
Excluding
Depreciation & Amortization
|
|
533
|
|
|
494
|
|
|
8
|
%
|
9
|
%
|
|
2,016
|
|
|
2,169
|
|
|
(7)
|
%
|
(3)
|
%
|
(6)
|
%
|
Selling, General
&
Administrative
|
|
271
|
|
|
240
|
|
|
13
|
%
|
15
|
%
|
|
968
|
|
|
903
|
|
|
7
|
%
|
13
|
%
|
11
|
%
|
Adjusted
OIBDA
|
|
$
|
315
|
|
|
$
|
350
|
|
|
(10)
|
%
|
(4)
|
%
|
|
$
|
1,057
|
|
|
$
|
1,077
|
|
|
(2)
|
%
|
8
|
%
|
5
|
%
|
Fourth Quarter 2019
- Revenues increased 3% to $1,119
million, or increased 7% ex-FX, compared with the prior
year's quarter.
-
- Advertising revenues increased 5% ex-FX primarily driven by the
consolidation of the UKTV Lifestyle Business(12) and
growth in our direct-to-consumer initiatives.
- Distribution revenues increased 10% ex-FX primarily driven by
content licensing arrangements and higher affiliate rates in our
Latin America business unit, and
higher affiliate rates and monetization of direct-to-consumer
initiatives in Europe and
Asia.
- Total operating expenses increased 10% to $804 million, or increased 11% ex-FX.
-
- Ex-FX, costs of revenues increased 9% primarily due to
investments in our direct-to-consumer initiatives and linear
content, and, to a lesser extent, consolidation of the UKTV
Lifestyle Business.
- Ex-FX, SG&A increased 15% primarily due to investments in
technology and personnel, as well as higher marketing expenses
driven by subscriber acquisition costs for our direct-to-consumer
initiatives.
- Adjusted OIBDA decreased 10% to $315
million, or decreased 4% ex-FX.
Full Year 2019
- Revenues decreased 3% to $4,041
million compared with the prior year. Ex-FX, revenues
increased 3%. On a pro forma combined ex-FX basis, revenues were
consistent with the prior year.
-
- Pro forma combined ex-FX advertising growth of 4% was primarily
driven by the consolidation of the UKTV Lifestyle Business, growth
in our direct-to-consumer initiatives, and, to a lesser extent,
higher pricing in certain European markets, partially offset by the
impact of the Olympics in 2018.
- Pro forma combined ex-FX distribution growth of 5% was
primarily driven by content licensing arrangements, higher
affiliate rates and new channel launches in our Latin America business unit, higher affiliate
rates in Europe and monetization
of direct-to-consumer initiatives in Europe and Asia.
- Operating expenses decreased 3% to $2,984 million. Ex-FX, operating expenses
increased 2%. On a pro forma combined ex-FX basis, operating
expenses decreased 1%.
-
- Pro forma combined ex-FX costs of revenues decreased 6%
primarily due to rights and production costs for the Olympics in
2018, partially offset by investments in linear content and our
direct-to-consumer initiatives, and the consolidation of the UKTV
Lifestyle Business.
- Pro forma combined ex-FX SG&A increased 11% primarily due
to investments in technology and personnel, as well as higher
marketing expenses driven by subscriber acquisition costs for our
direct-to-consumer initiatives, partially offset by expenses
incurred in the prior year for the Olympics and certain channel
launches in Asia.
- Adjusted OIBDA decreased 2% to $1,057
million. Ex-FX, Adjusted OIBDA increased 8%, or increased 5%
on a pro forma combined ex-FX basis.
Corporate and Inter-Segment Eliminations
For the
fourth quarter of 2019, Corporate Adjusted OIBDA decreased
$19 million compared with the prior
year's quarter, primarily due to investments in facilities and
technology infrastructure, partially offset by lower professional
services fees.
For full year 2019, Corporate Adjusted OIBDA decreased
$115 million compared with the prior
year, primarily due to investments in technology infrastructure and
facilities, and higher professional services fees.
Fourth Quarter 2019 Consolidated Results
- Total revenues increased 2% to $2,874
million, or increased 4% ex-FX, compared with the prior
year's quarter.
- Net income available to Discovery, Inc. increased to
$476 million, or $0.67 per diluted share, primarily due to lower
income tax expense and restructuring and other charges and higher
operating revenues, partially offset by investments in
direct-to-consumer initiatives.
- Total Adjusted OIBDA decreased 8% to $1,105 million, as U.S. Networks Adjusted OIBDA
decreased 4% and International Networks' Adjusted OIBDA decreased
10%. Ex-FX, total Adjusted OIBDA decreased 6% and International
Networks Adjusted OIBDA decreased 4%.
- Adjusted EPS increased to $0.98
compared with the prior year's quarter. Please refer to the table
"Calculation of Adjusted Earnings Per Diluted Share" on page 16 for
additional details.
- Cash provided by operating activities increased 33% to
$1,232 million reflecting
improvements in cash efficiency and an increase in net income
driven by lower restructuring and other charges and taxes. Capital
expenditures increased $59 million to
$100 million due to investments in
technology infrastructure, software development, and facilities.
Free cash flow increased 27% to $1,132
million primarily driven by improvements in cash efficiency,
as well as lower restructuring and other charges and taxes,
partially offset by an increase in digital investments and capital
expenditures.
Full Year 2019 Consolidated Results
- Total revenues increased 6% to $11,144
million, or increased 8% ex-FX, compared with the prior
year. On a pro forma combined ex-FX basis, revenues increased
2%.
- Net income available to Discovery, Inc. increased to
$2,069 million, or $2.88 per diluted share, primarily due to lower
restructuring and other charges, higher operating results and a
one-time, non-cash tax benefit recognized in the second quarter of
2019, partially offset by a non-cash goodwill impairment charge in
our Asia-Pacific region.
- Total Adjusted OIBDA increased 12% to $4,671 million, as an 18% increase in U.S.
Networks Adjusted OIBDA was partially offset by a $115 million decrease in Corporate Adjusted OIBDA
and a 2% decrease in International Networks Adjusted OIBDA. Ex-FX,
total Adjusted OIBDA increased 14% and International Networks
Adjusted OIBDA increased 8%. On a pro forma combined ex-FX basis,
total Adjusted OIBDA increased 7% as U.S. Networks Adjusted OIBDA
increased 10% and International Networks increased 5%.
- Adjusted EPS increased to $3.69
compared with the prior year. Please refer to the table
"Calculation of Adjusted Earnings Per Diluted Share" on page 16 for
additional details.
- Cash provided by operating activities increased 32% to
$3,399 million reflecting an increase
in net income due to higher operating results and lower
restructuring and other charges. Capital expenditures increased
$142 million to $289 million primarily due to investments in
technology infrastructure, software development, and facilities.
Free cash flow increased 28% to $3,110
million primarily driven by lower restructuring and other
charges, higher operating results, and improvements in cash
efficiency, partially offset by an increase in digital investments
and capital expenditures.
Other Items
Share Buyback
In February 2020, the Company's Board of Directors
authorized additional common stock repurchases of up to
$2 billion upon completion of the
existing $1 billion authorization.
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.
Pursuant to the Board of Directors' April
2019 authorization to repurchase up to $1 billion shares, the Company has
repurchased approximately 23 million shares of its Series C common
stock for a total of $637 million, at an average price of
$27.49 per share, through
December 31, 2019. The Company repurchased approximately 12
million shares of its Series C common stock for $337 million, at an average price of $29.04 per share in the fourth quarter of
2019.
2020 Outlook(13)
Discovery will provide
forward-looking commentary in connection with this earnings
announcement on its quarterly earnings conference call. Details on
how to access the call and audio webcast are included below.
Conference Call Information
Discovery will host a
conference call today, February 27, 2020 at 8:00 a.m. ET to discuss its full year and fourth
quarter 2019 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 the Annual Report on Form 10-K
for the year ended December 31, 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
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
|
Advertising
|
|
$
|
1,597
|
|
|
$
|
1,574
|
|
|
$
|
6,044
|
|
|
$
|
5,514
|
|
Distribution
|
|
1,204
|
|
|
1,149
|
|
|
4,835
|
|
|
4,538
|
|
Other
|
|
73
|
|
|
86
|
|
|
265
|
|
|
501
|
|
Total
revenues
|
|
2,874
|
|
|
2,809
|
|
|
11,144
|
|
|
10,553
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
Costs of revenues,
excluding depreciation and amortization
|
|
1,037
|
|
|
946
|
|
|
3,819
|
|
|
3,935
|
|
Selling, general and
administrative
|
|
793
|
|
|
657
|
|
|
2,788
|
|
|
2,620
|
|
Depreciation and
amortization
|
|
333
|
|
|
397
|
|
|
1,347
|
|
|
1,398
|
|
Impairment of
goodwill
|
|
—
|
|
|
—
|
|
|
155
|
|
|
—
|
|
Restructuring and
other charges
|
|
6
|
|
|
98
|
|
|
26
|
|
|
750
|
|
(Gain) on
disposition
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(84)
|
|
Total costs and
expenses
|
|
2,169
|
|
|
2,098
|
|
|
8,135
|
|
|
8,619
|
|
Operating
income
|
|
705
|
|
|
711
|
|
|
3,009
|
|
|
1,934
|
|
Interest expense,
net
|
|
(162)
|
|
|
(171)
|
|
|
(677)
|
|
|
(729)
|
|
Loss on
extinguishment of debt
|
|
—
|
|
|
—
|
|
|
(28)
|
|
|
—
|
|
Income (loss) from
equity investees, net
|
|
18
|
|
|
(10)
|
|
|
(2)
|
|
|
(63)
|
|
Other expense,
net
|
|
2
|
|
|
(36)
|
|
|
(8)
|
|
|
(120)
|
|
Income before income
taxes
|
|
563
|
|
|
494
|
|
|
2,294
|
|
|
1,022
|
|
Income tax
expense
|
|
(52)
|
|
|
(195)
|
|
|
(81)
|
|
|
(341)
|
|
Net income
|
|
511
|
|
|
299
|
|
|
2,213
|
|
|
681
|
|
Net income
attributable to noncontrolling interests
|
|
(34)
|
|
|
(26)
|
|
|
(128)
|
|
|
(67)
|
|
Net income
attributable to redeemable noncontrolling interests
|
|
(1)
|
|
|
(4)
|
|
|
(16)
|
|
|
(20)
|
|
Net income available
to Discovery, Inc.
|
|
$
|
476
|
|
|
$
|
269
|
|
|
$
|
2,069
|
|
|
$
|
594
|
|
Net income per share
available to Discovery, Inc. Series A, B and C
common
stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.68
|
|
|
$
|
0.38
|
|
|
$
|
2.90
|
|
|
$
|
0.86
|
|
Diluted
|
|
$
|
0.67
|
|
|
$
|
0.38
|
|
|
$
|
2.88
|
|
|
$
|
0.86
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
527
|
|
|
524
|
|
|
529
|
|
|
498
|
|
Diluted
|
|
702
|
|
|
715
|
|
|
711
|
|
|
688
|
|
DISCOVERY,
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(unaudited; in
millions, except par value)
|
|
|
December 31,
2019
|
|
December 31,
2018
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
1,552
|
|
|
$
|
986
|
|
Receivables,
net
|
2,633
|
|
|
2,620
|
|
Content rights,
net
|
579
|
|
|
313
|
|
Prepaid expenses and
other current assets
|
453
|
|
|
312
|
|
Total current
assets
|
5,217
|
|
|
4,231
|
|
Noncurrent content
rights, net
|
3,129
|
|
|
3,069
|
|
Property and
equipment, net
|
951
|
|
|
800
|
|
Goodwill
|
13,050
|
|
|
13,006
|
|
Intangible assets,
net
|
8,667
|
|
|
9,674
|
|
Equity method
investments, including note receivable
|
568
|
|
|
935
|
|
Other noncurrent
assets
|
2,153
|
|
|
835
|
|
Total
assets
|
$
|
33,735
|
|
|
$
|
32,550
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
463
|
|
|
$
|
325
|
|
Accrued
liabilities
|
1,678
|
|
|
1,604
|
|
Deferred
revenues
|
489
|
|
|
249
|
|
Current portion of
debt
|
609
|
|
|
1,819
|
|
Total current
liabilities
|
3,239
|
|
|
3,997
|
|
Noncurrent portion of
debt
|
14,810
|
|
|
14,974
|
|
Deferred income
taxes
|
1,691
|
|
|
1,811
|
|
Other noncurrent
liabilities
|
2,029
|
|
|
1,251
|
|
Total
liabilities
|
21,769
|
|
|
22,033
|
|
Commitments and
contingencies
|
|
|
|
Redeemable
noncontrolling interests
|
442
|
|
|
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 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; 547 and 524
shares
issued; and 360 shares outstanding
|
5
|
|
|
5
|
|
Additional paid-in
capital
|
10,747
|
|
|
10,647
|
|
Treasury stock, at
cost: 190 and 167 shares
|
(7,374)
|
|
|
(6,737)
|
|
Retained
earnings
|
7,333
|
|
|
5,254
|
|
Accumulated other
comprehensive loss
|
(822)
|
|
|
(785)
|
|
Total Discovery, Inc.
stockholders' equity
|
9,891
|
|
|
8,386
|
|
Noncontrolling
interests
|
1,633
|
|
|
1,716
|
|
Total
equity
|
11,524
|
|
|
10,102
|
|
Total liabilities and
equity
|
$
|
33,735
|
|
|
$
|
32,550
|
|
DISCOVERY,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(unaudited; in
millions)
|
|
|
Twelve Months
Ended December 31,
|
|
2019
|
|
2018
|
Operating
Activities
|
|
|
|
Net income
|
$
|
2,213
|
|
|
$
|
681
|
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
Content rights
amortization and impairment
|
2,853
|
|
|
3,288
|
|
Depreciation and
amortization
|
1,347
|
|
|
1,398
|
|
Deferred income
taxes
|
(504)
|
|
|
(131)
|
|
Impairment of
goodwill
|
155
|
|
|
—
|
|
Share-based
compensation expense
|
142
|
|
|
80
|
|
Equity in losses of
equity method investee companies, net of cash
distributions
|
62
|
|
|
138
|
|
Unrealized loss
(gain) from derivative instruments, net
|
62
|
|
|
(15)
|
|
Loss on
extinguishment of debt
|
28
|
|
|
—
|
|
Remeasurement gain on
previously held equity interests
|
(14)
|
|
|
—
|
|
Realized (gain) loss
from derivative instruments, net
|
(14)
|
|
|
—
|
|
(Gain) loss on
disposition
|
—
|
|
|
(84)
|
|
Other, net
|
42
|
|
|
141
|
|
Changes in operating
assets and liabilities, net of acquisitions and
dispositions:
|
|
|
|
Receivables,
net
|
(7)
|
|
|
(84)
|
|
Content rights and
payables, net
|
(3,060)
|
|
|
(2,883)
|
|
Accounts payable and
accrued liabilities
|
122
|
|
|
(74)
|
|
Prepaid income taxes
and income taxes receivable
|
4
|
|
|
57
|
|
Foreign currency and
other, net
|
(32)
|
|
|
64
|
|
Cash provided by
operating activities
|
3,399
|
|
|
2,576
|
|
Investing
Activities
|
|
|
|
Business
acquisitions, net of cash acquired
|
(73)
|
|
|
(8,565)
|
|
Investments in and
advances to equity investments
|
(254)
|
|
|
(61)
|
|
Purchases of property
and equipment
|
(289)
|
|
|
(147)
|
|
Proceeds from
dissolution of joint venture and sale of investments
|
125
|
|
|
—
|
|
Proceeds from
(payments for) derivative instruments, net
|
54
|
|
|
(2)
|
|
Proceeds from sale of
assets
|
4
|
|
|
68
|
|
Proceeds from
dispositions, net of cash disposed
|
—
|
|
|
107
|
|
Distributions from
equity method investees
|
—
|
|
|
1
|
|
Other investing
activities, net
|
(5)
|
|
|
6
|
|
Cash used in
investing activities
|
(438)
|
|
|
(8,593)
|
|
Financing
Activities
|
|
|
|
Principal repayments
of debt, including discount payment and premiums to par
value
|
(2,658)
|
|
|
(16)
|
|
Borrowings from debt,
net of discount and including premiums
|
1,479
|
|
|
—
|
|
Borrowings under term
loan facilities
|
—
|
|
|
2,000
|
|
Principal repayments
of term loans
|
—
|
|
|
(2,000)
|
|
Repurchases of
stock
|
(633)
|
|
|
—
|
|
Distributions to
noncontrolling interests and redeemable noncontrolling
interests
|
(250)
|
|
|
(76)
|
|
Principal repayments
of revolving credit facility
|
(225)
|
|
|
(200)
|
|
Principal repayments
of finance lease obligations
|
(44)
|
|
|
(50)
|
|
Hedge of borrowings
from debt instruments
|
(18)
|
|
|
—
|
|
(Repayments)
borrowings under program financing line of credit, net
|
(12)
|
|
|
22
|
|
Share-based plan
(payments) proceeds, net
|
(2)
|
|
|
54
|
|
Commercial paper
repayments, net
|
—
|
|
|
(5)
|
|
Other financing
activities, net
|
6
|
|
|
(12)
|
|
Cash (used in)
provided by financing activities
|
(2,357)
|
|
|
(283)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(38)
|
|
|
(23)
|
|
Net change in cash
and cash equivalents
|
566
|
|
|
(6,323)
|
|
Cash and cash
equivalents, beginning of period
|
986
|
|
|
7,309
|
|
Cash and cash
equivalents, end of period
|
$
|
1,552
|
|
|
$
|
986
|
|
DISCOVERY,
INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
RECONCILIATION OF
NET INCOME TO
|
ADJUSTED OPERATING
INCOME BEFORE DEPRECIATION AND AMORTIZATION
|
(unaudited; in
millions)
|
|
|
Three Months Ended
December 31, 2019
|
|
U.S.
Networks
|
|
International
Networks
|
|
Other
|
|
Corporate
and Inter-
Segment
Eliminations
|
|
Total
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
|
|
$
|
476
|
|
Net income
attributable to redeemable noncontrolling
interests
|
|
|
|
|
|
|
|
|
1
|
|
Net income
attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
34
|
|
Income tax
expense
|
|
|
|
|
|
|
|
|
52
|
|
Other expense,
net
|
|
|
|
|
|
|
|
|
(2)
|
|
(Income) from equity
investees, net
|
|
|
|
|
|
|
|
|
(18)
|
|
Interest expense,
net
|
|
|
|
|
|
|
|
|
162
|
|
Operating income
(loss)
|
$
|
689
|
|
|
$
|
224
|
|
|
$
|
6
|
|
|
$
|
(214)
|
|
|
$
|
705
|
|
Restructuring and
other charges
|
4
|
|
|
5
|
|
|
—
|
|
|
(3)
|
|
|
6
|
|
Depreciation and
amortization
|
227
|
|
|
87
|
|
|
—
|
|
|
19
|
|
|
333
|
|
Employee share-based
compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
57
|
|
|
57
|
|
Transaction and
integration costs
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
Inter-segment eliminations
|
5
|
|
|
(1)
|
|
|
(5)
|
|
|
1
|
|
|
—
|
|
Total Adjusted
OIBDA
|
$
|
925
|
|
|
$
|
315
|
|
|
$
|
1
|
|
|
$
|
(136)
|
|
|
$
|
1,105
|
|
|
Three Months Ended
December 31, 2018
|
|
U.S.
Networks
|
|
International
Networks
|
|
Other
|
|
Corporate
and Inter-
Segment
Eliminations
|
|
Total
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
|
|
$
|
269
|
|
Net income
attributable to redeemable noncontrolling
interests
|
|
|
|
|
|
|
|
|
4
|
|
Net income
attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
26
|
|
Income tax
expense
|
|
|
|
|
|
|
|
|
195
|
|
Other expense,
net
|
|
|
|
|
|
|
|
|
36
|
|
Loss from equity
investees, net
|
|
|
|
|
|
|
|
|
10
|
|
Interest expense,
net
|
|
|
|
|
|
|
|
|
171
|
|
Operating income
(loss)
|
$
|
601
|
|
|
$
|
217
|
|
|
$
|
6
|
|
|
$
|
(113)
|
|
|
$
|
711
|
|
Restructuring and
other charges
|
63
|
|
|
45
|
|
|
—
|
|
|
(10)
|
|
|
98
|
|
Depreciation and
amortization
|
294
|
|
|
83
|
|
|
(1)
|
|
|
21
|
|
|
397
|
|
Employee share-based
compensation
|
(1)
|
|
|
—
|
|
|
—
|
|
|
(11)
|
|
|
(12)
|
|
Transaction and
integration costs
|
7
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
3
|
|
(Gain) loss on
disposition
|
—
|
|
|
—
|
|
|
(1)
|
|
|
1
|
|
|
—
|
|
Inter-segment eliminations
|
—
|
|
|
5
|
|
|
(4)
|
|
|
(1)
|
|
|
—
|
|
Total Adjusted
OIBDA
|
$
|
964
|
|
|
$
|
350
|
|
|
$
|
—
|
|
|
$
|
(117)
|
|
|
$
|
1,197
|
|
DISCOVERY,
INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
RECONCILIATION OF
NET INCOME TO
|
ADJUSTED OPERATING
INCOME BEFORE DEPRECIATION AND AMORTIZATION
|
(unaudited; in
millions)
|
|
|
Twelve Months
Ended December 31, 2019
|
|
U.S.
Networks
|
|
International
Networks
|
|
Other
|
|
Corporate
and Inter-
Segment
Eliminations
|
|
Total
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
|
|
$
|
2,069
|
|
Net income
attributable to redeemable noncontrolling
interests
|
|
|
|
|
|
|
|
|
16
|
|
Net income
attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
128
|
|
Income tax
expense
|
|
|
|
|
|
|
|
|
81
|
|
Other expense,
net
|
|
|
|
|
|
|
|
|
8
|
|
Loss on
extinguishment of debt
|
|
|
|
|
|
|
|
|
28
|
|
Loss from equity
investees, net
|
|
|
|
|
|
|
|
|
2
|
|
Interest expense,
net
|
|
|
|
|
|
|
|
|
677
|
|
Operating income
(loss)
|
$
|
3,145
|
|
|
$
|
563
|
|
|
$
|
17
|
|
|
$
|
(716)
|
|
|
$
|
3,009
|
|
Restructuring and
other charges
|
15
|
|
|
20
|
|
|
—
|
|
|
(9)
|
|
|
26
|
|
Impairment of
goodwill
|
—
|
|
|
155
|
|
|
—
|
|
|
—
|
|
|
155
|
|
Depreciation and
amortization
|
950
|
|
|
328
|
|
|
—
|
|
|
69
|
|
|
1,347
|
|
Employee share-based
compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
137
|
|
|
137
|
|
Transaction and
integration costs
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
26
|
|
Settlement of a
withholding tax claim
|
—
|
|
|
(29)
|
|
|
—
|
|
|
—
|
|
|
(29)
|
|
Inter-segment
eliminations
|
7
|
|
|
20
|
|
|
(13)
|
|
|
(14)
|
|
|
—
|
|
Total Adjusted
OIBDA
|
$
|
4,117
|
|
|
$
|
1,057
|
|
|
$
|
4
|
|
|
$
|
(507)
|
|
|
$
|
4,671
|
|
|
Twelve Months
Ended December 31, 2018
|
|
U.S.
Networks
|
|
International
Networks
|
|
Other
|
|
Corporate
and Inter-
Segment
Eliminations
|
|
Total
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
|
|
$
|
594
|
|
Net income
attributable to redeemable noncontrolling
interests
|
|
|
|
|
|
|
|
|
20
|
|
Net income
attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
67
|
|
Income tax
expense
|
|
|
|
|
|
|
|
|
341
|
|
Other expense,
net
|
|
|
|
|
|
|
|
|
120
|
|
Loss from equity
investees, net
|
|
|
|
|
|
|
|
|
63
|
|
Interest expense,
net
|
|
|
|
|
|
|
|
|
729
|
|
Operating income
(loss)
|
$
|
2,182
|
|
|
$
|
434
|
|
|
$
|
97
|
|
|
$
|
(779)
|
|
|
$
|
1,934
|
|
Restructuring and
other charges
|
322
|
|
|
307
|
|
|
1
|
|
|
120
|
|
|
750
|
|
Depreciation and
amortization
|
985
|
|
|
315
|
|
|
2
|
|
|
96
|
|
|
1,398
|
|
Employee share-based
compensation
|
(1)
|
|
|
—
|
|
|
—
|
|
|
81
|
|
|
80
|
|
Transaction and
integration costs
|
14
|
|
|
3
|
|
|
—
|
|
|
93
|
|
|
110
|
|
(Gain) loss on
disposition
|
—
|
|
|
—
|
|
|
(85)
|
|
|
1
|
|
|
(84)
|
|
Inter-segment
eliminations
|
(2)
|
|
|
18
|
|
|
(12)
|
|
|
(4)
|
|
|
—
|
|
Total Adjusted
OIBDA
|
$
|
3,500
|
|
|
$
|
1,077
|
|
|
$
|
3
|
|
|
$
|
(392)
|
|
|
$
|
4,188
|
|
DISCOVERY,
INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
UNAUDITED SELECTED
PRO FORMA FINANCIALS(a)
|
(unaudited;
amounts in millions)
|
|
|
|
TOTAL COMPANY
REPORTED AND PRO FORMA FINANCIAL RESULTS
|
|
|
|
Twelve Months
Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Actual
Change
|
|
Pro Forma
Combined
Change
|
|
Pro Forma
Combined
Change
Ex-FX(b)
|
|
|
Actual
|
|
Actual
|
Pro Forma
Adjustments
|
Pro Forma
Combined
|
|
$
|
%
|
|
$
|
%
|
|
%
|
Advertising
|
|
$
|
6,044
|
|
|
$
|
5,514
|
|
$
|
425
|
|
$
|
5,939
|
|
|
$
|
530
|
|
10
|
%
|
|
$
|
105
|
|
2
|
%
|
|
3
|
%
|
Distribution
|
|
4,835
|
|
|
4,538
|
|
178
|
|
4,716
|
|
|
297
|
|
7
|
%
|
|
119
|
|
3
|
%
|
|
5
|
%
|
Other
|
|
265
|
|
|
501
|
|
20
|
|
521
|
|
|
(236)
|
|
(47)
|
%
|
|
(256)
|
|
(49)
|
%
|
|
(47)
|
%
|
Total
revenues
|
|
11,144
|
|
|
10,553
|
|
623
|
|
11,176
|
|
|
591
|
|
6
|
%
|
|
(32)
|
|
—
|
%
|
|
2
|
%
|
Costs of revenues,
excluding
depreciation and amortization
|
|
3,819
|
|
|
3,935
|
|
205
|
|
4,140
|
|
|
(116)
|
|
(3)
|
%
|
|
(321)
|
|
(8)
|
%
|
|
(6)
|
%
|
Selling, general and
administrative
|
|
2,654
|
|
|
2,430
|
|
155
|
|
2,585
|
|
|
224
|
|
9
|
%
|
|
69
|
|
3
|
%
|
|
5
|
%
|
Adjusted
OIBDA(c)
|
|
$
|
4,671
|
|
|
$
|
4,188
|
|
$
|
263
|
|
$
|
4,451
|
|
|
$
|
483
|
|
12
|
%
|
|
$
|
220
|
|
5
|
%
|
|
7
|
%
|
RECONCILIATION OF
TOTAL COMPANY REPORTED AND PRO FORMA OPERATING INCOME TO
ADJUSTED
OPERATING INCOME BEFORE DEPRECIATION AND
AMORTIZATION
|
|
|
|
Twelve Months
Ended December 31,
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Actual
Change
|
|
Pro Forma
Combined
Change
|
|
|
Actual
|
|
Actual
|
Pro Forma
Adjustments
|
Pro Forma
Combined
|
|
$
|
%
|
|
$
|
%
|
Operating
income
|
|
$
|
3,009
|
|
|
$
|
1,934
|
|
$
|
352
|
|
$
|
2,286
|
|
|
$
|
1,075
|
|
56
|
%
|
|
$
|
723
|
|
32
|
%
|
Restructuring and
other charges
|
|
26
|
|
|
750
|
|
10
|
|
760
|
|
|
(724)
|
|
(97)
|
%
|
|
(734)
|
|
(97)
|
%
|
Impairment of
goodwill
|
|
155
|
|
|
—
|
|
—
|
|
—
|
|
|
155
|
|
NM
|
|
155
|
|
NM
|
Depreciation and
amortization
|
|
1,347
|
|
|
1,398
|
|
(76)
|
|
1,322
|
|
|
(51)
|
|
(4)
|
%
|
|
25
|
|
2
|
%
|
Employee share-based
compensation
|
|
137
|
|
|
80
|
|
5
|
|
85
|
|
|
57
|
|
71
|
%
|
|
52
|
|
61
|
%
|
Transaction and
integration costs
|
|
26
|
|
|
110
|
|
(28)
|
|
82
|
|
|
(84)
|
|
(76)
|
%
|
|
(56)
|
|
(68)
|
%
|
Settlement of a
withholding tax claim
|
|
(29)
|
|
|
—
|
|
—
|
|
—
|
|
|
(29)
|
|
NM
|
|
(29)
|
|
NM
|
(Gain) on
disposition
|
|
—
|
|
|
(84)
|
|
—
|
|
(84)
|
|
|
84
|
|
NM
|
|
84
|
|
NM
|
Adjusted
OIBDA
|
|
$
|
4,671
|
|
|
$
|
4,188
|
|
$
|
263
|
|
$
|
4,451
|
|
|
$
|
483
|
|
12
|
%
|
|
$
|
220
|
|
5
|
%
|
(a)
|
Pro forma combined is
defined as the results of the Company as if the acquisition of
Scripps Networks had occurred on January 1, 2017. Refer to page 18
for adjustments to our pro forma combined results.
|
(b)
|
Refer to page 17 for
our methodology for calculating growth rates excluding the impact
of foreign currency.
|
(c)
|
Refer to page 17 for
our full definition of Adjusted OIBDA.
|
NM: Not
Meaningful
|
DISCOVERY,
INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
UNAUDITED SELECTED
PRO FORMA FINANCIALS(d)
|
(unaudited;
amounts in millions)
|
|
|
|
U.S. NETWORKS
REPORTED AND PRO FORMA FINANCIAL RESULTS
|
|
|
|
Twelve Months
Ended December 31,
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Actual
Change
|
|
Pro Forma
Combined
Change
|
|
|
Actual
|
|
Actual
|
Pro Forma
Adjustments
|
Pro Forma
Combined
|
|
$
|
%
|
|
$
|
%
|
Advertising
|
|
$
|
4,245
|
|
|
$
|
3,749
|
|
$
|
356
|
|
$
|
4,105
|
|
|
$
|
496
|
|
13
|
%
|
|
$
|
140
|
|
3
|
%
|
Distribution
|
|
2,739
|
|
|
2,456
|
|
156
|
|
2,612
|
|
|
283
|
|
12
|
%
|
|
127
|
|
5
|
%
|
Other
|
|
108
|
|
|
145
|
|
7
|
|
152
|
|
|
(37)
|
|
(26)
|
%
|
|
(44)
|
|
(29)
|
%
|
Total
revenues
|
|
7,092
|
|
|
6,350
|
|
519
|
|
6,869
|
|
|
742
|
|
12
|
%
|
|
223
|
|
3
|
%
|
Costs of revenues,
excluding
depreciation and amortization
|
|
1,800
|
|
|
1,748
|
|
153
|
|
1,901
|
|
|
52
|
|
3
|
%
|
|
(101)
|
|
(5)
|
%
|
Selling, general and
administrative
|
|
1,175
|
|
|
1,102
|
|
111
|
|
1,213
|
|
|
73
|
|
7
|
%
|
|
(38)
|
|
(3)
|
%
|
Adjusted
OIBDA(e)
|
|
$
|
4,117
|
|
|
$
|
3,500
|
|
$
|
255
|
|
$
|
3,755
|
|
|
$
|
617
|
|
18
|
%
|
|
$
|
362
|
|
10
|
%
|
RECONCILIATION OF
U.S. NETWORKS REPORTED AND PRO FORMA OPERATING INCOME TO
ADJUSTED
OPERATING INCOME BEFORE DEPRECIATION AND
AMORTIZATION
|
|
|
|
Twelve Months
Ended December 31,
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Actual
Change
|
|
Pro Forma
Combined
Change
|
|
|
Actual
|
|
Actual
|
Pro Forma
Adjustments
|
Pro Forma
Combined
|
|
$
|
%
|
|
$
|
%
|
Operating
income
|
|
$
|
3,145
|
|
|
$
|
2,182
|
|
$
|
350
|
|
$
|
2,532
|
|
|
$
|
963
|
|
44
|
%
|
|
$
|
613
|
|
24
|
%
|
Employee share-based
compensation
|
|
—
|
|
|
(1)
|
|
—
|
|
(1)
|
|
|
1
|
|
NM
|
|
1
|
|
NM
|
Depreciation and
amortization
|
|
950
|
|
|
985
|
|
(95)
|
|
890
|
|
|
(35)
|
|
(4)
|
%
|
|
60
|
|
7
|
%
|
Restructuring and
other charges
|
|
15
|
|
|
322
|
|
5
|
|
327
|
|
|
(307)
|
|
(95)
|
%
|
|
(312)
|
|
(95)
|
%
|
Transactions and
integration costs
|
|
—
|
|
|
14
|
|
—
|
|
14
|
|
|
(14)
|
|
NM
|
|
(14)
|
|
NM
|
Inter-segment
eliminations
|
|
7
|
|
|
(2)
|
|
(5)
|
|
(7)
|
|
|
9
|
|
NM
|
|
14
|
|
NM
|
Adjusted
OIBDA
|
|
$
|
4,117
|
|
|
$
|
3,500
|
|
$
|
255
|
|
$
|
3,755
|
|
|
$
|
617
|
|
18
|
%
|
|
$
|
362
|
|
10
|
%
|
(d)
|
Pro forma combined is
defined as the results of the Company as if the acquisition of
Scripps Networks had occurred on January 1, 2017. Refer to page 18
for adjustments to our pro forma combined results.
|
(e)
|
Refer to page 17 for
our full definition of Adjusted OIBDA.
|
NM: Not
Meaningful
|
DISCOVERY,
INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
UNAUDITED SELECTED
PRO FORMA FINANCIALS(f)
|
(unaudited;
amounts in millions)
|
|
|
|
INTERNATIONAL
NETWORKS REPORTED AND PRO FORMA FINANCIAL
RESULTS
|
|
|
|
Twelve Months
Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Actual
Change
|
|
Pro Forma
Combined
Change
|
|
Pro
Forma
Combined
Change
Ex-FX(g)
|
|
|
Actual
|
|
Actual
|
Pro Forma
Adjustments
|
Pro Forma
Combined
|
|
$
|
%
|
|
$
|
%
|
|
%
|
Advertising
|
|
$
|
1,799
|
|
|
$
|
1,765
|
|
$
|
69
|
|
$
|
1,834
|
|
|
$
|
34
|
|
2
|
%
|
|
$
|
(35)
|
|
(2)
|
%
|
|
4
|
%
|
Distribution
|
|
2,096
|
|
|
2,082
|
|
22
|
|
2,104
|
|
|
14
|
|
1
|
%
|
|
(8)
|
|
—
|
%
|
|
5
|
%
|
Other
|
|
146
|
|
|
302
|
|
13
|
|
315
|
|
|
(156)
|
|
(52)
|
%
|
|
(169)
|
|
(54)
|
%
|
|
(50)
|
%
|
Total
revenues
|
|
4,041
|
|
|
4,149
|
|
104
|
|
4,253
|
|
|
(108)
|
|
(3)
|
%
|
|
(212)
|
|
(5)
|
%
|
|
—
|
%
|
Costs of revenues,
excluding
depreciation and amortization
|
|
2,016
|
|
|
2,169
|
|
52
|
|
2,221
|
|
|
(153)
|
|
(7)
|
%
|
|
(205)
|
|
(9)
|
%
|
|
(6)
|
%
|
Selling, general and
administrative
|
|
968
|
|
|
903
|
|
27
|
|
930
|
|
|
65
|
|
7
|
%
|
|
38
|
|
4
|
%
|
|
11
|
%
|
Adjusted
OIBDA(h)
|
|
$
|
1,057
|
|
|
$
|
1,077
|
|
$
|
25
|
|
$
|
1,102
|
|
|
$
|
(20)
|
|
(2)
|
%
|
|
$
|
(45)
|
|
(4)
|
%
|
|
5
|
%
|
RECONCILIATION OF
INTERNATIONAL NETWORKS OPERATING INCOME TO PRO FORMA ADJUSTED
OPERATING INCOME BEFORE DEPRECIATION AND
AMORTIZATION
|
|
|
|
Twelve Months
Ended December 31,
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Actual
Change
|
|
Pro Forma
Combined
Change
|
|
|
Actual
|
|
Actual
|
Pro Forma
Adjustments
|
Pro Forma
Combined
|
|
$
|
%
|
|
$
|
%
|
Operating
income
|
|
$
|
563
|
|
|
$
|
434
|
|
$
|
—
|
|
$
|
434
|
|
|
$
|
129
|
|
30
|
%
|
|
$
|
129
|
|
30
|
%
|
Depreciation and
amortization
|
|
328
|
|
|
315
|
|
19
|
|
334
|
|
|
13
|
|
4
|
%
|
|
(6)
|
|
(2)
|
%
|
Impairment of
goodwill
|
|
155
|
|
|
—
|
|
—
|
|
—
|
|
|
155
|
|
NM
|
|
155
|
|
NM
|
Restructuring and
other charges
|
|
20
|
|
|
307
|
|
2
|
|
309
|
|
|
(287)
|
|
(93)
|
%
|
|
(289)
|
|
(94)
|
%
|
Transaction and
integration costs
|
|
—
|
|
|
3
|
|
—
|
|
3
|
|
|
(3)
|
|
NM
|
|
(3)
|
|
NM
|
Inter-segment
eliminations
|
|
20
|
|
|
18
|
|
4
|
|
22
|
|
|
2
|
|
11
|
%
|
|
(2)
|
|
(9)
|
%
|
Settlement of a
withholding tax claim
|
|
(29)
|
|
|
—
|
|
—
|
|
—
|
|
|
(29)
|
|
NM
|
|
(29)
|
|
NM
|
Adjusted
OIBDA
|
|
$
|
1,057
|
|
|
$
|
1,077
|
|
$
|
25
|
|
$
|
1,102
|
|
|
$
|
(20)
|
|
(2)
|
%
|
|
$
|
(45)
|
|
(4)
|
%
|
(f)
|
Pro forma combined is
defined as the results of the Company as if the acquisition of
Scripps Networks had occurred on January 1, 2017. Refer to page 18
for adjustments to our pro forma combined results.
|
(g)
|
Refer to page 17 for
our methodology for calculating growth rates excluding the impact
of foreign currency.
|
(h)
|
Refer to page 17 for
our full definition of Adjusted OIBDA.
|
NM: Not
Meaningful
|
DISCOVERY,
INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
UNAUDITED SELECTED
PRO FORMA FINANCIALS(i)
|
(unaudited;
amounts in millions)
|
|
|
|
CORPORATE AND
INTER-SEGMENT ELIMINATIONS REPORTED AND PRO FORMA FINANCIAL
RESULTS
|
|
|
|
Twelve Months
Ended December 31,
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Actual
Change
|
|
Pro Forma
Combined
Change
|
|
|
Actual
|
|
Actual
|
Pro Forma
Adjustments
|
Pro Forma
Combined
|
|
$
|
%
|
|
$
|
%
|
Costs of revenues,
excluding
depreciation and amortization
|
|
$
|
2
|
|
|
$
|
1
|
|
$
|
—
|
|
$
|
1
|
|
|
$
|
1
|
|
NM
|
|
$
|
1
|
|
NM
|
Selling, general and
administrative
|
|
505
|
|
|
391
|
|
21
|
|
412
|
|
|
114
|
|
29
|
%
|
|
93
|
|
23
|
%
|
Adjusted
OIBDA(j)
|
|
$
|
(507)
|
|
|
$
|
(392)
|
|
$
|
(21)
|
|
$
|
(413)
|
|
|
$
|
(115)
|
|
(29)
|
%
|
|
$
|
(94)
|
|
(23)
|
%
|
RECONCILIATION OF
CORPORATE AND INTER-SEGMENT ELIMINATIONS OPERATING INCOME TO
PRO
FORMA ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND
AMORTIZATION
|
|
|
|
Twelve Months
Ended December 31,
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Actual
Change
|
|
Pro Forma
Combined
Change
|
|
|
Actual
|
|
Actual
|
Pro Forma
Adjustments
|
Pro Forma
Combined
|
|
$
|
%
|
|
$
|
%
|
Operating
loss
|
|
$
|
(716)
|
|
|
$
|
(779)
|
|
$
|
2
|
|
$
|
(777)
|
|
|
$
|
63
|
|
(8)
|
%
|
|
$
|
61
|
|
(8)
|
%
|
Employee share-based
compensation
|
|
137
|
|
|
81
|
|
1
|
|
82
|
|
|
56
|
|
69
|
%
|
|
55
|
|
67
|
%
|
Depreciation and
amortization
|
|
69
|
|
|
96
|
|
—
|
|
96
|
|
|
(27)
|
|
(28)
|
%
|
|
(27)
|
|
(28)
|
%
|
Restructuring and
other charges
|
|
(9)
|
|
|
120
|
|
3
|
|
123
|
|
|
(129)
|
|
NM
|
|
(132)
|
|
NM
|
Transaction and
integration costs
|
|
26
|
|
|
93
|
|
(28)
|
|
65
|
|
|
(67)
|
|
(72)
|
%
|
|
(39)
|
|
(60)
|
%
|
Loss on
disposition
|
|
—
|
|
|
1
|
|
—
|
|
1
|
|
|
(1)
|
|
NM
|
|
(1)
|
|
NM
|
Inter-segment
eliminations
|
|
(14)
|
|
|
(4)
|
|
1
|
|
(3)
|
|
|
(10)
|
|
NM
|
|
(11)
|
|
NM
|
Adjusted
OIBDA
|
|
$
|
(507)
|
|
|
$
|
(392)
|
|
$
|
(21)
|
|
$
|
(413)
|
|
|
$
|
(115)
|
|
(29)
|
%
|
|
$
|
(94)
|
|
(23)
|
%
|
(i)
|
Pro forma combined is
defined as the results of the Company as if the acquisition of
Scripps Networks had occurred on January 1, 2017. Refer to page 18
for adjustments to our pro forma combined results.
|
(j)
|
Refer to page 17 for
our full definition of Adjusted OIBDA.
|
NM: Not
Meaningful
|
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
December 31,
|
|
Twelve Months
Ended December 31,
|
|
|
2019
|
|
2018
|
|
$
Change
|
%
Change
|
|
2019
|
|
2018
|
|
$
Change
|
%
Change
|
Diluted net income
per share allocated to
Discovery, Inc. Series A, B and C
common stockholders:
|
|
$
|
0.67
|
|
|
$
|
0.38
|
|
|
$
|
0.29
|
|
76
|
%
|
|
$
|
2.88
|
|
|
$
|
0.86
|
|
|
$
|
2.02
|
|
NM
|
Per share impacts,
net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquisition-related
intangible assets
|
|
0.29
|
|
|
0.36
|
|
|
(0.07)
|
|
(19)
|
%
|
|
1.21
|
|
|
1.25
|
|
|
(0.04)
|
|
(3)
|
%
|
Restructuring and
other charges
|
|
0.01
|
|
|
0.08
|
|
|
(0.07)
|
|
(88)
|
%
|
|
0.05
|
|
|
0.89
|
|
|
(0.84)
|
|
(94)
|
%
|
Legal entity
restructuring, deferred
tax impact
|
|
0.01
|
|
|
—
|
|
|
0.01
|
|
NM
|
|
(0.63)
|
|
|
—
|
|
|
(0.63)
|
|
NM
|
Impairment of
goodwill
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
%
|
|
0.22
|
|
|
—
|
|
|
0.22
|
|
NM
|
Settlement of a
withholding tax claim
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
%
|
|
(0.04)
|
|
|
—
|
|
|
(0.04)
|
|
NM
|
Gain on sale of
Education business
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
%
|
|
—
|
|
|
(0.09)
|
|
|
0.09
|
|
NM
|
Adjusted earnings per
diluted share
|
|
$
|
0.98
|
|
|
$
|
0.82
|
|
|
$
|
0.16
|
|
20
|
%
|
|
$
|
3.69
|
|
|
$
|
2.91
|
|
|
$
|
0.78
|
|
27
|
%
|
CALCULATION OF
FREE CASH FLOW
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
|
2019
|
|
2018
|
|
$
Change
|
|
%
Change
|
|
2019
|
|
2018
|
|
$
Change
|
|
%
Change
|
Cash provided by
operating
activities
|
|
$
|
1,232
|
|
|
$
|
929
|
|
|
$
|
303
|
|
|
33
|
%
|
|
$
|
3,399
|
|
|
$
|
2,576
|
|
|
$
|
823
|
|
|
32
|
%
|
Purchases of property
and
equipment
|
|
(100)
|
|
|
(41)
|
|
|
(59)
|
|
|
NM
|
|
(289)
|
|
|
(147)
|
|
|
(142)
|
|
|
(97)
|
%
|
Free cash
flow
|
|
$
|
1,132
|
|
|
$
|
888
|
|
|
$
|
244
|
|
|
27
|
%
|
|
$
|
3,110
|
|
|
$
|
2,429
|
|
|
$
|
681
|
|
|
28
|
%
|
NM: Not
Meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 in footnote 2 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) Pro Forma Combined: This press
release compares our actual results for the year ended December 31, 2019 to the year ended December 31, 2018, as well as our actual results
for the year ended December 31,
2019 to pro forma combined results for the year ended
December 31, 2018, as if the Scripps
Networks acquisition occurred on January 1,
2017. Scripps Networks was acquired on March 6, 2018.
Management believes reviewing our actual operating results in
addition to combined pro forma results is useful in identifying
trends in, or reaching conclusions regarding, the overall operating
performance of our businesses. Our combined U.S. Networks,
International Networks and Corporate and Inter-Segment Eliminations
pro forma information is based on the historical operating results
of the respective businesses as applicable to each segment and
includes adjustments directly attributable to the prior year
Scripps Networks acquisition as if it had occurred on
January 1, 2017, such as:
- The impact of the purchase price allocation to the fair value
of assets, liabilities, and noncontrolling interests, such as
intangible amortization;
- Adjustments to remove items associated with the acquisition of
Scripps Networks that will not have a continuing impact on the
combined entity, such as transaction costs and the impact of
employee retention agreements; and
- Changes to align accounting policies.
Adjustments do not include costs related to integration
activities, cost savings or synergies that have been or may be
achieved by the combined businesses. Pro forma amounts are not
necessarily indicative of what our results would have been had we
operated Scripps Networks since January 1, 2017 and should not
be taken as indicative of the Company's future consolidated results
of operations.
(6) Financial Highlights
Table: This table presents a selection of the Company's
financial results. Because the table as shown excludes the "Other"
and "Corporate and Inter-Segment Eliminations" operating segments,
total Adjusted OIBDA will not foot.
(7) 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, except in the Nordic
region. In the Nordic region, share percent is defined as the share
of viewing for commercial channels only. Change in share percent is
calculated by adjusting the prior year to include any newly
acquired channels, as if the acquisitions had occurred on
January 1, 2017.
(8) DPlay: As of December 31,
2019, DPlay is available in 10 markets including Denmark, Finland, Netherlands, Norway, Sweden, Spain, Italy,
Ireland, the United Kingdom, and Japan.
(9) Joyn: Joyn GmbH is a 50/50
joint venture of ProSiebenSat.1 and Discovery and is unconsolidated
for reporting purposes.
(10) Source: Nielsen, 2019
(12/31/2018-12/29/2019). Primetime is
8pm-11pm and Total Day is
6am-6am. Live+7-day.
Duration-weighted delivery: "Most Watched".
(11) Source: Nielsen, 2019
(12/31/2018-12/29/2019). Primetime is
8pm-11pm. Data based on program based
daypart (000s). Live+3-day. "Fastest Growing" includes networks
with 70,000+ UE. Prior to 2005 only Live Data is available.
(12) UKTV Lifestyle
Business: In June 2019, the
Company and BBC dissolved their 50/50 joint venture, UKTV, a
British multi-channel broadcaster, with the Company taking full
control of UKTV's three lifestyle channels and BBC taking full
control of UKTV's seven entertainment channels.
(13) 2020 Outlook: Discovery does
not expect to be able to provide a reconciliation of the non-GAAP
forward-looking commentary 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
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SOURCE Discovery, Inc.