10-QPeriod: Q3 FY2009

Warner Bros. Discovery, Inc. Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 3, 2009For Securities:WBD

Summary

Warner Bros. Discovery, Inc. (WBD) reported its third-quarter 2009 financial results, showcasing steady revenue growth and improved profitability. Total revenues saw a modest increase of 1% year-over-year, driven by distribution and advertising segments. The company demonstrated effective cost management, leading to a significant improvement in operating income, up 22% for the nine months ended September 30, 2009. This operational efficiency, coupled with strategic divestitures and gains from business dispositions (notably the Hasbro-Discovery joint venture), contributed to a strong increase in net income attributable to Discovery Communications, Inc. stockholders. The company also managed its debt effectively, issuing new senior notes and repaying existing debt, while maintaining compliance with all debt covenants. Liquidity remains robust, supported by cash on hand and available credit facilities, positioning WBD for continued operations and strategic investments.

Financial Highlights

46 data points
Beta

Revenue

$837.00M

70.0% Gross Margin

Net Income

$100.00M

11.9% Net Margin

EPS (Diluted)

$0.22

Total Assets

$10.74B

Cash & Equivalents

$401.00M

Free Cash Flow

$38.00M

Financial Statements
Beta
Revenue$837.00M
Cost of Revenue$251.00M
Gross Profit$586.00M
SG&A Expenses$324.00M
Operating Expenses$616.00M
Operating Income$221.00M
Interest Expense$65.00M
Net Income$100.00M
EPS (Basic)$0.22
EPS (Diluted)$0.22
Shares Outstanding (Diluted)427.00M

Key Highlights

  • 1Total revenues for the nine months ended September 30, 2009, increased by 1% to $2.55 billion compared to the prior year.
  • 2Operating income saw a substantial increase of 22% for the nine months ended September 30, 2009, reaching $943 million.
  • 3Net income attributable to Discovery Communications, Inc. stockholders rose significantly by 92% to $405 million for the nine months ended September 30, 2009.
  • 4The company realized a significant gain of $252 million from the formation of the Hasbro-Discovery Joint Venture.
  • 5Strong operating cash flow of $358 million was generated for the nine months ended September 30, 2009.
  • 6Discovery Communications successfully managed its debt, issuing $500 million in senior notes and repaying $428 million of existing debt.
  • 7Total liquidity, including cash and cash equivalents and available credit facilities, stood at approximately $2.0 billion as of September 30, 2009.

Frequently Asked Questions

The increase in operating income was primarily driven by revenue growth in the U.S. Networks segment, coupled with effective cost management across segments, including reductions in costs of revenues and selling, general, and administrative expenses. The gain on the business disposition of the Hasbro-Discovery Joint Venture also significantly contributed.

Discovery Communications actively managed its debt by issuing $500 million in new 5.625% Senior Notes due 2019 and using the proceeds to repay $428 million of its Term Loan A. The company also incurred $500 million in new Term Loan C and repaid a portion of its revolving credit facility. Importantly, the company remained compliant with all its debt covenants.

As of September 30, 2009, the company reported approximately $2.0 billion in total liquidity, comprising $401 million in cash and cash equivalents and $1.6 billion available under its revolving credit facility. Management anticipates these resources, along with anticipated cash flow from operations, will be sufficient to meet its cash requirements for at least the next twelve months, including debt repayments and capital expenditures.

The formation of the Hasbro-Discovery Joint Venture resulted in a significant gain of $252 million for Discovery Communications. This gain comprised $127 million from the 'step-up' in basis for the retained 50% interest in Discovery Kids and $125 million from the sale of the 50% ownership interest to Hasbro. As a result of this transaction, Discovery ceased to consolidate the gross operating results of Discovery Kids and now accounts for its interest using the equity method.