Discovery Communications Reports Third Quarter 2010 Results

Discovery Communications Reports Third Quarter 2010 Results

SILVER SPRING, Md., Nov. 2, 2010 /PRNewswire-FirstCall/ --

Third Quarter 2010 Financial Highlights:

-- Revenues increased 11% to $926 million
-- Adjusted OIBDA increased 14% to $418 million
-- Net Income from continuing operations increased 73% to $161 million
-- Free Cash Flow increased $308 million to $346 million

(Logo: http://photos.prnewswire.com/prnh/20080918/NETH035LOGO )

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

Discovery Communications, Inc. ("Discovery" or the "Company") (Nasdaq: DISCA, DISCB, DISCK) today reported financial results for the third quarter ended September 30, 2010.

David Zaslav, Discovery's President and Chief Executive Officer said, "Discovery continues to enjoy strong operational momentum across our businesses. Our ability to execute, combined with a robust advertising environment, enabled us to deliver third quarter results that exceeded our expectations. Most importantly, our revenue growth is translating into margin expansion and free cash flow growth as we remain focused on thoughtfully investing in our business and refining our cost structure. We are committed to building the next generation of growth drivers and are producing real returns from additional investments in Animal Planet, ID and our international networks, while launching our joint ventures, The Hub and OWN. We are excited by the opportunities these investments present to further grow our business long-term and generate increased value for shareholders."

Third quarter revenues of $926 million increased $89 million, or 11%, over the third quarter a year ago, led by 11% growth at U.S. Networks and 10% growth at International Networks. Adjusted Operating Income Before Depreciation and Amortization.(1) ("OIBDA") grew 14% to $418 million, driven by a 12% increase at U.S. Networks and an 23% increase at International Networks.

Third quarter net income from continuing operations available to Discovery Communications, Inc. stockholders of $161 million ($0.37 per diluted share) increased $68 million compared to $93 million ($0.22 per diluted share) for the third quarter a year ago. The current quarter results reflect the strong operating performance and $43 million of lower expense in the current year from the unrealized change in the fair value of mark-to-market share-based compensation.

Free cash flow was $346 million for the third quarter, an increase of $308 million from the third quarter of 2009, primarily reflecting the increased operating performance and higher cash tax payments a year ago of $81 million related to the sale of Discovery Kids as well as $59 million of tax payments in 2009 related to prior periods. 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
millions) September 30,
------------------
2010 2009(a) Change
---- ------ ------

Revenues:
U.S. Networks $585 $525 11%
International
Networks 304 276 10%
Education and Other 38 35 9%
Corporate and
Eliminations (1) 1 NM
--- ---
Total Revenues $926 $837 11%
==== ====

Adjusted OIBDA:
U.S. Networks $346 $309 12%
International
Networks 130 106 23%
Education and Other 1 2 (50%)
Corporate and
Eliminations (59) (50) (18%)
--- ---
Total Adjusted OIBDA $418 $367 14%
==== ====

(dollars in Nine Months Ended September
millions) 30,
----------------------------
2010 2009(a) Change
---- ------ ------

Revenues:
U.S. Networks $1,751 $1,609 9%
International
Networks 893 787 13%
Education and Other 108 106 2%
Corporate and
Eliminations 6 6 -
--- ---
Total Revenues $2,758 $2,508 10%
====== ======

Adjusted OIBDA:
U.S. Networks $1,018 $930 9%
International
Networks 384 295 30%
Education and Other 7 9 (22%)
Corporate and
Eliminations (171) (144) (19%)
---- ----
Total Adjusted OIBDA $1,238 $1,090 14%
====== ======

(a) The 2009 financial information has been recast so that the
basis of presentation is consistent with that of the 2010 financial
information. See Other Items on page 4 for additional detail.

U.S. Networks

(dollars in Three Months Ended September
millions) 30,
-----------------------------
2010 2009 Change
---- ---- ------

Revenues:
Distribution $264 $242 9%
Advertising 304 261 16%
Other 17 22 (23%)
--- ---
Total Revenues $585 $525 11%
==== ====

Adjusted OIBDA $346 $309 12%

Adjusted OIBDA
Margin 59% 59%

(dollars in Nine Months Ended September
millions) 30,
----------------------------
2010 2009 Change
---- ---- ------

Revenues:
Distribution $786 $737 7%
Advertising 899 795 13%
Other 66 77 (14%)
--- ---
Total Revenues $1,751 $1,609 9%
====== ======

Adjusted OIBDA $1,018 $930 9%

Adjusted OIBDA
Margin 58% 58%

U.S. Networks' revenues in the third quarter of 2010 increased 11% to $585 million as advertising and distribution growth more than offset lower representation revenue. Advertising revenue increased 16% driven by higher ratings and sellouts as well as increased pricing. Distribution revenue grew 9% largely from higher rates, subscriber growth primarily from networks carried on the digital tier and lower launch-support amortization.

Adjusted OIBDA increased 12% to $346 million reflecting the 11% revenue growth partially offset by 9% higher operating expenses primarily due to higher programming expense, higher sales commissions and increased marketing costs.

International Networks

(dollars in Three Months Ended September
millions) 30,
-----------------------------
2010 2009 Change
---- ---- ------

Revenues:
Distribution $188 $180 4%
Advertising 98 80 23%
Other 18 16 13%
--- ---
Total Revenues $304 $276 10%
==== ====

Adjusted OIBDA $130 $106 23%

Adjusted OIBDA
Margin 43% 38%

(dollars in Nine Months Ended September
millions) 30,
----------------------------
2010 2009 Change
---- ---- ------

Revenues:
Distribution $560 $529 6%
Advertising 286 214 34%
Other 47 44 7%
--- ---
Total Revenues $893 $787 13%
==== ====

Adjusted OIBDA $384 $295 30%

Adjusted OIBDA
Margin 43% 37%

International Networks' revenues for the third quarter increased 10% to $304 million primarily led by advertising revenue growth of 23% and distribution revenue growth of 4%. Excluding the impact of foreign currency fluctuations, revenues increased 12% led by 26% advertising revenue growth, primarily from higher sellouts and increased viewership supported by subscriber growth across all international regions. Affiliate revenue in local currency terms was up 8% during the third quarter mainly from increased subscribers primarily in Latin America and EMEA.

Adjusted OIBDA increased 23% to $130 million reflecting the 10% revenue growth partially offset by a 2% increase in operating expenses. Excluding the impact of foreign currency, Adjusted OIBDA increased 29% as the 12% revenue growth was partially offset by a 3% increase in operating expenses primarily due to higher personnel costs.

Education and Other

(dollars in Three Months Ended September
millions) 30,
-----------------------------
2010 2009 Change
---- ---- ------

Revenues $38 $35 9%

Adjusted OIBDA $1 $2 (50%)

Adjusted OIBDA
Margin 3% 6%

(dollars in Nine Months Ended September
millions) 30,
----------------------------
2010 2009 Change
---- ---- ------

Revenues $108 $106 2%

Adjusted OIBDA $7 $9 (22%)

Adjusted OIBDA
Margin 6% 8%

Education and Other third quarter revenues increased 9% to $38 million, primarily reflecting increased education revenue from higher streaming volumes. Adjusted OIBDA was in-line with the third quarter of 2009 as the revenue growth was more than offset by higher personnel costs and lower results from the Creative Sound Service business.

Corporate and Eliminations

Adjusted OIBDA decreased $9 million when compared to the third quarter a year ago, primarily due to increased stock-based compensation expense.

FULL YEAR 2010 OUTLOOK

For the full year ending December 31, 2010, Discovery Communications, Inc. expects total revenue between $3,750 million and $3,800 million, Adjusted OIBDA between $1,675 million and $1,725 million, and net income available to Discovery Communications, Inc. stockholders of $650 million to $700 million. Our outlook incorporates current foreign exchange rates for revenues and expenses and the current share price for mark-to-market stock-based compensation calculations.

STOCK REPURCHASE PROGRAM

During the quarter ended September 30, 2010, the Company repurchased a total of 1.12 million shares of its Series C common stock at an average price of $33.61 per share totaling approximately $38 million pursuant to its stock repurchase program announced in August 2010. Under the stock repurchase program, management is authorized to purchase shares from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors.

OTHER ITEMS

The 2009 financial information has been recast so that the basis of presentation is consistent with that of the 2010 financial information. This recast reflects the adoption of Financial Accounting Standards Board Accounting Standards Codification Topic 810, Consolidation (ASC 810), which amends the existing standards for variable interest entities, the classification of results of operations of our Antenna Audio business as discontinued operations, as well as the realignment of the Commerce business into the U.S. Networks segment.

During the third quarter of 2010, the Company sold its Antenna Audio business. Antenna Audio's results have been reflected as discontinued operations and are included in "Income (loss) from discontinued operations, net of taxes" on the Condensed Consolidated Statement of Operations. Assets, liabilities and cash flows of Antenna Audio have not been reflected as discontinued operations since the amounts are not material.

NON-GAAP FINANCIAL MEASURES

Adjusted OIBDA and Free Cash Flow

In addition to the results prepared in accordance with U.S. 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 its segments based on financial measures such as revenues and adjusted operating income before depreciation and amortization ("Adjusted OIBDA"). Adjusted OIBDA is defined as revenues less costs of revenues and selling, general and administrative expenses excluding: (i) mark-to-market stock-based compensation, (ii) depreciation and amortization, (iii) amortization of deferred launch incentives, (iv) exit and restructuring charges, (v) certain impairment charges, and (vi) gains (losses) on business and asset dispositions. The Company uses this measure to assess 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 and also provides investors a measure to analyze the operating performance of each segment against historical data. The Company excludes mark-to-market stock-based compensation, exit and restructuring charges, certain impairment charges, and gains (losses) on business and asset dispositions from the calculation of Adjusted OIBDA due to their volatility or non-recurring nature. The Company also excludes depreciation of fixed assets and amortization of intangible assets and deferred launch incentive as these amounts do not represent cash payments in the current reporting period.

The Company defines free cash flow as cash provided by operating activities 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 stockholders.

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

Conference Call Information

Discovery Communications, Inc. will host a conference call today at 4:30 p.m. EDT to discuss its third quarter 2010 results. To listen to the call, visit http://www.discoverycommunications.com or dial 1-866-831-6272 inside the U.S. and 1-617-213-8859 outside of the U.S., using the following passcode: 70250534.

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 22, 2010. 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 2010 outlook and plans for stock repurchases. 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; in millions, except per share amounts)

Three Months
Ended Nine Months Ended
September 30, September 30,
------------- -------------
2010 2009(a) 2010 2009(a)
---- ------ ---- ------
(recast) (recast)
Revenues:
Distribution $452 $422 $1,346 $1,266
Advertising 402 341 1,185 1,009
Other 72 74 227 233
--- --- --- ---
Total revenues 926 837 2,758 2,508
--- --- ----- -----

Costs of revenues,
excluding depreciation
and amortization listed
below 261 251 782 751
Selling, general and
administrative 306 324 894 885
Depreciation and
amortization 32 39 98 115
Restructuring and
impairment charges 15 2 18 40
Gains on dispositions - - - (252)
--- --- --- ----
614 616 1,792 1,539
--- --- ----- -----

Operating income 312 221 966 969

Interest expense, net (49) (65) (155) (182)
Loss on extinguishment of
debt - - (136) -
Other (expense) income,
net (16) (1) (57) 10
--- --- --- ---

Income from continuing
operations before income
taxes 247 155 618 797
Provision for income
taxes (83) (52) (171) (387)
--- --- ---- ----

Income from continuing
operations, net of taxes 164 103 447 410
Income (loss) from
discontinued operations,
net of taxes 25 1 25 (2)
--- --- --- ---

Net income 189 104 472 408
Less net income
attributable to
noncontrolling interests (3) (4) (10) (10)
--- --- --- ---

Net income attributable
to Discovery
Communications, Inc. 186 100 462 398
Stock dividends to
preferred interests - (6) (1) (8)
--- --- --- ---

Net income available to
Discovery
Communications, Inc.
stockholders $186 $94 $461 $390
==== === ==== ====

Income per share from
continuing operations
available to Discovery
Communications, Inc.
stockholders:
Basic $0.38 $0.22 $1.03 $0.93
===== ===== ===== =====
Diluted $0.37 $0.22 $1.01 $0.92
===== ===== ===== =====

Income (loss) per share
from discontinued
operations available to
Discovery
Communications, Inc.
stockholders:
Basic $0.06 $- $0.06 $-
===== === ===== ===
Diluted $0.06 $- $0.06 $-
===== === ===== ===

Net income per share
available to Discovery
Communications, Inc.
stockholders:
Basic $0.44 $0.22 $1.08 $0.92
===== ===== ===== =====
Diluted $0.43 $0.22 $1.07 $0.92
===== ===== ===== =====
Weighted average shares
outstanding:
Basic 426 424 425 423
=== === === ===
Diluted 431 427 431 424
=== === === ===

(a) The 2009 financial information has been recast so that the
basis of presentation is consistent with that of the 2010 financial
information. See Other Items on page 4 for additional detail.

DISCOVERY COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in millions)

As of As of
September
30, December 31,
2010 2009(a)
---- ------
(recast)
ASSETS
Current assets:
Cash and cash equivalents
(including $10 and $40 held by
variable interest entities at
2010 and 2009, respectively) $1,016 $623
Receivables, net 843 812
Content rights, net 81 75
Prepaid expenses and other
current assets 197 161
--- ---
Total current assets 2,137 1,671

Noncurrent content rights, net 1,229 1,207
Property and equipment, net 389 409
Goodwill 6,435 6,433
Intangible assets, net 615 643
Other noncurrent assets 593 589
--- ---
Total assets $11,398 $10,952
======= =======

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $464 $446
Current portion of long-term
debt 18 38
Other current liabilities 310 299
--- ---
Total current liabilities 792 783

Long-term debt 3,595 3,457
Other noncurrent liabilities 267 443
Commitments and contingencies

Redeemable noncontrolling
interests 49 49

Equity:
Preferred stock 2 2
Common stock 3 3
Additional paid-in capital 6,664 6,600
Treasury stock, at cost: Series
C common stock: 1.12 shares at
2010 (38) -
Retained earnings (accumulated
deficit) 75 (387)
Accumulated other comprehensive
loss (23) (21)
--- ---
Total Discovery Communications,
Inc. stockholders' equity 6,683 6,197
Noncontrolling interests 12 23
--- ---
Total equity 6,695 6,220
----- -----
Total liabilities and equity $11,398 $10,952
======= =======

(a) The 2009 financial information has been recast so that the
basis of presentation is consistent with that of the 2010 financial
information. See Other Items on page 4 for additional detail.

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

Nine Months Ended September
30,
----------------------------
2010 2009(a)
---- ------
(recast)
OPERATING ACTIVITIES
Net income $472 $408
Adjustments to reconcile net income to
cash provided by operating
activities:
Stock-based compensation expense 153 196
Depreciation and amortization 100 118
Content amortization and write-offs 526 515
Impairment charges 11 26
Gains on dispositions (12) (252)
Gains on sales of investments - (13)
Deferred income taxes (89) (38)
Noncash portion of loss on
extinguishment of debt 12 -
Other noncash expenses, net 46 51
Changes in operating assets and
liabilities:
Receivables, net (41) 1
Content rights (558) (562)
Accounts payable and accrued
liabilities (8) (32)
Stock-based compensation liabilities (128) (24)
Other, net (39) (10)
--- ---
Cash provided by operating activities 445 384

INVESTING ACTIVITIES
Purchases of property and equipment (29) (41)
Business acquisitions, net of cash
acquired (38) -
Proceeds from dispositions, net 24 300
Proceeds from sales of investments - 22
Investments in and advances to equity
investees (71) (22)
--- ---
Cash (used in) provided by investing
activities (114) 259

FINANCING ACTIVITIES
Net repayments of revolver loans - (315)
Borrowings from long-term debt, net
of discount and issuance costs 2,970 970
Principal repayments of long-term debt (2,883) (1,007)
Principal repayments of capital lease
obligations (8) (7)
Repurchases of common stock (38) -
Cash distributions to noncontrolling
interests (21) (9)
Proceeds from stock option exercises 27 26
Excess tax benefits from stock-based
compensation 9 -
Other financing activities, net - (1)
--- ---
Cash provided by (used in) financing
activities 56 (343)

Effect of exchange rate changes on
cash and cash equivalents 6 7
--- ---

NET CHANGE IN CASH AND CASH
EQUIVALENTS 393 307
Cash and cash equivalents, beginning
of period 623 94
--- ---
CASH AND CASH EQUIVALENTS, END OF
PERIOD $1,016 $401
====== ====

(a) The 2009 financial information has been recast so that the
basis of presentation is consistent with that of the 2010 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; in millions)

Three Months Ended September 30, 2010
-------------------------------------
Amortization
Adjusted Depreciation of
-------- ------------ -------------
Deferred
Launch
Operating and Incentives
--------- --- -----------
Income Before Amortization
------------- ------------
Depreciation
and
-------------
Amortization
------------

U.S. Networks $346 $(5) $(2)
International
Networks 130 (10) (9)
Education and Other 1 (2) -
Corporate and
Eliminations (59) (15) -
--- --- ---
Total $418 $(32) $(11)
==== ==== ====

Three Months Ended September 30, 2010
-------------------------------------
Mark-to- Other
Market (a) Operating
--------- -------- ---------
Stock-Based Income
----------- ------
Compensation
------------

U.S. Networks $- $- $339
International
Networks - (3) 108
Education and Other - (11) (12)
Corporate and
Eliminations (48) (1) (123)
--- --- ----
Total $(48) $(15) $312
==== ==== ====

Three Months Ended September 30, 2009(b)(recast)
-----------------------------------------------
Amortization
Adjusted of
-------- -------------
Deferred
Launch
Operating Incentives
--------- -----------
Income Before Depreciation
------------- ------------
Depreciation
and and
------------- ---
Amortization Amortization
------------ ------------

U.S. Networks $309 $(7) $(5)
International
Networks 106 (10) (9)
Education and Other 2 (2) -
Corporate and
Eliminations (50) (20) -
--- --- ---
Total $367 $(39) $(14)
==== ==== ====

Three Months Ended September 30, 2009(b)(recast)
-----------------------------------------------
Mark-to- Other
Market (a) Operating
--------- -------- ---------
Stock-Based Income
----------- ------
Compensation
------------

U.S. Networks $- $- $297
International
Networks - (2) 85
Education and Other - - -
Corporate and
Eliminations (91) - (161)
--- --- ----
Total $(91) $(2) $221
==== === ====

(a) For the three months ended September 30, 2010, amounts represent
asset impairments of $11 million and exit and restructuring charges
of $4 million. For the three months ended September 30, 2009,
amounts represent exit and restructuring charges of $2 million.

(b) The 2009 financial information has been recast so that the basis
of presentation is consistent with that of the 2010 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; in millions)

Nine Months Ended September 30, 2010
------------------------------------
Amortization
Adjusted Depreciation of
-------- ------------ -------------
Deferred
Launch
Operating and Incentives
--------- --- -----------
Income Before Amortization
------------- ------------
Depreciation
and
-------------
Amortization
------------

U.S. Networks $1,018 $(16) $(6)
International
Networks 384 (29) (26)
Education and Other 7 (5) -
Corporate and
Eliminations (171) (48) -
---- --- ---
Total $1,238 $(98) $(32)
====== ==== ====

Nine Months Ended September 30, 2010
------------------------------------
Mark-to- Other
Market (a) Operating
--------- -------- ---------
Stock-Based Income
----------- ------
Compensation
------------

U.S. Networks $- $- $996
International
Networks - (6) 323
Education and Other - (11) (9)
Corporate and
Eliminations (124) (1) (344)
---- --- ----
Total $(124) $(18) $966
===== ==== ====

Nine Months Ended September 30, 2009(b)(recast)
----------------------------------------------
Amortization
Adjusted of
-------- -------------
Deferred
Launch
Operating Incentives
--------- -----------
Income Before Depreciation
------------- ------------
Depreciation
and and
------------- ---
Amortization Amortization
------------ ------------

U.S. Networks $930 $(23) $(16)
International
Networks 295 (29) (25)
Education and Other 9 (4) -
Corporate and
Eliminations (144) (59) -
---- --- ---
Total $1,090 $(115) $(41)
====== ===== ====

Nine Months Ended September 30, 2009(b)(recast)
----------------------------------------------
Mark-to- Other
Market (a) Operating
--------- -------- ---------
Stock-Based Income
----------- ------
Compensation
------------

U.S. Networks $(1) $230 $1,120
International
Networks - (12) 229
Education and Other - (1) 4
Corporate and
Eliminations (176) (5) (384)
---- --- ----
Total $(177) $212 $969
===== ==== ====

(a) For the nine months ended September 30, 2010 amount represents
asset impairments of $11 million and restructuring charges of $7
million. For the nine months ended September 30, 2009, amounts
represent 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.
(b) The 2009 financial information has been recast so that the basis
of presentation is consistent with that of the 2010 financial
information. See Other Items on page 4 for additional detail.

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited; in millions)
CALCULATION OF FREE CASH FLOW

Three Months Ended September
30,
-----------------------------
2010 2009(a) Change
---- ------ ------
(recast)

Cash provided by operating
activities $355 $47 $308
Acquisition of property
and equipment (9) (9) -
--- --- ---
Free cash flow $346 $38 $308
==== === ====

Nine Months Ended September
30,
----------------------------
2010 2009(a) Change
---- ------ ------
(recast)

Cash provided by operating
activities $445 $384 $61
Acquisition of property
and equipment (29) (41) 12
--- --- ---
Free cash flow $416 $343 $73
==== ==== ===

(a) The 2009 financial information has been recast so that the
basis of presentation is consistent with that of the 2010 financial
information. See Other Items on page 4 for additional detail.

RECONCILIATION OF 2010 OUTLOOK TO GAAP MEASURES

Full Year 2010
--------------
Net income available to Discovery
Communications, Inc. stockholders $650 To $700
Interest expense, net 205 To 200
Depreciation and amortization 140 To 130
Other expense, including amortization
of deferred launch incentives, mark-
to-market stock-based compensation,
asset impairment, exit and
restructuring costs, gains (losses) on
business disposition, gains (losses)
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 noncontrolling
interests, and stock dividends to
preferred interests 680 To 695
Adjusted OIBDA $1,675 To $1,725
====== ======

NET INCOME AVAILABLE TO DISCOVERY COMMUNICATIONS, INC. STOCKHOLDERS

Nine Months
Ended
September
Three Months 30,
------------ ------------
Ended
September
30,
----------

2010 2009(a) 2010 2009(a)
---- ------ ---- ------

(recast) (recast)
Income from
continuing
operations, net
of taxes $161 $93 $436 $392
Income (loss)
from
discontinued
operations, net
of taxes 25 1 25 (2)
--- --- --- ---

Net income
available to
Discovery
Communications,
Inc.
stockholders $186 $94 $461 $390
==== === ==== ====

(a) The 2009 financial information has been recast so that the
basis of presentation is consistent with that of the 2010 financial
information. See Other Items on page 4 for additional detail.

DISCOVERY COMMUNICATIONS, INC.
SUPPLEMENTAL FINANCIAL DATA
SELECTED FINANCIAL DETAIL
(unaudited; in millions)

BORROWINGS
As of
-----
September 30,
2010
--------------
5.625% Senior Notes, semi-annual interest, due August
2019 $500
3.70% Senior Notes, semi-annual interest, due June
2015 850
5.05% Senior Notes, semi-annual interest, due June
2020 1,300
6.35% Senior Notes, semi-annual interest, due June
2040 850
Capital lease and other obligations 121
---
Total long-term debt 3,621
Unamortized discount (8)
---
Long-term debt, net 3,613
Less current portion of long-term debt 18
---
Noncurrent portion of long-term debt $3,595
======

STOCK-BASED COMPENSATION

As of September 30, 2010
------------------------
Total Units
Outstanding Weighted
------------ --------
(in
Long-Term millions) Average
--------- ---------- -------
Grant
Incentive Plans Price
--------------- ------

Discovery Appreciation Plan 10.3 $22.21

Stock Appreciation Rights 0.1 20.31

Stock Options 16.6 18.12

Performance-based
Restricted Stock Units 1.0 32.86

Service-based Restricted
Stock Units 0.5 32.09
---
Total stock-based
compensation plans 28.5 $20.37
----

As of September 30, 2010
------------------------
Vested
Units
Outstanding Weighted
------------ --------
(in
Long-Term millions) Average
--------- --------- -------
Grant
Incentive Plans Price
--------------- ------

Discovery Appreciation Plan 0.6 $21.75

Stock Appreciation Rights -- --

Stock Options 3.4 15.02

Performance-based
Restricted Stock Units -- --

Service-based Restricted
Stock Units -- --
---
Total stock-based
compensation plans 4.0 $16.03
---

SOURCE Discovery Communications, Inc.

Photo:http://photos.prnewswire.com/prnh/20080918/NETH035LOGO
http://photoarchive.ap.org/
Photo:http://www.newscom.com/cgi-bin/prnh/20080918/NETH035LOGO
http://photoarchive.ap.org/
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.discoverycommunications.com

-------
Profile: intent