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| 8-K - 8-K - Discovery, Inc. | a3q2018pressrelease8k.htm |
DISCOVERY, INC. REPORTS THIRD QUARTER 2018 RESULTS
Silver Spring, MD – November 8, 2018: Discovery, Inc. (“Discovery” or the “Company”) (NASDAQ: DISCA, DISCB, DISCK) today reported financial results for the third quarter ended September 30, 2018.
“Our solid third quarter results demonstrate the strength of our brands and unmatched multi-platform distribution network, as we continue to position our broad suite of IP to maximize value and extend our global presence,” said David Zaslav, President and Chief Executive Officer for Discovery. "We are very pleased with how far we've come in the eight months since we closed our merger with Scripps Networks, highlighted by the acceleration of synergy generation and strong Adjusted OIBDA growth in the third quarter. Additionally, we continue to drive organic growth opportunities across our diverse portfolio, further positioning us for continued cash flow generation and additional value creation. We remain increasingly optimistic about the roadmap ahead of us as we drive forward with our plan to transform our Company.”
Third Quarter 2018 Results
Third quarter revenues of $2,592 million increased 57% on a reported basis compared with the prior year quarter. Excluding the impact of foreign currency fluctuations and the Scripps Networks Interactive (“Scripps Networks”), Motor Trend Group, LLC (“MTG”) and the Oprah Winfrey Network (“OWN”) transactions (collectively, “the Transactions”)(1), revenues increased 1%, as a 3% increase in International Networks and a 2% increase in U.S. Networks were partially offset by a significant decrease in Education and Other revenues due to the sale of the education business(2) on April 30, 2018. On a pro forma(3) combined basis, excluding the impact of foreign currency fluctuations, total company third quarter revenues increased 2%, as International Networks revenues increased 2% and U.S. Networks revenues increased 4%, partially offset by the significant decrease in Education and Other revenues.
Third quarter Adjusted Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”)(4) increased 82% to $1,044 million on a reported basis compared with the prior year quarter. Excluding the impact of the Transactions and foreign currency fluctuations, Adjusted OIBDA increased 9% compared with the prior year quarter, as International Networks increased 21% and U.S. Networks increased 6%. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, third quarter Adjusted OIBDA increased 18%, as International Networks' Adjusted OIBDA increased 27% and U.S. Networks Adjusted OIBDA increased 13%.
Third quarter net income available to Discovery ("DCI Net Income") was $117 million, compared with $218 million in the prior year quarter, as improved operating results were more than offset by higher restructuring and other charges associated with the integration of Scripps Networks, higher tax expenses and higher interest expense. Diluted earnings per share(5) decreased to $0.16 due to lower DCI Net Income. Adjusted Earnings Per Diluted Share ("Adjusted EPS")(4),(5), which excludes the impact of amortization of acquisition-related intangible assets, net of tax was $0.52. Adjusted EPS excluding restructuring and other charges was $0.79, and included $190 million (or $0.27 per share) of after-tax restructuring and other charges.
(1) | The Transactions refer to the Company's acquisition of Scripps Networks on March 6, 2018, acquisition of a controlling interest in OWN on November 30, 2017 and the contribution of businesses from MTG on September 25, 2017. |
(2) | The Company sold a majority stake in the education business on April 30, 2018. |
(3) | Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 6 for the full list of pro forma adjustments and to page 11 for pro forma operating results. |
(4) | See full definitions of Adjusted OIBDA and Adjusted EPS on page 5. |
(5) | All per share amounts are calculated using DCI Net Income. Refer to table on page 21 for the full schedule. |
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Free cash flow(1) increased to $907 million for the third quarter of 2018 as cash flow from operations increased to $931 million while capital expenditures of $24 million were consistent with the prior year quarter. Third quarter cash flow from operations increased primarily due to higher operating results due to the Transactions offset by higher content costs, restructuring costs and interest expense.
THIRD QUARTER SEGMENT RESULTS
Total Company
(dollars in millions) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | |||||||||||||||||
Revenues: | ||||||||||||||||||||||
U.S. Networks | $ | 1,674 | $ | 823 | NM | $ | 4,628 | $ | 2,542 | 82 | % | |||||||||||
International Networks | 916 | 796 | 15 | % | 3,065 | 2,354 | 30 | % | ||||||||||||||
Education and Other | 3 | 32 | (91 | )% | 52 | 113 | (54 | )% | ||||||||||||||
Corporate and Inter-Segment Eliminations | (1 | ) | — | NM | (1 | ) | — | NM | ||||||||||||||
Total revenues | $ | 2,592 | $ | 1,651 | 57 | % | $ | 7,744 | $ | 5,009 | 55 | % | ||||||||||
Adjusted OIBDA: | ||||||||||||||||||||||
U.S. Networks | $ | 901 | $ | 480 | 88 | % | $ | 2,536 | $ | 1,548 | 64 | % | ||||||||||
International Networks | 254 | 180 | 41 | % | 727 | 610 | 19 | % | ||||||||||||||
Education and Other | — | — | — | % | 3 | (1 | ) | NM | ||||||||||||||
Corporate and Inter-Segment Eliminations | (111 | ) | (85 | ) | (31 | )% | (311 | ) | (262 | ) | (19 | )% | ||||||||||
Total Adjusted OIBDA | $ | 1,044 | $ | 575 | 82 | % | $ | 2,955 | $ | 1,895 | 56 | % | ||||||||||
U.S. Networks
(dollars in millions) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | |||||||||||||||||
Revenues: | ||||||||||||||||||||||
Distribution | $ | 644 | $ | 402 | 60 | % | $ | 1,812 | $ | 1,210 | 50 | % | ||||||||||
Advertising | 991 | 407 | NM | 2,708 | 1,284 | NM | ||||||||||||||||
Other | 39 | 14 | NM | 108 | 48 | NM | ||||||||||||||||
Total revenues | $ | 1,674 | $ | 823 | NM | $ | 4,628 | $ | 2,542 | 82 | % | |||||||||||
Adjusted OIBDA | $ | 901 | $ | 480 | 88 | % | $ | 2,536 | $ | 1,548 | 64 | % | ||||||||||
U.S. Networks’ revenues for the third quarter of 2018 increased to $1,674 million on a reported basis compared with the prior year quarter. Excluding the impact of the Transactions, revenues increased 2%, as an 8% increase in advertising revenues was partially offset by a 2% decrease in distribution revenues and a 29% decrease in other revenues. On a pro forma combined basis, U.S. Networks' revenues for the third quarter increased 4%, as advertising revenues increased 5%, distribution revenues remained consistent and other revenues increased 18%.
(1) | Free cash flow is defined as cash provided by operating activities less purchases of property and equipment. |
NM: Not Meaningful | |
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The growth in third quarter pro forma advertising revenues was primarily driven by increases in pricing and to a lesser extent volume, as well as the continued monetization of digital content offerings, partially offset by the impact of audience declines on our linear networks. Pro forma distribution revenues remained consistent, as increases in contractual affiliate rates were offset by a decline in subscribers and lower contributions from content deliveries under licensing agreements. On a pro forma combined basis, total portfolio subscribers declined 5%, while subscribers to our fully distributed networks declined 2%.
Operating expenses for U.S. Networks on a reported basis increased to $773 million compared with operating expenses of $343 million in the prior year quarter. Excluding the impact of the Transactions, operating expenses decreased 3%, as costs of revenues decreased 4% and SG&A expenses decreased 1%. On a pro forma combined basis, total operating expenses decreased 6%, as costs of revenues decreased 6% and SG&A expenses decreased 4%. The decrease in pro forma combined operating expenses was primarily attributable to higher content impairment expense recorded by Scripps Networks during the three months ended September 30, 2017, lower personnel costs due to restructuring and the integration of Scripps Networks and decreased spending on marketing.
U.S. Networks' Adjusted OIBDA increased 88% to $901 million on a reported basis compared with the prior year quarter. Excluding the impact of the Transactions, U.S. Networks' Adjusted OIBDA increased 6%. On a pro forma combined basis, Adjusted OIBDA increased 13%, driven by increases in revenues and declines in operating expenses.
International Networks
(dollars in millions) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | |||||||||||||||||
Revenues: | ||||||||||||||||||||||
Distribution | $ | 508 | $ | 479 | 6 | % | $ | 1,577 | $ | 1,383 | 14 | % | ||||||||||
Advertising | 374 | 298 | 26 | % | 1,232 | 913 | 35 | % | ||||||||||||||
Other | 34 | 19 | 79 | % | 256 | 58 | NM | |||||||||||||||
Total revenues | $ | 916 | $ | 796 | 15 | % | $ | 3,065 | $ | 2,354 | 30 | % | ||||||||||
Adjusted OIBDA | $ | 254 | $ | 180 | 41 | % | $ | 727 | $ | 610 | 19 | % | ||||||||||
International Networks’ revenues for the third quarter of 2018 on a reported basis increased 15% to $916 million compared with the prior year quarter. Excluding the impact of the acquisition of Scripps Networks and foreign currency fluctuations, International Networks' revenues increased 3%, driven by a 3% increase in distribution revenues, while advertising revenues remained flat and other revenues decreased $1 million. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, International Networks' revenues increased 2%, driven by a 3% increase in distribution revenues and a 2% increase in advertising revenues, slightly offset by a decrease in other revenues. Pro forma distribution revenue growth was primarily driven by increases in subscribers to our linear networks and digital subscription revenues in Europe and increases in pricing in Latin America, partially offset by pricing declines in Asia. Pro forma advertising revenue growth was primarily driven by increases in Europe, mostly due to higher pricing, partially offset by viewership declines in Europe.
Operating expenses for International Networks on a reported basis increased to $662 million compared with operating expenses of $616 million the prior year quarter. Excluding the impact of the acquisition of Scripps Networks and foreign currency fluctuations, operating expenses decreased 3%, as costs of revenues decreased 6% slightly offset by an increase in SG&A of 4%. On a pro forma combined basis, excluding currency effects, operating expenses decreased 5%, as costs of revenues decreased 7%, primarily attributable to content synergies following the acquisition of Scripps Networks while SG&A remained consistent, as cost savings from the integration of Scripps Networks offset increased personnel spending related to digital distribution offerings.
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International Networks' Adjusted OIBDA increased 41% to $254 million on a reported basis compared with the prior year quarter. Excluding the impact of the acquisition of Scripps Networks and foreign currency fluctuations, International Networks' Adjusted OIBDA increased 21%. On a pro forma combined basis, excluding currency effects, Adjusted OIBDA increased 27%. The increase in pro forma combined Adjusted OIBDA was primarily driven by increases in revenues and decreases in costs of revenues.
Education and Other
(dollars in millions) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | |||||||||||||||||
Revenues | $ | 3 | $ | 32 | (91 | )% | $ | 52 | $ | 113 | (54 | )% | ||||||||||
Adjusted OIBDA | $ | — | $ | — | — | % | $ | 3 | $ | (1 | ) | NM | ||||||||||
Education and Other revenues for the third quarter of 2018 decreased $29 million and Adjusted OIBDA was flat due to the sale of a majority stake in the education business resulting in deconsolidation on April 30, 2018. The Education and Other segment now only includes activities associated with inter-company sales of productions for the U.S. Networks segment.
Corporate and Inter-Segment Eliminations
Adjusted OIBDA for the third quarter of 2018 decreased 31% on a reported basis compared with the prior year quarter. Excluding the impact of the acquisition of Scripps Networks and foreign currency fluctuations, Adjusted OIBDA decreased 20%. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, Adjusted OIBDA decreased 1% compared with the prior year quarter due to increased technology costs, partially offset by reductions in personnel costs as a result of the integration of Scripps Networks.
FULL YEAR 2018 OUTLOOK(1)
Discovery will provide forward-looking guidance in connection with this quarterly earnings announcement on its quarterly earnings conference call and webcast referenced hereafter.
(1) | Discovery is unable to provide a reconciliation of the forward-looking guidance to GAAP measures as, at this time, Discovery cannot determine all of the adjustments that would be required. |
4
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 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 19 for reconciliations to the most comparable 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 Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”). Adjusted OIBDA is defined as operating income excluding: (i) mark-to-market share-based compensation, (ii) depreciation and amortization, (iii) restructuring and other charges, (iv) certain impairment charges, (v) gains and losses on business and asset dispositions, (vi) certain inter-segment eliminations related to production studios, and (vii) third-party transaction costs directly related to the acquisition and integration of Scripps Networks.
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 share-based compensation, restructuring and other charges, certain impairment charges, gains and losses on business and asset dispositions and Scripps Networks transaction and integration costs from the calculation of Adjusted OIBDA due to their impact on comparability between periods. The Company also excludes depreciation of fixed assets and amortization of intangible assets, as these amounts do not represent cash payments in the current reporting period. Certain corporate expenses are excluded from segment results to enable executive management to evaluate segment performance based upon the decisions of segment executives. Total Adjusted OIBDA should be considered in addition to, but not a substitute for, operating income, net income and other measures of financial performance reported in accordance with GAAP. Refer to the comments that follow for our methodology for calculating growth rates excluding the impact of currency effects.
Adjusted EPS and Adjusted EPS Excluding the Impact of Currency Effects
Adjusted EPS is defined 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 this metric 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. Refer to the comments that follow for our methodology for calculating growth rates excluding the impact of currency effects.
Methodology for Calculating Growth Rates Excluding the Impact of Currency Effects
In addition to the Transactions, 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, a spot rate for each of our currencies determined early in the fiscal year as part of our forecasting process (the “2018 Baseline Rate”), and the prior year amounts translated at the same 2018 Baseline Rate.
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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.
Selling, General and Administrative Expense
Selling, general and administrative expense, as presented, excludes mark-to-market based compensation and Scripps Networks transaction and integration costs due to their impact on comparability between periods.
Free Cash Flow
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.
Pro Forma Adjustments
The discussion and tables beginning on page 11 compare our actual and pro forma combined results as if the Transactions occurred on January 1, 2017. Management believes reviewing our actual operating results in addition to combined pro forma results is useful in identifying trends in, or reaching conclusions regarding, the overall operating performance of our businesses. Our combined U.S. Networks, International Networks and Corporate and Inter-Segment Eliminations pro forma information is based on the historical operating results of the respective businesses as applicable to each segment and includes adjustments directly attributable to the Transactions as if they had occurred on January 1, 2017, such as:
1. The impact of the purchase price allocation to the fair value of assets, liabilities, and noncontrolling interests, such as intangible amortization;
2. Adjustments to remove items associated with the Transactions that will not have a continuing impact on the combined entity, such as transaction costs and the impact of employee retention agreements; and
3. Changes to align accounting policies.
Adjustments do not include costs related to integration activities, cost savings or synergies that have been or may be achieved by the combined businesses. Pro forma amounts are not necessarily indicative of what our results would have been had we operated the acquired businesses since January 1, 2017, and should not be taken as indicative of the Company's future consolidated results of operations.
Actual amounts for the three and nine months ended September 30, 2018 include the results of operations for the Discovery and Scripps Networks, OWN and MTG businesses for the period since each respective transaction. Scripps Networks was acquired on March 6, 2018, OWN was consolidated on November 30, 2017 and MTG was consolidated on September 25, 2017.
Conference Call Information
Discovery will host a conference call today, November 8, 2018 at 8:30 a.m. ET to discuss its third quarter results. To listen to the call, visit https://corporate.discovery.com or dial 1-844-452-2811 inside the U.S. and 1-574-990-9832 outside of the U.S., using conference ID: 8488208 and passcode: DISCA.
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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 28, 2018.
Forward-looking statements include statements regarding the Company’s expectations, beliefs, intentions or strategies regarding the future, and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and “would” or similar words. Forward-looking statements in this release include, without limitation, statements regarding investing in the Company's programming, strategic growth initiatives, and the timing and effects of the Scripps Networks acquisition and related transactions. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
About Discovery
Discovery, Inc. (Nasdaq: DISCA, DISCB, DISCK) is a global leader in real life entertainment, serving a passionate audience of superfans around the world with content that inspires, informs and entertains. Discovery delivers over 8,000 hours of original programming each year and has category leadership across deeply loved content genres around the world. Available in 220 countries and territories and in nearly 50 languages, Discovery is a platform innovator, reaching viewers on all screens, including TV Everywhere products such as the GO portfolio of apps and Discovery Kids Play; direct-to-consumer streaming services such as Eurosport Player and Motor Trend OnDemand; digital-first and social content from Group Nine Media and a strategic alliance with the PGA Tour to create the Global Home of Golf. Discovery’s portfolio of premium brands includes Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, Turbo/Velocity, Animal Planet, and Science Channel, as well as OWN: Oprah Winfrey Network in the U.S., Discovery Kids in Latin America, and Eurosport, the leading provider of locally relevant, premium sports and Home of the Olympic Games across Europe. For more information, please visit https://corporate.discovery.com and follow @DiscoveryIncTV across social platforms.
Contacts
Media Contact | Investor Relations Contacts |
Catherine Frymark (240) 662-2934 | Andrew Slabin (212) 548-5544 |
catherine_frymark@discovery.com | andrew_slabin@discovery.com |
Jackie Burka (212) 548-5642 | |
jackie_burka@discovery.com | |
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DISCOVERY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in millions, except per share amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: | ||||||||||||||||
Distribution | $ | 1,152 | $ | 881 | $ | 3,389 | $ | 2,593 | ||||||||
Advertising | 1,365 | 705 | 3,940 | 2,197 | ||||||||||||
Other | 75 | 65 | 415 | 219 | ||||||||||||
Total revenues | 2,592 | 1,651 | 7,744 | 5,009 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Costs of revenues, excluding depreciation and amortization | 934 | 670 | 2,989 | 1,911 | ||||||||||||
Selling, general and administrative | 667 | 457 | 1,963 | 1,261 | ||||||||||||
Depreciation and amortization | 398 | 80 | 1,001 | 240 | ||||||||||||
Restructuring and other charges | 224 | 11 | 652 | 43 | ||||||||||||
(Gain) loss on disposition | — | — | (84 | ) | 4 | |||||||||||
Total costs and expenses | 2,223 | 1,218 | 6,521 | 3,459 | ||||||||||||
Operating income | 369 | 433 | 1,223 | 1,550 | ||||||||||||
Interest expense, net | (185 | ) | (136 | ) | (558 | ) | (318 | ) | ||||||||
Loss on extinguishment of debt | — | — | — | (54 | ) | |||||||||||
Income (loss) from equity investees, net | 9 | (27 | ) | (53 | ) | (122 | ) | |||||||||
Other expense, net | (15 | ) | (106 | ) | (84 | ) | (143 | ) | ||||||||
Income before income taxes | 178 | 164 | 528 | 913 | ||||||||||||
Income tax (expense) benefit | (43 | ) | 59 | (146 | ) | (89 | ) | |||||||||
Net income | 135 | 223 | 382 | 824 | ||||||||||||
Net income attributable to noncontrolling interests | (13 | ) | — | (41 | ) | — | ||||||||||
Net income attributable to redeemable noncontrolling interests | (5 | ) | (5 | ) | (16 | ) | (17 | ) | ||||||||
Net income available to Discovery, Inc. | $ | 117 | $ | 218 | $ | 325 | $ | 807 | ||||||||
Net income per share allocated to Discovery, Inc. Series A, B and C common stockholders: | ||||||||||||||||
Basic | $ | 0.16 | $ | 0.38 | $ | 0.47 | $ | 1.40 | ||||||||
Diluted(1) | $ | 0.16 | $ | 0.38 | $ | 0.47 | $ | 1.39 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 523 | 381 | 490 | 385 | ||||||||||||
Diluted(1) | 713 | 571 | 679 | 581 | ||||||||||||
(1) Diluted shares adjust for the potential dilution that would occur if common stock equivalents, including convertible preferred stock and share-based awards, were converted into common stock or exercised.
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DISCOVERY, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; in millions, except par value)
September 30, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 531 | $ | 7,309 | ||||
Receivables, net | 2,578 | 1,838 | ||||||
Content rights, net | 349 | 410 | ||||||
Prepaid expenses and other current assets | 456 | 434 | ||||||
Total current assets | 3,914 | 9,991 | ||||||
Noncurrent content rights, net | 3,115 | 2,213 | ||||||
Property and equipment, net | 810 | 597 | ||||||
Goodwill, net | 13,139 | 7,073 | ||||||
Intangible assets, net | 10,040 | 1,770 | ||||||
Equity method investments, including note receivable | 1,015 | 335 | ||||||
Other noncurrent assets | 879 | 576 | ||||||
Total assets | $ | 32,912 | $ | 22,555 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 280 | $ | 277 | ||||
Accrued liabilities | 1,623 | 1,309 | ||||||
Deferred revenues | 304 | 255 | ||||||
Current portion of debt | 1,653 | 30 | ||||||
Total current liabilities | 3,860 | 1,871 | ||||||
Noncurrent portion of debt | 15,829 | 14,755 | ||||||
Deferred income taxes | 1,901 | 319 | ||||||
Other noncurrent liabilities | 1,089 | 587 | ||||||
Total liabilities | 22,679 | 17,532 | ||||||
Redeemable noncontrolling interests | 414 | 413 | ||||||
Equity: | ||||||||
Discovery, Inc. stockholders’ equity: | ||||||||
Series A-1 convertible preferred stock: $0.01 par value; 8 authorized; 8 shares issued | — | — | ||||||
Series C-1 convertible preferred stock: $0.01 par value; 6 authorized; 6 shares issued | — | — | ||||||
Series A common stock: $0.01 par value; 1,700 shares authorized; 159 and 157 shares issued | 1 | 1 | ||||||
Series B convertible common stock: $0.01 par value; 100 shares authorized; 7 shares issued | — | — | ||||||
Series C common stock: $0.01 par value; 2,000 shares authorized; 524 and 383 shares issued | 5 | 4 | ||||||
Additional paid-in capital | 10,627 | 7,295 | ||||||
Treasury stock, at cost | (6,737 | ) | (6,737 | ) | ||||
Retained earnings | 4,984 | 4,632 | ||||||
Accumulated other comprehensive loss | (764 | ) | (585 | ) | ||||
Total Discovery, Inc. stockholders' equity | 8,116 | 4,610 | ||||||
Noncontrolling interests | 1,703 | — | ||||||
Total equity | 9,819 | 4,610 | ||||||
Total liabilities and equity | $ | 32,912 | $ | 22,555 | ||||
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DISCOVERY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in millions)
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Operating Activities | |||||||
Net income | $ | 382 | $ | 824 | |||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||
Share-based compensation expense | 92 | 22 | |||||
Depreciation and amortization | 1,001 | 240 | |||||
Content rights amortization and impairment | 2,523 | 1,397 | |||||
(Gain) loss on disposition | (84 | ) | 4 | ||||
Equity in losses of equity method investee companies, net of cash distributions | 106 | 130 | |||||
Deferred income taxes | (140 | ) | (167 | ) | |||
Loss on extinguishment of debt | — | 54 | |||||
Realized loss from derivative instruments, net | — | 98 | |||||
Other, net | 54 | 74 | |||||
Changes in operating assets and liabilities, net of acquisitions and dispositions: | |||||||
Receivables, net | (19 | ) | (138 | ) | |||
Content rights and payables, net | (2,222 | ) | (1,400 | ) | |||
Accounts payable and accrued liabilities | (123 | ) | 23 | ||||
Income taxes receivable and prepaid income taxes | (53 | ) | 11 | ||||
Foreign currency and other, net | 130 | (5 | ) | ||||
Cash provided by operating activities | 1,647 | 1,167 | |||||
Investing Activities | |||||||
Business acquisitions, net of cash acquired | (8,565 | ) | (4 | ) | |||
Payments for investments, net | (56 | ) | (387 | ) | |||
Proceeds from dispositions, net of cash disposed | 107 | 29 | |||||
Proceeds from sale of assets previously held for sale | 68 | — | |||||
Purchases of property and equipment | (106 | ) | (103 | ) | |||
Distributions from equity method investees | 1 | 38 | |||||
Payments for derivative instruments, net | (3 | ) | (99 | ) | |||
Other investing activities, net | 5 | 3 | |||||
Cash used in investing activities | (8,549 | ) | (523 | ) | |||
Financing Activities | |||||||
Commercial paper borrowings (repayments), net | 293 | (48 | ) | ||||
Borrowings under revolving credit facility | — | 350 | |||||
Principal repayments of revolving credit facility | (100 | ) | (475 | ) | |||
Borrowings under term loan facilities | 2,000 | — | |||||
Principal repayments of term loans | (2,000 | ) | — | ||||
Borrowings from debt, net of discount and including premiums | — | 7,488 | |||||
Principal repayments of debt, including discount payment and premiums to par value | — | (650 | ) | ||||
Payments for bridge financing commitment fees | — | (40 | ) | ||||
Principal repayments of capital lease obligations | (37 | ) | (26 | ) | |||
Repurchases of stock | — | (603 | ) | ||||
Cash settlement of common stock repurchase contracts | — | 58 | |||||
Distributions to noncontrolling interests and redeemable noncontrolling interests | (59 | ) | (22 | ) | |||
Share-based plan proceeds, net | 44 | 15 | |||||
Borrowings under program financing line of credit | 23 | — | |||||
Other financing activities, net | (16 | ) | (64 | ) | |||
Cash provided by financing activities | 148 | 5,983 | |||||
Effect of exchange rate changes on cash and cash equivalents | (24 | ) | 67 | ||||
Net change in cash and cash equivalents | (6,778 | ) | 6,694 | ||||
Cash and cash equivalents, beginning of period | 7,309 | 300 | |||||
Cash and cash equivalents, end of period | $ | 531 | $ | 6,994 | |||
10
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
UNAUDITED SELECTED PRO FORMA FINANCIALS(1)
(unaudited; amounts in millions)
TOTAL COMPANY REPORTED AND PRO FORMA FINANCIAL RESULTS
Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | Pro Forma Ex-FX(2) | |||||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | % | |||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||
Distribution | $ | 1,152 | $ | 1 | $ | 1,153 | $ | 881 | $ | 270 | $ | 1,151 | $ | 271 | 31 | % | $ | 2 | — | % | 2 | % | |||||||||||||
Advertising | 1,365 | — | 1,365 | 705 | 623 | 1,328 | 660 | 94 | % | 37 | 3 | % | 4 | % | |||||||||||||||||||||
Other | 75 | — | 75 | 65 | 38 | 103 | 10 | 15 | % | (28 | ) | (27 | )% | (27 | )% | ||||||||||||||||||||
Total revenues | 2,592 | 1 | 2,593 | 1,651 | 931 | 2,582 | 941 | 57 | % | 11 | — | % | 2 | % | |||||||||||||||||||||
Costs of revenues, excluding depreciation and amortization | 934 | (1 | ) | 933 | 670 | 366 | 1,036 | 264 | 39 | % | (103 | ) | (10 | )% | (8 | )% | |||||||||||||||||||
Selling, general and administrative | 614 | 1 | 615 | 406 | 245 | 651 | 208 | 51 | % | (36 | ) | (6 | )% | (4 | )% | ||||||||||||||||||||
Adjusted OIBDA(3) | $ | 1,044 | $ | 1 | $ | 1,045 | $ | 575 | $ | 320 | $ | 895 | 469 | 82 | % | 150 | 17 | % | 18 | % | |||||||||||||||
TOTAL COMPANY UNAUDITED RECONCILIATION OF REPORTED AND PRO FORMA OPERATING INCOME TO ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||||||||||
Operating income | 369 | 69 | 438 | 433 | 65 | 498 | $ | (64 | ) | (15 | )% | $ | (60 | ) | (12 | )% | ||||||||||||||||
Restructuring and other charges | 224 | — | 224 | 11 | — | 11 | 213 | NM | 213 | NM | ||||||||||||||||||||||
Depreciation and amortization | 398 | (70 | ) | 328 | 80 | 311 | 391 | 318 | NM | (63 | ) | (16 | )% | |||||||||||||||||||
Mark-to-market share-based compensation | 27 | 1 | 28 | (11 | ) | 4 | (7 | ) | 38 | NM | 35 | NM | ||||||||||||||||||||
Scripps Networks transaction and integration costs | 26 | — | 26 | 62 | (60 | ) | 2 | (36 | ) | (58 | )% | 24 | NM | |||||||||||||||||||
Inter-segment eliminations | — | 1 | 1 | — | — | — | — | NM | 1 | NM | ||||||||||||||||||||||
Adjusted OIBDA(3) | $ | 1,044 | $ | 1 | $ | 1,045 | $ | 575 | $ | 320 | $ | 895 | 469 | 82 | % | 150 | 17 | % | ||||||||||||||
(1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 6 for full list of adjustments to pro forma results.
(2) Refer to page 5 for our methodology for calculating growth rates excluding the impact of currency effects.
(3) See full definition of Adjusted OIBDA on page 5.
NM: Not Meaningful
11
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
UNAUDITED SELECTED PRO FORMA FINANCIALS(1)
(unaudited; amounts in millions)
U.S. NETWORKS REPORTED AND PRO FORMA FINANCIAL RESULTS
Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Distribution | $ | 644 | $ | 1 | $ | 645 | $ | 402 | $ | 240 | $ | 642 | $ | 242 | 60 | % | $ | 3 | — | % | ||||||||||||
Advertising | 991 | (1 | ) | 990 | 407 | 534 | 941 | 584 | NM | 49 | 5 | % | ||||||||||||||||||||
Other | 39 | 1 | 40 | 14 | 20 | 34 | 25 | NM | 6 | 18 | % | |||||||||||||||||||||
Total revenues | 1,674 | 1 | 1,675 | 823 | 794 | 1,617 | 851 | NM | 58 | 4 | % | |||||||||||||||||||||
Costs of revenues, excluding depreciation and amortization | (486 | ) | — | (486 | ) | (226 | ) | (292 | ) | (518 | ) | (260 | ) | NM | 32 | 6 | % | |||||||||||||||
Selling, general and administrative | (287 | ) | — | (287 | ) | (117 | ) | (183 | ) | (300 | ) | (170 | ) | NM | 13 | 4 | % | |||||||||||||||
Adjusted OIBDA(2) | 901 | 1 | 902 | 480 | 319 | 799 | 421 | 88 | % | 103 | 13 | % | ||||||||||||||||||||
U.S. NETWORKS UNAUDITED RECONCILIATION OF REPORTED AND PRO FORMA OPERATING INCOME TO ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||||||||||
Operating income | $ | 399 | $ | 70 | $ | 469 | $ | 469 | $ | 41 | $ | 510 | $ | (70 | ) | (15 | )% | $ | (41 | ) | (8 | )% | ||||||||||
Depreciation and amortization | 296 | (69 | ) | 227 | 7 | 284 | 291 | 289 | NM | (64 | ) | (22 | )% | |||||||||||||||||||
Restructuring and other charges | 206 | — | 206 | 2 | — | 2 | 204 | NM | 204 | NM | ||||||||||||||||||||||
Scripps Networks transaction and integration costs | 3 | — | 3 | — | — | — | 3 | NM | 3 | NM | ||||||||||||||||||||||
Inter-segment eliminations | (3 | ) | — | (3 | ) | 2 | (6 | ) | (4 | ) | (5 | ) | NM | 1 | 25 | % | ||||||||||||||||
Adjusted OIBDA(2) | 901 | 1 | 902 | 480 | 319 | 799 | 421 | 88 | % | 103 | 13 | % | ||||||||||||||||||||
(1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 6 for full list of adjustments to pro forma results.
(2) See full definition of Adjusted OIBDA on page 5.
12
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
UNAUDITED SELECTED PRO FORMA FINANCIALS(1)
(unaudited; amounts in millions)
INTERNATIONAL NETWORKS REPORTED AND PRO FORMA FINANCIAL RESULTS
Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | Pro Forma Ex-FX(2) | |||||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | % | |||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||
Distribution | $ | 508 | $ | — | $ | 508 | $ | 479 | $ | 30 | $ | 509 | $ | 29 | 6 | % | $ | (1 | ) | — | % | 3 | % | ||||||||||||
Advertising | 374 | 1 | 375 | 298 | 89 | 387 | 76 | 26 | % | (12 | ) | (3 | )% | 2 | % | ||||||||||||||||||||
Other | 34 | (1 | ) | 33 | 19 | 18 | 37 | 15 | 79 | % | (4 | ) | (11 | )% | (11 | )% | |||||||||||||||||||
Total revenues | 916 | — | 916 | 796 | 137 | 933 | 120 | 15 | % | (17 | ) | (2 | )% | 2 | % | ||||||||||||||||||||
Costs of revenues, excluding depreciation and amortization | (449 | ) | 1 | (448 | ) | (433 | ) | (73 | ) | (506 | ) | (16 | ) | (4 | )% | 58 | 11 | % | 7 | % | |||||||||||||||
Selling, general and administrative | (213 | ) | (1 | ) | (214 | ) | (183 | ) | (38 | ) | (221 | ) | (30 | ) | (16 | )% | 7 | 3 | % | — | % | ||||||||||||||
Adjusted OIBDA(3) | 254 | — | 254 | 180 | 26 | 206 | 74 | 41 | % | 48 | 23 | % | 27 | % | |||||||||||||||||||||
INTERNATIONAL NETWORKS UNAUDITED RECONCILIATION OF OPERATING INCOME TO PRO FORMA ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||||||||||
Operating income | $ | 146 | $ | — | $ | 146 | $ | 117 | $ | (9 | ) | $ | 108 | $ | 29 | 25 | % | $ | 38 | 35 | % | |||||||||||
Depreciation and amortization | 82 | — | 82 | 56 | 26 | 82 | 26 | 46 | % | — | — | % | ||||||||||||||||||||
Restructuring and other charges | 16 | — | 16 | 7 | — | 7 | 9 | NM | 9 | NM | ||||||||||||||||||||||
Scripps Networks transaction and integration costs | 3 | — | 3 | — | — | — | 3 | NM | 3 | NM | ||||||||||||||||||||||
Inter-segment eliminations | 7 | — | 7 | — | 9 | 9 | 7 | NM | (2 | ) | (22 | )% | ||||||||||||||||||||
Adjusted OIBDA(3) | 254 | — | 254 | 180 | 26 | 206 | 74 | 41 | % | 48 | 23 | % | ||||||||||||||||||||
(1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 6 for full list of adjustments to pro forma results.
(2) Refer to page 5 for our methodology for calculating growth rates excluding the impact of currency effects.
(3) See full definition of Adjusted OIBDA on page 5.
13
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
UNAUDITED SELECTED PRO FORMA FINANCIALS(1)
(unaudited; amounts in millions)
CORPORATE AND INTER-SEGMENT ELIMINATIONS REPORTED AND PRO FORMA FINANCIAL RESULTS
Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||||||||||
Revenues: | $ | (1 | ) | $ | — | $ | (1 | ) | $ | — | $ | — | $ | — | $ | (1 | ) | NM | $ | (1 | ) | NM | ||||||||||
Costs of revenues, excluding depreciation and amortization | 1 | — | $ | 1 | — | (1 | ) | (1 | ) | 1 | NM | 2 | NM | |||||||||||||||||||
Selling, general and administrative | (111 | ) | — | (111 | ) | (85 | ) | (24 | ) | (109 | ) | (26 | ) | (31 | )% | (2 | ) | (2 | )% | |||||||||||||
Adjusted OIBDA(2) | (111 | ) | — | (111 | ) | (85 | ) | (25 | ) | (110 | ) | (26 | ) | (31 | )% | (1 | ) | (1 | )% | |||||||||||||
CORPORATE AND INTER-SEGMENT ELIMINATIONS UNAUDITED RECONCILIATION OF OPERATING INCOME TO PRO FORMA ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||||||||||
Operating (loss) | $ | (177 | ) | $ | (1 | ) | $ | (178 | ) | $ | (151 | ) | $ | 33 | $ | (118 | ) | $ | (26 | ) | (17 | )% | $ | (60 | ) | (51 | )% | |||||
Mark-to-market share-based compensation | 27 | 1 | 28 | (11 | ) | 4 | (7 | ) | 38 | NM | 35 | NM | ||||||||||||||||||||
Depreciation and amortization | 20 | (1 | ) | 19 | 15 | 1 | 16 | 5 | 33 | % | 3 | 19 | % | |||||||||||||||||||
Restructuring and other charges | 2 | — | 2 | — | — | — | 2 | NM | 2 | NM | ||||||||||||||||||||||
Scripps Networks transaction and integration costs | 20 | — | 20 | 62 | (60 | ) | 2 | (42 | ) | (68 | )% | 18 | NM | |||||||||||||||||||
Inter-segment eliminations | (3 | ) | 1 | (2 | ) | — | (3 | ) | (3 | ) | (3 | ) | NM | 1 | 33 | % | ||||||||||||||||
Adjusted OIBDA(2) | (111 | ) | — | (111 | ) | (85 | ) | (25 | ) | (110 | ) | (26 | ) | (31 | )% | (1 | ) | (1 | )% | |||||||||||||
(1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 6 for full list of adjustments to pro forma results.
(2) See full definition of Adjusted OIBDA on page 5.
14
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
UNAUDITED SELECTED PRO FORMA FINANCIALS(1)
(unaudited; amounts in millions)
TOTAL COMPANY REPORTED AND PRO FORMA FINANCIAL RESULTS(2)
Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | Pro Forma Ex-FX(3) | |||||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | % | |||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||
Distribution | $ | 3,389 | $ | 178 | $ | 3,567 | $ | 2,593 | $ | 825 | $ | 3,418 | $ | 796 | 31 | % | $ | 149 | 4 | % | 3 | % | |||||||||||||
Advertising | 3,940 | 426 | 4,366 | $ | 2,197 | 1,980 | 4,177 | 1,743 | 79 | % | 189 | 5 | % | 3 | % | ||||||||||||||||||||
Other | 415 | 19 | 434 | 219 | 106 | 325 | 196 | 89 | % | 109 | 34 | % | 30 | % | |||||||||||||||||||||
Total revenues | 7,744 | 623 | 8,367 | 5,009 | 2,911 | 7,920 | 2,735 | 55 | % | 447 | 6 | % | 4 | % | |||||||||||||||||||||
Costs of revenues, excluding depreciation and amortization | 2,989 | 204 | 3,193 | 1,911 | 1,008 | 2,919 | 1,078 | 56 | % | 274 | 9 | % | 8 | % | |||||||||||||||||||||
Selling, general and administrative | 1,800 | 160 | 1,960 | 1,203 | 769 | 1,972 | 597 | 50 | % | (12 | ) | (1 | )% | (3 | )% | ||||||||||||||||||||
Adjusted OIBDA(4) | 2,955 | 259 | 3,214 | 1,895 | 1,134 | 3,029 | 1,060 | 56 | % | 185 | 6 | % | 6 | % | |||||||||||||||||||||
TOTAL COMPANY UNAUDITED RECONCILIATION OF REPORTED AND PRO FORMA OPERATING INCOME TO ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
Nine Months Ended September 30, | ||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||
Operating income | 1,223 | 282 | 1,505 | 1,550 | 256 | 1,806 | (327 | ) | (21 | )% | (301 | ) | (17 | )% | ||||||||||
Restructuring and other charges | 652 | 10 | 662 | 43 | — | 43 | 609 | NM | 619 | NM | ||||||||||||||
Depreciation and amortization | 1,001 | (6 | ) | 995 | 240 | 933 | 1,173 | 761 | NM | (178 | ) | (15 | )% | |||||||||||
Mark-to-market share-based compensation | 56 | 1 | 57 | (4 | ) | 5 | 1 | 60 | NM | 56 | NM | |||||||||||||
Scripps Networks transaction and integration costs | 107 | (28 | ) | 79 | 62 | (60 | ) | 2 | 45 | 73 | % | 77 | NM | |||||||||||
(Gain) loss on disposition | (84 | ) | — | (84 | ) | 4 | — | 4 | (88 | ) | NM | (88 | ) | NM | ||||||||||
Adjusted OIBDA(4) | 2,955 | 259 | 3,214 | 1,895 | 1,134 | 3,029 | 1,060 | 56 | % | 185 | 6 | % | ||||||||||||
(1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 6 for full list of adjustments to pro forma results.
(2) Certain updates were made to previously disclosed pro forma adjustments as a result of further information identified after May 10, 2018, the date our March 31, 2018 quarterly report was filed. These changes impact the costs of revenue, depreciation and amortization, and restructuring and other charges line items. The pro forma adjustments disclosed above are inclusive of these updates and therefore many not reconcile to previously disclosed amounts.
(3) Refer to page 5 for our methodology for calculating growth rates excluding the impact of currency effects.
(4) See full definition of Adjusted OIBDA on page 5.
15
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
UNAUDITED SELECTED PRO FORMA FINANCIALS(1)
(unaudited; amounts in millions)
U.S. NETWORKS REPORTED AND PRO FORMA FINANCIAL RESULTS(2)
Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Distribution | $ | 1,812 | $ | 156 | $ | 1,968 | $ | 1,210 | $ | 740 | $ | 1,950 | $ | 602 | 50 | % | $ | 18 | 1 | % | ||||||||||||
Advertising | 2,708 | 356 | 3,064 | 1,284 | 1,702 | 2,986 | 1,424 | NM | 78 | 3 | % | |||||||||||||||||||||
Other | 108 | 7 | 115 | 48 | 63 | 111 | 60 | NM | 4 | 4 | % | |||||||||||||||||||||
Total revenues | 4,628 | 519 | 5,147 | 2,542 | 2,505 | 5,047 | 2,086 | 82 | % | 100 | 2 | % | ||||||||||||||||||||
Costs of revenues, excluding depreciation and amortization | (1,297 | ) | (152 | ) | (1,449 | ) | (652 | ) | (802 | ) | (1,454 | ) | (645 | ) | (99 | )% | 5 | — | % | |||||||||||||
Selling, general and administrative | (795 | ) | (111 | ) | (906 | ) | (342 | ) | (587 | ) | (929 | ) | (453 | ) | NM | 23 | 2 | % | ||||||||||||||
Adjusted OIBDA(3) | 2,536 | 256 | 2,792 | 1,548 | 1,116 | 2,664 | 988 | 64 | % | 128 | 5 | % | ||||||||||||||||||||
U.S. NETWORKS UNAUDITED RECONCILIATION OF REPORTED AND PRO FORMA OPERATING INCOME TO ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||||||||||
Operating income | $ | 1,581 | $ | 279 | $ | 1,860 | $ | 1,511 | $ | 287 | $ | 1,798 | $ | 70 | 5 | % | $ | 62 | 3 | % | ||||||||||||
Mark-to-market share-based compensation | — | — | — | — | (2 | ) | (2 | ) | — | NM | 2 | NM | ||||||||||||||||||||
Depreciation and amortization | 691 | (25 | ) | 666 | 21 | 852 | 873 | 670 | NM | (207 | ) | (24 | )% | |||||||||||||||||||
Restructuring and other charges | 259 | 6 | 265 | 6 | — | 6 | 253 | NM | 259 | NM | ||||||||||||||||||||||
Scripps Networks transaction and integration costs | 7 | — | 7 | — | — | — | 7 | NM | 7 | NM | ||||||||||||||||||||||
Inter-segment eliminations | (2 | ) | (4 | ) | (6 | ) | 10 | (21 | ) | (11 | ) | (12 | ) | NM | 5 | 45 | % | |||||||||||||||
Adjusted OIBDA(3) | 2,536 | 256 | 2,792 | 1,548 | 1,116 | 2,664 | 988 | 64 | % | 128 | 5 | % | ||||||||||||||||||||
(1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 6 for full list of adjustments to pro forma results.
(2) Certain updates were made to previously disclosed pro forma adjustments as a result of further information identified after May 10, 2018, the date our March 31, 2018 quarterly report was filed. These changes impact the costs of revenue, depreciation and amortization, and restructuring and other charges line items. The pro forma adjustments disclosed above are inclusive of these updates and therefore many not reconcile to previously disclosed amounts.
(3) See full definition of Adjusted OIBDA on page 5.
16
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
UNAUDITED SELECTED PRO FORMA FINANCIALS(1)
(unaudited; amounts in millions)
INTERNATIONAL NETWORKS REPORTED AND PRO FORMA FINANCIAL RESULTS(2)
Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | Pro Forma Ex-FX(3) | |||||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | % | |||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||
Distribution | $ | 1,577 | $ | 22 | $ | 1,599 | $ | 1,383 | $ | 85 | $ | 1,468 | $ | 194 | 14 | % | $ | 131 | 9 | % | 6 | % | |||||||||||||
Advertising | 1,232 | 70 | 1,302 | 913 | 278 | 1,191 | 319 | 35 | % | 111 | 9 | % | 5 | % | |||||||||||||||||||||
Other | 256 | 12 | 268 | 58 | 43 | 101 | 198 | NM | 167 | NM | NM | ||||||||||||||||||||||||
Total revenues | 3,065 | 104 | 3,169 | 2,354 | 406 | 2,760 | 711 | 30 | % | 409 | 15 | % | 11 | % | |||||||||||||||||||||
Costs of revenues, excluding depreciation and amortization | (1,675 | ) | (52 | ) | (1,727 | ) | (1,214 | ) | (205 | ) | (1,419 | ) | (461 | ) | (38 | )% | (308 | ) | (22 | )% | (18 | )% | |||||||||||||
Selling, general and administrative | (663 | ) | (27 | ) | (690 | ) | (530 | ) | (107 | ) | (637 | ) | (133 | ) | (25 | )% | (53 | ) | (8 | )% | (2 | )% | |||||||||||||
Adjusted OIBDA(4) | 727 | 25 | 752 | 610 | 94 | 704 | 117 | 19 | % | 48 | 7 | % | 5 | % | |||||||||||||||||||||
INTERNATIONAL NETWORKS UNAUDITED RECONCILIATION OF OPERATING INCOME TO PRO FORMA ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||||||||||
Operating income | $ | 217 | $ | 1 | $ | 218 | $ | 417 | $ | (6 | ) | $ | 411 | $ | (200 | ) | (48 | )% | $ | (193 | ) | (47 | )% | |||||||||
Depreciation and amortization | 232 | 19 | 251 | 165 | 79 | 244 | 67 | 41 | % | 7 | 3 | % | ||||||||||||||||||||
Restructuring and other charges | 262 | 2 | 264 | 28 | — | 28 | 234 | NM | 236 | NM | ||||||||||||||||||||||
Scripps Networks transaction and integration costs | 3 | — | 3 | — | — | — | 3 | NM | 3 | NM | ||||||||||||||||||||||
Inter-segment eliminations | 13 | 3 | 16 | — | 21 | 21 | 13 | NM | (5 | ) | (24 | )% | ||||||||||||||||||||
Adjusted OIBDA(4) | 727 | 25 | 752 | 610 | 94 | 704 | 117 | 19 | % | 48 | 7 | % | ||||||||||||||||||||
(1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 6 for full list of adjustments to pro forma results.
(2) Certain updates were made to previously disclosed pro forma adjustments as a result of further information identified after May 10, 2018, the date our March 31, 2018 quarterly report was filed. These changes impact the costs of revenue, depreciation and amortization, and restructuring and other charges line items. The pro forma adjustments disclosed above are inclusive of these updates and therefore many not reconcile to previously disclosed amounts.
(3) Refer to page 5 for our methodology for calculating growth rates excluding the impact of currency effects.
(4) See full definition of Adjusted OIBDA on page 5.
17
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
UNAUDITED SELECTED PRO FORMA FINANCIALS(1)
(unaudited; amounts in millions)
CORPORATE AND INTER-SEGMENT ELIMINATIONS REPORTED AND PRO FORMA FINANCIAL RESULTS(2)
Nine Months Ended September 30, | ||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||||||||
Revenues: | $ | (1 | ) | $ | — | $ | (1 | ) | $ | — | $ | — | $ | — | (1 | ) | NM | (1 | ) | NM | ||||||||||
Costs of revenues, excluding depreciation and amortization | — | — | — | (1 | ) | (1 | ) | (2 | ) | 1 | NM | 2 | NM | |||||||||||||||||
Selling, general and administrative | (310 | ) | (22 | ) | (332 | ) | (261 | ) | (75 | ) | (336 | ) | (49 | ) | (19 | )% | 4 | 1 | % | |||||||||||
Adjusted OIBDA(3) | (311 | ) | (22 | ) | (333 | ) | (262 | ) | (76 | ) | (338 | ) | (49 | ) | (19 | )% | 5 | 1 | % | |||||||||||
CORPORATE AND INTER-SEGMENT ELIMINATIONS UNAUDITED RECONCILIATION OF OPERATING INCOME TO PRO FORMA ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
2018 | 2017 | Actual Change | Pro Forma Combined Change | |||||||||||||||||||||||||||||
Actual | Pro Forma Adjustments | Pro Forma Combined | Actual | Pro Forma Adjustments | Pro Forma Combined | $ | % | $ | % | |||||||||||||||||||||||
Operating (loss) | $ | (666 | ) | $ | 2 | $ | (664 | ) | $ | (376 | ) | $ | (25 | ) | $ | (401 | ) | $ | (290 | ) | (77 | )% | $ | (263 | ) | (66 | )% | |||||
Mark-to-market share-based compensation | 56 | 1 | 57 | (4 | ) | 7 | 3 | 60 | NM | 54 | NM | |||||||||||||||||||||
Depreciation and amortization | 75 | — | 75 | 50 | 2 | 52 | 25 | 50 | % | 23 | 44 | % | ||||||||||||||||||||
Restructuring and other charges | 130 | 2 | 132 | 6 | — | 6 | 124 | NM | 126 | NM | ||||||||||||||||||||||
Scripps Networks transaction and integration costs | 97 | (28 | ) | 69 | 62 | (60 | ) | 2 | 35 | 56 | % | 67 | NM | |||||||||||||||||||
Inter-segment eliminations | (3 | ) | 1 | (2 | ) | — | — | — | (3 | ) | NM | (2 | ) | NM | ||||||||||||||||||
Adjusted OIBDA(3) | (311 | ) | (22 | ) | (333 | ) | (262 | ) | (76 | ) | (338 | ) | (49 | ) | (19 | )% | 5 | 1 | % | |||||||||||||
(1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 6 for full list of adjustments to pro forma results.
(2) Certain updates were made to previously disclosed pro forma adjustments as a result of further information identified after May 10, 2018, the date our March 31, 2018 quarterly report was filed. These changes impact the costs of revenue, depreciation and amortization, and restructuring and other charges line items. The pro forma adjustments disclosed above are inclusive of these updates and therefore many not reconcile to previously disclosed amounts.
(3) See full definition of Adjusted OIBDA on page 5.
18
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF NET INCOME TO
ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
(unaudited; in millions)
Three Months Ended September 30, 2018 | |||||||||||||||||
U.S. Networks | International Networks | Education and Other | Corporate and Inter-Segment Eliminations | Total | |||||||||||||
Net income available to Discovery, Inc. | $ | 117 | |||||||||||||||
Net income attributable to redeemable noncontrolling interests | 5 | ||||||||||||||||
Net income attributable to noncontrolling interests | 13 | ||||||||||||||||
Income tax expense | 43 | ||||||||||||||||
Other expense, net | 15 | ||||||||||||||||
(Income) from equity investees, net | (9 | ) | |||||||||||||||
Interest expense, net | 185 | ||||||||||||||||
Operating income | 399 | 146 | 1 | (177 | ) | 369 | |||||||||||
Restructuring and other charges | 206 | 16 | — | 2 | 224 | ||||||||||||
Depreciation and amortization | 296 | 82 | — | 20 | 398 | ||||||||||||
Mark-to-market share-based compensation | — | — | — | 27 | 27 | ||||||||||||
Scripps Networks transaction and integration costs | 3 | 3 | — | 20 | 26 | ||||||||||||
Inter-segment eliminations | (3 | ) | 7 | (1 | ) | (3 | ) | — | |||||||||
Total Adjusted OIBDA | 901 | 254 | $ | — | (111 | ) | $ | 1,044 | |||||||||
Three Months Ended September 30, 2017 | ||||||||||||||||
U.S. Networks | International Networks | Education and Other | Corporate and Inter-Segment Eliminations | Total | ||||||||||||
Net income available to Discovery, Inc. | $ | 218 | ||||||||||||||
Net income attributable to redeemable noncontrolling interests | 5 | |||||||||||||||
Income tax (benefit) | (59 | ) | ||||||||||||||
Other expense, net | 106 | |||||||||||||||
Loss from equity investees, net | 27 | |||||||||||||||
Interest expense, net | 136 | |||||||||||||||
Operating income | 469 | 117 | (2 | ) | (151 | ) | 433 | |||||||||
Restructuring and other charges | 2 | 7 | 2 | — | 11 | |||||||||||
Depreciation and amortization | 7 | 56 | 2 | 15 | 80 | |||||||||||
Mark-to-market share-based compensation | — | — | — | (11 | ) | (11 | ) | |||||||||
Scripps Networks transaction and integration costs | — | — | — | 62 | 62 | |||||||||||
Inter-segment eliminations | 2 | — | (2 | ) | — | — | ||||||||||
Total Adjusted OIBDA | 480 | 180 | — | (85 | ) | $ | 575 | |||||||||
19
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF NET INCOME TO
ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
(unaudited; in millions)
Nine Months Ended September 30, 2018 | |||||||||||||||||
U.S. Networks | International Networks | Education and Other | Corporate and Inter-Segment Eliminations | Total | |||||||||||||
Net income available to Discovery, Inc. | $ | 325 | |||||||||||||||
Net income attributable to redeemable noncontrolling interests | 16 | ||||||||||||||||
Net income attributable to noncontrolling interests | 41 | ||||||||||||||||
Income tax expense | 146 | ||||||||||||||||
Other expense, net | 84 | ||||||||||||||||
Loss from equity investees, net | 53 | ||||||||||||||||
Interest expense | 558 | ||||||||||||||||
Operating income | 1,581 | 217 | 91 | (666 | ) | 1,223 | |||||||||||
Restructuring and other charges | 259 | 262 | 1 | 130 | 652 | ||||||||||||
Depreciation and amortization | 691 | 232 | 3 | 75 | 1,001 | ||||||||||||
Mark-to-market share-based compensation | — | — | — | 56 | 56 | ||||||||||||
Scripps Networks transaction and integration costs | 7 | 3 | — | 97 | 107 | ||||||||||||
(Gain) on disposition | — | — | (84 | ) | — | (84 | ) | ||||||||||
Inter-segment eliminations | (2 | ) | 13 | $ | (8 | ) | (3 | ) | — | ||||||||
Total Adjusted OIBDA | 2,536 | 727 | $ | 3 | (311 | ) | $ | 2,955 | |||||||||
Nine Months Ended September 30, 2017 | |||||||||||||||||
U.S. Networks | International Networks | Education and Other | Corporate and Inter-Segment Eliminations | Total | |||||||||||||
Net income available to Discovery, Inc. | $ | 807 | |||||||||||||||
Net income attributable to redeemable noncontrolling interests | 17 | ||||||||||||||||
Net income attributable to noncontrolling interests | — | ||||||||||||||||
Income tax expense | 89 | ||||||||||||||||
Other expense, net | 143 | ||||||||||||||||
Loss from equity investees, net | 122 | ||||||||||||||||
Loss on extinguishment of debt | 54 | ||||||||||||||||
Interest expense | 318 | ||||||||||||||||
Operating income | 1,511 | 417 | (2 | ) | (376 | ) | 1,550 | ||||||||||
Restructuring and other charges | 6 | 28 | 3 | 6 | 43 | ||||||||||||
Depreciation and amortization | 21 | 165 | 4 | 50 | 240 | ||||||||||||
Mark-to-market share-based compensation | — | — | — | (4 | ) | (4 | ) | ||||||||||
Scripps Networks transaction and integration costs | — | — | — | 62 | 62 | ||||||||||||
Loss on disposition | — | — | 4 | — | 4 | ||||||||||||
Inter-segment eliminations | 10 | — | (10 | ) | — | — | |||||||||||
Total Adjusted OIBDA | 1,548 | 610 | (1 | ) | $ | (262 | ) | $ | 1,895 | ||||||||
20
DISCOVERY, 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, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Numerator: | ||||||||||||||||
Net income | $ | 135 | $ | 223 | $ | 382 | $ | 824 | ||||||||
Less: | ||||||||||||||||
Allocation of undistributed income to Series A-1 convertible preferred stock | (12 | ) | (27 | ) | (34 | ) | (99 | ) | ||||||||
Net income attributable to noncontrolling interests | (13 | ) | — | (41 | ) | — | ||||||||||
Net income attributable to redeemable noncontrolling interests | (5 | ) | (5 | ) | (16 | ) | (17 | ) | ||||||||
Redeemable noncontrolling interest adjustments to redemption value | — | — | (6 | ) | — | |||||||||||
Net income allocated to Discovery, Inc. Series A, B and C common and Series C-1 convertible preferred stockholders for basic net income per share | $ | 105 | $ | 191 | $ | 285 | $ | 708 | ||||||||
Allocation of net income to Discovery, Inc. Series A, B and C common stockholders and Series C-1 convertible preferred stockholders for basic net income per share: | ||||||||||||||||
Series A, B and C common stockholders | 86 | 146 | 231 | 539 | ||||||||||||
Series C-1 convertible preferred stockholders | 19 | 45 | 54 | 169 | ||||||||||||
Total | 105 | 191 | 285 | 708 | ||||||||||||
Add: | ||||||||||||||||
Allocation of undistributed income to Series A-1 convertible preferred stockholders | 12 | 27 | 34 | 99 | ||||||||||||
Net income allocated to Discovery, Inc. Series A, B and C common stockholders for diluted net income per share | $ | 117 | $ | 218 | $ | 319 | $ | 807 | ||||||||
Denominator — weighted average: | ||||||||||||||||
Series A, B and C common shares outstanding — basic | 523 | 381 | 490 | 385 | ||||||||||||
Impact of assumed preferred stock conversion | 187 | 189 | 187 | 194 | ||||||||||||
Dilutive effect of share-based awards | 3 | 1 | 2 | 2 | ||||||||||||
Series A, B and C common shares outstanding — diluted | 713 | 571 | 679 | 581 | ||||||||||||
Series C-1 convertible preferred stock outstanding — basic and diluted | 6 | 6 | 6 | 6 | ||||||||||||
Basic net income per share allocated to Discovery, Inc. Series A, B and C common and Series C-1 convertible preferred stockholders: | ||||||||||||||||
Series A, B and C common stockholders | $ | 0.16 | $ | 0.38 | $ | 0.47 | $ | 1.40 | ||||||||
Series C-1 convertible preferred stockholders | $ | 3.19 | $ | 7.41 | $ | 9.13 | $ | 27.06 | ||||||||
Diluted net income per share allocated to Discovery, Inc. Series A, B and C common and Series C-1 convertible preferred stockholders: | ||||||||||||||||
Series A, B and C common stockholders | $ | 0.16 | $ | 0.38 | $ | 0.47 | $ | 1.39 | ||||||||
Series C-1 convertible preferred stockholders | $ | 3.18 | $ | 7.40 | $ | 9.10 | $ | 26.96 | ||||||||
21
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
SELECTED FINANCIAL DETAIL
(unaudited; in millions, except per share amounts)
CALCULATION OF ADJUSTED EARNINGS PER DILUTED SHARE
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | |||||||||||||||||||
Diluted net income per share available to Discovery, Inc. Series A, B and C common stockholders | $ | 0.16 | $ | 0.38 | $ | (0.22 | ) | $ | 0.47 | $ | 1.39 | $ | (0.92 | ) | ||||||||||
Per share impact of amortization of acquisition-related intangible assets, net of tax | 0.36 | 0.05 | 0.31 | 0.89 | 0.13 | 0.76 | ||||||||||||||||||
Adjusted earnings per diluted share | $ | 0.52 | $ | 0.43 | $ | 0.09 | $ | 1.36 | $ | 1.52 | $ | (0.16 | ) | |||||||||||
CALCULATION OF FREE CASH FLOW
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
2018 | 2017 | Change | % Change | 2018 | 2017 | Change | % Change | |||||||||||||||||||||||
Cash provided by operating activities | 931 | $ | 724 | $ | 207 | 29 | % | $ | 1,647 | $ | 1,167 | $ | 480 | 41 | % | |||||||||||||||
Purchases of property and equipment | (24 | ) | (25 | ) | 1 | 4 | % | (106 | ) | (103 | ) | (3 | ) | (3 | )% | |||||||||||||||
Free cash flow | $ | 907 | $ | 699 | $ | 208 | 30 | % | $ | 1,541 | $ | 1,064 | $ | 477 | 45 | % | ||||||||||||||
22
DISCOVERY, INC.
SUPPLEMENTAL FINANCIAL DATA
SELECTED FINANCIAL DETAIL
(unaudited; in millions, except per share amounts)
BORROWINGS
September 30, 2018 | December 31, 2017 | ||||||
5.625% Senior notes, semi-annual interest, due August 2019 | $ | 411 | $ | 411 | |||
2.200% Senior notes, semi-annual interest, due September 2019 | 500 | 500 | |||||
Floating rate notes, quarterly interest, due September 2019 | 400 | 400 | |||||
2.750% Senior notes, semi-annual interest, due November 2019 | 500 | — | |||||
2.800% Senior notes, semi-annual interest, due June 2020 | 600 | — | |||||
5.050% Senior notes, semi-annual interest, due June 2020 | 789 | 789 | |||||
4.375% Senior notes, semi-annual interest, due June 2021 | 650 | 650 | |||||
2.375% Senior notes, euro denominated, annual interest, due March 2022 | 350 | 358 | |||||
3.300% Senior notes, semi-annual interest, due May 2022 | 500 | 500 | |||||
3.500% Senior notes, semi-annual interest, due June 2022 | 400 | — | |||||
2.950% Senior notes, semi-annual interest, due March 2023 | 1,200 | 1,200 | |||||
3.250% Senior notes, semi-annual interest, due April 2023 | 350 | 350 | |||||
3.800% Senior notes, semi-annual interest, due March 2024 | 450 | 450 | |||||
2.500% Senior notes, sterling denominated, annual interest, due September 2024 | 525 | 538 | |||||
3.900% Senior notes, semi-annual interest, due November 2024 | 500 | — | |||||
3.450% Senior notes, semi-annual interest, due March 2025 | 300 | 300 | |||||
3.950% Senior notes, semi-annual interest, due June 2025 | 500 | — | |||||
4.900% Senior notes, semi-annual interest, due March 2026 | 700 | 700 | |||||
1.900% Senior notes, euro denominated, annual interest, due March 2027 | 700 | 717 | |||||
3.950% Senior notes, semi-annual interest, due March 2028 | 1,700 | 1,700 | |||||
5.000% Senior notes, semi-annual interest, due September 2037 | 1,250 | 1,250 | |||||
6.350% Senior notes, semi-annual interest, due June 2040 | 850 | 850 | |||||
4.950% Senior notes, semi-annual interest, due May 2042 | 500 | 500 | |||||
4.875% Senior notes, semi-annual interest, due April 2043 | 850 | 850 | |||||
5.200% Senior notes, semi-annual interest, due September 2047 | 1,250 | 1,250 | |||||
Revolving credit facility | 325 | 425 | |||||
Commercial paper | 297 | — | |||||
Program financing line of credit | 23 | — | |||||
Capital lease obligations | 245 | 225 | |||||
Total debt | 17,615 | 14,913 | |||||
Unamortized discount, premium and debt issuance costs, net | (133 | ) | (128 | ) | |||
Debt, net of unamortized discount, premium and debt issuance costs | 17,482 | 14,785 | |||||
Current portion of debt | (1,653 | ) | (30 | ) | |||
Noncurrent portion of debt | $ | 15,829 | $ | 14,755 | |||
23