Discovery Q4 Earnings Slip After Sluggish U.S. Ad Revenue

SILVER SPRING: Discovery Communications has reported lower fourth-quarter earnings, faced with higher restructuring costs and a drop in U.S. ad revenue.

Q4 net income was down 13 percent to $250 million. Revenue in the quarter, however, increased 9 percent to $1.68 billion, led by 17 percent growth at the international networks and 1 percent growth at U.S. networks. Adjusted OIBDA decreased $25 million to $638 million, as 11 percent growth at international networks was offset by a 7 percent decline at U.S. networks.

International networks’ revenues for the fourth quarter increased 17 percent to $884 million, with distribution revenues up 24 percent and advertising revenues up 7 percent. U.S. networks’ revenues in the fourth quarter of 2014 increased 1 percent to $745 million as distribution growth was partially offset by a decline in advertising and other revenues. Advertising revenues declined 3 percent due to lower delivery and lower demand. Distribution revenues increased 8 percent due to higher rates and the consolidation of Discovery Family in the fourth quarter of 2014, partially offset by additional revenues from licensing agreements in the fourth quarter of 2013. Excluding the impact of licensing agreements and the consolidation of Discovery Family, distribution revenues grew 6 percent and total revenues decreased 1 percent over the prior year's quarter.

For the full year, revenues of $6.3 billion were up 13 percent year on year, as international networks was up 28 percent and U.S. networks was flat. Discovery Communications' full-year net income of $1.139 billion is a 6 percent gain on the prior year, primarily due to improved operating performance as well as lower mark-to-market equity-based compensation, lower losses on derivatives and lower taxes, partially offset by higher restructuring costs, gains associated with the consolidation of new businesses in 2013 and increased amortization associated with purchase price allocation.

"The healthy performance of our core business coupled with increasing contributions from our recent strategic acquisitions led to another year of solid operational and financial results and increasing capital returns in 2014," said David Zaslav, the president and CEO of Discovery Communications. "Despite a more challenging U.S. market and significant foreign currency headwinds, our content portfolio once again drove audience gains and boosted our market share around the world. As we move into 2015, we are confident that our long-term content investment strategy, strong global IP and brands, and local approach to markets will continue to drive our results and enable us to deliver additional value to shareholders.”