Discovery Communications Reports Full Year and Fourth Quarter 2013 Results and Announces $1.5 Billion Increase to Share Repurchase Program

Feb 13, 2014, 07:03 ET from Discovery Communications, Inc.

SILVER SPRING, Md., Feb. 13, 2014 /PRNewswire/ --

Full Year 2013 Financial Highlights:

  • Revenues increased 23% to $5,535 million
  • Adjusted OIBDA increased 16% to $2,425 million
  • Net income available to Discovery Communications, Inc. increased 14% to $1,075 million
  • Free cash flow increased 14% to $1,170 million
  • Repurchased 18.1 million shares of stock for an aggregate purchase price of $1.3 billion

Discovery Communications, Inc. ("Discovery" or the "Company") (NASDAQ: DISCA, DISCB, DISCK) today reported financial results for the full year and fourth quarter ended December 31, 2013.

David Zaslav, Discovery's President and Chief Executive Officer, said, "Discovery's strong 2013 results reflect the additional market share we are capturing around the globe as we further invest in our diverse content portfolio and capitalize on the growth opportunities available across the unmatched worldwide distribution platform we have developed.  At the same time, the strength of our balance sheet enabled us to make several strategic investments that complement our existing businesses and further bolster the long-term growth profile of the company, while also providing us with the ability to return significant capital to shareholders.  As we move into 2014, we remain focused on maintaining the financial momentum we have generated consistently over the past several years while further investing in our brands and strategic growth initiatives so we can deliver additional shareholder value moving forward."

Fourth Quarter Results

Fourth quarter revenues of $1,537 million increased $337 million, or 28%, over the fourth quarter a year ago, led by 64% growth at International Networks and 5% growth at U.S. Networks.  Adjusted Operating Income Before Depreciation and Amortization(1) ("OIBDA") increased 21% to $662 million, as International Networks were up 47% and U.S. Networks were up 5%. Excluding newly acquired businesses(2) and foreign currency fluctuations, total Company revenues increased 10% and Adjusted OIBDA increased 12%.

Fourth quarter net income available to Discovery Communications, Inc. of $289 million ($0.81 per diluted share)(3) increased $65 million compared to $224 million ($0.61 per diluted share) for the fourth quarter a year ago, primarily due to the strong operating performance in the current quarter and improved earnings from equity investments partially offset by increased amortization associated with purchase price allocation for the SBS Nordic transaction as well as higher stock based compensation and interest expense.  Adjusted Earnings Per Diluted Share(4) ("Adjusted EPS"), which excludes the impact of the amortization of acquisition related intangible assets, was $0.92 per diluted share during the fourth quarter compared with $0.61 per diluted share in the same period a year ago. 

(1)

See the full definition of Adjusted Operating Income Before Depreciation and Amortization on page 6.  

(2)

Newly acquired businesses include SBS Nordic acquired in April 2013, Switchover Media acquired in December 2012 and a TV station in Dubai acquired in December 2012. See page 13 for reconciliation to results excluding newly acquired businesses.   

(3)

All per share amounts are calculated using Net Income Available to Discovery Communications, Inc. stockholders. See table on page 15 for the reconciliation.  

(4)

See the full definition of Adjusted Earnings Per Diluted Share on page 6.

Free cash flow was $316 million for the fourth quarter, an increase of $12 million or 4% from the fourth quarter of 2012, primarily due to increased operating performance partially offset by higher content costs, cash taxes and interest payments. Free cash flow is defined as cash provided by operating activities less purchases of property and equipment.

Full Year Results

Full year revenues of $5,535 million were up $1,048 million, or 23%, compared to the full year a year ago, led by 51% growth at International Networks and 7% growth at U.S. Networks.  Adjusted OIBDA grew 16% to $2,425 million, driven by a 35% increase at International Networks and a 5% increase at U.S. Networks.  Excluding the impact of licensing agreements, newly acquired businesses and foreign currency fluctuations, total company revenues increased 10% and Adjusted OIBDA increased 9%.

Full year net income from continuing operations available to Discovery Communications, Inc. of $1,075 million ($2.97 per diluted share) increased $121 million compared to $954 million ($2.51 per diluted share) for the full year 2012, primarily due to the strong operating performance in the current year and improved earnings from equity investments partially offset by increased amortization associated with purchase price allocation for the SBS Nordic transaction as well as higher tax and interest expense.  The current year also included a $92 million gain associated with the consolidation of Discovery Japan and $62 million of losses from hedging activities primarily associated with the acquisition of the SBS Nordic operations.  Adjusted EPS was$3.25 per diluted share for the full year compared with $2.51 per diluted share for full year 2012. 

Free cash flow was $1,170 million for the full year, an increase of $148 million or 14% from the full year of 2012, primarily due to increased operating performance partially offset by increased content costs as well as higher interest payments and lower working capital.

SEGMENT RESULTS

(dollars in millions)

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2012

Change

2013

2012

Change

Revenues:

U.S. Networks

$

740

$

703

5

%

$

2,952

$

2,748

7

%

International Networks

758

462

64

%

2,474

1,637

51

%

Education

41

35

17

%

114

105

9

%

Corporate and Eliminations

(2)

NM

(5)

(3)

(67)

%

Total Revenues

$

1,537

$

1,200

28

%

$

5,535

$

4,487

23

%

Adjusted OIBDA:

U.S. Networks

$

434

$

415

5

%

$

1,708

$

1,622

5

%

International Networks

295

201

47

%

976

721

35

%

Education

14

13

8

%

27

27

%

Corporate and Eliminations

(81)

(84)

4

%

(286)

(275)

(4)

%

Total Adjusted OIBDA

$

662

$

545

21

%

$

2,425

$

2,095

16

%

U.S. Networks

(dollars in millions)

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2012

Change

2013

2012

Change

Revenues:

Distribution

$

309

$

288

7

%

$

1,294

$

1,222

6

%

Advertising

411

397

4

%

1,576

1,456

8

%

Other

20

18

11

%

82

70

17

%

Total Revenues

$

740

$

703

5

%

$

2,952

$

2,748

7

%

Adjusted OIBDA

$

434

$

415

5

%

$

1,708

$

1,622

5

%

Adjusted OIBDA Margin

59

%

59

%

58

%

59

%

Fourth Quarter Results

U.S. Networks' revenues in the fourth quarter  of  2013 were up 5% to $740 million, mostly driven by distribution and advertising revenue growth. Distribution revenue increased 7% due to additional revenues from licensing agreements and higher rates as well as from subscriber growth, primarily from networks carried on the digital tier.  Advertising revenue increased 4% mainly due to increased pricing.  Excluding the impact of licensing agreements, distribution revenues increased 5% and total revenues increased 4% over the prior year's quarter. 

Adjusted OIBDA increased 5% to $434 million, primarily reflecting the 5% revenue growth which was more than offset by 6% higher operating expenses, mainly due to increased content amortization and higher content write-offs.  Excluding the impact of licensing agreements and content write-offs, Adjusted OIBDA grew 5% over last year's fourth quarter.

Full Year Results

U.S. Networks' revenues for the full year of 2013 increased  7% to $2,952 million, primarily driven by advertising and distribution revenue growth.  Advertising revenue increased 8% mainly due to higher delivery and increased pricing.  Distribution revenue increased 6% due to higher rates and subscriber growth, primarily from networks carried on the digital tier, as well as additional revenues from licensing agreements.  Excluding the impact of licensing agreements, distribution revenues increased 5% and total revenues increased 7% over the prior year.

Adjusted OIBDA increased 5% to $1,708 million, primarily reflecting the 7% revenue growth which was more than offset by 10% higher operating expenses, mainly due to increased content amortization as well as higher personnel expenses and marketing costs.  Excluding the impact of licensing agreements, Adjusted OIBDA increased 4% from last year.

International Networks

(dollars in millions)

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2012

Change

2013

2012

Change

Revenues:

Distribution

$

331

$

253

31

%

$

1,242

$

984

26

%

Advertising

406

185

119

%

1,162

580

100

%

Other

21

24

(13)

%

70

73

(4)

%

Total Revenues

$

758

$

462

64

%

$

2,474

$

1,637

51

%

Adjusted OIBDA

$

295

$

201

47

%

$

976

$

721

35

%

Adjusted OIBDA Margin

39

%

44

%

39

%

44

%

Fourth Quarter Results

International Networks' revenues for the fourth quarter increased 64% to $758 million, as advertising revenues were up 119% and distribution revenues were up 31%.  Excluding newly acquired businesses and foreign currency fluctuations, total revenues were up 18%.  Advertising revenues, excluding newly acquired businesses, were up 26% in local currency terms, primarily due to increased viewership and higher pricing, particularly in Western Europe and Latin America. Distribution revenues, excluding newly acquired businesses, grew 16% in local currency terms mainly from increased subscribers, most notably in Latin America, Central and Eastern Europe and Asia Pacific, and from higher rates, particularly in Latin America, as well as from additional contributions due to the consolidation of Discovery Japan.

Adjusted OIBDA increased 47% to $295 million on a reported basis and was up 21% excluding newly acquired businesses and foreign currency fluctuations, reflecting the 18% revenue growth partially offset by a 14% increase in operating expenses. The higher operating expenses were primarily due to increased content amortization, personnel costs and marketing expense as well as costs related to consolidating Discovery Japan.

Full Year Results

International Networks' revenues for the full year 2013 increased 51% to $2,474 million, as advertising revenues were up 100% and distribution revenues were up 26%. Excluding newly acquired businesses and foreign currency fluctuations, total revenues were up 16%.  Advertising revenues, excluding newly acquired businesses, were up 23% in local currency terms, primarily due to increased viewership and higher pricing particularly in Western Europe and Latin America. Distribution revenues, excluding newly acquired businesses, in local currency terms grew 15% mainly from increased subscribers and higher rates, most notably in Latin America, as well as from additional contributions due to the consolidation of Discovery Japan.

Adjusted OIBDA increased 35% to $976 million on a reported basis and increased 16% excluding newly acquired businesses and foreign currency fluctuations, reflecting the 16% revenue growth offset by a 16% increase in operating expenses. The higher operating expenses were mostly due to increased content amortization, personnel costs and marketing expense as well as costs related to consolidating Discovery Japan.

Education

(dollars in millions)

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2012

Change

2013

2012

Change

Revenues

$

41

$

35

17

%

$

114

$

105

9

%

Adjusted OIBDA

$

14

$

13

8

%

$

27

$

27

%

Adjusted OIBDA Margin

34

%

37

%

24

%

26

%

Fourth Quarter Results

Education revenues for the fourth quarter increased by $6 million and Adjusted OIBDA increased by $1 million compared to the fourth quarter of 2012 primarily due to higher assessment and subscription revenues as well as from additional revenues due to a business combination, partially offset by investment in new products.

Full Year Results

For the full year of 2013 Education revenues increased by $9 million and Adjusted OIBDA was flat compared to the full year of 2012, mainly reflecting higher digital textbook sales, increased professional development fees and additional revenues from a business combination, offset by investment in new products.

Corporate and Eliminations

Adjusted OIBDA increased $3 million when compared to the fourth quarter a year ago, mostly due to lower  strategic transaction costs, primarily associated with the acquisition of the SBS Nordic operations. Adjusted OIBDA decreased $11 million compared to full year 2012, primarily due to higher personnel costs as well as  higher professional fees in the current year.

STOCK REPURCHASE

During the quarter, the Company, pursuant to its existing stock repurchase program, repurchased 4.3 million shares of its Series C common stock for an aggregate purchase price of $336 million at an average price of$78.02 per share.  For the full year 2013 the Company repurchased a total of 18.08 million shares of stock for an aggregate purchase price of approximately $1,305 million, including 13.29 million shares of its Series C common stock at an average price of $74.23 per share under the Company's stock repurchase plan, 0.79 million shares of its Series A common stock at an average price of $79.11 per share under the Company's stock repurchase plan and 4.00 million shares of Series C convertible preferred stock purchased from Advance Programming Holdings, LLC at $64.10 per share outside of the Company's stock repurchase plan. 

The Company has repurchased 70.19 million shares of Series C common stock and 2.77 million shares of its Series A common stock under its stock repurchase program to date at an aggregate purchase price of approximately $3.5 billion. In aggregate, including the 17.73 million preferred shares acquired from Advance/Newhouse Programming Partnership and from Advance Programming Holdings, LLC, the Company has repurchased 21% of its outstanding shares since buyback activity was authorized in 2010.

The Company's Board of Directors has approved a $1.5 billion increase to the existing stock repurchase program, taking the total authorization to $5.5 billion.  Under the stock repurchase program, 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.

OTHER ITEMS

On January 21, 2014, the Company entered into an agreement to increase its stake in Eurosport International from 20% to 51% through an extension of its strategic partnership with TF1 Group for a net purchase price of approximately $340 million.  The transaction is expected to close in the second quarter of 2014, subject to the satisfaction of customary closing conditions.

FULL YEAR 2014 OUTLOOK

For the full year ending December 31, 2014, Discovery Communications, Inc. expects total revenue between $6.45 billion and $6.625 billion, Adjusted OIBDA between $2.6 billion and $2.725 billion, and net income available to Discovery Communications, Inc. between $1.2 billion and $1.3 billion. Our outlook incorporates current foreign exchange rates for revenues and expenses, the current share price for mark-to-market equity-based compensation calculations, and assumes that the Eurosport transaction closes during the second quarter of 2014.

NON-GAAP FINANCIAL MEASURES

Adjusted OIBDA, Adjusted Earnings Per Share and Free Cash Flow In addition to the results prepared in accordance with U.S. generally accepted accounting principles ("GAAP") provided in this release, the Company has presented Adjusted OIBDA, Adjusted EPS and free cash flow. The Company evaluates the operating performance of its segments based on financial measures such as revenues and Adjusted OIBDA. Adjusted OIBDA is defined as revenues less costs of revenues and selling, general and administrative expenses excluding: (i) mark-to-market equity-based compensation, (ii) depreciation and amortization, (iii) amortization of deferred launch incentives, (iv) exit and restructuring charges, (v) certain impairment charges, and (vi) gains and 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. The Company excludes mark-to-market equity-based compensation, exit and restructuring 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 and amortization of intangible assets and deferred launch incentives, as these amounts do not represent cash payments in the current reporting period.

The company defines Adjusted EPS as earnings excluding the impact of amortization of acquisition-related intangible assets per diluted share.  The Company believes Adjusted EPS is relevant to investors because it allows 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.

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.

Adjusted OIBDA, Adjusted EPS and free cash flow are non-GAAP measures, and 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 12 for reconciliations to GAAP measures.

Conference Call Information

Discovery Communications, Inc. will host a conference call today at 8:30 a.m. ET to discuss its fourth quarter results. To listen to the call, visit http://discoverycommunications.com or dial 1-877-280-4962 inside the U.S. and 1-857-244-7319 outside of the U.S., using the following passcode: 81468203.

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/A filed with the SEC on February 19, 2013. 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 brands, strategic growth initiatives, plans for stock repurchases, the anticipated closing of our investment in Eurosport and the full year 2014 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

December 31,

Twelve Months Ended

December 31,

2013

2012

2013

2012

Revenues:

Distribution

$

640

$

541

$

2,536

$

2,206

Advertising

817

582

2,739

2,037

Other

80

77

260

244

Total revenues

1,537

1,200

5,535

4,487

Costs and expenses:

Costs of revenues, ex depreciation and amortization

475

328

1,689

1,218

Selling, general and administrative

450

359

1,575

1,291

Depreciation and amortization

86

30

276

117

Restructuring charges

5

2

16

6

Gain on disposition

(19)

Total costs and expenses

1,016

719

3,537

2,632

Operating income

521

481

1,998

1,855

Interest expense

(78)

(64)

(306)

(248)

Income (loss) from equity investees, net

27

(10)

18

(86)

Other (expense) income, net

(11)

(2)

26

(3)

Income from continuing operations before income taxes

459

405

1,736

1,518

Provision for income taxes

(169)

(181)

(659)

(562)

Income from continuing operations, net of taxes

290

224

1,077

956

Loss from discontinued operations, net of taxes

(11)

Net income

290

224

1,077

945

Net income attributable to noncontrolling interests

(1)

(2)

Net income attributable to redeemable noncontrolling interests

(1)

(1)

Net income available to Discovery Communications, Inc.

$

289

$

224

$

1,075

$

943

Basic earnings per share available to Discovery       

Communications, Inc. stockholders:

Continuing operations

$

0.82

$

0.61

$

3.01

$

2.54

Discontinued operations

$

$

$

$

(0.03)

Net income

$

0.82

$

0.61

$

3.01

$

2.51

Diluted earnings per share available to Discovery   

Communications, Inc. stockholders:

Continuing operations

$

0.81

$

0.61

$

2.97

$

2.51

Discontinued operations

$

$

$

$

(0.03)

Net income

$

0.81

$

0.61

$

2.97

$

2.48

Weighted average shares outstanding:

Basic

351

366

357

376

Diluted

354

369

361

380

 

DISCOVERY COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited; in millions)

December 31,

2013

December 31,

2012

ASSETS

Current assets:

Cash and cash equivalents

$

408

$

1,201

Receivables, net

1,371

1,130

Content rights, net

277

122

Deferred income taxes

73

74

Prepaid expenses and other current assets

281

203

Total current assets

2,410

2,730

Noncurrent content rights, net

1,883

1,555

Property and equipment, net

514

388

Goodwill

7,341

6,399

Intangible assets, net

1,565

611

Equity method investments

1,087

1,095

Other noncurrent assets

179

152

Total assets

$

14,979

$

12,930

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

141

$

71

Accrued liabilities

992

721

Deferred revenues

144

123

Current portion of debt

17

31

Total current liabilities

1,294

946

Noncurrent portion of debt

6,482

5,212

Deferred income taxes

637

272

Other noncurrent liabilities

333

207

Total liabilities

8,746

6,637

Redeemable noncontrolling interests

36

Equity:

Preferred stock

2

2

Common stock

3

3

Additional paid-in capital

6,826

6,689

Treasury stock, at cost

(3,531)

(2,482)

Retained earnings

2,892

2,075

Accumulated other comprehensive income

4

4

Total Discovery Communications, Inc. stockholders' equity

6,196

6,291

Noncontrolling interests

1

2

Total equity

6,197

6,293

Total liabilities and equity

$

14,979

$

12,930

 

DISCOVERY COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in millions)

Twelve Months Ended December 31,

2013

2012

Operating Activities

Net income

$

1,077

$

945

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

Equity-based compensation expense

190

154

Depreciation and amortization

276

117

Content amortization and impairment expense

1,190

865

(Gain) loss on disposition

(19)

6

Remeasurement gain on previously held equity interest

(92)

Equity in (earnings) losses and distributions from investments

(4)

106

Deferred income tax expense (benefit)

83

(70)

Launch amortization expense

18

20

Loss from hedging instruments, net

55

Other, net

32

12

Changes in operating assets and liabilities:

Receivables, net

(120)

(59)

Content rights

(1,426)

(1,091)

Accounts payable and accrued liabilities

106

171

Equity-based compensation liabilities

(64)

(45)

Income tax receivable

(5)

(11)

Other, net

(12)

(21)

Cash provided by operating activities

1,285

1,099

Investing Activities

Purchases of property and equipment

(115)

(77)

Business acquisitions, net of cash acquired

(1,861)

(149)

Hedging instruments, net

(55)

Proceeds from disposition

28

Distributions from equity method investees

47

17

Investments in and advances to equity method investees, net

(28)

(404)

Other investing activities, net

(3)

(30)

Cash used in investing activities

(1,987)

(643)

Financing Activities

Borrowings from long-term debt, net of discount and issuance costs

1,186

981

Principal repayments of capital lease obligations

(32)

(22)

Repurchases of common stock

(1,049)

(1,380)

Repurchases of preferred stock

(256)

Cash proceeds from equity-based plans, net

73

119

Other financing activities, net

(7)

(3)

Cash used in financing activities

(85)

(305)

Effect of exchange rate changes on cash and cash equivalents

(6)

2

Net change in cash and cash equivalents

(793)

153

Cash and cash equivalents, beginning of period

1,201

1,048

Cash and cash equivalents, end of period

$

408

$

1,201

 

DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE

DEPRECIATION AND AMORTIZATION

(unaudited; in millions)

Three Months Ended December 31, 2013

Adjusted

Operating

Income Before

Depreciation and

Amortization

Depreciation

and

Amortization

Amortization of

Deferred

Launch

Incentives

Mark-to-Market

Equity-Based

Compensation

Other (a)

Operating

Income

U.S. Networks

$

434

$

(3)

$

(1)

$

$

(1)

$

429

International Networks

295

(67)

(3)

(3)

222

Education

14

(1)

13

Corporate and Eliminations

(81)

(15)

(46)

(1)

(143)

Total

$

662

$

(86)

$

(4)

$

(46)

$

(5)

$

521

Three Months Ended December 31, 2012

Adjusted

Operating

Income Before

Depreciation and

Amortization

 

Depreciation

and

Amortization

Amortization of

Deferred

Launch

Incentives

Mark-to-Market

Equity-Based

Compensation

Other (a)

Operating

Income

U.S. Networks

$

415

$

(4)

$

(2)

$

$

(1)

$

408

International Networks

201

(13)

(3)

185

Education

13

(1)

12

Corporate and Eliminations

(84)

(12)

(27)

(1)

(124)

Total

$

545

$

(30)

$

(5)

$

(27)

$

(2)

$

481

(a) For the three months ended December 31, 2013 amount represents restructuring charges of $5 million. For the three months ended December 31, 2012 amount represents restructuring charges of $2 million.

 

DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE

DEPRECIATION AND AMORTIZATION

(unaudited; amounts in millions)

Twelve Months Ended December 31, 2013

Adjusted

Operating

Income Before

Depreciation and

Amortization

Depreciation

and

Amortization

Amortization of

Deferred

Launch

Incentives

Mark-to-Market

Stock-Based

Compensation

Other (a)

Operating

Income

U.S. Networks

$

1,708

$

(11)

$

(7)

$

$

15

$

1,705

International Networks

976

(205)

(11)

(11)

749

Education

27

(3)

24

Corporate and Eliminations

(286)

(57)

(136)

(1)

(480)

Total

$

2,425

$

(276)

$

(18)

$

(136)

$

3

$

1,998

Twelve Months Ended December 31, 2012

Adjusted

Operating

Income Before

Depreciation and

Amortization

 

Depreciation

and

Amortization

Amortization of

Deferred

Launch

Incentives

Mark-to-Market

Stock-Based

Compensation

Other (a)

Operating

Income

U.S. Networks

$

1,622

$

(13)

$

(9)

$

$

(3)

$

1,597

International Networks

721

(47)

(11)

(1)

662

Education

27

(2)

25

Corporate and Eliminations

(275)

(55)

(97)

(2)

(429)

Total

$

2,095

$

(117)

$

(20)

$

(97)

$

(6)

$

1,855

(a) For the twelve months ended December 31, 2013 amount represents a $19 million gain recognized from the disposition of Petfinder partially offset by restructuring charges of $16 million. For the twelve months ended December 31, 2012 amount represents restructuring charges of $6 million.

 

DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

RECONCILIATION OF NEWLY ACQUIRED BUSINESSES(1)

(unaudited; amounts in millions)

Three months ended December 31,

2013

2013

2013

2012

International

Networks

As Reported

Newly

Acquired

Businesses

International

Networks

Ex-Acquisitions

International

Networks

As Reported

% Change

Revenues:

  Distribution

$

331

$

45

$

286

$

253

13

%

  Advertising

406

175

$

231

185

25

%

  Other

21

3

$

18

24

(25)

%

Total Revenues

$

758

$

223

$

535

$

462

16

%

Adjusted OIBDA

$

295

$

54

$

241

$

201

20

%

Three months ended December 31,

2013

2013

2013

2012

Total 

Company

As Reported

Newly

Acquired

Businesses

Total 

Company

Ex-Acquisitions

Total

Company

As Reported

% Change

Revenues:

  Distribution

$

640

$

45

$

595

$

541

10

%

  Advertising

817

175

$

642

582

10

%

  Other

80

3

$

77

77

%

Total Revenues

$

1,537

$

223

$

1,314

$

1,200

10

%

Adjusted OIBDA

$

662

$

54

$

608

$

545

12

%

Twelve months ended December 31,

2013

2013

2013

2012

International

Networks

As Reported

Newly

Acquired

Businesses

International

Networks

Ex-Acquisitions

International

Networks

As Reported

% Change

Revenues:

  Distribution

$

1,242

$

133

$

1,109

$

984

13

%

  Advertising

1,162

455

$

707

580

22

%

  Other

70

15

$

55

73

(25)

%

Total Revenues

$

2,474

$

603

$

1,871

$

1,637

14

%

Adjusted OIBDA

$

976

$

135

$

841

$

721

17

%

Twelve months ended December 31,

2013

2013

2013

2012

Total 

Company

As Reported

Newly

Acquired

Businesses

Total 

Company

Ex-Acquisitions

Total 

Company

As Reported

% Change

Revenues:

  Distribution

$

2,536

$

133

$

2,403

$

2,206

9

%

  Advertising

2,739

455

$

2,284

2,037

12

%

  Other

260

15

$

245

244

%

Total Revenues

$

5,535

$

603

$

4,932

$

4,487

10

%

Adjusted OIBDA

$

2,425

$

135

$

2,290

$

2,095

9

%

(1) Newly acquired businesses include SBS Nordic acquired in April 2013, Switchover Media acquired in December 2012 and a TV station in Dubai acquired in December 2012. Note that this reconciliation does not take into account other one-time items such as foreign exchange and licensing revenues.

 

DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited; in millions)

CALCULATION OF FREE CASH FLOW

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2012

Change

2013

2012

Change

Cash provided by operating activities

$

355

$

328

$

27

$

1,285

$

1,099

$

186

Purchases of property and equipment

(39)

(24)

(15)

(115)

(77)

(38)

Free cash flow

$

316

$

304

$

12

$

1,170

$

1,022

$

148

 

RECONCILIATION OF 2014 OUTLOOK TO GAAP MEASURES

Full Year 2014

Net income available to Discovery Communications, Inc.

$

1,200

To

$

1,300

Interest expense, net

375

To

365

Depreciation and amortization

330

To

320

Other expense, including amortization of deferred launch incentives, mark-to-market equity-

based compensation, asset impairment, exit and restructuring costs, gains (losses) on business

disposition, gains (losses) on sale of securities, equity earnings (losses) in unconsolidated

affiliates, unrealized and realized gains (losses) from derivatives, income tax expense, net loss

(income) attributable to noncontrolling interests, and stock dividends to preferred interests

695

To

740

Adjusted OIBDA

$

2,600

To

$

2,725

 

DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited; in millions)

NET INCOME AVAILABLE TO DISCOVERY COMMUNICATIONS, INC. STOCKHOLDERS

Three Months 

Ended December 31,

Twelve Months

Ended December 31,

2013

2012

2013

2012

Income from continuing operations, net of taxes

$

290

$

224

$

1,077

$

956

Net income attributable to noncontrolling interests

(1)

(2)

Net income attributable to redeemable noncontrolling interests

(1)

(1)

Net income from continuing operations available to Discovery

Communications, Inc.

289

224

1,075

954

Loss from discontinued operations, net of taxes

(11)

Net income available to Discovery Communications, Inc.

289

224

1,075

943

Redeemable noncontrolling interest adjustments of redemption value

to floor

(1)

(2)

Net income available to Discovery Communications, Inc.

stockholders

$

288

$

224

$

1,073

$

943

 

CALCULATION OF ADJUSTED EARNINGS PER DILUTED SHARE

Three Months Ended December 31,

Twelve Months Ended December 31,

2013

2012

Change

2013

2012

Change

Diluted earnings per share from continuing

operations available to Discovery

Communications, Inc. stockholders

$

0.81

$

0.61

$

0.20

$

2.97

$

2.51

$

0.46

Amortization of acquisition-related intangible

assets, net of tax

0.11

0.11

0.28

0.28

Adjusted earnings per diluted share

$

0.92

$

0.61

$

0.31

$

3.25

$

2.51

$

0.74

 

DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

SELECTED FINANCIAL DETAIL

(unaudited; in millions)

BORROWINGS

December 31, 2013

3.70% Senior Notes, semi-annual interest, due June 2015

$

850

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

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

500

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

350

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

Capital lease obligations

165

Total debt

6,515

Unamortized discount

(16)

Debt, net

6,499

Current portion of debt

(17)

Noncurrent portion of debt

$

6,482

 

EQUITY-BASED COMPENSATION

December 31, 2013

 

Long-Term

Incentive Plans

Total Units

Outstanding

(in millions)

Weighted

Average

Grant Price

Vested Units

Outstanding

(in millions)

Weighted

Average

Grant Price

Unit Awards

1.6

$38.46

$—

Stock Appreciation Rights

3.2

55.20

Stock Options

7.6

36.47

4.7

26.08

Performance-based Restricted Stock Units

1.6

43.12

0.3

32.39

Service-based Restricted Stock Units

0.8

52.15

Total Equity-based Compensation Plans

14.8

$42.30

5.0

$26.46

 

SHARE COUNT ROLL FORWARD

Common

Preferred

Total

(Basic shares, in millions)

Total shares outstanding as of December 31, 2012

245.17

119.05

364.22

Shares repurchased

(14.08)

(4.00)

(18.08)

Shares issued – equity-based compensation

2.65

2.65

Conversion of shares

0.55

(0.55)

Total shares outstanding as of December 31, 2013

234.29

114.50

348.79

 

SOURCE Discovery Communications, Inc.



RELATED LINKS

http://discoverycommunications.com