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Discovery Communications Reports Third Quarter 2016 Results
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Third Quarter 2016 Financial Highlights:

  • Revenues of $1,556 million were flat vs. last year (increased 3% excluding currency effects)
  • DCI Net Income decreased 22% to $219 million (decreased 23% excluding currency effects)
  • Diluted EPS decreased 16% to $0.36 and Adjusted EPS decreased 15% to $0.40 (decreased 14% excluding currency effects)
  • Repurchased $374 million of stock

SILVER SPRING, Md. , Nov. 1, 2016 /PRNewswire/ -- Discovery Communications, Inc. ("Discovery" or the "Company") (NASDAQ: DISCA, DISCB, DISCK) today reported financial results for the third quarter ended September 30, 2016.

"While we faced challenging but expected headwinds this quarter, Discovery is well positioned for long-term growth driven by our well-defined global brands, differentiated content and favorable distribution agreements," said David Zaslav, President and CEO, Discovery Communications . "We have continued to strengthen and maximize our traditional pay-TV offering with robust new programming while aggressively exploiting new opportunities to leverage our content across numerous digital platforms around the world. Amid an ever shifting global media ecosystem, Discovery is evolving to reach more consumers on more screens and platforms than ever before."

Third Quarter Results

Third quarter revenues of $1,556 million were flat compared to the prior year, as 2% growth at U.S. Networks and 19% growth at Education and Other were offset by a 3% decline at International Networks, primarily due to currency effects.  Adjusted Operating Income Before Depreciation and Amortization ("OIBDA")(1) decreased 2% to $562 million , as 3% growth at U.S. Networks was more than offset by a 16% decline at International Networks, partially due to currency effects.  Excluding currency effects, total Company revenues and Adjusted OIBDA grew 3% and 1%, respectively.

Third quarter net income available to Discovery Communications, Inc. ("DCI Net Income") decreased 22% to $219 million compared to $279 million for the third quarter of 2015, primarily due to a $50 million (or $0.08 per share) after-tax impairment charge related to the Lionsgate investment and higher equity-based compensation, partially offset by a decrease in taxes, currency-related transactional gains and higher contribution from equity investees income.  Diluted earnings per share(2) decreased 16% to $0.36 due to lower DCI Net Income, partially offset by lower shares outstanding.  Adjusted Earnings Per Diluted Share ("Adjusted EPS")(2), which excludes the impact of amortization of acquisition-related intangible assets, decreased 15% to $0.40 for the third quarter 2016 compared to $0.47 for the third quarter 2015.  Third quarter Adjusted EPS excluding currency effects decreased 14%.

(1)

See full definitions of Adjusted Operating Income Before Depreciation and Amortization and Adjusted Earnings Per Diluted Share on page 5

(2)

All per share amounts are calculated using DCI Net Income. See table on page 14 for the full schedule.

Free cash flow increased 75% to $410 million for the third quarter of 2016 as cash flow from operations increased to $436 million while capital expenditures increased 8% to $26 million .  Capital expenditures for the first nine months of 2016 decreased 9%.  Third quarter cash flow from operations increased primarily due to lower cash taxes and the timing of working capital.  Third quarter free cash flow excluding the impact of currency effects increased 112%.  Free cash flow is defined as cash provided by operating activities less purchases of property and equipment.

 

 

SEGMENT RESULTS

 

(dollars in millions)


Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


Change


2016


2015


Change

Revenues:













U.S. Networks


$

793



$

781



2

%


$

2,473



$

2,344



6

%

International Networks


720



740



(3)%



2,221



2,276



(2)%


Education and Other


43



36



19

%


133



130



2

%

Corporate and Inter-Segment Eliminations






%


(2)



(2)



%

Total Revenues


$

1,556



$

1,557



%


$

4,825



$

4,748



2

%














Adjusted OIBDA:













U.S. Networks


$

458



$

443



3

%


$

1,475



$

1,364



8

%

International Networks


183



218



(16)%



617



699



(12)%


Education and Other


(1)



(5)



80

%


(5)



(2)



     NM

Corporate and Inter-Segment Eliminations


(78)



(80)



3

%


(242)



(237)



(2)%


Total Adjusted OIBDA


$

562



$

576



(2)%



$

1,845



$

1,824



1

%

 

 

U.S. Networks

(dollars in millions)


Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


Change


2016


2015


Change

Revenues:













Distribution


$

381



$

357



7

%


$

1,157



$

1,076



8

%

Advertising


396



410



(3)%



1,269



1,232



3

%

Other


16



14



14

%


47



36



31

%

Total Revenues


$

793



$

781



2

%


$

2,473



$

2,344



6

%

Adjusted OIBDA


$

458



$

443



3

%


$

1,475



$

1,364



8

%

Adjusted OIBDA Margin


58

%


57

%




60

%


58

%



 

U.S. Networks' revenues in the third quarter of 2016 increased 2% to $793 million , driven by 7% distribution growth, partially offset by a 3% decline in advertising.  Distribution revenue growth was primarily driven by higher rates, partially offset by a slight decline in subscribers.  Advertising revenues decreased 3% primarily due to expected ratings declines, partially offset by higher pricing and inventory management.

Operating expenses decreased 1% mainly due to lower content amortization, partially offset by higher marketing costs.  Adjusted OIBDA increased 3% to $458 million due to higher revenues and lower operating expenses.

 

International Networks

(dollars in millions)


Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


Change


2016


2015


Change

Revenues:













Distribution


$

425



$

419



1

%


$

1,263



$

1,233



2

%

Advertising


273



289



(6)%



900



968



(7)%


Other


22



32



(31)%



58



75



(23)%


Total Revenues


$

720



$

740



(3)%



$

2,221



$

2,276



(2)%


Adjusted OIBDA


$

183



$

218



(16)%



$

617



$

699



(12)%


Adjusted OIBDA Margin


25

%


29

%




28

%


31

%



 

International Networks' revenues for the third quarter decreased 3% to $720 million and Adjusted OIBDA decreased 16% to $183 million .  Changes in foreign currency exchange rates reduced third quarter International revenues and Adjusted OIBDA growth by 5% and 7%, respectively.  Excluding currency effects, total revenues increased 2%.  Distribution revenues, excluding the impact of currency effects, grew 8% mostly due to higher  affiliate rates in Latin America , Northern Europe and CEEMEA as well as higher volume in Latin America.  Advertising revenues, excluding the impact of currency effects, declined  2%, primarily due to lower ratings and pricing in Northern Europe , partially offset by higher volume in Southern Europe.  Other revenues declined 24% excluding currency effects primarily due to lower Eurosport sub-licensing revenues.

Operating expenses increased 3%, or 6% excluding the impact of foreign currency exchange rates, primarily due to increased sports content and production costs. Excluding the impact of foreign currency exchange rates, Adjusted OIBDA decreased 9%, reflecting revenue growth more than offset by higher operating expenses.

 

Education and Other

(dollars in millions)


Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


Change


2016


2015


Change

Revenues


$

43



$

36



19

%


$

133



$

130



2

%

Adjusted OIBDA


$

(1)



$

(5)



80

%


$

(5)



$

(2)



NM

 

Education and Other revenues for the third quarter increased by $7 million primarily due to higher production deliveries at the Studios production business and increased international revenues at the Education business. Adjusted OIBDA improved primarily due to higher revenues, partially offset by additional investments in the Education business.

Corporate and Inter-Segment Eliminations

Adjusted OIBDA for the third quarter of 2016 was relatively consistent with the prior year.

STOCK REPURCHASE

During the quarter, the Company, pursuant to its existing stock repurchase program, repurchased 10.4 million shares of its Series C common stock at an average price of $24.47 per share, for a total of $253 million .  On August 4, 2016 , the Company repurchased 2.2 million preferred shares from Advance/Newhouse Programming Partnership ("ANPP") at $54.40 per share (or $27.20 per share on an as converted to common basis), for a total of $121 million pursuant to the previously announced share repurchase agreement described below between the Company and ANPP.  In total, the Company spent $374 million on share repurchases during the third quarter of 2016.

Through September 30, 2016, the Company has repurchased 144.2 million shares of Series C common stock and 2.8 million shares of its Series A common stock under its stock repurchase program.  In aggregate, including the 31.0 million preferred shares acquired from ANPP and from Advance Programming Holdings, LLC , this represents $7.8 billion of the Company's shares since buyback activity was authorized in 2010, at an average price of $26.54 per share on an adjusted basis(1).  Note that the aggregate share numbers have not been adjusted to reflect the stock dividend that was distributed in August 2014 .

On May 22, 2014 , the Company entered into a share repurchase agreement with ANPP to repurchase its shares of the Company's Series C convertible preferred stock, on a quarterly basis, in proportion to the Company's repurchases under its stock repurchase program in a manner that is intended to maintain ANPP's current ownership percentage of the Company.  This agreement was amended by letter agreement on August 25, 2014 .

OTHER ITEMS

On October 13, 2016, the Company announced a plan to contribute $100 million and its digital network Seeker and production studio SourceFed in exchange for a 39% minority interest in a new holding company, Group Nine Media. Group Nine Media includes digital companies Thrillist Media Group , Now This Media, and The Dodo.  Discovery has the option to buy a controlling stake in Group Nine Media in the future.  The transaction is expected to close in the fourth quarter of 2016, subject to customary closing conditions.

FULL YEAR 2016 OUTLOOK(2)

Discovery will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.

(1)

The average repurchase price was calculated by dividing a) the aggregate amount spent on share repurchases since the inception of share repurchases in 2010 ($7.8 billion) by b) the number of shares that would have been repurchased if the Series C Common Stock special dividend paid on August 6, 2014 occurred prior to the inception of share repurchases in 2010. For each common share repurchased prior to August 6, 2014, we assume one additional share of Class C Common Stock was repurchased for no additional consideration. For each preferred share repurchased, we assume each preferred share would have converted into two common shares.

(2)

Discovery is unable to provide a reconciliation of the forward-looking guidance to GAAP measures as, at this time, Discovery cannot determine the adjustments that would be required, including those related to fluctuations in foreign currency exchange rates.

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 Net Income, 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 beginning on page 10 for reconciliations to GAAP measures.

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) mark-to-market equity-based compensation, (ii) depreciation and amortization, (iii) amortization of deferred launch incentives, (iv) restructuring and other charges, (v) certain impairment charges, (vi) gains and losses on business and asset dispositions, and (vii) certain inter-segment eliminations related to production studios.

The Company uses Adjusted OIBDA 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 mark-to-market equity-based compensation, restructuring and other charges, certain impairment charges, and gains and losses on business and asset dispositions from the calculation of Adjusted OIBDA due to their volatility.  The Company also excludes depreciation of fixed assets, amortization of intangible assets and deferred launch incentives, as these amounts do not represent cash payments in the current reporting period.  Additionally, certain corporate expenses are excluded from segment results to enable executive management to evaluate segment performance based upon the decisions of segment executives.  Refer to page 6 for our methodology for calculating growth rates excluding the impact of currency effects.

Adjusted Net Income, Adjusted EPS and Adjusted EPS Excluding the Impact of Currency Effects
The Company defines Adjusted Net Income as net income available to Discovery Communications, Inc. stockholders excluding the impact of amortization of acquisition-related intangible assets.  Adjusted EPS is defined as earnings excluding the impact of amortization of acquisition-related intangible assets per diluted share.  Note that given the change in conversion ratio for our preferred stock, the preferred shares are now only included in the diluted share count.  The Company believes Adjusted Net Income and Adjusted EPS are relevant to investors because these metrics allow them to evaluate the performance of the Company's operations exclusive of the non-cash amortization of acquisition-related intangible assets that impact the comparability of results from period to period.  Refer to page 6 for our methodology for calculating growth rates excluding the impact of currency effects.

Free Cash Flow and Free Cash Flow Excluding the Impact of Currency Effects
The Company defines free cash flow as cash provided by operating activities 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.  Refer to page 6 for our methodology for calculating growth rates excluding the impact of currency effects.

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 based on a spot rate for each of our currencies determined early in the fiscal year as part of our forecasting process) (the "2016 Baseline Rate") and the prior year amounts translated at the same 2016 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.

Conference Call Information

Discovery Communications, Inc. will host a conference call today, November 1, 2016 at 8:30 a.m. ET to discuss its third quarter results.  To listen to the call, visit http://discoverycommunications.com or dial 1-844-452-2811 inside the U.S. and 1-574-990-9832 outside of the U.S., using the following 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 February 18, 2016 . 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 our programming and strategic growth initiatives and the full year 2016 outlook. 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.

 

 

DISCOVERY COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in millions, except per share amounts)



Three Months Ended
September 30,


Nine Months Ended
September 30,



2016


2015


2016


2015

Revenues:







Distribution


$

806



$

776



$

2,420



$

2,309


Advertising


670



699



2,170



2,200


Other


80



82



235



239


Total revenues


1,556



1,557



4,825



4,748


Costs and expenses:









Costs of revenues, excluding depreciation and amortization


592



574



1,787



1,703


Selling, general and administrative


419



394



1,227



1,224


Depreciation and amortization


80



80



239



243


Restructuring and other charges


7



4



52



37


Gain on disposition






(13)



(3)


Total costs and expenses


1,098



1,052



3,292



3,204


Operating income


458



505



1,533



1,544


Interest expense


(91)



(82)



(267)



(248)


Income (loss) from equity investees, net


3



(10)



(28)



(2)


Other expense, net


(49)





(27)



(78)


Income before income taxes


321



413



1,211



1,216


Income tax expense


(96)



(130)



(302)



(394)


Net income


225



283



909



822


Net income attributable to noncontrolling interests






(1)




Net income attributable to redeemable noncontrolling interests


(6)



(4)



(18)



(7)


Net income available to Discovery Communications, Inc.


$

219



$

279



$

890



$

815











Net income per share available to Discovery Communications, Inc.
Series A, B and C common stockholders:









Basic


$

0.37



$

0.43



$

1.45



$

1.25


Diluted(1)


$

0.36



$

0.43



$

1.44



$

1.24











Weighted average shares outstanding:









Basic


395



432



404



434


Diluted(1)


602



653



615



658


 

 

(1) Diluted shares adjust for the potential dilution that would occur if common stock equivalents, including convertible preferred stock and equity-based awards, were converted into common stock or exercised.

 

 

DISCOVERY COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; in millions)

 



September 30,
2016


December 31,
2015

ASSETS





Current assets:





Cash and cash equivalents


$

224



$

390


Receivables, net


1,545



1,479


Content rights, net


350



313


Deferred income taxes


110



68


Prepaid expenses and other current assets


454



346


Total current assets


2,683



2,596







Noncurrent content rights, net


2,117



2,030


Property and equipment, net


464



488


Goodwill


8,179



8,164


Intangible assets, net


1,621



1,730


Equity method investments


515



567


Other noncurrent assets


271



289


Total assets


$

15,850



$

15,864







LIABILITIES AND EQUITY





Current liabilities:





Accounts payable


$

202



$

282


Accrued liabilities


1,045



988


Deferred revenues


180



190


Current portion of debt


95



119


Total current liabilities


1,522



1,579







Noncurrent portion of debt


7,901



7,616


Deferred income taxes


536



556


Other noncurrent liabilities


440



421


Total liabilities


10,399



10,172







Redeemable noncontrolling interests


247



241







Equity:





Preferred stock


2



2


Common stock


5



5


Additional paid-in capital


7,016



7,021


Treasury stock, at cost


(6,214)



(5,461)


Retained earnings


5,038



4,517


Accumulated other comprehensive loss


(643)



(633)


Total equity


5,204



5,451


Total liabilities and equity


$

15,850



$

15,864


 

 


DISCOVERY COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in millions)


Nine Months Ended September 30,


2016


2015

Operating Activities




Net income

$

909



$

822


Adjustments to reconcile net income to cash provided by operating activities:




Equity-based compensation expense

49



16


Depreciation and amortization

239



243


Content amortization and impairment expense

1,293



1,243


Gain on disposition

(13)



(3)


Remeasurement gain on previously held equity interest



(2)


Equity in losses (earnings) of investee companies, net of cash distributions

33



9


Deferred income taxes

(55)



4


Realized loss from derivative instruments

3



11


Other-than-temporary impairment of AFS investments

62




Other, net

45



29


Changes in operating assets and liabilities, net of business combinations:




Receivables, net

(48)



(133)


Content rights, net

(1,464)



(1,386)


Accounts payable and accrued liabilities

(44)



(14)


Equity-based compensation liabilities

(5)



(25)


Income taxes receivable and prepaid income taxes

(50)



(136)


Other, net

(127)



(26)


Cash provided by operating activities

827



652






Investing Activities




Investments in equity method investees, net

(67)



(26)


Purchases of property and equipment

(69)



(76)


Distributions from equity method investees

69



67


Proceeds from disposition, net of cash disposed

19



61


Investments in cost method investments

(4)



(16)


Payments for derivative instruments, net



(11)


Business acquisitions, net of cash acquired



(24)


Other investing activities, net

(2)



(1)


Cash used in investing activities

(54)



(26)


Financing Activities




Commercial paper repayments, net

(23)



(140)


Borrowings under revolving credit facility

445



222


Principal repayments of revolving credit facility

(672)



(179)


Borrowings from debt, net of discount

498



936


Principal repayments of debt



(849)


Principal repayments of capital lease obligations

(23)



(22)


Repurchases of stock

(1,124)



(576)


Prepayments for common stock repurchase contracts

(71)




Distributions to redeemable noncontrolling interests

(17)



(38)


Equity-based plan proceeds (payments), net

32



(9)


Hedge of borrowings from debt instruments



(29)


Other financing activities, net

(13)



(15)


Cash used in financing activities

(968)



(699)






Effect of exchange rate changes on cash and cash equivalents

29



(32)






Net change in cash and cash equivalents

(166)



(105)


Cash and cash equivalents, beginning of period

390



367


Cash and cash equivalents, end of period

$

224



$

262


 

 

 

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION TO NET INCOME
(unaudited; in millions)

 



Three Months Ended September 30, 2016



U.S. Networks


International Networks


Education and
Other


Corporate and
Inter-Segment
Eliminations


Total

Total Adjusted OIBDA


$

458



$

183



$

(1)



$

(78)



$

562


Amortization of deferred launch incentives




(3)







(3)


Mark-to-market equity-based compensation








(14)



(14)


Depreciation and amortization


(7)



(55)



(3)



(15)



(80)


Restructuring and other charges


(2)



(5)







(7)


Gain on disposition











Inter-segment Eliminations


(4)





4






Operating income


445



120





(107)



458


Interest expense










(91)


Income (loss) from equity investees, net










3


Other expense, net










(49)


Income tax expense










(96)


Net income attributable to noncontrolling interests











Net income attributable to redeemable noncontrolling interests










(6)


Net income available to Discovery Communications,
Inc.










$

219


 

 



Three Months Ended September 30, 2015



U.S. Networks


International Networks


Education and
Other


Corporate and
Inter-Segment
Eliminations


Total

Total Adjusted OIBDA


$

443



$

218



$

(5)



$

(80)



$

576


Amortization of deferred launch incentives




(4)







(4)


Mark-to-market equity-based compensation








17



17


Depreciation and amortization


(7)



(56)



(2)



(15)



(80)


Restructuring and other charges




(3)



(2)



1



(4)


Gain on disposition











Inter-segment Eliminations


(3)





3






Operating income


433



155



(6)



(77)



505


Interest expense










(82)


Income (loss) from equity investees, net










(10)


Other expense, net











Income tax expense










(130)


Net income attributable to noncontrolling interests











Net income attributable to redeemable noncontrolling interests










(4)


Net income available to Discovery Communications,
Inc.










$

279


 

 

 

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION TO NET INCOME
(unaudited; in millions)

 



Nine Months Ended September 30, 2016



U.S. Networks


International Networks


Education and
Other


Corporate and
Inter-Segment
Eliminations


Total

Total Adjusted OIBDA


$

1,475



$

617



$

(5)



$

(242)



$

1,845


Amortization of deferred launch incentives




(10)







(10)


Mark-to-market equity-based compensation








(24)



(24)


Depreciation and amortization


(19)



(165)



(6)



(49)



(239)


Restructuring and other charges


(10)



(25)



(3)



(14)



(52)


Gain on disposition




13







13


Inter-segment Eliminations


(9)



(2)



11






Operating income


1,437



428



(3)



(329)



1,533


Interest expense










(267)


Income (loss) from equity investees, net










(28)


Other expense, net










(27)


Income tax expense










(302)


Net income attributable to noncontrolling interests










(1)


Net income attributable to redeemable noncontrolling interests










(18)


Net income available to Discovery Communications,
Inc.










$

890


 

 



Nine Months Ended September 30, 2015



U.S. Networks


International Networks


Education and
Other


Corporate and
Inter-Segment
Eliminations


Total

Total Adjusted OIBDA


$

1,364



$

699



$

(2)



$

(237)



$

1,824


Amortization of deferred launch incentives




(12)







(12)


Mark-to-market equity-based compensation








9



9


Depreciation and amortization


(23)



(172)



(5)



(43)



(243)


Restructuring and other charges


(22)



(13)



(2)





(37)


Gain on disposition




3







3


Inter-segment Eliminations


(5)



(2)



7






Operating income


1,314



503



(2)



(271)



1,544


Interest expense










(248)


Income (loss) from equity investees, net










(2)


Other expense, net










(78)


Income tax expense










(394)


Net income attributable to noncontrolling interests











Net income attributable to redeemable noncontrolling interests










(7)


Net income available to Discovery Communications,
Inc.










$

815


 

 

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
SELECTED FINANCIAL DETAIL
(unaudited; in millions, except per share amounts)

 

SELECTED TOTAL COMPANY FINANCIAL METRICS - YEAR OVER YEAR GROWTH RATES REPORTED AND EXCLUDING FOREIGN CURRENCY IMPACT

 



Three Months Ended September 30,



2016


2015


% Change

(Reported)


% Change

(ex-FX)(1)

Revenues


$

1,556



$

1,557



%


3

%










Adjusted OIBDA


$

562



$

576



(2)

%


1

%










DCI Net Income


$

219



$

279



(22)

%


(23)

%










Diluted EPS


$

0.36



$

0.43



(16)

%


(17)

%










Adjusted EPS


$

0.40



$

0.47



(15)

%


(14)

%










Free Cash Flow


$

410



$

234



75

%


112

%










 

 



Nine Months Ended September 30,



2016


2015


% Change

(Reported)


% Change

(ex-FX)(1)

Revenues


$

4,825



$

4,748



2

%


4

%










Adjusted OIBDA


$

1,845



$

1,824



1

%


5

%










DCI Net Income


$

890



$

815



9

%


6

%










Diluted EPS


$

1.44



$

1.24



16

%


11

%










Adjusted EPS


$

1.57



$

1.38



14

%


12

%










Free Cash Flow


$

758



$

576



32

%


72

%










 

(1) Refer to Page 6 for our methodology for calculating growth rates excluding the impact of currency effects.

 

 

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
SELECTED FINANCIAL DETAIL
(unaudited; in millions, except per share amounts)

 

SELECTED INTERNATIONAL NETWORKS FINANCIAL METRICS - YEAR OVER YEAR GROWTH RATES REPORTED AND EXCLUDING FOREIGN CURRENCY IMPACT

 



Three Months Ended September 30,



2016


2015


% Change

(Reported)


% Change

(ex-FX)(1)

Revenues









Distribution


$

425



$

419



1

%


8

%

Advertising


273



289



(6)

%


(2)

%

Other


22



32



(31)

%


(24)

%

Total Revenues


$

720



$

740



(3)

%


2

%










Adjusted OIBDA


$

183



$

218



(16)

%


(9)

%



















 

 




Nine Months Ended September 30,



2016


2015


% Change

(Reported)


% Change

(ex-FX)(1)

Revenues









Distribution


$

1,263



$

1,233



2

%


10

%

Advertising


900



968



(7)

%


(4)

%

Other


58



75



(23)

%


(22)

%

Total Revenues


$

2,221



$

2,276



(2)

%


3

%










Adjusted OIBDA


$

617



$

699



(12)

%


(2)

%










 

(1) Refer to Page 6 for our methodology for calculating growth rates excluding the impact of currency effects.

 

 

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
SELECTED FINANCIAL DETAIL
(unaudited; in millions, except per share amounts)

 

EARNINGS PER SHARE



Three Months Ended
September 30,


Nine Months Ended
September 30,



2016


2015


2016


2015

Numerator:









Net income


$

225



$

283



$

909



$

822


Less:









Allocation of undistributed income to Series A convertible preferred
stock


(52)



(61)



(205)



(176)


Net income attributable to noncontrolling interests






(1)




Net income attributable to redeemable noncontrolling interests


(6)



(4)



(18)



(7)


Net income available to Discovery Communications, Inc. Series A, B and C common and Series C convertible preferred stockholders for basic net income per share


$

167



$

218



$

685



$

639


Allocation of net income available to Discovery Communications Inc. Series A, B and C common stockholders and Series C convertible preferred stockholders for basic net income per share:









Series A, B and C common stockholders


144



185



587



541


Series C convertible preferred stockholders


23



33



98



98


Total


167



218



685



639











Add:









Allocation of undistributed income to Series A convertible preferred stockholders


52



61



205



176


Net income available to Discovery Communications, Inc. Series A, B and C common stockholders for diluted net income per share


$

219



$

279



$

890



$

815











Denominator:









Weighted average Series A, B and C common shares outstanding —
basic


395



432



404



434


Weighted average impact of assumed preferred stock conversion


204



217



208



220


Weighted average dilutive effect of equity-based awards


3



4



3



4


Weighted average Series A, B and C common shares outstanding — diluted


602



653



615



658


Weighted average Series C convertible preferred stock outstanding —
basic and diluted


31



38



34



39











Basic net income per share available to Discovery Communications, Inc.
Series A, B and C common and Series C convertible preferred
stockholders:









Series A, B and C common stockholders


$

0.37



$

0.43



$

1.45



$

1.25


Series C convertible preferred stockholders


$

0.74



$

0.86



$

2.90



$

2.50











Diluted net income per share available to Discovery Communications, Inc. Series A, B and C common and Series C convertible preferred stockholders:









Series A, B and C common stockholders


$

0.36



$

0.43



$

1.44



$

1.24


Series C convertible preferred stockholders


$

0.72



$

0.86



$

2.88



$

2.48


 

 

 

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
SELECTED FINANCIAL DETAIL
(unaudited; in millions, except per share amounts)

 

CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED NET EARNINGS PER DILUTED SHARE




Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


Change


2016


2015


Change

Net Income available to Discovery
Communications, Inc. Series A, B and C
common stockholders for diluted net income
per share


$

219



$

279



$

(60)



$

890



$

815



$

75


Amortization of acquisition-related intangible
assets (gross)


37



38



(1)



112



121



(9)


Tax effect on amortization of acquisition-related intangible assets


(10)



(11)



1



(30)



(35)



5


Adjusted Net Income


$

246



$

306



$

(60)



$

972



$

901



$

71

















Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


Change


2016


2015


Change

Diluted net income per share available to Discovery Communications, Inc. Series A, B and C common stockholders


$

0.36



$

0.43



$

(0.07)



$

1.44



$

1.24



$

0.20


Amortization of acquisition-related intangible assets (gross) per share


0.06



0.06





0.18



0.18




Tax effect on amortization of acquisition-related intangible assets per share


(0.02)



(0.02)





(0.05)



(0.04)



(0.01)


Adjusted earnings per diluted share


$

0.40



$

0.47



$

(0.07)



$

1.57



$

1.38



$

0.19











 

 

 

CALCULATION OF FREE CASH FLOW




Three Months Ended September 30,



2016


2015


Change


% Change

Cash provided by operating activities


$

436



$

258



$

178



69

%

Purchases of property and equipment


(26)



(24)



(2)



(8)

%

Free cash flow


$

410



$

234



$

176



75

%

 



Nine Months Ended September 30,



2016


2015


Change


% Change

Cash provided by operating activities


$

827



$

652



$

175



27

%

Purchases of property and equipment


(69)



(76)



7



9

%

Free cash flow


$

758



$

576



$

182



32

%

 

 

 

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
SELECTED FINANCIAL DETAIL
(unaudited; in millions, except per share amounts)

 



BORROWINGS



September 30, 2016

5.625% Senior notes, semi-annual interest, due August 2019

$

500


5.05% Senior notes, semi-annual interest, due June 2020

1,300


4.375% Senior notes, semi-annual interest, due June 2021

650


2.375% Senior notes, euro denominated, annual interest, due March 2022

336


3.30% Senior notes, semi-annual interest, due May 2022

500


3.25% Senior notes, semi-annual interest, due April 2023

350


3.45% Senior notes, semi-annual interest, due March 2025

300


4.90% Senior notes, semi-annual interest, due March 2026

500


1.90% Senior notes, euro denominated, annual interest, due March 2027

672


6.35% Senior notes, semi-annual interest, due June 2040

850


4.95% Senior notes, semi-annual interest, due May 2042

500


4.875% Senior notes, semi-annual interest, due April 2043

850


Revolving credit facility

545


Commercial paper

70


Capital lease obligations

142


Total debt

8,065


Unamortized discount and debt issuance costs

(69)


Debt, net

7,996


Current portion of debt

(95)


Noncurrent portion of debt

$

7,901


 

SHARE COUNT ROLL FORWARD


Common


Preferred


Total

(Basic shares, in millions)







Total shares outstanding as of December 31, 2015


418.0


108.2


526.2

Shares repurchased


(29.2)


(6.9)


(36.1)

Shares issued – equity-based compensation


3.7



3.7

Conversion of shares


0.6


(0.3)


0.3

Total shares outstanding as of September 30, 2016


393.1


101.0


494.1

 

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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/discovery-communications-reports-third-quarter-2016-results-300354766.html

SOURCE Discovery Communications, Inc.

Corporate Communications: Catherine Frymark (240) 662-2934, catherine_frymark@discovery.com; Investor Relations: Jackie Burka (212) 548-5642, jackie_burka@discovery.com




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