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Discovery, Inc. Reports Fourth Quarter And Full Year 2019 Results

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

%