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U.S. Networks Lift Discovery Earnings

Discovery Communications—which announced plans to cut costs—reported higher profits in the first quarter, led by higher income at its U.S. cable networks.

First-quarter net income rose 5% to $263 million, or 42 cents a share, from $250 million, or 37 cents a share a year ago.

Revenues rose 2% to $1.6 billion.

“Discovery’s business momentum continued to build in the first quarter with strong viewership across our worldwide portfolio of brands and platforms,” said CEO David Zaslav. “We have also made progress in reaching consumers across the world’s 7 billion screens with a robust multiplatform strategy that is increasingly showing potential to drive growth in the future. Given the long-term growth profile associated with the investments we’ve made, I remain optimistic about our overall operating and financial prospects, the opportunities ahead, and our potential to deliver significant shareholder value.”

The company late Wednesday said it was embarking on a cost-cutting plan that would reduce personnel and potentially involve restructurings and other changes. Discovery said the personnel moves also would cost between $40 million and $60 million.

The cost-cutting program is designed to let the company increase investment in digital services and content creation.

Discovery says that for the full year it expects adjusted earnings per share, excluding currency effects, to grow by at least high teens and free cash flow to grow by at least high teens.

In the first quarter, operating income at Discovery’s U.S. cable networks rose 11% to $473 million.

Revenues rose 8% to $807 million. Distribution revenue was up 8%. In what is generally being described as a hot ad market, Discovery’s U.S. network’s ad revenues rose 7% to $402 million.

Discovery’s international networks posted a 14% decline in operating income, impacted by the strong dollar, which cut growth by 12 percentage points. Revenues were down 3% to $771 million.