International Entertainment News: Discovery Communications Reports Second Quarter 2009 Results

Discovery Communications Reports Second Quarter 2009 Results

Second Quarter 2009 Financial Highlights: - Adjusted OIBDA increased to $381 million - Net income available to Discovery stockholders increased to $183 million - Free Cash Flow increased to $166 million

SILVER SPRING, Md., Aug. 4 /PRNewswire-FirstCall/ -- Discovery Communications, Inc. ("Discovery" or the "Company") (NASDAQ:DISCA)(NASDAQ:DISCB)(NASDAQ: DISCK) today reported financial results for the second quarter ended June 30, 2009. The discussion below assumes the transaction between Discovery Holding Company ("DHC"), Discovery Communications Holding, LLC ("DCH"), and Advance/Newhouse Programming Partnership that resulted in Discovery becoming a public company, as described in the Other Items section, occurred on January 1, 2008, and as such includes 100% of Discovery's results.

(Logo: http://www.newscom.com/cgi-bin/prnh/20080918/NETH035LOGO )

David Zaslav, Discovery's President and Chief Executive Officer, said "Discovery's second quarter results demonstrate our ability to execute on our business plan and strategic initiatives in a difficult operating environment. We delivered 12% ratings growth across our domestic networks and increased international subscribers 11% while offsetting our continued investment in programming with reductions to the selling, general and administrative cost base. The result was demonstrable operating leverage, with Adjusted OIBDA growth of 13% despite the challenging economy and adverse foreign currency fluctuations. At the same time, we took several strategic steps to better position the Company including partnering with Hasbro on a new children's venture and monetizing an underutilized part of our valuable distribution platform. We also considerably strengthened our balance sheet, paying down $772 million in debt and reducing our leverage to 2.5 times, providing us additional financial flexibility. While the operating environment remains uncertain, with a strengthened balance sheet, operational momentum and sustained operating leverage, we expect to continue to deliver on our commitments to shareholders in the second half of 2009."

Second quarter revenues of $881 million were down slightly compared with the second quarter a year ago as 2% growth at U.S. Networks was offset by a 5% decline at International Networks, primarily the result of a $34 million unfavorable impact from foreign currency fluctuations. Adjusted Operating Income Before Depreciation and Amortization (1) ("OIBDA") grew 13% to $381 million, driven by a 11% increase at U.S. Networks partially offset by a 5% decline at International Networks due primarily to a $12 million unfavorable impact from foreign currency fluctuations. Total company Adjusted OIBDA margin increased to 43% for the second quarter from 38% for the same period a year ago.

Second quarter net income available to Discovery Communications, Inc. stockholders of $183 million ($0.43 per share) increased $140 million compared to $43 million ($0.16 per share) for the second quarter a year ago. The increased results primarily reflect the $45 million growth in Adjusted OIBDA and a net of tax gain of $46 million as a result of the sale of 50% of the Discovery Kids channel.

Free cash flow was $166 million for the second quarter, an increase of $71 million from the second quarter of 2008. Free cash flow is defined as cash provided by operating activities less acquisitions of property and equipment.

(1) See the definition of Adjusted Operating Income Before Depreciation and Amortization on page 4.

SEGMENT RESULTS

(dollars in Three Months Ended Six Months Ended
millions) June 30, June 30,
----------------------- ----------------------
2009 2008(a) Change 2009 2008(a) Change
---- ------- ------ ---- ------- ------
Revenues:
U.S. Networks $557 $544 2% $1,066 $1,028 4%
International
Networks 283 298 (5%) 538 564 (5%)
Commerce, Education,
and Other 40 41 (2%) 89 81 10%
Corporate 1 2 (50%) 5 21 (76%)
- - - --
Total Revenues $881 $885 0% $1,698 $1,694 0%
==== ==== ====== ======

Adjusted OIBDA:
U.S. Networks $330 $296 11% $605 $554 9%
International
Networks 92 97 (5%) 188 177 6%
Commerce, Education,
and Other 5 (3) NM 11 (3) NM
Corporate (46) (54) 15% (94) (91) (3%)
--- --- --- ---
Total Adjusted OIBDA $381 $336 13% $710 $637 11%
==== ==== ==== ====

(dollars in Three Months Ended Six Months Ended
millions) June 30, June 30,
----------------------- ----------------------
2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Revenues:
Distribution $247 $236 5% $495 $460 8%
Advertising 290 288 1% 534 527 1%
Other 20 20 0% 37 41 (10%)
-- -- -- --
Total Revenues $557 $544 2% $1,066 $1,028 4%
==== ==== ====== ======

Adjusted OIBDA $330 $296 11% $605 $554 9%

Adjusted OIBDA
Margin 59% 54% 57% 54%

U.S. Networks' revenues in the second quarter of 2009 increased 2% to $557 million primarily driven by distribution and advertising revenue growth. Distribution revenue grew 5% largely from higher rates, subscriber growth primarily from networks carried on the digital tier and lower launch-incentives amortization, offset by the absence of $5 million due to the removal of Discovery Kids from the consolidated results following the sale of 50% of the entity on May 22, 2009, and an $8 million one-time revenue item recorded in the second quarter of 2008. Adjusting for these items, distribution revenue grew 10% compared with second quarter a year ago. Advertising revenue increased 1% as a result of higher pricing and increased ratings, partially offset by lower cash sellouts due to softness in the economy.

Adjusted OIBDA increased 11% to $330 million reflecting the 2% revenue growth and a 10% decline in operating expenses as lower marketing, selling and administrative costs were partially offset by a slight increase in programming spending. Operating expenses would have declined 13% excluding $7 million of costs related to OWN incurred in the current quarter.

International Networks

(dollars in Three Months Ended Six Months Ended
millions) June 30, June 30,
----------------------- ----------------------
2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Revenues:
Distribution $179 $182 (2%) $356 $360 (1%)
Advertising 78 90 (13%) 135 155 (13%)
Other 26 26 0% 47 49 (4%)
-- -- -- --
Total Revenues $283 $298 (5%) $538 $564 (5%)
==== ==== ==== ====

Adjusted OIBDA $92 $97 (5%) $188 $177 6%

Adjusted OIBDA
Margin 33% 33% 35% 31%

International Networks' revenues for the second quarter decreased 5% to $283 million as a $34 million unfavorable impact from foreign currency fluctuations resulted in a 13% decline in advertising revenue and slightly lower distribution revenue. Excluding the impact of foreign currency fluctuations, revenues increased 7% led by 9% affiliate revenue growth, primarily from subscriber increases in Latin America, EMEA and Asia-Pacific. Advertising revenue in local currency terms was up 3% led by growth in EMEA and the UK.

Adjusted OIBDA decreased 5% to $92 million as the 5% revenue decline was partially offset by a 6% decline in operating expenses which included a content charge of $11 million in the quarter, primarily at our German operations, and $12 million unfavorable impact related to foreign exchange. Excluding the impact of foreign currency and the content charge, Adjusted OIBDA increased 21% reflecting the 7% revenue growth partially offset by 1% higher operating expenses as increased programming expenses were mostly offset by lower marketing and personnel costs.

Commerce, Education, and Other

Adjusted OIBDA $5 $(3) NM $11 $(3) NM

Commerce, Education and Other second quarter revenues of $40 million were slightly lower than the second quarter of 2008, as increased education revenues from higher streaming volumes was offset by lower commerce revenues as a result of the transition to a new licensing model. Adjusted OIBDA increased to $5 million as compared with a loss of $3 million a year ago as commerce operating costs declined due to lower personnel costs and the new licensing model.

Corporate

Adjusted OIBDA increased $8 million when compared to the second quarter a year ago due primarily to lower consulting costs.

FULL YEAR 2009 OUTLOOK

For the full year ended December 31, 2009, Discovery Communications, Inc., expects total revenue between $3,375 million and $3,500 million, Adjusted OIBDA between $1,350 million and $1,400 million, an increase to the bottom end of the range, and net income available to Discovery Communications, Inc. stockholders of $500 million to $600 million, increased primarily to reflect the net of tax gain on the Discovery Kids transaction. Our outlook incorporates current foreign exchange rates for revenues and expenses, the removal of Discovery Kids from our consolidated operations and current share price for mark-to-market share-based compensation calculations, while excluding the impact of OWN.

NON-GAAP FINANCIAL MEASURES

Adjusted OIBDA and Free Cash Flow

In addition to the results prepared in accordance with generally accepted accounting principles (GAAP) provided in this release, the Company has presented Adjusted OIBDA and free cash flow. The Company evaluates the operating performance of segments based on financial measures such as revenues and Adjusted OIDBA. Adjusted OIBDA is defined as revenues less cost of revenues and selling, general and administrative expense excluding (i) mark-to-market share-based compensation expense, (ii) amortization of deferred launch incentives, (iii) restructuring and impairment charges, and (iv) gains (losses) on asset and dispositions. Management uses Adjusted OIBDA to assess the operational strength and performance of its segments and the Company as a whole. Management uses this measure to view operating results, 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 operating performance of each segment using the same metric management uses and also provides investors a measure to analyze operating performance of each segment against historical data. The Company excludes mark-to-market compensation expense and restructuring and impairment charges from the calculation of Adjusted OIBDA due to their volatility or non-recurring nature. The Company also excludes the amortization of deferred launch incentive payments because these payments are infrequent and the amortization does not represent cash payments in the current reporting period.

The Company defines free cash flow as cash provided by operations less acquisitions of property and equipment. The Company uses free cash flow as it believes it is an important indicator for management and investors of the Company's liquidity, including its ability to reduce debt, make strategic investments and return capital to shareholders.

Because Adjusted OIBDA and free cash flow are non-GAAP measures, they should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance reported in accordance with U.S. GAAP. Please review the supplemental financial schedules beginning on page 9 for reconciliations to GAAP measures.

OTHER ITEMS

In May 2009, the Company completed the issuance of $500 million of indebtedness pursuant to a supplement to its Term Loan B credit agreement, referred to as Term Loan C. Net proceeds were used to repay outstanding debt.

Also in May 2009, the Company closed its sale of a 50% interest in a joint venture which holds the Discovery Kids channel. Proceeds from the sale were $300 million and as of May 22, 2009 Discovery Kids is no longer consolidated in the Company's financial statements.

In September 2008, Discovery Holding Company, Inc. ("DHC") and Advance/Newhouse Programming Partnership ("Advance/Newhouse") closed a transaction that included the combination of DHC's approximate 67% interest in Discovery Communications Holding, LLC ("DCH") with Advance/Newhouse's approximate 33% interest in DCH. In connection with the transaction, DHC spun-off its interests in Ascent Media Corporation ("AMC") except for certain businesses that provide sound-related services, which remain with Discovery. As a result of the transaction, DHC ceased to be a reporting company and Discovery became the successor reporting entity to DHC. The attached condensed consolidated statements of operations, condensed consolidated balance sheets and condensed consolidated statements of cash flows assume the above transaction occurred as of January 1, 2008, in accordance with U.S. GAAP. Additionally, the results of AMC, with the exception of the Creative Sound Services business, have been treated as discontinued operations for 2008. AMC's results of operations are not separately presented as discontinued operations in the condensed consolidated statements of operations because its net operating results were not significant for the three and six months ended June 30, 2008. See our Form 10-Q filed with the Securities and Exchange Commission on August 4, 2009 for a more detailed description of the transaction and for further explanation of the financial statement presentation.

The 2008 financial information has been recast so that the basis of presentation is consistent with that of the 2009 financial information. This recast reflects (i) the gross combined financial information of both DHC and DCH as though the transaction was consummated on January 1, 2008, (ii) adjustments to revenues and expenses to exclude amounts for AMC and (iii) the adoption of Financial Accounting Standards Board Statement No. 160, Non-controlling Interests in Consolidated Financial Statement - an Amendment of ARB No. 51.

Conference Call Information

Discovery Communications, Inc. will host a conference call today at 8:30 a.m. EDT to discuss its second quarter 2009 results. To listen to the call, visit http://www.discoverycommunications.com/.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. These statements are based on information available to the Company as of the date hereof, and the Company's actual results could differ materially from those stated or implied, due to risks and uncertainties associated with its business, which include the risk factors disclosed in its Annual Report on Form 10-K filed with the SEC on February 25, 2009. Forward-looking statements include statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future, and can be identified by forward-looking words such as "anticipate," "believe," "could,", "continue," "estimate," "expect," "intend," "may," "should," "will" and "would" or similar words. Forward-looking statements in this release include, without limitation, the full year 2009 outlook. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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

Three Months Six Months
Ended Ended
June 30, June 30,
-------- --------
2009 2008(a) 2009 2008(a)
---- ------- ---- -------
Revenues:
Distribution $426 $418 $851 $820
Advertising 368 378 669 682
Other 87 89 178 192
-- -- --- ---
Total revenues 881 885 1,698 1,694

Cost of revenues, excluding depreciation and
amortization listed below 257 254 510 496
Selling, general and administrative 310 370 591 621
Depreciation and amortization 40 49 78 96
Asset impairments 26 - 26 -
Exit and restructuring charges 14 4 17 4
Gain on business disposition (252) - (252) -
----- --- ----- ---
395 677 970 1,217
--- --- --- -----

Operating income 486 208 728 477

Interest expense (60) (66) (117) (135)
Other non-operating income, net 20 22 28 6
-- -- -- --

Income before income taxes 446 164 639 348
Provision for income taxes (267) (82) (337) (192)
----- ---- ----- -----

Net income 179 82 302 156
Less: Net loss (income) attributable to
non-controlling interests 6 (39) 2 (79)
-- ---- -- ----
Net income attributable to Discovery
Communications, Inc. 185 43 304 77
=== == === ==

Stock dividends to preferred interests (2) - (2) -
--- --- --- ---
Net income available to Discovery
Communications, Inc. stockholders $183 $43 $302 $77
==== === ==== ===

Net income per share available to Discovery
Communications, Inc. stockholders:
Basic $0.43 $0.16 $0.72 $0.28
===== ===== ===== =====
Diluted $0.43 $0.16 $0.71 $0.28
===== ===== ===== =====

Weighted average number of shares
outstanding:
Basic 422 282 422 282
=== === === ===
Diluted 424 282 423 282
=== === === ===

(a) The 2008 financial information has been recast so that the basis of
presentation is consistent with that of the 2009 financial
information. See Other Items on page 4 for additional detail.
DISCOVERY COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; amounts in millions)

June 30, December 31,
2009 2008(a)
---- -----------
ASSETS
Current assets:
Cash and cash equivalents $339 $100
Receivables, net 759 780
Content rights, net 78 73
Prepaid expenses and other
current assets 155 156
--- ---
Total current assets 1,331 1,109

Noncurrent content rights, net 1,230 1,163
Property and equipment, net 410 395
Goodwill 6,439 6,891
Intangible assets, net 665 716
Other noncurrent assets 621 210
--- ---
Total assets $10,696 $10,484
======= =======

LIABILITIES, REDEEMABLE
NON-CONTROLLING INTERESTS IN
SUBSIDIARIES, AND EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $564 $421
Current portion of long-term debt 421 458
Other current liabilities 242 191
--- ---
Total current liabilities 1,227 1,070

Long-term debt 3,053 3,331
Other noncurrent liabilities 449 473
--- ---
Total liabilities 4,729 4,874

Commitments and contingencies
Redeemable non-controlling
interests in subsidiaries 49 49

Equity:
Preferred stock 2 2
Common stock 3 3
Additional paid-in capital 6,555 6,545
Accumulated deficit (632) (936)
Accumulated other
comprehensive loss (25) (78)
---- ----
Equity attributable to Discovery
Communications, Inc. 5,903 5,536
Equity attributable to
non-controlling interests 15 25
-- --
Total equity 5,918 5,561
----- -----
Total liabilities, redeemable
non-controlling interests in
subsidiaries, and equity $10,696 $10,484
====== =======

Six Months Ended June 30,
-------------------------
2009 2008(a)
---- -------

OPERATING ACTIVITIES
Net income $302 $156
Adjustments to reconcile net income to
cash provided by operating activities:
Share-based compensation expense 98 19
Depreciation and amortization 78 127
Asset impairments 26 -
Gain on business disposition (252) -
Gain on sale of securities (13) -
Deferred income taxes 15 77
Other noncash expenses, net 18 35
Changes in operating assets and
liabilities, net of discontinued
operations:
Receivables, net 15 (67)
Accounts payable and accrued liabilities 106 (100)
Other, net (73) (65)
---- ----
Cash provided by operating activities 320 182

INVESTING ACTIVITIES
Purchases of property and equipment (34) (42)
Net cash acquired from Newhouse
Transaction - 45
Business acquisitions, net of cash
acquired - (7)
Proceeds from business disposition 300 -
Proceeds from sales of securities 22 24
Other investing activities, net - 2
--- ---
Cash provided by investing activities 288 22

FINANCING ACTIVITIES
Net (repayments of) borrowings from
revolver loans (315) 92
Borrowings from long-term debt, net of
discount and debt issuance costs 478 -
Principal repayments of long-term debt (518) (187)
Principal repayments of capital lease
obligations (5) (8)
Cash distribution to non-controlling
interest (8) -
Other financing activities, net (3) (9)
--- ---
Cash used in financing activities (371) (112)

Effect of exchange rate changes on cash
and cash equivalents 2 7
--- ---

CHANGE IN CASH AND CASH EQUIVALENTS 239 99
Cash and cash equivalents of continuing
operations, beginning of period 100 8
Cash and cash equivalents of discontinued
operations, beginning of period - 201
--- ---
CASH AND CASH EQUIVALENTS, END OF PERIOD $339 $308
==== ====

(a) The 2008 financial information has been recast so that the basis of
presentation is consistent with that of the 2009 financial
information. See Other Items on page 4 for additional detail.
DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION
(unaudited; amounts in millions)

Three Months Ended June 30, 2009
--------------------------------
Adjusted
Operating Amortization
Income Before of
Depreciation Depreciation Deferred Mark-to-Market
and and Launch Share-Based Operating
Amortization Amortization Incentives Compensation Other(a) Income
-----------------------------------------------------------------
U.S.
Networks $330 $(8) $(5) $(2) $225 $540
International
Networks 92 (11) (8) - (9) 64
Commerce,
Education,
and Other 5 (1) - - (1) 3
Corporate (46) (20) - (52) (3) (121)
--- --- -- --- -- ----
Total $381 $(40) $(13) $(54) $212 $486
==== ==== ==== ==== ==== ====
Three Months Ended June 30, 2008(b)
-----------------------------------
Adjusted
Operating Amortization
Income Before of
Depreciation Depreciation Deferred Mark-to-Market
and and Launch Share-Based Operating
Amortization Amortization Incentives Compensation Other(a) Income
-----------------------------------------------------------------

U.S.
Networks $296 $(14) $(10) $(1) $- $271
International
Networks 97 (11) (11) - - 75
Commerce,
Education,
and Other (3) (3) - - (4) (10)
Corporate (54) (21) - (53) - (128)
--- --- -- --- -- ----
Total $336 $(49) $(21) $(54) $(4) $208
==== ==== ==== ==== === ====

(a) For the three months ended June 30, 2009, amount represents the pre-
tax gain on the sale of Discovery Kids of $252 million as well as
asset impairments of $26 million and exit and restructuring charges
of $14 million. For the three months ended June 30, 2008, amount
represents exit and restructuring charges.
(b) The 2008 financial information has been recast so that the basis of
presentation is consistent with that of the 2009 financial
information. See Other Items on page 4 for additional detail.
DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION
(unaudited; amounts in millions)

Six Months Ended June 30, 2009
------------------------------
Adjusted
Operating Amortization
Income Before of
Depreciation Depreciation Deferred Mark-to-Market
and and Launch Share-Based Operating
Amortization Amortization Incentives Compensation Other(a) Income
-----------------------------------------------------------------

U.S.
Networks $605 $(16) $(11) $(1) $225 $802
International
Networks 188 (21) (16) - (10) 141
Commerce,
Education,
and Other 11 (2) - - (1) 8
Corporate (94) (39) - (85) (5) (223)
--- --- -- --- -- ----
Total $710 $(78) $(27) $(86) $209 $728
==== ==== ==== ==== ==== ====
Six Months Ended June 30, 2008(b)
---------------------------------
Adjusted
Operating Amortization
Income Before of
Depreciation Depreciation Deferred Mark-to-Market
and and Launch Share-Based Operating
Amortization Amortization Incentives Compensation Other(a) Income
-----------------------------------------------------------------

U.S.
Networks $554 $(28) $(20) $(6) $- $500
International
Networks 177 (20) (22) - - 135
Commerce,
Education,
and Other (3) (5) - - (4) (12)
Corporate (91) (43) - (12) - (146)
--- --- -- --- -- ----
Total $637 $(96) $(42) $(18) $(4) $477
==== ==== ==== ==== === ====

(a) For the six months ended June 30, 2009, amount represents the pre-
tax gain on the sale of Discovery Kids of $252 million as well as
asset impairments of $26 million and exit and restructuring charges
of $17 million. For the six months ended June 30, 2008, amount
represents exit and restructuring charges.
(b) The 2008 financial information has been recast so that the basis of
presentation is consistent with that of the 2009 financial
information. See Other Items on page 4 for additional detail.
DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited; amounts in millions)

CALCULATION OF FREE CASH FLOW

Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
2009 2008(a) Change 2009 2008(a) Change
---- ------- ------ ---- ------- ------

Cash provided by
operating
activities $180 $115 $65 $320 $182 $138
Acquisition of property
and equipment (14) (20) 6 (34) (42) 8
--- --- - --- --- -
Free cash flow $166 $95 $71 $286 $140 $146
==== === === ==== ==== ====

Full Year 2009
--------------
Net income available to Discovery
Communications, Inc. $500 To $600
Interest expense, net 260 To 230
Depreciation and amortization 170 To 160
Other expense, including amortization of
deferred launch incentives, mark-to-market
share-based compensation, asset impairment,
restructuring costs, gain (loss) on business
disposition gain (loss) on sale of
securities, equity earnings in unconsolidated
affiliates, unrealized and realized gains and
losses from derivatives, income tax expense,
net loss (income) attributable to
non-controlling interests, and stock
dividends to preferred interests 420 To 410
--- ---
Adjusted OIBDA $1,350 To $1,400
====== ======
DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
SELECTED FINANCIAL DETAIL
(unaudited; amounts in millions)

BORROWINGS
As of
June 30, 2009
-------------

$1.0 billion Term Loan A, due quarterly
December 2008 to October 2010 $428
$1.5 billion Term Loan B, due quarterly
September 2007 to May 2014 1,470
$500 million Term Loan C, due quarterly
June 2009 to May 2014 499
---
$1.6 billion Revolving Loan, due October 2010
7.45% Senior Notes, semi-annual interest, due
September 2009 55
8.37% Senior Notes, semi-annual interest, due
March 2011 220
8.13% Senior Notes, semi-annual interest, due
September 2012 235
Floating Rate Senior Notes, semi-annual
interest, due December 2012 (2.0% at June 30,
2009) 90
6.01% Senior Notes, semi-annual interest, due
December 2015 390
Obligations under capital leases 98
Other notes payable 1
---
Total debt outstanding 3,486
Unamortized discount (12)
----
Total debt outstanding, net 3,474
-----
Current portion (421)
-----
Long-term debt $3,053
======
SHARE-BASED COMPENSATION

As of June 30, 2009
-------------------

Total Vested
Units Weighted Units Weighted
Long-Term Outstanding Average Outstanding Average
Incentive (in Exercise (in Exercise
Plans millions) Price millions) Price
------------- ------------ -------- ----------- ---------

Discovery
Appreciation Plan 17.4 $18.84 0.1 $21.64

Stock Appreciation
Rights 4.2 14.44 1.3 14.39

Stock options 18.4 15.36 2.7 14.06
---- ---
Total
share-based
compensation
plans 40.0 $16.78 4.1 $14.35
---- ---

NET OF TAX GAIN RECONCILIATION FOR DISCOVERY KIDS TRANSACTION

Pre-tax gain on sale of 50% of Discovery Kids $252
Tax recorded on book gain (93)
Tax recorded on goodwill allocated to the 50% of Discovery Kids
sold (81)
Tax recorded on step-up of book value for the retained 50% of
Discovery Kids (32)
---
Net of tax gain $46
===

Photo: http://www.newscom.com/cgi-bin/prnh/20080918/NETH035LOGO
http://photoarchive.ap.org/
PRN Photo Desk, photodesk@prnewswire.com
Source: Discovery Communications, Inc.

CONTACT: Corporate Communications, Michelle Russo, +1-240-662-2901,
michelle_russo@discovery.com, or Investor Relations, Craig Felenstein,
+1-212-548-5109, craig_felenstein@discovery.com

Web Site: http://www.discovery.com/

-------
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International Entertainment News

Tuesday, August 04, 2009

Discovery Communications Reports Second Quarter 2009 Results

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