Discovery, Inc. Reports Full Year And Fourth Quarter 2018 Results

Published

SILVER SPRING, Md., Feb. 26, 2019 /PRNewswire/ -- Discovery, Inc. ("Discovery" or the "Company") (NASDAQ: DISCA, DISCB, DISCK) today reported financial results for the full year and fourth quarter ended December 31, 2018.

2018 Operational Highlights

  • Completed the acquisition and integration of Scripps Networks;
  • Successfully broadcast the first of four Olympic Games across Europe;
  • Announced a distinctive golf service in partnership with the PGA TOUR to become the new international home for golf;
  • Formed a new streaming partnership with broadcaster ProSieben in Germany; and
  • Secured additional, favorable U.S. streaming agreements with Hulu and Sling TV.

"2018 was a transformational year for Discovery, highlighted by our operational accomplishments, our strong progress in synergy generation and our overall solid financial performance, as we continued powering people's passions around the world," said David Zaslav, President and Chief Executive Officer for Discovery. "Discovery is a differentiated global content company, and we are optimistic that we will continue to build on all of our operating momentum to drive additional shareholder value into the future."

Full Year Financial Results

Full year revenues increased 54% to $10.6 billion on a reported basis compared with the prior year. Excluding the impact of foreign currency fluctuations(1) and the Scripps Networks Interactive, Inc. ("Scripps Networks"), MotorTrend Group, LLC ("MTG") and Oprah Winfrey Network ("OWN") transactions (collectively, "the Transactions")(2), revenues increased 3%, as an 8% increase in International Networks and a 1% 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 on April 30, 2018. On a pro forma(3) combined basis, excluding the impact of foreign currency fluctuations, total company revenues increased 3%, as International Networks increased 8% and U.S. Networks increased 2%, partially offset by a significant decrease in Education and Other revenues due to the sale of the education business.

Full year Adjusted Operating Income Before Depreciation and Amortization ("Adjusted OIBDA")(4) increased 64% to $4.1 billion on a reported basis compared with the prior year. Excluding the impact of the Transactions and foreign currency fluctuations, Adjusted OIBDA increased 1%, as U.S. Networks increased 3% and International Networks increased 2%, partially offset by a 16% decrease in Corporate and Other. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, Adjusted OIBDA increased 8%, as U.S. Networks increased 8% and International Networks increased 7%.

(1) Refer to page 7 for our methodology for calculating growth rates excluding the impact of currency effects.
(2) The Transactions refer to the Company's acquisition of Scripps Networks on March 6, 2018, the acquisition of a controlling interest in OWN on November 30, 2017 and the contribution of businesses from MTG on September 25, 2017.
(3) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 8 for the full list of pro forma adjustments and to pages 13-20 for pro forma operating results.
(4) See full definition of Adjusted OIBDA on page 7.

Full year net income available to Discovery increased to $594 million, compared with a $337 million loss in the prior year, due to higher operating results primarily due to the Transactions, partially offset by higher restructuring and other charges associated with the integration of Scripps Networks, higher tax expenses and higher interest expense. In addition, a non-cash goodwill impairment charge was recognized in the prior year. Diluted earnings per share(1) increased to $0.86, primarily due to higher net income. Adjusted Earnings Per Diluted Share ("Adjusted EPS")(1),(2), which excludes the impact of amortization of acquisition-related intangible assets, net of tax was $2.11. Adjusted EPS excluding $618 million (or $0.89 per share) of after-tax restructuring and other charges was $3.00.

Free cash flow(3) increased to $2.4 billion for the full year as cash flow from operations increased to $2.6 billion while capital expenditures of $147 million were slightly higher compared with the prior year primarily due to the integration of Scripps Networks. Full year cash flow from operations increased primarily as a result of higher operating results primarily due to the Transactions, partially offset by higher content and restructuring costs and higher interest expense.

Fourth Quarter 2018 Financial Results

Fourth quarter revenues of $2.8 billion increased 51% on a reported basis compared with the prior year quarter. Excluding the impact of the Transactions(4) and foreign currency fluctuations, revenues decreased 2% as a 1% increase in U.S. Networks and flat revenues in International Networks were more than offset by a significant decrease in Education and Other revenues due to the sale of the education business. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, total company fourth quarter revenues decreased 1%, as a 2% increase in U.S. Networks and flat revenues in International Networks were more than offset by a significant decrease in Education and Other revenues due to the sale of the education business.

Fourth quarter Adjusted OIBDA increased 86% to $1.2 billion on a reported basis compared with the prior year quarter. Excluding the impact of the Transactions and foreign currency fluctuations, Adjusted OIBDA increased 5% compared with the prior year quarter, as International Networks increased 13% and U.S. Networks increased 6%, partially offset by a 29% decrease in Corporate and Other. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, fourth quarter Adjusted OIBDA increased 16%, as U.S. Networks Adjusted OIBDA increased 17% and International Networks' Adjusted OIBDA increased 15%.

Fourth quarter net income available to Discovery was $269 million, compared with a loss of $1.1 billion in the prior year quarter, due to higher operating results, primarily due to the integration of Scripps Networks partially offset by higher restructuring and other charges, higher tax expenses and higher interest expense. In addition, a non-cash goodwill impairment charge was recognized in the prior year's quarter. Diluted earnings per share increased to $0.38 primarily due to higher DCI Net Income. Adjusted EPS, which excludes the impact of amortization of acquisition-related intangible assets, net of tax was $0.74. Adjusted EPS excluding $62 million (or $0.08 per share) of after-tax restructuring and other charges was $0.82.

Free cash flow increased to $888 million for the fourth quarter of 2018 as cash flow from operations increased to $929 million while capital expenditures of $41 million were slightly higher compared with the prior year quarter primarily due to the integration of Scripps Networks. Fourth quarter cash flow from operations increased as a result of higher operating results due to the integration of Scripps Networks, partially offset by higher content and restructuring costs and higher interest expense.

(1) All per share amounts are calculated using net income. Refer to table on page 25 for the full schedule.
(2) See full definition of Adjusted EPS on page 7.
(3) Free cash flow is defined as cash provided by operating activities less purchases of property and equipment.
(4) In the fourth quarter, the Transactions refer to just the Company's acquisition of Scripps Networks on March 6, 2018 and the acquisition of a controlling interest in OWN on November 30, 2017.

SEGMENT RESULTS

NM: Not Meaningful
(1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Pro forma change for Total Company and the International Networks segment excludes the impact from foreign currency fluctuations. Refer to page 8 for the full list of pro forma adjustments and to pages 13-20 for full detail on pro forma operating results.

Operating expenses for U.S. Networks increased to $2.9 billion on a reported basis compared with $1.4 billion in the prior year. Excluding the impact of the Transactions, operating expenses decreased 1%, as costs of revenues decreased 4% while SG&A expenses increased 4%. On a pro forma combined basis, total operating expenses decreased 4%, as costs of revenues decreased 5% and SG&A expenses decreased 3%. The decrease in pro forma combined operating expenses was primarily attributable to higher content impairment expenses recorded in the prior year, lower personnel costs due to restructuring as well as content synergies following the acquisition of Scripps Networks.

U.S. Networks' Adjusted OIBDA increased 73% to $3.5 billion on a reported basis compared with the prior year. Excluding the impact of the Transactions, U.S. Networks' Adjusted OIBDA increased 3%. On a pro forma combined basis, Adjusted OIBDA increased 8%, driven by an increase in revenues combined with a decrease in operating expenses.

Fourth Quarter Financial Results

U.S. Networks' revenues for the fourth quarter of 2018 increased 93% to $1.7 billion on a reported basis compared with the prior year quarter. Excluding the impact of the Transactions, revenues increased 1%, as distribution revenues increased 3%, advertising revenues remained consistent and Other revenues decreased $9 million compared with the prior year quarter. On a pro forma combined basis, U.S. Networks' revenues for the fourth quarter increased 2%. Pro forma advertising revenues increased 3%, primarily driven by continued monetization of digital content offerings and an increase in pricing, partially offset by the impact of audience declines on our linear networks. Pro forma distribution revenues increased 1% primarily reflecting increases in contractual affiliate rates, partially offset by a decline in overall subscribers. On a pro forma combined basis, total portfolio subscribers for December 2018 were 4% lower than December 2017 and subscribers to our fully distributed networks were flat with the prior year, primarily due to additional carriage on streaming platforms toward the end of the year, which offset the overall trend of subscriber declines.

Operating expenses for U.S. Networks increased to $758 million on a reported basis compared with $414 million in the prior year quarter. Excluding the impact of the Transactions, operating expenses decreased 6%, as costs of revenues decreased 15% and SG&A expenses increased 11%. On a pro forma combined basis, total operating expenses decreased 13%, as costs of revenues decreased 18% and SG&A expenses decreased 4%. The decrease in pro forma combined operating expenses was primarily attributable to content synergies and higher impairments recorded in the prior year quarter along with lower personnel costs due to restructuring and the integration of Scripps Networks.

U.S. Networks' Adjusted OIBDA for the fourth quarter increased to $964 million on a reported basis compared with $478 million in 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 17%, driven by an increase in revenues combined with a decrease in operating expenses.

International Networks
(dollars in millions) Three Months Ended December 31, Twelve Months Ended December 31,
2018 2017 Change ProFormaChange(1) 2018 2017 Change ProFormaChange(1)
Revenues:
Distribution $ 505 $ 479 5 % 2 % $ 2,082 $ 1,862 12 % 5 %
Advertising 533 419 27 % % 1,765 1,332 33 % 3 %
Other 46 29 59 % (21) % 302 87 NM 88 %
Total revenues $ 1,084 $ 927 17 % % $ 4,149 $ 3,281 26 % 8 %
Adjusted OIBDA $ 350 $ 249 41 % 15 % $ 1,077 $ 859 25 % 7 %
NM: Not Meaningful
(1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Pro forma change excludes the impact from foreign currency fluctuations. Refer to page 8 for the full list of pro forma adjustments and to pages 13-20 for full detail on pro forma operating results.

Full Year Financial Results

International Networks' revenues for the full year of 2018 increased 26% to $4.1 billion on a reported basis compared with the prior year. Excluding the impact of the acquisition of Scripps Networks and foreign currency fluctuations, International Networks' revenues increased 8%, driven by a 5% increase in distribution revenues, a 2% increase in advertising revenues and a significant increase in Other revenues due to the sublicensing of the Olympic Games in the first quarter. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, International Networks' revenues increased 8%, driven by a 5% increase in distribution revenues and a 3% increase in advertising revenues, and an 88% increase in other revenues due to the sublicensing of the Olympics. Pro forma distribution revenue growth was primarily driven by increases in subscribers to our linear networks and higher digital subscription revenues in Europe and increases in pricing in Latin America and Europe, partially offset by pricing declines in Asia. Pro forma advertising revenue growth was primarily attributable to revenues associated with the Olympics in the first quarter, strength in certain European markets, and to a lesser extent, continued monetization of our digital distribution offerings, partially offset by linear viewership declines in Latin America.

Operating expenses for International Networks increased to $3.1 billion compared with $2.4 billion on a reported basis in the prior year. Excluding the impact of the acquisition of Scripps Networks and foreign currency fluctuations, operating expenses increased 11%, as costs of revenues increased 12% and SG&A increased 7%. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, operating expenses increased 8%. Costs of revenues increased 11%, primarily attributable to spending on the Olympics, partially offset by content synergies from the integration of Scripps Networks. SG&A increased 2%, due to increased marketing spend, particularly related to our digital distribution offerings, and Olympics-related expenses, partially offset by cost savings from the integration of Scripps Networks.

International Networks' Adjusted OIBDA increased 25% to $1.1 billion on a reported basis compared with the prior year. Excluding the impact of the acquisition of Scripps Networks and foreign currency fluctuations, International Networks' Adjusted OIBDA increased 2%. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, Adjusted OIBDA increased 7%. The increase in pro forma combined Adjusted OIBDA was primarily driven by the growth in revenues, which outpaced the increases in costs of revenues and SG&A expenses.

Fourth Quarter Financial Results

International Networks' revenues for the fourth quarter of 2018 increased 17% to $1.1 billion 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' revenues were flat, driven by a 2% increase in distribution revenues, while advertising revenues were flat and Other revenues decreased 13%. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, International Networks' revenues were flat, driven by a 2% increase in distribution revenues while advertising revenues were flat, offset by a 21% decrease in Other revenues due to the timing of certain content distribution and licensing revenues. Pro forma distribution revenue growth was primarily driven by increases in Europe, mostly due to higher pricing, and higher pricing and subscriber increases in Latin America, partially offset by pricing declines in Asia. Pro forma advertising revenues were flat, as increases in Europe, mostly due to higher pricing, were offset by viewership declines in Latin America.

Operating expenses for International Networks increased to $734 million compared with $678 million on a reported basis in the prior year quarter. Excluding the impact of the acquisition of Scripps Networks and foreign currency fluctuations, operating expenses decreased 5%, as costs of revenues decreased 9% partially offset by an increase in SG&A of 4%. On a pro forma combined basis, excluding currency effects, operating expenses decreased 6%, as costs of revenues decreased 9%, primarily attributable to content synergies following the acquisition of Scripps Networks, while SG&A was flat, primarily due to reductions in personnel costs from restructuring and the integration of Scripps Networks offset by increased personnel spending related to digital distribution offerings.

International Networks' Adjusted OIBDA increased 41% to $350 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 13%. On a pro forma combined basis, excluding currency effects, Adjusted OIBDA increased 15%. The increase in pro forma combined Adjusted OIBDA was primarily driven by the decrease in costs of revenues.

Education and Other
(dollars in millions) Three Months EndedDecember 31, Twelve Months EndedDecember 31,
2018 2017 Change 2018 2017 Change
Revenues $ 2 $ 45 (96) % $ 54 $ 158 (66) %
Adjusted OIBDA $ $ 7 NM $ 3 $ 6 (50) %
NM: Not Meaningful

Full Year Financial Results

Education and Other saw significant decreases in revenues and Adjusted OIBDA for the full year primarily due to the sale of the education business.

Fourth Quarter Financial Results

Education and Other saw significant decreases in revenues and Adjusted OIBDA for the fourth quarter primarily due to the sale of the education business.

Corporate and Inter-Segment Eliminations

Full Year Financial Results

Corporate and Inter-Segment Eliminations Adjusted OIBDA for the full year of 2018 decreased 23% on a reported basis compared with the prior year. Excluding the impact of the Transactions and foreign currency fluctuations, Adjusted OIBDA decreased 16%. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, Adjusted OIBDA decreased 1% compared with the prior year primarily due to an increase in SG&A expenses driven by higher technology costs, tax advisory fees and share-based compensation, partially offset by a reduction in personnel costs as a result of restructuring and the integration of Scripps Networks.

Fourth Quarter Financial Results

Adjusted OIBDA for the fourth quarter of 2018 decreased 33% on a reported basis compared with the prior year quarter. Excluding the impact of the Transactions and foreign currency fluctuations, Adjusted OIBDA decreased 29%. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, Adjusted OIBDA decreased 8% compared with the prior year quarter primarily due to the timing of compensation expense and professional service fees and lower inter-company allocations to operating segments offsetting lower personnel costs as a result of restructuring and the integration of Scripps Networks.

FULL YEAR 2019 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.

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 21 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 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 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 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.

Effective January 1, 2019, our definition of Adjusted OIBDA was modified to exclude all share-based compensation, whereas only mark-to-market share-based compensation is excluded for each of the periods presented herein. See pages 23-24 for Adjusted OIBDA as historically reported and under the revised definition.

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

The impact of exchange rates on our business is an important factor in understanding period-to-period comparisons of our results. For example, our international revenues are favorably impacted as the U.S. dollar weakens relative to other foreign currencies, and unfavorably impacted as the U.S dollar strengthens relative to other foreign currencies. We believe the presentation of results on a constant currency basis (ex-FX), in addition to results reported in accordance with GAAP, provides useful information about our operating performance because the presentation ex-FX excludes the effects of foreign currency volatility and highlights our core operating results. The presentation of results on a constant currency basis should be considered in addition to, but not a substitute for, measures of financial performance reported in accordance with GAAP.

The ex-FX change represents the percentage change on a period-over-period basis adjusted for foreign currency impacts. The ex-FX change is calculated as the difference between the current year amounts translated at a baseline rate, which is 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. 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, currently excludes mark-to-market share-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 13 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:

  • The impact of the purchase price allocation to the fair value of assets, liabilities, and noncontrolling interests, such as intangible amortization;
  • 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
  • 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 twelve months ended December 31, 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, February 26, 2019 at 8:30 a.m. ET to discuss its fourth 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 passcode: DISCA.

    CAUTIONARY STATEMENT CONCERNING FORWARD_LOOKING STATEMENTS

    This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties and on information available to the Company as of the date hereof. The Company's actual results could differ materially from those stated or implied, due to risks and uncertainties associated with its business, which include the risk factors disclosed in its Annual Report on Form 10-K filed with the SEC on February 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 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; direct-to-consumer streaming services such as Eurosport Player and MotorTrend OnDemand; digital-first and social content from Group Nine Media and a strategic alliance with PGA TOUR to create the international home of golf. Discovery's portfolio of premium brands includes Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, MotorTrend, 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.

    DISCOVERY, INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (unaudited; in millions, except per share amounts)
    Three Months EndedDecember 31, Twelve Months EndedDecember 31,
    2018 2017 2018 2017
    Revenues:
    Distribution $ 1,149 $ 881 $ 4,538 $ 3,474
    Advertising 1,574 876 5,514 3,073
    Other 86 107 501 326
    Total revenues 2,809 1,864 10,553 6,873
    Costs and expenses:
    Costs of revenues, excluding depreciation and amortization 946 745 3,935 2,656
    Selling, general and administrative 657 507 2,620 1,768
    Impairment of goodwill 1,327 1,327
    Depreciation and amortization 397 90 1,398 330
    Restructuring and other charges 98 32 750 75
    (Gain) loss on disposition (84) 4
    Total costs and expenses 2,098 2,701 8,619 6,160
    Operating income (loss) 711 (837) 1,934 713
    Interest expense, net (171) (157) (729) (475)
    Loss on extinguishment of debt (54)
    Loss from equity investees, net (10) (89) (63) (211)
    Other (expense) income, net (36) 33 (120) (110)
    Income (loss) before income taxes 494 (1,050) 1,022 (137)
    Income tax expense (195) (87) (341) (176)
    Net income (loss) 299 (1,137) 681 (313)
    Net income attributable to noncontrolling interests (26) (67)
    Net income attributable to redeemable noncontrolling interests (4) (7) (20) (24)
    Net income (loss) available to Discovery, Inc. $ 269 $ (1,144) $ 594 $ (337)
    Net income (loss) per share available to Discovery, Inc. Series A, B andC common stockholders:
    Basic $ 0.38 $ (1.99) $ 0.86 $ (0.59)
    Diluted(1) $ 0.38 $ (1.99) $ 0.86 $ (0.59)
    Weighted average shares outstanding:
    Basic 524 381 498 384
    Diluted(1) 715 568 688 576

    (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.

    DISCOVERY, INC.
    CONSOLIDATED BALANCE SHEETS
    (unaudited; in millions, except par value)
    December 31, 2018 December 31, 2017
    ASSETS
    Current assets:
    Cash and cash equivalents $ 986 $ 7,309
    Receivables, net 2,620 1,838
    Content rights, net 313 410
    Prepaid expenses and other current assets 312 434
    Total current assets 4,231 9,991
    Noncurrent content rights, net 3,069 2,213
    Property and equipment, net 800 597
    Goodwill 13,006 7,073
    Intangible assets, net 9,674 1,770
    Equity method investments, including note receivable 935 335
    Other noncurrent assets 835 576
    Total assets $ 32,550 $ 22,555
    LIABILITIES AND EQUITY
    Current liabilities:
    Accounts payable $ 325 $ 277
    Accrued liabilities 1,563 1,309
    Deferred revenues 249 255
    Current portion of debt 1,860 30
    Total current liabilities 3,997 1,871
    Noncurrent portion of debt 15,185 14,755
    Deferred income taxes 1,811 319
    Other noncurrent liabilities 1,040 587
    Total liabilities 22,033 17,532
    Commitments and contingencies
    Redeemable noncontrolling interests 415 413
    Equity:
    Discovery, Inc. stockholders' equity:
    Series A-1 convertible preferred stock: $0.01 par value; 8 shares authorized, issued, andoutstanding
    Series C-1 convertible preferred stock: $0.01 par value; 6 shares authorized, issued, andoutstanding
    Series A common stock: $0.01 par value; 1,700 shares authorized; 160 and 157 sharesissued; and 157 and 154 shares outstanding 2 1
    Series B convertible common stock: $0.01 par value; 100 shares authorized; 7 sharesissued and outstanding
    Series C common stock: $0.01 par value; 2,000 shares authorized; 524 and 383 sharesissued; and 360 and 219 shares outstanding 5 4
    Additional paid-in capital 10,647 7,295
    Treasury stock, at cost: 167 shares (6,737) (6,737)
    Retained earnings 5,254 4,632
    Accumulated other comprehensive loss (785) (585)
    Total Discovery, Inc. stockholders' equity 8,386 4,610
    Noncontrolling interests 1,716
    Total equity 10,102 4,610
    Total liabilities and equity $ 32,550 $ 22,555

    DISCOVERY, INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (unaudited; in millions)
    Year Ended December 31,
    2018 2017
    Operating Activities
    Net income (loss) $ 681 $ (313)
    Adjustments to reconcile net income (loss) to cash provided by operating activities:
    Share-based compensation expense 80 39
    Depreciation and amortization 1,398 330
    Content rights amortization and impairment 3,288 1,910
    Impairment of goodwill 1,327
    (Gain) loss on disposition (84) 4
    Remeasurement gain on previously held equity interests (34)
    Equity in earnings and distributions from equity method investee companies 138 223
    Deferred income taxes (131) (199)
    Loss on extinguishment of debt 54
    Realized loss from derivative instruments, net 98
    Other, net 141 85
    Changes in operating assets and liabilities, net of acquisitions and dispositions:
    Receivables, net (84) (258)
    Content rights and payables, net (2,883) (1,947)
    Accounts payable and accrued liabilities (74) 265
    Prepaid income taxes and income taxes receivable 57 20
    Foreign currency and other, net 49 25
    Cash provided by operating activities 2,576 1,629
    Investing Activities
    Business acquisitions, net of cash acquired (8,565) (60)
    Payments for investments, net (61) (444)
    Proceeds from dispositions, net of cash disposed 107 29
    Proceeds from sale of assets 68
    Purchases of property and equipment (147) (135)
    Distributions from equity method investees 1 77
    Payments for derivative instruments, net (2) (101)
    Other investing activities, net 6 1
    Cash used in investing activities (8,593) (633)
    Financing Activities
    Commercial paper repayments, net (5) (48)
    Borrowings under revolving credit facility 350
    Principal repayments of revolving credit facility (200) (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 (16) (650)
    Payments for bridge financing commitment fees (40)
    Principal repayments of capital lease obligations (50) (33)
    Repurchases of stock (603)
    Cash settlement (prepayments) of common stock repurchase contracts 58
    Distributions to noncontrolling interests and redeemable noncontrolling interests (76) (30)
    Share-based plan proceeds, net 54 16
    Borrowings under program financing line of credit 22
    Other financing activities, net (12) (82)
    Cash (used in) provided by financing activities $ (283) $ 5,951
    Effect of exchange rate changes on cash and cash equivalents (23) 62
    Net change in cash and cash equivalents (6,323) 7,009
    Cash and cash equivalents, beginning of period 7,309 300
    Cash and cash equivalents, end of period 986 7,309

    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 December 31,
    2018 2017 ActualChange Pro FormaCombinedChange ProFormaEx-FX(2)
    Actual Pro FormaAdjustments Pro FormaCombined Actual Pro FormaAdjustments Pro FormaCombined $ % $ % %
    Revenues:
    Distribution $ 1,149 $ $ 1,149 $ 881 $ 265 $ 1,146 $ 268 30 % $ 3 % 1 %
    Advertising 1,574 (1) 1,573 876 697 1,573 698 80 % % 2 %
    Other 86 1 87 107 44 151 (21) (20) % (64) (42) % (41) %
    Total revenues 2,809 2,809 1,864 1,006 2,870 945 51 % (61) (2) % (1) %
    Costs of revenues,excluding depreciationand amortization 946 1 947 745 383 1,128 201 27 % (181) (16) % (14) %
    Selling, general andadministrative 679 (1) 678 483 237 720 196 41 % (42) (6) % (3) %
    Adjusted OIBDA(3) $ 1,184 $ $ 1,184 $ 636 $ 386 $ 1,022 548 86 % 162 16 % 16 %

    TOTAL COMPANY RECONCILIATION OF REPORTED AND PRO FORMA OPERATING INCOME TO ADJUSTEDOPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
    Three Months Ended December 31,
    2018 2017 Actual Change Pro FormaCombinedChange
    Actual Pro FormaAdjustments Pro FormaCombined Actual Pro FormaAdjustments Pro FormaCombined $ % $ %
    Operating income(loss) 711 70 781 (837) 83 (754) $ 1,548 NM $ 1,535 NM
    Restructuring andother charges 98 98 32 32 66 NM 66 NM
    Depreciation andamortization 397 (70) 327 90 308 398 307 NM (71) (18) %
    Impairment ofgoodwill 1,327 1,327 (1,327) NM (1,327) NM
    Mark-to-market share-based compensation (25) (25) 7 3 10 (32) NM (35) NM
    Scripps Networkstransaction andintegration costs 3 3 17 (8) 9 (14) (82) % (6) (67) %
    Adjusted OIBDA(3) $ 1,184 $ $ 1,184 $ 636 $ 386 $ 1,022 548 86 % 162 16 %

    (1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 8 for full list of adjustments to pro forma results.
    (2) Refer to page 7 for our methodology for calculating growth rates excluding the impact of currency effects.
    (3) See full definition of Adjusted OIBDA on page 7.
    NM: Not Meaningful

    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 December 31,
    2018 2017 ActualChange Pro FormaCombinedChange
    Actual Pro FormaAdjustments Pro FormaCombined Actual Pro FormaAdjustments Pro FormaCombined $ % $ %
    Revenues:
    Distribution $ 644 $ $ 644 $ 402 $ 234 $ 636 $ 242 60 % $ 8 1 %
    Advertising 1,041 1,041 456 559 1,015 585 NM 26 3 %
    Other 37 37 34 10 44 3 9 % (7) (16) %
    Total revenues 1,722 1,722 892 803 1,695 830 93 % 27 2 %
    Costs of revenues,excluding depreciationand amortization (451) (1) (452) (265) (285) (550) (186) (70) % 98 18 %
    Selling, general andadministrative (307) (307) (149) (171) (320) (158) NM 13 4 %
    Adjusted OIBDA(2) 964 (1) 963 478 347 825 486 NM 138 17 %

    U.S. NETWORKS RECONCILIATION OF REPORTED AND PRO FORMA OPERATING INCOME TO ADJUSTEDOPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
    Three Months Ended December 31,
    2018 2017 ActualChange Pro FormaCombinedChange
    Actual Pro FormaAdjustments Pro FormaCombined Actual Pro FormaAdjustments Pro FormaCombined $ % $ %
    Operating income $ 601 $ 71 $ 672 $ 450 $ 72 $ 522 $ 151 34 % $ 150 29 %
    Restructuring andother charges 63 (1) 62 12 12 51 NM 50 NM
    Depreciation andamortization 294 (70) 224 14 280 294 280 NM (70) (24) %
    Mark-to-market share-based compensation (1) (1) 1 1 (1) NM (2) NM
    Scripps Networkstransaction andintegration costs 7 7 7 NM 7 NM
    Inter-segmenteliminations (1) (1) 2 (6) (4) (2) NM 3 75 %
    Adjusted OIBDA(2) 964 (1) 963 478 347 825 486 NM 138 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 8 for full list of adjustments to pro forma results.
    (2) See full definition of Adjusted OIBDA on page 7.
    NM: Not Meaningful

    (1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 8 for full list of adjustments to pro forma results.
    (2) See full definition of Adjusted OIBDA on page 7.
    NM: Not Meaningful

    DISCOVERY, INC.
    SUPPLEMENTAL FINANCIAL DATA
    UNAUDITED SELECTED PRO FORMA FINANCIALS(1)
    (unaudited; amounts in millions)
    TOTAL COMPANY REPORTED AND PRO FORMA FINANCIAL RESULTS(2)
    Twelve Months Ended December 31,
    2018 2017 ActualChange Pro FormaCombinedChange ProFormaEx-FX(3)
    Actual Pro FormaAdjustments Pro FormaCombined Actual Pro FormaAdjustments Pro FormaCombined $ % $ % %
    Revenues:
    Distribution $ 4,538 $ 178 $ 4,716 $ 3,474 $ 1,090 $ 4,564 $ 1,064 31 % $ 152 3 % 3 %
    Advertising 5,514 425 5,939 $ 3,073 2,677 5,750 2,441 79 % 189 3 % 3 %
    Other 501 20 521 326 150 476 175 54 % 45 9 % 8 %
    Total revenues 10,553 623 11,176 6,873 3,917 10,790 3,680 54 % 386 4 % 3 %
    Costs of revenues,excluding depreciationand amortization 3,935 205 4,140 2,656 1,391 4,047 1,279 48 % 93 2 % 2 %
    Selling, general andadministrative 2,479 159 2,638 1,686 1,006 2,692 793 47 % (54) (2) % (3) %
    Adjusted OIBDA(4) 4,139 259 4,398 2,531 1,520 4,051 1,608 64 % 347 9 % 8 %

    TOTAL COMPANY RECONCILIATION OF REPORTED AND PRO FORMA OPERATING INCOME TO ADJUSTEDOPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
    Twelve Months Ended December 31,
    2018 2017 ActualChange Pro FormaCombinedChange
    Actual Pro FormaAdjustments Pro FormaCombined Actual Pro FormaAdjustments Pro FormaCombined $ % $ %
    Operating income 1,934 352 2,286 713 339 1,052 1,221 NM 1,234 NM
    Restructuring andother charges 750 10 760 75 75 675 NM 685 NM
    Depreciation andamortization 1,398 (76) 1,322 330 1,241 1,571 1,068 NM (249) (16) %
    Impairment ofgoodwill 1,327 1,327 (1,327) NM (1,327) NM
    Mark-to-market share-based compensation 31 1 32 3 8 11 28 NM 21 NM
    Scripps Networkstransaction andintegration costs 110 (28) 82 79 (68) 11 31 39 % 71 NM
    (Gain) loss ondisposition (84) (84) 4 4 (88) NM (88) NM
    Adjusted OIBDA(4) 4,139 259 4,398 2,531 1,520 4,051 1,608 64 % 347 9 %

    (1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 8 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 7 for our methodology for calculating growth rates excluding the impact of currency effects.
    (4) See full definition of Adjusted OIBDA on page 7.
    NM: Not Meaningful

    (1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 8 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 7 for our methodology for calculating growth rates excluding the impact of currency effects.
    (4) See full definition of Adjusted OIBDA on page 7.
    NM: Not Meaningful

    (1) Pro forma is defined as the results of the Company as if the Transactions had occurred on January 1, 2017. Refer to page 8 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 7.
    NM: Not Meaningful

    DISCOVERY, INC.
    SUPPLEMENTAL FINANCIAL DATA
    RECONCILIATION OF NET INCOME TO
    ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
    (unaudited; in millions)
    Three Months Ended December 31, 2018
    U.S. Networks InternationalNetworks Education andOther Corporate andInter-SegmentEliminations Total
    Net income available to Discovery, Inc. $ 269
    Net income attributable to redeemable noncontrollinginterests 4
    Net income attributable to noncontrolling interests 26
    Income tax expense 195
    Other expense, net 36
    Loss from equity investees, net 10
    Interest expense, net 171
    Operating income 601 217 6 (113) 711
    Restructuring and other charges 63 45 (10) 98
    Depreciation and amortization 294 83 (1) 21 397
    Mark-to-market share-based compensation (1) (24) (25)
    Scripps Networks transaction and integration costs 7 (4) 3
    (Gain) loss on disposition (1) 1
    Inter-segment eliminations 5 (4) (1)
    Total Adjusted OIBDA $ 964 $ 350 $ $ (130) $ 1,184
    Three Months Ended December 31, 2017
    U.S. Networks InternationalNetworks Education andOther Corporate andInter-SegmentEliminations Total
    Net loss available to Discovery, Inc. $ (1,144)
    Net income attributable to redeemable noncontrollinginterests 7
    Net income attributable to noncontrolling interests
    Income tax expense 87
    Other (income), net (33)
    Loss from equity investees, net 89
    Loss on extinguishment of debt
    Interest expense, net 157
    Operating income 450 (311) 8 (984) (837)
    Restructuring and other charges 12 14 6 32
    Depreciation and amortization 14 57 1 18 90
    Impairment of goodwill 489 838 1,327
    Mark-to-market share-based compensation 7 7
    Scripps Networks transaction and integration costs 17 17
    Inter-segment eliminations 2 (2)
    Total Adjusted OIBDA $ 478 $ 249 $ 7 $ (98) $ 636

    DISCOVERY, INC.
    SUPPLEMENTAL FINANCIAL DATA
    RECONCILIATION OF NET INCOME TO
    ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION - HISTORICALLY REPORTED ANDUNDER THE REVISED DEFINITION
    (unaudited; in millions)
    U.S. Networks InternationalNetworks Educationand Other Corporate andInter-SegmentEliminations Total
    Year Ended December 31, 2018
    Adjusted OIBDA, as reported $ 3,500 $ 1,077 $ 3 $ (441) $ 4,139
    Deduct: Mark-to-market share-based compensation (1) 32 31
    Add: Total share-based compensation (1) 81 80
    Adjusted OIBDA, as revised 3,500 1,077 3 (392) $ 4,188
    Year Ended December 31, 2017
    Adjusted OIBDA, as reported $ 2,026 $ 859 $ 6 $ (360) $ 2,531
    Deduct: Mark-to-market share-based compensation 3 3
    Add: Total share-based compensation 39 39
    Adjusted OIBDA, as revised 2,026 859 6 (324) $ 2,567
    Year Ended December 31, 2016
    Adjusted OIBDA, as reported $ 1,922 $ 835 $ (10) $ (334) $ 2,413
    Deduct: Mark-to-market share-based compensation 38 38
    Add: Total share-based compensation 69 69
    Adjusted OIBDA, as revised 1,922 835 (10) (303) $ 2,444

    DISCOVERY, INC.
    SUPPLEMENTAL FINANCIAL DATA
    RECONCILIATION OF NET INCOME TO
    ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION - HISTORICALLY REPORTED ANDUNDER THE REVISED DEFINITION
    (unaudited; in millions)
    U.S. Networks InternationalNetworks Educationand Other Corporate andInter-SegmentEliminations Total
    Three Months Ended March 31, 2018
    Adjusted OIBDA, as reported $ 652 $ 137 $ 3 $ (95) $ 697
    Deduct: Mark-to-market share-based compensation 3 $ 3
    Add: Total share-based compensation 15 $ 15
    Adjusted OIBDA, as revised 652 137 3 (83) $ 709
    Three Months Ended June 30, 2018
    Adjusted OIBDA, as reported $ 983 $ 336 $ $ (105) $ 1,214
    Deduct: Mark-to-market share-based compensation 26 26
    Add: Total share-based compensation 34 34
    Adjusted OIBDA, as revised 983 336 (97) $ 1,222
    Three Months Ended September 30, 2018
    Adjusted OIBDA, as reported $ 901 $ 254 $ $ (111) $ 1,044
    Deduct: Mark-to-market share-based compensation 27 27
    Add: Total share-based compensation 43 43
    Adjusted OIBDA, as revised 901 254 (95) $ 1,060
    Three Months Ended December 31, 2018
    Adjusted OIBDA, as reported $ 964 $ 350 $ $ (130) $ 1,184
    Deduct: Mark-to-market share-based compensation (1) (24) (25)
    Add: Total share-based compensation (1) (11) (12)
    Adjusted OIBDA, as revised 964 350 (117) $ 1,197

    DISCOVERY, INC.
    SUPPLEMENTAL FINANCIAL DATA
    SELECTED FINANCIAL DETAIL
    (unaudited; in millions, except per share amounts)
    EARNINGS PER SHARE
    Three Months EndedDecember 31, Twelve Months EndedDecember 31,
    2018 2017 2018 2017
    Numerator:
    Net income (loss) $ 299 $ (1,137) $ 681 $ (313)
    Less:
    Allocation of undistributed income to Series A-1 convertible preferred stock (27) 142 (60) 41
    Net income attributable to noncontrolling interests (26) (67)
    Net income attributable to redeemable noncontrolling interests (4) (7) (20) (24)
    Redeemable noncontrolling interest adjustments to redemption value 1 (5)
    Net income (loss) available to Discovery, Inc. Series A, B and C common and Series C-1convertible preferred stockholders for basic net income per share $ 243 $ (1,002) $ 529 $ (296)
    Allocation of net income (loss) available to Discovery, Inc. Series A, B and C commonstockholders and Series C-1 convertible preferred stockholders for basic net income per share:
    Series A, B and C common stockholders 199 (767) 429 (225)
    Series C-1 convertible preferred stockholders 44 (235) 100 (71)
    Total 243 (1,002) 529 (296)
    Add:
    Allocation of undistributed income to Series A-1 convertible preferred stockholders 27 (142) 60 (41)
    Net income (loss) available to Discovery, Inc. Series A, B and C common stockholders fordiluted net income per share $ 270 $ (1,144) $ 589 $ (337)
    Denominator — weighted average:
    Series A, B and C common shares outstanding — basic 524 381 498 384
    Impact of assumed preferred stock conversion 187 187 187 192
    Dilutive effect of share-based awards 4 3
    Series A, B and C common shares outstanding — diluted 715 568 688 576
    Series C-1 convertible preferred stock outstanding — basic and diluted 6 6 6 6
    Basic net income (loss) per share available to Discovery, Inc. Series A, B and C common andSeries C-1 convertible preferred stockholders:
    Series A, B and C common stockholders $ 0.38 $ (1.99) $ 0.86 $ (0.59)
    Series C-1 convertible preferred stockholders $ 7.36 $ (39.02) $ 16.65 $ (11.33)
    Diluted net income (loss) per share available to Discovery, Inc. Series A, B and C common andSeries C-1 convertible preferred stockholders:
    Series A, B and C common stockholders $ 0.38 $ (1.99) $ 0.86 $ (0.59)
    Series C-1 convertible preferred stockholders $ 7.32 $ (39.02) $ 16.58 $ (11.33)

    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 December 31, Twelve Months Ended December 31,
    2018 2017 Change 2018 2017 Change
    Diluted net income per share available to Discovery, Inc. Series A, Band C common stockholders $ 0.38 $ (1.99) $ 2.37 $ 0.86 $ (0.59) $ 1.45
    Per share impact of amortization of acquisition-related intangibleassets, net of tax 0.36 0.05 0.31 1.25 0.19 1.06
    Adjusted earnings per diluted share $ 0.74 $ (1.94) $ 2.68 $ 2.11 $ (0.40) $ 2.51

    CALCULATION OF FREE CASH FLOW
    Three Months Ended December 31, Twelve Months Ended December 31,
    2018 2017 Change % Change 2018 2017 Change % Change
    Cash provided by operating activities $ 929 $ 462 $ 467 NM $ 2,576 $ 1,629 $ 947 58 %
    Purchases of property and equipment (41) (32) (9) (28) % (147) (135) (12) (9) %
    Free cash flow $ 888 $ 430 $ 458 NM $ 2,429 $ 1,494 $ 935 63 %

    DISCOVERY, INC.
    SUPPLEMENTAL FINANCIAL DATA
    SELECTED FINANCIAL DETAIL
    (unaudited; in millions)
    BORROWINGS
    December 31, 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 344 358
    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 1,185 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 507 538
    3.900% Senior notes, semi-annual interest, due November 2024 497
    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 688 717
    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 225 425
    Program financing line of credit 22
    Capital lease obligations 252 225
    Total debt 17,170 14,913
    Unamortized discount, premium and debt issuance costs, net (125) (128)
    Debt, net of unamortized discount, premium and debt issuance costs 17,045 14,785
    Current portion of debt (1,860) (30)
    Noncurrent portion of debt $ 15,185 $ 14,755

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    SOURCE Discovery, Inc.

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