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Earnings Per Share
6 Months Ended
Jun. 30, 2018
Earnings Per Share [Abstract]  
Earnings Per Share
EARNINGS PER SHARE
In calculating earnings per share, the Company follows the two-class method, which distinguishes between classes of securities based on the proportionate participation rights of each security type in the Company's undistributed income. The Company's Series A, B and C common stock and the Series C-1 convertible preferred stock are treated as one class for purposes of applying the two-class method, because they have substantially equal rights and share equally on an as-converted basis with respect to income available to Discovery, Inc.
Pursuant to the Exchange Agreement with Advance/Newhouse, Discovery issued 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 9.) The Exchange is treated as a reverse stock split and the Company has recast historical basic and diluted earnings per share available to Series C-1 preferred stockholders (previously Series C preferred stockholders). 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 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 three and six months ended June 30, 2017. 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 income allocated to Discovery, Inc. stockholders (in millions).
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Numerator:
 
 
 
 
 
 
 
 
Net income
 
$
244

 
$
380

 
$
247

 
$
601

Less:
 
 
 
 
 
 
 
 
Allocation of undistributed income to Series A-1 convertible preferred stock
 
(21
)
 
(46
)
 
(22
)
 
(72
)
Net income attributable to noncontrolling interests
 
(23
)
 

 
(28
)
 

Net income attributable to redeemable noncontrolling interests
 
(5
)
 
(6
)
 
(11
)
 
(12
)
Redeemable noncontrolling interest adjustments to redemption value
 
(6
)
 

 
(6
)
 

Net income allocated to Discovery, Inc. Series A, B and C common and Series C-1 convertible preferred stockholders for basic net income per share
 
$
189

 
$
328

 
$
180

 
$
517

 
 
 
 
 
 
 
 
 
Allocation of net income to Discovery, Inc. Series A, B and C common stockholders and Series C-1 convertible preferred stockholders for basic net income per share:
 
 
 
 
 
 
 
 
Series A, B and C common stockholders
 
155


250


145


393

Series C-1 convertible preferred stockholders
 
34


78


35


124

Total
 
189

 
328

 
180

 
517

Add:
 
 
 
 
 
 
 
 
Allocation of undistributed income to Series A-1 convertible preferred stockholders
 
21

 
46

 
22

 
72

Net income allocated to Discovery, Inc. Series A, B and C common stockholders for diluted net income per share
 
$
210

 
$
374

 
$
202

 
$
589


Net income allocated to Discovery, Inc. Series C-1 convertible preferred stockholders for diluted net income per share is included in net income allocated to Discovery, Inc. Series A, B and C common stockholders for diluted net income per share. For the three months ended June 30, 2018 and 2017, net income allocated to Discovery, Inc. Series C-1 convertible preferred stockholders used to calculate diluted net income per share was $34 million and $78 million, respectively. For the six months ended June 30, 2018 and 2017, net income allocated to Discovery, Inc. Series C-1 convertible preferred stockholders used to calculate diluted net income per share was $35 million and $124 million, respectively.
The table below sets forth the weighted average number of shares outstanding utilized in determining the denominator for basic and diluted earnings per share (in millions).
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Denominator — weighted average:
 
 
 
 
 
 
 
 
Series A, B and C common shares outstanding — basic
 
523


384


473


387

Impact of assumed preferred stock conversion
 
187


192


187


193

Dilutive effect of share-based awards
 
2


2


1


3

Series A, B and C common shares outstanding — diluted
 
712


578


661


583

 
 
 
 
 
 
 
 
 
Series C-1 convertible preferred stock outstanding — basic and diluted
 
6


6


6


6


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. 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 share of Series C-1 preferred stock.
The table below sets forth the Company's calculated earnings per share.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Basic net income per share allocated to Discovery, Inc. Series A, B and C common and Series C-1 convertible preferred stockholders:
 
 
 
 
 
 
 
 
Series A, B and C common stockholders

$
0.30


$
0.65

 
$
0.31


$
1.02

Series C-1 convertible preferred stockholders
 
$
5.73


$
12.54

 
$
5.93


$
19.65

 
 
 
 
 
 
 
 
 
Diluted net income per share allocated to Discovery, Inc. Series A, B and C common and Series C-1 convertible preferred stockholders:
 
 
 
 
 
 
 
 
Series A, B and C common stockholders
 
$
0.30


$
0.64

 
$
0.31


$
1.01

Series C-1 convertible preferred stockholders
 
$
5.72


$
12.50

 
$
5.92


$
19.56


Earnings per share amounts may not recalculate due to rounding. The computation of the diluted 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.
The table below presents the details of the anticipated stock repurchases and share-based awards that were excluded from the calculation of diluted earnings per share (in millions).
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Anti-dilutive stock options and RSUs
 
11
 
11
 
12
 
10
PRSUs whose performance targets have not been achieved
 
2
 
1
 
2
 
1

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.