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| Discovery Communications Reports Third Quarter 2009 Results |
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(Logo: http://www.newscom.com/cgi-bin/prnh/20080918/NETH035LOGO ) Revenues of Third quarter net income available to Free cash flow was (1) See the definition of Adjusted Operating Income Before Depreciation and Amortization on page 4. SEGMENT RESULTS
(dollars in Three Months Ended Nine Months Ended
millions) September 30, September 30,
2009 2008 Change 2009 2008 Change
Revenues:
U.S. Networks $522 $498 5% $1,588 $1,526 4%
International
Networks 293 300 (2%) 831 864 (4%)
Commerce, Education,
and Other 38 45 (16%) 127 126 1%
Corporate 1 2 (50%) 6 23 (74%)
Total Revenues $854 $845 1% $2,552 $2,539 1%
Adjusted OIBDA:
U.S. Networks $302 $257 18% $907 $811 12%
International
Networks 110 103 7% 298 280 6%
Commerce, Education,
and Other 2 5 (60%) 13 2 NM
Corporate (50) (54) 7% (144) (145) 1%
Total Adjusted OIBDA $364 $311 17% $1,074 $948 13%
U.S. Networks
(dollars in Three Months Ended Nine Months Ended
millions) September 30, September 30,
2009 2008 Change 2009 2008 Change
Revenues:
Distribution $242 $231 5% $737 $691 7%
Advertising 261 249 5% 795 776 2%
Other 19 18 6% 56 59 (5%)
Total Revenues $522 $498 5% $1,588 $1,526 4%
Adjusted OIBDA $302 $257 18% $907 $811 12%
Adjusted OIBDA Margin 58% 52% 57% 53%
U.S. Networks' revenues in the third quarter of 2009 increased 5% to Adjusted OIBDA increased 18% to International Networks
(dollars in Three Months Ended Nine Months Ended
millions) September 30, September 30,
2009 2008 Change 2009 2008 Change
Revenues:
Distribution $184 $188 (2%) $540 $548 (1%)
Advertising 80 83 (4%) 215 238 (10%)
Other 29 29 0% 76 78 (3%)
Total Revenues $293 $300 (2%) $831 $864 (4%)
Adjusted OIBDA $110 $103 7% $298 $280 6%
Adjusted OIBDA Margin 38% 34% 36% 32%
International Networks' revenues for the third quarter decreased 2% to Adjusted OIBDA, which included a Commerce, Education, and Other
(dollars in Three Months Ended Nine Months Ended
millions) September 30, September 30,
2009 2008 Change 2009 2008 Change
Revenues $38 $45 (16%) $127 $126 1%
Adjusted OIBDA $2 $5 (60%) $13 $2 NM
Commerce, Education and Other third quarter revenues of Corporate Adjusted OIBDA increased FULL YEAR 2009 OUTLOOK For the full year ended NON-GAAP FINANCIAL MEASURES Adjusted OIBDA and Free Cash Flow In addition to the results prepared in accordance with generally accepted accounting principles (GAAP) provided in this release, the Company has presented Adjusted OIBDA and free cash flow. The Company evaluates the operating performance of its segments based on financial measures such as revenues and adjusted operating income before depreciation and amortization ("Adjusted OIBDA"). Adjusted OIBDA is defined as revenues less costs of revenues and selling, general and administrative expenses excluding: (i) mark-to-market share-based compensation, (ii) depreciation and amortization, (iii) amortization of deferred launch incentives, (iv) exit and restructuring charges, (v) impairment charges, and (vi) gains (losses) on business and asset dispositions. The Company uses this measure to assess 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 and also provides investors a measure to analyze the operating performance of each segment against historical data. The Company excludes mark-to-market share-based compensation, exit and restructuring charges, impairment charges, and gains (losses) on business and asset dispositions from the calculation of Adjusted OIBDA due to their volatility or non-recurring nature. The Company also excludes the amortization of deferred launch incentive payments because these payments are infrequent and the amortization does not represent cash payments in the current reporting period. The Company defines free cash flow as cash provided by 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 shareholders. Because Adjusted OIBDA and free cash flow are non-GAAP measures, they should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance reported in accordance with U.S. GAAP. Please review the supplemental financial schedules beginning on page 9 for reconciliations to GAAP measures. OTHER ITEMS In The 2008 financial information has been recast so that the basis of presentation is consistent with that of the 2009 financial information. This recast reflects the adoption of Financial Accounting Standards Board Accounting Standards Codification Topic 810, Consolidation. Conference Call Information Cautionary Statement Concerning Forward-Looking Statements This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. These statements are based on information available to the Company as of the date hereof, and 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
DISCOVERY COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; dollars in millions, except per share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
2009 2008(a) 2009 2008(a)
Revenues:
Distribution $426 $419 $1,277 $1,239
Advertising 341 332 1,010 1,014
Other 87 94 265 286
Total revenues 854 845 2,552 2,539
Costs of revenues, excluding depreciation
and amortization listed below 257 262 767 758
Selling, general and administrative 338 224 929 845
Depreciation and amortization 40 50 118 146
Restructuring and impairment charges 4 13 47 17
Gain on business disposition - - (252) -
639 549 1,609 1,766
Operating income 215 296 943 773
Interest expense, net (66) (61) (183) (196)
Other non-operating income (expense), net 6 (8) 34 (4)
Income from continuing operations before
income taxes 155 227 794 573
Provision for income taxes (54) (93) (391) (285)
Income from continuing operations, net
of taxes 101 134 403 288
Income from discontinued operations, net
of taxes - 40 - 42
Net income 101 174 403 330
Less: Net (income) loss attributable to
non-controlling interests - (40) 2 (119)
Net income attributable to Discovery
Communications, Inc. 101 134 405 211
Stock dividends to preferred interests (6) - (8) -
Net income available to Discovery
Communications, Inc. stockholders $95 $134 $397 $211
Amounts available to
DISCOVERY COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; dollars in millions)
September 30, December 31,
2009 2008(a)
ASSETS
Current assets:
Cash and cash equivalents $401 $100
Receivables, net of allowances of
$16 and $16, respectively 775 780
Content rights, net 76 73
Prepaid expenses and other current assets 165 156
Total current assets 1,417 1,109
Noncurrent content rights, net 1,225 1,163
Property and equipment, net 417 395
Goodwill 6,438 6,891
Intangible assets, net 654 716
Other noncurrent assets 590 210
Total assets $10,741 $10,484
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS
IN SUBSIDIARIES, AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $394 $421
Current portion of long-term debt 39 458
Other current liabilities 329 191
Total current liabilities 762 1,070
Long-term debt 3,472 3,331
Other noncurrent liabilities 416 473
Total liabilities 4,650 4,874
Commitments and contingencies
Redeemable non-controlling interests
in subsidiaries 49 49
Equity:
Preferred stock 2 2
Common stock 3 3
Additional paid-in capital 6,589 6,545
Accumulated deficit (531) (936)
Accumulated other comprehensive loss (35) (78)
Equity attributable to Discovery
Communications, Inc. 6,028 5,536
Equity attributable to non-controlling interests 14 25
Total equity 6,042 5,561
Total liabilities, redeemable non-controlling
interests in subsidiaries, and equity $10,741 $10,484
(a) The 2008 financial information has been recast so that the basis of
presentation is consistent with that of the 2009 financial
information. See Other Items on page 4 for additional detail.
DISCOVERY COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; dollars in millions)
Nine Months Ended September 30,
2009 2008(a)
OPERATING ACTIVITIES
Net income $403 $330
Adjustments to reconcile net income to cash
provided by operating activities:
Share-based compensation expense (benefit) 196 (47)
Depreciation and amortization 118 195
Asset impairments 26 -
Gains on business dispositions (252) (67)
Gains on asset dispositions - (9)
Gain on sale of securities (13) -
Deferred income taxes (33) 122
Other noncash expenses, net 26 62
Changes in operating assets and liabilities, net
of discontinued operations:
Receivables, net - (29)
Accounts payable and accrued liabilities (21) (18)
Other, net (92) (116)
Cash provided by operating activities 358 423
INVESTING ACTIVITIES
Purchases of property and equipment (43) (84)
Net cash acquired from Newhouse Transaction - 45
Business acquisitions, net of cash acquired - (8)
Proceeds from asset dispositions - 13
Proceeds from business dispositions 300 126
Proceeds from sales of securities 22 24
Cash provided by investing activities 279 116
FINANCING ACTIVITIES
Ascent Media Corporation spin-off - (356)
Net repayments of revolver loans (315) (89)
Borrowings from long-term debt, net of discount
and issuance costs 970 -
Principal repayments of long-term debt (1,007) (191)
Principal repayments of capital lease obligations (7) (12)
Cash distribution to non-controlling interest (9) -
Proceeds from stock option exercises 26 -
Other financing activities, net (1) (10)
Cash used in financing activities (343) (658)
Effect of exchange rate changes on cash and cash
equivalents 7 2
CHANGE IN CASH AND CASH EQUIVALENTS 301 (117)
Cash and cash equivalents of continuing
operations, beginning of period 100 8
Cash and cash equivalents of discontinued
operations, beginning of period - 201
CASH AND CASH EQUIVALENTS, END OF PERIOD $401 $92
(a) The 2008 financial information has been recast so that the basis of
presentation is consistent with that of the 2009 financial
information. See Other Items on page 4 for additional detail.
DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION
(unaudited; dollars in millions)
Three Months Ended September 30, 2009
Adjusted Operating Amortization
Income Before of
Depreciation Depreciation Deferred Mark-to-Market
and and Launch Share-Based Operating
Amortization Amortization Incentives Compensation Other(a) Income
U.S. Networks $302 $(7) $(5) $- $(1) $289
International
Networks 110 (11) (9) - (3) 87
Commerce,
Education,
and Other 2 (2) - - - -
Corporate (50) (20) - (91) - (161)
Total $364 $(40) $(14) $(91) $(4) $215
Three Months Ended September 30, 2008
Adjusted Operating Amortization
Income Before of
Depreciation Depreciation Deferred Mark-to-Market
and and Launch Share-Based Operating
Amortization Amortization Incentives Compensation Other(a) Income
U.S. Networks $257 $(12) $(6) $(1) $(13) $225
International
Networks 103 (12) (11) - - 80
Commerce,
Education,
and Other 5 (2) - - - 3
Corporate (54) (24) - 66 - (12)
Total $311 $(50) $(17) $65 $(13) $296
(a) Total amount represents exit and restructuring charges.
DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION
(unaudited; dollars in millions)
Nine Months Ended September 30, 2009
Adjusted Operating Amortization
Income Before of
Depreciation Depreciation Deferred Mark-to-Market
and and Launch Share-Based Operating
Amortization Amortization Incentives Compensation Other(a) Income
U.S. Networks $907 $(23) $(16) $(1) $224 $1,091
International
Networks 298 (32) (25) - (13) 228
Commerce,
Education,
and Other 13 (4) - - (1) 8
Corporate (144) (59) - (176) (5) (384)
Total $1,074 $(118) $(41) $(177) $205 $943
Nine Months Ended September 30, 2008
Adjusted Operating Amortization
Income Before of
Depreciation Depreciation Deferred Mark-to-Market
and and Launch Share-Based Operating
Amortization Amortization Incentives Compensation Other(a) Income
U.S. Networks $811 $(40) $(26) $(7) $(13) $725
International
Networks 280 (32) (33) - - 215
Commerce,
Education,
and Other 2 (7) - - (4) (9)
Corporate (145) (67) - 54 - (158)
Total $948 $(146) $(59) $47 $(17) $773
(a) Total amount in 2009 represents the pre-tax gain on the sale of
Discovery Kids of
DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited; dollars in millions)
CALCULATION OF FREE CASH FLOW
Three Months Nine Months
Ended September 30, Ended September 30,
2009 2008 Change 2009 2008 Change
Cash provided by operating
activities $38 $241 $(203) $358 $423 $(65)
Acquisition of property
and equipment (9) (42) 33 (43) (84) 41
Free cash flow $29 $199 $(170) $315 $339 $(24)
RECONCILIATION OF 2009 OUTLOOK TO GAAP MEASURES
Full Year 2009
Net income available to Discovery Communications,
Inc. stockholders $525 To $550
Interest expense, net 260 To 240
Depreciation and amortization 155 To 150
Other expense, including amortization of deferred
launch incentives, mark-to-market share-based
compensation, asset impairment, exit and
restructuring costs, gain (loss) on business
disposition, gain (loss) on sale of securities,
equity earnings in unconsolidated affiliates,
unrealized and realized gains and losses from
derivatives, income tax expense, net loss
(income) attributable to non-controlling
interests, and stock dividends to preferred
interests 490 To 520
Adjusted OIBDA $1,430 To $1,460
SHARE-BASED COMPENSATION
As of September 30, 2009
Total Units Weighted Vested Units Weighted
Outstanding Average Outstanding Average
Long-Term (in Exercise (in Exercise
Incentive Plans millions) Price millions) Price
Discovery Appreciation Plan 16.9 $18.76 0.1 $21.64
Stock Appreciation Rights 3.5 14.46 0.7 14.44
Stock option 16.3 15.15 1.0 13.94
Total share-based
compensation plans 36.7 $16.75 1.8 $14.56
NET OF TAX GAIN RECONCILIATION FOR DISCOVERY KIDS TRANSACTION
Pre-tax gain on sale of 50% of Discovery Kids
SOURCE Corporate Communications, Michelle Russo +1-240-662-2901, michelle_russo@discovery.com; Investor Relations, Craig Felenstein, +1-212-548-5109, craig_felenstein@discovery.com |
