Discovery Communications Reports Full Year And Fourth Quarter 2012 Results

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SILVER SPRING, Md., Feb. 14, 2013 /PRNewswire/ -- 

Full Year 2012 Financial Highlights:

  • Revenues increased 8% to $4.487 billion

  • Adjusted OIBDA increased 9% to $2.095 billion

  • Repurchased 28.5 million shares for an aggregate purchase price of $1.38 billion

Discovery Communications, Inc. ("Discovery" or the "Company") (NASDAQ: DISCA, DISCB, DISCK) today reported financial results for the full year and fourth quarter ended December 31, 2012.

David Zaslav, Discovery's President and Chief Executive Officer said, "Discovery's commitment to investing in our brands and developing new and diverse growth opportunities produced another year of strong operating momentum and financial results in 2012.  The appeal of our content resulted in larger audiences across the globe, enabling us to deliver consistently healthy advertising growth both domestically and internationally, while we further leveraged our valuable programming across emerging distribution platforms worldwide.   At the same time, the strength of our balance sheet allowed us to make several strategic investments that we believe further bolster our asset portfolio, while also returning over $1.3 billion to shareholders this year.   We head into 2013 with significant momentum, having just delivered the highest fourth quarter domestic viewership in our history, and will continue to invest in strategic growth initiatives so that we can deliver sustained long-term financial results and shareholder value."

Fourth Quarter Results

Fourth quarter revenues of $1,200 million increased $94 million, or 8%, over the fourth quarter a year ago, led by 15% growth at International Networks and 4% growth at U.S. Networks.  Adjusted Operating Income Before Depreciation and Amortization (1) ("OIBDA") grew 9% to $545 million, as a 17% increase at International Networks, despite the adverse impact of foreign currency fluctuations, and a 7% increase at U.S. Networks, more than offset strategic transaction related costs recognized in the quarter. Excluding foreign currency fluctuations, fourth quarter revenues increased 9% and Adjusted OIBDA increased 11%.

Fourth quarter net income from continuing operations available to Discovery Communications, Inc. stockholders of $224 million ($0.61 per diluted share) decreased $112 million compared to $336 million ($0.86 per diluted share) for the fourth quarter a year ago as the strong operating performance and improved equity earnings in the current year were more than offset primarily by higher taxes and increased mark-to-market equity-based compensation. The higher taxes were largely due to foreign tax credits recognized a year ago as well as an increase in tax reserves in the fourth quarter of 2012.    

Free cash flow was $304 million for the fourth quarter, a decrease of $20 million from the fourth quarter of 2011, as improved operating performance was more than offset by higher content investment, interest and cash taxes. Free cash flow is defined as cash provided by operating activities less acquisitions of property and equipment. 

Full Year Results

Full year 2012 revenues of $4,487 million increased $319 million, or 8%, over 2011 revenues, primarily driven by 13% growth at International Networks and 5% growth at U.S. Networks.  Adjusted OIBDA grew 9% to $2,095 million, driven by an 8% increase at U.S. Networks and a 12% increase at International Networks. Excluding foreign currency fluctuations, full year revenues increased 9% and Adjusted OIBDA increased 12%.

Full year 2012 net income from continuing operations available to Discovery Communications, Inc. stockholders of $954 million ($2.51 per diluted share) decreased $181 million compared to $1,135 million ($2.80 per diluted share) a year ago as the strong operating performance in the current year was more than offset by the prior year inclusion of a $102 million, net of tax, gain from the contribution of the Discovery Health network to the OWN: Oprah Winfrey Network ("OWN") joint venture as well as the recognition of foreign tax credits a year ago.  Current year results also included increased mark-to-market equity-based compensation, higher interest expense and lower equity earnings as the Company began recording 100% of OWN's net losses in 2012.  

Free cash flow was $1,022 million for the full year, a decrease of $20 million from full year 2011, as better operating performance was more than offset by higher content investment, cash taxes and interest.

SEGMENT RESULTS

Click to view table full screen

(dollars in millions)

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2012

 

2011

 

Change

 

2012

 

2011

 

Change

                       

Revenues:

                             

   U.S. Networks

$

703

 

$

677

 

4%

 

$

2,748

 

$

2,619

 

5%

   International Networks

 

462

   

401

 

15%

   

1,637

   

1,455

 

13%

   Education

 

35

   

29

 

21%

   

105

   

95

 

11%

   Corporate and Eliminations

 

   

(1)

 

NM

   

(3)

   

(1)

 

NM

Total Revenues

$

1,200

 

$

1,106

 

8%

 

$

4,487

 

$

4,168

 

8%

                               

Adjusted OIBDA:

                             

   U.S. Networks

$

415

 

$

388

 

7%

 

$

1,622

 

$

1,495

 

8%

   International Networks

 

201

   

172

 

17%

   

721

   

645

 

12%

   Education

 

13

   

8

 

63%

   

27

   

25

 

8%

   Corporate and Eliminations

 

(84)

   

(69)

 

(22%)

   

(275)

   

(249)

 

(10%)

Total Adjusted OIBDA

$

545

 

$

499

 

9%

 

$

2,095

 

$

1,916

 

9%

 

U.S. Networks

(dollars in millions)

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2012

 

2011

 

Change

 

2012

 

2011

 

Change

Revenues:

                             

   Distribution

$

288

 

$

282

 

2%

 

$

1,222

 

$

1,180

 

4%

   Advertising

 

397

   

364

 

9%

   

1,456

   

1,337

 

9%

   Other

 

18

   

31

 

(42%)

   

70

   

102

 

(31%)

Total Revenues

$

703

 

$

677

 

4%

 

$

2,748

 

$

2,619

 

5%

                               

Adjusted OIBDA

$

415

 

$

388

 

7%

 

$

1,622

 

$

1,495

 

8%

                               

Adjusted OIBDA Margin       

 

59%

   

57%

       

59%

   

57%

   
 

Fourth Quarter Results

U.S. Networks' revenues in the fourth quarter of 2012 increased 4% to $703 million driven by advertising and distribution revenue growth. Advertising revenue increased 9% primarily as a result of higher delivery and increased pricing, partially offset by the absence of non-recurring revenue items in the fourth quarter a year ago. Distribution revenue grew 2% largely from higher rates and subscriber growth primarily from networks carried on the digital tier, partially offset by additional licensing revenue in the fourth quarter of 2011.  Excluding non-recurring advertising revenue items from the prior year's quarter, advertising revenue grew 10% and excluding the impact from licensing revenue, distribution revenue grew 5%, compared to the fourth quarter a year ago. Other revenue decreased $13 million primarily due to lower revenue from services provided to unconsolidated equity method investees.

Adjusted OIBDA increased 7% to $415 million primarily reflecting 4% revenue growth and flat operating expenses as higher content amortization was offset by additional content costs in the fourth quarter of 2011 from a change in amortization rates at certain networks and higher content impairment charges. Excluding non-recurring revenue items and the additional content costs in the prior year, Adjusted OIBDA increased 5%.

Full Year Results

U.S. Networks' revenues for the full year 2012 increased 5% to $2,748 million primarily driven by advertising and distribution growth. Advertising revenue increased 9% primarily as a result of higher pricing and increased delivery partially offset by the absence of non-recurring revenue items recognized in the prior year. Distribution revenue grew 4% largely from higher rates and subscriber growth primarily from networks carried on the digital tier, partially offset by additional licensing revenue in the prior year.  Other revenue decreased $32 million primarily due to lower revenue from services provided to unconsolidated equity method investees.

Adjusted OIBDA increased 8% to $1,622 million primarily reflecting 5% revenue growth and flat operating expenses as increased content amortization in the current year was offset by additional content costs in the prior year from higher content impairment charges and changes in amortization rates at certain networks.  Additionally, higher personnel costs were offset by lower expenses from services provided to unconsolidated equity method investees.

International Networks

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(dollars in millions)

Three Months Ended December 31,

 

Twelve Months Ended December 31,

   

2012

   

2011

 

Change

   

2012

   

2011

 

Change

                       

Revenues:

                             

   Distribution

$

253

 

$

225

 

12%

 

$

984

 

$

890

 

11%

   Advertising

 

185

   

160

 

16%

   

580

   

514

 

13%

   Other

 

24

   

16

 

50%

   

73

   

51

 

43%

Total Revenues

$

462

 

$

401

 

15%

 

$

1,637

 

$

1,455

 

13%

                               

Adjusted OIBDA

$

201

 

$

172

 

17%

 

$

721

 

$

645

 

12%

                               

Adjusted OIBDA Margin

 

44%

   

43%

       

44%

   

44%

   
                                   
 

Fourth Quarter Results

International Networks' revenues for the fourth quarter increased 15% to $462 million primarily led by distribution revenue growth of 12% and advertising revenue growth of 16%.  Excluding the impact of foreign currency fluctuations, total revenues increased 18%.  Distribution revenue, excluding foreign currency fluctuations as well as lower launch support amortization, grew 12% mainly from increased subscribers in Latin America and CEEMEA.  Advertising revenue in local currency terms was up 18% during the fourth quarter primarily from higher pricing across most regions and strong growth on new and existing free to air networks in Western Europe. Other revenue was $8 million higher primarily due to revenue from a production company acquired in the fourth quarter of 2011.

Adjusted OIBDA increased 17% to $201 million reflecting the 15% revenue growth, partially offset by a 10% increase in operating expenses.  Excluding the impact of foreign currency and higher content impairment charges taken in the fourth quarter a year ago, Adjusted OIBDA grew 18% as the 18% revenue growth was partially offset by increased operating expenses primarily from higher content amortization, marketing and personnel costs.

Full Year Results

International Networks' revenues for the full year increased 13% to $1,637 million primarily led by distribution revenue growth of 11% and advertising revenue growth of 13%.  Excluding the impact of foreign currency fluctuations, total revenues increased 18%.  Distribution revenue, excluding foreign currency fluctuations and lower launch support amortization, grew 12% mainly from increased subscribers in Latin America, CEEMEA and Asia Pacific.  Advertising revenue in local currency terms was up 19% during the full year 2012 primarily from higher pricing across most regions and strong growth on new and existing free to air networks in Western Europe.  Other revenue was $22 million higher primarily due to revenue from a production company acquired in the fourth quarter of 2011.

Adjusted OIBDA increased 12% to $721 million reflecting the 13% revenue growth, partially offset by a 9% increase in operating expenses.  Excluding the impact of foreign currency, Adjusted OIBDA grew 18% as the revenue growth was partially offset by higher operating expenses primarily due to higher content amortization and increased personnel costs.

Education

(dollars in millions)

Three Months Ended December 31,

 

Twelve Months Ended December 31,

   

2012

   

2011

 

Change

   

2012

   

2011

 

Change

                       

Revenues

$

35

 

$

29

 

21%

 

$

105

 

$

95

 

11%

                               

Adjusted OIBDA

$

13

 

$

8

 

63%

 

$

27

 

$

25

 

8%

                               

Adjusted OIBDA Margin

 

37%

   

28%

       

26%

   

26%

   
 

Fourth Quarter Results

Education revenue for the fourth quarter increased $6 million to $35 million and Adjusted OIBDA increased $5 million to $13 million, mainly reflecting increased licensing fees as well as higher subscription and corporate partnership revenue.   

Full Year Results

Education revenue for full year 2012 increased 11% to $105 million and Adjusted OIBDA increased 8%, driven by increased licensing fees as well as higher subscription and corporate partnership revenue, partially offset by increased personnel costs.  

Corporate and Eliminations

Adjusted OIBDA decreased $15 million when compared to the fourth quarter a year ago and decreased $26 million compared to full year 2011, primarily due to strategic transaction costs.

STOCK REPURCHASE

During the quarter, the Company, pursuant to its existing stock repurchase program, repurchased 4.14 million shares of its common stock for an aggregate purchase price of approximately $234 million, including 3.77 million shares of its Series C common stock at an average price of$55.96 per share and 0.37 million shares of its Series A common stock at an average price of $60.44 per share.  For the full year 2012, the Company repurchased a total of 28.53 million shares of its common stock for an aggregate purchase price of approximately $1,380 million, including 26.54 million shares of its Series C common stock at an average price of $47.88 per share and 1.99 million shares of its Series A common stock at an average price of $54.67 per share.

The Company has repurchased 56.69 million shares of Series C common stock and 1.99 million shares of Series A common stock under its $4.0 billion stock repurchase program to date at an aggregate purchase price of approximately $2.37 billion and $109 million respectively.  In the aggregate, including the 13.73 million preferred shares acquired from Advance/Newhouse Programming Partnership, the Company has repurchased 17% of the outstanding shares of its capital stock since buyback activity was authorized in 2010.  Under the stock repurchase program, management is authorized to purchase shares from time to time through open market purchases at prevailing prices or privately negotiated transactions, subject to market conditions and other factors.

OTHER ITEMS

In December 2012, the Company announced a definitive agreement with the ProSiebenSat.1 Group to purchase the Nordic television and radio business operations for a total enterprise value of approximately $1.7 billion.  The transaction is expected to close in the first quarter of 2013.

On December 21, 2012, the Company acquired 20% equity ownership interests in Eurosport and a portfolio of TF1 pay television channels network for a total of $264 million, including transaction costs.

FULL YEAR 2013 OUTLOOK

For the full year ending December 31, 2013, Discovery Communications, Inc. expects total revenue between $5.575 billion and $5.700 billion, Adjusted OIBDA between $2.425 billion and $2.525 billion, and net income available to Discovery Communications, Inc. stockholders of $1.200 billion to $1.300 billion.  Our outlook assumes the acquisition of the SBS Nordic operations closes during the first quarter of 2013, incorporates current foreign exchange rates for revenues and expenses and the current share price for mark-to-market equity-based compensation calculations.

NON-GAAP FINANCIAL MEASURES

Adjusted OIBDA and Free Cash Flow

In addition to the results prepared in accordance with U.S. generally accepted accounting principles ("GAAP") provided in this release, the Company has presented Adjusted OIBDA and free cash flow.  The Company evaluates the operating performance of its segments based on financial measures such as revenues and Adjusted OIBDA. Adjusted OIBDA is defined as revenues less costs of revenues and selling, general and administrative expenses excluding: (i) mark-to-market equity-based compensation, (ii) depreciation and amortization, (iii) amortization of deferred launch incentives, (iv) exit and restructuring charges, (v) certain impairment charges, and (vi) gains (losses) on business and asset dispositions. The Company uses this measure to assess the operating results and performance of its segments, perform analytical comparisons, identify strategies to improve performance and allocate resources to each segment.  The Company believes Adjusted OIBDA is relevant to investors because it allows them to analyze the operating performance of each segment using the same metric management uses. The Company excludes mark-to-market equity-based compensation, exit and restructuring charges, certain impairment charges, and gains (losses) on business and asset dispositions from the calculation of Adjusted OIBDA due to their volatility. The Company also excludes depreciation of fixed assets and amortization of intangible assets and deferred launch incentives, as these amounts do not represent cash payments in the current reporting period.

The Company defines free cash flow as cash provided by operating activities less acquisitions of property and equipment.  The Company uses free cash flow as it believes it is an important indicator for management and investors of the Company's liquidity, including its ability to reduce debt, make strategic investments and return capital to stockholders.

Adjusted OIBDA and free cash flow are non-GAAP measures, and should be considered in addition to, and not as a substitute for, operating income, net income and other measures of financial performance reported in accordance with GAAP. Please review the supplemental financial schedules beginning on page 9 for reconciliations to GAAP measures.

Conference Call Information

Discovery Communications, Inc. will host a conference call today at 8:30 a.m. ET to discuss its fourth quarter and full year results.  To listen to the call, visit http://www.discoverycommunications.com or dial 1-866-700-6293 inside the U.S. or 1-617-213-8835 outside of the U.S., using the following passcode: 38272747.

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 that are based on current expectations, forecasts and assumptions that involve risks and uncertainties.  These statements are based on information available to the Company as of the date hereof, and the Company's actual results could differ materially from those stated or implied, due to risks and uncertainties associated with its business, which include the risk factors disclosed in its Annual Report on Form 10-K filed with the SEC onFebruary 17, 2012. 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 2013 outlook, plans for stock repurchases and statements regarding the anticipated completion of pending acquisitions. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

DISCOVERY COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in millions, except per share amounts)

 

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

 

December 31,

   

2012

   

2011

   

2012

   

2011

                       

Revenues:

                     

Distribution

$

541

 

$

507

 

$

2,206

 

$

2,070

Advertising

 

582

   

524

   

2,037

   

1,852

Other

 

77

   

75

   

244

   

246

Total revenues

 

1,200

   

1,106

   

4,487

   

4,168

                       

Costs and expenses:

                     

    Costs of revenues, excluding depreciation and amortization

 

328

   

316

   

1,218

   

1,176

    Selling, general and administrative

 

359

   

316

   

1,291

   

1,171

    Depreciation and amortization

 

30

   

29

   

117

   

117

    Restructuring and impairment charges

 

2

   

23

   

6

   

30

    Gain on disposition

 

   

   

   

(129)

Total costs and expenses

 

719

   

684

   

2,632

   

2,365

                       

Operating income

 

481

   

422

   

1,855

   

1,803

                       

Interest expense

 

(64)

   

(54)

   

(248)

   

(208)

Other expense, net

 

(12)

   

(22)

   

(89)

   

(32)

                       

Income from continuing operations before income taxes

 

405

   

346

   

1,518

   

1,563

Provision for income taxes

 

(181)

   

(9)

   

(562)

   

(427)

                       

Income from continuing operations, net of taxes

 

224

   

337

   

956

   

1,136

Loss from discontinued operations, net of taxes

 

   

   

(11)

   

(3)

                       

Net income

 

224

   

337

   

945

   

1,133

Net income attributable to noncontrolling interests

 

   

(1)

   

(2)

   

(1)

                       

Net income available to Discovery Communications, Inc.

stockholders

$

224

 

$

336

 

$

943

 

$

1,132

                       

Income per share from continuing operations available to

Discovery Communications, Inc. stockholders:

                     

Basic

$

0.61

 

$

0.86

 

$

2.54

 

$

2.83

Diluted

$

0.61

 

$

0.86

 

$

2.51

 

$

2.80

                       

Loss per share from discontinued operations available to

Discovery Communications, Inc. stockholders:

                     

Basic

$

 

$

 

$

(0.03)

 

$

(0.01)

Diluted

$

 

$

 

$

(0.03)

 

$

(0.01)

                       

Net income per share available to Discovery

Communications, Inc. stockholders:

                     

Basic

$

0.61

 

$

0.86

 

$

2.51

 

$

2.82

Diluted

$

0.61

 

$

0.86

 

$

2.48

 

$

2.80

Weighted average shares outstanding:

                     

Basic

 

366

   

391

   

376

   

401

Diluted

 

369

   

393

   

380

   

405

 

 

DISCOVERY COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited; in millions)

 

 

December 31,

 

December 31,

 

2012

 

2011

         

ASSETS

         

Current assets:

         

Cash and cash equivalents

$

1,201

 

$

1,048

Receivables, net

 

1,130

   

1,042

Content rights, net

 

122

   

93

Deferred income taxes

 

74

   

73

Prepaid expenses and other current assets

 

203

   

175

Total current assets

 

2,730

   

2,431

           

Noncurrent content rights, net

 

1,555

   

1,302

Property and equipment, net

 

388

   

379

Goodwill

 

6,399

   

6,291

Intangible assets, net

 

611

   

571

Equity method investments

 

1,095

   

807

Other noncurrent assets

 

152

   

132

Total assets

$

12,930

 

$

11,913

           

LIABILITIES AND EQUITY

         

Current liabilities:

         

Accounts payable

$

71

 

$

53

Accrued expenses and other current liabilities

 

721

   

554

Deferred revenues

 

123

   

113

Current portion of long-term debt

 

31

   

26

Total current liabilities

 

946

   

746

           

Long-term debt

 

5,212

   

4,219

Deferred income taxes

 

272

   

337

Other noncurrent liabilities

 

207

   

92

Total liabilities

 

6,637

   

5,394

           
           

Equity:

         

Preferred stock

 

2

   

2

Common stock

 

3

   

3

Additional paid-in capital

 

6,689

   

6,505

Treasury stock, at cost

 

(2,482)

   

(1,102)

Retained earnings

 

2,075

   

1,132

Accumulated other comprehensive income (loss)

 

4

   

(23)

    Total Discovery Communications, Inc. stockholders' equity

 

6,291

   

6,517

    Noncontrolling interests

 

2

   

2

Total equity

 

6,293

   

6,519

Total liabilities and equity

$

12,930

 

$

11,913

 

 

DISCOVERY COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in millions)

 

 

Twelve Months Ended December 31,

   

2012

   

2011

           

OPERATING ACTIVITIES

         

Net income

$

945

 

$

1,133

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

         

Equity-based compensation expense

 

154

   

99

Depreciation and amortization

 

117

   

119

Content amortization and impairment expense

 

865

   

846

Loss (gains) on dispositions

 

6

   

(129)

Equity in losses and distributions from investee companies

 

106

   

65

Deferred income tax (benefit) expense

 

(70)

   

40

Other, net

 

32

   

69

    Changes in operating assets and liabilities:

         

   Receivables, net

 

(59)

   

(179)

   Content rights

 

(1,091)

   

(884)

   Accounts payable and accrued liabilities

 

171

   

6

   Equity-based compensation liabilities

 

(45)

   

(126)

   Income tax receivable

 

(11)

   

72

   Other, net

 

(21)

   

(31)

Cash provided by operating activities

 

1,099

   

1,100

           

INVESTING ACTIVITIES

         

Purchases of property and equipment

 

(77)

   

(58)

Business acquisitions, net of cash acquired

 

(149)

   

(26)

Distributions from equity method investees

 

17

   

21

Investments in and advances to equity method investees

 

(404)

   

(151)

Other investing activities, net

 

(30)

   

Cash used in investing activities

 

(643)

   

(214)

           

FINANCING ACTIVITIES

         

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

 

981

   

639

Principal repayments of capital lease obligations

 

(22)

   

(20)

Repurchases of common stock

 

(1,380)

   

(997)

Proceeds from issuance of common stock in connection with equity-based plans

 

81

   

60

Excess tax benefits from equity-based compensation

 

38

   

28

Other financing activities, net

 

(3)

   

(7)

Cash used in financing activities

 

(305)

   

(297)

           

Effect of exchange rate changes on cash and cash equivalents

 

2

   

(7)

           

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

153

   

582

 Cash and cash equivalents, beginning of period

 

1,048

   

466

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

1,201

 

$

1,048

 

 

DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE

DEPRECIATION AND AMORTIZATION

(unaudited; in millions)

 

 

Three Months Ended December 31, 2012

 

Adjusted

Operating

Income Before

Depreciation and

Amortization

Depreciation

and

Amortization

Amortization of

Deferred Launch

Incentives

Mark-to-Market

Equity-Based

Compensation

Other (a)

Operating

Income

             

U.S. Networks

$  415

$    (4)

$    (2)

$       —

$   (1)

$    408

International Networks

201

(13)

(3)

185

Education

13

(1)

12

Corporate and Eliminations

(84)

(12)

(27)

(1)

(124)

       Total

$  545

$  (30)

$    (5)

$    (27)

$    (2)

$    481

 
 
 

Three Months Ended December 31, 2011

 

Adjusted

Operating

Income Before

Depreciation and

Amortization

 

 

Depreciation

and

Amortization

Amortization of

Deferred Launch Incentives

Mark-to-Market

Equity-Based

Compensation

Other (a)

Operating

Income

             

U.S. Networks

$   388

$    (3)

$     (3)

$      —

$   (21)

$   361

International Networks

172

(10)

(10)

(1)

151

Education

8

(1)

7

Corporate and Eliminations

(69)

(15)

(12)

(1)

(97)

       Total

$   499

$  (29)

$   (13)

$   (12)

$   (23)

$   422

 

 

(a)

For the three months ended December 31, 2012, amount represents restructuring charges of $2 million. For the three months ended December 31, 2011, amounts represent asset impairments of $20 million and restructuring charges of $3 million.

 

 

DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE

DEPRECIATION AND AMORTIZATION

(unaudited; amounts in millions)

 

 

Twelve Months Ended December 31, 2012

 

Adjusted

Operating

Income Before

Depreciation and

Amortization

Depreciation

and

Amortization

Amortization of

Deferred Launch

Incentives

Mark-to-Market

Equity-Based

Compensation

Other (a)

Operating

Income

             

U.S. Networks

$  1,622

$    (13)

$     (9)

$        —

$   (3)

$   1,597

International Networks

721

(47)

(11)

(1)

662

Education

27

(2)

25

Corporate and Eliminations

(275)

(55)

(97)

(2)

(429)

       Total

$  2,095

$  (117)

$   (20)

$     (97)

$   (6)

$   1,855

 
 
 

Twelve Months Ended December 31, 2011

 

Adjusted

Operating

Income Before

Depreciation and

Amortization

 

 

Depreciation

and

Amortization

Amortization of

Deferred Launch Incentives

Mark-to-Market

Equity-Based

Compensation

Other (a)

Operating

Income

             

U.S. Networks

$  1,495

$    (15)

$   (10)

$        —

$  105

$  1,575

International Networks

645

(43)

(42)

(3)

557

Education

25

(3)

22

Corporate and Eliminations

(249)

(56)

(43)

(3)

(351)

       Total

$  1,916

$   (117)

$   (52)

$     (43)

$    99

$  1,803

 

 

(a)

For the twelve months ended December 31, 2012 amounts represent restructuring charges of $6 million.  For the twelve months ended December 31, 2011, amounts represent a pre-tax gain of $129 million as a result of contributing Discovery Health to the OWN joint venture and asset impairments of $20 million and restructuring charges of $10 million.

 

 

DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited; in millions)

 

CALCULATION OF FREE CASH FLOW

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2012

 

2011

 

Change

 

2012

 

2011

 

Change

                               
                                   

Cash provided by operating activities

$

328

 

$

340

 

$

(12)

 

$

1,099

 

$

1,100

 

$

(1)

Acquisition of property and equipment

 

(24)

   

(16)

   

(8)

   

(77)

   

(58)

   

(19)

Free cash flow

$

304

 

$

324

 

$

(20)

 

$

1,022

 

$

1,042

 

$

(20)

 

 

RECONCILIATION OF 2013 OUTLOOK TO GAAP MEASURES

 

   

Full Year 2013

Net income available to Discovery Communications, Inc. stockholders

 

$

1,200

To

$

1,300

Interest expense, net

   

305

To

 

295

Depreciation and amortization

   

135

To

 

125

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

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

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

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

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

   

785

To

 

805

Adjusted OIBDA

 

$

2,425

To

$

2,525

 

 

Click to view table full screen

NET INCOME AVAILABLE TO DISCOVERY COMMUNICATIONS, INC. STOCKHOLDERS

 

 

Three Months 

Ended December 31,

Twelve Months

Ended December 31,

 

2012

2011

2012

2011

         

Income from continuing operations, net of taxes

$                    224

$                    337

$                     956

$              1,136

Net income attributable to noncontrolling interests

(1)

(2)

(1)

         

Net income from continuing operations available to Discovery

Communications, Inc. stockholders

224

336

954

1,135

Loss from discontinued operations, net of taxes

(11)

(3)

         

Net income available to Discovery Communications, Inc. stockholders

$                    224

$                    336

$                     943

$              1,132

 

 

DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

SELECTED FINANCIAL DETAIL

(unaudited; in millions)

 

BORROWINGS

 
 

December 31, 2012

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

$

850

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

 

500

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

 

1,300

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

 

650

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

 

500

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

 

850

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

 

500

Capital lease obligations

 

110

Total long-term debt

 

5,260

Unamortized discount

 

(17)

Long-term debt, net

 

5,243

Current portion of long-term debt

 

(31)

Noncurrent portion of long-term debt

$

5,212

 

 

EQUITY-BASED COMPENSATION

   

December 31, 2012

 

Long-Term

Incentive Plans

 

Total Units Outstanding

(in millions)

 

Weighted

Average

Grant Price

 

Vested Units

Outstanding

(in millions)

 

Weighted

Average

Grant Price

                     

Discovery Appreciation Plan

 

3.1

 

$

34.78

 

——

 

$

——

                     

Stock Appreciation Rights

 

1.8

   

41.13

 

——

   

——

                     

Stock Options

 

9.0

   

28.53

 

5.4

   

21.08

                     

Performance-based Restricted Stock Units

 

2.1

   

39.23

 

——

   

——

                     

Service-based Restricted Stock Units

 

0.8

   

40.82

 

——

   

——

      Total Equity-based Compensation Plans

 

16.8

 

$

32.96

 

5.4

 

$

21.08

 
 

SHARE COUNT ROLL FORWARD

       

Common

 

Preferred

   

Total

(Basic shares, in millions)

                   

Total shares outstanding as of December 31, 2011

       

260.37

 

127.46

   

387.83

  Shares repurchased

       

(28.53)

 

——

   

(28.53)

  Shares issued – equity-based compensation

       

4.92

 

——

   

4.92

  Conversion of shares

       

8.41

 

(8.41)

   

——

Total shares outstanding as of December 31, 2012

       

245.17

 

119.05

   

364.22

 

 

 

 

 

SOURCE Discovery Communications, Inc.


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