Discovery Communications Reports Full Year and Fourth Quarter 2009 Results
SILVER SPRING, Md., Feb. 10 /PRNewswire-FirstCall/ --
Full Year 2009 Financial Highlights:
- Revenues increased 2% to $3.52 billion
- Adjusted OIBDA increased 12% to $1.46 billion
- Net income available to Discovery stockholders increased to $552 million
- Free Cash Flow increased 18% to $551 million
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, 2009. The discussion below assumes the transaction between Discovery Holding Company ("DHC"), Discovery Communications Holding, LLC ("DCH"), and Advance/Newhouse Programming Partnership that resulted in Discovery becoming a public company occurred on January 1, 2008 and as such includes 100% of Discovery's results.
(Logo: http://www.newscom.com/cgi-bin/prnh/20080918/NETH035LOGO )
David Zaslav, Discovery's President and Chief Executive Officer, said, "The strength of Discovery's performance throughout 2009 reflected the quality of our distribution platform and content assets and our focus on delivering real operating leverage. The affiliate fees we generate across the globe provided consistent resiliency throughout this past year, while the ratings growth across our networks and the value of our unique content enabled advertising to grow despite the weak environment. Our revenue growth, combined with thoughtful cost management, increased our operating efficiency, translating into double-digit Adjusted OIBDA (1) and free cash flow growth. As we look to 2010, we remain focused on further monetizing our ratings momentum in an improving advertising environment, continuing to strengthen our distribution platforms and relationships and, most importantly, delivering high quality content to our viewers."
Fourth Quarter Results
Fourth quarter revenues of $964 million increased $60 million, or 7%, over the fourth quarter a year ago as 22% growth at International Networks and 3% growth at U.S. Networks was partially offset by a $21 million or 30% decline at Commerce, Education and Other as a result of the transition to a new commerce licensing model. Adjusted Operating Income Before Depreciation and Amortization (1) ("OIBDA") grew to $390 million, an increase of $28 million or 8% versus the fourth quarter a year ago, mainly driven by a 42% increase at International Networks partially offset by a 4% decline at U.S. Networks due to content impairment charges of $22 million. Adjusted OIBDA margin of 40% for the fourth quarter was in-line with the same period a year ago.
Fourth quarter net income available to Discovery Communications, Inc., stockholders of $155 million ($0.36 per diluted share) grew $49 million compared to $106 million ($0.25 per diluted share) for the fourth quarter a year ago. The increased results primarily reflect the growth in Adjusted OIBDA, lower restructuring and impairment charges and an increase in Other non-operating income, partially offset by a $28 million expense in the current quarter from the change in the fair value of the mark-to-market share-based compensation, compared with a benefit of $22 million in the fourth quarter a year ago.
Free cash flow was $236 million for the fourth quarter, an increase of $108 million or 84% from the same period for 2008. Free cash flow is defined as cash flows from operating activities less acquisitions of property and equipment.
(1) See the definition of Adjusted Operating Income Before Depreciation and Amortization on page 5.
Full Year Results
Full year 2009 revenues of $3,516 million increased $73 million, or 2%, over 2008 revenues, primarily driven by 4% growth at U.S. Networks and 3% growth at International Networks. Adjusted OIBDA increased 12% to $1,464 million led by 8% growth at U.S. Networks and 16% growth at International Networks. Adjusted OIBDA margin for the full year increased to 42% from 38% in 2008.
Full year net income available to Discovery Communications, Inc. stockholders from continuing operations of $552 million ($1.30 per diluted share) grew $278 million versus $274 million ($0.85 per diluted share) a year ago. The increased results primarily reflect the higher Adjusted OIBDA, a net of tax gain on the sale of Discovery Kids channel and an increase in Other non-operating income, partially offset by a $205 million expense in the current year related to the change in the fair value of the mark-to-market share-based compensation, which was a benefit of $69 million in the prior year. 2008 net income also included $128 million of minority interest primarily associated with the Advanced Newhouse ownership prior to the transaction that resulted in Discovery Communications, Inc. becoming a public company.
Free cash flow was $551 million for the full year, an increase of $84 million or 18% from 2008. Free cash flow includes $108 million in taxes paid related to the sale of 50% of the Discovery Kids channel and $64 million of additional tax payments related to prior periods. Excluding these taxes, free cash flow for 2009 increased $256 million or 55% compared to the same period in 2008.
SEGMENT RESULTS
(dollars in millions) Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Revenues:
U.S. Networks $554 $536 3% $2,142 $2,062 4%
International
Networks 358 294 22% 1,189 1,158 3%
Commerce, Education,
and Other 49 70 (30%) 176 196 (10%)
Corporate 3 4 (25%) 9 27 (67%)
--- --- --- ---
Total Revenues $964 $904 7% $3,516 $3,443 2%
==== ==== ====== ======
Adjusted OIBDA:
U.S. Networks $289 $300 (4%) $1,196 $1,111 8%
International
Networks 152 107 42% 450 387 16%
Commerce, Education,
and Other 9 11 (18%) 22 13 69%
Corporate (60) (56) (7%) (204) (201) (1%)
--- --- ---- ----
Total Adjusted OIBDA $390 $362 8% $1,464 $1,310 12%
==== ==== ====== ======
U.S. Networks
(dollars in millions) Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Revenues:
Distribution $245 $236 4% $982 $927 6%
Advertising 287 282 2% 1,082 1,058 2%
Other 22 18 22% 78 77 1%
--- --- --- ---
Total Revenues $554 $536 3% $2,142 $2,062 4%
==== ==== ====== ======
Adjusted OIBDA $289 $300 (4%) $1,196 $1,111 8%
Adjusted OIBDA Margin 52% 56% 56% 54%
Fourth Quarter Results
U.S. Networks' revenue in the fourth quarter of 2009 increased 3% to $554 million. Distribution revenue grew 4% largely from higher rates and subscriber growth primarily from networks carried on the digital tier, partially offset by the absence of $10 million due to the removal of Discovery Kids following the sale of 50% of that entity on May 22, 2009. Excluding Discovery Kids from 2008 results, distribution revenue in the current quarter grew 8% compared with the fourth quarter a year ago. Advertising revenue increased 2% from higher cash sellouts as well as increased ratings.
Adjusted OIBDA decreased $11 million to $289 million reflecting the 3% revenue growth offset by 11% higher operating expenses primarily due to content impairment charges of $22 million in the current quarter. Operating expenses would have increased 2% excluding content impairment charges.
Full Year Results
U.S. Networks' revenue for the full year 2009 increased 4% to $2,142 million mainly driven by distribution and advertising revenue growth. Distribution revenue grew 6% largely from higher rates, subscriber growth primarily from networks carried on the digital tier and lower launch-support amortization, partially offset by the absence of $20 million due to the removal of Discovery Kids from the consolidated results as well an $8 million one-time revenue item recorded in the second quarter of 2008. Adjusting for these items, distribution revenue grew 9% compared with 2008. Advertising revenue increased 2% as a result of higher ratings and increased pricing, partially offset by lower cash sellouts due to softness in the economy.
Adjusted OIBDA increased 8% to $1,196 million reflecting the 4% revenue growth and a 2% decline in operating expenses as lower selling and administrative costs were partially offset by increased programming costs, which included higher content impairment charges in 2009. Excluding content impairment charges in 2008 and 2009, as well as $20 million of increased costs during 2009 related to OWN, operating expenses would have decreased 5% as compared with 2008.
International Networks
(dollars in millions) Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
2009 2008 Change 2009 2008 Change
Revenues:
Distribution $191 $165 16% $731 $713 3%
Advertising 130 98 33% 345 336 3%
Other 37 31 19% 113 109 4%
--- --- --- ---
Total Revenues $358 $294 22% $1,189 $1,158 3%
==== ==== ====== ======
Adjusted OIBDA $152 $107 42% $450 $387 16%
Adjusted OIBDA Margin 42% 36% 38% 33%
Fourth Quarter Results
International Networks' revenue for the fourth quarter increased 22% to $358 million as $19 million of favorable impact from foreign currency fluctuations contributed to advertising revenue growth of 33% and distribution revenue growth of 16%. Excluding the impact of foreign currency fluctuations, revenues increased 16% led by 24% advertising revenue growth primarily in the U.K., EMEA (Europe (excluding U.K.) Middle East and Africa) and Latin America from higher viewership and an increased subscriber base. Advertising revenue in the current quarter also included a $6 million benefit due to a settlement from a prior contract dispute at our U.K. operations. Affiliate revenue in local currency terms was up 10% during the fourth quarter mainly from subscriber growth in Latin America. The increase in Other revenue primarily reflects $6 million from programming sales.
Adjusted OIBDA increased 42% to $152 million as the 22% revenue increase more than offset a 10% increase in operating expenses. Excluding the impact of foreign currency, Adjusted OIBDA increased 44% reflecting 16% revenue growth, partially offset by a 1% rise in operating expenses as increased programming expenses were slightly offset by lower marketing and personnel costs.
Full Year Results
International Networks' revenue for the full year 2009 increased 3% to $1,189 million, despite a $69 million unfavorable impact from foreign currency fluctuations, as distribution and advertising revenue each grew 3%. Excluding the impact of foreign currency fluctuations, revenues for the full year 2009 increased 10%, driven by 9% distribution revenue growth, primarily due to increased subscribers in Latin America, EMEA and Asia-Pacific. Advertising revenue in local currency terms increased 12%, primarily in the U.K., EMEA and Latin America from higher viewership due to ratings growth and an increased subscriber base, as well as from the $6 million benefit in the U.K. from the settlement of a contract provision.
Adjusted OIBDA increased 16% to $450 million, despite a $20 million unfavorable impact from foreign currency fluctuations, reflecting the 3% revenue growth as well as a 5% decline in operating expenses. Excluding foreign currency fluctuations, Adjusted OIBDA increased 24% versus 2008 as the 10% revenue growth was partially offset by increased operating expenses of 2% as lower marketing and personnel costs were more than offset by increased programming expenses which included a content charge taken in the second quarter related to our Germany operations. Excluding this charge, operating expenses in 2009 increased only 1% in local currency terms compared with 2008.
Commerce, Education, and Other
(dollars in millions) Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Revenues $49 $70 (30%) $176 $196 (10%)
Adjusted OIBDA $9 $11 (18%) $22 $13 69%
Adjusted OIBDA Margin 18% 16% 13% 7%
Fourth Quarter Results
Commerce, Education and Other fourth quarter revenue decreased 30% to $49 million primarily from $23 million of lower commerce revenues as a result of the transition to a new licensing model, partially offset by increased educational revenues from higher streaming volumes. Adjusted OIBDA decreased to $9 million as the revenue decline at commerce was mostly offset by lower operating costs as compared to prior year.
Full Year Results
Commerce, Education and Other full year 2009 revenue decreased 10% to $176 million primarily from $25 million of lower commerce revenues as a result of the transition to the new licensing model, and a decline in sound services, partially offset by $8 million of increased educational revenues from higher streaming volumes. Adjusted OIBDA increased $9 million to $22 million, primarily from an $8 million increase from Education and a $5 million increase from Commerce compared to the prior year.
Corporate
For the full year 2009 Adjusted OIBDA decreased $3 million due to lower revenue from a joint venture, whose primary sales were of the Planet Earth DVD, as well as a decline in personnel and consulting costs.
FULL YEAR 2010 OUTLOOK
For the full year ending December 31, 2010, Discovery Communications, Inc., expects total revenue between $3,625 million and $3,750 million, Adjusted OIBDA between $1,560 million and $1,640 million, and net income available to Discovery Communications, Inc. stockholders of $660 million to $725 million. Our outlook incorporates current foreign exchange rates for revenues and expenses and current share price for mark-to-market share-based compensation calculations.
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 flows 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 10 for reconciliations to GAAP measures.
OTHER ITEMS
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 (ASC 810).
Conference Call Information
Discovery Communications will host a conference call today at 8:30 a.m. EST to discuss its full year and fourth quarter 2009 results. To listen to the call, visit http://www.discoverycommunications.com.
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 most recent Annual Report on Form 10-K filed with the SEC. 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, the full year 2010 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; dollars in millions, except per share amounts)
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------- ------------
2009 2008(a) 2009 2008(a)
---- ---- ---- ----
Revenues:
Distribution $436 $401 $1,713 $1,640
Advertising 418 382 1,428 1,396
Other 110 121 375 407
--- --- --- ---
Total revenues 964 904 3,516 3,443
--- --- ----- -----
Costs of revenues, excluding
depreciation and amortization
listed below 298 266 1,065 1,024
Selling, general and administrative 318 270 1,247 1,115
Depreciation and amortization 37 40 155 186
Restructuring and impairment charges 19 44 66 61
Gain on dispositions - - (252) -
--- --- ---- ---
672 620 2,281 2,386
--- --- ----- -----
Operating income 292 284 1,235 1,057
Interest expense, net (67) (60) (250) (256)
Other non-operating income
(expense), net 12 (43) 46 (47)
--- --- --- ---
Income from continuing operations
before income taxes 237 181 1,031 754
Provision for income taxes (81) (67) (472) (352)
--- --- ---- ----
Income from continuing operations,
net of taxes 156 114 559 402
Income from discontinued
operations, net of taxes - 1 - 43
--- --- --- ---
Net income 156 115 559 445
Less net loss (income) attributable
to non-controlling interests (1) (9) 1 (128)
--- --- --- ----
Net income attributable to
Discovery Communications, Inc. 155 106 560 317
Stock dividends to preferred
interests - - (8) -
--- --- --- ---
Net income available to Discovery
Communications, Inc. stockholders $155 $106 $552 $317
==== ==== ==== ====
Amounts available to Discovery
Communications, Inc. stockholders:
Income from continuing operations,
net of taxes $155 $105 $552 $274
Income from discontinued
operations, net of taxes - 1 - 43
--- --- --- ---
Net income $155 $106 $552 $317
==== ==== ==== ====
Income per share from continuing
operations available to Discovery
Communications, Inc. stockholders:
Basic $0.36 $0.25 $1.30 $0.85
===== ===== ===== =====
Diluted $0.36 $0.25 $1.30 $0.85
===== ===== ===== =====
Income per share from discontinued
operations available to Discovery
Communications, Inc. stockholders:
Basic $- $- $- $0.13
=== === === =====
Diluted $- $- $- $0.13
=== === === =====
Net income per share available to
Discovery Communications, Inc.
stockholders:
Basic $0.36 $0.25 $1.30 $0.99
===== ===== ===== =====
Diluted $0.36 $0.25 $1.30 $0.98
===== ===== ===== =====
Weighted average number of shares
outstanding:
Basic 425 422 423 321
=== === === ===
Diluted 429 422 425 322
=== === === ===
(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 6 for additional detail.
DISCOVERY COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited; dollars in millions)
As of December 31,
--------------------
2009 2008(a)
---- ----
ASSETS
Current assets:
Cash and cash equivalents $623 $100
Receivables, net of allowances of $15 and
$16, respectively 810 780
Content rights, net 76 73
Deferred income taxes 71 49
Prepaid expenses and other current assets 100 107
--- ---
Total current assets 1,680 1,109
Noncurrent content rights, net 1,217 1,163
Property and equipment, net 411 395
Goodwill 6,433 6,891
Intangible assets, net 643 716
Other noncurrent assets 581 210
--- ---
Total assets $10,965 $10,484
======= =======
LIABILITIES, REDEEMABLE NON-CONTROLLING
INTERESTS IN SUBSIDIARIES, AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $457 $421
Deferred revenues 91 93
Current portion of share-based compensation
liabilities 117 8
Current portion of long-term debt 38 458
Other current liabilities 87 90
--- ---
Total current liabilities 790 1,070
Long-term debt 3,457 3,331
Deferred income taxes 274 246
Other noncurrent liabilities 176 227
--- ---
Total liabilities 4,697 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 6,600 6,545
Accumulated deficit (376) (936)
Accumulated other comprehensive loss (21) (78)
--- ---
Equity attributable to Discovery
Communications, Inc. 6,208 5,536
Equity attributable to non-controlling
interests 11 25
--- ---
Total equity 6,219 5,561
----- ---
Total liabilities, redeemable non-
controlling interests in subsidiaries, and
equity $10,965 $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 6 for additional detail.
DISCOVERY COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; dollars in millions)
Twelve Months Ended
December 31,
-------------------
2009 2008(a)
---- ------
OPERATING ACTIVITIES
Net income $559 $445
Adjustments to reconcile net income to cash
provided by operating activities:
Share-based compensation expense (benefit) 228 (66)
Depreciation and amortization 155 232
Impairment charges 32 30
Gains on dispositions (252) (76)
Gains on sales of investments (15) -
Deferred income taxes (7) 190
Other noncash expenses, net 32 130
Changes in operating assets and liabilities,
net of discontinued operations:
Receivables, net (37) (45)
Content rights, net (55) (145)
Accounts payable and accrued liabilities 40 (46)
Share-based compensation liabilities (72) (49)
Other, net - (31)
--- ---
Cash provided by operating activities 608 569
INVESTING ACTIVITIES
Purchases of property and equipment (57) (102)
Net cash acquired from Newhouse Transaction - 45
Business acquisitions, net of cash acquired - (8)
Proceeds from dispositions 300 139
Other investing activities, net 23 24
--- ---
Cash provided by investing activities 266 98
FINANCING ACTIVITIES
Ascent Media Corporation spin-off - (356)
Net repayments of revolver loans (315) (125)
Borrowings from long-term debt, net of
discount and issuance costs 970 -
Principal repayments of long-term debt (1,012) (257)
Principal repayments of capital lease
obligations (14) (29)
Cash distributions to non-controlling interest (13) -
Proceeds from stock option exercises 28 -
Other financing activities, net - (7)
--- ---
Cash used in financing activities (356) (774)
Effect of exchange rate changes on cash and
cash equivalents 5 (2)
--- ---
CHANGE IN CASH AND CASH EQUIVALENTS 523 (109)
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 $623 $100
==== ====
(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 6 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 December 31, 2009
------------------------------------
Adjusted
Operating
Income Before Amortization Mark-to-
Depreciation Depreciation of Deferred Market Operating
and and Launch Share-Based Other Income
Amortization Amortization Incentives Compensation (a) (loss)
------------ ------------ ---------- ------------ ----- -------
U.S. Networks $289 $(7) $(5) $- $(9) $268
International
Networks 152 (9) (9) - (9) 125
Commerce,
Education,
and Other 9 (2) - - (1) 6
Corporate (60) (19) - (28) - (107)
--- --- --- --- --- ----
Total $390 $(37) $(14) $(28) $(19) $292
==== ==== ==== ==== ==== ====
Three Months Ended December 31, 2008
------------------------------------
Adjusted
Operating
Income Before Amortization Mark-to-
Depreciation Depreciation of Deferred Market Operating
and and Launch Share-Based Other Income
Amortization Amortization Incentives Compensation (a) (loss)
------------ ------------ ---------- ------------ ----- -------
U.S. Networks $300 $(16) $(8) $3 $(38) $241
International
Networks 107 (11) (8) - (2) 86
Commerce,
Education,
and Other 11 (2) - - (2) 7
Corporate (56) (11) - 19 (2) (50)
--- --- --- --- --- ---
Total $362 $(40) $(16) $22 $(44) $284
==== ==== ==== === ==== ====
(a) Total amount in 2009 represents asset impairment charges of $6
million and exit and restructuring charges of $13 million. Total
amount in 2008 represents asset impairment charges of $30 million and
exit and restructuring charges of $14 million.
DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION
(Unaudited; dollars in millions)
Twelve Months Ended December 31, 2009
------------------------------------
Adjusted
Operating
Income Before Amortization Mark-to-
Depreciation Depreciation of Deferred Market Operating
and and Launch Share-Based Other Income
Amortization Amortization Incentives Compensation (a) (loss)
------------ ------------ ---------- ------------ ----- -------
U.S. Networks $1,196 $(30) $(21) $(1) $215 $1,359
International
Networks 450 (41) (34) - (22) 353
Commerce,
Education,
and Other 22 (6) - - (2) 14
Corporate (204) (78) - (204) (5) (491)
---- --- --- ---- --- ----
Total $1,464 $(155) $(55) $(205) $186 $1,235
====== ===== ==== ===== ==== ======
Twelve Months Ended December 31, 2008
------------------------------------
Adjusted
Operating
Income Before Amortization Mark-to-
Depreciation Depreciation of Deferred Market Operating
and and Launch Share-Based Other Income
Amortization Amortization Incentives Compensation (a) (loss)
------------ ------------ ---------- ------------ ----- -------
U.S. Networks $1,111 $(56) $(34) $(4) $(51) $966
International
Networks 387 (43) (41) - (2) 301
Commerce,
Education,
and Other 13 (9) - - (6) (2)
Corporate (201) (78) - 73 (2) (208)
---- --- --- --- --- ----
Total $1,310 $(186) $(75) $69 (61) $1,057
====== ===== ==== === === ======
(a) Total amount in 2009 represents the pre-tax gain on the sale of
Discovery Kids of $252 million, asset impairment charges of $32
million and exit and restructuring charges of $34 million. Total
amount in 2008 represents asset impairment charges of $30 million and
exit and restructuring charges of $31 million.
DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
(Unaudited; dollars in millions)
CALCULATION OF FREE CASH FLOW
Three Months Ended Twelve Months Ended
------------------ -------------------
December 31, December 31,
------------ ------------
2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Cash provided by
operating
activities $250 $146 $104 $608 $569 $39
Acquisition of
property and
equipment (14) (18) 4 (57) (102) 45
--- --- --- --- ---- ---
Free cash flow $236 $128 $108 $551 $467 $84
==== ==== ==== ==== ==== ===
RECONCILIATION OF 2010 OUTLOOK TO GAAP MEASURES
Full Year 2010
--------------
Net income available to Discovery
Communications, Inc. stockholders $660 To $725
Interest expense, net 235 To 220
Depreciation and amortization 140 To 130
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 525 To 565
--- ---
Adjusted OIBDA $1,560 To $1,640
====== ======
DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
SELECTED FINANCIAL DETAIL
(Unaudited; dollars in millions, except per share amounts)
BORROWINGS
As of
December 31,
2009
$1.6 billion Revolving Credit Facility, due October 2010 $ -
$1.5 billion Term Loan B, due quarterly September 2007 to May 2014 1,463
$500 million Term Loan C, due quarterly June 2009 to May 2014 496
8.37% Senior Notes, semi-annual interest, due March 2011 220
8.13% Senior Notes, semi-annual interest, due September 2012 235
Floating Rate Senior Notes, semi-annual interest,
due December 2012 (1.23 % at December 31, 2009) 90
6.01% Senior Notes, semi-annual interest, due December 2015 390
5.625% Senior Notes, semi-annual interest, due August 2019 500
Capital lease obligations 114
---
Total long-term debt 3,508
Unamortized discount (13)
---
Long-term debt, net 3,495
Less: Current portion of long-term debt 38
---
Noncurrent portion of long-term debt $3,457
======
SHARE-BASED COMPENSATION
As of December 31, 2009
------------------------------------------------------
Total Units Weighted Vested Units Weighted
Long-Term Outstanding Average Outstanding Average
Incentive Plans (in millions) Exercise Price (in millions) Exercise Price
--------------- ------------ -------------- ------------- --------------
Discovery appreciation
plan 12.4 $19.36 0.1 $21.64
Stock appreciation
rights 3.1 14.48 0.5 14.47
Stock options 17.2 16.31 2.4 14.28
---- ---
Total share-based
compensation plans 32.7 $17.29 3.0 $14.56
---- ---
NET OF TAX GAIN RECONCILIATION FOR DISCOVERY KIDS TRANSACTION
Pre-tax gain on sale of 50% of Discovery Kids $252
Tax recorded on book gain (93)
Tax recorded on goodwill allocated to the 50% of Discovery Kids sold (81)
Tax recorded on step-up of book value for the retained 50% of
Discovery Kids (32)
---
Net of tax gain $46
===
DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
(Unaudited; dollars in millions)
IMPACT ON SELECT FINANCIAL ITEMS OF ADOPTING AMENDED STANDARDS IN ASC 810
Year Ended December 31, 2009
As Reported Adjustment Recast(a)
----------- ---------- ---------
Revenues:
Distribution $1,713 $(15) $1,698
Advertising 1,428 (1) 1,427
Other 375 5 380
--- --- ---
Total revenues 3,516 (11) 3,505
----- --- -----
Costs of revenues 1,065 (7) 1,058
Selling, general and
administrative 1,247 (28) 1,219
Other operating
income, net (31) (6) (37)
--- --- ---
2,281 (41) 2,240
----- --- -----
Operating income 1,235 30 1,265
Interest expense, net (250) 2 (248)
Other non-operating
income, net 46 (33) 13
--- --- ---
Income before income taxes 1,031 (1) 1,030
Provision for income taxes (472) - (472)
---- --- ----
Net income 559 (1) 558
Less net loss (income)
attributable to non-
controlling interests 1 (16) (15)
--- --- ---
Net income attributable to
Discovery Communications, Inc. 560 (17) 543
Stock dividends to
preferred interests (8) - (8)
--- --- ---
Net income available to
Discovery Communications,
Inc. stockholders $552 $(17) $535
==== ==== ====
(a) Beginning in January 2010 Discovery will deconsolidate the OWN and
Animal Planet Japan joint ventures due to the adoption of the amended
accounting standards for interests in a variable interest entity
included in ASC 810. The above table reflects the impact of the
adoption as if it had been effective January 1, 2009.
SOURCE Discovery Communications, Inc.
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