10-QPeriod: Q1 FY2010

Warner Bros. Discovery, Inc. Quarterly Report for Q1 Ended Mar 31, 2010

Filed April 30, 2010For Securities:WBD

Summary

Discovery Communications, Inc. (WBD) reported solid top-line growth in its first quarter of 2010, with total revenues increasing by 8% to $879 million, driven by strong performance in both distribution and advertising revenues. The company demonstrated improved profitability, with net income attributable to Discovery Communications, Inc. stockholders rising 42% to $169 million. This growth was supported by strategic segment performance, particularly in International Networks, which saw a significant 29% increase in Adjusted OIBDA. While the company experienced higher costs of revenue and selling, general, and administrative expenses, primarily due to increased content amortization and stock-based compensation, the overall financial health appears robust. The company maintained a strong liquidity position with $691 million in cash and cash equivalents and significant access to its revolving credit facility. Key strategic initiatives, such as the adoption of new accounting standards and the acquisition of an uplink facility, along with ongoing discussions with partners like the BBC and Harpo, Inc., indicate continued focus on operational efficiency and future growth.

Financial Highlights

46 data points
Beta

Revenue

$869.00M

69.3% Gross Margin

Net Income

$169.00M

19.4% Net Margin

EPS (Diluted)

$0.39

Total Assets

$10.95B

Cash & Equivalents

$691.00M

Free Cash Flow

$114.00M

Financial Statements
Beta
Revenue$869.00M
Cost of Revenue$267.00M
Gross Profit$602.00M
SG&A Expenses$284.00M
Operating Expenses$587.00M
Operating Income$282.00M
Interest Expense$58.00M
Net Income$169.00M
EPS (Basic)$0.40
EPS (Diluted)$0.39
Shares Outstanding (Basic)425.00M
Shares Outstanding (Diluted)429.00M

Key Highlights

  • 1Total revenues increased 8% to $879 million in Q1 2010 compared to Q1 2009.
  • 2Net income attributable to Discovery Communications, Inc. stockholders increased significantly by 42% to $169 million.
  • 3Distribution revenues grew 5% to $445 million, driven by contractual rate increases and subscriber growth.
  • 4Advertising revenues saw a strong increase of 16% to $348 million, fueled by improved ratings and market conditions.
  • 5International Networks segment showed robust growth with Adjusted OIBDA up 29% to $124 million.
  • 6The company maintained a healthy cash position, ending the quarter with $691 million in cash and cash equivalents.
  • 7Adoption of new accounting standards for Variable Interest Entities (VIEs) led to deconsolidation of OWN and APJ joint ventures, impacting comparability but aligning reporting with current best practices.

Frequently Asked Questions

The primary drivers of the revenue increase in the first quarter of 2010 were growth in distribution revenues, attributed to contractual rate increases and subscriber growth, and a significant rise in advertising revenues, bolstered by improved ratings and a strengthening advertising market.

The adoption of new accounting guidance for Variable Interest Entities (VIEs) resulted in the deconsolidation of the Oprah Winfrey Network (OWN) and Animal Planet Japan (APJ) joint ventures. This change means these entities are now accounted for using the equity method rather than being consolidated, which impacts the comparability of financial statements between periods but aligns with current accounting standards.

Discovery Communications, Inc. maintains a strong liquidity position, with $691 million in cash and cash equivalents at the end of the quarter. Additionally, the company has access to a $1.6 billion revolving credit facility. While the revolving credit facility expires in October 2010, the company is assessing options for a new facility. Overall, the company anticipates sufficient liquidity for its operating requirements for at least the next twelve months.

The company has significant long-term debt obligations. Scheduled debt payments for the remainder of 2010 and the succeeding four years are substantial, with $15 million due in the rest of 2010, $240 million in 2011, $345 million in 2012, and a large portion of $1.879 billion due in 2014. The company is also discussing potential revisions to its contractual relationships with the BBC regarding joint ventures, which could involve significant acquisition costs.