UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

ýFORM10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20172021
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
Commission File Number: 001-34177
disca-20211231_g1.jpg
Discovery, Communications, Inc.
(Exact name of Registrant as specified in its charter)
Delaware35-2333914
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
Delaware230 Park Avenue South35-233391410003
(State or other jurisdiction of
incorporation or organization)
New York, New York
(I.R.S. Employer
Identification No.)
Zip Code)
One Discovery Place
Silver Spring, Maryland
20910
(Address of principal executive offices)(Zip Code)
(240) 662-2000(212) 548-5555
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolsName of Each Exchange on Which Registered
Series A Common Stock, par value $0.01 per shareDISCAThe NASDAQNasdaq Global Select Market
Series B Common Stock, par value $0.01 per shareDISCBThe NASDAQNasdaq Global Select Market
Series C Common Stock, par value $0.01 per shareDISCKThe NASDAQNasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None




Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ý    No  ¨
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  ý
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”filer” “smaller reporting company,”company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerýAccelerated filer¨☐
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
☐
Smaller reporting 
company
¨☐
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨☐   No  ý
The aggregate market value of voting and non-voting common stock held by non-affiliates of the Registrant computed by reference to the last sales price of such stock, as of the last business day of the Registrant’s most recently completed second fiscal quarter, which was June 30, 2017,2021, was approximately $9 billion.$14 billion.
Total number of shares outstanding of each class of the Registrant’s common stock as of February 21, 201810, 2022 was:
Series A Common Stock, par value $0.01 per share155,613,008169,580,151 
Series B Common Stock, par value $0.01 per share6,512,3796,511,917 
Series C Common Stock, par value $0.01 per share219,782,537330,153,753 

DOCUMENTS INCORPORATED BY REFERENCE
Certain information required in Item 10 through Item 14 of Part III of this Annual Report on Form 10-K is incorporated herein by reference to the Registrant’s definitive Proxy Statement for its 20182022 Annual Meeting of Stockholders, which shall be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, within 120 days of the Registrant’s fiscal year end.amended.




DISCOVERY, COMMUNICATIONS, INC.
FORM 10-K
TABLE OF CONTENTS


Page
Page
4
ITEM 1. Business.
45
ITEM 1A. Risk Factors.
1921
ITEM 1B. Unresolved Staff Comments.
2936
ITEM 2. Properties.
2936
ITEM 3. Legal Proceedings.
2937
ITEM 4. Mine Safety Disclosures.
3037
3240
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
3240
ITEM 6. Selected Financial Data.[Reserved.]
3541
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
3741
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.
6258
ITEM 8. Financial Statements and Supplementary Data.
6861
ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
150118
ITEM 9A. Controls and Procedures.
150118
ITEM 9B. Other Information.
150118
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
119
150120
ITEM 10. Directors, Executive Officers and Corporate Governance.
151120
ITEM 11. Executive Compensation.
151120
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
151120
ITEM 13. Certain Relationships and Related Transactions, and Director Independence.
151120
ITEM 14. Principal Accountant Fees and Services.
151120
152121
ITEM 15. Exhibits and Financial Statement Schedules.
152121
ITEM 16. Form 10-K Summary.
152128
160129



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PART I
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business, marketing and operating strategies, integration of acquired businesses, new service offerings, financial prospects, anticipated sources and uses of capital and our proposed transaction to combine our business with AT&T’s WarnerMedia business. Words such as “anticipate,” “assume,” “believe,” “continue,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “potential,” “predict,” “project,” “strategy,” “target” and similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “should,” “will” and “would,” among other terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be accomplished. The following is a list of some, but not all, of the factors that could cause actual results or events to differ materially from those anticipated:
•the occurrence of any event, change or other circumstance that could give rise to the termination of, or prevent or delay our ability to consummate, our proposed transaction to combine with WarnerMedia;
•the effects of the announcement, pendency or completion of our proposed transaction to combine with WarnerMedia on our ongoing business operations;
•changes in the distribution and viewing of television programming, including the continuing expanded deployment of personal video recorders, subscription video on demand, internet protocol television, mobile personal devices, personal tablets and user-generated content and their impact on television advertising revenue;
•continued consolidation of distribution customers and production studios;
•a failure to secure affiliate agreements or the renewal of such agreements on less favorable terms;
•rapid technological changes;
•the inability of advertisers or affiliates to remit payment to us in a timely manner or at all;
•general economic and business conditions, including the impact of the ongoing COVID-19 pandemic;
•industry trends, including the timing of, and spending on, feature film, television and television commercial production;
•spending on domestic and foreign television advertising;
•disagreements with our distributors or other business partners over contract interpretation;
•fluctuations in foreign currency exchange rates, political unrest and regulatory changes in international markets, including any proposed or adopted regulatory changes that impact the operations of our international media properties and/or modify the terms under which we offer our services and operate in international markets;
•market demand for foreign first-run and existing content libraries;
•the regulatory and competitive environment of the industries in which we, and the entities in which we have interests, operate;
•uncertainties regarding the financial performance of our investments in unconsolidated entities;
•our ability to complete, integrate, maintain and obtain the anticipated benefits and synergies from our proposed business combinations and acquisitions, including our proposed transaction to combine with WarnerMedia, on a timely basis or at all;
•uncertainties associated with product and service development and market acceptance, including the development and provision of programming for new television and telecommunications technologies, and the success of our discovery+ streaming product;
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•realizing direct-to-consumer subscriber goals;
•future financial performance, including availability, terms, and deployment of capital;
•the ability of suppliers and vendors to deliver products, equipment, software, and services;
•the outcome of any pending or threatened or potential litigation, including any litigation that has been or may be instituted against us relating to our proposed transaction to combine with WarnerMedia;
•availability of qualified personnel and recruiting, motivating and retaining talent;
•changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations of the Federal Communications Commission and similar authorities internationally and data privacy regulations and adverse outcomes from regulatory proceedings;
•changes in income taxes due to regulatory changes or changes in our corporate structure;
•changes in the nature of key strategic relationships with partners, distributors and equity method investee partners;
•competitor responses to our products and services and the products and services of the entities in which we have interests;
•threatened or actual cyber-attacks and cybersecurity breaches;
•threatened terrorist attacks and military action;
•our level of debt;
•reduced access to capital markets or significant increases in costs to borrow; and
•a reduction of advertising revenue associated with unexpected reductions in the number of subscribers.
These risks have the potential to impact the recoverability of the assets recorded on our balance sheets, including goodwill or other intangibles. Additionally, many of these risks are currently amplified by and may, in the future, continue to be amplified by the prolonged impact of the COVID-19 pandemic. For additional risk factors, refer to Item 1A, “Risk Factors” of this Annual Report on Form 10-K. These forward-looking statements and such risks, uncertainties, and other factors speak only as of the date of this Annual Report on Form 10-K, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.
ITEM 1. Business.
For convenience, the terms “Discovery,” the “Company,” “we,” “us” or “our” are used in this Annual Report on Form 10-K to refer to both Discovery, Communications, Inc. and collectively to Discovery, Communications, Inc. and one or more of its consolidated subsidiaries, unless the context otherwise requires.
We were formed on September 17, 2008 asWarnerMedia
In May 2021, the Company entered into an agreement with AT&T Inc. to combine with WarnerMedia’s ("WarnerMedia") entertainment, sports and news assets to create a Delaware corporation instandalone, global entertainment company.
The proposed combination transaction will be executed through a Reverse Morris Trust type transaction, under which WarnerMedia will be distributed to AT&T’s shareholders via a pro rata distribution (i.e., a spin off). In connection with the combination transaction, AT&T will receive approximately $43 billion (subject to working capital and other adjustments) in a combination of cash, debt securities and WarnerMedia’s retention of certain debt. The Company has concluded that it will be considered the accounting acquirer. The Company established an interest rate derivative program to mitigate interest rate risk associated with the anticipated issuance of future fixed-rate debt by WarnerMedia, which is expected to be guaranteed by the Company and certain subsidiaries of the Company upon closing of the transaction. (See Note 10 to the accompanying consolidated financial statements.)
Immediately prior to closing, all shares of Series A, Series B, and Series C common stock and Series A-1 and Series C-1 convertible preferred stock will be reclassified and converted to one class of the Company's common stock. AT&T’s shareholders that receive WarnerMedia stock in the distribution will receive stock representing 71% of the combined company and the
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Company's shareholders will continue to own 29% of the combined company, in each case on a fully diluted basis. The Boards of Directors of both AT&T and the Company have approved the transaction.
The transaction is anticipated to close in the second quarter of 2022, subject to approval by the Company's shareholders and the satisfaction of customary closing conditions, including receipt of regulatory approvals. On December 22, 2021, the transaction received unconditional antitrust clearance from the European Commission (“EC”) pursuant to the EC Merger Regulation, and on December 28, 2021, AT&T received a favorable Private Letter Ruling from the Internal Revenue Service regarding the qualification of the transactions for their intended tax-free treatments. On February 9, 2022, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, statutory waiting period has expired or otherwise been terminated, and any agreement not to consummate the transaction between the parties and the Federal Trade Commission or the Antitrust Division of the United States Department of Justice or any other applicable governmental entity, has also expired or otherwise been terminated. Discovery Holding Company (“DHC”)and AT&T are in the process of obtaining other required regulatory approvals. Agreements are in place with Dr. John Malone and Advance/Newhouse Programming Partnership to vote in favor of the transaction, representing approximately 43% of the aggregate voting power of the shares of Discovery voting stock. The transaction requires, among other things, the consent of Advance/Newhouse Programming Partnership under the Company's certificate of incorporation as the sole holder of the Series A-1 Preferred Stock, which consent was given pursuant to a consent agreement. In connection with Advance/Newhouse Programming Partnership’s entry into the consent agreement and related forfeiture of the significant rights attached to the Series A-1 Preferred Stock in the reclassification of the shares of Series A-1 Preferred Stock into common stock, it will receive an increase to the number of shares of common stock of the Company into which the Series A-1 Preferred Stock would be converted. Upon the closing, the impact of the issuance of such additional shares of common stock of the Company will be recorded as a transaction expense. No vote by AT&T shareholders is required.
The merger agreement contains certain customary termination rights for Discovery and AT&T, including, without limitation, a right for either party to terminate if the transaction is not completed on or before July 15, 2023. Termination under specified circumstances will require Discovery to pay AT&T a termination fee of $720 million or AT&T to pay Discovery a termination fee of $1.8 billion.
In anticipation of this combination, in June 2021, Magallanes, Inc., a wholly owned subsidiary of AT&T Inc., entered into a $10 billion term loan that will be guaranteed by the Company and certain material subsidiaries of the Company upon closing of the transaction.
Impact of COVID-19
On March 11, 2020, the World Health Organization declared the coronavirus disease 2019 (“Advance/Newhouse”COVID-19”) combining their respective ownership interestsoutbreak to be a global pandemic. COVID-19 has continued to spread throughout the world, and the duration and severity of its effects and associated economic disruption remain uncertain. We continue to closely monitor the impact of COVID-19 on all aspects of our business and geographies, including the impact on our customers, employees, suppliers, vendors, distribution and advertising partners, production facilities, and various other third parties.
Beginning in Discovery Communications Holding, LLC (“DCH”)the second quarter of 2020, demand for our advertising products and exchanging those interests withservices decreased due to economic disruptions from limitations on social and into Discovery (the “Discovery Formation”). Ascommercial activity. These economic disruptions and the resulting effect on us eased during the second half of 2020. The pandemic did not have a significant impact on demand during fiscal year 2021. Many of our third-party production partners that were shut down during most of the second quarter of 2020 due to COVID-19 restrictions came back online in the third quarter of 2020 and, as a result, we have incurred additional costs to comply with various governmental regulations and implement certain safety measures for our employees, talent, and partners.Additionally, certain sporting events that we have rights to were cancelled or postponed, thereby eliminating or deferring the related revenues and expenses, including the Tokyo 2020 Olympic Games, which occurred in July and August 2021. The postponement of the Discovery Formation, DHC2020 Olympic Games deferred both Olympic-related revenues and DCH became wholly-owned subsidiariessignificant expenses from fiscal year 2020 to fiscal year 2021.
In response to the impact of Discovery, with Discovery becoming the successorpandemic, we employed innovative production and programming strategies, including producing content filmed by our on-air talent and seeking viewer feedback on which content to air. We pursued a number of cost savings initiatives, which began during the third quarter of 2020 through the implementation of travel, marketing, production and other operating cost reductions, including personnel reductions, restructurings and resource reallocations to align our expense structure to ongoing changes within the industry.
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The full extent of COVID-19’s effects on our operations and results is not yet known and will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity and the extent of future surges of COVID-19, vaccine distribution and other actions to contain the virus or treat its impact, among others. We will continue to monitor COVID-19 and its impact on our business results and financial condition. The consolidated financial statements set forth in this Annual Report on Form 10-K reflect management’s latest estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures as of the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting entity to DHC.periods presented. Actual results may differ significantly from these estimates and assumptions.
OVERVIEW
We are a global IP media company that provides content around the world viaacross multiple distribution platforms, including linear platforms includingsuch as pay-television ("pay-TV"), free-to-air ("FTA") and broadcast television, as well as variousauthenticated GO applications, digital distribution platforms, including ad-supported TV Everywhere ("TVE") offerings, subscription-based direct-to-consumer products, digital and mobile-first, social media platforms and over-the-top streaming services. We also enter intoarrangements, content licensing agreements.arrangements and direct-to-consumer ("DTC") subscription products. As one of the world’s largest pay-TV programmers, we provide original and purchased content and live events to more than 3approximately 3.5 billion cumulative subscribers and viewers worldwide through networks that we wholly or partially own. We distribute customized content in the U.S. and approximatelyover 220 other countries and territories in over 4050 languages. Our global portfolio of networks includes prominent nonfiction television brands such as Discovery Channel, our most widely distributed global brand, TLC, Investigation Discovery, Animal Planet, Science and Velocity (known as Turbo outside of the U.S.). Our portfolio includes Eurosport, a leading sports entertainment provider and the Olympic Games (the "Olympics") across Europe, as well as Discovery Kids, a leading children's entertainment brand in Latin America. We participate in joint ventures including Group Nine Media ("Group Nine"), a digital media holding company home to top digital brands including NowThis News, The Dodo, Thrillist and Seeker, as well as The Enthusiast Network ("TEN"), a leading digital media company for auto fans which includes our Velocity network and Motor Trend On Demand. We operate a portfolio of additional websites, digital direct-to-consumer products, a production studio and curriculum-based education products and services.
Our objectives are to invest in high-quality content for our networks and brands to build viewership, optimize distribution revenue, capture advertising sales, and create or reposition branded channels and businesses to sustain long-term growth and occupy a desired content niche with strong consumer appeal. Our strategy is to maximize the distribution, ratings and profit potential of each of our branded networks. In addition to growing distribution and advertising revenues for our branded networks, we are extending content distribution across new platforms, including brand-aligned websites, online streaming, mobile devices, video on demand ("VOD") and broadband channels, which provide promotional platforms for our television content and serve as additional outlets for advertising and distribution revenue. Audience ratings are a key driver in generating advertising revenue and creating demand on the part of cable television operators, direct-to-home ("DTH") satellite operators, telecommunication service providers, and other content distributors who deliver our content to their customers.
Our content spans genres including survival, exploration, sports, lifestyle, automobiles, general entertainment, heroes, adventure, crime and investigation, health and kids. We have an extensive library of high-definition content and own most rights to the majority of our content and footage, which enables us to exploitleverage our library to quickly launch brands and services into new markets quickly.and on new platforms. Our content can be re-edited and updated in a cost-effective manner to provide topical versions of subject matter that can be utilized around the world on a variety of platforms.
Our content spans genres including survival, natural history, exploration, sports, general entertainment, home, food, travel, heroes, adventure, crime and investigation, health, and kids. Our global portfolio of networks includes prominent nonfiction television brands such as Discovery Channel, our most widely distributed global brand, HGTV, Food Network, TLC, Animal Planet, Investigation Discovery, Travel Channel, Science, and MotorTrend (previously known as Velocity domestically and currently known as Turbo in most international distribution countries). Among other networks in the U.S., Discovery also features two Spanish-language services, Discovery en Español and Discovery Familia. Discovery Sports oversees our international portfolio of sports businesses, brands, channels and platforms. This includes Eurosport, a leading multi-sports entertainment destination and broadcaster of the Olympic Games (the "Olympics") across Europe (excluding Russia), live and on-demand sports streaming, including Eurosport’s content, on discovery+; Global Cycling Network and Global Mountain Bike Network, part of the cycling media group; Golf Digest, a premier golf destination; and Discovery Sports Events, a global sports promoter. Beyond sports, our international portfolio includes TVN, a Polish media company, as well as Discovery Kids, a leading children's entertainment brand in Latin America. We participate in joint ventures including Magnolia, the multi-platform venture with Chip and Joanna Gaines, and Group Nine Media, a digital media holding company home to digital brands including NowThis News, the Dodo, Thrillist, PopSugar, and Seeker. We also operate production studios.
In 2021, we launched discovery+, our aggregated DTC product, in the U.S. across several streaming platforms and entered into a partnership with Verizon. Since then, discovery+ has expanded internationally, including the UK, Canada, the Philippines, Brazil, Italy and India. As of December 31, 2021, we had 22 million total paid DTC subscribers.1 discovery+ currently has an extensive content library, including original series and documentaries. The service is available with ads or on an ad-free tier, providing us with dual revenue streams.
We aim to generate revenues principally from the sale of advertising on our networks and digital products and from fees charged to distributors that carry our network brands and content, primarily including cable, direct-to-home ("DTH") satellite, telecommunication and digital service providers, as well as through DTC subscription services. Other revenue-generating transactions include affiliate and advertising sales representation services, production studios content development and services content licenses, and the licensing of our brands for consumer products. During 2021, advertising, distribution and other revenues were 51%, 44% and 5%, respectively, of consolidated revenues.
1We define a DTC subscription as (i) a subscription to a direct-to-consumer product for which we have recognized subscription revenue from a direct-to-consumer platform; (ii) a subscription received through wholesale arrangements for which we receive a fee for the distribution of our direct-to-consumer platforms, as well as subscriptions provided directly or through third-party platforms; and (iii) a subscription recognized by certain joint venture partners and affiliated parties. We may refer to the aggregate number of subscriptions across our direct-to-consumer services as subscribers. A subscription is only counted if it is on a paying status, and excludes users on free trials. At the end of each quarter, the subscription count includes the actual number of users that rolled to pay up to seven days immediately following quarter end.
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We aim to invest in high-quality content for our networks and brands with the objective of building viewership, optimizing distribution revenue, capturing advertising revenue, and creating or repositioning branded channels and business to sustain long-term growth and occupy a desired content niche with strong consumer appeal. Our strategy is to maximize the distribution, ratings and profit potential of each of our linear branded networks and genres, as well as our DTC products. We have grown distribution and advertising revenues for our linear branded networks and discovery+. In addition to growing distribution and advertising revenues for our branded networks, we have extended content distribution across new platforms, including brand-aligned websites, online streaming, mobile devices, VOD, and broadband channels, which provide promotional platforms for our television content and serve as additional outlets for advertising and distribution revenue. Our goal is to reach consumers wherever and whenever they are consuming content, as well as reaching new audiences including broadband only, cord cutters and cord nevers, while continuing to serve our linear network subscribers. Audience ratings, audience engagement and channel packaging are key drivers in generating advertising revenue and creating demand on the part of cable television operators, DTH satellite operators, telecommunication service providers, device partners and other content distributors who deliver our content to their customers.
Although the Company utilizeswe utilize certain brands and content globally, we classify our operations in two reportable segments: U.S. Networks, consisting principally of domestic television network brands,networks and digital content services, and International Networks, consisting primarily of international television network brands. In addition, Educationnetworks and Other consists principally of curriculum-based product and service offerings and a production studio.digital content services. Our segment presentation aligns with our management structure and the financial information management has useduses to make strategic anddecisions about operating decisions,matters, such as the allocation of resources and business performance assessments. Financial information for our segments and the geographical areas in which we do business is set forth in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2123 to the consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. Our global brands are described below.




ANTICIPATED ACQUISITION
Scripps Networks Interactive, Inc. ("Scripps Networks")
On February 26, 2018, the U.S. Department of Justice notified the Company that it has closed its investigation into Discovery's agreement for a plan of merger (the "Merger Agreement") to acquire Scripps Networks in a cash-and-stock transaction (the "Scripps Networks acquisition"). Scripps Networks is a global media company with lifestyle-oriented content, such as home, food, and travel-related programming. The Scripps Networks portfolio of networks includes HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and Great American Country, and TVN S.A.’s (“TVN”) portfolio of networks outside the United States. Additionally, outside the United States, Scripps Networks participates in UKTV, a joint venture with BBC Worldwide Limited (the “BBC”). The estimated merger consideration for the acquisition totals $12.0 billion, including $8.4 billion of cash and $3.6 billion of our Series C common stock based on our Series C common stock prices as of January 31, 2018. In addition, the Company will assume approximately $2.7 billion of Scripps Networks' net debt. The transaction is expected to close in early 2018.
Scripps Networks shareholders will receive $63.00 per share in cash and a number of shares of Discovery's Series C common stock that is determined in accordance with a formula and subject to a collar based on the volume weighted average price of the Company's Series C common stock. The formula is based on the volume weighted average price of Discovery's Series C common stock over the 15 trading days ending on the third trading day prior to closing (the “Average Discovery Price”). Scripps Networks shareholders will receive 1.2096 shares of Discovery's Series C common stock if the Average Discovery Price is below $22.32, and 0.9408 shares of Discovery's Series C common stock if the Average Discovery Price is above $28.70. The intent of the range was to provide Scripps Networks shareholders with $27.00 of value per share in Discovery Series C common stock; if the Average Discovery Price is greater than or equal to $22.32 but less than or equal to $28.70, Scripps Networks shareholders will receive a proportional number of shares between 1.2096 and 0.9408. If the Average Discovery Price is below $25.51, Discovery has the option to pay additional cash instead of issuing more shares above the 1.0584 conversation ratio required at $25.51. The cash payment is equal to the product of the additional shares required under the collar formula multiplied by the Average Discovery Price; for example, if the Average Discovery Price were $22.32 with a conversion ratio of 1.2096, the Company could offer shares at the 1.0584 ratio and pay for the difference associated with the incremental shares in cash. Outstanding employee equity awards or share-based awards that vest upon the change of control will be acquired with a similar combination of cash and shares of Discovery Series C common stock pursuant to terms specified in the Merger Agreement. Therefore, the merger consideration will fluctuate based upon changes in the share price of Discovery Series C common stock and the number of Scripps Networks common shares, stock options, and other equity-based awards outstanding on the closing date. Discovery will also pay certain transaction costs incurred by Scripps Networks. The post-closing impact of the formula was intended to result in Scripps Networks’ shareholders owning approximately 20% of Discovery’s fully diluted common shares and Discovery’s shareholders owning approximately 80%. The Company will utilize the proceeds of the senior notes offering described below, borrowings under certain term loans (see Note 9 to the accompanying consolidated financial statements) and cash on hand to finance the cash portion of the transaction. The transaction is subject to regulatory approvals and other customary closing conditions.
John C. Malone, Advance/Newhouse and members of the Scripps family entered into voting agreements to vote in favor of the transactions (the “Advance/Newhouse Voting Agreement”) and the stockholders of both Discovery and Scripps Networks approved the transaction on November 17, 2017. In addition, Advance/Newhouse has provided its consent, in its capacity as the holder of Discovery’s outstanding shares of Series A preferred stock, for Discovery to enter into the Merger Agreement and consummate the merger. In connection with this consent, Discovery and Advance/Newhouse entered into an exchange agreement pursuant to which Advance/Newhouse exchanged all of its shares of Series A and Series C preferred stock of Discovery for shares of newly designated Series A-1 and Series C-1 preferred stock of Discovery. The exchange transaction did not change the aggregate number of shares of Discovery’s Series A common stock and Series C common stock that are beneficially owned by Advance/Newhouse or change voting rights or liquidation preferences afforded to Advance/Newhouse. Discovery valued the securities immediately prior to and immediately after the exchange and determined that the exchange increased the fair value of Advance/Newhouse’s preferred stock by $35 million. Discovery does not believe the exchange is considered significant and does not reflect an extinguishment of the previously issued preferred stock for accounting purposes. Accordingly, Discovery has accounted for the exchange of the previously issued preferred stock as a modification, which is measured as the increase in fair value of the preferred stock held by Advance/Newhouse. The impact of the modification has been recorded as a component of selling, general and administrative expense. (See Note 3 and Note 12 to the accompanying consolidated financial statements). All of Discovery's direct costs of the Scripps Networks acquisition will be reflected as a component of selling, general and administrative expense in the consolidated statements of operations.
On September 21, 2017, Discovery Communications, LLC ("DCL") issued a series of senior notes to partially fund the acquisition of Scripps Networks with an aggregate principal amount of $6.8 billion. With the exception of $900 million in senior notes that mature in 2019, the senior notes contain a special mandatory redemption feature requiring the Company to redeem the


notes for a price equal to 101% of the principal amount plus any accrued and unpaid interest on the senior notes in the event that the Scripps Networks acquisition has not closed on or prior to August 30, 2018, or if the Merger Agreement is terminated prior to that date. While the Company expects to complete the acquisition on or before the deadline, unanticipated developments could delay or prevent the acquisition. As such, the Company cannot ensure that it will complete the acquisition by August 30, 2018. (See Note 3 to the accompanying consolidated financial statements).
Global Network Brands
Subscriber statistics set forth in this Annual Report on Form 10-K include both wholly-owned networks and networks operated by equity method investees. Domestic subscriber statistics are based on Nielsen Media Research. International subscriber and viewer statistics are derived from internal data coupled with external sources when available. As used herein, a “subscriber” is a single household that receives the applicable network from its cable television operator, DTH satellite operator, telecommunication service provider, or other television provider, including those who receive our networks from pay-TV providers without charge pursuant to various pricing plans that include free periods and/or free carriage. The term “cumulative subscribers” refers to the sum of the total number of subscribers to each of our networks or content services. By way of example, two households that each receive five of our networks from their pay-TV provider represent two subscribers, but 10 cumulative subscribers. The term "viewer" is a single household that receives the signal from one of our networks using the appropriate receiving equipment without a subscription to a pay-TV provider.
Our global brands areconsist of the following:

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•Discovery Channel reachedhad approximately 9181 million subscribers in the U.S. and 6 million subscribers through a licensing arrangement with partners in Canada included in the U.S. Networks segment as of December 31, 2017.2021. Discovery Channel reachedhad approximately 340266 million cumulative subscribers and viewers in international markets as of December 31, 2017 including the Discovery HD Showcase brand.2021.
•Discovery Channel is dedicated to creating the highest qualityhigh-quality, non-fiction content that informs and entertains its consumersviewers about the world in all its wonder, diversity and amazement. The network offers a signature mix of high-end production values and vivid cinematography across genres including science and technology, exploration, adventure, history and in-depth, behind-the-scenes glimpses at the people, places and organizations that shape and share our world.
•In the U.S., Discovery Channel audiences can enjoy their favorite programming anytime, anywhere through the Discovery GO app, which features live and on-demand access.
•Discovery Channel content includes is led by numerous franchises such as Gold Rush,, Naked and Afraid, Deadliest Catch, Fast N' Loud, Street Outlaws, Alaskan Bush People, Manhunt: UNABOMBER, Deadliest Catch, Moonshiners, Expedition Unknown, BattleBots, and recently, the return of Cash Cab. Discovery ChannelNaked & Afraid. It is also known for its blue-chip and natural history specials such as Serengeti, and is home to Shark Week, the network's long-running annual summer TV event.
•Target viewers are adults aged 25-54,in the 25 to 54 age range, particularly men.

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TLC reached•HGTV had approximately 8982 million subscribers in the U.S. and approximately 176 million subscribers and viewers in international markets as of December 31, 2017,2021.
•HGTV programming content attracts audiences interested specifically in home/lifestyle related topics, including real estate, renovation, restoration, decorating, interior or landscape design and also reached fantasy lifestyles, as well as docu-series and reality competitions focused on those genres.
•In the U.S., HGTV audiences can enjoy their favorite programming anytime, anywhere through the Discovery GO app, which features live and on-demand access.
•Content on HGTV includes: Home Town, Home Town Takeover, Flip or Flop, Christina on the Coast, Flipping 101, Love It or List It, Tough Love with Hilary Farr, Celebrity IOU, Property Brothers: Forever Home, Fixer to Fabulous, House Hunters, My Lottery Dream Home, Good Bones, Unsellable Houses, and Rock the Block.
•Target viewers are adults with higher incomes in the 25 to 54 age range, particularly women.
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•Our most widely distributed ad-supported cable network in the U.S., Food Network had approximately 82 million subscribers in the U.S. and approximately 112 million subscribers and viewers in international markets as of December 31, 2021.
•Food Network programming content attracts audiences interested in food-related entertainment, including competition and travel, as well as food-related topics such as recipes, food preparation, entertaining, and dining out.
•In the U.S., Food Network audiences can enjoy their favorite programming anytime, anywhere through the Discovery GO app, which features live and on-demand access, as well as on the Food Network Kitchen app.
•Content on Food Network includes primetime series Beat Bobby Flay, BBQ Brawl, Chef Boot Camp, Chopped, Diners, Drive-Ins and Dives, The Great Food Truck Race, Guy’s Grocery Games, Restaurant: Impossible, Worst Cooks in America, and several seasonal baking championships such as Christmas Cookie Challenge, Halloween Baking Championship, Halloween Wars, Holiday Baking Championship, Holiday Wars, Spring Baking Championship and more, as well as daytime series Barefoot Contessa, Delicious Miss Brown, Girl Meets Farm, Guy's Ranch Kitchen, The Kitchen, The Pioneer Woman, Simply Giada, Trisha’s Southern Kitchen, Tournament of Champions, and Valerie's Home Cooking.
•Target viewers are adults with higher incomes in the 25 to 54 age range, particularly women.
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•TLC had approximately 80 million subscribers in the U.S. and 5 million subscribers in Canada that are included in the U.S. Networks segment as of December 31, 2017.2021. TLC content reachedhad approximately 375357 million cumulative subscribers and viewers in international markets as of December 31, 20172021 including the Home & Health and Real Time and Travel & Living brands.
TLC celebrates remarkable•Offering real-life stories without judgment, TLC shares everyday heart, humor, hope, and human connection with programming genres that include fascinating families, heartwarming transformations and life's milestone moments.
•In the U.S., TLC audiences can enjoy their favorite programming anytime, anywhere through the Discovery GO app, which features live and on-demand access.
•Content on TLC includes the90 Day Fiancéfranchise, Sister Wives, I Am Jazz, Dr. Pimple Popper, 1,000-lb Sisters, Welcome to Plathville, Doubling Down with the Derricos, I am Shauna Rae, 7 Little Johnstons, My Big Fat Fabulous Life, Little People Big World, Long Island Medium, Outdaughtered Unexpected, I Love a Mama's Boy, My 600-lb Life, and returning in 2018, Trading Spaces.
My Feet Are Killing Me.
•Target viewers are adults aged 25-54,in the 25 to 54 age range, particularly women.

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•Animal Planet reachedhad approximately 8779 million subscribers in the U.S. and 2approximately 178 million subscribers through a licensing arrangement with partners in Canada included in the U.S. Networks segment as of December 31, 2017. Animal Planet reached approximately 263 million subscribersand viewers in international markets as of December 31, 2017.2021.
•Animal Planet immerses viewers inis dedicated to creating high quality content that keeps the full rangechildhood joy and wonder of life inanimals alive by showcasing their stories and the animal kingdompeople that work with rich, deep content via multiple platforms, offering animal lovers access to a centralized, television, digital socialthem.
•In the U.S., Animal Planet audiences can enjoy their favorite programming anytime, anywhere through the Animal Planet GO app, which features live and mobile community for immersive, engaging, high-quality entertainment, informationon-demand access.
•Content and enrichment.
Contenttalent on Animal Planet includes River Monsters, Tanked,include Crikey! It's the Irwins, The Zoo, Mysterious Creatures with Forrest Galante, The Zoo: San Diego, Pit Bulls & Parolees, The Zoo, Dr. Jeff: Rocky Mountain Vet, Treehouse Masters North Woods Law and Lone Star Law. Animal Planet is also home to Puppy Bowl.
Bowl, the original and longest running animal adoption event on television.
•Target viewers are adults aged 25-54.in the 25 to 54 age range.

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•Investigation Discovery ("ID") reachedhad approximately 8481 million subscribers in the U.S. and 1approximately 90 million subscribers through a licensing arrangement with partners in Canada included in the U.S. Networks segment as of December 31, 2017. ID reached approximately 167 million subscribersand viewers in international markets as of December 31, 2017.2021.
•ID is a leading true crime, mystery and suspense network. From harrowing crimes and salacious scandalsin-depth investigations to the in-depth investigation and heart-breakingriveting mysteries, behind these "real people, real stories," ID challenges our everyday understanding of culture, society and the human condition.
•In the U.S., ID audiences can enjoy their favorite programming anytime, anywhere through the Discovery GO app, which features live and on-demand access.
•ID content includes On the Case with Paula Zahn, American Murder Mystery franchise, Homicide Hunter:Detective with Lt. Joe Kenda, People Magazine Investigates, Deadline: CrimeIn Pursuit with Tamron Hall John Walsh, Evil Lives Here and On The Case With Paula Zahn.
Bodycam.
•Target viewers are adults aged 25-54,in the 25 to 54 age range, particularly women.

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Science•Travel Channel reachedhad approximately 6579 million subscribers in the U.S. and 2approximately 46 million subscribers through a licensing arrangement with partners in Canada included in the U.S. Networks segment as of December 31, 2017. Science Channel reached approximately 117 million subscribersand viewers in international markets as of December 31, 2017.
2021.
Science•Travel Channel is home to all things science aroundfor the clock. Sciencebold, daring and spontaneous: adventurers who embrace the thrill of the unexpected, risk-takers who aren’t afraid of a little mystery and anyone who loves a great story.
•In the U.S., Travel Channel isaudiences can enjoy their favorite programming anytime, anywhere through the premiere TV, digitalDiscovery GO app which, features live and social community for those with a passion for science, space, technology, archeology, and engineering.on-demand access.
•Content on ScienceTravel Channel includes MythBusters, Street Science, Outrageous Acts of Science, WhatGhost Adventures, Destination Fear, Eli Roth Presents: A Ghost Ruined My Life, Expedition Bigfoot, Ghost Brothers: Lights Out, Kindred Spirits, Portals to Hell, and Paranormal Caught on Earth?, How the Universe Works and How It's Made.
Camera.
•Target viewers are adults aged 25-54.in the 25 to 54 age range.

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Velocity reached•MotorTrend had approximately 7375 million subscribers in the U.S. as of December 31, 2017. Velocity reachedand approximately 114152 million subscribers and viewers in international markets, where the brand is known as Turbo, as of December 31, 2017.
2021.
Velocity engages viewers with a variety of high-octane, action-packed, intelligent thrilling automotive programming. In addition•Programming on MotorTrend TV and the MotorTrend+ App, the leading subscription streaming service dedicated entirely to seriesthe motoring world, is engaging and specials exemplifyinginformative, featuring the very best of the automotive genre,world as told by top experts and personalities.
•MotorTrend+ offers more than 8,000 episodes of world-leading automotive series and specials including the network broadcasts approximately 100 hours ofall-new Top Gear America, Top Gear, the Emmy Award-winning docuseries Nascar 2020: Under Pressure, Kevin Hart’s Muscle Car Crew, Motor Mythbusters, Wheeler Dealers, Roadkill, Bitchin’ Rides, Iron Resurrection, and Texas Metal.
•In the U.S., MotorTrend TV audiences can also enjoy their favorite MotorTrend programming anytime, anywhere through the Discovery GO app, which features live event coverage every year.and on-demand access and on discovery+, our subscription streaming service.
Content on Velocity includes Wheeler Dealers,Texas Metal, Iron Resurrection and Barrett-Jackson Live.
In 2017, Discovery formed a joint venture ("VTEN") with Velocity and TEN to create a leading automotive digital media company comprised of consumer automotive brands including Motor Trend, Hot Rod, Automobile, and more. Motor Trend On Demand, which is part of the transaction and is being enhanced with Velocity content, represents the Company's first direct-to-consumer opportunity in the U.S. Discovery has a 67.5% ownership interest in the new joint venture. The joint venture is controlled and consolidated by Discovery. (See Note 3 to the accompanying consolidated financial statements.)
•Target viewers are adults aged 25-54,in the 25 to 54 age range, particularly men.
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•The Oprah Winfrey Network ("OWN") had approximately 70 million subscribers in the U.S. as of December 31, 2021.
•OWN is the first and only network named for, and inspired by a single iconic leader. OWN is a leading destination for premium scripted and unscripted programming from today's most innovative storytellers, with popular series such as Queen Sugar, Love & Marriage: Huntsville, Ready to Love, and upcoming dramas The Kings of Napa and All Rise.
•Target viewers are African-American adults in the 25 to 54 age range, particularly women.
U.S. NETWORKS
U.S. Networks generated revenues of $3.4$7.7 billion and adjusted operating income before depreciation and amortization ("Adjusted OIBDA") of $2.0$3.9 billion during 2017,2021, which represented 50%63% and 80%103% of our total consolidated revenues and Adjusted OIBDA, respectively. Our U.S. Networks segment principally consists of national television networks. Our U.S. Networks segment owns and operates 1116 national television networks, including fully distributed television networks such as Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel and Animal Planet.
In addition, we operate the following U.S. Networks generates revenues from fees chargedNetworks: MotorTrend, DIY Network (which converted to distributors of our television networks’ first run content, which include cable, DTH satellitethe Magnolia Network in January 2022), Science, Discovery Family, American Heroes Channel, Destination America, Discovery Life, Cooking Channel and telecommunication service providers, referred to as affiliate fees; fees from distributors for licensed content and content to equity method investee networks, referred to as other distribution revenue; fees from advertising sold on our television networks and digital products, which includes our GO suite of TVE applications and our virtual reality product, Discovery VR; fees from providing sales representation, network distribution services; and revenue from licensing our brands for consumer products. During 2017, distribution, advertising and other revenues were 47%, 51% and 2%, respectively, of total net revenues for this segment.
Typically, our television networks are aired pursuant to multi-year carriage agreements that provide for the level of carriage that our networks will receive and for annual graduated rate increases. Carriage of our networks depends on package inclusion, such as whether networks are on the more widely distributed, broader packages or lesser-distributed, specialized packages,OWN. In 2021, we also referred to as digital tiers. We provideprovided authenticated U.S. TV Everywhere ("TVE") streaming products that are available to certainpay-TV subscribers and connect viewers through our GO applications with live and on-demand access to award-winning shows and series from 1016 U.S. networks in the Discovery portfolio:portfolio and from Discovery Channel, TLC, Animal Planet, ID, Science Channel, Velocity, Discovery Family Channel, Destination America, American Heroes Channel ("AHC")Familia and Discovery Life. The Oprah Winfrey Network ("OWN"), a consolidated subsidiary as of November 30, 2017, is currently on the Watch OWN application.en Español. During 2017,2021, we achieved incremental increases in U.S. digital platform consumption. We alsoFurthermore, we provide ourcertain networks to consumers as part of subscription-based over-the-top services provided by DirectTV Now, Sony VueStream, AT&T Watch, Hulu + Live, SlingTV, fuboTV, and Philo.YouTube TV.
Advertising revenue is generated across multiple platforms and is based on the price received for available advertising spots and is dependent upon a number of factors including the number of subscribers to our channels, viewership demographics, the popularity of our programming, our ability to sell commercial time over a portfolio of channels and leverage multiple platforms to connect advertisers to target audiences. In the U.S., advertising time is sold in the upfront and scatter markets. In the upfront market, advertisers buy advertising time for upcoming seasons and, by committing to purchase in advance, lock in the advertising rates they will pay for the upcoming year. Many upfront advertising commitments include options whereby advertisers may reduce or increase purchase commitments. In the scatter market, advertisers buy advertising closer to the time when the commercials will be run, which often results in a pricing premium compared to the upfront rates. The mix of upfront and scatter market advertising time sold is based upon the economic conditions at the time that upfront sales take place, impacting the sell-out levels management is willing


or able to obtain. The demand in the scatter market then impacts the pricing achieved for our remaining advertising inventory. Scatter market pricing can vary from upfront pricing and can be volatile.
In additionU.S. Networks generates revenues from fees charged to distributors of our television networks’ first run content, which includes cable, DTH satellite and telecommunication service providers, referred to as affiliate fees; fees from distributors for licensed content and content to equity method investee networks, referred to as other distribution revenue; fees from advertising sold on our television networks and digital products, which include discovery+, our GO suite of TVE applications and other DTC subscription products; fees from providing sales representation, network distribution services; and revenue from licensing our brands for consumer products. Typically, our television networks are aired pursuant to multi-year carriage agreements that provide for the globallevel of carriage that our networks described inwill receive and for annual graduated rate increases. Carriage of our networks depends on package inclusion, such as whether networks are on the overview section above, we operate networks inmore widely distributed, broader packages or lesser-distributed, specialized packages, also referred to as digital tiers. In the U.S., approximately 84% of distribution revenues come from the top 10 distributors, with whom we have agreements that utilizeexpire at various times. Distribution fees are typically collected ratably throughout the following brands:year. Certain of our DTC products, including the recent launch of our aggregated discovery+ service in January 2021, provide dual revenue streams.

OWN reached approximately 76 million subscribers in the U.S. as of December 31, 2017.
OWN is the firstDuring 2021, advertising, distribution and only network named for, and inspired by, a single iconic leader. OWN is a leading destination for premium scripted and unscripted programming from today's most innovative storytellers, including award-winning filmmaker Ava DuVernay (Queen Sugar)other revenues were 55%, writers/producers Mara Brock Akil and Salim Akil (Love Is__)43%, and upcoming projects from Academy Award-winning writer Tarell Alvin McCraney and Emmy Award-nominated producer/writer Will Packer.
2%, respectively, of total net revenues for this segment.
Target viewers are African-American women aged 25-54.
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On November 30, 2017, the Company acquired from Harpo, Inc. ("Harpo") a controlling interest in OWN, increasing Discovery’s ownership stake from 49.50% to 73.99%. OWN is a pay-TV network and website that provides adult lifestyle and entertainment content, which is focused on African Americans. As a result of the transaction on November 30, 2017, the accounting for OWN was changed from an equity method investment to a consolidated subsidiary.



We have a 60% controlling financial interest in Discovery Family and account for it as a consolidated subsidiary. Hasbro, Inc. ("Hasbro") owns the remaining 40% of Discovery Family.
Discovery Family reached approximately 58 million subscribers in the U.S. as of December 31, 2017.
Discovery Family reached approximately 8 million viewers in international markets as of December 31, 2017.
Discovery Family is programmed with a mix of original series, family-friendly movies, and programming from Discovery’s nonfiction library and Hasbro Studios’ popular animation franchises.
Content on Discovery Family includes My Little Pony: Friendship is Magic and Equestria Girls, Zak Storm, Littlest Pet Shop, lifestyle programming and family-friendly movies.
Target viewers are children aged 2-11, family inclusive and adults aged 25-54.




AHC reached approximately 51 million subscribers in the U.S. as of December 31, 2017. AHC also reached approximately 1 million subscribers through a licensing arrangement with partners in Canada included in the U.S. Networks segment as of December 31, 2017.
AHC provides a rare glimpse into major events that shaped our world, visionary leaders and unexpected heroes who made a difference, and the great defenders of our freedom.
Content on AHC includes Gunslingers, Apocalypse WWI and America: Fact vs. Fiction.
Target viewers are adults aged 35-64, particularly men.


Destination America reached approximately 48 million subscribers in the U.S. as of December 31, 2017.
Destination America celebrates the people, places and stories of the United States, showcasing programming about myths, legends, food, adventure, natural history, and iconic landscapes from Alaska to Appalachia.
Content on Destination America includes Ghosts of Shepherdstown, Haunted Towns, Paranormal Lockdown, Mountain Monsters, A Haunting and Ghost Brothers.
Target viewers are adults aged 18-54.



Discovery Life reached approximately 46 million subscribers in the U.S. as of December 31, 2017.
Discovery Life reached approximately 8 million subscribers in international markets as of December 31, 2017.
Discovery Life entertains viewers with gripping, real-life dramas, featuring storytelling that chronicles the human experience from cradle to grave, including forensic mysteries, amazing medical stories, emergency room trauma, baby and pregnancy programming, parenting challenges, and stories of extreme life conditions.
Content on Discovery Life includes Untold Stories of the E.R., Body Bizarre, My Strange Addiction, Emergency 24/7 and Diagnose Me.
Target viewers are adults aged 25-54.



INTERNATIONAL NETWORKS
International Networks generated revenues of $3.3$4.5 billion and Adjusted OIBDA of $859$494 million during 2017,2021, which represented 48%37% and 34%13% of our total consolidated revenues and Adjusted OIBDA, respectively. Our International Networks segment principally consists of national and pan-regional television networks and brands that are delivered across multiple distribution platforms. This segment generates revenue from operations in virtually every pay-TV market in the world through an infrastructure that includes operational centers in London, Amsterdam, Paris, New Dehli, Warsaw, Milan, Singapore and Miami. Global brands include Discovery Channel, Food Network, HGTV, Animal Planet, TLC, ID, Science Channel and TurboMotorTrend (known as Velocity inTurbo outside of the U.S.), along with brands exclusive to International Networks, including Eurosport, Discovery Kids, DMAX, and Discovery Home & Health.Health, and TVN. As of December 31, 2017,2021, International Networks operated over 400operates unique distribution feeds in over 4050 languages with channel feeds customized according to language needs and advertising sales opportunities. International Networks also has FTA networks in Europe and the Middle East and broadcast networks in Denmark, Norway and Sweden,Europe, and continues to pursue further international expansion.
FTA and broadcast networks generate a significant portion of International Networks' revenue. The penetration and growth rates of television services vary across countries and territories depending on numerous factors including the dominance of different television platforms in local markets. While pay-TV services have greater penetration in certain markets, FTA or broadcast television is dominant in others. International Networks has a large international distribution platform for its 37with nearly 80 networks, with as many as 1423 networks distributed in any particular country or territory across approximatelymore than 220 countries and territories around the world. International Networks pursues distribution across all television platforms based on the specific dynamics of local markets and relevant commercial agreements.
With the growing demand for consumer content on digital and mobile devices, a suite of international DTC products has been made available to consumers. dplay, our real-life entertainment streaming service, was rebranded to our new global streaming service, discovery+. The remainder of the dplay markets, including the UK, Ireland, the Nordics, Italy, Spain, the Netherlands and Brazil followed in 2021. Discovery expanded its DTC offerings in 2021 by leveraging its library of local-language content, as well as its broad portfolio of live sports. Eurosport’s existing streaming service, Eurosport Player, offers premium and localized sports to fans in Europe. This service is expected to continue to be available until discovery+ launches in each market and Eurosport Player's content is fully integrated onto the service in those markets.
During summer 2021, discovery+ became the streaming home of the Olympics in Europe (excluding Russia) with live and on-demand access to the Tokyo Olympic Games 2020. Eurosport and Discovery are official broadcasters of the Beijing 2022 Winter Olympics and the Paris 2024 Summer Olympics.
In Germany, we are partners with ProSiebenSat.1 in the streaming joint venture, Joyn, which offers a collection of free and pay TV content, including series, documentaries, media libraries and sports content from ProSiebenSat.1, Discovery and other content partners, all bundled on one platform.
Effective January 1, 2018, weSeptember 2020, the Company realigned ourits International Networks management reporting structure. The table below represents the reporting structures during the periods presentedAs a result, Australia and New Zealand, which were previously included in the consolidated financial statements.
Reporting Structure effective January 1, 2018Reporting Structure effective January 1, 2017Reporting Structure effective January 1, 2015
Europe, Middle East and Africa ("EMEA"), includes the former CEEMEA, Southern Europe, Nordics and the U.K. Additionally, the grouping includes Australia and New Zealand, previously included as part of Asia-Pacific
CEEMEA, expanded to include Belgium, the Netherlands and LuxembourgCentral and Eastern Europe, Middle East and Africa ("CEEMEA"), included Germany, Switzerland and Austria
NordicsNorthern Europe included the Nordics, U.K, Netherlands, Belgium and Luxembourg
U.K.
Southern EuropeSouthern Europe
Latin AmericaLatin AmericaLatin America
Asia-Pacific now excludes Australia and New ZealandAsia-PacificAsia-Pacific

Europe reporting unit, are now included in the Asia-Pacific reporting unit.
In addition to the global networks described in the overview section above, we operate networks internationally that utilize the following brands:

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•Discovery Sports represents our international portfolio of sports businesses, brands, channels, and platforms.
•Eurosport is the leadinga household name for live sports entertainment provider across all platforms, showcasing sporting events with both regional and pan-regional appeal. Viewers in Europe withcan enjoy live-action events including coverage of cycling's Grand Tours, all four Grand Slam tennis tournaments, as well as every International Ski Federation World Cup and World Championship event during the following TV brands: Eurosport 1, Eurosport 2 and Eurosport News, reachingwinter sports season. It reaches millions of viewers across Europe and Asia as well asvia Eurosport Digital, which includes1, Eurosport 2, the network's DTC streaming service, Eurosport Player, ahead of its move to discovery+ in all of its markets, and Eurosport.com.Eurosport.com, an online sports news and video website reaching up to 50 million unique users per month.
•Subscribers reached by each brandand viewers as of December 31, 20172021 were as follows: Eurosport 1: 154 million;192 millionand Eurosport 2: 82 million;77 million.
•Eurosport offers live and Eurosport News: 6 million.on-demand streaming on discovery+, and began integrating Eurosport’s streaming offer in Europe in 2021 and will continue across the continent in step with the continued international roll out of discovery+.

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Eurosport telecasts live sporting events with both local and pan-regional appeal and its events focus on winter sports, cycling and tennis, including the Tour de France and it is the home of Grand Slam tennis with all four tournaments. Important local sports rights include Bundesliga and MotoGP. •In addition to pan-European rights, Eurosport has increasingly investedinvests in more exclusive and localized rights to drive local audience and commercial relevance. Important local sports rights include soccer leagues such as Allsvenskan and European Europa League in Sweden, Lega Basket basketball in Italy, and year-round ATP World Tour tennis in France, Czech Republic, Finland, Iceland, Norway, Russia, Slovakia, and Sweden.
We have acquired•discovery+ became the exclusive broadcast rightsstreaming home of the Olympics, the only place to watch all the Olympics in the European markets where the service had launched, while Eurosport Player remained the lead destination in other markets.
•Discovery Sports Events is the Discovery-owned event management division that oversees events across all media platforms throughout Europefive continents. Previously known as Eurosport Events, it acts as the global promoter and commercial rights-holder for six global Championships under long-term relationships with some of the four Olympic Games between 2018world’s leading governing bodies and 2024event owners. It promotes the World Touring Car Cup – Fédération Internationale de Automobile (“FIA”) and the FIA eTouring World Cup, the world’s first all-electric touring car championship. Launching in 2023, it will also promote the FIA Electric GT Championship, a new long-term platform for €1.3 billion ($1.5 billionmanufacturers to showcase their flagship GT cars and innovative technologies. In 2021, the group launched the Union Cycliste Internationale Track Champions League, a new series in a new 10-year alliance with Fédération Internationale de Motocyclisme that will promote Speedway events globally.
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•DMAX had approximately 138 million subscribers and viewers, according to internal estimates, as of December 31, 2017). The broadcast rights exclude France for the Olympic Games in 2018 and 2020, and exclude Russia. In addition to FTA broadcasts for the Olympic Games, many of these events are set to air on Eurosport's pay-TV platforms, and every minute of the Olympic Games will be available exclusively on the Eurosport Player, the network’s direct-to-consumer streaming service.2021.
On November 2, 2016, we announced a long-term agreement and joint venture partnership with BAMTech ("MLBAM") a technology services and video streaming company, and subsidiary of Major League Baseball's digital business, that includes the formation of BamTech Europe, a joint venture that will provide digital technology services to a broad set of both sports and entertainment clients across Europe.




As of December 31, 2017, DMAX reached approximately 102 million viewers through FTA networks, according to internal estimates.
•DMAX is a men’s factual entertainment channel in Asia and Europe.

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•Discovery Kids reachedhad approximately 122104 million subscribers and viewers, according to internal estimates, as of December 31, 2017.2021.
•Discovery Kids is athe leading children'spre-school network of Pay TV in Latin AmericaAmerica.
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•TVN operates a portfolio of free-to-air and Asia.pay-TV lifestyle, entertainment, and news networks in Poland, including TVN, TVN7, TTV, HGTV, TVN24, TVN Style, TVN Turbo, TVN24 BiS, TVN Fabu³a, Travel Channel, Food Network, iTVN and iTVNExtra.

•The TVN portfolio, excluding HGTV, Travel Channel and Food Network, had approximately 86 million cumulative subscribers and viewers as of December 31, 2021.

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Our International Networks segment also owns and operates the following regional television networks, which reached the following number of subscribers and viewers via paypay-TV and FTA or broadcast networks, respectively, as of December 31, 2017:2021:
Television Service
International
Subscribers/
Subscribers and Viewers

(millions)
QuestJeet PrimeFTA6638
DsportTele5FTA4337
Nordic broadcast networks(a)
Broadcast3431
Quest RedReallyFTA2729
GialloQuest RedFTA2529
FrisbeeQuestFTA2529
FocusGialloFTA25
K2FrisbeeFTA25
NoveK2FTA25
Discovery HD WorldNovePay1725
DKISSPay1519
ShedPay12
Discovery HD TheaterPay1118
Discovery HistoryAsian Food ChannelPay1017
Discovery CivilizationWorldPay817
Discovery WorldMetroPay613
Discovery en Espanol (U.S.)HistoryPay611
Discovery Familia (U.S.)Life PolandPay68
Discovery Family7
Discovery HistoriaPay7
6
(a) Number of subscribers and viewers corresponds to the sum of the subscribers and viewers to each of the Nordic broadcast networks in Sweden, Norway, Finland and Denmark subject to retransmission agreements with pay-TV providers. The Nordic broadcast networks include Kanal 5, Kanal 9, and Kanal 11 in Sweden, TVNorge, MAX, FEM and VOX in Norway, TV 5, Kutonen, and Frii in Finland, and Kanal 4, Kanal 5, 6'eren, and Canal 9 in Denmark.
(a) Number of subscribers corresponds to the sum of the subscribers to each of the Nordic broadcast networks in Sweden, Norway, Finland and Denmark subject to retransmission agreements with pay-TV providers. The Nordic broadcast networks include Kanal 5, Kanal 9, and Kanal 11 in Sweden, TV Norge, MAX, FEM and VOX in Norway, TV 5, Kutonen, and Frii in Finland, and Kanal 4, Kanal 5, 6'eren, and Canal 9 in Denmark.

Similar to U.S. Networks, a significant source of revenue for International Networks relates to fees charged to operators who distribute our linear networks. Such operators primarily include cable and DTH satellite service providers, internet protocol television ("IPTV") and over-the-top operators ("OTT").providers. International television markets vary in their stages of development. Some markets, such as the U.K., are more advanced digital television markets, while others remain in the analog environment with varying degrees of investment from operators to expand channel capacity or convert to digital technologies. Common practice in internationalsome markets results in long-term contractual distribution relationships, with terms generally shorter than similarwhile customers in the U.S.other markets renew contracts annually. Distribution revenue for our International Networks segment is largely dependent on the number of subscribers that receive our networks or content, the rates negotiated in the distributor agreements, and the market demand for the content that we provide. International Networks additionally generates revenues through DTC subscription services.
The other significant source of revenue for International Networks relates to advertising sold on our television networks and across other distribution platforms, similar to U.S. Networks. Advertising revenue is dependent upon a number of factors, including the development of pay and FTA television markets, the number of subscribers to and viewers of our channels, viewership demographics, the popularity of our programming, and our ability to sell commercial time over all mediaa portfolio of channels on multiple platforms. In certain markets, our advertising sales business operates with in-house sales teams, while we rely on external sales representation services in other markets. Outside the U.S., advertisers typically buy advertising closer to the time when the commercials will be run. In developing pay-TV markets, we expect advertising revenue growth will result from subscriber growth, our localization strategy, and the shift of advertising spending from broadcast to pay-TV. In mature markets, such as Western Europe, high proportions of market penetration and distribution are unlikely to drive rapid revenue growth. Instead, growth in advertising sales comes from increasing viewership and pricing and launching new services, either in pay-TV, broadcast, or FTA television environments.
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During 2017,2021, advertising, distribution advertising and other revenues were 57%45%, 41%47%, and 2%9%, respectively, of total net revenues for this segment. While the Company haswe have traditionally operated cable networks, in recent years an increasing portion of the Company'sour international advertising revenue is generated by FTA or broadcast networks, unlike U.S. Networks. During 2017, FTA or broadcast2021, pay-TV networks generated 54%33% of International Networks' advertising revenue and pay-TVFTA or broadcast networks generated 46%67% of International Networks' advertising revenue. We also have increased efforts to drive revenue growth from digital products such as the dplay DTC entertainment service in select international markets.
International Networks' largest cost is content expense for localized programming disseminated via more than 400 unique distribution feeds.programming. While our International Networks segment maximizes the use of programming from U.S. Networks, we also develop local programming that is tailored to individual market preferences and license the rights to air films, television series and


sporting events from third parties. International Networks amortizes the cost of capitalized content rights based on the proportion of current estimated revenues relative to the estimated remaining total lifetime revenues, which results in either an accelerated method or a straight-line method over the estimated useful lives of the content of up to five years. Content acquired from U.S. Networks and content developed locally airing on the same network is amortized similarly, as amortization rates vary by network. More than half of International Networks' content is amortized using an accelerated amortization method, while the remainder is amortized on a straight-line basis. The costs for multi-year sports programming arrangements are expensed when the event is broadcast based on the estimated relative value of each component of the arrangement.
While International Networks and U.S. Networks have similarities with respect to the nature of operations, the generation of revenue and the categories of expense, International Networks have a lower segment margin due to lower economies of scale from being in over 220 markets requiringwhich requires additional cost for localization to satisfy market variations. International Networks also include sports and FTA broadcast channels, which drive higher costs from sports rights and production and investment in broad entertainment programming for broadcast networks.
On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the European Union (“E.U.”), commonly referred to as “Brexit.” After a preliminary phase of negotiations towards the end of 2017, the U.K. government and the E.U. will in 2018 negotiate the main principles of the U.K.’s future relationship with the E.U., as well as a transitional period. Brexit may have an adverse impact on advertising, subscribers, distributors and employees, as described in Item 1A, Risk Factors, below. We continue to monitor the situation and plan for potential effects to our distribution and licensing agreements, unusual foreign currency exchange rate fluctuations, and changes to the legal and regulatory landscape.
EDUCATION AND OTHER
Education and Other generated revenues of $158 million during 2017, which represented 2% of our total consolidated revenues. Education is comprised of curriculum-based product and service offerings and generates revenues primarily from subscriptions charged to K-12 schools for access to an online suite of curriculum-based VOD tools, professional development services, digital textbooks and, to a lesser extent, student assessments and publication of hard copy curriculum-based content. Other is comprised of our wholly-owned production studio, which provides services to our U.S. Networks and International Networks segments at cost.
On February 26, 2018, the Company announced the planned sale of a controlling equity stake in its education business in the first half of 2018, toFrancisco Partners for cash of $120 million. No loss is expected upon sale. The Company will retain an equity interest. Additionally, the Company will have ongoing license agreements which are considered to be at fair value. As of December 31, 2017, the Company determined that the education business did not meet the held for sale criteria, as defined in GAAP as management had not committed to a plan to sell the assets.
On April 28, 2017, the Company sold Raw and Betty to All3Media. All3Media is a U.K. based television, film and digital production and distribution company. The Company owns 50% of All3Media and accounts for its investment in All3Media under the equity method of accounting. Raw and Betty were components of the studios operating segment reported with Education and Other.
On November 12, 2015, we paid $195 million to acquire 5 million shares, or approximately 3%, of Lions Gate Entertainment Corp. ("Lionsgate"), an entertainment company involved in the production of movies and television which is accounted for as an available-for-sale ("AFS") security. During 2016, we determined that the decline in value of our investment in Lionsgate is other-than-temporary in nature and, as such, the cost basis was adjusted to the fair value of the investment as of September 30, 2016. (See Note 4 to the accompanying consolidated financial statements.)
CONTENT DEVELOPMENT
Our content development strategy is designed to increase viewership, maintain innovation and quality leadership, and provide value for our network distributors and advertising customers. Our content is sourced from a wide range of third-party producers, which include some of the world’s leading nonfiction production companies, as well as independent producers and wholly-owned production studios.
Our production arrangements fall into three categories: produced, coproduced and licensed. Produced content includes content that we engage third parties or wholly ownedwholly-owned production studios to develop and produce. We retain editorial control and own most or all of the rights, in exchange for paying all development and production costs. Production of digital-first content such as virtual reality and short-form video is typically done through wholly-owned production studios. Coproduced content refers to program rights on which we have collaborated with third parties to finance and develop either because at times world-wide rights are not available for acquisition or we save costs by collaborating with third parties. Licensed content is comprised of films or


series that have been produced by third parties.parties and where we do not own the rights. Payments for sports rights made in advance of the event are recognized as prepaid content license assets.
International Networks maximizes the use of content from our U.S. Networks. Our non-fiction content tends to be culturally neutral and maintains its relevance for an extended period of time. As a result, a significant amount of our non-fiction content translates well across international borders and is made even more accessible through extensive use of dubbing and subtitles in local languages. Our content can be re-edited and updated in a cost-effective manner to provide topical versions of subject matter that can be utilized around the world. International Networks executes a localization strategy by offering content from U.S. Networks, customized content and localized schedules via our distribution feeds. While our International Networks segment maximizes the use of content from U.S. Networks, we also develop local content that is tailored to individual market preferences and license the rights to air films, television series and sporting events from third-party producers.
Our largest single costexpense is content, expense, which includes content amortization, content impairment and production costs for programming.costs. We amortize the cost of capitalized content rights based on the proportion that the current year's estimated revenues bear to the estimated remaining total lifetime revenues, which normally results in an accelerated amortization method over the estimated useful lives. However, certain networks also utilize a straight-line method of amortization over the estimated useful lives of the content. Content is amortized primarily over periods of threetwo to fourfive years. The costs for multi-year sports programming arrangements are expensed when the event is broadcast based on the estimated relative value of each season in the arrangement. The majority of our content assets are assessed for impairment within film groups. Content assets are reviewed for impairment when impairment indicators are present suchat the respective film group level. Impairment indicators at the film group represent significant adverse changes that impact the film group as low viewership or limited expected use.a whole. Impairment losses are recorded for content assetwhen the carrying value in excess of net realizable value.
REVENUES
We generate revenues principally from fees charged to operators who distribute our network content, which primarily include cable, DTH satellite, telecommunication and digital service providers and advertising sold on our networks and digital products. Other transactions include curriculum-based products and services, affiliate and advertising sales representation services, production of content content licenses andassets exceeds the licensing of our brands for consumer products. During 2017, distribution, advertising and other revenues were 51%, 44% and 5%, respectively, of consolidated revenues. No individual customer represented more than 10% of our total consolidated revenues for 2017, 2016 or 2015.
Distribution
Distribution revenue includes fees charged for the right to view Discovery's network branded content made available to customers through a variety of distribution platforms and viewing devices. The largest component of distribution revenue is comprised of linear distribution services for rights to our networks from cable, DTH satellite and telecommunication service providers. We have contracts with distributors representing most cable and satellite service providers around the world, including the largest operators in the U.S. and major international distributors. Typically, our television networks are aired pursuant to multi-year carriage agreements that provide for the level of carriage that Discovery’s networks will receive, and, if applicable, for scheduled graduated annual rate increases. Carriage of our networks depends upon package inclusion, such as whether networks are on the more widely distributed, broader packages or lesser-distributed, specialized packages. Distribution revenues are largely dependent on the rates negotiated in the agreements, the number of subscribers that receive our networks or content, the number of platforms covered in the distribution agreement, and the market demand for the content that we provide. From time to time, renewals of multi-year carriage agreements include significant initial year one market adjustments to re-set subscriber rates, which then increase at rates lower than the initial increase in the following years. We have provided distributors launch incentives, in the form of cash payments or free periods, to carry our networks.
In the U.S., more than 90% of distribution revenues come from the top 10 distributors, with whom we have agreements that expire at various times from 2018 through 2021. Outsideestimated fair value of the U.S., approximately 42% of distribution revenue comes from the top 10 distributors. Distribution fees are typically collected ratably throughout the year. International television markets vary in their stages of development. Some are more advanced digital multi-channel television markets, while others operate in the analog environment with varying degrees of investment from distributors in expanding channel capacity or converting to digital.respective film group.
Distribution revenue also includes fees charged for bulk content arrangements and other subscription services for episodic content. These digital distribution revenues are impacted by the quantity, as well as the quality, of the content Discovery provides.
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Advertising

Our advertising revenue is generated across multiple platforms and consists of consumer advertising, which is sold primarily on a national basis in the U.S. and on a pan-regional or local-language feed basis outside the U.S. Advertising contracts generally have a term of one year or less.


In the U.S., we sell advertising time in the upfront and scatter markets. In the upfront market, advertisers buy advertising time for the upcoming season and by purchasing in advance often receive discounted rates. In the scatter market, advertisers buy advertising time close to the time when the commercials will be run and often pay a premium. The mix between the upfront and scatter markets is based upon a number of factors, such as pricing, demand for advertising time and economic conditions. Outside the U.S., advertisers typically buy advertising closer to the time when the commercials will be run. In developing pay-TV markets, we expect advertising revenue growth will result from subscriber growth, our localization strategy, and the shift of advertising spending from broadcast to pay-TV. In mature markets, such as the U.S. and Western Europe, high proportions of market penetration and distribution are unlikely to drive rapid revenue growth. Instead, growth in advertising sales comes from increasing viewership and pricing and launching new services, either in pay-TV, broadcast, or FTA television environments.
Advertising revenue is dependent upon a number of factors, including the stage of development of television markets, the popularity of FTA television, the number of subscribers to our channels, viewership demographics, the popularity of our content and our ability to sell commercial time over a group of channels. Revenue from advertising is subject to seasonality, market-based variations and general economic conditions. Advertising revenue is typically highest in the second and fourth quarters. In some cases, advertising sales are subject to ratings guarantees that require us to provide additional advertising time if the guaranteed audience levels are not achieved.
We also generate revenue from the sale of advertising through our digital products on a stand-alone basis and as part of advertising packages with our television networks.
Other
We also generate income associated with curriculum-based products and services, the licensing of our brands for consumer products and third-party content sales, and content production from our production studios.
COMPETITION
Providing content across various distribution platforms is a highly competitive business worldwide. We experience competition for the development and acquisition of content, distribution of our content, sale of commercial time on our networks and viewership. There is competition from other production studios, other television networks, and the internetonline-based content providers for the acquisition of content and creative talent such as writers, producers and directors. In certain instances, internet competitors have been able to acquire content at more competitive prices since content ownership may benefit their business in other ways. Our ability to produce and acquire popular content is an important competitive factor for the distribution of our content, attracting viewers and the sale of advertising. Our success in securing popular content and creative talent depends on various factors such as the number of competitors providing content that targets the same genre and audience, the distribution of our content, viewership, and the production, marketing and advertising support we provide.
Our networks compete with other television networks, including broadcast, cable and local, for the distribution of our content and fees charged to cable television operators, DTH satellite service providers, and other distributors that carry our content. Our ability to secure distribution agreements is necessary to ensure the retention of our audiences. Our contractual agreements with distributors are renewed or renegotiated from time to time in the ordinary course of business. Growth in the number of networks distributed, consolidation and other market conditions in the cable and satellite distribution industry, and increased popularity of other platforms may adversely affect our ability to obtain and maintain contractual terms for the distribution of our content that are as favorable as those currently in place. The ability to secure distribution agreements is dependent upon the production, acquisition and packaging of original content, viewership, the marketing and advertising support and incentives provided to distributors, the product offering across a series of networks within a region, and the prices charged for carriage.
Our networks and digital products, which include discovery+ and other DTC subscription products, compete for the sale of advertising with other television networks, including broadcast, cable, local networks, and other content distribution outlets for their target audiences and the sale of advertising. Our success in selling advertising is a function of the size and demographics of our audiences, quantitative and qualitative characteristics of the audience of each network, the perceived quality of the network and of the particular content, the brand appeal of the network and ratings as determined by third-party research companies, prices charged for advertising and overall advertiser demand in the marketplace.
Our education business competesnetworks and digital products also compete for their target audiences with all forms of content and other providersmedia provided to viewers, including broadcast, cable and local networks, streaming services, pay-per-view and VOD services, online activities and other forms of curriculum-based productsnews, information and services to schools. media entertainment.
Our production studios compete with other production and media companies for talent.
INTELLECTUAL PROPERTY
Our intellectual property assets include copyrights in content, trademarks in brands, names and logos, patents protecting novel inventions, technology platforms, websites, and licenses of intellectual property rights from third parties.


We are fundamentally a content company and the protection of our brands and content is of primary importance. We have also made and will continue to make investments in developing technology platforms to support our digital products and DTC offerings, including discovery+, and consider these platforms to be one of our intellectual property assets. To protect our intellectual property assets, we rely upon a combination of copyright, trademark, patent, unfair competition, trade secret and Internet/domain name statutes and laws, and contract provisions. However, there can be no assurance of the degree to which these measures will be successful. Moreover, effective intellectual property protection may be either unavailable or limited in certain foreign territories. Policing unauthorized use of our products and services and related intellectual property is difficult and costly. We seek to limit unauthorized use of our intellectual property through a combination of approaches. However, the steps taken to prevent the infringement of our intellectual property by unauthorized third parties may not work.be effective.
Third parties may challenge the validity or scope of our intellectual property from time to time, and the success of any such challenges could result in the limitation or loss of intellectual property rights. Irrespective of their validity, such claims may result in substantial costs and diversion of resources which could have an adverse effect on our operations. In addition, piracy, which encompasses the theft of our signal, and unauthorized use of our content, in the digital environment continues to present a threat to revenues from products and services based on our intellectual property. We use external vendors to detect and remove infringing content and leverage our membership in a range of industry groups to address piracy issues.
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REGULATORY MATTERS
Our businesses are subject to and affected by regulations of U.S. federal, state and local government authorities, and our international operations are subject to laws and regulations of the countries and international bodies, such as the E.U., in which we operate. Content networks, such as those owned by us, are regulated by the Federal Communications Commission (“FCC”) in certain respects if they areFCC including some regulations that only apply to content networks affiliated with a cable television operator. Other FCC regulations, although imposed on cable television operators and direct broadcast satellite ("DBS") operators and other distributors, affect content networks indirectly. The rules, regulations, policies and procedures affecting our businesses are constantly subject to change. These descriptions are summary in nature and describe only the most significant regulations we face; they do not purport to describe all present and proposed laws and regulations affecting our businesses.
Program Access
The FCC’s program access rules prevent a satellite or cablesatellite-delivered content vendor in which a cable operator has an “attributable” ownership interest from discriminating against unaffiliated multichannel video programming distributors (“MVPDs”), such as cable and DBS operators, in the rates, terms and conditions for the sale or delivery of content. These rules also permit MVPDsthe unaffiliated MVPD to initiate complaintsa complaint to the FCC against content networks if an MVPD claims it is unablebelieves this rule has been violated.
Program Carriage
The FCC's program carriage rules prohibit distributors from favoring their affiliated content networks over unaffiliated similarly situated content networks in the rates, terms and conditions of carriage agreements between content networks and cable operators or other MVPDs. Recent regulatory changes and court decisions make it more difficult for us to obtain rightschallenge a distributor’s decision to decline to carry theone of our content network on nondiscriminatory rates, termsnetworks or conditions. The FCC allowed a previous blanket prohibition on exclusive arrangements with cable operators to expire in October 2012, but will consider case-by-case complaints that exclusive contracts between cable operators and cable-affiliated programmers significantly hinder or prevent an unaffiliated MVPD from providing satellite or cable programming.discriminate against one of our content networks.
“Must-Carry”/Retransmission Consent
The Cable Television Consumer Protection and CompetitionCommunications Act of 1992 (the “Act”) imposes “must-carry” regulations on cable systems, requiring them to carry the signals of most local broadcast television stations in their market. DBS systems are also subject to their own must-carry rules. The FCC’s implementation of “must-carry” obligations requires cable operators and DBS providers to give broadcasters preferential access to channel space.space and favorable channel positions. This reduces the amount of channel space that is available for carriage of our content networks by cable and DBS operators. The Act also establishedgives broadcasters the choice of opting out of must-carry and invoking the right to retransmission consent, which refers to a broadcaster’s right to require MVPDs, such as cable and satellite operators, to obtain the broadcaster's consent before distributing the broadcaster's signal to the MVPDs' subscribers. Broadcasters have traditionally used the resulting leverage from demand for their must-have broadcast content to obtain carriage for their affiliated networks. Increasingly, broadcasters are additionally seekingsubscribers, often at a substantial monetary compensation for granting carriage rights for their must-have broadcast content. Such increased financial demands on distributors reducecost that reduces the content funds available for independent programmers not affiliated with broadcasters, such as us.
Closed CaptioningAccessibility, Children's Advertising Restrictions, Emergency Alerts and Advertising RestrictionsCALM Act
Certain of our content networks and some of our IP-delivered video content must provide closed-captioning and audio description of content.some of their programming and comply with other regulations designed to make our content more accessible. Our content networks and digital products intended primarily for children 12 years of age and under must comply with certain limits on advertising,the amount and commercialstype of permissible advertising. We may not include emergency alert tones or signals in our content. Commercials embedded in our networks’ content stream also must adhere to certain standards for ensuring that those commercials are not transmitted at louder volumes than our program material. The 21st Century Communications and Video Accessibility Act of 2010 requires us to provide closed captioning on certain IP-delivered video content that we offer.
Obscenity Restrictions
Network distributors are prohibited from transmitting obscene content, and our affiliationdistribution agreements generally require us to refrain from including such content on our networks.

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Violent Programming
In 2007, the FCC issued a report on violence in programing that recommended Congress prohibit the availability of violent programming, including cable programming, during hours when children are likely to be watching. Recent events have led to a renewed interest by some members of Congress in the alleged effects of violent programming, which could lead to a renewal of interest in limiting the availability of such programming or prohibiting it.
Regulation of the InternetDigital Services
We operate severala variety of free, advertising-based and subscription-based digital products and websites that we useservices providing information and entertainment to distribute information about our programsconsumers in the U.S. and to offer consumers the opportunity to purchase consumer productsinternational markets via web, mobile and services. Internetconnected TV platforms. Our digital services are now subject to federal and state regulation in the U.S. relating to the privacy and security of personally identifiable userpersonal information andcollected from our users, including laws pertaining to the acquisition of personal information from children under 13, includingsuch as the federal Children's Online Privacy Protection Act and the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act. In addition, a majority of states have enacted lawsAct, and that impose data security and security breach obligations.obligations on the Company. These laws are continually evolving, with robust new data protection frameworks having been introduced during the past few years in both the U.S. and international markets, such as the California Consumer Privacy Act ("CCPA"), the E.U. General Data Protection Regulation ("GDPR") and Brazil’s General Data Protection Law. Additional federal and state laws and regulations may be adopted with respect to the Internet or other on-lineour digital services, covering such issues as userdata privacy and security, child safety, data security,oversight of user-generated content, advertising, pricing, content, copyrights and trademarks, access by persons with disabilities, distribution, taxation and characteristics and quality of products and services. In addition, the FCC from time to the extent we offertime considers whether some or all digital services should be considered MVPDs and regulated as such.
Our digital products and services available to on-line consumers outside the U.S.,in international markets are also subject to the laws and regulations of foreign jurisdictions, including, without limitation, consumer protection, data privacy and security, advertising, data retention, intellectual property, and content limitations, may impose additionallimitations. We must design and operate our digital products, services and websites in compliance obligations on us.with these laws and regulations.
Foreign Laws and Regulations
The foreign jurisdictions in which our networks are offered have, in varying degrees, laws and regulations governing our businesses.
EMPLOYEESHUMAN CAPITAL
As of December 31, 2017,2021, we had approximately 7,00011,000 employees, including full-time and part-time employees of our wholly-owned subsidiaries and consolidated ventures. Our employees are located in 35 different countries, with 34% located in the United States and 66% located outside of the United States.
We are a talent-driven business, aiming to attract, develop, and motivate top talent throughout our company. To support these objectives, our human resources programs are designed to provide competitive, locally-relevant benefits, performance-based pay, and nonfinancial support and incentives. We also strive to enhance our culture through efforts aimed at making our workplace diverse, engaging and inclusive, and to develop our talent to prepare them for critical roles and leadership positions for the future. We also provide opportunities for our employees to make an impact in their communities through social good initiatives around the world.
Some examples of our human resources programs and initiatives are described below.
Compensation
Our compensation philosophy is to pay for performance, encourage excellence and reward employees who innovate and deliver high-quality results.Our compensation programs are designed to implement our compensation philosophy by:
•paying competitively, across salary grades and geographies;
•applying compensation policies in an internally consistent manner; and
•incenting our employees to deliver on our short- and long-term objectives.
Benefits
We provide an array of benefits and programs that support our employees in their personal and professional lives. Highlights include:
•local medical, dental, and vision plans in many countries around the world to support our employees with access to health care, supplementing any state-provided health care;
•on-site wellness centers in our New York, Silver Spring, Knoxville and London offices, a fully-equipped fitness center in our Knoxville office, and access to virtual fitness classes and wellbeing programs;
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•family support programs, including on-site childcare in our Knoxville office, childcare locator services, back-up childcare, maternity/paternity leave, adoption assistance and elder care;
•tuition reimbursement and student loan repayment programs for our U.S. population;
•tools and resources to support the mental wellbeing of our employees and their families, including mental health counselors in our on-site wellness centers and a confidential, dedicated line for employees to contact and speak with a counselor in the event they need mental health support;
•products and services to support employees’ financial wellbeing, including life, accident, and disability insurance plans, discount benefits, financial planning tools, a 401(k) savings plan in the U.S. and retirement/pension plans in another 20 countries, with competitive contributions from Discovery for employees at all levels;
•offering an employee stock purchase plan, which allows employees globally (where legislation permits) an opportunity to buy Discovery, Inc. stock at a discounted price through convenient after-tax payroll deductions with no commission charges; and
•flexible working arrangements around the globe to enable our employees to better balance work and personal commitments, which were expanded during the COVID-19 pandemic to support our employees’ health and safety.
Diversity, Equity and Inclusion ("DE&I")
Our DE&I objective is to foster a culture of equity, inclusion, and mutual respect. We emphasize our DE&I focus through Mosaic – our Diversity, Equity and Inclusion activation. Mosaic covers a range of initiatives, including: Unconscious Bias, Respect & Integrity; Allyship; Recruitment and Career Development; Content Diversity; Supplier Diversity; and Social Impact.
We sponsor over 30 chapters of Employee Resource Groups (“ERGs”) across the globe with more than 2,500 members. ERGs draw upon their collection of unique experiences to help drive our mission of fostering a diverse and inclusive environment and provide important insights to our diversity, equity and inclusion initiatives.
Learning and Development
Our Global Learning & Development ("L&D") team provides learning opportunities for employees around the world. The L&D team uses a variety of delivery methods suitable to the content and audience, including live in-person sessions, virtual workshops, webinars, and asynchronous online learning through our global learning management platform.
Social Good
We have a department dedicated to social good that builds and oversees consumer and employee-facing initiatives and campaigns. We leverage our platforms, resources, and employee base to make an impact in our communities and with our key nonprofit partners around the world. We have corporate partnerships aimed at addressing childhood hunger, inequality, civic engagement and wildlife preservation. Our employee-facing initiatives include matching gift and “dollars for doers” programs and sponsoring Impact Day, a global day of employee volunteerism that gives back to the communities where we live and work around the world. We are also committed to using our voice to advocate for action around the issues of our time that are important to our employees.
AVAILABLE INFORMATION
All of our filings with the U.S. Securities and Exchange Commission (the “SEC”), including reports on Form 10-K, Form 10-Q and Form 8-K, and all amendments to such filings are available free of charge at the investor relations section of our website, www.discoverycommunications.com,www.corporate.discovery.com, as soon as reasonably practicable after such material is filed with, or furnished to, the SEC. Our annual report, corporate governance guidelines, code of business ethics, audit committee charter, compensation committee charter, and nominating and corporate governance committee charter are also available on our website. In addition, we will provide a printed copy of any of these documents, free of charge, upon written request to: Investor Relations, Discovery, Communications, Inc., 850 Third230 Park Avenue 8th Floor,South, New York, NY 10022-7225.10003. Additionally, the SEC maintains a website at http://www.sec.gov that contains quarterly, annual and current reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company. The public may also read and copy any materials that the Company files with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
The information contained on our website is not part of this Annual Report on Form 10-K and is not incorporated by reference herein.
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ITEM 1A. Risk Factors.
Investing in our securities involves risk. In addition to the other information contained in this report,Annual Report on Form 10-K, you should consider the following risk factors before investing in our securities. Additional risks and uncertainties not presently known to us or that we currently believe not to be material may also adversely impact our business, results of operations, financial position and cash flows.
RisksRisk Factors Related to Ourthe Combination of Discovery and AT&T’s WarnerMedia Business
There has been a shiftOn May 17, 2021, the Company, our wholly owned subsidiary Drake Subsidiary, Inc., AT&T Inc. (“AT&T”) and AT&T’s wholly owned subsidiary Magallanes, Inc. entered into definitive agreements pursuant to which and subject to the terms and conditions therein (1) AT&T will transfer the business, operations and activities that constitute the WarnerMedia segment of AT&T, subject to certain exceptions (the “WarnerMedia Business”) to Magallanes, Inc. (such transfer, the “Separation”), (2) AT&T will distribute to its stockholders the issued and outstanding shares of common stock of Magallanes, Inc. held by AT&T (such distribution, the “Distribution”) and (3) Drake Subsidiary, Inc. will merge with and into Magallanes, Inc. with Magallanes, Inc. as the surviving entity and wholly owned subsidiary of the Company (such merger, the “Merger” and the Separation, Distribution and Merger collectively, the “Combination”).
The pendency of the proposed Combination may cause disruption in consumer behavior as a resultour business.
The definitive agreement and plan of technological innovationsmerger (the “Merger Agreement”) related to the Combination restricts us from taking specified actions without AT&T’s consent until the Combination is completed or the Merger Agreement is terminated, including making certain significant acquisitions or investments, entering into certain new lines of business, incurring certain indebtedness in excess of certain thresholds, making non-ordinary course capital expenditures, amending or modifying certain material contracts, divesting certain assets (including certain intellectual property rights), and making certain non-ordinary course changes to personnel and employee compensation. These restrictions and others more fully described in the distribution of content, whichMerger Agreement may affect our viewership and the profitability of our business in unpredictable ways.
Technology and business models in our industry continue to evolve rapidly. Consumer behavior related to changes in content distribution and technological innovation affect our economic model and viewership in ways that are not entirely predictable.


Consumers are increasingly viewing content on a time-delayed or on-demand basis from traditional distributors and from connected apps and websites and on a wide variety of screens, such as televisions, tablets, mobile phones and other devices. Additionally, devices that allow users to view television programs on a time-shifted basis and technologies that enable users to fast-forward or skip programming, including commercials, such as DVRs and portable digital devices and systems that enable users to store or make portable copies of content may affect the attractiveness of our offerings to advertisers and could therefore adversely affect our revenues. There is increased demand for short-form, user-generated and interactive content, which have different economic models than our traditional content offerings. Likewise, distributors are offering smaller programming packages known as “skinny bundles,” which are delivered at a lower cost than traditional offerings and sometimes allow consumers to create a customized package of networks, that are gaining popularity among consumers. If our networks are not included in these packages or consumers favor alternative offerings, we may experience a decline in viewership and ultimately the demand for our programming, which could lead to lower distribution and advertising revenues. We have also seen declines in subscribers to the traditional cable bundle. In 2017, total U.S. Networks portfolio subscribers declined 5% while subscribers to our fully distributed networks declined 3% for the same period. Each distribution model has different risks and economic consequences for us, so the rapid evolution of consumer preferences may have an economic impact that is not completely predictable. Distribution windows are also evolving, potentially affecting revenues from other windows. If we cannot ensure that our distribution methods and content are responsive to our target audiences, our business could be adversely affected.
Consolidation among cable and satellite providers, both domestically and internationally, could have an adverse effect on our revenue and profitability.
Consolidation among cable and satellite operators has given the largest operators considerable leverage in their relationships with programmers, including us. In the U.S., approximately 90% of our distribution revenues come from the top 10 distributors. For the International Networks segment, approximately 42% of distribution revenue comes from the 10 largest distributors. We currently have agreements in place with the major cable and satellite operators in U.S. Networks and International Networks which expire at various times through 2021. Some of our largest distributors have combined, and as a result, have gained, or may gain, market power, which could affect our ability to maximize the valueexecute our business strategies and attain our financial and other goals and may impact our financial condition, results of our content through those platforms. In addition, manyoperations and cash flows.
The pendency of the countries and territories in which we distributeproposed Combination could cause disruptions to our networks also have a small number of dominant distributors. Continued consolidation within the industry could reduce the number of distributors to carry our programming, subject our affiliate fee revenue to greater volume discounts, and further increase the negotiating leverage of the cable and satellite television system operatorsbusiness or business relationships, which could have an adverse impact on our results of operations. Parties with which we have business relationships, including distributors, advertisers and content providers, may be uncertain as to the future of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties.
The pursuit of the Combination and the preparation for the integration of the WarnerMedia Business is expected to place a significant burden on our management and internal resources. The diversion of management’s attention away from day-to-day business concerns and any difficulties encountered in the transition and integration process could adversely affect our financial results.
We have incurred and will continue to incur significant costs, expenses and fees for professional services and other transaction costs in connection with the Combination. The substantial majority of these costs will be nonrecurring expenses relating to the Combination, and many of these costs are payable regardless of whether or not the Combination is consummated. We are also subject to litigation related to the proposed Combination, which could prevent or delay the consummation of the Combination and result in significant costs and expenses.
Failure to complete the Combination in a timely manner or at all could negatively impact the market price of our common stock, as well as our future business and our financial condition, results of operations and cash flows.
We currently anticipate the Combination will be completed in the second quarter of 2022, but the Combination cannot be completed until conditions to closing are satisfied or (if permissible under applicable law) waived. The Combination is subject to numerous closing conditions, including approval by Discovery’s stockholders, receipt of certain regulatory approvals from governmental authorities and AT&T's receipt of a special cash payment in accordance with the terms of the Separation and Distribution Agreement by and among Discovery, AT&T and Magallanes, Inc. Governmental authorities may not approve the Combination, may impose conditions to the approval of the Combination, or may require changes to the terms of the Combination. Any such conditions or changes could have the effect of delaying completion of the Combination, imposing costs on or limiting the revenues of the combined company following the Combination, or otherwise reducing the anticipated benefits of the Combination. We can provide no assurance that these conditions, terms, obligations or restrictions will not result in the abandonment of the Combination.
The satisfaction of the required closing conditions could delay the completion of the Combination for a significant period of time or prevent it from occurring. Further, there can be no assurance that the conditions to the closing of the Combination will be satisfied or waived or that the Combination will be completed.
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If the Combination is not completed in a timely manner or at all, our ongoing business may be adversely affected as follows:
•we may experience negative reactions from the financial markets, and our stock price could decline to the extent that the current market price reflects an assumption that the Combination will be completed;
•we may experience negative reactions from employees, customers, suppliers or other third parties;
•we may be subject to litigation, which could result in significant costs and expenses;
•management’s focus may have been diverted from day-to-day business operations and pursuing other opportunities that                     could have been beneficial to Discovery; and
•our costs of pursuing the Combination may be higher than anticipated.
In addition to the above risks, we may be required, under certain circumstances, to pay AT&T a termination fee equal to $720 million and/or to reimburse or indemnify AT&T for certain of its expenses. If the Combination is not consummated, there can be no assurance that these risks will not materialize and will not materially adversely affect our stock price, business, financial condition, results of operations or cash flows.
Although we expect that the Combination will result in synergies and other benefits to us, we may not realize those benefits because of difficulties related to integration, the achievement of such synergies, and other challenges.
Discovery and the WarnerMedia Business have operated and, until completion of the Combination, will continue to operate, independently, and there can be no assurances that our businesses can be combined in a manner that allows for the achievement of any financial or other benefits. If we are not able to successfully integrate the WarnerMedia Business with ours or pursue our direct-to-consumer strategy successfully, including coordinating our streaming services for global customers, the anticipated benefits, including synergies, of the Combination may not be realized fully, if at all, or may take longer than expected to be realized. Specifically, the following issues, among others, must be addressed in combining the operations of Discovery and the WarnerMedia Business in order to realize the anticipated benefits of the Combination:
•combining the businesses of Discovery and the WarnerMedia Business inthetimeframecurrentlyanticipated;
•maintaining existing agreements with customers, distributors, providers, talent and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, providers, talent and vendors;
•combining certain of the businesses’ corporate functions;
•determining whether and how to address possible differences in corporate cultures and management philosophies;
•integrating the businesses’ administrative, accounting and information technology infrastructure;
•integrating employees and attracting and retaining key personnel, including talent;
•managing the expanded operations of a significantly larger and more complex company, including with Discovery’s limited prior experience in running a studio or scripted content;
•coordinating the businesses’ direct-to-consumer streaming services for global customers; and
•resolving potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with the Combination.
Even if the operations of our business and the business of the WarnerMedia Business are integrated successfully, the full benefits of the Combination may not be realized, including, among others, the synergies that are expected. These benefits may not be achieved within the anticipated time frame or at all. Additional unanticipated costs may also be incurred in the integration of our business and the business of the WarnerMedia Business. Further, it is possible that there could be loss of key Discovery or WarnerMedia Business employees, loss of customers, disruption of either or both of Discovery’s or WarnerMedia Business’ ongoing businesses or unexpected issues, higher than expected costs and an overall post-completion process that takes longer than originally anticipated. All of these factors could materially adversely affect our stock price, business, financial condition, results of operations or cash flows.
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Our consolidated indebtedness will increase substantially following completion of the Combination. This increased level of indebtedness could adversely affect us, including by decreasing our business flexibility.
Our consolidated indebtedness as of December 31, 2021was approximately $15.2 billion. Upon completion of the Combination, we will become responsible for up to approximately $43.0 billion of additional debt, including existing debt of the existing WarnerMedia Business, and debt that may be issued by Magallanes, Inc. to fund the transactions, with the ultimate amount of such debt to be issued subject to certain adjustments, including for net working capital. In addition, subject to certain conditions, availability under our revolving credit facility will increase from $2.5 billion to $6.0 billion. The increased indebtedness could have the effect of, among other things, reducing our flexibility to respond to changing business and economic conditions, increasing our vulnerability to general adverse economic and industry conditions and limiting our ability to obtain additional financing in the future. In addition, the amount of cash required to pay interest on our indebtedness levels will increase following completion of the Combination, and thus the demands on our cash resources will be greater than prior to the Combination. The increased levels of indebtedness following completion of the Combination could also reduce funds available for capital expenditures, share repurchases, investments, mergers and acquisitions, and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels.
Following consummation of the Combination, our corporate or debt-specific credit rating could be downgraded, which may increase our borrowing costs or give rise to a need to refinance existing indebtedness. If a ratings downgrade occurs, we may need to refinance existing debt or be subject to higher borrowing costs and more restrictive covenants when we incur new debt in the future, which could reduce profitability and diminish operational flexibility.
Risks Related to Our Industry
Our businesses operate in highly competitive industries, and if we are unable to compete effectively, our business, financial condition and results of operations could suffer.
The entertainment and media programming industries in which we operate are highly competitive. We compete with other programming networks for distribution, viewers and advertising. We face increased competitive pressure from subscription based streaming services and DTC offerings, including our discovery+ product, and expansion by other companies—in particular, technology companies—into the content production and distribution space. We also compete for viewers with other forms of media entertainment, such as home entertainment (such as digital products), feature films, periodicals, interactive entertainment, user-generated content, live sports and other events, social media and diverse on-line and mobile activities. Internet-based advertising, including through websites and search engines, has seen significant growth, placing pressure on traditional advertising models tied to television networks, including on free-to-air, cable network and satellite delivered channels. Businesses, including ours, that offer multiple services, or that may be vertically integrated and offer both video distribution and programming content, may face closer regulatory review from the competition authorities in the countries in which we currently have operations. If our distributors have to pay higher rates to holders of sports broadcasting rights, it might be difficult for us to negotiate higher rates for distribution of our networks. The ability of our businesses to compete successfully depends on a number of factors, including our ability to consistently supply high quality and popular content, access our targeted audience with appealing category-specific content, adapt to new technologies, distribution platforms and business models and achieve widespread distribution.
In addition, our television networks, premium pay-TV and basic tier television services and the discovery+ platform also face competition from other television networks, online platforms/streaming video service providers, pay-TV service providers and independent producers that develop, produce, acquire and sell entertainment and sports content. As competition from these networks, service providers and producers continues to increase, we may not be able to acquire or create popular entertainment, sports and news content or acquire it at a cost-effective price. As a result of an increasing number of market entrants in the programming space, we have seen upward pressure on programming costs in recent years, including in connection with the licensing and acquisition of entertainment and sports content from third parties, as well as with the commissioning of original production. We may also be impacted by such upward pressures driven by increasing investment by competitors. In certain international markets, regulations concerning content quotas or content investment requirements may be a further factor driving increasing programming costs. There can be no assurance that we will be able to compete successfully in the future against existing or new competitors, or that increasing competition will not have a material adverse effect on our business, financial condition or results of operations.
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The success of our business depends on the acceptance of our entertainment and sports content by our U.S. and foreign viewers, which may be unpredictable and volatile.volatile.
The production and distribution of entertainment and sports content are inherently risky businesses because the revenue we derive and our ability to distribute our content depend primarily on consumer tastes and preferences that often change in unpredictable ways. Our success depends on our ability to consistently create and acquire content that meets the changing preferences of viewers in general, in special interest groups, in specific demographic categories and in various international marketplaces. As the home of the Olympic Games in Europe until 2024, we have been developing and innovating new forms of content in connection with the Olympic Games. Our success with the Olympics depends on audience acceptance of this content. If viewers do not find our Olympic Games content acceptable, we could see low viewership, which could lead to low distribution and advertising revenues. The success of our partnership with the PGA Tour, which runs through 2031, is similarly dependent on audience acceptance and viewership. Failing to gain the level of audience acceptance we expect for the PGA Tour content may negatively impact our distribution and advertising revenues over the period of the partnership.
The commercial success of our content also depends upon the quality and acceptance of competing content available in the applicable marketplace. Other factors, including the availability of alternative forms of entertainment and leisure time activities, our ability to maintain or develop strong brand awareness and target key audiences, general economic conditions, piracy, and growing competition for consumer discretionary spending, time and attention may also affect the audience for our content. Audience sizes for our media networks are critical factors affecting both the volume and pricing of advertising revenue that we receive with respect to advertising-supported services, and the extent of distribution and penetration and the license fees we receive under agreements with our distributors. distributors with respect to subscription-based services. The appeal, success and performance of our content with consumers, as well as with third-party licensees and other distribution partners, are also critical factors that can affect the revenue that we receive with respect to our content-related business.
Consequently, reduced public acceptance of our entertainment content may decrease our audience share and customer/viewer reach and adversely affect our results of operations.
AsThere has been a company that has operationsshift in the United Kingdom, the vote by the United Kingdom to leave the E.U. could have an adverse impact on our business, results of operations and financial position.
On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the European Union (“E.U.”), commonly referred to as “Brexit.” As a result of the referendum, the British government has begun negotiating the terms of the U.K.’s future relationship with the E.U. The effects of Brexit will depend on any agreements the U.K. makes to retain access to the E.U. markets either during a transitional period or more permanently. The measures could potentially disrupt the markets we serve and may cause us to lose subscribers, distributors and employees. If the U.K. loses access to the single E.U. market and the global trade deals negotiated by the E.U., it could have a detrimental impact on our U.K. growth. Such a decline could also make


our doing business in Europe more difficult, which could delay and reduce the scope our distribution and licensing agreements. Without access to the single E.U. market, it may be more challenging and costly to obtain intellectual property rights for our content within the U.K. or distribute our services in Europe. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace and replicate. If there are changes to U.K. immigration policyconsumer behavior as a result of Brexit, this couldtechnological innovations and changes in the distribution of content, which may affect our employeesviewership and the profitability of our business in unpredictable ways.
Technology and business models in our industry continue to evolve rapidly in an environment of fast-paced changes in consumer behavior as well as innovation. Changes to these business models include (a) consumers’ increasing demand to consume video content on their abilityown terms, including on the screen of their choice, at the time of their choice, and with enhanced functionality; (b) the presence of streaming services, which are increasing in number and some of which have a significant and growing subscriber base; (c) the proliferation of high speed internet connections and the expansion of 5G networks able to move freely betweensupport high-quality streaming video within increasingly interactive and interconnected digital environments; and (d) the E.U. member states for work-related matters.
Foreign exchange rate fluctuationsincreased video consumption through subscription streaming services and time-delayed or time-shifted viewing of television programming through on-demand services and DVRs as well as the availability of video content through other distribution outlets, including digital home entertainment (such as electronic sell-through and transaction video-on-demand). Consumer behavior related to these changes in content distribution, viewership and technological innovation are not entirely predictable but remain key factors in our economic model; such changes may accordingly materially adversely affect our operatingbusiness, financial condition and results of operations.
Consumers are increasingly viewing content on a time-delayed or on-demand basis from traditional distributors and financial conditions.from streaming services, apps and websites and on a wide variety of screens, such as televisions, tablets, mobile phones and other devices. The inability to meet consumer demands and expectations in today’s highly mobile, multi-screen and multi-platform environment for video delivery may affect the attractiveness of our offerings. Ineffective technology and product integration, lack of specific features and functionalities, poor interface design or ease of use, or platform performance issues, among other factors, may cause viewers to favor alternative offerings. Additionally, devices that allow users to view television programs on a time-shifted basis and technologies that enable users to fast-forward or skip programming, including commercials, such as DVRs and portable digital devices and systems that enable users to store or make portable copies of content may affect the attractiveness of our offerings to advertisers and could therefore adversely affect our advertising revenues. In addition, there is increased demand for short-form, user-generated and interactive content, which have different economic models than our traditional content offerings. Likewise, distributors are seeking to offer smaller programming packages known as “skinny bundles,” which are delivered at a lower cost than traditional offerings and sometimes allow consumers to create a customized package of networks, that are gaining popularity among consumers. If our networks are not included in these packages or consumers favor alternative offerings, we may experience a decline in viewership and ultimately the demand for our programming, which could lead to lower distribution and advertising revenues.
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We have also seen declines in subscribers to the traditional cable bundle. In 2021, total U.S. Networks portfolio subscribers declined 8% while subscribers to our fully distributed networks declined 4%. In order to respond to subscription declines and changes in content distribution models in our industry, we have invested in, developed and launched DTC products including our discovery+ product. There can be no assurance, however, that our viewers will respond to our DTC products or that our DTC strategy will be successful, particularly given the increase in DTC products on the market. Each distribution model has different risks and economic consequences for us, so the rapid evolution of consumer preferences may have an economic impact that is not ultimately predictable. Distribution windows are also evolving, potentially affecting revenues from other windows. If we cannot ensure that our distribution methods and content are responsive to our target audiences, our business could be adversely affected.
The COVID-19 pandemic appears to have accelerated some existing trends. Lockdowns during the pandemic, for example, encouraged households to experiment with digital offerings including subscription video-on-demand or to stack subscriptions. Although we expect these trends to continue in the coming years, our viewership and the profitability of our business may be impacted in unpredictable ways as a result thereof. Moreover, there can be no assurance of the continuation of these trends.
If our DTC product, discovery+, fails to attract and retain subscribers, our business, financial condition and results of operations may be adversely impacted.
In January 2021, Discovery launched an aggregated DTC product, discovery+, in the U.S. We have incurred and will likely continue to incur significant operationscosts to develop and market discovery+ and there can be no assurance that consumers and advertisers will embrace our offering or that subscribers will activate or renew a subscription.
Our discovery+ offering is a subscription-based streaming product and is among many such services in a numbercrowded and competitive landscape. Its success will also be largely dependent on our ability to initially attract, and ultimately retain, subscribers. Competitors to discovery+ include traditional linear programming networks, including our own linear channels, competing subscription video-on-demand services, and other digital entertainment platforms and offerings all vying for consumer time, attention and discretionary spending. If we are unable to effectively market discovery+ or if consumers do not perceive the pricing and related features of foreign jurisdictionsdiscovery+ to be of value versus our competitors, we may not be able to attract and certainretain subscribers. In particular, decreases in consumer discretionary spending where discovery+ is offered may reduce our ability to attract and retain subscribers to discovery+, which could have a negative impact on our business. Relatedly, a decrease in viewing subscribers on our advertising-supported offering of discovery+ could also have a negative impact on the rates we are able to charge advertisers for advertising-supported services. The ability to attract and retain subscribers will also depend in part on our ability to provide compelling content choices that are differentiated from that of our operationscompetitors and that are conductedmore attractive than other sources of entertainment that consumers could choose in their free time. Furthermore, our ability to provide a quality subscriber experience and certain of our debt obligationsrelative service levels, may also impact our ability to attract and retain subscribers. If we are denominated in foreign currencies. As a result, we have exposureunable to foreign currency risk as we enter into transactionsattract and make investments denominated in multiple currencies. The value of these currencies fluctuates relativeretain subscribers to the U.S. dollar. Our consolidated financial statements are denominated in U.S. dollars,discovery+, our business could be adversely affected.
Consolidation among pay-TV programming and to prepare those financial statements we must translate the amounts of the assets, liabilities, net sales, other revenuessatellite providers, both domestically and expenses of our operations outside of the U.S. from local currencies into U.S. dollars using exchange rates for the current period. As we have expanded our international operations, our exposure to exchange rate fluctuations has increased. This increased exposureinternationally, could have an adverse effect on our reportedbusiness, financial condition and results of operationsoperations.
Consolidation among cable and net asset balances. There is no assurancesatellite operators has given the largest operators considerable leverage in their relationships with programmers, including us. For the U.S. Networks segment, 84% of our distribution revenue comes from the top 10 distributors. We currently have agreements in place with the 10 largest cable and satellite operators at U.S. Networks that downward trending currencies will reboundexpire at various times from 2022 through 2025. Some of our largest distributors have combined, and as a result, have gained, or that stable currencies will remain unchanged in any period or for any specific market.
Our businesses operate in highly competitive industries.
The entertainmentmay gain, market power, which could affect our ability to maximize the value of our content through those platforms. In addition, many of the countries and media programming industriesterritories in which we operate are highly competitive. We compete with otherdistribute our networks also have a small number of dominant distributors. Continued consolidation within the industry could reduce the number of distributors to carry our programming, networks for distribution, viewerssubject our affiliate fee revenue to greater volume discounts, and advertising. We also compete for viewers with other formsfurther increase the negotiating leverage of media entertainment, such as home video, movies, periodicals, on-line and mobile activities. In particular, websites and search engines have seen significant advertising growth, a portion of which has moved from traditionalthe cable network and satellite advertisers. Businesses, including ours, that offer multiple services, or that may be vertically integrated and offer both video distribution and programming content, may face closer regulatory review from the competition authorities in the countries intelevision system operators which we currentlycould have operations. If our distributors have to pay higher rates to holders of sports broadcasting rights, it might be difficult for us to negotiate higher rates for distribution of our networks. Our commerce business competes against a wide range of competitive retailers selling similar products. The ability of our businesses to compete successfully depends on a number of factors, including our ability to consistently supply high quality and popular content, access our niche viewership with appealing category-specific content, adapt to new technologies and distribution platforms and achieve widespread distribution. There can be no assurance that we will be able to compete successfully in the future against existing or new competitors, or that increasing competition will not have a materialan adverse effect on our business, financial condition or results of operations.
Failure to renew, renewal with less favorable terms, or termination of our affiliationdistribution agreements may cause a decline in our revenue.
Because our networks are licensed on a wholesale basis to distributors, such as cable and satellite operators, which in turn distribute them to consumers, we are dependent upon the maintenance of affiliationdistribution agreements with these operators. These affiliationdistribution agreements generally provide for the level of carriage our networks will receive, such as channel placement and programming package inclusion (widely distributed, broader programming packages compared to lesser distributed, specialized programming packages) and for payment of a license fee to us based on the number of subscribers that receive our networks. networks or other factors.
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While the number of subscribers associated with our networks impacts our ability to generate advertising revenue, these per subscriber paymentssubscription-based revenue also representrepresents a significant portion of our revenue. Our affiliationdistribution agreements generally have a limited term which varies by marketterritory and distributor, and there can be no assurance that these affiliationdistribution agreements will be renewed in the future or that they will be renewed on terms that are favorable to us. A reduction in the license fees that we receive per subscriber or in the number of subscribers for which we are paid, including as a result of a loss or reduction in carriage for our networks or a reduction in distributor penetration, including as a result of changes in consumer habits, could adversely affect our distribution revenue. Such a loss or reduction in carriage could also decrease the potential audience for our programs thereby adversely affecting our advertising revenue. In addition, our affiliationdistribution agreements are complex and individually negotiated. If we were to disagree with one of our counterparties on the interpretation of an affiliationa distribution agreement, our relationship with that counterparty could be damaged and our business could be negatively affected.
Interpretation of some terms of our distribution agreements may have an adverse effect on the distribution payments we receive under those agreements.
Some of our distribution agreements contain “most favored nation” clauses. These clauses typically provide that if we enter into an agreement with another distributor which contains certain more favorable terms, we must offer some of those terms to our existing distributors. We have entered into a number of distribution agreements with terms that differ in some respects from those contained in other agreements. While we believe that we have appropriately complied with the most favored nation clauses included in our distribution agreements, these agreements are complex and other parties could reach a different conclusion that, if correct, could have an adverse effect on our financial condition or results of operations.


We face cybersecurity and similar risks, which could result in the disclosure of confidential information, disruption of our programming services, damage to our brands and reputation, legal exposure and financial losses.
OurWe and our partners rely on various technology systems in connection with the production, distribution and broadcast of our programming, and our on-line, mobile and app offerings, as well as our internal systems, involve the storage and transmission of personal and proprietary information,information. From time to time, hackers and weother malicious actors target Discovery and our partners rely on various technology systems in connection with the production and distribution of our programming.service providers. Our systems and our service providers’ systems have been breached in the past due to cybersecurity attacks. These systems may continue to be breached in the future due to employee error, malicious code, hacking and phishing attacks, or otherwise. Additionally, outside parties may attempt to fraudulently induce employeesIf our information security systems or users to disclose sensitive or confidential informationdata are compromised in order to gain access to data. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Anymaterial way, such breach or unauthorized accesscompromises could result in a loss of our proprietary information, which may include user data, a disruption of our services or a reduction of the revenues we are able to generate from such services, damage to our brands and reputation, a loss of confidence in the security of our offerings and services, and significant legal and financial exposure, each of which could potentially have an adverse effect on our business.
Our equity method Additionally, outside parties may attempt to fraudulently induce employees or users to disclose sensitive or confidential information in order to gain access to data and cost method investments' financial performance may differ from current estimates.systems.
We have equity investments in several entitiesalso face regulatory risk associated with the acquisition, storage, disclosure, use and protection of personal data, including under the accounting treatment applied for these investments varies depending on a number of factors, including, but not limited to, our percentage ownershipE.U. GDPR, the CCPA, and the level of influence or control we have over the relevant entity. Any losses experienced by these entities could adversely impact our results of operationsvarious other domestic and the value of our investment. In addition, if these entities were to failinternational privacy and cease operations, we may lose the entire value of our investmentdata security laws and the stream of any shared profits. Some of our venturesregulations, which are continually evolving. These evolving data protection laws may require us to expend significant resources to implement additional uncommitted funding. We also havedata protection measures, and our actual or alleged failure to comply with such laws could result in legal claims, regulatory enforcement actions and significant investments in entities that we have accounted for using the cost method. If these entities experience significant losses or were to failfines and cease operations, our investments could be subject to impairment and the loss of a part or all of our investment value.penalties.
Risks Related to the Scripps Networks AcquisitionCOVID-19 Pandemic
We may not be able to successfully integrate the Scripps Networks business with our own, realize the anticipated benefitsThe COVID-19 pandemic has caused substantial disruption in television production, financial markets and economies worldwide, both of the Scripps Networks acquisition or manage our expanded operations, any of which would adversely affect our results of operations.
We have devoted, and expect to continue to devote, significant management attention and resources to integrating our organization, procedures, and operations with those of Scripps Networks. Such integration efforts are costly due to the large number of processes, policies, procedures, locations, operations, technologies and systems to be integrated, including purchasing, accounting and finance, sales, service, operations, payroll, pricing, marketing and employee benefits. Integration expenses could, particularly in the short term, exceed the cost synergies we expect to achieve from the elimination of duplicative expenses and the realization of economies of scale, which could result in adverse effects on our business, operations, stock price and ability to raise capital.
The COVID-19 pandemic has negatively impacted the global economy and continues to create significant chargesvolatility and disruption in the credit and financial markets, and while some economic disruption may ease from time to earnings that we cannot currently quantify. Potential difficulties that wetime, such disruption is expected to continue and may encounterworsen for an undetermined period of time. There is a significant degree of uncertainty and lack of visibility as partto the extent and duration of the integration process includeglobal economic disruption caused by COVID-19; however, a prolonged disruption, slowdown or recession could materially adversely affect our credit ratings, stock price, ability to access capital on favorable terms and ability to meet our liquidity needs.
Our businesses, as with other businesses globally, have been significantly affected by the following:COVID-19 pandemic both domestically and internationally, including as a result of governmentally imposed shutdowns, workforce realignments, labor and supply chain interruptions, and quarantines and travel restrictions, among other factors. Shutdowns and/or restrictions relating to television production activity have impacted, and may continue to impact, various aspects of project scheduling, completion and budgets, as well as revenue streams tied to projected release or availability dates. All such impacts may continue for an indefinite length of time.
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Our actions to limit the adverse effects of COVID-19 on our inability to successfully combine our business with Scripps Networks in a manner that permitsfinancial condition may not be successful, as the combined company to achieveextent and duration of the full synergiesadverse effects of the pandemic is not determinable and other benefits anticipated to resultdepends on future developments, which are highly uncertain and cannot be predicted. Events resulting from the merger; and
complexities associated with managing the combined businesses, including difficulty addressing possible differences in corporate cultures and management philosophies and the challengeeffects of integrating products, services, complex and different information technology systems, control and compliance processes, technology, networks and other assets of each of the companies in a cohesive manner.
Following the merger, the size and complexity of the business of the combined company will increase significantly. Our future success depends, in part, uponCOVID-19 may negatively impact our ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that we will be successful or that we will realize the expected synergies and benefits anticipated from the merger.
DCL was not obligated to place in escrow the net proceeds of its senior notes that were issued in September 2017, partially to fund the Scripps Networks acquisition (the “Senior Notes”), and, as a result, wecomply with our financial covenants. Also, additional funding may not be ableavailable to redeem the Senior Notes upon a special mandatory redemption.
Under theus on acceptable terms of the Senior Notes, we are obligated to redeem the Senior Notesor at a redemption price of 101% of their principal amount plus accrued and unpaid interest if the Scripps acquisition doesall. If adequate funding is not close by August 18, 2018 (a “special mandatory redemption”).  We were not obligated to place the net proceeds of the offering of the Senior Notes in escrow prior to the completion of the Scripps Networks acquisition or to provide a security interest in those proceeds, and the indenture governing the Senior Notes imposes no other restrictions on our use of these proceeds during that time. Accordingly, the source of funds for any redemption of the $500 million principal amount of 2.200% senior notes due 2019, $1.20 billion principal amount of 2.950% senior notes due 2023, $1.70 billion principal amount of 3.950% senior notes due 2028, $1.25 billion principal amount of 5.000% senior notes due


2037 and $1.25 billion principal amount of 5.200% senior notes due 2047 or £400 million principal amount of 2.500% senior notes due 2024 upon a special mandatory redemption would be the proceeds that we have voluntarily retained or other sources of liquidity, including available, cash, borrowings, sales of assets or sales of equity. We may not be able to satisfy our obligation to redeem these Senior Notes upon a special mandatory redemption, because we may not have sufficient financial resourcesbe required to pay the aggregate redemption price on such Senior Notes. Our failurereduce expenditures, including curtailing our growth strategies and reducing our product development efforts, or forego acquisition opportunities.
Risks Related to redeem these Senior Notes as required under the indenture would resultDomestic and Foreign Laws and Regulations and Other Risks Related to International Operations
Changes in a default under the indenture, which could result in defaults under ourdomestic and our subsidiaries’ other debt agreementsforeign laws and have material adverse consequences for us and the holders of the Senior Notes. In addition, our ability to redeem the senior notes for cash may be limited by law or the terms of other agreements relating to our indebtedness outstanding at the time.
General Risks
Theft of our content, including digital copyright theftregulations and other unauthorized exhibitions of our content, may decrease revenue received from our programming and adversely affect our businesses and profitability.
The success of our business depends in part on our ability to maintain the intellectual property rights to our entertainment content. We are fundamentally a content company, and piracy of our brands, television networks, digital content and other intellectual property has the potential to significantly and adversely affect us. Piracy is particularly prevalent in many parts of the world that lack copyright and other protections similar to existing law in the U.S. It is also made easier by technological advances allowing the conversion of content into digital formats, which facilitates the creation, transmission and sharing of high-quality unauthorized copies. Unauthorized distribution of copyrighted material over the Internet is a threat to copyright owners’ ability to protect and exploit their property. The proliferation of unauthorized use of our content may have an adverse effect on our business and profitability because it reduces the revenue that we potentially could receive from the legitimate sale and distribution of our content. Litigation may be necessary to enforce our intellectual property rights, protect trade secrets or to determine the validity or scope of proprietary rights claimed by others.
We are subject to risks related to international operations could adversely impact our internationalbusiness, financial condition and results of operations.
Programming services like ours, and the distributors of our services, including cable operators, satellite operators and other multi-channel video programming distributors, are regulated by U.S. federal laws and regulations issued and administered by various federal agencies, including the FCC, as well as by state and local governments, in ways that affect the daily conduct of our video content business. These obligations and regulations, among other things, require closed captioning of programming for the hearing impaired, require certain content providers to make available audio descriptions of programming for the visually impaired, limit the amount and content of commercial matter that may be shown during programming aimed primarily at an audience of children aged 12 and under, and require the identification of (or the maintenance of lists of) sponsors of political advertising. See the discussion under “Business – Regulatory Matters” that appears above. The U.S. Congress, the FCC and the courts currently have under consideration, and may adopt or interpret in the future, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operations of our U.S. media properties or modify the terms under which we offer our services and operate.
Similarly, the foreign jurisdictions in which our networks are offered have, in varying degrees, laws and regulations that govern our business. We have operations through which we distribute programming outside the United States. As a result, our business is subject to certain risks inherent in international business, many of which are beyond our control. These risks include:
•laws and policies affecting trade and taxes, including laws and policies relating to the repatriation of funds and withholding taxes, and changes in these laws;
changes in •local regulatory requirements (and any changes to such requirements), including restrictions on content, censorship, imposition of local content quotas, local production levies and restrictions or prohibitions on foreign ownership;ownership, outsourcing, consumer protection, intellectual property and related rights, including copyright and rightsholder rights and remuneration;
•our ability to obtain the appropriate licenses and other regulatory approvals we need to broadcast content in foreign countries;
•differing degrees of protection for intellectual property and varying attitudes towards the piracy of intellectual property;
•significant fluctuations in foreign currency value;
•currency exchange controls;
•the instability of foreign economies and governments;
•war and acts of terrorism;
•anti-corruption laws and regulations such as the Foreign Corrupt Practices Act and the U.K. Bribery Act, and programs administered by the Office of Foreign Assets Control, that impose stringent requirements on how we conduct our foreign operations and changes in these laws and regulations;
•foreign privacy and data protection laws and regulation and changes in these laws; and
•shifting consumer preferences regarding the viewing of video programming.
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Events or developments related to these and other risks associated with international trade could adversely affect our revenues from non-U.S. sources, which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.
Acts of terrorism, hostilities, imposition of sanctions, or financial, political, economic or other uncertainties could lead to a reduction in revenue or loss of investment, which could adversely affect our results of operations. Furthermore, some foreign markets where we and our partners operate may be more adversely affected by current economic conditions than the U.S. We also may incur substantial expense as a result of changes, including the imposition of new restrictions, in the existing economic or political environment in the regions where we do business. Acts
This is of terrorism, hostilities,particular concern in Poland, where we own and operate TVN, a portfolio of free-to-air and pay-TV lifestyle, entertainment, and news networks. On December 17, 2021, a proposed amendment to the Polish Broadcasting Act commonly referred to as “LEX TVN” was presented to the lower chamber of the Polish Parliament (the “Sejm”) for consideration and was subsequently passed by the Sejm. LEX TVN would prohibit the granting of licenses for television and radio broadcasting channels in Poland, such as the TVN portfolio of channels, to broadcasters with more than 49% of their share capital directly or financial, political, economicindirectly controlled by an entity with a registered seat outside of the European Economic Area, essentially precluding non-European Economic Area ownership of media entities in Poland. LEX TVN was presented to the President of Poland for consideration and, on December 27, 2021, the President of Poland vetoed LEX TVN. In the future, if legislation similar to LEX TVN is enacted, it could, directly or other uncertainties could lead to a reductionindirectly, affect the future operations of our Polish media properties and/or modify the terms under which we offer our services and operate in revenue or loss of investment, which could adversely affect our results of operations.that market in the future.
Global economic conditions may have an adverse effect on our business.
Our business is significantly affected by prevailing economic conditions, including inflation and fluctuations in interest rates, and by disruptions to financial markets. We derive substantial revenues from advertisers, and these expenditures are sensitive to general economic conditions and consumer buying patterns. Financial instability or a general decline in economic conditions in the U.S. and other countries where our networks are


distributed could adversely affect the businesses of our partners who might reduce their spending on advertising, which could result in a decrease in advertising rates and volume resulting in a decrease inand our advertising revenues.
Decreases in consumer discretionary spending in the U.S. and other countries where our networks are distributed may affect cable television and other video service subscriptions, in particular with respect to digital service tiers on which certain of our programming networks are carried. This could lead to a decrease in the number of subscribers receiving our programming from multi-channel video programming distributors, which could have a negative impact on our viewing subscribers and affiliation feedistribution revenues. Similarly, a decrease in viewing subscribers would also have a negative impact on the number of viewers actually watching the programs on our programming networks, which could also impact the rates we are able to charge advertisers.
Economic conditions affect a number of aspects of our businesses worldwide and impact the businesses of our partners who purchase advertising on our networks and might reduce their spending on advertising. Economic conditions can also negatively affect the ability of those with whom we do business to satisfy their obligations to us. The general worsening of current global economic conditions could adversely affect our business, financial condition or results of operations, and the worsening of economic conditions in certain parts of the world, specifically, could impact the expansion and success of our businesses in such areas.
Domestic and foreign laws and regulations could adversely impact our operation results.
Programming services like ours, and the distributors of our services, including cable operators, satellite operators and other multi-channel video programming distributors, are regulated by U.S. federal laws and regulations issued and administered by various federal agencies, including the FCC, as well as by state and local governments, in ways that affect the daily conduct of our video content business. See the discussion under “Business – Regulatory Matters” above. The U.S. Congress, the FCC and the courts currently have under consideration, andForeign exchange rate fluctuations may adopt or interpret in the future, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operations of our U.S. media properties or modify the terms under which we offer our services and operate.
Similarly, the foreign jurisdictions in which our networks are offered have, in varying degrees, laws and regulations governing our businesses. Programming businesses are subject to regulation on a country-by-country basis. Changes in regulations imposed by foreign governments could also adversely affect our business,operating results and financial conditions.
We have significant operations in a number of operationsforeign jurisdictions and ability to expandcertain of our operations beyond their current scope.
Financial markets are subjectconducted and certain of our debt obligations are denominated in foreign currencies. As a result, we have exposure to volatilityforeign currency risk as we enter into transactions and disruptions that maymake investments denominated in multiple currencies. In addition, unforeseeable changes in foreign currency exchange rates could materially adversely affect our abilitycalculations of interest coverage and leverage ratios, which are used by independent rating agencies to obtain or increase the cost of financing our operations and our ability to meet our other obligations.
Increased volatility and disruptions in the U.S. and global financial and equity markets may make it more difficult for us to obtain financing for our operations or investments or increase the cost of obtaining financing. Our borrowing costs can be affected byassign short and long-term debt ratings. Lower debt ratings assigned by independent rating agencies which are based, in significant part, on our performance as measured by credit metrics such as interest coverage and leverage ratios. A low rating could increase our cost of borrowing or make it more difficult for us to obtain future financing. Unforeseeable changesfinancing, which could materially adversely affect our operating results and financial conditions. The value of these currencies fluctuates relative to the U.S. dollar. Our consolidated financial statements are denominated in foreign currencies could negatively impact our resultsU.S. dollars, and to prepare those financial statements we must translate the amounts of operationsthe assets, liabilities, net sales, other revenues and calculations of interest coverage and leverage ratios.
Acquisitions and other strategic transactions present many risks and we may not realize the financial and strategic goals that were contemplated at the time of any transaction.
From time to time we make acquisitions, investments and enter into other strategic transactions, including our planned transaction with Scripps Networks. In connection with such acquisitions and strategic transactions, we may incur unanticipated expenses fail to realize anticipated benefits, have difficulty incorporating the acquired businesses, disrupt relationships with current and new employees, subscribers, affiliates and vendors, incur significant debt, or have to delay or not proceed with announced transactions such as the Scripps Networks transaction. Additionally, regulatory agencies, such as the FCC or DOJ may impose additional restrictions on the operation of our business as a resultoperations outside of the U.S. from local currencies into U.S. dollars using exchange rates for the current period. As we have expanded our seeking regulatory approvals for any significant acquisitions and strategic transactions. The occurrence of any of these eventsinternational operations, our exposure to exchange rate fluctuations has increased. This increased exposure could have an adverse effect on our business.
Our inability to successfully acquire and integrate other businesses, assets, products or technologies could harm our operating results.
Our success may depend on opportunities to buy other businesses or technologies that could complement, enhance or expand our current business or products or that might otherwise offer us growth opportunities. We have acquired, and have made strategic investments in, a numberreported results of companies (including through joint ventures) in the past, and we expect to make additional acquisitions and strategic investments in the future. Such transactions may result in dilutive issuances of our equity securities, use of our cash resources, and incurrence of debt and amortization expenses related to intangible assets. Any acquisitions and strategic investments that we are able to identify and complete may be accompanied by a number of risks, including:
the difficulty of assimilating the operations and personnel of acquired companies into our operations;


the potential disruption of our ongoing business and distraction of management;
the incurrence of additional operating losses and operating expenses of the businesses we acquired or in which we invested;
the difficulty of integrating acquired technology and rights into our services and unanticipated expenses related to such integration;
the failure to successfully further develop an acquired business or technology and any resulting impairment of amounts currently capitalized as intangible assets;
the failure of strategic investments to perform as expected or to meet financial projections;
the potential for patent and trademark infringement and data privacy and security claims against the acquired companies, or companies in which we have invested;
litigation or other claims in connection with acquisitions, acquired companies, or companies in which we have invested;
the impairment or loss of relationships with customers and partners of the companies we acquired or in which we invested or with our customers and partners as a result of the integration of acquired operations;
the impairment of relationships with, or failure to retain, employees of acquired companies or our existing employees as a result of integration of new personnel;
our lack of, or limitations on our, control over the operations of our joint venture companies;
the difficulty of integrating operations, systems, and controls as a result of cultural, regulatory, systems, and operational differences;
in the case of foreign acquisitions and investments, the impact of particular economic, tax, currency, political, legal and regulatory risks associated with specific countries; and
the impact of known potential liabilities or liabilities that may be unknown, including as a result of inadequate internal controls, associated with the companies we acquired or in which we invested.
Our failure to be successful in addressing these risks or other problems encountered in connection with our past or future acquisitions and strategic investments could cause us to fail to realize the anticipated benefits of such acquisitions or investments, incur unanticipated liabilities, and harm our business generally.
The loss of key personnel or talent could disrupt our business and adversely affect our revenue.
Our business depends upon the continued efforts, abilities and expertise of our corporate and divisional executive teams and entertainment personalities. Our success after the Scripps Networks acquisition will depend in part upon our ability to retain key employees. Prior to and following the completion of the merger, current and prospective employees may experience uncertainty about their future roles with Discovery and choose to pursue other opportunities, which could have an adverse effect on Discovery after the transaction. If key employees depart, the integration of Scripps Networks with Discovery may be more difficult and our business following the completion of the merger may be adversely affected. Additionally, we employ or contract with entertainment personalities who may have loyal audiences. These individuals are important to audience endorsement of our programs and other content.net asset balances. There can beis no assurance that these individualsdownward trending currencies will rebound or that stable currencies will remain with usunchanged in any period or retain their current audiences. If we fail to retain key individuals or if our entertainment personalities lose their current audience base, our operations could be adversely affected.for any specific market.
Newly-enacted US
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Increasing complexity of global tax reformpolicy and regulations could adversely impact our international business and results of operations.
Recentlyenacted US tax reform could adversely impact ourWe continue to face the increasing complexity of operating a global business, and results of operations. On December 22, 2017, President Trump signed the 2017 Tax Cuts and Jobs Act ("TCJA"), which includes a broad range of tax reform regulations affecting businesses, including corporate tax rates, business deductions, and international tax provisions. Some of the changes, like the new tax on global intangible low-taxed income ("GILTI") or the base erosion and anti-abuse tax ("BEAT"), could have the effect of increasing our effective tax rate, the amount of our consolidated net taxable incomeas we are subject to incometax policy and regulations in multiple non-U.S. jurisdictions. Many foreign jurisdictions are contemplating additional taxes and our overall tax liability, and could reduce our net income and our earnings per share,and/or levies on over-the-top services, as well as media advertising. In addition, many foreign jurisdictions have increased scrutiny and have either changed, or plan to change, their international tax systems due to the Organisation for Economic Co-operation and Development’s (“OECD”) Base Erosion and Profit Shifting (“BEPS”) recommendations. The BEPS recommendations call for enhanced transparency and reporting relating to companies’ entity structures and transfer pricing policies. These have been implemented through various initiatives including the requirement for taxpayers to comply with global country-by-country reporting and the filing of a global master file as well as the introduction of the multilateral instrument (“MLI”) which allows taxing authorities to better take aim at multinational tax avoidance. We continue to address and comply with these compliance and reporting requirements. Recently, officials from 136 jurisdictions, including the U.S., agreed upon a framework for overhauling the taxation of multinational corporations that includes, among other things, profit reallocation rules and a 15% global minimum corporate income tax rate. These provisions, if implemented, could have a material effect on our consolidated cash flowsincome tax liability.
Additional complexity has also arisen in state aid: state resources used to provide recipients an advantage on a selective basis that has or could distort competition and liquidity, even ifaffect trade between European member states. In recent years the European Commission (“EC”) has increased their scrutiny on state aid and deviated from the historical E.U. state aid practices. There is great uncertainty about the future of E.U. state aid practices based on the appeals of many significant EC rulings against multinational corporations that are currently being challenged. The potential impact of these rulings is difficult to assess and our transfer pricing analyses conducted pursuant to accepted OECD methodologies may not sufficiently mitigate risk associated with our past or current agreements. Continued access, at historical levels, to production incentive schemes, such as tax credits, may also be affected by proposed changes include a reduction in the rate at which corporate taxable income is taxed. laws currently under examination.
In addition, the determination of our worldwide provision for income taxes and current and deferred tax assets and liabilities requires judgment and estimation. Our income taxes could also be materially adversely affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in worldwide tax laws, regulations, or accounting principles.


In the U.S., the Biden administration has issued guidance on certain tax law changes that it would support, which include, among other things, a significant increase in the corporate income tax rate, a new alternative minimum tax on book income and changes in the taxation of non-U.S. income. There has been recently released proposed legislation that includes, among other things, a new interest deduction limitation for certain domestic corporations that are member of certain multinational groups. While it is too early to predict the outcome of these proposals, if enacted, they would have a material impact on our income tax liability.
Risks Related to Our DebtBusiness Model and Capital Structure
We have a significant amount of debt and may incur significant amounts of additional debt, which could adversely affect our financial health and our ability to react to changes in our business.
As of December 31, 2017,2021, we had approximately $14.8$15.2 billion of consolidated debt, including capital leases.of which $339 million is current. Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay when due the principal of, interest on, or other amounts associated with our indebtedness. In addition, we have the ability to draw down our $2.5 billion revolving credit facility in the ordinary course, which would have the effect of increasing our indebtedness. We are also permitted, subject to certain restrictions under our existing indebtedness, to obtain additional long-term debt and working capital lines of credit to meet future financing needs. This would have the effect of increasing our total leverage.
Our substantial leverage could have significant negative consequences on our financial condition and results of operations, including:
•impairing our ability to meet one or more of the financial ratio covenants contained in our debt agreementsrevolving credit facility or to generate cash sufficient to pay interest or principal, which could result in an acceleration of some or all of our outstanding debt in the event that an uncured default occurs;
•increasing our vulnerability to general adverse economic and market conditions;
•limiting our ability to obtain additional debt or equity financing;
•requiring the dedication of a substantial portion of our cash flow from operations to service our debt, thereby reducing the amount of cash flow available for other purposes;
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•requiring us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations;
•limiting our flexibility in planning for, or reacting to, changes in our business and the markets in which we compete; and
•placing us at a possible competitive disadvantage with less leveraged competitors and competitors that may have better access to capital resources.
Our ability to incur debt and the use of our funds could be limited by the restrictive covenants in the loan agreement for our revolving credit facility.
The loan agreement for our revolving credit facility contains restrictive covenants, as well as requirements to comply with certain leverage and other financial maintenance tests. These covenants and requirements could limit our ability to take various actions, including incurring additional debt, guaranteeing indebtedness and engaging in various types of transactions, including mergers, acquisitions and sales of assets. These covenants could place us at a disadvantage compared to some of our competitors, who may have fewer restrictive covenants and may not be required to operate under these restrictions. Further, these covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, mergers and acquisitions or other opportunities.
Risks RelatedFinancial performance for our equity method investments and investments without readily determinable fair value may differ from current estimates.
We have equity investments in several entities and the accounting treatment applied for these investments varies depending on a number of factors, including, but not limited to, Corporate Structureour percentage ownership and the level of influence or control we have over the relevant entity. Any losses experienced by these entities could adversely impact our results of operations and the value of our investment. In addition, if these entities were to fail and cease operations, we may lose the entire value of our investment and the stream of any shared profits. Some of our ventures may require additional uncommitted funding. We also have significant investments in entities that we have accounted for as investments without readily determinable fair value. If these entities experience significant losses or were to fail and cease operations, our investments could be subject to impairment and the loss of a part or all of our investment value.
As a holding company, we could be unable to obtain cash in amounts sufficient to meet our financial obligations or other commitments.
Our ability to meet our financial obligations and other contractual commitments will depend upon our ability to access cash. We are a holding company, and our sources of cash include our available cash balances, net cash from the operating activities of our subsidiaries, any dividends and interest we may receive from our investments, availability under our credit facility or any credit facilities that we may obtain in the future and proceeds from any asset sales we may undertake in the future. The ability of our operating subsidiaries, including Discovery Communications, LLC, ("DCL") to pay dividends or to make other payments or advances to us will depend on their individual operating results and any statutory, regulatory or contractual restrictions, including restrictions under our credit facility, to which they may be or may become subject. Under the TCJA,2017 Tax Cuts and Jobs Act, we arewere subject to U.S. taxes for the deemed repatriation of certain cash balances held by foreign corporations. However, we intentThe Company intends to continue to permanently reinvest these funds outside of the U.S., and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.
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Risks Related to Corporate Structure
We have directors in common with those of Liberty Media Corporation (“Liberty Media”), Liberty Global plc (“Liberty Global”), Qurate Retail Group f/k/a Liberty Interactive Corporation (“Liberty Interactive”Qurate Retail”) and, Liberty Broadband Corporation ("Liberty Broadband"), and Liberty Latin America Ltd ("LLA"), which may result in the diversion of business opportunities or other potential conflicts.
Liberty Media, Liberty Global, Liberty Interactive andQurate Retail, Liberty Broadband and LLA (together, the "Liberty Entities") own interests in


various U.S. and international companies, such as Charter Communications, Inc. ("Charter"), that have subsidiaries that own or operate domestic or foreign content services that may compete with the content services we offer. We have no rights in respect of U.S. or international content opportunities developed by or presented to the subsidiaries of any Liberty Entities, and the pursuit of these opportunities by such subsidiaries may adversely affect our interests and those of our stockholders. Because we and the Liberty Entities have overlapping directors, the pursuit of business opportunities may serve to intensify the conflicts of interest or appearance of conflicts of interest faced by the respective management teams. Our charter provides that none of our directors or officers will be liable to us or any of our subsidiaries for breach of any fiduciary duty by reason of the fact that such individual directs a corporate opportunity to another person or entity (including any Liberty Entities), for which such individual serves as a director or officer, or does not refer or communicate information regarding such corporate opportunity to us or any of our subsidiaries, unless (x)(a) such opportunity was expressly offered to such individual solely in his or her capacity as a director or officer of us or any of our subsidiaries and (y)(b) such opportunity relates to a line of business in which we or any of our subsidiaries is then directly engaged.
We have directors that are also related persons of Advance/Newhouse and that overlap with those of the Liberty Entities, which may lead to conflicting interests for those tasked with the fiduciary duties of our board.
Our eleven-persontwelve-person board of directors includes three designees of Advance/Newhouse Programming Partnership ("Advance/Newhouse"), including Robert J. Miron, who was the Chairman of Advance/Newhouse until December 31, 2010, and Steven A. Miron, the Chief Executive Officer of Advance/Newhouse. In addition, our board of directors includes two persons who are currently members of the board of directors of Liberty Media, three persons who are currently members of the board of directors of Liberty Global, one person who is currently a member of the board of directors of Liberty Interactive,Qurate Retail, two persons who are currently members of the board of directors of Liberty Broadband, and two personsone person who areis currently membersa member of the board of directors of Charter, of which Liberty Broadband owns an equity interest.interest, and two persons who are currently members of the board of directors of LLA. John C. Malone is the Chairman of the boards of all of the Liberty Entities other than LLA and is a member of the board of directors of Charter.Qurate Retail. The parent company of Advance/Newhouse and the Liberty Entities own interests in a range of media, communications and entertainment businesses.
Advance/Newhouse will elect three directors annually for so long as it owns a specified minimum amount of our Series A-1 convertible preferred stock. The Advance/Newhouse Series A-1 convertible preferred stock, which votes with our common stock on all matters other than the election of directors, represents approximately 24%23% of the voting power of our outstanding shares. The Series A-1 convertible preferred stock also grants Advance/Newhouse consent rights over a range of our corporate actions, including fundamental changes to our business, the issuance of additional capital stock, mergers and business combinations and certain acquisitions and dispositions.
None of the Liberty Entities own any interest in us. Mr. Malone beneficially owns stockowns: shares of Liberty Media representing approximately 47%48% of the aggregate voting power of its outstanding stock, owns shares representing approximately 26%30% of the aggregate voting power of Liberty Global, shares representing approximately 39%6% of the aggregate voting power of Liberty Interactive,Qurate Retail, shares representing approximately 46%49% of the aggregate voting power of Liberty Broadband and shares representing approximately 21%20% of the aggregate voting power (other than with respect to the election of the common stock directors) of our outstanding stock. Mr. Malone controls approximately 28%26% of our aggregate voting power relating to the election of our eightnine common stock directors, assuming that the preferred stock owned by Advance/Newhouse has not been converted into shares of our common stock. Our directors who are also directors of the Liberty Entities ownhold stock and stock incentives ofstock-based compensation in the Liberty Entities and ownhold our stock and stock incentives.stock-based compensation.
These ownership interests and/or business positions could create, or appear to create, potential conflicts of interest when these individuals are faced with decisions that could have different implications for us, Advance/Newhouse and/or the Liberty Entities. For example, there may be the potential for a conflict of interest when we, on the one hand, or Advance/Newhouse and/or one or more of the Liberty Entities, on the other hand, consider acquisitions and other corporate opportunities that may be suitable for the other.
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The members of our board of directors have fiduciary duties to us and our stockholders. Likewise, those persons who serve in similar capacities at Advance/Newhouse or a Liberty Entity have fiduciary duties to those companies. Therefore, such persons may have conflicts of interest or the appearance of conflicts of interest with respect to matters involving or affecting both respective companies, and there can be no assurance that the terms of any transactions will be as favorable to us or our subsidiaries as would be the case in the absence of a conflict of interest.
It may be difficult for a third party to acquire us, even if such acquisition would be beneficial to our stockholders.
Certain provisions of our charter and bylaws may discourage, delay or prevent a change in control that a stockholder may consider favorable. These provisions include the following:
•authorizing a capital structure with multiple series of common stock: a Series B that entitles the holders to ten votes per share, a Series A-1 that entitles the holders to one vote per share and a Series C that, except as otherwise required by applicable law, entitles the holders to no voting rights;


•authorizing the Series A-1 convertible preferred stock with special voting rights, which prohibits us from taking any of the following actions, among others, without the prior approval of the holders of a majority of the outstanding shares of such stock:
◦increasing the number of members of the Board of Directors above ten;
◦making any material amendment to our charter or by-laws;
◦engaging in a merger, consolidation or other business combination with any other entity; and
◦appointing or removing our Chairman of the Board or our Chief Executive Officer;
��authorizing the issuance of “blank check” preferred stock, which could be issued by our Board of Directors to increase the number of outstanding shares and thwart a takeover attempt;
•authorizing the issuance of “blank check” preferred stock, which could be issued by our Board of Directors to increase the number of outstanding shares and thwart a takeover attempt;
•classifying our common stock directors with staggered three-year terms and having three directors elected by the holders of the Series A convertible preferred stock, which may lengthen the time required to gain control of our Board of Directors;
•limiting who may call special meetings of stockholders;
•prohibiting stockholder action by written consent (subject to certain exceptions), thereby requiring stockholder action to be taken at a meeting of the stockholders;
•establishing advance notice requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;
•requiring stockholder approval by holders of at least 80%of our voting power or the approval by at least 75% of our Board of Directors with respect to certain extraordinary matters, such as a merger or consolidation, a sale of all or substantially all of our assets or an amendment to our charter;
•requiring the consent of the holders of at least 75% of the outstanding Series B common stock (voting as a separate class) to certain share distributions and other corporate actions in which the voting power of the Series B common stock would be diluted by, for example, issuing shares having multiple votes per share as a dividend to holders of Series A common stock; and
•the existence of authorized and unissued stock which would allow our Board of Directors to issue shares to persons friendly to current management, thereby protecting the continuity of our management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us.
We have also adopted a shareholder rights plan in order to encourage anyone seeking to acquire us to negotiate with our Board of Directors prior to attempting a takeover. While the plan is designed to guard against coercive or unfair tactics to gain control of us, the plan may have the effect of making more difficult or delaying any attempts by others to obtain control of us.
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Holders of any single series of our common stock may not have any remedies if any action by our directors or officers has an adverse effect on only that series of common stock.
Principles of Delaware law and the provisions of our charter may protect decisions of our Board of Directors that have a disparate impact upon holders of any single series of our common stock. Under Delaware law, the Board of Directors has a duty to act with due care and in the best interests of all of our stockholders, including the holders of all series of our common stock. Principles of Delaware law established in cases involving differing treatment of multiple classes or series of stock provide that a board of directors owes an equal duty to all common stockholders regardless of class or series and does not have separate or additional duties to any group of stockholders. As a result, in some circumstances, our directors may be required to make a decision that is adverse to the holders of one series of common stock. Under the principles of Delaware law referred to above, stockholders may not be able to challenge these decisions if our Board of Directors is disinterested and adequately informed with respect to these decisions and acts in good faith and in the honest belief that it is acting in the best interests of all of our stockholders.
If Advance/Newhouse were to exercise its registration rights, it may cause a significant decline in our stock price, even if our business is doing well.
Advance/Newhouse has been granted registration rights covering all of the shares of common stock issuable upon conversion of the convertible preferred stock held by Advance/Newhouse. Each share of Advance/Newhouse’s Series A-1 convertible preferred stock is currently convertible into nine shareshares of our Series A common stock and each share of Advance/Newhouse’s Series C-1 convertible preferred stock is convertible into 19.3648 shares of our Series C common stock, subject to certain anti-dilution adjustments. The registration rights, which are immediately exercisable, are transferable with the sale or transfer by Advance/Newhouse of blocks of shares representing 10% or more of the preferred stock it holds. The exercise of the registration rights, and subsequent sale of


possibly large amounts of our common stock in the public market, could materially and adversely affect the market price of our common stock.
John C. Malone and Advance/Newhouse each have significant voting power with respect to corporate matters considered by our stockholders.
For corporate matters other than the election of directors, Mr. Malone and Advance/Newhouse each beneficially own shares of our stock representing approximately 21%20% and 24%23%, respectively, of the aggregate voting power represented by our outstanding stock. With respect to the election of directors, Mr. Malone controls approximately 28%26% of the aggregate voting power relating to the election of the eightnine common stock directors (assuming that the convertible preferred stock owned by Advance/Newhouse (the “A/N Preferred Stock”) has not been converted into shares of our common stock). The A/N Preferred Stock carries with it the right to designate three preferred stock directors to our board (subject to certain conditions), but does not carry voting rights with respect to the election of the eightnine common stock directors. Also, under the terms of the A/N Preferred Stock, Advance/Newhouse has special voting rights as to certain enumerated matters, including material amendments to the restated charter and bylaws, fundamental changes in our business, mergers and other business combinations, certain acquisitions and dispositions and future issuances of capital stock. Although there is no stockholder agreement, voting agreement or any similar arrangement between Mr. Malone and Advance/Newhouse, by virtue of their respective holdings, Mr. Malone and Advance/Newhouse each have significant influence over the outcome of any corporate transaction or other matter submitted to our stockholders.
33

General Risks
Theft of our content, including digital copyright theft and other unauthorized exhibitions of our content, may decrease revenue received from our programming and adversely affect our businesses and profitability.
The success of our business depends in part on our ability to maintain and enforce the intellectual property rights underlying our entertainment content. We are fundamentally a content company, and piracy of our content (including digital content), television networks, brands and other intellectual property has the potential to significantly and adversely affect us. Piracy is particularly prevalent in parts of the world that do not effectively enforce intellectual property rights and laws, in contrast to territories such as the U.S. and much of Europe, and the Oceania territories. Even in territories like the U.S., legal frameworks that are unresponsive to modern realities, combined with the lack of effective technological prevention and enforcement measures, may impede our enforcement efforts. Our enforcement activities depend in part on third parties, including technology and platform providers, whose cooperation and effectiveness cannot be assured to any degree. In addition, technological advances that allow the almost instantaneous unauthorized copying and downloading of content into digital formats without any degradation of quality from the original facilitate the rapid creation, transmission and sharing of high-quality unauthorized copies. Unauthorized distribution of copyrighted material over the internet is a threat to copyright owners’ ability to maintain the exclusive control over their copyrighted material and thus the value of their property. The proliferation of unauthorized use of our content may have an adverse effect on our business and profitability because it reduces the revenue that we potentially could receive from the legitimate sale and distribution of our content. We may need to spend significant amounts of money on improvement of technological platform security and enforcement activities, including litigation, to protect our intellectual property rights. Any impairment of our intellectual property rights, including due to changes in U.S. or foreign intellectual property laws or the absence of effective legal protections or enforcement measures, could materially adversely impact our business, financial condition and results of operations.
Acquisitions and other strategic transactions present many risks and we may not realize the financial and strategic goals that were contemplated at the time of any transaction.
From time to time we make acquisitions, investments and enter into other strategic transactions, such as the Scripps Acquisition and the pending Combination. In connection with such acquisitions and strategic transactions, we may incur unanticipated expenses, fail to realize anticipated benefits, have difficulty incorporating the acquired businesses, disrupt relationships with current and new employees, subscribers, affiliates and vendors, incur significant debt, or have to delay or not proceed with announced transactions. Additionally, regulatory agencies, such as the FCC or U.S. Department of Justice may impose additional restrictions on the operation of our business as a result of our seeking regulatory approvals for any significant acquisitions and strategic transactions. The occurrence of any of these events could have an adverse effect on our business.
Our inability to successfully acquire and integrate other businesses, assets, products or technologies could harm our operating results.
Our success may depend on opportunities to buy other businesses or technologies that could complement, enhance or expand our current business or products or that might otherwise offer us growth opportunities. We have acquired, and have made strategic investments in, a number of companies (including through joint ventures) in the past, such as the Scripps Acquisition, and we expect to make additional acquisitions and strategic investments in the future. Such transactions may result in dilutive issuances of our equity securities, use of our cash resources, and incurrence of debt and amortization expenses related to intangible assets. Any acquisitions and strategic investments that we are able to identify and complete may be accompanied by a number of risks, including:
•the difficulty of assimilating the operations and personnel of acquired companies into our operations;
•the potential disruption of our ongoing business and distraction of management;
•the incurrence of additional operating losses and operating expenses of the businesses we acquired or in which we invested;
•the difficulty of integrating acquired technology and rights into our services and unanticipated expenses related to such integration;
•the failure to successfully further develop an acquired business or technology and any resulting impairment of amounts currently capitalized as intangible assets;
•the failure of strategic investments to perform as expected or to meet financial projections;
•the potential for patent and trademark infringement and data privacy and security claims against the acquired companies, or companies in which we have invested;
•litigation or other claims in connection with acquisitions, acquired companies, or companies in which we have invested;
34

•the impairment or loss of relationships with customers and partners of the companies we acquired or in which we invested or with our customers and partners as a result of the integration of acquired operations;
•the impairment of relationships with, or failure to retain, employees of acquired companies or our existing employees as a result of integration of new personnel;
•our lack of, or limitations on our, control over the operations of our joint venture companies;
•the difficulty of integrating operations, systems, and controls as a result of cultural, regulatory, systems, and operational differences;
•in the case of foreign acquisitions and investments, the impact of particular economic, tax, currency, political, legal and regulatory risks associated with specific countries; and
•the impact of known potential liabilities or liabilities that may be unknown, including as a result of inadequate internal controls, associated with the companies we acquired or in which we invested.
Our failure to be successful in addressing these risks or other problems encountered in connection with our past or future acquisitions and strategic investments could cause us to fail to realize the anticipated benefits of such acquisitions or investments, incur unanticipated liabilities, and harm our business generally.
The loss of key personnel or talent could disrupt our business and adversely affect our revenue.
Our business depends upon the continued efforts, abilities and expertise of our corporate and divisional executive teams and entertainment personalities. Following the completion of a merger, like the Scripps Acquisition or the pending Combination, current and prospective employees may experience uncertainty about their future roles with Discovery and choose to pursue other opportunities, which could have an adverse effect on Discovery.If key employees depart, our business may be adversely affected. Additionally, we employ or contract with entertainment personalities who may have loyal audiences. These individuals are important to audience endorsement of our programs and other content. There can be no assurance that these individuals will remain with us or retain their current audiences. If we fail to retain key individuals or if our entertainment personalities lose their current audience base, our operations could be adversely affected.
The market price of our common stock has been highly volatile and may continue to be volatile due to circumstances beyond our control.
The market price of our common stock has fluctuated, and may continue to fluctuate, widely, due to many factors, some of which may be beyond our control. These factors include, without limitation:
•the pendency and completion of the Combination, including AT&T's decision to conduct the Distribution as a pro rata distribution;
•large stockholders exiting their position in our common stock;
•an increase or decrease in the short interest in our common stock;
•comments by securities analysts or other third parties, including blogs, articles, message boards, and social and other media;
•actual or anticipated fluctuations in our financial and operating results;
•risks and uncertainties associated with the ongoing COVID-19 pandemic;
•risks and uncertainties related to material effects of climate change;
•development and provision of programming for new television and telecommunications technologies and the success of our discovery+ streaming product;
•spending on domestic and foreign television advertising;
•changes in the distribution and viewing of television programming, including the expanded deployment of personal video recorders, subscription video on demand, internet protocol television, mobile personal devices, and personal tablets and their impact on television advertising revenue;
•fluctuations in foreign currency exchange rates;
•public perception of us, our competitors, or industry; and
•overall general market fluctuations.
35

Stock markets in general and our stock price in particular have recently experienced extreme price and volume fluctuations that have been unrelated or disproportionate to the operating performance of those companies and our company. Market fluctuations and anomalous trading activities, including sales of large blocks of our Series A common stock and Series C common stock, have caused and may in the future cause the market price and demand for our common stock to fluctuate substantially, which may negatively affect the price and liquidity of our common stock.
ITEM 1B. Unresolved Staff Comments.
None.
ITEM 2. Properties.
We own and lease approximately 2.272.94 million square feet of building space forin 116 locations around the conduct of our businesses at 84 locations throughout the world.
In the U.S. alone,, we own and lease approximately 597,000 and 840,0001.46 million square feet of building space respectively, at 22 locations.27 locations representing 398 thousand square feet of owned space and 1.06 million square feet that we lease. Principal locations in the U.S. include: (i)
•a headquarters located at One Discovery Place, Silver Spring, Maryland, where approximately 543,000 square feet isGlobal Headquarters in New York, New York, primarily used for certain executivegeneral office space by various business units including Ad Sales, U.S. Networks, DTC, Corporate functions and corporateDiscovery Digital Studios and production space used for U.S. Networks;
•twoowned offices in Knoxville, Tennessee, used for general office space and for technology support and content production (including studios and production support space), respectively, and one leased warehouse space;
•two leased offices in Los Angeles, California, used for general office space by our U.S. Networks, U.S. Ad Sales, Corporate Operations functions, and Education and Other segments, (ii) general office space at 850 Third Avenue, New York, New York, where approximately 190,000 square feet is primarily used for sales by our U.S. Networks, segmentcontent production functions (including production support space), respectively;
•a planned new office in Bellevue, Washington that will house the DTC business unit once fully completed;
•an owned technical facility in Sterling, Virginia, used to manage all technical aspects of most of our global linear and certain executive offices, (iii)digital businesses.
•a leased office in Miami, Florida, primarily used for general office space facility located at 8045 Kennett Street, Silver Spring, Maryland, where approximately 149,000 square feet is primarily used by our U.S. Networks segment, (iv) general office space located at 10100 Santa Monica Boulevard, Los Angeles, California, where approximately 64,000 square feet is primarily used by our U.S. Networks segment, (v) general office space at 6505 Blue Lagoon Drive, Miami, Florida, where approximately 91,000 square feet is primarily used by our International Networks segment, and (vi) an origination facility at 45580 Terminal Drive, Sterling, Virginia, where approximately 54,000 square feet of space is used to manage the distribution of domestic network television content by our U.S. Networks segment.segment;
We also own and lease over 833,000approximately 1.48 million square feet of building space at 6289 locations outside of the U.S., including the U.K., France, Denmark, Italy, Singapore & Poland. Included in the non-US office figures are approximately 138,000representing 299 thousand square feet of buildingowned space in Poland and 1.18 million square feet that we lease.
In Poland, our TVN business unit has 31 locations including 299 thousand square feet of owned space and 390 thousand square feet that we lease. The TVN office locations are used for linear and digital news and entertainment content production, including studios, warehouse, production, technology, broadcasting and supporting office productionspace, and post-production for Eurosport.are located primarily in Warsaw and Krakow.
Other principal locations outside of the U.S. include the Office, Production and Playout space in the U.K. and France, and Office and Production space in New Zealand, Denmark, Norway, Germany, and Italy.
We have undertaken consolidations across the global portfolio, resulting in a reduction of approximately 391 thousand square feet, primarily through consolidation of offices in New York City and we are rationalizing our overall real estate footprint as individual leases expire.
Each property is considered to be in good condition, adequate for its purpose, and suitably utilized according to the individual nature and requirements of the relevant operations.operations housed within. Our policy is to improve and replace property as considered appropriate, to efficiently meet the needs of the individual operation.operations.
On January 9, 2018, weOur facility management response to COVID-19 is dynamic and ongoing, with regular adjustments made to ensure our site teams continue to follow guidelines issued a press release announcing a new real estate strategy with plans to relocateby local, national, and regional public and government health authorities. Our enhanced cleaning and disinfection programs have remained in place since the Company's global headquarters from Silver Spring, Maryland to New York City in 2019. As of December 31, 2017, we did not meet the held for sale classification criteria, as defined in the U.S. generally accepted accounting principles ("GAAP"), as it is uncertain that the salebeginning of the Silver Spring property will be completed within the next twelve months.pandemic and we have assessed environmental and building infrastructural components such as air quality, ventilation, and filtration for all of our locations, with remedial actions undertaken where necessary.
36

ITEM 3. Legal Proceedings.
TheFrom time to time, in the normal course of its operations, the Company is partysubject to various lawsuitslitigation matters and claims, in the ordinary course of business.including claims related to employees, vendors, other business partners or patent issues. However, a determination as to the amount of the accrual required for such contingencies is highly subjective and requires judgments about future events. Although the outcome of these matters cannot be predicted with certainty and the impact of the final resolution of these matters on the Company's results of operations in a particular subsequent reporting period is not known, management does not believe that the resolution of these matters will have a material adverse effect on our consolidated financial position, future results of operations or liquidity.cash flows.


On September 20, 2017, a putative class action lawsuitAs of February 1, 2022, eight lawsuits have been filed by alleged Discovery stockholders against Discovery and the Discovery Board related to the proposed transaction to combine with WarnerMedia. A complaint captioned Inzlicht-SpreiRahman v. Scripps Networks Interactive,Discovery Inc. et al. (Case, Case No. 3:17-cv-00420)1:21-cv-09785 (the “Rahman Complaint”), which we refer to aswas filed in the “Inzlicht-Sprei action”United States District Court for the Southern District of New York on November 23, 2021. A complaint captioned Chiao v. Discovery Inc. et al., Case No. 1:21-cv-10409, was filed in the United States District Court for the Southern District of New York on December 6, 2021. A complaint captioned Whitfield v. Discovery Inc. et al., Case No. 1:21-cv-10514 (the “Whitfield Complaint”), was filed by Matthew Whitfield in the United States District Court for the Southern District of New York on December 8, 2021. A complaint captioned Solakian v. Discovery Inc. et al., Case No. 1:21-cv-06806, was filed in the United States District Court for the Eastern District of Tennessee.New York on December 8, 2021. A putative class action lawsuitcomplaint captioned BergFinger v. Scripps Networks Interactive,Discovery Inc. et al. (Case, Case No. 2:17-cv-848), which we refer to as21-cv-09799, was filed in the “Berg action”, and a lawsuitUnited States District Court for the Central District of California on December 20, 2021. A complaint captioned WagnerCiccotelli v. Scripps Networks Interactive,Discovery Inc. et al. (Case, Case No. 2:17-cv-859)21-cv-05566, was filed in the United States District Court for the Eastern District of Pennsylvania on December 21, 2021. A complaint captioned Kent v. Discovery Inc. et al., which we refer to asCase No. 1:22-cv-00033-UNA, was filed by Michael Kent in the “Wagner action,” wereUnited States District Court for the District of Delaware on January 7, 2022. A complaint captioned Jones v. Discovery Inc. et al., Case No. 1:22-cv-00204, was filed by Brian Jones in the United States District Court for the Southern District of OhioNew York on September 27, 2017January 10, 2022. Each of the above complaints name as defendants Discovery and September 29, 2017, respectively. We refer tomembers of the Inzlicht-Sprei action, Berg actionDiscovery Board. The Whitfield Complaint and Wagner action collectivelythe Rahman Complaint also name as defendants AT&T and Merger Sub. The Whitfield Complaint names Spinco as an additional defendant. Each of the “actions.”complaints alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 14a-9 promulgated thereunder. The actions allegedcomplaints generally allege that the respective defendants filed a materially incomplete and misleading Form S-4 in violation of Sections 14(a) and 20(a)preliminary proxy statement with the SEC. Each of the Exchange Actcomplaints seeks injunctive relief preventing the consummation of the proposed transaction to combine with WarnerMedia, damages and SEC Rule 14a-9. On October 12, 2017, the plaintiff in the Inzlicht-Sprei action filed a notice of voluntary dismissal without prejudice. On November 21, 2017, the plaintiffs in both the Berg action and the Wagner action filed notices of voluntary dismissal.other relief.
ITEM 4. Mine Safety Disclosures.
Not applicable.

37


Executive Officers of Discovery, Communications, Inc.
Pursuant to General Instruction G(3) to Form 10-K, the information regarding our executive officers required by Item 401(b) of Regulation S-K is hereby included in Part I of this report.Annual Report on Form 10-K. The following table sets forth the name and date of birth of each of our executive officers and the office held by such officer as of February 28, 2018.
24, 2022.
NamePosition
David M. Zaslav

Born January 15, 1960
President, Chief Executive Officer and a common stock director. Mr. Zaslav has served as our President and Chief Executive Officer since January 2007 and a common stock director since September 2008. Mr. Zaslav served as President, Cable & Domestic Television and New Media Distribution of NBC Universal, Inc. ("NBC"), a media and entertainment company, from May 2006 to December 2006. Mr. Zaslav served as Executive Vice President of NBC, and President of NBC Cable, a division of NBC, from October 1999 to May 2006. Mr. Zaslav is a member of the boardboards of Sirius XM Radio Inc., and Grupo Televisa S.A.B and LionsGate Entertainment Corp.S.A.B.
Gunnar Wiedenfels

Born September 6, 1977
Chief Financial Officer. Mr. Wiedenfels has served as our Chief Financial Officer since April 2017. Prior to joining Discovery, Mr. Wiedenfels served as Chief Financial Officer of ProSiebenSat.1 Media SE ("ProSieben") starting in 2015. Prior to that, he served as ProSieben's Deputy Chief Financial Officer from 2014 to 2015 and served as Chief Group Controller from 2013 to 2015. Previously, he served as ProSieben's Deputy Group Controller, responsible for group-wide budget planning, budget controlling, and management reporting and as Chief Financial Officer, National, where he had commercial responsibility for the group's German-speakingGerman- speaking free TV segment. Before this, he worked as a management consultant and engagement manager at McKinsey & Company. In May 2019, Mr. Wiedenfels joined the supervisory board of SAP SE and serves as chairman of their audit committee.
Jean-Briac Perrette
Born April 30, 1971
President and CEO of Discovery Networks International. Mr. Perrette became CEO of Discovery International (formerly referred to as Discovery Networks InternationalInternational) in June 2016 and President of Discovery Networks International in March 2014. Prior to that, Mr. Perrette served as our Chief Digital Officer from October 2011 to February 2014. Mr. Perrette served in a number of roles at NBC Universal from March 2000 to October 2011, with the last being President of Digital and Affiliate Distribution.
Adria Alpert Romm

Born March 2, 1955
Chief Human ResourcesPeople and Global Diversity Officer.Culture Officer since April 2019. Ms. Romm has served as our Chief Human Resources and Global Diversity Officer sincefrom March 2014.2014 to March 2019. Prior to that, Ms. Romm has served as our Senior Executive Vice President of Human Resources from March 2007 to February 2014. Ms. Romm served as Senior Vice President of Human Resources of NBC from 2004 to 2007. Prior to 2004, Ms. Romm served as a Vice President in Human Resources for the NBC TV network and NBC staff functions.

Bruce L. Campbell

Born November 26, 1967
Chief Development, Distribution & Legal Officer. Mr. Campbell became our Chief Distribution Officer in October 2015, Chief Development Officer in August 2010 and served as our General Counsel infrom December 2010.2010 to April 2017. Mr. Campbell served as Digital Media Officer from August 2014 through October 2015. Prior to that, Mr. Campbell served as our President, Digital Media & Corporate Development from March 2007 through August 2010. Mr. Campbell also served as our corporate secretary from December 2010 to February 2012. Mr. Campbell served as Executive Vice President, Business Development of NBC from December 2005 to March 2007, and Senior Vice President, Business Development of NBC from January 2003 to November 2005.

David Leavy

Born December 24, 1969
Chief Corporate Operations and CommunicationsOperating Officer. Mr. Leavy becameserved as our Chief Corporate Operations and Communications Officer from March 2016 to June 2019 and became our Chief Corporate Operating Officer in March 2016.July 2019. Prior to that, Mr. Leavy served as our Chief Communications Officer and Senior Executive Vice President, Corporate Marketing and Business Operations from August 2015 to March 2016. From December 2011 to August 2015, Mr. Leavy served as our Chief Communications Officer and Senior Executive Vice President, Corporate Marketing and Affairs. Prior to that, Mr. Leavy served as our Executive Vice President, Communications and Corporate Affairs and has served in a number of other roles at Discovery since joining in March 2000.

Lori Locke
Born August 23, 1963
Chief Accounting Officer. Ms. Locke joined Discovery as our Chief Accounting Officer in June 2019. Prior to joining Discovery, Ms. Locke served as Vice President, Corporate Controller and Principal Accounting Officer for Gannett Co., Inc. (“Gannett”), a media company, from June 2015 to May 2019. Before joining Gannett, Ms. Locke was Vice President and Corporate Assistant Controller for Leidos, Inc. (formerly SAIC, Inc.), a science, engineering and information technology company, from February 2013 to May 2015.
38

NamePosition
Savalle C. Sims
Born May 21, 1970		Executive Vice President and General Counsel. Ms. Sims became Executive Vice President and General Counsel in April 2017. Ms. Sims served as our Executive Vice President and Deputy General Counsel from December 2014 to April 2017. Prior to that, Ms. Sims served as our Senior Vice President, Litigation and Intellectual Property from August 2011 through December 2014. Prior to joining Discovery, Ms. Sims was a partner at the law firm of Arent Fox LLP.
Kurt T. Wehner
Born June 30, 1962
Executive Vice President and Chief Accounting Officer. Mr. Wehner joined the Company in September 2011 and has served as our Executive Vice President, Chief Accounting Officer since November 2012. Mr. Wehner was an Audit Partner at KPMG LLP from 2000 to 2011.




39

PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our Series A common stock, Series B common stock and Series C common stock are listed and traded on The NASDAQNasdaq Global Select Market (“NASDAQ”) under the symbols “DISCA,” “DISCB” and “DISCK,” respectively. The following table sets forth, for the periods indicated, the range of high and low sales prices per share of our Series A common stock, Series B common stock and Series C common stock as reported on Yahoo! Finance (finance.yahoo.com).
  
Series A
Common Stock
 
Series B
Common Stock
 
Series C
Common Stock
  High Low High Low High Low
2017            
Fourth quarter $23.73
 $16.28
 $26.80
 $20.00
 $22.47
 $15.27
Third quarter $27.18
 $20.80
 $27.90
 $22.00
 $26.21
 $19.62
Second quarter $29.40
 $25.11
 $29.55
 $25.45
 $28.90
 $24.39
First quarter $29.62
 $26.34
 $29.65
 $27.55
 $28.87
 $25.76
2016            
Fourth quarter $29.55
 $25.01
 $30.50
 $26.00
 $28.66
 $24.20
Third quarter $26.97
 $24.27
 $28.00
 $25.21
 $26.31
 $23.44
Second quarter $29.31
 $23.73
 $29.34
 $24.15
 $28.48
 $22.54
First quarter $29.42
 $24.33
 $29.34
 $24.30
 $28.00
 $23.81
As of February 21, 2018,10, 2022, there were approximately 1,308, 751,030, 57 and 1,4141,525 record holders of our Series A common stock, Series B common stock and Series C common stock, respectively. These amounts do not include the number of shareholders whose shares are held of record by banks, brokerage houses or other institutions, but include each such institution as one shareholder.
We have not paid any cash dividends on our Series A common stock, Series B common stock or Series C common stock, and we have no present intention to do so. Payment of cash dividends, if any, will be determined by our Board of Directors after consideration of our earnings, financial condition and other relevant factors such as our credit facility's restrictions on our ability to declare dividends in certain situations.
Purchases of Equity Securities
The following table presents information about our repurchases of common stock that were made through open market transactions during the three months ended December 31, 2017 (in millions, except per share amounts).
PeriodTotal  Number
of Series C Shares
Purchased
Average
Price
Paid per
Share: Series C (a)
Total Number
of Shares
Purchased as
Part of  Publicly
Announced
Plans or
Programs(b)(c)
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the  Plans or Programs(a)(b)
October 1, 2017 - October 31, 2017—
$—
—
$—
November 1, 2017 - November 30, 2017—
$—
—
$—
December 1, 2017 - December 31, 2017—
$—
—
$—
Total—


—
$—
(a) The amounts do not give effect to any fees, commissions or other costs associated with repurchases of shares.



(b) Under the stock repurchase program, management was authorized to purchase shares of the Company's common stock from time to time through open market purchases or privately negotiated transactions at prevailing prices or pursuant to one or more accelerated stock repurchase agreements or other derivative arrangements as permitted by securities laws and other legal requirements, and subject to stock price, business and market conditions and other factors. The Company's authorization under the program expired on October 8, 2017 and we have not repurchased any shares of common stock since then. We historically have funded and in the future may fund stock repurchases through a combination of cash on hand and cash generated by operations and the issuance of debt. In the future, if further authorization is provided, we may also choose to fund stock repurchases through borrowings under our revolving credit facility or future financing transactions. There were no repurchases of our Series A and B common stock during 2017 and no repurchases of Series C common stock during the three months ended December 31, 2017. The Company first announced its stock repurchase program on August 3, 2010.
(c) We entered into an agreement with Advance/Newhouse to repurchase, on a quarterly basis, a number of shares of Series C-1 convertible preferred stock convertible into a number of shares of Series C common stock. We did not convert any any shares of Series C-1 convertible preferred stock during the three months ended December 31, 2017. There are no planned repurchases of Series C-1 convertible preferred stock for the first quarter of 2018 as there were no repurchases of Series A or Series C common stock during the three months ended December 31, 2017.

Stock Performance Graph
The following graph sets forth the cumulative total shareholder return on our Series A common stock, Series B common stock and Series C common stock as compared with the cumulative total return of the companies listed in the Standard and Poor’sPoor's 500 Stock Index (“("S&P 500 Index”Index") and a peer group of companies (the "Peer Group"). The Peer Group is comprised of CBS Corporation Class B common stock, Scripps Network Interactive, Inc., Time Warner, Inc., Twenty-First Century Fox, Inc. Class A common stock (News Corporation Class A Common Stock prior to June 2013), Viacom,The Walt Disney Company, ViacomCBS, Inc. Class B common stock, Fox Corporation Class A common stock and The Walt Disney Company.AMC Networks Inc. Class A common stock. The graph assumes $100 originally invested on December 31, 20122016 in each of our Series A common stock, Series B common stock and Series C common stock, the S&P 500 Index, and the stockstocks of our peer group companies,the Peer Group, including reinvestment of dividends, for the years ended December 31, 2013, 2014, 2015, 20162017, 2018, 2019, 2020 and 2017.2021.
disca-20211231_g16.jpg
NOTE: Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2022.
NOTE: Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
December 31,
201620172018201920202021
DISCA$100.00 $81.65 $90.26 $119.46 $109.79 $85.89 
DISCB$100.00 $85.08 $114.93 $124.40 $111.15 $102.06 
DISCK$100.00 $79.05 $86.18 $113.85 $97.80 $85.51 
S&P 500$100.00 $121.83 $116.49 $153.17 $181.35 $233.41 
Peer Group$100.00 $103.28 $103.43 $133.73 $159.05 $138.99 
40
  December 31, 
2012		 December 31, 
2013		 December 31, 
2014		 December 31, 
2015		 December 31, 
2016		 
December 31, 
2017
DISCA $100.00
 $139.42
 $106.23
 $82.27
 $84.53
 $69.01
DISCB $100.00
 $144.61
 $116.45
 $85.03
 $91.70
 $78.01
DISCK $100.00
 $143.35
 $115.28
 $86.22
 $91.56
 $72.38
S&P 500 $100.00
 $129.60
 $144.36
 $143.31
 $156.98
 $187.47
Peer Group $100.00
 $163.16
 $186.87
 $180.10
 $200.65
 $208.79



Equity Compensation Plan Information
Information regarding securities authorized for issuance under equity compensation plans will be set forth in our definitive Proxy Statement for our 2018 Annual Meeting of Stockholders under the caption “Securities Authorized for Issuance Under Equity Compensation Plans,” which is incorporated herein by reference.


ITEM 6. Selected Financial Data.[Reserved].
The table set forth below presents our selected financial information for each of the past five years (in millions, except per share amounts). The selected statement of operations information for each of the three years ended December 31, 2017 and the selected balance sheet information as of December 31, 2017 and 2016 have been derived from and should be read in conjunction with the information in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the audited consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data,” and other financial information included elsewhere in this Annual Report on Form 10-K. The selected statement of operations information for each of the two years ended December 31, 2014 and 2013 and the selected balance sheet information as of December 31, 2015, 2014 and 2013 have been derived from financial statements not included in this Annual Report on Form 10-K.
  2017 2016 2015 2014 2013
Selected Statement of Operations Information:          
Revenues $6,873
 $6,497
 $6,394
 $6,265
 $5,535
Operating income 713
 2,058
 1,985
 2,061
 1,975
Net (loss) income (313) 1,218
 1,048
 1,137
 1,077
Net (loss) income available to Discovery Communications, Inc. (337) 1,194
 1,034
 1,139
 1,075
Basic (loss) earnings per share available to Discovery Communications, Inc. Series A, B and C common stockholders:          
Net (loss) income (0.59) 1.97
 1.59
 1.67
 1.50
Diluted (loss) earnings per share available to Discovery Communications, Inc. Series A, B and C common stockholders:          
Net (loss) income (0.59) 1.96
 1.58
 1.66
 1.49
Weighted average shares outstanding:          
Basic

 384
 401
 432
 454
 484
Diluted

 576
 610
 656
 687
 722
Selected Balance Sheet Information:          
Cash and cash equivalents $7,309
 $300
 $390
 $367
 $408
Total assets 22,555
 15,672
 15,803
 15,709
 14,693
Deferred income taxes 319
 467
 495
 518
 579
Long-term debt: 

 

      
Current portion 30
 82
 119
 1,107
 17
Long-term portion 14,755
 7,841
 7,616
 6,002
 6,437
Total liabilities 17,532
 10,262
 10,111
 9,358
 8,460
Redeemable noncontrolling interests 413
 243
 241
 747
 36
Equity attributable to Discovery Communications, Inc. 4,610
 5,167
 5,451
 5,602
 6,196
Total equity $4,610
 $5,167
 $5,451
 $5,604
 $6,197


(Loss) income per share amounts may not sum since each is calculated independently.
As of December 31, 2017, the Company recognized a goodwill impairment charge totaling $1.3 billion for its European reporting unit. (See Note 8 to the accompanying consolidated financial statements.) On November 30, 2017, the Company acquired a controlling interest in OWN from Harpo, increasing Discovery’s ownership stake from 49.50% to 73.99%. Discovery paid $70 million in cash and recognized a gain of $33 million to account for the difference between the carrying value and the fair value of the previously held 49.50% equity interest. On September 25, 2017, the Company acquired a 67.5% controlling interest in VTEN, a new joint venture with GoldenTree, in exchange for its contribution of the Velocity network.On April 28, 2017, the Company sold Raw and Betty to All3Media and recorded a loss of $4 million upon disposition. (See Note 3 to the accompanying consolidated financial statements.) For the year ended December 31, 2017, the Company has incurred transaction and integration costs for the Scripps Networks acquisition of $79 million, including the $35 million charge associated with the modification of Advance/Newhouse's preferred stock. (See Note 12 to the accompanying consolidated financial statements.) In conjunction with the Scripps Networks acquisition, the Company executed a number of new derivative instruments which were settled during September 2017 resulting in a $98 million and $12 million loss in connection with interest rate and foreign exchange contracts, respectively. (See Note 10 to the accompanying consolidated financial statements.)
On September 30, 2016, the Company recorded an other-than-temporary impairment of $62 million related to its investment in Lionsgate. On December 2, 2016, the Company acquired a minority interest and formed a new joint venture, Group Nine Media, Inc. ("Group Nine Media"), in exchange for contributions of $100 million and the Company's digital network businesses Seeker and SourceFed, resulting in a gain of $50 million upon deconsolidation of the businesses ("Group Nine Transaction"). As of December 31, 2017, the Company owns a 42% minority interest in Group Nine Media with a carrying value of $212 million. (See Note 4 to the accompanying consolidated financial statements.)
On October 7, 2015, the Company recorded a loss of $5 million upon the deconsolidation of its Russian business following its contribution to a joint venture with a Russian media company, National Media Group. As part of the transaction, Discovery obtained a 20% ownership interest in the New Russian Business, which is accounted for under the equity method of accounting. On June 30, 2015, Discovery sold its radio businesses in Northern Europe to Bauer Media Group for total consideration, net of cash disposed of €72 million ($80 million). The cumulative gain on the disposal is $1 million. Based on the final resolution and receipt of contingent consideration payable, Discovery recorded a pre-tax gain of $13 million for the year ended December 31, 2016. The Company had previously recorded a $12 million loss including estimated contingent consideration as disclosed for the year ended December 31, 2015. (See Note 3 to the accompanying consolidated financial statements.)
On September 23, 2014, we acquired an additional 10% ownership interest in Discovery Family. The purchase increased our ownership interest from 50% to 60%. As a result, the accounting for Discovery Family was changed from an equity method investment to a consolidated subsidiary. (See Note 3 to the accompanying consolidated financial statements.) On May 30, 2014, the Company acquired a controlling interest in Eurosport International by increasing Discovery’s ownership stake from 20% to 51%. As a result, as of that date, the accounting for Eurosport was changed from an equity method investment to a consolidated subsidiary. On March 31, 2015, the Company acquired a controlling interest in Eurosport France increasing Discovery's ownership stake by 31% upon the resolution of certain regulatory matters and began accounting for Eurosport France as a consolidated subsidiary. On October 1, 2015, the Company acquired the remaining 49% of Eurosport for €491 million ($548 million) upon TF1's exercise of its right to put. (See Note 11 to the accompanying consolidated financial statements.)
On April 9, 2013, we acquired the television and radio operations of SBS Nordic. The acquisition has been included in our operating results since the acquisition date. The radio operations of SBS Nordic were subsequently sold on June 30, 2015. (See Note 3 to the accompanying consolidated financial statements.)
Balance sheet amounts for prior years have been adjusted to reclassify debt issuance costs from other noncurrent assets to noncurrent portion of debt in accordance with ASU 2015-03 adopted in 2014. Amounts reclassified were $44 million and $45 million for 2014 and 2013, respectively.
The Company retrospectively adopted ASU 2015-17 guidance effective January 1, 2017. This guidance requires deferred tax assets and deferred tax liabilities to be presented as non-current assets and liabilities, respectively. Balance sheet amounts reclassified were $86 million, $61 million, $261 million and $241million for 2016, 2015, 2014 and 2013, respectively. (See Note 2 to the accompanying consolidated financial statements.)




ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management’s discussion and analysis of financial condition and results of operations is a supplement to and should be read in conjunction with the accompanying consolidated financial statements and related notes. This section provides additional information regarding our businesses, current developments, results of operations, cash flows, financial condition, contractual commitments, and critical accounting policies.policies, and estimates that require significant judgment and thus have the most significant potential impact on our consolidated financial statements. This discussion and analysis is intended to better allow investors to view the company from management's perspective.
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statementsThis section provides an analysis of our financial results for the fiscal year ended December 31, 2021 compared to the fiscal year ended December 31, 2020. A discussion of our result of operations and liquidity for the fiscal year ended December 31, 2020 compared to the fiscal year ended December 31, 2019 can be found under Item 7 in thisour Annual Report on Form 10-K constitute forward-looking statements withinfor the meaningfiscal year ended December 31, 2020, filed on February 22, 2021, which is available free of charge on the Private Securities Litigation Reform Act of 1995, including statements regarding our business, marketing and operating strategies, integration of acquired businesses, new service offerings, financial prospects, anticipated sources and uses of capitalSEC’s website at www.sec.gov and our proposed acquisition of Scripps Networks. Words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes,” and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be accomplished.Investor Relations website at ir.corporate.discovery.com. The following is a list of some, but not all, of the factors that could cause actual results or events to differ materially from those anticipated: changes in the distribution and viewing of television programming, including the expanded deployment of personal video recorders, subscription video on demand (“SVOD”), internet protocol television, mobile personal devices and personal tablets and their impact on television advertising revenue; continued consolidation of distribution customers and production studios; a failure to secure affiliate agreements or renewal of such agreements on less favorable terms; rapid technological changes; the inability of advertisers or affiliates to remit payment to us in a timely manner or at all; general economic and business conditions; industry trends, including the timing of, and spending on, feature film, television and television commercial production; spending on domestic and foreign television advertising; disagreements with our distributors or other business partners over contract interpretation; fluctuations in foreign currency exchange rates and political unrest and regulatory changes in international markets, from events including Brexit; market demand for foreign first-run and existing content libraries; the regulatory and competitive environment of the industries in which we, and the entities in which we have interests, operate; uncertainties inherent in the development of new business lines and business strategies; uncertainties regarding the financial performance of our equity method investees; our ability to complete, integrate and obtain the anticipated benefits and synergies from our proposed business combinations and acquisitions, including our proposed acquisition of Scripps Networks, on a timely basis or at all; uncertainties associated with product and service development and market acceptance, including the development and provision of programming for new television and telecommunications technologies; future financial performance, including availability, terms, and deployment of capital; the ability of suppliers and vendors to deliver products, equipment, software, and services; our ability to achieve the efficiencies, savings and other benefits anticipated from our cost-reduction initiative; the outcome of any pending or threatened litigation; availability of qualified personnel; the possibility or duration of an industry-wide strike or other job action affecting a major entertainment industry union; changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations of the Federal Communications Commission and adverse outcomes from regulatory proceedings; changes in income taxes due to regulatory changes, such as U.S. tax reform, or changes in our corporate structure; changes in the nature of key strategic relationships with partners, distributors and equity method investee partners; competitor responses to our products and services and the products and services of the entities in which we have interests; threatened terrorist attacks and military action; our significant level of debt; reduced access to capital markets or significant increases in costs to borrow; and a reduction of advertising revenue associated with unexpected reductions in the number of subscribers. These risks have the potential to impact the recoverability of the assets recordedinformation contained on our balance sheets, including goodwill or other intangibles. For additional risk factors, refer to Item 1A, “Risk Factors.” These forward-looking statements and such risks, uncertainties, and other factors speak only as of the datewebsite is not part of this Annual Report on Form 10-K and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.not incorporated by reference herein.
BUSINESS OVERVIEW
We are a global media company that provides content across multiple distribution platforms, including linear platforms such as pay-TV, FTA and broadcast television, our authenticated GO applications, digital distribution arrangements, and content licensing agreements. Ourarrangements and DTC subscription products. For a discussion of our global portfolio of networks includes prominent television brands such as Discovery Channel,and joint ventures see our most widely distributed global brand, TLC, Animal Planet, ID, Velocity (known as Turbo outside of the U.S.) and Eurosport, a leading sports entertainment pay-TV programmer across Europe and Asia. We also develop and sell curriculum-based education products and services and operate production studios.


Our objectives are to investbusiness overview set forth in content for our networks to build viewership, optimize distribution revenue, capture advertising sales, and create or reposition branded channels and businesses that can sustain long-term growth and occupy a desired content niche with strong consumer appeal. Our strategy is to maximize the distribution, ratings and profit potential of each of our branded networks. In addition to growing distribution and advertising revenues for our branded networks, we are extending content distribution across new platforms, including brand-aligned websites, on-line streaming, mobile devices, VOD and broadband channels, which provide promotional platforms for our television content and serve as additional outlets for advertising and distribution revenue. Audience ratings are a key driverItem 1, “Business” in generating advertising revenue and creating demandthis Annual Report on the part of cable television operators, DTH satellite operators, telecommunication service providers, and other content distributors, that deliver our content to their customers.Form 10-K.
Our content spans genres including survival, natural history, exploration, sports, lifestyle, general entertainment, home, food, travel, heroes, adventure, crime and investigation, health and kids. We have an extensive library of high-definition content and own most rights to much of our content and footage, which enables us to exploitleverage our library to quickly launch brands and services into new markets quickly.and on new platforms. Our content can be re-edited and updated in a cost-effective manner to provide topical versions of subject matter that can be utilized around the world on a variety of platforms.
We aim to invest in high-quality content for our networks and brands with the objective of building viewership, optimizing distribution revenue, capturing advertising revenue, and creating or repositioning branded channels and business to sustain long-term growth and occupy a desired content niche with strong consumer appeal. Our strategy is to maximize the distribution, ratings and profit potential of each of our branded networks and discovery+. In addition to growing distribution and advertising revenues for our branded networks, we have extended content distribution across new platforms, including brand-aligned websites, online streaming, mobile devices, VOD, and broadband channels, which provide promotional platforms for our television content and serve as additional outlets for advertising and distribution revenue. Our goal is to reach consumers wherever and whenever they are consuming content, as well as reaching new audiences including broadband only, cord cutters and cord nevers, while continuing to serve our linear network subscribers. Audience ratings, audience engagement and channel packaging are key drivers in generating advertising revenue and creating demand on the part of cable television operators, DTH satellite operators, telecommunication service providers, and other content distributors who deliver our content to their customers.
Although the Company utilizeswe utilize certain brands and content globally, we classify our operations in two reportable segments: U.S. Networks, consisting principally of domestic television network brands,networks and digital content services, and International Networks, consisting primarily of international television network brands.networks and digital content services. Our segment presentation aligns with our management structure and the financial information management uses to make decisions about operating matters, such as the allocation of resources and business performance assessments. For further discussion of financial information for our Company, segments and the geographical areas in which we do business, and our content development activities, and revenues see our business overview set forth in Item 1, "Business" in this Annual Report on Form 10-K.


RESULTS OF OPERATIONS – 2017 vs. 2016
Consolidated Results of Operations – 2017 vs. 2016
Our consolidated results of operations for 2017 and 2016 were as follows (in millions).
  Year Ended December 31,  
  2017 2016 % Change
Revenues:      
Distribution $3,474
 $3,213
 8 %
Advertising 3,073
 2,970
 3 %
Other 326
 314
 4 %
Total revenues 6,873
 6,497
 6 %
Costs of revenues, excluding depreciation and amortization 2,656
 2,432
 9 %
Selling, general and administrative 1,768
 1,690
 5 %
Impairment of goodwill 1,327
 —
 NM
Depreciation and amortization 330
 322
 2 %
Restructuring and other charges 75
 58
 29 %
Loss (gain) on disposition 4
 (63) NM
Total costs and expenses 6,160
 4,439
 39 %
Operating income 713
 2,058
 (65)%
Interest expense (475) (353) 35 %
Loss on extinguishment of debt (54) —
 NM
Loss from equity method investees, net (211) (38) NM
Other (expense) income, net (110) 4
 NM
(Loss) income before income taxes (137) 1,671
 NM
Income tax expense (176) (453) (61)%
Net (loss) income (313) 1,218
 NM
Net income attributable to noncontrolling interests —
 (1) NM
Net income attributable to redeemable noncontrolling interests (24) (23) 4 %
Net (loss) income available to Discovery Communications, Inc. $(337) $1,194
 NM

NM - Not meaningful
Revenues
Distribution revenue consists principally of fees from affiliates for distributing our linear networks, supplemented by revenue earned from SVOD content licensing and other emerging forms of digital distribution. Distribution revenue increased 8%. Excluding the impact of foreign currency fluctuations, distribution revenue increased 7%. U.S. Networks distribution revenue increases were driven by increases in affiliate fee rates and increases in SVOD revenue partially offset by a decline in affiliate subscribers. Total U.S. Networks portfolio subscribers declined 5% for the year ended December 31, 2017, while subscribers to our fully distributed networks declined 3% for the same period. International Networks' distribution revenue increase was mostly due to increases in contractual rates in Europe following further investment in sports content, and to a lesser extent increases in Latin America due to increases in rates offset by decreases in subscribers. Contributions from other distribution revenues also contributed slightly to growth. Other distribution revenues were comprised of content deliveries under licensing agreements. These increases were partially offset by decreases in contractual rates in Asia.



Advertising revenue is dependent upon a number of factors, including the stage of development of television markets, the number of subscribers to our channels, viewership demographics, the popularity of our content, our ability to sell commercial time over a group of channels, market demand, the mix of sales of commercial time between the upfront and scatter markets, and economic conditions. These factors impact the pricing and volume of our advertising inventory. Advertising revenue increased 3% in 2017 compared to 2016. The increase for our U.S. Networks was primarily due to pricing increases and continued monetization of our GO platform, partially offset by lower audience delivery due to continued linear distribution audience universe declines. International Networks' increases were primarily due to increased volume across key markets in Europe, particularly Southern Europe and Germany, and Latin America. The increase was partially offset by declines in ad sales due to lower pricing and volume in Asia.
Other revenue increased 4% compared with the prior year, primarily due to the formation and consolidation of the VTEN joint venture during the third quarter of the current year. (See Note 3 to the accompanying consolidated financial statements.)
Costs of Revenues
Costs of revenues increased 9%. Excluding the impact of foreign currency fluctuations, OWN and TEN acquisitions and the Group Nine Transaction, costs of revenues increased 7% for the year ended December 31, 2017. The increase was primarily attributable to increased spending on content at our International Networks segment, particularly sports rights and associated production costs. Content amortization was $1.9 billion and $1.7 billion for the years ended December 31, 2017 and December 31, 2016, respectively.
Selling, General and Administrative
Selling, general and administrative expenses consist principally of employee costs, marketing costs, research costs, occupancy and back office support fees. Selling, general and administrative expenses increased 5%. Excluding the impact of foreign currency fluctuations, OWN and TEN acquisitions, selling, general and administrative expenses increased 3% for the year ended December 31, 2017. The increase was primarily due to transaction costs for the Scripps Networks acquisition and integration costs of $79 million, including the $35 million charge associated with the modification of Advance/Newhouse's preferred stock. (See Note 12 to the accompanying consolidated financial statements.)
Impairment of Goodwill
Goodwill impairment expense of $1.3 billion was recognized during the year ended December 31, 2017. (See Note 8 to the accompanying consolidated financial statements.)
Depreciation and Amortization
Depreciation and amortization expense includes depreciation of fixed assets and amortization of finite-lived intangible assets. Depreciation and amortization was consistent for the year ended December 31, 2017, compared with the prior period as capital spending has remained consistent over the periods.
Restructuring and Other Charges
Restructuring and other charges increased $17 million. The increase was primarily due to higher personnel-related termination costs for voluntary and involuntary severance actions. (See Note 15 to the accompanying consolidated financial statements.)
Loss (Gain) on Disposition
The change in loss (gain) on disposition was $67 million. We recorded a $4 million loss for the year ended December 31, 2017 due to the sale of the Raw and Betty production studios on April 28, 2017, compared with a gain of $63 million for the year ended December 31, 2016. The gain on disposition recorded for the year ended December 31, 2016 is comprised of the $50 million gain for the deconsolidation of our digital networks business Seeker and SourceFed Studios in connection with the Group Nine Transaction and the $13 million gain due to the disposition of our radio businesses in the Nordics. (See Note 3 to the accompanying consolidated financial statements.)
Interest Expense
Interest expense increased $122 million for the year ended December 31, 2017primarily due to costs incurred for the unsecured bridge loan commitment as well as interest accrued on the senior notes issued on September 21, 2017 for the financing of the anticipated Scripps Networks acquisition. (See Note 9 to the accompanying consolidated financial statements.)


Loss on Extinguishment of Debt
On March 13, 2017, we issued new senior notes in an aggregate principal amount of $650 million and used the proceeds to fund the repurchase of $600 million of combined aggregate principal amount of our then-outstanding senior notes through a cash tender offer that closed on March 13, 2017. As a result, we recognized a $54 million loss on extinguishment of debt, which included $50 million for premiums to par value, $2 million of non-cash write-offs of unamortized deferred financing costs, $1 million for the write-off of the original issue discount of the existing senior notes and $1 million accrued for other third-party fees. (See Note 9 to the accompanying consolidated financial statements.)
Loss from Equity Investees, net
Losses from our equity method investees increased $173 million primarily due to losses from investments in limited liability companies that sponsor renewable energy projects related to solar energy, partially offset by increases in earnings at OWN and decreases in losses at All3Media. (See Note 4 to the accompanying consolidated financial statements.)
Other (Expense) Income, Net
The table below presents the details of other expense, net (in millions).
  Year Ended December 31,
  2017 2016
Foreign currency (losses) gains, net $(83) $75
Losses on derivative instruments (82) (12)
Remeasurement gain on previously held equity interest 33
 —
Interest income 21
 —
Other-than-temporary impairment of AFS investments —
 (62)
Other income, net 1
 3
Total other (expense) income, net

 $(110) $4
Other expense increased $114 million in 2017. We recorded foreign currency losses during 2017 compared to foreign currency gains during 2016, mostly due to exchange rate changes on the U.S. dollar compared with the British pound that impacted foreign currency monetary assets. Increases in losses from derivative instruments primarily resulted from losses of $98 million on interest rate contracts used to economically hedge the pricing for the issuance of a portion of the dollar-denominated senior notes, which were settled on September 21, 2017. The interest rate contracts did not receive hedging designation. The losses were partially offset by various other items, including a gain of $17 million on previously settled interest rate contracts for which the hedged issuance of debt is considered remote following the issuance of the senior notes on September 21, 2017. (See Note 9“Business” and Note 1023 to the accompanying consolidated financial statements.) On November 30, 2017, the Company acquired from Harpo a controlling interest in OWN. We recognized a remeasurement gain to account for the difference between the carrying value and the fair value of previously held 49.50% equity interest. (See Note 3 to the accompanying consolidated financial statements.)


Income Taxes
The following table reconciles the Company's effective income tax rate to the U.S. federal statutory income tax rate.
  Year Ended December 31,
  2017 2016
U.S. federal statutory income tax rate 35 % 35 %
State and local income taxes, net of federal tax benefit (18)% (2)%
Effect of foreign operations 25 % (1)%
Domestic production activity deductions 39 % (4)%
Change in uncertain tax positions (44)% — %
Goodwill impairment (334)% — %
Renewable energy investments tax credits 142 % (1)%
Preferred stock modification

 (9)% — %
Impact of Tax Reform Act 32 % — %
Other, net 4 % — %
Effective income tax rate (128)% 27 %
Income tax expense was $176 million and $453 million and our effective tax rate was (128)% and 27% for 2017 and 2016, respectively. During 2017, the decrease in the effective tax rate was primarily attributable to the impact of non-cash goodwill impairment charges that are non-deductible for tax purposes. Thereafter, the decrease in the effective tax rate was primarily due to investment tax credits that we receive related to our renewable energy investments, and to a lesser extent, the domestic production activity deduction benefit, the allocation and taxation of income among multiple foreign and domestic jurisdictions, and the impact of the 2017 Tax Act (see Note 16 to the accompanying consolidating financial statements). The benefits were partially offset by an increase in reserves for uncertain tax positions in 2017. In 2016, we favorably resolved multi-year state tax positions that resulted in a reduction of reserves related to uncertain tax positions that did not recur in 2017.


Segment Results of Operations – 2017 vs. 2016
We evaluate the operating performance of our operating 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, and (vi) certain inter-segment eliminations related to production studios. Additionally, beginning with the quarter ended September 30, 2017, Adjusted OIBDA also excludes material incremental third-party transaction costs directly related to the Scripps Networks acquisition and planned integration. We use this measure to assess the operating results and performance of our segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment. We believe Adjusted OIBDA is relevant to investors because it allows them to analyze the operating performance of each segment using the same metric management uses. We exclude mark-to-market share-based compensation, restructuring and other charges, certain impairment charges, gains and losses on business and asset dispositions and Scripps Networks acquisition and integration costs from the calculation of Adjusted OIBDA due to their impact on comparability between periods. We also exclude the 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. Certain corporate expenses and inter-segment eliminations related to production studios are excluded from segment results to enable executive management to evaluate segment performance based upon the decisions of segment executives. As of January 1, 2017, the Company no longer excludes amortization of deferred launch incentives in calculating total Adjusted OIBDA as this expense is not material. For the year ended December 31, 2016, deferred launch incentives of $13 million were not reflected as an adjustment to the calculation of total Adjusted OIBDA in order to conform to the current presentation.
Adjusted OIBDA should be considered in addition to, but not a substitute for, operating income, net (loss) income and other measures of financial performance reported in accordance with U.S. generally accepted accounting principles (“GAAP”).
Additional financial information for our segments and geographical areas in which we do business is discussed in Note 21 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
The table below presentsImpact of COVID-19
On March 11, 2020, the calculationWorld Health Organization declared the coronavirus disease 2019 (“COVID-19”) outbreak to be a global pandemic. COVID-19 has continued to spread throughout the world, and the duration and severity of total Adjusted OIBDA (in millions).its effects and associated economic disruption remain uncertain. We continue to closely monitor the impact of COVID-19 on all aspects of our business and geographies, including the impact on our customers, employees, suppliers, vendors, distribution and advertising partners, production facilities, and various other third parties.
  Year Ended December 31,  
  2017 2016 % Change
Revenue:      
U.S. Networks $3,434
 $3,285
 5 %
International Networks 3,281
 3,040
 8 %
Education and Other 158
 174
 (9)%
Corporate and inter-segment eliminations —
 (2) NM
Total revenue 6,873
 6,497
 6 %
Costs of revenues, excluding depreciation and amortization (2,656)
(2,432) 9 %
Selling, general and administrative(a)
 (1,686)
(1,652) 2 %
Total Adjusted OIBDA $2,531
 $2,413
 5 %
(a) Selling, general and administrative expenses exclude mark-to-market share-based compensation, restructuring and other charges, gains (losses) on dispositions and third-party transaction costs directly related toBeginning in the Scripps Networks acquisition and planned integration.



The table below presents a reconciliationsecond quarter of consolidated net income available to Discovery Communications, Inc. to total Adjusted OIBDA (in millions).
  Year Ended December 31,  
  2017 2016 % Change
Net (loss) income available to Discovery Communications, Inc. $(337) $1,194
 (128)%
Net income attributable to redeemable noncontrolling interests 24
 23
 4 %
Net income attributable to noncontrolling interests —
 1
 NM
Income tax expense 176
 453
 (61)%
Other expense (income), net 110
 (4) NM
Loss from equity investees, net 211
 38
 NM
Loss on extinguishment of debt 54
 —
 NM
Interest expense 475
 353
 35 %
Operating income 713
 2,058
 (65)%
Loss (gain) on disposition 4
 (63) NM
Restructuring and other charges 75
 58
 29 %
Depreciation and amortization 330
 322
 2 %
Impairment of goodwill 1,327
 —
 NM
Mark-to-market share-based compensation 3
 38
 NM
Scripps Networks transaction and integration costs
 79
 —
 NM
Total Adjusted OIBDA $2,531
 $2,413
 5 %
U.S. Networks
The table below presents,2020, demand for our U.S. Networks segment,advertising products and services decreased due to economic disruptions from limitations on social and commercial activity. These economic disruptions and the resulting effect on us eased
41

during the second half of 2020. The pandemic did not have a significant impact on demand during fiscal year 2021. Many of our third-party production partners that were shut down during most of the second quarter of 2020 due to COVID-19 restrictions came back online in the third quarter of 2020 and, as a result, we have incurred additional costs to comply with various governmental regulations and implement certain safety measures for our employees, talent, and partners.Additionally, certain sporting events that we have rights to were cancelled or postponed, thereby eliminating or deferring the related revenues by type, certain operatingand expenses, Adjusted OIBDAincluding the Tokyo 2020 Olympic Games, which occurred in July and a reconciliationAugust 2021. The postponement of Adjusted OIBDAthe 2020 Olympic Games deferred both Olympic-related revenues and significant expenses from fiscal year 2020 to operating income (in millions).fiscal year 2021.
  Year Ended December 31,  
  2017 2016 % Change
Revenues:      
Distribution $1,612
 $1,532
 5 %
Advertising 1,740
 1,690
 3 %
Other 82
 63
 30 %
Total revenues 3,434
 3,285
 5 %
Costs of revenues, excluding depreciation and amortization (917) (891) 3 %
Selling, general and administrative (491) (472) 4 %
Adjusted OIBDA 2,026
 1,922
 5 %
Depreciation and amortization (35) (28) 25 %
Restructuring and other charges (18) (15) 20 %
Gain on dispositions —
 50
 NM
Inter-segment eliminations (12) (14) (14)%
Operating income $1,961
 $1,915
 2 %
Revenues
Distribution revenue consists principally of fees from affiliates for distributing our linear networks, supplemented by revenue earned from SVOD content licensing and other emerging forms of digital distribution. Distribution revenues increased 5%. ExcludingIn response to the impact of the OWN acquisition, distribution revenues increased 4%, primarily drivenpandemic, we employed innovative production and programming strategies, including producing content filmed by increases in affiliate fee ratesour on-air talent and increases in SVOD revenue dueseeking viewer feedback on which content to the timingair. We pursued a number of content deliveries. These increases were partially offset by a decline in affiliate subscribers. Total portfolio subscribers declined 5% for the year ended December 31, 2017, while subscribers to our fully distributed networks declined 3% for the same period.
Advertising revenue increased 3%. Excluding the impact of the OWN and TEN acquisitions and the Group Nine Transaction, advertising revenue increased 2% for the year ended December 31, 2017. The increase was primarily due to pricing


increases and continued monetization of our GO platform, partially offset by lower audience delivery due to continued linear distribution audience universe declines.
Other revenue increased 30% primarily due to the formation and consolidation of the VTEN joint venturecost savings initiatives, which began during the third quarter of 2020 through the current year. (See Note 3implementation of travel, marketing, production and other operating cost reductions, including personnel reductions, restructurings and resource reallocations to align our expense structure to ongoing changes within the accompanyingindustry.
The full extent of COVID-19’s effects on our operations and results is not yet known and will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity and the extent of future surges of COVID-19, vaccine distribution and other actions to contain the virus or treat its impact, among others. We will continue to monitor COVID-19 and its impact on our business results and financial condition. The consolidated financial statements.)
Costsstatements set forth in this Annual Report on Form 10-K reflect management’s latest estimates and assumptions that affect the reported amounts of Revenues
Costsassets and liabilities and related disclosures as of revenues increased 3% for the year ended December 31, 2017. Excludingdate of the impact of OWNconsolidated financial statements and TEN acquisitions and the Group Nine Transaction, costsreported amounts of revenue increased 1%. Content amortization was $752 million and $716 million for 2017expenses during the reporting periods presented. Actual results may differ significantly from these estimates and 2016, respectively.
Selling, General and Administrative
Selling, general and administrative expenses increased 4%. Excluding the impact of OWN and TEN acquisitions and the Group Nine Transaction, selling, general and administrative expenses increased 1% for the year ended December 31, 2017. Increased spending on viewer research was offset by decreases in personnel and marketing costs.
Adjusted OIBDA
Adjusted OIBDA increased 5% primarily due to increases in distribution and advertising revenues, partially offset by increases in costs of revenues. Excluding the impact of the OWN and TEN acquisitions and the Group Nine Transaction, adjusted OIBDA also increased 5%.
International Networks
The following table presents, for our International Networks segment, revenues by type, certain operating expenses, Adjusted OIBDA and a reconciliation of Adjusted OIBDA to operating income (in millions).assumptions.
42
  Year Ended December 31,  
  2017 2016 % Change
Revenues:      
Distribution $1,862
 $1,681
 11 %
Advertising 1,332
 1,279
 4 %
Other 87
 80
 9 %
Total revenues 3,281
 3,040
 8 %
Costs of revenues, excluding depreciation and amortization (1,677) (1,462) 15 %
Selling, general and administrative (745) (743) — %
Adjusted OIBDA 859
 835
 3 %
Depreciation and amortization (222) (221) — %
Impairment of goodwill (489) —
 NM
Restructuring and other charges (42) (26) 62 %
Gain on disposition —
—
13
 NM
Inter-segment eliminations —
 (4) NM
Operating income $106
 $597
 (82)%
Revenues
Distribution revenue increased 11%. Excluding the impact of foreign currency fluctuations, distribution revenue increased 9%. The increase was mostly due to increases in contractual rates in Europe following further investment in sports content, and to a lesser extent increases in Latin America due to increases in rates offset by decreases in subscribers. Contributions from other distribution revenues also contributed slightly to growth. Other distribution revenues were comprised of content deliveries under licensing agreements. These increases were partially offset by decreases in contractual rates in Asia.
Advertising revenue increased 4%. Excluding the impact of foreign currency fluctuations, advertising revenue increased 3%. The increase was primarily driven by increases in volume across key markets in Europe, particularly Southern Europe and Germany, and Latin America. The increase was partially offset by declines in ad sales due to lower pricing and volume in Asia.
Other revenue remained consistent with the prior year.


Costs of Revenues
Costs of revenues increased 15%. Excluding the impact of foreign currency fluctuations, costs of revenues increased 12%. The increase was mostly attributable to increased spending on content, particularly sports rights and associated production costs. Content amortization was $1.1 billion and $976 million for 2017 and 2016, respectively.
Selling, General and Administrative
Selling, general and administrative expenses remained consistent with the prior year.
Adjusted OIBDA
Adjusted OIBDA increased 3% as increases in distribution and advertising revenues were offset by increases in costs of revenues, related to content expense.
The impairment of goodwill presented above for International Networks is a portion of the total goodwill impairment recorded for the European reporting unit during 2017. The remaining portion of the impairment of $838 million is a component of corporate and inter-segment eliminations. The presentation of goodwill impairment is consistent with the financial reports that are reviewed by the Company's CEO. Goodwill has been allocated from corporate assets to reporting units within the International Networks segment.
Education and Other
The following table presents our Education and Other operating segments' revenues, certain operating expenses, Adjusted OIBDA, and a reconciliation of Adjusted OIBDA to operating income (in millions).

  Year Ended December 31,  
  2017 2016 % Change
Revenues $158
 $174
 (9)%
Costs of revenues, excluding depreciation and amortization (60) (79) (24)%
Selling, general and administrative (92) (105) (12)%
Adjusted OIBDA 6
 (10) NM
Depreciation and amortization (5) (7) (29)%
Restructuring and other charges (3) (3) — %
Loss on disposition

 (4) —
 NM
Inter-segment eliminations 12
 18
 (33)%
Operating income (loss) $6
 $(2) NM

Adjusted OIBDA increased $16 million. The increase was primarily due to improved operating results for the education business and the disposition of the Raw and Betty production studios.
Corporate and Inter-segment Eliminations
The following table presents our unallocated corporate amounts including revenue, certain operating expenses, Adjusted OIBDA and a reconciliation of Adjusted OIBDA to operating loss (in millions).
  Year Ended December 31,  
  2017 2016 % Change
Revenues $—
 $(2) NM
Costs of revenues, excluding depreciation and amortization (2) —
 NM
Selling, general and administrative (358) (332) 8 %
Adjusted OIBDA (360) (334) 8 %
Mark-to-market share-based compensation (3) (38) NM
Depreciation and amortization (68) (66) 3 %
Impairment of goodwill (838) —
 NM
Restructuring and other charges (12) (14) (14)%
Scripps Networks transaction and integration costs
 (79) —
 NM
Operating loss $(1,360) $(452) NM


Corporate operations primarily consist of executive management, administrative support services, substantially all of our share-based compensation and transaction and integration costs related to the Scripps Networks acquisition.
Adjusted OIBDA decreased 8% due to increased costs related to personnel, legal and technology for data security.
The impairment of goodwill presented above for corporate and inter-segment eliminations is a portion of the total goodwill impairment recorded for the European reporting unit during 2017. The remaining portion of the impairment of $489 million is a component of our International Networks segment. The presentation of goodwill impairment is consistent with the financial reports that are reviewed by the Company's CEO. Goodwill has been allocated from corporate assets to reporting units within corporate and inter-segment eliminations.
The decrease in mark-to-market share-based compensation expense was primarily attributable to a decrease in Discovery's stock price in 2017 compared to 2016. Changes in stock price are a key driver of fair value estimates used in the attribution of expense for stock appreciation rights ("SARs") and performance-based restricted stock units ("PRSUs"). By contrast, stock options and service-based restricted stock units ("RSUs") are fair valued at grant date and amortized over their vesting period without mark-to-market adjustments. The expense associated with stock options and RSUs is included in Adjusted OIBDA as a component of selling, general and administrative expense.RESULTS OF OPERATIONS
Items Impacting Comparability
From time to time certain items may impact the comparability of our consolidated results of operations between two periods. In comparing the financial results for the years 2017 and 2016, the Company has identified foreign currency as one such item, as noted below. The Company also has various acquisitions and dispositions that impact the comparability of our results. To the extent that the transaction materially impacts a particular item or segment, it may be discussed in the relevant section above (see Note 3 to the accompanying consolidating financial statements).
Foreign Currency
The impact of exchange rates on our business is an important factor in understanding period to periodperiod-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.SU.S. dollar strengthens relative to other foreign currencies. We believe the presentation of results on a constant currency basis ("ex-FX")(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 “2016“2021 Baseline Rate”), and the prior year amounts translated at the same 20162021 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. The impact of foreign currency on the comparability of our results is reflected in the tables below (in millions). Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies.

Consolidated Results of Operations – 2021 vs. 2020
Consolidated Year Ended December 31,
  2017 2016 
% Change
(Reported)
 
% Change
(ex-FX)
Revenues:        
Distribution $3,474
 $3,213
 8% 7%
Advertising 3,073
 2,970
 3% 3%
Other 326
 314
 4% 6%
Total revenues 6,873
 6,497
 6% 5%
Costs of revenue, excluding depreciation and amortization (2,656)
(2,432) 9% 8%
Selling, general and administrative expense (1,686)
(1,652) 2% 2%
Adjusted OIBDA $2,531
 $2,413
 5% 5%



International Networks Year Ended December 31,
  2017 2016 
% Change
(Reported)
 
% Change
(ex-FX)
Revenues:        
Distribution $1,862
 $1,681
 11% 9 %
Advertising 1,332
 1,279
 4% 3 %
Other 87
 80
 9% 8 %
Total revenues 3,281
 3,040
 8% 7 %
Costs of revenue, excluding depreciation and amortization (1,677) (1,462) 15% 12 %
Selling, general and administrative expenses (745) (743) —% — %
Adjusted OIBDA $859
 $835
 3% 3 %


RESULTS OF OPERATIONS – 2016 vs. 2015
  Year Ended December 31,  
  2016 2015 % Change
Revenues:      
Distribution $3,213
 $3,068
 5 %
Advertising 2,970
 3,004
 (1)%
Other 314
 322
 (2)%
Total revenues 6,497
 6,394
 2 %
Costs of revenues, excluding depreciation and amortization 2,432
 2,343
 4 %
Selling, general and administrative 1,690
 1,669
 1 %
Depreciation and amortization 322
 330
 (2)%
Restructuring and other charges 58
 50
 16 %
(Gain) loss on disposition (63) 17
 NM
Total costs and expenses 4,439
 4,409
 1 %
Operating income 2,058
 1,985
 4 %
Interest expense (353) (330) 7 %
(Loss) income ncome from equity method investees, net (38) 1
 NM
Other income (expense), net 4
 (97) NM
Income before income taxes 1,671
 1,559
 7 %
Income taxes (453) (511) (11)%
Net income 1,218
 1,048
 16 %
Net income attributable to noncontrolling interests (1) (1) — %
Net (income) loss attributable to redeemable noncontrolling interests (23) (13) 77 %
Net income available to Discovery Communications, Inc. $1,194
 $1,034
 15 %

Our consolidated results of operations for 2021 and 2020 were as follows (in millions).
Year Ended December 31,
20212020% Change% Change (ex-FX)
Revenues:
Advertising$6,215 $5,583 11 %10 %
Distribution5,409 4,866 11 %11 %
Other567 222 NMNM
Total revenues12,191 10,671 14 %14 %
Costs of revenues, excluding depreciation and amortization4,620 3,860 20 %18 %
Selling, general and administrative4,016 2,722 48 %46 %
Depreciation and amortization1,582 1,359 16 %15 %
Impairment of goodwill and other intangible assets— 124 NMNM
Restructuring and other charges32 91 (65)%(64)%
Gain on disposition(71)— NMNM
Total costs and expenses10,179 8,156 25 %23 %
Operating income2,012 2,515 (20)%(18)%
Interest expense, net(633)(648)(2)%
Loss on extinguishment of debt(10)(76)(87)%
Loss from equity investees, net(18)(105)(83)%
Other income, net82 42 95 %
Income before income taxes1,433 1,728 (17)%
Income tax expense(236)(373)(37)%
Net income1,197 1,355 (12)%
Net income attributable to noncontrolling interests(138)(124)11 %
Net income attributable to redeemable noncontrolling interests(53)(12)NM
Net income available to Discovery, Inc.$1,006 $1,219 (17)%
NM - Not meaningful
43

Revenues
DistributionOur advertising revenue includes affiliate feesis generated across multiple platforms and digital distribution revenueconsists of consumer advertising, which is sold primarily on a national basis in the U.S. and is largely dependent on a pan-regional or local-language feed basis outside the rates negotiated in our distribution agreements, the numberU.S. Advertising contracts generally have a term of subscribers that receive our networksone year or content, and the market demand for the content that we provide. Distribution revenue increased 5%. Excluding the impact of foreign currency fluctuations and the acquisition of Eurosport France in March 2015, distribution revenue increased 7% at our U.S. Networks segment and 9% at our International Networks segment. U.S. Networks distribution revenue increased primarily due to contractual rate increases partially offset by slight declines in subscribers. International Networks' distribution revenue increases were mostly due to increases in rates in Europe and increases in subscribers and rates in Latin America.
less. Advertising revenue is dependent upon a number of factors, including the stage of development of television markets, the popularity of FTA television, the number of subscribers to our channels, viewership demographics, the popularity of our content and our ability to sell commercial time over a group of channels, market demand,channels. Revenue from advertising is subject to seasonality, market-based variations, the mix ofin sales of commercial time between the upfront and scatter markets, and general economic conditions. These factors impact the pricing and volume of our advertising inventory. Advertising revenue decreased 1%.is typically highest in the second and fourth quarters. In some cases, advertising sales are subject to ratings guarantees that require us to provide additional advertising time if the guaranteed audience levels are not achieved. We also generate revenue from the sale of advertising through our digital products on a stand-alone basis and as part of advertising packages with our television networks.
Advertising revenue increased 11% in 2021. Excluding the impact of foreign currency fluctuations, and the disposition of the Company's radio business, advertising revenue increased 2%10%. The increase was primarily attributable to improved overall performance at International Networks as a resultadvertising markets recovered from the COVID-19 pandemic, as well as the broadcast of increasesthe Summer Olympics throughout Europe in the third quarter of 2%2021.
Distribution revenue consists principally of fees from affiliates for distributing our linear networks, supplemented by revenue earned from SVOD content licensing, DTC subscription services, and other emerging forms of digital distribution. The largest component of distribution revenue is comprised of linear distribution services for rights to our networks from cable, DTH satellite and telecommunication service providers. We have contracts with distributors representing most cable and satellite service providers around the world, including the largest operators in the U.S. and major international distributors. Distribution revenues are largely dependent on the rates negotiated in the agreements, the number of subscribers that receive our networks or content, the number of platforms covered in the distribution agreement, and the market demand for the content that we provide. From time to time, renewals of multi-year carriage agreements include significant year one market adjustments to re-set subscriber rates, which then increase at rates lower than the initial increase in the following years. In some cases, we have provided distributors launch incentives, in the form of cash payments or free periods, to carry our networks. Distribution revenue also includes fees charged for bulk content arrangements and other subscription services for episodic content. These digital distribution revenues are impacted by the quantity, as well as the quality, of the content we provide.
As reported and excluding the impact of foreign currency fluctuations, distribution revenue increased 11% in 2021 primarily attributable to the growth of discovery+ at both U.S. Networks and 3% at our International Networks. The increase for our U.S. Networks was due to inventory management and pricing increases, partially offset by a decline in ratings. The increase for our International Networks was primarily driven by ratings and volume in Southern Europe, and to a lesser extent, pricing, ratings and volume in Central and Eastern Europe, the Middle East, and Africa (“CEEMEA”), partially offset by lower ratings in Northern Europe.
Other revenue decreased 2%.increased $345 million in 2021. Excluding the impact of foreign currency fluctuations, and the disposition of the Company's radio business, other revenue which includes revenues from services provided to equity investees, increased 3%. This was due to increases at our U.S. Networks offset by decreases at our International Networks.



Costs of Revenues
Costs of revenues increased 4%.$354 million in 2021. Excluding the impact of foreign currency fluctuations, the acquisitionincreases were primarily attributable to sublicensing of Eurosport FranceOlympics sports rights to broadcast networks throughout Europe.
Costs of Revenues
Our principal component of costs of revenues is content expense. Content expense includes television series, television specials, films, sporting events and digital products. The costs of producing a content asset and bringing that asset to market consist of film costs, participation costs, exploitation costs and manufacturing costs.
Costs of revenues increased 20% in March 2015 and2021. Excluding the dispositionimpact of the Company's radio business,foreign currency fluctuations, costs of revenues increased 7% for the year ended December 31, 2016.18%. The increase was primarily attributable to increased spending forthe Olympics and to a lesser extent, European sporting events and leagues
returning to a more normalized schedule, and higher content on our networks, particularly sports rightsinvestment related to discovery+ at U.S. Networks and associated production costs, and increases in content impairments in Northern Europe as a result of changes in programming strategies. Content amortization was $1.7 billion and $1.6 billion for the years ended December 31, 2016 and December 31, 2015, respectively.International Networks.
Selling, General and Administrative
Selling, general and administrative expenses consist principally of employee costs, marketing costs, research costs, occupancy and back office support fees. Selling, general and administrative expenses increased 1%.48% in 2021. Excluding the impact of foreign currency fluctuations, and the disposition of the Company's radio business, selling, general and administrative expenses increased 5% for the year ended December 31, 2016. 46%. The increase was dueprimarily attributable to increases in mark-to-market equity-based compensation expense from increases inhigher marketing related expenses to drive the Company's stock pricegrowth of discovery+ at U.S. Networks and marketing expense.International Networks.
Depreciation and Amortization
Depreciation and amortization expense includes depreciation of fixed assets and amortization of finite-lived intangible assets. Depreciation and amortization declined slightly forincreased 16% in 2021. Excluding the year ended December 31, 2016 as there were slight declines in capital spendingimpact of foreign currency fluctuations, depreciation and no new significant business combinations.
Restructuring and Other Charges
Restructuring and other chargesamortization increased $8 million for the year ended December 31, 2016.15%. The increase was primarily dueattributable to personnel-related termination costsa change in amortization method from the straight-line method to the sum of the years digits method effective October 1, 2021 for voluntaryacquired customer relationships, and involuntary severance actionsto a lesser extent, assets placed in service related to the second quarterlaunch of 2016.discovery+.
44

Impairment of Goodwill and Other Intangible Assets
There was no impairment of goodwill and other intangible assets in 2021 compared to $124 million in 2020. (See Note 157 to the accompanying consolidated financial statements.) This increase was partially offset by decreases
Restructuring and Other Charges
Restructuring and other charges were $32 million and $91 million in content impairments that were classified as2021 and 2020, respectively. Restructuring and other charges.charges primarily include employee relocation and termination costs. (See Note 17 to the accompanying consolidated financial statements.)
(Gain) LossGain on Disposition
Gain on disposition increased $80was $71 million for the year ended December 31, 2016 as a result of a gain recorded upon the deconsolidation of our digital networks businesses Seeker2021, and SourceFed Studios on December 2, 2016 in connection with the Group Nine Media transaction, and the recognition of a gain following the resolution of the final contingent payment forwas primarily attributable to the sale of the radio business, compared with an expected loss in the prior year.our Great American Country network. (See Note 3 to the accompanying consolidated financial statements.)
Interest Expense, net
Interest expense increased for the year ended December 31, 2016primarily due to the March 11, 2016 issuance of the 4.90% senior notes due March 2026.decreased 2% in 2021. (See Note 9 to the accompanying consolidated financial statements.)
(Loss) Income from Equity Investees, net
Losses from our equity method investees increased $39 million due to investments in limited liability companies that sponsor renewable energy projects related to solar energy8 and increased losses at All3Media for derivatives that do not receive hedge accounting. (See Note 410 to the accompanying consolidated financial statements.)

Loss on Extinguishment of Debt

Losses on extinguishment of debt were $10 million and $76 million in 2021 and 2020, respectively. In 2020, we repurchased $1.5 billion aggregate principal amount of DCL's and Scripps Networks' senior notes. The repurchase resulted in a loss on extinguishment of debt of $76 million. (See Note 8 to the accompanying consolidated financial statements.)
Loss from Equity Investees, net
We reported losses from our equity method investees of $18 million and $105 million in 2021 and 2020, respectively. The changes are attributable to the Company's share of earnings and losses from its equity investees.
Other Expense, NetIncome, net
The table below presents the details of other income, (expense), net (in millions).
Year Ended December 31,
20212020
Foreign currency gains (losses), net$93 $(115)
(Losses) gains on derivative instruments, net(33)29 
Interest income18 10 
Gain on sale of investment with readily determinable fair value15 101 
Change in the value of equity investments without readily determinable fair value(13)— 
Change in the value of investments with readily determinable fair value(6)28 
Expenses from debt modification— (11)
Other income, net8 — 
Other income, net$82 $42 
45
  Year Ended December 31,
  2016 2015
Foreign currency gains (losses), net $75
 $(103)
(Losses) gains on derivative instruments (12) 5
Remeasurement gain on previously held equity interest —
 2
Other-than-temporary impairment of AFS investments (62) —
Other income (expense), net 3
 (1)
Total other income (expense), net

 $4
 $(97)

Other income (expense), net increased $101 million in 2016. The change is primarily the result of gains in foreign currency offset by a $62 million other-than-temporary impairment in the value of our Lionsgate shares (see Note 4 to the accompanying consolidated financial statements). The change in foreign currency (gains) losses, net is caused by the remeasurement of foreign currency monetary assets and liabilities. For the year ended December 31, 2016, exchange rate changes in the British pound resulted in net remeasurement gains. The gains in the current year are in contrast to losses in the prior period for the remeasurement of our 1.90% euro-dominated senior notes due March 19, 2027, which have been effectively hedged for the year ended December 31, 2016 , and remeasurement losses on monetary assets in Venezuela following a steep decline in value during the prior year.
Income Taxes
The following table reconciles the Company'sour effective income tax rate to the U.S. federal statutory income tax rate.
  Year Ended December 31,
  2016 2015
U.S. federal statutory income tax rate 35 % 35 %
State and local income taxes, net of federal tax benefit (2)% 2 %
Effect of foreign operations (1)% 1 %
Domestic production activity deductions (4)% (3)%
Change in uncertain tax positions — % (1)%
Renewable energy investments tax credits (1)% — %
Other, net — % (1)%
Effective income tax rate 27 % 33 %
Year Ended December 31,
20212020
Pre-tax income at U.S. federal statutory income tax rate$301 21 %$363 21 %
State and local income taxes, net of federal tax benefit108 7 %(10)— %
Effect of foreign operations25 2 %58 3 %
UK Finance Act legislative change(155)(11)%(51)(3)%
Noncontrolling interest adjustment(40)(3)%(29)(2)%
Change in uncertain tax positions12 1 %17 1 %
Impairment of goodwill— — %25 2 %
Deferred tax adjustment— — %(22)(1)%
Other, net(15)(1)%$22 1 %
Income tax expense$236 16 %$373 22 %
Income tax expense was $453$236 million and $511$373 million, and the Company's effective tax rate was 27%16% and 33%22% for 20162021 and 2015,2020, respectively. The net 6% decrease in income tax expense for the effective tax rateyear ended December 31, 2021 was primarily attributable to a decrease in pre-tax book income and an increase in the resolution of multi-year statedeferred tax positionsbenefit from the UK Finance Act 2021 that resultedwas enacted in a reduction of reserves related to uncertain tax positions, allocation and taxation of income among multiple foreign and domestic jurisdictions, the impact of various foreign legislative changes, and tax credits that we receive related to our renewable energy investments. The decrease wasJune 2021. Those decreases were partially offset by 2015 favorable audit resolutions which positively impactedan increase in the assessment of uncertainstate and local income tax positions for 2015 but did not recurexpense recorded in 2016. (See Note 16 to the accompanying consolidated financial statements.)



2021.
Segment Results of Operations – 20162021 vs. 20152020
AsWe evaluate the operating performance of January 1, 2017, the Company no longer excludes amortization of deferred launch incentives in calculating totalour operating segments based on financial measures such as revenues and Adjusted OIBDA. Adjusted OIBDA is defined as operating income excluding: (i) employee 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, (vii) third-party transaction and integration costs, and (viii) other items impacting comparability. We use this expense is not material. Formeasure to assess the years ended December 31, 2016operating results and December 31, 2015, deferred launch incentivesperformance of $13 millionour segments, perform analytical comparisons, identify strategies to improve performance, and $16 million, respectively, were not reflected as an adjustmentallocate resources to the calculation of totaleach segment. We believe Adjusted OIBDA in orderis relevant to conforminvestors because it allows them to analyze the current presentation.
The table below presentsoperating performance of each segment using the calculation of total Adjusted OIBDA (in millions).
  Year Ended December 31,  
  2016 2015 % Change
Revenues:      
U.S. Networks $3,285
 $3,131
 5 %
International Networks 3,040
 3,092
 (2)%
Education and Other 174
 173
 1 %
Corporate and inter-segment eliminations (2) (2) — %
Total revenues 6,497
 6,394
 2 %
Costs of revenues, excluding depreciation and amortization (2,432) (2,343) 4 %
Selling, general and administrative(a)
 (1,652) (1,669) (1)%
Adjusted OIBDA $2,413
 $2,382
 1 %
(a) Selling, general and administrative expensessame metric management uses. We exclude mark-to-market share-based compensation, restructuring and other charges, certain impairment charges, gains and gains (losses)losses on dispositions.business and asset dispositions, and acquisition and integration costs from the calculation of Adjusted OIBDA due to their impact on comparability between periods. We also exclude the 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 and inter-segment eliminations related to production studios are excluded from segment results to enable executive management to evaluate segment performance based upon the decisions of segment executives.
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 U.S. generally accepted accounting principles (“GAAP”).
46

The table below presents our Adjusted OIBDA by segment, with a reconciliation of consolidated net income available to Discovery, Communications, Inc. to total Adjusted OIBDA (in millions).
Year Ended December 31,
20212020% Change
Net income available to Discovery, Inc.$1,006 $1,219 (17)%
Net income attributable to redeemable noncontrolling interests53 12 NM
Net income attributable to noncontrolling interests138 124 11 %
Income tax expense236 373 (37)%
Income before income taxes1,433 1,728 (17)%
Other (income) expense, net(82)(42)95 %
Loss from equity investees, net18 105 (83)%
Loss on extinguishment of debt10 76 (87)%
Interest expense, net633 648 (2)%
Operating income2,012 2,515 (20)%
Depreciation and amortization1,582 1,359 16 %
Impairment of goodwill and other intangible assets— 124 NM
Employee share-based compensation167 99 69 %
Restructuring and other charges32 91 (65)%
Transaction and integration costs95 6 NM
(Gain) loss on disposition(71)2 NM
Adjusted OIBDA$3,817 $4,196 (9)%
Adjusted OIBDA
U.S. Networks3,940 3,975 (1)%
International Networks494 723 (32)%
Corporate, inter-segment eliminations, and other(617)(502)23 %
Adjusted OIBDA$3,817 $4,196 (9)%

47

  Year Ended December 31,  
  2016 2015 % Change
Net income available to Discovery Communications, Inc. $1,194
 $1,034
 15 %
Net income attributable to redeemable noncontrolling interests 23
 13
 NM
Net income attributable to noncontrolling interests 1
 1
 — %
Income tax expense 453
 511
 (11)%
Other (expense) income, net (4) 97
 NM
Income (loss) from equity investees, net 38
 (1) NM
Interest expense 353
 330
 7 %
Operating income 2,058
 1,985
 4 %
(Gain) loss on disposition (63) 17
 NM
Restructuring and other charges 58
 50
 16 %
Depreciation and amortization 322
 330
 (2)%
Mark-to-market share-based compensation 38
 —
 (100)%
Total Adjusted OIBDA $2,413
 $2,382
 1 %
       
Adjusted OIBDA:      
U.S. Networks $1,922
 $1,774
 8 %
International Networks 835
 945
 (12)%
Education and Other (10) (2) NM
Corporate and inter-segment eliminations (334) (335) — %
Total Adjusted OIBDA $2,413
 $2,382
 1 %


The table below presents the calculation of Adjusted OIBDA (in millions).
Year Ended December 31,
20212020% Change
Revenue:
U.S. Networks$7,662 $6,949 10 %
International Networks4,539 3,713 22 %
Corporate, inter-segment eliminations, and other(10)9 NM
Total revenue12,191 10,671 14 %
Costs of revenues, excluding depreciation and amortization4,620 3,860 20 %
Selling, general and administrative (a)
3,754 2,615 44 %
Adjusted OIBDA$3,817 $4,196 (9)%
(a) Selling, general and administrative expenses exclude employee share-based compensation and third-party transaction and integration costs.
U.S. Networks
The following table below presents, for our U.S. Networks segment, revenues by type, certain operating expenses, contra revenue amounts,and Adjusted OIBDA and a reconciliation of Adjusted OIBDA to operating income (in millions).
  Year Ended December 31,  
  2016 2015 % Change
Revenues:      
Distribution $1,532
 $1,431
 7 %
Advertising 1,690
 1,650
 2 %
Other 63
 50
 26 %
Total revenues 3,285
 3,131
 5 %
Costs of revenues, excluding depreciation and amortization (891) (892) — %
Selling, general and administrative (472) (465) 2 %
Adjusted OIBDA 1,922
 1,774
 8 %
Depreciation and amortization (28) (29) (3)%
Restructuring and other charges (15) (33) (55)%
Gain on disposition 50
 —
 NM
Inter-segment eliminations (14) (8) 75 %
Operating income $1,915
 $1,704
 12 %
Year Ended December 31,
20212020Change %
Revenues:
Advertising$4,188 $4,012 4 %
Distribution3,297 2,852 16 %
Other177 85 NM
Total revenues7,662 6,949 10 %
Costs of revenues, excluding depreciation and amortization1,841 1,843 — %
Selling, general and administrative1,881 1,131 66 %
Adjusted OIBDA3,940 3,975 (1)%
Employee share-based compensation1 — 
Gain on disposition(77)— 
Depreciation and amortization1,065 899 
Restructuring and other charges4 41 
Transactions and integration costs1 — 
Inter-segment eliminations20 4 
Operating income$2,926 $3,031 
Revenues
Advertising revenue increased 4% in 2021 and was primarily attributable to higher pricing, the continued monetization of content offerings on our next generation initiatives, and higher inventory, partially offset by lower overall ratings and secular declines in the pay-TV ecosystem.
Distribution revenue increased 7%,16% in 2021 and was primarily dueattributable to growth of discovery+ and an increase in contractual rate increases that include market adjustments for certain recent contract renewals partially offset by slight declines in subscribers.
Advertising revenue increased 2%, due to inventory management and pricing increases,affiliate rates, partially offset by a decline in ratings.linear subscribers, and certain prior year nonrecurring items. Excluding these nonrecurring items, distribution revenue increased 17% in 2021. Total portfolio subscribers at December 31, 2021 were 8% lower than at December 31, 2020, while subscribers to our fully distributed networks were 4% lower than the prior year. Excluding the impact of the sale of our Great American Country linear network, total subscribers to our linear networks at December 31, 2021 were 5% lower than at December 31, 2020.
Other revenue increased 26%,$92 million in 2021 and was primarily dueattributable to increases in services provided to equity method investees.a nonrecurring item.
48

Costs of Revenues
Costs of revenues remained consistent with the prior period. were flat in 2021, primarily attributable to our content investment in discovery+, a nonrecurring, non-cash item in 2020, and third-party app store fees, offset by more efficient content spend on our linear networks.
Content amortizationexpense was $716 million$1.6 billion in 2021 and $714 million for 2016 and 2015, respectively.2020.
Selling, General and Administrative
Selling, general and administrative expenses increased 2% as increased spending on marketing66% in 2021 and was offset by decreases in personnel costs.primarily attributable to higher marketing-related expenses to drive the growth of discovery+.
Adjusted OIBDA
Adjusted OIBDA increased 8%, primarily due to increasesdecreased 1% in distribution and advertising revenue.


2021.
International Networks
The following table presents, for our International Networks segment, revenues by type, certain operating expenses, certain contra revenue amounts,and Adjusted OIBDA and a reconciliation of Adjusted OIBDA to operating income (in millions). In addition, see the International Networks' table in "Results of Operations – 2016 vs. 2015 – Items Impacting Comparability" for more information on Eurosport.
  Year Ended December 31,  
  2016 2015 % Change
Revenues:      
Distribution $1,681
 $1,637
 3 %
Advertising 1,279
 1,353
 (5)%
Other 80
 102
 (22)%
Total revenues 3,040
 3,092
 (2)%
Costs of revenues, excluding depreciation and amortization (1,462) (1,375) 6 %
Selling, general and administrative (743) (772) (4)%
Adjusted OIBDA 835
 945
 (12)%
Depreciation and amortization (221) (235) (6)%
Restructuring and other charges (26) (14) 86 %
Loss on disposition 13
 (17) NM
Inter-segment eliminations (4) (3) 33 %
Operating income $597
 $676
 (12)%
Year Ended December 31,
20212020Change %Change % (ex-FX)
Revenues:
Advertising$2,027 $1,571 29 %25 %
Distribution2,112 2,014 5 %4 %
Other400 128 NMNM
Total revenues4,539 3,713 22 %20 %
Costs of revenues, excluding depreciation and amortization2,784 2,004 39 %35 %
Selling, general and administrative1,261 986 28 %24 %
Adjusted OIBDA494 723 (32)%(27)%
Depreciation and amortization394 374 
Impairment of goodwill and other intangible assets— 124 
Restructuring and other charges26 29 
Transaction and integration costs4 4 
Inter-segment eliminations(15)1 
Loss on disposition6 — 
Operating income$79 $191 
Revenues
DistributionAdvertising revenue increased 3%.29% in 2021. Excluding the impact of foreign currency fluctuations, and the acquisition of Eurosport France in March 2015, distributionadvertising revenue increased 9%25%.The increase was mostly dueincreases were attributable to increases in rates in Europe and increases in subscribers and rates in Latin America. Such growth is consistent withimproved overall performance as advertising markets recovered from the value negotiated in new arrangements following investment in sports content in markets in Europe andCOVID-19 pandemic, as well as the continued developmentbroadcast of the pay-TV marketsSummer Olympics throughout Europe in Latin America.the third quarter of 2021.
AdvertisingDistribution revenue decreasedincreased 5%. in 2021. Excluding the impact of foreign currency fluctuations, and the disposition of the Company's radio business, advertisingdistribution revenue increased 3%4%. The increase wasincreases were primarily driven by ratings and volume in Southern Europe, and,attributable to a lesser extent, pricing, ratings and volume in CEEMEA,higher next generation revenues due to growth of discovery+, partially offset by lower ratingscontractual affiliate rates in Northern Europe and lower price, ratings and volume in Asia.some European markets.
Other revenue decreased 22%.increased $272 million in 2021. Excluding the impact of foreign currency fluctuations, and the disposition of the Company's radio business, other revenue decreased 17% dueincreased $281 million. The increases were primarily attributable to a reduction in sublicensing revenue for Eurosport.of Olympics sports rights to broadcast networks throughout Europe.
Costs of Revenues
Costs of revenues increased 6%.39% in 2021. Excluding the impact of foreign currency fluctuations, the acquisition of Eurosport France in March 2015, and the disposition of the Company's radio business, costs of revenues increased 11%35%. The increase was mostlyincreases were primarily attributable to increased spending onthe Olympics and to a lesser extent, European sporting events and leagues returning to a more normalized schedule, and higher content particularly sports rightsinvestment related to discovery+. Content expense, excluding the impact of foreign currency fluctuations, was $2.0 billion for 2021 and associated production costs, and increases in content impairments, primarily in Northern Europe as a result of changes in programming strategies. Content amortization was $976 million and $906 million for 2016 and 2015, respectively.$1.4 billion 2020.
49

Selling, General and Administrative
Selling, general and administrative expenses decreased 4%.increased 28% in 2021. Excluding the impact of foreign currency fluctuations, and the disposition of the Company's radio business, selling, general, and administrative expenses increased 4%24%. The componentsincreases were primarily attributable to higher marketing-related expenses to drive the growth of selling, generaldiscovery+ and administrative expenses included increases inthe Olympics, as well as personnel expenses and marketing costs.costs to support our next generation platforms.
Adjusted OIBDA
Adjusted OIBDA decreased 12%.32% in 2021. Excluding the impact of foreign currency fluctuations, and the disposition of the Company's radio business, Adjustedadjusted OIBDA decreased 3%27%. The decrease was primarily due to higher content expense partially offset by increases in distribution revenue.


EducationCorporate, Inter-segment Eliminations, and Other
The following table presents for our Education and Other operating segments, revenue, certain operating expenses, Adjusted OIBDA and a reconciliation of Adjusted OIBDA to operating income (in millions).
  Year Ended December 31,  
  2016 2015 % Change
Revenues $174
 $173
 1%
Costs of revenues, excluding depreciation and amortization (79) (75) 5%
Selling, general and administrative (105) (100) 5%
Adjusted OIBDA (10) (2) NM
Depreciation and amortization (7) (7) —%
Restructuring and other charges (3) (2) 50%
Inter-segment eliminations 18
 11
 64%
Operating income $(2) $—
 NM
Adjusted OIBDA decreased $8 million. The decrease was primarily due to additional operational spending to invest in Education's digital textbooks, which more than offset improvements in operating expenses at the Studios business.
Corporate and Inter-segment Eliminations
The following table presents, for our unallocated corporate amounts revenue,including certain operating expenses, Adjusted OIBDA and a reconciliation of Adjusted OIBDA to operating loss (in millions).
  Year Ended December 31,  
  2016 2015 % Change
Revenues $(2) $(2) — %
Costs of revenues, excluding depreciation and amortization —
 (1) NM
Selling, general and administrative (332) (332) — %
Adjusted OIBDA (334) (335) — %
Mark-to-market equity-based compensation (38) —
 NM
Depreciation and amortization (66) (59) 12 %
Restructuring and other charges (14) (1) NM
Operating loss $(452) $(395) 14 %
Year Ended December 31,
20212020% Change
Revenues$(10)$9 NM
Costs of revenues, excluding depreciation and amortization(5)13 NM
Selling, general and administrative612 498 23 %
Adjusted OIBDA(617)(502)(23)%
Employee share-based compensation166 99 
Depreciation and amortization123 86 
Transaction and integration costs90 2 
Restructuring and other charges2 21 
Loss on asset disposition— 2 
Inter-segment eliminations(5)(5)
Operating loss$(993)$(707)
Corporate operations primarily consist of executive management, administrative support services, and substantially all of our equity-based compensation.share-based compensation and third-party transaction and integration costs.
Adjusted OIBDA remained consistent with the prior period.
The increase in mark-to-market equity-based compensation expense was primarily attributable to an increase in Discovery's stock price in 2016 compared to 2015. Changes in stock price are a key driver of fair value estimates used in the attribution of expense for stock appreciation rights ("SARs") and performance-based restricted stock units ("PRSUs"). By contrast, stock options and service-based restricted stock units ("RSUs") are fair valued at grant date and amortized over their vesting period without mark-to-market adjustments. The expense associated with stock options and RSUs is included in Adjusted OIBDA as a component of selling, general and administrative expense.
Items Impacting Comparability
From time to time, certain items may impact the comparability of our consolidated results of operations between two periods. In comparing the financial results for the years 2016 and 2015, the Company has identified foreign currency and the impact of the acquisition of Eurosport as items impacting comparability between periods, as noted below.
Foreign Currency
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, a spot rate for each of our currencies determined early in the fiscal year as part of our forecasting process, (the “2015 Baseline Rate”) and the prior year amounts translated at the same 2015 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. The impact of foreign currency on the comparability of our results is reflected in the tables below (in millions). Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies.

Consolidated Year Ended December 31,
  2016 2015 
% Change
(Reported)
 
% Change
(ex-FX)
Revenues:        
Distribution $3,213
 $3,068
 5 % 9%
Advertising 2,970
 3,004
 (1)% 1%
Other 314
 322
 (2)% 2%
Total revenues 6,497
 6,394
 2 % 4%
Costs of revenue, excluding depreciation and amortization 2,432
 2,343
 4 % 6%
Selling, general and administrative expense 1,690
 1,669
 1 % 4%
Adjusted OIBDA $2,413
 $2,382
 1 % 5%

International Networks Year Ended December 31,
  2016 2015 
% Change
(Reported)
 
% Change
(ex-FX)
Revenues:        
Distribution $1,681
 $1,637
 3 % 10 %
Advertising 1,279
 1,353
 (5)% (2)%
Other 80
 102
 (22)% (20)%
Total revenues 3,040
 3,092
 (2)% 4 %
Costs of revenue, excluding depreciation and amortization 1,462
 1,375
 6 % 10 %
Selling, general and administrative expenses 743
 772
 (4)% 1 %
Adjusted OIBDA $835
 $945
 (12)% (4)%
There are no other items impacting comparability.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Sources of Cash
Historically, we have generated a significant amount of cash from operations. During the year ended December 31, 2017,2021, we funded our working capital needs primarily through cash flows from operations. As of December 31, 2017,2021, we had $7.3$3.9 billion of cash and cash equivalents on hand. We maintain an effective Registration Statement on Form S-3 that allows usare a well-known seasoned issuer and have the ability to conduct registered offerings of securities, including debt securities, common stock and preferred stock.stock, on short notice, subject to market conditions. Access to sufficient capital from the public market is not assured.


Debt
Debt Incurred for the Scripps Networks Acquisition
In August and September 2017, the Company entered into $2 billion of term loan credit facilities and issued $6.8 billion of senior notes to fund a portion of the Scripps Networks acquisition. On September 21, 2017, DCL, a wholly-owned subsidiary of the Company, issued $5.9 billion in senior fixed rate notes, $400 million in senior floating rate notes (together, the "2017 USD Notes") and £400 million principal amount of 2.500% fixed rate senior notes (the "Sterling Notes"), collectively the "2017 Senior Notes." Using exchange rates as of December 31, 2017, the senior notes had a weighted average effective interest rate of 3.9% without including the impact of debt issuance costs. The proceeds received by DCL from the 2017 Senior Notes were net of a $11 million issuance discount and $57 million of debt issuance costs. The 2017 Senior Notes are fully and unconditionally guaranteed by the Company. Some of these proceeds have been invested in short-term investments until the closing of the acquisition. Approximately $5.9 billion aggregate principal amount of the senior notes is subject to repayment by the Company to satisfy provisions related to the special mandatory redemption provision attached to certain series of the 2017 Senior Notes. The special mandatory redemption provision requires the Company to redeem the applicable senior notes for a price equal to 101% of the principal amount plus any accrued and unpaid interest on the applicable senior notes, following a termination of the Scripps Networks Merger Agreement or if the merger does not close prior to August 30, 2018. The $5.9 billion principal amount of senior notes subject to the special mandatory redemption provision will be classified as noncurrent until either of the contingent events which would trigger the redemption has occurred. As of December 31, 2017, neither of the contingent events have occurred and therefore these senior notes are classified as noncurrent.
On August 11, 2017, DCL, a wholly-owned subsidiary of the Company, entered into a three-year delayed draw tranche and a five-year delayed draw tranche unsecured term loan credit facility (the "Term Loans"), each with a principal amount of up to $1 billion. The term of each delayed draw loan begins when Discovery borrows the funds to finance a portion of the purchase price of the Scripps Networks acquisition. The Term Loans' interest rates are based, at the Company's option, on either adjusted LIBOR plus a margin or an alternate base rate plus a margin. The Company will pay a commitment fee of 20 basis points per annum for each loan, based on its current credit rating, beginning September 28, 2017 until either the funding of the Term Loans or the termination of the Scripps Networks acquisition. As of December 31, 2017, the Company has not yet borrowed on the term loan credit facilities.
Issuance of Debt to Fund the Tender Offer for Outstanding Senior Notes
On March 13, 2017, DCL issued $450 million principal amount of 3.80% senior notes due March 13, 2024 (the "March 2017 USD Notes") and an additional $200 million principal amount of its existing 4.90% senior notes due March 11, 2026 (the "2016 USD Notes"). The Company used the proceeds to fund the repurchase of $600 million of combined aggregate principal amount of our then-outstanding senior notes through a cash tender offer that also closed on March 13, 2017.
All of DCL's outstanding senior notes are fully and unconditionally guaranteed on an unsecured and unsubordinated basis by Discovery and contain certain covenants, events of default and other customary provisions.
Revolving Credit Facility
We also have access to a $2.5 billion revolving credit facility as amended on August 11, 2017 (See Note 9 to the accompanying consolidated financial statements). Borrowing capacity under this agreement is reduced by the amount of outstanding borrowings under ourand commercial paper program. As of December 31, 2017,program described below.
•Debt
    Revolving Credit Facility and Commercial Paper
In June 2021, we entered into a multicurrency revolving credit agreement (the "Credit Agreement"), replacing the Company had outstanding borrowingsexisting $2.5 billion credit agreement, dated February 4, 2016, as amended. We have the capacity to initially borrow up to $2.5 billion under the revolving credit facilityCredit Agreement. Upon the closing of $425the proposed Combination with WarnerMedia and subject to certain conditions, the available commitments will increase by $3.5 billion, to an aggregate amount not to exceed $6 billion. The Credit Agreement includes a $150 million at a weighted average interest ratesublimit for the issuance of 2.69%. The revolving credit facility agreement provides for a maturity datestandby letters of August 11, 2022, andcredit. We may also request additional commitments up to $1 billion from the option for two additional 364-day renewal periods. All obligationslenders upon satisfaction of DCL and the other borrowerscertain conditions. Obligations under the revolving credit facilityCredit Agreement are unsecured and are fully and unconditionally guaranteed by Discovery. Borrowings mayDiscovery, Inc. and Scripps Networks Interactive, Inc., and will also be used for general corporate purposes.guaranteed by the holding company of the WarnerMedia business upon the closing of the proposed Combination.
50

The credit agreement governingCredit Agreement will be available on a revolving basis until June 2026, with an option for up to two additional 364-day renewal periods subject to the revolving credit facility (the “Credit Agreement”)lenders' consent. The Credit Agreement contains customary representations warranties and events of default,warranties as well as affirmative and negative covenants, which mirror the provisions of the credit agreement governing the Term Loans, including limitations on liens, investments, indebtedness, dispositions, affiliate transactions, dividends and restricted payments. DCL, its subsidiaries and Discovery are also subject to a limitation on mergers, liquidation and disposals of all or substantially all of their assets. The Credit Agreement, as amended on August 11, 2017, continues to require DCL to maintain a consolidated interest coverage ratio (as defined in the Credit Agreement) of no less than 3.00 to 1.00 and now requires a consolidated leverage ratio of financial covenant of 5.50 to 1.00, with step-downs to 5.00 to 1.00 in the first year after the closing and 4.50 to 1.00 in the second year after the closing.covenants. As of December 31, 2017, Discovery,2021, DCL and the other borrowers werewas in compliance with all covenants and there were no events of default under the Credit Agreement.Facility.


Commercial Paper
UnderAdditionally, our commercial paper program and subject to market conditions, DCLis supported by the Credit Facility. Under the commercial paper program, we may issue unsecuredup to $1.5 billion, including up to $500 million of euro-denominated borrowings. Borrowing capacity under the Credit Facility is reduced by any outstanding borrowings under the commercial paper notes guaranteed by the Company from time to time up to an aggregate principal amount outstanding at any given time of $1.0 billion. The maturities of these notes will vary but may not exceed 397 days. The notes may be issued at a discount or at par, and interest rates vary based on market conditions and the credit ratings assigned to the notes at the time of issuance. program.
As of December 31, 2017, we2021 and 2020, the Company had no commercial paperoutstanding borrowings outstanding. Borrowings under the Credit Facility or the commercial paper program would reduce the borrowing capacity under the revolving credit facility arrangement referenced above.program.
•Investments
We repay our senior notes, term loans, revolving credit facility and commercial paper as required, and accordingly these sourcesreceived proceeds of cash also require use of our cash.
Cash Settlement of Common Stock Repurchase Contract
We elected to settle our outstanding prepaid common stock repurchase contract in cash$599 million during the twelve months ended December 31, 2017, resulting in the receipt of $58 million. The cash received was inclusive of a $1 million premium over the $57 million up-front cash payment made in 2016 and was determined by the market price of our Series C common stock during the settlement period in March 2017. (See Note 9 to the accompanying consolidated financial statements.)
Dispositions
On February 26, 2018, we announced the planned sale of a controlling equity stake in its education business in the first half of 2018 to Francisco Partners for cash of $120 million. No loss is expected upon sale. The Company will retain an equity interest. (See Note 3 to the accompanying consolidated financial statements.)
Real Estate Strategy and Relocation of Global Headquarters
On January 9, 2018, we announced a new real estate strategy with plans to relocate the Company's global headquarters from Silver Spring, Maryland to New York City, New York in 2019. Contingent upon the closing of our acquisition of Scripps Networks, we will establish a National Operation Headquarters at Scripps Networks' current campus in Knoxville, Tennessee. The sale and closure of our Silver Spring building is expected approximately one year2021 from the closingsales and maturities of the Scripps Networks transaction.

investments.
Uses of Cash
Our primary uses of cash include the creation and acquisition of new content, business acquisitions, repurchases of our capital stock, income taxes, personnel costs, costs to develop and market discovery+, principal and interest payments on our outstanding debt,senior notes, and funding for various equity method and other investments.
•Content Acquisition
We plan to continue to invest significantly in the creation and acquisition of new content. Our investment in content has increased as we acquire and develop new content for discovery+. Additional information regarding contractual commitments to acquire content is set forth in "Material Cash Requirements from Known Contractual and Other Obligations" in this Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
•Debt
Senior Notes
In July 2021, we issued notices for the redemption in full of all $168 million aggregate principal amount outstanding of our 3.300% Senior Notes due May 2022 and $62 million aggregate principal amount outstanding of our 3.500% Senior Notes due June 2022 (collectively, the "2022 Notes"). The 2022 Notes were redeemed in July 2021 for an aggregate redemption price of $235 million, plus accrued interest.
In February 2021, we issued a notice for the redemption in full of all $335 million aggregate principal amount outstanding of our 4.375% Senior Notes due June 2021 (the “2021 Notes”). The 2021 Notes were redeemed in March 2021 for an aggregate redemption price of $339 million, plus accrued interest.
In addition, we have $339 million of senior notes coming due in March 2022.
•Capital Expenditures and Investments in Next Generation Initiatives
We effected capital expenditures of $373 million in 2021, including amounts capitalized to support our next generation platforms, such as discovery+. In addition, we expect to continue toincur significant costs to develop and market discovery+ in the future.
•Investments and Business Combinations
Scripps Networks Acquisition
On February 26, 2018, the U.S. Department of Justice notified the Company that it has closed its investigation into Discovery's agreement for a plan of merger to acquire Scripps Networks in a cash-and-stock transaction. The estimated merger consideration for the acquisition totals $12.0 billion, including cash of $8.4 billion and stock of $3.6 billion based on the Series C common stock price as of January 31, 2018. In addition, the Company will assume Scripps Networks' net debt of approximately $2.7 billion in aggregate principal amount. The transaction is expected to close by early 2018.
Scripps Networks shareholders will receive $63.00 per share in cash and a number of shares of Discovery's Series C common stock that is determined in accordance with a formula and subject to a collar based on the volume weighted average price of the Company's Series C common stock. The formula is based on the volume weighted average price of Discovery's Series C common stock over the 15 trading days ending on the third trading day prior to closing (the “Average Discovery Price”). Scripps Networks shareholders will receive 1.2096 shares of Discovery's Series C common stock if the Average Discovery Price is below $22.32, and 0.9408 shares of Discovery's Series C common stock if the Average Discovery Price is above $28.70. The intent of the range was to provide Scripps Networks shareholders with $27.00 of value per share in Discovery Series C common stock; if the Average Discovery Price is greater than or equal to $22.32 but less than or equal to $28.70, Scripps Networks shareholders will receive a proportional number of shares between 1.2096 and 0.9408. If the Average Discovery Price is below $25.51, Discovery has the option to pay additional cash instead of issuing more shares above the 1.0584 conversation ratio required at $25.51. The cash payment is equal to the product of the additional shares required under the collar formula multiplied by the Average Discovery Price; for example, if the Average Discovery Price were $22.32 with a conversion ratio of 1.2096, the Company could offer shares at the 1.0584 ratio and pay for the difference associated with the incremental


shares in cash. Outstanding employee equity awards or share-based awards that vest upon the change of control will be acquired with a similar combinationOur uses of cash have included investments in equity method investments and shares of Discovery Series C common stock pursuant to terms specified in the Merger Agreement. Therefore, the merger consideration will fluctuate based upon changes in the share price of Discovery Series C common stock and the number of Scripps Networks common shares, stock options, and other equity-based awards outstanding on the closing date. Discovery will also pay certain transaction costs incurred by Scripps Networks. The post-closing impact of the formula was intended to result in Scripps Networks’ shareholders owning approximately 20% of Discovery’s fully diluted common shares and Discovery’s shareholders owning approximately 80%. The Company will utilize previously issued debt proceeds (see Note 6 to the accompanying consolidated financial statements.) and cash on hand to finance the cash portion of the transaction. The transaction is subject to approvals and other customary closing conditions.
On July 30, 2017, the Company obtained a commitment letter from a financial institution for a $9.6 billion unsecured bridge term loan facility that could have been used to complete the Scripps Networks acquisition. No amounts were drawn under the bridge loan commitment and the commitment was terminated on September 21, 2017, following the execution of the Term Loans and the issuance of the 2017 Senior Notes. The Company incurred $40 million of debt issuance costs related to the bridge loan commitment.
During 2017, the Company issued $6.8 billion in senior notes to fund the anticipated Scripps Networks acquisitionequity investments without readily determinable fair value. (See Note 3 and Note 9 to the accompanying consolidated financial statements.) Of these total proceeds, $2.7 billion were invested in money market funds, $1.3 billion were invested in time deposit accounts, and the remainder was invested in highly liquid, short-term instruments with original maturities of 90 days or less. These investments are classified as cash and cash equivalents on the consolidated balance sheet and are anticipated to be used for the Scripps Networks acquisition. In the interim, the Company has full access to these proceeds.
For the year ended December 31, 2017, we incurred transaction and integration costs for the Scripps Networks acquisition of $79 million, including the $35 million charge associated with the modification of Advance/Newhouse's preferred stock. (See Note 124 to the accompanying consolidated financial statements.) We provide funding to our investees from time to time. We contributed $184 million and $181 million in 2021 and 2020, for investments in and advances to our investees. We also purchased $103 million and $250 million of time deposit investments during 2021 and 2020.
In May 2021, we entered into an agreement with AT&T Inc. to combine with WarnerMedia’s ("WarnerMedia") entertainment, sports and news assets to create a standalone, global entertainment company. The transaction is expected to close in the second quarter of 2022, subject to approval by the Company's shareholders and customary closing conditions, including receipt of regulatory approvals. For the year ended December 31, 2021, we incurred transaction and integration costs of $95 million, primarily related to the WarnerMedia acquisition, and we expect to continue to incur significant transaction and integration costs related to the acquisition of Scripps Networks in 2018.
Other Investments2022 and Business Combinations
Our uses of cash have included investment in equity method investments, AFS securities, cost method investments (see Note 4 to the accompanying consolidated financial statements) and business combinations. During the year ended December 31, 2017, the Company invested $322 million in limited liability companies that sponsor renewable energy projects related to solar energy. The Company has $20 million of future funding commitments for these investments as of December 31, 2017 and intends to reduce its investments starting in 2018. We provide funding to our equity method investees from time to time. During the year ended December 31, 2017, the Company acquired other equity method investments, largely to enhance the Company's digital distribution strategies and made additional contributions to existing equity method investments totaling $73 million.
On November 30, 2017, the Company acquired from Harpo a controlling interest in OWN increasing Discovery’s ownership stake from 49.50% to 73.99%. Discovery paid $70 million in cash and recognized a gain of $33 million to account for the difference between the carrying value and the fair value of the previously held 49.50% equity interest. The gain is included in other (expense) income, net in the Company's consolidated statements of operations.beyond. (See Note 3 and Note 18 to the accompanying consolidated financial statements.)
Our cost method investments as of December 31, 2017 primarily include a 42% minority interest in Group Nine Media with a carrying value of $212 million. The Company also has investments in an educational website
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•Redeemable Noncontrolling Interest and an electric car racing series. (See Note 4 to the accompanying consolidated financial statements).Noncontrolling Interest
Due to business combinations, we also have redeemable equity balances of $413$363 million, which may require the use of cash in the event holders of noncontrolling interests put their interests to the Company. (See Note 11us. Distributions to the accompanying consolidated financial statements).noncontrolling interests and redeemable noncontrolling interests totaled $251 million and $254 million in 2021 and 2020, respectively.
Content Acquisition
We plan to continue to invest significantly in the creation and acquisition of new content. Additional information regarding contractual commitments to acquire content is set forth in “Commitments and Off-Balance Sheet Arrangements” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.


•Common Stock Repurchase ProgramRepurchases
Under the Company's stock repurchase program, management was authorized to purchase shares of the Company's common stock from time to time through open market purchases or privately negotiated transactions at prevailing prices or pursuant to one or more accelerated stock repurchase or other derivative arrangements as permitted by securities laws and other legal requirements and subject to stock price, business and market conditions and other factors. As of December 31, 2017, the Company had repurchased 3 million and 164 million shares of Series A and Series C common stock over the life of the program for the aggregate purchase price of $171 million and $6.6 billion, respectively. The Company's authorization under the program expired on October 8, 2017, andHistorically, we have not repurchased any shares of common stock since then. (See Note 12 to the accompanying consolidated financial statements.) We have funded our stock repurchases through a combination of cash on hand, cash generated by operations and the issuance of debt. In the future, we may also choose to fundFebruary 2020, our Board of Directors authorized additional stock repurchases through borrowings underof up to $2 billion upon completion of our revolving credit facility and future financing transactions.
Preferred Stock Conversion and Repurchase
Prior toexisting $1 billion authorization announced in May 2019. Under the Exchange Agreement with Advance/Newhouse entered into on July 30, 2017, we had an agreement with Advance/Newhouse to repurchase, on a quarterly basis, a number of shares of Series C-1 convertible preferred stock convertible into Series C common stock purchased under the Company’snew stock repurchase program during the then most recently completed fiscal quarter. The price paid per share was calculated as 99% of the average price paid for the Series C commonauthorization, management is authorized to purchase shares repurchased by the Company during the applicable fiscal quarter multiplied by the Series C conversion rate. The Advance/Newhouse repurchases are made outside of the Company’s publicly announced stock repurchase program. The Advance/Newhouse repurchase agreement was amended on August 7, 2017from time to conform the terms of the previous agreement, as detailed above,time through open market purchases at prevailing prices or privately negotiated purchases subject to the conversion ratio of the newly issued Series C-1 convertible preferred stock. Prior to the Exchange Agreement, we convertedmarket conditions and retired 2.3 million shares of our Series C convertible preferred stock under the preferred stock conversion and repurchase arrangement for an aggregate purchase price of $120 million. Following the Exchange Agreement, we repurchased 0.2 million shares of Series C-1 convertible preferred stock for a purchase price of $102 million. The aggregate purchase price paid during the year ended December 31, 2017, including Series C convertible preferred stock and Series C-1 convertible preferred stock, was $222 million.other factors. (See Note 12 to the accompanying consolidated financial statements.) There was no common stock repurchase activity during 2021. During 2020, we repurchased $969 million of our Series C common stock.
•Income Taxes and Interest
We expect to continue to make payments for income taxes and interest on our outstanding senior notes.During the year ended December 31, 2017,2021 and 2020, we made cash payments of $274$643 million and $357$641 million for income taxes and $664 million and $673 million for interest on our outstanding debt, respectively.
Restructuring and Other
Our uses of cash include restructuring costs related to management changes and cost reduction efforts, including employee terminations, intended to enable us to more efficiently operate in a leaner and more directed cost structure and invest in growth initiatives, including digital services and content creation. As of December 31, 2017, we have restructuring liabilities of $42 million related to employee terminations. (See Note 15 todebt. Following the accompanying consolidated financial statements).We expect to incur additional restructuring costs following the acquisition of Scripps Networks in early 2018.
Share-Based Compensation
We expect to continue to make payments for vested cash-settled share-based awards. Actual amounts expensed and payable for cash-settled awards are dependent on future fair value calculations, which are primarily affected by changes in our stock price or changes in the number of awards outstanding. During 2017, we paid $1 million for cash-settled share-based awards. As of December 31, 2017, liabilities totaled $47 million for outstanding liability-classified share-based compensation awards, of which $12 million was classified as current. (See Note 13 to the accompanying consolidated financial statements.)
Repurchase of Debt
DCL used the proceeds from the offeringsclosing of the March 2017 USD Notes and the 2016 USD Notesproposed Combination with WarnerMedia, we expect cash required for interest payments to repurchase $600 million aggregate principal amount of DCL's 5.05% senior notes due 2020 and 5.625% senior notes due 2019 in a cash tender offer.


significantly increase.
Cash Flows
ChangesThe following table presents changes in cash and cash equivalents were as follows (in millions).
  Year Ended December 31,
  2017 2016 2015
Cash and cash equivalents, beginning of period $300
 $390
 $367
Cash provided by operating activities 1,629
 1,380
 1,294
Cash used in investing activities (633) (256) (301)
Cash provided by (used in) financing activities 5,951
 (1,184) (919)
Effect of exchange rate changes on cash and cash equivalents 62
 (30) (51)
Net change in cash and cash equivalents 7,009
 (90) 23
Cash and cash equivalents, end of period $7,309
 $300
 $390
Year Ended December 31,
20212020
Cash, cash equivalents, and restricted cash, beginning of period$2,122 $1,552 
Cash provided by operating activities2,798 2,739 
Cash used in investing activities(56)(703)
Cash used in financing activities(853)(1,549)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(106)83 
Net change in cash, cash equivalents, and restricted cash1,783 570 
Cash, cash equivalents, and restricted cash, end of period$3,905 $2,122 
Operating Activities
Cash provided by operating activities increased $249 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016. The increase was primarily attributable to a $253 million decrease in cash paid for taxes. The decrease in cash paid for taxes, net, for the year ended December 31, 2017 is mostly due to the tax impact from the Company's investments in limited liability companies that sponsor renewable energy projects related to solar energy. (See Note 4 and Note 18 to the accompanying consolidated financial statements.) Declines in working capital, primarily due to changes in accounts receivable, were offset by a decrease in the net negative effect of foreign currency and increases in payables.
Cash provided by operating activities increased $96 million for the year ended December 31, 2016 as compared to the year ended December 31, 2015. Improvementswas $2.8 billion and $2.7 billion in operating results were partially offset by increases in content spending, particularly for sports rights, of $131 million2021 and the impact of foreign currency.
Investing Activities
Cash flows used in investing activities increased $377 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016.2020, respectively. The increase in cash provided by operating activities was mostlyprimarily attributable to an increase in payments for investments of $172 million, including renewable energy projects and payments for derivative instruments of $98 million that did not receive hedge accounting, but economically hedged pricing risk for the senior notes issued September 21, 2017.net income excluding non-cash items, partially offset by a negative fluctuation in working capital activity.
Investing Activities
Cash flows used in investing activities decreased $45was $56 million for the year ended December 31, 2016 as compared to the year ended December 31, 2015.and $703 million in 2021 and 2020, respectively. The decrease was primarily attributable to a decrease in cash paid for business combinations, net of cash acquired of $80 million, partially offset by a decreaseused in proceeds from dispositions of businesses of $42 million.
Financing Activities
Cash flows provided by financinginvesting activities increased $7.1 billion for the twelve months ended December 31, 2017 as compared to the twelve months ended December 31, 2016. The increase was primarily attributable to proceeds received from the issuancesales and maturities of senior notes which will be used to finance the Scripps Networks Acquisition (see Note 9 to the accompanying consolidated financial statements)investments and a decreasereduction in repurchasespurchases of stock of $771 million,investments, partially offset by an increase in principal repayments of debt.payments for derivatives during 2021.
Financing Activities
Cash flows used in financing activities increased $265was $853 million for the year ended December 31, 2016 as comparedand $1.5 billion in 2021 and 2020, respectively. The decrease in cash used in financing activities was primarily attributable to the year ended December 31, 2015. The increase was attributable to an increase in repurchasessuspension of stock of $423 million and a decrease in net borrowings of $471 million, which is comprised of increases in repayments under our revolving credit facility, net of repayments, of $973 million partially offset by increased borrowings of senior notes, net of repayments, of $411 million and decreases in commercial paper repayments of $91 million. These net increases were partially offset by decreases in purchases of redeemable noncontrolling interests of $548 million and payments on hedging instruments for derivatives in connection with the effective portion of interest rate contracts of $69 million.repurchases throughout 2021.

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Capital Resources
As of December 31, 2017,2021, capital resources were comprised of the following (in millions).
  December 31, 2017
  
Total
Capacity
 
Outstanding
Letters of
Credit
 
Outstanding
Indebtedness
 
Unused
Capacity
Cash and cash equivalents $7,309
 $—
 $—
 $7,309
Revolving credit facility and commercial paper program 2,500
 1
 425
 2,074
Senior notes(a)
 14,263
 —
 14,263
 —
Total $24,072
 $1
 $14,688
 $9,383
(a) Interest on our senior notes is paid annually, semi-annually or quarterly. Our senior notes outstanding as of December 31, 2017 had interest rates that ranged from 1.90% to 6.35% and will mature between 2019 and 2047.
 December 31, 2021
 Total
Capacity		Outstanding
Letters of
Credit		Outstanding
Indebtedness		Unused
Capacity
Cash and cash equivalents$3,905 $— $— $3,905 
Revolving credit facility and commercial paper program2,500 — — 2,500 
Senior notes (a)
15,187 — 15,187 — 
Total$21,592 $— $15,187 $6,405 
(a) Interest on senior notes is paid annually or semi-annually. Our senior notes outstanding as of December 31, 2021 had interest rates that ranged from 1.90% to 6.35% and will mature between 2022 and 2055.
We expect that our cash balance, cash generated from operations and availability under our revolving credit facilitythe Credit Agreement will be sufficient to fund our cash needs for both the next twelve months, including any potential required payments related toshort-term and the special mandatory redemption provision associated with certain senior notes issued on September 21, 2017.long-term. Our borrowing costs and access to the capital markets can be affected by short and long-term debt ratings assigned by independent rating agencies which are based, in part, on our performance as measured by credit metrics such as interest coverage and leverage ratios.
As of December 31, 2017,2021, we held $103$236 million of our $7.3$3.9 billion of cash and cash equivalents in our foreign subsidiaries. The 2017 Tax Act features a participation exemption regime with current taxation of certain foreign income and imposes a mandatory repatriation toll tax on unremitted foreign earnings. Notwithstanding the U.S. taxation of these amounts, we intend to continue to reinvest these funds outside of the U.S. Our current plans do not demonstrate a need to repatriate them to the U.S. However, if these funds are needed in the U.S., we would be required to accrue and pay foreignnon-U.S. taxes to repatriate them. The determination of the amount of unrecognized deferred income tax liability with respect to these undistributed foreign earnings is not practicable.
Summarized Guarantor Financial Information
Basis of Presentation
As of December 31, 2021, all of the Company’s outstanding registered senior notes have been issued by DCL, a wholly owned subsidiary of the Company and guaranteed by the Company and Scripps Networks, except for $23 million of senior notes outstanding as of December 31, 2021 that have been issued by Scripps Networks and are not guaranteed. (See Note 8 to the accompanying consolidated financial statements.) DCL primarily includes the Discovery Channel and TLC networks in the U.S. DCL is a wholly owned, indirect subsidiary of the Company. Scripps Networks is also 100% owned by the Company.
The tables below present the summarized financial information as combined for Discovery, Inc. (the “Parent”), Scripps Networks and DCL (collectively, the “Obligors”). All guarantees of DCL's senior notes (the “Note Guarantees”) are full and unconditional, joint and several and unsecured, and cover all payment obligations arising under the senior notes.
Note Guarantees issued by Scripps Networks or any subsidiary of the Parent that in the future issues a Note Guarantee (each, a “Subsidiary Guarantor”) may be released and discharged (i) concurrently with any direct or indirect sale or disposition of such Subsidiary Guarantor or any interest therein, (ii) at any time that such Subsidiary Guarantor is released from all of its obligations under its guarantee of payment by DCL, (iii) upon the merger or consolidation of any Subsidiary Guarantor with and into DCL or the Parent or another Subsidiary Guarantor, or upon the liquidation of such Subsidiary Guarantor and (iv) other customary events constituting a discharge of the Obligors’ obligations.
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Summarized Financial Information
The Company has included the accompanying summarized combined financial information of the Obligors after the elimination of intercompany transactions and balances among the Obligors and the elimination of equity in earnings from and investments in any subsidiary of the Parent that is a non-guarantor (in millions).
December 31, 2021
Current assets$4,452 
Non-guarantor intercompany trade receivables, net85 
Noncurrent assets5,969 
Current liabilities1,018 
Noncurrent liabilities15,778 
Year Ended December 31, 2021
Revenues$2,091 
Operating income1,028 
Net income294 
Net income available to Discovery, Inc.246 
Additional information regarding the changes in our outstanding indebtedness and the significant terms and provisions of our revolving credit facility and outstanding indebtedness is discussed in Note 98 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
MATERIAL CASH REQUIREMENTS FROM KNOWN CONTRACTUAL AND OTHER OBLIGATIONS
As of December 31, 2021, our significant contractual and other obligations were as follows (in millions).
TotalShort-termLong-term
Long-term debt:
Principal payments$15,187 $339 $14,848 
Interest payments9,988 629 9,359 
Purchase obligations:
Content5,352 1,798 3,554 
Other1,611 704 907 
Finance lease obligations277 65 212 
Operating lease obligations801 84 717 
Pension and other employee obligations17 3 14 
Total$33,233 $3,622 $29,611 
Long-term Debt
Principal payments on long-term debt reflect the repayment of our outstanding senior notes, at face value, assuming repayment will occur upon maturity. Interest payments on our outstanding senior notes are projected based on their contractual interest rates and maturity dates.
Additionally, DCL's revolving credit facility allows DCL and certain designated foreign subsidiaries of DCL to borrow up to $2.5 billion, including a $150 million sublimit for the issuance of standby letters of credit. Upon the closing of the Combination with WarnerMedia and subject to certain conditions, the available commitments will increase by $3.5 billion, to an aggregate amount not to exceed $6 billion. As of December 31, 2021, we had no outstanding borrowings under the credit facility or the commercial paper program. (See Note 8 to the accompanying consolidated financial statements.)
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Purchase Obligations
Content purchase obligations include commitments and liabilities associated with third-party producers and sports associations for content that airs on our television networks. Production contracts generally require: purchase of a specified number of episodes; payments over the term of the license; and include both programs that have been delivered and are available for airing and programs that have not yet been produced or sporting events that have not yet taken place. If the content is ultimately never produced, our commitments expire without obligation. The commitments exclude content liabilities recognized on the consolidated balance sheet. We expect to enter into additional production contracts and content licenses to meet our future content needs.
Other purchase obligations include agreements with certain vendors and suppliers for the purchase of goods and services whereby the underlying agreements are enforceable, legally binding and specify all significant terms. Significant purchase obligations include transmission services, television rating services, marketing commitments and research, equipment purchases, and information technology and other services. Some of these contracts do not require the purchase of fixed or minimum quantities and generally may be terminated with a 30-day to 60-day advance notice without penalty, and are not included in the table above past the 30-day to 60-day advance notice period.
Finance Lease Obligations
We acquire satellite transponders and other equipment through multi-year finance lease arrangements. Principal payments on finance lease obligations reflect amounts due under our finance lease agreements. Interest payments on our outstanding finance lease obligations are based on the stated or implied rate in our finance lease agreements.
Operating Lease Obligations
We obtain office space and equipment under multi-year lease arrangements. Most operating leases are not cancelable prior to their expiration. Payments for operating leases represent the amounts due under the agreements assuming the agreements are not canceled prior to their expiration.
Pension and Other Employee Obligations
We sponsor a qualified defined benefit pension plan (“Pension Plan”) that covers certain U.S.-based employees. We also have a non-qualified Supplemental Executive Retirement Plan (“SERP”).
Contractual commitments include payments to meet minimum funding requirements of our Pension Plan in 2022 and estimated benefit payments for our SERP that exceed plan assets. Payments for the SERP have been estimated over a ten-year period. While benefit payments under these plans are expected to continue beyond 2031, we believe it is not practicable to estimate payments beyond this period.
We are unable to reasonably predict the ultimate amount of any payments due to cash-settled share-based compensation awards. As of December 31, 2021, the current portion of the liability for cash-settled share-based compensation awards was $17 million.
Unrecognized Tax Benefits
We are unable to reasonably predict the ultimate amount or timing of settlement of our unrecognized tax benefits because, until formal resolutions are reached, reasonable estimates of the amount and timing of cash settlements with the respective taxing authorities are not practicable. Our unrecognized tax benefits totaled $420 million as of December 31, 2021.
Put Rights
We have granted put rights to certain consolidated subsidiaries, but we are unable to reasonably predict the ultimate amount or timing of any payment. We recorded the carrying value of the noncontrolling interest in the equity associated with the put rights as a component of redeemable noncontrolling interest in the amount of $363 million. (See Note 11 to the accompanying consolidated financial statements.)
Noncontrolling Interest
The Food Network and Cooking Channel are operated and organized under the terms of the TV Food Network Partnership (the "Partnership"). We hold interests in the Partnership, along with another noncontrolling owner. The Partnership agreement specifies a dissolution date of December 31, 2022. If the term of the Partnership is not extended prior to that date, the Partnership agreement permits us, as holder of 80% of the applicable votes, to reconstitute the Partnership and continue its business. If for some reason the Partnership is not continued, it will be required to limit its activities to winding up, settling debts, liquidating assets and distributing proceeds to the partners in proportion to their partnership interests.
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RELATED PARTY TRANSACTIONS
In the ordinary course of business, we enter into transactions with related parties, primarily the Liberty Entities and our equity method investees. Information regarding transactions and amounts with related parties is discussed in Note 21 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
NEW ACCOUNTING AND REPORTING PRONOUNCEMENTS
We adopted certain accounting and reporting standards during 2021. Information regarding our adoption of new accounting and reporting standards is discussed in Note 2 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.
On an ongoing basis, we evaluate our estimates and assumptions, including those related to uncertain tax positions, goodwill and intangible assets, content rights, consolidation and revenue recognition. We base our estimates on historical experience, current developments and on various other assumptions that we believe to be reasonable under these circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that cannot readily be determined from other sources. There can be no assurance that actual results will not differ from those estimates.
Management considers an accounting estimate to be critical if it required assumptions to be made that were uncertain at the time the estimate was made and changes in the estimate or different estimates could have a material effect on our results of operations.
The development and selection of these critical accounting estimates have been determined by management and the related disclosures have been reviewed with the Audit Committee of the Board of Directors of the Company. We believe the following accounting policies are critical to our business operations and the understanding of our results of operations and involve the more significant judgments and estimates used in the preparation of our consolidated financial statements.
Uncertain Tax Positions
We are subject to income taxes in numerous U.S. and foreign jurisdictions. From time to time, we engage in transactions or take filing positions in which the tax consequences may be uncertain and may recognize tax liabilities based on estimates of whether additional taxes and interest will be due. We establish a reserve for uncertain tax positions unless we determine that such positions are more likely than not to be sustained upon examination based on their technical merits, including the resolution of any appeals or litigation processes. We include interest and where appropriate, potential penalties, as a component of income tax expense on the consolidated statement of operations. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events including the status and results of income tax audits with the relevant tax authorities. Significant judgment is exercised in evaluating all relevant information, the technical merits of the tax positions, and the accurate measurement of uncertain tax positions when determining the amount of reserve and whether positions taken on our tax returns are more likely than not to be sustained. This also involves the use of significant estimates and assumptions with respect to the potential outcome of positions taken on tax returns that may be reviewed by tax authorities. At December 31, 2021, the reserve for uncertain tax positions was $420 million, and it is reasonably possible that the total amount of unrecognized tax benefits related to certain of our uncertain tax positions could decrease by as much as $125 million within the next twelve months as a result of ongoing audits, foreign judicial proceedings, lapses of statutes of limitations or regulatory developments.
Goodwill and Intangible Assets
Goodwill is allocated to our reporting units, which are our operating segments or one level below our operating segments (the component level). Reporting units are determined by the discrete financial information available for the component and whether it is regularly reviewed by segment management. Components are aggregated into a single reporting unit if they share similar economic characteristics. Our reporting units are as follows: U.S. Networks, Europe, Latin America, and Asia-Pacific.
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We evaluate our goodwill for impairment annually as of October 1 or earlier upon the occurrence of substantive unfavorable changes in economic conditions, industry trends, costs, cash flows, or ongoing declines in market capitalization. If we believe that as a result of our qualitative assessment it is not more likely than not that the fair value of a reporting unit is greater than its carrying amount, a quantitative impairment test is required. The quantitative impairment test requires significant judgment in determining the fair value of the reporting units. We determine the fair value of our reporting units by using a combination of the income approach, which incorporates the use of the discounted cash flow (“DCF”) method and the market multiple approach, which incorporates the use of EBITDA multiples based on market data. For the DCF method, we use projections specific to the reporting unit, as well as those based on general economic conditions, which require the use of significant estimates and assumptions. Determining fair value specific to each reporting unit requires the Company to exercise judgment when selecting the appropriate discount rates, control premiums, terminal growth rates, relevant comparable company earnings multiples and the amount and timing of expected future cash flows, including revenue growth rates and profit margins. The cash flows employed in the DCF analysis for each reporting unit are based on the reporting unit's budget, long range plan, and recent operating performance. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting unit and market conditions.
2021 Impairment Analysis
During the fourth quarter of 2021, the Company performed a qualitative goodwill impairment assessment for all reporting units and it determined that it was more likely than not that the fair value of those reporting units exceeded their carrying values, therefore, no quantitative goodwill impairment analysis was performed
Content Rights
Content rights principally consist of television series, specials, films and sporting events. Costs of produced and coproduced content consist of development costs, acquired production costs, direct production costs, certain production overhead costs and participation costs and are capitalized if we have previously generated revenues from similar content in established markets and the content will be used and revenues will be generated for a period of at least one year.
Linear content amortization expense for each period is recognized based on the revenue forecast model, which approximates the proportion that estimated distribution and advertising revenues for the current period represent in relation to the estimated remaining total lifetime revenues. Digital content amortization for each period is recognized based on estimated viewing patterns as there are no direct revenues to associate to the individual content assets and therefore, number of views is most representative of the use of the title. Judgment is required to determine the useful lives and amortization patterns of our content assets.
Critical assumptions used in determining content amortization include: (i) the grouping of content with similar characteristics, (ii) the application of a quantitative revenue forecast model or viewership model based on the adequacy of historical data, (iii) determining the appropriate historical periods to utilize and the relative weighting of those historical periods in the forecast model, (iv) assessing the accuracy of our forecasts and (v) incorporating secondary streams. We then consider the appropriate application of the quantitative assessment given forecasted content use, expected content investment and market trends. Content use and future revenues may differ from estimates based on changes in expectations related to market acceptance, network affiliate fee rates, advertising demand, the number of cable and satellite television subscribers receiving our networks, the number of subscribers to our digital services, and program usage. Accordingly, we continually review our estimates and planned usage and revise our assumptions if necessary.
Consolidation
We have ownership and other interests in and contractual arrangements with various entities, including corporations, partnerships, and limited liability companies. For each such entity, we evaluate our ownership, other interests and contractual arrangements to determine whether we should consolidate the entity or account for its interest as an investment at inception and upon reconsideration events. As part of its evaluation, we initially determine whether the entity is a variable interest entity ("VIE"). Management evaluates key considerations through a qualitative and quantitative analysis in determining whether an entity is a VIE including whether (i) the entity has sufficient equity to finance its activities without additional financial support from other parties, (ii) the ability or inability to make significant decisions about the entity’s operations, and (iii) the proportionality of voting rights of investors relative to their obligations to absorb the expected losses (or receive the expected returns) of the entity. If the entity is a VIE and if we have a variable interest in the entity, we use judgment in determining if we are the primary beneficiary and are thus required to consolidate the entity. In making this determination, we evaluate whether we or another party involved with the VIE (1) has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) has the obligation to absorb losses of or receive benefits from the VIE that could be significant to the VIE.
57

If it is concluded that an entity is not a VIE, we consider our proportional voting interests in the entity and consolidate majority-owned subsidiaries in which a controlling financial interest is maintained. A controlling financial interest is determined by majority ownership and the absence of substantive third-party participation rights. Key factors we consider in determining the presence of substantive third-party participation rights include, but are not limited to, control of the board of directors, budget approval or veto rights, or operational rights that significantly impact the economic performance of the business such as programming, creative development, marketing, and selection of key personnel. Ownership interests in unconsolidated entities for which we have significant influence are accounted for as equity method.
We evaluated reconsideration events during the year ended December 31, 2021 and concluded there were no changes to our consolidation assessments.
Revenue Recognition
As described in Note 2, we generate advertising revenues primarily from advertising sold on our television networks, authenticated TVE applications, DTC subscription services and websites and distribution revenues from fees charged to distributors of our network content, which include cable, direct-to-home satellite, telecommunications and digital service providers and bundled long-term content arrangements, as well as through DTC subscription services.
A substantial portion of the advertising contracts in the U.S. and certain international markets guarantee the advertiser a minimum audience level that either the program in which their advertisements are aired or the advertisement will reach. These advertising campaigns are considered to represent a single, distinct performance obligation. For such contracts, judgment is required in measuring progress across the Company’s single performance obligation. Various factors such as pricing specific to the channel, daypart and targeted demographic, as well as estimated audience guarantees, are considered in determining how to appropriately measure progress across the campaigns. Revenues are ultimately recognized based on the audience level delivered multiplied by the average price per impression.
See Item 1A, "Risk Factors" for details on significant risks that could impact our ability to successfully grow our cash flows.
For an in-depth discussion of each of our significant accounting policies, including our critical accounting policies and further information regarding estimates and assumptions involved in their application, see Note 2 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.
Our financial position, earnings and cash flows are exposed to market risks and can be affected by, among other things, economic conditions, interest rate changes, foreign currency fluctuations, and changes in the market values of investments. We have established policies, procedures and internal processes governing our management of market risks and the use of financial instruments to manage our exposure to such risks.
Interest Rates
We are exposed to the impact of interest rate changes primarily through our actual and potential borrowing activities. During the year ended December 31, 2017,2021, we had access toentered into a $2.5new $2.5 billion multicurrency revolving credit facility, replacing the existing $2.5 billion credit agreement. We have the capacity to initially borrow up to $2.5 billion, and upon the closing of the proposed combination transaction with WarnerMedia and subject to certain conditions, the available commitments will increase by $3.5 billion, to an aggregate amount not to exceed $6 billion. We had no outstanding borrowings of $425 million as of December 31, 2017.2021. We also have access to a commercial paper program, andwhich had no outstanding borrowings as of December 31, 2017.2021. The interest rate on borrowings under the revolving credit facility is variable based on an underlying index and DCL's then-current credit rating for its publicly traded debt.a floating rate based on the applicable currency of the borrowing plus a margin. The revolving credit facility provides for a maturity date of August 11, 2022matures in June 2026 and the option for up to two additional 364-day renewal periods. As of December 31, 2017,2021, we had outstanding debt with a book value of $13.9$15.2 billion under various public senior notes with fixed interest rates and $400 million with a floating interest rate.
The Company has entered into a three year delayed draw tranche and a five year delayed draw tranche unsecured term loan credit facility, each with a principal amount of up to $1 billion. The Term Loans' interest rates are based, at the Company's option, on either adjusted LIBOR plus a margin, or an alternate base rate plus a margin. The Company will pay a commitment fee of 20 basis points per annum for each loan, based on its current credit rating, beginning September 28, 2017 until either the funding of the loans or the termination of the Scripps Networks acquisition. As of December 31, 2017, the Company has not yet borrowed on the term loan credit facilities.rates.
Our current objectives in managing exposure to interest rate changes are to limit the impact of interest rates on earnings and cash flows. To achieve these objectives, we may enter into variable interest rate swaps or swaptions, effectively converting fixed rate borrowings


to variable rate borrowings indexed to LIBOR in order to reduce the amount of interest paid. We may also enter into fixed rate forward starting swaps to limit the impact of volatility in interest rates for future issuances of fixed rate debt. As of December 31, 2017,2021, we have no outstandinghad entered into forward starting interest rate swaps.swap agreements with a notional value of $2 billion for the future issuances of fixed rate debt and a combination of swaption collars, purchase payer swaptions and interest rate swaps with a combined notional value of $15 billion for the expected issuances of debt associated with the upcoming WarnerMedia merger.
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As of December 31, 2017,2021, the fair value of our outstanding public senior notes was $14.8 billion.$17.2 billion. The fair value of our long-term debt may vary as a result of market conditions and other factors. A change in market interest rates will impact the fair market value of our fixed rate debt. The potential change in fair value of these senior notes from an adversea 100 basis-point changeincrease in quoted interest rates across all maturities, often referred to as a parallel shift in the yield curve, would be a decrease in fair value of approximately $1.3$1.5 billion as of December 31, 2017.2021.
Foreign Currency Exchange Rates
We transact business globally and are subject to risks associated with changing foreign currency exchange rates. Market risk refers to the risk of loss arising from adverse changes in foreign currency exchange rates. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows, and future earnings. Our International Networks segment operates from the following hubs:hubs in EMEA, Latin America and Asia. Cash is primarily managed from five global locationsAsia with net earnings reinvested locally and working capital requirements met from existing liquid funds. To the extent such funds are not sufficient to meet working capital requirements, drawdowns in the appropriate local currency are available from intercompany borrowings or drawdowns from our revolving credit facility. The earnings of certain international operations are expected to be reinvested in those businesses indefinitely.
The functional currency of most of our international subsidiaries is the local currency. We are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than our subsidiaries’ respective functional currencies ("non-functional currency risk"). Such transactions include affiliate and ad sales arrangements, content arrangements, equipment and other vendor purchases, and intercompany transactions. Changes in exchange rates with respect to amounts recorded in our consolidated balance sheets related to these items will result in unrealized foreign currency transaction gains and losses based upon period-end exchange rates. We also record realized foreign currency transaction gains and losses upon settlement of the transactions. Moreover, we will experience fluctuations in our revenues, costs and expenses solely as a result of changes in foreign currency exchange rates.
We also are exposed to unfavorable and potentially volatile fluctuations of the U.S. dollar, which is our reporting currency, against the currencies of our operating subsidiaries when their respective financial statements are translated into U.S. dollars for inclusion in our consolidated financial statements. Cumulative translation adjustments are recorded in accumulated other comprehensive (loss) incomeloss as a separate component of equity. Any increase or decrease in the value of the U.S. dollar against any foreign functional currency of one of our operating subsidiaries will cause us to experience unrealized foreign currency translation gains (losses)or losses with respect to amounts already invested in such foreign currencies. Accordingly, we may experience a negative impact on our net (loss) income, other comprehensive income (loss) and equity with respect to our holdings solely as a result of changes in foreign currency.
The majority of our foreign currency exposure is to the euroEuro, Polish zloty, and the British pound.Pound. We may enter into spot, forward and option contracts that change in value as foreign currency exchange rates change to hedge certain exposures associated with affiliate revenue, the cost for producing or acquiring content, certain intercompany transactions, or in connection with forecasted business combinations. These contracts hedge forecasted foreign currency transactions in order to mitigate fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates. Our objective in managing exposure to foreign currency fluctuations is to reduce volatility of earnings and cash flows. The net market value of our foreign currency derivative instruments intended to hedge future cash flows held at December 31, 2017 was a liability value of $5 million. Most of our non-functional currency risks related to our revenue, operating expenses and capital expenditures were not hedged as of December 31, 2017.2021. We generally do not hedge against the risk that we may incur non-cash losses upon the translation of the financial statements of our subsidiaries and affiliates into U.S. dollars. (See Note 10 to the accompanying consolidated financial statements.)
Derivatives
We may use derivative financial instruments to modify our exposure to exogenous events and market risks from changes in foreign currency exchange rates, interest rates, and the fair value of investments classified as AFS securities.with readily determinable fair values. We do not use derivative financial instruments unless there is an underlying exposure. While derivatives are used to mitigate cash flow risk and the risk of declines in fair value, they also limit potential economic benefits to our business in the event of positive shifts in foreign currency exchange rates, interest rates, and market values. We do not hold or enter into financial instruments for speculative trading purposes. (See Note 10 to the accompanying consolidated financial statements.)

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Market Values of Investments
In addition to derivatives, we had investments in entities accounted for using theas equity method cost method, AFS securities,investments, equity investments, and other highly liquid instruments, such as money market and mutual funds, that are accounted for at fair value. The carrying values of investments in equity method investees, cost method investees, AFS securities(See Note 4 and mutual funds were $335 million, $295 million, $164 million and $2.9 billion, respectively, at December 31, 2017.Note 5 to the accompanying consolidated financial statements.) Investments in mutual funds include both fixed rate and floating rate interest earning securities that carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. Due in part to these factors, our income from such investments may decrease in the future. During 2017, the Company issued $6.8 billion in senior notes to partially fund the Scripps Networks acquisition (See Note 3 and Note 9 to the accompanying consolidated financial statements.) Of these total proceeds, $2.7 billion were invested in money market funds, $1.3 billion were invested in time deposit accounts, and the remainder was invested in highly liquid, short-term instruments with original maturities of 90 days or less.
These investments are classified as cash and cash equivalents on the consolidated balance sheet and are anticipated to be used for the Scripps Networks acquisition. In the interim, the Company has full access to these proceeds.
COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS
Obligations
As of December 31, 2017, our significant contractual obligations, including related payments due by period, were as follows (in millions).
60
  Payments Due by Period
  Total 
Less than 1 
Year
 1-3 Years 3-5 Years 
More than 
5 Years
Long-term debt:          
Principal payments $14,263
 $—
 $2,100
 $1,508
 $10,655
Interest payments 8,165
 587
 1,109
 971
 5,498
Capital lease obligations:          
Principal payments 225
 38
 56
 44
 87
Interest payments 40
 10
 13
 9
 8
Operating lease obligations 230
 61
 88
 45
 36
Content 3,846
 1,075
 1,308
 692
 771
Other 920
 332
 416
 83
 89
Total $27,689
 $2,103
 $5,090
 $3,352
 $17,144

The above table does not include certain long-term obligations as the timing or the amount of the payments cannot be predicted. For example, as of December 31, 2017, we have recorded $413 million for redeemable equity (see Note 11 to the accompanying consolidated financial statements), although we are unable to predict reasonably the ultimate amount or timing of any payment. The current portion of the liability for cash-settled share-based compensation awards was $12 million as of December 31, 2017. Additionally, reserves for unrecognized tax benefits have been excluded from the above table because we are unable to predict reasonably the ultimate amount or timing of settlement. Our unrecognized tax benefits totaled $189 million as of December 31, 2017.
The above table also does not include DCL's revolving credit facility that, during the year ended December 31, 2017, allowed DCL and certain designated foreign subsidiaries of DCL to borrow up to $2.5 billion, including a $100 million sublimit for the issuance of standby letters of credit and a $50 million sublimit for swingline loans. Borrowing capacity under this agreement is reduced by the outstanding borrowings under the commercial paper program discussed below. As of December 31, 2017, the revolving credit facility agreement provided for a maturity date of August 11, 2022 and the option for up to two additional 364-day renewal periods.
From time to time we may provide our equity method investees additional funding that has not been committed to as of December 31, 2017 based on unforeseen investee opportunities or cash flow needs. (See Note 4 to the accompanying consolidated financial statements.)


Long-term Debt
Principal payments on long-term debt reflect the repayment of our outstanding senior notes, at face value, assuming repayment will occur upon maturity. Interest payments on our outstanding senior notes are projected based on their contractual rate and maturity.
Capital Lease Obligations
We acquire satellite transponders and other equipment through multi-year capital lease arrangements. Principal payments on capital lease obligations reflect amounts due under our capital lease agreements. Interest payments on our outstanding capital lease obligations are based on the stated or implied rate in our capital lease agreements.
Operating Lease Obligations
We obtain office space and equipment under multi-year lease arrangements. Most operating leases are not cancelable prior to their expiration. Payments for operating leases represent the amounts due under the agreements assuming the agreements are not canceled prior to their expiration.
Purchase Obligations
Content purchase obligations include commitments and liabilities associated with third-party producers and sports associations for content that airs on our television networks. Production contracts generally require: purchase of a specified number of episodes; payments over the term of the license; and include both programs that have been delivered and are available for airing and programs that have not yet been produced or sporting events that have not yet taken place. If the content is ultimately never produced, our commitments expire without obligation. The commitments disclosed above exclude content liabilities recognized on the consolidated balance sheet. We expect to enter into additional production contracts and content licenses to meet our future content needs.
Other purchase obligations include agreements with certain vendors and suppliers for the purchase of goods and services whereby the underlying agreements are enforceable, legally binding and specify all significant terms. Significant purchase obligations include transmission services, television rating services, marketing research, employment contracts, equipment purchases, and information technology and other services. The Company has contracts that do not require the purchase of fixed or minimum quantities and generally may be terminated without penalty with a 30-day to 60-day advance notice, and are not included in the table above past the 30-day to 60-day advance notice period. Amounts related to employment contracts include base compensation and do not include compensation contingent on future events.
Put Rights
The Company has granted put rights related to certain consolidated subsidiaries. Harpo, Inc. ("Harpo"), GoldenTree Asset Management L.P. ("GoldenTree"), Hasbro Inc. ("Hasbro"), and Jupiter Telecommunications Co., Ltd. ("J:COM") have the right to require the Company to purchase the remaining noncontrolling interests in OWN, VTEN, Discovery Family and Discovery Japan, respectively. The Company recorded the value of the put rights for OWN, VTEN, Discovery Family and Discovery Japan as a component of redeemable noncontrolling interests in the amounts of $55 million, $120 million, $210 million and $27 million, respectively. (See Note 11 to the accompanying consolidated financial statements.)
Off-Balance Sheet Arrangements
We have no material off-balance sheet arrangements (as defined in Item 303(a)(4) of Regulation S-K) that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
RELATED PARTY TRANSACTIONS
In the ordinary course of business we enter into transactions with related parties, primarily our equity method investees and Liberty Media, Liberty Global, Liberty Interactive and Liberty Broadband (together, the "Liberty Entities"). Information regarding transactions and amounts with related parties is discussed in Note 19 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.


NEW ACCOUNTING AND REPORTING PRONOUNCEMENTS
We adopted certain accounting and reporting standards during 2017. Information regarding our adoption of new accounting and reporting standards is discussed in Note 2 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K and accompanying notes. Management considers an accounting policy to be critical if it is important to reporting our financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application. The development and selection of these critical accounting policies have been determined by management and the related disclosures have been reviewed with the Audit Committee of the Board of Directors of the Company. We consider policies relating to the following matters to be critical accounting policies:
Revenue recognition;
Goodwill and intangible assets;
Income taxes;
Content rights;
Equity-based compensation; and
Equity method investments.
With respect to our accounting policy for goodwill, we further supplement disclosures in Note 2 with the following:
Goodwill is allocated to our reporting units, which are our operating segments or one level below our operating segments (the component level). Reporting units are determined by the discrete financial information available for the component and whether it is regularly reviewed by segment management. Components are aggregated into a single reporting unit if they share similar economic characteristics. Our reporting units are as follows: U.S. Networks, Europe, Latin America, Asia and Education.
We evaluate our goodwill for impairment annually as of November 30 or earlier upon the occurrence of substantive unfavorable changes in economic conditions, industry trends, costs, cash flows, or ongoing declines in market capitalization. The impairment test requires judgment, including the identification of reporting units, the assignment of assets, liabilities and goodwill to reporting units, and the determination of fair value of each reporting unit if a quantitative test is performed. If we believe that as a result of our qualitative assessment it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, a quantitative impairment test is not required.
Consistent with our accounting policy, the Company performed a quantitative step 1 impairment test (comparison of fair value to carrying value) for each of its reporting units in 2016 which indicated limited headroom (the excess of fair value over carrying value) in the European reporting unit of 12%, while all other reporting units had headroom in excess of 40%. Given the limited headroom in the European reporting unit, the Company closely monitored its results during 2017 and again performed a quantitative impairment test of the European reporting unit as of November 30, 2017, which indicated a slight failure (approximately $100 million or 3% deficit). The key factors resulting in the impairment include: 1) moderated revenue expectations based on continued declines in viewership, 2) expected increases in content investment to service existing customers and grow the Company's direct-to-consumer business, and 3) lower stock price multiples for peer media companies. Given the results of the step 1 impairment test, the Company applied the hypothetical purchase price analysis required by the step 2 test and recognized a pre-tax goodwill impairment charge of $1.3 billion as of November 30, 2017, for the European reporting unit. The impairment charge of $1.3 billion significantly exceeds the deficit of fair value to carrying value of approximately $100 million because of significant intangible assets that are not recognized on our balance sheet (i.e., excluded from book carrying value) but are considered in the step 2 calculation on a fair value basis. The step 1 and step 2 tests and relevant assumptions are further discussed below. For our US Networks, Latin, Asia and Education reporting units, we performed a qualitative goodwill impairment review in 2017. No factors were identified indicating a need for a quantitative assessment.
For the 2017 step 1 test, the carrying value of the European reporting unit of $4.0 billion, which includes $2.4 billion of goodwill, exceeded its fair value of $3.9 billion by 3%. In performing the step 1 test, we determined the fair value of our European reporting unit by using a combination of discounted cash flow (“DCF”) analyses and market-based valuation methodologies. The results of these valuation methodologies were weighted 75% towards the DCF and 25% towards the market-based approach, which


is consistent with prior quantitative analyses. Significant judgments and assumptions used in the DCF and market-based model to assess the reporting unit's fair value include the amount and timing of expected future cash flows, long-term growth rates of 2.5% (compared with 3% in 2016), a discount rate of 9.75% (compared with 10.5% in 2016), and our selection of guideline company earnings multiples of 7.5 (compared with 9.5 in 2016). The cash flows employed in the DCF analysis for the European reporting unit are based on the reporting unit's budget and long-term business plan, which reflect our expectations based upon recent operating performance. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting unit and market conditions. Given the inherent uncertainty in determining the assumptions underlying a DCF analysis, actual results may differ from those used in our valuations.
The net assets assigned to the European reporting unit included corporate allocations. These assets and liabilities include corporate enterprise goodwill and intangible assets, allocated in prior periods based on the relative fair value of the European reporting unit at the time, and deferred taxes and content, allocated based on whether or not the jurisdiction gave rise to the deferred tax balance or is using the content asset.
In the second step of the impairment test, we hypothetically assigned the European reporting unit's fair value to its individual assets and liabilities, including significant unrecognized intangible assets such as customer relationships and trade names, or liabilities, in a hypothetical purchase price allocation that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a business combination. Since the implied fair value of the reporting unit's goodwill was less than the carrying value, the difference was recorded as an impairment charge. The fair value estimates incorporated in step 2 for the hypothetical intangible assets were based on the excess earnings income approach for customer relationships, the relief-from-royalty method for trademarks, and the greenfield approach for broadcast licenses. Key judgments made by management in step 2 of the impairment test included revenue growth rates, length of contract term, number of renewals, customer attrition rates, market-based royalty rates, and market based tax rates. The valuation of advertising relationships assumed an attrition rate of 10%, affiliate relationships assumed three contract renewals, each with a four year term, per customer and trade names assumed royalty rates ranging from 2% to 5%. Other assumptions used in these hypothetical calculations had a less significant impact on the concluded fair value or were subject to less significant estimation or judgment. None of these hypothetical calculations for unrecorded intangibles were recorded in the consolidated financial statements.
As of the goodwill testing date, the carrying value of remaining goodwill assigned to the European reporting unit was $1.1 billion and the net assets of the reporting unit were approximately $2.7 billion, which results in headroom based on the estimated fair value of $3.9 billion.
See Note 8 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for the key factors underlying these charges.
Management will continue to monitor reporting units for changes in the business environment that could impact recoverability. The recoverability of goodwill is dependent upon the continued growth of cash flows from our business activities. See Item 1A, "Risk Factors" for details on all significant risks that could impact the Company's ability to successfully grow its cash flows.
For an in depth discussion of each of our significant accounting policies, including our critical accounting policies and further information regarding estimates and assumptions involved in their application, see Note 2 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.


ITEM 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Page
6962
7063
65
Consolidated Balance Sheets as of December 31, 2017 and 2016..
7265
Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015..
7366
Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2017, 2016 and 2015.(Loss).
7467
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015..
7568
Consolidated Statements of Equity for the Years Ended December 31, 2017, 2016 and 2015..
7669
Notes to Consolidated Financial Statements.
7770



61

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Discovery, Communications, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) of the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and provide reasonable assurance that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of the inherent limitations in any internal control, no matter how well designed, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s system of internal control over financial reporting as of December 31, 20172021 based on the framework set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation, management concluded that, as of December 31, 2017,2021, the Company’s internal control over financial reporting was effective at a reasonable assurance level based on the specified criteria.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 20172021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report in Item 8 of Part II of this Annual Report on Form 10-K under the caption “Report of Independent Registered Public Accounting Firm.”


62
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of Independent Registered Public Accounting Firm
To the Board of Directors and
the Stockholders of Discovery, Communications, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Discovery, Communications, Inc. and its subsidiaries (the “Company”) as of December 31, 20172021 and 2016,2020, and the related consolidated statements of operations, of comprehensive income (loss) income,, of equity and of cash flows for each of the three years in the period ended December 31, 2017,2021, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2021 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172021 and 2016, 2020, and the results of theirits operations and theirits cash flows for each of the three years in the period ended December 31, 20172021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.

Changes in Accounting Principles
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for goodwill impairment and content in 2020, and the manner in which it accounts for leases in 2019.
Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Overover Financial Reporting. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.






63

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Certain Reserves for Uncertain Tax Positions

As described in Notes 2 and 18 to the consolidated financial statements, the Company’s reserves for uncertain tax positions were $420 million as of December 31, 2021. Management establishes a reserve for uncertain tax positions unless management determines that such positions are more likely than not to be sustained upon examination based on their technical merits, including the resolution of any appeals or litigation processes. As disclosed by management, significant judgment is exercised in evaluating all relevant information, the technical merits of the tax positions, and the accurate measurement of uncertain tax positions when determining the amount of the reserve and whether positions taken on the Company’s tax returns are more likely than not to be sustained. This also involves the use of significant estimates and assumptions with respect to the potential outcome of positions taken on tax returns that may be reviewed by tax authorities.

The principal considerations for our determination that performing procedures relating to certain reserves for uncertain tax positions is a critical audit matter are (i) the significant judgment by management when determining certain reserves for uncertain tax positions, including a high degree of estimation uncertainty when determining the reserves and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to management’s determination of certain reserves for uncertain tax positions, the technical merits of the tax positions, and the accurate measurement of the uncertain tax positions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the recognition, measurement, and completeness of uncertain tax positions. These procedures also included, among others (i) testing the information used in the determination of certain reserves for uncertain tax positions, including international and federal filing positions and the related final tax returns; (ii) testing the calculation of the liability for certain reserves for uncertain tax positions by jurisdiction, including evaluating management’s assessment of the technical merits of tax positions and estimates of the amount of tax benefit expected to be sustained, as well as the likelihood of the possible estimated outcome; (iii) for certain uncertain tax positions, testing the completeness of management’s assessment and possible outcomes, and (iv) evaluating the status and results of income tax audits with the relevant tax authorities.

/s/ PricewaterhouseCoopers LLP

McLean, VirginiaWashington, District of Columbia
February 28, 201824, 2022


We have served as the Company’s auditor since 2008.

64



DISCOVERY, COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)



December 31,
20212020
ASSETS
Current assets:
Cash and cash equivalents$3,905 $2,091 
Receivables, net2,446 2,537 
Content rights and prepaid license fees, net245 532 
Prepaid expenses and other current assets668 970 
Total current assets7,264 6,130 
Noncurrent content rights, net3,832 3,439 
Property and equipment, net1,336 1,206 
Goodwill12,912 13,070 
Intangible assets, net6,317 7,640 
Equity method investments543 507 
Other noncurrent assets2,223 2,095 
Total assets$34,427 $34,087 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$412 $397 
Accrued liabilities2,230 1,793 
Deferred revenues478 557 
Current portion of debt339 335 
Total current liabilities3,459 3,082 
Noncurrent portion of debt14,420 15,069 
Deferred income taxes1,225 1,534 
Other noncurrent liabilities1,927 2,019 
Total liabilities21,031 21,704 
Commitments and contingencies (See Note 22)00
Redeemable noncontrolling interests363 383 
Equity:
Discovery, Inc. stockholders’ equity:
Series A-1 convertible preferred stock: $0.01 par value; 8 shares authorized, issued and outstanding— — 
Series C-1 convertible preferred stock: $0.01 par value; 6 shares authorized; 4 shares issued and outstanding and 5 shares issued and outstanding— — 
Series A common stock: $0.01 par value; 1,700 shares authorized; 170 and 163 shares issued; and 169 and 162 shares outstanding2 2 
Series B convertible common stock: $0.01 par value; 100 shares authorized; 7 shares issued and outstanding— — 
Series C common stock: $0.01 par value; 2,000 shares authorized; 559 and 547 shares issued; and 330 and 318 shares outstanding5 5 
Additional paid-in capital11,086 10,809 
Treasury stock, at cost: 230 shares(8,244)(8,244)
Retained earnings9,580 8,543 
Accumulated other comprehensive loss(830)(651)
Total Discovery, Inc. stockholders’ equity11,599 10,464 
Noncontrolling interests1,434 1,536 
Total equity13,033 12,000 
Total liabilities and equity$34,427 $34,087 
The accompanying notes are an integral part of these consolidated financial statements.


65
  December 31,
  2017 2016
ASSETS    
Current assets:    
Cash and cash equivalents $7,309
 $300
Receivables, net 1,838
 1,495
Content rights, net 410
 310
Prepaid expenses and other current assets 434
 397
Total current assets 9,991
 2,502
Noncurrent content rights, net 2,213
 2,089
Property and equipment, net 597
 482
Goodwill, net 7,073
 8,040
Intangible assets, net 1,770
 1,512
Equity method investments (See Note 4) 335
 557
Other noncurrent assets 576
 490
Total assets $22,555
 $15,672
LIABILITIES AND EQUITY    
Current liabilities:    
Accounts payable $277
 $241
Accrued liabilities 1,309
 1,075
Deferred revenues 255
 163
Current portion of debt 30
 82
Total current liabilities 1,871
 1,561
Noncurrent portion of debt 14,755
 7,841
Deferred income taxes 319
 467
Other noncurrent liabilities 587
 393
Total liabilities 17,532
 10,262
Commitments and contingencies (See Note 20) 
 
Redeemable noncontrolling interests 413
 243
Equity:    
Discovery Communications, Inc. stockholders’ equity:    
Series A-1 convertible preferred stock: $0.01 par value; 8 authorized; 8 shares issued as of December 31, 2017 (formerly Series A convertible preferred stock: $0.01 par value; 75 authorized; 71 issued as of December 31, 2016) —
 1
Series C-1 convertible preferred stock: $0.01 par value; 6 authorized; 6 shares issued as of December 31, 2017 (formerly Series C convertible preferred stock: $0.01 par value; 75 authorized; 28 issued as of December 31, 2016) —
 1
Series A common stock: $0.01 par value; 1,700 shares authorized; 157 and 155 shares issued 1
 1
Series B convertible common stock: $0.01 par value; 100 shares authorized; 7 shares issued —
 —
Series C common stock: $0.01 par value; 2,000 shares authorized; 383 and 381 shares issued 4
 4
Additional paid-in capital 7,295
 7,046
Treasury stock, at cost (6,737) (6,356)
Retained earnings 4,632
 5,232
Accumulated other comprehensive loss (585) (762)
Total equity 4,610
 5,167
Total liabilities and equity $22,555
 $15,672
The accompanying notes are an integral part of these consolidated financial statements.


DISCOVERY, COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)

Year Ended December 31,
202120202019
Revenues:
Advertising$6,215 $5,583 $6,044 
Distribution5,409 4,866 4,835 
Other567 222 265 
Total revenues12,191 10,671 11,144 
Costs and expenses:
Costs of revenues, excluding depreciation and amortization4,620 3,860 3,819 
Selling, general and administrative4,016 2,722 2,788 
Depreciation and amortization1,582 1,359 1,347 
Impairment of goodwill and other intangible assets— 124 155 
Restructuring and other charges32 91 26 
Gain on disposition(71)— — 
Total costs and expenses10,179 8,156 8,135 
Operating income2,012 2,515 3,009 
Interest expense, net(633)(648)(677)
Loss on extinguishment of debt(10)(76)(28)
Loss from equity investees, net(18)(105)(2)
Other income (expense), net82 42 (8)
Income before income taxes1,433 1,728 2,294 
Income tax expense(236)(373)(81)
Net income1,197 1,355 2,213 
Net income attributable to noncontrolling interests(138)(124)(128)
Net income attributable to redeemable noncontrolling interests(53)(12)(16)
Net income available to Discovery, Inc.$1,006 $1,219 $2,069 
Net income per share available to Discovery, Inc. Series A, B and C common stockholders:
Basic$1.55 $1.82 $2.90 
Diluted$1.54 $1.81 $2.88 
Weighted average shares outstanding:
Basic503 505 529 
Diluted664 672 711 
The accompanying notes are an integral part of these consolidated financial statements.


66
  Year Ended December 31,
  2017 2016 2015
Revenues:      
Distribution $3,474
 $3,213
 $3,068
Advertising 3,073
 2,970
 3,004
Other 326
 314
 322
Total revenues 6,873
 6,497
 6,394
Costs and expenses:      
Costs of revenues, excluding depreciation and amortization 2,656
 2,432
 2,343
Selling, general and administrative 1,768
 1,690
 1,669
Impairment of goodwill 1,327
 —
 —
Depreciation and amortization 330
 322
 330
Restructuring and other charges 75
 58
 50
Loss (gain) on disposition 4
 (63) 17
Total costs and expenses 6,160
 4,439
 4,409
Operating income 713
 2,058
 1,985
Interest expense (475) (353) (330)
Loss on extinguishment of debt (54) —
 —
(Loss) income from equity investees, net (211) (38) 1
Other (expense) income, net (110) 4
 (97)
(Loss) income before income taxes (137) 1,671
 1,559
Income tax expense (176) (453) (511)
Net (loss) income (313) 1,218
 1,048
Net income attributable to noncontrolling interests —
 (1) (1)
Net income attributable to redeemable noncontrolling interests (24) (23) (13)
Net (loss) income available to Discovery Communications, Inc. $(337) $1,194
 $1,034
Net (loss) income per share available to Discovery Communications, Inc. Series A, B and C common stockholders:      
Basic $(0.59) $1.97
 $1.59
Diluted $(0.59) $1.96
 $1.58
Weighted average shares outstanding:      
Basic 384
 401
 432
Diluted 576
 610
 656
The accompanying notes are an integral part of these consolidated financial statements.


DISCOVERY, COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) INCOME
(in millions)

Year Ended December 31,
202120202019
Net income$1,197 $1,355 $2,213 
Other comprehensive income (loss) adjustments, net of tax:
Currency translation(290)292 (15)
Pension plan and SERP2 (8)(10)
Derivatives109 (113)18 
Comprehensive income1,018 1,526 2,206 
Comprehensive income attributable to noncontrolling interests(138)(124)(127)
Comprehensive income attributable to redeemable noncontrolling interests(53)(12)(17)
Comprehensive income attributable to Discovery, Inc.$827 $1,390 $2,062 
The accompanying notes are an integral part of these consolidated financial statements.


67
  Year Ended December 31,
  2017 2016 2015
Net (loss) income $(313) $1,218
 $1,048
Other comprehensive income (loss) adjustments, net of tax:      
Currency translation 183
 (191) (201)
Available-for-sale securities 15
 38
 (25)
Derivatives (20) 24
 (1)
Comprehensive (loss) income (135) 1,089
 821
Comprehensive income attributable to noncontrolling interests —
 (1) (1)
Comprehensive (income) loss attributable to redeemable noncontrolling interests (25) (23) 10
Comprehensive (loss) income attributable to Discovery Communications, Inc. $(160) $1,065
 $830
The accompanying notes are an integral part of these consolidated financial statements.


DISCOVERY, COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)

 Year Ended December 31,
 202120202019
Operating Activities
Net income$1,197 $1,355 $2,213 
Adjustments to reconcile net income to cash provided by operating activities:
Content rights amortization and impairment3,501 2,956 2,853 
Depreciation and amortization1,582 1,359 1,347 
Deferred income taxes(511)(186)(504)
Equity in losses of equity method investee companies and cash distributions63 167 62 
Loss on extinguishment of debt10 76 28 
Share-based compensation expense178 110 142 
Impairment of goodwill and other intangible assets— 124 155 
Gain on sale of investments(19)(103)(10)
(Gain) loss on disposition(71)2 — 
Other, net105 (22)86 
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Receivables, net47 105 (7)
Content rights and payables, net(3,381)(3,053)(3,060)
Accounts payable, accrued liabilities, deferred revenues and other noncurrent liabilities185 (131)122 
Foreign currency, prepaid expenses and other assets, net(88)(20)(28)
Cash provided by operating activities2,798 2,739 3,399 
Investing Activities
Purchases of property and equipment(373)(402)(289)
Purchases of investments(103)(250)— 
Investments in and advances to equity investments(184)(181)(254)
Proceeds from sales and maturities of investments and dissolution of joint venture599 69 125 
Business acquisitions, net of cash acquired(2)(39)(73)
(Payments for) proceeds from derivative instruments, net(86)85 54 
Other investing activities, net93 15 (1)
Cash used in investing activities(56)(703)(438)
Financing Activities
Principal repayments of debt, including premiums to par value and discount payment(574)(2,193)(2,658)
Borrowings from debt, net of discount and issuance costs— 1,979 1,479 
Repurchases of stock— (969)(633)
Principal repayments of revolving credit facility— (500)(225)
Borrowings under revolving credit facility— 500 — 
Distributions to noncontrolling interests and redeemable noncontrolling interests(251)(254)(250)
Other financing activities, net(28)(112)(70)
Cash used in financing activities(853)(1,549)(2,357)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(106)83 (38)
Net change in cash, cash equivalents, and restricted cash1,783 570 566 
Cash, cash equivalents, and restricted cash, beginning of period2,122 1,552 986 
Cash, cash equivalents, and restricted cash, end of period$3,905 $2,122 $1,552 
The accompanying notes are an integral part of these consolidated financial statements.

68
  Year Ended December 31,
  2017 2016 2015
Operating Activities      
Net (loss) income $(313) $1,218
 $1,048
Adjustments to reconcile net (loss) income to cash provided by operating activities:      
Share-based compensation expense 39
 69
 35
Depreciation and amortization 330
 322
 330
Content amortization and impairment expense 1,910
 1,773
 1,709
Impairment of goodwill 1,327
 —
 —
Loss (gain) on disposition 4
 (63) 17
Remeasurement gain on previously held equity interest (34) —
 (2)
Equity in losses of investee companies, net of cash distributions 223
 44
 8
Deferred income taxes (199) (27) 2
Loss on extinguishment of debt 54
 —
 —
Realized loss from derivative instruments, net 98
 3
 5
Other-than-temporary impairment of AFS investments —
 62
 —
Other, net 85
 50
 35
Changes in operating assets and liabilities, net of acquisitions and dispositions:      
Receivables, net (258) (25) (44)
Content rights and payables, net (1,947) (1,904) (1,773)
Accounts payable and accrued liabilities 265
 (10) (2)
Income taxes receivable and prepaid income taxes 20
 (31) (64)
Foreign currency and other, net 25
 (101) (10)
Cash provided by operating activities 1,629
 1,380
 1,294
Investing Activities      
Payments for investments (444) (272) (272)
Purchases of property and equipment (135) (88) (103)
Distributions from equity method investees 77
 87
 87
Proceeds from dispositions, net of cash disposed 29
 19
 61
Payments for derivative instruments, net (101) —
 (9)
Business acquisitions, net of cash acquired (60) —
 (80)
Other investing activities, net 1
 (2) 15
Cash used in investing activities (633) (256) (301)
Financing Activities      
Commercial paper repayments, net (48) (45) (136)
Borrowings under revolving credit facility 350
 613
 1,016
Principal repayments of revolving credit facility (475) (835) (265)
Borrowings from debt, net of discount and including premiums 7,488
 498
 936
Principal repayments of debt, including discount payment and premiums to par value (650) —
 (854)
Payments for bridge financing commitment fees (40) —
 —
Principal repayments of capital lease obligations (33) (28) (27)
Repurchases of stock (603) (1,374) (951)
Cash settlement (prepayments) of common stock repurchase contracts 58
 (57) —
Purchase of redeemable noncontrolling interests —
 —
 (548)
Distributions to redeemable noncontrolling interests (30) (22) (42)
Share-based plan proceeds (payments), net 16
 39
 (6)
Hedge of borrowings from debt instruments —
 40
 (29)
Other financing activities, net (82) (13) (13)
Cash provided by (used in) financing activities 5,951
 (1,184) (919)
Effect of exchange rate changes on cash and cash equivalents 62
 (30) (51)
Net change in cash and cash equivalents 7,009
 (90) 23
Cash and cash equivalents, beginning of period 300
 390
 367
Cash and cash equivalents, end of period $7,309
 $300
 $390
The accompanying notes are an integral part of these consolidated financial statements.


DISCOVERY, COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in millions)

Preferred StockCommon StockAdditional
Paid-In
Capital		Treasury
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Discovery,
Inc. Stockholders’
Equity		Noncontrolling
Interests		Total
Equity
SharesPar ValueSharesPar Value
December 31, 201814 $— 691 $7 $10,647 $(6,737)$5,254 $(785)$8,386 $1,716 $10,102 
Cumulative effect of accounting changes— — — — — — 34 (30)4 — 4 
Net income available to Discovery, Inc. and attributable to noncontrolling interests— — — — — — 2,069 — 2,069 128 2,197 
Other comprehensive loss— — — — — — — (7)(7)— (7)
Preferred stock conversion(1)— 22 — — — — — — — — 
Share-based compensation— — — — 73 — — — 73 — 73 
Repurchases of stock— — — — — (637)— — (637)— (637)
Settlement of common stock repurchase contract— — — — 5 — — — 5 — 5 
Tax settlements associated with share-based plans— — — — (22)— — — (22)— (22)
Dividends paid to noncontrolling interests— — — — — — — — — (211)(211)
Issuance of stock in connection with share-based plans— — 2 — 44 — — — 44 — 44 
Redeemable noncontrolling interest adjustments to redemption value— — — — — — (24)— (24)— (24)
December 31, 201913 — 715 7 10,747 (7,374)7,333 (822)9,891 1,633 11,524 
Cumulative effect of an accounting change— — — — — — 2 — 2 — 2 
Cumulative effect of accounting changes of an equity method investee— — — — — — (3)— (3)— (3)
Net income available to Discovery, Inc. and attributable to noncontrolling interests— — — — — — 1,219 — 1,219 124 1,343 
Other comprehensive income— — — — — — — 171 171 — 171 
Share-based compensation— — — — 94 — — — 94 — 94 
Repurchases of stock— — — — — (965)— — (965)— (965)
Tax settlements associated with share-based plans— — — — (32)— — — (32)— (32)
Equity exchange with Harpo for step acquisition of OWN (See Note 11)— — — — (45)95 9 — 59 — 59 
Dividends paid to noncontrolling interests— — — — — — — — — (223)(223)
Issuance of stock in connection with share-based plans— — 2 — 43 — — — 43 — 43 
Redeemable noncontrolling interest adjustments to redemption value— — — — — — (17)— (17)— (17)
Other adjustments to stockholders' equity— — — — 2 — — — 2 2 4 
December 31, 202013 — 717 7 10,809 (8,244)8,543 (651)10,464 1,536 12,000 
Net income available to Discovery, Inc. and attributable to noncontrolling interests— — — — — — 1,006 — 1,006 138 1,144 
Other comprehensive loss— — — — — — — (179)(179)— (179)
Share-based compensation— — — — 158 — — — 158 — 158 
Preferred stock conversion(1)— 11 — — — — — — — — 
Tax settlements associated with share-based plans— — — — (71)— — — (71)— (71)
Dividends paid to noncontrolling interests— — — — — — — — — (240)(240)
Issuance of stock in connection with share-based plans— — 8 — 198 — — — 198 — 198 
Redeemable noncontrolling interest adjustments to redemption value— — — — (8)— 31 — 23 — 23 
December 31, 202112 $— 736 $7 $11,086 $(8,244)$9,580 $(830)$11,599 $1,434 $13,033 
The accompanying notes are an integral part of these consolidated financial statements.

69
  Preferred Stock Common Stock Additional
Paid-In
Capital		 Treasury
Stock		 Retained
Earnings		 Accumulated
Other
Comprehensive
Loss		 Discovery
Communications,
Inc. Stockholders’
Equity		 Noncontrolling
Interests		 Total
Equity
  Shares Par Value Shares Par Value       
December 31, 2014 113
 $2
 533
 $5
 $6,917
 $(4,763) $3,809
 $(368) $5,602
 $2
 $5,604
Net income available to Discovery Communications, Inc. and attributable to noncontrolling interests

 —
 —
 —
 —
 —
 —
 1,034
 —
 1,034
 1
 1,035
Other comprehensive loss —
 —
 —
 —
 —
 —
 —
 (204) (204) —
 (204)
Repurchases of stock (4) —
 —
 —
 —
 (698) (253) —
 (951) —
 (951)
Share-based compensation —
 —
 —
 —
 39
 —
 —
 —
 39
 —
 39
Excess tax benefits from share-based compensation —
 —
 —
 —
 12
 —
 —
 —
 12
 —
 12
Tax settlements associated with share-based compensation —
 —
 —
 —
 (27) —
 —
 —
 (27) —
 (27)
Issuance of stock in connection with share-based plans —
 —
 3
 —
 21
 —
 —
 —
 21
 —
 21
Other adjustments for equity-based plans —
 —
 —
 —
 (2) —
 —
 —
 (2) —
 (2)
Redeemable noncontrolling interest adjustments to redemption value —
 —
 —
 —
 —
 —
 (73) —
 (73) —
 (73)
Purchase of redeemable noncontrolling interest —
 —
 —
 —
 61
 —
 —
 (61) —
 —
 —
Other adjustments to stockholders' equity —
 —
 —
 —
 —
 —
 —
 —
 —
 (3) (3)
December 31, 2015 109
 2
 536
 5
 7,021
 (5,461) 4,517
 (633) 5,451
 —
 5,451
Net income available to Discovery Communications, Inc. and attributable to noncontrolling interests

 —
 —
 —
 —
 —
 —
 1,194
 —
 1,194
 1
 1,195
Other comprehensive loss —
 —
 —
 —
 —
 —
 —
 (129) (129) —
 (129)
Repurchases of stock and stock settlement of common stock repurchase contracts (9) —
 —
 —
 —
 (895) (479) —
 (1,374) —
 (1,374)
Prepayments for common stock repurchase contracts —
 —
 —
 —
 (57) —
 —
 —
 (57) —
 (57)
Share-based compensation —
 —
 —
 —
 35
 —
 —
 —
 35
 —
 35
Excess tax benefits from share-based compensation —
 —
 —
 —
 7
 —
 —
 —
 7
 —
 7
Tax settlements associated with share-based compensation —
 —
 —
 —
 (11) —
 —
 —
 (11) —
 (11)
Issuance of stock in connection with equity-based plans —
 —
 5
 —
 51
 —
 —
 —
 51
 —
 51
Cash distributions to noncontrolling interests —
 —
 —
 —
 —
 —
 —
 —
 —
 (1) (1)
Share conversion (1) —
 2
 —
 —
 —
 —
 —
 —
 —
 —
December 31, 2016 99
 2
 543
 5
 7,046
 (6,356) 5,232
 (762) 5,167
 —
 5,167
Net loss available to Discovery Communications, Inc. and attributable to noncontrolling interests —
 —
 —
 —
 —
 —
 (337) —
 (337) —
 (337)
Cumulative effect of accounting change - share-based payments —
 —
 —
 —
 4
 —
 (4) —
 —
 —
 —
Other comprehensive loss —
 —
 —
 —
 —
 —
 —
 177
 177
 —
 177
Preferred stock modification (82) (2) —
 —
 37
 —
 —
 —
 35
 —
 35
Repurchases of stock (3) —
 —
 —
 —
 (381) (222) —
 (603) —
 (603)
Excess of fair value received over book value of equity contributed to redeemable noncontrolling interest in Velocity —
 —
 —
 —
 57
 —
 —
 —
 57
 —
 57
Cash settlement of common stock repurchase contracts —
 —
 —
 —
 58
 —
 —
 —
 58
 —
 58
Share-based compensation —
 —
 —
 —
 44
 —
 —
 —
 44
 —
 44
Tax settlements associated with share-based compensation —
 —
 (1) —
 (30) —
 —
 —
 (30) —
 (30)
Issuance of stock in connection with share-based plans —
 —
 5
 —
 79
 —
 1
 —
 80
 —
 80
Redeemable noncontrolling interest adjustments to redemption value —
 —
 —
 —
 —
 —
 (38) —
 (38) —
 (38)
December 31, 2017 14
 $—
 547
 $5
 $7,295
 $(6,737) $4,632
 $(585) $4,610
 $—
 $4,610
The accompanying notes are an integral part of these consolidated financial statements.

DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
We areDiscovery, Inc. (“Discovery”, the “Company”, "we", "us" or "our") is a global media company that provides content across multiple distribution platforms, including linear platforms such as pay-television ("pay-TV"), free-to-air ("FTA") and broadcast television, variousauthenticated GO applications, digital distribution platforms andarrangements, content licensing agreements. We also operate a portfolio of websites, digitalarrangements and direct-to-consumer products, production studios and curriculum-based education products and services.("DTC") subscription products. In January 2021, the Company launched discovery+, its aggregated DTC product, in the U.S. across several streaming platforms. The Company presents the following business units:also operates production studios. The Company has organized its operations into 2 reportable segments: U.S. Networks, consisting principally of domestic television networks and digital content services, and International Networks, consisting principallyprimarily of international television networks and digital content services; and Education and Other, consisting principally of curriculum-based product and service offerings and production studios. Financial information for Discovery’s reportable segments is discussed in Note 21.services.
Basis of PresentationConsolidation
The consolidated financial statements include the accounts of Discovery and its majority-owned subsidiaries in which a controlling interest is maintained.maintained, including variable interest entities ("VIE") for which the Company is the primary beneficiary. For each non-wholly owned subsidiary, the Company evaluates its ownership and other interests to determine whether it should consolidate the entity or account for its ownership interest as an unconsolidated investment. As part of its evaluation, the Company makes judgments in determining whether the entity is a variable interest entity ("VIE")VIE and, if so, whether it is the primary beneficiary of the VIE and is thus required to consolidate the entity. (See Note 4.) Inter-companyIf it is concluded that an entity is not a VIE, then the Company considers its proportional voting interests in the entity. The Company consolidates majority-owned subsidiaries in which a controlling financial interest is maintained. A controlling financial interest is determined by majority ownership and the absence of significant third-party participating rights. Ownership interests in entities for which the Company has significant influence that are not consolidated are accounted for as equity method investments.
Intercompany accounts and transactions between consolidated entities have been eliminatedeliminated.
Use of Estimates
The preparation of financial statements in consolidation.accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from these estimates.
Significant estimates and judgments inherent in the preparation of the consolidated financial statements include accounting for asset impairments, revenue recognition, estimated credit losses, content rights, leases, depreciation and amortization, business combinations, share-based compensation, income taxes, other financial instruments, contingencies, and the determination of whether the Company should consolidate certain entities.
Impact of COVID-19
On March 11, 2020, the World Health Organization declared the coronavirus disease 2019 (“COVID-19”) outbreak to be a global pandemic. COVID-19 has continued to spread throughout the world, and the duration and severity of its effects and associated economic disruption remain uncertain. We continue to closely monitor the impact of COVID-19 on all aspects of our business and geographies, including the impact on our customers, employees, suppliers, vendors, distribution and advertising partners, production facilities, and various other third parties.
Beginning in the second quarter of 2020, demand for the Company’s advertising products and services decreased due to economic disruptions from limitations on social and commercial activity. These economic disruptions and the resulting effect on the Company eased during the second half of 2020. The pandemic did not have a significant impact on demand during fiscal year 2021. Many of the Company’s third-party production partners that were shut down during most of the second quarter of 2020 due to COVID-19 restrictions came back online in the third quarter of 2020 and, as a result, the Company has incurred additional costs to comply with various governmental regulations and implement certain safety measures for the Company's employees, talent, and partners.Additionally, certain sporting events that the Company has rights to were cancelled or postponed, thereby eliminating or deferring the related revenues and expenses, including the Tokyo 2020 Olympic Games, which occurred in July and August 2021. The postponement of the 2020 Olympic Games deferred both Olympic-related revenues and significant expenses from fiscal year 2020 to fiscal year 2021.
70
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In response to the impact of the pandemic, we employed innovative production and programming strategies, including producing content filmed by our on-air talent and seeking viewer feedback on which content to air. We pursued a number of cost savings initiatives, which began during the third quarter of 2020 through the implementation of travel, marketing, production and other operating cost reductions, including personnel reductions, restructurings and resource reallocations to align our expense structure to ongoing changes within the industry.
The full extent of COVID-19’s effects on our operations and results is not yet known and will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity and the extent of future surges of COVID-19, vaccine distribution and other actions to contain the virus or treat its impact, among others. We will continue to monitor COVID-19 and its impact on our business results and financial condition. The consolidated financial statements set forth in this Annual Report on Form 10-K reflect management’s latest estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures as of the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. Actual results may differ significantly from these estimates and assumptions.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ReclassificationsForeign Currency
The reporting currency of the Company is the U.S. dollar. The functional currency of most of the Company’s international subsidiaries is the local currency. Financial statements of subsidiaries whose functional currency is not the U.S. dollar are translated at exchange rates in effect at the balance sheet date for assets and liabilities and at average exchange rates for revenues and expenses for the respective periods. Translation adjustments are recorded in accumulated other comprehensive loss. Cash flows from the Company's operations in foreign countries are generally translated at the weighted average rate for the applicable period in the consolidated statements of cash flows.
The Company adopted new accounting guidance for share-based payments, deferred income taxesis exposed to foreign currency risk to the extent that it enters into transactions denominated in currencies other than its subsidiaries’ respective functional currencies. Transactions denominated in currencies other than subsidiaries’ functional currencies are recorded based on exchange rates at the time such transactions arise. Such transactions include affiliate and statements of cash flows as of January 1, 2017. The adoption of the new guidance for deferred income taxes resultedad sales arrangements, content arrangements, equipment and other vendor purchases and intercompany transactions. Changes in reclassifications of current deferred tax assetsexchange rates with respect to noncurrent deferred tax assets and liabilitiesamounts recorded in the Company's consolidated balance sheet as of December 31, 2016sheets related to conform to the current period presentation.these items will result in unrealized foreign currency transaction gains and losses based upon period-end exchange rates. The impact of these reclassifications is shown within the balance sheet classificationCompany also records realized foreign currency transaction gains and losses upon settlement of the deferredtransactions. Foreign currency transaction gains and losses resulting from the conversion of the transaction currency to functional currency are included in other income taxes section below.(expense), net.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of 90 days or less.
Receivables
Receivables include amounts billed and currently due from customers and are presented net of an estimate for credit losses. To assess collectability, the Company analyzes market trends, economic conditions, historical collection experience, the aging of receivables and customer specific risks, and reserves an amount that it estimates may not be collected. The new accounting pronouncements adoptedCompany does not require collateral with respect to trade receivables.
Content Rights
Content rights principally consist of television series, specials, films and sporting events. Content aired on the Company’s television networks and digital content offerings is sourced from a wide range of third-party producers, wholly-owned and equity method investee production studios, and sports associations. Content is classified either as produced, coproduced or licensed.
The Company owns most or all of the rights to produced content. The Company collaborates with third parties to finance and develop coproduced content, and it retains significant rights to exploit the programs. Prepaid licensed content includes advance payments for share-based payments resultedrights to air sporting events that will take place in the reclassificationfuture and advance payments for acquired films and television series.
Costs of net tax windfall from financing activities to operating activities inproduced and coproduced content consist of development costs, acquired production costs, direct production costs, certain production overhead costs and participation costs. The Company’s coproduction arrangements generally provide for the consolidated statementsharing of cash flows.production costs. The impact of these reclassifications is shown withinCompany records its costs but does not record the share-based payments section below. The new accounting pronouncements adopted for cash flow statements resulted in a reclassification of debt extinguishment costs from operating activities to financing activities in the consolidated statement of cash flows. The impact of this reclassification is shown within the statement of cash flows section below.
Preferred Stock Exchange
As a result of the July 30, 2017, Preferred Share Exchange Agreement (the "Exchange Agreement") with Advance/Newhouse Programming Partnership ("Advance/Newhouse"), in which Discovery agreed to issue newly designated shares of Series A-1 and Series C-1 preferred stock in exchange for all outstanding shares of Discovery's Series A and Series C convertible participating preferred stock (see Note 12), historical basic and diluted earnings per share available to Series C-1 preferred stockholders, previously Series C preferred stockholders, has changed. The transactions contemplatedborne by the Exchange Agreement were completed on August 7, 2017. Prior to the Exchange Agreement, Series C convertible preferred stock was convertible into Series C common stock at a conversion rate of 2.0 shares of Series C common stock for each share of Series C preferred stock. Following the exchange, the Series C-1 preferred stock may be converted into Series C common stock at the initial conversion rate of 19.3648 shares of Series C common stock for each share of Series C-1 preferred stock. As such,other party as the Company has retrospectively recast basic and diluted earnings perdoes not share information for Series C preferred stock for the years ended December 31, 2016 and 2015 in order to conform with per share earnings that would have been available for Series C-1 preferred stock. (See Note 17). The Exchange Agreement did not impact historical basic and diluted earnings per share attributable to the Company's Series A, B and C common stockholders.

any associated economics of exploitation.

71
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The table below sets forthLicensed content is comprised of films or series that have been previously produced by third parties and the impactCompany does not own the rights. Program licenses typically have fixed terms and require payments during the term of the preferred stock modification tolicense. The cost of licensed content is capitalized when the Company's calculated basic earnings per share.
  Year Ended December 31,
  2016 2015
Pre-Exchange: Basic net income per share available to:    
   Series A, B and C common stockholders $1.97
 $1.59
   Series C-1 convertible preferred stockholders $3.94
 $3.18
     
Post-Exchange: Basic net income per share available to:    
     Series A, B and C common stockholders $1.97
 $1.59
     Series C-1 convertible preferred stockholders $38.07
 $30.74

Accounting and Reporting Pronouncements Adopted

Statement of Cash Flows
In November 2016,cost is known or reasonably determinable, the Financial Accounting Standard Board ("FASB") issued guidance that reduces diversity in practice in how certain cash receipts and cash payments are classified inlicense period for the statement of cash flows. The topics relevant toprograms has commenced, the program materials have been accepted by the Company include: (1) debt prepayment or debt extinguishment costs, which prior to adoption were classified as operating activities, butin accordance with the license agreements, and the programs are now classified as financing activities, (2) settlementavailable for the first showing. The Company pays in advance of delivery for television series, specials, films and receiptsports rights. Payments made in advance of discounts and premiums associated with our senior notes, which prior to adoption were classified as operating activities, but are now classified as financing activities when the stated interest rateright to air the content is deemed not insignificant toreceived are recognized as prepaid licensed content. Participation costs are expensed in line with the effective interest rateamortization of the borrowing, (3) contingent consideration payments not made soon after a business combination date, which must be classifiedproduction costs. Content distribution, advertising, marketing, general and administrative costs are expensed as financing activities up to the contingent consideration liability amount with any excess payment classified as operating activities, and (4) the election to assess distributions received from equity method investeesincurred.
Linear content amortization expense for each period is recognized based on the nature ofrevenue forecast model, which approximates the proportion that estimated distribution approach, which results in the classification of such distributions based on the nature of the activity that generated the distribution as either a return on investment (classified as cash inflows from operating activities) or a return of investment (classified as cash inflows from investing activities). The Company early adopted this guidance retrospectively effective January 1, 2017 resulting in a reclassification of $5 million of debt extinguishment costs from operating activities to financing activities in the consolidated statement of cash flowsand advertising revenues for the year ended December 31, 2015. There was no impact on other prior periods presented for the first and second items listed above and no change in the Company's historical accounting policy was required for the third and fourth items.
Share-Based Payments
In March 2016, the FASB issued guidance that simplifies how share-based payments are accounted for and presented in the financial statements. Implementation of the new accounting guidance was effective January 1, 2017, and impacted the financial statements as follows:
Actual forfeitures will be used in the calculations of share-based compensation expense instead of estimated forfeitures. Retained earnings were decreased by approximately $4 million to affect the modified retrospective method impact of the adoption as of January 1, 2017.
Net windfall tax benefits or deficiencies are recorded in income tax expense in thecurrent period in which they occur, whereas they were previously recorded in additional paid-in capital (“APIC”). This change has been applied prospectively. There were $7 million and $12 million in net tax windfall adjustments for the years ended December 31, 2016 and December 31, 2015, respectively.
Expected cash flows from windfall tax benefits are no longer factored into the calculation of the number of shares for diluted earnings per share. This change has been applied prospectively. Net windfall tax benefits did not impact the presentation of diluted earnings per share for the years ended December 31, 2016 and December 31, 2015 by more than $0.01 per share.
Cash flows from net windfall tax benefits are classified as operating activities in the statement of cash flows presentation. Previously net windfall tax benefits were classified as financing activities. This change was applied on a retrospective basis resulting in adjustments to prior period amounts. As a result, there were $7 million and $12 million in net tax windfall adjustments for the years ended December 31, 2016 and December 31, 2015, respectively, reclassified from financing activities to operating activities.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Company evaluated the accounting for awards that are liability-classified and marked-to-market each accounting period and concluded that there is no change to the accounting for those awards.
Balance Sheet Classification of Deferred Income Taxes
In November 2015, the FASB issued guidance that removes the requirement to separate deferred tax assets and liabilities into current and noncurrent amounts, and instead requires all such amounts be classified as noncurrent on the Company's consolidated balance sheets. As a result, each tax jurisdiction will now have only one net noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that prohibits offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The Company retrospectively adopted the new guidance effective January 1, 2017.
The following table summarizes the adjustments the Company made to conform prior period classifications to the new guidance:
  December 31, 2016
  As reported As adjusted
Current deferred income tax assets $97
 $—
Noncurrent deferred income tax assets (included within other noncurrent assets) 9
 20
Noncurrent deferred income tax liabilities (553) (467)
Total $(447) $(447)
Business Combinations
In September 2015, the FASB issued new guidance on adjustments to provisional amounts recognized in a business combination, which were recognized on a retrospective basis. Under the new requirements, adjustments will be recognized in the reporting period in which the adjustments are determined. The effects of changes in depreciation, amortization, or other income arising from changes to the provisional amounts, if any, are included in earnings of the reporting period in which the adjustments to the provisional amounts are determined. An entity is also required to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The Company adopted this guidance effective January 1, 2016 and has applied it on a prospective basis.
Accounting for Fees Paid in a Cloud Computing Arrangement
In April 2015, the FASB issued explicit guidance on the recognition of fees paid by a customer for cloud computing arrangements as either the acquisition of a software license or a service contract. The Company adopted this guidance effective October 1, 2015, and there was no effect on the consolidated financial statements.
Business Consolidation
In February 2015, the FASB issued guidance that amends the analysis that a reporting entity performs to determine whether it should consolidate certain legal entities. The changes in this guidance include how related parties and de facto agents are considered in the primary beneficiary determination and the analysis for determining whether a fee paid to a decision maker or service provider is a variable interest. The Company adopted this guidance effective January 1, 2016, and there was no effect on the consolidated financial statements.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Presentation of Financial Statements - Going Concern
In August 2014, the FASB issued guidance requiring the Company to perform interim and annual assessments regarding conditions or events that raise substantial doubt about the Company's ability to continue as a going concern for a period of one year after the financial statements are issued, and to provide related disclosures, if applicable. If such conditions or events exist, an entity should disclose that there is substantial doubt about the entity's ability to continue as a going concern for a period of one year after the financial statements are issued, along with the principal conditions or events that raise substantial doubt, management's evaluation of the significance of those conditions or eventsrepresent in relation to the entity's abilityestimated remaining total lifetime revenues. Digital content amortization for each period is recognized based on estimated viewing patterns as there are no direct revenues to meetassociate to the individual content assets and therefore, number of views is most representative of the use of the title. Judgment is required to determine the useful lives and amortization patterns of the Company’s content assets.
Quarterly, the Company prepares analyses to support its obligations,content amortization expense. Critical assumptions used in determining content amortization include: (i) the grouping of content with similar characteristics, (ii) the application of a quantitative revenue forecast model or viewership model based on the adequacy of historical data, (iii) determining the appropriate historical periods to utilize and management's plans that are intended to mitigatethe relative weighting of those conditions or events.historical periods in the forecast model, (iv) assessing the accuracy of the Company's forecasts and (v) incorporating secondary streams. The Company adopted this guidancethen considers the appropriate application of the quantitative assessment given forecasted content use, expected content investment and market trends. Content use and future revenues may differ from estimates based on changes in expectations related to market acceptance, network affiliate fee rates, advertising demand, the number of cable and satellite television subscribers receiving the Company’s networks, the number of subscribers to its digital services, and program usage. Accordingly, the Company continually reviews its estimates and planned usage and revises its assumptions if necessary. Any material adjustments from the Company’s review of the amortization rates are applied prospectively in the period of the change for assets in film groups, which represent the year ended December 31, 2016, and concluded that aslargest proportion of December 31, 2017 there were no conditions or events that raise substantial doubt about the Company's ability to continue as a going concern for one year after the financial statements are issued.content assets.
Accounting and Reporting Pronouncements Not Yet Adopted
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the FASB issued updated guidance which permits entities to reclassify tax effects stranded in accumulated other comprehensive income as aThe result of the tax reform legislation ("content amortization analysis is either an accelerated method or a straight-line amortization method over the 2017 Tax Act" or "the Tax Act")estimated useful lives of generally two to retained earningsfive years. Amortization of capitalized costs for eachproduced and coproduced content begins when a program has been aired. Amortization of capitalized costs for licensed content generally commences when the license period in whichbegins and the effect of the changeprogram is recorded. The update also requires entities to disclose their accounting policyavailable for releasing income tax effects from accumulated other comprehensive income. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. use.The Company is currently evaluatingallocates the impact thatcost of multi-year sports programming arrangements over the pronouncement will havecontract period of each event or season based on the consolidated financial statements.estimated relative value of each event or season. Amortization of sports rights takes place when the content airs.
Targeted Improvements to Accounting for Hedging Activities
In August 2017,Capitalized content costs are stated at the FASB issued significant amendments to hedge accounting which expand the eligibility for hedge accounting to more financiallower of cost less accumulated amortization or fair value. Content assets (produced, coproduced and nonfinancial hedging strategies. The guidance is intended to align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparencylicensed) are predominantly monetized as to the scope and results of hedging programs. In addition, the guidance amends the presentation and disclosure requirements and changes how companies assess effectiveness. The updated guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact that the pronouncement will havea group on the consolidated financial statements.
Goodwill
UnderCompany’s linear networks and digital content offerings. For content assets that are predominantly monetized within film groups, the current accounting guidance, the quantitative goodwill impairment test is performed using a two-step process. The first step of the process is to compareCompany evaluates the fair value of content in aggregate at the group level by considering expected future revenue generation typically by using a reporting unit with its carrying amount, including goodwill. Ifdiscounted cash flow ("DCF") analysis when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the quantitative impairment test is not necessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the quantitative goodwill impairment test is required tomay be performed to measure the amount of impairment loss, if any. The second step of the quantitative goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit’s identifiable net assets excluding goodwill is compared to the fair value of the reporting unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss, such as the $1.3 billion recorded for the year ended December 31, 2017 in the consolidated statements of operations, is recognized in an amount equal to that excess (see Note 8).
In January 2017, the FASB issued guidance that simplifies the subsequent measurement of goodwill. The new guidance eliminates Step 2 from the goodwill impairment test, and eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. Therefore, an entity will recognize impairment charges for the amount by which the carrying amount exceeds the reporting unit's fair value, and the same impairment assessment applies to all reporting units. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments in this update must be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. If the Company had early adopted this accounting pronouncement, the impact of the current period goodwill impairment would have been approximately $100 million, substantially less than unamortized costs. Estimates of future revenues consider historical airing patterns and future plans for airing content, including any changes in strategy. Given the impairment charge recorded under the current guidance.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Accounting changessignificant estimates and error corrections
In January 2017, the FASB issued guidance which states that registrants should consider additional qualitative disclosures if the impact of an issued but not yet adopted ASU is unknownjudgments involved, actual demand or cannot be reasonably estimated and to include a description of the effect of the accounting policies that the registrant expects to apply, if determined. This guidance is effective immediately. Transition guidance in certain issued but not yet adopted standards has been updated to reflect this amendment.
Clarifying the definition of a business
In January 2017, the FASB issued guidance that amends the definition of a business and provides a threshold which must be considered to determine whether a transaction is an acquisition (or disposal) of an asset or a business. Under the current accounting guidance, the minimum inputs and processes required for a “set” of assets and activities to meet the definition of a business is not specified. That lack of clarity has led to broad interpretations of the definition of a business. Under this guidance, when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or group of similar assets), the assets acquired would not represent a business. In addition, in order to be considered a business, an acquisition would have to include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The amended guidance also narrows the definition of outputs by more closely aligning it with how outputs are described in FASB guidance for revenue recognition. The guidance is effective on a prospective basis beginning January 1, 2018 and is not expected to have a material impact on the Company’s consolidated financial statements.
Income Taxes
In October 2016, the FASB issued guidance that simplifies the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The new guidance includes requirements to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, and therefore eliminates the exception for an intra-entity transfer of an asset other than inventory. The new standard is effective January 1, 2018. The Company is currently analyzing the impact of the pronouncement to the consolidated financial statements.
Leases
In February 2016, the FASB issued guidance on leases that will require lessees to recognize almost all of their leases on the balance sheet by recording a right-of-use asset and liability. The new standard will be effective for reporting periods beginning after December 15, 2018, and the new accounting guidancemarket conditions may be applied at the beginning of the earliest comparative period presented in the year of adoption or at effective date without applying the provisions of the new guidanceless favorable than those projected, requiring a write-down to comparative periods presented. The Company is currently evaluating the impactfair value. Programming and development costs for programs that the pronouncement will have on the consolidated financial statements; however, it is expected that assets and liabilities will increase materially when operating leases are recorded under the new standard. The method of transition will be determined when the Company has completed its evaluation.
Recognition and Measurement of Financial Instruments
In January 2016, the FASB issued guidance regarding the classification and measurement of financial instruments, which among other changes in accounting and disclosure requirements, replaces the cost method of accounting for non-marketable equity securities with a model for recognizing impairments and observable price changes, and also eliminates the available-for-sale classification for marketable equity securities. The standard requires equity securities, including available-for-sale ("AFS") securities, todetermined will not be measured at fair value with changesproduced, are fully expensed in the fair value recognized through net income, supersedingperiod the guidance permitting entitiesdetermination is made. The Company’s film groups are generally aligned along the Company’s networks and digital content offerings except for certain international territories wherein content assets are shared across the various networks in the territory and therefore, the territory is the film group. The Company’s rights to record gainsthe Olympic Games are predominantly monetized on their own as the sublicensing of the rights in certain territories is a significant component of the monetization strategy. Beginning in 2020, all content rights and losses on equity securitiesprepaid license fees are classified as a noncurrent asset, with readily determinable fair values in accumulated other comprehensive income. Investments accounted for under the equity methodexception of accountingcontent acquired with an initial license period of 12 months or that result in consolidation are not included within the scope of this update. The new standard will affect the Company's accounting for AFS securities for reporting periods beginning after December 15, 2017. The Company will apply the guidance on a modified retrospective basis. The transition adjustment to reclassify accumulated other comprehensive income to retained earnings isless and prepaid sports rights expected to be $26 million.air within 12 months. (See "Accounting and Reporting Pronouncements Adopted" below and Note 12.)
Revenue from Contracts with Customers
In May 2014, the FASB issued an accounting pronouncement related to revenue recognition, which applies a single, comprehensive revenue recognition model for all contracts with customers. The core principle of the new guidance is that the Company will recognize revenue from the transfer of promised goods or services to customers at an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. Subsequent to the issuance of the May 2014 guidance, several clarifications and updates have been issued by the FASB on this topic, the most recent of which was issued in December 2016. Many of these clarifications and updates to the guidance, as well as a number of interpretive issues, apply to companies in the media and entertainment industry.
The guidance requires new or expanded disclosures related to the judgments made by companies when following the framework. The Company is nearing completion of its assessment of the impact of adopting this new guidance, and the Company

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


will implement the new revenue standard beginning January 1, 2018. The Company currently does not anticipate that the adoption of the new guidance will have a material impact on the Company's financial statements, principally because the Company does not expect significant changes in the way it will record distribution or advertising revenues. The Company will apply the guidance on a modified retrospective basis.
Use of Estimates
The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates, judgments and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Management continually re-evaluates its estimates, judgments and assumptions, and management’s evaluations could change. These estimates are sometimes complex, sensitive to changes in assumptions and require fair value determinations using Level 3 fair value measurements. Actual results may differ materially from those estimates.
Estimates and judgments inherent in the preparation of the consolidated financial statements include accounting for asset impairments, revenue recognition, allowances for doubtful accounts, content rights, depreciation and amortization, business combinations, share-based compensation, income taxes, other financial instruments, contingencies, and the determination of whether the Company is the primary beneficiary of entities in which it holds variable interests.
Consolidation
The Company has ownership and other interests in various entities, including corporations, partnerships, and limited liability companies. For each such entity, the Company evaluates its ownership and other interests to determine whether it should consolidate the entity or account for its ownership interest as an investment. As part of its evaluation, the Company initially determines whether the entity is a VIE and, if so, whether it is the primary beneficiary of the VIE. An entity is generally a VIE if it meets any of the following criteria: (i) the entity has insufficient equity to finance its activities without additional subordinated financial support from other parties, (ii) the equity investors cannot make significant decisions about the entity’s operations, or (iii) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity or receive the expected returns of the entity and substantially all of the entity’s activities involve or are conducted on behalf of the investor with disproportionately few voting rights. The Company consolidates VIEs for which it is the primary beneficiary, regardless of its ownership or voting interests. The primary beneficiary is the party involved with the VIE that (i) has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) has the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Upon inception of a variable interest or the occurrence of a reconsideration event, the Company makes judgments in determining whether entities in which it invests are VIEs. If so, the Company makes judgments to determine whether it is the primary beneficiary and is thus required to consolidate the entity.
If it is concluded that an entity is not a VIE, then the Company considers its proportional voting interests in the entity. The Company consolidates majority-owned subsidiaries in which a controlling financial interest is maintained. A controlling financial interest is determined by majority ownership and the absence of substantive third-party participating rights.
Ownership interests in entities for which the Company has significant influence that are not consolidated under the Company’s consolidation policy are accounted for as equity method investments. Related party transactions between the Company and its equity method investees have not been eliminated. (See Note 19.6.)
Investments
The Company holds investments in equity method investees cost method investees and available-for-sale securities.equity investments with and without readily determinable fair values. (See Note 4.)
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Equity Method Investments
Investments in equity method investees are those for which the Company has the ability to exercise significant influence but does not control and is not the primary beneficiary. Significant influence typically exists if the Company has a 20% to 50% ownership interest in the venture unless persuasive evidence to the contrary exists. Under this method of accounting, the Company typically records its proportionate share of the net earnings or losses of equity method investees and a corresponding increase or decrease to the investment balances. Cash payments to equity method investees such as additional investments, loans and advances and expenses incurred on behalf of investees, as well as payments from equity method investees such as dividends, distributions and repayments of loans and advances are recorded as adjustments to investment balances.
For certain of the Company's equity method investments, such as investments in renewable energy limited liability companies where the capital structure of the equity investment results in different liquidation rights and priorities than what is reflected by the underlying percentage ownership interests, the Company's proportionate share of net earnings is accounted for using the Hypothetical Liquidation at Book Value ("HLBV") methodology available under the equity method of accounting. When applying HLBV, the Company determines the amount that would be received if the investment were to liquidate all of its assets and distribute the resulting cash to the investors based on contractually

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defined liquidation priorities, assuming the entity continues as a going concern.priorities. The change in the Company's claim on the investee's book value in accordance with GAAP at the beginning and the end of the reporting period, after adjusting for any contributions or distributions, is the Company's share of the earnings or losses for the period.
The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. (See "Asset Impairment Analysis" below.)
Cost methodEquity Investments with Readily Determinable Fair Values
Investments in entities or other securities in which the Company has no control or significant influence, is not the primary beneficiary, and have a readily determinable fair value are recorded at fair value based on quoted market prices and are classified as equity securities or equity investments with readily determinable fair value. For equity securities with readily determinable fair value, gains and losses are recorded in other income (expense), net. (See Note 4 and Note 20.)
Equity Investments without Readily Determinable Fair Values
Equity investments without readily determinable fair values include ownership rights that either (i) do not meet the definition of in-substance common stock or (ii) do not provide the Company with control or significant influence and these investments do not have readily determinable fair values. Cost methodEquity investments without readily determinable fair values are recorded at cost, less any impairment, and adjusted for subsequent observable price changes as of the lower of cost or fair value.
Investments in entities or other securities in which the Company has no control or significant influencedate that an observable transaction takes place and is not the primary beneficiary and have a readily determinable fair value are accounted for at fair value based on quoted market prices are classified as either trading securities or available-for-sale securities. For investments classified as trading securities, which include securities held in a separate trust in connection with the Company’s deferred compensation plan, unrealized and realized gains and losses related to the investment and corresponding liability are recorded in earnings as a component of other income (expense), net, on the consolidated statements of operations. For investments classified as AFS, which include investments in common stock, unrealized gainsnet. (See Note 4 and losses are recorded, net of income taxes, in other comprehensive (loss) income until the security is sold or considered impaired. If declines in the value of AFS securities are determined to be other-than-temporary, a loss is recorded in earnings in the current period as a component of other income (expense), net on the consolidated statements of operations. (See "Asset Impairment Analysis" below.Note 20.) For purposes of computing realized gains and losses, the Company determines cost on a specific identification basis.
Cash obtained as a result of the Company's debt issuance in September 2017 is invested into short-term instruments that qualify as cash and cash equivalents. Any accrued interest received after maturity is reinvested into additional short-term instruments. These investments are anticipated to be used to partially fund the Scripps Networks Interactive, Inc. ("Scripps Networks") acquisition. In the interim, the Company has full access to these proceeds.
Foreign Currency
The reporting currency of the Company is the U.S. dollar. The functional currency of most of the Company’s international subsidiaries is the local currency. Assets and liabilities, including inter-company balances for which settlement is anticipated in the foreseeable future, denominated in foreign currencies are translated at exchange rates in effect at the balance sheet date. Foreign currency equity balances are translated at historical rates. Revenues and expenses denominated in foreign currencies are translated at average exchange rates for the respective periods. Foreign currency translation adjustments are recorded in accumulated other comprehensive income.
Transactions denominated in currencies other than subsidiaries’ functional currencies are recorded based on exchange rates at the time such transactions arise. Changes in exchange rates with respect to amounts recorded in the consolidated balance sheets related to these items will result in unrealized foreign currency transaction gains and losses based upon period-end exchange rates. The Company also records realized foreign currency transaction gains and losses upon settlement of the transactions. Foreign currency transaction gains and losses are included in other (expense) income, net, and totaled a loss of $83 million, a gain of $75 million, and a loss of $103 million for 2017, 2016 and 2015, respectively.
Cash flows from the Company's operations in foreign countries are generally translated at the weighted average rate for the applicable period in the consolidated statements of cash flows. The impacts of material transactions are recorded at the applicable spot rates as of the transaction date in the consolidated statements of operations and cash flows. The effects of exchange rates on cash balances held in foreign currencies are separately reported in the Company's consolidated statements of cash flows.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of 90 days or less.
Receivables
Receivables include amounts billed and currently due from customers and are presented net of an estimate for uncollectible accounts. The Company evaluates outstanding receivables to assess collectability. In performing this evaluation, the Company analyzes market trends, economic conditions, the aging of receivables and customer specific risks. Using this information, the Company reserves an amount that it estimates may not be collected. The Company does not require collateral with respect to trade receivables.

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Content Rights
Content rights principally consist of television series, specials, films and sporting events. Content aired on the Company’s television networks is sourced from a wide range of third-party producers, wholly-owned and equity method investee production studios and sports associations. Content is classified either as produced, coproduced or licensed. The Company owns most or all of the rights to produced content. The Company collaborates with third parties to finance and develop coproduced content, and it retains significant rights to exploit the programs. Licensed content is comprised of films or series that have been previously produced by third parties and the Company retains limited airing rights over a contractual term. Prepaid licensed content includes advance payments for rights to air sporting events that will take place in the future and advance payments for acquired films and television series.
Costs of produced and coproduced content consist of development costs, acquired production costs, direct production costs, certain production overhead costs and participation costs. Costs incurred for produced and coproduced content are capitalized if the Company has previously generated revenues from similar content in established markets and the content will be used and revenues will be generated for a period of at least one year. The Company’s coproduction arrangements generally provide for the sharing of production costs. The Company records its costs, but does not record the costs borne by the other party as the Company does not share any associated economics of exploitation. Program licenses typically have fixed terms and require payments during the term of the license. The cost of licensed content is capitalized when the license period for the programs has commenced and the programs are available for air or the Company has paid for the programs. The Company pays in advance of delivery for television series, specials, films and sports rights. Payments made in advance of when the right to air the content is received are recognized as in-production produced, coproduced content or prepaid licensed content. Content distribution, advertising, marketing, general and administrative costs are expensed as incurred.
Content amortization expense for each period is recognized based on the revenue forecast model, which approximates the proportion that estimated distribution and advertising revenues for the current period represent in relation to the estimated remaining total lifetime revenues. The Company annually, or on an as needed basis, prepares analyses to support its content amortization expense by network and by region. Critical assumptions used in determining content amortization include: (i) the grouping of content by network, (ii) the application of a quantitative revenue forecast model based on the adequacy of a network's historical data, (iii) determining the appropriate historical periods to utilize and the relative weighting of those historical periods in the revenue forecast model, and (iv) assessing the accuracy of the Company's revenue forecasts. The Company then considers the appropriate application of the quantitative assessment given forecasted content use, expected content investment and market trends. Content use and future revenues may differ from estimates based on changes in expectations related to market acceptance, network affiliate fee rates, advertising demand, the number of cable and satellite television subscribers receiving the Company’s networks, and program usage. Accordingly, the Company continually reviews revenue estimates and planned usage and revises its assumptions if necessary. As part of the Company's annual assessment in determining the film forecast model, the Company compares the calculated amortization rates to those that have been utilized during the year. If the calculated rates do not deviate materially from the applied amortization rates, no adjustment is recorded for the current year amortization expense. The Company allocates the cost of multi-year sports programming arrangements over the contract period to each event or season based on the estimated relative value of each event or season.
The result of the revenue forecast model is either an accelerated method or a straight-line amortization method over the estimated useful lives of primarily three to four years for produced, coproduced and licensed content. Amortization of capitalized costs for produced and coproduced content begins when a program has been aired. Amortization of capitalized costs for licensed content commences when the license period begins and the program is available for use. Amortization of sports rights takes place when the content airs.
Capitalized content costs are stated at the lower of cost less accumulated amortization or net realizable value. The Company periodically evaluates the net realizable value of content by considering expected future revenue generation. Estimates of future revenues consider historical airing patterns and future plans for airing content, including any changes in strategy. Given the significant estimates and judgments involved, actual demand or market conditions may be less favorable than those projected, requiring a write-down to net realizable value. Development costs for programs that the Company has determined will not be produced, are fully expensed in the period the determination is made.
All produced and coproduced content is classified as long-term. The portion of the unamortized licensed content balance, including prepaid sports rights, that will be amortized within one year is classified as a current asset.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and impairments. The cost of property and equipment acquired under capital lease arrangements represents the lesser of the present value of the minimum lease payments or the fair value of the leased asset as of the inception of the lease. The Company leases fixed assets and software. Capitalized

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Internal use software costs are for internal use. Capitalization of software costs occurscapitalized during the application development stage. Software costs incurred during the preliminary project and post implementation stages are expensed as incurred. Repairs and maintenance expenditures that do not enhance the use or extend the life of property and equipment are expensed as incurred.
Depreciation for most property and equipment is recognized using the straight-line method over the estimated useful lives of the assets. (See Note 20.)
Leases
The Company determines if an arrangement is a lease at its inception. Operating lease right-of-use ("ROU") assets whichare included in "Other noncurrent assets" and operating lease liabilities are included in “Accrued liabilities” and “Other noncurrent liabilities” in the consolidated balance sheets. Finance lease ROU assets are included in "Property and equipment, net" and finance lease liabilities are included in “Accrued liabilities” and “Other noncurrent liabilities” in the consolidated balance sheets.
A rate implicit in the lease when readily determinable is 15used in arriving at the present value of lease payments. As most of the Company's leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on information available at lease commencement date for most of its leases. The incremental borrowing rate is based on the Company's U.S. dollar denominated senior unsecured borrowing curves using public credit ratings adjusted down to 39 yearsa collateralized basis using a combination of recovery rate and credit notching approaches and translated into major contract currencies as applicable.
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The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. The Company does not separate lease components from non-lease components across all lease categories. Instead, each separate lease component and non-lease component are accounted for buildings, three to five yearsas a single lease component. In addition, variable lease payments that are based on an index or rate are included in measurement of ROU assets and lease liabilities at lease inception. All other variable lease payments are expensed as incurred and are not included in the measurement of ROU assets and lease liabilities. Lease expense for broadcast equipment, two to five years for capitalized software costs and three to five years for office equipment, furniture, fixtures and other property and equipment. Assets acquired under capitaloperating leases is recognized on a straight-line basis. For finance leases, the Company recognizes interest expense on lease arrangements and leasehold improvements are amortizedliabilities using the effective interest method and amortization of ROU assets on a straight-line method over the lesser of the estimated useful lives of the assets or the terms of the related leases, which is one to 15 years. Depreciation commences when property or equipment is ready for its intended use.basis.
Asset Impairment Analysis
Goodwill and Indefinite-lived Intangible Assets
Goodwill is allocated to the Company's reporting units, which are its operating segments or one level below its operating segments. The Company evaluates goodwill and other indefinite-lived intangible assets for impairment annually as of November 30 andOctober 1, or earlier if an event or other circumstance indicates that weit may not recover the carrying value of the asset. If the Company believes that, as a result of its qualitative assessment, it is more likely than not that the fair value of a reporting unit or other indefinite-lived intangible asset is greater than its carrying amount, the quantitative impairment test is not required. If a qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit goodwill or other indefinite-lived intangible asset exceeds its fair value, a quantitative impairment test is performed. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, an impairment charge is recorded for the amount by which the carrying amount exceeds the fair value, not to exceed the amount of goodwill recorded for that reporting unit. The Company typically performs a quantitative impairment test every three years, irrespective of the outcome of the Company's qualitative assessment.
The quantitative goodwill impairment test is performed using a two-step process. The first step of the process is to compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the quantitative impairment test is not necessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the quantitative goodwill impairment test is required to be performed to measure the amount of impairment loss, if any. The second step of the quantitative goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit’s identifiable net assets excluding goodwill is compared to the fair value of the reporting unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
Following a qualitative assessment indicating that it is not more likely than not that the fair value of the indefinite lived intangible asset exceeds its carrying amount, impairment of other intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Determining fair value requires the exercise of judgment about appropriate discount rates, perpetual growth rates and the amount and timing of expected future cash flows.
Long-lived Assets
Long-lived assets such as amortizing trademarks, customer lists, other intangible assets, and property and equipment are not required to be tested for impairment annually. Instead, long-lived assetsannually, but rather are tested for impairment whenever circumstances indicate that the carrying amount of the asset may not be recoverable, such as when the disposal of such assets is likely or there is an adverse change in the market involving the business employing the related assets.recoverable. If an impairment analysis is required, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale. If the intent is to hold the asset for continued use, the impairment test first requires a comparison of undiscounted future cash flows to the carrying value of the asset. If the carrying value of the asset exceeds the undiscounted cash flows, the assetan impairment loss would not be deemedrecognized equal to be recoverable. Impairment would then be measured as the excess of the asset’s carrying value over its fair value. Fair value, which is typically determined by discounting the future cash flows associated with that asset. If the intent is to hold the asset for sale and certain other criteria are met, the impairment test involves comparing the asset’s carrying value to its fair value less costs to sell. To the extentIf the carrying value is greater thanof the asset’sasset exceeds the fair value, less costs to sell, an impairment loss iswould be recognized in an amount equal to the difference. Significant judgments used for long-lived asset impairment assessments include identifying the appropriate asset groupings and primary assets within those groupings, determining whether events or circumstances indicate that the carrying amount of the asset may not be recoverable, determining the future cash flows for the assets involved and assumptions applied in determining fair value, which include reasonable discount rates, growth rates, market risk premiums and other assumptions about the economic environment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Equity Method Investments AFS Securities and Cost MethodEquity Investments Without Readily Determinable Fair Value
Equity method investments, AFS securities and cost method investments are reviewed for indicators of other-than-temporary impairment on a quarterly basis. Equity method investments, AFS securities and cost method investments are written down to fair value if there is evidence of a loss in value whichthat is other-than-temporary. The Company estimatesmay estimate the fair value of its equity method investments by considering share price and other publicly available information, recent investee equity transactions, discounted cash flowDCF analysis, recent operating results, comparable public company operating cash flow multiples and in certain situations, balance sheet liquidation values. If the fair value of the investment has dropped below the carrying amount, management considers several factors when determining whether an other-than-temporary decline has occurred, such as:as the length of the time and the extent to which the estimated fair value or market value has been below the carrying value, the financial condition and the near-term prospects of the investee, the intent and ability of the Company to retain its investment in the investee for a period of time sufficient to allow for any anticipated recovery in market value, and general market conditions. The estimation of fair value and whether an other-than-temporary impairment has occurred requires the application of significant judgment and future results may vary from current assumptions. (See Note 4.) Other than AFS securities, fair values of investments are not assessed every reporting period unless there are indications of impairment.
If declines in the value of thesethe equity method investments are determined to be other-than-temporary, a loss is recorded in earnings in the current period as a component of other income (expense),loss from equity investees, net on the consolidated statements of operations.
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For equity investments without readily determinable fair value, investments are recorded at cost, less impairment, adjusted for subsequent observable price changes as of the date that an observable transaction takes place. The Company performs a qualitative assessment on a quarterly basis to determine if an observable price change has occurred. If the qualitative assessment indicates that an observable price change has occurred, a gain or loss is recorded equal to the difference between the fair value and carrying value in the current period as a component of other income (expense), net. (See Note 4.)
Derivative Instruments
The Company uses derivative financial instruments to modify its exposure to exogenous events, market risks from changes in foreign currency exchange rates, interest rates and thefrom market volatility related to certain equity investments measured at fair value of investments classified as available-for-sale securities.value. At the inception of a derivative contract, the Company designates the derivative as one of fourthree types based on the Company's intentions and expectations as to the likely effectiveness as a hedge. These fourThe three types are: (i)
(1) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"), (ii);
(2) a hedge of net investments in foreign operations ("net investment hedge"), (iii) a hedge of the fair value of a recognized asset; or liability or of an unrecognized firm commitment ("fair value hedge"), or (iv)
(3) an instrument with no hedging designation. (See Note 10.)
Cash Flow Hedges
For those derivative instruments designatedThe Company designates foreign currency forward and option contracts as cash flow hedges gainsto mitigate foreign currency risk arising from third-party revenue and intercompany licensing agreements. The Company also designates interest rate contracts used to hedge the interest rate risk for certain senior notes and forecasted debt issuances as cash flow hedges. For foreign exchange forward contracts accounted for as cash flow hedges, the entire change in the fair value of the forward contract is recorded in other comprehensive income (loss) and reclassified into the statement of operations in the same line item in which the hedged item is recorded and in the same period as the hedged item affects earnings.
Net Investment Hedges
The Company designates cross-currency swaps and foreign currency forward contracts as hedges of net investments in foreign operations. The Company assesses effectiveness for net investment hedges utilizing the spot-method. The entire change in the fair value of derivatives that qualify as net investment hedges is initially recorded in the currency translation adjustment component of other comprehensive income. While the change in fair value attributable to hedge effectiveness remains in accumulated other comprehensive loss until the net investment is sold or liquidated, the change in fair value attributable to components excluded from the assessment of hedge effectiveness (e.g., forward points, cross currency basis, etc.) is reflected as a component of interest expense, net in the current period.
No Hedging Designation
The Company may also enter into derivative financial instruments that do not qualify for hedge accounting and are not designated as hedges. These instruments are intended to mitigate economic exposures due to exogenous events and changes in foreign currency exchange rates and interest rates. The changes in fair value of derivatives not designated as hedges are recorded in other income (expense), net.
Financial Statement Presentation
Unsettled derivative contracts are recorded at their gross fair values on the consolidated balance sheets. The portion of the fair value that represents cash flows occurring within one year is classified as current, and the portion related to cash flows occurring beyond one year is classified as noncurrent. Gains and losses on the effective portion of derivative instrumentsdesignated cash flow and net investment hedges are initially recorded inrecognized as components of accumulated other comprehensive loss on the consolidated balance sheets and reclassified into the consolidated statements of operations in the same line item in which the hedged item is recognizedrecorded and in the same period as the hedged item affects earnings. If it becomes probable that a forecasted transaction will not occur, any relatedThe Company records gains and losses recorded in accumulatedfor instruments that receive no hedging designation, as a component of other comprehensive loss on the consolidated balance sheets are reclassified to otherincome (expense) income,, net on the consolidated statements of operations in that period. Generally, the maximum length of time over which the Company hedges its exposure to variability in future cash flows for forecasted transactions is less than one year.operations.
Net Investment Hedges
For those derivative instruments designated as net investment hedges, the changes in the fair value of the derivatives instruments are recorded as cumulative translation adjustments, a component of accumulated other comprehensive loss on the consolidated balance sheets, and are only recognized in earnings upon the liquidation or sale of the hedged investment. If the notional amount of the instrument designated as the hedge of a net investment is greater than the portion of the net investment being hedged, hedge ineffectiveness, which is the gain or loss of the portion over-hedged, is reclassified to other (expense) income, net on the consolidated statements of operations in that period.
Fair Value Hedges
For those derivative instruments designated as fair value hedges, the changes in the fair value of the derivative instruments, including offsetting changes in fair value of the hedged items and amounts excluded from the assessment of effectiveness are recorded in other (expense) income, net.
No Hedging Designation
The Company may also enter into derivative instruments that are not designated as hedges and do not qualify for hedge accounting. These contracts are intended to mitigate economic exposures of the Company. The changes in fair value of derivatives not designated as hedges and the ineffective portion of derivatives designated as hedging instruments are immediately recorded in other (expense) income, net.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Financial Statement Presentation
The Company records all unsettled derivative contracts at their gross fair values on the consolidated balance sheets. (See Note 5.) The portion of the fair value that represents cash flows occurring within one year are classified as current, and the portion related to cash flows occurring beyond one year are classified as noncurrent.
The cashCash flows from the effective portion ofdesignated derivative instruments used as hedges are classified in the consolidated statements of cash flows in the same section as the cash flows fromof the hedged item. For example, thePremiums paid for these instruments and associated settlements are reflected as components of investing cash paid or received to settle the effective portion of foreign exchange derivatives intended to hedge distribution revenue earned during the year ended December 31, 2017 is reported as an operating activity in the consolidated statements of cashflows. Cash flows consistent with the classification of cash received from customers. Also, the cash flows related to our interest rate contracts used to hedge the pricing for certain senior notes are reported as a financing activity in the consolidated statements of cash flows consistent with the cash proceeds from our debt offerings. The cash flows from the ineffective portion of derivative instruments used as hedges, periodic settlement of interest on cross-currencycross currency swaps and derivative contracts not designated as hedges are reported as investing activities in the consolidated statements of cash flows.
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Treasury Stock
When stock is acquired for purposes other than formal or constructive retirement, the purchase price of the acquired stock is recorded in a separate treasury stock account, which is separately reported as a reduction of equity.
When stock is retired or purchased for formal or constructive retirement, the purchase price is initially recorded as a reduction to the par value of the shares repurchased, with any excess purchase price over par value recorded as a reduction to additional paid-in capital related to the series of shares repurchased and any remainderremaining excess purchase price recorded as a reduction to retained earnings. If the purchase price exceeds the amounts allocated to par value and additional paid-in capital related to the series of shares repurchased and retained earnings, the remainder is allocated to additional paid-in capital related to other series of shares.
Common Stock Repurchase Contracts
Under commonTo determine the cost of treasury stock repurchase contracts,that is either sold or reissued, the Company makes up front cash payments foruses the future settlement of the contractlast in, either shares or in cash based on the Company's Series C common stock price at settlement in relation to the strike price of the contract.first out method. If the Company's Series C commonproceeds from the re-issuance of treasury stock priceare greater than the cost, the excess is below the strike price at expiry, the Company receives a predetermined number of its Series C common stock. If the Company's Series C common stock price is above the strike price at expiry, the Company can elect to settle the transaction in either cash or the equivalent value in shares of Series C common stock at the then current market price upon settlement, based on the notional value of the repurchase contract. The contracts represent a hybrid instrument consisting of a debt instrument and an embedded equity-linked derivative that does not require bifurcation because it is linked to the Company’s own stock. The Company accounts for these contracts as equity transactions. Prepayments are recorded as a reduction in additional paid-in capital. If the contract settles in sharesproceeds from re-issuance of Series C commontreasury stock are less than the cost, the excess cost first reduces any additional paid-in capital arising from previous treasury stock transactions for that amount will be reclassified to treasury stock. If the contract settles in cash, the cash receipt will beclass of stock, and any additional excess is recorded as an increase to additional paid-in capital.a reduction of retained earnings.
Revenue Recognition
The Company generates revenues principally from: (i) advertising revenue from (i)advertising sold on its television networks, authenticated TVE applications, DTC subscription services and websites, (ii) distribution revenues from fees charged to distributors of its network content, which include cable, direct-to-home ("DTH") satellite, telecommunications and digital service providers, (ii) advertising sold on its television networks and websites,bundled long-term content arrangements, as well as through DTC subscription services, and (iii) transactions for curriculum-based products and services, (iv)other revenue related to several items including: (a) unbundled rights to sales of network content, including sports rights, (b) production studios content development and services, (v) affiliate and advertising sales representation services and (vi)(c) the licensing of the Company's brands for consumer products.products, and (d) affiliate and advertising sales representation services.
Revenue is recognized when persuasive evidenceupon transfer of a sales arrangement exists,control of promised services are rendered or delivery occurs,goods to customers in an amount that reflects the sales price is fixedconsideration that the Company expects to receive in exchange for those services or determinable and collectability is reasonably assured.goods. Revenues do not include taxes collected from customers on behalf of taxing authorities such as sales tax and value-added tax. However, certain revenues include taxes that customers pay to taxing authorities on the Company’s behalf, such as foreign withholding tax. Revenue recognition for each source of revenue is also based on the following policies.
Advertising
Advertising revenues are principally generated from the sale of commercial time on linear and digital platforms. A substantial portion of the linear and digital advertising contracts in the U.S. and certain international markets guarantee the advertiser a minimum audience level that either the program in which their advertisements are aired or the advertisement will reach. On the linear platform, the Company provides a service to deliver an advertising campaign which is satisfied by the provision of a minimum number of advertising spots in exchange for a fixed fee over a contract period of one year or less. The Company delivers spots in accordance with these contracts during a variety of day parts and programs. In the agreements governing these advertising campaigns, the Company has also promised to deliver to its customers a guaranteed minimum number of viewers (“impressions”) on a specific television network within a particular demographic (e.g. men aged 18-35). These advertising campaigns are considered to represent a single, distinct performance obligation. Revenues are recognized based on the audience level delivered multiplied by the average price per impression. The Company provides the advertiser with advertising until the guaranteed audience level is delivered, and invoiced advertising revenue receivables may exceed the value of the audience delivery. As such, revenues are deferred until the guaranteed audience level is delivered or the rights associated with the guarantee lapse, which is less than one year. Audience guarantees are initially developed internally, based on planned programming, historical audience levels, the success of pilot programs, and market trends. Actual audience and delivery information is published by independent ratings services.
Digital advertising contracts typically contain promises to deliver guaranteed impressions in specific markets against a targeted demographic during a stipulated period of time. If the specified number of impressions is not delivered, the transaction price is reduced by the number of impressions not delivered multiplied by the contractually stated price per impression. Each promise is considered a separate performance obligation. For digital contracts with an audience guarantee, advertising revenues are recognized as impressions are delivered. Actual audience delivery is typically reported by independent third parties.
For contracts without an audience guarantee, advertising revenues are recognized as each spot airs. The airing of individual spots without a guaranteed audience level are each distinct, individual performance obligations. The Company allocates the consideration to each spot based on its relative standalone selling price.
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Distribution
Cable operators, DTH satellite operators and telecommunications service providers typically pay royalties via a per-subscriber fee for the right to distribute the Company’s programming under the terms of distribution contracts. The majority of the Company’s distribution fees are collected monthly throughout the year and distribution revenue is recognized over the term of the contracts based on contracted programming rates and reported subscriber levels. The amount of distribution fees due to the Company areis reported by distributors

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based on actual subscriber levels. Such information is generally not received until after the close of the reporting period. In these cases, the Company estimates the number of subscribers receiving the Company’s programming.programming to estimate royalty revenue. Historical adjustments to recorded estimates have not been material. Distribution revenue from fixed-fee contracts is recognized over the contract term based on the continuous delivery of the content to the affiliate. Any monetary incentives provided to distributors other than for distinct goods or services acquired at fair value are recognized as a reduction of revenue over the service term.
Although the delivery of linear feeds and digital products, such as video-on-demand (“VOD”) and authenticated TVE applications, are considered distinct performance obligations within a distribution arrangement, on demand offerings generally match the programs that are airing on the linear network. Therefore, the Company recognizes revenue for licensing arrangements as the license fee is earned and based on continuous delivery for fixed fee contracts.
For DTC subscription services, the Company recognizes revenue as the service fee is earned over the subscription period.
Revenues associated with digital distribution arrangements are recognized when the Company transfers control of the content and the rights to distribute the content to the customer. If multiple programs are included in the arrangement, the Company allocates the fee to each program based on its relative fair value.
AdvertisingOther
Advertising revenues are principally generatedLicense fees from the salesublicensing of bundled commercial time on television networks and websites. The Company allocates the ad sales arrangement consideration to each item based on its relative fair value. Advertising revenuessports rights are recognized net of agency commissions inwhen the period advertising spots are aired. A substantial portion ofrights become available for airing. Revenue from production studios is recognized when the advertising contracts in the U.S. guarantee the advertiser a minimum audience level that either the program in which their advertisements are aired or the advertisement will reach. Revenues are recognized for the actual audience level delivered. The Company provides the advertiser with additional advertising spots in future periods if the guaranteed audience level is not delivered. Revenues are deferred for any shortfall in the guaranteed audience level until the guaranteed audience levelcontent is delivered orand available for airing by the rights associated with the guarantee lapse. Audience guarantees are initially developed internally based on planned programming, historical audience levels, the success of pilot programs, and market trends. In the U.S., actual audience and delivery information is published by independent ratings services. In certain instances, the independent ratings information is not received until after the close of the reporting period. In these cases, reported advertising revenue and related deferred revenue are based upon the Company’s estimates of the audience level delivered. Historical adjustments to recorded estimates have not been material.
Advertising revenues from online properties are recognized as impressions are delivered or the services are performed.
Other
Revenue for curriculum-based services is recognized ratably over the contract term as service is provided.customer. Royalties from brand licensing arrangements are earned as products are sold by the licensee. Revenue fromAffiliate and ad sales representation services are recognized as services are provided.
Multiple Performance Obligations
Contracts with customers may include multiple distinct performance obligations. Advertising contracts may include sponsorship, production, or product integration in addition to the production studios segmentairing of spots and/or the satisfaction of an audience guarantee. For such contracts, the contract value is recognizedallocated to individual performance obligations and recorded as revenue when each performance obligation has been satisfied and value has been transferred to the customer. Distribution contracts also include multiple performance obligations. The Company also enters into certain distribution contracts that include promises to deliver content libraries. There are generally two types of such arrangements: 1) content licensing arrangements that include subscription video on demand (“SVOD”) licensing arrangements and 2) digital content (such as VOD and authenticated TVE applications), which is a performance obligation within the Company's linear distribution arrangements. These contracts vary by customer and in certain instances include a promise by the Company to deliver existing content and new content. For SVOD arrangements, revenue is allocated to each performance obligation based on that performance obligation's relative standalone selling price. In the case of VOD and digital content, content is deliveredregularly refreshed over the term of the agreement, as new titles are added and available for airing byolder titles are removed. Consequently, satisfaction of the customer.performance obligations generally occurs in the same pattern as the delivery of the linear feed.
Deferred Revenue
Deferred revenue primarily consists of cash received for television advertising for which the advertising spots haveguaranteed viewership has not yet fully delivered the ratings guaranteed,been provided, product licensing arrangements advanced billings to subscribers for access toin which fee collections are in excess of the Company’s curriculum-based streaming serviceslicense value provided, and advanced fees received related to the sublicensing of Olympic rights. The amounts classified as current are expected to be earned within the next year.
Payment terms vary by the type and location of the customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, the Company requires payment before the products or services are delivered to the customer.
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DISCOVERY, INC.
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Share-Based Compensation Expense
The Company has incentive plans under which performance-based restricted stock units (“PRSUs”), service-based restricted stock units (“RSUs”), stock options, and stock appreciation rights (“SARs”) are issued. The Company's unitIn addition, the Company offers an Employee Stock Purchase Plan (the "ESPP"). Share-based compensation expense for all awards plan is no longer active, effective January 1, 2016.recorded as a component of selling, general and administrative expense. Forfeitures for all awards are recognized as incurred. Excess tax benefits realized from the exercise of stock options and vested RSUs, PRSUs and the ESPP are reported as cash inflows from operating activities on the consolidated statements of cash flows.
PRSUs
Vesting for certain PRSUs is subject to satisfying objective operating performance conditions while vesting for other PRSUs is based on the achievement ofor a combination of objective and subjective operating performance conditions. Compensation expense for PRSUs that vest based on achieving objective operating performance conditions is measured based on the fair value of the Company’s Series A and C common stock on the date of grant less actual forfeitures.grant. Compensation expense for PRSUs that vest based on achieving subjective operating performance conditions or in situations where the executive is able to withhold taxes in excess of the minimummaximum statutory requirement, is remeasured at the fair value of the Company’s Series A and Series C common stock, as applicable, less actual forfeitures each reporting period until the date of conversion.award is settled. Compensation expense for all PRSUs is recognized ratably, following a graded vesting pattern during the vesting period only when it is probable that the operating performance conditions will be achieved. The Company records a cumulative adjustment to compensation expense for PRSUs if there is a change in the determination of whether or not it is probablethe probability that the operating performance conditions will be achieved.
The Company measures the cost of employee services received in exchange for RSUs based on the fair value of the Company’s Series A common stock on the date of grant less actual forfeitures.
Compensation expense for RSUs is recognized ratably during the vesting period.
Compensation expense for stock options is attributed to expense over the vesting period based on the fair value on the date of grant less actual forfeitures. Compensation expense for stock options is recognized ratably during the vesting period.
The Company measures the cost of employee services received in exchange for SARs and unit awards based on the fair value of the award less forfeitures.on the date of grant and is recognized ratably during the vesting period.
SARs and Stock Options
Compensation expense for SARs is based on the fair value of the award. Because certain SARs and all unit awards are cash-settled, the Company remeasures the fair

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value of these awards each reporting period until settlement. Compensation expense for SARs, including changes in fair value, for SARs and unit awards is recognized during the vesting period in proportion to the requisite service that has been rendered as of the reporting date. For awards with graded vesting, the Company measures fair value and records compensation expense separately for each vesting tranche.
Compensation expense for stock options is based on the fair value of the award on the date of grant and is recognized ratably during the vesting period.
The fair values of SARs and stock options are estimated using the Black-Scholes option-pricing model. Because the Black-Scholes option-pricing model requires the use of subjective assumptions, changes in these assumptions can materially affect the fair value of awards. For SARs, the expected term is the period from the grant date to the end of the contractual term of the award unless the terms of the award allow for cash-settlement automatically on the date the awards vest, in which case the vesting date is used. For stock options the simplified method is utilized to calculate the expected term, since the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The simplified method considers the period from the date of grant through the mid-point between the vesting date and the end of the contractual term of the award. Expected volatility is based on a combination of implied volatilities from traded options on the Company’s common stock and historical realized volatility of the Company’s common stock. The dividend yield is assumed to be zero because the Company has no history of paying cash dividends and no present intention to pay dividends. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of the award.
When recording compensation cost for share-based awards, the Company has the option to estimate the number of awards granted that are expected to be forfeited or use actual forfeitures, in accordance with the March 2016 FASB guidance that simplified how share-based payments are accounted for and presented in the financial statements. On January 1, 2017, the Company adopted the new guidance on a modified retrospective basis to use actual forfeitures in the calculations of share-based compensation expense instead of estimated forfeitures.ESPP
The Employee Stock Purchase Plan (the “ESPP”)ESPP enables eligible employees to purchase shares of the Company’s common stock through payroll deductions or other permitted means. The Company recognizes the fair value of the discount associated with shares purchased under the planESPP as equity-basedshare-based compensation expense.
Share-based compensation expense is recorded as a component of selling, general and administrative expense. The Company classifies the intrinsic value of SARs that are vested or will become vested within one year as a current liability.
Excess tax benefits realized from the exercise of stock options and vested RSUs, PRSUs and the ESPP are reported as cash inflows from operating activities on the consolidated statements of cash flows.
Advertising Costs
Advertising costs are expensed as promotional services are delivered and are presented in selling, general and administrative expenses. Advertising costs paid to third parties totaled $162 million, $166$1.2 billion, $412 million and $148$390 million for 2017, 2016years ended December 31, 2021, 2020 and 2015,2019, respectively.
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Income Taxes
Income taxes are recorded using the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred taxes are measured using rates the Company expects to apply to taxable income in years in which those temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more likely than not such assets will be unrealized. The Company also engages in transactions that make the Company eligible for federal investment tax credits. The Company accounts for federal investment tax credits under the flow-through method, under which the tax benefit generated from an investment tax credit is recorded in the period the credit is generated.
From time to time, the Company engages in transactions in which the tax consequences may be uncertain. Significant judgment is required in assessing and estimating the tax consequences of these transactions. The Company prepares and files tax returns based on its interpretation of tax laws and regulations. In the normal course of business, the Company's tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities.
In determining the Company's tax provision for financial reporting purposes, the Company establishes a reserve for uncertain tax positions unless the Company determines that such positions are more likely than not to be sustained upon examination based on their technical merits, including the resolution of any appeals or litigationslitigation processes. The Company includes interest and where appropriate, penalties, as a component of income tax expense on the consolidated statements of operations. There is considerablesignificant judgment involved in determining the amount of reserve and whether positions taken on the Company's tax returns are more likely than not to be sustained.sustained, which involve the use of significant estimates and assumptions with respect to the potential outcome of positions taken on tax returns that may be reviewed by tax authorities. The Company adjusts its tax reserve estimates periodically because of ongoing examinations by, and settlements with, various taxing authorities, as well as changes in tax laws, regulations and interpretations.

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On December 22, 2017, new federal tax reform legislation was enacted in the United States, resulting in significant changes from previous tax law, including the new tax on global intangible low-taxed income ("GILTI"). The Company concluded that it would not be appropriate to provide deferred taxes on individual inside basis differences or the outside basis difference (or portion thereof) because a taxpayer’s GILTI is based on its aggregate income from all foreign corporations. Because the computation is done at an aggregate level, the unit of account is not the taxpayer’s investment in an individual foreign corporation or that corporation’s assets and liabilities.
Concentrations Risk
Customers
The Company has long-term contracts with distributors around the world. For the U.S. Networks segment, more than 90%84% of distribution revenue comes from the 10 largest distributors. For the International Networks segment, approximately 42% of distribution revenue comes from the 10 largest distributors. Agreements in place with the 10 largest cable and satellite operators with the U.S. Networks and International Networks expire at various times from 20182022 through 2021.2025. Although the Company seeks to renew its agreements with its distributors prior to expiration of a contract, a delay in securing a renewal that results in a service disruption, a failure to secure a renewal or a renewal on less favorable terms may have a material adverse effect on the Company’s financial condition and results of operations. Not only could the Company experience a reduction in distribution revenue, but it could also experience a reduction in advertising revenue, as viewership is impacted by affiliate subscriber levels.
No individual customer accounted for more than 10% of total consolidated revenues for 2017, 2016 and 2015.2021, 2020 or 2019. As of December 31, 20172021 and 2016,2020, the Company’s trade receivables do not represent a significant concentration of credit risk as the customers and markets in which the Company operates are varied and dispersed across many geographic areas.
Financial Institutions
Cash and cash equivalents are maintained with several financial institutions. The Company has deposits held with banks that exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear minimal credit risk. In conjunction with the Scripps Networks acquisition, $2.7 billion of proceeds from debt issuances were invested in money market funds, $1.3 billion were invested in time deposit accounts, and the remainder was invested in highly liquid, short-term instruments with original maturities of 90 days or less. These investments are classified as cash and cash equivalents on the balance sheet and are anticipated to be used for the Scripps Networks acquisition; in the interim, the Company has full access to these proceeds. Additionally, the Company has cash and cash equivalents held by its foreign subsidiaries. Under the TCJA, the Company is subject to U.S. taxes for the deemed repatriation of certain cash balances held by foreign corporations. The Company intends to continue to permanently reinvest these funds outside of the U.S., and current plans do not demonstrate a need to repatriate them to fund our U.S. operations.
Lender Counterparties
There is a risk that the counterparties associated with the Company’s revolving credit facility will not be available to fund as obligated under the terms of the facility and that the Company may, at the time of such unavailability to fund, have limited or no access to the commercial paper market. If funding under the revolving credit facility is unavailable, the Company may have to acquire a replacement credit facility from different counterparties at a higher cost or may be unable to find a suitable replacement. Typically, the Company seeks to manage such risks from its revolving credit facility by contracting with experienced large financial institutions and monitoring the credit quality of its lenders. As of December 31, 2017, the Company did not anticipate nonperformance by any of its counterparties.
Counterparty Credit Risk
The Company is exposed to the risk that the counterparties to outstanding derivative financial instruments will default on their obligations. The Company manages these credit risks through the evaluation and monitoring of the creditworthiness of, and concentration of risk with, the respective counterparties. In this regard, credit risk associated with outstanding derivative financial instruments is spread across a relatively broad counterparty base of banks and financial institutions. In connection with the Company's hedge of certain investments classified as available-for-sale securities, the Company has pledged shares as collateral to the derivative counterparty. (See Note 5.) The Company also has a limited number of arrangements where collateral is required to be posted in the instance that certain fair value thresholds are exceeded. As of December 31, 2017, $3 million of2021, no collateral has been posted by the Company under these arrangements and classified as other noncurrent assets in the consolidated balance sheets.arrangements. As of December 31, 2017, our2021, the Company's exposure to counterparty credit risk included derivative assets with an aggregate fair value of $25$330 million. (See Note 10.)

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Accounting and Reporting Pronouncements Adopted
LIBOR
In March 2020, the FASB issued guidance providing optional expedients and exceptions for applying U.S. GAAP to contract modifications, hedging relationships, and other transactions associated with the expected market transition away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The guidance is for March 12, 2020 through December 31, 2022 and may not be applied to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The Company will apply the relevant provisions of the guidance to its existing hedge relationships.
Business Combinations
In October 2021, the Financial Standards Accounting Board ("FASB") issued guidance that requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination as if it had originated the contracts. The guidance is effective for interim and annual periods beginning after December 15, 2022, and may be early adopted. The Company early adopted this guidance during the third quarter of 2021. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements for prior acquisitions in the current annual period, and the impact in future periods will be dependent on the contract assets and contract liabilities acquired in future business combinations.
Content
In March 2019, the FASB issued guidance which generally aligns the accounting for production costs of episodic television series with the accounting for production costs of films. In addition, this guidance modifies certain aspects of the capitalization, impairment, presentation and disclosure requirements. The Company adopted this guidance on January 1, 2020 and applied the provisions prospectively. In connection with this adoption, the Company elected to treat all content rights and prepaid license fees as a noncurrent asset, with the exception of content acquired with an initial license period of 12 months or less and prepaid sports rights expected to air within 12 months. As of December 31, 2021 and 2020, $245 million and $532 million, respectively, of content rights and prepaid license fees were reflected as a current asset. The Company determined that most of its content is exploited as part of film groups. For such content assets, the unit of account for the impairment assessment is the respective film group. There was no material impact upon adoption to the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows. (See Note 6.)
Goodwill
In January 2017, the FASB issued guidance simplifying the subsequent measurement of goodwill by eliminating Step 2 from the former two-step goodwill impairment test and eliminating the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. Therefore, an entity will recognize impairment charges for the amount by which the carrying amount exceeds the reporting unit's fair value not to exceed the amount of goodwill recorded for that reporting unit. Goodwill impairment will no longer be measured as the excess of the carrying amount of goodwill over its implied fair value determined by assigning the fair value of a reporting unit to all of its assets and liabilities as if it had been acquired in a business combination. The Company adopted this guidance on January 1, 2020 and has applied the provisions to quantitative goodwill impairment assessments performed subsequent to adoption. (See Note 7.)
Leases
In February 2016, the FASB issued guidance, which requires lessees to recognize almost all of their leases on the balance sheet by recording a right-of-use asset and lease liability. The guidance also requires improved disclosures to help users of the financial statements better understand the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted this guidance effective January 1, 2019 and elected to apply the guidance at the effective date without recasting the comparative periods presented. Additionally, the Company elected to apply practical expedients allowing it to not reassess: 1) whether any expired or existing contracts previously assessed as not containing leases are, or contain, leases; 2) the lease classification for any expired or existing leases; and 3) initial direct costs for any existing leases. The Company also elected to not separate lease components from non-lease components across all lease categories. Instead, each separate lease component and non-lease component are accounted for as a single lease component. The Company did not elect to apply the practical expedient to use hindsight in determining the lease term and in assessing the right-of-use assets for impairment. Additionally, the Company did not elect to apply the short-term lease scope exemption.
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DISCOVERY, INC.
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Accounting and Reporting Pronouncements Not Yet Adopted
Convertible Instruments
In August 2020, the FASB issued guidance simplifying the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. The guidance amends the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions, requires the use of the if-converted method for calculating earnings per share for convertible instruments, and makes targeted improvements to the disclosures for convertible instruments and related earnings per share guidance. This guidance is effective for interim and annual periods beginning after December 15, 2021. The Company does not expect adoption of this guidance will have a material impact on its consolidated financial statements and related disclosures.
NOTE 3. ACQUISITIONS AND DISPOSITIONS
Acquisitions
Scripps Networks Interactive, Inc.WarnerMedia
On February 26, 2018, the U.S. Department of Justice notifiedIn May 2021, the Company entered into an agreement with AT&T Inc. to combine with WarnerMedia’s ("WarnerMedia") entertainment, sports and news assets to create a standalone, global entertainment company.
The proposed combination transaction will be executed through a Reverse Morris Trust type transaction, under which WarnerMedia will be distributed to AT&T’s shareholders via a pro rata distribution (i.e., a spin off). In connection with the combination transaction, AT&T will receive approximately $43 billion (subject to working capital and other adjustments) in a combination of cash, debt securities and WarnerMedia’s retention of certain debt. The Company has concluded that it has closed its investigation into Discovery's agreement for a planwill be considered the accounting acquirer. The Company established an interest rate derivative program to mitigate interest rate risk associated with the anticipated issuance of merger to acquire Scripps Networks in a cash-and-stock transaction. The estimated merger consideration for the acquisition totals $12.0 billion, including cash of $8.4 billion and stock of $3.6 billion based on the Series C common stock price as of January 31, 2018. In addition, the Company will assume Scripps Networks' netfuture fixed-rate debt of approximately $2.7 billion. The transactionby WarnerMedia, which is expected to close in early 2018.
Scripps Networks shareholders will receive $63.00 per share in cashbe guaranteed by the Company and a number of shares of Discovery's Series C common stock that is determined in accordance with a formula and subject to a collar based on the volume weighted average pricecertain subsidiaries of the Company's Series C common stock. The formula is based onCompany upon closing of the volume weighted average price of Discovery's Series C common stock over the 15 trading days ending on the third trading daytransaction. (See Note 10.)
Immediately prior to closing, (the “Average Discovery Price”). Scripps Networks shareholders will receive 1.2096all shares of Discovery's Series C common stock if the Average Discovery Price is below $22.32,A, Series B, and 0.9408 shares of Discovery's Series C common stock if the Average Discovery Price is above $28.70. The intent of the range was to provide Scripps Networks shareholders with $27.00 of value per share in Discovery Series C common stock; if the Average Discovery Price is greater than or equal to $22.32 but less than or equal to $28.70, Scripps Networks shareholders will receive a proportional number of shares between 1.2096 and 0.9408. If the Average Discovery Price is below $25.51, Discovery has the option to pay additional cash instead of issuing more shares above the 1.0584 conversation ratio required at $25.51. The cash payment is equal to the product of the additional shares required under the collar formula multiplied by the Average Discovery Price; for example, if the Average Discovery Price were $22.32 with a conversion ratio of 1.2096, the Company could offer shares at the 1.0584 ratio and pay for the difference associated with the incremental shares in cash. Outstanding employee equity awards or share-based awards that vest upon the change of control will be acquired with a similar combination of cash and shares of Discovery Series C common stock pursuant to terms specified in the Merger Agreement. Therefore, the merger consideration will fluctuate based upon changes in the share price of Discovery Series C common stock and the number of Scripps Networks common shares,Series A-1 and Series C-1 convertible preferred stock options,will be reclassified and other equity-based awards outstanding on the closing date. Discovery will also pay certain transaction costs incurred by Scripps Networks. The post-closing impactconverted to one class of the formula was intendedCompany's common stock. AT&T’s shareholders that receive WarnerMedia stock in the distribution will receive stock representing 71% of the combined company and the Company's shareholders will continue to resultown 29% of the combined company, in Scripps Networks’ shareholders owning approximately 20% of Discovery’seach case on a fully diluted common sharesbasis. The Boards of Directors of both AT&T and Discovery’s shareholders owning approximately 80%. Thethe Company will utilize debt (see Note 9) and cash on hand to financehave approved the cash portion of the transaction.
The transaction is anticipated to close in the second quarter of 2022, subject to regulatory approvalsapproval by the Company's shareholders and otherthe satisfaction of customary closing conditions.
conditions, including receipt of regulatory approvals. On December 22, 2021, the transaction received unconditional antitrust clearance from the European Commission (“EC”) pursuant to the EC Merger Regulation, and on December 28, 2021, AT&T received a favorable Private Letter Ruling from the Internal Revenue Service regarding the qualification of the transactions for their intended tax-free treatments. On February 9, 2022, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, statutory waiting period has expired or otherwise been terminated, and any agreement not to consummate the transaction between the parties and the Federal Trade Commission or the Antitrust Division of the United States Department of Justice or any other applicable governmental entity, has also expired or otherwise been terminated. Discovery and AT&T are in the process of obtaining other required regulatory approvals. Agreements are in place with Dr. John C. Malone and Advance/Newhouse and members of the Scripps family entered into voting agreementsProgramming Partnership to vote in favor of the transactions andtransaction, representing approximately 43% of the stockholdersaggregate voting power of boththe shares of Discovery and Scripps Networks approvedvoting stock. The transaction requires, among other things, the transaction on November 17, 2017. In addition,consent of Advance/Newhouse has provided its consent, in its capacityProgramming Partnership under the Company's certificate of incorporation as the sole holder of Discovery’s outstandingthe Series A-1 Preferred Stock, which consent was given pursuant to a consent agreement. In connection with Advance/Newhouse Programming Partnership’s entry into the consent agreement and related forfeiture of the significant rights attached to the Series A-1 Preferred Stock in the reclassification of the shares of Series A preferredA-1 Preferred Stock into common stock, for Discoveryit will receive an increase to enter into the Merger Agreement and consummate the merger. In connection with this consent, Discovery and Advance/Newhouse entered into an exchange agreement pursuant to which Advance/Newhouse exchanged all of its shares of Series A and Series C preferred stock of Discovery for shares of newly designated Series A-1 and Series C-1 preferred stock of Discovery. The exchange transaction did not change the aggregate number of shares of Discovery’s Series A common stock andof the Company into which the Series C common stock that are beneficially owned by Advance/Newhouse or change voting rights or liquidation preferences afforded to Advance/Newhouse. The $35 millionA-1 Preferred Stock would be converted. Upon the closing, the impact of the modification has beenissuance of such additional shares of common stock of the Company will be recorded as a componenttransaction expense. No vote by AT&T shareholders is required.
The merger agreement contains certain customary termination rights for Discovery and AT&T, including, without limitation, a right for either party to terminate if the transaction is not completed on or before July 15, 2023. Termination under specified circumstances will require Discovery to pay AT&T a termination fee of selling, general$720 million or AT&T to pay Discovery a termination fee of $1.8 billion.
In anticipation of this combination, in June 2021, Magallanes, Inc., a wholly owned subsidiary of AT&T Inc., entered into a $10 billion term loan that will be guaranteed by the Company and administrative expense. (See Note 12 and Note 17.) All of Discovery's direct costscertain material subsidiaries of the Scripps Networks acquisition will be reflected as a componentCompany upon closing of selling, general and administrative expense in the consolidated statements of operations.transaction.

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UKTV - Lifestyle Business
The following table summarizesOn June 11, 2019, the components of the estimated merger consideration (in millions of dollarsCompany and shares, except for per share amounts, share conversion ratio, stock option conversion ratio, average cash consideration and average equity consideration). The estimated merger consideration is based on the number of Scripps Networks shares outstanding as of December 31, 2017, and utilizesBBC Studios (“BBC”) dissolved their 50/50 joint venture, UKTV, a January 31, 2018 transaction closing date to compute the equity portion of the purchase price.
Outstanding Scripps Networks equity  
Scripps Networks shares outstanding 130
Cash consideration per share $63.00
Estimated cash portion of purchase price $8,193
   
Scripps Networks shares outstanding 130
Share conversion ratio 1.1316
Discovery Series C common stock assumed to be issued 147
Discovery Series C common stock price per share $23.86
Estimated equity portion of purchase price $3,511
   
Outstanding shares under Scripps Networks share-based compensation programs  
Shares under Scripps Networks share-based compensation programs 3
Scripps Networks share-based compensation converting to cash (70%)
 2
Average cash consideration (per share less applicable exercise price) $50.34
Estimated cash portion of purchase price $114
   
Scripps Networks share-based compensation converting to Discovery Series C common stock (30%)
 1
Stock option conversion ratio (based on intrinsic value per award) 3
Discovery Series C common stock (1) or options (2) assumed to be issued 3
Average equity consideration (intrinsic value of Discovery Series C common stock or options to be issued as consideration) $12.84
Estimated equity portion of purchase price for share awards $45
   
Scripps Networks transaction costs required to be paid by Discovery $105
   
Total estimated consideration to be paid $11,968
Balances reflect rounding of dollar and share amounts to millions, which may result in differences for recalculated amounts comparedBritish multi-channel broadcaster, with the amounts presented above.

Merger Consideration Sensitivity
The table below illustrates the potential impactCompany taking full control of UKTV’s 3 lifestyle channels (the “Lifestyle Business”) and BBC taking full control of UKTV’s 7 entertainment channels (the "Entertainment Business"). Prior to the total estimated outstanding Discovery Series C common stock to be issued assuming that the stock portion of the consideration for outstanding Scripps shares were converted to shares of Discovery Series C common stock at either the low-end or the high-end of the collar range. For the purposes of this calculation, the total number of Scripps outstanding shares has been assumed to be the same as in the table above. The stock prices used to determine the equity portion of the consideration in each scenario is based on Discovery Series C common stock price at the low-end and the high-end of the collar (in millions of dollars and shares, except for conversion ratio).

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


  Discovery Series C Common Stock (DISCK) Shares to Issue and Total Estimated Consideration to be Paid
  Minimum Maximum
Scripps shares outstanding as of December 31, 2017 130
 130
Average Discovery price - Series C common stock $22.32
 $28.70
Conversion ratio 1.2096
 0.9408
Discovery Series C common stock to be issued for estimated Scripps shares outstanding 157
 122
Total estimated consideration to be paid $11,968
 $11,968
If the average price of Discovery Series C common stock is above the collar maximum or below the collar minimum, the total estimated consideration to be paid will increase or decrease accordingly from the amount shown in the table above.
The merger will be accounted for as a business combination using the acquisition method of accounting, which will establish a new basis of accounting for all identifiable assets acquired and liabilities assumed at fair value as of the date control is obtained. Accordingly, the costs to acquire such interests will be allocated to the underlying net assets based on their respective fair values, including noncontrolling interests. Any excess of the purchase price over the estimated fair value of the net assets acquired will be recorded as goodwill.
OWN
On November 30, 2017,transaction, the Company acquiredheld a note receivable from Harpo, Inc. ("Harpo") a controlling interest in OWN, increasing Discovery’s ownership stake from 49.50% to 73.99%. OWN is a pay-TV networkUKTV of $118 million. Concurrent with the transaction, the note was settled.
To compensate Discovery for the note receivable and website that provides adult lifestyle and entertainment content, which is focused on African Americans. Discovery paid $70 million in cash and recognized a gain of $33 million to account for the difference in fair value between the carrying valueLifestyle Business and the Entertainment Business retained by BBC, Discovery received cash of $88 million at closing and a note receivable from BBC of $130 million, payable in 2 equal installments, which were received in June 2020 and June 2021. The Company used a market-based valuation model to determine the fair value of the previously held 49.50%50% equity interest. The price included an assessment of fair value of the equity interestmethod investment in the network, subject to the impact of the note payable to Discovery. TheLifestyle Business and recognized an immaterial gain, which is included in other income (expense) income,, net in the Company's consolidated statementsstatement of operations (see Note 18). Discovery consolidated OWN under the VIE consolidation model upon closing of the transaction. As a result, the accounting for OWN was changed from an equity method investment to a consolidated subsidiary.operations.
The Company applied the acquisition method of accounting to OWN’s business,the Lifestyle Business, whereby the excess of the fair value of the business over the fair value of identifiable net assets was allocated to goodwill. The goodwill reflects the workforce and synergies expected from broader exposure to the self-discovery and self-improvementlifestyle entertainment sector. The goodwill recorded as part of this acquisition is includedsector in the U.S. Network reportable segment and is not amortizable for tax purposes. Intangible assets consist of advertiser backlog, advertiser relationships and affiliate relationships with a weighted average estimated useful life of 9 years.
The preliminary opening balance sheet is subject to adjustment based on final assessment of the fair values of certain acquired assets, principally intangibles, and certain contingent liabilities. The Company used discounted cash flow ("DCF") analyses, which represent Level 3 fair value measurements, to assess certain components of its purchase price allocation. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments occur. The preliminary fair value of assets acquired and liabilities assumed, as well as a reconciliation to cash consideration transferred is presented in the table below (in millions).


DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


  November 30, 2017
Intangible assets $295
Content rights 176
Accounts receivable 84
Other assets 26
Other liabilities (230)
Net assets acquired $351
Goodwill 136
Remeasurement gain on previously held equity interest (33)
Carrying value of previously held equity interest (329)
Redeemable noncontrolling interest (55)
Cash consideration transferred $70
Following the acquisition of the incremental equity interest and change to governance provisions, the Company has determined that it is now the primary beneficiary of OWN as Discovery obtained control of the Board of Directors and operational rights that significantly impact the economic performance of the business such as programming and marketing, and selection of key personnel. As the primary beneficiary, Discovery includes OWN's assets, liabilities and results of operations in the Company's consolidated financial statements. As of December 31, 2017, the carrying amounts of assets and liabilities of the consolidated VIE were $707 million and $505 million, respectively. The fair value of the noncontrolling interest retained by Harpo was computed based on Harpo's contractual claims to the underlying net assets of the business, which are partially subordinate to the Company's given the Company's historical funding of OWN's losses. The loans funded by Discovery to launch the network require repayment prior to equity distributions to partners.
Harpo has the right to require the Company to purchase its remaining non-controlling interest during 90-day windows beginning on July 1, 2018 and every two and half years thereafter through January 1, 2026. As OWN’s put right is outside the Company's control, OWN’s noncontrolling interest is presented as redeemable noncontrolling interest outside of permanent equity on the Company's consolidated balance sheet. (See Note 11.)
The Enthusiast Network, Inc.
On September 25, 2017, the Company contributed its linear cable network focused on cars and motor sports, Velocity, to a new joint venture ("VTEN"), with GoldenTree Asset Management L.P. ("GoldenTree"). GoldenTree's contributions to the joint venture included businesses from The Enthusiast Network, Inc. ("TEN"), primarily MotorTrend.com, Motor Trend YouTube channel and the Motor Trend OnDemand OTT service. TEN did not contribute its print businesses to the joint venture. The joint venture will establish a portfolio of digital content, social groups, live events and original content focused on the automotive audience. In exchange for their contributions, Discovery and GoldenTree received 67.5% and 32.5% ownership of the new joint venture, respectively.
Discovery consolidated the joint venture under the voting interest consolidation model upon the closing of the transaction. As the Company controlled Velocity and continues to control Velocity after the transaction, the change in the value of the Company's ownership interest was accounted for as an equity transaction and no gain or loss was recognized in the Company's consolidated statements of operations. The Company applied the acquisition method of accounting to TEN's contributed businesses, whereby the excess of the fair value of the contributed business over the fair value of identifiable net assets was allocated to goodwill. The goodwill reflects the workforce and synergies expected from broader exposure to the automotive entertainment sector. The goodwill recorded as part of this acquisition is included in the U.S. Network reportable segment and is not amortizable for tax purposes. Intangible assets primarily consist of trade names, licensing agreements and customer relationships with a weighted average estimated useful life of 16 years.
The Company used DCF analyses, which represent Level 3 fair value measurements, to assess certain components of its purchase price allocation. The fair value of net assets acquired includes measurement period adjustments primarily due to finalization of the valuation of intangible assets recorded against goodwill. The fair value of the assets acquired and liabilities assumed is presented in the table below (in millions).

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


  
Preliminary
September 25, 2017
 Measurement Period Adjustments 
Final
September 25, 2017
Goodwill $59
 $16
 $75
Intangible assets 71
 (18) 53
Property plant and equipment, net 16
 1
 17
Other assets acquired 6
 —
 6
Liabilities assumed (8) 1
 (7)
Net assets acquired $144
 $—
 $144
Discovery has a fair value call right exercisable during 30 day windows beginning September 2022 and March 2024 to require GoldenTree to sell its entire ownership interest in the joint venture at fair value. GoldenTree has a fair value put right exercisable during 30 day windows beginning in March 2021, September 2022 and March 2024 that requires Discovery to either purchase all of GoldenTree's interest in the joint venture at fair value or participate in an initial public offering for the joint venture. GoldenTree's 32.5% noncontrolling interest in the joint venture is presented as redeemable noncontrolling interest outside of permanent equity on the Company's consolidated balance sheet. The opening balance sheet value recognized for the redeemable noncontrolling interest upon closing was $82 million, based on GoldenTree's ownership interest in the book value of Velocity and fair value of GoldenTree's contribution. The balance was subsequently increased by $38 million to adjust the redemption value to fair value of $120 million. (See Note 11.)
Eurosport International and France
On March 31, 2015 the Company acquired an additional 31% interest in Eurosport France for €36 million ($38 million). This transaction gave the Company a 51% controlling stake in Eurosport. The Company recognized gains of $2 million for the year ended December 31, 2015 to account for the difference between the carrying value and the fair value of the previously held 20% equity method investments in Eurosport France and Eurosport International. The gains were included in other (expense) income, net in the Company's consolidated statements of operations. (See Note 18.) On October 1, 2015, TF1 put its remaining 49% interest in Eurosport to the Company for €491 million ($548 million). (See Note 11.)
Eurosport is a leading pan-European sports media platform. The flagship Eurosport network focuses on regionally popular sports, such as tennis, skiing, cycling and motor sports. Eurosport’s brands and platforms also include Eurosport HD (high definition simulcast), Eurosport 2, Eurosport 2 HD and Eurosportnews. The acquisitions are intended to enhance the Company's pay-TV offerings in Europe and increase the growth of Eurosport.
The Company used a DCF analysis, which represent Level 3 fair value measurements, to assess certain components of the Eurosport purchase price allocations. The fair value of the assets acquired, liabilities assumed, noncontrolling interests recognized and the remeasurement gains recorded on the previously held equity interests is presented in the table below (in millions).
  
Eurosport
France
  March 31, 2015
Goodwill $69
Intangible assets 40
Other assets acquired 25
Cash 35
Removal of TF1 put right 2
Currency translation adjustment (6)
Remeasurement gain on previously held equity interest (2)
Liabilities assumed (30)
Deferred tax liabilities (14)
Redeemable noncontrolling interest (Note 11) (60)
Carrying value of previously held equity interest (21)
Net assets acquired $38

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The goodwill reflects the workforce and synergies expected from increased pan-European market penetration as the operations of Eurosport and the Company are combined.U.K. The goodwill recorded as part of this acquisition is included in the International Networks reportable segment and is not amortizable for tax purposes. Intangible assets primarily consist of distribution and advertising customer relationships, advertiser backlogelectronic program guide slots and trademarks withand have a weighted average estimated useful life of 106 years. The Company used DCF analyses, which represent Level 3 fair value measurements, to assess certain components of its purchase price allocation. The measurement period closed in June 2020, with no material adjustments recorded.
OtherThe final fair value of Lifestyle Business assets acquired and liabilities assumed, as well as a reconciliation to total assets received in dissolution of the UKTV joint venture, is presented in the table below (in millions).
Cash$17 
Content rights18 
Intangible assets34 
Goodwill121 
Accrued liabilities(12)
Total assets acquired and liabilities assumed in Lifestyle Business178 
Note receivable from BBC130 
Cash received88 
Net assets received in dissolution of UKTV joint venture$396 
A summary of total assets derecognized in connection with the dissolution of the UKTV joint venture is presented in the table below (in millions).
Carrying value of UKTV equity method investment$278 
Settlement of note receivable118 
Total assets derecognized in dissolution of UKTV joint venture$396 
In 2017 and 2015,connection with the above transaction, the Company acquired other businessescontemporaneously entered into a ten-year content licensing arrangement with BBC in exchange for total cash and contingent consideration of $4 million and $91 million, net of cash acquired, respectively. Total consideration as of December 31, 2015 included contingent consideration of $13 million, of which $2 million was paid during 2016. The acquisitions included FTA networks in Poland, Italy and Turkey, cable networks in Denmark and a pay-TV sports channel in Asia. The goodwill reflectslicense fees over the synergies and regional market penetration from combining the operations of these acquisitions with the Company's operations.term.
Pro Forma Financial InformationMagnolia Discovery Ventures
The Company did not have material pro forma information to present for 2017, 2016 and 2015. The Company's 2017 business combinations are not material individually or in the aggregate,On July 19, 2019, the Company had no 2016 business combinations, and the Company's 2015 business combinations are also not material individually or in the aggregate.
Dispositions
Education Sale
On February 26, 2018, the Company announced the planned sale of a controlling equity stake incontributed its education business in the first half of 2018linear cable network focused on home improvement, DIY Network, toFrancisco Partners for cash of $120 million. No loss is expected upon sale. The Company will retain an equity interest. Additionally, the Company will have ongoing license agreements which are considered to be at fair value. As of December 31, 2017, the Company determined that the education business did not meet the held for sale criteria, as defined in GAAP as management had not committed to a plan to sell the assets.
Raw and Betty Studios, LLC
On April 28, 2017, the Company sold Raw and Betty to All3Media. All3Media is a U.K. based television, film and digital production and distribution company. The Company owns 50% of All3Media and accounts for its investment in All3Media under the equity method of accounting. The Company recorded a loss of $4 million for the disposition of these businesses for the year ended December 31, 2017. The loss on disposition of Raw and Betty included $38 million in net assets, including $30 million of goodwill. Raw and Betty were components of the studios operating segment reported with Education and Other.
Group Nine Transaction
On December 2, 2016, the Company recorded a pre-tax gain of $50 million upon disposition of its digital network Seeker and production studio SourceFed, following its contribution of the businesses and $100 million in cash for the formation of a new joint venture, Group Nine Media, Inc.Magnolia Discovery Ventures, LLC ("Group Nine Media"Magnolia"), on December 2, 2016 ("Group Nine Transaction"). Group Nine Media includes Thrillist Media Group, NowThis Mediawith Chip and TheDodo.com. AsJoanna Gaines acting as Chief Creative Officers to the joint venture. The joint venture replaced and rebranded the DIY Network in January 2022.
Upon formation of Magnolia, Discovery received a result of the transaction, Discovery obtained a non-controlling75% ownership interest in the preferred stock of Group Nine Media, which is accountedjoint venture. In exchange for under the cost method of accounting. As of December 31, 2017, the Company owns a 42% minority interest in Group Nine Media with a carrying value of $212 million. (See Note 4.) The gain on contribution of the digital networks business included the disposition of $32 million in net assets, including $22 million of goodwill allocatedproviding services and exclusivity to the transaction based on the relative fair values of the digital networks business disposed of and the portion of the U.S. Networks reporting unit that was retained.
Russia
On October 7, 2015, Discovery recorded a loss of $5 million upon the deconsolidation of its Russian business following its contribution to a joint venture, (the “New Russian Business”) withthe Gaines received a Russian media company, National Media Group ("NMG"). The New Russian Business was established to comply with changes in Russian legislation that limit foreign ownership of media companies in Russia. No cash consideration was exchanged in the transaction. NMG contributed a FTA license which enables advertising for the New Russian Business. As part of the transaction, Discovery obtained a 20%25% ownership interest in the New Russian Business, which isjoint venture, a put right after 6.5 years at fair value, potential for an additional 5% incentive equity, and certain guaranteed payments. Discovery consolidated the joint venture under the voting interest consolidation model. Payments to the Gaines for rendering services in their capacity as the Chief Creative Officers of the joint venture will be accounted for under the equity method of accounting. The loss on contribution of the Russian business included $15 million of goodwill allocatedas liability-classified share-based awards to the transaction based on the relative fair values of the Russian business disposed of and the portion of the reporting unit that was retained. Although Discovery no longer consolidates the Russian business, Discovery earns revenue by providing content and brands to the New Russian Business under long-term licensing arrangements. (See Notenon-employees as services are rendered.

82
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Golf Digest
19.)On May 13, 2019, the Company paid $36 million in cash to acquire Golf Digest, a leading golf brand whose content is available across multiple platforms, including print and social media. The Russian business wasCompany applied the acquisition method of accounting to Golf Digest, and recorded net assets of $36 million, including net working capital liabilities of $12 million, intangible assets of $25 million and goodwill of $23 million. The measurement period closed in May 2020, with no material adjustments recorded. Intangible assets consist of trademarks and trade names and licensing agreements and have a weighted average useful life of 9 years. The goodwill reflects the workforce and synergies expected from broader exposure to the golf entertainment sector. The goodwill recorded as part of this acquisition is included in the International Networks reportable segment;segment and is not amortizable for tax purposes.
Other
During 2020 and 2019, the licensing arrangements withCompany completed other immaterial acquisitions.
Dispositions
Great American Country
In June 2021, the New Russian Business are reported as distribution revenue inCompany completed the International Networks reportable segment. (See Note 21.)
Radio
On June 30, 2015, Discovery soldsale of its radio businesses in Northern EuropeGreat American Country network to Bauer Media Group ("Bauer")Hicks Equity Partners for total consideration, neta sale price of cash disposed of €72 million ($80 million), which included €54 million ($61 million) in cash and €18 million ($19 million) of contingent consideration.$90 million. The cumulative gain on the disposal is $1 million. Based on the final resolution and receipt of contingent consideration payable, DiscoveryCompany recorded a pre-tax gain of $13 million for the year ended December 31, 2016. The Company had previously recorded a $12 million loss including estimated contingent consideration as disclosed for the year ended December 31, 2015.
The Company determined that the disposals noted above did not meet the definition of a discontinued operation because the dispositions do not represent strategic shifts that have a significant impact on the Company's operations and consolidated financial results.
NOTE 4. INVESTMENTS
The Company’s investments consisted of the following (in millions).$76 million.
83
  
   December 31,
Category Balance Sheet Location 2017 2016
Cash equivalents:      
Time deposits Cash and cash equivalents $1,305
 $—
Trading securities:      
Money market funds Cash and cash equivalents 2,707
 —
Mutual funds Prepaid expenses and other current assets 182
 160
Equity method investments:      
Equity investments Equity method investments 335
 246
OWN advances and note receivable 
Equity method investments

 —
 311
AFS securities:      
Common stock Other noncurrent assets 82
 64
Common stock - pledged Other noncurrent assets 82
 64
Cost method investments Other noncurrent assets 295
 245
Total investments   $4,988
 $1,090
Money Market Funds, Time Deposits and U.S. Treasury Securities
During 2017, the Company issued $6.8 billion in senior notes to fund the anticipated Scripps Networks acquisition. (See Note 3 and Note 9.) Of these total proceeds, $2.7 billion were invested in money market funds, $1.3 billion were invested in time deposit accounts, and the remainder was invested in highly liquid, short-term instruments with original maturities of 90 days or less. These investments are classified as cash and cash equivalents on the consolidated balance sheet and are anticipated to be used for the Scripps Networks acquisition. In the interim, the Company has full access to these proceeds. Of the $6.8 billion in debt proceeds, approximately $5.9 billion is subject to a special mandatory redemption provision that requires the Company to redeem the notes for a price equal to 101% of their principal amount, plus any accrued and unpaid interest on the notes, in the event that the Scripps Networks acquisition has not closed or the agreement is terminated prior to August 30, 2018. While the Company expects to complete the Scripps Networks acquisition by the required date, unanticipated developments could delay or prevent the acquisition.
Mutual Funds
Trading securities include investments in mutual funds held in a separate trust, which are owned as part of the Company’s supplemental retirement plan. (See Note 5.)

DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4. INVESTMENTS
The Company’s equity investments consisted of the following, net of investments recorded in other noncurrent liabilities (in millions).
CategoryBalance Sheet LocationOwnershipDecember 31, 2021December 31, 2020
Equity method investments:
nC+Equity method investments32%$151 $164 
Discovery Solar Ventures, LLC (a)
Equity method investmentsN/A75 83 
All3MediaEquity method investments50%78 76 
OtherEquity method investments237 184 
Total equity method investments541 507 
Investments with readily determinable fair values:
Lionsgate Entertainment Corp.Other noncurrent assets80 54 
SharecarePrepaid expenses and other current assets40 — 
fuboTV Inc.Prepaid expenses and other current assets— 32 
Total equity investments with readily determinable fair values120 86 
Equity investments without readily determinable fair values:
Group Nine Media (b)
Other noncurrent assets25%191 276 
Formula E (c)
Other noncurrent assets28%83 65 
PhiloOther noncurrent assets19%50 50 
OtherOther noncurrent assets172 150 
Total equity investments without readily determinable fair values496 541 
Total equity investments$1,157 $1,134 
(a) Discovery Solar Ventures, LLC invests in limited liability companies that sponsor renewable energy projects related to solar energy. These investments are considered VIEs of the Company and are accounted for under the equity method of accounting using the HLBV methodology for allocating earnings.
(b) Overall ownership percentage for Group Nine Media is calculated on an outstanding shares basis. The amount shown herein includes a $20 million note receivable balance, excluding interest, presented within Prepaid expenses and other current assets on the Company's consolidated balance sheets.
(c) Ownership percentage for Formula E includes holdings accounted for as an equity method investment and holdings accounted for as an equity investment without a readily determinable fair value.
Equity Method Investments
The Company makes investments that support its underlying business strategy and enable it to enter new markets and develop programming. Almost allInvestments in equity method investees are privately owned. those for which the Company has the ability to exercise significant influence but does not control and is not the primary beneficiary. Impairment losses due to a change in value that are considered other-than-temporary were not material for the years ended December 31, 2021, 2020 and 2019, and are reflected as a component of loss from equity investees, net on the Company's consolidated statements of operations.
With the exception of the OWN investment prior to the November 30, 2017 acquisition (see Note 3)nC+, and certain investments in renewable energy projects accounted for using the HLBV methodology, carrying values of the Company’s equity method investments are consistent with its ownershipclaim in the underlying net assets of the investees. A portion of the Scripps Networks purchase price associated with the investment in nC+ was attributed to amortizable intangible assets. This basis difference is included in the carrying value of nC+ and is amortized over time as a reduction of earnings from nC+. Earnings from nC+ were reduced by the amortization of these intangibles of$10 million, $10 million, and $9 million during the years ended December 31, 2021, 2020 and 2019, respectively. Amortization that reduces the Company's equity in earnings of nC+ for future periods is expected to be $36 million.
84
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain of the Company's other equity method investments are VIEs, for which the Company is not the primary beneficiary. As of December 31, 2017,2021, the Company’s maximum estimated exposure for all its unconsolidated VIEs, including the investment carrying values and unfunded contractual commitments and guarantees made on behalf of VIEs, was approximately $204$196 million. The Company's maximum estimated exposure excludes the non-contractual future funding of VIEs. The aggregate carrying values of these VIE equity method investments were $181 million and $426$126 million as of December 31, 20172021 and 2016, respectively.$123 million as of December 31, 2020. The Company recognized its portion of VIE operating results with net losses of $182$35 million, earnings of $7$91 million, and earnings of $30$14 million for 2017, 2016the years ended December 31, 2021, 2020 and 2015,2019, respectively, in incomeloss from equity investees, net on the consolidated statements of operations.
Renewable Energy Investments with Readily Determinable Fair Value
TheInvestments in entities or other securities in which the Company invested in limited liability companies that sponsor renewable energy projects related to solar energy duringhas no control or significant influence, is not the years ended December 31, 2017primary beneficiary, and December 31, 2016, for the amounts of $322 million and $63 million, respectively. There were nohave a readily determinable fair value are classified as equity investments in 2015.with readily determinable fair value. The Company expects these investments to result in tax benefits received, which reduce the Company's tax liability, and cash flows from the operations of the investees. These investments are considered VIEs of the Company. The Company accounts for these investments under the equity method of accounting. While the Company possesses rights that allow it to exercise significant influence over the investments, the Company does not have the power to direct the activities that will most significantly impact their economic performance, such as the investee's ability to obtain sufficient customers or control solar panel assets. Oncemeasured at fair value based on a stipulated return on investment is garneredquoted market price per unit in active markets multiplied by the Company, the investment allocations to the Company are significantly reduced. Accordingly, the Company applies the HLBV method for recognizing the Company's proportionate sharenumber of the investments' net earnings or losses.
The Company recognized $251 millionunits held without consideration of transaction costs (Level 1). Gains and $24 million of losses on these investments as of December 31, 2017 and December 31, 2016, respectively. The losses are reflected as a component of (loss)recorded in other income from equity investees,(expense), net on the Company's consolidated statements of operations. The Company has recorded income tax benefits associated with these investments of $294 million post-tax reform and $26 million for 2017 and 2016, respectively. These benefits are comprised of $83 million post-tax reform and $9 million from
During the entities' passive losses and $211 million post-tax reform and $17 million from investment tax credits for 2017 and 2016, respectively. The Company accounts for investment tax credits utilizing the flow through method. As of December 31, 2017 and December 31, 2016, the Company's carrying value of renewable energy investments were $98 million and $39 million, respectively. The Company has $20 million of future funding commitments for these investments as of December 31, 2017, which are cancelable under limited circumstances. The Company has concluded that losses incurred on these investments to-date are not indicative of an other-than-temporary impairment due to the nature of these investments. Losses in the early stages of investments in companies that sponsor renewable energy projects are not uncommon, and the Company expects improved performance from these investments in future periods.
Other Equity Method Investments
At December 31, 2017 and December 31, 2016, the Company's other equity method investments included All3Media, a Russian cable television business, Mega TV in Chile, and certain joint ventures in Canada. The Company acquired other equity method investments, largely to enhance the Company's digital distribution strategies, particularly for Eurosport Player, and made additional contributions to existing equity method investments totaling $73 million during 2017.
Significant Subsidiaries
    The table set forth below presents selected financial information for investments accounted for under the equity method. Because renewable energy projects discussed above are accounted for under the HLBV equity method of accounting, the Company's equity method losses do not directly correlate with the GAAP results of the investees presented below. The selected statement of operations information for each of the three yearsyear ended December 31, 2017, 2016,2021, Sharecare, an investment that was formerly determined to not have a readily determinable fair value, was listed on the Nasdaq stock exchange and 2015 and the selected balance sheet informationreclassified as of December 31, 2017 and 2016 (in millions).

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


  2017 2016 2015
Selected Statement of Operations Information:      
Revenues $1,780
 $1,617
 $1,324
Cost of sales 1,100
 998
 853
Operating income 76
 83
 42
Pre-tax income (loss) from continuing operations before extraordinary items 16
 (78) (42)
After-tax net loss (27) (98) (42)
Net loss attributable to the entity (27) (99) (42)
       
Selected Balance Sheet Information:


      
Current assets $1,002
 $884
  
Noncurrent assets 1,946
 1,646
  
Current liabilities 701
 752
  
Noncurrent liabilities 1,008
 1,177
  
Redeemable preferred stock 476
 —
  
Non-controlling interests 6
 8
  
       
AFS Securities
On November 12, 2015,an investment with readily determinable fair value. Prior to this reclassification, the Company acquired 5recorded a gain of $77 million as a result of observable price changes in orderly transactions for the identical or similar investment of the same issuer.
The Company owns shares or 3%,of common stock of Lions Gate Entertainment Corp. ("Lionsgate"), an entertainment company, for $195 million. Lionsgate operates incompany. Formerly, the motion picture production and distribution, television programming and syndication, home entertainment, family entertainment and digital distribution businesses. As the shares have a readily determinable fair value and the Company has the intent to retain the investment, the shares are classified as AFS securities.
The accumulated amounts associated with the components of the Company's AFS securities, which are included in other non-current assets, are summarized in the table below.
  December 31,
  2017 2016
Cost $195
 $195
Accumulated change in the value of:    
Hedged AFS recognized in other expense, net (1) (19)
Unhedged AFS recorded in other comprehensive income 32
 14
Other-than-temporary impairment of AFS Securities (62) (62)
Carrying value $164
 $128

The Company hedged 50% of the Lionsgate shares with an equity collar (the “Lionsgate Collar”"Lionsgate Collar") and pledged those shares as collateral to the derivative counter party. In the application of hedge accounting, when the share price of Lionsgate is within the boundaries of the collar and the hedge has no intrinsiccounterparty with changes in fair value the Company records the gains or losses on the Lionsgate AFS securitiesreflected as a component of other comprehensive income (loss). When(expense), net on the share priceconsolidated statements of the Lionsgate AFS is outside the boundaries of the collar and the hedge has intrinsic value, the Company records a gain or loss for the change in the fair value of the hedged portion of Lionsgate shares that correspond to the change in intrinsic value of the hedge as a component of other (expense) income, net.operations. (See Note 10.)
In 2016, the Company determined that the decline in value of AFS securities related to its investment in Lionsgate was other-than-temporary in nature and, as such, the cost basis was adjusted to fair value. The impairment determination was based on the sustained decline in the stock price of Lionsgate in relation to the purchase price and the prolonged length of time the fair value of the investment has been less than the carrying value. Based on the other-than-temporary impairment determination, unrealized pre-tax losses of $62 million previously recorded as a component of other comprehensive income (loss) were recognized as an impairment charge that is included as a component of other (expense) income, net for During the year ended December 31, 2016. Since2020, the Company terminated the Lionsgate Collar. The Company received cash of $44 million and recognized an immaterial gain, which is included in other income (expense), net on the consolidated statements of operations.
During the fourth quarter of 2020, fuboTV Inc., an investment that was formerly determined to not have a readily determinable fair value, was listed on the New York Stock Exchange. As a result, the Company recognized a total gain of $126 million, including a realized gain and receivable of $101 million pertaining to the Company's sale of 4 million fuboTV Inc. shares. Such gain and receivable are recorded in other income (expense), net on the consolidated statements of operations and prepaid expenses and other current assets on the consolidated balance sheets, respectively. (See Note 20.) As of December 31, 2021, the Company no longer owns shares of fuboTV Inc.
The gains and losses related to the Company's investments with readily determinable fair values for the years ended December 31, 2021, 2020 and 2019 are summarized in the table below (in millions).
Year Ended December 31,
202120202019
Net gains (losses) recognized during the period on equity securities$9 $129 $(26)
Less: Net gains recognized on equity securities sold15 101 — 
Unrealized gains (losses) recognized during reporting period on equity securities still held at the reporting date$(6)$28 $(26)
Equity investments without readily determinable fair values assessed under the measurement alternative
Equity investments without readily determinable fair value include ownership rights that either (i) do not meet the definition of in-substance common stock or (ii) do not provide the Company with control or significant influence and these investments do not have readily determinable fair values.
During the year ended December 31, 2021, the Company invested $42 million in various equity investments without readily determinable fair values and concluded that its other equity investments without readily determinable fair values had decreased $88 million in fair value as a result of observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The decrease was primarily related to the write-down of the Company's investment in Group Nine Media. As of December 31, 2021, the Company had recorded cumulative upward adjustments of $9 million and cumulative impairments of $88 million for its equity investments without readily determinable fair values.

85
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


impairment charge in 2016, the changes in fair value as result of changes in stock price have been recorded as a component of other comprehensive income (loss).
Cost Method Investments
The Company's cost method investments as of December 31, 2017 and December 31, 2016 totaled $295 million and $245 million, respectively, and primarily include its non-controlling interest in Group Nine Media with a carrying value of $212 million and $182 million as of December 31, 2017 and December 31, 2016, respectively. (See Note 3.) Although Discovery has significant influence through its voting rights in the preferred stock of Group Nine Media, the Company applied the cost method for its ownership interest, which does not meet the definition of in-substance common stock. As of December 31, 2017, the Company owns a 42% minority interest in Group Nine Media. The Company increased its cost method investments by $50 million and $18 million for the years ended December 31, 2017 and December 31, 2016. For the year ended December 31, 2017, there were no indicators of impairment or that the fair values of the Company's investments had changed materially.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5. FAIR VALUE MEASUREMENTS
Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities carried at fair value are classified in the following three categories:
Level 1–Quoted prices for identical instruments in active markets.
Level 2–Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3–Valuations derived from techniques in which one or more significant inputs are unobservable.
The table below presents assets and liabilities measured at fair value on a recurring basis (in millions).
December 31, 2021
CategoryBalance Sheet LocationLevel 1Level 2Level 3Total
Assets
Cash equivalents:
Time depositsCash and cash equivalents$— $426 $— $426 
Equity securities:
Money market fundsCash and cash equivalents425 — — 425 
Mutual fundsPrepaid expenses and other current assets12 — — 12 
Company-owned life insurance contractsPrepaid expenses and other current assets— 1 — 1 
Mutual fundsOther noncurrent assets215 — — 215 
Company-owned life insurance contractsOther noncurrent assets— 32 — 32 
Total$652 $459 $— $1,111 
Liabilities
Deferred compensation planAccrued liabilities$21 $— $— $21 
Deferred compensation planOther noncurrent liabilities238 — — 238 
Total$259 $— $— $259 
    December 31, 2017
Category Balance Sheet Location Level 1 Level 2 Level 3 Total
Assets:          
Cash equivalent:          
Time deposits Cash and cash equivalents $—
 $1,305
 $—
 $1,305
Trading securities:          
Money market funds Cash and cash equivalents 2,707
 —
 —
 2,707
Mutual funds Prepaid expenses and other current assets 182
 —
 —
 182
AFS securities:          
Common stock Other noncurrent assets 82
 —
 —
 82
Common stock - pledged Other noncurrent assets 82
 —
 —
 82
Derivatives:          
Cash flow hedges:          
Foreign exchange Prepaid expenses and other current assets —
 7
 —
 7
Net investment hedges:          
Cross-currency swaps Other noncurrent assets —
 3
 —
 3
Foreign exchange Prepaid expenses and other current assets —
 2
 —
 2
Fair value hedges:          
Equity (Lionsgate Collar) Other noncurrent assets —
 13
 —
 13
Total   $3,053
 $1,330
 $—
 $4,383
Liabilities:          
Deferred compensation plan Accrued liabilities $182
 $—
 $—
 $182
Derivatives:          
Cash flow hedges:          
Foreign exchange Accrued liabilities —
 12
 —
 12
Net investment hedges:          
Cross-currency swaps Accrued liabilities —
 13
 —
 13
Cross-currency swaps Other noncurrent liabilities —
 98
 —
 98
Foreign exchange Accrued liabilities —
 8
 —
 8
No hedging designation:         

Credit contracts Other noncurrent liabilities —
 1
 —
 1
Cross-currency swaps Other noncurrent liabilities —
 6
 —
 6
Total   $182
 $138
 $—
 $320

December 31, 2020
CategoryBalance Sheet LocationLevel 1Level 2Level 3Total
Assets
Cash equivalents:
Time depositsCash and cash equivalents$— $7 $— $7 
Treasury securitiesCash and cash equivalents500 — — 500 
Equity securities:
Money market fundsCash and cash equivalents— 150 — 150 
Time depositsPrepaid expenses and other current assets— 250 — 250 
Mutual fundsPrepaid expenses and other current assets14 — — 14 
Company-owned life insurance contractsPrepaid expenses and other current assets— 4 — 4 
Mutual fundsOther noncurrent assets200 — — 200 
Company-owned life insurance contractsOther noncurrent assets— 48 — 48 
Total$714 $459 $— $1,173 
Liabilities
Deferred compensation planAccrued liabilities$28 $— $— $28 
Deferred compensation planOther noncurrent liabilities220 — — 220 
Total$248 $— $— $248 

86
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    December 31, 2016
Category Balance Sheet Location Level 1 Level 2 Level 3 Total
Assets:          
Trading securities - mutual funds Prepaid expenses and other current assets $160
 $—
 $—
 $160
Available-for-sale securities:          
Common stock Other noncurrent assets 64
 —
 —
 64
Common stock - pledged Other noncurrent assets 64
 —
 —
 64
Derivatives:          
Cash flow hedges:          
Foreign exchange Prepaid expenses and other current assets —
 31
 —
 31
Net investment hedges:          
Cross-currency swaps Other noncurrent assets —
 35
 —
 35
Fair value hedges:          
Equity (Lionsgate Collar) Other noncurrent assets —
 25
 —
 25
No hedging designation:          
Cross-currency swaps Other noncurrent assets —
 1
 —
 1
Total   $288
 $92
 $—
 $380
Liabilities:          
Deferred compensation plan Accrued liabilities $160
 $—
 $—
 $160
Derivatives:          
Cash flow hedges:          
Foreign exchange Accrued liabilities —
 18
 —
 18
Net investment hedges:          
Cross-currency swaps Accrued liabilities —
 3
 —
 3
Cross-currency swaps Other noncurrent liabilities —
 31
 —
 31
Total   $160
 $52
 $—
 $212
Cash obtained as a result of the issuance of senior notes to fund a portion of the purchase price of the Scripps Networks acquisition is invested intoEquity securities include money market funds, time deposit accounts, U.S. Treasury securitiesdeposits, investments in mutual funds held in separate trusts, which are owned as part of the Company’s supplemental retirement plans, and highly liquid short-term instruments that qualify as cash and cash equivalents. Any accrued interest received after maturity are reinvested into additional short-term instruments.company-owned life insurance contracts. (See Note 4.16.) The Company values cash and cash equivalents using quoted market prices.
The fair value of Level 1 tradingequity securities was determined by reference to the quoted market price per unitshare in active markets multiplied by the number of unitsshares held without consideration of transaction costs. (See Note 4.) The fair value of the deferred compensation plan liability was determined based on the fair value of the related investments elected by employees.
AFS securities represent equity investments with readily determinable fair values. The Changes in the fair value of Level 1 AFS securities was determinedthe investments are offset by reference tochanges in the quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs. (See Note 4.)
Derivative financial instruments are comprised of foreign exchange, interest rate, credit and equity contracts. (See Note 10). The fair value of Level 2 derivative financial instruments was determined using a market-based approach.the deferred compensation obligation. (See Note 16.) Company-owned life insurance contracts are recorded at their cash surrender value, which approximates fair value (Level 2).
In addition to the financial instruments listed in the tables above, the Company hasholds other financial instruments, including cash deposits, accounts receivable, accounts payable, commercial paper, borrowings under the revolving credit facility, capital leases and senior notes. The carrying values for such financial instruments, other than the senior notes, each approximated their fair values as of December 31, 20172021 and December 31, 2016.2020. The estimated fair value of the Company’s outstanding senior notes using quoted prices from over the counterover-the-counter markets, considered Level 2 inputs, was $14.8$17.2 billion and $7.4$18.7 billion as of December 31, 20172021 and 2016,2020, respectively.

The Company's derivative financial instruments are discussed in Note 10 and its investments with readily determinable fair value are discussed in Note 4.
DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6. CONTENT RIGHTS
The following table presents the components of content rights (in millions).
 December 31,
 20212020
Produced content rights:
Completed$10,404 $8,576 
In-production696 731 
Coproduced content rights:
Completed1,003 888 
In-production91 78 
Licensed content rights:
Acquired1,213 1,312 
Prepaid251 556 
Content rights, at cost13,658 12,141 
Accumulated amortization(9,581)(8,170)
Total content rights, net4,077 3,971 
Current portion(245)(532)
Noncurrent portion$3,832 $3,439 
  December 31,
  2017 2016
Produced content rights:    
Completed $4,355
 $3,920
In-production 442
 420
Coproduced content rights:    
Completed 745
 632
In-production 27
 57
Licensed content rights:    
Acquired 1,070
 1,090
Prepaid(a)
 181
 129
Content rights, at cost 6,820
 6,248
Accumulated amortization (4,197) (3,849)
Total content rights, net 2,623
 2,399
Current portion (410) (310)
Noncurrent portion $2,213
 $2,089
(a) Prepaid licensed content rights includes prepaid rights to the Olympic Games of $83 million that are reflected as current content rights assets on the consolidated balance sheet as of December 31, 2017.
Content expense is included in costscost of revenuesrevenue on the consolidated statements of operations and consisted of the following (in millions).
Year Ended December 31,
202120202019
Content amortization$3,496 $2,908 $2,786 
Other production charges464 334 412 
Content impairments
5 48 67 
Total content expense$3,965 $3,290 $3,265 
  For the year ended December 31,
  2017 2016 2015
Content amortization $1,878
 $1,701
 $1,628
Other production charges 310
 272
 231
Content impairments (a)
 32
 72
 81
Total content expense $2,220
 $2,045
 $1,940
(a) Content impairments are generally recorded as a componentAs of costs of revenue. However during the years ended December 31, 2016 and 2015, content impairments of $7 million and $21 million, respectively, were reflected as a component of restructuring and other charges. These impairment charges resulted from the cancellation of certain series due to legal circumstances pertaining to the associated talent. No content impairments were recorded as a component of restructuring and other during the year ended December 31, 2017.
As of December 31, 2017,2021, the Company estimates thatexpects to amortize approximately 96%56%, 26% and 13% of unamortized costs ofits produced and co-produced content, rights, excluding content in-production, and prepaid licenses, will be amortized within47%, 23% and 11% of its licensed content rights in the next three years. As of twelve-month operating cycles ended December 31, 2017, the Company will amortize $1.1 billion of the above unamortized content rights, excluding content in-production2022, 2023 and prepaid licenses, during the next twelve months.2024, respectively.

87
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in millions).
 December 31,
 2017 2016
Land, buildings and leasehold improvements$363
 $327
Broadcast equipment728
 607
Capitalized software costs379
 347
Office equipment, furniture, fixtures and other431
 333
Property and equipment, at cost1,901
 1,614
Accumulated depreciation(1,304) (1,132)
Property and equipment, net$597
 $482
Property and equipment includes assets acquired under capital lease arrangements, primarily satellite transponders classified as broadcast equipment, with gross carrying values of $358 million and $284 million as of December 31, 2017 and 2016, respectively. The related accumulated amortization for capital lease assets was $154 million and $155 million as of December 31, 2017 and 2016, respectively.
The net book value of capitalized software costs was $86 million and $96 million as of December 31, 2017 and 2016, respectively.
Depreciation expense for property and equipment, including amortization of capitalized software costs and capital lease assets, totaled $150 million, $139 million and $138 million for 2017, 2016 and 2015, respectively.
In addition to the capitalized property and equipment included in the above table, the Company rents certain facilities and equipment under operating lease arrangements. Rental expense for operating leases totaled $127 million, $122 million and $134 million for 2017, 2016 and 2015, respectively.
NOTE 8.7. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The carrying value and changes in the carrying value of goodwill attributable to each business unit were as follows (in millions).
U.S.
Networks		International
Networks		Total
December 31, 2019$10,813 $2,237 $13,050 
Acquisitions (Note 3)— 25 25 
Impairment of goodwill— (121)(121)
Foreign currency translation and other adjustments— 116 116 
December 31, 2020$10,813 $2,257 $13,070 
Dispositions (Note 3)— (3)(3)
Foreign currency translation and other adjustments— (155)(155)
December 31, 2021$10,813 $2,099 $12,912 
  
U.S.
Networks
 
International
Networks
 Education and Other Total
December 31, 2015 $5,287
 $2,800
 $77
 $8,164
Dispositions (Note 3) (22) —
 —
 (22)
Foreign currency translation —
 (92) (10) (102)
December 31, 2016 5,265
 2,708
 67
 8,040
Acquisitions (Note 3) 211
 7
 —
 218
Dispositions (Note 3) —
 —
 (30) (30)
Impairment of goodwill —
 (1,327) —
 (1,327)
Foreign currency translation 2
 167
 3
 172
December 31, 2017 $5,478
 $1,555
 $40
 $7,073
The carrying amount of goodwill at the International Networks segment included accumulated impairments of $1.3 billion as of December 31, 2017. The carrying amount of goodwill at the U.S. Networks segment included accumulated impairments of $20 million as of December 31, 2017, 20162021 and 2015, respectively. 

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2020. The carrying amount of goodwill at the International Networks segment included accumulated impairments of $1.6 billion as of December 31, 2021 and 2020.
Intangible Assets
Finite-lived intangible assets consisted of the following (in millions, except years).
 Weighted
Average
Amortization
Period (Years)		December 31, 2021December 31, 2020
GrossAccumulated 
Amortization		NetGrossAccumulated
Amortization		Net
Intangible assets subject to amortization:
Trademarks10$1,716 $(858)$858 $1,751 $(715)$1,036 
Customer relationships109,433 (4,303)5,130 9,551 (3,338)6,213 
Other8395 (227)168 421 (191)230 
Total$11,544 $(5,388)$6,156 $11,723 $(4,244)$7,479 
 
Weighted
Average
Amortization
Period (Years)
 December 31, 2017 December 31, 2016
Gross 
Accumulated 
Amortization
 Net Gross 
Accumulated
Amortization
 Net
Intangible assets subject to amortization:             
Trademarks10 $494
 $(224) $270
 $412
 $(165) $247
Customer relationships16 2,026
 (758) 1,268
 1,632
 (594) 1,038
Other16 118
 (50) 68
 97
 (34) 63
Total  $2,638
 $(1,032) $1,606
 $2,141
 $(793) $1,348

Indefinite-lived intangible assets not subject to amortization (in millions):
  December 31,
  2017 2016
Intangible assets not subject to amortization:    
Trademarks $164
 $164
Straight-line amortizationAmortization expense for finite-lived intangible assets reflects the pattern in which the assets' economic benefits are consumed over their estimated useful lives. During the fourth quarter of 2021, the Company reassessed the useful lives and amortization methods for acquired customer relationships and concluded the economic benefits would be consumed in greater proportion earlier in their life with gradual decline, accordingly we have changed the amortization method for these assets from the straight-line method to the sum of the years digits method effective October 1, 2021. This change was considered a change in estimate, was accounted for prospectively, and resulted in incremental amortization expense of $196 million. Amortization expense related to finite-lived intangible assets was $180 million, $183 million$1.3 billion, $1.1 billion and $192 million$1.1 billion for 2017, 2016the years ended December 31, 2021, 2020 and 2015,2019, respectively.
Amortization expense relating to intangible assets subject to amortization for each of the next five years and thereafter is estimated to be as follows (in millions).
20222023202420252026Thereafter
Amortization expense$1,635 $1,355 $1,073 $845 $625 $623 
88
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2018 2019 2020 2021 2022 Thereafter
Amortization expense $220
 $203
 $198
 $174
 $147
 $664
Indefinite-lived intangible assets not subject to amortization (in millions):
 December 31,
 20212020
Trademarks$161 $161 
TheImpairment Analysis
Significant judgments and assumptions for all quantitative goodwill tests performed include the amount and timing of the estimated expenses in the above table may vary due to future acquisitions, dispositions, impairments, changes in estimated useful lives or changes in foreign currency exchangecash flows, including revenue growth rates, long-term growth rates, and discount rates.
2021 Impairment Analysis
Consistent withDuring the Company's accounting policy, the Company performed a quantitative step 1 impairment test (comparisonfourth quarter of fair value to carrying value) for each of its reporting units in 2016 which indicated limited headroom (the excess of fair value over carrying value) in the European reporting unit of 12%, all other reporting units had headroom in excess of 40%. Given the limited headroom in the European reporting unit, the Company closely monitored its results during 2017 and again performed a quantitative impairment test of the European reporting unit as of November 30, 2017, which indicated potential impairment (approximately $100 million or 3% deficit). The key factors resulting in the impairment include: 1) moderated revenue expectations based on continued declines in viewership, 2) expected increases in content investment to service existing customers and grow the Company's direct-to-consumer business, and 3) lower stock price multiples for peer media companies. Given the results of the step 1 impairment test, the Company applied the hypothetical purchase price analysis required by the step 2 test and recognized a pre-tax goodwill impairment charge of $1.3 billion as of November 30, 2017, for the European reporting unit. The impairment charge of $1.3 billion significantly exceeds the deficit of fair value to carrying value of approximately $100 million because of significant intangible assets that are not recognized on the Company's consolidated balance sheet (i.e., excluded from book carrying value) but are considered in the step 2 calculation on a fair value basis. The step 1 and step 2 tests and relevant assumptions are further discussed below. For the US Networks, Latin, Asia and Education reporting units,2021, the Company performed a qualitative goodwill impairment review in 2017. No factors were identified indicating a needassessment for a quantitative assessment.
For the 2017 step 1 test, the carrying value of the Europeanall reporting unit of $4.0 billion, which includes $2.4 billion of goodwill, exceeded its fair value of $3.9 billion by 3%. In performing the step 1 test, the Companyunits and it determined that it was more likely than not that the fair value of its Europeanthose reporting unit by using a combinationunits exceeded their carrying values, therefore, no quantitative goodwill impairment analysis was performed.
2020 Impairment Analysis
During the second quarter of DCF analyses and market-based valuation methodologies. The results of these valuation methodologies were weighted 75% towards2020, the DCF and 25% towardsCompany determined that it was more likely than not that the market-based approach, which is consistent

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


with prior quantitative analyses. Significant judgments and assumptions used in the DCF and market-based model to assess the reporting unit's fair value include the amount and timing of expected future cash flows, long-term growth rates of 2.5% (compared with 3% in 2016), a discount rate of 9.75% (compared with 10.5% in 2016), and our selection of guideline company earnings multiples of 7.5 (compared with 9.5 in 2016). The cash flows employed in the DCF analysis for the European reporting unit are based on the reporting unit's budget and long-term business plan, which reflect our expectations based upon recent operating performance. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting unit and market conditions. Given the inherent uncertainty in determining the assumptions underlying a DCF analysis, actual results may differ from those used in the valuations.
The net assets assigned to the European reporting unit included corporate allocations. These assets and liabilities include corporate enterprise goodwill and intangible assets, allocated in prior periods based on the relative fair value of the European reporting unit at the time, and deferred taxes and content, allocated based on whether or not the jurisdiction gave rise to the deferred tax balance or is using the content asset.
In the second step of the impairment test, the Company hypothetically assigned the European reporting unit's fair value to its individual assets and liabilities, including significant unrecognized intangible assets such as customer relationships and trade names, or liabilities, in a hypothetical purchase price allocation that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a business combination. Since the implied fair value of the reporting unit's goodwill was lessgreater than the carrying value for all other reporting units with the difference was recorded as anexception of the Asia-Pacific reporting unit. The Company performed a quantitative goodwill impairment charge. The fair value estimates incorporated in step 2analysis for the hypothetical intangible assets were based on the excess earnings income approach for customer relationships, the relief-from-royalty method for trademarks, and the greenfield approach for broadcast licenses. Key judgments made by management in step 2 of the impairment test included revenue growth rates, length of contract term, number of renewals, customer attrition rates, market-based royalty rates, and market based tax rates. The valuation of advertising relationships assumed an attrition rate of 10%, affiliate relationships assumed three contract renewals, each with a four year term, per customer and trade names assumed royalty rates ranging from 2% to 5%. Other assumptions used in these hypothetical calculations had a less significant impact on the concluded fair value or were subject to less significant estimation or judgment. None of these hypothetical calculations for unrecorded intangibles were recorded in the consolidated financial statements.
As of the goodwill testing date, the carrying value of remaining goodwill assigned to the EuropeanAsia-Pacific reporting unit was $1.1 billion and the net assets of the reporting unit were approximately $2.7 billion, which results in $1.2 billion headroom based ondetermined that the estimated fair value of $3.9 billion.
did not exceed its carrying value, which resulted in a pre-tax impairment charge to write-off the remaining $36 million goodwill balance. The impairment charge was not deductible for tax purposes. The determination of fair value of the Company's DNI-EuropeCompany’s Asia-Pacific reporting unit represents a Level 3 fair value measurement in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs. Changes
During the third quarter of 2020, the Company realigned its International Networks management reporting structure. As a result, Australia and New Zealand, which were previously included in the Europe reporting unit, are now included in the Asia-Pacific reporting unit, including the associated goodwill. As a result of this realignment, the Company performed a quantitative goodwill impairment analysis for its Europe and Asia-Pacific reporting units using a DCF valuation model. A market-based valuation model was not weighted in the analysis given the significant judgmentsvolatility in the equity markets. The estimated fair value of both the Europe and estimates could significantly impactAsia-Pacific reporting units exceeded their carrying values and, therefore, no impairment was recorded.
For the concluded2020 annual impairment test, the Company performed its annual qualitative goodwill impairment assessment for all reporting units and it determined that it was more likely than not that the fair value of those reporting units exceeded their carrying values, except for its Europe and Asia-Pacific reporting units. Given limited headroom of below 20% in its Europe and Asia-Pacific reporting units during the third quarter of 2020, the Company performed a quantitative goodwill impairment analysis for each of these reporting units using a DCF valuation model. A market-based valuation model was not weighted in the analysis due to significant volatility in the reporting units' equity markets.
The quantitative goodwill impairment analysis for the Company’s Europe reporting unit indicated that the estimated fair value exceeded its carry value by approximately 20% and, therefore, no impairment was recorded.
The quantitative impairment analysis for the Company’s Asia-Pacific reporting unit indicated that estimated fair value did not exceed its carrying value, which resulted in a pre-tax impairment charge to write-off the remaining $85 million goodwill balance. The impairment charge was not deductible for tax purposes. The determination of fair value of the Company’s Asia-Pacific reporting unit orrepresents a Level 3 fair value measurement in the valuationfair value hierarchy due to its use of intangible assets. Changesinternal projections and unobservable measurement inputs.
2019 Impairment Analysis
During 2019, due to assumptionsan increasingly challenging business environment in the Asia-Pacific region, which included 1) moderating revenue growth projections, 2) underperformance of certain sports investments, 3) heightened volatility in China and surrounding economies, and 4) a decline in Asia-Pacific stock price multiples for peer media companies, the Company believed the increased risk required it to perform an interim impairment test. The impairment test indicated that would decrease the carrying value of the net assets in the Asia-Pacific reporting unit exceeded its fair value and the Company recognized a pre-tax goodwill impairment charge of $155 million during the year ended December 31, 2019, which was not deductible for tax purposes. The determination of fair value of the Company's Asia-Pacific reporting unit would resultrepresents a Level 3 fair value measurement in corresponding increasesthe fair value hierarchy due to its use of internal projections and unobservable measurement inputs.
89
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the 2019 annual impairment of goodwill at the reporting unit.
The goodwill impairment charge does not have an impact on the calculation of the Company's financial covenants under the Company's debt arrangements.
As of November 30, 2016,test, the Company performed a quantitative goodwill impairment assessment for all reporting units. Due to the period elapsed since the last quantitative impairment test in 2013, the Company elected to proceed to the first step of the quantitative goodwill impairment test. The estimated fair value of each reporting unit exceeded its carrying value and, therefore, no impairment was recorded. The Europe reporting unit, which had headroom of 19%, was the only reporting unit with fair value in excess of carrying value of less than 20%. The fair values of the reporting units were determined using DCF and market-based valuation models. Cash flows were determined based on Company estimates of future operating results and discounted using an internal rate of return based on an assessment of the risk inherent in future cash flows of the respective reporting unit. The market-based valuation models utilized multiples of earnings before interest, taxes, depreciation and amortization. Both the DCF and market-based models resulted in substantially similar fair values.
As of November 30, 2015, the Company performed a qualitative goodwill impairment assessment for all reporting units, and determined that it was more likely than not that the fair value of those reporting units exceeded their carrying values.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9.8. DEBT
The table below presents the components of outstanding debt (in millions).
December 31,
20212020
4.375% Senior Notes, semi-annual interest, due June 2021$— $335 
2.375% Senior Notes, euro denominated, annual interest, due March 2022339 369 
3.300% Senior Notes, semi-annual interest, due May 2022— 168 
3.500% Senior Notes, semi-annual interest, due June 2022— 62 
2.950% Senior Notes, semi-annual interest, due March 2023796 796 
3.250% Senior Notes, semi-annual interest, due April 2023192 192 
3.800% Senior Notes, semi-annual interest, due March 2024450 450 
2.500% Senior Notes, sterling denominated, annual interest, due September 2024540 545 
3.900% Senior Notes, semi-annual interest, due November 2024497 497 
3.450% Senior Notes, semi-annual interest, due March 2025300 300 
3.950% Senior Notes, semi-annual interest, due June 2025500 500 
4.900% Senior Notes, semi-annual interest, due March 2026700 700 
1.900% Senior Notes, euro denominated, annual interest, due March 2027678 739 
3.950% Senior Notes, semi-annual interest, due March 20281,700 1,700 
4.125% Senior Notes, semi-annual interest, due May 2029750 750 
3.625% Senior Notes, semi-annual interest, due May 20301,000 1,000 
5.000% Senior Notes, semi-annual interest, due September 2037548 548 
6.350% Senior Notes, semi-annual interest, due June 2040664 664 
4.950% Senior Notes, semi-annual interest, due May 2042285 285 
4.875% Senior Notes, semi-annual interest, due April 2043516 516 
5.200% Senior Notes, semi-annual interest, due September 20471,250 1,250 
5.300% Senior Notes, semi-annual interest, due May 2049750 750 
4.650% Senior Notes, semi-annual interest, due May 20501,000 1,000 
4.000% Senior Notes, semi-annual interest, due September 20551,732 1,732 
Total debt15,187 15,848 
Unamortized discount, premium and debt issuance costs, net (a)
(428)(444)
Debt, net of unamortized discount, premium and debt issuance costs14,759 15,404 
Current portion of debt(339)(335)
Noncurrent portion of debt$14,420 $15,069 
(a) Current portion of unamortized discount, premium, and debt issuance costs, net was not material.
90
  December 31,
  2017 2016
5.625% Senior notes, semi-annual interest, due August 2019 $411
 $500
2.200% Senior notes, semi-annual interest, due September 2019 500
 —
Floating rate notes, quarterly interest, due September 2019 400
 —
5.050% Senior notes, semi-annual interest, due June 2020 789
 1,300
4.375% Senior notes, semi-annual interest, due June 2021 650
 650
2.375% Senior notes, euro denominated, annual interest, due March 2022 358
 314
3.300% Senior notes, semi-annual interest, due May 2022 500
 500
2.950% Senior notes, semi-annual interest, due March 2023 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
 —
2.500% Senior notes, sterling denominated, annual interest, due September 2024 538
 —
3.450% Senior notes, semi-annual interest, due March 2025 300
 300
4.900% Senior notes, semi-annual interest, due March 2026 700
 500
1.900% Senior notes, euro denominated, annual interest, due March 2027 717
 627
3.950% Senior notes, semi-annual interest, due March 2028 1,700
 —
5.000% Senior notes, semi-annual interest, due September 2037 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
 —
Revolving credit facility 425
 550
Commercial paper —
 48
Capital lease obligations 225
 151
Total debt 14,913
 7,990
Unamortized discount and debt issuance costs (128) (67)
Debt, net 14,785
 7,923
Current portion of debt (30) (82)
Noncurrent portion of debt $14,755
 $7,841
Senior Notes
On September 21, 2017, Discovery Communications, LLC ("DCL"), a wholly-owned subsidiary of the Company, issued $500 million principal amount of 2.200% senior notes due 2019 (the “2019 Notes”), $1.20 billion principal amount of 2.950% senior notes due 2023 (the “2023 Notes”), $1.70 billion principal amount of 3.950% senior notes due 2028 (the “2028 Notes”), $1.25 billion principal amount of 5.000% senior notes due 2037 (the “2037 Notes”), $1.25 billion principal amount of 5.200% senior notes due 2047 (the “2047 Notes” and, together with the 2019 Notes, the 2023 Notes, the 2028 Notes, the 2037 Notes and the 2047 Notes, the “Senior Fixed Rate Notes”) and $400 million principal amount of floating rate senior notes due 2019 (the “Senior Floating Rate Notes” and, together with the Senior Fixed Rate Notes, the “USD Notes”). Interest on the Senior Fixed Rate Notes is payable on March 20 and September 20 of each year, beginning March 20, 2018. Interest on the Senior Floating Rate Notes is payable on March 20, June 20, September 20 and December 20 of each year, beginning December 20, 2017. The USD Notes are fully and unconditionally guaranteed by the Company.
On September 21, 2017, DCL issued £400 million principal amount ($540 million at issuance based on the exchange rate of $1.35 per pound at September 21, 2017) of 2.500% senior notes due 2024 (the “Sterling Notes”). Interest on the Sterling Notes is payable on September 20 of each year, beginning September 20, 2018.
The proceeds received by DCL from the USD Notes and the Sterling Notes were net of a $11 million issuance discount and $57 million of debt issuance costs. The Sterling Notes are fully and unconditionally guaranteed by the Company.

DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Senior Notes
WithFor the exceptionyear ended December 31, 2021, Discovery Communications, LLC (“DCL”) and Scripps Networks Interactive, Inc. ("Scripps"), wholly owned subsidiaries of Discovery Inc., issued notices for the redemption in full of all $168 million aggregate principal amount outstanding of DCL's 3.300% Senior Notes due May 2022 and $62 million aggregate principal amount outstanding of DCL's and Scripps' 3.500% Senior Notes due June 2022 (collectively, the "2022 Notes"). The 2022 Notes were redeemed in July 2021 for an aggregate redemption price of $235 million, plus accrued interest.
Also, for the year ended December 31, 2021, DCL issued a notice for the redemption in full of all $335 million aggregate principal amount outstanding of its 4.375% Senior Notes due June 2021 (the “2021 Notes”) in accordance with the terms of the 2019indenture governing the 2021 Notes. The 2021 Notes were redeemed in March 2021 for an aggregate redemption price of $339 million, plus accrued interest.
The redemptions for the year ended December 31, 2021 resulted in an immaterial loss on extinguishment of debt.
For the year ended December 31, 2020, Discovery, Inc. commenced 5 separate private offers to exchange (the “Exchange Offers”) any and all of DCL's outstanding 5.000% Senior Notes due 2037, 6.350% Senior Notes due 2040, 4.950% Senior Notes due 2042, 4.875% Senior Notes due 2043 and 5.200% Senior Notes due 2047 (collectively, the “Old Notes”) for one new series of DCL 4.000% Senior Floating Rate Notes, semi-annual interest, due September 2055 (the “New Notes”). Discovery, Inc. completed the USD Notes and Sterling Notes include a redemption requirement following a termination of the Scripps Networks Merger Agreement or if the merger does not close prior to August 30, 2018. The $5.9Exchange Offers in September 2020, by exchanging $1.4 billion aggregate principal amount of senior notes subject to special mandatory redemption will be classified as noncurrent until either of the contingent events which would trigger the redemption has occurred. As of December 31, 2017, neither of the contingent events have occurred and therefore these senior notes are classified as noncurrent. In the event that the redemption provision is triggered, the Company would be required to redeem the notesOld Notes for a price equal to 101% of the principal amount plus any accrued and unpaid interest on the notes.
On March 13, 2017, DCL issued $450 million$1.7 billion aggregate principal amount of 3.80% senior notes due March 13, 2024the New Notes (before debt discount of $318 million). The Exchange Offers were accounted for as a debt modification and, as a result, third-party issuance costs totaling $11 million were expensed as incurred.
Also, for the year ended December 31, 2020, the Company completed offers to purchase for cash (the "2017 USD Notes"“Cash Offers”) and an additional $200the Old Notes. Approximately $22 million aggregate principal amount of its existing 4.90% senior notesthe Old Notes were accepted for purchase by Discovery pursuant to the Cash Offers, for total cash consideration of $27 million, plus accrued interest. The Cash Offers resulted in an immaterial loss on extinguishment of debt.
Finally, for the year ended December 31, 2020, DCL issued $1.0 billion aggregate principal amount of Senior Notes due March 11, 2026 (the "2016 USD Notes"). Interest on the 2017 USDMay 2030 and $1.0 billion aggregate principal amount of Senior Notes is payable semi-annually on March 13 and September 13 of each year. Interest on the 2016 USD Notes is payable semi-annually on March 11 and September 11 of each year.due May 2050. The proceeds received by DCL from the 2017 USD Notes were net of a $1 million issuance discount and $4$20 million of debt issuance costs. The proceeds received by DCL from the 2016 USD Notes included a $10 million issuance premium and were net of $2 million of debt issuance costs. The 2017 USD Notes and the 2016 USD Notes are fully and unconditionally guaranteed by the Company.
DCL used the proceeds from the offerings of the 2017 USD Notes and the 2016 USD Notesoffering to repurchase $600 million$1.5 billion aggregate principal amount of DCL's 5.05%and Scripps Networks' senior notes due 2020 and 5.625% senior notes due 2019 in a cash tender offer. The repurchase resulted in a pretax loss on extinguishment of debt of $54$71 million. The Company used the remaining proceeds and cash on hand to fully repay the $500 million for the year endedthat was outstanding under its revolving credit facility.
As of December 31, 2017, which is presented as a separate line item on2021, all senior notes are fully and unconditionally guaranteed by the Company's consolidated statements of operationsCompany and recognized as a component of financing cash outflows on the consolidated statements of cash flows. The loss included $50 millionScripps Networks, except for premiums to par value, $2$23 million of non-cash write-offs of unamortized deferred financing costs, $1 million for the write-off of the original issue discount of theseun-exchanged Scripps Networks senior notes acquired in conjunction with the acquisition of Scripps Networks.
Revolving Credit Facility and $1 million accrued for other third-party fees.Commercial Paper Programs

Term Loans
On August 11, 2017,In June 2021, DCL entered into a three-year delayed draw tranche and a five-year delayed draw tranche unsecured term loan credit facility (the "Term Loans"), each with a principal amount of up to $1 billion. The term of each delayed draw loan begins when Discovery borrows the funds to finance a portion of the Scripps Networks acquisition. The Term Loans' interest rates are based, at the Company's option, on either adjusted LIBOR plus a margin, or an alternate base rate plus a margin. The Company will pay a commitment fee of 20 basis points per annum for each Term Loan, based on its current credit rating, beginning September 28, 2017 until either the funding of the Term Loans or the termination of the Scripps Networks acquisition. As of December 31, 2017, the Company has not yet borrowed the Term Loans.
Unsecured Bridge Loan Commitment
On July 30, 2017, the Company obtained a commitment letter from a financial institution for a $9.6 billion unsecured bridge term loan facility that could have been used to complete the Scripps Networks acquisition. No amounts were drawn under the bridge loan commitment and following the execution of the Term Loans and the issuance of the USD Notes and the Sterling Notes on September 21, 2017, the commitment was terminated. The Company incurred $40 million of debt issuance costs, which are fully amortized as a component of interest expense following the issuance of the senior notes on September 21, 2017. The associated cash payment has been classified as a financing activity in the consolidated statements of cash flows.
Revolving Credit Facility
On August 11, 2017, DCL amended its $2.0 billionmulticurrency revolving credit facilityagreement (the "Credit Agreement"), replacing the existing $2.5 billion credit agreement, dated February 4, 2016, as amended. DCL has the capacity to allow DCL and certain designated foreign subsidiaries of DCL toinitially borrow up to $2.5 billion includingunder the Credit Agreement. Upon the closing of the proposed combination transaction with WarnerMedia and subject to certain conditions, the available commitments will increase by $3.5 billion, to an aggregate amount not to exceed $6 billion. The Credit Agreement includes a $100$150 million sublimit for the issuance of standby letters of credit and a $50 million sublimit for Euro-denominated swing line loans. Borrowing capacity under this agreement is reduced by any outstanding borrowingscredit. DCL may also request additional commitments up to $1 billion from the lenders upon satisfaction of certain conditions. Obligations under the commercial paper program discussed below.Credit Agreement are unsecured and are fully and unconditionally guaranteed by Discovery, Inc. and Scripps Networks Interactive, Inc., and will also be guaranteed by the holding company of the WarnerMedia business upon the closing of the proposed combination transaction. The Credit Agreement will be available on a revolving credit facility agreement amendment extends the maturity date from February 4, 2021 to August 11, 2022,basis until June 2026, with thean option for up to two2 additional 364-day renewal periods.periods subject to the lenders' consent. The amended credit facility agreement expressly permits the incurrence of indebtedness to finance the Scripps Networks acquisition. Discovery also agreed to make Scripps Networks a guarantor under the agreement following the closing of the acquisition.
The credit agreement governing the revolving credit facilityCredit Agreement contains customary representations warranties and events of default,warranties as well as affirmative and negative covenants. In addition to the change in the revolver's capacity on August 11, 2017, the financial covenants were modified to reset the maximum consolidated leverage ratio financial covenant to 5.50 to 1.00, with step-downs to 5.00 to 1.00 and to 4.50 to 1.00, one year and two years after the closing of the Scripps Networks acquisition, respectively. As of December 31, 2017, the Company's subsidiary,2021, DCL was in compliance with all covenants and there were no events of default under the revolving credit facility.Credit Facility.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The following table presents a summaryAdditionally, the Company's commercial paper program is supported by the Credit Facility. Under the commercial paper program, the Company may issue up to $1.5 billion, including up to $500 million of euro-denominated borrowings. Borrowing capacity under the Credit Facility is reduced by any outstanding borrowings under the revolving credit facility (in millions).commercial paper program.
  For the year ended December 31,
  2017 2016
Outstanding debt $425
 $550
Outstanding debt denominated in foreign currency —
 207
Weighted average interest rate 2.69% 2.05%
The interest rate onAs of December 31, 2021 and 2020, the Company had no outstanding borrowings under the revolving credit facility is variable based on DCL's then-current credit ratings for its publicly traded debt and changes in financial index rates. For dollar-denominated borrowings,Credit Facility or the interest rate is based, at the Company's option, on either adjusted LIBOR plus a margin, or an alternate base rate plus a margin. For borrowings denominated in foreign currencies, the interest rate is based on adjusted LIBOR, plus a margin. The current margins are 1.30% and 0.30%, respectively, per annum for adjusted LIBOR and alternate base rate borrowings. A monthly facility fee is charged based on the total capacity of the facility, and interest is charged based on the amount borrowed on the facility. The current facility fee rate is 0.20% per annum and subject to change based on DCL's then-current credit ratings. commercial paper program.
All obligations of DCL and the other borrowers under the revolving credit facilityCredit Facility are unsecured and are fully and unconditionally guaranteed by Discovery.Discovery and Scripps.

91
DISCOVERY, INC.
Commercial PaperNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Credit Agreement Financial Covenants
The Company's commercial paper program is supported byCredit Agreement includes financial covenants that require the revolving credit facility described above. The following table presentsCompany to maintain a summaryminimum consolidated interest coverage ratio of 3.00 to 1.00 and a maximum adjusted consolidated leverage ratio of 4.50 to 1.00, which increases to 5.75 to 1.00 upon the closing of the outstanding commercial paper borrowingsproposed combination transaction with maturitiesWarnerMedia, with step-downs to 5.00 to 1.00 and 4.50 to 1.00 on the first and second anniversaries of less than 90 days (in millions).
  For the year ended December 31,
  2017 2016
Outstanding debt $—
 $48
Weighted average interest rate —% 1.2%

the closing, respectively.
Long-term Debt Repayment Schedule
The following table presents a summary of scheduled and estimated debt payments, excluding the revolving credit facility and commercial paper borrowings, and capital lease obligations, for the succeedingnext five years based on the amount of the Company's debt outstanding as of December 31, 20172021 (in millions).
20222023202420252026Thereafter
Long-term debt repayments$339 $988 $1,487 $800 $700 $10,873 
NOTE 9. LEASES
The Company has operating and finance leases for transponders, office space, studio facilities, and other equipment. The Company's leases have remaining lease terms of up to 19 years, some of which include options to extend the leases for up to 10 years. Most leases are not cancellable prior to their expiration.
The components of lease cost were as follows (in millions):
Year Ended December 31,
20212020
Operating lease cost$103 $116 
Finance lease cost:
Amortization of right-of-use assets$61 $52 
Interest on lease liabilities7 8 
Total finance lease cost$68 $60 
Variable lease cost$7 $9 
Supplemental cash flow information related to leases was as follows (in millions):
Year Ended December 31,
20212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$(107)$(101)
Operating cash flows from finance leases$(7)$(8)
Financing cash flows from finance leases$(65)$(54)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$53 $51 
Finance leases$104 $36 

92
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2018 2019 2020 2021 2022 Thereafter
Long-term debt repayments $—
 $1,311
 $789
 $650
 $858
 $10,655
Supplemental balance sheet information related to leases was as follows (in millions):
Scheduled payments for capital
December 31,
20212020
Operating LeasesLocation on Balance Sheet
Operating lease right-of-use assetsOther noncurrent assets$535 $575 
Operating lease liabilities (current)Accrued liabilities$62 $71 
Operating lease liabilities (noncurrent)Other noncurrent liabilities567 592 
Total operating lease liabilities$629 $663 
Finance Leases
Finance lease right-of-use assetsProperty and equipment, net$249 $220 
Finance lease liabilities (current)Accrued liabilities$58 $57 
Finance lease liabilities (noncurrent)Other noncurrent liabilities197 184 
Total finance lease liabilities$255 $241 
December 31,
20212020
Weighted average remaining lease term (in years):
Operating leases1212
Finance leases55
Weighted average discount rate
Operating leases2.94 %3.37 %
Finance leases3.57 %3.80 %
Maturities of lease obligations outstandingliabilities as of December 31, 2017 are disclosed2021 were as follows (in millions):
Operating LeasesFinance Leases
2022$84 $65 
202375 65 
202471 48 
202563 35 
202660 26 
Thereafter448 38 
Total lease payments801 277 
Less: Imputed interest(172)(22)
Total$629 $255 
As of December 31, 2021, the Company has additional leases that have not yet commenced with total minimum lease payments of approximately $8 million, primarily related to equipment leases. The remaining leases will commence in Note 20.fiscal year 2022, have lease terms of 4 to 5 years, and include options to extend the terms for up to 10 additional years.
NOTE 10. DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments to modify its exposure to exogenous events and market risks from changes in foreign currency exchange rates and interest rates and the fair value of investments classified as AFS securities. At the inception of a derivative contract, the Company designates the derivative as one of four types based on the Company's intentions and belief as to its likely effectiveness as a hedge. These four types are: (i) a cash flow hedge, (ii) a net investment hedge, (iii) a fair value hedge, or (iv) an instrument with no hedging designation.rates. The Company does not enter into or hold derivative financial instruments for speculative trading purposes.
Cash Flow Hedges
The Company designates foreign currency forward and option contracts as In addition to the Company's normal course of business cash flow hedges to mitigate foreign currency risk arising from third-party revenue and inter-company licensing agreements. The Company also designates interest rate contracts used to hedge the pricing for certain senior notes as cash flow hedges.
During the three months ended December 31, 2016,hedging program, the Company terminated and settled its outstanding interest rate cash flow hedges which resulted in a $40 million pretax gain. Asentered into the hedges were considered to be effective and the forecasted transactions were considered probable of occurring, the gain remained in accumulated other comprehensive loss to be amortized as a reduction to interest expense over the term of the forecasted senior notes. The Company reclassified $17 million of the gainsfollowing arrangements:

93
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Cash Flow Hedges
fromDuring the year ended December 31, 2021, the Company dedesignated, unwound and settled foreign exchange forward contracts with a total notional value of $374 million. An $18 million pretax accumulated other comprehensive gain was previously deferred in accumulated other comprehensive loss. In December 2021, the Company determined a portion of the hedged transactions were probable of not occurring within the defined hedge periods. As a result, the Company reclassified $16 million of the pretax gain that was previously deferred in accumulated other comprehensive loss tointo other income (expense) income,, net in the Company's consolidated statement of operations, as the forecasted transaction was considered remote following the issuance of the USD Notes on September 21, 2017.
In 2016, the Company also discontinued hedge accounting for certain foreign currency forward and option cash flow hedges with notional and fair value amounts of $125 million and $14 million, respectively. At that time, the occurrence of the forecasted intercompany transactions was no longer considered probable, but was still reasonably possible of occurring. The change in probability was the result of new tax regulations that impacted the planned intercompany transactions that were hedged. As a result of the change in probability, subsequent changes in the fair value of these hedges were reflected immediately in other (expense) income, net on the consolidated statements of operations. The resultCompany also dedesignated additional foreign exchange forward contracts that have not been settled with an aggregate notional amount of $163 million.
During the year ended December 31, 2020, the Company dedesignated, unwound and settled certain foreign exchange forward contracts designated as cash flow hedges with an aggregate notional amount of $255 million. The Company received cash of $19 million, which was a $1 million gain recognized on the consolidated statements of operations for the period until November 1, 2016, when the forecasted transactions were once again considered probable, as it was determined that no changes to the forecasted intercompany transactions would occur. Accordingly, any changes in the fair value of these hedges subsequent to that date will remaindeferred in accumulated other comprehensive loss until earnings are impacted by the forecasted transaction, at which time they will beand subsequently reclassified to other (expense) income (expense), net on the consolidated statementsin December 2021 due to a change of operations.
In 2015,assumptions in forecasted cash flows as the Company terminateddetermined that the hedged transactions were no longer probable of occurring.
Also, during the year ended December 31, 2020, the Company executed forward starting interest rate swap contracts designated as cash flow hedges with a total notional value of $1.6 billion. These contracts will mitigate interest rate risk associated with the forecasted issuance of future fixed-rate public debt. The Company also issued and settled its interest rate cash flow hedges with a total notional value of $1 billion following the pricing of its 3.45% senior notesoffering of 3.625% Senior Notes due March 15, 2025 (the "2015 USD Notes"May 2030 and 4.650% Senior Notes due May 2050. (See Note 8.). The total notional value of the interest rate forward contracts at the termination date was $490$7 million which exceeded the $300 million principal amount of the 2015 USD Notes. Of the $40 million pretax loss recorded in accumulated other comprehensive loss at the termination date $29 million was an effective cash flow hedge that will be amortized as an adjustment to interest expense, net over the ten year termrespective terms of the 2015 USD Notes consistent with amortization of the debt discount. The remaining $11 million was reclassified into other (expense) income, net on the consolidated statements of operations duringnewly issued notes.
No Hedging Designation
During the year ended December 31, 2015, because2021, in anticipation of the proposed combination transaction with WarnerMedia, the Company executed forward starting interest rate swap contracts with a total notional value of $5.0 billion, swaption collars with a total notional value of $2.5 billion, and purchase payer swaptions with a total notional value of $7.5 billion. The objective of these contracts is to mitigate interest rate risk associated with the forecasted borrowing transaction was no longer probable.
Net Investment Hedges
The Company designates cross-currency swaps and foreign currency forward contracts as hedges of net investments in foreign operations. Changes in the fair value of these instruments, including the accrual and periodic cash settlement of interest on cross-currency swaps, are reported in the same manner as translation adjustments to the extent that they are effective. Changes in the value of the investment due to changes in spot rates are offset by fair value changes in the effective portion of the derivative instruments.
On September 21, 2017, in conjunction with the Scripps Networks acquisition (see Note 3 and Note 9), DCL issued £400 million principal amount of 2.500% senior notes due 2024. The Sterling Notes were designated as net investment hedges, hedging against fluctuations in foreign currency exchange rates on a portion of the Company's investments in foreign subsidiaries. Prior to issuance of the Sterling Notes, the Company also entered into a seriesfuture fixed-rate public debt. Premiums of foreign exchange contracts designated as net investment hedges on a portion of the Company's investments in foreign subsidiaries. These foreign exchange contracts$142 million were settled on the date of issuance of the Sterling Notespaid at execution and resulted in a $12 million loss, which has been reflected as a component of currency translation adjustments on the Company's consolidated balance sheet as of December 31, 2017.
Fair Value Hedges
cash outflows from investing activities. The Company designates derivative instruments used to mitigate the risk ofcontracts did not receive hedging designation and changes in the fair value of its AFS securities as fair value hedges. On November 12, 2015,are recognized in other income (expense), net in the Company entered into the Lionsgate Collar, designed to mitigate the risk of market fluctuations with respect to 50% of the Lionsgate shares held by the Company. (See Note 4.) The collar, which qualifies for hedge accounting, settles in three tranches starting in 2019 and ending in 2022.
No Hedging Designation
The Company may also enter into derivative financial instruments that do not qualify for hedge accounting and are not designated as hedges. These instruments are intended to mitigate economic exposures due to exogenous events and changes in foreign currency exchange rates and interest rates.
During the three months ended September 30, 2017, in conjunction with the Scripps Networks acquisition (see Note 3 and Note 9), the Company entered into $4 billion notional amount of interest rate contracts used to economically hedge a portion of the pricing of the 2017 USD Notes. These interest rate contracts were settled on September 21, 2017, and did not receive hedging designation. The Company recognized a $98 million loss in connection with these interest rate contracts, which has been reflected as a component of other (expense) income, net on the Company's consolidated statementstatements of operations.
Financial Statement Presentation
The Company records all unsettled derivative contracts at their gross fair values on the consolidated balance sheets. (See Note 5.) The portion of the fair value that represents cash flows occurring within one year are classified as current, and the portion related to cash flows occurring beyond one year are classified as noncurrent.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The following table summarizes the impact of derivative financial instruments on the Company's consolidated balance sheets (in millions). There were no amounts eligible to be offset under master netting agreements as of December 31, 20172021 and 2020. The fair value of the Company's derivative financial instruments at December 31, 2016.
 December 31, 2017 December 31, 2016
   Fair Value   Fair Value
 Notional Prepaid expenses and other current assets 
Other non-
current assets
 Accrued liabilities 
Other non-
current liabilities
 Notional Prepaid expenses and other current assets 
Other non-
current assets
 Accrued liabilities 
Other non-
current liabilities
Cash flow hedges:                   
Foreign exchange$817
 $7
 $—
 $12
 $—
 $677
 $31
 $—
 $18
 $—
Net investment hedges:(a)
                  
Cross-currency swaps1,708
 —
 3
 13
 98
 751
 —
 35
 3
 31
Foreign exchange

303
 2
 —
 8
 —
 —
 —
 —
 —
 —
Fair value hedges:                   
Equity
(Lionsgate collar)
97
 —
 13
 —
 —
 97
 —
 25
 —
 —
No hedging designation:                  
Interest rate swaps25
 —
 —
 —
 —
 25
 —
 —
 —
 —
Cross-currency swaps64
 —
 —
 —
 6
 64
 —
 1
 —
 —
Credit contracts665
 —
 —
 —
 1
��—
 —
 —
 —
 —
Total  $9
 $16
 $33
 $105
   $31
 $61
 $21
 $31
2021 and 2020 was determined using a market-based approach (Level 2).
December 31, 2021December 31, 2020
Fair ValueFair Value
NotionalPrepaid expenses and other current assetsOther non-
current assets		Accrued liabilitiesOther non-
current liabilities		NotionalPrepaid expenses and other current assetsOther non-
current assets		Accrued liabilitiesOther non-
current liabilities
Cash flow hedges:
Foreign exchange$777 $14 $— $2 $— $1,082 $2 $5 $14 $17 
Interest rate swaps2,000 44 — 11 — 2,000 — 11 — 89 
Net investment hedges: (a)
Cross-currency swaps3,512 54 61 20 76 3,544 34 41 — 154 
Foreign exchange— — — — — 44 2 — — — 
No hedging designation:
Foreign exchange1,020 — — 34 66 1,035 — — 2 26 
Interest rate swaps15,000 126 28 9 5 — — — — — 
Cross-currency swaps139 3 — — 5 139 2 — — 13 
Total$241 $89 $76 $152 $40 $57 $16 $299 
(a) Excludes £400 million of sterling notes ($538540 million equivalent at December 31, 2017)2021) designated as a net investment hedge. (Note 9.(See Note 8.)
94
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the pretax impact of derivatives designated as cash flow hedges on income and other comprehensive income (loss) (in millions).
  Year Ended December 31,
  2017 2016 2015
(Losses) gains recognized in accumulated other comprehensive loss:      
Foreign exchange - derivative adjustments $(41) $(1) $34
Interest rate swaps - derivative adjustments —
 40
 (11)
(Losses) gains reclassified into income from accumulated other comprehensive loss (effective portion):      
Foreign exchange - distribution revenue (22) (25) 23
Foreign exchange - advertising revenue (3) (2) 2
Foreign exchange - costs of revenues —
 27
 9
Foreign exchange - other (expense) income, net —
 3
 4
Interest rate - interest expense (1) (3) (3)
Gains (losses) reclassified into income from accumulated other comprehensive loss (ineffective portion):      
Foreign exchange - other (expense) income, net —
 1
 —
Interest rate - other (expense) income, net 17
 —
 (11)
Fair value excluded from effectiveness assessment:      
Foreign exchange - other (expense) income, net —
 (5) —

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Year Ended December 31,
202120202019
Gains (losses) recognized in accumulated other comprehensive loss:
Foreign exchange - derivative adjustments$57 $14 $17 
Interest rate - derivative adjustments112 (124)21 
Gains (losses) reclassified into income from accumulated other comprehensive loss:
Foreign exchange - advertising revenue1 1 6 
Foreign exchange - distribution revenue4 30 5 
Foreign exchange - costs of revenues— 2 2 
Interest rate - interest expense, net(2)1 (2)
Foreign exchange - other expense, net30 — 3 
If current fair values of designated cash flow hedges as of December 31, 20172021 remained static over the next twelve months, the Company would reclassify $6$10 million of net deferred lossesgains from accumulated other comprehensive loss into income in the next twelve months. The maximum length of time the Company is hedging exposure to the variability in future cash flows is 34 years.
The following table presents the pretax impact of derivatives designated as net investment hedges on other comprehensive income (loss) (in millions). Other than amounts excluded from effectiveness testing, there were no other gains (losses) reclassified from accumulated other comprehensive loss to income during the years ended December 31, 2021, 2020 and 2019.
  Year Ended December 31,
  2017 2016 2015
Currency translation adjustments:      
Cross-currency swaps - changes in fair value $(109) $1
 $—
Cross-currency swaps - interest settlements 13
 2
 —
Foreign exchange - changes in fair value
 (18) —
 —
Sterling Notes - changes in foreign exchange rates
 2
 —
 —
Total in other comprehensive income (loss) $(112) $3
 $—
Year Ended December 31,
Amount of gain (loss) recognized in AOCILocation of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
202120202019202120202019
Cross currency swaps$114 $(61)$93 Interest expense, net$42 $43 $44 
Foreign exchange contracts5 (2)4 Other income (expense), net— — — 
Sterling notes (foreign denominated debt)6 (20)(17)N/A— — — 
Total$125 $(83)$80 $42 $43 $44 
The following table presents the pretax impact of derivatives designated as fair value hedges on income, including offsetting changes in fair value of the hedged items and amounts excluded from the assessment of effectiveness (in millions). The Company recognized $1 million of ineffectiveness on fair value hedges for the years ended December 31, 2017 and 2016.
  Year Ended December 31,
  2017 2016 2015
Gains (losses) on changes in fair value of hedged AFS $18
 $(17) $(2)
(Losses) gains on changes in the intrinsic value of equity contracts (17) 16
 2
Fair value of equity contracts excluded from effectiveness assessment 5
 (6) 10
Total in other (expense) income, net $6
 $(7) $10
The following table presents the pretaxgains (losses) gains on derivatives not designated as hedges and recognized in other income (expense) income,, net in the consolidated statements of operations (in millions).
Year Ended December 31,
 202120202019
Interest rate swaps$(2)$— $1 
Cross-currency swaps8 (10)— 
Foreign exchange derivatives(39)32 (65)
Equity— 7 13 
Total in other income (expense), net$(33)$29 $(51)
95
  Year Ended December 31,
  2017 2016 2015
Interest rate swaps $(98) $—
 $—
Cross-currency swaps (6) —
 —
Foreign exchange —
 (1) 6
Credit contracts (1) —
 —
Total in other (expense) income, net $(105) $(1) $6
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. REDEEMABLE NONCONTROLLING INTERESTS
Redeemable noncontrolling interests are presented outside of permanent equity on the Company's consolidated balance sheet when the put right is outside of the Company's control. Redeemable noncontrolling interests reflected as of the balance sheet date are the greater of the noncontrolling interest balances adjusted for comprehensive income items and distributions or the redemption values including any remeasurement necessaryremeasured at the period end foreign exchange rates (i.e., the "floor").rates. Adjustments to the carrying amount of redeemable noncontrolling interests to redemption value as a result of changes in exchange rates are reflected in currency translation adjustments, a component of other comprehensive income (loss); however, such. Such currency translation adjustments to redemption value are allocated to Discovery stockholders only. Redeemable noncontrolling interest adjustments of redemptioncarrying value to the floorredemption value are reflected in retained earnings. AnyThe adjustment of redemptioncarrying value to the floorredemption value that reflects a redemption in excess of fair value is included as an adjustment to net (loss) income from continuing operations available to Discovery, Inc. stockholders in the calculation of earnings per share. There were no current period adjustments to reflect a redemption in excess of fair value. (See Note 17.19.) The table below summarizes the Company's redeemable noncontrolling interests balances (in millions).

December 31,
20212020
Discovery Family$213 $206 
MotorTrend Group LLC ("MTG")114 112 
Other36 65 
Total$363 $383 
DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The table below presents the reconciliation of changes in redeemable noncontrolling interests (in millions).
December 31,
202120202019
Beginning balance$383 $442 $415 
Initial fair value of redeemable noncontrolling interests of acquired businesses— — 25 
Cash distributions to redeemable noncontrolling interests(11)(31)(39)
Equity exchange with Harpo for step acquisition of OWN— (50)— 
Redemption of redeemable noncontrolling interest(26)— — 
Comprehensive income adjustments:
Net income attributable to redeemable noncontrolling interests53 12 16 
Currency translation on redemption values(5)3 1 
Retained earnings adjustments:
Adjustments of carrying value to redemption value (redemption value does not equal fair value)(16)— 14 
Adjustments of carrying value to redemption value (redemption value equals fair value)(15)7 4 
OWN interest adjustment— — 6 
Ending balance$363 $383 $442 
  December 31,
  2017 2016 2015
Beginning balance $243
 $241
 $747
Initial fair value of redeemable noncontrolling interests of acquired businesses 137
 —
 60
Purchase of subsidiary shares at fair value —
 —
 (551)
Cash distributions to redeemable noncontrolling interests (30) (22) (42)
Comprehensive (loss) income adjustments:      
Net income attributable to redeemable noncontrolling interests 24
 23
 13
Other comprehensive income (loss) attributable to redeemable noncontrolling interests 1
 —
 (23)
Currency translation on redemption values —
 1
 (36)
Retained earnings adjustments:      
Adjustments to redemption value 38
 —
 73
Ending balance $413
 $243
 $241
RedeemableThe significant arrangements for redeemable noncontrolling interests consist of the arrangementsare described below:
On November 30, 2017, the Company acquired from Harpo a controlling interest in OWN, increasing Discovery’s ownership stake from 49.50% to 73.99%. Harpo has the right to require the Company to purchase its remaining non-controlling interest during 90-day windows beginning on July 1, 2018 and every two and half years thereafter through January 1, 2026. As OWN’s put right is outside the control of the Company, OWN’s noncontrolling interest is presented as redeemable noncontrolling interest outside of permanent equity on the Company's consolidated balance sheet. The Company recorded $55 million for the value of the put right for OWN. (See Note 3.)
In connection with the joint venture created between Discovery and GoldenTree on September 25, 2017, GoldenTree acquired a put right exercisable during 30 day windows beginning in March 2021, September 2022 and March 2024 that requires Discovery to either purchase all of GoldenTree's 32.5% interest in the joint venture at fair value or participate in an initial public offering for the joint venture. As the put right is outside of the Company's control, GoldenTree's 32.5% noncontrolling interest is presented as redeemable noncontrolling interest outside of permanent equity on the Company's consolidated balance sheet. The Company recorded a redeemable noncontrolling interest of $82 million and an adjustment to redemption value of $38 million for the value of the put right for VTEN. (See Note 3.)
In connection with its non-controlling interest in Discovery Family
Hasbro Inc. ("Hasbro") has the right to put the entirety of its remaining 40% non-controlling interest in Discovery Family to Discovery at any time during the Company for one year afterone-year period beginning December 31, 2021, or in the event a Discovery performance obligation related to Discovery Family is not met. Embedded in the redeemable noncontrolling interest is also a Discovery call right that is exercisable for one year after December 31, 2021. Upon the exercise of the put or call options, the price to be paid for the redeemable noncontrolling interest is a function of the then currentthen-current fair market value of the redeemable noncontrolling interest, to which certain discounts and redemption floor values may apply in specified situations depending upon the party exercising the put or call and the basis for the exercise of the put or call. As Hasbro's put right is outside the control of the Company, Hasbro's 40% noncontrolling interest is presented as redeemable noncontrolling interest outside of permanent equity on the Company's consolidated balance sheet. The Company recorded $210 million for the value of the put right for Discovery Family.
In connection with its non-controlling interest in Discovery Japan, Jupiter Telecommunications Co., Ltd ("J:COM") has the right to put all, but not less than all, of its 20% noncontrolling interest to Discovery at any time for cash. As amended, through January 10, 2018, the redemption value is the January 10, 2013, fair value denominated in Japanese yen; thereafter, as chosen by J:COM, the redemption value is the then-current fair value or the January 10, 2013, fair value denominated in Japanese yen. The Company recorded $27 million for the value of the put right for Discovery Japan.
In connection with the acquisition of a controlling interest in Eurosport France on March 31, 2015 and Eurosport International on May 30, 2014, the Company recognized $60 million and $558 million, respectively, for TF1's 49% redeemable noncontrolling interest in each entity. On July 22, 2015, TF1 exercised its right to put the entirety of its remaining 49% noncontrolling interest in both Eurosport France and Eurosport International to the Company for €491 million ($551 million as of the date redemption became mandatory, and $548 million on October 1, 2015 when the transaction closed). The difference between the carrying amount of the redeemable noncontrolling interest and its fair value at the date of exercise resulted in a €25 million ($28 million) adjustment to retained earnings, recognized as a component of redeemable noncontrolling interest adjustments to

96
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


MTG
redemptionGoldenTree acquired a put right exercisable during 30-day windows beginning on each of March 25, 2021, September 25, 2022 and March 25, 2024, that requires Discovery to either purchase all of GoldenTree's noncontrolling 32.5% interest in the joint venture at fair value on the consolidated statements of equityor participate in an initial public offering for the year ended December 31, 2016. Upon acquisition of TF1'sjoint venture.
OWN
Harpo has the right to require the Company to purchase Harpo's remaining noncontrolling interest in OWN at fair value during 4 90-day windows beginning on OctoberJuly 1, 2015,2018 and every two and a half years thereafter through January 1, 2026. In December 2020, the Company adjustedand Harpo completed an equity exchange and amended the accumulated other comprehensive income balanceLLC agreement whereby the Company acquired an additional 20.2% ownership interest in OWN from Harpo in exchange for $35 million of $61 million attributable to TF1the Company's Series A common stock, which was issued from treasury stock. A third-party exited the joint venture during 2021, and allocated it to Discovery stockholders.as a result, the Company now owns 95% of OWN with Harpo holding 5%. Harpo's remaining put rights are currently exercisable on July 1, 2023 and January 1, 2026.
NOTE 12. EQUITY
Common Stock
The Company has three3 series of common stock authorized, issued and outstanding as of December 31, 2017:2021: Series A common stock, Series B common stock and Series C common stock. Holders of these three3 series of common stock have equal rights, powers and privileges, except as otherwise noted. Holders of Series A common stock are entitled to one1 vote per share and holders of Series B common stock are entitled to ten10 votes per share on all matters voted on by stockholders, except for directors to be elected by holders of the Company’s Series A-1 convertible preferred stock. Holders of Series C common stock are not entitled to any voting rights, except as required by Delaware law. Generally, holders of Series A common stock and Series B common stock and Series A-1 convertible preferred stock vote as one class, except for certain preferential rights afforded to holders of Series A-1 convertible preferred stock.
Holders of Series A common stock, Series B common stock and Series C common stock will participate equally in cash dividends if declared by the Board of Directors, subject to preferential rights of outstanding preferred stock.
Each share of Series B common stock is convertible, at the option of the holder, into one1 share of Series A common stock. Series A and Series C common stock are not convertible.
Generally, distributions made in shares of Series A common stock, Series B common stock or Series C common stock will be made proportionally to all common stockholders. In the event of a reclassification, subdivision or combination of any series of common stock, the shares of the other series of common stock will be equally reclassified, subdivided or combined.
In the event of a liquidation, dissolution, or winding up of Discovery, after payment of Discovery’s debts and liabilities and subject to preferential rights of outstanding preferred stock, holders of Series A common stock, Series B common stock and Series C common stock and holders of Series A-1 and Series C-1 convertible preferred stock will share equally in any assets available for distribution to holders of common stock.
On February 13, 2014, John C. Malone, a member of Discovery’s Board of Directors, entered into an agreement granting David Zaslav, the Company’s President and CEO, certain voting and purchase rights with respect to the approximately 6 million shares of the Company’s Series B common stock owned by Mr. Malone. The agreement gives Mr. Zaslav the right to vote the Series B shares if Mr. Malone is not otherwise voting or directing the vote of those shares. The agreement also provides that if Mr. Malone proposes to sell the Series B shares, Mr. Zaslav will have the first right to negotiate for the purchase of the shares. If that negotiation is not successful and Mr. Malone proposes to sell the Series B shares to a third party, Mr. Zaslav will have the exclusive right to match that offer. The rights granted under the agreement will remain in effect for as long as Mr. Zaslav is either employed as the principal executive officer of the Company or serving on its Board of Directors.
Common Stock Repurchase Program
Under the Company's stock repurchase program, management was authorized to purchase shares of the Company's common stock from time to time through open market purchases, privately negotiated transactions at prevailing prices, pursuant to one or more accelerated stock repurchase agreements, or other derivative arrangements as permitted by securities laws and other legal requirements, and subject to stock price, business and market conditions and other factors. The Company's authorization under the program expired on October 8, 2017.
All common stock repurchases, including prepaid common stock repurchase contracts, during 2017, 2016 and 2015 were made through open market transactions. As of December 31, 2017, the Company had repurchased over the life of the program 3 million and 164 million shares of Series A and Series C common stock, respectively, for the aggregate purchase price of $171 million and $6.6 billion, respectively.


DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The table below presents a summary of common stock repurchases (in millions).
  Year Ended December 31,
  2017 2016 2015
Series C Common Stock:      
Shares repurchased 14.3 34.8 23.7
Purchase price(a)
 $381
 $895
 $698
(a) The purchase price for Series C common stock in 2016 includes repurchases made pursuant to a common stock repurchase contract that was executed on August 22, 2016 and settled on December 2, 2016 at a cost of $71 million, resulting in the receipt of 2.8 million shares of Series C common stock at the then current market price equal to $75 million. See below for additional details.
Convertible Preferred Stock and Preferred Stock Modification
The Company has two2 series of preferred stock authorized, issued and outstanding as of December 31, 2017:2021: Series A-1 convertible preferred stock and Series C-1 convertible preferred stock. There are 8 million shares authorized for Series A-1 convertible preferred stock and 6 millionis convertible into 9 shares authorized forof the Company's Series A common stock and Series C-1 convertible preferred stock.
On August 7, 2017, Discovery completed the transactions contemplated by the Exchange Agreement with Advance/Newhouse. Under the Exchange Agreement, Discovery issued a number ofstock is convertible into 19.3648 shares of newly designatedthe Company's Series C common stock, subject to certain anti-dilution adjustments. Shares of Series A-1 and Series C-1 convertible preferred stock (collectively, the "New Preferred Stock") to Advance/Newhouse in exchange for all outstanding shares of Discovery Series A and Series C convertible participating preferred stock (the "Exchange"). The terms of the Exchange Agreement resulted in Advance/Newhouse's aggregate voting and economic rights before the exchange being equal to its aggregate voting and economic rights after the exchange. Immediately following the Exchange, Advance/Newhouse’s beneficial ownership of the aggregate number of shares of Discovery’s Series A common stock and Series C common stock into which the New Preferred Stock received by Advance/Newhouse in the Exchange are convertible, remained unchanged. The terms of the exchange agreement also provide that certain of the shares of Discovery Series C-1 convertible preferred stock received by Advance/Newhouse in the Exchange (including the Discovery Series C common stock into which such shares are convertible) are subject to transfer restrictions on the terms set forth in the Exchange Agreement. While subject to transfer restrictions, such shares may be pledged in certain bona fide financing transactions, but may not be pledged in connection with hedging or similar transactions.
The following table summarizes the preferred shares issued at the time of the Exchange.
Pre-Exchange Post-Exchange
Shares Held Prior to the Amendment Converts into Common Stock Shares Issued Subsequent to the Amendment Converts into Common Stock
Series A Preferred Stock70,673,242
 Common A70,673,242
 Series A-1 Preferred Stock7,852,582
 Common A70,673,242
 Common C70,673,242
 Series C-1 Preferred Stock3,649,573
 Common C70,673,242
Series C Preferred Stock24,874,370
 Common C49,748,740
 Series C-1 Preferred Stock2,569,020
 Common C49,748,740
Prior to the Exchange the Series A preferred stock had a carrying value of $108 million as a class of securities and each share of Series A preferred stock was convertible into one share of Series A common stock and one share of Series C common stock (referred to as the “embedded Series C common stock”). Through its ownership of the Series A convertible preferred stock, Advance/Newhouse had the right to elect three directors (the “preferred directors”) and maintained special voting rights on certain matters, including but not limited to blocking rights for material acquisitions, the issuance of debt securities and the issuance of equity securities (collectively, the “preferred rights”). Additionally, Advance/Newhouse was subject to certain transfer restrictions with respect to its governance rights. Prior to the Exchange, the Series C convertible preferred stock was considered the economic equivalent of Series C common stock.
Following the Exchange, shares of Series A-1 preferred stock and Series C-1 preferred stock are convertibleindependently converted into Series A common stock and Series C common, stock, respectively. The aforementioned preferred rights and transfer restrictions are retained as features of the Series A-1 convertible preferred stock, and holder of Series A-1 convertible preferred stock are now subject to a right of first offer in favor of Discovery should Advance/Newhouse desire to sell 80% or more of such shares in a “Permitted Transfer” (as defined in the Discovery charter). Following the Exchange, Series C-1 convertible preferred stock is considered the economic equivalent of Series C common stock and is subject to certain transfer restrictions.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Discovery considers the Exchange of the Series A convertible preferred stock for Series A-1 convertible preferred stock and Series C-1 convertible preferred stock to be a modification to the conversion option of the Series A convertible preferred stock. Previously, conversion of Series A preferred stock required simultaneous conversion into Series A common stock and Series C common stock. The Exchange, however, allows for the independent conversion of the Series C-1 convertible preferred stock into Series C common stock without the conversion of Series A-1 convertible preferred stock. Advance/Newhouse’s aggregate voting, economic and preferred rights before the Exchange are equal to its aggregate voting, economic and preferred rights after the Exchange.
Discovery valued the securities immediately prior to and immediately after the Exchange and determined that the Exchange increased the fair value of Advance/Newhouse’s preferred stock by $35 million from $3.340 billion to $3.375 billion, or 1.05%, which was not considered significant in the context of the total value of the Company's preferred stock. On the basis of the qualitative and quantitative factors noted above, Discovery does not believe the Exchange is considered significant and does not reflect an extinguishment of the previously issued preferred stock for accounting purposes. Accordingly, Discovery has accounted for the exchange of the previously issued preferred stock as a modification, which is measured as the increase in fair value of the preferred stock held by Advance/Newhouse, or $35 million.
In connection with the Exchange Agreement, Advance/Newhouse also entered into the Advance/Newhouse Voting Agreement. The Advance/Newhouse Voting Agreement requires that Advance/Newhouse vote its shares of Discovery Series A-1 convertible preferred stock to approve the issuance of shares of Series C common stock in connection with the Scripps Networks acquisition as contemplated by the Merger Agreement. As the $35 million of incremental value was transferred to Advance/Newhouse in exchange for consent with respect to the Scripps Networks acquisition, the Company determined that the incremental amount should be expensed as acquisition transaction costs, which are reported as a component of selling, general and administrative expense.
As of December 31, 2017,2021, all outstanding shares of Series A-1 and Series C-1 convertible preferred stock arewere held by Advance/Newhouse. Consistent with the terms of the arrangement prior to the Exchange, holdersHolders of Series A-1 and Series C-1 convertible preferred stock have equal rights, powers and privileges, except as otherwise noted. Except for the election of common stock directors, the holders of Series A-1 convertible preferred stock are entitled to vote on matters to which holders of Series A and Series B common stock are entitled to vote, and holders of Series C-1 convertible preferred stock are entitled to vote on matters to which holders of Series C common stock, which is generally non-voting, are entitled to vote pursuant to Delaware law. Series A-1 convertible preferred stockholders vote on an as converted to common stock basis together with the Series A and Series B common stockholders as a single class on all matters except the election of directors. Series C-1 convertible preferred stock is considered the economic equivalent of Series C common stock and is subject to certain transfer restrictions.
97
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additionally, through its ownership of the Series A-1 convertible preferred stock, Advance/Newhouse has special voting rights on certain matters and the right to elect three3 directors. Holders of the Company’s common stock are not entitled to vote in the election of such directors. Advance/Newhouse retains these rights so long as it or its permitted transferees own or have the right to vote such shares that equal at least 80% of the shares of Series A-1A convertible preferred stock issued to Advance/Newhouse in connection with the formation of Discovery, as converted to Series A-1 convertible preferred stock, plus any Series A-1 convertible preferred stock released from escrow, as may be adjusted for certain capital transactions. Holders of Series A-1 convertible preferred stock are subject to a right of first offer in favor of Discovery should Advance/Newhouse desire to sell 80% or more of the Series A-1 convertible preferred stock in a “Permitted Transfer” (as defined in the Discovery charter).
Subject to the prior preferences and other rights of any senior stock, holders of Series A-1 and Series C-1 convertible preferred stock will participate equally with common stockholders on an as converted to common stock basis in any cash dividends declared by the Board of Directors.
In the event of a liquidation, dissolution or winding up of Discovery, after payment of Discovery’s debts and liabilities and subject to the prior payment with respect to any stock ranking senior to Series A-1 and Series C-1 convertible preferred stock, the holders of Series A-1 and Series C-1 convertible preferred stock will receive, before any payment or distribution is made to the holders of any common stock or other junior stock, an amount (in cash or property) equal to $0.01 per share. Following payment of such amount and the payment in full of all amounts owing to the holders of securities ranking senior to Discovery’s common stock, holders of Series A-1 and Series C-1 convertible preferred stock will share equally on an as converted to common stock basis with the holders of common stock with respect to any assets remaining for distribution to such holders.
Preferred Stock ConversionDuring the years ended December 31, 2021, 2020 and Repurchases
2019, no Series CA-1 convertible preferred stock held by Advance/was converted. During the years ended December 31, 2021 and 2019, Advance Newhouse was,Programming Partnership converted 0.6 million and the1.1 million shares of its Series C-1 preferred stock held by Advance/Newhouse is, convertible, at the option of the holder, into shares of Series C common stock. Prior to the Exchange, the Company had an agreement with Advance/Newhouse to repurchase, on a quarterly basis, a number of shares of Series C convertible preferred stock convertible into Series C common stock based on the number of11.0 million and 22.0 million shares of Series C common stock, purchased under the Company’s stock repurchase program during the then most recently completed fiscal quarter. The price paid per share is calculated as 99% of the average price paid for the Series C common shares repurchased by the Company during the applicable fiscal quarter multiplied by the Series C conversion rate. The Advance/Newhouse repurchases are made outside of the Company’s publicly announced common stock repurchase program. The repurchase transactions are recorded as a decrease in par value of preferred stock and retained

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


earnings upon settlement as there is no remaining APIC for this class of stock and the shares are retired upon repurchase. The Advance/Newhouse repurchase agreement was amended on August 7, 2017 to conform the terms of the previous agreement, as detailed above, to the conversion ratio of the newly issued Series C-1 convertible preferred stock.
The preferred stock repurchase made during the third quarter of 2017 occurred after the Exchange and, as such, was a repurchase of the newly issued Series C-1 convertible preferred stock. The total price paid for the repurchase of $102 million was the planned amount subject to repurchase under the previous repurchase agreement with Advance/Newhouse, as determined and disclosed in the previous quarter. The number of shares repurchased reflect the post-exchange repurchase of Seriesrespectively. No series C-1 convertible preferred stock was converted during the year ended December 31, 2020.
Repurchase Programs
Common Stock
Under the Company's stock repurchase program, management is authorized to purchase shares of the Company's common stock from time to time through open market purchases, privately negotiated transactions at prevailing prices, pursuant to one or more accelerated stock repurchase agreements, or other derivative arrangements as permitted by securities laws and therefore differs fromother legal requirements, and subject to stock price, business and market conditions and other factors.
In February 2020, the previously disclosed plannedCompany's Board of Directors authorized additional stock repurchases of up to $2 billion upon completion of its existing $1 billion repurchase authorization announced in May 2019. All common stock repurchases, including prepaid common stock repurchase contracts, have been made through open market transactions and have been recorded as treasury stock on the consolidated balance sheets. Over the life of the Company's repurchase programs and as of December 31, 2021, the Company had repurchased 3 million and 229 million shares of Series A and Series C convertible preferred shares. There were no additional repurchasescommon stock, respectively, for the aggregate purchase price of Series C-1 convertible preferred stock during the fourth quarter of 2017.
$171 million and $8.2 billion, respectively. The table below presents a summary of Series C and Series C-1 convertible preferredcommon stock repurchases made under the repurchase agreement (in millions).
Year Ended December 31,
202120202019
Series C Common Stock:
Shares repurchased— 41.6 23.2 
Purchase price$— $965 $637 
 Year Ended December 31,
 2017 2016
Series C Convertible Preferred Stock:   
Shares repurchased2.3
 9.1
Purchase price$120
 $479
Series C-1 Convertible Preferred Stock:   
Shares repurchased0.2
 —
Purchase price$102
 $—
In 2019, the Company made an upfront cash payment of $96 million to enter into common stock repurchase contracts for the Company’s Series C common stock. These contracts settled in cash for a total of $100 million during the year ended December 31, 2019. The contracts were accounted for as equity transactions.
Convertible Preferred Stock
There arewere no plannedconvertible stock repurchases during 2021, 2020, or 2019. Over the life of the Company's repurchase programs and as of December 31, 2021, the Company had repurchased 0.2 million shares of Series C-1 convertible preferred stock for the first quarter of 2018 as there were no repurchases of Series A or Series C common stock during the fourth quarter of 2017.
Stock Repurchases
As of December 31, 2017, total shares repurchased, on a split-adjusted and as-converted basis, under these programs were 33% of the Company's common outstanding shares on a fully-diluted basis since the repurchase programs were authorized, including offsetting adjustments for the issuance of equity for share-based compensation. Total shares repurchased excluding the impact of stock compensation, on a split-adjusted and as-converted basis, under these programs represent 38% of the Company's outstanding shares from the time the repurchase programs were authorized.
Common Stock Repurchase Contract
On March 15, 2017, the Company settled a December 15, 2016 common stock repurchase contract through the receipt of $58 million of cash. The Company had prepaid $57 million for the common stock repurchase contract in 2016 with the option to settle the contract in cash or Series C common stock in March 2017. The Company elected to receive a cash settlement inclusive of a $1 million premium, which is reflected as an adjustment to APIC.
On December 2, 2016, the Company settled an August 22, 2016 common stock repurchase contract with a net notional value of $71 million whose strike price of $25.86 was below the Series C common stock price at expiry. The Company elected to settle the contract through receipt of 2.8 million shares of Series C common stock at the then current market price equal to $75$102 million. The receipt of shares is reflected as a component of treasury stock and reclassified from additional paid-in capital at the prepaid cost of $71 million. 

98
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Other Comprehensive Income (Loss)
The table below presents the tax effects related to each component of other comprehensive (loss) income (loss) and reclassifications made into the consolidated statements of operations (in millions).
Year Ended December 31, 2021Year Ended December 31, 2020Year Ended December 31, 2019

Pretax
Tax Benefit (Expense)

Net-of-tax

Pretax
Tax Benefit (Expense)

Net-of-tax

Pretax
Tax Benefit (Expense)

Net-of-tax
Currency translation adjustments:
Unrealized gains (losses):
Foreign currency$(404)$17 $(387)$357 $33 $390 $(95)$14 $(81)
Net investment hedges105 (8)97 (109)11 (98)56 4 60 
Reclassifications:
Gain on disposition— — — — — — 6 — 6 
Total currency translation adjustments(299)9 (290)248 44 292 (33)18 (15)
Derivative adjustments:
Unrealized gains (losses)169 (35)134 (110)24 (86)38 (9)29 
Reclassifications from other comprehensive income to net income(33)8 (25)(34)7 (27)(14)3 (11)
Total derivative adjustments136 (27)109 (144)31 (113)24 (6)18 
Pension plan and SERP liability:
Unrealized gains (losses)3 (1)2 (10)2 (8)(13)3 (10)
Other comprehensive income (loss) adjustments$(160)$(19)$(179)$94 $77 $171 $(22)$15 $(7)
 Year Ended December 31, 2017 Year Ended December 31, 2016 Year Ended December 31, 2015
 

Pretax
 
Tax
Benefit (Expense)
 

Net-of-tax
 

Pretax
 Tax Benefit (Expense) 

Net-of-tax
 

Pretax
 Tax Benefit (Expense) 

Net-of-tax
Currency translation adjustments:                 
Unrealized gains (losses)                 
Foreign currency$280
 $3
 $283
 $(234) $41
 $(193) $(249) $19
 $(230)
Net investment hedges(112) —
 (112) 3
 (1) 2
 —
 —
 —
Reclassifications:                 
Loss (gain) on disposition12
 —
 12
 —
 —
 —
 23
 —
 23
Other (expense) income, net—
 —
 —
 —
 —
 —
 6
 —
 6
Total currency translation adjustments180
 3
 183
 (231) 40
 (191) (220) 19
 (201)
                  
AFS adjustments:                 
Unrealized gains (losses)36
 (6) 30
 (34) 6
 (28) (33) 6
 (27)
Reclassifications to other (expense) income, net:                 
Other-than-temporary-impairment AFS securities—
 —
 —
 62
 (10) 52
 —
 —
 —
Hedged portion of AFS securities(18) 3
 (15) 17
 (3) 14
 2
 —
 2
Total AFS adjustments18
 (3) 15
 45
 (7) 38
 (31) 6
 (25)
                  
Derivative adjustments:                 
Unrealized (losses) gains(41) 15
 (26) 39
 (14) 25
 23
 (8) 15
Reclassifications:                 
Distribution revenue22
 (8) 14
 25
 (7) 18
 (23) 8
 (15)
Advertising revenue3
 (1) 2
 2
 —
 2
 (2) —
 (2)
Costs of revenues—
 —
 —
 (27) 7
 (20) (9) 3
 (6)
Interest expense1
 —
 1
 3
 (1) 2
 3
 (1) 2
Other (expense) income, net(17) 6
 (11) (4) 1
 (3) 7
 (2) 5
Total derivative adjustments(32) 12
 (20) 38
 (14) 24
 (1) —
 (1)
Other comprehensive income (loss)$166
 $12
 $178
 $(148) $19
 $(129) $(252) $25
 $(227)


99
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Accumulated Other Comprehensive Loss
The table below presents the changes in the components of accumulated other comprehensive loss, net of taxes (in millions).
Currency TranslationDerivative AdjustmentsPension Plan and SERP LiabilityAccumulated
Other
Comprehensive Income (Loss)
December 31, 2018$(804)$16 $3 $(785)
Other comprehensive income (loss) before reclassifications(20)29 (10)(1)
Reclassifications from accumulated other comprehensive loss to net income6 (11)— (5)
Other comprehensive income (loss)(14)18 (10)(6)
Other comprehensive loss attributable to redeemable noncontrolling interests(1)— — (1)
Reclassifications to retained earnings resulting from the adoption of ASU 2018-02(28)(2)— (30)
December 31, 2019(847)32 (7)(822)
Other comprehensive income (loss) before reclassifications292 (86)(8)198 
Reclassifications from accumulated other comprehensive loss to net income— (27)— (27)
Other comprehensive income (loss)292 (113)(8)171 
December 31, 2020(555)(81)(15)(651)
Other comprehensive income (loss) before reclassifications(290)134 2 (154)
Reclassifications from accumulated other comprehensive loss to net income— (25)— (25)
Other comprehensive income (loss)(290)109 2 (179)
December 31, 2021$(845)$28 $(13)$(830)
NOTE 13. NONCONTROLLING INTEREST
The Company has a controlling interest in the TV Food Network Partnership (the "Partnership"), which includes the Food Network and Cooking Channel. Food Network and Cooking Channel are operated and organized under the terms of the Partnership. The Company holds 80% of the voting interest and 68.7% of the economic interest in the Partnership. During the fourth quarter of 2020, the Partnership agreement was extended and specifies a dissolution date of December 31, 2022. If the term of the Partnership is not extended prior to the dissolution date of December 31, 2022, the Partnership agreement permits the Company, as holder of 80% of the applicable votes, to reconstitute the Partnership and continue its business. If for some reason the Partnership is not continued, it will be required to limit its activities to winding up, settling debts, liquidating assets and distributing proceeds to the partners in proportion to their partnership interests. Ownership interests attributable to the noncontrolling owner are presented as noncontrolling interests on the Company's consolidated financial statements. Under the terms of the Partnership agreement, the noncontrolling owner cannot force a redemption outside of the Company's control. As such, the noncontrolling interests in the Partnership are reflected as a component of permanent equity in the Company's consolidated financial statements.
100
  Currency Translation Adjustments AFS 
Derivative
Adjustments
 
Accumulated
Other
Comprehensive Loss
December 31, 2014 $(367) $(2) $1
 $(368)
Other comprehensive (loss) income before reclassifications (230) (27) 15
 (242)
Reclassifications from accumulated other comprehensive loss to net income 29
 2
 (16) 15
Other comprehensive loss (201) (25) (1) (227)
Purchase of redeemable noncontrolling interest
 (61) —
 —
 (61)
Other comprehensive loss attributable to redeemable noncontrolling interests 23
 —
 —
 23
December 31, 2015 (606) (27) —
 (633)
Other comprehensive (loss) income before reclassifications (191) (28) 25
 (194)
Reclassifications from accumulated other comprehensive loss to net income —
 66
 (1) 65
Other comprehensive (loss) income (191) 38
 24
 (129)
December 31, 2016 (797) 11
 24
 (762)
Other comprehensive income (loss) before reclassifications 171
 30
 (26) 175
Reclassifications from accumulated other comprehensive loss to net loss 12
 (15) 6
 3
Other comprehensive income (loss) 183
 15
 (20) 178
Other comprehensive income attributable to redeemable noncontrolling interests (1) —
 —
 (1)
December 31, 2017 $(615) $26
 $4
 $(585)
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. REVENUES AND ACCOUNTS RECEIVABLE
Disaggregated Revenue
The following table presents the Company’s revenues disaggregated by revenue source (in millions). Management uses these categories of revenue to evaluate the performance of its businesses and to assess its financial results and forecasts.
Year Ended December 31, 2021
U.S. NetworksInternational NetworksCorporate, inter-segment eliminations, and otherTotal
Revenues:
Advertising$4,188 $2,027 $— $6,215 
Distribution3,297 2,112 — 5,409 
Other177 400 (10)567 
Totals$7,662 $4,539 $(10)$12,191 
Year Ended December 31, 2020
U.S. NetworksInternational NetworksCorporate, inter-segment eliminations, and otherTotal
Revenues:
Advertising$4,012 $1,571 $— $5,583 
Distribution2,852 2,014 — 4,866 
Other85 128 9 222 
Totals$6,949 $3,713 $9 $10,671 
Year Ended December 31, 2019
U.S. NetworksInternational NetworksCorporate, inter-segment eliminations, and otherTotal
Revenues:
Advertising$4,245 $1,799 $— $6,044 
Distribution2,739 2,096 — 4,835 
Other108 146 11 265 
Totals$7,092 $4,041 $11 $11,144 
Accounts Receivable and Credit Losses
Receivables include amounts currently due from customers and are presented net of an estimate for lifetime expected credit losses. Allowance for credit losses is measured using historical loss rates for the respective risk categories and incorporating forward-looking estimates. To assess collectability, the Company analyzes market trends, economic conditions, the aging of receivables and customer specific risks, and records a provision for estimated credit losses expected over the lifetime of receivables. The corresponding expense for the expected credit losses is reflected in selling, general and administrative expenses.
The Company’s accounts receivable balances and the related credit losses arise primarily from distribution and advertising revenue. The Company monitors ongoing credit exposure through active review of customers’ financial conditions, aging of receivable balances, historical collection trends, and expectations about relevant future events that may significantly affect collectability. The allowance for credit losses decreased from $59 million at December 31, 2020 to $54 million at December 31, 2021. The activity in the allowance for credit losses for the twelve months ended December 31, 2021 was not material.
101
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Contract Liability
A contract liability, such as deferred revenue, is recorded when cash is received in advance of the Company's performance. Total deferred revenues, including both current and noncurrent, were $573 million and $649 million at December 31, 2021 and December 31, 2020, respectively. Noncurrent deferred revenue is a component of other noncurrent liabilities on the consolidated balance sheets. The change in deferred revenue for the year ended December 31, 2021 was primarily due to cash payments received for which the performance obligation was not satisfied prior to the end of the period, partially offset by revenue recognized during the period, of which $456 million was included in the deferred revenue balance at December 31, 2020. Revenue recognized for the year ended December 31, 2020 related to the deferred revenue balance at December 31, 2019 was $309 million.
Transaction Price Allocated to Remaining Performance Obligations
Most of the Company's distribution contracts are licenses of functional intellectual property where revenue is derived from royalty-based arrangements, for which the guidance allows the application of a practical expedient to record revenues as a function of royalties earned to date instead of estimating incremental royalty contract revenue. Accordingly, in these instances revenue is recognized based upon the royalties earned to date. However, there are certain other distribution arrangements that are fixed price or contain minimum guarantees that extend beyond one year. The Company recognizes revenue for fixed fee distribution contracts on a monthly basis based on minimum monthly fees; by calculating one twelfth of annual license fees specified in its distribution contracts; or based on the pro-rata fees earned calculated on the license fees specified in the distribution contract. The transaction price allocated to remaining performance obligations within these fixed price or minimum guarantee distribution revenue contracts was $1.3 billion as of December 31, 2021 and is expected to be recognized over the next five years.
The Company's content licensing contracts and sports sublicensing deals are licenses of functional intellectual property. Certain of these arrangements extend beyond one year. The transaction price allocated to remaining performance obligations on these long-term contracts was $712 million as of December 31, 2021 and is expected to be recognized over the next five years.
The Company's brand licensing contracts are licenses of symbolic intellectual property. Certain of these arrangements extend beyond one year. The transaction price allocated to remaining performance obligations on these long-term contracts was $94 million as of December 31, 2021 and is expected to be recognized over the next 11 years.
The value of unsatisfied performance obligations disclosed above does not include: (i) contracts involving variable consideration for which revenues are recognized in accordance with the usage-based royalty exception, and (ii) contracts with an original expected length of one year or less, such as advertising contracts.
Capitalized Contract Costs
Sales commissions are generally expensed as incurred because contracts for which the sales commissions are generated are one year or less or are not material. Sales commissions are recorded as a component of cost of revenues on the consolidated statements of operations. The financing component of content licensing arrangements is not capitalized, because the period between delivery of the license and customer payment is one year or less or is not material.
NOTE 13.15. SHARE-BASED COMPENSATION
The Company has various incentive plans under which PRSUs, RSUs, stock options RSUs, PRSUs and SARs have been issued. As of December 31, 2017,2021, the Company has reserved a total of 11787 million shares of its Series A and Series C common stock for future exercises, of outstandingvestings and future grants of stock options, and stock-settled SARs, and future vesting of outstanding and future grants of PRSUs and RSUs. Upon exercise of stock options and stock-settled SARs or vesting of PRSUs and RSUs,stock awards, the Company issues new shares from its existing authorized but unissued shares. There were 9742 million shares of common stock in reserves that were available for future grantissuance under the incentive plans as of December 31, 2017.2021.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Shared-BasedShare-Based Compensation Expense
The table below presents the components of share-based compensation expense (in millions).
Year Ended December 31,
202120202019
PRSUs$10 $8 $46 
RSUs110 76 41 
Stock options58 30 33 
SARs— (4)22 
Total share-based compensation expense$178 $110 $142 
Tax benefit recognized$29 $18 $17 
102
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Year Ended December 31,
  2017 2016 2015
RSUs $23
 $17
 $17
Stock options 12
 13
 17
PRSUs 6
 34
 16
SARs (3) 4
 (14)
ESPP 1
 1
 1
Unit awards —
 —
 (2)
Total share-based compensation expense $39
 $69
 $35
Tax benefit recognized $9
 $25
 $13
Compensation expense for all awards was recorded in selling, general and administrative expense on the consolidated statements of operations. Liability-classified equity-basedshare-based compensation awards include certain SARSPRSUs and PRSUs.SARs. The Company recorded total liabilities for cash-settled and other liability-classified equity-basedshare-based compensation awards of $47$22 million and $83$55 million as of December 31, 20172021 and 2016,2020, respectively. The current portion of the liability for cash-settled and other liability-classified awards was $12$17 million and $31$37 million as of December 31, 20172021 and 2016,2020, respectively.
Share-Based Award Activity
RSUs
The table below presents RSU activity (in millions, except years and weighted-average grant price).
  

RSUs
 
Weighted-Average
Grant
Price
 
Weighted-Average
Remaining
Contractual
Term
(years)
 
Aggregate
Fair
Value
Outstanding as of December 31, 2016 2.6
 $30.03
    
Granted 1.6
 $28.81
    
Converted (0.4) $35.91
   $12
Forfeited (0.4) $29.61
    
Outstanding as of December 31, 2017 3.4
 $28.78
 2.6 $77
Vested and expected to vest as of December 31, 2017 3.4
 $28.78
 2.6 $77
RSUs represent the contingent right to receive shares of the Company's Series A and C common stock, substantially all of which vest ratably each year over periods of one to four years based on continuous service. As of December 31, 2017, there was $61 million of unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted-average period of 2.7 years.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Stock Options
The table below presents stock option activity (in millions, except years and weighted-average exercise price).
  Stock Options 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Term
(years)
 
Aggregate
Intrinsic
Value
Outstanding as of December 31, 2016 13.7
 $26.05
    
Granted 2.6
 $28.74
    
Exercised (2.5) $17.54
   $26
Forfeited (1.5) $33.46
    
Outstanding as of December 31, 2017 12.3
 $27.46
 3.5 14
Vested and expected to vest as of December 31, 2017 12.3
 $27.46
 3.5 14
Exercisable as of December 31, 2017 6.7
 $26.26
 2.1 14
Stock options are granted with an exercise price equal to or in excess of the closing market price of the Company’s Series A or Series C common stock on the date of grant. Substantially all stock options vest ratably over three to four years from the grant date based on continuous service and expire seven to ten years from the date of grant. Stock option awards generally provide for accelerated vesting upon retirement or after reaching a specified age and years of service. The Company received cash payments from the exercise of stock options totaling $42 million, $46 million and $16 million during 2017, 2016 and 2015, respectively. As of December 31, 2017, there was $32 million of unrecognized compensation cost, net of actual forfeitures, related to stock options, which is expected to be recognized over a weighted-average period of 2.0 years.
The fair value of stock options is estimated using the Black-Scholes option-pricing model. The weighted-average assumptions used to determine the fair value of stock options as of the date of grant during 2017, 2016 and 2015 were as follows.
  Year Ended December 31,
  2017 2016 2015
Risk-free interest rate 1.87% 1.26% 1.54%
Expected term (years) 5.0
 5.0
 5.0
Expected volatility 27.52% 28.74% 26.78%
Dividend yield —
 —
 —
The weighted-average grant date fair value of options granted during 2017, 2016 and 2015 was $7.99, $7.09 and $8.44, respectively, per option. The total intrinsic value of options exercised during 2017, 2016 and 2015 was $26 million, $42 million and $28 million, respectively.
PRSUs
The table below presents PRSU activity (in millions, except years and weighted-average grant price).
PRSUsWeighted-
Average
Grant
Date Fair Value		Weighted-Average
Remaining
Contractual
Term
(years)		Aggregate
Fair
Value
Outstanding as of December 31, 20201.5 $26.57 0.0$45 
Granted0.2 $58.18 
Converted(0.8)$26.56 $35 
Outstanding as of December 31, 20210.9 $34.84 0.0$20 
Vested and expected to vest as of December 31, 20210.9 $34.84 0.0$20 
Convertible as of December 31, 20210.6 $26.58 0.0$15 
  PRSUs  
Weighted-Average
Grant
Price
 
Weighted-Average
Remaining
Contractual
Term
(years)
 
Aggregate
Fair
Value
Outstanding as of December 31, 2016 4.5
 $34.44
    
Granted 0.7
 $29.50
    
Converted (1.7) $34.62
   $49
Forfeited —
 $—
    
Outstanding as of December 31, 2017 3.5
 $33.41
 0.9
 76
Vested and expected to vest as of December 31, 2017 3.5
 $33.41
 0.9
 76
Convertible as of December 31, 2017 1.5
 $40.42
 —
 33

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Company has granted PRSUs to certain senior level executives. PRSUs represent the contingent right to receive shares of the Company’s Series A andor C common stock, substantially all of which vest over three to four years based on continuous service and whether the Company achieves certain operating performance targets. The performance targets for substantially all PRSUs are cumulative measures of the Company’s adjusted operating income before depreciation and amortization (as defined in Note 21)23), free cash flows and revenues over a three yearthree-year period. The number of PRSUs that vest principally range from 0% to 100% based on a sliding scale where achieving or exceeding the performance target will result in 100% of the PRSUs vesting and achieving less than 80% of the target will result in no portion of the PRSUs vesting. Additionally, for certain PRSUs, the Company’s Compensation Committee has discretion in determining the final amount of units that vest, but may not increase the amount of any PRSU award above 100%. Upon vesting, each PRSU becomes convertible into one share of the Company’s Series A or Series C common stock as applicable. Holders of PRSUs do not receive payments of dividends in the event the Company pays a cash dividend until such PRSUs are converted into shares of the Company’s common stock.
As of December 31, 2021, there was no unrecognized compensation cost related to PRSUs.
RSUs
The Company records compensation expense for PRSUs ratably overtable below presents RSU activity (in millions, except years and weighted-average grant price).

RSUs		Weighted-
Average
Grant
Date Fair Value		Weighted-Average
Remaining
Contractual
Term
(years)		Aggregate
Fair
Value
Outstanding as of December 31, 20208.6 $26.31 2.8$259 
Granted3.2 $51.20 
Vested(3.0)$26.30 $152 
Forfeited(0.7)$31.29 
Outstanding as of December 31, 20218.1 $35.56 2.3$192 
Vested and expected to vest as of December 31, 20218.1 $35.56 2.3$192 
RSUs represent the graded vesting service period once it is probable that the performance targets will be achieved. In any period in which the Company determines that achievementcontingent right to receive shares of the performance targets is not probable, the Company ceases recording compensation expense and all previously recognized compensation expense for the award is reversed.
Compensation expense is separately recorded for each vesting tranche of PRSUs for a particular grant. For certain PRSUs, the Company measures the fair value and related compensation cost based on the closing price of the Company’sCompany's Series A or C common stock, substantially all of which vest ratably each year over periods of one to four years based on the grant date. For PRSUs forcontinuous service. As of December 31, 2021, there was $233 million of unrecognized compensation cost related to RSUs, of which the Company’s Compensation Committee has discretion in determining the final amount$47 million is related to cash settled RSUs. Stock settled RSUs are expected to be recognized over a weighted-average period of units that vest1.0 years and cash settled RSUs are expected to be recognized over a weighted-average period of 2.5 years.
103
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Options
The table below presents stock option activity (in millions, except years and weighted-average exercise price).
Stock OptionsWeighted-
Average
Exercise
Price		Weighted-
Average
Remaining
Contractual
Term
(years)		Aggregate
Intrinsic
Value
Outstanding as of December 31, 202021.0 $29.00 4.0$41 
Granted15.5 $40.25 
Exercised(5.9)$27.84 $145 
Forfeited(0.2)$31.77 
Outstanding as of December 31, 202130.4 $34.93 5.0$0.4 
Vested and expected to vest as of December 31, 202130.4 $34.93 5.0$0.4 
Exercisable as of December 31, 20213.1 $27.14 3.0$0.4 
Stock options are granted with an exercise price equal to or in situations where the executive is able to withhold taxes in excess of the minimum statutory requirement, compensation cost is remeasured at each reporting date based on the closing market price of the Company’s Series A or Series C common stock.
stock on the date of grant. Substantially all stock options vest ratably over three to four years from the grant date based on continuous service and expire seven to ten years from the date of grant. Stock option awards generally provide for accelerated vesting upon retirement or after reaching a specified age and years of service. The Company received cash payments from the exercise of stock options totaling $159 million, $8 million and $17 million during 2021, 2020 and 2019, respectively. As of December 31, 2017,2021, there was $226 million of unrecognized compensation cost net of forfeitures, related to PRSUs was $21 million,stock options, which is expected to be recognized over a weighted-average period of 1.6 years based on2.5 years.
The fair value of stock options is estimated using the Company’s current assessmentBlack-Scholes option-pricing model. The weighted-average assumptions used to determine the fair value of stock options as of the PRSUs that will vest, which may differ from actual results.date of grant during 2021, 2020 and 2019 were as follows.
Year Ended December 31,
202120202019
Risk-free interest rate1.03 %0.89 %2.67 %
Expected term (years)5.95.05.5
Expected volatility42.45 %31.86 %30.44 %
Dividend yield— — — 
The weighted-average grant date fair value of options granted during 2021, 2020 and 2019 was $14.08, $7.57 and $8.43, respectively, per option. The total intrinsic value of options exercised during 2021, 2020 and 2019 was $145 million, $3 million and $4 million, respectively.
SARs
The table below presents SAR award activity (in millions, except years and weighted-average grant price).
  SARs 
Weighted-
Average
Grant
Price
 
Weighted-
Average
Remaining
Contractual
Term
(years)
 
Aggregate
Intrinsic
Value
Outstanding as of December 31, 2016 8.6
 $35.29
    
Granted 3.0
 $27.39
    
Settled (0.6) $25.72
   $1
Forfeited (3.3) $38.60
    
Outstanding as of December 31, 2017 7.7
 $31.58
 1.0 $—
Vested and expected to vest as of December 31, 2017 7.7
 $31.58
 1.0 $—
SARsWeighted-
Average
Grant
Price		Weighted-
Average
Remaining
Contractual
Term
(years)		Aggregate
Intrinsic
Value
Outstanding as of December 31, 20202.6 $24.01 0.5$12 
Settled(1.7)$24.87 $11 
Outstanding as of December 31, 20210.9 $22.46 0.1$1 
Vested and expected to vest as of December 31, 20210.9 $22.46 0.1$1 
SAR award grants include cash-settled SARs and stock-settled SARs. Cash-settled SARs entitle the holder to receive a cash payment for the amount by which the price of the Company’s Series A or Series C common stock exceeds the base price established on the grant date. Cash-settled SARs are granted with a base price equal to or greater than the closing market price of the Company’s Series A or Series C common stock on the date of grant. Stock-settled SARs entitle the holder to shares of Series A or Series C common stock in accordance with the award agreement terms.
104
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of outstanding SARs is estimated using the Black-Scholes option-pricing model. The weighted-average assumptions used to determine the fair value of outstanding SARs were as follows.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


  Year Ended December 31,
  2017 2016 2015
Risk-free interest rate 1.74% 0.95% 0.83%
Expected term (years) 1.0
 0.9
 0.9
Expected volatility 31.37% 29.46% 31.59%
Dividend yield —
 —
 —
Year Ended December 31,
202120202019
Risk-free interest rate0.22 %0.10 %1.60 %
Expected term (years)0.10.50.8
Expected volatility41.12 %42.13 %30.54 %
Dividend yield— — — 
As of December 31, 20172021 and 2016,2020, the weighted-average fair value of SARs outstanding was $1.01$1.77 and $1.79$5.48 per award. The Company made cash payments of $1$8 million, $5$11 million, and $11$2 million to settle exercised SARs during 2017, 20162021, 2020, and 2015,2019 respectively. As of December 31, 2017, there was $4 million of2021, unrecognized compensation cost net of actual forfeitures, related to SARs which is expected to be recognized over a weighted-average period of 0.9 years.was immaterial.
Employee Stock Purchase Plan
The ESPP enables eligible employees to purchase shares of the Company’s common stock through payroll deductions or other permitted means. Unless otherwise determined by the Company’s Compensation Committee, the purchase price for shares offered under the ESPP is 85% of the closing price of the Company’s Series A common stock on the purchase date. The Company recognizes the fair value of the discount associated with shares purchased in selling, general and administrative expense on the consolidated statement of operations. The Company’s Board of Directors has authorized 98 million shares of the Company’s common stock to be issued under the ESPP. During the years ended December 31, 2017, 20162021, 2020 and 20152019 the Company issued 179203 thousand, 191254 thousand and 208142 thousand shares under the ESPP, respectively, and received cash totaling $4$6 million, $4$5 million and $5$3 million, respectively.
Unit Awards
Unit awards represented the contingent right to receive a cash payment for the amount by which the vesting price exceeded the grant price. Because unit awards were cash-settled, the Company remeasured the fair value and compensation expense of outstanding unit awards each reporting date until settlement. During the year ended December 31, 2015, the Company made cash payments of $14 million to settle all 1.2 million remaining unit awards, which had a weighted-average grant price of $20.59.
NOTE 14.16. RETIREMENT SAVINGS PLANS
The Company has defined contribution, defined benefit, and other savings plans for the benefit of its employees that meet eligibility requirements.
Defined Contribution Plans
Eligible employees may contribute a portion of their compensation to the plans, which may be subject to certain statutory limitations. For these plans, the Company also makes contributions, including discretionary contributions, subject to plan provisions, which vest immediately. The Company made total contributions of $30$50 million,, $29 $47 million and $36$37 million during 2017, 2016 for the years ended December 31, 2021, 2020 and 2015,2019, respectively. The Company's contributions were recorded in cost of revenues and selling, general and administrative expense in the consolidated statements of operations.
Executive Deferred Compensation Plans
The Company’s savings plans includeCompany has a deferred compensation plan through which members of the Company’s executive team in the U.S. may elect to defer up to 50%a portion of their eligible compensation. The amounts deferred are invested in various mutual funds at the direction of the executive, which are used to finance payment of the deferred compensation obligation. Distributions from the deferred compensation plan are made upon termination or other events as specified in the plan. The Company has established a separate trustrabbi trusts to hold the investments that finance the deferred compensation obligation. The accounts of the separate trustrabbi trusts are included in the Company’s consolidated financial statements. The investments are included in prepaid expenses and other current assets and other noncurrent assets in the consolidated balance sheets. The deferred compensation obligation is included in accrued liabilities and other noncurrent liabilities in the consolidated balance sheets. The values of the investments and deferred compensation obligation are recorded at fair value. Changes in the fair value of the investments are offset by changes in the fair value of the deferred compensation obligation.obligation and are recorded in earnings as a component of other income (expense), net, on the consolidated statements of operations. (See Note 5.5 and Note 20.)

105
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Defined Benefit Plans
The Company has a defined benefit pension plan (“Pension Plan”) that covers certain U.S. based employees and a non-qualified unfunded Supplemental Executive Retirement Plan (“SERP”) that provides defined pension benefits to eligible executives. Expense recognized in relation to the Pension Plan and SERP is based upon actuarial valuations. Inherent in those valuations are key assumptions including discount rates and, where applicable, expected returns on assets. Discount rates are based on a bond portfolio approach that includes high-quality debt instruments with maturities matching the Company's expected benefit payments from the plans. Expected returns on assets are based on the weighted-average expected rate of return and capital market forecasts for each asset class employed and also consider the Company's historical compounded return on plan assets for 10 and 15-year periods. Benefits are generally based on the employee’s compensation and years of service. Since December 31, 2009, no additional service benefits have been earned by participants under the Pension Plan. The amount of eligible compensation that is used to calculate a plan participant’s pension benefit includes compensation earned by the employee through December 31, 2019, after which time all plan participants have a frozen pension benefit. Net periodic pension cost was not material for the years ended December 31, 2021, 2020 and 2019.
The projected benefit obligation, fair value of plan assets and discount rate used in determining the projected benefit obligations were as follows (in millions).
Pension PlanSERP
December 31,
2021202020212020
Projected benefit obligation$82 $94 $22 $25 
Fair value of plan assets (Level 1)$63 $70 $— $— 
Discount rate2.42 %1.92 %2.13 %1.58 %
NOTE 15.17. RESTRUCTURING AND OTHER CHARGES
Restructuring and other charges by reportable segment and corporate, inter-segment eliminations, and other were as follows (in millions).
  Year Ended December 31,
  2017 2016 2015
U.S. Networks $18
 $15
 $33
International Networks 42
 26
 14
Education and Other 3
 3
 2
Corporate 12
 14
 1
Total restructuring and other charges $75
 $58
 $50

  Year Ended December 31,
  2017 2016 2015
Restructuring charges $68
 $55
 $29
Other charges 7
 3
 21
Total restructuring and other charges $75
 $58
 $50
Year Ended December 31,
202120202019
U.S. Networks$4 $41 $15 
International Networks26 29 20 
Corporate, inter-segment eliminations, and other2 21 (9)
Total restructuring and other charges$32 $91 $26 
Restructuring charges for the years ended December 31, 2021, 2020 and 2019 primarily include management changescharges related to employee relocation and termination costs and other cost reduction efforts,efforts. During 2020, the Company implemented various cost-savings initiatives including employee terminations,personnel reductions, restructurings and resource reallocations to align its expense structure to ongoing changes within the industry, including economic challenges resulting from the COVID-19 pandemic. These actions were intended to enable the Company to more efficiently operate in a leaner and more directed cost structure and invest in growth initiatives, including digital services and content creation. Other charges during 2015 result from content impairments primarily at the Company's U.S. Networks segment due to the cancellation of certain series as a result of legal circumstances pertaining to the associated talent. (See Note 6.)continued throughout 2021.
106
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in restructuring and other liabilities recorded in accrued liabilities by major category and by reportable segment and corporate, inter-segment eliminations, and other were as follows (in millions).
U.S. NetworksInternational NetworksCorporate, inter-segment eliminations, and otherTotal
December 31, 2019$4 $5 $9 $18 
Net contract termination accruals— — 4 4 
Employee termination accruals, net41 29 13 83 
Other accruals, net— — 4 4 
Cash paid(22)(14)(15)(51)
December 31, 202023 20 15 58 
Employee termination accruals, net4 26 2 32 
Cash paid(23)(33)(15)(71)
December 31, 2021$4 $13 $2 $19 
  
Contract
Terminations
 
Employee
Relocations/
Terminations
 Total
December 31, 2014 $4
 $15
 $19
Net accruals 3
 26
 29
Cash paid (5) (20) (25)
December 31, 2015 2
 21
 23
Net accruals 3
 52
 55
Cash paid (2) (37) (39)
December 31, 2016 3
 36
 39
Net accruals 3
 65
 68
Cash paid (5) (59) (64)
December 31, 2017 $1
 $42
 $43
NOTE 16.18. INCOME TAXES
The domestic and foreign components of income before income taxes were as follows (in millions).
 Year Ended December 31,
 202120202019
Domestic$1,598 $1,916 $1,910 
Foreign(165)(188)384 
Income before income taxes$1,433 $1,728 $2,294 
  Year Ended December 31,
  2017 2016 2015
Domestic $815
 $1,414
 $1,281
Foreign (952) 257
 278
Income before income taxes $(137) $1,671
 $1,559

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The components of the provision for income taxes were as follows (in millions).
 Year Ended December 31,
 202120202019
Current:
Federal$451 $422 $411 
State and local130 12 42 
Foreign166 125 132 
747 559 585 
Deferred:
Federal(250)(14)(54)
State and local6 (24)(8)
Foreign(267)(148)(442)
(511)(186)(504)
Income taxes$236 $373 $81 
107
  Year Ended December 31,
  2017 2016 2015
Current:      
Federal $177
 $384
 $306
State and local 45
 (56) 57
Foreign 153
 152
 146
  375
 480
 509
Deferred:      
Federal (124) 45
 59
State and local (7) —
 (10)
Foreign (68) (72) (47)
  (199) (27) 2
Income taxes $176
 $453
 $511

On December 22, 2017, new federal tax reform legislation was enacted in the United States, resulting in significant changes from previous tax law. The TCJA revised the U.S. corporate income tax by among other things, lowering the statutory corporate tax rate from 35% to 21% and reinstating bonus depreciation that will allow for full expensing of qualified property, for property placed in service before 2023, including qualified film. The TCJA also eliminated or significantly amended certain deductions (interest, domestic production activities deduction and executive compensation). The TCJA fundamentally changed taxation of multinational entities by moving from a system of worldwide taxation with deferral to a hybrid territorial system, featuring a participation exemption regime with current taxation of certain foreign income. Included in the international provisions was the enactment of a minimum tax on low-taxed foreign earnings, and new measures to deter base erosion and promote U.S. production. In addition, the TCJA imposed a mandatory repatriation toll tax on unremitted foreign earnings. Notwithstanding the U.S. taxation of these amounts, we intend to continue to invest most or all of these earnings, as well as our capital in these subsidiaries, indefinitely outside of the U.S. and do not expect to incur any significant, additional taxes related to such amounts.
To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements and the TCJA provides a measurement period that should not extend beyond one year from the TCJA enactment date. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the tax laws that were in effect immediately before the enactment of the TCJA. Although not effective until January 1, 2018, the Company has calculated its best estimate of the TCJA impact in its year end income tax provision and as a result has recorded $44 million as an income tax benefit. Our federal income tax expense for periods beginning in 2018 will be based on the new rate. The mandatory repatriation toll charge resulted in a tax expense which was mostly offset by available foreign tax credits. We have recorded provisional amounts for several of the impacts of the new tax law including: the deemed repatriation tax on post-1986 accumulated earnings and profits, the deferred tax rate change effect of the new law, gross foreign tax credit carryforwards and related valuation allowances to offset foreign tax credit carryforwards. Certain items or estimates that result in impacts of the TCJA being provisional include: detailed foreign earnings calculations for the most recent period, projected foreign cash balances for certain foreign subsidiaries and finalized computations of foreign tax credit availability. In addition, our 2017 US federal income tax return will not be finalized until later in 2018, and while historically this process has resulted in offsetting changes in estimates in current and deferred taxes for items which are timing related, the reduction of the US tax rate will result in adjustments to our income tax provision when recorded. Finally, we consider it likely that further technical guidance regarding certain of the new provisions included in the TCJA, as well as clarity regarding state income tax conformity to current federal tax code, may be issued. We have reported provisional amounts for the income tax effects of the TCJA for which the accounting is incomplete but a reasonable estimate could be determined. Based on a continued analysis of the estimates and further guidance and interpretations on the application of the law, additional revisions may occur throughout the allowable measurement period.


DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The following table reconciles the Company's effective income tax raterates to the U.S. federal statutory income tax rate of 35%.    
  Year Ended December 31,
  2017 2016 2015
U.S. federal statutory income tax rate 35 % 35 % 35 %
State and local income taxes, net of federal tax benefit (18)% (2)% 2 %
Effect of foreign operations 25 % (1)% 1 %
Domestic production activity deductions 39 % (4)% (3)%
Change in uncertain tax positions (44)% — % (1)%
Preferred stock modification (9)% — % — %
Goodwill impairment (334)% — % — %
Renewable energy investments tax credits 142 % (1)% — %
Impact of Tax Reform Act 32 % — % — %
Other, net 4 % — % (1)%
Effective income tax rate (128)% 27 % 33 %
rates.
Year Ended December 31,
202120202019
Pre-tax income at U.S. federal statutory income tax rate$301 21 %$363 21 %$482 21 %
State and local income taxes, net of federal tax benefit108 7 %(10)— %27 1 %
Effect of foreign operations25 2 %58 3 %(21)(1)%
UK Finance Act legislative change(155)(11)%(51)(3)%— — %
Noncontrolling interest adjustment(40)(3)%(29)(2)%(30)(1)%
Change in uncertain tax positions12 1 %17 1 %3 — %
Impairment of goodwill— — %25 2 %32 1 %
Deferred tax adjustment— — %(22)(1)%— — %
Legal entity restructuring, deferred tax impact— — %— — %(445)(19)%
Other, net(15)(1)%22 1 %33 2 %
Income tax expense$236 16 %$373 22 %$81 4 %
Income tax expense was $176$236 million and $453$373 million, and ourthe Company's effective tax rate was (128)%16% and 27%22% for 20172021 and 2016,2020, respectively. During 2017, theThe decrease in income tax expense for the effective tax rateyear ended December 31, 2021 was primarily attributable to the impact of a goodwill impairment charge that is non-deductible for tax purposes. Thereafter, the decrease in pre-tax book income and an increase in the effectivedeferred tax ratebenefit from the UK Finance Act 2021 that was primarily due to investment tax credits that we receive related to our renewable energy investments, and to a lesser extent, the domestic production activity deduction benefit, the allocation and taxation of income among multiple foreign and domestic jurisdictions, and the impact of the TCJA. The benefitsenacted in June 2021. Those decreases were partially offset by an increase in reservesthe state and local income tax expense recorded in 2021.
Income tax expense was $373 million and $81 million, and the Company's effective tax rate was 22% and 4% for 2020 and 2019, respectively. The increase in income tax expense for the year ended December 31, 2020 was primarily attributable to the discrete, one-time, non-cash deferred tax benefit of $445 million from legal entity restructurings that was recorded during the year ended December 31, 2019. Additionally, the increase in income tax expense was attributable to an increase in provision for uncertain tax positions and an increase in 2017. In 2016, we favorably resolvedthe effect of foreign operations. Those increases were partially offset by a decrease in pre-tax book income, a tax benefit from a favorable multi-year state resolution, and a favorable deferred tax positionsadjustment in the U.S. that resulted in a reduction of reserves related to uncertain tax positions that did not recur in 2017.was recorded during the year ended December 31, 2020.
Components of deferred income tax assets and liabilities were as follows (in millions).
 December 31,
 20212020
Deferred income tax assets:
Accounts receivable$8 $7 
Tax attribute carry-forward445 354 
Accrued liabilities and other548 471 
Total deferred income tax assets1,001 832 
Valuation allowance(305)(257)
Net deferred income tax assets696 575 
Deferred income tax liabilities:
Intangible assets(395)(654)
Content rights(138)(163)
Equity method and other investments in partnerships(413)(470)
Noncurrent portion of debt(87)(85)
Other(133)(140)
Total deferred income tax liabilities(1,166)(1,512)
Net deferred income tax liabilities$(470)$(937)
108
  December 31,
  2017 2016
Deferred income tax assets:    
Accounts receivable $5
 $2
Tax attribute carry-forward 151
 67
Accrued liabilities and other 190
 174
Total deferred income tax assets 346
 243
Valuation allowance (105) (25)
Net deferred income tax assets 241
 218
Deferred income tax liabilities:    
Intangible assets (315) (384)
Content rights (82) (166)
Equity method investments (68) (76)
Notes receivable (3) (7)
Other (28) (32)
Total deferred income tax liabilities (496) (665)
Net deferred income tax liabilities $(255) $(447)

DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Company’s net deferred income tax assets and liabilities were reported on the consolidated balance sheets as follows (in millions).
 December 31,
 20212020
Noncurrent deferred income tax assets (included within other noncurrent assets)$755 $597 
Deferred income tax liabilities(1,225)(1,534)
Net deferred income tax liabilities$(470)$(937)
  December 31,
  2017 2016
Noncurrent deferred income tax assets (included within other noncurrent assets)

 $64
 $20
Deferred income tax liabilities (classified on the balance sheet) (319) (467)
Net deferred income tax liabilities $(255) $(447)
The Company’s loss carry-forwards were reported on the consolidated balance sheets as follows (in millions).
FederalStateForeign
Loss carry-forwards$9 $418 $1,528 
Deferred tax asset related to loss carry-forwards2 20 367 
Valuation allowance against loss carry-forwards— (17)(192)
Earliest expiration date of loss carry-forwards203420222022
  State Foreign
Loss carry-forwards $176
 $1,109
Deferred tax asset related to loss carry-forwards 12
 61
Valuation allowance against loss carry-forwards (11) (17)
Earliest expiration date of loss carry-forwards 2018
 2018
A reconciliation of the beginning and ending amounts of unrecognized tax benefits (without related interest and penalty amounts) is as follows (in millions).
 Year Ended December 31,
 202120202019
Beginning balance$348 $375 $378 
Additions based on tax positions related to the current year68 31 54 
Additions for tax positions of prior years64 4 11 
Additions for tax positions acquired in business combinations— — 47 
Reductions for tax positions of prior years(27)(5)(47)
Settlements(5)(9)(19)
Reductions due to lapse of statutes of limitations(25)(51)(50)
Changes due to foreign currency exchange rates(3)3 1 
Ending balance$420 $348 $375 
  Year Ended December 31,
  2017 2016 2015
Beginning balance $117
 $173
 $176
Additions based on tax positions related to the current year 27
 13
 30
Additions for tax positions of prior years 57
 19
 17
Additions for tax positions acquired in business combinations —
 —
 3
Reductions for tax positions of prior years —
 (60) (21)
Settlements (8) (16) (16)
Reductions due to lapse of statutes of limitations (6) (9) (13)
Changes due to foreign currency exchange rates 2
 (3) (3)
Ending balance $189
 $117
 $173
The balances as of December 31, 2017, 20162021, 2020 and 20152019 included $189$420 million,, $117 $348 million and $173$375 million,, respectively, of unrecognized tax benefits that, if recognized, would reduce the Company’s income tax expense and effective tax rate after giving effect to interest deductions and offsetting benefits from other tax jurisdictions. For the year ended December 31, 2017,2021, increases in unrecognized tax benefits related to the uncertainty of allocation and taxation of income among multiple jurisdictions waspartially offset by the movements of tax positions as a result of multiple audit resolutions and the lapse of statutes of limitations.
The Company and its subsidiaries file income tax returns in the U.S. and various state and foreign jurisdictions. The Internal Revenue Service recently completed audit procedures for its 2008 to 2011 tax years, the results of which should be finalized in the coming year. The Company is currently under audit by the Internal Revenue Service for its 2012 to 20142019 consolidated federal income tax returns. It is difficult to predict the final outcome or timing of resolution of any particular tax matter. Accordingly, an estimate of any related impact to the reserve for uncertain tax positions cannot currently be determined. With few exceptions, the Company is no longer subject to audit by any jurisdiction for years prior to 2006. Adjustments that arose from the completion of audits for certain tax years have been included in the change in uncertain tax positions in the table above.
It is reasonably possible that the total amount of unrecognized tax benefits related to certain of the Company's uncertain tax positions could decrease by as much as $53$125 million within the next twelve months as a result of ongoing audits, foreign judicial proceedings, lapses of statutes of limitations or regulatory developments.
As of December 31, 2017, 20162021, 2020 and 2015,2019, the Company had accrued approximately $21$60 million, $11$53 million, and $20$58 million, respectively, of total interest and penalties payable related to unrecognized tax benefits. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

109
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 17.19. EARNINGS PER SHARE
In calculating earnings per share, the Company follows the two-class method, which distinguishes between the classes of securities based on the proportionate participation rights of each security type in the Company's undistributed (loss) income. The Company's Series A, B and C common stock is treated as one class and the Series C-1 convertible preferred stock areis treated as onea separate class for purposes of applying the two-class method, because they havemethod. The Company's Series C-1 convertible preferred stock is an in-substance common stock equivalent as it has substantially equal rights and shareshares equally on an as convertedas-converted basis with respect to (loss) income available to Discovery, Communications, Inc.
Pursuant to The Company's Series A-1 convertible preferred stock is also a separate class but is not considered a common stock equivalent and therefore is not presented separately in the Exchange Agreement with Advance/Newhouse, Discovery issued newly designatedcalculation of earnings per share. Series A-1 convertible preferred stock is currently convertible into 9 shares of the Company's Series A-1A common stock and Series C-1 convertible preferred stock in exchange for all outstandingis convertible into 19.3648 shares of Discovery's Series A andthe Company's Series C convertible participating preferredcommon stock, (see Note 12). The Exchange is treated as a reverse stock splitsubject to certain anti-dilution adjustments. During the years ended December 31, 2021, 2020 and the Company has recast historical basic and diluted earnings per share available to2019, no Series C-1 preferred stockholders (previously Series C preferred stockholders). Prior to the Exchange Agreement, Series CA-1 convertible preferred stock was converted. During the years ended December 31, 2021 and 2019, Advance Newhouse Programming Partnership converted 0.6 million and 1.1 million shares of its Series C-1 convertible preferred stock into Series C common stock at a conversion rate of 2.011.0 million and 22.0 million shares of Series C common stock, for each shares ofrespectively. No Series CC-1 convertible preferred stock. Followingstock was converted during the Exchange, the Series C-1 preferred stock may be converted into Series C common stock at a conversion rate of 19.3648 shares of Series C common stock for each share of Series C-1 preferred stock. As such, the Company has retrospectively restated basic and diluted earnings per share information for Discovery's Series C-1 preferred stock for the yearsyear ended December 31, 2016 and December 31, 2015. The Exchange did not impact historical basic and diluted earnings per share attributable to the Company's Series A, B and C common stockholders.    
The table below sets forth the computation for (loss) income available to Discovery Communications, Inc. stockholders (in millions).
  Year Ended December 31,
  2017 2016 2015
Numerator:      
Net (loss) income $(313) $1,218
 $1,048
Less:      
Allocation of undistributed income to Series A-1 convertible preferred stock 41
 (139) (113)
Net income attributable to noncontrolling interests —
 (1) (1)
Net income attributable to redeemable noncontrolling interests (24) (23) (13)
Net (loss) income available to Discovery Communications, Inc. Series A, B and C common and Series C-1 convertible preferred stockholders for basic net income per share $(296) $1,055
 $921
       
Allocation of net (loss) income available to Discovery Communications Inc. Series A, B and C common stockholders and Series C-1 convertible preferred stockholders for basic net (loss) income per share:      
Series A, B and C common stockholders (225) 789
 686
Series C-1 convertible preferred stockholders (71) 266
 235
Total (296) 1,055
 921
Add:      
Allocation of undistributed income to Series A-1 convertible preferred stockholders (41) 139
 113
Net (loss) income available to Discovery Communications, Inc. Series A, B and C common stockholders for diluted net (loss) income per share $(337) $1,194
 $1,034
2020.
Net (loss) income availableallocated to Discovery, Communications, Inc. Series C-1 convertible preferred stockholders for diluted net (loss) income per share is included in net (loss) income availableallocated to Discovery, Communications, Inc. Series A, B and C common stockholders for diluted net (loss) income per share. For the year ended December 31, 2017 net loss available to Discovery Communications, Inc. Series C-1 convertible preferred stockholders for diluted loss per share was $71 million. For the years ended December 31, 2016 and December 31, 2015 net income available to Discovery Communications, Inc. Series C-1 convertible preferred stockholders for diluted earnings per share was $265 million and $234 million, respectively.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The table below sets forth the weighted average number of shares outstanding utilized in determining the denominator for basic and diluted (loss) earnings per share (in millions).

  Year Ended December 31,
  2017 2016 2015
Denominator - weighted average:      
Series A, B and C common shares outstanding — basic

 384
 401
 432
Impact of assumed preferred stock conversion

 192
 206
 219
Dilutive effect of share-based awards —
 3
 5
Series A, B and C common shares outstanding — diluted

 576
 610
 656
       
Series C-1 convertible preferred stock outstanding — basic and diluted

 6
 7
 8
The weighted average number of diluted shares outstanding adjusts the weighted average number of shares of Series A, B and C common stock outstanding 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, calculated using the treasury stock method. Series A, B and C diluted common stock includes the impact of the conversion of Series A-1 preferred stock, the impact of the conversion of Series C-1 preferred stock, and the impact of share-based compensation to the extent it is not anti-dilutive. For 2017, the weighted average number of shares outstanding for the computation of diluted loss per share does not include 2 million of share-based awards, as the effects of these potentially outstanding shares would have been anti-dilutive. Prior to the Exchange, Series C convertible preferred stock was convertible into Series C common stock at a conversion rate of 2.0 shares of Series C common stock for each share of Series C convertible preferred stock. Following the exchange, the Series C-1 preferred stock may be converted into Series C common stock at a conversion rate of 19.3648 shares of Series C common stock for each shares of Series C-1 preferred stock.
The table below sets forth the Company's calculated (loss) earnings per share.
  Year Ended December 31,
  2017 2016 2015
Basic net (loss) income per share available to Discovery Communications, Inc. Series A, B and C common and Series C-1 convertible preferred stockholders:      
     Series A, B and C common stockholders $(0.59) $1.97
 $1.59
     Series C-1 convertible preferred stockholders $(11.33) $38.07
 $30.74
       
Diluted net (loss) income per share available to Discovery Communications, Inc. Series A, B and C common and Series C-1 convertible preferred stockholders:      
     Series A, B and C common stockholders $(0.59) $1.96
 $1.58
     Series C-1 convertible preferred stockholders $(11.33) $37.88
 $30.54
(Loss) earnings per share amounts may not recalculate due to rounding. The computation of the diluted (loss) earnings per share of Series A, B and C common stockholders assumes the conversion of Series A-1 and C-1 convertible preferred stock, while the diluted earnings per share amounts of Series C-1 convertible preferred stock does not assume conversion of those shares.
110
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The table below sets forth the Company's calculated earnings per share (in millions). Earnings per share amounts may not recalculate due to rounding.
Year Ended December 31,
202120202019
Numerator:
Net income$1,197 $1,355 $2,213 
Less:
Allocation of undistributed income to Series A-1 convertible preferred stock(110)(128)(204)
Net income attributable to noncontrolling interests(138)(124)(128)
Net income attributable to redeemable noncontrolling interests(53)(12)(16)
Redeemable noncontrolling interest adjustments of carrying value to redemption value (redemption value does not equal fair value)16 — (20)
Net income available to Discovery, Inc. Series A, B and C common and Series C-1 convertible preferred stockholders for basic net income per share$912 $1,091 $1,845 
Allocation of net income:
Series A, B and C common stockholders780 919 1,531 
Series C-1 convertible preferred stockholders132 172 314 
Total912 1,091 1,845 
Add:
Allocation of undistributed income to Series A-1 convertible preferred stockholders110 128 204 
Net income available to Discovery, Inc. Series A, B and C common stockholders for diluted net income per share$1,022 $1,219 $2,049 
Denominator — weighted average:
Series A, B and C common shares outstanding — basic503 505 529 
Impact of assumed preferred stock conversion156 165 179 
Dilutive effect of share-based awards5 2 3 
Series A, B and C common shares outstanding — diluted664 672 711 
Series C-1 convertible preferred stock outstanding — basic and diluted4 5 6 
Basic net income per share allocated to:
Series A, B and C common stockholders$1.55 $1.82 $2.90 
Series C-1 convertible preferred stockholders$30.01 $35.24 $56.07 
Diluted net income per share allocated to:
Series A, B and C common stockholders$1.54 $1.81 $2.88 
Series C-1 convertible preferred stockholders$29.80 $35.12 $55.80 
The table below presents the details of the anticipated stock repurchases and share-based awards and that were excluded from the calculation of diluted (loss) earnings per share (in millions).
Year Ended December 31,
202120202019
Anti-dilutive share-based awards17 24 17 
111
  Year Ended December 31,
  2017 2016 2015
Anti-dilutive share-based awards 19
 8
 6
PRSUs whose performance targets have not yet been achieved 2
 4
 3
Anti-dilutive common stock repurchase contracts —
 2
 —

DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Only outstanding PRSUs whose performance targets have been achieved as of the last day of the most recent period are included in the dilutive effect calculation.
NOTE 18.20. SUPPLEMENTAL DISCLOSURES
ValuationProperty and Qualifying Accountsequipment
Changes in valuationProperty and qualifying accountsequipment consisted of the following (in millions).
 December 31,
 Useful Lives20212020
Broadcast equipment (a)
3 - 5 years$672 $744 
Office equipment, furniture, fixtures and other3 - 5 years467 510 
Capitalized software costs2 - 5 years904 696 
Land, buildings and leasehold improvements (b)
15- 39 years481 334 
Property and equipment, at cost2,524 2,284 
Accumulated depreciation(1,329)(1,363)
1,195 921 
Assets under construction141 285 
Property and equipment, net$1,336 $1,206 
(a) Property and equipment includes assets acquired under finance lease arrangements, primarily satellite transponders classified as broadcast equipment. Assets acquired under finance lease arrangements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the terms of the related leases. (See Note 9.)
(b) Land has an indefinite life and is not depreciated. Leasehold improvements generally have an estimated useful life equal to the lease term.
  
Beginning
of Year
 Additions Write-offs Utilization 
End
of Year
2017          
Allowance for doubtful accounts $47
 $12
 $(4) $—
 $55
Deferred tax valuation allowance 25
 84
 (4) —
 105
2016          
Allowance for doubtful accounts 40
 13
 (6) —
 47
Deferred tax valuation allowance 19
 9
 (3) —
 25
2015          
Allowance for doubtful accounts 39
 8
 (7) —
 40
Deferred tax valuation allowance 13
 6
 —
 —
 19
Capitalized software costs are for internal use. The net book value of capitalized software costs was $371 million and $247 million as of December 31, 2021 and 2020, respectively. The related accumulated amortization was $533 million and $448 million as of December 31, 2021 and 2020, respectively.
Depreciation expense for property and equipment totaled $311 million,$267 million and $207 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Accrued Liabilities
Accrued liabilities consisted of the following (in millions).:
December 31,
20212020
Accrued payroll and related benefits$533 $494 
Content rights payable772 528 
Other accrued liabilities925 771 
Total accrued liabilities$2,230 $1,793 
112
 December 31,
 2017 2016
Accrued payroll and related benefits$535
 $486
Content rights payable219
 173
Accrued interest148
 67
Accrued income taxes45
 34
Current portion of share-based compensation liabilities12
 31
Other accrued liabilities350
 284
Total accrued liabilities$1,309
 $1,075
DISCOVERY, INC.
Other (Expense) Income, netNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other income (expense), net
Other income (expense), net, consisted of the following (in millions).
  Year Ended December 31,
  2017 2016 2015
Foreign currency (losses) gains, net $(83) $75
 $(103)
(Losses) gains on derivative instruments, net (82) (12) 5
Remeasurement gain on previously held equity interest 33
 —
 2
Interest income(a)
 21
 —
 —
Other-than-temporary impairment of AFS investments —
 (62) —
Other 1
 3
 (1)
Total other (expense) income, net $(110) $4
 $(97)
(a) Interest income for 2017 is comprised of interest on proceeds from issuance of senior notes to fund the anticipated Scripps Networks acquisition. Of the $6.8 billion in senior notes issued, $2.7 billion were invested in money market funds, $1.3 billion were invested in time

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


deposit accounts, and the remainder was invested in highly liquid, short-term instruments with original maturities of 90 days or less. (See Note 4 and Note 9.)
Share-Based Plan Payments, net
Share-based plan payments, net in the statement of cash flows consisted of the following (in millions). (a)
  Year Ended December 31,
  2017 2016 2015
Tax settlements associated with share-based plans $(30) $(11) $(27)
Proceeds from issuance of common stock in connection with share-based plans 46
 50
 21
Total share-based plan payments, net $16
 $39
 $(6)
(a) Share-based plan payments, net includes the retrospective reclassification of windfall tax benefits or deficiencies from financing activities to operating activities in the statement of cash flows presentation pursuant to the adoption of the new guidance on share-based payments on January 1, 2017. There were $7 million and $12 million in net windfall tax adjustments for the years ended December 31, 2016 and December 31, 2015, respectively, reclassified from financing activities to operating activities. (See Note 2.):
 Year Ended December 31,
 202120202019
Foreign currency gains (losses), net$93 $(115)$17 
(Losses) gains on derivative instruments, net(33)29 (52)
Interest income18 10 22 
Gain on sale of investment with readily determinable fair value15 101 — 
Change in the value of equity investments without readily determinable fair value(13)— — 
Change in the value of investments with readily determinable fair value(6)28 (26)
Expenses from debt modification— (11)— 
Other income, net8 — 31 
Total other income (expense), net$82 $42 $(8)
Supplemental Cash Flow Information
Year Ended December 31,
202120202019
Cash paid for taxes, net$643 $641 $562 
Cash paid for interest664 673 708 
Non-cash investing and financing activities:
Receivable from sale of fuboTV Inc. shares— 124 — 
Disposal of UKTV investment and acquisition of Lifestyle Business— — 291 
Accrued purchases of property and equipment34 48 47 
Assets acquired under finance lease and other arrangements134 91 38 
Equity exchange with Harpo for step acquisition of OWN— 59 — 
Unsettled stock repurchases— — 4 
Cash, Cash Equivalents, and Restricted Cash
 December 31, 2021December 31, 2020
Cash and cash equivalents$3,905 $2,091 
Restricted cash - other current assets (a)
— 31 
Total cash, cash equivalents, and restricted cash$3,905 $2,122 
(a) Restricted cash includes cash posted as collateral related to forward starting interest rate swap contracts.
  Year Ended December 31,
  2017 2016 2015
Cash paid for taxes, net(a)
 $274
 $527
 $653
Cash paid for interest 357
 343
 312
Noncash investing and financing activities:      
Contributions of business and assets of strategic ventures      
Fair value of assets and liabilities of business received in exchange for redeemable noncontrolling interests (b)
 144
 —
 —
     Fair value of investment received, net of cash paid —
 82
 —
     Net asset value of contributed business —
 32
 —
Contingent consideration obligations from business acquisitions —
 —
 13
Accrued purchases of property and equipment 24
 42
 12
Contingent consideration receivable from business dispositions —
 —
 6
Assets acquired under capital lease arrangements 103
 37
 5
(a) The decrease in cash paid for taxes, net, is mostly due to the tax benefits from the Company's investments in limited liability companies that sponsor renewable energy projects. (See Note 4.)
(b) Amount relates to the Company's VTEN joint venture. (See Note 3.) The joint venture was affected via DCL's contribution of the Velocity network to a newly formed entity, VTEN, which is a non-guarantor subsidiary of the Company and is reflected as a non-cash contribution in the condensed consolidating financial statements. (See Note 23.)
The table above does not include the November 30, 2017 acquisition of a controlling interest in OWN from Harpo. The Company increased its ownership stake from 49.50% to 73.99%. The table above does not include the March 31, 2015 acquisition of an additional 31% interest in Eurosport France. The Company increased its ownership stake from 20% to 51%. Upon consolidation a cash payment for a portion of these businesses resulted in inclusion of the fair value of all of the net assets and liabilities of OWN and Eurosport France in Discovery's consolidated financial statements. (See Note 3.)





DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 19.21. RELATED PARTY TRANSACTIONS
In the normal course of business, the Company enters into transactions with related parties. Related parties include entities that share common directorship, such as Liberty Global plc (“Liberty Global”), Liberty Broadband Corporation ("Liberty Broadband") and their subsidiaries and equity method investees (together the “Liberty Group”). Discovery’s Board of Directors includes Mr. Malone, who is Chairman of the Board of Liberty Global and beneficially owns approximately 26%30% of the aggregate voting power with respect to the election of directors of Liberty Global. Mr. Malone is also Chairman of the Board of Liberty Broadband and beneficially owns approximately 46%49% of the aggregate voting power with respect to the election of directors of Liberty Broadband. The majority of the revenue earned from the Liberty Group relates to multi-year network distribution arrangements. Related party transactions also include revenues and expenses for content and services provided to or acquired from equity method investees such as All3Media and a Russian cable television business, or minority partners of consolidated subsidiaries, such as Hasbro. For the year ended December 31, 2017, related party transaction costs include expenses associated with the Exchange Agreement executed with Advance/Newhouse. subsidiaries.
113
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The table below presents a summary of the transactions with related parties including OWN prior to the November 30, 2017 acquisition (in millions).
  Year Ended December 31,
  2017 2016 2015
Revenues and service charges:      
Liberty Group(a)
 $476
 $387
 $171
Equity method investees(b)
 145
 129
 62
Other 46
 32
 35
Total revenues and service charges $667
 $548
 $268
Interest income(c)
 $13
 $17
 $23
Expenses $(178) $(102) $(67)
(a) The increase for the year ended December 31, 2017 reflects the May 2016 acquisition of Time Warner Cable, Inc. by Charter Communications, an equity method investee of the Liberty Group and other changes in the Liberty Group's businesses.
(b) The increases to revenue from equity method investees for the years ended December 31, 2017 and 2016 relate to the joint venture agreement with the New Russian Business which began in October 2015. (See Note 3.)
(c) The Company records interest earnings from loans to equity method investees as a component of income from equity method investees, net, in the consolidated statements of operations. (See Note 4.)
Year Ended December 31,
202120202019
Revenues and service charges:
Liberty Group$671 $686 $668 
Equity method investees253 223 210 
Other169 103 111 
Total revenues and service charges$1,093 $1,012 $989 
Interest income$— $— $1 
Expenses$(238)$(244)$(224)
Distributions to noncontrolling interests and redeemable noncontrolling interests$(251)$(254)$(250)
The table below presents receivablesamounts due from and to related parties (in millions).
December 31,
20212020
Receivables$172 $177 
Payables$23 $43 
  December 31,
  2017 2016
Receivables $105
 $109
Note receivable(a)
 —
 311
(a) The decrease for the year ended December 31, 2017 reflects the November 2017 acquisition of OWN by Discovery (See Note 3.) The receivable is recorded as a component of Discovery's consolidated financial statements.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 20.22. COMMITMENTS, CONTINGENCIES, AND CONTINGENCIESGUARANTEES
Contractual Commitments
AsIn the normal course of December 31, 2017,business, the Company’s significant contractual commitments, including related payments due by period, were as follows (in millions).
  Leases      
 Year Ending December 31, Operating Capital Content Other Total
2018 $61
 $48
 $1,075
 $332
 $1,516
2019 52
 36
 558
 241
 887
2020 36
 33
 750
 175
 994
2021 28
 30
 342
 54
 454
2022 17
 23
 350
 29
 419
Thereafter 36
 95
 771
 89
 991
Total minimum payments 230
 265
 3,846
 920
 5,261
Amounts representing interest —
 (40) —
 —
 (40)
Total $230
 $225
 $3,846
 $920
 $5,221
The Company enters into multi-year leasevarious commitments, which primarily include programming and talent arrangements, for transponders, office space, studio facilities,operating and other equipment. Leases are not cancelable priorfinance leases (See Note 9), arrangements to their expiration. On January 9, 2018, we issued a press release announcing a new real estate strategy with planspurchase various goods and services, and future funding commitments to relocate the Company's global headquarters from Silver Spring, Maryland to New York City in 2019. As of December 31, 2017, we did not meet the held for sale classification criteria, as defined in GAAP as it is uncertain that the sale of the Silver Spring property will be completed within the next twelve months.equity method investees.
Year Ending December 31,ContentOther Purchase ObligationsPension and Other Employee ObligationsTotal
2022$1,798 $704 $3 $2,505 
2023697 443 2 1,142 
2024985 209 2 1,196 
2025466 132 2 600 
2026289 71 2 362 
Thereafter1,117 52 6 1,175 
Total$5,352 $1,611 $17 $6,980 
Content purchase obligations include commitments areand liabilities associated with third-party producers and sports associations for content that airs on theour television networks. Production contracts generally require therequire: purchase of a specified number of episodes withepisodes; payments over the term of the license. Production contractslicense; and include both programs that have been delivered and are available for airing and programs that have not yet been produced or sporting events that have not yet taken place. If the content is ultimately never produced, the Company'sour commitments expire without obligation. The commitments disclosed above exclude content liabilities recognized on the consolidated balance sheet.
Other purchase obligations include agreements with certain vendors and suppliers for the purchase of goods and services whereby the underlying agreements are enforceable, legally binding and specify all significant terms. Significant purchase obligations include transmission services, television rating services, marketing commitments and research, employment contracts, equipment purchases, and information technology and other services. Some of these contracts do not require the purchase of fixed or minimum quantities and generally may be terminated with a 30-day to 60-day advance notice without penalty, and are not included in the table above past the 30-day to 60-day advance notice period. Amounts related
114
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pension and other employee obligations include payments to employment contracts include base compensation, but domeet minimum funding requirements of our Pension Plan in 2022 and estimated benefit payments for our SERP that exceed plan assets. Payments for the SERP have been estimated over a ten-year period. While benefit payments under these plans are expected to continue beyond 2031, we believe it is not include compensation contingent on future events.practicable to estimate payments beyond this period. (See Note 16.)
Although the Company had funding commitments to equity method investees as of December 31, 2017,2021, the Company may also provide uncommitted additional funding to its equity method investments in the future. (See Note 4.)
Contingencies
Put Rights
The Company has granted put rights related to certain consolidated subsidiaries. Harpo, Golden Tree, Hasbro and J:COM have the right to require the Company to purchase their remaining noncontrolling interests in OWN, VTEN, Discovery Family and Discovery Japan, respectively. The Company recorded the value of the put rights for OWN, VTEN, Discovery Family and Discovery Japan as a component of redeemable noncontrolling interests in the amounts of $55 million, $120 million, $210 million and $27 million, respectively. (See Note 11.)
Legal Matters
TheFrom time to time, in the normal course of its operations, the Company is partysubject to various lawsuitslitigation matters and claims, in the ordinary course of business.including claims related to employees, vendors, other business partners or patent issues. However, a determination as to the amount of the accrual required for such contingencies is highly subjective and requires judgmentsjudgment about future events. Although the outcome of these matters cannot be predicted with certainty and the impact of the final resolution of these matters on the Company's results of operations in a particular subsequent reporting period is not known, management does not believe that the

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


resolution of these matters will have a material adverse effect on ourthe Company's future consolidated financial position, future results of operations or liquidity.
On September 20, 2017, a putative class action lawsuit captioned Inzlicht-Sprei v. Scripps Networks Interactive, et al. (Case No. 3:17-cv-00420), which we refer to as the “Inzlicht-Sprei action”, was filed in the United States District Court for the Eastern District of Tennessee. A putative class action lawsuit captioned Berg v. Scripps Networks Interactive, et al. (Case No. 2:17-cv-848), which we refer to as the “Berg action”, and a lawsuit captioned Wagner v. Scripps Networks Interactive, et al. (Case No. 2:17-cv-859), which we refer to as the “Wagner action”, were filed in the United States District Court for the Southern District of Ohio on September 27, 2017 and September 29, 2017, respectively. We refer to the Inzlicht-Sprei action, Berg action and Wagner action collectively as the “actions”. The actions alleged that the defendants filed a materially incomplete and misleading Form S-4 in violation of Sections 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9. On October 12, 2017, the plaintiff in the Inzlicht-Sprei action filed a notice of voluntary dismissal without prejudice. On November 21, 2017, the plaintiffs in both the Berg action and the Wagner action filed notices of voluntary dismissal.cash flows.
Guarantees
There were no guarantees recorded under ASC 460 as of December 31, 20172021 and December 31, 2016.2020.
TheIn the normal course of business, the Company may provide or receive indemnities that are intended to allocate certain risks associated with business transaction risks.transactions. Similarly, the Company may remain contingently liable for certain obligations of a divested business in the event that a third party does not fulfill its obligations under an indemnification obligation. The Company records a liability for its indemnification obligations and other contingent liabilities when probable and estimable. There were no material amounts for indemnifications or other contingencies recorded as of December 31, 20172021 and 2016.2020.
NOTE 21.23. REPORTABLE SEGMENTS
The Company’s operating segments are determined based onon: (i) financial information reviewed by its chief operating decision maker ("CODM"), the Chief Executive Officer ("CEO"), (ii) internal management and related reporting structure, and (iii) the basis upon which the CEO makes resource allocation decisions.
The accounting policies of the reportable segments are the same as the Company’s, except that certain inter-segment transactions that are eliminated for consolidation are not eliminated at the segment level. Inter-segment transactions primarily include the purchase of advertising and content between segments.purchases. The Company does not report assets by segment because this is not used to allocate resources or evaluate segment performance.
The Company evaluates the operating performance of its segments based on financial measures such as revenues and adjusted operating income before depreciation and amortization (“Adjusted OIBDA”). Adjusted OIBDA is defined as operating income excluding: (i) mark-to-marketemployee 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, and (vi) certain inter-segment eliminations related to production studios. In addition, beginning with the quarter ended September 30, 2017, Adjusted OIBDA also excludes incremental third partystudios, (vii) third-party transaction costs directly related to the Scripps Networks acquisition and planned integration.integration, and (viii) other items impacting comparability. 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 transactionacquisition 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 and inter-segment eliminations related to production studios are excluded from segment results to enable executive management to evaluate segment performance based upon the decisions of segment executives. As of January 1, 2017, the Company no longer excludes amortization of deferred launch incentives in calculating total Adjusted OIBDA as it is not material. For the years ended December 31, 2017, 2016 and 2015, deferred launch incentives of $3 million, $13 million and $16 million, respectively, were not reflected as an adjustment to the calculation of total Adjusted OIBDA in order to conform to the current presentation. Total Adjusted OIBDA should be considered in addition to, but not a substitute for, operating income, net (loss) income and other measures of financial performance reported in accordance with U.S. GAAP.
115
DISCOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tables below present summarized financial information for each of the Company’s reportable segments other operating segments and corporate, and inter-segment eliminations, and other (in millions).

Revenues
Year Ended December 31,
202120202019
U.S. Networks$7,662 $6,949 $7,092 
International Networks4,539 3,713 4,041 
Corporate, inter-segment eliminations, and other(10)9 11 
Total revenues$12,191 $10,671 $11,144 
Reconciliation of Net Income Available to Discovery, Inc. to Adjusted OIBDA
Year Ended December 31,
202120202019
Net income available to Discovery, Inc.$1,006 $1,219 $2,069 
Net income attributable to redeemable noncontrolling interests53 12 16 
Net income attributable to noncontrolling interests138 124 128 
Income tax expense236 373 81 
Income before income taxes1,433 1,728 2,294 
Other (income) expense, net(82)(42)8 
Loss from equity investees, net18 105 2 
Loss on extinguishment of debt10 76 28 
Interest expense, net633 648 677 
Operating income2,012 2,515 3,009 
Depreciation and amortization1,582 1,359 1,347 
Impairment of goodwill and other intangible assets— 124 155 
Employee share-based compensation167 99 137 
Restructuring and other charges32 91 26 
Transaction and integration costs95 6 26 
Loss (gain) on disposition(71)2 — 
Settlement of a withholding tax claim— — (29)
Adjusted OIBDA$3,817 $4,196 $4,671 
Adjusted OIBDA
Year Ended December 31,
202120202019
U.S. Networks$3,940 $3,975 $4,117 
International Networks494 723 1,057 
Corporate, inter-segment eliminations, and other(617)(502)(503)
Adjusted OIBDA$3,817 $4,196 $4,671 
116
DISCOVERY, COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Revenues
  Year Ended December 31,
  2017 2016 2015
U.S. Networks $3,434
 $3,285
 $3,131
International Networks 3,281
 3,040
 3,092
Education and Other 158
 174
 173
Corporate and inter-segment eliminations —
 (2) (2)
Total revenues $6,873
 $6,497
 $6,394
Adjusted OIBDA
  Year Ended December 31,
  2017 2016 2015
U.S. Networks $2,026
 $1,922
 $1,774
International Networks 859
 835
 945
Education and Other 6
 (10) (2)
Corporate and inter-segment eliminations (360) (334) (335)
Total Adjusted OIBDA $2,531
 $2,413
 $2,382
Reconciliation of Net (Loss) Income available to Discovery Communications, Inc. to total Adjusted OIBDA
  Year Ended December 31,
  2017 2016 2015
Net (loss) income available to Discovery Communications, Inc. $(337) $1,194
 $1,034
Net income attributable to redeemable noncontrolling interests 24
 23
 13
Net income attributable to noncontrolling interests —
 1
 1
Income tax expense 176
 453
 511
(Loss) income before income taxes (137) 1,671
 1,559
Other expense (income), net 110
 (4) 97
Loss (income) from equity investees, net 211
 38
 (1)
Loss on extinguishment of debt 54
 —
 —
Interest expense 475
 353
 330
Operating income 713
 2,058
 1,985
Loss (gain) on disposition 4
 (63) 17
Restructuring and other charges 75
 58
 50
Depreciation and amortization 330
 322
 330
Impairment of goodwill 1,327
 —
 —
Mark-to-market equity-based compensation 3
 38
 —
Scripps Networks transaction and integration costs 79
 —
 —
Total Adjusted OIBDA $2,531
 $2,413
 $2,382

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Total Assets
  December 31,
  2017 2016
U.S. Networks $4,127
 $3,412
International Networks 5,187
 4,922
Education and Other 394
 399
Corporate and inter-segment eliminations 12,847
 6,939
Total assets $22,555
 $15,672
Total assets for corporate and inter-segment eliminations include goodwill that is allocated to the Company's segments to account for goodwill. The presentation of segment assets in the table above is consistent with the financial reports that are reviewed by the Company's CEO. The goodwill allocated from corporate assets to U.S. Networks and International Networks to account for goodwill is included in the goodwill balances disclosed in Note 8.
Content Amortization and Impairment Expense
 Year Ended December 31,Year Ended December 31,
 2017 2016 2015202120202019
U.S. Networks $776
 $756
 $771
U.S. Networks$1,565 $1,647 $1,548 
International Networks 1,126
 1,008
 931
International Networks1,934 1,307 1,303 
Education and Other 8
 9
 7
Corporate, inter-segment eliminations, and otherCorporate, inter-segment eliminations, and other2 2 2 
Total content amortization and impairment expense $1,910
 $1,773
 $1,709
Total content amortization and impairment expense$3,501 $2,956 $2,853 
Content amortization and impairment expenses areexpense is generally included ina component of costs of revenuesrevenue on the consolidated statements of operations (see Note 6).
Revenues by Geography
 Year Ended December 31, Year Ended December 31,
 2017 2016 2015 202120202019
U.S. $3,560
 $3,411
 $3,261
U.S.$7,728 $7,025 $7,152 
Non-U.S. 3,313
 3,086
 3,133
Non-U.S.4,463 3,646 3,992 
Total revenues $6,873
 $6,497
 $6,394
Total revenues$12,191 $10,671 $11,144 
Distribution and advertising revenues are attributed to each country based on viewer location. Other revenues are attributed to each country based on customer location.
Property and Equipment by Geography
 December 31,
 20212020
U.S.$834 $645 
Poland176 180 
U.K.164 149 
Other non-U.S.162 232 
Total property and equipment, net$1,336 $1,206 

117
  December 31,
  2017 2016
U.S. $309
 $258
U.K. 173
 107
Other 115
 117
Total property and equipment, net $597
 $482
Property and equipment balances are allocated to each country based on the location of the asset.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 22. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
  
2017(a, b, c,)
  1st quarter 2nd quarter 3rd quarter 4th quarter
         
Revenues $1,613
 $1,745
 $1,651
 $1,864
Operating income (loss) 487
 630
 433
 (837)
Net income (loss) 221
 380
 223
 (1,137)
Net income (loss) available to Discovery Communications, Inc. 215
 374
 218
 (1,144)
         
Earnings per share available to Discovery Communications, Inc. Series A, B and C common stockholders        
Basic $0.37
 $0.65
 $0.38
 $(1.99)
Diluted(e)
 $0.37
 $0.64
 $0.38
 $(1.99)
         
  
2016(d)
  1st quarter 2nd quarter 3rd quarter 4th quarter
         
Revenues $1,561
 $1,708
 $1,556
 $1,672
Operating income 489
 586
 458
 525
Net income 269
 415
 225
 309
Net income available to Discovery Communications, Inc. 263
 408
 219
 304
         
Earnings per share available to Discovery Communications, Inc. Series A, B and C common stockholders        
Basic $0.42
 $0.66
 $0.37
 $0.52
Diluted $0.42
 $0.66
 $0.36
 $0.52
(a)Goodwill impairment expense of $1.3 billion was recognized during the fourth quarter of 2017. (See Note 8.)
(b)On September 25, 2017, the Company acquired a 67.5% controlling interest in VTEN, a new joint venture with GoldenTree, in exchange for its contribution of the Velocity network. On November 30, 2017, the Company acquired a controlling interest in OWN from Harpo, increasing Discovery’s ownership stake from 49.50% to 73.99%. Discovery paid $70 million in cash and recognized a gain of $33 million to account for the difference between the carrying value and the fair value of the previously held 49.50% equity interest. On April 28, 2017, the Company sold Raw and Betty to All3Media and recorded a loss of $4 million upon disposition. (See Note 3.) As of December 31, 2017, the Company has incurred transaction and integration costs for the Scripps Networks acquisition of $79 million, including the $35 million charge associated with the modification of Advance/Newhouse's preferred stock. (See Note 12.)
(c) In March 2017, DCL completed a cash tender offer for $600 million aggregate principal amount of DCL's 5.05% senior notes due 2020 and 5.625% senior notes due 2019. This transaction resulted in a pretax loss on extinguishment of debt of $54 million for the year ended December 31, 2017, which is presented as a separate line item on the Company's consolidated statements of operations and recognized as a component of financing cash outflows on the consolidated statements of cash flows. The loss included $50 million for premiums to par value, $2 million of non-cash write-offs of unamortized deferred financing costs, $1 million for the write-off of the original issue discount of these senior notes and $1 million accrued for other third-party fees. (See Note 10.)
(d) On September 30, 2016, the Company recorded an other-than-temporary impairment of $62 million related to its investment in Lionsgate. On December 2, 2016, the Company acquired a 39% minority interest in Group Nine Media, a newly formed media holding company, in exchange for contributions of $100 million and the Company's digital businesses Seeker and SourceFed, resulting in a gain of $50 million upon deconsolidation of the businesses. (See Note 3.)
(e)Amounts may not sum to annual total due to rounding.


DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 23. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Overview
As of December 31, 2017 and 2016, all of the outstanding senior notes have been issued by DCL, a wholly-owned subsidiary of Discovery Communications Holding LLC (“DCH”), which is a wholly-owned subsidiary of the Company, pursuant to one or more Registration Statements on Form S-3 filed with the U.S. Securities and Exchange Commission ("SEC"). (See Note 9.) The Company fully and unconditionally guarantees the senior notes on an unsecured basis. Each of the Company, DCH, and/or DCL (collectively the “Issuers”) may issue additional debt securities under the Company's current Registration Statement on Form S-3 that are fully and unconditionally guaranteed by the other Issuers.
Set forth below are condensed consolidating financial statements presenting the financial position, results of operations and comprehensive income and cash flows of (i) the Company, (ii) DCH, (iii) DCL, (iv) the non-guarantor subsidiaries of DCL on a combined basis, (v) the other non-guarantor subsidiaries of the Company on a combined basis, and (vi) reclassifications and eliminations necessary to arrive at the consolidated financial statement balances for the Company. DCL and the non-guarantor subsidiaries of DCL are the primary operating subsidiaries of the Company. DCL primarily includes the Discovery Channel and TLC networks in the U.S. The non-guarantor subsidiaries of DCL include substantially all of the Company’s other U.S. and international networks, education businesses, and most of the Company’s websites and digital distribution arrangements. The non-guarantor subsidiaries of DCL are wholly-owned subsidiaries of DCL with the exception of certain equity method investments. DCL is a wholly-owned subsidiary of DCH. The Company wholly owns DCH through a 33 1/3% direct ownership interest and a 66 2/3% indirect ownership interest through Discovery Holding Company (“DHC”), a wholly-owned subsidiary of the Company. DHC is included in the other non-guarantor subsidiaries of the Company.
On September 25, 2017, the Company acquired a 67.5% controlling interest in VTEN, a new joint venture with GoldenTree, in exchange for its contribution of the Velocity network. The VTEN non-cash transaction and all related financial activity is included within the non-guarantor subsidiaries of DCL. (See Note 3.) The Company's 2016 minority investment in Group Nine Media and all related financial activity is included within the DCL issuer entity in the accompanying condensed consolidated financial statements. (See Note 4.)
Basis of Presentation
Solely for purposes of presenting the condensed consolidating financial statements, investments in the Company’s subsidiaries have been accounted for by their respective parent company using the equity method. Accordingly, in the following condensed consolidating financial statements the equity method has been applied to (i) the Company’s interests in DCH and the other non-guarantor subsidiaries of the Company, (ii) DCH’s interest in DCL, and (iii) DCL’s interests in the non-guarantor subsidiaries of DCL. Inter-company accounts and transactions have been eliminated to arrive at the consolidated financial statement amounts for the Company. The Company’s accounting bases in all subsidiaries, including goodwill and recognized intangible assets, have been pushed down to the applicable subsidiaries.
The operations of certain of the Company’s international subsidiaries are excluded from the Company’s consolidated U.S. income tax return. Tax expense related to permanent differences has been allocated to the entity that created the difference. Tax expense related to temporary differences has been allocated to the entity that created the difference, where identifiable. The remaining temporary differences are allocated to each entity included in the Company’s consolidated U.S. income tax return based on each entity’s relative pretax income. Deferred taxes have been allocated based upon the temporary differences between the carrying amounts of the respective assets and liabilities of the applicable entities.
The condensed consolidating financial statements should be read in conjunction with the consolidated financial statements of the Company.

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2017
(in millions)
  Discovery DCH DCL Non-Guarantor
Subsidiaries of
DCL		 Other Non-
Guarantor
Subsidiaries of Discovery		 Reclassifications 
and
Eliminations		 Discovery and
Subsidiaries
ASSETS              
Current assets:              
Cash and cash equivalents $—
 $—
 $6,800
 $509
 $—
 $—
 $7,309
Receivables, net —
 —
 410
 1,428
 —
 —
 1,838
Content rights, net —
 —
 4
 406
 —
 —
 410
Prepaid expenses and other current assets 49
 32
 204
 149
 —
 —
 434
Inter-company trade receivables, net —
 —
 205
 —
 —
 (205) —
Total current assets 49
 32
 7,623
 2,492
 —
 (205) 9,991
Investment in and advances to subsidiaries 4,563
 4,532
 6,951
 —
 3,056
 (19,102) —
Noncurrent content rights, net —
 —
 672
 1,541
 —
 —
 2,213
Goodwill, net —
 —
 3,677
 3,396
 —
 —
 7,073
Intangible assets, net —
 —
 259
 1,511
 —
 —
 1,770
Equity method investments —
 —
 25
 310
 —
 —
 335
Other noncurrent assets, including property and equipment, net —
 20
 364
 809
 —
 (20) 1,173
Total assets $4,612
 $4,584
 $19,571
 $10,059
 $3,056
 $(19,327) $22,555
LIABILITIES AND EQUITY              
Current liabilities:              
Current portion of debt $—
 $—
 $7
 $23
 $—
 $—
 $30
Other current liabilities —
 —
 572
 1,269
 —
 —
 1,841
Inter-company trade payables, net —
 —
 —
 205
 —
 (205) —
Total current liabilities —
 —
 579
 1,497
 —
 (205) 1,871
Noncurrent portion of debt —
 —
 14,163
 592
 —
 —
 14,755
Other noncurrent liabilities 2
 —
 297
 606
 21
 (20) 906
Total liabilities 2
 —
 15,039
 2,695
 21
 (225) 17,532
Redeemable noncontrolling interests —
 —
 —
 413
 —
 —
 413
Total equity 4,610
 4,584
 4,532
 6,951
 3,035
 (19,102) 4,610
Total liabilities and equity $4,612
 $4,584
 $19,571
 $10,059
 $3,056
 $(19,327) $22,555

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2016
(in millions)
  Discovery DCH DCL Non-Guarantor
Subsidiaries of
DCL		 Other Non-
Guarantor
Subsidiaries of Discovery		 Reclassifications 
and
Eliminations		 Discovery and
Subsidiaries
ASSETS              
Current assets:              
Cash and cash equivalents $—
 $—
 $20
 $280
 $—
 $—
 $300
Receivables, net —
 —
 421
 1,074
 —
 —
 1,495
Content rights, net —
 —
 8
 302
 —
 —
 310
Prepaid expenses and other current assets 62
 36
 180
 119
 —
 —
 397
Inter-company trade receivables, net —
 —
 195
 —
 —
 (195) —
Total current assets 62
 36
 824
 1,775
 —
 (195) 2,502
Investment in and advances to subsidiaries 5,106
 5,070
 7,450
 —
 3,417
 (21,043) —
Noncurrent content rights, net —
 —
 663
 1,426
 —
 —
 2,089
Goodwill, net —
 —
 3,769
 4,271
 —
 —
 8,040
Intangible assets, net —
 —
 272
 1,240
 —
 —
 1,512
Equity method investments, including note receivable —
 —
 30
 527
 —
 —
 557
Other noncurrent assets, including property and equipment, net —
 20
 306
 666
 —
 (20) 972
Total assets $5,168
 $5,126
 $13,314
 $9,905
 $3,417
 $(21,258) $15,672
LIABILITIES AND EQUITY             

Current liabilities:             

Current portion of debt $—
 $—
 $52
 $30
 $—
 $—
 $82
Other current liabilities —
 —
 516
 963
 —
 —
 1,479
Inter-company trade payables, net —
 —
 —
 195
 —
 (195) —
Total current liabilities —
 —
 568
 1,188
 —
 (195) 1,561
Noncurrent portion of debt —
 —
 7,315
 526
 —
 —
 7,841
Other noncurrent liabilities 1
 —
 361
 498
 20
 (20) 860
Total liabilities 1
 —
 8,244
 2,212
 20
 (215) 10,262
Redeemable noncontrolling interests —
 —
 —
 243
 —
 —
 243
Total equity 5,167
 5,126
 5,070
 7,450
 3,397
 (21,043) 5,167
Total liabilities and equity $5,168
 $5,126
 $13,314
 $9,905
 $3,417
 $(21,258) $15,672

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2017
(in millions)
  Discovery DCH DCL Non-Guarantor
Subsidiaries of
DCL		 Other Non-
Guarantor
Subsidiaries of Discovery		 Reclassifications 
and
Eliminations		 Discovery and
Subsidiaries
Revenues $—
 $—
 $1,988
 $4,897
 $—
 $(12) $6,873
Costs of revenues, excluding depreciation and amortization —
 —
 467
 2,191
 —
 (2) 2,656
Selling, general and administrative 53
 —
 309
 1,416
 —
 (10) 1,768
Impairment of goodwill —
 —
 —
 1,327
 —
 —
 1,327
Depreciation and amortization —
 —
 42
 288
 —
 —
 330
Restructuring and other charges —
 —
 35
 40
 —
 —
 75
Loss on disposition —
 —
 —
 4
 —
 —
 4
Total costs and expenses 53
 —
 853
 5,266
 —
 (12) 6,160
Operating (loss) income (53) —
 1,135
 (369) —
 —
 713
Equity in loss of subsidiaries (288) (288) (541) —
 (192) 1,309
 —
Interest expense —
 —
 (448) (27) —
 —
 (475)
Loss on extinguishment of debt —
 —
 (54) —
 —
 —
—
(54)
Loss from equity investees, net —
 —
 (3) (208) —
 —
 (211)
Other (expense) income, net —
 —
 (204) 94
 —
 —
 (110)
Loss before income taxes (341) (288) (115) (510) (192) 1,309
 (137)
Income tax benefit (expense) 4
 —
 (173) (7) —
 —
 (176)
Net loss (337) (288) (288) (517) (192) 1,309
 (313)
Net income attributable to redeemable noncontrolling interests —
 —
 —
 —
 —
 (24) (24)
Net loss available to Discovery Communications, Inc. $(337) $(288) $(288) $(517) $(192) $1,285
 $(337)


DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2016
(in millions)
  Discovery DCH DCL Non-Guarantor
Subsidiaries of
DCL		 Other Non-
Guarantor
Subsidiaries of Discovery		 Reclassifications 
and
Eliminations		 Discovery and
Subsidiaries
Revenues $—
 $—
 $1,963
 $4,547
 $—
 $(13) $6,497
Costs of revenues, excluding depreciation and amortization —
 —
 466
 1,970
 —
 (4) 2,432
Selling, general and administrative 14
 —
 292
 1,393
 —
 (9) 1,690
Depreciation and amortization —
 —
 41
 281
 —
 —
 322
Restructuring and other charges —
 —
 28
 30
 —
 —
 58
Gain on disposition —
 —
 (50) (13) —
 —
 (63)
Total costs and expenses 14
 —
 777
 3,661
 —
 (13) 4,439
Operating (loss) income (14) —
 1,186
 886
 —
 —
 2,058
Equity in earnings of subsidiaries 1,203
 1,203
 602
 —
 802
 (3,810) —
Interest expense —
 —
 (332) (21) —
 —
 (353)
Loss from equity investees, net —
 —
 (3) (35) —
 —
 (38)
Other income (expense), net —
 —
 40
 (36) —
 —
 4
Income before income taxes 1,189
 1,203
 1,493
 794
 802
 (3,810) 1,671
Income tax benefit (expense) 5
 —
 (290) (168) —
 —
 (453)
Net income 1,194
 1,203
 1,203
 626
 802
 (3,810) 1,218
Net income attributable to noncontrolling interests —
 —
 —
 —
 —
 (1) (1)
Net income attributable to redeemable noncontrolling interests —
 —
 —
 —
 —
 (23) (23)
Net income available to Discovery Communications, Inc. $1,194
 $1,203
 $1,203
 $626
 $802
 $(3,834) $1,194

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2015
(in millions)
  Discovery DCH DCL Non-Guarantor
Subsidiaries of
DCL		 Other Non-
Guarantor
Subsidiaries of Discovery		 Reclassifications 
and
Eliminations		 Discovery and
Subsidiaries
Revenues $—
 $—
 $1,909
 $4,498
 $—
 $(13) $6,394
Costs of revenues, excluding depreciation and amortization —
 —
 500
 1,847
 —
 (4) 2,343
Selling, general and administrative 15
 —
 265
 1,398
 —
 (9) 1,669
Depreciation and amortization —
 —
 35
 295
 —
 —
 330
Restructuring and other charges —
 —
 28
 22
 —
 —
 50
Loss on disposition —
 —
 —
 17
 —
 —
 17
Total costs and expenses 15
 —
 828
 3,579
 —
 (13) 4,409
Operating (loss) income (15) —
 1,081
 919
 —
 —
 1,985
Equity in earnings of subsidiaries 1,044
 1,044
 505
 —
 696
 (3,289) —
Interest expense —
 —
 (318) (12) —
 —
 (330)
Income (loss) from equity investees, net —
 —
 4
 (3) —
 —
 1
Other income (expense), net —
 —
 9
 (106) —
 —
 (97)
Income before income taxes 1,029
 1,044
 1,281
 798
 696
 (3,289) 1,559
Income tax benefit (expense) 5
 —
 (237) (279) —
 —
 (511)
Net income 1,034
 1,044
 1,044
 519
 696
 (3,289) 1,048
Net income attributable to noncontrolling interests —
 —
 —
 —
 —
 (1) (1)
Net loss attributable to redeemable noncontrolling interests —
 —
 —
 —
 —
 (13) (13)
Net income available to Discovery Communications, Inc. $1,034
 $1,044
 $1,044
 $519
 $696
 $(3,303) $1,034


DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE (LOSS) INCOME
For the Year Ended to December 31, 2017
(in millions)

  Discovery DCH DCL Non-Guarantor
Subsidiaries of
DCL		 Other Non-
Guarantor
Subsidiaries of Discovery		 Reclassifications 
and
Eliminations		 Discovery and
Subsidiaries
Net loss $(337) $(288) $(288) $(517) $(192) $1,309
 $(313)
Other comprehensive (loss) income, net of tax:              
Currency translation 183
 183
 183
 186
 122
 (674) 183
Available-for-sale securities 15
 15
 15
 15
 10
 (55) 15
Derivatives (20) (20) (20) (9) (13) 62
 (20)
Comprehensive loss (159) (110) (110) (325) (73) 642
 (135)
Comprehensive income attributable to redeemable noncontrolling interests (1) (1) (1) (1) (1) (20) (25)
Comprehensive loss attributable to Discovery Communications, Inc. $(160) $(111) $(111) $(326) $(74) $622
 $(160)



DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
For the Year Ended to December 31, 2016
(in millions)

  Discovery DCH DCL Non-Guarantor
Subsidiaries of
DCL		 Other Non-
Guarantor
Subsidiaries of Discovery		 Reclassifications 
and
Eliminations		 Discovery and
Subsidiaries
Net income $1,194
 $1,203
 $1,203
 $626
 $802
 $(3,810) $1,218
Other comprehensive (loss) income, net of tax:              
Currency translation (191) (191) (191) (190) (127) 699
 (191)
Available-for-sale securities 38
 38
 38
 38
 25
 (139) 38
Derivatives 24
 24
 24
 22
 16
 (86) 24
Comprehensive income 1,065
 1,074
 1,074
 496
 716
 (3,336) 1,089
Comprehensive income attributable to noncontrolling interests —
 —
 —
 —
 —
 (1) (1)
Comprehensive income attributable to redeemable noncontrolling interests (23) (23) (23) (23) (15) 84
 (23)
Comprehensive income attributable to Discovery Communications, Inc. $1,042
 $1,051
 $1,051
 $473
 $701
 $(3,253) $1,065


DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
For the Year Ended to December 31, 2015
(in millions)

  Discovery DCH DCL Non-Guarantor
Subsidiaries of
DCL		 Other Non-
Guarantor
Subsidiaries of Discovery		 Reclassifications 
and
Eliminations		 Discovery and
Subsidiaries
Net income $1,034
 $1,044
 $1,044
 $519
 $696
 $(3,289) $1,048
Other comprehensive (loss) income, net of tax:              
Currency translation (201) (201) (201) (199) (134) 735
 (201)
Available-for-sale securities (25) (25) (25) (25) (17) 92
 (25)
Derivatives (1) (1) (1) (3) (1) 6
 (1)
Comprehensive income 807
 817
 817
 292
 544
 (2,456) 821
Comprehensive income attributable to noncontrolling interests —
 —
 —
 —
 —
 (1) (1)
Comprehensive loss attributable to redeemable noncontrolling interests 23
 23
 23
 23
 15
 (97) 10
Comprehensive income attributable to Discovery Communications, Inc. $830
 $840
 $840
 $315
 $559
 $(2,554) $830


DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2017
(in millions)

  Discovery DCH DCL Non-Guarantor
Subsidiaries of
DCL		 Other Non-
Guarantor
Subsidiaries of Discovery		 Reclassifications 
and
Eliminations		 Discovery and
Subsidiaries
Operating Activities              
Cash (used in) provided by operating activities $(3) $3
 $476
 $1,153
 $—
 $—
 $1,629
Investing Activities              
Payments for investments —
 —
 (45) (399) —
 —
 (444)
Purchases of property and equipment —
 —
 (43) (92) —
 —
 (135)
Distributions from equity method investees —
 —
 —
 77
 —
 —
 77
Proceeds from dispositions, net of cash disposed —
 —
 —
 29
 —
 —
 29
Payments for derivative instruments, net —
 —
 (111) 10
 —
 —
 (101)
Business acquisitions, net of cash acquired —
 —
 —
 (60) —
 —
 (60)
Inter-company distributions —
 —
 42
 —
 —
 (42) —
Other investing activities, net —
 —
 (1) 2
 —
 —
 1
Cash used in investing activities —
 —
 (158) (433) —
 (42) (633)
Financing Activities              
Commercial paper repayments, net —
 —
 (48) —
 —
 —
 (48)
Borrowings under revolving credit facility —
 —
 350
 —
 —
 —
 350
Principal repayments of revolving credit facility —
 —
 (475) —
 —
 —
 (475)
Borrowings from debt, net of discount and including premiums

 —
 —
 7,488
 —
 —
 —
 7,488
Principal repayments of debt, including discount payment and premiums to par value

 —
 —
 (650) —
 —
 —
 (650)
Payments for bridge financing commitment fees —
 —
 (40) —
 —
 —
 (40)
Principal repayments of capital lease obligations —
 —
 (7) (26) —
 —
 (33)
Repurchases of stock (603) —
 —
 —
 —
 —
 (603)
Cash settlement of common stock repurchase contracts 58
 —
 —
 —
 —
 —
 58
Distributions to redeemable noncontrolling interests —
 —
 —
 (30) —
 —
 (30)
Share-based plan proceeds, net 16
 —
 —
 —
 —
 —
 16
Inter-company distributions —
 —
 —
 (42) —
 42
 —
Inter-company contributions and other financing activities, net 532
 (3) (156) (455) —
 —
 (82)
Cash provided by (used in) financing activities 3
 (3) 6,462
 (553) —
 42
 5,951
Effect of exchange rate changes on cash and cash equivalents —
 —
 —
 62
 —
 —
 62
Net change in cash and cash equivalents —
 —
 6,780
 229
 —
 —
 7,009
Cash and cash equivalents, beginning of period —
 —
 20
 280
 —
 —
 300
Cash and cash equivalents, end of period $—
 $—
 $6,800
 $509
 $—
 $—
 $7,309

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2016
(in millions)

  Discovery DCH DCL Non-Guarantor
Subsidiaries of
DCL		 Other Non-
Guarantor
Subsidiaries of Discovery		 Reclassifications 
and
Eliminations		 Discovery and
Subsidiaries
Operating Activities              
Cash (used in) provided by operating activities $(20) $(9) $249
 $1,160
 $—
 $—
 $1,380
Investing Activities              
Payments for investments —
 —
 (124) (148) —
 —
 (272)
Purchases of property and equipment —
 —
 (18) (70) —
 —
 (88)
Proceeds from dispositions, net of cash disposed —
 —
 —
 19
 —
 —
 19
Distributions from equity method investees —
 —
 —
 87
 —
 —
 87
Inter-company distributions —
 —
 30
 —
 —
 (30) —
Other investing activities, net

 —
 —
 —
 (2) —
 —
 (2)
Cash used in investing activities —
 —
 (112) (114) —
 (30) (256)
Financing Activities              
Commercial paper repayments, net

 —
 —
 (45) —
 —
 —
 (45)
Borrowings under revolving credit facility —
 —
 350
 263
 —
 —
 613
Principal repayments of revolving credit facility —
 —
 (225) (610) —
 —
 (835)
Borrowings from debt, net of discount and including premiums

 —
 —
 498
 —
 —
 —
 498
Principal repayments of capital lease obligations —
 —
 (5) (23) —
 —
 (28)
Repurchases of stock (1,374) —
 —
 —
 —
 —
 (1,374)
Prepayments of common stock repurchase contracts (57) —
 —
 —
 —
 —
 (57)
Distributions to redeemable noncontrolling interests —
 —
 —
 (22) —
 —
 (22)
Share-based plan proceeds, net

 39
 —
 —
 —
 —
 —
 39
Hedge of borrowings from debt instruments —
 —
 40
 —
 —
 —
 40
Inter-company distributions —
 —
 —
 (30) —
 30
 —
Inter-company contributions and other financing activities, net 1,412
 9
 (733) (701) —
 —
 (13)
Cash provided by (used in) financing activities 20
 9
 (120) (1,123) —
 30
 (1,184)
Effect of exchange rate changes on cash and cash equivalents —
 —
 —
 (30) —
 —
 (30)
Net change in cash and cash equivalents —
 —
 17
 (107) —
 —
 (90)
Cash and cash equivalents, beginning of period —
 —
 3
 387
 —
 —
 390
Cash and cash equivalents, end of period $—
 $—
 $20
 $280
 $—
 $—
 $300

DISCOVERY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2015
(in millions)
  Discovery DCH DCL Non-Guarantor
Subsidiaries of
DCL		 Other Non-
Guarantor
Subsidiaries of Discovery		 Reclassifications 
and
Eliminations		 Discovery and
Subsidiaries
Operating Activities              
Cash (used in) provided by operating activities $(122) $(15) $427
 $1,004
 $—
 $—
 $1,294
Investing Activities              
Payments for investments —
 —
 (10) (262) —
 —
 (272)
Purchases of property and equipment —
 —
 (17) (86) —
 —
 (103)
Distributions from equity method investees —
 —
 —
 87
 —
 —
 87
Proceeds from disposition, net of cash disposed —
 —
 —
 61
 —
 —
 61
Payments for derivative instruments, net —
 —
 (11) 2
 —
 —
 (9)
Business acquisitions, net of cash acquired —
 —
 —
 (80) —
 —
 (80)
Inter-company distributions —
 —
 37
 —
 —
 (37) —
Other investing activities, net —
 —
 —
 15
 —
 —
 15
Cash used in investing activities —
 —
 (1) (263) —
 (37) (301)
Financing Activities              
Commercial paper repayments, net

 —
 —
 (136) —
 —
 —
 (136)
Borrowings under revolving credit facility —
 —
 —
 1,016
 —
 —
 1,016
Principal repayments of revolving credit facility —
 —
 (13) (252) —
 —
 (265)
Borrowings from debt, net of discount and including premiums —
 —
 936
 —
 —
 —
 936
Principal repayments of debt, including discount payment and premiums to par value


 —
 —
 (854) —
 —
 —
 (854)
Principal repayments of capital leases obligations —
 —
 (5) (22) —
 —
 (27)
Repurchases of stock (951) —
 —
 —
 —
 —
 (951)
Purchase of redeemable noncontrolling interests —
 —
 —
 (548) —
 —
 (548)
Distributions to redeemable noncontrolling interests —
 —
 —
 (42) —
 —
 (42)
Share-based plan payments, net

 (6) —
 —
 —
 —
 —
 (6)
Hedge of borrowings from debt distributions —
 —
 (29) —
 —
 —
 (29)
Inter-company distributions —
 —
 —
 (37) —
 37
 —
Inter-company contributions and other financing activities, net 1,079
 15
 (330) (777) —
 —
 (13)
Cash provided by (used in) financing activities 122
 15
 (431) (662) —
 37
 (919)
Effect of exchange rate changes on cash and cash equivalents —
 —
 —
 (51) —
 —
 (51)
Net change in cash and cash equivalents —
 —
 (5) 28
 —
 —
 23
Cash and cash equivalents, beginning of period —
 —
 8
 359
 —
 —
 367
Cash and cash equivalents, end of period $—
 $—
 $3
 $387
 $—
 $—
 $390



ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
ITEM 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2017.2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2017,2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.effective.
Management’s Annual Report on Internal Control Over Financial Reporting
Management’s report on internal control over financial reporting is set forth in Item 8 of this Annual Report on Form 10-K under the caption “Management’s Report on Internal Control overOver Financial Reporting,” which is incorporated herein by reference.
Report of the Independent Registered Public Accounting Firm
The report of our independent registered public accounting firm regarding internal control over financial reporting is set forth in Item 8 of this Annual Report on Form 10-K under the caption “Report of Independent Registered Public Accounting Firm,” which is incorporated herein by reference.
Changes in Internal Control Over Financial Reporting
During the quarterthree months ended December 31, 2017,2021, there were no changes in our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. Other Information.
None.We currently anticipate that our 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”) will be held on April 8, 2022. Because the date of the 2022 Annual Meeting represents a change of more than 30 days from the anniversary of our 2021 Annual Meeting of Stockholders, in accordance with Rule 14a-5(f) under the Exchange Act, we are informing our stockholders of this change. The time and location of the 2022 Annual Meeting will be specified in our definitive Proxy Statement for the 2022 Annual Meeting, which will be filed with the SEC pursuant to Regulation 14A of the Exchange Act within 120 days of our fiscal year end.
Pursuant to Rule 14a-8 under the Exchange Act, a stockholder intending to present a proposal to be included in the Proxy Statement for the 2022 Annual Meeting must deliver a proposal in writing to our principal executive offices no later than a reasonable time before we begin to print and mail the proxy materials for the 2022 Annual Meeting. Such proposal must also comply with the applicable requirements as to form and substance established by the SEC if those proposals are to be included in the proxy statement and form of proxy. Because the date of the 2022 Annual Meeting is more than 30 days earlier than the anniversary of our 2021 Annual Meeting of Stockholders and the previously disclosed deadline of December 31, 2021 for the submission of such proposals has expired, we have determined that the December 31, 2021 deadline constitutes a reasonable time for the submission of such proposals and that no change is needed to the deadline.

118


Our bylaws set forth advance notice procedures with regard to other stockholder proposals, including nominations for the election of directors and business proposals to be brought before an annual meeting of stockholders by any stockholder (other than matters included in our proxy materials in accordance with Rule 14a-8 under the Exchange Act). With respect to the 2022 Annual Meeting, such notice will be considered timely if we receive notice of such proposed director nomination or the proposal of other business at our principal executive offices not later than the close of business on March 7, 2022.

ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
119

PART III
Certain information required in Item 10 through Item 14 of Part III of this Annual Report on Form 10-K is incorporated herein by reference to our definitive Proxy Statement for our 20182022 Annual Meeting of Stockholders (“20182022 Proxy Statement”), which shall be filed with the SEC pursuant to Regulation 14A of the Exchange Act within 120 days of our fiscal year end.
ITEM 10. Directors, Executive Officers and Corporate Governance.
Information regarding our directors, compliance with Section 16(a) of the Exchange Act, and our Audit Committee, including committee members and its financial expert, will be set forth in our 20182022 Proxy Statement under the captions “Proposal 1:One: Election of Directors,” “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance,Reports,” if applicable, and “Corporate Governance – Committees of the Board of DirectorsMeetings and Committees – Audit Committee,” respectively, which are incorporated herein by reference.
Information regarding our executive officers is set forth in Part I of this Annual Report on Form 10-K under the caption “Executive Officers of Discovery, Communications, Inc.” as permitted by General Instruction G(3) to Form 10-K.
We have adopted a Code of Business Conduct and Ethics (the “Code”) that is applicable to all of our directors, officers and employees. Our Board of Directors approved thean updated Code in September 2008January 2019 and reviews it regularly. A copy of the Code and any amendments or waivers that would be required to be disclosed under applicable SEC rules are available free of charge at the investor relations section ofour Investor Relations website at ir.corporate.discovery.com. The information contained on our website www.discoverycommunications.com.is not part of this Annual Report on Form 10-K and is not incorporated by reference herein. In addition, we will provide a printed copy of the Code, free of charge, upon written request to: Investor Relations, Discovery, Communications, Inc., 850 Third230 Park Avenue 8th Floor,South, New York, NY 10022-7225.10003.
ITEM 11. Executive Compensation.
Information regarding executive compensation will be set forth in our 20182022 Proxy Statement under the captions “Compensation“Executive Compensation – Compensation Discussion and Analysis” and “Executive Compensation – Executive Compensation Tables,” which are incorporated herein by reference.
Information regarding compensation policies and practices as they relate to our risk management, director compensation, and compensation committee interlocks and insider participation will be set forth in our 20182022 Proxy Statement under the captions “Risk“Executive Compensation – Compensation Discussion and Analysis – Other Compensation-Related Matters – Risk Considerations in our Compensation Programs,” “Board“Corporate Governance – Director Compensation,” and “Corporate Governance – Committees of the Board of DirectorsMeetings and Committees – Compensation Committee,” respectively, which are incorporated herein by reference.
Information regarding the compensation committee reportsreport will be set forth in our 20182022 Proxy Statement under the captions “Report of thecaption “Executive Compensation Committee” and “Report of the Equity– Compensation Subcommittee of the Compensation Committee” Report” which areis incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information regarding securities authorized for issuance under equity compensation plans will be set forth in our 20182022 Proxy Statement under the caption “Securities Authorized for Issuance Under Equity Compensation Plans,” which is incorporated herein by reference.
Information regarding security ownership of certain beneficial owners and management will be set forth in our 20182022 Proxy Statement under the captions “Security Ownership Information of Certain Beneficial Owners and Management of Discovery – Security Ownership of Certain Beneficial Owners of Discovery”Owners” and “Security Ownership Information of Certain Beneficial Owners and Management of Discovery – Security Ownership of Discovery Management,” which are incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence.
Information regarding certain relationships and related transactions, and director independence will be set forth in our 20182022 Proxy Statement under the captions “Certain Relationships and“Corporate Governance – Transactions with Related Person Transactions,” “Policy Governing Related Person Transactions,”Persons” and “Corporate Governance – Director Independence,” respectively, which are incorporated herein by reference.
ITEM 14. Principal Accountant Fees and Services.
Information regarding principal accountant fees and services will be set forth in our 20182022 Proxy Statement under the captions “Ratification of Appointment of Independent Registered Public Accounting“Audit Matters – Audit Firm – Description of Fees”Fees and “Ratification of Appointment of Independent Registered Public Accounting FirmServices” and “Audit Matters – Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm,Policy,” which are incorporated herein by reference.


120


PART IV

ITEM 15. Exhibits and Financial Statement Schedules.
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1.(1) The following consolidated financial statements of Discovery, Communications, Inc. are filed as part of Item 8 of this Annual Report on Form 10-K:
Page
Page
7265
7366
7467
7568
7669
7770
2. (2) Financial Statement Schedule
Schedule II: Valuation and Qualifying Accounts
Changes in valuation and qualifying accounts consisted of the following (in millions):
Beginning
of Year		Additions
Other (a)
Write-offsEnd
of Year
2021
Allowance for credit losses$59 21 — (26)$54 
Deferred tax valuation allowance$257 80 — (32)$305 
2020
Allowance for credit losses$54 30 (2)(23)$59 
Deferred tax valuation allowance$307 51 — (101)$257 
2019
Allowance for credit losses$46 15 — (7)$54 
Deferred tax valuation allowance$336 37 — (66)$307 
(a) Amount relates to the impact of the adjustment recorded for adoption of ASU 2016-13.
All other financial statement schedules required to be filed pursuant to Item 8 and Item 15(c) of Form 10-K have been omitted as the required information is not applicable, not material, or is set forth in the consolidated financial statements or notes thereto.
3.
121

(3) The following exhibits are filed or furnished as part of this Annual Report on Form 10-K pursuant to Item 601 of SEC Regulation S-K and Item 15(b) of Form 10-K:


EXHIBITS INDEX
Exhibit No.Description
2.1
2.2
2.3
2.4
2.5
2.6
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3


EXHIBITS INDEX
Exhibit No.Description
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
123

EXHIBITS INDEX
Exhibit No.Description
4.16
4.17
4.18
4.19
4.20
4.21
10.1
10.2
10.3
10.4
10.5
10.6
10.7
124

EXHIBITS INDEX
Exhibit No.Description
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
125

EXHIBITS INDEX
Exhibit No.Description
10.22
10.23

10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
126

EXHIBITS INDEX
Exhibit No.Description
10.37
10.38
10.39
10.40
10.41
21
22
23
31.1
31.2
32.1
32.2
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document (filed herewith)†
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)†
127

EXHIBITS INDEX
Exhibit No.Description
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)†
101.LABInline XBRL Taxonomy Extension Label Linkbase Document (filed herewith)†
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)†
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
* Indicates management contract or compensatory plan, contract or arrangement.
†Attached as Exhibit 101 to this Annual Report on Form 10-K are the following formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020, (ii) Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020, and 2019, (iii) Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021, 2020, and 2019, (iv) Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020, and 2019, (v) Consolidated Statements of Equity for the Years Ended December 31, 2021, 2020, and 2019, and (vi) Notes to Consolidated Financial Statements.
ITEM 16. Form 10-K Summary

Not Applicable.

EXHIBITS INDEX128
Exhibit No.     Description



2.1
Agreement and Plan of Merger, dated as of July 30, 2017, among Discovery Communications, Inc., Skylight Merger Sub, Inc. and Scripps Networks Interactive, Inc. (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on July 31, 2017 (SEC File No. 001-34177))
3.1
Form of Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 2 to the Registration Statement on Form S-4 (SEC File No. 333-151586 (“Amendment No. 2”))
3.2
Bylaws (incorporated by reference to Exhibit 3.2 to the Form 8-K filed on November 16, 2009 (SEC File No. 001-34177))
3.3
Certificate of Designation of Series A-1 Convertible Participating Preferred Stock, par value $0.01 per share (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on August 7, 2017 (SEC File No. 001-34177))
3.4
Certificate of Designation of Series C-1 Convertible Participating Preferred Stock, par value $0.01 per share (incorporated by reference to Exhibit 3.2 to the Form 8-K filed on August 7, 2017 (SEC File No. 001-34177))
4.1
Specimen Certificate for Shares of the Registrant’s Series A Common Stock, par value $0.01 per share (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4, SEC File No. 333-151586 (the “Registration Statement”))
4.2
Specimen Certificate for Shares of the Registrant’s Series B Common Stock, par value $0.01 per share (incorporated by reference to Exhibit 4.2 to the Registration Statement (SEC File No. 333-151586))
4.3
Specimen Certificate for Shares of the Registrant’s Series C Common Stock, par value $0.01 per share (incorporated by reference to Exhibit 4.3 to the Registration Statement (SEC File No. 333-151586))
4.4
Form of Registration Rights Agreement, by and between Discovery Communications, Inc. and Advance/Newhouse Programming Partnership (incorporated by reference to Exhibit 4.4 to the Registration Statement (SEC File No. 333-151586))
4.5
Amendment No. 1 to Registration Rights Agreement, dated as of August 7, 2017, by and between Discovery Communications, Inc. and Advance/Newhouse Programming Partnership (incorporated by reference to Exhibit 10.6 to the Form 10-Q filed on November 2, 2017 (SEC File No. 001-34177))
4.6
Form of Rights Agreement, by and between Discovery Communications, Inc. and Computershare Trust Company, N.A., as Rights Agent (incorporated by reference to Exhibit 4.5 to the Registration Statement (SEC File No. 333-151586))
4.7
Amendment No. 1 to Rights Agreement, dated as of December 10, 2008, by and between Discovery Communications, Inc. and Computershare Trust Company, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on December 11, 2008 (SEC File No. 001-34177))
4.8
Amendment No. 2 to Rights Agreement, dated as of July 30, 2017, by and between Discovery Communications, Inc. and Computershare Trust Company N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on July 31, 2017 (SEC File No. 001-34177))
4.9
Indenture, dated as of August 19, 2009, among Discovery Communications, LLC, Discovery Communications, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on August 19, 2009 (SEC File No. 001-34177))
EXHIBITS INDEX
Exhibit No.     Description

4.10
First Supplemental Indenture, dated as of August 19, 2009, among Discovery Communications, LLC, Discovery Communications, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Form 8-K filed on August 19, 2009 (SEC File No. 001-34177))
4.11
Second Supplemental Indenture, dated as of June 3, 2010, among Discovery Communications LLC, Discovery Communications, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on June 3, 2010 (SEC File No. 001-34177))
4.12
Third Supplemental Indenture, dated as of June 20, 2011, among Discovery Communications, LLC, Discovery Communications, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on June 21, 2011 (SEC File No. 001-34177))
4.13
Fourth Supplemental Indenture, dated as of May 17, 2012, among Discovery Communications, LLC, Discovery Communications, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on May 17, 2012 (SEC File No. 001-34177))

4.14
Fifth Supplemental Indenture, dated as of March 19, 2013, among Discovery Communications, LLC, Discovery Communications, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on March 19, 2013 (SEC File No. 001-34177))

4.15
Sixth Supplemental Indenture, dated as of March 7, 2014, among Discovery Communications, LLC, Discovery Communications, Inc., U.S. Bank National Association, as Trustee and Evalon Financial Services Limited, UK Branch, as London Paying Agent (incorporated by reference to Exhibit 4.1 to the Form 8-K/A filed on March 7, 2014 (SEC File No. 001-34177))
4.16
Seventh Supplemental Indenture, dated as of March 2, 2015, among Discovery Communications, LLC, Discovery Communications, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on March 2, 2015 (SEC File No. 001-34177))

4.17
Eighth Supplemental Indenture, dated as of March 19, 2015, among Discovery Communications, LLC, Discovery Communications, Inc., U.S. Bank National Association, as Trustee, and Elavon Financial Services Limited, UK Branch, as London Paying Agent (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on March 19, 2015 (SEC File No. 001-34177))
4.18
Ninth Supplemental Indenture, dated as of March 11, 2016, among Discovery Communications, LLC, Discovery Communications, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on March 11, 2016 (SEC File No. 001-34177))
4.19
Tenth Supplemental Indenture, dated as of March 13, 2017, among Discovery Communications, LLC, Discovery Communications, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on March 13, 2017 (SEC File No. 001-34177))
4.20
Eleventh Supplemental Indenture, dated as of September 21, 2017, among Discovery Communications, LLC, Discovery Communications, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on September 21, 2017 (SEC File No. 001-34177))
4.21
Twelfth Supplemental Indenture, dated as of September 21, 2017, among Discovery Communications, LLC, Discovery Communications, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Form 8-K filed on September 21, 2017 (SEC File No. 001-34177))
4.22
Thirteenth Supplemental Indenture, dated as of September 21, 2017, among Discovery Communications, LLC, Discovery Communications, Inc., Elavon Financial Service DAC, UK Branch, as London Paying Agent, and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.3 to the Form 8-K filed on September 21, 2017 (SEC File No. 001-34177))
EXHIBITS INDEX
Exhibit No.     Description

4.23
Amended and Restated Credit Agreement, dated as of February 4, 2016, among Discovery Communications, LLC ("DCL"), certain wholly-owned subsidiaries of DCL, Discovery Communications, Inc., as Facility Guarantor, the lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Lender (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on February 5, 2016 (SEC File No. 001-34177))
4.24
Amendment No. 1 to Amended and Restated Credit Agreement, dated as of August 11, 2017, among Discovery Communications, LLC ("DCL"), certain wholly-owned subsidiaries of DCL, Discovery Communications, Inc., as Facility Guarantor, the lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 4.2 to the Form 10-Q filed on November 2, 2017 (SEC File No. 001-34177))
4.25
Term Loan Credit Agreement, dated as of August 11, 2017, among Discovery Communications, LLC, as the Company, Discovery Communications, Inc., as Facility Guarantor, the lenders from time to time party thereto, Goldman Sachs Bank USA, as Administrative Agent (incorporated by reference to Exhibit 4.3 to the Form 10-Q filed on November 2, 2017 (SEC File No. 001-34177))
10.1
Discovery Communications U.S. Executive Relocation Policy (filed herewith)*
10.2
Discovery Communications Standard-Company Initiated Permanent International Transfer Relocation Benefits Policy (filed herewith)*
10.3
Discovery Communications International Relocation Benefits Policy, effective as of June 1, 2017 (filed herewith)*
10.4
Discovery Communications Executive Benefit Summary (filed herewith)*
10.5
Discovery Communications 2017 Incentive Compensation Plan (filed herewith)*
10.6
Amended and Restated Discovery Communications, LLC Supplemental Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on November 19, 2009 (SEC File No. 001-34177))*
10.7
Discovery Communications, Inc. 2005 Incentive Plan (As Amended and Restated) (incorporated by reference to Exhibit 10.6 to Amendment No. 2 (SEC File No. 333-151586))*
10.8
2011 Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.1 to the Form 8-K filed on May 19, 2011 (SEC File No. 001-34177))*

10.9
Discovery Communications, Inc. 2013 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 16, 2013 (SEC File No. 001-34177))*

10.10
Discovery Communications, Inc. 2005 Non-Employee Director Incentive Plan (As Amended and Restated Effective May 20, 2015) (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 22, 2015 (SEC File No. 001-34177))*


10.11
Form of Stock Option Agreement (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on October 7, 2008 (SEC File No. 001-34177))*

EXHIBITS INDEX
Exhibit No.     Description

10.12
Form of 7-year Stock Appreciation Right Agreement (incorporated by reference to Exhibit 10.7 to the Form 8-K filed on October 7, 2008 (SEC File No. 001-34177))*

10.13
Form of Stock Option Agreement (incorporated by reference to Exhibit 99.1 to the Form 8-K filed on March 9, 2009 (SEC File No. 001-34177))*


10.14
Form of Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on August 4, 2009 (SEC File No. 001-34177))*

10.15
Form of Performance Restricted Stock Agreement (incorporated by reference to Exhibit 10.26 to the Form 10-K filed on February 22, 2010 (SEC File No. 001-34177))*

10.16
Form of Nonqualified Stock Option Grant Agreement (incorporated by reference to Exhibit 10.27 to the Form 10-K filed on February 22, 2010 (SEC File No. 001-34177))*

10.17
Form of Cash-Settled Stock Appreciation Right Agreement (incorporated by reference to Exhibit 10.28 to the Form 10-K filed on February 22, 2010 (SEC File No. 001-34177))*



10.18
Form of Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.29 to the Form 10-K filed on February 22, 2010 (SEC File No. 001-34177))*

10.19
Form of Performance Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on March 1, 2011 (SEC File No. 001-34177))*

10.20
Form of Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on March 1, 2011 (SEC File No. 001-34177))*

10.21
Form of Cash-Settled Stock Appreciation Right Grant Agreement (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on March 1, 2011 (SEC File No. 001-34177))*

10.22
Form of Nonqualified Stock Option Grant Agreement (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on March 1, 2011 (SEC File No. 001-34177))*

10.23
Form of David Zaslav's Cash-Settled Stock Appreciation Award Agreement (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on December 21, 2011 (SEC File No. 001-34177))*

10.24
Form of Discovery Performance Equity Program Nonqualified Stock Option Agreement for Employees (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on May 16, 2013 (SEC File No. 001-34177))*

10.25
Form of Discovery Communications, Inc. Restricted Stock Unit Agreement for Employees (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on May 16, 2013 (SEC File No. 001-34177))*

10.26
Form of Discovery Communications, Inc. Performance Restricted Stock Unit Grant Agreement for Employees (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on May 16, 2013 (SEC File No. 001-34177))*

EXHIBITS INDEX
Exhibit No.     Description

10.27
Form of Discovery Performance Equity Program Cash-Settled Stock Appreciation Right Agreement for Employees (incorporated by reference to Exhibit 10.5 of the Form 8-K filed on May 16, 2013 (SEC File No. 001-34177))*

10.28
Form of Special Stock Appreciation Right Award Agreement (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on January 3, 2014 (SEC File No. 001-34177))*

10.29
Form of David Zaslav's One Year Performance Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.45 to the Form 10-K filed on February 20, 2014 (SEC File No. 001-34177))*

10.30
Form of David Zaslav's Three Year Performance Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.46 to the Form 10-K filed on February 20, 2014 (SEC File No. 001-34177))*

10.31
Form of Stock Dividend Related Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed on July 31, 2014 (SEC File No. 001-34177))*
10.32
Form of Stock Dividend Related Performance Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.3 to the Form 10-Q filed on July 31, 2014 (SEC File No. 001-34177))*
10.33
Form of Stock Dividend Related Stock Appreciation Right Agreement (incorporated by reference to Exhibit 10.4 to the Form 10-Q filed on July 31, 2014 (SEC File No. 001-34177))*
10.34
Form of Stock Dividend Related Nonqualified Stock Option Grant Agreement (incorporated by reference to Exhibit 10.5 to the Form 10-Q filed on July 31, 2014 (SEC File No. 001-34177))*
10.35
Form of David Zaslav's Stock Dividend Related Discovery Appreciation Plan Letter (incorporated by reference to Exhibit 10.6 to the Form 10-Q filed on July 31, 2014 (SEC File No. 001-34177))*
10.36
Form of David Zaslav's Stock Dividend Related Performance Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.7 to the Form 10-Q filed on July 31, 2014 (SEC File No. 001-34177))*
10.37
Form of David Zaslav's Stock Dividend Related Stock Appreciation Right Agreement for Pre-2014 Awards (incorporated by reference to Exhibit 10.8 to the Form 10-Q filed on July 31, 2014 (SEC File No. 001-34177))*
10.38
Form of David Zaslav's Stock Dividend Related Stock Appreciation Right Agreement for the 2014 Award (incorporated by reference to Exhibit 10.9 to the Form 10-Q filed on July 31, 2014 (SEC File No. 001-34177))*
10.39
Employment Agreement, dated as of November 28, 2006, between David Zaslav and Discovery Communications, Inc. (incorporated by reference to Exhibit 10.9 to Amendment No. 1 to the Registration Statement on Form S-4 (SEC File No. 333-151586))*
10.40
Addendum to Employment Agreement, dated as of September 9, 2009, between David Zaslav and Discovery Communications, Inc. (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed on November 3, 2009 (SEC File No. 001-34177))*

10.41
Second Addendum to Employment Agreement, dated as of December 15, 2011, between David Zaslav and Discovery Communications, Inc. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on December 21, 2011 (SEC File No. 001-34177))*

EXHIBITS INDEX
Exhibit No.     Description

10.42
Employment Agreement, dated as of January 2, 2014, between Discovery Communications, Inc. and David Zaslav (incorporated by reference to Exhibit 10.44 to the Form 10-K filed on February 20, 2014 (SEC File No. 001-34177))*


10.43
Amended and Restated Employment Agreement, dated as of July 21, 2010, between Bruce Campbell and Discovery Communications, LLC (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on November 2, 2010 (SEC File No. 001-34177))*


10.44
First Amendment to Employment Agreement, dated as of July 31, 2014, between Bruce Campbell and Discovery Communications, LLC (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on November 4, 2014 (SEC File No. 001-34177))*


10.45
Employment Agreement, dated as of August 8, 2014, between Bruce Campbell and Discovery Communications, LLC (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed on November 4, 2014 (SEC File No. 001-34177))*

10.46
Amendment to Employment Agreement, dated as of September 24, 2015, between Bruce Campbell and Discovery Communications, LLC (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on November 3, 2015 (SEC File No. 001-34177))*


10.47
Employment Agreement, dated as of January 9, 2012, between Andrew Warren and Discovery Communications, LLC (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on May 8, 2012 (SEC File No. 001-34177))*


10.48
Amendment to Employment Agreement, dated as of June 1, 2012, between Andrew Warren and Discovery Communications, LLC (incorporated by reference to Exhibit 10.33 to the Form 10-K/A filed on February 19, 2013 (SEC File No. 001-34177))*

10.49
Employment Agreement, dated as of September 18, 2014, between Andrew Warren and Discovery Communications, LLC (incorporated by reference to Exhibit 10.4 to the Form 10-Q filed on November 4, 2014 (SEC File No. 001-34177))*

10.50
First Amendment to Employment Agreement, dated as of February 22, 2016, between Andrew Warren and Discovery Communications, LLC (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on February 23, 2016 (SEC File No. 001-34177))*
10.51
Second Amendment to Employment Agreement, dated as of September 30, 2016, between Andrew Warren and Discovery Communications, LLC (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on November 1, 2016 (SEC File No. 001-34177))*
10.52
Third Amendment to Employment Agreement, dated as of January 18, 2017, between Andrew Warren and Discovery Communications, LLC (incorporated by reference to Exhibit 10.52 to the Form 10-K filed on February 14, 2017 (SEC File No. 001-34177))*
10.53
Employment Agreement, dated as of October 3, 2016, between Dr. Gunnar Wiedenfels and Discovery Communications, LLC (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed on November 1, 2016 (SEC File No. 001-34177))*
10.54
Employment Agreement, dated as of January 14, 2014, between Jean-Briac Perrette and Discovery Communications, LLC (incorporated by reference to Exhibit 10.54 to the Form 10-K filed on February 19, 2015 (SEC File No. 001-34177))*
EXHIBITS INDEX
Exhibit No.     Description

10.55
Employment Agreement, dated as of June 13, 2016, between Jean-Briac Perrette and Discovery Corporate Services Limited (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on August 2, 2016 (SEC File No. 001-34177))*
10.56
Employment Agreement, dated as of September 18, 2015, between Paul Guagliardo and Discovery Communications, LLC (filed herewith)*

10.57
Preferred Share Exchange Agreement, dated as of July 30, 2017, by and between Discovery Communications, Inc. and Advance/Newhouse Programming Partnership (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on July 31, 2017 (SEC File No. 001-34177))
10.58
Share Repurchase Agreement, dated as of May 22, 2014, by and between Discovery Communications, Inc. and Advance/Newhouse Programming Partnership (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 22, 2014 (SEC File No. 001-34177))

10.59
Letter Amendment, dated as of August 25, 2014, between Discovery Communications, Inc. and Advance/Newhouse Programming Partnership (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on August 26, 2014 (SEC File No. 001-34177))

10.60
Amendment No. 2 to Share Repurchase Agreement, dated as of August 7, 2017, by and between Discovery Communications, Inc. and Advance/Newhouse Programming Partnership (incorporated by reference to Exhibit 10.7 to the Form 10-Q filed on November 2, 2017 (SEC File No. 001-34177))
10.61
Voting Agreement, dated as of July 30, 2017, by and among Scripps Networks Interactive, Inc., Discovery Communications, Inc. and John Malone (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on July 31, 2017 (SEC File No. 001-34177))
10.62
Voting Agreement, dated as of July 30, 2017, by and among Scripps Networks Interactive, Inc., Discovery Communications, Inc. and Advance/Newhouse Programming Partnership (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on July 31, 2017 (SEC File No. 001-34177))
10.63
Voting Agreement, dated as of July 30, 2017, by and among Scripps Networks Interactive, Inc., Discovery Communications, Inc. and the persons whose names are set forth on the signature pages thereto under the caption "Stockholders" (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on July 31, 2017 (SEC File No. 001-34177))
12
Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (filed herewith)
14
Discovery Communications, Inc. Code of Ethics (incorporated by reference to Exhibit 14.1 to the Form 8-K filed on April 30, 2012 (SEC File No. 001-34177))

21
List of Subsidiaries of Discovery Communications, Inc. (filed herewith)
23
Consent of Independent Registered Public Accounting Firm (filed herewith)
31.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as Amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as Amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
EXHIBITS INDEX
Exhibit No.     Description

101.INSXBRL Instance Document†
101.SCHXBRL Taxonomy Extension Schema Document†
101.CALXBRL Taxonomy Extension Calculation Linkbase Document†
101.DEFXBRL Taxonomy Extension Definition Linkbase Document†
101.LABXBRL Taxonomy Extension Label Linkbase Document†
101.PREXBRL Taxonomy Extension Presentation Linkbase Document†

* Indicates management contract or compensatory plan, contract or arrangement.
†Attached as Exhibit 101 to this Annual Report on Form 10-K are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016, (ii) Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016, and 2015, (iii) Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2017, 2016, and 2015, (iv) Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016, and 2015, (v) Consolidated Statements of Equity for the Years Ended December 31, 2017, 2016, and 2015, and (vi) Notes to Consolidated Financial Statements.



SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DISCOVERY, COMMUNICATIONS, INC.
(Registrant)
Date: February 28, 201824, 2022By:/s/ David M. Zaslav
David M. Zaslav
President and Chief Executive Officer

129


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
SignatureTitleDate
SignatureTitleDate
/s/ David M. Zaslav
President and Chief Executive Officer, and Director
(Principal Executive Officer)
February 28, 201824, 2022
David M. Zaslav
/s/ Gunnar Wiedenfels
Senior Executive Vice President and

Chief Financial Officer (Principal
(Principal Financial Officer)
February 28, 201824, 2022
Gunnar Wiedenfels
/s/ Kurt T. WehnerLori C. Locke
Executive Vice President and Chief Accounting Officer

(Principal Accounting Officer)
February 28, 201824, 2022
Kurt T. WehnerLori C. Locke
/s/ S. Decker AnstromDirectorFebruary 28, 2018
S. Decker Anstrom
/s/ Robert R. BeckDirectorFebruary 28, 201824, 2022
Robert R. Beck
/s/ Robert R. BennettDirectorFebruary 28, 201824, 2022
Robert R. Bennett
/s/ Paul A. GouldDirectorFebruary 28, 201824, 2022
Paul A. Gould
/s/ Robert L. JohnsonDirectorFebruary 24, 2022
Robert L. Johnson
/s/ Kenneth W. LoweDirectorFebruary 24, 2022
Kenneth W. Lowe
/s/ John C. MaloneDirectorFebruary 28, 201824, 2022
John C. Malone
/s/ Robert J. MironDirectorFebruary 28, 201824, 2022
Robert J. Miron
/s/ Steven A. MironDirectorFebruary 28, 201824, 2022
Steven A. Miron
/s/ Daniel E. SanchezDirectorFebruary 28, 201824, 2022
Daniel E. Sanchez
/s/ Susan M. SwainDirectorFebruary 28, 201824, 2022
Susan M. Swain
/s/ J. David WargoDirectorFebruary 28, 201824, 2022
J. David Wargo